SC: Statutory tariff amendment overrides PPA—generator not entitled to deemed generation incentive; refund limited by limitation period

Case Name: CLP India Pvt. Ltd. v. Gujarat Urja Vikas Nigam Ltd. & Anr.
Citation: Civil Appeal Nos. 2793 and 2969 of 2010
Date of Judgment: 6 May 2020
Bench: Justice Arun Mishra, Justice Vineet Saran, and Justice S. Ravindra Bhat

Held: The Supreme Court held that the Central Government’s statutory amendment dated 06.11.1995 to its tariff notification of 30.03.1992—issued under Section 43A of the Electricity (Supply) Act, 1948—barred payment of deemed generation incentive to naphtha-based generating units, and this statutory change bound the parties despite contrary terms in the Power Purchase Agreement (PPA) of 03.02.1994. The Court ruled that contractual terms inconsistent with statutory notifications cannot prevail. However, since the Gujarat Electricity Regulatory Commission (GERC) and the Appellate Tribunal for Electricity (APTEL) had concurrently limited the refund claim to three years before the filing date, the Court refused to reopen that finding.

Summary:
CLP India, a gas-based generator using naphtha as alternate fuel, entered into a 20-year PPA with the Gujarat Electricity Board (now GUVNL). The Central Government’s 1995 amendment disallowed generation incentive for naphtha-based plants. Despite this, GUVNL continued to pay incentive until 2005. In 2006, it sought refund before GERC, which held that incentive was wrongly paid but restricted recovery to the three years preceding the petition. APTEL upheld this decision.

Before the Supreme Court, GUVNL argued that the refund should cover the full period since the notification rendered payments illegal. CLP contended that the amendment applied only to fully naphtha-based stations and not to gas-based ones, and that limitation barred the claim. The Court rejected CLP’s argument, finding that the amendment, being statutory, superseded the PPA and applied equally to all plants using naphtha as fuel. The claim beyond three years was barred by limitation, as mere correspondence did not extend time under Section 18 of the Limitation Act.

On the issue of interest on deemed loan capital, the Court upheld findings that ₹53.90 crore treated as “own capital” under the supplementary agreement dated 05.12.2003 attracted 14% interest only for 01.07.2003–31.12.2009; no interest was payable for earlier years since that period was expressly excluded by agreement.

Decision:
Both appeals dismissed. The statutory amendment barred incentive payments; refund confined to the preceding three years.
Interest on deemed capital restricted to the agreed period (01.07.2003–31.12.2009); no further liability or equitable claim allowed.