In the Matter of : Ajmer Vidyut Vitran Nigam Limited Vs. Rajasthan Electricity Regulatory Commission, Jaipur and Others - Court Judgment

Excerpt:
hon’ble mr. a.a. khan, technical member opinion i have gone through the draft judgment of my esteemed colleague on the bench, judicial member, mrs. justice manju goel on the appeal, which is placed below. while i respectfully differ with her analysis and findings firstly in respect of the fundamental issue of the impugned pre-existing procedure of billing by the appellant for consumption of energy to respondent no. 3 as cpp-cum-ht-consumer which is found to be erroneous by me not being in accordance with the provisions of the relevant agreement and secondly i find that the doctrine of estoppel is not applicable in the instant case. i am in agreement with her on the issue of application of section 56(2) of the electricity act, 2003 and the provisions of the limitation act. i also.....

Judgment:

Hon’ble Mr. A.A. Khan, Technical Member Opinion

I have gone through the draft judgment of my esteemed colleague on the bench, Judicial Member, Mrs. Justice Manju Goel on the Appeal, which is placed below. While I respectfully differ with her analysis and findings firstly in respect of the fundamental issue of the impugned pre-existing procedure of billing by the Appellant for consumption of energy to Respondent No. 3 as CPP-cum-HT-Consumer which is found to be erroneous by me not being in accordance with the provisions of the relevant agreement and secondly I find that the doctrine of estoppel is not applicable in the instant case. I am in agreement with her on the issue of application of Section 56(2) of the Electricity Act, 2003 and the provisions of the Limitation Act. I also opine that the principle of conduct of parties to a contract in deciding its future operation is not applicable in the instant case. I additionally find the failure on the part of the Commission in not considering the prayer of the Respondent No. 2, RSMML (Petitioner before the Commission) for waiver of the minimum charges. Due to divergence of my views on the aforesaid points my analysis of the instant case has resulted into the conclusions which are at variance from that of my esteemed colleague. In my separate judgment I have dealt with the aforesaid issues in sufficient detail.

2. The Appeal of Ajmer Vidyut Vitran Nigam (for short ‘AVVN’) a distribution Company wholly owned by the State Government of Rajasthan, has challenged the order dated 13 Apr. 07 in Review Petition No. 124 of 2007 and original order dated 04 Nov. 2006 in Petition No. 100 of 2006 passed by Rajasthan Electricity Regulatory Commission (hereinafter to be referred to as the ‘Commission/RERC’). Petition No. 100 of 2006 was preferred by Rajasthan State Mines and Minerals Ltd. (for brevity to be called as ‘RSMML’) a company wholly owned by the state government engaged in Mining of minerals in the State which has also set up various Captive Power Plants based on wind power, generating electricity for captive use at its different industrial sites and sale to the Appellant and / or third party. RSMML has also been an HT-consumer of the Appellant and its’ predecessors since 1984 and both had entered into agreements for a specific contract load, last being on 06 Feb. 02. RSMML becoming a power producer from its various wind energy based captive power plant set up under GOR Policy dated 04 Feb. 2000 for promoting generation of Power through Non-Conventional Energy (NCE) source also signed Wheeling and Banking Agreement (WBA) dated 29 Aug. 01 with the Appellant followed by another agreement titled Purchase, Wheeling and Banking Agreement on 19 Feb. 2004. The aforesaid agreements were signed in pursuance to Govt. of Rajasthan (GOR) Policy for Promoting Generation through Non-Conventional Energy (NCE) Sources dated 04 Feb. 00 and policy for promotion of electricity generation from wind dated 30 Apr. 03.

3. RSMML, the Respondent No. 2 has set-up 4.0 MW (Phase-I) wind energy power plant in Aug. 2001 in Jaisalmer district of Rajasthan under GOR policy of 04 Feb. 00. It executed a WBA with the Appellant, Rajasthan Vidyut Prasaran Nigam Ltd. (‘RVPN’) and Jodhpur Vidyut Vitran Nigam Ltd (‘JdVVNL’) for wheeling and banking of power from the aforesaid plant to its own industrial units and sale to third party on 29 Aug. 01. Subsequently, the aforesaid agreement was amended to include an additional installed capacity of 4.9 MW (Phase-II) in May 02. The aforesaid agreement was further amended vide RVPN’s letter dated 16 Apr. 03 RSMML to add a further capacity of 5.0 MW in Mar 04 under GOR Policy of Apr. 03 and power purchase-cum- wheeling and Banking agreement was extended on 19 Feb. 04 with RVPN, AVVNL, JdVVNL and Jaipur Vidyut Vitran Nigam Ltd (JVVNL). This agreement provides for sale of 95% of net generation to Discoms and balance 5% for the captive use of RSMML. From 2x4.9 MW captive power plant (Phase I and II), 75% of net energy generated is sold to Discoms and balance 25% is utilized/wheeled for captive use of RSMML.

4. On the request made by the Appellant, Jaipur Vidyut Vitran Nigam (JVVNL) has been impleaded as a party to this Appeal. JVVNL was the party respondent in the similar case of Balakrishan Industries Vs. JVVNL in which the Appellant was one of the respondents before the Commission in Case No. 101 of 2006. The Appellant in its application has stated that the parties in the aforesaid case have been following the same billing methodology as now proposed in the revised procedure in the instant case. The Commission in its order dated 25 Jul. 06 in Case No. 101 of 2006 has found certain anomolies and directed all Discoms including the Appellant in the instant case to amend Art. 7 of the Power Purchase cum Wheeling and Banking Agreement dated 21 Sep. 04. The Petitioner is having liberty for redressing its grievance either under the Act/regulations or by recourse to the provisions of the agreements.

Dispute and Issues raised

5. The dispute is primarily pivoting on the revised accounting procedure for energy exchange between the Appellant on one hand and RSMML as Captive Generator-cum-HT-consumer on the other highlighting on the issue of “Minimum Charges” not being paid for under the earlier procedure and inter-alia relates to issues that:

(a) As per the Appellant’s claim the ‘Banking’ of energy with it is allowed only when the energy generated and wheeled in the grid is more than the captive consumption of RSMML. The energy generated and wheeled by the Captive generator unless found surplus to the captive consumption is not eligible to be banked and therefore, the generated and wheeled energy is to be first adjusted against the Captive consumption to determine the bankable energy.

(b) The Appellant has been raising bill allegedly following a wrong procedure under mistaken belief wherein the ‘minimum energy’ chargeable as per HT-Consumer agreement was being adjusted first against the Captive consumption and the generated and wheeled energy was then adjusted against the balance deficit in captive consumption, to determine the energy to be banked with it. This procedure continued till Oct. 2005 and the Appellant adopted the revised procedure as at (a) above when objected to in Audit with effect from Nov. 2005.

(c) The Appellant has claimed for recovery of arrears due primarily on account of minimum charges not being paid in the procedure adopted earlier as entitled to it by the HT-contract. RSMML while contesting the revised procedure has invoked the principles of estoppel and non-recovery of arrears under Section 56(2) of EA, 2003.

(d) Appellant has challenged the jurisdiction of the Commission on the ground that it is a billing dispute between the licensee and HT Consumer and does not fall within the purview of Section 86 of the EA-2003.

Issue of Jurisdiction

6. Before taking up the primary dispute of billing procedure, I will take up the issue of jurisdiction raised by the Appellant.

7. The Appellant has submitted that since the dispute has arisen out of the bills covered under the HT-agreement and thus is a consumer issue, and is beyond the jurisdiction of the Commission. The learned counsel for the appellant has submitted that dispute between licensee and consumer arising out of an independent consumer agreement is to be settled [under Section 42(5) and 42(7) of the Electricity Act, 2003] by forum namely Consumer Redressal Grievances Forum/Ombudsman and does not fall within the purview of Section 86(1) of the Act.

8. Mr. P.N. Bhandari, learned counsel of the respondent No. 2, RSMML has stated that it did not challenge the provisions of ‘minimum charges’ and nor there is any dispute between the Consumer and Licensee on it. He states that the dispute has arisen from the Wheeling and Banking agreements executed in accordance with GOR Policy.

9. I have observed in para 13 later that the Clause 3.4 of wheeling and banking Agreement dated 24 Aug 01 and Clause 7.4 of Purchase, Wheeling and Banking Agreement dated 19 Feb. 04 link these Agreements with the HT-consumer Agreement signed between the contesting parties. It has necessitated the adoption of a common composite billing methodology for wheeling and banking of energy with CPP as NCE generator and a consumer of HT for computation of captive consumption, adjustment of ‘minimum charges’, wheeling, banking etc. and has been implemented based on mutual agreement between the parties. Further, the Appellant, right from Aug 01, till Oct. 05, has been raising bills in the belief and understanding of that being in accordance with the relevant agreements. The Commission in its submission before us, has stated that the issue of its jurisdiction was examined by it in para 3 of its main impugned order dated 04 Nov. 06 which reads as under:

“…………….the Commission observes that under Section 86(1)(e), the Commission is to promote electricity generation from renewable sources of energy, including wind energy and under section 86(4), it is to be guided by National Electricity Policy. As per para 5.2.26 of the said policy, the Commission may have regulatory oversight on commercial arrangement between CPP and licensee so as to enable harnessing of surplus power from such captive power plant. Under these provisions, the Commission have jurisdiction to examine whether adjustment of wheeled energy as per the methodology adopted by AVVNL, adversely affects promotion/harnessing of surplus power from a captive power plant and that, too, of renewable sources of generation.”

10. This Tribunal in its judgment dated Sep. 06 in Appeal NO. 20 of 2006 in the case

of Chhattisgarh Biomass Energy Developers Association and Ors. Vs. Chhattisgarh State Electricity Regulatory Commission and Ors. has stated thus:-

“……………it is the mandate of the Act of 2003 more particularly Section 86(1)(e) of the Act of 2003 read with Section 61(h) thereof and Preamble thereto and the various policy guidelines to promote generation of electricity from renewable sources of energy including biomass. The appropriate Commission is bound to give effect to the statutory direction of the Act of 2003 to promote generation of electricity from renewable sources of energy.”

The aforesaid judgment has further held that:

“……….it is the bounden duty of the appropriate Commission to invoke the provisions of Section 86(1)(e) to issue appropriate directions with a view to promote generation for electricity from renewable sources of energy. This call for re-opening of power purchase and wheeling agreements by the Commission for suitable amendments in keeping with the provisions of Section 86(1)(e) of Electricity Act, 2003.”

11. In view of the above, I hold that the claim of the Commission to intervene in the

instant case is justified and is well within its jurisdiction.

Issue of Billing Procedure

12. The primary dispute between the Appellant and Respondent No. 2, RSMML is based on:

(a) RSMML as HT- Consumer of the Appellant under the agreement last being signed on 06 Feb. 2002 according to which ‘minimum charges’ is payable to the Appellant if the consumption of electricity is less than the minimum units specified by the HT agreement and the relevant applicable tariff order.

(b) Appellant, as licensee providing wheeling of generated energy earmarked for captive use from captive power generation plant of RSMML to its captive load for consumption and energy surplus to consumption for banking under Wheeling and Banking agreements dated 29Aug. 2001 and 19 Feb. 2004.

13. Even though the agreements at 5(a) and 5(b) above are distinctly separate agreements, the billing procedure specified in clause 3.4 of agreement dated 29 Aug. 01 and clause 7.4 of agreement dated 19 Feb. 2004 have linked them to HT-Consumer agreement of 5(a) above insofar as the liability of RSMML to pay ‘minimum charges’ are concerned beside maintenance of pass book for units generated, units consumed etc. Thus the quantum of captive generation, captive consumption, minimum charges towards demand charge and minimum guaranteed off-take of energy from grid and quantum of energy to be banked with the licensee were treated in a composite manner.

14. To have proper appreciation of the case and taking the agreement whereby 5% of the total generation of the captive power plant is earmarked for captive use for wheeling to the captive loads on payment of wheeling charges and the balance 95% is sold to the Appellant for which no wheeling charges is leviable on the generator. Wheeling charges as per the agreement are recovered in the form of energy units and not in cash. Thus 5% of the total generation recorded by the export meter is injected into the grid and after netting of with the wheeling charges, the balance energy is available for captive use in the grid. The grid network additionally has a pool of energy procured and injected from different sources of the distribution licensee. The energy from different sources in the energy pool have common characteristics and is not distinguishable as to which energy is injected by which source into the grid; nor it is required to be known. The energy units injected into one point of the grid network are off-taken by one or more destination consumers recorded by the import meters within their premises. The transactions are carried out based on the energy equalization i.e. the sum of energy units injected by all sources into the grid is equal to sum of energy off-take from the grid by all connected consumers, giving due regard to TandD losses which are recovered through wheeling charges. The entire distribution and transmission networks providing connectivity to widely dispersed generation sources with innumerable consumers operate on this principle. The open access to transmission and distribution networks also work on the same principle.

15. Thus, in the instant case also, the injected energy into the grid by the generator

becomes a part of the grid pool and the load draws energy from the grid which is measured by the import meter. The load has to consume what it needs. If the consumption recorded by the import meter is more than the energy injected by the generator (in this case 5% of energy generated and net of wheeling charges) recorded by the export meter, it would obviously draw deficit from the AVVNL owned sources and will be determined by the difference of the aforesaid recorded readings. If the consumption is less than the injected energy into the grid, the difference will determine the energy surplus to the load requirement and will be eligible for banking. The ‘minimum charges’ is applicable only in case of HT-agreement which inter-alia means the energy off take from the sources owned by the AVVNL and not the energy generated and wheeled by the generator.

Composite Billing Methodology:

16. The billing procedure for exchange of units of energy is based on setting-off in kind the units exported to licensee from those imported from the licensee and working out the energy charges on the basis of net energy units imported from the grid. The prevailing billing methodology till Oct. 2005 admittedly is to first adjust ‘minimum charges’ against the captive consumption of RSMML. Thereafter, the Appellant used to adjust the generated and wheeled energy against the remaining actual captive consumption and balance left, if any, of wheeled energy was banked with it to be later released during lean season of wind generation for captive use of RSMML. It is submitted by RSMML that due to existing favourable natural wind-flow profile (six months from Jan. to Jun.) about 70% of the total energy is generated during the said period and 30% is generated in the remaining lean-season-period (six months from Jul. to Dec.). Accordingly, the energy banked with AVVNL is released back to RSMML for meeting the shortfall in captive consumption requirements. The said procedure has resulted into denial of ‘minimum charges’ to AVVNL as provided for in the terms and conditions of HT-contract.

17. Based on audit observations made in Mar. 05, the Appellant has revised the above stated procedure of billing from Nov. 2005. The said revised procedure provided, firstly to adjust the generated and wheeled energy for captive use against the captive consumption of RSMML, and meeting the deficit in captive consumption from the energy supplied by AVVNL.

18. The Commission in its impugned order dated 04 No. 06 has set out the preexisting and revised procedure as indicated below:

“The Petitioner has stated that initially, after adjusting minimum charges against the actual energy consumption, AVVNL used to adjust wheeled energy against the remaining actual energy consumption and the balance wheeled energy was banked for the next month. In other words, out of the actual energy consumption, energy corresponding to minimum charge was deemed to have been supplied by AVVNL and the balance energy was adjusted for banking. However, from Nov. 05 AVVNL revised the procedure and started adjusting the wheeled energy first against the actual energy consumption and the balance energy consumption was considered as the energy supplied by the Nigam. If, however, such

balance energy consumption was not adequate to cover minimum charge, AVVNL levied the minimum charge in the monthly bill. (Emphasis supplied).

19. Without prejudice to the revised procedure I find that the ‘Minimum Charges’, while operating the stated earlier procedure, is interpreted to be as deemed supplied

(portion under lined above) instead of deemed consumption. The units corresponding to ‘Minimum Charges’ is liable to be paid by the consumer without being delivered by the licensee and is, therefore, required to be added to the actual energy consumption.

20. Accordingly, consistent with the revised procedure AVVNL raised bill dated 04 Nov. 2005 for recovery of arrears of Rs. 48,653.18 (July 02 to Aug. 03) and Rs. 43,54,946.64 (Feb. 05 to Oct. 05) with retrospective effect, aggregating to Rs. 91.54

lakhs from RSMML.

21. In order to have better appreciation of the issues involved in the dispute certain terms involved are required to be clearly understood as described below:

(a) Minimum Charges: - The two-part tariff structure primarily has two components namely Demand (Fixed) Charges and Energy Charges. The fixed charges facilitates recovery of capacity charge which is often termed as ‘Demand Charge’ related to contract demand and is attributed to infrastructure cost incurred by the licensee in providing connection to the consumer. It has to be paid by the consumer whether or not it avails supply from the licensee. If the consumer consumes energy it has to additionally pay for the actual consumption of energy at the rate determined in the tariff applicable to the concerned category of consumers. However, in case of HT- consumers, often the tariff has also yet another component for minimum guaranteed off-take (generally termed as 13 of 53 ‘Minimum Units’) of energy in order to ensure an assured revenue to the licensee to supplement the Fixed Cost. The deficit in drawal up to specified ‘Minimum Units’ is termed as ‘Minimum Charges’. These charges are levied consistent with the tariff regime in force and basically compensate the supplier to arrange for energy to meet its liability of contracted demand of energy with the consumer and for sustenance of the feasibility of the connection. The ‘Minimum Charge’ is only compensation to licensee for consumer taking units less than the specified equivalent minimum units and only represents notional units and not physical units purchased. The notional units of ‘Minimum Charges’ are deemed consumed and have to be paid for by the consumers.

If the consumer does not draw any unit or its drawal is less than the prescribed ‘minimum units’, it has to pay the ‘minimum charges’ equivalent to shortfall in drawl up to ‘Minimum Units’. If the drawal of the consumer is more than the prescribed ‘minimum units’ of energy, the ‘minimum charges’ is not separately recoverable as the charges of the energy off-take adequately provides for the deficit in fixed cost recovery. In other words, if the HT-consumer does not draw any energy or draws energy less than the ‘Minimum Units’ it is liable to pay ‘Minimum Charges’ for notional units not drawn and is considered as deemed consumption. If its drawal exceeds the ‘Minimum Units’, no ‘minimum charges’ is leviable.

(b) Banking of Energy: This Tribunal in para 22 of its judgment dated Sep. 06 in Appeal 20 of 2006 in the case between Chhattisgarh Biomass Energy Developers Association and Ors. Vs. CSERC and Others, describes the banking of energy in the following terms:

“Banking

22. Banking of electricity is a facility to help small generation stations based on non-conventional sources of energy to produce power by maximizing the utilizations of available fuel stock without demand restrictions. .… In this arrangement the distribution licensee purchases the entire power generated by a plant even if it is more than the demand of the third party or its own and utilizes the excess power to meet its current demand by adjusting the purchases from other outside sources. The excess power so utilized (banked) by the distribution licensee is released back from its own source to the generators when required by them. This facilitates in optimal utilization of available sources of energy viz., water, wind, bagasse, biomass etc. and makes an economic sense.” The dispensation of banking facility is to incentivise and promote maximizing the production of Power from Non-conventional energy sources (in the present case natural wind flow profile) by utilizing the fuel stock to the maximum extent. The obligation to produce power to the maximum extent is, therefore, inextricably linked to incentive of banking facility. One without other will not survive.

22. In the instant case, the energy surplus to captive consumption out of energy generated annually by the captive wind-based plant during the first two quarters of the year is banked with AVVNL and is released back from AVVNL’s own source to RSMML during the last two quarters of the year or as and when required to supplement shortfall in its captive consumption when the captive generation of RSMML is merely 30% of the annual generation. Further, if at the end of December, still some banked energy is left it will be deemed to have been sold to AVVNL at 60% of the prevailing energy rate. The arrangement of banking facility for Non-conventional Energy generators is basically promotional initiative and is provided in both Wheeling and Banking Agreements in consonance with the GOR Policy referred to above and also in Ministry of Non-Conventional Energy Sources (MNES) guidelines of Govt. of India. This facility is provided to NCE- CPP in several states to promote development of green power sources and make them commercially competitive. The government provides promotional and fiscal incentives to attract investment in such environmentally benign sources of energy. The production of energy from wind-based power being not uniform throughout the year, the industries having wind based CPP while maximizing the production of electricity from CPP, have to essentially use grid-power support.

23. It may be pertinent to clarify here that the parties do not dispute that the energy is banked only when the energy generated and wheeled by the captive power plant is surplus to the total captive consumption. As a corollary to it, if the generated and wheeled energy is less than the captive consumption, the deficit energy is drawn from AVVNL owned sources to meet the deficit in consumption and there being no surplus energy the question of banking does not arise at all.

24. At the cost of repetition, the levy of ‘minimum charges’ is only related to contracted demand and energy drawn from AVVNL owned sources as per the HT agreement and not on the energy generated and wheeled by the captive generator. The load draws energy from the grid pool which also contains energy generated for captive use by the captive generator. In order to operate the HT-agreement, the quantum of energy drawn from the AVVNL owned sources is to be first determined. It is obtained by taking the difference of consumption (Import Meter reading) and energy generated for captive use (5% of export meter reading adjusted for wheeling charges). The HT agreement and the applicable tariff specify the ‘minimum units’ and any shortfall in consumption (i.e. ‘minimum charges’) from the AVVNL owned sources is liable to be charged from the consumer. The ‘minimum charges’ is not recorded by the import meter but is to be deduced by comparing the energy drawn by the load from AVVNL owned sources against the minimum units specified. This is why the ‘minimum charges’ is to be considered as deemed consumed and is to be added to quantum of energy units consumed from AVVNL owned sources which as mentioned above is computed from the difference of the recorded readings by the Import and Export meters. For illustration:

Case –I: When consumption recorded by Import Meter (M1) is greater than the generated and wheeled energy which is 5% of the quantum recorded by Export Meter (M2):

Energy drawn from AVVNL owned source (es) = M1 - M2; No banking.

Let Minimum units specified = x Compare es with x,

Energy units to be billed = es + em; if es x; No ‘minimum charges i.e. em = 0

if es x; the minimum charges (em = x-es) is chargeable.

Case –II When consumption recorded by import meter (M1) is less than the generated and wheeled energy which is 5% of the quantum recorded by Export Meter (M2)

Implies, Energy units surplus to consumption that will be eligible to be banked = (eb) = M2-M1

No energy units being drawn from AVVNL owned sources.

The minimum charges equivalent to minimum units is chargeable.

The energy units to be billed = Minimum units

25. From the above, it is abundantly clear that neither the captive generation nor the

total consumption play any role to decide about the minimum charges. The ‘minimum charges is exclusively dependant on the contracted demand and energy units drawn from the AVVNL owned sources as per HT-agreement and applicable tariff. The total consumption has nothing to do with the ‘minimum charges’. Hence to determine minimum charges the ‘minimum units’ level can not be compared with the total consumption as is being done in page No. 5 of the reply submitted by Respondent No. 2. It will be examined later.

26. If the separate billing against each agreement is to be dispensed with and combined billing is resorted to, the HT-consumer agreement has to be necessarily kept in view while implementing the WB agreement signed between AVVNL and Respondent NO. 2 for captive generation and wheeling of energy for captive use and banking. The concept is analogous to a generator given access to distribution grid to wheel its energy to a consumer who is also a consumer of the licensee.

What are envisaged by Agreements?

27. Since Respondent No. 2, RSMML has approached the Commission for enforcement of the agreement, the first step is to determine the terms of the agreement and its interpretation by harmoniously reading together the terms and conditions of HT Consumer Agreement, WB Agreement dated 29 Aug. 01 and Purchase-cum-Wheeling and Banking Agreement dated 19 Feb. 04 entered into between the Appellant and Respondent NO. 2, RSMML. It is to be borne in mind that since 1984 the Respondent No. 2, RSMML has been HT-consumer of the Appellant and while continuing in that status, also became Wind Power Captive Generator from August 2001 onward.

(a) HT-Agreement dated 15 Apr. 1984:

• “Clause 17 (b) of the agreement provides that

“The Consumer shall in any event be liable to pay the Minimum Charges/minimum guarantee every year as mentioned in the tariff schedule

attached hereto” (Emphasis supplied)

• Clause 19(a) made provisions for late payment surcharge and disconnection of supply in the event of default in payment.

• Clause 24, provides that the agreement shall remain in force for a period of five years in the first instance commencing from the date of supply and thereafter from year to year.

• In an agreement of 06 Feb. 02, the parties agreed to increase the contract demand to 6 MVA.

From the above, it is clear that for the Maximum Demand of 6 MVA, the Consumer (RSMML), in any event, is liable to pay the Minimum charges as per the provisions of the prevailing tariff schedule for the Industrial consumers approved by the Commission.

(b) WB Agreement dated 29 Aug. 01

• Initial term of the agreement shall be twenty years from COD. On expiry of the aforesaid term, the agreement maybe extended for further ten years with mutual consent of the parties.

• RSMML shall be free to use the power for the captive consumption of its’ industrial units/or sale to third party – after paying wheeling charges @ 2% of the energy fed to grid subject to changes, if any, by the Commission [Note: The facility to sale to third party was later withdrawn by the Commission by its order dated 05 Dec. 02) and a specified percentage (95% of the generation) is sold to AVVNL and 5% is allocated for captive use by the Respondent No. 2 , RSMML. The energy not utilized out of 5% allocation is only considered for banking].

• RVPN shall allow banking of energy in the financial year and if at the end of the financial year energy banked remains unutilized, it will be deemed to have been purchased by RVPN at the rate of 60% of the prevailing energy charges for Industrial Tariff.

• The cost of interfacing from the point of generation to the grid (delivery point) is to be borne by RSMML.

• RVPN will augment the sub-station capacity at 33 KV and down stream sub-transmission lines to receive power generated by RSMML at its own cost.

• Two meters, one for import and the other for export of power are to be installed by RSMML. Thus the energy units generated, exported and imported at all interfacing points are being measured. The energy units pooled in the grid from various sources are electrons which are indistinguishable from each other. But time-coincident measurement by Export meters at Delivery Points of generators and Import meters at load points, and the knowledge of the quantum of banked units with simple energy equalization will accurately determine the quantum of energy units consumed from generated, wheeled and/or banked units and how much is drawn from AVVNL’s own source of power.

• Article 2.2 (iii) provides that,

“The energy supplied by RSMML at the Delivery point shall be considered as the energy supplied to RVPN and deemed banking to RVPN after adjustment of units for captive use and / or sale to third party by RSMML in case the total generation is more than the Captive Consumption and /or sale to third party plus wheeling charges. The suitable metering arrangement shall be made at 132 KV GSS, Jaislamer, to have the account of power utilized by Jodhpur Discom due to generation of power from RSMML’s power plant”

• Article 3.4 provides that

“The billing will be on monthly basis. This shall be done after deducting the units for adjustment towards captive use and/or sale to third party by RSMML. The detailed account of units generated and used for captive use and/or sale to third party shall be kept in a pass book and or subsidiary pass books and such pass books shall be used for adjustment of bills. It is clarified that the users shall continue to be the consumer of Ajmer/Jodhpur Discom and shall be billed for the fixed charges and minimum charges as applicable for large industrial service as per the tariff determined by RERC. The Energy Charges shall be worked out on the net energy drawl from the grid (Total energy drawn less captive generation less losses and wheeling charges). (Emphasis supplied)

In the event the received Energy plus the banked energy so available for supply to the user(s) in any month is less than the Energy consumption of the User(s) in that month, the Energy supplied to each user from the plant shall be in the ratio, as intimated by RSMML two months in advance and such intimation shall be restricted to one a year and the balance of Energy consumed by each user will be deemed to have been supplied by the Jodhpur Discom/Ajmer Discom to the User(s) at the applicable Energy Charges of Large Industrial Service Tariff.”

It clearly stipulates that the energy supplied at Delivery Point is deemed banking only if the total generation is more than the captive consumption. The energy units generated for captive use are first adjusted against the consumption. The balance left after adjusting units generated and wheeled against the captive consumption is banked. The above inter-alia specifies that:

(i) The captive generator (RSMML) will continue to be billed for ‘Minimum charges’ and fixed charges as applicable to large industrial user (under HT-consumer agreement). It indicates that while these agreements are linked their terms and conditions are mutually exclusive. It provides indisputable right to licensee to recover minimum charges. Non-recovery of ‘Minimum Charges’ will be repugnant to both HT-consumer agreement and WB agreement. As pointed out at para 27(a), clause 17(b) of the HT agreement specify that “the consumer shall in any event be liable to pay the minimum charges………” and at para 27(b), Article 3.4 of WB Agreement reiterates that “………. the user shall continue …..and shall be billed for the fixed charges and ‘Minimum charges’…..”

(ii) Units for adjustment towards Captive use is to be determined. ‘Minimum Charges’ being units of deemed consumption is to be added to the recorded captive consumption by the captive load, to obtain adjusted captive consumption.

(iii) A pass book to be maintained for record of units generated and units for captive use for adjustment of bills.

(iv) The monthly billing is done after adjustment of the units towards captive use and/or sale to third party by RSMML from units generated and wheeled. Billing is to be based on net import of the energy supplied from the AVVNL owned sources of the grid which is equal to,

= (Total energy drawn or consumed (minus) captive generation net of Wheeling charges and losses)

(v) If (Energy + Banked energy) is less than the consumption, the deficit is deemed to have been supplied by the Appellant grid. It means, the energy supplied from the grid = consumption –(Energy generated and wheeled + energy banked)

(c) Power Purchase and WB Agreement dated 19 Feb 04

This agreement insofar as the metering and billing procedure is concerned is similar to the agreement mentioned in (b) above, except that the Wheeling Charges are increased from 2% to 10% of the energy available at the delivery point and the Appellant purchases 95% of the energy generated.

For the sake of completeness, Clause 7.4 (billing provision) is quoted hereunder:

“7.4 Billing provision

The billing will be on monthly basis. This shall be done after deducting the units for adjustment towards captive use by Power Producer. The detailed account of units generated and used for captive use shall be kept in a pass book and or subsidiary pass books and such pass books shall be used for adjustment of bills.

Concerned Discoms shall prefer monthly bills as per applicable Tariff Rate for the electric power made available and energy supplied to the scheduled captive user out of their system after accounting for the energy delivered by Power Producer for captive use. It is clarified that the scheduled captive user shall continue to be the consumer of concerned Discoms and shall liable to pay minimum billing, fixed charges, excess demand surcharge, power factor surcharge and any other charges leviable and as may be applicable from time to time as per concerned Discom’s Tariff for supply of electricity and General Conditions of supply.”

(d) GOR Policy for promotion of Electricity Generation from Wind, 2003

The objectives of this policy are to support Wind Power generation programme based on Wind resource studies and assessment and to attract investment in the power sector. It targeted a further capacity addition of 200-250 MW. It provided pricing of generated power; wheeling; banking; exemption from Electricity Duty; Grid interfacing; metering; allotment of sites to eligible developers etc. The fiscal concessions including banking facility under GOR policy are the incentives to maximize production up to the maximum available generating capacity and any regulation to avoid paying ‘minimum charges’ is bound to be counter productive and disadvantageous to the generator as it will affect its revenue out of sale to AVVNL as its purchase at a special price from the RSMML. Moreover, such practice for any commercial compulsion will make the facility of banking meaningless.

Further, the Commission has said that the RSMML being the generator of the power could declare as to how much of its power is needed to be wheeled to its industry in another district. It is clarified that the ratio of energy supplied from the plant to each industry of the user, RSMML can only be changed once an year within 5% of the generation allocated for captive use. In this connection Article 3.4 of the WB Agreement may be referred to. This aspect is not relevant here as the entire 5% of the generated power for the captive use including the energy that is banked during the year is being fully consumed. The consumer has no option but to draw deficit energy from AVVNL owned sources and the payment of minimum charges is linked to such energy. The agreements described in (b) and (c) above are structured on these policies and are consistent with them. It will be `irrational to search for billing procedure in GOR policies.

Summary

28. Having seen the policy and relevant agreements concerning the dispute on the billing process, the essential steps required to operationalize the process could be sequenced and summarized to harmoniously satisfy the terms and conditions of both agreements namely HT-consumer Agreement and WB Agreements separately and jointly in composite billing.

(a) Operating HT-consumer agreement without captive generator since 1984 essentially implies that:

• Billing is done on units drawn from the grid to bridge the gap in consumption = (eL + em); where, eL is the consumption of load recorded by the import meter and em is the minimum charge not measured by the meter. When units drawn from the AVVNL owned sources is less than ‘minimum units’ em is charged and when it is more or equal to minimum units, em = 0.

(b) A Captive generator, later in Aug. 2001, is added into the system and is regulated by terms and conditions of WB Agreement. It inter-alia implies that:

• G Units Net of generated and wheeling charges is wheeled to the industrial load.

• The units banked (eb) in the preceding month is added to G to give total units of energy available i.e. = G + eb.

• Minimum charges (em) is payable, if units drawn from the grid’s AVVNL’s owned sources (es) is less than the specified minimum units determined by the HT-agreement and applicable tariff. For example, if minimum units = 20 and units drawn from the AVVNL owned sources=10, the shortfall in minimum units = (20-10) = 10 units represent ‘Minimum Charges’ (em). The units drawn from the grid’s AVVNL owned sources (es) is equal to the difference of recorded consumption by the import meter (i.e. eL) and the recorded generation by export meter net of wheeling charges (i.e G) by energy equalization. These measurements are recorded at coincident time and verified by both parties.

• em is ‘units deemed consumed’ and is to be added to captive meter consumption, eL to obtain adjusted total consumption i.e. (eL + em) units.

• Account of Minimum Charges (em) and ‘other than Minimum Charges’ (es) are to be recorded in pass Book.

• If (G + eb) (eL + em), the banking is allowed the units banked =[(G + eb) - (eL + em)]

• If (eL + em) (G + eb), the deficit in consumption is made up by drawing from the grid and the units drawn from the grid = [(eL + em) - (G + eb)]

• Units supplied from grid inclusive of minimum charge and the charges thereof are worked out at the rate of Large industrial Service Tariff. The above sequence will meet the requirements of both Agreements.

Revisiting Composit Billing Methodology (Per Impugned Order)

29. Applying the above formulation to test the example depicted by the Commission in its impugned order of 04 Nov. 06 on pages 12 and 13. We observe that in the given example the Commission has assumed; Monthly consumption = 300 Kwh per KVA Monthly Captive Generation = 280 Kwh in first six months and 120 Kwh in next six months Monthly Minimum Units = 107 Kwh.

30. It has then sought to demonstrate and justify the pre-existing procedure of billing considering adjustment of wheeled energy beyond minimum billing as illustrated in the table below:

Table

31. It is observed that the formulation itself is misconceived i.e. billing considering adjustment of wheeled energy beyond minimum billing (excluding minimum units) which inter-alia means that minimum units is supplied by the licensee, even when the deficit in the wheeled energy to meet the consumption is less than the specified minimum units. The liability to pay minimum charges is being condoned by the very adjustment process of “energy beyond minimum billing” In other words ‘Minimum Charges’ is being taken outside the scope of adjustment and is banked. It may be pointed out that drawal is possible only up to the level required by the load and not more. Say in the first entry in the above Table-I, indicates that while 20 units (i.e. 300-280) are needed to meet the captive consumption, the units deemed drawn from the grid is 107 (up to the level of Minimum Units) and 20 units are consumed from the grid and balance (87 units) being banked. The energy units deemed drawn from the grid is only to meet the deficit in consumption and not for banking back with the licensee. The banking is only admissible for excess units supplied by the captive generation and are surplus units over and above the consumption. The minimum charges are the notional units basically considered as deemed consumed and is liable to be charged to meet an element of fixed cost. In the procedure erroneously units equivalent to ‘minimum charge’ are successively banked month after month. The ‘Minimum Charges’ if banked for use by the consumer, is not being paid for and, therefore, not supplementing the fixed cost of the licensee. It is contrary to the basic concept of ‘minimum charge’ and is repugnant to Clause 17(b) of HT-agreement and Article 3.4 and 7.4 of WB agreements referred to in para 27 above. This is despite the clear enunciation of the billing procedure in Article 3.4 and 7.4 of WB agreement whereby it is stated that the billing will be on monthly basis and shall be done after deducting the units for adjustment towards captive use and / or sale to third party (i.e. 5% of the generation for captive use) by RSMML, from the consumption. This itself confirms that the first step of billing procedure to be the adjustment of generation for captive use against the consumption and is the major point of dispute between the parties. The procedure is ultra vires to the contracts and is liable to be set aside. The point, however, remains to be examined whether in the instant case of the concluded contracts with clearly stated provisions, if the parties have by genuine oversight erroneously operated the contract for first three years out of its operating life of 30 years, the provisions of doctrine of estoppel will apply to perpetuate the wrong for rest of the contract period.

32. Reviewing the process depicted in Table –I further, it is observed that in all cases Generated or wheeled energy is less than the captive consumption. Firstly, Wheeled energy of 280 or 120 units being less than the total energy consumption of 300 units leads to - No Banking in all scenarios as there is no surplus units available with the captive generator. Secondly, Where actual units required from the AVVNL owned sources of the grid to meet the deficit in consumption is less than the ‘minimum units’, then the shortfall in ‘Minimum Units’ i.e. ‘Minimum Charge’ is recoverable and where units drawn from aforesaid source of the grid is more than the prescribed ‘Minimum Units’, then the ‘Minimum Charge’ is not recoverable. Thus for 1st month to 6 month The actual units deficit = (300-280) = 20 units, And 20 units being less than the prescribed minimum units of 107, the ‘minimum charge’ equivalent to 87 units (i.e. 107-20) are to be charged but not banked.

For 7th Months to 12th months

The actual units deficit = (300-120) = 180 units

And 180 units being more than prescribed minimum units of 107. being drawn from AVVNL sources of the grid to meet the deficit.

No recovery of ‘Minimum Charge’. No adjustment for 107 units. Charges for 180 units need only to be paid for.

Based on the above, the Table is modified as under:

TABLE

33. The Commission in the impugned order has concluded that the consumer gets benefits of 1878 Kwh (3600 Kwh consumption – 1722 Kwh) while has supplied 2400 Kwh as a generator and has misconstrued that 522 Kwh supplied by the generator is availed by Vitran Nigam without any payment. The fact is that 522 units are the notional units which represent the cost of non-drawal up to the prescribed minimum off-take level for first six months @ 87 units / month and charges accrued from it is meant to supplement fixed charges of the licensee. These units are liable to be charged as per Large Industrial Tariff Schedule and is meant to compensate cost incurred by the licensee. This is the legitimate liability of the Captive generator to licensee for under-drawal as per the HT-consumer agreement and is consistent with all agreements read together. It has essentially arisen out of the commission’s notified tariff order applicable to HT-consumers. Firstly, the situation in all cases of the example show that Wheeled energy is less than the consumption and, therefore, are not eligible for banking, hence, not qualified for consideration even. Secondly the notional shortfall in minimum off-take units (107 units) by 87 units/month simply cannot be allowed to be carried forward and banked in successive months for banking at page 13 of the impugned order in accordance with the impugned methodology which is challenged by the Appellant. If the specified procedure in the agreement is followed there will be no occasion to make a prior payment for Minimum Units.

34. The learned counsel for Respondent No. 2, RSMML, during presentation before us, has attempted to focus on differentiating features of the two procedures through an example with certain assumptions. However, I feel that in order to have an appreciation of the revised procedure for all scenarios, the table of the impugned order be recast on page 32 above and expanded to cover two additional situations as under:

(a) When generated and Wheeled energy is = Energy Consumption

(b) When generated and Wheeled energy is Energy consumption

35. The above scenario would appear as indicated below:

Table – III

36. Thus the banking of energy is only allowed when the energy generated and wheeled inclusive of energy earlier in bank is more than the captive consumption and the ‘minimum charge’ is liable to be recovered for all drawal from AVVNL owned sources of the grid being less than the specified minimum level without any assumption of that being drawn by the consumer or supplied by the licensee.

37. From the above there is a clear conclusion that even the pre-existing procedure would give same result as the proposed revised procedure for billing and banking by the Appellant, if ‘Minimum Charge’ is considered as deemed consumption instead of deemed supplied.

38. The captive consumer having given up its right to use energy units up to the minimum guaranteed off-take level ceases to have lien on the units not used and can not claim it to be banked for future use. Shortfall in minimum energy off-take level is merely notional and is not available to the consumer for use and is treated as deemed consumption and is to be paid for. Since minimum charge equivalent units are not recorded by the consumption meter, it is to be added to recorded consumption for billing. The Commission’s statement in the impugned order that “The ‘generator’ is the owner of generated energy and by any interpretation of agreement no part of energy generated by him and wheeled, can be utilized free of cost by the distribution licensee” is, therefore, not sustainable. Clause 17 (b) of the HT-consumer Agreement and tariff order passed by the Commission impose this liability on Respondent NO. 2, RSMML. The Minimum charge is deemed consumption by the Respondent No. 2 and is required to be paid to supplement the fixed cost of licensee.

39. It is observed that the Commission in the impugned order has referred to its order in case of M/s Balakrishan industries Vs. JVVNL in respect of supply of electricity by a wind power captive plant to its industrial units under the GOR policy of 2003. It says that the agreement executed was similar to the instant case. In that case, JVVNL was first adjusting the wheeled energy of wind farm from total energy consumption and balance was considered as supplied by JVVNL under large industrial service tariff and provision of the minimum billing was enforced. The procedure which was followed by JVVNL is exactly the revised procedure being proposed in the instant case by AVVNL. The Commission has stated to have found some anamoly in that banking in the Agreement dated 28 Aug. 2000 is mentioned in clauses 1(iv) and 2.2 (iii) but not in clause 3.4 which mentions units of adjustment. It says that clause 6.1(ii) and 7.4 para 1 and 2 of Agreement dated 19 Feb. 04 are analogous respectively to Clause No. 5(i), 7(i) and (ii) of the agreement between M/s Balkrishna and JVVNL. I do not at all agree with the alleged anamoly as all clauses of the relevant agreements if read down and interpreted harmoniously shall give the same result. The impugned order has stated that “the ‘generator’ is the owner of generated energy and by any interpretation of agreement, no part of energy generated by him and wheeled, can be utilized free of cost by the distribution licensee.” It amounts to saying that even in HT-consumer Agreement, the tariff approved by the Commission providing recovery of minimum charge supplementing the fixed cost of the licensee for giving connectivity to the consumer and making energy available is not allowed as the units equivalent to minimum charge is paid for but not utilized by the HT-consumer. In such a case also if the consumer is not drawing units from grid or drawing less than the minimum units has to pay for minimum charges without licensee supplying those units. The billing in the instant case is based on netting-off in kind the units exported/imported with minimum charges as deemed consumed. The units deemed consumed is to be justifiably set-off against the units generated and cannot be termed as units ‘utilized free of cost by the distribution licensee’. The Commission chooses to ignore the fact that the main cause is the prevailing tariff order approved by the Commission for HT-industrial consumers making provision for recovery of ‘Minimum Charges’ proportionate to contract demand, which is also applicable to wind based CPP. If the Commission was desirous of promoting NCE-source it could have addressed the situation under Sections 86(1)(e), 61, 62 and 64 of the Electricity Act 2003, either by creating a separate class of Tariff Category for CPP (NCE) exempting ‘Minimum Charges’ or providing any other concession to promote Non-conventional energy source of energy in particular wind power CPP.

What specific relief relating to ‘minimum charges’ was prayed for by the Petitioner?

40. While at it, attention has to be drawn to the Petition filed before the Commission in case of Balakrishna Industries Ltd. Vs. JVVNL, whereby the petitioner under Section 86(1)(e) and Section 86(4) of ES Act, 2003 had pleaded for removing the difficulties faced in the operation of wind based captive power plant. The impugned order in the instant case has drawn reference to the order in the aforesaid case and decided it accordingly. Mr. Bhandari, Advocate, on behalf of the Respondent No. 2, in the instant case, is also the advocate for the Petitioner. The petition is replete with the plea of waiver of ‘Minimum Charge’ clause in the following words:

“Ideally the old concept of minimum charges should be waived for consumers drawing substantial power from captive and non-conventional energy plants. This would greatly encourage them and lead to their faster growth. This would be a win win situation for all. By waiving minimum charges, the Discoms would not loose financially because whatever energy is consumed by the consumers, would be fully paid. It is only the non consumption that would be waived. If the Discoms are not supplying power, in all fairness, they should not go all out to extract charges even for non-consumption.” (Emphasis supplied).

Whatever may be the justification for minimum charges but for promoting captive and non-conventional energy, it would be a bold, equitable and just measure if the Hon’ble Commission could waive the minimum charges of the Petitioner. This will give a big boost to the captive plants and non-conventional energy without any financial burden upon the Discoms.

x x x

If the captive plants and non-conventional energy has to be given a boost, the minimum charge clause will have to be waived for consumers like the Petitioner x x x Removal of minimum charge clause is the only step which can give a quantum jump to the growth of the captive plants and non-conventional

energy without any financial burden upon the Discom. x x x The petitioner in its prayer has requested for:

3. …………………. ………provision of minimum charges should be waived in cases like the Petitioner, Payment for actual consumption on HT tariff can be made by the Petitioner”. (Emphasis supplied).

41. Even in the instant case the Petitioner before the Commission has pleaded for removal of difficulties in exactly the same terms and words. The impugned order does not address to the prayer for the waiver of minimum charges in the petition. The request is legitimate and the Commission should not have ignored if it wished to promote NCE sources. Had the Commission decided on giving relief requested, the dispute which is centered on ‘minimum charges’ would have been settled without acrimonious litigation.

The Appellant has, however, not included this as an issue in the Appeal.

42. The above clearly conveys the understanding of the Petitioners in the case of M/s

Balkrishan Vs. JVVNL and also in the instant case that the problem, if any, lay with the HT-consumer tariff order/policy and the Petitioner had sought remedial measures from the Commission by exercising the provisions of Sections 86(1)(e), 61, 62 and 64 of the Electricity Act, 2003 or power vested in it for removal of difficulty in Regulation. Instead the Commission proceeded to search for ambiguities in the W.B. Agreements (which did not exist) and did not take care to ensure that its interpretation should not compromise with HT-consumer agreement and its applicable tariff. The basic issues of composite billing have been threadbare examined in this judgment above while maintaining the integrity of all agreements and demonstrates beyond any doubt that the billing procedure followed prior to Nov. 05 is violative of agreement.

Additional Observation and Analysis

43. I also observe that despite Commission stating in the impugned order that “we state that the provision of minimum billing is to ensure an assured revenue to the supplier to meet its fixed cost…..”, it has completely gone diametrically opposite in banking the notional shortfall in prescribed minimum off-take units and in the process has denied the rightful dues to licensee. One should appreciate the significance of ‘minimum charges’ being hypothetical units having nexus with HT-consumer agreement and are considered deemed consumption facilitating the recovery of charges to supplement a portion of fixed cost incurred by the licensee. The HT-consumer agreement and WB agreement being distinctly separate agreements with mutually exclusive terms and conditions, if operated independently, will yield the same results as in the composite billing methodology here.

44. Respondent No. 2, RSMML in its written submission has stated that “while captive consumption’ is self-consumption, ‘minimum charges’ indicate the minimum level of consumption which a consumer should achieve every month. If the consumer does not consume that much of power, the Discom can levy minimum charges even without consuming a single unit. Therefore, the minimum charges are levied for any shortfall in consuming up to the minimum specified level. The question of levy of minimum charges can arise only when the minimum consumption falls short of the specified limit of monthly consumption.”

45. It goes further to submit that “But if the consumer regularly consumes equal or more than minimum charges, then there is no question of levying minimum charges against him. Minimum charges can be levied only if there is any short-fall in the minimum prescribed units. The present case is of analogous nature where the respondent has physically purchased electricity every month from the appellant, more than the minimum charges. Hence its liability to consume a minimum number of units is fully discharged. This liability of minimum charges is achieved not through any fiction or paper exercise or adjustment. This is achieved by actual purchase of power from the Discoms. “Minimum Charge” is nothing but such purchase of power from the Discom.” I may clarify that the payment on account of ‘Minimum Charges’ gets dissolved into the price of electricity if the drawal of units from the AVVNL owned sources of the grid is more than the specified level of ‘minimum units’; else the ‘minimum charges’ are to be recovered by treating the corresponding units as deemed consumed and not as deemed supplied.

46. The Respondent NO. 2 RSMML has also averred that “The electricity purchases every month is more than the prescribed minimum charges.” And has affirmed that “there is not a single month when the answering respondent’s electricity purchase was less than the minimum charges.” I hasten to add that if the aforesaid affirmation is held true then the ‘minimum charges’ is not liable to be recovered from RSMML and no adjustment of the corresponding ‘Minimum Units’ is warranted. This statement of the respondent, however, needs to be scrutinized and validated based on its submissions. The reference is made to passbook submitted as Annexure V and page No. 5 of reply filed before us. Respondent No. 2 has vehemently claimed that the electricity purchased every month is more than the prescribed minimum charges; that it has purchased electricity of Rs. 10.46 crores, the minimum charges being only Rs. 6.13 crores and thus it has purchased more electricity (Rs. 10.46 crores – Rs. 6.13 crores) than even the minimum charges. It further claims that there is not a single month when the answering Respondent’s electricity purchase is less than the minimum charges. Using the passbook data and the statement showing power consumption at page No. 5 of the reply filed before us, the claim has been tested for the month of July, August, and September, 2002. Since the columns in the statement of page NO. 5 except for ‘captive consumption’ provide the data in Rupees, the data for other columns have been taken from pass book of Annexure V for the corresponding months.

TABLE

Without going any further, the above figures demonstrate that in the above months the energy units drawn from AVVNL owned source of the grid is less than the specified Minimum units and, therefore, the claim made by the Respondent No. 2 is invalid. The data given by RSMML in column of ‘Captive Consumption’ of the above table is the total recorded consumption which includes captive generation plus drawl from AVVNL owned sources and has compared the minimum charges determined as per HT-consumer agreement with the total recorded consumption whereas it has to be compared only with what has been drawn from AVVNL owned sources. Therefore to obtain units drawn from AVVNL owned sources the total captive consumption for each month in column-I is to be reduced by the units of generation wheeled for captive use in column –II. In all the months taken for examination, the energy drawn from the AVVNL –owned sources are found to be less than the corresponding minimum units. Hence the minimum charges as indicated in the last column of the above table are liable to be charged from the Respondent No.2, RSMML.

47. RSMML also accepts that “Once surplus generation is there, then as per the GOR policy and the WB agreement, banking has to be allowed by the Discom.”

48. From the above, it is observed that while RSMML has made right assertions on the applicability of principles to be followed for the composite billing methodology enunciated earlier, it, however, in the same submission has negated them all in supporting the findings of the examples on pages 12 and 13 of the impugned order wherein with respect to the model taken in the example it is concluded that new methodology leads to utilization of free units (522 Kwh) to AVVNL for which it does not pay anything to the wind generator. I have no hesitation in confirming that it is how it is to be as it represents the cost of drawal of energy below the level of specified ‘Minimum Units’ and is meant to supplement the fixed charge of the licensee and the corresponding notional ‘Minimum Units’ are not eligible for banking as per the contract. I have analyzed the model sufficiently in detail above and found that the procedure followed prior to Nov. 05 has failed the test of composite billing methodology and principles thereof and is repugnant to the agreements. I have remarked earlier that if the procedure specified in the agreement is followed, there will be no necessity of prior adjustment of ‘Minimum Units’ in the billing process.

49. From the records of the Petition submitted by the Commission we found two letters written by RSMML, one dated 31.01.2005 addressed to M/s Rajasthan Renewable Energy Corporation Ltd and another D.O. letter dated 28.01.2006 from the M.D., RSMML to Secretary (Energy) GOR seeking help to resolve the disputes. We provided opportunity to the parties to clarify certain points on two occasions. Amongst other clarifications we also sought their comments on the aforesaid letters, particularly the examples given therein for illustration of the procedure. The Appellant and Respondent No. 2 has submitted their additional written submissions. The Appellant has submitted that minimum charges being deemed consumption and not recorded by the meter is to be added to recorded consumption, whereas the Respondent NO. 2. RSMML has endorsed the reduction of recorded consumption by the minimum charges. The example of the aforesaid letter is restated below with relevant remarks against each step in italics. I have remarked earlier that if the procedure specified in the agreement is followed then will be no necessity of prior adjustment of “Minimum Units’ in the billing process.

(1) Captive Consumption (units) = A (from the combined sources of Captive generation and AVVNL owned sources of grid and recorded by the consumption meter)

(2) Minimum Charges (units) = B (Not metered but derived from energy consumed from AVVNL owned source of grid and is deemed consumption)

(3) Balance units of consumption available for adjustment of wheeled power A-B=C (subtracting B from A amounts to exclusion of B in billing for payment. Instead B is to be added to A to obtain adjusted consumption)

(4) Power Wheeled from Wind Farm = D (Units adjusted in monthly bill of HT connection)

(i) If balance captive consumption is greater than captive generation (i.e. C D) then billing is = C-D

(ii) If captive generation is greater than balance consumption (i.e. D C) then the energy units equivalent to D-C is banked; No minimum charges.

Minimum charges, B, being deemed consumption and not recorded by meter is to be added to recorded consumption A i.e. [C = (A+B) –D] i.e. [(A-D) + B]. This is equivalent to saying that the recorded consumption at load site is first adjusted against the energy generated and wheeled for captive use (that amounts to energy drawn from the of Discom sources of grid) and the balance then added to minimum charges B for billing. This exactly turns out to be the revised procedure which is sought to be introduced by the Appellant. It may be further stated that whether the minimum charge is adjusted in the beginning with the captive consumption as in the pre-existing procedure or the same is adjusted in the end (as in the revised procedure) it should not make any difference in the result provided the minimum charges i.e. B is considered as deemed consumption and is treated as such. Respondent No. 2, RSMML in its written submission has illustrated the mechanism of billing by taking two examples, one where consumption is greater than the captive generation and second, in which the consumption is less than the captive generation:

TABLE

50. Through the above stated examples the Respondent No. 2, RSMML has supported the revised procedure that it had challenged before the Commission. I would not like to extend the examination of the issue further with respect to the submission of the Respondent No. 2 made on 15.04.2008 as I find that its arguments with respect to examples given at page 2 as well clarifications regarding the two letters of the Respondent analyzed at page 10 are mutually contradictory and are not sustainable.

51. Further, the Respondent No. 2, RSMML in its reply to the instant appeal has submitted the following averment:

(a) That there is no dispute on the statement of the appellant saying “the Respondent no. 2 was entitled to banking only in the event nothing was left unutilized after adjustment of the wheeled energy against the captive consumption (self).” And “it is elementary that only when something is surplus it can be banked”. It also admits that “The fact of the matter is that when generation is more and captive consumption less, then the provisions of banking come into play.” The aforesaid are the appropriate reiteration of the principles involved.

(b) “under the HT-agreement the licensee is contractually duty bound towards minimum charges”

52. Both of the above WB Agreements specify that banking is allowed only in case the total generation is more than the captive consumption and the quantum of energy to be banked is determined after adjustment of units for captive use inclusive of ‘minimum charges’; units drawn from the grid; units banked etc.

Applicability of doctrine of estoppel

53. The Commission has decided the petition of Respondent No.2, RSMML based on the merit of the billing procedure and has mentioned the applicability of doctrine of estoppel only in passing without going into detail. My esteemed colleague in her judgment has contended that based on the billing method adopted, RSMML could have planned its consumption of electricity as well as its production of electricity. And any change in the billing procedure (revised procedure) will disadvantage RSMML being not able to gain by regulating its production such that it just matches the shortfall in consumption plus minimum charges and in the process could have saved in generating energy units just equal to minimum charges.

54. An example in support of the above is cited with the assumptions of consumption

being 300 unit and energy generated and wheeled for captive use as 280 units and the deficit of 20 units in consumption is met by drawl of energy units from HT-supply of AVVNL owned sources. ‘Minimum Units’ is assumed as 107 units and RSMML pays for 87 units without actual consumption. The strategy recommended is to scale down the generation for captive use from 280 units to 193 units (i.e. reduction by about 30%) to avoid minimum charges for 87 units. It is only feasible if the entire production of the plant is reduced by 30%. It implies that 95% of the generation which is presently sold to AVVNL at a special incentive rate will also get reduced to 65% giving a debilitating impact on revenue from the sale and obviously will not be in the interest of Respondent No. 2 RSMML.

55. Restating the example differently, the captive generator generates, 5600 units; 280 units (constituting 5% of the generation) is meant for captive use and 5320 units being sold to AVVNL. If generation is backed down by 30% to save ‘minimum charges’ the sale will come down by 1596 units from 5320 units to 3724 units. Taking into account the saving of 87 units of minimum charges, net loss in revenue due to reduction in sale will be for 1509 units (1596 units – 87 units). Further the reduced generation will force industries of RSMML to draw more energy from AVVNL’s sources of the grid at a tariff applicable to large industries rather than using their own generation with payment of 2% or 10% towards the wheeling charges. It is not in consonance with the spirit of GOR policy.

56. I have no quarrel if to incentivise development of NCE sources, the minimum charges are abolished for supply of power from wind power plant meant for captive use as prayed for by the Respondent No. 2 RSMML in its petition before the Commission. Additionally as it brought out earlier at paras 21(b) and 27(d) the fiscal concessions including banking facility under GOR policy are the incentives to maximize production up to the maximum available generating capacity and any regulation to avoid paying minimum charges beside being contrary to the spirit of the policy is bound to be counter productive and disadvantageous to the generator and also such practice will make the facility of banking meaningless. It also does not make any economic sense to scarifies more for less as brought out above. If the Wind Power generators are operationally available it would be sensible to generate the energy from them at their maximum capacity since the fuel stock naturally available is free of cost and should be exploited fully.

57. There is no doubt that in the instant case both the parties operated the agreement in a particular manner for three years based on the impugned pre-existing billing procedure before it was detected to be erroneous and violative of the provisions of the agreements and the same was accordingly revised by the Appellant. It has been pointed out earlier that JVVNL, as a party impleaded in this appeal, was the Respondent in a similar case No. 101 of 2006 of Balakrishan Vs. JVVNL before the Commission and the present Appellant was one of the Respondents. The Petitioner was following the same billing procedure in its contract with JVVNL as now proposed in the revised procedure in the instant case. The Commission by its order directed JVVNL to follow the billing procedure which is impugned in this Appeal. The impugned order of the Commission against which the instant Appeal is preferred is disposed of in terms of the order passed in Case No. 101 of 2006. In both of the aforesaid cases which are of the similar nature the parties concerned operated the different billing procedures for almost equal length of time. If the conduct of the parties to a contract is to reflect the interpretation of the terms of contract and their actions on such understanding give meaning to the contract from which no deviation is permissible, it will lead to providing sanction to two billing procedures by the Commission for similar consumers. It will amount to discriminating consumers of the same class or category. It is against the provisions of the Electricity Act, 2003. The relevant portion of Section 62 of the Act is extracted below:

62. Determination of tariff (1) The Appropriate commission shall determine the tariff in accordance with the provisions of this Act for-

(a) supply of electricity by a generating company to a distribution licensee;

………………………………….

(b) transmission of electricity;

(c) wheeling of electricity;

(d) retail sale of electricity

………………………………….

(2) …………………..

(3) The Appropriate Commission shall not, while determining the tariff under this Act, show undue preference to any consumer of electricity but may differentiate according to the consumer’s load factor, power factor, voltage, total consumption of electricity during any specified period of the time at which the supply is required or the geographical position of any area, the nature of supply and the purpose for which the supply is required.

58. If the parties have by genuine oversight erroneously operated a procedure to implement a concluded contract for the first three years of the long validity period of the contract the equity demands that the error should not be allowed to be perpetuated to the commercial benefit/harm to one or the other signatories of the contract but needs to be corrected without further loss of time.

59. In the Case of C.V. Enterprises Vs. M/s. Baithwaite and Co. Ltd. and Ors., reported in AIR 1984 Calcutta 306, regarding the applicability of promissory estoppel in the concluded contract. The head note of the said judgment reads as under:

“There is no question of any promissory estoppel in respect of a contract which stands concluded. It applies only in the case where there is no concluded contract, but a promise has been made by one party intending to create legal relations or affect legal relationship to arise in the future and the other party has acted upon and changed its position. Thus where the contractual relationship between the parties have been established under a completed contract, there is no scope for the application of promissory estoppel). The rule of promissory estoppel is a rule of equity, while contractual relationship between the parties is governed by the law of contract. Where the provisions of law of the contract are applicable, the case comes within the domain of common law courts and the enforcement of the rule of promissory estoppel is mainly the concern of courts of equity.”

60. Also the Hon’ble Supreme Court in its judgment in the case of Ester Industries Ltd. Vs. U.P. State Electricity Board and Ors. reported in 1996 (11) SCC 199 has held as under:

“Promissory estoppel would apply only in a case where there was no contract executed between the parties. IN instant case, since there exists a contract duly executed under law between the petitioner and the Board which binds them unless the same is revised, the question of promissory estoppel does not arise”

In the same case the SLP was dismissed for the reasons that :

“In this case, the question does not arise for the reason that the promissory estoppel would apply only in a case where there was no contract executed between the parties. In this case, since there exists a contract duly executed under law between the petitioner and the Board which binds them, unless it is revised, the question of promissory estoppel does not arise. Considered from this perspective, we are of the view that the High Court has not committed any manifest error of law warranting interference.”

In view of the above in my opinion the doctrine of estoppel is not applicable in the instant case.

61. As regards Commission’s finding that in respect of the validity of claim under Section 56(2) of Electricity Act 2003 I am of the same opinion as brought out by my esteemed colleague in para nos. 29 to 47 of her judgment and endorse that the amount claimed by the AVVNL is subject to the general law of limitation under the Limitation Act and nothing falling due prior to three years from the date on which the claim is made would be barred by law.

Conclusion

62. In view of the above the impugned order is set aside and the Appeal is allowed subject to the Limitation Act, 1963. The Commission is advised to consider the prayer of RSMML (Petitioner before the Commission in Petition No. 100 of 2006) for waiver of minimum charges and take decision in accordance with law.

63. Accordingly the Appeal is disposed but no orders as to costs.

Ms. Justice Manju Goel, Judicial Member Opinion

1) The present appeal is directed against the order dated 04.11.2006 in Petition No. 100 of 2006 and the subsequent order dated 13.04.2007 declining to review the order dated 04.11.06. The appellant, Ajmer Vidyut Vitran Nigam Ltd. (AVVNL), is the successor in interest of the Rajasthan State Electricity Board (RSEB).

The background facts:

2) The respondent No.2, which runs the Jhamarkotra Mines in District Udaipur, has been a consumer of electric energy in bulk. The first agreement for High Tension supply by the Rajasthan State Electricity Board (PSEB for short) to the respondent No.2 i.e. Rajasthan State Mines and Minerals Ltd. (RSMML for short) is of 15th April, 1984. The respondent No.2 continues to be a consumer of High Tension electricity of the appellant and the contract dated 15th April, 1984 has been renewed from time to time. The agreement will be referred to as the HT agreement and electricity supply under the agreement as HT supply. The respondent No.2 set up various wind energy power plant at Barabagh in Jaisalmer District of Rajasthan. The Government of Rajasthan has been promoting generation of wind energy for which the Government issued a policy on 04.02.2000 and 03.04.2003. Having set up the wind energy power plant, on account of such encouragement, the respondent No.2 entered into a wheeling and banking agreement with the appellant on 29.08.2001. Banking of electricity is a facility to help small generating stations based on non-conventional energy sources to produce power by maximizing utilization of available fuel stock without demand restrictions. The purchaser i.e. the transmission licensee or distribution licensee, purchases the entire power generated by the plant and to the extent it is in excess of the need of the purchaser or the demand of the third parties, the same is, so to say, deposited or banked with the licensee which can be later released or returned to the generator as and when the generator may require. The policy paper dated 04.02.2000 issued by Rajasthan Energy Development Agency incorporated the clause that the State Electricity Board will permit the power generated in a financial year by eligible producers to be banked for the period up to 31st March of the said financial year and that the banked energy, if not consumed within this period would be treated to have been sold to the RSEB at 60% of the prevailing valid HT rates. The policy paper also includes wheeling or transmission clauses requiring RSEB to transmit on its grid the power generated by eligible producers and make it available to them for their captive use or to third party nominated by eligible producer for sale at a uniform wheeling charge of 2% of energy wheeled. The same provisions reappear in the next policy paper with the only amendment that the wheeling charges would be 10% of the energy wheeled. By the time the second policy paper was issued in 2003, the three distributing companies known as Jaipur Vidyut Vitaran Nigam Ltd., Jodhpur Vidyut Vitaran Nigam Ltd. and Ajmer Vidyut Vitaran Nigam Ltd. had come into existence as successors of the RSEB for the function of distribution of electricity. They were briefly described as Jaipur DISCOM, Jodhur DISCOM and Ajmer DISCOM in the policy paper. The wheeling and banking agreement was entered into by the respondent No.2 or RSMML with the Rajasthan Rajya Vidyut Prasaran Nigam Ltd. or the RVPN which was the transmission licensee at the time and with the Jodhpur DISCOM and Ajmer DISCOM (the appellant). This agreement was entered into for an initial term of 20 years. The RSMML, under the agreement, is entitled to make use of the power generated by it for its captive consumption at its industrial units or to sell to third parties after paying wheeling charges @ 2% to RVPNL and to wheel the energy to any place within the jurisdiction of the appellant or the Jodhpur DISCOM. RVPN was obliged to bank in a financial year up to 31st March of the financial year. The respondent No.2, RSMML was to bear the entire cost of grid interfacing including laying of HT lines from the point of generation to the nearest HT line of the Jodhpur DISCOM i.e. up to the technically feasible point. RSMML required energy at the wind farm for back up purposes. Meters were stipulated to be installed at the point of export of power to the grid and another for import from the grid. The meter for measuring outgoing energy i.e. power delivered by RSMML to RVPN was required to be installed at delivery point. Banking provision is as under:

“2.2 (iii) The energy supplied by RSMML at the delivery point shall be considered as the energy supplied to RVPN and deemed banking to RVPN after adjustment of Units for captive use and/or sale to third party by RSMML in case the total generation is more than the captive consumption and/or sale to third party plus wheeling charges.”

3) The main metering system and back up metering system were required to be sealed in the presence of the parties. Since billing provision is of importance in this case the same needs to be reproduced in its entirety.

“3.4. Billing Provision.

The billing will be on monthly basis. This shall be done after deducting the units for adjustment towards captive use and/or sale to third party by RSMML. The detailed account of units generated and used for captive use and/or sale to third party shall be kept in a pass book and or subsidiary pass books and such pass books shall be used for adjustment of bills. It is clarified that the users shall continue to be the consumer of Ajmer/Jodhpur Discom and shall be billed for the fixed charges and minimum charges as applicable for large industrial service as per the tariff determined by RERC. The Energy Charges shall be worked out on the net energy drawl from the grid (Total energy drawn less captive generation less losses and wheeling charges).

In the event the received Energy plus the banked energy so available for supply to the User(s) in any month is less than the Energy consumption of the User(s) in that month, the Energy supplied to each User from the plant shall be in the ratio, as intimated by RSMML two months in advance and such intimation shall be restricted to once a year and the balance of Energy consumed by each User will be deemed to have been supplied by the Jodhpur Discom/ Ajmer Discom to the User(s) at the applicable Energy Charges of Large Industrial Service Tariff.”

4) Annexure-‘A’ to the agreement showed location of RSMML’s industries which were in Jhamarkotra (District Udaipur), Sanu (District Jaisalmer) and Rishabdev (District Udaipur) and the third party user is at Debari (District Udaipur). Subsequent amendment to the wheeling and banking agreement was effected vide a letter dated 16.04.03, thereby fixing the price of energy supplied by RSMML to RVPN at Rs.3.18 per unit with provision to raise the rate annually. A fresh agreement was entered into on 19th February, 2004 between the same parties when the power producer i.e. RSMML intended to set up a 5 MW power plant at Village Pohara, District Jaisalmer. In this agreement, the power purchaser was to sell 95% of electric energy produced by it for commercial purposes to RVPN and to DISCOMs and consume 5% as captive use. This agreement also had a wheeling and banking condition. The RSMML was allowed to use the energy to its industrial units anywhere in Rajasthan after paying wheeling charges @ 10% of energy fed into the grid commensurate to the captive use to RVPN/DISCOMs. Banking was also allowed in the same terms as in the previous agreement. The billing provision in this agreement was as under:

“7.4 Billing Provision.

The billing will be on monthly basis. This shall be done after deducting the units for adjustment towards captive use by Power Producer. The detailed account of units generated and used for captive use shall be kept in a pass book and or subsidiary pass books and such pass books shall be used for adjustment of bills.

Concerned Discom shall prefer monthly bills as per applicable Tariff Rate for the electric power made available and energy supplied to the scheduled captive user out of their system after accounting for the energy delivered by Power Producer for captive use. It is clarified that the scheduled captive user shall continue to be the consumer of concerned Discom and shall be liable to pay minimum billing, fixed charges, excess demand surcharge, power factor surcharge and any other charges leviable and as may be applicable from time to time as per concerned Discom’s Tariff for supply of electricity and General Conditions of supply.”

5) The RSMML has been receiving power at Jhamarkotra mines as an HT consumer under the agreement which has been mentioned in the earlier part of this judgment. As an HT consumer RSMML was required to pay various charges including the minimum charge which has been mentioned in the billing provision. The two wheeling and banking agreements do not stipulate combining the two bills required to be served on the RSMML – one for consuming electricity as HT consumer and other for wheeling charges of the energy wheeled from its wind farms to its mining units. The two agreements however stipulate a pass book to be maintained and it appears that the parties did maintain a pass book. There was no dispute till the appellant Ajmer DISCOM/AVVNL changed the billing pattern in Nov. ’05. The new billing pattern led to increase in the amount payable by the RSMML to the appellant Ajmer DISCOM. RSMML challenged the new billing pattern before the Commission in Case No. 100/06 in which the impugned order dated 04.11.06 was passed.

6) Before going into the dispute it will be necessary to understand the why billing pattern makes such a substantial difference that may lead to a dispute. The power production was done at Barabagh and Pohara within District Jaisalmer. The point of consumption by RSMML was at Jhamarkotra within District Udaipur. The HT connection from the grid of the DISCOM to the Jhamarkotra mines already existed. The power produced by wind farm and Barabagh and Pohara was fed into the grid. It was from this grid that power was supplied to the RSMML. The grid had power from the wind farms of Barabagh and Pohara as well as from the other sources from which the power was received by the State transmission utility and the DISCOMs. When RSMML drew power from this grid, it can be said, it drew power from both or any of the two sources. How much of power consumed by RSMML from the supply of DISCOM and how much from the power produced by wind farm cannot be distinguished. One can only notionally attribute the power consumed as coming from one or both of the sources. For drawl from the DISCOM’s HT supply, RSMML was required to pay ‘minimum charges’ and other charges like all other HT consumers. Minimum charge is in the nature of fixed charge which a consumer has to pay whether or not he draws or consumes energy equivalent to the contracted minimum. The parties resorted to a composite billing for wheeling charges as well as for the HT charges, an important component of which is the minimum charge. In the bills, minimum charge was represented in terms of minimum energy required to be consumed. In the initial method followed, such minimum amount of energy was presumed to have been always consumed, whereas in the subsequent method it was presumed that RSMML paid the minimum charges but did not consume the HT supply unless the wheeled energy from wind farms was less than total consumption of electricity. Thus in the subsequent method, RSMML was shown liable for minimum charges without corresponding consumption from the HT source. This increased the liability of RSMML.

The pleas of the parties before the Commission:

7) RSMML disclosed in its complaint that it has been using wind power generated by it in the following manner:

• Phase – I and II (9.80 MW)

75% of generated power sale to Discom.

25% of generated power for its captive use at Jhamarkotra Mines.

• Phase – III (5.9 MW)

95% of generated power sale to Discom

5% of generated power for its captive use at Jhamarkotra Mines, Udaipur.

8) In the complaint to the Commission, RSMML complained that:

“5) Ajmer Discom used to adjust the wheeled power of wind farm in monthly energy bills from captive consumption after adjusting the minimum charges. The balance wheeled units of wind farm were adjusted towards captive consumption of the Petitioner. If in any month, the balance units were not sufficient then the same used to be adjusted in future months up till the end of the calendar year. By the end of the calendar year; if the banked units could not be adjusted then the same were treated as sale to Discom at 60% of the applicable tariff as per the wind power policy. Photocopy of a sample statement duly signed by the officers of Ajmer Discom is enclosed as Annexure V. This clearly shows that from the very beginning, adjustment was first made towards minimum charges.

6) From November 2005 Ajmer Discom has suddenly changed the procedure of adjustment of wheeled power in energy bills. Now they have started first adjusting the wheeled power of wind farm from captive consumption and then the balance units, if any, are calculated towards minimum charges and in case the same is not enough to cover the minimum charges, then Ajmer Discom levies minimum charges in the monthly energy bills.”

9) The appellant, which was the respondent before the Commission, filed a reply before the Commission. It did not dispute that it had changed the pattern of billing in the manner alleged, but justified the same on the plea that this was necessary to meet an audit objection. The relevant part of the reply is as under:

“5. That the contents of para 5 of the petition is not admitted in the manner stated. It is however submitted that as per the audit objection it was revealed that as per provision of agreement dated 29.8.2001 energy generated and fed in grid by the Rajasthan State Mines and Minerals Ltd. from their wind farm for their captive use was to be deducted after deduction of wheeling charges and net consumption should have been charged qua Rajasthan State Mines and Minerals Ltd. during same month but by way of inadvertence the answering respondent adjusted energy of captive generation equal to the consumption of consumer recorded over and above minimum consumption charges unit and remaining units were treated as unused and banked which was to be adjusted in subsequent month or upto closing of that year i.e. December of that year.

Thus this contention of the petitioner is incorrect that answering respondent was carrying out the instructions in consonance with the agreement but by way of inadvertence the same was deviated.”

The view of the Commission and the impugned order:

10) The Commission after hearing the parties passed the order dated 25th July, 2006. The Commission found that the provision of billing suffers from lack of clarity in respect of mechanism for banking and utilization of banked energy. It also observed that even GoR does not specify it. It also observed that generator i.e. RSMML as owner of the generated energy has right to declare at any step before meter reading as to how much energy to be banked or how much energy to be utilized for wheeling. This, however, was not done by the generator in actual practice. The Commission had examined the question involved in the case of M/s. Balakrishna Industries and had analysed the situation as under:

“14. In absence of such an declaration, distribution licensee has considered, entire energy generated and that banked as available to be utilized for wheeling for captive use and accordingly supplies to petitioner’s individual unit, is first adjusted for that available for wind generated captive use and balance is billed at HT large industrial service tariff. If entire energy (so wheeled) cannot be adjusted balance is banked. Unutilised banked energy as on 31st December is considered as deemed sale to Discom under clause 5(ii). This mechanism under certain contingency can result in HT supply billing at minimum billing. This is elaborated by the example. M/s. Balkrishna Industries as Consumer have contract demand of 3000 kVA. For billing demand of say 2952 kVA during a month, the minimum billing consumption will be 316549 kWh (‘minimum energy’). If total consumption of the consumer (‘consumption’) is 388080 kWh that if delivered plus banked energy, duly adjusted for wheeling charges of 10% (i.e. wheeled energy) is more than 71531 kWh (i.e. 388080 – 316549). Say it is 2,00,000 kWh then out of consumption of 388080 kWh wheeled energy of 2,00,000 kWh would be adjusted and HT supply billed for 1,88,080 kWh. As this is less than minimum billing, so consumer would be billed for minimum billing (equivalent to energy consumption of 316549 kWh). Thus, consumer, in facts, gets benefit of 3,88,080 – 3,16,549 = 71,531 kWh only against 2,00,000 kWh supplied by him. In other words, these units go to Discom free of cost. If, wheeled energy is more than consumption, say wheeling energy is 4,01,320 kWh against a consumption of 3,85,080 kWh, then wheeled energy cannot be fully adjusted and these are adjusted upto consumption and balance (in this case 16,240 kWh) are banked. But in this process, consumer gets no benefit for energy wheeled upto ‘minimum energy’. This is precisely the case cited for the billing month of April 05 cited by the petitioner in their letter dated 26.4.2005 (Annexure-4 of the petition). This mechanism in such extreme cases would not definitely encourage / promote wind energy generation.”

11) In the impugned order dated 04.11.06, the Commission found that if the adjustment is done as per audit para then it may not result in banking as envisaged in the agreements which were entered into in accordance with the GoR policy. This position has been elaborated by giving a table showing energy consumption as fixed at 300 kWh per kVA of contract demand and having a wind energy generator supplying wind energy of 280 kWh per month in the first six months and 120 kWh during the rest of the months and monthly minimum consumption required by the HT agreement being equal to 107 kWh (the energy generation is not uniform through out the year and generally about 70% is generated in the 1st and 2nd quarter and 30% in the 3rd and 4th quarter of the year). We need not reproduce the entire table to understand the impact of the two methods of billing which was cited for appreciation of the problem assuming that the consumption is 300 kWh and contract demand and minimum charge represented by 107 kWh/kVA.

12) The first two rows showing the disputed billing pattern of the table are reproduced below:

TABLE

13) However, if the billing as per the practice followed by the two parties till the audit objection was adopted the situation can be as depicted in another table given in the impugned order. We reproduce the first two rows hereunder:

Billing considering adjustment of wheeled energy beyond minimum billing

TABLE

14) As per the method earlier followed, it was being taken that the RSMML was consuming 107 kWh/kVA of contract demand as was required by the minimum charge term and was meeting further requirements of power from its own generation. In this process if the RSMML consumed 107 kWh/kVA from the HT supply of DISCOM then out of the wind energy of 280 kWh/kVA 87 remains unused and could be banked. The audit paragraph suggests that the RSMML be presumed to have first used the wind power generated by it and wheeled upto its mining industries and only requirements beyond such wind energy be taken to have been met from the DISCOMs under the HT agreement.

15) The Commission noted its earlier orders in the case of M/s. Balakrishna Industries raising similar issues wherein it had found that the billing clause was not in line with the GoR policy and also suffers from lack of clarity. It also found that even the GoR policy does not specifically say how in such situations billing will be done. The Commission then said :

“21. … In absence of such provision, obviously generator, as owner of generated energy has right to declare at any stage before meter readings, as to how much generated energy to be banked or how much banked energy to be utilized for wheeling. It also established that by enforcement of minimum billing for April 05), M/s. Balakrishna (as consumer) get benefit of 3,88,080- 3,16,549 = 71,531 kWh only against 2,00,000 kWh supplied by him (as generator). In other words these units went to discom free of cost. In this process, consumer gets no benefit for energy wheeled up to minimum (billing) energy. This mechanism (of billing for minimum charges) in some extreme cases would not definitely encourage/promote wind energy generation. The Commission held that in view of the anomalies indicated (in said order) the provision of clause 7 is not proper and requires review by JVVNL…..”

16) The Commission noted further :

“22. …. The “generator” is the owner of generated energy and by any interpretation of agreement, no part of energy generated by him and wheeled, can be utilized free of cost by the distribution licensee. The conclusion of the Commission in case of Balakrishna Industries and examples given in the preceeding paras in this order and the method of adjustment of delivered energy adopted by JVVNL and AVVNL, being not conducive to banking and use of delivered energy free of cost by discom is also corroborated by the consumption and adjustment for the month of June, ’03 and billing month of Aug’03 in case of RSMML…..”

17) The Commission tested the two methods on the RSMML’s production and consumption in the bills of certain months and found that subsequent method of billing which was based on the audit para provided the DISCOM with energy, supplied by RSMML, free of cost. The Commission observed:

“27. Thus, the billing procedure, as per the audit para, adopted by AVVNL is not based on harmonious interpretation of provisions of WBA and GoR policy and is not only against the policy of banking but also against natural justice to the generator. The procedure adopted in consequence of the audit para is, therefore, set aside.”

18) The Commission ended with the following direction:

“30. Although we have already directed the JVVNL to review the provisions of clause 7 of the agreement with M/s. Balakrishna Industries and similar clauses of other wheeling and banking agreements, we also direct AVVNL and JdVVNL and reiterate our direction to JVVNL to review the provisions of all wheeling and banking agreements in line with this order and confirm in writing to the Commission within 30 days.”

19) The Commission also noted that some part of the arrears claimed by the Ajmer DISCOM had become barred under section 56(ii) of the Electricity Act 2003. The Commission also made a reference to the doctrine of estoppel. The Commission however, did not examine the applicability of doctrine of estoppel in the case in much detail as it had concluded to allow RSMML’s petition on grounds mentioned above.

20) The appellant AVVNL/the DISCOM filed a Review Petition, being No. 124. The respondent No.2, RSMML, also filed a petition No.125 requesting the Commission to refer the matter for arbitration to settle the dispute. RSMML contended that inspite of repeated reminders AVVNL had not acted upon the Commission’s order dated 04.11.06. The Commission refused the prayer of RSMML on the ground that the dispute between the generation company and a licensee could not be referred to arbitration and RSMML as a consumer could lodge a complaint in the forum for redressal of grievance constituted under 42(5) of the Electricity Act 2003. RSMML has not challenged this part of the order and we need not go into the details of the issues involved in RSMML’s petition for reference to arbitration. Directions were given to AVVNL to comply with the Commission’s order dated 04.11.06 in respect of amending the clause by way of clarifying the model of the adjustment of wheeled energy and also settle the dispute in its corporate level grievance redressal forum within a period of 30 days.

Decision with reasons:

21) The appellant has challenged both the orders of the Commission. In the appeal, the question of jurisdiction of the Commission has also been raised to which I will come shortly. On merits the appeal challenges the finding of the Commission on the ground that the Commission has failed to appreciate the meaning of banking. The appellant reiterates its stand that there can be no banking so long as the consumption is not more than the wheeled energy and that in coming to this calculation the quantum of minimum consumption under the HT agreement has no relevance. The appellant also disputes the finding of the Commission as part of the claim being barred by section 56(2) of the Electricity Act 2003. Further the appellant challenges the Commission’s jurisdiction to direct an amendment in the PPA.

Jurisdiction:

22) So far as the jurisdiction is concerned suffice it to refer to section 86(i)(f) which endows the Commission with the function to adjudicate upon the disputes between the licensees and the generating companies and to refer any case to arbitration. The present dispute is a dispute between the licensees and the generating company. RSMML is a generating company. Although its consumption under the HT agreement, the dispute relates to its business as a generating company. Even the question of banking is a part of the banking wheeling agreement which is between the generating company and the licensee. Therefore, the Commission had the jurisdiction to adjudicate the dispute.

The contract and The Principle of Estoppel:

23) Coming to the merits of the case, the Tribunal has to begin by saying that the dispute related to the contract between parties and the respondent No.2, RSMML had approached the Commission for enforcement of the contract and therefore the first thing to be determined is the terms of the contract. The contract itself needs to be interpreted in order to give effect to it. The Commission has examined the question by keeping in view the GoR policy for promotion of non-conventional energy. The Commission has found that unless the billing is done in the method which was initially adopted the wind farm generator will be made to part with the power generated by it without getting the return of it which will not be in consonance with the policy to promote non-conventional energy and therefore it will be appropriate that first method be adopted. The Commission did make a mention of the plea of estoppel but did not go into the details of it as it had already settled the question on the basis of the policy for promotion of non-conventional energy.

24) The moot question is whether the respondent No.2 is entitled to treat the minimum consumption, as mandated by the HT agreement to be a part of the total consumption, while calculating whether the consumption from the energy delivered from the wind farm is less or more than the energy consumed. As said earlier, it will be a matter of contract as there is no way of distinguishing the energy coming from the DISCOM from the energy coming from the wind farm. The Commission has said that the RSMML being the generator of power could declare as to how much of its power is needed to be wheeled to its industry in another District. If the RSMML had done it, it would certainly have taken note of its liability to pay the minimum charges and would have assessed its requirements for energy from the wind farm accordingly. In other words RSMML would certainly have presumed that upto a minimum point of consumption energy would be drawn from the HT sources leaving the rest to be drawn either from the HT sources or from the wind farm depending upon which was cheaper. It appears that in the bill initially drawn nothing more than the minimum consumption is seen as having been drawn from the DISCOM under the HT agreement. The rest is shown to have been drawn from RSMML’s wind farm.

25) Now recalling the billing provision in the agreement as reproduced in paragraph 3 we find that the same is totally silent as to how billing should be done if the RSMML is assumed to have consumed the minimum mandated by the HT agreement. Now in this situation, the contract or the intention of the parties can be gathered by immediate subsequent conduct of the parties

26) The natural conduct of RSMML would be to consume the minimum required under the HT agreement because it will have to pay for it any way. So far as its own production is concerned the same was not to go waste even if left unconsumed for it could be banked. The first method adopted namely to presume the minimum under the HT agreement to have been consumed and therefore to form part of the total consumption was in no way contradictory to the banking and wheeling agreement. Therefore, the first method was not repugnant to the contract. Further this would have left more amount of energy to be banked compared to the second method of billing and would have been inline with the GoR policy which provided for banking as a means to promote electricity generation from non-conventional sources. This first method of billing therefore cannot be said to be wrong. Since both the parties also followed this method for several years it will be reasonable to presume that the parties understood the agreement to be the same, both parties therefore have to adhere to the contract as understood by them. Any other method will be violative of contract and therefore will be incorrect and impermissible. I have no hesitation to hold that the contract as evidenced by the conduct of the parties was to necessarily include the minimum consumption under the HT agreement within the total consumption at the industrial units of the RSMML.

27) The Commission has not gone into the applicability of the doctrine of estoppel in detail. However, doctrine of estoppel is undoubtedly attracted to this case. The parties have adopted a method of billing giving RSMML some benefit in terms of banking. Based on the billing method adopted, RSMML has planned its consumption of electricity as well as its production of electricity. Had the second method been initially adopted RSMML could have changed either its consumption of electricity or its production of electricity. Assuming energy requirements of RSMML and RSMML’s liability to pay minimum charges as given and further assuming that the minimum charges be taken note of only after deducting the power consumed from its share of power generation under the two banking and wheeling agreements, RSMML would stand to gain by reducing its production so that the production is equal to its share in it plus the minimum charges. Assuming the total consumption to be 300 and wheeled energy equal to 280, the consumption from DISCOM i.e. HT supply would only be equal to 20 thereby making RSMML paying for 107 units which would mean that RSMML pays for 87 units without actual consumption. If RSMML reduces the wheeled energy by 87 units and actually gets only 193 units wheeled it would pay equal to what it was paying while generating 280 units for wheeling to its industries. In this situation, it would pay the same amount but would save itself all the cost of generating 87 units. Therefore, it can be said that RSMML has acted upon the agreement as held out by the bills and has changed its position to its disadvantage and therefore the appellant cannot now go back and say that the methodology adopted by it was wrong.

28) Since the parties by their conduct, in the course of their dealing have put a particular interpretation to the terms of contract and both have acted on such understanding of the contract both are bound to continue to give the same meaning to the contract and any deviation would be barred by the doctrine of estoppel. This proposition could not have been said better by anyone other than Lord Denning in Amalgamated Investment and Property Co. ltd. (in liquidation) v Texas Commerce International Bank Ltd. 1981 All England Law Reports 577.. In that case there was in fact a mistake committed by the parties in construing the terms of the contract. Yet it was said that since they had given one particular meaning to the contract for several years both were bound to treat the contract at such. It will be proper to reproduce the following part from the judgment which would bring out the effect of conduct which follows a written contract:

“….There are many cases to show that a course of dealing may give rise to legal obligations. It may be used to complete a contract which would otherwise be incomplete: see Brogden v Metropolitan Railway (1877) 2 App Cas 666 at 682 per Lord Hatherley. It may be used so as to introduce terms and conditions into a contract which would not otherwise be there: See J Spurling Ltd. v Bradshaw [1956]2 All ER 121, [1956] I WLR 461, and Henry Kendall and Sons (a firm) v William Lillico and Sons Ltd. [1966] I All ER 309 at 322, 327-329, [1966]I WLR 287 at 308, 316, CA; [1968]2 All ER 444 at 462, 474-475, 481, [1969]2 AC 31 at 90, 104, 113 (per Lord Morris, Lord Guest and Lord Pearce in the House of Lords all disapproving the dictum of Lord Devlin in McCutcheon v David Macbrayne Ltd. [1964]I All ER 430 at 437, [1964]I WLR 125 at 134) and Hollier v Rambler Motors Ltd. [1972]I All ER 399 at 403-404, [1972]2 QB 71 at 77-78 per Salmon LJ. If it can be used to introduce terms which were not already there, it must also be available to add to, or vary, terms which are there already, or to interpret them. If parties to a contract, by their course of dealing, put a particular interpretation on the terms of it, on the faith of which each of them to the knowledge of the other acts and conducts their mutual affairs, they are bound by that interpretation just as if they had written it down as being a variation of the contract. There is no need to inquire whether their particular interpretation is correct or not, or whether they were mistaken or not, or whether they had in mind the original terms or not. Suffice it that they have, by the course of dealing, put their own interpretation on their contract, and cannot be allowed to go back on it.

……

So I come to this conclusion: when the parties to a contract are both under a common mistake as to the meaning or effect of it and thereafter embark on a course of dealing on the footing of that mistake, thereby replacing the original terms of the contract by a conventional basis on which they both conduct their affairs, then the original contract is replaced by the conventional basis. The parties are bound by the conventional basis. Either party can sue or be sued upon it just as if it had been expressly agreed between them.

Conclusion

The doctrine of estoppel is one of the most flexible and useful in the armoury of the law. But it has become overloaded with cases. That is why I have not gone through them all in this judgment. It has evolved during the last 150years in a sequence of separate developments; proprietory estoppel, estoppel by representation of fact, estoppel by acquiescence and promissory estoppel. At the same time it has been sought to be limited by a series of maxims: estoppel is only a rule of evidence; estoppel cannot give rise to a cause of action; estoppel cannot do away with the need for consideration, and so forth. All these can now be seen to merge into one general principle shorn of limitations. When the parties to a transaction proceed on the basis of an underlying assumption (either of fact or of law, and whether due to misrepresentation or mistake, makes no difference), on which they have conducted the dealings between them, neither of them will be allowed to go back on that assumption when it would be unfair or unjust to allow him to do so. If one of them does seek to go back on it, the courts will give the other such remedy as the equity of the case demands.”

29) In view of the above analysis of law, the appellant is estopped from changing its way of billing RSMML for wheeling and for minimum consumption and for banking the power available for that purpose. Thus we find that :

i) The contract was in fact as was evidenced by the billing method adopted immediately after the banking and wheeling agreements and the conduct that continued for years thereafter.

ii) We find that the appellant is not entitled to the subsequent method of billing, being estopped by conduct and on principle enunciated in the judgment Amalgamated Investment and Property Co. ltd. (in liquidation) v Texas Commerce International Bank Ltd. 1981 All England Law Reports 577 (supra)

Bar of Section 56(2) Electricity Act :

30) The Commission has found that the claim for the period of July 2002 to August 2003 is barred by section 56(2) of the Electricity Act 2003. The appellant on the other hand says that the period of two years under section 56(2) starts running after the first bill is raised. I feel that neither the Commission nor the appellant has properly understood the import of section 56(ii) of Electricity Act 2003.

31) Clause (1) and (2) of 56 have to be read together to understand the import of the second sub section. The Section is extracted below:

“56. Disconnection of supply in default of payment. –(1) Where any person neglects to pay any charge for electricity or any sum other than a charge for electricity due from him to a licensee or the generating company in respect of supply, transmission or distribution or wheeling of electricity to him, the licensee or the generating company may, after giving not less than fifteen clear days’ notice in writing, to such person and without prejudice to his rights to recover such charge or other sum by suit, cut off the supply of electricity and for that purpose cut or disconnect any electric supply line or other works being the property of such licensee or the generating company through which electricity may have been supplied, transmitted, distributed or wheeled and may discontinue the supply until such charge or other sum, together with any expenses incurred by him in cutting off and reconnecting the supply, are paid, but no longer:

Provided that the supply of electricity shall not be cut off if such person deposits, under protest,-

(a) an amount equal to the sum claimed from him, or

(b) the electricity charges due from him for each month calculated n the basis of average charge for electricity paid by him during the preceding six months,

whichever is less, pending disposal of any dispute between him and the licensee.

(2) Notwithstanding anything contained in any other law for the time being in force, no sum due from any consumer, under this section shall be recoverable after the period of two years from the date when such sum became first due unless such sum has been shown continuously as recoverable as arrear of charges for electricity supplied and the licensee shall not cut off the supply of the electricity.”

32) Section 56 has the caption “Disconnection of supply in default of payment”. Section 56 is not prescribing the period of limitation. It is prescribing a procedure of disconnection of supply in default of payment. It is a tool of recovery of dues. 56(1) says that the dues towards electricity supply can be recovered by a licensee or a generating company by disconnecting electric supply line. This procedure is without prejudice to the right of licensee or the generating company to recover such charge by the legal process of filing a suit. The consumer can save himself such consequences of default by making the payment as prescribed in (a) and (b) to the proviso to 56(1). if the electricity company intends to file a suit it will have to file a suit within the time prescribed by the Limitation Act. However, even without resorting to a suit, the company is allowed to use the coercive method of disconnection of electricity to force the consumer or purchaser of electricity to make the payment.

33) The sub section (2) then proceeds to say that this coercive method shall not be available if after the sum has become due the same has not been shown for two years continuously in the bills. For this purpose it will be proper to dissect section (2) as under:

i) notwithstanding anything contained in any other law for the time being in force,

ii) no sum due from any consumer,

iii) under this section shall be recoverable after a period of two years from the date when such sum became first due,

iv) unless such sum has been shown continuously as recoverable as arrears of charges for electricity supplied and

v) licensee shall not cut off the supply of electricity

34) The second sub section has to be necessarily read with the first sub section. This is the general rule of interpretation. However, in this case it is all the more important because the second sub section has the words “under this section”. 56(1) is not creating any dues. It is creating a method of recovery. This method of recovery is disconnection of supply albeit after 15 days notice. 56(2) says that this process of recovery is subject to certain restrictions. So we can find the first important part of section 56(2) namely no sum due from any consumer, under this section shall be recoverable after the period of two years. It is important to notice the comma after the word consumer and absence of the comma after the word section. So “under this section” has to relate to the subsequent words “shall be recoverable” and not to “no sum due”. Therefore, it follows that sub section (2) says that no sum shall be recoverable under this section after two years under this section.

35) The two years period starts when such sum became ‘first due’ which is another important term to notice here. Now the protection given to a consumer (not to others purchasing electricity) is that the electricity shall not be disconnected for recovery of dues which are more than two years old or after the lapse of two years from the time the sum became first due. Now this has to be read with the interest of the consumer in view. Vis-à-vis a consumer a sum becomes due towards his electricity consumption when a bill is raised by the distributing company. In that sense, the words “first due” may be read to mean when the sum was first billed.

36) However, there is another exception which is for the protection of the distribution company which comes from the following words “unless such sum has been shown continuously as recoverable as arrears of charges for electricity supplied”. In another words, if the sum has been shown continuously as arrears of charges for electricity supplied then the method of recovery given in 56(1) can be used even after the lapse of two years.

37) The last words “and the licensee shall not cut off the supply of electricity” has to be read with the first clause of the sentence i.e. “no such …. shall be recoverable”. The sub section, thus, says that the licensee shall not cut off electricity after a lapse of two years from the date the sum became due unless the dues have been continuously shown for two years.

38) When the two sub sections are read together we find that for recovery of dues from a consumer 15 days clear notice will have to be given but at the same time a bill should have been raised specifying the amount due.

39) The section 56 read as a whole does not at all give any period of limitation for recovery of dues in the usual legal process which is through a civil suit. Limitation of two years is only for the method of recovery given in section 56(1). This does not mean that the distributing company can raise a bill even after the dues have become barred by limitation. Nor does it say that limitation vis-à-vis the distributing company or the creditor, will start running only after the bill is raised. The appellant however, says that only after November 2005 when it raised the bill, the limitation shall start running.

40) The appellant seeks support to its view the judgment rendered by this Tribunal in the case of Ajmer Vidyut Vitran Nigam Ltd. Vs. M/s. Sisodia Marbles and Granites Pvt. Ltd. Appeal No. 202 and 203 of 2006, decided on 14.11.2006.

41) I have carefully gone through the judgment. The judgment in appeal No. 202 and 203 have been passed by applying the opinion expressed by the High Court of Delhi in the case of H.D.Shourie Vs. Municipal Corporation of Delhi 1987 Delhi 219. This judgment of the High Court, rendered in the case of H.D.Shourie Vs. Municipal Corporation of Delhi, was subject to a letter patent appeal and the Division Bench of the High Court dismissed the appeal (which is reported in 1994(1) AD Delhi 105).

42) That judgment deals with three sections which are as under:

(i) Section 455 of the Municipal Corporation of Delhi Act

(ii) Section 24 of the Indian Electricity Act 1910 and

(iii) Section 26(6) of the Indian Electricity Act 1910.

None of these sections have anything similar or analogous to the provisions of sub section 92) of section 56 of Electricity Act 2003. Section 455 of Municipal Corporation of Delhi Act provides for a method of recovery of certain dues. The Corporation has been empowered to recover certain dues as arrears of tax. This coercive provision has a proviso namely “that no proceeding for recovery of any sum under this section shall be commenced after the expiry of three years from the date of which such sum becomes due”. It is in the context of 455 that the Delhi High Court said that so far as the person liable to pay is concerned the sum will become due when the bill is raised. If the coercive method is not adopted for three years even after such a bill is raised the coercive method will no more be available to Municipal Corporation. There can be no quarrel with this proposition. However, if we say that Municipal Corporation of Delhi is not subject to any law of limitation that will not be correct. One cannot say that Municipal Corporation of Delhi can wait and wait even after a sum has become due to it and raise a bill after many years and say that it has now become due on account of the bill being raised and therefore take the coercive method of recovery as arrears of tax unless the Corporation was prevented, by some reason, from raising the bill on time.

43) In the judgment in the appeal, the DB of the High Court said that the liability to pay may arise when the electricity consumed by the consumer nevertheless it becomes due and payable when the liability is quantified and a bill is raised. This was said in the context of the case which was one of defective meter. The bill for the connection could be raised only after the defect was detected and the arrears assessed. The period of limitation starts running only when the fraud on mistake could, with reasonable diligence, have been discovered by the creditor. This principle is incorporated in section 17 of the Limitation Act which is as under :

“17. Effect of fraud or mistake. – (1) Where, in the case of any suit or application for which a period of limitation is prescribed by this Act,-

(a) the suit or application is based upon the fraud of the defendant or respondent or his agent; or

(b) the knowledge of the right or title on which a suit or application is founded is concealed by the fraud of any such person as aforesaid; or

(c) the suit or application is for relief from the consequences of a mistake; or

(d) where any document necessary to establish the right of the plaintiff or applicant has been fraudulently concealed from him;

the period of limitation shall not begin to run until plaintiff or applicant has discovered the fraud or the mistake or could, with reasonable diligence, have discovered it; or in the case of a concealed document, until the plaintiff or the applicant first had the means of producing the concealed document or compelling its production:

Provided that nothing in this section shall enable any suit to be instituted or application to be made to recover or enforce any charge against, or set aside any transaction affecting, any property which-

(i) in the case of fraud, has been purchased for valuable consideration by a person who was not a party to the fraud and did not at the time of the purchase know, or have reason to believe, that any fraud had been committed, or

(ii) in the case of mistake, has been purchased for valuable consideration subsequently to the transaction in which the mistake was made, by a person who did not know, or have reason to believe, that the mistake had been made, or

(iii) in the case of a concealed document, has been purchased for valuable consideration by a person who was not a party to the concealment and, did not at the time of purchase know, or have reason to believe, that the document had been concealed.

(2) Where a judgment-debtor has, by fraud or force, prevented the execution of a decree or order within the period of limitation, the court may, on the application of the judgment-creditor made after the expiry of the said period extend the period for execution of the decree or order.

Provided that such application is made within one year from the date of the discovery of the fraud or the cessation of force, as the case may be.”

44) Section 24 of the Indian Electricity Act 1910 has a caption “Discontinuance of Supply to consumer neglecting to pay charge”. This section also gives power to a licensee in respect of supply of energy to cut off supply after giving seven days clear notice. This also prescribes that this right to disconnect for the purpose of recovery of its charges will be without prejudice to its right to recover dues through a civil suit. No time limit is prescribed therein. The Section 24 is reproduced below:

“24. Discontinuance of supply to consumer neglecting to pay charge.-

[(1)] Where any person neglects to pay any charge for energy or any [sum, other than a charge for energy,] due from him to a licensee in respect of the supply of energy to him, the licensee may, after giving not less than seven clear days’ notice in writing to such person and without prejudice to his right to recover such charge or other sum by suit, cut off the supply and for that purpose cut or disconnect any electric supply-line or other works, being the property of the licensee, through which energy may be supplied, and may discontinue the supply until such charge or other sum, together with any expenses incurred by him in cutting off and re-connecting the supply, are paid, but no longer.”

45) Section 26(6) prescribes a time limit for raising a revised bill in case the meter was defective. This period is six months. The relevant provision is extracted below :

“26. Meters.- (1) …

(2) …

(3) …

(4) …

(5) …

(6) Where any difference or dispute arises as to whether any meter referred to in sub-section (1) is or is not correct, the matter shall be decided, upon the application of either party, by an Electrical Inspector; and where the meter has, in the opinion of such Inspector ceased to be correct, such Inspector shall estimate the amount of the energy supplied to the consumer or the electrical quantity contained in the supply, during such time, not exceeding six months, as the meter shall not, in the opinion of such Inspector, have been correct; but save as a foresaid, the register of the meter shall, in the absence of fraud, be conclusive proof of such amount or quantity;

(7) …”

46) This provision is merely about revision in a bill. It has no relation to mode of recovery of dues or with disconnection of supply as a method of recovery. This provision is again for the protection of the consumer which is clearly brought out in the judgment of single Judge, extracted in the judgment of this Tribunal in the aforesaid appeal No.202 and 203 of 2006:

“The maximum period for which a bill can be raised in respect of a defective meter under S. 26 (6) is six months and no more. Therefore, even if a meter has been defective for, say, a period of five years, the revised charges can be for a period not exceeding six months. The reason for this is obvious. It is the duty and obligation of the licensee to maintain and check the meter. If there is a default committed in this behalf by the licensee and the defective meter is not replaced, then it is obvious that the consumer should not be unduly penalized at a later point of time and a large bill raised. The provision for a bill not to exceed six months would possibly ensure better checking and maintenance by the licensee”.

47) The judgment in the case of H.D.Shourie Vs. Municipal Corporation of Delhi 1987 Delhi 219 first says that the provisions of section 455 would come into play after detection of the defect and consequent submission of the bill for electricity charges and not earlier.

48) The appeal No. 202 and 203 of 2006 was also a case of defective meter. The meter was replaced but the bill for the dues had not been immediately raised. The bill was raised after two years. Till then the claim of the Electricity Distributing Company had not become barred by limitation on account of application of section 17 of the Limitation Act. Therefore, the appeal deserved to be allowed. This Tribunal did allow the appeal although on a different analysis. It will not be correct to say that the judgment in Appeal Nos. 202 and 203 of 2006 lays down a law that the period of limitation shall not run even if the DISCOM is negligent in raising the bill and allows three years to pas even after the defect in the meter was discovered.

49) Applying the above analysis to our case the amount claimed by the AVVNL is subject to the general law of limitation and anything falling due prior to three years from the date on which the claim is made would be barred by limitation as prescribed by the Limitation Act 1963.

Other issues:

50) The appellant has also challenged the jurisdiction of the Commission in making the direction to review the provisions of clause 7 of the agreement with M/s Balakrishna Industries and similar agreements of banking and wheeling agreements in line with the order. It is contended that when the parties have concluded the contract the Commission cannot direct the parties to review that contract. It will be re-opening of the already concluded contract. The respondent relies upon two earlier judgments of this Tribunal and claims that section 86 (i)(e) allows the Commission to reopen a contract dealing with generation of electricity from renewable sources of energy. Section 86(i)(e) is as under:

“86. Functions of State Commission.- (1) The State Commission shall discharge the following functions, namely:-

(a) ….

(b) ….

(c) ….

(d) ….

(e) Promote cogeneration and generation of electricity from renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity to any person, and also specify, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee;

(f) ….

(g) ….

(h) ….

(i) ….

(j) ….

(k) ….”

51) Apparently this section, directs the Commission to promote cogeneration from renewable sources of energy. But the clause also mentions the method for promotion that is by providing suitable measures for connectivity with the grid and sale of electricity to any person. Apart from promoting generation from renewable sources of energy the Commission has also to specify purchase of electricity from such sources, a percentage of total consumption of electricity in the area of a distribution licensee. The power to reopen a concluded PPA of wind energy does not directly flow from this section.

52) The proposition that the Commission under the aforesaid clause can reopen the concluded PPA, may be a disputable proposition. However, in the present case it is sufficient to say that the agreement as it exists has to be interpreted in the manner described in this judgment. If at all the parties so want this interpretation can be included in a fresh contract. If the parties agree to the second method of billing they cannot be barred from entering into another agreement to do so. The parties are under certain obligations on account of the GoR policy. Subject to those obligations, the parties can enter into any agreement according to their own volition and suiting their respective commercial interests. Nothing more is required to be said by this Tribunal in this regard. In the facts of the case it is no more necessary to enter into an anlysis of several provisions of Electricity Act 2003 to examine the jurisdiction of the Commission in passing the order for reviewing the wheeling and banking agreements.

53) Before parting with the judgments one can also refer to the plea raised by the RSMML in reply to the appeal. In its written submission RSMML, referring to certain Supreme Court judgments, says that contracts have to be interpreted in favour of the weaker party. In my opinion this plea does not arise for consideration in this appeal. At no point of time RSMML based its case on respective strength of the two parties. It will not be proper to stereotype all wind generating companies as weaker and all distributing and transmission licensees as stronger.

54) In view of the above analysis the appeal is dismissed. The petition filed RSMML before the Commission is allowed. During the continuance of the wheeling and banking agreement and the HT agreement, unless the same are expressly modified by the parties, the appellant will bill the respondent No.2 in the method applied before November, 2005.

55) Before parting with the judgment I have to say that I had the privilege of going through the judgment of my learned brother Shri A. A. Khan. We have disagreed on the merit of the matter namely the methodology for composite billing as also on the question of application of principle of estoppel. Both the question will now be dealt with by another member of this Tribunal. The respondent had prayed for waiver of the provision of minimum charges which the Commission has not considered and by implication has rejected. The respondent has not challenged this part of the impugned judgment by filing any appeal / cross appeal and therefore I do not think it necessary to remand the matter to the Commission for consideration of the respondent’s plea for abolition of minimum charges.

56) Pronounced in open court on this 09th day of May, 2008.

ORDER OF REFERENCE

UNDER SECTION 123 OF ELECTRICITY ACT 2003

We have today (i.e. 08th May, ’08) delivered two judgments on this appeal. The judgment written by one of us, Shri A. A. Khan, concludes that the appeal has to be allowed subject to Limitation Act of 1963 setting aside the impugned order and the principle of estoppel is not applicable in the case. He also holds that the principle of conduct of parties to the contract deciding the future operation is not applicable in the instant case. The other Member namely Mrs. Justice Manju Goel has concluded that the appeal be dismissed and that during the continuance of the wheeling and banking agreements and the HT agreement, unless the same are expressly modified by the parties, the appellant will be billed by respondent No.2 in the method applied before November 2005.

The points of divergence can be culled out as under:

(a) Whether the billing pattern for the energy consumption of RSMML, the respondent No.2, should be the one that was being followed before November, 2005 or whether the billing pattern should be the one which was challenged before the Commission, respondent No.1.

(b) Whether the principle of conduct of the parties to the contract deciding the future operation of the contract is applicable in the instant case.

(c) Whether the principle of estoppel has any application in the facts of the case.

(d) Whether a remand order is required to be passed directing the Commission to consider the respondent’s prayer for waiving the minimum charges.

These points are being referred to the Hon’ble Chairperson of this Tribunal for further action under section 123 of the Electricity Act, 2003.