Power Purchase Agreement Rebate Interpretation: Supreme Court Ruling

The Supreme Court of India recently ruled on an important case concerning the interpretation of Clause 6.5 of the Power Purchase Agreement (PPA). The case involved Tuppadahalli Energy India Pvt Ltd as the appellant and the Karnataka Electricity Regulatory Commission (KERC) as the respondent.

Background of the Case

Tuppadahalli Energy India Pvt Ltd entered into a Power Purchase Agreement with Karnataka Electricity Regulatory Commission (KERC). The dispute arose regarding Clause 6.5 of the agreement, which the KERC and the Appellate Tribunal for Electricity (APTEL) interpreted as an incentive for the prompt payment of monthly tariff invoices.

Arguments of the Petitioner

The appellant argued that Clause 6.5 was a one-time expenditure rather than an ongoing rebate for timely payments. The petitioner contended that the clause should be understood as a fixed incentive rather than a recurring benefit.

Arguments of the Respondent

The Karnataka Electricity Regulatory Commission maintained that Clause 6.5(v) was a rebate mechanism to encourage prompt payments of the monthly tariff invoice. The Appellate Tribunal for Electricity supported this interpretation.

Supreme Court’s Judgment

Justice Kurian Joseph and Justice A. M. Khanwilkar ruled that Clause 6.5(v) indeed functions as a rebate for timely payments, rejecting the appellant’s argument that it was a one-time expenditure. The court noted that while Clause 6.2 provides for interest on delayed payments, Clause 6.5(v) explicitly establishes a discount for payments made on time.

Final Verdict

The Supreme Court upheld the views of the KERC and APTEL, ruling that their interpretation of Clause 6.5 was reasonable and legally sound. Since no substantial question of law was involved, the court dismissed the appeals.

Implications of the Judgment

• Reaffirms the principle that timely payments can be incentivized through rebates.
• Provides clarity for similar power purchase agreements in the electricity sector.
• Ensures that regulatory bodies have the authority to interpret contractual clauses in line with industry practices.

The ruling sets an important precedent for contractual interpretations related to electricity regulations and rebates on tariff payments.

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Download Judgment: Tuppadahalli Energy vs Karnataka Electricit Supreme Court of India Judgment Dated 10-01-2017.pdf