The Supreme Court directed the Punjab State Power Corporation (PSPCL) to pay Rs 1100 crores as refund to L&T subsidiary Nabha Power (NPL), relieving NPL from a potential loss of Rs 8000 crore over the next 22 years.

Senior advocates Mukul Rohatgi and CS Vaidyanathan appeared for Nabha Power in the Supreme Court, briefed by HSA Advocates founding partner Hemant Sahai, partner Aniket Prasoon and associate Abhishek Kumar and associate Srishti Rai. The advocates-on-record (AoR) in the matter was Agarwal Law Associates, via partner Mahesh Agarwal and partner Rishi Agarwal and associate Parul Shukla and associate Sadapurna Mukherjee.

J Sagar Associates (JSA) had advised Larsen & Toubro subsidiary Nabha Power before the matter had reached the Supreme Court.

PSPCL had entered into a power purchase agreement (PPA) with NPL, on the energy charges formula contained in which both parties entered a dispute. According to an HSA statement PSPCL was:

a) not making payment towards the washing charges of coal including the cost of coal lost in washing;

(b) erroneously considering the gross calorific value (GCV) of the coal at the mine end at Chhattisgarh; and

(c) also not making payment towards surface transportation at the mine end as well as the plant end.

Effectively, PSPCL took a position that the entire costs related to washing should have been included by NPL’s parent company while bidding as part of the capital cost of the Project and the same does not constitute as part of the cost of purchase of coal in the energy charges formula specified in the PPA.

In this way PSPCL had ended up deducting Rs 1100 crores from its payment obligation under the PPA over a period of 3 months. The Supreme Court directed it to refund that amount to NPL failing which it will have to refund the principal amount and simple interest at 12%.

“The long-term impact of this judgement will allow NPL to have benefits over the balance term of around 22 years as the future deduction by PSPCL is going to stop on the basis of this judgement. The overall impact could have been around Rs. 7000 – 8000 crores over the entire term of the PPA,” according to the HSA release.

Justices Sanjay Kishen Kaul and Rohinton Fali Nariman ordered:

On behalf of the first respondent an endeavour has been made to make a distinction between ‘at the site’ and ‘to the project’ in the definition of FCOAL and PCV. However, this is not of much assistance to the first respondent, in our view, as delivery ‘to the project’ could only mean ‘at the site of the project’. It cannot be at the mine site. In fact, this is a fundamental issue where the first respondent seems to be altering the basic concept of the formula by seeking to replace the wordings in the formula relatable to the project-site to the mine-site. 68. In view of our discussion we have no hesitation in concluding that the point at which the Calorific Value of the coal is to be measured is at the project-site. The plea of the first respondent that there is no such methodology of measuring the Calorific Value at the project-site is belied by the sample reports of different financial years filed by the appellant along with the synopsis, which itself referred to the joint sampling and testing of the coal received and is duly signed by both sides. It is surprising how such a bald denial was made despite the position existing at the site. These sample reports are for years 2014, 2015, 2016 and 2017.

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