Supreme Court: Parties Are Bound By Their Pleadings & Case Put Forth By Them; Court Can't Substitute Its Notion Of What Case Should Be

The Supreme Court reiterated that parties are bound by their pleadings and the case put forth by them on the strength thereof and it is not for the Court to substitute its own notion of what that case should be.

The Court reiterated thus in Civil Appeals filed by Gujarat Urja Vikas Nigam Limited (GUVNL) under Section 125 of the Electricity Act, 2003, challenging the common Judgment of the Appellate Tribunal for Electricity (APTEL), New Delhi.

The two-Judge Bench comprising Justice Sanjay Kumar and Justice Alok Aradhe observed, “At this stage, we may make it clear that we are not building up a new case for GUVNL contrary to its pleaded case. It is a well settled proposition of law that parties would be bound by their pleadings and the case put forth by them on the strength thereof and it is not for the Court to substitute its own notion of what that case should be. However, as already noted supra, this case entirely turns upon the earlier decision of this Court. Each of the parties has its own take on how that decision is to be interpreted to suit its own interest, even if mistakenly so. We are merely giving effect to the clear findings of this Court in that earlier decision, irrespective and independent of how the parties understood them and how they formulated their cases on the basis of such understanding.”

The Bench remarked that the Court cannot be a mute spectator when its Judgments and findings are misconstrued or misunderstood by the parties and are projected erroneously in a subsequent round of litigation.

Senior Advocates C.A. Sundaram and M.G. Ramachandran represented the Appellant while Senior Advocates C.S. Vaidyanathan and Buddy Ranganatdhan represented the Respondents.

Brief Facts

Gujarat Electricity Board (GEB), the predecessor-in-interest of GUVNL, entered into a Power Purchase Agreement (PPA) with Essar Power Limited (EPL) in 1996 for purchase of the electricity generated by EPL from its plant for a period of 20 years. EPL entered into a separate PPA with Essar Steel Limited (ESL), its sister company, in the same year for sale and supply of the remaining 215 MW. In breach of the agreed proportionate shares in the electricity generated by it, EPL started supplying more power to its sister company, ESL, from out of the allocated share of GEB. This issue was raised by GEB, contending that EPL had supplied over its proportionate share of electricity to ESL which should be treated as deemed supply of electricity by GEB itself and it should be compensated.

EPL addressed letter to GEB wherein it stated that if ESL drew more power than its allocated capacity, then GEB should charge ESL for the excess power drawn, as EPL’s deemed power supply to GEB, but in that case no deemed non-generation penalty should be imposed upon EPL. Thereafter, GUVNL filed a claim before GERC, seeking a declaration that it was entitled to adjust from the tariff payable by it to EPL all such amounts that were received by EPL as a result of wrongful allocation of electricity. The Petition was disposed of by GERC and then both GUVNL and EPL preferred Appeals before the APTEL. The APTEL held that EPL was not required to declare the capacity of the entire plant of 515 MW. Hence, the case was before the Apex Court.

Reasoning

The Supreme Court in view of the above facts, noted, “Needless to state, the very connotation of ‘compensation’ would imply the payment to be made to one party to make good the loss or damage suffered by it owing to a breach or violation of an obligation by the other. Reimbursement of fixed charges flowed from the provisions of the PPA itself and was not traceable only to the breach by EPL, in terms of the diverted capacity which fell to GUVNL’s share. That was only one of the scenarios in which such reimbursement stood triggered apart from those envisaged by the provisions of the PPA.”

The Court added that the misconceived notion that ‘fixed charges’ were also to be included in the ‘compensation’ to be claimed by GUVNL, resulted in arguments being advanced before GERC and the APTEL to that effect and the rejection thereof by both the fora.

“However, neither GERC nor the APTEL took note of what was stated by this Court, in the preceding paragraphs, referring to the GERC’s earlier order with regard to reimbursement of fixed charges in the event the corresponding power was not supplied to GUVNL, as per its allocated proportionate share in the declared available capacity”, it said.

The Court was of the view that in any event, it is not open to EPL to claim fixed charges twice over, by appropriating the excess fixed charges paid by GUVNL for electricity that was never supplied to it from its allocated proportionate share, on the one hand, and also pocketing the fixed charges paid by ESL for the extra electricity that was supplied to it from out of GUVNL’s share.

“In this regard, we may note that the PPA dated 29.06.1996 between EPL and ESL also provided for similar fixed charges being paid by ESL for the electricity supplied towards its proportionate share. Once that proportion was not adhered to and excess power was supplied to ESL, EPL would obviously collect fixed charges from ESL for such excess power supply also”, it further said.

The Court held that the finding of GERC and the APTEL that GUVNL is not entitled to reimbursement of fixed charges is, therefore, unsustainable and once GUVNL did not receive the electricity for which such fixed charges had been computed and paid on a monthly basis, it was entitled to reimbursement thereof, not as compensation, but on the principle of restitution as such payment was not at all due from it.

“The argument to the contrary by EPL, which was accepted by GERC and the APTEL, on the strength of the methodology to be adopted for computing compensation under para 9.13 of GERC’s order dated 18.02.2009, therefore, cannot be accepted. GUVNL was entitled to reimbursement of the fixed charges, in relation to the diverted electricity from out of its allocated share, in addition to the compensation payable for such wrongful diversion, computed on the basis of HTP-1 Tariff Energy Charge”, it also observed.

The Court concluded that in the event GUVNL actually paid a lesser amount towards Deemed Generation Incentive and is now claiming ₹2.2 Crores more than what is due and payable to it, that is an aspect that can be looked into by GERC.

Accordingly, the Apex Court disposed of the Appeals and refused to interfere with the directions of the APTEL.

Cause Title- Gujarat Urja Vikas Nigam Limited v. Essar Power Limited and Another (Neutral Citation: 2025 INSC 1160)

Appearance:

Appellant: Senior Advocates C.A. Sundaram, M.G. Ramachandran, AOR Hemantika Wahi, Advocates Anand Ganesan, Srishti Khindaria, and Jesal Wahi.

Respondents: Senior Advocates C.S. Vaidyanathan, Buddy Ranganatdhan, AOR E. C. Agrawala, Advocates Mahesh Agarwal, Rohan Talwar, Shashwat Singh, Naman Agarwal, and Shefail Tripathi.

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