Supreme Court: Party Not Having Privity To Contract Cannot Be Made Liable For Any Terms & Conditions Unrelated To It
The Supreme Court set aside the decision of the APTEL, which held that BHP Ltd was liable for construction costs and O&M charges of the Bay.
Justice Abhay S Oka & Justice Augustine George Masih, Supreme Court
The Supreme Court has clarified that a party not having privity to a contract cannot be, unless the context otherwise makes it apparent, made liable for any terms and conditions unrelated to it.
The Court allowed an Appeal by the HP Power Transmission Corporation Ltd. (HPPTC Ltd), setting aside a judgment by the Appellate Tribunal for Electricity (APTEL) and restoring the order of the Himachal Pradesh Electricity Regulatory Commission (State Commission) in a dispute concerning the cost of constructing a Bay at a switching station.
A Bench of Justice Abhay S Oka and Justice Augustine George Masih held, “An equivalence should have then been drawn by the APTEL to consider the fact that Respondent No.02 and Respondent No.03, although beneficiaries to the liability of the HPPTC Ltd to construct, operate and maintain the Bay…could not have been held liable for the charges when explicit wording…only binds BHP Ltd for the payment of concerned cost and charges…If that be so, as per the terms of agreement, the Impugned Judgment of the APTEL is based upon wrong assumptions and misreading of the terms of agreement ignoring the basic principle that a party not privity to the agreement or contract cannot be, unless the context otherwise makes it apparent, made liable for any term(s) and condition(s) unrelated to it.”
Advocate Anand K. Ganesan represented the Appellant, while AOR Tarun Johri appeared for the Respondents.
Brief Facts
The dispute arose from a Connection Agreement between HPPTC Ltd and M/s Brua Hydrowatt Pvt. Ltd. (BHP Ltd), for the Brua Hydro Electric Project. The agreement designated Urni as the connection point. HPPTC Ltd constructed the Bay and sought payment from BHP Ltd, which contested the demand, claiming the cost should be shared with other generating companies.
The State Commission passed an Order in favour of HPPTC Ltd, holding BHP Ltd liable for the entire cost. However, APTEL reversed the findings, leading HPPTC Ltd to Appeal before the Supreme Court.
Court’s Reasoning
The Supreme Court remarked, “Having considered the provisions of the contracts/agreements as above, we should ideally be considerate of the impact of the liability of the charges under the CA dated 02.07.2021, if so imposed on Respondent No.02 and Respondent No.03 through existing legal doctrines and decisions of the Courts.”
The Bench pointed out, “Liability, if any, being therefore upon BHP Ltd as per the CA dated 02.07.2021 with HPPTC Ltd not being a party to ITA dated 27.12.2019, the latter could not have and cannot claim proportionate shares as per the installed capacity of the project from Respondent No.02 and Respondent No.03. The right, if any, of the claim and recovery of the liability from Respondent No.02 and Respondent No.03 would be only with BHP Ltd. The HPPTC Ltd, therefore, has rightly put forth its claim to BHP Ltd.”
The Court held that “it is our opinion that the APTEL was incorrect in not considering the absence of privity of Respondent No.02 and Respondent No.03 to the CA dated 02.07.2021, especially when it went on to observe that the ITA dated 27.12.2019 cannot be relied upon by the HPPTC Ltd for its contentions as it does not form part and parcel of the CA dated 02.07.2021.”
The Bench stated that “if the contentions of the BHP Ltd are accepted by this Court, HPPTC Ltd would technically have no legal remedy to recover its dues or other charges from Respondent No.02 and Respondent No.03 in event of a default as they are not under any contractual obligation to discharge any liability towards the HPPTC Ltd vis-àvis the Bay.”
Consequently, the Court ordered, “Therefore, the instant Appeal is allowed in favour of the HPPTC Ltd to the effect that the Impugned Judgment passed by the APTEL is set aside and the Order passed by the State Commission is restored.”
Accordingly, the Supreme Court allowed the Appeal.
Cause Title: The HP Power Transmission Corporation Ltd. v. M/S Brua Hydrowatt Pvt. Ltd. & Ors. (Neutral Citation: 2025 INSC 680)
Appearance:
Appellant: AOR Nikunj Dayal; Advocates Anand K. Ganesan, Pramod Dayal, Amal Nair and Shivani Verma
Respondents: AOR Tarun Johri; Advocates Ankur Gupta and Vishwajeet Tyagi
