Supreme Court Restores State Commission Order, Holds Lead Applicant Solely Liable For Bay Charges on Privity Ground

A bench of Justices Abhay S. Oka and Augustine George Masih heard the Civil Appeal arising from a challenge to the Appellate Tribunal for Electricity’s (APTEL) judgment of 17.03.2023 which had set aside the Himachal Pradesh Electricity Regulatory Commission’s (State Commission) order dated 27.12.2022. The appeal concerned whether the HP Power Transmission Corporation Ltd. (HPPTC Ltd) could recover the entire construction and O&M cost of a 66kV feeder bay at Urni (“Bay”) from M/s Brua Hydrowatt Pvt. Ltd. (BHP Ltd), who had executed a Connection Agreement dated 02.07.2021 with HPPTC Ltd while other generating companies claimed a proportionate share under an earlier internal tripartite agreement.

The Court allowed the appeal, set aside the Impugned Judgment of APTEL and restored the State Commission’s order that BHP Ltd was liable to pay the Bay charges and related costs under the CA dated 02.07.2021. The Court held that APTEL erred in failing to appreciate the absence of privity between HPPTC Ltd and the other two generating companies (Respondent Nos. 2 and 3), and in wrongly relying on the internal tripartite agreement (ITA dated 27.12.2019) for imposing liability on those non-contracting parties. The Court emphasised the doctrine of privity and relied on settled precedents to conclude that HPPTC Ltd could not be required to recover its dues from parties who were not party to the CA. The Court, in its reasoning, observed: “Therefore, 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. 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 through the CA dated 02.07.2021, could not have been held liable for the charges when explicit wording in the CA dated 02.07.2021 only binds BHP Ltd for the payment of concerned cost and charges.” The Court recorded that there would be no order as to costs and disposed of pending applications.

Background The dispute arose after the Government of Himachal Pradesh approved pooled interconnection at Urni for three small hydro projects—Brua (BHP Ltd), Shaung, and Roura-II. BHP Ltd applied for connection in joint mode and executed the Connection Agreement dated 02.07.2021 with HPPTC Ltd as the sole applicant. HPPTC Ltd constructed the Bay and invoiced BHP Ltd for the full construction cost (approximately INR 3.42 crore) and O&M charges. BHP Ltd relied on an earlier Internal Tripartite Agreement dated 27.12.2019 among the three IPPs which provided that the “entire cost of common 66kV terminal bay … shall be shared by the IPPs in proportionate to their individual generating capabilities” and that BHP Ltd would seek reimbursement from the others. BHP Ltd contested HPPTC Ltd’s demand before the State Commission under Section 86(1)(f) of the Electricity Act, 2003; the State Commission dismissed BHP Ltd’s petition and held it liable under the CA.

On appeal, APTEL reversed and held that the CA did not show BHP Ltd agreed to bear other parties’ shares and that HPPTC Ltd could not recover from Respondent Nos. 2 and 3. The Supreme Court analysed the CA clauses including Clause 2.4 and 2.5—“The applicant will execute an agreement with STU for the erection of equipment … For this purpose the applicant shall pay charges to the STU on mutually agreed terms” and the O&M provisions—and applied the doctrine of privity. The Court noted precedents including Tweddle v. Atkinson, Jamna Das v. Pandit Ram Autar Pande, and Essar Oil Ltd. v. Hindustan Shipyard Ltd., to conclude that HPPTC Ltd had valid contractual recourse only against BHP Ltd and not against the other two IPPs who were not party to the CA. The Supreme Court therefore restored the State Commission’s order, held the APTEL’s decision to be based on an erroneous assumption, and allowed HPPTC Ltd’s appeal. The Court recorded that there was no order as to costs and disposed of pending applications.

Case Details: Case No.: Civil Appeal No. 3919 of 2023 (2025 INSC 680) Case Title: The HP Power Transmission Corporation Ltd. v. M/s Brua Hydrowatt Pvt. Ltd. & Ors. Appearances: For the Petitioner(s): [Not indicated in the judgment] For the Respondent(s): [Not indicated in the judgment]