14 May 2025 Civil Appeals >> Civil & Consumer Law  

In a significant ruling of The HP POWER Transmission Corporation Ltd. v/s M/s. Brua Hydrowatt Pvt. Ltd. & Others, the Supreme Court of India has overturned a judgment by the Appellate Tribunal for Electricity (APTEL), reinforcing the principle of privity of contract. The apex court has restored the Himachal Pradesh Electricity Regulatory Commission (State Commission) order, holding M/s Brua Hydrowatt Pvt. Ltd. (BHP Ltd) solely responsible for the entire cost of the 66kV Switching Station Bay at Urni, constructed by Himachal Pradesh Power Transmission Corporation Limited (HPPTC Ltd).

The dispute, which reached the Supreme Court as Civil Appeal No. 3919 of 2023, stemmed from a disagreement over the liability for construction and operation & maintenance (O&M) charges for a crucial interconnection facility.   

Background of the Case:

HPPTC Ltd, a transmission licensee in Himachal Pradesh, constructed a 66kV feeder Bay at Urni to facilitate power evacuation for three generating companies: BHP Ltd, M/s Darjeeling Power Pvt Ltd (Respondent No. 02), and M/s Roura Non-Conventional Energy Pvt Ltd (Respondent No. 03).

Initially, BHP Ltd, as the lead generating company, entered into a Connection Agreement (CA) with HPPTC Ltd on July 2, 2021. This agreement stipulated that BHP Ltd would be liable for all payments related to the interconnection, including the construction cost of the Bay. Concurrently, BHP Ltd, Respondent No. 02, and Respondent No. 03 had an Internal Tripartite Agreement (ITA) dated December 27, 2019, which outlined a proportionate sharing of these costs among themselves.

When HPPTC Ltd demanded INR 3,42,85,447 as the construction cost for the Bay from BHP Ltd, the latter sought proportionate contributions from Respondent No. 02 and Respondent No. 03. While Respondent No. 02 agreed, Respondent No. 03 expressed an inability to pay. Consequently, BHP Ltd offered to pay its share and that of Respondent No. 02, requesting HPPTC Ltd to recover Respondent No. 03's share separately. HPPTC Ltd rejected this, citing BHP Ltd's sole liability under the CA.

Journey Through the Tribunals:

Aggrieved by HPPTC Ltd's stance, BHP Ltd approached the State Commission, arguing that it should not be held solely responsible for the entire cost, especially given the internal agreement for cost-sharing. However, the State Commission, in its order dated December 27, 2022, dismissed BHP Ltd's petition. It observed that BHP Ltd, acting as the lead partner, had agreed to bear the costs with the expectation of reimbursement from the other generating companies, an internal matter HPPTC Ltd was not concerned with.

BHP Ltd then appealed to APTEL. APTEL, in its judgment dated March 17, 2023, reversed the State Commission's findings. APTEL reasoned that the CA did not explicitly state that BHP Ltd would pay the entire Bay charges and O&M costs on behalf of the other generating companies. It further noted that HPPTC Ltd could not rely on the ITA, to which it was not a party, to enforce recovery from Respondent No. 02 and Respondent No. 03. APTEL directed HPPTC Ltd to provide connections to BHP Ltd and Respondent No. 02 upon payment of their respective shares.

Supreme Court's Analysis and Verdict:

HPPTC Ltd subsequently appealed APTEL's decision to the Supreme Court. The core of HPPTC Ltd's argument was that BHP Ltd was the sole applicant and liable party under the CA, and HPPTC Ltd, being a stranger to the ITA, could not directly recover proportionate shares from the other generating companies.

The Supreme Court meticulously analyzed the terms of the CA dated July 2, 2021. It observed that the agreement was exclusively between HPPTC Ltd (referred to as STU) and BHP Ltd (referred to as Applicant). The preamble clearly indicated that BHP Ltd applied for the connection in "joint mode" with Respondent No. 02 and Respondent No. 03. Crucially, Clause 2 of the CA, which deals with charges and costs, unequivocally stated that "the applicant shall pay the charges," including construction costs and O&M charges.

The Court emphasized that Respondent No. 02 and Respondent No. 03 were not privy to the CA. While acknowledging the existence of the ITA among the three generating companies for internal cost-sharing, the Supreme Court highlighted that HPPTC Ltd was not a party to this internal arrangement.

Invoking the Doctrine of Privity of Contract, the Supreme Court asserted that a contract cannot confer rights or impose obligations upon anyone who is not a party to it. Therefore, HPPTC Ltd had no legal recourse to recover dues directly from Respondent No. 02 and Respondent No. 03 in the event of a default, as they were not contractually bound to HPPTC Ltd.

The Court concluded that APTEL erred by not considering the absence of privity of contract between HPPTC Ltd and Respondent No. 02 and Respondent No. 03. If APTEL disallowed HPPTC Ltd from relying on the ITA because it wasn't a party, it should have similarly recognized that the other generating companies, despite being beneficiaries of the Bay, could not be held directly liable to HPPTC Ltd for charges when the CA explicitly bound only BHP Ltd for payment.

In light of this, the Supreme Court found APTEL's judgment to be based on "wrong assumptions and misreading of the terms of agreement." Consequently, the Supreme Court allowed HPPTC Ltd's appeal, setting aside APTEL's judgment dated March 17, 2023, and restoring the State Commission's order dated December 27, 2022. This means BHP Ltd remains solely liable to HPPTC Ltd for the entire cost of the Bay.

This ruling reiterates the fundamental principle of contractual law, emphasizing that parties are bound by the agreements they directly enter into. For HPPTC Ltd, this ensures that the agreed-upon payment structure with BHP Ltd stands, leaving the internal adjustments of costs to the generating companies themselves.

Section 2, ELECTRICITY ACT - 2003  

Section 86, ELECTRICITY ACT - 2003  

Section 111, ELECTRICITY ACT - 2003

Section 158, ELECTRICITY ACT - 2003  

ELECTRICITY ACT, 2003