The Supreme Court has restored the order of the Punjab State Electricity Regulatory Commission (SERC) and upheld penalties imposed on Talwandi Sabo Power Limited (TSPL) for failure to demonstrate its declared generation capacity.
The bench of Justice Sanjay Kumar and Justice K. Vinod Chandran clarified that failure to demonstrate declared capability under the State Grid Code attracts a strict civil liability and does not require proof of intention to profit or wrongful gain.
The dispute arose from penalties imposed by the Punjab State Load Despatch Centre (PSLDC) against TSPL over alleged misdeclaration of declared capacity during several dates in January 2017. Initially, penalties were imposed for five separate days, amounting to approximately ₹162.74 crore, out of which around ₹74.27 crore had already been deducted from pending bills. The matter subsequently travelled through multiple forums including the High Court, SERC, and the Appellate Tribunal for Electricity (APTEL), before reaching the Supreme Court.
The central issue before the Court concerned whether failure to demonstrate declared generation capability constituted “gaming” requiring proof of deliberate misconduct and intent to make unlawful gains, or whether it was a distinct violation inviting automatic penalties.
Punjab State Power Corporation Limited (PSPCL) and PSLDC argued that under the Punjab State Grid Code, power generating stations are required to faithfully declare their generation capability and maintain readiness to supply power whenever required. The procurer of power, despite drawing lower quantities than the declared capacity, continues to pay fixed charges on such declared capability, creating a possibility that generators may overstate available capacity and earn undue financial benefits.
TSPL, on the other hand, contended that misdeclaration required a finding of deliberate intention and profit motive. It argued that technical issues affecting operations should not automatically lead to penalties and that demonstration of capacity had in fact been achieved during the same day on the disputed occasions.
The Supreme Court carefully distinguished between “gaming” and “failure to demonstrate declared capability.” The Court observed that gaming involves intentional misdeclaration made for obtaining undue commercial gains and therefore necessarily requires proof of mens rea along with a proper inquiry and opportunity of hearing. However, demonstration of declared capability under Regulation 11.3.13 of the State Grid Code stands on a different footing altogether.
The Court emphasized that the two concepts cannot be mixed merely because both involve some form of incorrect declaration. It held that failure to demonstrate capability is a standalone violation with a built-in penalty mechanism under the Grid Code.
Importantly, the Supreme Court held that once the SLDC issues a notice requiring demonstration of capability, the generating station must demonstrate the declared capability within four time blocks, counting the block in which the notice is received as the first block. The Court rejected APTEL’s conclusion that no time limit existed for such demonstration.
The Court further ruled that the penalty imposed under Regulation 11.3.13 is a civil consequence arising out of contractual and statutory obligations and therefore proof of guilty intention is unnecessary. Referring to earlier decisions including Union of India v. Dharamendra Textile Processors, the Court reiterated that where a breach of civil obligation occurs, absence of mens rea does not invalidate the penalty.
Examining the facts of each disputed date, the Court found repeated instances where TSPL either failed to achieve its declared generation capability within the stipulated time blocks or revised its declared capacity downward after receiving demonstration notices. On certain occasions, despite multiple opportunities, the generator never reached the declared capability at all.
The Court concluded that the findings of misdeclaration stood established beyond doubt and therefore restored SERC’s order while setting aside APTEL’s decision. It also modified SERC’s observations to clarify that deliberate intention and motive to make money are not essential elements for imposing penalties under Regulation 11.3.13.
The Court additionally directed that any surcharge earlier refunded because of APTEL’s order would also have to be repaid along with applicable interest.
Case Details
Case Title: Punjab State Power Corporation Limited Versus Talwandi Sabo Power Limited & Ors.
Citation: JURISHOUR-1316-SC-2026
Case No.: Civil Appeal No. 7432 of 2025
Date: 20/05/2026
