Only when all Parties are in Agreement on all Material Terms of the Contract can a Contract be said to have been Concluded: Supreme Court
The Supreme Court ruled that only when all parties are in agreement on all material terms of the contract can a contract be said to have been concluded.
Background
By the judgment, the High Court has allowed Miscellaneous First Appeal filed by the first respondent JSW Energy Ltd., earlier known as Jindal Thermal Power Company Limited. The appeal was filed by first respondent under Section 41 of the Karnataka Electricity Reforms Act, 1999.
By the order, the High Court has set aside the orders which are orders passed by the Karnataka Electricity Regulatory Commission. The Commission is the appellant in the other appeal. The High Court has after setting aside the orders directed the appellant, to comply with the tariff rate specified in the order of the Government of Karnataka.
Arguments
Advocate Raghavendra S. Srivastava, appearing for the appellant, contended that there is no concluded contract within the meaning of the proviso to Section 27 of the Act with the aid of the correspondence and the facts established otherwise.
He submitted that the parties contemplated that there be a PPA whereupon alone a concluded contract would emerge.
He further submitted that Government G.O. relied upon by first respondent as the fountain head for the claim there is a concluded contract cannot for many reasons be treated as such.
Senior Advocate A.M. Singhvi, appearing for the respondent, contended that prior to the issue of GO, parties were agreed about the essential terms, viz., price/tariff, quantum and tenure. These terms were incorporated in the PPA without any change or amendment.
He submitted that the conditions, seven in number, enumerated in letter, were incidental matters, which were not necessary or a pre-requisite for the formation of the contract. A PPA was not a precondition.
He further contended that the appellant made admissions before the High court about the existence of a concluded contract qua tariff, quantum and tenure. As regards the confirmation of the offer by the first respondent’s Board, it is merely a procedural internal requirement, an aspect of the doctrine of indoor management.
Decision
The three judges bench of Justice K.M. Joseph, Justice Aniruddha Bose and Justice Hrishikesh Roy observed that it is self-evident that in keeping with the very name of the Act, viz Karnataka Electricity Reforms Act, 1999, the Legislature intended to depart from the earlier regime, under which, the State Electricity Boards, in conjunction with the Government, enjoyed a free run in the matter of fixation of tariff.
It was further observed that the determination of the tariff was to be done, bearing in mind, the interest of the consumer. At the same time, the Commission was not to be oblivious to the need to arrive at charges for the service of purchase, distribution and supply of electricity, in such a manner that the tariff is adequate in that the charges for the electricity supply, was duly collected, being adequate, for maintaining the supply and distribution of electricity.
The court said that the appellant has a case that what in ‘substance’ was agreed to be sold to the appellant was only surplus available power.
The court added that the findings, that the first respondent was CPP will stand set aside and High Court will undertake a consideration of the matter based on a study of the documents and also taking note of the proceedings by which, the first respondent allegedly claimed as CPP and availed benefits.
The court ordered that the High Court will also consider the argument of the appellant that even treating the first respondent as IPP, in the context of the contention of the appellant that the sale contemplated to the appellant was only of ‘surplus power’, only after the demand of the first two categories were fulfilled on the aspect of fixation of tariff.
The bench remitted the matter back to the High Court.
Case title: Karnataka Power Transmission Corporation Limited v/s JSW Energy Limited
Citation: Civil appeal no.8714 of 2022
Date: 22.11.2022
