‘Court Cannot Be a Mute Spectator’: SC on Misconstruction of Its Decisions in GUVNL–Essar Power Dispute
Supreme Court Bench allows GUVNL to claim fixed charges reimbursement from Essar Power
The Supreme Court has held that Gujarat Urja Vikas Nigam Limited (GUVNL) is entitled not only to compensation but also reimbursement of fixed charges for the wrongful diversion of its allocated share of electricity by Essar Power Limited (EPL) to its sister concern, Essar Steel Limited (ESL).
A bench of Justices Sanjay Kumar and Alok Aradhe delivered the judgment on September 25, 2025, in a dispute arising from two Power Purchase Agreements (PPAs) signed in 1996. Under these agreements, EPL’s 515 MW plant at Hazira was to supply 300 MW to the Gujarat Electricity Board (later GUVNL) and 215 MW to ESL. However, EPL allegedly supplied more than ESL’s share, diverting power meant for GUVNL. In 2004, EPL agreed to pay Rs. 64 crore to settle diversion for the period between 1998 and 2004, but disputes persisted.
In 2009, the Gujarat Electricity Regulatory Commission (GERC) ruled that EPL was bound to maintain the 58:42 allocation and compensate GUVNL at HTP-1 tariff (excluding variable costs) for wrongful diversion. The Appellate Tribunal for Electricity (APTEL) partly reversed this in 2010, but the Supreme Court in 2016 restored GERC’s order. Subsequent proceedings saw GERC in 2019 compute compensation on a half-hourly basis, order refund of Rs. 36.62 crore as Deemed Generation Incentive, and impose delayed payment charges. APTEL in March 2025 partly disagreed, insisting on hourly computation, while upholding other findings.
The Supreme Court has now clarified that the earlier rulings were misconstrued. It held that GUVNL is entitled to both:
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Compensation – payable at HTP-1 tariff energy charge (excluding variable costs) for power diverted to ESL.
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Reimbursement of fixed charges – since GUVNL had already paid for 300 MW capacity but did not receive the full supply. Court reasoned that EPL could not recover fixed charges from both GUVNL and ESL for the same capacity.
Court also accepted half-hourly computation for diverted electricity after February 2005, noting that EPL itself had sought such a mechanism from the Central Electricity Authority. It rejected EPL’s reliance on the Rs. 64 crore settlement as final, holding that it covered only past diversions and did not preclude further claims.
“The Court cannot be a mute spectator when its judgments and findings are misconstrued or misunderstood by the parties and are projected erroneously in subsequent litigation,” court observed, emphasising that restitution principles required EPL to refund fixed charges proportionately.
The apex court modified APTEL’s March 2025 order and GERC’s 2019 decision to include reimbursement of fixed charges along with compensation. Certain disputed figures, including the exact amount of Deemed Generation Incentive refunded and deductions made by GUVNL, were left to be verified by GERC.
Case Title: Gujarat Urja Vikas Nigam Limited v. Essar Power Limited and Another
Judgment Date: September 25, 2025
Bench: Justices Sanjay Kumar and Alok Aradhe