The Supreme Court of India, in a judgment delivered on September 25, 2025, has conclusively settled a long-standing dispute between Gujarat Urja Vikas Nigam Limited (GUVNL) and Essar Power Limited (EPL) over the wrongful diversion of electricity. A bench comprising Justice Sanjay Kumar and Justice Alok Aradhe held that GUVNL is entitled not only to compensation for the power diverted from its share but also to a separate reimbursement of proportionate fixed charges paid for that unsupplied electricity. The Court modified the previous orders of the Gujarat Electricity Regulatory Commission (GERC) and the Appellate Tribunal for Electricity (APTEL).
Background of the Case
The dispute originates from a Power Purchase Agreement (PPA) dated May 30, 1996, between the Gujarat Electricity Board (GEB), GUVNL’s predecessor, and EPL. Under the PPA, GEB was to purchase 300 MW of a total 515 MW capacity from EPL’s Hazira plant for 20 years. The remaining 215 MW was contracted to EPL’s sister concern, Essar Steel Limited (ESL), establishing a proportionate allocation ratio of approximately 58:42 between GEB and ESL.
The conflict began when EPL started supplying more electricity to ESL than its allocated share, at the expense of GEB’s quota. This led GEB to propose a recovery of ₹64 Crores in October 2004 for power diverted between April 1998 and September 2004, treating it as a deemed supply from GEB to ESL. While EPL initially accepted this amount, GEB clarified in a subsequent letter that this was not a final settlement.
This “tortuous litigative journey,” as described by the Court, commenced in 2005 when GUVNL filed a petition before GERC (Petition No. 873 of 2006).
Previous Rulings and Appeals
On February 18, 2009, GERC ruled in favor of GUVNL, holding that EPL was obligated to supply power based on the proportionate principle. It determined that for diversions post-September 2004, GUVNL was entitled to compensation at the prevailing HTP-1 Tariff, less variable costs. The order also noted that if GUVNL did not schedule its share of power, EPL could sell it to ESL, “subject to reimbursement of the proportionate of the annual fixed charges.”
This order was challenged by both parties before APTEL, which, in its judgment dated February 22, 2010, partly reversed the GERC order. APTEL held that EPL was not required to declare the capacity of the entire plant and that no reimbursement of fixed charges was liable to be made.
The matter reached the Supreme Court, which, in a landmark decision on August 9, 2016 (Gujarat Urja Vikas Nigam Limited vs. Essar Power Limited), set aside the APTEL judgment and restored GERC’s 2009 order in its entirety.
Following this, GERC passed a new order on December 27, 2019, to quantify the amounts due. In this order, GERC calculated compensation for GUVNL but rejected its claim for reimbursement of fixed charges, stating it was not part of the previously accepted compensation methodology. This GERC order was again appealed, and on March 21, 2025, APTEL largely upheld GERC’s view on fixed charges but reversed its decision on the calculation method for diverted energy. These appeals led to the present judgment from the Supreme Court.
Supreme Court’s Analysis and Decision
The Supreme Court observed that the core of the present dispute turned on the correct interpretation of its own 2016 judgment which had restored GERC’s 2009 order. The bench found that both GERC and APTEL, in the latest round of litigation, had erred by conflating the concepts of ‘compensation’ for wrongful diversion and ‘reimbursement’ of fixed charges.
On Reimbursement of Fixed Charges
The Court held that GUVNL’s entitlement to reimbursement of fixed charges was distinct from its right to compensation. It pointed out that the 2016 Supreme Court judgment had restored the 2009 GERC order, which explicitly provided for the reimbursement of proportionate annual fixed charges in para 9.11. This, the Court clarified, was a separate entitlement from the compensation for diversion discussed in para 9.13 of the same order.
The judgment stated, “The finding of GERC and the APTEL that GUVNL is not entitled to reimbursement of fixed charges is, therefore, unsustainable. Once GUVNL did not receive the electricity for which such fixed charges had been computed and paid on a monthly basis, it was entitled to reimbursement thereof, not as compensation, but on the principle of restitution as such payment was not at all due from it.”
The Court further noted that EPL could not enrich itself by claiming fixed charges twice. The judgment reads, “it is not open to EPL to claim fixed charges twice over, by appropriating the excess fixed charges paid by GUVNL for electricity that was never supplied to it from its allocated proportionate share, on the one hand, and also pocketing the fixed charges paid by ESL for the extra electricity that was supplied to it from out of GUVNL’s share.”
On Computation of Diverted Energy
The second key issue was whether the diversion should be calculated on an hourly or half-hourly basis. The PPA originally specified hourly periods. However, the Court noted that EPL itself, in 2003, had sought advice from the Central Electricity Authority (CEA), which recommended in a letter dated February 21, 2005, that metering be done on a half-hourly basis. This recommendation was accepted and acted upon by all three parties (GUVNL, EPL, and ESL).
The Supreme Court found that EPL could not now revert to the hourly method for calculating compensation when it had accepted the half-hourly method for supply. “Having invited that methodology for supply of power so as to avoid installation of a circuit breaker, EPL cannot fight shy of the same methodology being adopted for computation of the excess power diverted by it to ESL from out of the allocated share of GUVNL.” The Court, therefore, set aside APTEL’s finding and held that the computation must be done on a half-hourly basis from February 23, 2005.
Final Order
The Supreme Court disposed of the appeals by modifying the orders of GERC and APTEL to the following extent:
- GUVNL is entitled to the reimbursement of fixed charges for the diverted electricity, in addition to the compensation payable for the wrongful diversion.
- The computation of diverted energy must be on a half-hourly basis.
The Court did not interfere with APTEL’s decision to remand certain factual disputes to GERC for re-computation, such as the exact amount of Deemed Generation Incentive paid and deductions made by GUVNL. The parties were directed to bear their own costs.
