APTEL Overturns Compensation Order, Cites Discoms’ Limitation Bar

APTEL) has overturned a ruling by the Rajasthan Electricity Regulatory Commission that had directed the company to compensate state power distribution companies (Discoms) for an alleged shortfall in electricity supply.

In a significant legal victory for National Energy Trading and Services Limited (NETS), the Appellate Tribunal for Electricity (APTEL) has overturned a ruling by the Rajasthan Electricity Regulatory Commission that had directed the company to compensate state power distribution companies (Discoms) for an alleged shortfall in electricity supply.

The Tribunal, comprising Technical Member Sandesh Kumar Sharma and Judicial Member Virender Bhat, ruled that the Discoms’ petition was barred by limitation and should not have been entertained by the Commission.

The case arose from a short-term power procurement deal between NETS, an inter-State electricity trading licensee, and Rajasthan’s three Discoms—Jaipur, Ajmer, and Jodhpur—for the period from February to June 2011, under a Letter of Intent (LoI) issued on January 31, 2011.

Under Clause 13 of the agreement, NETS was liable to pay ₹2 per unit for any monthly shortfall below 80% of the contracted power. Discoms later issued compensation bills totaling ₹1.68 crore after shortfalls were reported in February, April, and May 2011.

Submissions Of NETS

NETS disputed the charges, prompting the Discoms to initially recover part of the amount from the bills of V S Lignite Power Pvt Ltd (VSLP), the generator supplying power to NETS. In 2013, VSLP challenged this deduction before the Commission, which ruled in 2014 that the Discoms had wrongly withheld payments from VSLP, noting that NETS was solely liable under the contract.

Following this, the Discoms refunded the amount to VSLP and filed a fresh petition against NETS in October 2014, seeking recovery of ₹1.08 crore. The Commission ruled in their favour in December 2014. NETS appealed the order.

At the core of the appeal was the question of limitation. NETS argued that the Discoms’ claim was time-barred, as the cause of action arose by May 2011, and the petition was filed only in October 2014—well beyond the three-year statutory period under the Limitation Act, 1963.

The Discoms, however, claimed that a letter written by NETS to VSLP in September 2012 amounted to an acknowledgment of liability, which would have restarted the limitation period under Section 18 of the Act.

APTEL’s Views

But the Tribunal found no such acknowledgment in NETS’ correspondence. It noted that NETS had consistently denied liability, and the letter to VSLP merely passed on the Discoms’ demand, without accepting responsibility. It further held that the Discoms had failed to plead any exemption from the limitation law in their petition before the Commission—an omission that, under legal procedure, rendered the claim untenable.

“The Commission’s finding that the petition was within the limitation period is absolutely erroneous,” the Tribunal said in its judgment.

Consequently, APTEL allowed the appeal filed by NETS and dismissed the Discoms’ petition. The ruling is likely to set a precedent for limitation-related disputes in the Indian power sector.