Mr. Poovayya, Regulation 11.3.13 of the Grid Code is clear: 'In the event of the SGS failing to demonstrate the declared capability, the capacity charges due to the generator shall be reduced as a measure of penalty.' Where does this provision require a finding of mens rea or illegal enrichment?

My Lord, Regulation 11.3.13 must be read in the context of the entire scheme. Regulation 11.3.4 makes the SLDC responsible for checking that there is 'no gaming' in availability declaration. Regulation 11.3.12 requires the SLDC to serve notice of 'gaming' when over/under declaration leads to deviation. The definition of 'gaming' is an intentional misdeclaration to make undue commercial gain. Therefore, the entire scheme addressing misdeclaration — including Regulation 11.3.13 — is part of the gaming framework. The SERC itself found that gaming requires mens rea and illegal enrichment. The only error was that it upheld the penalty without such a finding. That error was corrected by APTEL. The penalty cannot stand without proof of intent.

The CERC decision in TPDDL is not binding on this Court. More importantly, it dealt with a specific factual situation of choking of filters. The observation in paragraph 22 was merely illustrative, not exhaustive. How can you rely on it as laying down a universal test?

My Lord, even if the CERC's decision is not binding, it is persuasive authority. The CERC is the central regulator, and its interpretation of similar Grid Code provisions should be given due weight. The CERC held that misdeclaration can be established only when there is a demonstrable restriction on the generating station's capacity — such as lack of fuel or plant shutdown. In the present case, there was no such restriction. The respondent had sufficient coal stock and the plant was functional. The fact that the respondent could not achieve the declared capacity within the 4th time block does not mean the declared capacity was false; it means there were operational challenges that were communicated to the SLDC. The SLDC itself revised the schedule multiple times. This is not misdeclaration; it is normal grid operation.

You raised a force majeure contention but abandoned it when queried. Why?

My Lord, the force majeure contention was raised by counsel in the written submissions, but after reviewing the record, the respondent realised that the specific events did not meet the high threshold of force majeure. The respondent does not press that contention. However, the fact that the respondent does not have a force majeure defence does not mean there was misdeclaration. The respondent had technical issues on some days — such as coal handling plant problems on 17.01.2017 — which were duly communicated to the SLDC. The SLDC revised the schedule accordingly. The demonstration notice was issued after the revision. The respondent's inability to demonstrate the earlier declared capacity was because the declared capacity had already been revised downward due to genuine technical issues. This is not misdeclaration; it is a genuine operational revision.

The penalty is Rs. 162 crores — a substantial amount. Do you argue that the generating station should not be penalised at all, or only that the quantum is excessive?

My Lord, the primary submission is that no penalty should be imposed because there is no misdeclaration. The respondent demonstrated declared capacity within the same day on each occasion. The deviation, where it existed, was minimal — within 1% on 24.01.2017 — which is within practical limits as held in PSEB v. CERC. The penalty of Rs. 162 crores is disproportionate and punitive. Even if this Court finds that there was a technical violation, the penalty should be reduced to a nominal amount. The respondent has been operating the plant for nine years without any prior incident. The petitioners have not quantified any actual loss suffered by PSPCL. A penalty of this magnitude is arbitrary and violates the principle of proportionality.

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Misdeclaration Requires Intent and Illegal Gain Under Grid Code — (2026) INSC 515

The Punjab State Grid Code, 2013 requires a finding of intentional misdeclaration (gaming) with motive to make undue profit before penalty can be imposed.

Punjab State Power Corporation Limited v. Talwandi Sabo Power Limited — (2026) INSC 515

Core Argument

The Punjab State Grid Code, 2013 requires a finding of intentional misdeclaration (gaming) with motive to make undue profit before penalty can be imposed. The demonstration notice did not specify a time limit, and the generating station demonstrated capacity within the same day. The APTEL correctly set aside the penalty.

Key Precedents

TPDDL v. PPCL (Petition No. 199/MP/2019, CERC, 29.11.2023) — Held that misdeclaration of declared capability requires absence of adequate coal stock or plant shutdown/repair; mere failure to achieve declared capacity is not sufficient.
PSEB v. CERC (Appeal No. 79 of 2007, APTEL, 11.12.2007) — Held that less than 1% deviation is within practical limits and does not justify an allegation of gaming.
Excel Crop Care Ltd. v. CCI (2017) 8 SCC 47 — Held that where two reasonable interpretations are possible, the interpretation favouring the assessee should be adopted, especially for penal provisions.

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