Strict liability applies to declared capacity misdeclaration

The Supreme Court has restored the Punjab State Electricity Regulatory Commission’s finding that Talwandi Sabo Power Limited misdeclared its declared capacity on specific dates in January 2017. The Court set aside the Appellate Tribunal for Electricity’s order, which had deleted the misdeclaration finding and the resulting penalty.

The dispute arose from the Punjab State Load Despatch Centre’s conclusion that the generating station had failed to demonstrate its declared capacity on five dates, namely 10 August 2015, 15 January 2017, 17 January 2017, 24 January 2017 and 31 January 2017. A penalty of Rs.162,74,72,865 was levied by memo dated 15 March 2017, and Rs.74,27,27,159 was deducted from pending bills.

The matter travelled through proceedings before the Commercial and Metering Committee, the State Grid Code Review Committee, and then the SERC, after directions from the High Court. The SERC affirmed the PSLDC’s finding for four dates in January 2017, but rejected the August 2015 finding. APTEL later reversed that order.

The Supreme Court examined the Punjab State Grid Code, 2013, the power of the PSLDC under Section 32 of the Electricity Act, 2003, and the scheme governing declaration, scheduling, despatch, and revision of capability. The Court accepted the appellants’ submission that the generator must faithfully declare and demonstrate its capability, and that the regulatory framework is designed to prevent unfair gain through inflated declarations.

A central issue was whether penalty under Regulation 11.3.13 required proof of deliberate intent or mens rea. The Court held that it did not. It treated the provision as one imposing strict liability for failure to demonstrate declared capability, and distinguished that consequence from the separate mischief of gaming under Regulations 11.3.4 and 11.3.12.

The Court also held that the reasoning adopted by APTEL was incorrect in treating deliberate intention and motive to make money as necessary ingredients for the penalty. It restored the SERC’s order, while modifying it to clarify the distinction between the different regulatory misdemeanors.

The Court further directed that the consequences of the reversal, including the penalty and any related interest liability, would follow. Any surcharge paid only because of the deductions made towards the penalty was also directed to be refunded to PSPCL with interest or surcharge at the same rate, since the generating station had the benefit of those amounts during the intervening period.

Practical takeaway: under the Punjab Grid Code, failure to demonstrate declared capability can attract penalty on a strict liability basis, without proof of deliberate intent.