Chhattisgarh HC Sets Aside Rs 153.55 Crore Demand Against Jindal Steel, Holds Generator Was Never Heard

The Division Bench found that tariff and true-up proceedings fastening a Rs 153.55 crore refund liability on Jindal Steel were conducted without affording the company any opportunity of hearing, rendering the consequential demand and denial of open access unsustainable.

A Division Bench of the High Court of Chhattisgarh at Bilaspur, led by Chief Justice Ramesh Sinha and Justice Bibhu Datta Guru, has set aside a single judge order that had dismissed a writ petition by Jindal Steel Limited challenging a demand of Rs 153.55 crore raised by the Chhattisgarh State Power Distribution Company Limited (CSPDCL). The court held that the tariff determination and true-up proceedings before the Chhattisgarh State Electricity Regulatory Commission (CSERC) and the Appellate Tribunal for Electricity, which formed the basis of the demand, were conducted without impleading or hearing Jindal Steel. The bench directed that the company be afforded a fresh hearing before the Commission and kept the demand notice, the Appellate Tribunal's judgment, and the denial of open access in abeyance until that exercise is completed.

The Dispute Before the Division Bench

Jindal Steel Limited (formerly Jindal Steel and Power Limited) operates a Captive Power Plant at Patrapali village in Raigarh District, Chhattisgarh, with a generation capacity that was enhanced to 325.7 MW. Under a Power Purchase Agreement (PPA) dated 2 November 2011, Jindal Steel agreed to supply 150 MW of power to CSPDCL for the period from 1 November 2011 to 30 June 2012. Supplementary PPAs dated 12 July 2012, 13 August 2012, and 24 January 2013 extended the arrangement through 30 June 2013, with contracted capacity varying between 75 MW and 150 MW.

The PPAs contained a detailed tariff structure linked to load factor, permitted injection of power up to 110% of scheduled supply during off-peak hours and up to 120% during peak hours, with any over-injection payable at Re 1 per unit. CSPDCL accepted the power supplied during financial years 2011–12 and 2012–13 and made payments at average rates of Rs 2.42 per kWh and Rs 2.66 per kWh respectively, without contemporaneous protest.

In 2014, CSPDCL filed Tariff Petition No. 07/2014 before CSERC seeking true-up and tariff determination. By order dated 12 June 2014, the Commission characterised the power supplied by Jindal Steel as “non-firm power” and approved a minimum base rate of Rs 1.50 per kWh for that procurement. A review petition by CSPDCL was dismissed on 8 December 2014. CSPDCL then appealed to the Appellate Tribunal for Electricity in Appeal Nos. 41 and 67 of 2015. The Appellate Tribunal, by judgment dated 26 May 2016, upheld the Commission's orders. Jindal Steel was not a party to any of these proceedings.

Following the Appellate Tribunal's judgment, CSPDCL issued a demand notice dated 7 July 2016 seeking recovery of Rs 153.55 crore together with interest, alleging that excess amounts had been charged for power supplied in FY 2011–12 and FY 2012–13. When Jindal Steel applied for Short Term Open Access (STOA) in July 2016 to supply power through the Indian Energy Exchange, CSPDCL refused to issue a No Objection Certificate (NoC) citing the alleged outstanding dues. CSPTCL consequently rejected the open access application on 25 July 2016 on the same basis.

Jindal Steel filed Writ Petition (Civil) No. 1927/2016 before the High Court challenging the Appellate Tribunal's judgment, the demand notice, and the denial of NoC and open access. The single judge dismissed the petition by order dated 30 March 2026, holding that the denial of NoC and rejection of STOA applications was in consonance with Sections 32 and 33 of the Electricity Act, 2003 and was justified on grounds of grid discipline, system security, and public interest. Jindal Steel then filed Writ Appeal No. 379 of 2026 before the Division Bench.

The Legal Issues

The central question before the Division Bench was whether the tariff and true-up proceedings before CSERC and the Appellate Tribunal, conducted without impleading Jindal Steel, could validly form the basis for a demand of Rs 153.55 crore against the company. Intertwined with this was whether the single judge had erred in dismissing the writ petition despite recording, in paragraph 57 of the impugned judgment, that the case fell within the recognised exceptions to the rule of alternative remedy on account of violation of principles of natural justice.

The appellants pressed several additional grounds: that the Commission's characterisation of the power as “non-firm” was made without examining the PPAs; that Section 62(6) of the Electricity Act does not create an automatic refund obligation against a generator without independent adjudication; that the demand was raised beyond the limitation period under the Limitation Act, 1963; that the denial of NoC was founded solely on a disputed claim and not on any crystallised outstanding dues; and that the single judge had introduced the issue of congestion charges without any pleading on that point, thereby violating the audi alteram partem rule in the writ proceedings themselves.

How the Bench Reasoned

Chief Justice Ramesh Sinha, writing for the bench, identified a fundamental contradiction in the single judge's approach. The single judge had expressly held in paragraph 57 that the writ petition was maintainable because the case fell within the recognised exception of violation of natural justice, given that Jindal Steel had not been impleaded in the proceedings before CSERC or the Appellate Tribunal. Yet in paragraphs 69 and 73, the single judge held that Jindal Steel had been made aware of the proceedings and that no prejudice in the legal sense had been demonstrated. The Division Bench found this internally inconsistent: once a court records that natural justice has been violated, it cannot then dismiss the petition on the ground that no prejudice was shown.

The bench examined Regulation 9 of the Chhattisgarh State Electricity Regulatory Commission (Conduct of Business) Regulations, 2009, which provides that the Commission may initiate proceedings suo motu or on a petition by any affected or interested person, and that initiation shall be by issuance of notices to affected or interested parties. Regulation 13 permits service by publication in a newspaper only where the Commission is satisfied that it is not reasonably practicable to serve notice through hand delivery or registered post. The bench held that Jindal Steel, a company with offices in Chhattisgarh, could easily have been served notice at its registered address. Publication of a general public notice did not satisfy the requirement of individual notice to a party against whom specific financial consequences were being fastened.

The respondents contended that a representative of Jindal Steel, one N.K. Chandiramani, DGM, had attended the review proceedings before CSERC on 28 October 2014, and that this demonstrated awareness of the proceedings. The bench rejected this argument. Attendance at a hearing without party status, without the right to file pleadings, lead evidence, cross-examine witnesses, or make formal submissions, does not constitute an opportunity of hearing in any legally meaningful sense. The bench also noted that the final order in the review petition was made on 8 December 2014, after the date of that attendance, and that the officer had attended in his personal capacity as a consumer of CSPDCL, not as a representative of Jindal Steel in its capacity as a generating company party to the PPAs.

On the character of the proceedings, the bench held that while tariff determination may ordinarily possess a regulatory or legislative flavour, the moment proceedings culminate in specific findings fastening adverse financial consequences upon a distinct generating company under identified PPAs, those proceedings assume a quasi-judicial character with respect to that entity. The bench found substance in the appellants' submission that neither the tariff orders nor the Appellate Tribunal's judgment expressly directed recovery from Jindal Steel. The Commission had primarily examined the extent to which CSPDCL could pass on power purchase cost to consumers. A regulatory disallowance against a distribution licensee cannot, without more, become an executable recovery against a third-party generator without independent adjudication of that generator's liability.

On Section 62(6) of the Electricity Act, the bench held that the provision does not dispense with the requirement of adjudication, particularly where the basis of the alleged excess recovery is seriously disputed and the concerned entity was never heard in the original proceedings. The bench observed that the PPAs governed the field during the relevant period, that CSPDCL accepted supply and made payments under those contracts, and that whether the power answered the contractual description of firm power, whether fluctuations were contractually permissible, and whether payments were made contrary to the approved tariff were all matters requiring proper adjudication after affording full opportunity to Jindal Steel.

On the denial of open access, the bench held that the refusal of NoC was founded solely upon disputed dues arising from the impugned demand notice. In the absence of crystallised and adjudicated liability, such disputed claims could not be treated as “outstanding dues” within the meaning of Section 5(3) of the CSERC (Connectivity and Intra-State Open Access) Regulations, 2011 so as to deny open access rights. The bench also noted that the single judge had upheld the denial on the ground of grid discipline, a reason that did not appear in the letters dated 21 July 2016 and 25 July 2016 by which the NoC and open access were refused. Those letters expressly cited only the alleged outstanding dues of Rs 153.55 crore.

The bench reiterated that the rule regarding alternative remedy is a rule of discretion and not one of compulsion. Where proceedings suffer from breach of natural justice or where orders are passed against a person without hearing, exercise of writ jurisdiction is fully justified. The single judge had therefore erred in declining interference despite recording that natural justice stood violated.

Outcome

The Division Bench set aside the order dated 30 March 2026 passed by the single judge in WPC No. 1927/2016. It directed that Jindal Steel be afforded an opportunity of hearing before CSERC in the proceedings relating to the tariff order of CSPDCL and the final true-up. After hearing the company, the Commission may proceed to hear and decide the matter afresh in accordance with law. Liberty was reserved to the respondents to initiate appropriate proceedings for adjudication of their claims after impleading Jindal Steel and affording it full opportunity of hearing. Any such proceedings are to be decided independently on their own merits without being influenced by observations in the Division Bench's judgment.

Until such adjudication is undertaken and liability, if any, is duly determined, Jindal Steel shall not be denied NoC or open access solely on the basis of the disputed demand. The Commission was directed to conclude the fresh exercise preferably within two months of receipt of the judgment. If any party is aggrieved by the Commission's order and approaches the Appellate Tribunal, the Tribunal was directed to decide the matter preferably within a further two months, given that substantial time has already elapsed.

The effect and operation of the Appellate Tribunal's judgment dated 26 May 2016, the demand notice dated 7 July 2016 for Rs 153.55 crore, the letter dated 21 July 2016 from CSPDCL, and the letter dated 25 July 2016 from CSPTCL were all kept in abeyance. The writ appeal and the writ petition were disposed of accordingly.