LexNABHA POWER LIMITED (NPL) versus PUNJAB STATE POWER CORPORATION LIMITED (PSPCL) & ANR.
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[2017] 14 S.C.R. 301 NABHA POWER LIMITED (NPL) v. PUNJAB STATE POWER CORPORATION LIMITED (PSPCL) & ANR. (Civil Appeal No. 179 of2017) OCTOBER 05, 2017 . [R. F. NARIMAN AND SANJAY KISHAN KAUL, JJ.) Contract: Commercial contract - Interpretation of - Power Purchase Agreement - Energy Charge Formula - Procurement route wav 'fuel specific' having 'a pre-identified site' - The procurer-respondent arranged the fuel (coal) and specified the site location for the project A B c - Energy charges were designed to vary in accordance with the actual cost of coal and the actual quality of coal - Procurer was D responsible for co~·t of coal and quality of coal i.e. Gross Calorific Value (GCV) of coal - It was clarified by the procurer that the 'coal' to be supplied for the project would be 'washed coal' - The procurer deducted certain components of monthly tariff i.e. component of cost of purchasing coal comprising washing related costs; E consideration of mid-point GCV of ROM coal on equilibrated GCV basis·(EGCV) to calculate energy charges; denying of road transportation cost at the plant-end and at the mine-end; and denying the Liasing charges, transit and handling losses and denying third party coal testing charges etc. - Appellant filed petition before State Commission challenging the deductions - State Commission F dismissed the petition - Appellate Tribunal rejected the appeal on most of the grounds - On appeal. held: Normally a contract should be read as it reads. as per its express terms - The explicit terms are the final word with regard to the. intention of the parties - Reading an implied condition into the contract is necessitated only when G penta-test comes into play - There has to be a strict necessity for it - A multi-clause contract inter-se the parties has to be understood and interpreted in a manner that any view, on a particular clause · of the contract, should ·not do violence to another part of the contract - In the present case, the Court has read the contract (Power 301 H 302 SUPREME COURT REPORTS [2017] 14 S.C.R. A Purchase Agreement) only in the manner it reads - Energy Charge Formula alone would have to be referred to for the purposes of calculation of the coal price - The principle of 'business efficacy' would also require the court to read 'Monthly Energy Charges' formula in a manner as would be normally understood - Reference B to coal in the formula would be only a reference to 'washed' coal and not to 'unwa~hed' coal - The prior activity of 'washing· before receiving the coal at the project site would be part of the pricing of coal and cost of purchasing the same - The transportation costs to the project site have to be compensated - It is not qualified by methodology of transfer i.e. railway or road and therefore appellant C is entitled to it - The Calorific Value of coal has to be determined at project-site and not at the mine-site - Appellant is not entitled to any other charges as the formula contains only three elements and no other element other than those would form part of the formula - Rules of Interpretation - Principle of 'Reddendo Singula Singzilis' D - Electricity Act, 2003 - ss. 63 - Electricity. Partly allowing the appeal, the Court HELD: 1.1 Parties- indulging in commerce, act in a commercial sense. It is this ground rule which is the basis of The Moorcock test of giving 'business efficacy' to the transaction, as E must have been intended at all events by both business parties. F G H The development oflaw saw the 'five condition test' for an implied condition to be read into the contract including the 'business efficacy' test. It also sought to incorporate 'The Officious Bystander Test'. This test required the requisite conditions to be satisfied: (1) reasonable and equitable; (2) necessary to give business efficacy to the contract; (3) it goes without saying, i.e., The Officious Bystander Test; (4) capable of clear expression; and (5) must not contradict a_ny express term of the contract. [Para 49)(338-G-H; 339-A-C] Life Corporation of India & Anr. v. Dharam Vir Anand (1998) 7 SCC 348 : [1998] 2 Suppl. SCR 295; Mis. Dhanrajamal Gobindram v. Mis. Shamji Kalidas and Co. [1961] 3 SCR 1020; The Union of India v. Mis. D.N. Revri & Co. and Ors. (1976) 4 SCC 147 : [1977) 1 SCR 483; Satya Jain (Dead) Through LRs. and Ors. NABHA POWERLIMITED (NPL) v. PUNJAB STATE POWER CORPORATION LIMITED (PSPCL) v. An
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