The Supreme Court on Thursday restrained the Punjab government from taking any coercive action against GVK Power for two weeks, saying the generation company can approach the high court against any termination notice issued by the Punjab State Power Corporation.

A Bench led by Chief Justice NV Ramana refused to direct the state government to quash the default notice of October 29 purporting to terminate the amended power purchase agreement (PPA) for the Goindwal Sahib unit as sought by GVK Power. The company also wanted direction from the state government to comply with its obligations to procure power from its 540 MW Thermal Power Project in Goindwal in terms of the amended and restated PPA.

While directing GVK to take an “effective remedy” available to it following the law, the CJI said that the state government should not take any action against the company for two weeks.

With an eye on the upcoming state elections, the Charanjit Singh Channi-led Punjab government had decided to terminate and cancel all power purchase agreements with independent power producers including GVK allegedly on the grounds of “commercial impracticability and high tariff.”

After Channi took over the government, the Punjab Vidhan Sabha had in September passed the Punjab Renewable Energy Security, Reform, Termination and Redetermination of Power Tariff Bill, 2021 and the Punjab Energy Security, Reform, Termination and Redetermination of Power Tariff Bill, 2021 under which identified PPAs with private companies were sought to be terminated.

GVK said that the state government’s actions amounted to “malice in law, done with the sole aim and objective of furthering its agenda in light of the upcoming elections. The actions are a classic example of regime revenge with the Punjab government seeking to cancel PPAs including the amended and restated PPA” which was entered into in 2009 and under which the power producer was supplying electricity since 2016.

“This is a deliberate and calculated attempt… to accumulate political mileage and gains at the cost of the power producers, GVK said, adding that the amended and restated PPA itself provided for tariff determination and relief for change in law and force majeure events.

Terming the impugned notice and actions as “manifestly arbitrary and discriminatory,” GVK said that it had been issued for “ulterior motives” without following due process and in complete and utter contravention of the provisions of the Electricity Act and the amended and restated PPA. “Premature termination… amounts to deprivation/expropriation of the property of GVK in contravention of the constitutional safeguards under Article 300A, it said, adding that the statutory contract cannot be unilaterally altered/rejected by either party.

GVK said that the claim of frustration of the contract is belied by the fact that after issuing the notice on October 29, the Corporation had again requested the company to generate and supply power with effect from December 8. “This conclusively establishes that the amended and restated PPA has not been frustrated, continues to be in effect and the parties are bound to perform their respective obligation,” the appeal stated.

According to it, the allegation of commercial impracticability and high tariff is belied by the fact that tariff is determined by the Punjab State Electricity Regulatory Commission and no appeal was ever filed by the state government against the tariff orders.