The Supreme Court of India has restored a penalty of more than ₹162 crore imposed on Talwandi Sabo Power Limited, holding that a power generating company can be penalised for failing to demonstrate its declared electricity generation capacity even without proof of deliberate wrongdoing.
A Bench of Justice K. Vinod Chandran and Justice Sanjay Kumar ruled that failure to demonstrate declared capacity under the Punjab State Grid Code attracts “strict liability” and does not require proof of mens rea or illegal profit-making.
Background of the Case
The dispute arose after the Punjab State Load Despatch Centre (PSLDC) accused Talwandi Sabo Power Limited (TSPL) of “misdeclaration of declared capacity” on several dates in January 2017. According to the authorities, the company failed to demonstrate the declared generation capability when called upon by the grid operator.
Initially, penalties were imposed for five days, resulting in a demand of ₹162.74 crore, out of which over ₹74 crore had already been adjusted from pending bills.
The Punjab State Electricity Regulatory Commission (SERC) upheld the findings for four dates in January 2017, but the Appellate Tribunal for Electricity (APTEL) later set aside the penalty. The matter then reached the Supreme Court.
Court’s Observations
The Supreme Court drew a distinction between “gaming” of the system and failure to demonstrate declared capacity.
The Bench observed that “gaming” involves intentional misdeclaration for unlawful commercial gain and therefore requires proof of guilty intent. However, failure to demonstrate declared capacity under Regulation 11.3.13 of the Grid Code is different and attracts a civil liability irrespective of intention.
The Court said:
“The demonstration of declared capability invites strict liability if the declared capability is not achieved within four time-blocks.”
Rejecting the reasoning adopted by APTEL, the Bench held that the fourth time block rule was relevant for testing whether the generating station could actually achieve the declared capacity in real time.
The judges further clarified that penalties under Regulation 11.3.13 are civil in nature and therefore do not require proof of mens rea.
“The penalty… is a civil liability,” the Court observed, adding that absence of guilty intention “will not be of any consequence.”
Findings on Specific Dates
The Court examined records for January 15, 17, 24 and 31 of 2017 and concluded that TSPL failed to demonstrate the declared generation capability within the required four time blocks after receiving notices from the SLDC.
In one instance, the company even revised its declared capacity downward after receiving the demonstration notice, which the Court treated as a significant circumstance against the generator.
Decision
Allowing the appeals filed by Punjab State Power Corporation Limited and PSLDC, the Supreme Court set aside the APTEL judgment and restored the SERC order imposing penalty on TSPL.
The Court also clarified that findings relating to “gaming” and findings relating to “failure to demonstrate declared capability” operate in separate fields under the Grid Code.
Case Details
Case Title: Punjab State Power Corporation Limited v. Talwandi Sabo Power Limited & Ors.
Case Number: Civil Appeal No. 7432 of 2025 with Civil Appeal No. 7436 of 2025
Judge: Justice K. Vinod Chandran and Justice Sanjay Kumar
Decision Date: May 20, 2026
