Supreme Court Holds That Misdeclaration Is Distinct From Gaming And Does Not Require Proof Of Mens Rea Or Illegal Profiteering

The Supreme Court of India, through its judgment dated 20.05.2026 in the matter of Punjab State Power Corporation Limited v. Talwandi Sabo Power Limited & Ors., ¹ allowed the appeals filed by Punjab State Load Despatch Centre (“PSLDC”) and Punjab State Power Corporation Limited (“PSPCL”), and set aside the judgment of the Appellate Tribunal for Electricity (“APTEL”) while restoring the order of the Punjab State Electricity Regulatory Commission (“PSERC”), upholding the finding of misdeclaration of Declared Capacity (“DC”) by Talwandi Sabo Power Limited (“TSPL”) under the Punjab State Grid Code, 2013 (“SG Code”).

The principal issue before the Court was whether failure of a generating station to demonstrate its DC upon notice issued by the State Load Despatch Centre (“SLDC”) constitutes “misdeclaration” attracting penalty under Regulation 11.3.13 of the SG Code, and whether such penalty requires proof of mens rea or illegal profiteering. TSPL contended that misdeclaration and gaming are synonymous and therefore penalty could be imposed only upon establishing deliberate intention to profiteer. PSLDC and PSPCL, on the other hand, contended that Regulation 11.3.13 of the SG Code creates a strict liability mechanism in respect of demonstration of DC, which is independent of gaming, and once the generating station fails to demonstrate its DC within the stipulated time blocks, penalty automatically follows irrespective of mens rea or profiteering.

The Court held that gaming under Regulations 11.3.4 of the SG Code is distinct from failure to demonstrate DC under Regulation 11.3.13 of the SG Code. While gaming requires proof of intentional misdeclaration coupled with intention of illegal enrichment, Regulation 11.3.13 of the SG Code imposes a strict civil liability upon failure to demonstrate DC after notice by the SLDC. The Court found that TSPL had failed to demonstrate its DC on four occasions in January 2017 despite issuance of notices by PSLDC and therefore upheld imposition of penalty. Accordingly, the Court restored the order of PSERC and directed refund of all amounts recovered by TSPL pursuant to the APTEL judgment along with applicable interest.

Footnotes

^{1 Civil Appeal Nos. 7432 of 2025 and 7436 of 2025.}

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