Maharashtra State Electricity … vs Maharashtra Electricity … on 8 October, 2021


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Supreme Court of India

Maharashtra State Electricity … vs Maharashtra Electricity … on 8 October, 2021

Author: Hon’Ble Ms. Banerjee

Bench: Hon’Ble Ms. Banerjee, J.K. Maheshwari

                                                                                REPORTABLE

                                        IN THE SUPREME COURT OF INDIA

                                          CIVIL APPELLATE JURISDICTION

                                          CIVIL APPEAL NO.1843 OF 2021

                      MAHARASHTRA STATE ELECTRICITY
                      DISTRIBUTION COMPANY LIMITED                          ....Appellant(s)

                                                          versus


                      MAHARASHTRA ELECTRICITY REGULATORY
                      COMMISSION & ORS.                                    .…Respondent(s)


                                                   JUDGMENT

Indira Banerjee, J.

This appeal, under Section 125 of the Electricity Act 2003, is

against a judgment and order dated 27 th April 2021 passed by the

Appellate Tribunal for Electricity, hereinafter referred to, in short, as

‘APTEL’, dismissing Appeal No.77 of 2018 filed by the Appellant,

Maharashtra State Electricity Distribution Company Ltd., and affirming

an order dated 16th November, 2017 passed by the Maharashtra

Signature Not Verified
Electricity Regulatory Commission, hereinafter referred to, in short, as
Digitally signed by
SUNIL KUMAR
Date: 2021.10.08
18:05:35 IST ‘MERC’, whereby MERC dismissed the petition filed by the Appellant
Reason:

under Section 86 of the Electricity Act, being Case No.24 of 2017,

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rejecting the contention of the Appellant that, introduction by Reserve

Bank of India of the Base Rate system and the Marginal Cost of Funds

Based Lending Rate system constituted a change in law, within the

meaning of the expression ‘Change in Law’ as defined in the respective

Power Purchase Agreements between the Appellant and the

Respondent Nos.2, 3, 4 and 5, hereinafter collectively referred to as the

“Power Generating Companies”, so as to alter the rate of Late Payment

Surcharge(LPS) payable by the Appellant to the Power Generating

Companies under the respective Power Purchase Agreements.

2. The Appellant, incorporated under the Companies Act, 1956,

pursuant to the decision of the Government of Maharashtra to

reorganize erstwhile Maharashtra State Electricity Board, is a

Distribution Licensee under the provisions of the Electricity Act, 2003,

with license to supply electricity all over the State of Maharashtra,

except some parts of the city of Mumbai. The Appellant is a bulk

purchaser of electricity from generators of electricity.

3. The Appellant had, from time to time, issued Tender Notices,

inviting bids for bulk supply of electricity to the Appellant, pursuant to

which, the Power Generating Companies submitted their bids.

4. The Appellant has executed Power Purchase Agreements with the

Power Generating Companies, arrayed as Respondent Nos. 2 to 5 in this

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appeal in two stages. The two sets of Power Purchase Agreements,

hereinafter referred to as the stage 1 and stage 2 Power Purchase

Agreements, contain almost identical terms and conditions. The

respective dates and brief particulars of the respective agreements

(five in number) are as follows:-

“Stage 1-PPA

Sl. Date of PPA Name of the Generating Drawal of Tariff (Rs/Unit) Name of the
No. Company Power (in relevant projects of
MW) the Generating
Company

(i) 14.08.2008 Adani Power 1320 2.64 Units 2 and 3 of its
Maharashtra Ltd. Tiroda Project
(Respondent No. 2)

(ii) 23.02.2010 JSW Energy Ratnagiri 300 2.71 Unit 1 of its
Ltd. (Respondent No.3) Ratnagiri Project

Stage 2-PPA

Sl. Date of PPA Name of the Generating Drawal of Tariff Name of the
No. Company Power (in MW) (Rs/Unit) relevant projects of
the Generating
Company

(i) 17.03.2010 GMR Warora Energy Ltd. 200 2.88 Warora Project
(Respondent No.5)

(ii) 22.04.2010 Rattan India Power Ltd. 450 3.26 Amravati Project
05.06.2010 (Respondent No. 4) 750

(iii) 31.03.2010 Adani Power Maharashtra 1200 3.28 Tiroda Project
09.08.2010 Ltd. (Respondent No.2) 125
16.02.2013 440

5. The relevant terms and conditions of the Stage 1 Power Purchase

Agreements are set out hereunder:-

“Article 1 : Definitions and interpretation

Change in law – shall have the meaning ascribed thereto in
Article 13.1.1 of this agreement.

Indian Governmental instrumentality – means the GoI,
Government of Maharashtra and any ministry or, department of or,
board, agency or other regulatory or quasi-judicial authority
controlled by GoI or Government of States where the procurer and

3
project are located and includes the CERC and MERC.

Late Payment Surcharge – shall have the meaning ascribed
there to in Article 11.3.4

Law – means, in relation to this Agreement, all laws including
Electricity Laws in force in India and any stature, ordinance,
regulation, notification or code, rule, or any interpretation of any of
them by an Indian Government Instrumentality and having force of
law and shall further include all applicable rules, regulations,
orders, notifications by an Indian Governmental Instrumentality
pursuant to or under any of them and shall include all rules,
regulations, decisions and orders of the CERC and the MERC.

SBAR – means the prime lending Rate per annum applicable for
loans with one (1) year maturity as fixed from time to time by the
State Bank of India. In the absence of such rate, any other
arrangement that substitutes such prime lending rate as mutually
agreed to by the parties.

Article 11: Billing and Payment

.

.

.

11.3.4 In the event of delay in payment of a monthly bill by the
procurer beyond its due date month billing, a Late Payment
Surcharge shall be payable by the procurer to the seller at the rate
of two (2) percent in excess of applicable SBAR per annum, on the
amount of outstanding payment, calculated on a day to day basis
(and compounded with monthly rest) for each date of the delay.

..

Article 13 : Change in Law

13.1. Definitions

In this Article 13, the following terms have the following meanings.

13.1.1 “Change in Law” means the occurrence of any of the
following events after the date, which is seven (7) days prior, to the
Bid Deadline:

(i) the enactment, bringing into effect, adoption, promulgation,
amendment, modification or repeal or any law or

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(ii) a change in interpretation of any law by a competent court of law,
tribunal or Indian governmental instrumentality provided such court of
law, tribunal or Indian governmental instrumentality is final authority
under law for such interpretation.

But shall not include (i) any change in any withholding tax on income
or dividends distributed to the shareholders of the seller, or (ii) Change
in respect of UI charges or frequency intervals by an Appropriate
Commission.

.

.

.

13.2 Application and principal for computing impact of Change
in Law
While determining the consequence of Change in Law under this Article
13
, the parties shall have due regard to the principle that the purpose
compensating the party affected by such change in law, is to restore
through monthly tariff payments to the extent contemplated in this
Article 13, the affected party to the same economic position as if such
Change in Law has not occurred.

a) …………

b) Operation Period –
As a result of change in Law, the compensation for any
increase/decrease in revenue or cost to the seller shall be determined
by the Maharashtra State Electricity Regulatory Commission whose
decision shall be final and binding on both the parties, subject to right
of appeal provided under applicable law and effective from the date
specified in 13.4.1
13.3 Notification of Change in Law:

13.3.1 If the seller is affected by a Change in Law in accordance with
Article 13.2 and the Seller wishes to claim a Change in Law under this
Article, it shall give notice to the Procurer of such Change in Law as
soon as reasonably practicable after becoming aware of the same or
should reasonably have known of the Change in Law.

13.3.2 Notwithstanding Article 13.3.1, the seller shall be obliged to
serve notice to the Procurer under this Article 13.3.2 if it is beneficially
affected by a Change in Law. Without prejudice to the factor of
materiality or other provisions contained in this Agreement, the
obligation to inform the procurer contained herein shall be material.
Provided that in case the seller has not provided such notice, the
Procurer shall have the right to issue such notice to the seller.
13.3.3 Any notice served pursuant to this Article 13.3.2 shall provide,

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amongst other things, precise details of:

a) The Change in Law; and

b) The effects on the Seller of the matters referred to in Article 13.2

13.4 Tariff adjustment payment on account of Change in Law
13.4.1 subject to Article 13.2, the adjustment in monthly tariff payment
shall be effective from:

(i) the date of adoption, promulgation, amendment, re-enactment,
repeal of the Law or Change in Law, or

(ii) the date of order/judgment of the competent court or tribunal or
Indian Governmental Instrumentality, if the Change in Law is on
account of a change in interpretation of law.”

6. The Stage 2 Power Purchase Agreements, as stated hereinbefore,

contain terms and conditions almost identical to those of the first set of

agreements. The relevant provisions of the second set of agreements

(Stage 2) are as follows:-

“Article 1 : Definitions and Interpretation

Change in law – shall have the meaning ascribed thereto in
Article 10.1.1 of this agreement.

Indian Governmental Instrumentality – shall mean the
Government of India, Governments of state(s) of Maharashtra, and
any ministry, department, board, authority, agency, corporation,
commission under the direct or indirect control of Government of
India or any of the above State Government(s) or both, any political
sub-division of any of them including any court or Appropriate
Commission(s) or tribunal or judicial or quasi-judicial body in India
but excluding the Seller and the Procurer.

Late Payment Surcharge – shall have the meaning ascribed
thereto in Article 8.3.5 of this Agreement.

Law – Shall mean in relation to this Agreement, all laws including
Electricity Laws in force in India and any statute, ordinance,
regulation, notification or code, rule or any interpretation of any of
them by an Indian Governmental instrumentality and having force
of law and shall further include without limitation all applicable

6
rules, regulations, orders, notifications by an Indian Governmental
instrumentality pursuant to or under any of them and shall include
without limitation all rules, regulations, decisions and orders of the
Appropriate Commission.

SBAR – Shall mean the prime lending Rate per annum applicable
for loans with one (1) year maturity as fixed from time to time by
the State Bank of India. In the absence of such rate, SBAR shall
mean any other arrangement that substitutes such prime lending
rate as mutually agreed to by the parties.

Article 8 : Billing and Payment
.

.

.

8.3.5 In the event of delay in payment of a monthly bill by the
procurer beyond its due date, a Late Payment Surcharge shall be
payable by such procurer to the seller at the rate of two (2) percent
in excess of applicable SBAR per annum, on the amount of
outstanding payment, calculated on a day to day basis (and
compounded with monthly rest) for each date of the delay. The
Late Payment Surcharge shall be claimed by the Seller through the
Supplementary Bill.

.

.

.

Article 10 : Change in Law

10.1 Definitions

In this Article 10, the following terms have the following meanings

10.1.1 “Change in Law” means the occurrence of any of the
following events after the date, which is seven (7) days prior, to the
Bid Deadline resulting into any additional recurring/non-recurring
expenditure by the Seller or any income to the Seller:
* the enactment, coming into effect, adoption, promulgation,
amendment, modification or repeal (without re-enactment or
consolidation) in India, of any Law, including rules and regulations
framed pursuant to such Law;

* a change in interpretation or application of any law by any
Indian Governmental Instrumentality having the legal power to
interpret or apply such Law, or any Competent Court of Law;
* the imposition of requirement for obtaining any Consents,
Clearances and Permits which was not required earlier;
* a change in the terms of conditions prescribed for obtaining any

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Consents, Clearances and Permits or the inclusion of any new
terms or conditions for obtaining such Consents, Clearances and
Permits; except due to any default of the Seller;
* any change in tax or introduction of any tax made applicable for
supply of power by the Seller as per the terms of this Agreement
but shall not include (i) any change in any withholding tax on
income or dividends distributed to the shareholders of the Seller, or

(ii) Change in respect of UI Charges or frequency intervals by an
Appropriate Commission or (iii) any change on account of
regulatory measures by the Appropriate Commission including
calculation of Availability.

10.2 Application and Principles for computing impact of
Change in Law
10.2.1 While determining the consequence of Change in Law
under this Article 10, the parties shall have due regard to the
principle that the purpose compensating the party affected by such
Change in Law, is to restore through monthly tariff Payment, to the
extent contemplated in this Article 10, the affected party to the
same economic position as if such Change in Law has not occurred.

10.3 Relief for Change in Law
10.3.2 During Operation Period
The compensation for any decrease in revenue or increase in
expenses to the Seller shall be payable only if the decrease in
revenue or increase in expenses of the Seller is in excess of an
amount equivalent to 1% of the value of the Letter of Credit in
aggregate for the relevant Contract Year.

10.4 Notification of change in Law:

10.4.1 If the seller is affected by a Change in Law in accordance
with Article 10.1 and the Seller wishes to claim a Change in Law
under this Article 10, it shall give notice to the Procurer of such
Change in Law as soon as reasonably practicable after becoming
aware of the same or should reasonably have known of the Change
in Law.

10.4.2 Notwithstanding Article 10.4.1, the Seller shall be obliged to
serve notice to the Procurer under this Article 10.4.2, even if it is
beneficially affected by a Change in Law. Without prejudice to the
factor of materiality or other provisions contained in this
Agreement, the obligation to inform the procurer contained herein
shall be material.

Provided that in case the Seller has not provided such notice, the
Procurer shall have the right to issue such notice to the Seller.

10.4.3 Any notice served pursuant to this Article 10.4.2 shall
provide, amongst other things, precise details of:

a) The Change in Law; and

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b) The effects on the Seller.

10.5 Tariff Adjustment Payment on account of Change in
Law

10.5.1 Subject to Article 10.2, the adjustment in monthly Tariff
Payment shall be effective from:

(i) the date of adoption, promulgation, amendment, re-enactment,
repeal of the Law or Change in Law, or

(ii)the date of order/ judgment of the Competent Court or tribunal
or Indian Governmental Instrumentality, if the Change in Law is on
account of a change in interpretation of Law.

10.5.2 The payment for Change in Law shall be through
Supplementary Bill as mentioned in Article 8.8. However, in case
any change in Tariff by reason of Change in Law, as determined in
accordance with this Agreement, the Monthly Invoice to be raised
by the Seller after such change in Tariff shall appropriately reflect
the changed tariff.”

7. With the object of bringing transparency in the lending rates, that

is, the rates of interest charged by banks on loans and advances, the

Reserve Bank of India had introduced the Benchmark Prime Lending

Rate (BPLR) system in 2003.

8. By a notification dated 1st July 2010, the Reserve Bank of India

introduced the Base Rate System, replacing the BPLR system with

immediate effect. The relevant extracts of the notification dated

01.07.2010 are set out hereinbelow :-

“2.2.1 The Base Rate system, as detailed below and in Annex
1 will replace the BPLR system with effect from July 1, 2010.
For loans sanctioned up to June 30, 2010, BPLR will be applicable, as
given in Annex 3 and 4. However, for those loans sanctioned up to
June 30, 2010 which come up for renewal from July 1, 2010 onwards,
Base Rate would be applicable…..

2.3.6. The Base Rate system would be applicable for all new

9
loans and for those old loans that come up for renewal.

Existing loans based on the BPLR system may run till their maturity.
In case existing borrowers want to switch to the new system,
before expiry of existing contracts, an option may be given
to them, on mutually agreed terms. Banks, however, should
not charge any fee for such switch-over.

2.3.7 Interest rates under the BPLR system are applicable to
all existing loans sanctioned up to June 30, 2010. However,
wherever loans sanctioned up to June 30, 2010 come up for
renewal from July 1, 2010 the Base Rate system would be
applicable. The guidelines on Benchmark Prime Lending Rate
(BPLR) and Spreads and its determination for existing loans
sanctioned up to June 30, 2010 are given in Annex 3 and Annex 4.”
(Emphasis supplied)

9. Later by a further notification dated 3 rd March 2016, the Reserve

Bank of India introduced the Marginal Cost of Funds Based Lending Rate

(MCLR) replacing the Base Rate System with effect from 1 st April 2016.

The notification dated 03.03.2016 provided:

“6 (a) (i) All floating rate rupee loans sanctioned and renewed
between July 1, 2010 and March 31, 2016 shall be priced
with reference to the Base Rate which will be the internal
benchmark for such purposes.

………..

6 (b) (i) All floating rate rupee loans sanctioned and renewed
w.e.f. April 1, 2016 shall be priced with reference to the
Marginal Cost of Funds based Lending Rate (MCLR) which will
be the internal benchmark for such purposes subject to the
provisions contained in paragraph 7 of this Master Direction.
“(Emphasis supplied)

10. There can be no dispute that the obligation to pay Late Payment

Surcharge (LPS) in case of delay in payment of bills raised by the Power

Generating Companies on the Appellant arises from the Power

Purchase Agreements, the relevant clauses being Article 11.3.4 of the

Stage 1 Power Purchase Agreements and Article 8.3.5 of the Stage 2

10
Power Purchase Agreements.

11. LPS is payable at the rate agreed upon by the parties to the

Power Purchase Agreements. The Power Purchase Agreements stipulate

that LPS for delay in payment of bills is to be computed on the basis of

the Prime Lending Rate fixed as per SBAR, that is, the State Bank

Advance Rate.

12. The expression SBAR (State Bank Advance Rate) refers to the

Prime Lending Rate notified by the State Bank of India (hereinafter

referred to as ‘SBI’) from time to time, that is applicable per annum for

loans with one year maturity, advanced by SBI. It is only in the absence

of SBAR that the rate of LPS may be substituted by some other

arrangement, by mutual agreement.

13. On 23.09.2016, the Appellant issued notice of ‘Change in Law’ to

independent power producers including the Power Generating

Companies impleaded as Respondent Nos.2 to 5.

14. On 02.12.2016, the Appellant filed Case No.24 of 2017 before the

MERC claiming that the introduction of the Base Rate and MCLR

qualifies as Change in Law. Case No.24 of 2017 has been dismissed by

a judgment and order dated 16.11.2017, which has been affirmed by

the APTEL in Appeal No.77 of 2018, by the judgment and order

impugned in this Appeal under Section 125 of the Electricity Act, 2003.

11

15. Mr. Vikas Singh appearing on behalf of the Appellant submitted

that this appeal raises the following substantial questions of law:

(a) Whether Late Payment Surcharge (LPS) can be determined
on the basis of the Prime Lending Rate (PLR) methodology,
particularly when:-

(i) Reserve Bank of India discontinued the PLR methodology
and shifted to Base Rate system by its notification dated
01.07.2010 and Marginal Cost of Fund-based Lending Rate
System (MCLR) by its notification dated 03.03.2016 as
methodologies for calculation of rate of interest?

(ii) Should the State Bank Advance Rate (SBAR) as defined in
the Power Purchase Agreement be determined only on the basis
of PLR even though SBAR is for loans with one year maturity
(i.e., short term loans) and not for long term loans?

(b) Whether the notifications dated 01.07.2010 and
03.03.2016 issued by the Reserve Bank of India are an event of
change in law in terms of Article 13 and Article 10 of the two sets
of Power Purchase Agreements executed by the Appellant with the
Power Generators?

(c) Whether LPS, which admittedly is compensatory in nature,
can in law be awarded to the Respondents without any evidence
of actual loss (equivalent to the LPS determined at the rate of PLR
+2%), particularly when Power Generators are availing working
capital loan at much lower rate of interest, based on Base Rate or
MCLR?

(d) Whether LPS, which is admittedly compensatory in nature,
can in law be awarded in such a manner that it results in unjust
enrichment of the Power Generators, especially since the interest
is to be paid by compounding monthly?

16. Mr. Singh argued that none of the above questions of law have

yet been decided by this Court, in the context of LPS. All these

questions of law go to the root of the dispute between the Appellant

12
and the Power Generating Companies and have a direct bearing on the

outcome of the lis between the parties. If any of these substantial

questions of law are decided either way, the same shall not only be

determinative of inter-se rights between the parties during the entire

term of the Power Purchase Agreements but shall also have wide

ranging impact across the entire electricity sector.

17. In support of his argument that this Appeal involves a substantial

question of law, well within the four corners of Section 125 of the

Electricity Act, 2003 Mr. Singh cited State Bank of India and Ors. v.

S.N. Goyal1, where this Court held:-

“13. Second appeals would lie in cases which involve substantial
questions of law. The word “substantial” prefixed to “question of
law” does not refer to the stakes involved in the case, nor intended
to refer only to questions of law of general importance, but refers to
impact or effect of the question of law on the decision in
the lis between the parties. “Substantial questions of law” means
not only substantial questions of law of general importance, but also
substantial question of law arising in a case as between the
parties. In the context of Section 100 CPC, any question of law
which affects the final decision in a case is a substantial
question of law as between the parties. A question of law
which arises incidentally or collaterally, having no bearing on
the final outcome, will not be a substantial question of law.

Where there is a clear and settled enunciation on a question
of law, by this Court or by the High Court concerned, it
cannot be said that the case involves a substantial question
of law. It is said that a substantial question of law arises when a
question of law, which is not finally settled by this Court (or by the
High Court concerned so far as the State is concerned), arises for
consideration in the case. But this statement has to be understood in
the correct perspective. Where there is a clear enunciation of law
and the lower court has followed or rightly applied such clear
enunciation of law, obviously the case will not be considered as
giving rise to a substantial question of law, even if the question of
law may be one of general importance. On the other hand, if there is

1 (2008) 8 SCC 92

13
a clear enunciation of law by this Court (or by the High Court
concerned), but the lower court had ignored or misinterpreted or
misapplied the same, and correct application of the law as declared
or enunciated by this Court (or the High Court concerned) would
have led to a different decision, the appeal would involve a
substantial question of law as between the parties. Even where there
is an enunciation of law by this Court (or the High Court concerned)
and the same has been followed by the lower court, if the appellant
is able to persuade the High Court that the enunciated legal position
needs reconsideration, alteration, modification or clarification or that
there is a need to resolve an apparent conflict between two
viewpoints, it can be said that a substantial question of law arises for
consideration. There cannot, therefore, be a straitjacket definition as
to when a substantial question of law arises in a case. Be that as it
may.” (Emphasis supplied)

18. Mr. Singh also cited Nazir Mohamed v. J. Kamala and

Others2, authored by one of us (Indira Banerjee, J), where this Court

reiterated that :-

“32. To be “substantial”, a question of law must be debatable, not
previously settled by the law of the land or any binding
precedent, and must have a material bearing on the decision
of the case and/or the rights of the parties before it, if
answered either way.” (Emphasis supplied)

19. Mr. Singh submitted that the LPS under the Power Purchase

Agreements must be calculated at prevailing Base Rate/ MCLR Rates as

issued by the RBI from time to time. Mr. Singh argued that, as per the

definition of SBAR in the Power Purchase Agreement, SBAR means the

Prime Lending Rate per annum applicable for loans with one (1) year

maturity, as fixed from time to time by the State Bank of India, and in

the absence of such rate, any other arrangement that substitutes such

Prime Lending Rate, as mutually agreed to by the parties.

2 2020 SCC OnLine SC 676

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20. Mr. Singh argued that the definition of SBAR as provided under

the Power Purchase Agreements expressly refers to the interest rate

that is applicable for loans with one year maturity. The interest rate is

therefore, to be renewed on a yearly basis, and further, only the

interest rates for short term loans would be applicable to LPS under the

Power Purchase Agreements. Upon renewal of the loan, the Base Rate

system and/or MCLR system, as the case may be, is to be applicable,

for the relevant period for which LPS is to be calculated.

21. Mr. Singh submitted that no PLR rates are being notified by SBI

for short term loans. The PLR rates issued by SBI, after notification of

the Base Rate system and the MCLR rates by the RBI, are only for long

term loans that have not come up for renewal, and for those loans

which are running to maturity. Even in case of loans there is option of

switching to the Base Rate / MCLR system.

22. Mr. Singh submitted that in Jaipur Vidyut Vitaran Nigam

Limited & Ors. v. Adani Power Rajasthan Limited and Anr3., this

Court has capped the interest rate on LPS at 9% per annum, inclusive

of the 2% in excess of the applicable interest rate. Moreover, this Court

has directed that the interest should be compounded annually and not

monthly as provided in the clause therein. The relevant portion of the

said judgment cited to by Mr. Singh, is reproduced hereunder:

3 2020 SCC Online SC 697

15
“71. Considering the facts of this case and keeping in view that the
RERC and APTEL have given concurrent findings in favour of the
respondent with regard to change in law, with which we also concur,
we may now deal with the question of liability of appellants-
Rajasthan Discoms with regard to late payment surcharge. In this
regard, the following Articles 8.3.5 and 8.8 of PPA, which are relevant
for the present purpose, are extracted hereunder:

“8.3.5. In the event of delay in payment of a Monthly Bill by
the Procurers beyond its Due Date, a Late Payment
Surcharge shall be payable by such Procurers to the Seller at
the rate of two percent (2%) in excess of the applicable SBAR
per annum, on the amount of outstanding payment,
calculated on a day to day basis (and compounded with
monthly rest), for each day of the delay. The Late Payment
Surcharge shall be claimed by the Seller through the
Supplementary Bill.

72. Liability of the Late Payment Surcharge which has been saddled
upon the appellants is at the rate of 2% in excess of applicable SBAR
per annum, on the amount of outstanding payment, calculated on a
day to day basis (and compounded with monthly rest) for each day
of the delay. Therefore, there shall be huge liability of payment of
Late Payment Surcharge upon the appellants-Rajasthan Discoms.

73. With regard to the question of interest/late payment surcharge,
we notice that the plea of change in law was initially raised by APRL
in the year 2013. A case was also filed by APRL in the year 2013
itself raising its claim on such basis. However, the appellants-
Rajasthan Discoms did not allow the claim regarding change in law,
because of which APRL was deprived of raising the bills with effect
from the date of change in law in the year 2013. We are, thus, of the
opinion that considering the totality of the facts of this case and in
order to do complete justice and to reduce the liability of the
appellants-Rajasthan Discoms, payment of 2 per cent in excess of
the applicable SBAR per annum with monthly rest would be on
higher side. In our opinion, it would be appropriate to direct the
appellants-Rajasthan Discoms to pay interest/late payment
surcharge as per applicable SBAR for the relevant years, which
should not exceed 9 per cent per annum. It is also provided that
instead of monthly rest, the interest would be compounded per
annum.

74. We accordingly direct that the rate of interest/late
payment surcharge would be at SBAR, not exceeding 9 per
cent per annum, to be compounded annually, and the 2 per
cent above the SBAR (as provided in Article 8.3.5 of PPA)
would not be charged in the present case.”

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23. Mr. Singh argued that the provisions of the Power Purchase

Agreement considered in Jaipur Vidyut Vitaran Nigam Ltd. (supra)

with regard to LPS are in pari materia with the corresponding

provisions in the Power Purchase Agreements under consideration in

this case. Thus, the aforesaid judgment squarely covers the present

case.

24. Mr. Singh argued that, in terms of Article 1 of the Power Purchase

Agreements, “law means all laws including Electricity Laws in force in

India and any statute, ordinance, regulation, notification or code,

rule, or any interpretation of any of them by an Indian Governmental

Instrumentality and having force of law and shall further include all

applicable rules, regulations, orders, notifications by an Indian

Governmental Instrumentality pursuant to or under any of them and

shall include all rules,” Change in Law has been defined to include the

enactment, bringing into effect, adoption, promulgation,

amendment, modification or repeal of any law.

25. Mr. Singh further argued that the Reserve Bank of India is an

Indian Government Instrumentality. The Notifications referred to above,

were issued by the Reserve Bank of India under Sections 21 and 35A of

the Banking Regulation Act, 1949 and have the force of law. Thus, these

17
Notifications are well within the definition of law provided in the Power

Purchase Agreements.

26. Mr. Singh emphatically argued that the Reserve Bank of India

Notifications dated 01.07.2010 and 03.03.2016, issued after execution

of the Power Purchase Agreements with the Respondent Nos. 2 to 5

constituted change in Law, as contemplated in the Power Purchase

Agreements.

27. Mr. Singh submitted that the APTEL has erroneously come to the

conclusion that LPS is not tariff and also not part of the income of the

Respondent Power Generating Companies and thus does not constitute

change in law. Mr. Singh submitted that any payment made by a

procurer of electricity to the generator of electricity is nothing but a

facet of the tariff payable under the Power Purchase Agreement. The

term ‘tariff’ cannot be restricted to only two facets of tariff, i.e., per

unit energy charge and fixed energy charge on the basis of production

capacity (capacity charge). All payments that are payable to a

generator of electricity for supply of electricity under the Power

Purchase Agreements including LPS are different facets of tariff. Tariff

will also include what the distribution licencees would ultimately

charge the consumers.

18

28. Referring to the meaning of the word ‘tariff’ as given in Merriam

Webster Dictionary, as downloaded from the website

https://www.merriam-webster.com/dictionary/tariff on 29.07.2021,

which includes a charge, Mr. Singh argued that LPS is part of the

charges that are payable by the Appellant to the Respondent

Generating Companies under their respective Power Purchase

Agreements, and is therefore tariff.

29. Mr. Singh submitted that interest income is considered as income

under the Income Tax Act, 1961. LPS is nothing but interest on account

of delay in payment of the tariff under the Power Purchase

Agreements, and is payable as a part of the said tariff. However, APTEL

has by its impugned judgment and order wrongly held that LPS neither

has any bearing on the income of the Respondent Power Generating

Companies nor is part of the tariff. APTEL has erroneously held that

change in methodology in computation of the rate of interest is not

change in law.

30. Mr. Singh further argued that the LPS, as a concept, is

compensatory in nature for delayed payment, if any. The Order dated

16.11.2017 passed by the MERC in Case No.24 of 2017 also holds that

LPS is essentially compensatory in character, in terms of the effect on

the seller on account of delay by the procurer in making payments.

19

31. Mr. Singh further argued that LPS is paid to compensate a power

generator for delay in making payments of invoices, because the

power generator would have to arrange additional working capital loan

to the extent of the amount of outstanding delayed invoice(s). Thus, to

offset the loss that may have been caused on account of additional

interest on such additional working capital loan, the Power Purchase

Agreements contain a provision for LPS. The fact that LPS is to be

compounded monthly is a further benefit to the Power Generating

Companies. Thus, LPS in essence is nothing but a kind of liquidated

damages for delay in payment of invoice(s).

32. Mr. Singh emphatically argued that LPS being compensatory in

nature, the same cannot be claimed as a windfall gain. A comparative

analysis of the LPS rate claimed by the Respondents, with the

prevailing rates of interest for availing working capital loans would

reveal that the Respondent Power Generating Companies were making

profit from LPS, at the cost of the Appellant, contrary to the concept of

compensation and/or damages.

33. Mr. Singh submitted that it is well settled that law does not

permit any windfall gain, while awarding any compensation. In this

context Mr. Singh cited M/s Kailash Nath Associates v. Delhi

Development Authority and Anr.4 where this court held :-

4 (2015) 4 SCC 136

20
“43. …..On a conspectus of the above authorities, the law on
compensation for breach of contract under Section 74 can be stated
to be as follows:-

43.1. Where a sum is named in a contract as a liquidated amount
payable by way of damages, the party complaining of a breach can
receive as reasonable compensation such liquidated amount only if
it is a genuine pre-estimate of damages fixed by both parties and
found to be such by the Court. In other cases, where a sum is
named in a contract as a liquidated amount payable by way of
damages, only reasonable compensation can be awarded not
exceeding the amount so stated. Similarly, in cases where the
amount fixed is in the nature of penalty, only reasonable
compensation can be awarded not exceeding the penalty so
stated. In both cases, the liquidated amount or penalty is
the upper limit beyond which the Court cannot grant
reasonable compensation.”

43.2. Reasonable compensation will be fixed on well-known
principles that are applicable to the law of contract, which are to be
found inter alia in Section 73 of the Contract Act. 43.3. Since Section
74
awards reasonable compensation for damage or loss caused by a
breach of contract, damage or loss caused is a sine qua non for the
applicability of the section. 43.4. The section applies whether a
person is a plaintiff or a defendant in a suit. 43.5. The sum spoken
of may already be paid or be payable in future. 43.6. The expression
“whether or not actual damage or loss is proved to have been
caused thereby” means that where it is possible to prove actual
damage or loss, such proof is not dispensed with. It is only in cases
where damage or loss is difficult or impossible to prove that the
liquidated amount named in the contract, if a genuine pre-estimate
of damage or loss, can be awarded.

43.7. Section 74 will apply to cases of forfeiture of earnest money
under a contract. Where, however, forfeiture takes place under the
terms and conditions of a public auction before agreement is
reached, Section 74 would have no application.

44. The Division Bench has gone wrong in principle. As has been
pointed out above, there has been no breach of contract by the
appellant. Further, we cannot accept the view of the Division
Bench that the fact that DDA made a profit from re-auction
is irrelevant, as that would fly in the face of the most basic
principle on the award of damages—namely, that
compensation can only be given for damage or loss suffered.
If damage or loss is not suffered, the law does not provide
for a windfall” (emphasis supplied)”

21

34. To impress upon this Court that the Respondents were making a

huge gain from LPS as claimed by them, Mr. Singh emphasized the

difference between LPS rates as claimed by the Respondents and the

rates of LPS which the Appellant seeks, based on rates of interest on

loans (excluding an additional 2% as payable in terms of the Power

Purchase Agreements) as given in the Table below:-

                  Average PLR      Average Base rate
                                                            Average MCLR
      Financial   (In %) (LPS (In %) (Rate sought by
                                                     (In %) (Rate sought by
      Year        Claimed     by Appellant up to Mar
                                                     Appellant from Apr 2016)**
                  Respondents* 2016)



        2010-11       12.17             7.55                     --

        2011-12       13.67             8.92                     --

        2012-13       14.50             9.73                     --

        2013-14       14.48             9.90                     --

        2014-15       14.75             9.85                     --

        2015-16       14.37             9.62                     --

        2016-17       14.05                                     9.08

        2017-18       13.83                                     7.98

        2018-19       13.43                                     8.15

        2019-20       13.70                                     8.15

        2020-21       12.28                                     7.10




35. Mr. Singh also relied on a table reproduced below, of the

monetary difference between the LPS claimed by the Respondents and

the LPS if charged as per Base Rate/MCLR methodologies :-




                                                                                  22
                                Summary of LPS claims of IPPs

                                                                                       Final
                                                                                    Calculated
                                  Additional LPS
                Amount @                                                              LPS @
                               quantified by MERC
                PLR as per                           Total LPS as   LPS paid by        Base
 Generator                     in order in case no
               MSEDCL upto                           per PLR rate    MSEDCL         Rate/MCLR
                                24 of 2017 dated
               March 2021                                                             up to
                                   28.07.2021
                                                                                      March
                                                                                      2021

       A           B                   C               D=B+C            E               F
APML               1001.64                  15.92         1017.56           764.7      537.61
RIPL                241.78                    2.17         243.95        191.54        138.09
JSW                 185.26                    0.96         186.22        132.07          92.48
GMR                    41.01                  0.47          41.48           36.61        28.88
Total              1469.69                  19.52        1489.21       1124.92         797.06



36. Mr. Singh emphatically submitted that the Respondent Power

Generating Companies have been availing their working capital loans

at interest computed in accordance with the Reserve Bank of India

Notifications, but are claiming LPS applying archaic and discontinued

PLR methodology. There are, however, no materials on record to

substantiate the contention that the Respondent Power Companies are

availing working capital loans at interest computed in accordance with

the Notification dated 3rd March, 2016 of the Reserve Bank of India.

37. Mr. Singh submitted that the Respondent No.2 sought for bill

discounting from the Appellant during the financial year 2020-2021.

Such bill discounting was done at the rate of 7% per annum. He

pointed out that other Power Generators had also discounted their

energy bills at interest rates varying from 4 to 6.5%. However, those

Power Generators are not parties to this appeal.

23

38. Mr. Singh adverted to the Independent Auditor’s Certificate on

computation of actual rate of interest on short term borrowings for

Coastal Gujarat Power Limited (CGPL), which is also an Independent

Power Producer. The actual rates of interest on short term borrowings

by CGPL between 01.04.2018 to 25.01.2021 are as follows:

                            Period              Rate of interest
                                                    (In %)
             April 01, 2018- March 31, 2019               9.04%
             April 01, 2019- March 31, 2020               9.28%
             April 01, 2020- January 25, 2021             8.18%


CGPL not being a party to these proceedings its borrowings or the

interest paid by them on borrowings is inconsequential.

39. Mr. Singh further submitted that the Appellant is a revenue

neutral entity. The Annual Revenue Requirement of the Appellant is

required to be approved by the MERC. Expenditure not allowed by the

MERC is excluded from the Annual Revenue Requirement that is

approved by the MERC. The delay in payments made under the Power

Purchase Agreements is due to several extraneous and unavoidable

circumstances, which are beyond the control of the Appellant,

including but not limited to delayed recovery of dues from the

consumers of the Appellant. Even before the outbreak of the COVID-19

pandemic, the Appellant had been suffering major cashflow crunches.

40. Mr. Singh submitted that the Appellant has been facing severe

cash flow issues, as the tariff hike approved by the MERC is much lower

24
than the required tariff hike. The same is evident from the gap in the

revenue sought by the Appellant as against the revenue allowed by the

MERC, the figures of which are as follows:

                    Particulars              Claimed by       Approved by
                                           MSEDCL       (Rs      MERC
                                               in Crs.)        (Rs in Crs)
      True up requirement for F.Y. 15-16         5546             5032
      True up requirement for F.Y. 16-17         6704             4897
      Revenue Gap for 17-18                      5420             5308
      Total                                     17670            15237



41. Mr. Singh argued that a Revenue gap of Rs.2433 Crores has not

been approved by the MERC for the Financial Years 2015-16, 2016-17

and 2017-18. Furthermore, the Appellant has projected/claimed

Revenue Gap of Rs. 34,646 Crores upto the Financial Year 2019-20

(including past period revenue gap, from 2015-16 to FY 2017-18).

However, the MERC has determined the total Revenue Gap at Rs.

20,651 Crores only vide its Order dated 12.09.2018 passed in a Mid-

term Review Petition being Case No. 195 of 2017 out of which Rs.

8,269 Crores was allowed to be recovered in tariff. As per the order of

the MERC a “Regulatory Asset” has been created, in respect of the

balance amount Rs.12,382 Crores. There is, however, no timeline or

stipulations provided in the order of the MERC for recovery of the

aforesaid amount. This has led to severe financial problems for

Appellant.

42. Mr. Singh submitted that the MERC has disallowed various

components of Annual Revenue Requirement sought by the Appellant,

25
such as Agriculture (AG) Sales. The MERC has suo motu disallowed

sale of agriculture units for the Financial Years 2014-15 and 2015-16 by

2414 and 3399 units respectively, thereby penalizing the Appellant for

Rs.935 Crores & 2286 Crores, for each of the years, which has widened

the revenue gap and cannot be met unless the MERC allows the

Revenue Gap in terms of Case No. 195 of 2017 ( supra). Mr. Singh has

referred to the yearwise approval of total sales and AG sale, which are

not relevant to this appeal and therefore not reproduced in this

judgment, to avoid prolixity.

43. Mr. Singh submitted that, even though the AG Sales figures

submitted by the Appellant were based on actual consumption, the

MERC was of the opinion that the methodology followed by the

Appellant needed to be revisited and validated. Pending the enquiry

into the methodology, the MERC mechanically devised its own

methodology to calculate AG Sales, which does not take into

consideration the details / actual figures submitted by the Appellant.

This led to disallowance of a quantum of AG sales. The difference

between the AG Sales claimed by the Appellant, as against the

quantum allowed, has led to shortfall in cash flow and inability of the

Appellant to make payments.

44. Mr. Singh further submitted that the tariff for the Financial Year

2016-2017 came into effect from 01.11.2016 instead of 01.04.2016 in

26
view of Tariff Order dated 03.11.2016 passed by the MERC in Case

No.48 of 2016, leading to the older tariff to continue to remain in effect

after 7 months of commencement of the Financial Year.

45. Mr. Singh submitted that the shortfall in actual revenue vis-à-vis

the approved revenue requirement was made up after almost 2 years,

by an order dated 12.09.2018 in Case No. 195 of 2017. The Appellant

has therefore been constrained to take loans, the interest component

of which is not allowed to be passed on as a tariff component.

46 Mr. Singh submitted that the actual growth in sales of the

Appellant in relation to subsidized categories (e.g. HT industrial and

Commercial) was very low. Further, tariff subsidy for making prompt

payment has widened the gap between expenditure and revenue

receipts, so has the rise in the number of consumers from different

categories, who delay payment of their dues.

47. Mr. Singh argued that the MERC determines tariff upon

consideration of actual gains and losses. He argued that the MERC

considered the Gains/Losses of the Appellant at time of passing the

Multi Year Tariff (MYT) Order instead of considering the same at the

time of true up of the Appellant as specified in MYT regulations, which

resulted into loss of revenue to the Appellant.

27

48. Mr. Singh further argued that the data submitted and approved in

determining Multi Year tariff (MYT) and/or Annual Revenue Requirement

(ARR) is based on estimation/ projections/ norms, as against the data

which is submitted at the time of True-up Petition, which is based on

audited accounts and figures which are actually frozen, as per

Regulation 11 of the Maharashtra Electricity Regulatory Commission

(Multi Year Tariff) Regulations, 2015, referred to hereinafter as the ‘MYT

Regulations’.

49. By way of example, Mr. Singh pointed out that, if a particular

expense is approved at a certain amount but during true-up exercise,

the actual expenditure is higher than that approved by the MYT Order,

the Appellant ends up borrowing additional working capital for which

the interest is not approved by the MERC, if it crosses the normative

working capital. As per the MYT Regulations, the difference would be

subject to treatment of sharing of gains or loss as envisaged under

Regulation 11. In other words, only 1/3rd of the loss and/or difference

would be permitted to be recovered through tariff, and the balance

2/3rd amount would have to be borne by the Appellant as financial loss.

This led to further cashflow crunch for the Appellant.

50. Mr. Singh submitted that the time gap between the approval of

the Annual Revenue Requirement and the final true up has resulted in

grave mismatch in revenue and expenditure thereby increasing the

28
working capital requirement of the Appellant. The Appellant has been

constrained to borrow from Financial Institutions/ Banks, on an interest

component, which is not passed through in its Annual Revenue

Requirement.

51. Mr. Singh argued that another important factor that has

deepened the financial crisis of the Appellant is low recovery of dues

from agricultural consumers who consume about 30% of the electricity

supplied through the Appellant. Similarly, the arrears on account of

supply of electricity to Government departments, public water works

and for street-lights have also accumulated. Under the MYT

Regulations MERC allows a provision for bad debts to the extent of

1.5% of receivables only, even though the largest consumer base of

the Appellant is in rural areas where consumers are less likely to pay

bills on time.

52. Mr. Singh submitted that these issues are not within the control

of the Appellant, but has continued to deeply impact the financial

position of the Appellant for many years. It is not that the Appellant

has been realising its dues from its consumers in time, but not making

payments to the Power Generating Companies. The Appellant is itself

in a precarious financial position which becomes worse by levy of

interest beyond rates prescribed in RBI Notifications for delay, which is

not in the control of the Appellant.

29

53. Mr. Singh submitted that the COVID 19 pandemic has also

severely affected the financial viability of the Appellant, and has led to

the Appellant incurring losses to the tune of Rs.7500 crores. Further,

the financial position of the Appellant has also been affected by the

measures taken to alleviate difficulties of the consumers during the

pandemic. The Appellant has given rebate of 2% to all residential

consumers for timely payment of all bills (including arrears) of June-20

and July-20 in full, based on actual readings. Further, residential

category consumers who were not able to pay the electricity bills of

June-20 and July-20 at one go, were allowed to pay bills in three equal

instalments, without interest or delayed payment charges.

54. Mr. Singh further submitted that on 26.03.2020 the MERC issued

the following ‘Practice Direction- Measures to Minimize Public Interface

in View of the Coronavirus Epidemic’.

(a) Distribution Licensees were to ensure continuity of supply.
Complaints related to restoration of supply as also safety
related complaints were to continue to be attended by the
Distribution Licensee.

(b) The Distribution Licensees might suspend other non-essential
services which required visit to premises of consumers or
meeting consumers in person i.e., Meter reading, Billing,
Offline Bill Collection at Bill Payment Centres, release of new
connections etc.

(c) Automated Meter Reading facility whenever available was to
be used for meter reading.

(d) In the absence of Meter reading, the Consumers were to be
intimated through digital channels such as email, sms, mobile

30
app about their estimated bill, computed on average basis, as
per Supply Code Regulations.

(e) For bill payment, Distribution Licensee was required to
facilitate and update alternate payment modes i.e. digital
payment mode.

(f) All the above measures were directed to be communicated
through social media, electronic media and print media for
wider publicity.

55. Later, on 30.03.2020, the MERC issued an order approving a

moratorium for consumers under the Industrial and Commercial

category, on payment of electricity bills for three billing cycles

beginning from the lockdown date of 25.03.2020. Mr. Singh submitted

that the said moratorium granted by the MERC has badly affected the

revenue mechanism of the Appellant as the Appellant continued to

incur expenditure due to its universal service obligations whilst the

recovery got badly hit. Further, the MERC, through its practice

directions issued on 09.05.2020 and 21.05.2020, gave the following

relaxations and/or reliefs to the consumers:

(a) It was clarified that moratorium of 3 billing cycles had been
given to the industrial and commercial establishments for
payment of fixed charges, which they would be liable to pay in the
subsequent three billing cycles, in equal interest free instalments.

(b) If the consumers chose to pay the entire moratorium
amount in one go, rebate of 1% would be given to such
consumers.

(c) HT Industrial and HT Commercial consumers were allowed
to revise their contract Demand upto 3 times in a Billing Cycle.

31

(d) Low Tension Industrial and Low Tension Commercial
consumers having demand-based tariff were allowed to revise
their Contract Demand up to 2 times in a Billing Cycle.

(e) for Industrial and Commercial consumers, only a token
amount of 10% of the average energy consumption was to be
billed in respect of premises under Lockdown.

56. Mr. Singh argued that these factors clearly show that the

Appellant could not make timely payments for reasons beyond its

control, for which the Appellant cannot be blamed. It is for this delay

that compensation is prescribed under the Power Purchase Agreements

by way of LPS. Mr. Singh emphatically reiterated his submission that

such compensation cannot in law be a windfall gain or unjust

enrichment of the Respondents at the cost of the Appellant, and the

consumers including marginalised consumers i.e., agricultural

consumers, people living in slums and the downtrodden strata of the

society.

57. Mr. Singh finally argued that the claim of the Appellant is not

time barred, as contended by the Power Generators. In terms of Article

13.3.2 of the Power Purchase Agreements, the seller is obligated to

serve the Change in Law notice to the procurer, if it is beneficially

affected by a Change in Law. The Respondent Nos. 2 to 5 however,

failed to issue any such notice, and are now attempting to take

advantage of their own wrong, in contravention of settled

principles of law to this effect. Moreover, on account of the failure

of the Respondent Power Generating Companies to issue Change in

32
Law notices under the Power Purchase Agreements, the Appellant

herein was constrained to issue the Change in Law notices to the

Respondent Generating Companies.

58. In conclusion, Mr. Singh submitted the argument that APTEL

erred in law in issuing directions on the Appellant for payment of LPS

as claimed. Such directions to make payment to the Respondent

Power Generators could not have been made, more so in the

Appellant’s appeal. No monetary relief could be granted in the

Appellant’s appeal. The Respondents should have been remitted to

MERC for execution and quantification of the Change in Law claims.

59. The only issue in this appeal is whether the change in interest

rate system by the RBI from Prime Lending Rate (PLR) to Base Rate

and then to MCLR amounts to Change in Law under the Power Purchase

Agreements.

60. Mr. Mukul Rohatgi, Senior Advocate appearing on behalf of the

Respondent No.2, followed by Dr. Abhishek Manu Singhvi, Senior

Advocate appearing on behalf of the Respondent No.3, Mr. Vishrov

Mukherjee appearing on behalf of the Respondent No.4 and Ms. Divya

Anand appearing on behalf of the Respondent No.5 advanced

arguments, opposing the appeal. There being some overlapping of

33
arguments of the respective Counsel, this Court has not recorded the

submission of all Counsel in entirety, to avoid unnecessary repetition.

61. Mr. Rohatgi, Mr. Singhvi, Mr. Vishrov Mukerjee and Ms. Divya

Anand all argued in one voice that this Appeal under Section 125 of the

Electricity Act 2003, is not maintainable, there being no question of

law, not to speak of substantial question of law raised by the Appellant.

62. Mr. Rohatgi appearing for the Respondent No.2, Mr. Singhvi

appearing for Respondent No.3, Mr. Mukerjee appearing for the

Respondent No.4 and Ms. Divya Anand appearing for the Respondent

No.5 submitted that Article 8.3.5 of the Stage 2 Power Purchase

Agreements corresponding to Article 11.3.4 of the Stage 1 Power

Purchase Agreements between the Distribution Licensee, that is, the

Appellant, as purchaser, and the Power Generating Companies being

the Respondent Nos.2 to 5, for supply of electricity, governs the LPS

payable by the Appellant to the Power Generating Companies,

whenever there is delay in payment of bills. Article 11.3.4. of the

Stage 1 Power Purchase Agreement, and Article 8.3.5 of the Stage 2

Power Purchase Agreement have been set out earlier in this Judgment.

63. Mr. Rohatgi submitted that the SBAR which is actually the rate of

interest for grant of loan/finance by the State Bank of India, has been

incorporated in the Power Purchase Agreements and the agreed rate for

34
LPS is 2% above the SBAR. This SBAR keeps changing. LPS is therefore

2% in excess of the applicable SBAR during the billing period.

64. Mr. Rohatgi pointed out that the SBI rate is existing even today,

as pleaded by the Respondent No.2 at pages 48 to 50 of its Reply to

the application for stay being I.A. No. 69796 of 2021 filed by the

Appellant. The SBAR for the month of March 2021 is 12.15%.

65. Ms. Divya Anand appearing on behalf of the Respondent No.5,

drew the attention of this Court to Clause 10 of the Notification dated

03.03.2016 of the Reserve Bank of India, introducing the MCLR system

with effect from 01.04.2016, in place of the Base Rate System, in terms

whereof existing loans based on the PLR system were to continue

under the PLR System till maturity. She submitted that MCLR System

was to apply to loans sanctioned after 01.04.2016, and not loans

already in existence as on that date.

66. Ms. Divya Anand submitted that the State Bank of India has been

notifying all three rates, that is, PLR, Base Rate and MCLR as

demonstrated in the Table of interest rates of the State Bank of India

during the year 2020 which is reproduced below:-

SBI notified Rate 10.12.2020 10.09.2020 10.06.2020 10.03.2020

BPLR 12.05 12.15 12.15 12.90

Base Rate 7.30 7.40 7.40 8.15

MCLR 7.30 7.30 7.30 8.05

35

67. Mr. Rohatgi argued that, the contention of the Appellant that, the

contractual rate, as incorporated in the Power Purchase Agreements, which is

the SBI Rate, will stand altered by introduction by the Reserve Bank of

India of the MCLR w.e.f. from 2016, is completely misconceived. The

Power Purchase Agreement cannot be deemed to be amended by

introduction of the MCLR. It is open to the Appellant, a Government

entity, to take a loan at a cheaper rate if it wants to, and clear the bills

raised by the Power Generating Companies.

68. Mr. Rohatgi submitted that the Appellant is purporting to portray late

payments as an act of virtue. If the Appellant did not delay payment, it

would not have to pay any LPS. LPS is attracted only in the event of

delay in payment beyond the due date. The Appellant cannot

circumvent the provisions of the Power Purchase Agreement which is a

binding contract.

69. Mr. Rohatgi argued that the APTEL has, by its impugned Judgment

and order dated 27.04.2021, correctly dismissed the Statutory Appeal

filed by the Appellant, and upheld the order of the MERC dated

16.11.2017. The limited issue involved in the present Civil Appeal is,

whether the Appellant is liable to pay LPS calculated as per the SBAR

(State Bank Advance Rate) as provided in the Power Purchase

Agreements executed between the Appellant and Mr. Rohatgi’s client

or as per the Base Rate System introduced in 2010 and Marginal Cost

36
of Funds Based Lending Rate System(MCLR) introduced in 2016 as

notified by the Reserve Bank of India. Mr. Rohatgi pointed out that the

Appellant had not, at any stage, denied that it had committed a series

of defaults in timely payments.

70. Mr. Rohatgi emphatically argued that the APTEL had, by the

impugned judgment and order, very rightly held that the notifications,

guidelines or circulars issued by the Reserve Bank of India, including

the Notifications dated 09.04.2010 introducing the Base Rate and

03.03.2016 introducing the MCLR, after execution of the Power

Purchase Agreements dated 14.08.2008, 31.03.2010, 09.08.2010 and

16.02.2013 between the Appellant and the Respondent No.2 would

not qualify as Change in Law. He argued that the APTEL had correctly

held that the payment of LPS along with interest calculated on the

SBAR, has authorisation in the express terms of the aforesaid Power

Purchase Agreements. Moreover, since the Circulars dated 09.04.2010

of the Reserve Bank of India, introducing Base Rate had been in

existence since 2010, the Change in Law notice, issued only on

23.09.2016, had rightly been held to be time barred.

71. Mr. Rohatgi submitted that this Appeal does not meet the

requirement of Section 125 of the Electricity Act, 2003, which only

permits grounds as specified under Section 100 of the Code of Civil

Procedure, 1908 (hereinafter referred to as “CPC”). Section 100 of the

37
CPC mandates that the first Appellate Court is the final Court of facts.

Section 100 of the CPC does not permit interference with findings of

fact of the first Appellate Court.

72. Mr. Rohatgi submitted that contrary to the grounds permitted in

Section 100 of the CPC, in this Appeal under Section 125 of the

Electricity Act, 2003, the Appellant has raised pure questions of fact,

which have been concurrently decided in favour of the Power

Generating Companies. This Appeal is, therefore not maintainable. In

support of the aforesaid argument, Mr. Rohatgi cited DSR Steel (P).

Ltd. v. State of Rajasthan and others5, Tamil Nadu Generation &

Distribution Corporation Ltd. v. PPN Power Generating

Company Private Limted6 and Wardha Power Company

Limited v. Maharashtra State Electricity Distribution Co.

Limited and Another7.

73. Mr. Vishrov Mukherjee cited DSR Steel (P) Ltd. v. State of

Rajasthan and Ors. (supra) referring to paras 4, 14, 15, 16, 18 & 19

and Power Grid Corporation of India and Ors. v. Tamil Nadu

Generation and Distribution Company Limited and Others .8 in

support of the argument that this appeal under Section 125 of the

5 (2012) 6 SCC 782 (para 14)
6 (2014) 11 SCC 53 (paras 53 and 70)

7. (2016) 16 SCC 541 (para 5)
8 (2019) 7 SCC 34 (para 1 and 6)

38
Electricity Act, 2003 is liable to be dismissed as it does not involve any

substantial question of law.

74. Mr. Mukherjee also cited Bharat Sanchar Nigam Ltd. v.

Pawan Kumar Gupta9, Wardha Power Co. Ltd. v. MSEDCL & Anr .,

(supra) and Tuppadahalli Energy India Private Limited v.

Karnataka Electricity Regulatory Commission and Anr. 10, where

this Court dismissed statutory appeals on the ground of absence of

any substantial question of law.

75. Mr. Rohatgi pointed out that both the MERC and t he APTEL

have rendered concurrent findings against the Appellant as shown in

the tabular statement given below:

                Concurrent Findings                Order of       Judgment
                                                   MERC           and Orders
                                                                  of APTEL
   The Appellant (MSEDCL) is called upon to pay Para 12 @ pg      Para   13    @
   LPS only when    it    delays    payment of 109-111
   monthly   or supplementary bills beyond the                    page 11-14
   due date.

   SBI PLR for loans with maturity of one          Para 13 @      Para   12    @
   year, remains in vogue and its value            page 109-111
   continues to be declared by SBI from time to                   page 11-14
   time.

   The RBI revisions of PLR to Base Rate in 2010   Para 14 @      Para   14    @
   and MCLR in 2016 do not amount to Change        page 109-111
   in Law in terms of the Power Purchase                          page 11-14
   Agreements (PPAs).




9. (2016) 1 SCC 363
10. (2017) 11 SCC 194




                                                                               39
   The Appellant (MSEDCL) entered into several      Para 16 @       Para   23    @
   PPAs, assumably with open eyes, subsequent       page 109-111
   to the notification of the Base Rate System by                   page 16
   RBI.

   MSEDCL issued Notices of Change in Law to the     Para 15 @      Para   23    @
   Respondents only in September, 2016, i.e.         page
   more than 6 years after RBI introduced the                       page 16
   Base Rate system in place of the BPLR system.     109-111




76. Mr. Rohatgi argued that the Appellant is seeking to raise the above

issues which have been concurrently decided, once again. No

substantial question of law has arisen in this Appeal filed under Section

125 of the Electricity Act, 2003 warranting interference by this Court. Mr.

Rohatgi cited Ramanuja Naidu v. V. Kanniah Naidu and Another11

and Navaneethammal v. Arjuna Chetty12 in support of his aforesaid

argument.

77. Mr. Rohatgi argued that since SBAR continues to be in operation,

it cannot be said that there is any change in law. The Respondent No.2

and the Appellant have entered into four Power Purchase Agreements,

the first dated 14.08.2008 for supply of 1320 MW, the second dated

31.03.2010 for supply of 1200 MW, the third dated 09.08.2010 for

supply of 125 MW and the fourth dated 16.02.2013 for supply of 440

MW of electricity, pursuant to the competitive bidding process initiated

by the Appellant. Article 8.3.5 of the Power Purchase Agreements

11. (1996) 3 SCC 392 (para 11)

12. (1996) 6 SCC 166 (para 11)

40
dated 31.03.2010, 09.8.2010 and 16.02.2013, executed after

introduction of the Base Rate System, specially provide for

computation of LPS as per the SBAR, in invocation of the principle of

incorporation by reference. There is a specific reference to the SBAR in

the Power Purchase Agreements, binding on the parties for the entire

term of the contract i.e., 25 years. The Power Purchase Agreement dated

14.08.2008 for supply of 1320 MW entered into between the Appellant and

the R espondent No.2 also contains similar provision for LPS.

78. Mr. Rohatgi further argued that the Power Purchase Agreements

define SBAR to mean “the prime lending rate per annum applicable for

loans with one (1) year maturity as fixed from time to time by the

State Bank of India. In the absence of such rate, SBAR shall mean any

other arrangement that substitutes such prime lending rate as

mutually agreed to by the parties”.

79. Mr. Rohatgi submitted that the definition of SBAR in the Power

Purchase Agreements makes it clear that any reference in the Power

Purchase Agreements to SBAR has to be construed as reference to the

Prime Lending Rate as fixed by State Bank of India. These provisions

have no reference at all to the Reserve Bank of India. Further, the Power

Purchase Agreements do not contemplate automatic shift to Base Rate /

MCLR notified by RBI, even if SBI PLR ceased to be in existence. The

agreed position in such situation is for the contracting parties to

41
substitute SBI PLR with any other mutually agreed arrangement. Having

agreed to such an arrangement in the Power Purchase Agreements, the

claim of Appellant for treating Base Rate/MCLR as Change in Law event

cannot be entertained.

80. Mr. Rohatgi argued that, while introducing the Base Rate system

in 2010 and the MCLR system in 2016, the Reserve Bank of India had

provided for the continuation of the earlier Benchmark Prime Lending

Rate (BPLR) dispensation for existing loans. Consequently, the SBAR

Rate referred to in Clause 8.3.5 and/or 11.3.4 of the two sets of Power

Purchase Agreements, which is the SBI PLR for loans with maturity of

one year, continues to be notified even to this day. The same is evident

from the Notification dated 03.03.2016 of the Reserve Bank of India.

81. Mr. Rohatgi further argued that, in terms of the relevant clauses

in the Power Purchase Agreements regarding Change in Law, the pre-

requisites are that the event in question must be one that is covered

by Clause 10.1.1 of the Stage 2 Power Purchase Agreements

corresponding to Clause 13.1.1. of the Stage 1 Power Purchase

Agreements, that is, it must be a new enactment, or amendment of

existing legislation, or new interpretation by a competent court, the

event must have occurred after the Cut-off Date, which is in this case,

concededly 31.07.2009, that is, the date seven days prior to the Bid

Deadline date, which is 07.08.2009 and such event must have resulted

42
in additional recurring or non-recurring expenditure or income for the

Seller. The first and third of these conditions are not fulfilled by the

Appellant since the LPS Rate under the Power Purchase Agreements is

not linked to Reserve Bank of India circulars or guidelines and the RBI

notifications referred to are not shown to have resulted in any

additional income or expenditure for the Power Generating Companies.

The introduction of Base Rate in 2010 and MCLR in 2016 by the

Reserve Bank of India by its Notifications/Circulars does not, therefore,

amount to Change in Law. Therefore, the contention of the Appellant

that Reserve Bank of India Directive of 2016 amounts to “Change in

Law” is erroneous and misleading. The Appellant is, therefore, liable to

pay the LPS as per SBAR as rightly held by the MERC and the APTEL.

82. Refuting the argument of Mr. Singh that the RBI circulars are to

be considered as Change in Law, Mr. Rohatgi advanced an alternate

submission that the Appellant is not entitled to claim Change in Law

since Clause 13.3.1 of the Power Purchase Agreement dated 14.08.2008

for supply of 1320 MW and Article 10.4.1 of the other three Power

Purchase Agreements provides that notices of Change in Law events

are to be issued by the affected party as soon as reasonably

practicable after becoming aware of the Change in Law. While the

changes cited by the Appellant were effected by Reserve Bank of India

from July, 2010 and again April, 2016 and notified in advance, the

Appellant issued notices of Change in Law to the Respondent No.2 only

43
in September 2016 i.e. more than 6 years after Reserve Bank of India

introduced the Base Rate system in place of the BPLR system. The

Appellant could not have been unaware of the revision effected by the

Reserve Bank of India at that time. Nor has it explained this inordinate

delay in raising its claim. Further, while Base Rate was introduced on

09.04.2010, the Appellant entered into Power Purchase Agreements

with the Respondent No.2 on 09.08.2010 and 16.02.2013 incorporating

PLR as the LPS rate for supply of contracted quantum of 125 MW and

440 MW of electricity respectively to the Appellant. As such, the

Appellant’s claim is inadmissible, the same being barred by limitation.

83. Mr. Rohatgi emphatically reiterated that Late Payment

Surcharge ( LPS) is imposed only when the re is delay in the

payment of bills. The liability towards LPS was therefore, within the

control of the Appellant, for there would be no LPS liability, if the

Appellant did not delay payment of monthly or supplementary bills

beyond the due date. Mr. Rohatgi argued that, LPS is a penalty to

which the Appellant has voluntarily agreed, in case it delays payment

to the Power Generating Companies. Any changes by the Reserve

Bank of India in respect of interest on loans advanced by Banks and

Financial Institutions, do not affect in any manner the rates at which

power was agreed to be sold and purchased or the rate at which LPS

is chargeable. Mr. Rohatgi emphatically argued that LPS is a

44
deterrent to inculcate payment discipline and is also entirely

avoidable.

84. Mr. Rohatgi pointed out that the APTEL has, by its impugned

judgment and order (para 21) categorically rejected the Appellant’s

contention of there being unjust enrichment of the Respondent Power

Generating Companies, on account of LPS being calculated at SBAR

Rate. The APTEL has held :-

(i) In order to be termed as unjust enrichment, benefit
gained by a party must be such as to have been retained without
any legal basis;

(ii) The primary purpose of LPS being to compensate the Power
Generators for the time value of money lost on account of delay
in payment by the Appellant, it cannot be said that recovery of
LPS results in the generators being unjustly enriched;

(iii) The payment of LPS, with interest calculated on the Prime
Lending Rate, has authorisation in the express terms of the Power
Purchase Agreements;

(iv) The claim of LPS does not represent any benefit accruing
to the Respondent Power Generating Companies, but is
compensatory in nature. Moreover, LPS is not economic
restitution but is a disincentive;

(v) It is wrong to equate LPS with carrying cost or actual cost
incurred because any interest paid for finances raised cannot
have any nexus to the LPS as it is not the same as a loan
advanced, but is a penalty for delay;

(vi) The LPS payable in terms of legally enforceable contracts
cannot be termed as unjust enrichment, as payment of LPS is due
to default by the Appellant and not for any action taken by the
Power Generators. That being the factual position, it is incorrect
on the part of Appellant to allege unjust enrichment.

45

85. Mr. Rohatgi drew the attention of this Court to Paragraph 35 of

the impugned judgment and order of the APTEL recording its

categorical finding that the Appellant had never denied the serious

defaults it committed, by inordinately delaying the payment of bills to

the Respondent Power Generating Companies. The APTEL found that

the Appellant was indisputably liable to pay LPS.

86. Mr. Rohatgi finally argued that even though the proceedings were

initiated before the MERC in 2017, the Appellant is now citing the

pandemic related financial hardships caused during the year 2020 to

renege on its contractually binding obligation of payment of LPS in

terms of the Power Purchase Agreements and somehow seeking to

unilaterally amend the terms of the Power Purchase Agreements so

that they are favourable to them, which is impermissible in law.

87. Mr. Rohatgi submitted that LPS is calculated on compounding

basis with monthly rests in terms of the Power Purchase Agreements and

further the same cannot be passed on to consumers in view of the

Order dated 29.08.2020 of MERC in Case No.45 of 2020.

88. Mr. Rohatgi argued that by way of this Appeal, the Appellant is,

in fact, seeking a downward revision of a contractually determined

penalty in order to unjustly enrich itself at the cost of the Respondent

Power Generating Companies, more so, since admittedly the Appellant

46
recovers delayed payment surcharge from its consumers at much

higher rates than the SBI PLR.

89. Mr. Singhvi appearing on behalf of the Respondent No.3 referred to

the Power Purchase Agreement dated 23.02.2010 executed by and

between the Appellant and the Respondent No.3 for supply of electricity to

the Appellant. Mr. Singhvi pointed out that the Power Purchase Agreement

was executed pursuant to a bidding process carried out by the Appellant

under the aegis of the MERC under Section 63 of the Electricity Act, 2003.

The tariff was adopted by the MERC (Respondent No.1) and the Power

Purchase Agreement was approved by the MERC.

90. Mr. Singhvi argued that, it was not in dispute that payment against

monthly bill for electricity charges raised by the Respondent No.3, was

agreed to be made by the Appellant within 30 days. It is also not disputed

that in the event of delay in payment of a monthly, beyond its due date,

that is, 30 days, the Appellant would be bound to pay a Late Payment

Surcharge (LPS). In this context, Mr. Singhvi referred to Clause 11.3.4 of

the Power Purchase Agreement which has already been reproduced

hereinbefore.

91. Mr. Singhvi submitted that in this case too the rate of LPS was 2% in

excess of SBAR. Mr. Singhvi referred to the definition of SBAR in the

concerned Power Purchase Agreement, defining SBAR to mean the prime

lending rate per annum applicable for loans with one (1) year maturity as

47
fixed from time to time by the State Bank of India. Mr. Singhvi pointed out

that it was only in the absence of any prime lending rate that the rate of

LPS could be fixed at such rate as might be mutually agreed to by

the parties.

92. Mr. Singhvi questioned the legality of the argument of the Appellant

that the purpose of publication of the SBI PLR having undergone a change

in view of the RBI circulars/notifications, the SBI PLR, which admittedly

continues to be published, can no longer be used as a benchmark

reference in a Power Purchase Agreement, that the Power Purchase

Agreement reference benchmark rate should be modified in accordance

with the RBI circulars/guidelines. Mr. Singhvi argued that the arguments of

the Appellant neither had legal nor contractual basis. Both the forums

below have rightly rendered concurrent decisions holding that the RBI

circulars/guidelines have no impact on the rate of LPS in the contract and

the agreed terms of a contract cannot be rewritten.

93. Mr. Singhvi argued that the Power Purchase Agreement for sale and

purchase of power, was between a power generating company and a

procurer of electricity, to which the circulars/guidelines of RBI applicable to

banks and financial institutions can have no application. The Power

Purchase Agreement does not incorporate or refer to any RBI circulars or

guidelines. Mr. Singhvi cited the judgment of this Court in B.O.I. Finance

Limited v. Custodian and Ors.13 where this Court held that RBI

13. (1997) 10 SCC 488

48
circulars/instructions/guidelines cannot result in invalidation of a contract

even between a bank and a third party and the consequence for violation is

penalty as provided for in Section 46 of the Banking Regulation Act. The

RBI circulars/guidelines cannot therefore vary or modify a contract between

two parties, none of which is a bank or a financial institutions.

94. Mr. Singhvi argued that reliance by the Appellant on the RBI

circulars/guidelines, in the context of the agreement between the

Appellant and the Respondent is totally misplaced. The RBI

circulars/guidelines are admittedly instructions issued to banks and

financial institutions and are not applicable to either the Appellant or

the Respondent, who are engaged in the business of sale and purchase

of electricity and not of advancing loans. Further, SBAR as defined

under the PPA is also admittedly, not linked to the RBI

circulars/guidelines. Therefore, the impact of the RBI

circulars/guidelines on the purpose for which the SBI PLR continues to

be notified, is totally irrelevant for the purposes of the present case.

95. Mr. Singhvi emphatically argued that the agreement provides for

the parties to mutually agree on a substitute of SBI PLR, in case of its

absence. This dispensation is contained in the definition of SBAR itself.

This special provision in the agreement applicable to the specific case

of absence of SBI PLR, excludes the applicability of the general

‘Change in Law’ provision contained in Article 13 of the PPA. In the

49
context of his arguments Mr. Singhvi cited Adani Power (Mundra)

Ltd. v. Gujarat Electricity Regulatory Commission and Others 14

the relevant paragraph whereof is reproduced herein below:-

“38. In the present case, the perusal of various Articles
would reveal that the provisions under Article 14 are
general in nature. The provision under Article 3.4.2 is
specific, only to be invoked in the case of non-compliance
with any of the conditions as provided under Article
3.1.2.
As such, the special provision made in Article 3.4.2
will exclude the applicability of general provisions
contained in Article 14 of the contract.”

96. Mr. Singhvi argued that the general provisions of the Change in

Law clause have been consciously kept out by the parties, in relation

to a situation arising out of absence of the SBI PLR and the consequent

calculation of LPS. Therefore, the Hon’ble APTEL correctly found as

under:

“13…. On the contrary, there is a conscious exclusion regarding any
suo moto change in the rate to be applied while calculating LPS, it
being incorrect to argue on the assumption that the contract permits
automatic change in system.”

97. Mr. Singhvi submitted that the consequence of a change in law event

under the Power Purchase Agreement is determination of compensation for

any increase/decrease in revenues of cost to the Seller by the MERC. Late

payment surcharge is payable only in case payment against the monthly

bills is delayed by the Procurer. As such, the LPS rate does not in any

manner affect the tariff at which electricity is agreed to be sold and

purchased. Therefore, there is absolutely no increase/decrease in the

14. (2019) 19 SCC 9

50
revenues or cost to the Respondent, connected with the object of the

agreement, i.e. generation and sale of electricity, as a result of the RBI

notification/circulars. Consequently, the RBI notifications/circulars relied

upon by the Appellant, in the context of LPS, do not require any

determination of change in law compensation.

98. Mr. Singhvi ponted out that the MERC had, in its order dated

16.11.2017, rightly rejected the claim of the Appellant inter alia observing:-

“12. However, the LPS provision is attracted only when the
payments are not made by MSEDCL against the Monthly Bills of the
Seller within the time stipulated in the PPAs Any changes in the
basis of the LPS rates consequent to revisions by the RBI do not
affect in any manner the rates at which power was agreed to be
sold and purchased under the PPAs and in the consequent financial
implications for either Party resulting in a liability to compensate the
affected Party….”

99. Mr. Singhvi submitted that the APTEL, aptly concurred with the

finding of the MERC and held:-

“16. Having regard to the terms of the contract (PPA) as a
whole, there is no doubt that provision for compensation
to the affected party for a Change in Law event is
essential with regard to tariff only. The rate of LPS has no
bearing or impact on tariff. Any possible changes in the
basis of the LPS rates consequent to revisions by the RBI,
or for that matter, SBI would not affect the rate at which
power was agreed to be sold and purchased under the
PPAs and consequently there is no financial implications
on expenditure or income for either Party. The LPS only
recompenses what was lost in terms of real value of
money due to delay in payment.”

51

100. Mr. Singhvi argued that the Appellant has till 24.06.2016, signed

reconciliation statements with the Respondent No.3 in which the

Appellant calculated the LPS on the basis of the PLR published by the

State Bank of India and not the Base Rate or the MCLR, as is now being

claimed by the Appellant. It is, therefore, clear that in this case, there

has never been any dispute whatsoever with regard to the principal

liability of the Appellant towards energy charges, and no dispute was

raised regarding LPS for over 5 years.

101. Mr. Rohatgi, Mr. Singhvi, Mr. Mukherjee and Ms. Anand all

submitted that the contentions of the Appellant are liable to be

rejected outright, since LPS provision in the Power Purchase Agreements,

is not linked to the rate at which the affected party is able to get loans

from Banks or Financial Institutions. The Appellant having agreed to

pay LPS at SBI PLR, till such time it exists, cannot now seek any other

rate such as MCLR or actual interest rates at which the Respondent Power

Generating Companies obtain financial accommodation. On behalf of

the Respondent No.3 Mr. Singhvi supported the submissions of Mr.

Rohatgi.

102. Mr. Singhvi distinguished the judgment of this Court in Jaipur

Vidyut Vitran Nigam Limited v. Adani Power Rajasthan Ltd.

And Anr. (supra) and argued that there is no bona fide dispute in this

case. The Appellant has acted in conscious disregard of its obligations

52
under the Power Purchase Agreements. Mr. Singhvi cited the decision

of this Court in Union of India v. Association of Unified Telecom

Service Providers of India & Ors. 15 where this Court considered an

identical interest clause in the license. The interest clause, which has

been reproduced in Paragraph 182 of the judgment of this Court,

reads:

“In re: Levy of interest, penalty, and interest on penalty.
Para 182. Levy of licence fee is provided in Clause 20.2. In case of
any delay in payment of licence fee beyond the stipulated period
would attract penalty at the rate, which would be 2% above the
prime lending rate (PLR) of State Bank of India. As per Clauses 20.5
and 20.8, if the licensee does not pay the demand, consequences
would follow. The clauses are extracted hereunder:
“20.5. Any delay in payment of licence fee payable or any other
dues payable under the Licence beyond the stipulated period will
attract interest at a rate which will be 2% above the prime lending
rate (PLR) of State Bank of India existing as on the beginning of the
financial year (namely 1st April) in respect of the licence fees
pertaining to the said financial year. The interest shall be
compounded monthly and a part of the month shall be reckoned as
a full month for the purposes of calculation of interest. A month
shall be reckoned as an English calendar month.”

103. Mr. Singhvi submitted that in the case of Association of

Unified Telecom Service Providers of India (supra), it was

contended by the Distribution licensee that under section 74 of the

Contract Act, compensation must only be reasonable compensation.

For this, reliance was placed on Hindustan Steel Ltd. v. State of

15 2020 (3) SCC 525

53
Orissa16, Akbar Badrudin Giwani v. Collector of Customs 17,

Jaiprakash Industries Ltd. v. Commissioner of Central Excise,

Chandigarh18, Tecumseh Products India Ltd. v. Commissioner of

Central Excise, Hyderabad19, J.K. Synthetics Ltd. v. Commercial

Taxes Officer20, Kailash Nath Associates v. Delhi Development

Authority and Another21 and Central Bank of India v. Ravindra

and Others22. However, this Court found that the dispute raised by

the Distribution Licensee with regard to the definition of gross revenue,

in that case, was not bona fide and had only been raised to delay

payment in accordance with the Power Purchase Agreement. This

Court, accordingly, held that none of the above decisions would come

to the aid of the Distribution Licensee and concluded that since there is

a contractual stipulation, the interest can be levied and compounded.

Mr. Singhvi referred to the part of said judgment reproduced

hereinbeow:-

“192….The ratio of the case, it is not attracted for the reason that in
the instant matter, it is the contractual rate of interest and penalty
agreed to which cannot be said to be arduous in any manner. The
rate of interest has been agreed and particularly since it is a revenue
sharing regime, and the licensees have acted in conscious

16 1969 (2) SCC 627
17 1990 (2) SCC 203
18 2003 (1) SCC 67
19 2004 (6) SCC 30
20 1994 (4) SCC 276
21 2015 (4) SCC 136
22 2002 (1) SCC 367

54
disregards of their obligation. Thus on the anvil of the decision above
also, they are liable to pay the dues with interest and penalty……

…… There is no such discretion available when the parties have
agreed in default what amount is to be paid. It automatically follows
that it is not to be determined by the licensor once over again.
Parties (licensor and licensees) are bound by the terms and
conditions of the contract. There is no enabling clause to vary either
the rate of interest or the penalty provided therein and even if
permissible, it is not called for to vary interest or penalty fixed under
the agreement in the facts and circumstances of the case……

197. It is not levy of penal interest which is involved in the instant
case. Thus, based on the decision mentioned above, we find that
when there is contractual stipulation, the interest can be levied and
compounded”

104. Mr. Singhvi submitted that there being no dispute in this case,

regarding the principal sums due under the monthly bills; and this

Court having taken a view in Association of Unified Telecom

Providers of India (supra) that interest on delayed payment at 2% in

excess of SBI PLR is not arduous, there is no case made out for this

Court to reduce the contractually agreed rate of interest, in exercise of

powers under Article 142 of the Constitution of India. On the other

hand, facts would reveal that in this case the Appellant has

deliberately and consciously been disregarding its obligation and

raising frivolous disputes as an afterthought, only with a view to

further delay payment in accordance with the terms of the Power

Purchase Agreement. No indulgence need, therefore, be granted to the

Appellant.

55

105. Mr. Singhvi submitted that the Appellant has the funds to clear

the interest liability. This is apparent from the fact that the Appellant

had, itself made an offer before the MERC, to clear all dues of the

Respondent No. 3 in 1 weeks’ time. The Appellant is, therefore not

entitled to further time.

106. Mr. Singhvi submitted that, it is wrong for the Appellant to

suggest that the burden of interest shall be passed on to the

consumers. The MERC has already held that as the Appellant solely is

responsible for the delay in making payment and therefore the said

burden cannot be passed on to the consumers.

107. Mr. Singhvi further submitted that in any case, claims pertaining

to the period of 3 years prior to the filing of the Petition before the

MERC that is, before 02.12.2016, are clearly barred by limitation.

108. Mr. Singhvi concluded his arguments with the submission that

the Regulations relied upon by the Appellant were the Tariff

Regulations, framed by the MERC for the purpose of determination of

tariff for generating stations under Section 62 of the Act, which have

no application in this case, where the Power Purchase Agreements

have been executed pursuant to a bid process under Section 63 of the

Electricity Act. Mr. Singhvi submitted that the Appellant as purchaser

was in no way concerned with how the Respondent manages the

shortfall in working capital, whether from internal accruals, additional

56
equity infusion, foreign loans, domestic loans etc. in a bid out tariff,

adopted by the MERC under Section 63 of the Electricity Act.

109. Mr. Singhvi submitted that the second appeal filed by the

Appellant should be dismissed with directions to the Appellant to make

payment of the balance reconciled outstanding interest liability of

Rs.48.55 crore (i.e. 47.79 crore + Rs. 0.76 crore as per the Appellant’s

affidavit dated 29.06.2021 I.A. No.73474/2021.

110. Mr. Vishrov Mukherjee, appearing on behalf of the Respondent No.4,

adopted the arguments advanced by Mr. Rohatgi and Mr. Singhvi, and also

argued that the Appellant’s contention that the PLR had been replaced with

other interest rate systems was incorrect. He argued that Reserve Bank of

India had introduced Base Rate and MCLR prospectively. Referring to

Annexure R-2 of the reply of the respondent no.4 to the appellant’s stay

application being IA 69709/2021, Mr. Mukherjee pointed out that the PLR

system was still continuing. He submitted that SBI continues to notify PLR

on quarterly basis.

111. Mr. Mukherjee reiterated the submission of Mr. Rohatgi and Mr.

Singhvi that the introduction of Base Rate and MCLR interest rate system

does not constitute a Change in Law under the Power Purchase

Agreements. Mr. Mukherjee argued that in terms of Article 13.1.1 of the

agreement dated 23.02.2010, between the Appellant and the Respondent

57
No.4, the Change in Law evaluation is a two step process being:

a) Occurrence of an event described as a change in law event in
Article 13.1.1 and;

b) Such change in law has to result in any increase/
decrease in cost / revenue of the Seller, i.e.,the Power
Generating Company i.e. the Respondent no.4 [Art. 13.2(b)].

112. Referring to Uttar Haryana Bijli Vitran Nigam Limited and

Another v Adani Power Limited and Others23 Mr. Mukherjee

argued that a change or amendment in the LPS rate does not

constitute Change in Law because there is no impact on cost or

revenue of the Generating Company. LPS is payment for a default

committed by the Appellant in making timely payment. It has no

impact on the cost incurred or the revenue received by the Generating

Company. It is in the nature of a contingent liability incurred by the

Appellant for failing to adhere to its contractual obligations under the

PPA.

113. Mr. Mukherjee argued that compensation to the Affected Party for

a Change in Law event is by adjustment of tariff. LPS has no bearing or

impact on tariff., Therefore, the Appellant’s claim does not qualify as a

Change in Law event, as change in the LPS rates do not affect the tariff

under the Power Purchase Agreements, and consequently there are no

23. (2019) 5 SCC 325 (para 11)

58
financial implications on expenditure/income for either Party. In

support of his argument, Mr. Mukherjee referred to paragraphs of Adani

Power Ltd. (supra).

114. Mr. Mukherjee reiterated the submission of Mr. Rohatgi and Mr.

Singhvi that the LPS rate under the Power Purchase Agreements, is not

linked to RBI Notifications/Circulars/Guidelines. The applicable interest

rate for payment of LPS is contractually defined, and linked to PLR

rates notified by State Bank of India. This is independent of any RBI

Notification/Circular/Guideline. Citing Union of India v. Association

of Unified Telecom Service Providers of India and Others 24, Mr.

Mukherjee argued that, once a term has been defined contractually,

parties cannot vary such terms.

115. Mr. Mukherjee reiterated the submission of Mr. Rohatgi and Mr.

Singhvi that in terms of Article 11.3.4 read with the definition of SBAR,

the parties have agreed to apply the Prime Lending Rate applicable for

loans with one year maturity as fixed from time to time by State Bank

of India in fixing the applicable LPS rate and the parties have also

agreed that in case SBI PLR is not available, the parties are to mutually

agree to the interest rate. Therefore, the parties have, by doctrine of

incorporation, included a particular interest rate for calculation of LPS.

24. 2020 (3) SCC 525

59
It is not open to the Appellant to seek an interest rate different from

what has been contractually agreed, as held in CLP India Private

Limited v. Gujarat Urja Vikas Nigam Limited and Another25.

116. Mr. Mukerjee argued that State Bank of India is, in any event, still

notifying the Prime Lending Rate. Mr. Mukerjee submitted that the

rate so notified is applicable to all cases and instances irrespective of

the tenor, duration and type of transaction, including loans of one year

maturity.

117. Mr. Mukherjee further argued that Power Purchase Agreements

are complex technical documents which the parties having knowingly

executed. The express terms of the Power Purchase Agreements must

be given effect. Citing Nabha Power Limited v. Punjab State

Power Corporation Limited (PSPCL) And Another 26,

Transmission Corporation of Andhra Pradesh Ltd. And

Others v. GMR Vemagiri Power Generation Ltd. And Another 27,

and Shree Ambica Medical Stores and Others. v. Surat People’s

Cooperative Bank Limited and Others28, Mr. Mukherjee submitted

that it is settled law that Courts will neither rewrite nor substitute the

25. 2020 (5) SCC 185 (paras 32 & 34)
26 (2018) 11 SCC 508 (paras 45 & 72)
27 (2018) 3 SCC 716
28 (2020) 13 SCC 564 (para 20)

60
terms of a Contract.

118. Mr. Mukherjee argued that, if Change in Law is applied to change

in interest rate it would render the provision relating to parties having

to mutually agree on a different interest rate redundant. Mr. Mukherjee

adverted to Article 1.2.13 of the Power Purchase Agreements, which

states that different provisions of the Power Purchase Agreements have

to be read and interpreted harmoniously in order to give effect to all

provisions. Treating change in interest rate system as change in law

(despite parties having agreed to mutually decide on the

consequences) will render the latter part of the SBAR definition otiose

since only the Regulatory Commission can decide change in law

claims.

119. Mr Mukerjee submitted that Base Rate was introduced with effect

from 09.04.2010 whereas the appellant entered into the Power

Purchase Agreements with the Respondent No.4 on 22.04.2010 and

05.06.2010. This further establishes the point that parties have

consciously agreed to apply a particular interest rate (SBI PLR) and not

the Reserve Bank of India notifed interest rate.

120. Mr.Mukherjee submitted that the present Power Purchase

Agreement has been entered into under Section 63 of the Electricity

Act pursuant to competitive bidding, based on quoted tariff alone.

61
There is no separate element of interest on working capital.

Irrespective of the expenditure / cost incurred by the generating

company, it only receives the bid tariff. Therefore, the argument that

generating companies are benefitting on account of an arbitrage

between the LPS Rate and interest rates being paid by them is

incorrect.

121. Mr. Mukherjee finally argued that the APTEL and the MERC have

rightly held that payment / imposition of LPS is within the control of the

Appellant. Mr. Mukherjee submitted that, being in default admittedly, the

Appellant ought not to be permitted to benefit from its default and seek a

lower penalty for failure to comply with its obligations of making timely

payment. The defaults were during 2011 to 2017 during which time there

was no pandemic. The Appellant has recovered the amount it was

supposed to pay to the Respondent No. 5 during the period in question.

Despite recovering this amount as part of its tariff, it deliberately and

wilfully delayed in payment of these amounts to the Respondent Power

Generating Companies. In light of the admitted default, the Appellant is

not entitled to relief, let alone relief in exercise of jurisdiction under Article

142 of the Constitution.

122. In response to the submission of the Appellant that the

Respondent No.2 and other Power Generating Companies had unjustly

enriched themselves by availing bill discounting from the Appellant

62
during the Financial Year 2020-21, at the rate of 7% per annum, which

rate is substantially lower than the LPS calculated at MCLR, let alone

PLR, Mr. Rohatgi submitted that if the Appellant’s contention were to

be believed then being a government entity, the Appellant could

easily avail loans at much lower rate than the rate of LPS in terms of

the Power Purchase Agreements and pay the bills raised by the Power

Generating Companies promptly, rather than end up paying LPS.

There is no impediment to the Appellant raising loans to promptly

clear the bills due to the Respondent Power Generating Companies.

123. Mr. Mukerjee also pointed out that the Appellant had been

charging interest for delay in payment from its consumers @ 1.25% per

month, i.e. 15% on an annual basis as per MERC MYT Regulations,

2019. This belies the argument of the Appellant that LPS rate is

correlated to the actual interest rate on loans taken by the Appellant or

generating companies.

124. Mr. Mukerjee argued that at no stage had the Appellant denied

that the Reserve Bank of India was continuing to notify PLR. It is only

before this Hon’ble Court that the Appellant has submitted that PLR is

not available. The Appellant is precluded from raising such a plea at

this belated stage. Further, such plea is factually incorrect since SBI is

notifying PLR.

63

125. Mr. Mukherjee submitted that the Appellant is the only Discom in

the country to raise this claim of change in law. None of the other

Discoms in Maharashtra or other States have claimed this as a change

in law.

126. Mr. Mukherjee further submitted that, during the period of the

alleged financial hardship, the Appellant has not only paid NTPC and

other Central Generating Stations, but has also entered into several

Power Purchase Agreements, for additional power.

127. Mr. Mukherjee argued that the Appellant’s contention that the

consumers in the State of Maharashtra will ultimately bear the alleged

charges is incorrect. As per the MERC Tariff Regulations, only such

expenditure as is prudently incurred can be claimed as part of

tariff. In case the expenditure is on account of the Appellant’s

imprudence or default, such amounts cannot be claimed by the

Appellant as part of tariff. Mr. Mukerjee submitted that Mr. Singh’s

argument of bill discounting has no bearing on this case at hand since

RattanIndia is not availing of bill discounting.

128. Ms. Divya Anand adopted the submissions of Mr. Rohatgi and Mr.

Singhvi and added that Court has defined ‘unjust enrichment’ as the

unjust retention of a benefit to the loss of another, or the retention of

money or property of another against the fundamental principles of

justice or equity and good conscience. She argued that a person is

64
enriched if he has received a benefit, and he is unjustly enriched if

retention of the benefit would be unjust. In support of her argument,

Ms. Anand cited Indian Council for Enviro-Legal Action v. Union of

India29.

129. Justifying the direction of APTEL on the Appellant to make

payment in terms of the order of MERC, Mr. Rohatgi referred to an

Office Memorandum dated 08.03.2019 of the Ministry of Power,

Government of India mandating that Electricity Regulatory

Commissions must ensure payment of LPS as per the Power Purchase

Agreements where payment is delayed. Mr. Rohatgi argued that it is in

the interest of the Appellant to liquidate the outstanding dues of the

Respondent Power Generating Companies including LPS, at the

earliest. This will also enable the Respondent No.2 and other Power

Generating Companies to comply with their obligations under the

Power Purchase Agreements, of supplying uninterrupted power by

procuring coal with available funds.

130. Mr. Rohatgi argued that under Section 111 (3) of the Electricity

Act, 2003, the APTEL is empowered to pass an order either confirming,

modifying or setting aside the order appealed against. The APTEL acted

within the scope of its powers under Section 111 (3) by directing payment of

the LPS dues to the Respondent Generating Companies. Further, in

29. (2011) 8 SCC 161

65
terms of Section 120 of the Electricity Act, 2003, the APTEL has the

power to direct the Appellant to pay the outstanding LPS amounts in a

time bound manner to ensure that the principles laid down under

Section 61 of the Electricity Act, 2003 are achieved.

131. Mr. Rohatgi argued that the APTEL directed the Appellant to pay

the LPS within the time stipulated in the impugned judgment and order,

in keeping with the objective of the Electricity Act which is aimed at

taking measures conducive to development of the power sector while

protecting the interest of consumers. Mr. Rohatgi submitted that this

is also consistent with the principles set out in Section 61 of the

Electricity Act, specifically Sections 61(b) and (d) i.e., to conduct

generation, transmission and distribution of electricity on commercial

principles and at the same time safeguard consumer interest while

ensuring reasonable recovery of the cost of electricity in a reasonable

manner.

132. Mr. Rohatgi submitted that any further delay in payment of LPS

would not be in the interest of the Respondent Generating Companies

as they have been deprived of their legitimate dues for long. Further

delay would also be detrimental to the interest of the Appellant as it

is not allowed to pass on LPS to end consumers in terms of the order

dated 29.08.2020 of the MERC in Case No. 45 of 2020, which has

attained finality.

66

133. Mr. Mukerjee submitted that the directions given by the APTEL in

Paragraphs 35 and 36 of the Impugned Judgment are aimed at

quantification rather than execution. The time period for compliance

under the Impugned Judgment was 90 days whereas the period of

limitation for filing an appeal under Section 125 of the Electricity Act is

60 days.

134. Mr. Mukerjee further submitted that, in terms of Section 120 of

the Electricity Act, the APTEL is not bound by the procedure laid down

by the Code of Civil Procedure 1908. The directions for time bound

payment or payment within the prescribed timeframe is consistent

with past judgments of the APTEL including the judgment dated

14.09.2019 in Appeal 202 of 2018, which was upheld by this Hon’ble

Court in Jaipur Vidyut Vitran Nigam Limited v. Adani Power

Rajasthan Limited (supra).

135. Mr. Mukerjee submitted that, one of the objectives of the

Electricity Act is time-bound disposal of matters. This is evident from

Section 111(5) of the Electricity Act. Any direction for payment, is only

in furtherance of such direction.

136. Mr. Mukerjee further argued that the Paragraphs 27 to 34 of the

67
Impugned Judgment deal with sectoral issues including delay in

adjudication of claims. In this case, the delay in adjudication has

resulted in severe stress in the power sector in addition to financial

impact in the form of carrying cost and LPS. However, the APTEL

held that since the Electricity Act does not have a specific provision

granting power to the Electricity Regulatory Commission to execute its

orders, it requires legislative intervention. [Para 33 & 34 @ Pg. 22 – 24

of the Appeal].

137. Mr. Mukerjee submitted that this is a fit case for this Hon’ble

Court to consider interpreting the regulatory powers of regulatory

commissions under Section 79 / 86 of the Electricity Act to include the

power to execute their own orders. Mr. Mukerjee cited Gujarat Urja

Vikas Nigam Limited v. Amit Gupta and Others30, wherein this

Hon’ble Court held that pending legislative action, the courts can

devise a workable formula that advances the goals and objective of the

legislation.

138. Mr. Mukerjee submitted that, while the Electricity Act, 2003 does

not have a specific provision on execution of decrees/orders by the

Regulatory Commissions, Regulatory Commissions have been held to

be “courts”. In Tamil Nadu Generation & Distribution

30. (2021) SCC OnLine 194 (paras 142 & 188)

68
Corporation Ltd. vs. PPN Power (supra), this Court held that the

State Electricity Regulatory Commissions have the trappings of a court.

The relevant portion of the aforesaid judgment is reproduced below:-

“59. In view of the aforesaid categorical statement of law, we
would accept the submission of Mr Nariman that the tribunal
such as the State Commission in deciding a lis, between the
appellant and the respondent discharges judicial functions and
exercises judicial power to the State. It exercises judicial
functions of far-reaching effect. Therefore, in our opinion, Mr
Nariman is correct in his submission that it must have essential
trapping of the court. This can only be achieved by the
presence of one or more judicial members in the State
Commission which is called upon to decide complicated
contractual or civil issues which would normally have been
decided by a civil court. Not only the decisions of the State
Commission have far-reaching consequences, they are final
and binding between the parties, subject, of course, to judicial
review.”

139. Mr. Mukerjee referred to the judgment of this Court in Andhra

Pradesh Power Coordination Committee & Others v. Lanco

Kondapalli Power Ltd & Ors.31, where the court held that in view of

its judgment in Gujarat Urja Vikas Nigam Ltd. v. Essar Power

Limited32, the Commission has been elevated to the status of a

substitute for Civil Court in respect of all disputes between the

licensees and the generating companies.

140. It is a settled position of law that Courts have the power to

execute their own orders. The aforesaid position has been confirmed

31. (2016) 3 SCC 468

32. (2008) 4 SCC 755

69
by the Hon’ble Supreme Court in State of Karnataka v.

Vishwabharathi House Building Cooperative Society and

Others33.

141. Mr. Mukerjee argued that the Electricity Act, 2003 has to be

interpreted to also include and incorporate the power to execute by

steps such as attachment of accounts, suspension/revocation of

license etc. Mr. Mukerjee further argued that the role and function of

Electricity Regulatory Commissions should not be viewed from the

perspective of ‘civil courts’ alone. Unlike Civil Courts which assume

jurisdiction only when a dispute arises, the Regulatory Commissions

have an overarching regulatory power over licensees. The Regulatory

Commissions continue to exercise continuous regulatory supervision

over the parties (licensees) especially over tariff. In support of his

submission Mr. Mukherjee cited All India Power Engineering

Federation & Ors. vs. Sasan Power Limited & Others 34 . This will

protect the financial health of the sector while protecting public

interest by abusing the financial liability in the form of carry cost/ sign

value for money. This approach is also consistent with the Preamble to

the Electricity Act, 2003 which stipulates that it is aimed at taking

measures conducive to development of the power sector while

protecting the interest of consumers.

33. (2003) 2 SCC 412 (paras 59 to 62)

34. (2017) 1 SCC 487 (para 31)

70

142. Distinguishing the judgment of this Court in Jaipur Vidyut

Vitran Nigam Ltd v. Adani Power Rajasthan Ltd (supra) Mr.

Rohatgi argued that the issue involved in that case, was the rate at

which interest on carrying cost is to be paid. While a specific rate is

stipulated in the Power Purchase Agreement for LPS the interest on

delayed payment of carrying cost is not specified in Power Purchase

Agreement. Therefore, APTEL directed that charges for deferred

payment of carrying cost should be paid at the same rate as LPS,

since both are meant for time value of money. This was disputed in

the Appeal. This Court, keeping in view the peculiarities of the facts

of the case, where the power generator was unable to raise bills while

the question of change in law raised by the power generator was

pending adjudication before the MERC and the APTEL reduced the

rate of interest on carrying cost to 9%. Mr. Rohatgi submitted that it

is important to note that there was no dispute in relation to Late

Payment Surcharge in the case of Jaipur Vidyut Vitran Nigam

Limited (supra).

143. Mr. Singhvi also submitted that Jaipur Vidyut Vitran Nigam

Ltd. v. Adani Power Rajasthan Ltd. (supra) was distinguishable.

In Jaipur Vidyut Vitran Nigam Ltd. (supra), there were change in

law claims for cost of imported coal, made by the generator which

were disputed by the distribution licensee on the ground that the bid

71
submitted by the generator itself was premised on imported coal.

Since the principal claim was disputed by the distribution licensee in

the first instance, the generator could not raise any supplementary

bills, for change in law compensation.

144. In contrast, in this case the bills, payment against which has

been delayed, are energy bills, pertaining to energy supplied to the

Appellant; and supplied further by the Appellant to its consumers

against payment of retail tariff. Secondly, the energy bills in question,

raised by the Respondent Generating Companies have never been

disputed by the Appellant. This has duly been noticed by the APTEL in

its judgment and order impugned in Paragraph 24, reproduced below:-

24. It is submitted by the contesting respondents
(generators) that LPS liability of the appellant on account of
defaults in timely payments for the period between
01.07.2010 and 31.03.2017 had crystallized and the dispute
as to the rate of LPS was raised to vex it further. It is not
denied that the appellant had not disputed any of the
Monthly Bills or Supplementary Bills as per the procedure
prescribed under the PPA. This rendered the demands to
have become final and conclusive . The notice based on plea
of CIL was issued in 2016, the issue having remained
pending for 5 years, depriving the generators of the
recompense for the loss suffered. Payment of LPS is
triggered only when there is a default by MSEDCL. LPS is
levied under the PPAs which were duly executed by MSEDCL.
In these circumstances, it is inappropriate to project the
outstanding liability towards LPS as an additional burden
being placed upon MSEDCL.. ”

145. Mr. Mukerjee submitted that the judgment in Jaipur Vidyut

72
Vitran Nigam Ltd. v. Adani Power Rajasthan Ltd
. (supra) to

contend that the LPS rate should be limited to 9% is misconceived. He

submitted that reliance of the Appellant, on the judgment is

inapplicable in the facts of the present case for the following reasons:-

(i) The matter pertained to a change in law claim which
required prior adjudication by the Rajasthan Electricity
Regulatory Commission. The liability to pay arose only after the
APTEL dismissed the Appeal filed by the Rajasthan Distribution
companies and directed payment of change in law amount. To
Adani Power Rajasthan Ltd. [Paras 24, 70 & 73].

(ii) The judgment in Jaipur Vidyut Vitran Nigam Ltd.
(supra) is in the context of carrying cost payable by the
Rajasthan Distribution Companies and not in the context of
LPS. This is evident from Paragraphs 62, 69, 70, 71 and 73 of
the judgment. The LPS rate is referenced for determining the
carrying cost rate that would apply given the inordinate delay
in adjudication of claims and the inability of Adani Power
Rajasthan Ltd. to raise bills till the adjudication was
completed.

(iii) This Hon’ble Court limited the interest rate in the facts of
that case and in order to do complete justice. There was no
default on the part of the Distribution Licencee, Jaipur Vidyut
Vitran Nigam Ltd.

(iv) In this case, the Appellant has admitted that it delayed
payment. No adjudication was required prior to payment of
monthly bills. Therefore, the judgment is inapplicable.
Reduction of LPS rate will result in rewarding the Appellant for
repeatedly defaulting on its obligations.

146. Mr. Rohatgi, Mr. Singhvi, Mr. Mukherjee and Ms. Anand all

submitted that in Jaipur Vidyut Vitran Nigam Ltd v. Adani Power

Rajasthan Ltd. (supra), this Court had reduced the rate of interest to

SBAR not exceeding 9% per annum, to be compounded annually, in

73
exercise of its power under Article 142 of the Constitution to do

complete justice. A direction given in the facts and circumstances of

any particular case, to do complete justice under Article 142 of the

Constitution does not operate as a precedent.

147. This appeal is under Section 125 of the Electricity Act, 2003

which is set out out hereinbelow for convenience:-

“125. Appeal to Supreme Court.—Any person aggrieved by
any decision or order of the Appellate Tribunal, may, file an
appeal to the Supreme Court within sixty days from the date of
communication of the decision or order of the Appellate
Tribunal, to him, on any one or more of the grounds specified in
Section 100 of the Code of Civil Procedure, 1908:

Provided that the Supreme Court may, if it is satisfied that
the appellant was prevented by sufficient cause from filing the
appeal within the said period, allow it to be filed within a
further period not exceeding sixty days.”

148. An appeal lies to this Court under Section 125 only on grounds

permitted in Section 100 of the Code of Civil Procedure, 1908 (CPC).

Section 100 of CPC is set out hereinbelow:-

“100. Second appeal.–(1) Save as otherwise expressly provided in
the body of this Code or by any other law for the time being in force,
an appeal shall lie to the High Court from every decree passed in
appeal by any Court subordinate to the High Court, if the High Court
is satisfied that the case involves a substantial question of law.

(2) An appeal may lie under this section from an appellate decree
passed ex parte.

(3) In an appeal under this section, the memorandum of appeal shall
precisely state the substantial question of law involved in the
appeal.

74

(4) Where the High Court is satisfied that a substantial question of
law is involved in any case, it shall formulate that question.

(5) The appeal shall be heard on the question so formulated and the
respondent shall, at the hearing of the appeal, be allowed to argue
that the case does not involve such question:

Provided that nothing in this sub-section shall be deemed to take
away or abridge the power of the Court to hear, for reasons to be
recorded, the appeal on any other substantial question of law, not
formulated by it, if it is satisfied that the case involves such
question.”

149. As held by this Court in State Bank of India and Ors. v. S.N.

Goyal (supra) cited by Mr. Singh, the word “substantial question of

law” means not only a substantial question of law of general

importance, but also any substantial question of law arising in a case

between the parties on which the decision in the lis depends. A

question of law which arises incidentally or collaterally and has no

bearing on the final outcome, will not be a substantial question of law.

Whether the question raised is a question of law and if so, whether the

question is a substantial question of law is also not determined by the

enormity of the stakes involved in the case.

150. In Nazir Mohamed v. J. Kamala and Others (supra), also cited

by Mr. Singh, this Court held that, to be “substantial”, a question of law

must be debatable, not previously settled by the law of the land or any

binding precedent, and must have a material bearing on the decision of

the case and/or the rights of the parties before it, if answered either

way.

75

151. The proposition of law laid down in Nazir Mohamed v. J.

Kamala and Others (supra) and State Bank of India v. S.N. Goyal

(supra) is well settled. The aforesaid judgments do not, however

support the contention of Mr. Singh that there is a substantial question

of law involved in this appeal. Rather, the judgments lend support to

the contention of the Respondent-Power Generating Companies that

there is no substantial question of law involved in this appeal.

152. On a conjoint reading of Section 125 of the Electricity Act with

Section 100 of the CPC, it is absolutely clear that an appeal to this

Court lies on a substantial question of law. The condition precedent for

entertaining an appeal under Section 125 of the Electricity Act, 2003 is

the existence of a substantial question.

153. In DSR Steel (P) Ltd. v. State of Rajasthan (supra) cited

by Mr. Singhvi, this Court held:-

“14. An appeal under Section 125 of the Electricity Act, 2003 is
maintainable before this Court only on the grounds specified in
Section 100 of the Code of Civil Procedure. Section 100 CPC in turn
permits filing of an appeal only if the case involves a substantial
question of law. Findings of fact recorded by the courts below, which
would in the present case, imply the Regulatory Commission as the
court of first instance and the Appellate Tribunal as the court hearing
the first appeal, cannot be reopened before this Court in an appeal
under Section 125 of the Electricity Act, 2003. Just as the High Court
cannot interfere with the concurrent findings of fact recorded by the
courts below in a second appeal under Section 100 of the Code of
Civil Procedure, so also this Court would be loath to entertain any
challenge to the concurrent findings of fact recorded by the

76
Regulatory Commission and the Appellate Tribunal. The decisions of
this Court on the point are a legion. Reference
to Govindaraju v. Mariamman
[(2005) 2 SCC 500 : AIR 2005 SC
1008] , Hari Singh v. Kanhaiya Lal [(1999) 7 SCC 288 : AIR 1999 SC
3325] , Ramaswamy Kalingaryar v. Mathayan Padayachi [1992 Supp
(1) SCC 712 : AIR 1992 SC 115] , Kehar Singh v. Yash Pal [AIR 1990
SC 2212] and Bismillah Begum v. Rahmatullah Khan [(1998) 2 SCC
226 : AIR 1998 SC 970] should, however, suffice.”

154. In Wardha Power Co. Ltd. v. Maharashtra State Electricity

Distribution Co. Ltd. (supra) also cited by Mr. Singhvi, this Court

held:-

“5. Under Section 125 of the Electricity Act, 2003, an appeal to this
Court lies only when there is a substantial question of law, as
required for a second appeal under Section 100 of the Code of Civil
Procedure, 1908. Though the appellant has raised 34 questions, they
are actually grounds for attacking the appellate order. Grounds for
attacking an order are different from substantial question of law
evolved in the appeal. On appreciation of the correspondence
between the parties during the subsistence of the agreement, both
the Commission and the Appellate Tribunal have held against the
appellant.”

155. In Tuppadahalli Energy India (P) Ltd. v. Karnataka

Electricity Regulatory Commission and Anr. (supra), this Court

held that the view taken by the Kerala State Electricity Regulatory

Commission and APTEL in interpreting of Clause 6(5) of the Power

Purchase Agreement as an incentive, being a plausible view, there was

no substantial question of law to warrant interference under Section

125 of the Electricity Act.

156. In Ramanuja Naidu v. V Kanniah Naidu and Another 35, cited

by Mr. Rohatgi, this Court held:-

35 (1996) 3 SCC 392

77
“7. The scope of Section 100 of Civil Procedure Code even before
the amendment of the section in 1976 has been neatly
summarised in Mulla’s Code of Civil Procedure (15th Edn., Vol. I) at
p. 703. It is stated therein as follows:

“The section even as it stood before its recent amendment
allowed a second appeal only on the grounds set out in clauses (a),

(b) or (c). Therefore, whereas a Court of First Appeal is competent
to enter into questions of fact and decide for itself whether the
findings of fact by the lower Court are or are not erroneous, a Court
of Second Appeal was not and is not competent to entertain the
question as to the soundness of a finding of fact by the court
below. A second appeal, accordingly, could lie only on one or the
other grounds specified in the section. ….

8. In Madamanchi Ramappa v. Muthalur Bojjappa [(1964) 2 SCR
673 : AIR 1963 SC 1633] , speaking for a three-member Bench,
Gajendragadkar, J. summarised the law thus: (SCR pp. 683-85)
“The question about the limits of the powers conferred on the
High Court in dealing with second appeals has been considered by
High Courts in India and by the Privy Council on several occasions.
One of the earliest pronouncements of the Privy Council on this
point is to be found in the case of Durga Choudhrain [17 IA 122 :

ILR (1891) 18 Cal 23 (PC)] . In the case of Deity
Pattabhiramaswamy v. S. Hanymayya [AIR 1959 SC 57 : 1958 Andh
LT 834] , this Court had occasion to refer to the said decision of the
Privy Council and it was constrained to observe that
‘notwithstanding such clear and authoritative pronouncements on
the scope of the provisions of Section 100, CPC, some learned
Judges of the High Courts are disposing of second appeals as if
they were first appeals. This introduces, apart from the fact that
the High Court assumes and exercises a jurisdiction which it does
not possess, a gambling element in litigation and confusion in the
mind of the litigant public.’ On this ground, this Court set aside the
second appellate decision which had been brought before it by the
appellants.

78
In R. Ramachandran Ayyar v. Ramalingam Chettiar [(1963) 3
SCR 604 : AIR 1963 SC 302] , this Court had occasion to revert to
the same subject once again. The true legal position in regard to
the powers of the second appellate court under Section 100 was
once more examined and it was pointed out that the learned
Judges of the High Courts should bear in mind the caution and
warning pronounced by the Privy Council in the case of Durga
Choudhrain and should not interfere with findings of fact.
It appears that the decision of this Court in Deity
Pattabhiramaswamy, was in fact cited before the learned Single
Judge, but he was inclined to take the view that some aspects of
the provisions contained in Section 100 of the Code had not been
duly considered by this Court and so, he thought that it was open
to him to interfere with the conclusions of the courts below in the
present appeal. According to the learned Judge, it is open to the
second appellate court to interfere with the conclusions of fact
recorded by the District Judge not only where the said conclusions
are based on no evidence, but also where the said conclusions are
based on evidence which the High Court considers insufficient to
support them. In other words, the learned Judge seems to think
that the adequacy or sufficiency of evidence to sustain a
conclusion of fact is a matter of law which can be effectively raised
in a second appeal. In our opinion, this is clearly a misconception
of the true legal position. The admissibility of evidence is no doubt
a point of law, but once it is shown that the evidence on which
courts of fact have acted was admissible and relevant, it is not
open to a party feeling aggrieved by the findings recorded by the
courts of fact to contend before the High Court in second appeal
that the said evidence is not sufficient to justify the findings of fact
in question. It has been always recognised that the sufficiency or
adequacy of evidence to support a finding of fact is a matter for
decision of the court of facts and cannot be agitated in a second
appeal. Sometimes, this position is expressed by saying that like all
questions of fact, sufficiency or adequacy of evidence in support of
a case is also left to the jury for its verdict. This position has always

79
been accepted without dissent and it can be stated without any
doubt that it enunciates what can be properly characterised as an
elementary proposition. Therefore, whenever this Court is satisfied
that in dealing with a second appeal, the High Court has, either
unwittingly and in a casual manner, or deliberately as in this case,
contravened the limits prescribed by Section 100, it becomes the
duty of this Court to intervene and give effect to the said
provisions. It may be that in some cases, the High Court dealing
with the second appeal is inclined to take the view that what it
regards to be justice or equity of the case has not been served by
the findings of fact recorded by courts of fact; but on such
occasions it is necessary to remember that what is administered in
courts is justice according to law and considerations of fair play
and equity however important they may be, must yield to clear and
express provisions of the law. If in reaching its decisions in second
appeals, the High Court contravenes the express provisions of
Section 100, it would inevitably introduce in such decisions an
element of disconcerting unpredictability which is usually
associated with gambling; and that is a reproach which judicial
process must constantly and scrupulously endeavour to avoid.”

9. In Dudh Nath Pandey v. Suresh Chandra Bhattasali [(1986) 3
SCC 360] , a Bench of this Court held that: (SCC Headone P.360)
“High Court cannot set aside findings of fact of first appellate
court and come to a different conclusion on reappraisal of
evidence.”

10. There are innumerable subsequent decisions of this Court
which have held that concurrent findings of fact of trial court and
first appellate court cannot be interfered with by the High Court in
exercise of its jurisdiction under Section 100 of Civil Procedure
Code. (See: Kamala Devi Budhia v. Hem Prabha Ganguli [(1989) 3
SCC 145] , Jahejo Devi v. Moharam Ali [(1988) 1 SCC 372] , P.
Velayudhan v. Kurungot Imbichia Moidu’s son Ayammad [1990
Supp SCC 9] , etc.)

80

11. We are of the view that in interfering with the concurrent
findings of facts of the lower courts, the learned Single Judge of the
High Court acted in excess of the jurisdiction vested in him under
Section 100 of Civil Procedure Code. The learned Judge totally
erred in his approach to the entire question and in reappraising and
reappreciating the entire evidence and in considering the
probabilities of the case, to hold that the judgments of the courts
below are ‘perverse’ and that the plaintiff is entitled to the
declaration of title to suit property and recovery of possession.

157. In Navaneethammal v. Arjuna Chetty 36, this Court held that

interference with concurrent findings of the courts below must be

avoided under Section 100 of the CPC unless warranted by compelling

reasons. In any case, this Court is not expected to reappreciate the

evidence.

158. The questions of law raised by Mr. Vikas Singh, which have been

set forth hereinabove in Paragraph 15, would not have a material

bearing on the decision in this appeal, for the reasons discussed

hereinafter.

159. The only issue in this appeal is, whether the change applicable in

respect of interest charged by banks and financial institutions from the

Prime Lending Rate to Base Rate and then to MCLR amounts to change

in law in terms of the Power Purchase Agreement, and if so, whether

there is any substantial question of law involved in this appeal, as

argued by Mr. Singh, on behalf of the Appellant. It is not for this Court

36 (1996) 6 SCC 166

81
to reanalyze evidence adduced before the forums below or to sit in

appeal over concurrent findings of facts.

160. There can be no doubt that a notification issued by the Reserve

Bank of India constitutes law. A Reserve Bank of India notification

which alters, modifies, cancels or replaces an earlier notification would

tantamount to a change in law. However the notification relating to

alteration of the lending rates chargeable by banks and financial

institutions are not laws which relate to the Power Purchase

Agreements in question, and therefore do not attract, as the case may

be, Article 13 of the Stage 1 Agreements or Article 10 of the Stage 2

Agreements.

161. The RBI circulars/guidelines referred to above are admittedly

instructions issued to banks and financial institutions and are not

applicable to the Appellant or to the Respondent-Power Generating

Companies, who are engaged in the business of production,

sale/purchase and/or distribution of electricity and not of advancing

loans. Moreover, SBAR as defined in the Power Purchase Agreements

is admittedly not linked to any RBI guidelines or circulars. The

guidelines/circulars are thus not relevant to the issues involved in this

appeal.

162. As rightly argued by the counsels appearing for the Power

Generating Companies, the RBI circulars/guidelines to banks, advising

82
the banks to follow certain norms, while setting their benchmark

reference rates for loans, and the amendments thereto, have no legal

consequence on the contract between the parties. This has been

correctly appreciated by both the forums below.

163. In B.O.I. Finance Limited v. Custodian and Ors.(supra) this

Court held that the RBI Circulars/Instructions/Guidelines could not result in

invalidation of a contract even between a bank and a third party and the

consequence for violation is penalty as provided for in Section 46 of the

Banking Regulation Act. The RBI Circulars/Guidelines cannot therefore vary

or modify a contract between two parties.

164. As pointed out by Counsel appearing on behalf of the

Respondent- Power Generating Companies and admitted on behalf of

the Appellant, SBI has been notifying and continues to notify Prime

Lending Rates for its loans. The Appellant itself has given the average

PLR notified by SBI from 2010 till date in its application being I.A. No.

69796 of 2021. Therefore, Late Payment Surcharge as per the Power

Purchase Agreement has been calculated at the rate of 2% in excess of

the SBI notified Prime Lending Rate.

165. From paragraph 12 of the impugned judgment and order of the

APTEL, it appears that the Appellant conceded before the APTEL that

83
the SBI continues to issue the PLR rates till date. The relevant part of

the impugned judgment and order is reproduced hereinbelow:-

“….It is fairly conceded that SBI continues to issue the PLR rates till
date…”

166. The definition of SBAR is clear and has been correctly applied by

both the forums below. There are concurrent findings of fact that the

SBI PLR (i.e. the benchmark reference rate mentioned in the PPA) is

still being published and is available. The Court cannot, at this stage of

a second appeal under Section 125 of the Electricity Act reopen the

factual question of whether at all PLR rates were being notified by SBI

for short term loans.

167. Therefore, as submitted on behalf of the Respondent-Power

Generating Companies, there is no substantial question of law involved

in this appeal filed under section 125 of the Electricity Act, 2003.

168. As argued by Mr. Singhvi, Mr. Rohatgi and other Counsel, the

definition of SBAR in the Power Purchase Agreements is clear. SBAR is

the Prime Lending Rate per annum fixed by the State Bank of India

(SBI) from time to time for loans with one year maturity. LPS is to be

calculated at the rate of 2% in excess of the PLR for loans with 1 year

maturity, as fixed from time to time by SBI. Moreover, the parties have

84
consciously agreed that in the absence of such rate, the LPS rate shall

be mutually agreed to by the Parties.

169. As argued by Mr. Rohatagi, Mr. Singhvi and Mr. Mukherjee, the

purpose for which the Guidelines/Circulars have been issued by the

Reserve Bank of India or their impact on the rates of interest on loans

and advances, are not relevant to this appeal.

170. The provision in the Power Purchase Agreement, whereby the

parties are to mutually agree on a rate of interest, in case there is no

SBI Prime Lending Rate, in itself excludes the applicability of the

general provision for Change in Law contained in Article 13 of the

Power Purchase Agreement to Late Payment Surcharge.

171. In Adani Power (Mundra) Ltd. v. Gujarat Electricity

Regulatory Commission (supra), this Court found :-

“38. In the present case, the perusal of various Articles would
reveal that the provisions under Article 14 are general in nature.
The provision under Article 3.4.2 is specific, only to be invoked in
the case of non-compliance with any of the conditions as provided
under Article 3.1.2…..”

172. The APTEL correctly found that:-

“13…. On the contrary, there is a conscious exclusion regarding any
suo moto change in the rate to be applied while calculating LPS, it
being incorrect to argue on the assumption that the contract permits
automatic change in system.”

173. This Court is unable to accept Mr. Singh’s submission that the

conclusion of APTEL that LPS is not tariff is erroneous. The meaning of

85
the expression tariff has to be considered, and has rightly been

considered by APTEL in the context of the relevant provision of the

Power Purchase Agreements. The dictionary meaning of tariff may be

charge. However, in Article 13 of the Stage 1 and Article 10 of the

Stage 2 Power Purchase Agreements, tariff means monthly tariff and

tariff adjustment consequential to change in law, is of monthly tariff in

respect of supply of electricity.

174. As argued by the Respondent- Power Generating Companies

appearing through Mr. Rohatagi, Mr. Singhvi, Mr. Mukherjee and Ms.

Anand respectively, LPS is only payable when payment against

monthly bills is delayed and not otherwise.

175. The object of LPS is to enforce and/or encourage timely payment

of charges by the procurer, i.e. the Appellant. In other words, LPS

dissuades the procurer from delaying payment of charges. The rate of

LPS has no bearing or impact on tariff. Changes in the basis of the

rates of LPS do not affect the rate at which power was agreed to be

sold and purchased under the Power Purchase Agreements. The

principle of restitution under the Change in Law provisions of the

Power Purchase Agreements are attracted in respect of tariff.

176. LPS cannot be equated with carrying cost or actual cost incurred

for the supply of power. The Appellant has a contractual obligation to

86
make timely payment of the invoices raised by the Power Generating

Companies, subject, of course, to scrutiny and verification of the same.

Mr. Mukul Rohatgi has a point that if the funding cost was so much

lesser than the rate of LPS, as contended by the Appellant, the

Appellant could have raised funds at a lower rate of interest, made

timely payment of the invoices raised by the Power Generating

Companies, and avoided LPS.

177. The proposition that Courts cannot rewrite a contract mutually

executed between the parties, is well settled. The Court cannot,

through its interpretative process, rewrite or create a new contract

between the parties. The Court has to simply apply the terms and

conditions of the agreement as agreed between the parties, as

observed by this Court in Shree Ambica Medical Stores and Ors.

v. Surat People‘s Co-operative Bank (supra), cited by Ms. Divya

Anand. This appeal is an attempt to renegotiate the terms of the PPA,

as argued by Ms. Divya Anand as also other Counsel. It is well settled

that Courts cannot substitute their own view of the presumed

understanding of commercial terms by the parties, if the terms are

explicitly expressed. The explicit terms of a contract are always the

final word with regard to the intention of the parties, as held by this

Court in Nabha Power Ltd. (NPL) vs. Punjab State Power

Corporation Ltd. (supra) cited by Ms. Anand.

87

178. There is substance in Ms. Anand’s argument that the Appellant is

obliged to seek amendment of the provisions of the Power Purchase

Agreement only in accordance with the agreed procedure for

amendment of the terms thereof. The agreed rate of Late Payment

Surcharge can only be amended in the absence of SBI PLR and that too

with the mutual consent of the parties to the Power Purchase

Agreement.

179. The argument that the Power Generating Companies are availing

loans at a lesser rate of interest, but charging LPS on the basis of a

higher rate of interest, leading to unjust enrichment, is untenable in

law. LPS under the Power Purchase Agreements do not correspond to

the actual interest paid by the Power Generating Companies for funds

raised by them. The payment of Late Payment Surcharg LPS enalty

suffered by the Procurer, that is, the Appellant, on account of default in

timely payment.

180. As observed above, the Parties to the Power Purchase

Agreements have mutually and consciously agreed to the

incorporation of the PLR as notified by SBI from time to time, as the

rate for levy of LPS. Therefore, by virtue of the doctrine of

incorporation, the PLR as notified by SBI each year gets incorporated

in the Power Purchasing Agreements, as binding between the parties.

88
Thus, any other system notified by the Reserve Bank of India by its

circulars has no bearing on the terms of the Power Purchase

Agreement and cannot be deemed to be incorporated in the Power

Purchase Agreement, except in case of mutual agreement between the

parties, in the event of absence of SBI PLR, and approved by the

MERC.

181. As argued by Ms. Anand, conceptually, PLR, Base Rate and MCLR

are not comparable. The submission that the definition of SBAR should

be read in the context of MCLR instead of PLR, is therefore not tenable.

PLR is the internal benchmark rate for charing of interest on floating

rate loans, calculated on the basis of average cost of funds and the

loans were offered at a discount on their existing PLR. However, Base

Rate is the lending rate calculated based on the total cost of funds of

the banks and is the minimum interest rate at which a bank can lend,

except for loans to its own employees, its retired employees and

against bank’s own deposits. MCLR is a lending rate calculated on the

cost of raising new funds for the bank which include the cost of

maintaining CRR/SLR (Credit Reserve Ratio/Statutory Liquidity Ratio),

operating costs of banks and tenor premium. MCLR is the lowest

interest rate that a bank or lender can offer. Thus, loans are offered at

a markup on the MCLR. Thus, the basis of both the rates are different

and cannot be compared, as has been sought to be done by the

89
Appellant. When PLR, Base Rate and MCLR are compared side by side.

The difference is that very stark. Loans are advanced at a mark-up

over Base Rate and MCLR, while during the PLR regime, loans were

offered at a discount on PLR.

182. In any case, the Appellant cannot contend that the Reserve Bank

of India circulars are to be considered as Change in Law, since Article

13.3.1 of the Stage 1 agreements corresponding to Article 10.4.1 of the

Stage 2 agreements provides that notices of Change in Law events are

to be issued by the affected party, as soon as reasonably practicable,

after the affected party becomes aware of Change in Law event or

when it should reasonably have known of the Change in Law.

183. In this case, the changes cited by the Appellant were effected by

RBI from July 2010 and April 2016 and notified in advance. The

Appellant issued notices of Change in Law as late as in September

2016, more than six years after the Reserve Bank of India introduced

the base rate system in place of the BPLR system. Furthermore, while

the guidelines on the base rate system were published on 9 th April

2010 and introduced with effect from 01.07.2010, the Appellant

entered into Power Purchase Agreements with the Respondent No. 2 on

90
9th August 2010 and on 16th February 2013 incorporating PLR as the

Late Payment Surcharge rate for supply of contracted quantum of

electricity to the Appellant.

184. Significantly, the Appellant charges interest from its consumers

for delay in payment @ 1.25% per month and/or in other words 15%

per annum as per the MYT Regulations of MERC. This also shows that

interest rate is not co-related to the actual interest rate on loans taken

by the Appellant or by Power Generating Companies. According to the

Respondent- Power Generating Companies, no other distribution

licencee other than the Appellant has raised the claim of Change in

Law. All other Distribution Licencees procuring electricity from

producers of electricity pay LPS in accordance with the respective

Power Purchase Agreements.

185. In Halliburton Offshore Services Inc. v. Vedanta

Limited & Anr., O.M.P (I) (COMM.) No. 88/2020, decided on

29.05.2020 to which reference was made by Ms. Anand, the Delhi High

Court aptly remarked that the outbreak of a pandemic cannot be used

as an excuse for non-performance of a contract for which the

deadlines were much before the outbreak itself. In the aforesaid case,

the Delhi High Court rightly observed that the Court, while considering

the plea of non performance of the condition due to outbreak of the

COVID-19 pandemic, ought to examine factors such as the conduct of

the parties prior to the outbreak.

91

186. Admittedly, the Appellant has landed itself in its present

predicament, due to delay in making timely payments to the

Respondent Power Generating Companies. There was no pandemic at

the time of filing of the petition before the MERC in 2017 and the

Appeal before the APTEL in 2018. It, cannot, therefore be said that

the Appellant defaulted in payment of bills by reason of its financial

predicament as a result of the outbreak of COVID 19 in India, which

was in March 2020.

187. Extensive submissions have been made by Mr. Singh, to impress

upon the Court, that the Appellant committed default in payment of

the bills raised by the Power Generating Companies on account of

various circumstances, beyond its control. The various circumstances

mentioned by the Appellant, which allegedly impacted the financial

position of the Appellant, have no bearing on the merits of the Appeal.

Mr. Rohatgi, Mr. Singhvi, Mr. Mukerjee and Ms. Anand submitted in one

voice that the delays in payment and/or non-payment of the invoices

raised by the Power Generating Companies for the supply of power to

the Appellant, had put the Respondent-Power Generating Companies

under immense financial stress, as their source of revenue is from the

sale and supply of power generated from their power plants. The

Respondent Power Generating Companies cannot be burdened with

the consequences of the Appellant’s defaults.

92

188. The judgment of this Court in M/s Kailash Nath Associates v.

Delhi Development Authority (supra) cited by Mr. Singh is clearly

distinguishable since this Court found that there had been no breach of

contract by the Appellant (Para 44). Further, the Court did not accept

the view of the Division Bench, that the fact that DDA had made a

profit from re-auction was irrelevant, since compensation for breach of

a contract can be given for damage or loss suffered. If no damage is

suffered by reason of the breach, the law does not provide for a

windfall.

189. In this case, the Appellant admittedly did not pay the bills raised

by the Power Generating Companies within time. The Power Purchase

Agreements provided for Late Payment Surcharge on the presumption

that delayed payment of bills causes prejudice and loss to the seller

whose bill remains outstanding. Accordingly, the Appellant also

imposes delayed payment charges on its consumers, who pay their

bills after the stipulated due date for payment of the bills at the rate of

1.5% per month and/or in other 18% per annum. LPS rate of 2%

above the SBAR is neither unreasonably exorbitant nor arbitrary. It

cannot be said that the LPS agreed upon is not a genuine pre estimate

of damages.

190. The issues raised in this appeal are almost identical to the issues

involved in Union of India v. Association of Unified Telecom

93
Service Providers of India & Ors
. 37 where this Court was considering

an identical interest clause in a contract which is reproduced hereinbelow:

“In re: Levy of interest, penalty, and interest on penalty.
Para 182. Levy of licence fee is provided in Clause 20.2. In case of
any delay in payment of licence fee beyond the stipulated period
would attract penalty at the rate, which would be 2% above the
prime lending rate (PLR) of State Bank of India. As per Clauses 20.5
and 20.8, if the licensee does not pay the demand, consequences
would follow. The clauses are extracted hereunder:
“20.5. Any delay in payment of licence fee payable or any other
dues payable under the Licence beyond the stipulated period will
attract interest at a rate which will be 2% above the prime lending
rate (PLR) of State Bank of India existing as on the beginning of the
financial year (namely 1st April) in respect of the licence fees
pertaining to the said financial year. The interest shall be
compounded monthly and a part of the month shall be reckoned as
a full month for the purposes of calculation of interest. A month
shall be reckoned as an English calendar month.”

191. In the aforesaid case, the licensee had contended that under Section

74 of the Contract Act, compensation has to be reasonable compensation.

This Court after considering Hindustan Steel Ltd. v. State of

Orissa38, Akbar Badrudin Giwani v. Collector of Customs39,

Jaiprakash Industries Ltd. v. Commissioner of Central Excise,

Chandigarh40, Tecumseh Products (India) Ltd. v. Commissioner

of Central Excise, Hyderabad41, J.K. Synthetics Ltd. v.

37 2020 (3) SCC 525
38 1969 (2) SCC 627
39 1990 (2) SCC 203
40 2003 (1) SCC 67
41 2004 (6) SCC 30

94
Commercial Taxes Officer42, Kailash Nath Associates v. Delhi

Development Authority and Another43 and Central Bank of India

v. Ravindra and Others44. This Court after considering the above-

mentioned judgments of this Court cited on behalf of the licensee held

that none of the decisions would come to the aid of the licensee. This

Court held:

“192….The ratio of the case, it is not attracted for the reason that in
the instant matter, it is the contractual rate of interest and penalty
agreed to which cannot be said to be arduous in any manner. The
rate of interest has been agreed and particularly since it is a revenue
sharing regime, and the licensees have acted in conscious
disregards of their obligation. Thus on the anvil of the decision above
also, they are liable to pay the dues with interest and penalty……

…… There is no such discretion available when the parties have
agreed in default what amount is to be paid. It automatically follows
that it is not to be determined by the licensor once over again.
Parties (licensor and licensees) are bound by the terms and
conditions of the contract. There is no enabling clause to vary either
the rate of interest or the penalty provided therein and even if
permissible, it is not called for to vary interest or penalty fixed under
the agreement in the facts and circumstances of the case……

197. It is not levy of penal interest which is involved in the instant
case. Thus, based on the decision mentioned above, we find that
when there is contractual stipulation, the interest can be levied and
compounded”

192. It would perhaps be pertinent to note that stereotype Power

Purchase Agreements containing identical terms and conditions are

executed by the Appellant with different Power Generating Companies.
42 1994 (4) SCC 276
43 2015 (4) SCC 136
44 2002 (1) SCC 367

95
It is patently obvious that the Power Generating Companies only agree

to terms and conditions of an agreement prepared by the Appellant. It

is difficult to accept that the Appellant should incorporate in their

stereotype Power Purchase Agreements, a provision for payment of LPS

at a rate 2% higher than the SBAR, in case of late payment of

invoices/bills, without any pre estimation of the loss likely to be

suffered by a Power Generating Company, by reason of non payment

of bills in time, more so when the Late Payment Surcharge is linked to

the rate of interest in respect of specific types of loan, charged by a

leading nationalised bank with the largest numbers of branches spread

all over the country including in mofussil and rural areas.

193. In any case, in this second appeal under Section 125 of the

Electricity Act 2003, which is only to be heard on a substantial question

of law, this Court would not embark upon the exercise of making a

factual enquiry into the mode and manner in which the Power

Generating Companies meet their working capital requirements and

interest that individual Power Generating Companies pay to their

lenders.

194. It is axiomatic that the Power Purchase Agreements provide for

computation of Late Payment Surcharge in a particular manner to

avoid the time consuming exercise of assessing the losses of individual

Power Generating Companies by reason of late payment of their bills.

96
The SBAR has been made the bench mark for computation of Late

Payment Surcharge, irrespective of whether the Power Generating

Companies are financed by the State Bank of India or any of its

subsidiaries. The LPS provision is in the nature of a caution to arrange

their affairs and finances keeping the upper limit of LPS of 2% above

the SBAR in view, so that the Power Generating Company desists from

borrowing at uneconomic rate of interest.

195. There being no dispute in the present case with regard to the

principal sums due under the monthly bills, interest on delayed

payment at 2% in excess of SBI PLR cannot be said to be arbitrarily

high. There is no reason for this Court to reduce the contractual rate of

interest and thereby alter or modify the contract between the parties,

in exercise of its powers under Article 142 of the Constitution of India.

196. We need not go into the question whether or not the Appellant

has funds to clear its interest liability. The Appellant cannot continue to

get supply of electricity without having appropriate funds. Appellant

would necessarily have to raise funds to clear its contractual

obligations.

197. Even assuming that the burden of interest would have to be

passed on to the consumers, that cannot be the ground for the

Appellant to resile from its contractual commitment to the Power

97
Generating Companies. The Appellant cannot pass on the burden for

delay in making payment to the Power Generating Companies. In any

case the claims as argued by Mr. Singhvi pertains to a period of three

years before filing of the petition before the MERC on 2nd December,

2016 and therefore barred by limitation.

198. Reliance by the Appellant, upon the tariff regulations framed by

MERC for determination of tariff for Power Generating Companies under

Section 62 of the Electricity Act 2003, is untenable since the Tariff

Regulations have no application in this case where PPAs have been

executed pursuant to a bidding process, under Section 63 of the

Electricity Act.

199. MERC, rightly rejected the claim of the Appellant by its order dated

16.11.2017, holding:

“12…………. However, the LPS provision is attracted only when the
payments are not made by MSEDCL against the Monthly Bills of the
Seller within the time stipulated in the PPA’s. Any changes in the
basis of the LPS rates, consequent to revisions by the RBI do not
affect in any manner, the rates at which the power was agreed to be
sold and purchased under the PPA’s and in the consequent financial
implication for either party resulting in a liability to compensate the
affected party….”

200. The APTEL, concurred with the finding of MERC and held:-

“16. Having regard to the terms of the contract (PPA) as a whole,
there is no doubt that provision for compensation to the affected
party for a Change in Law event is essential with regard to tariff only.

The rate of LPS has no bearing or impact on tariff. Any possible

98
changes in the basis of the LPS rates consequent to revisions by the
RBI, or for that matter, SBI would not affect the rate at which power
was agreed to be sold and purchased under the PPAs and
consequently there is no financial implications on expenditure or
income for either Party. The LPS only recompenses what was lost in
terms of real value of money due to delay in payment.”

201. The decision of this Court in Jaipur Vidyut Vitran Nigam Ltd.

(supra) is distinguishable on facts. In Jaipur Vidyut Vitran Nigam

Ltd. (supra), there were change in law claims for cost of imported coal,

made by the Power Generating Company which were disputed by the

distribution licensee on the ground that the bid submitted by the

Generating Company was premised on imported coal. Since the

principal claim was disputed by the distribution licensee in the first

instance, the Generating Company could not raise any supplementary

bills, for change in law compensation.

202. In this case, the bills, payment of which has been delayed, are

energy bills, pertaining to energy supplied to the Appellant; and

supplied further by the Appellant to its consumers against payment of

retail tariff. Secondly, the energy bills in question, raised by the

respondent Power Generating Companies have never been disputed by

the Appellant, as noticed by the APTEL in the impugned judgment and

order, the relevant part whereof is extracted hereunder:-

“24. It is submitted by the contesting respondents (generators) that
LPS liability of the appellant on account of defaults in timely
payments for the period between 01.07.2010 and 31.03.2017 had
crystallised and the dispute as to rate of LPS was raised to vex it

99
further. It is not denied that the appellant had not disputed any of
the Monthly Bills or Supplementary Bills as per the procedure
prescribed under the PPA. This renders the demands to have
become final and conclusive. The notice based on plea of CIL was
issued in 2016, the issue having remained pending for five years,
depriving the generators of the recompense for the loss suffered.
Payment of LPS is triggered only when there is a default by MSEDCL.
LPS is levied under the PPAs which were duly executed by MSEDCL.
In these circumstances, it is inappropriate to project the outstanding
liability towards LPS as an additional burden being placed upon
MSEDCL.. ”

203. Mr. Singh’s challenge to the impugned judgment and order

on the ground of the directions on the Appellant to make payment

of the LPS found due and payable, within a stipulated date, is also

not sustainable.

204. APTEL is not bound by the procedure laid down in the Civil

Procedure Code, as argued by Mr. Mukerjee. Directions for time bound

payment within a prescribed time frame are in conformity with the

judgment of this Court in Jaipur Vidyut Vitran Nigam Ltd. v. Adani

Power (supra) which has been upheld by this Court. Moreover, one of

the objectives of the Electricity Act is time bound disposal of matters.

This is evident from various provisions of the said Act including in

particular Section 111(5) of the Act. Since APTEL and MERC are not

bound by the procedure as laid down in the Civil Procedure Code, it

was open to APTEL to pass such orders as would finally put an end to

litigation.

100

205. It is now well settled by various decisions of this Court that an

Electricity Regulatory Commission such as MERC constituted under the

Electricity Act, 2003 has all the trappings of a Court. The MERC is a

substitute for a Civil Court in respect of all disputes between licensees

and Power Generating Companies. This proposition finds support from

the judgments of this Court in Tamil Nadu Generation &

Distribution Corporation Ltd. v. PPN Power Generating Co. Pvt.

Ltd.45, Andhra Pradesh Power Coordination Committee & Ors. v.

Lanco Kondapalli Power Ltd. & Others. 46 and Gujarat Urja Vikas

Nigam Limited v. Amit Kumar & Others47 cited by Mr. Vishrov

Mukerjee.

206. As held by this Court in State of Karnataka v.

Vishwabharathi House Building Cooperative Society and

Others48, cited by Mr. Mukerjee, Courts have the power to execute

their own order. The impugned judgment and order cannot, therefore,

be faulted for giving directions for payment of the outstanding dues of

the Appellant. Moreover, State Regulatory Commissions exercise

continuous regulatory supervision as affirmed by this Court in All

45 (2014) 11 SCC 53
46 (2016) 3 SCC 468
47 (2021) SCC OnLine 194
48 (2003) 2 SCC 412 (Paras 59-62)

101
India Power Engineering Federation & Ors. v. Sasan Power

Limited & Others49, cited by Mr. Mukerjee.

207. MERC acted within the scope of its power of regulatory

supervision in directing the Appellant to make payment of LPS within

the time stipulated in the order of MERC. The APTEL rightly upheld

the direction. In any case, such a direction cannot be interfered

with in exercise of powers under Section 125 of the Electricity Act

which corresponds to the power of Second Appeal under Section 100 of

the CPC, since the sine qua non for entertaining an appeal is the

existence of a substantial question of law.

208. After the the hearing of this appeal was concluded and the

appeal was reserved for judgment, the Appellant filed an application to

bring on record additional facts and documents in the form of queries

under the Right to Information Act, 2005 made by one Alka Mehta to

the State Bank of India and the responses thereto in an attempt to

show that PLR would not apply to short term loans advanced by SBI

after transition to the Base Rate/MCLR system. This Court cannot take

note of any documents sought to be introduced after the conclusion of

hearing. In any case, as observed above, this Court cannot in a

second appeal under Section 125 of the Electricity Act, 2003 interfere

with concurrent factual findings arrived at by MERC and APTEL on the

basis of facts admitted by the Appellant. The Appellant had been

49 (2017) 1 SCC 487 (Para 31)

102
accepting the invoices raised by the Respondent–Power Generating

companies and accounts had duly been reconciled by the Appellant.

The LPS charged by the Respondent Power Generating Companies was

never disputed. Further more, this Court cannot look into documents

introduced for the first time in this second appeal, which were not

tendered in evidence before the MERC or the APTEL. Even otherwise,

queries made by one Alka Mehta, a rank outsider as late as on 12 th July

2021 or replies thereto cannot be relied upon in evidence, by the

Appellant.

209. For the reasons discussed above, we find no grounds to interfere

with the judgment and order of the learned APTEL confirming the

judgment and order passed by MERC. The appeal is accordingly

dismissed.

…………………………………J
[INDIRA BANERJEE]

…………………………………J
[V. RAMASUBRAMANIAN]

OCTOBER 08, 2021;

NEW DELHI.

103



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