UTTAR HARYANA BIJLI VITRAN NIGAM LTD [UHBVNL]. & ANR versus ADANI POWER LTD. & ORS. on 25 February 2019

[2019] 4 S.C.R. 487

UTTAR HARYANA BIJLI VITRAN NIGAM LTD.[UHBVNL] & ANR.

v.

ADANI POWER LTD. & ORS.

(Civil Appeal No. 5865 of 2018)

FEBRUARY 25, 2019

[R. F. NARIMAN AND NAVIN SINHA, JJ.]

Electricity – Power Purchase Agreements(PPAs) – Adjustmentin monthly tariff payment on account of change in law – Appellantsin C.A. No.5865 of 2018 are distribution licensees in the State ofHaryana – Appellant in C.A. No. 6190 of 2018 is the Gujarat UrjaVikas Nigam Ltd. (GUVNL), assigned with the task of procuringpower by the State of Gujarat – Respondent, a generating companyhas a 4620 MW coal-fired power plant at Mundra, District Kutch,Gujarat – On 23.06.2005 SEZ Act was enacted – U/s.26, SEZ Actevery Developer shall be entitled to various exemptions, such asduty leviable u/Customs Act, Customs Tariff Act etc.– Respondentapproved as Co-Developer (which is included within the term“Developer”) – Appellant established a power plant in the aforesaidSEZ – Respondent entered into various PPAs inter alia dtd 07.08.2008and 02.02.2007, with the appellant – Ministry of Commerce &Industry (MoC&I) vide notification dtd. 06.04.2015 withdrew theexemption of all duties under the Customs Act, Customs Tariff Actetc. on goods imported/procured by the respondent – Videnotification dtd.16.02.2016 exemption from service tax, to whichthe respondent was entitled, also withdrawn – Respondent filedpetition before the Central Electricity Regulatory Commission(CERC) seeking compensation for change in law by invoking Art.13of the respective PPAs – Allowed, however held that respondent’sprayer to grant carrying cost on restitutionary principles from thedate of change in law till the date of decision cannot be allowed –Judgment set aside by Appellate Tribunal – On appeal, held:Art.13.4.1 makes it clear that adjustment in monthly tariff paymenton account of change in law shall be effected from the date of thechange in law [sub-clause (i) of clause 4.1], in case the change inlaw happens to be by way of adoption, promulgation, amendment,

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Are-enactment or repeal of the law or change in law– Art.13.4.1 issubject to Art.13.2 of the PPAs –Art.13.2 is an in-built restitutionaryprinciple which compensates the party affected by such change inlaw – Art.13.2, however, goes on to divide such restitution into twoseparate periods – Restitutionary principles apply in case a certainthreshold limit is crossed in both sub-clauses (a) and (b) –BIndisputably, the present case is covered by sub-clause (b) and theaforesaid threshold has been crossed – Mechanism for claiming achange in law is then set out by Art.13.3 of the PPA – Sub-clause(c) does not occur in the PPA in C.A. No.5865 of 2018 – Presentcase is governed by sub-clause (i) of Art.13.4.1, it is obvious thatCsub-clauses (b) and (c) have no application to the facts of the presentcase –A reading of Art.13 as a whole, therefore, leads to the positionthat subject to restitutionary principles contained in Art.13.2, theadjustment in monthly tariff payment, in the facts of the presentcase, has to be from the date of the withdrawal of exemption which was done by administrative orders dtd. 06.04.2015 and 16.02.2016D– Present case, therefore, falls within Art.13.4.1(i) – Respondentsentitled to adjustment in their monthly tariff payment from the dateon which the exemption notifications became effective – No reasonto interfere with the judgment of the Appellate Tribunal – ElectricityAct, 2003 – s.2(18) – Special Economic Zones Act, 2005 – s.26 –ECustoms Act, 1962 – Customs Tariff Act, 1975 – Central Excise Act,1944.

Dismissing the appeals, the Court

Conclusion

Dismissing the appeals, the Court

HELD: 1.1 Article 13.4.1 makes it clear that adjustment inmonthly tariff payment on account of change in law shall be effectedFfrom the date of the change in law [sub-clause (i) of clause 4.1], incase the change in law happens to be by way of adoption,promulgation, amendment, re-enactment or repeal of the law orchange in law. As opposed to this, if the change in law is onaccount of a change in interpretation of lawby a judgment of aGCourt or Tribunal or governmental instrumentality, the case wouldfall under sub-clause (ii) of clause 4.1, in which case, the monthlytariff payment shall be effected from the date of the said order/judgment of the competent authority/Tribunal or the governmentalinstrumentality. Article 13.4.1 is subject to Article 13.2 of thePPAs. Article 13.2 is an in-built restitutionary principle whichH

compensates the party affected by such change in law and whichmust restore, through monthly tariff payments, the affected partyto the same economic position as if such change in law has notoccurred. This would mean that by this clause a fiction is created,and the party has to be put in the same economic position is ifsuch change in law has not occurred, i.e., the party must be giventhe benefit of restitution as understood in civil law. Article 13.2,however, goes on to divide such restitution into two separateperiods. The first period is the “construction period” in whichincrease/decrease of capital cost of the project in the tariff is tobe governed by a certain formula. However, the seller has toprovide to the procurer documentary proof of such increase/decrease in capital cost for establishing the impact of such changein law and in the case of dispute as to the same, a disputeresolution mechanism as per Article 17 of the PPA is to beresorted to. It is also made clear that compensation is only payableto either party only with effect from the date on which the totalincrease/decrease exceeds the amount stated therein. So far asthe “operation period” is concerned, compensation for anyincrease/decrease in revenues or costs to the seller is to bedetermined and effected from such date as is decided by theappropriate Commission. Here again, this compensation is onlypayable for increase/decrease in revenue or cost to the seller ifit is in excess of an amount equivalent to 1% of the Letter ofCredit in aggregate for a contract year. From a reading of Article13.2 it is clear that restitutionary principles apply in case a certainthreshold limit is crossed in both sub-clauses (a) and (b). Thereis no dispute that the present case is covered by sub-clause (b)and that the aforesaid threshold has been crossed. Themechanism for claiming a change in law is then set out by Article13.3 of the PPA. [Paras 6, 7 and 8][498-C-H; 499-A-C]

1.2 A reading of Article 13 as a whole, therefore, leads tothe position that subject to restitutionary principles contained inArticle 13.2, the adjustment in monthly tariff payment, in the factsof the present case, has to be from the date of the withdrawal ofexemption which was done by administrative orders dated06.04.2015 and 16.02.2016. The present case, therefore, fallswithin Article 13.4.1(i). This being the case, it is clear that the AB

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[2019] 4 S.C.R.

Aadjustment in monthly tariff payment has to be effected from thedate on which the exemptions given were withdrawn. This beingthe case, monthly invoices to be raised by the seller after suchchange in tariff are to appropriately reflect the changed tariff. Onthe facts of the present case, it is clear that the respondents wereentitled to adjustment in their monthly tariff payment from theBdate on which the exemption notifications became effective. Thisbeing the case, the restitutionary principle contained in Article13.2 would kick in for the simple reason that it is only after theorder dated 04.05.2017 that the CERC held that the respondentswere entitled to claim added costs on account of change in lawCw.e.f. 01.04.2015. This being the case, it would be fallacious tosay that the respondents would be claiming this restitutionaryamount on some general principle of equity outside the PPA.Since it is clear that this amount of carrying cost is only relatableto Article 13 of the PPA, no reason to interfere with the judgmentof the Appellate Tribunal. [Para 10][500-A-E]DNational Thermal Power Corporation Ltd. v. MadhyaPradesh State Electricity Board, (2011) 15 SCC 580 :[2011] 11 SCR 651; South Eastern Coalfields Ltd. v.State of Madhya Pradesh and Ors. (2003) 8 SCC 648 :[2003] 4 Suppl. SCR 651; Indian Council for Enviro-ELegal Action v. Union of India and Ors. (2011) 8 SCC161 : [2011] 9 SCR 146; All India Power EngineerFederation and Ors. v. Sasan Power Ltd. and Ors.(2017) 1 SCC 487 : [2016] 9 SCR 901 – heldinapplicable.FEnergy Watchdog v. Central Electricity RegulatoryCommission and Ors. [2017] 3 SCR 153– referred to.

Case Law Reference

UTTAR HARYANA BIJLI VITRAN NIGAM LTD. [UHBVNL] v.ADANI POWER LTD.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5865of 2018

From the Judgment and Order dated 13.04.2018 of the AppellateTribunal for Electricity at New Delhi in Appeal No. 210 of 2017

With

Civil Appeal No. 6190 of 2018.

V. Giri, Mukul Rohatgi, Vikram Nankani, P. S. Narsimha, Sr. Advs.,G. Umapathy, Rakesh K. Sharma, Aditya Singh, Ms. Vashnavi, Ms.Hemantika Wahi, Anand K. Ganesan, Ms. Jesal Wahi, Mahesh Agarwal,Ms. Neeha Nagpal, Ms. Poonam Verma, Abiha Zaidi, Ms. AparajitaUpadhyay, Ms. Devanshi Singh, Malav Deliwala, Ms. Aditi Pathak, ArshitAnand, E. C. Agrawala, Nikunj Dayal, Pramod Dayal, Ms. Payal Dayal,Advs. for the appearing parties.

The Judgment of the Court was delivered by

R. F. NARIMAN, J. 1. The appellants in Civil Appeal No. 5865of 2018 are Uttar Haryana Bijli Vitran Nigam Ltd. and Dakshin HaryanaBijli Vitran Nigam Ltd. [collectively referred to as the “HaryanaDiscoms”], which are distribution licensees in the State of Haryana.The appellant in Civil Appeal No. 6190 of 2018 is the Gujarat Urja VikasNigam Ltd. [“GUVNL”], which has been assigned with the task ofprocuring power by the State of Gujarat. The respondent, Adani PowerLtd., is a generating company in terms of Section 2(18) of the ElectricityAct, 2003 and has a 4620 MW coal-fired power plant at Mundra, DistrictKutch, Gujarat. On 23.06.2005, the Special Economic Zones Act, 2005[“SEZ Act”] was enacted. Section 26 of this Act provides that everyDeveloper shall be entitled to various exemptions, such as duty leviableunder the Customs Act, 1962, Customs Tariff Act, 1975, Central ExciseAct, 1944, etc. The Government of India approved the respondent as aCo-Developer (which is included within the term “Developer”). TheMinistry of Commerce and Industry [“MoC&I”], by a letter dated19.12.2006, granted approval to the appellant for setting up a powerplant in the aforesaid SEZ. Thus, the appellant has established theaforesaid power plant in four phases consisting of four units of 330 MWin Phase I and II, two units of 660 MW in Phase III, and three units of660 MW in Phase IV. The respondent has entered into various PowerPurchase Agreements [“PPAs”] with the appellant. We are concerned A

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Ain the present case with the PPAs dated 07.08.2008 and 02.02.2007.The MoC&I, vide notification dated 06.04.2015 has withdrawn theexemption of all duties under the Customs Act, Customs Tariff Act,Central Excise Act, etc. on goods imported/procured by the respondentfor authorized operations w.e.f. 01.04.2015. Equally, vide notificationdated 16.02.2016, fiscal benefits including exemption of service tax onBpower plants approved prior to 27.02.2009 was promulgated, as a resultof which, exemption from service tax, to which the respondent wasentitled, has been withdrawn. On 15.10.2015, the respondent filed PetitionNo. 235/MP/2015 before the Central Electricity Regulatory Commission[“CERC” or “Commission”], seeking compensation for change in lawCby invoking Article 13 of the respective PPAs. On 04.05.2017, the CERCallowed, as a change in law, the added cost by way of payment of taxconsequent to withdrawal of the exemption notifications thus:

“35. …… However, the change in rates of custom duty, exciseduty, withholding tax and service tax on taxable services whichDhave been imposed pursuant to the Acts passed by the Parliamentshall be covered under Change in Law. As regards the GreenEnergy Cess, it was imposed after the cut-off date and satisfiedthe requirements of Change in Law. Accordingly, the Petitionershall therefore be entitled for reimbursement of custom duty, exciseduty on import/procurement of any other goods and service taxEon the spares and consumables payable by it from 1.4.2015 onaccount of the withdrawal of exemption to the power plants locatedin the SEZ by the Ministry of Commercial [sic Commerce] andIndustry only to the extent of difference in the duty or tax as onthe cut-off date and as prevailing as on 1.4.2015 and thereafter.”FHowever, the CERC followed its earlier order dated 06.02.2017 in PetitionNo.156/MP/2014, in which it stated that “carrying cost” under Article13 of the PPA must be given to the respondent as it is to be restored tothe same economic position as if the change in law – which is withdrawalof the exemption notifications – did not take place. After setting outGArticle 13 of the PPA and distinguishing a Supreme Court judgment inNational Thermal Power Corporation Ltd. v. Madhya PradeshState Electricity Board, (2011) 15 SCC 580 [“National ThermalPower Corporation Ltd.”], the Commission came to the conclusionthat there is no provision in the PPA for payment of carrying cost for theperiod from the date of the change in law till the date of approval by theH

Commission. This being the case, the Commission held that the prayerof the respondent to grant carrying cost on restitutionary principles fromthe date of change in law till the date of decision cannot be allowed. Bythe impugned judgment of the Appellate Tribunal for Electricity[“Appellate Tribunal”] dated 13.04.2018, the Appellate Tribunal wentthrough the relevant provisions of the PPAs and finally observed :

“x. Further, the provisions of Article 13.2 i.e. restoring the Appellantto the same economic position as if Change in Law has notoccurred is in consonance with the principle of ‘restitution’ i.e.restoration of some specific thing to its rightful status. Hence, inview of the provisions of the PPA, the principle of restitution andjudgment of the Hon’ble Supreme Court in case of Indian Councilfor Enviro-Legal Action vs. Union of India & Ors., we are ofthe considered opinion that the Appellant is eligible for CarryingCost arising out of approval of the Change in Law events fromthe effective date of Change in Law till the approval of the saidevent by appropriate authority. It is also observed that the GujaratBid-01 PPA have no provision for restoration to the same economicposition as if Change in Law has not occurred. Accordingly, thisdecision of allowing Carrying Cost will not be applicable to theGujarat Bid-01 PPA.”

Accordingly, carrying cost was allowed and the judgment of theCommission was set aside.

2. Shri G. Umapathy, learned Advocate, and Shri V. Giri, learnedSenior Advocate, appearing for the appellants in these appeals haveargued before us that the judgment of the Commission was correct andthat since carrying costs are not part of the PPAs in question, any resortto rules of equity and interest being granted on rules of equity cannot beresorted to. For this purpose, they relied upon judgments of this Court.According to them, therefore, the finding of the Appellate Tribunal oughtto be set aside.

3. On the other hand, Mr. Mukul Rohatgi, learned Senior Advocateappearing on behalf of the respondent, supported the Appellate Tribunaljudgment and stated that the Appellate Tribunal has not gone outside thefour corners of the PPA. Since Article 13.2, in particular, expresslyprovides a restitutionary principle, the respondents are entitled to availof the same.

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A4. In order to appreciate the respective contentions of the parties,it is necessary to set out certain provisions of the PPAs. Thus, Articles11.3.1 and 11.3.4 state as follows:

“11.3 Payment of Monthly Bills

11.3.1 The Procurer shall pay the amount payable under MonthlyBBill on the Due Date to such account of the Seller, as shall havebeen previously notified by the Seller to the Procurer in accordancewith Article 11.3.3 below.

All payments made by the Procurer shall be appropriated by theSeller in the following order of priority:

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1. towards Late Payment Surcharge, payable by the Procurer,if any;

2. towards earlier unpaid Monthly Bill, if any; and

3. towards the then current Monthly Bill.”

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“11.3.4. In the event of delay in payment of a Monthly Bill by anyprocurer beyond its Due Date, a Late Payment Surcharge shallbe payable by the Procurer to the Seller at the rate of two (2)percent in excess of the applicable SBAR per annum, on theEamount of outstanding payment, calculated on a day to day basis(and compounded with Monthly rest), for each day of the delay.”

Articles 11.8.1 and 11.8.3 are also important and provide as follows:

“11.8. Payment of Supplementary Bill

F11.8.1 Either Party may raise a bill on the other Party(“Supplementary Bill”) for payment on account of:

i. Adjustments required by the Regional Energy Account (ifapplicable);

ii. Tariff Payment for change in parameters, pursuant toGprovisions in Schedule-5; or

iii. Change in Law as provided in Article 13

and such Bill shall be paid by the other Party.”

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“11.8.3 In the event of delay in payment of a Supplementary Billby either Party beyond one month from the date of billing, a LatePayment Surcharge shall be payable at same terms applicable tothe Monthly Bill in Article 11.3.4.”

Article 18.17 states as follows:

“18.17 No Consequential or Indirect Losses The liability of the Seller and the Procurer shall be limited to thatexplicitly provided in this Agreement. Provided thatnotwithstanding anything contained in this Agreement, under noevent shall the Procurer or the Seller claim from one another anyindirect or consequential losses or damages.”

5. Ultimately, the result of this appeal depends upon theinterpretation of Article 13 of the PPAs which is set out in full hereinbelow:

“13. ARTICLE 13 – CHANGE IN LAW

13.1 Definitions

In this Article 13, the following terms shall have the followingmeanings:

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

(i) the enactment, bringing into effect, adoption, promulgation,amendment, modification or repeal, of any Law or (ii) a changein interpretation of any Law by a Competent Court of law,tribunal or Indian Governmental Instrumentality provided suchCourt of law, tribunal or Indian Governmental Instrumentalityis final authority under law for such interpretation or (iii) changein any consents, approvals or licenses available or obtained forthe Project, otherwise than for default of the Seller, whichresults in any change in any cost of or revenue from the businessof selling electricity by the Seller to the Procurer under theterms of this Agreement; but shall not include (i) any change in any withholding tax onincome or dividends distributed to the shareholders of the Seller,or (ii) change in respect of UI Charges or frequency intervalsby an Appropriate Commission.

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Provided that if Government of India does not extend the incometax holiday for power generation projects under Section 80 IAof the Income Tax Act, upto the Scheduled CommercialOperation Date of the Power Station, such non-extension shallbe deemed to be a Change in Law (applicable only in case theSeller envisaging supply from the Project awarded the statusof “Mega Power Project” by Government of India).

13.1.2 “Competent Court” means:

The Supreme Court or any High Court, or any tribunal or anysimilar judicial or quasi-judicial body in India that has jurisdictionto adjudicate upon issues relating to the Project.

13.2 Application and Principles for computing impact ofChange in Law While determining the consequence of Change in Law under thisArticle 13, the Parties shall have due regard to the principle thatthe purpose of compensating the Party affected by such Changein Law, is to restore through Monthly Tariff Payments, to theextent contemplated in this Article 13, the affected Party to thesame economic position as if such Change in Law has not occurred.

a) Construction Period

As a result of any Change in Law, the impact of increase/decreaseof Capital Cost of the Project in the Tariff shall be governed bythe formula given below:

For every cumulative increase/decrease of each Rs.8,90,00,000[sic] (Rupees eight crore ninety lakh only) Rupees of theContracted Capacity in the Capital Cost over the term of thisAgreement, the increase/decrease in Quoted Capacity Chargesshall be an amount equal to zero point two two seven (0.227%)per cent of the Quoted Capacity Charges. Provided that the Sellerprovides to the Procurer documentary proof of such increase/decrease in Capital Cost for establishing the impact of such Changein Law. In case of Dispute, Article 17 shall apply.

It is clarified that the above mentioned compensation shall bepayable to either Party, only with effect from the date on whichthe total increase/decrease exceeds amount of Rs.8,90,00,000 [sic](Rupees eight crore ninety lakh only)

b) Operation Period

As a result of Change in Law, the compensation for any increase/decrease in revenues or cost to the Seller shall be determined andeffective from such date, as decided by the AppropriateCommission whose decision shall be final and binding on both theParties, subject to rights of appeal provided under applicable Law.

Provided that the above mentioned compensation shall be payableonly if and for increase/decrease in revenues or cost to the Selleris in excess of an amount equivalent to 1% of Letter of Credit inaggregate for a Contract Year.

13.3 Notification of Change in Law

13.3.1 If the Seller is affected by a Change in Law in accordancewith Article 13.2 and wishes to claim a Change in Law under thisArticle it shall give notice to the Procurer of such Change in Lawas soon as reasonably practicable after becoming aware of thesame or should reasonably have known of the Change in Law.

13.3.2 Notwithstanding Article 13.3.1, the Seller shall be obligedto serve a notice to the Procurer under this Article 13.3.2 if it isbeneficially affected by a Change in Law. Without prejudice tothe factor of materiality or other provisions contained in thisAgreement, the obligation to inform the Procurer contained hereinshall be material. Provided that in case the Seller has not providedsuch notice, the Procurer shall have the right to issue such noticeto the Seller.

13.3.3 Any notice served pursuant to this Article 13.3.2 shallprovide, amongst other things, precise details of:

(a) the Change in Law; and

(b) the effects on the Seller of the matters referred to in Article13.2

13.4 Tariff Adjustment Payment on account of Change in Law 13.4.1 Subject to Article 13.2, the adjustment in Monthly TariffPayment shall be effective from:

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

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

13.4.2 The payment for Changes in Law shall be throughsupplementary bill as mentioned in Article 11.8. However, in caseBof any change in Tariff by reason of Change in Law, as determinedin accordance with this Agreement, the Monthly Invoice to beraised by the Seller after such change in Tariff shall appropriatelyreflect the changed Tariff.”

6. It will be seen that Article 13.4.1 makes it clear that adjustmentCin monthly tariff payment on account of change in law shall be effectedfrom the date of the change in law [see sub-clause (i) of clause 4.1], incase the change in law happens to be by way of adoption, promulgation,amendment, re-enactment or repeal of the law or change in law. Asopposed to this, if the change in law is on account of a change ininterpretation of lawby a judgment of a Court or Tribunal or governmentalDinstrumentality, the case would fall under sub-clause (ii) of clause 4.1, inwhich case, the monthly tariff payment shall be effected from the dateof the said order/judgment of the competent authority/Tribunal or thegovernmental instrumentality. What is important to notice is that Article13.4.1 is subject to Article 13.2 of the PPAs.

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7. Article 13.2 is an in-built restitutionary principle whichcompensates the party affected by such change in law and which mustrestore, through monthly tariff payments, the affected party to the sameeconomic position as if such change in law has not occurred. This wouldmean that by this clause a fiction is created, and the party has to be putFin the same economic position is if such change in law has not occurred,i.e., the party must be given the benefit of restitution as understood incivil law. Article 13.2, however, goes on to divide such restitution intotwo separate periods. The first period is the “construction period” inwhich increase/decrease of capital cost of the project in the tariff is tobe governed by a certain formula. However, the seller has to provide toGthe procurer documentary proof of such increase/decrease in capitalcost for establishing the impact of such change in law and in the case ofdispute as to the same, a dispute resolution mechanism as per Article 17of the PPA is to be resorted to. It is also made clear that compensationis only payable to either party only with effect from the date on whichthe total increase/decrease exceeds the amount stated therein.H

8. So far as the “operation period” is concerned, compensationfor any increase/decrease in revenues or costs to the seller is to bedetermined and effected from such date as is decided by the appropriateCommission. Here again, this compensation is only payable for increase/decrease in revenue or cost to the seller if it is in excess of an amountequivalent to 1% of the Letter of Credit in aggregate for a contract year.What is clear, therefore, from a reading of Article 13.2, is thatrestitutionary principles apply in case a certain threshold limit is crossedin both sub-clauses (a) and (b). There is no dispute that the present caseis covered by sub-clause (b) and that the aforesaid threshold has beencrossed. The mechanism for claiming a change in law is then set out byArticle 13.3 of the PPA.

9. In Civil Appeal No. 6190 of 2018, the PPA contains Article13.4 as follows:

“13.4 Tariff Adjustment Payment on account of Change in Law 13.4.1 Subject to Article 13.2, the adjustment in Monthly TariffPayment shall be effective from:

(a) the date of adoption, promulgation, amendment, re-enactment or repeal of the Law or Change in Law; or (b) the date of order/judgment of the Competent Court ortribunal or Indian Governmental Instrumentality, if the Changein Law is on account of a change in interpretation of Law.

(c) the date of impact resulting from the occurrence of Article13.1.1.

13.4.2 The payment for Changes in Law shall be throughSupplementary Bill as mentioned in Article 11.8. However, incase of any change in Tariff by reason of Change in Law, asdetermined in accordance with this Agreement, the MonthlyInvoice to be raised by the Seller after such change in Tariff shallappropriately reflect the changed Tariff.”

It will be seen that sub-clause (c) does not occur in the PPA in CivilAppeal No.5865 of 2018. As we have held that the present case isgoverned by sub-clause (i) of Article 13.4.1, it is obvious that sub-clauses (b) and (c) have no application to the facts of the present case.

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A10. A reading of Article 13 as a whole, therefore, leads to theposition that subject to restitutionary principles contained in Article 13.2,the adjustment in monthly tariff payment, in the facts of the presentcase, has to be from the date of the withdrawal of exemption which wasdone by administrative orders dated 06.04.2015 and 16.02.2016. Thepresent case, therefore, falls within Article 13.4.1(i). This being the case,Bit is clear that the adjustment in monthly tariff payment has to be effectedfrom the date on which the exemptions given were withdrawn. Thisbeing the case, monthly invoices to be raised by the seller after suchchange in tariff are to appropriately reflect the changed tariff. On thefacts of the present case, it is clear that the respondents were entitled toCadjustment in their monthly tariff payment from the date on which theexemption notifications became effective. This being the case, therestitutionary principle contained in Article 13.2 would kick in for thesimple reason that it is only after the order dated 04.05.2017 that theCERC held that the respondents were entitled to claim added costs onaccount of change in law w.e.f. 01.04.2015. This being the case, it wouldDbe fallacious to say that the respondents would be claiming thisrestitutionary amount on some general principle of equity outside thePPA. Since it is clear that this amount of carrying cost is only relatableto Article 13 of the PPA, we find no reason to interfere with the judgmentof the Appellate Tribunal.E

11. We now come to some of the judgments cited by learnedcounsel on behalf of both sides. In South Eastern Coalfields Ltd. v.State of Madhya Pradesh and Ors., (2003) 8 SCC 648 [“SouthEastern Coalfields”], this Court held that interest is payable in equityin certain circumstances and finally concluded:F“

“24. We are, therefore, of the opinion that in the absence of therebeing a prohibition either in law or in the contract entered intobetween the two parties, there is no reason why the Coalfieldsshould not be compensated by payment of interest for the periodfor which the consumers/purchasers did not pay the amount ofGenhanced royalty which is a constituent part of the price of themineral for the period for which it remained unpaid. Thejustification for award of interest stands fortified by the weightyfactor that the Coalfields themselves are obliged to pay interest tothe State on such amount. It will be a travesty of justice to hold that though the Coalfields must pay the amount of interest to theState but the consumers/purchasers in whose hands the moneywas actually withheld be exonerated from liability to pay theinterest.”

What was argued by Shri Giri was that this judgment cannot be appliedto fact situations that arise under the PPA in view of Article 18.17 of thePPA which clearly states that the liability of the seller and the procurershall be limited to that explicitly provided in this agreement and that, inno event, shall either procurer or seller claim any indirect or consequentiallosses or damages. Since we have found that the claim for carryingcosts is under Article 13 of the PPAs, this judgment would have noapplication to the facts of the present case.

12. Shri Giri also relied upon National Thermal PowerCorporation Ltd. (supra), in which, South Eastern Coalfields (supra)was distinguished in the following manner:

“25. In this connection, it is material to note that the claim in SouthEastern Coalfields [(2003) 8 SCC 648] was essentially coveredunder Section 61 of the Sale of Goods Act, 1930, and the interestby way of damages was payable as per this statutory provisionitself. The liability had been crystallised and the interest hadbecome payable because of the failure to pay the amount as perthe liability. Besides, there was nothing in the agreement betweenthe parties to the contrary on the issue of grant of interest. In thepresent matter, we have the second proviso to Regulation 79(2)of the 1999 Regulations which permitted the generating companyto continue to charge the existing tariff for such period as may bespecified in the notification by the Commission, and the notificationspermitted continuation of the existing tariff as on 31-3-2001, untilthe final tariff was determined. There was no provision for paymentof interest therein. The very fact that interest came to be providedsubsequently by a notification under the Regulations of 2004 isalso indicative of a contrary situation in the present matter viz.that interest was not payable earlier.”

13. Article 13 of the PPAs provides for payment of carrying costs,as held by us above. This judgment also turned on the interpretation ofRegulation 79(2) of the Central Electricity Regulatory Commission A

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A(Conduct of Business) Regulations, 1999, and therefore, also has nomanner of application to the facts of the present case.

14. In Indian Council for Enviro-Legal Action v. Union ofIndia and Ors., (2011) 8 SCC 161, this Court was concerned withwhether a successful party in a litigation should not be compensated byBway of restitution for deprivation of its legitimate dues. While dealingwith restitutionary principles as applicable in the context of environmentpollution, this Court laid down certain principles in paragraph 197. Thisjudgment, again, has no manner of application to the facts of the presentcase which are confined to the interpretation of Article 13 of the PPAs.

C15. The next judgment relied upon by Shri Giri was All IndiaPower Engineer Federation and Ors. v. Sasan Power Ltd. andOrs., (2017) 1 SCC 487. Paragraph 31 of this judgment was relied uponto state that in context of Section 63 of the Electricity Act, the Commissionalone can accept amended tariff that would impact consumer interest,and therefore, public interest, and waiver of any rights of one of theDparties under the PPA, if it impacts such consumer interest, would haveto pass muster under the Commission which would look into all factorsand then pass a reasoned order. We fail to see how this judgment hasany application on the facts of the present case as, in the present case,we are concerned with the interpretation of Article 13 of the PPAs.

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16. Lastly, the judgment of this Court in Energy Watchdog v.Central Electricity Regulatory Commission and Ors., (2017) 14SCC 80 was also relied upon. In this judgment, three issues were set outand decided, one of which was concerned with a change in law provisionof a PPA. In holding that change in Indonesian law would not qualify asFa change in law under the guidelines read with the PPAs, this Courtreferred to Clause 13.2 as follows:

“57. …… This being so, it is clear that so far as the procurementof Indian coal is concerned, to the extent that the supply fromCoal India and other Indian sources is cut down, the PPA readwith these documents provides in Clause 13.2 that whiledetermining the consequences of change in law, parties shall havedue regard to the principle that the purpose of compensating theparty affected by such change in law is to restore, through monthlytariff payments, the affected party to the economic position as ifsuch change in law has not occurred……”

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UTTAR HARYANA BIJLI VITRAN NIGAM LTD. [UHBVNL] v.ADANI POWER LTD. [R. F. NARIMAN, J.]

There can be no doubt from this judgment that the restitutionary principlecontained in Clause 13.2 must always be kept in mind even whencompensation for increase/decrease in cost is determined by the CERC.

17. In this view of the matter, the appeals are accordingly dismissed.

Divya Pandey

Appeals dismissed.

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