MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LIMITED versus MAHARASHTRA ELECTRICITY REGULATORY COMMISSION & ORS. on 8 October 2021

[2021] 5 S.C.R.

AMAHARASHTRA STATE ELECTRICITY DISTRIBUTIONCOMPANY LIMITED

v.

MAHARASHTRA ELECTRICITY REGULATORYCOMMISSION & ORS.

B

(Civil Appeal No.1843 of 2021)

OCTOBER 08, 2021

[INDIRA BANERJEE AND V. RAMASUBRAMANIAN, JJ.]

Electricity Act, 2003:C

s.125 – Appeal to Supreme Court – Interference with – Powerpurchase agreements – Change in law –On facts, petition u/s. 86 bythe appellant-State Electricity Distribution Company seeking thatthe change in interest rate system by the RBI from Prime LendingRate (PLR) to Base Rate and then to Marginal cost of funds basedDlending rate (MCLR) constituted change in law under the powerpurchase agreements between the appellant and the “PowerGenerating Companies”, so as to alter the rate of Late PaymentSurcharge(LPS) payable by the appellant to the power generatingcompanies – Dismissed by the Maharashtra Electricity RegulatoryCommission(MERC)and issuance of direction to the appellant toEmake payment of LPS within the time stipulated – Said order upheldby the Appellate Tribunal for Electricity – On appeal, held: Existenceof substantial question of law is sine qua non for second appeal u/s 125 r/w s. 100 CPC – This Court would not make a factual enquiryinto the mode and manner in which the Power Generating CompaniesFmeet their working capital requirements and interest that individualPower Generating Companies pay to their lenders – Thus, nosubstantial question of law involved in the instant appeal – RBInotifications would tantamount to a change in law, however thenotification relating to alteration of the lending rates chargeableby banks and financial institutions are not laws which relate to theGPower Purchase Agreements and are not applicable to the appellantor to the Power Generating Companies engaged in distribution ofelectricity and not of advancing loans –Furthermore, courts cannotrewrite contract mutually executed by parties – Explicit terms ofcontract always the final word with regard to intention of parties –HThus, MERC acted within the scope of its power of regulatory

supervision in directing the appellant to make payment of LPS withinthe time stipulated – APTEL rightly upheld the direction – In anycase, such a direction cannot be interfered with in exercise of powersu/s. 125 – Code of Civil Procedure, 1908 – s. 100.

s. 125 – Appeal to Supreme Court – Grounds for – Held:Appeal lies to this Court u/s 125 only on grounds permitted u/s 100CPC – Condition precedent for entertaining an appeal u/s 124 isthe existence of a substantial question – Code of Civil Procedure,1908 – s. 100.

Maharashtra Electricity Regulatory Commission(MERC) –Power of – Held: MERC constituted under the Electricity Act, 2003has all the trappings of a Court – MERC is a substitute for a CivilCourt in respect of all disputes between licensees and PowerGenerating Companies.

Dismissing the appeal, the Court

HELD : 1.1 An appeal lies to this Court under Section 125of the Electricity Act, 2003 only on grounds permitted in Section100 of the Code of Civil Procedure, 1908. On a conjoint readingof Section 125 of the 2003 Act with Section 100 CPC, it isabsolutely clear that an appeal to this Court lies on a substantialquestion of law. The condition precedent for entertaining an appealunder Section 125 is the existence of a substantial question.[Para 148, 152][1122-C; 1123-E-F]

State Bank of India and Ors. v. S.N. Goyal (2008) 8SCC 92 : [2008] 7 SCR 631; Nazir Mohamed v. J.Kamala and Others 2020 SCC OnLine SC 676; WardhaPower Company Limited v. Maharashtra State ElectricityDistribution Co. Limited and Another (2016) 16 SCC541; Tuppadahalli Energy India Private Limited v.Karnataka Electricity Regulatory Commission and Anr(2017) 11 SCC 194; Ramanuja Naidu v. V. KanniahNaidu and Another (1996) 3 SCC 392 : [1996] 3 SCR239; Navaneethammal v. Arjuna Chetty (1996) 6 SCC166 : [1996] 5 Suppl. SCR 582 – referred to.

1.2 It is not for this Court to re-analyze evidence adducedbefore the forums below or to sit in appeal over concurrent findingsof facts. [Para 159][1128-G]

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A1.3 There can be no doubt that a notification issued by theReserve Bank of India constitutes law. A Reserve Bank of Indianotification which alters, modifies, cancels or replaces an earliernotification would tantamount to a change in law. However thenotification relating to alteration of the lending rates chargeableby banks and financial institutions are not laws which relate toBthe Power Purchase Agreements in question, and therefore donot attract, as the case may be, Article 13 of the Stage 1Agreements or Article 10 of the Stage 2 Agreements.[Para 160][1128-H; 1129-A-B]

1.4 The RBI circulars/guidelines referred to, are admittedlyCinstructions issued to banks and financial institutions and are notapplicable to the appellant or to the respondent-Power GeneratingCompanies, who are engaged in the business of production, sale/purchase and/or distribution of electricity and not of advancingloans. Moreover, State Bank Advanced Rate (SBAR) as definedDin the Power Purchase Agreements is admittedly not linked toany RBI guidelines or circulars. The guidelines/circulars are thusnot relevant to the issues involved in this appeal. [Para 161][1129-B-C]

1.5 The RBI circulars/guidelines to banks, advising theEbanks to follow certain norms, while setting their benchmarkreference rates for loans, and the amendments thereto, have nolegal consequence on the contract between the parties. This hasbeen correctly appreciated by both the forums below.[Para 162][1129-D]

FB.O.I. Finance Limited v. Custodian and Ors. (1997)10 SCC 488 : [1997] 3 SCR 51 – referred to.

1.6 SBI has been notifying and continues to notify PrimeLending Rates(PLR) for its loans. The appellant itself has giventhe average PLR notified by SBI from 2010 till date in itsGapplication being I.A. No. 69796 of 2021. Therefore, LatePayment Surcharge(LPS) as per the Power Purchase Agreementhas been calculated at the rate of 2% in excess of the SBI notifiedPrime Lending Rate.From the impugned judgment and order ofthe APTEL, it appears that the appellant conceded before theAPTEL that the SBI continues to issue the PLR rates till date.H[Para 164, 165][1129-F-H]

1.7 The definition of SBAR is clear and has been correctlyapplied by both the forums below. There are concurrent findingsof fact that the SBI PLR (i.e. the benchmark reference ratementioned in the PPA) is still being published and is available.The Court cannot, at this stage of a second appeal under Section125 of the Electricity Act reopen the factual question of whetherat all PLR rates were being notified by SBI for short term loans.Therefore, there is no substantial question of law involved inthis appeal filed under section 125 of the Electricity Act, 2003.[Para 166, 167][1130-B-C]

1.8 The definition of SBAR in the Power PurchaseAgreements is clear. SBAR is the Prime Lending Rate per annumfixed by the State Bank of India (SBI) from time to time for loanswith 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 fromtime to time by SBI. Moreover, the parties have consciouslyagreed that in the absence of such rate, the LPS rate shall bemutually agreed to by the Parties. [Para 168][1130-D-E]

1.9 The provision in the Power Purchase Agreement,whereby the parties are to mutually agree on a rate of interest, incase there is no SBI Prime Lending Rate, in itself excludes theapplicability of the general provision for Change in Law containedin Article 13 of the Power Purchase Agreement to Late PaymentSurcharge. [Para 170][1130-F]

1.10 This Court is unable to accept the submission that theconclusion of APTEL that LPS is not tariff is erroneous. Themeaning of the expression tariff has to be considered, and hasrightly been considered by APTEL in the context of the relevantprovision of the Power Purchase Agreements. The dictionarymeaning of tariff may be charge. However, in Article 13 of theStage 1 and Article 10 of the Stage 2 Power Purchase Agreements,tariff means monthly tariff and tariff adjustment consequential tochange in law, is of monthly tariff in respect of supply of electricity.[Para 173][1131-B-C]

1.11 It was submitted by the Power Generating Companiesrespectively, LPS is only payable when payment against monthly A

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Abills is delayed and not otherwise.The object of LPS is to enforceand/or encourage timely payment of charges by the procurer, i.e.the appellant. In other words, LPS dissuades the procurer fromdelaying payment of charges. The rate of LPS has no bearing orimpact on tariff. Changes in the basis of the rates of LPS do notaffect the rate at which power was agreed to be sold and purchasedBunder the Power Purchase Agreements. The principle ofrestitution under the Change in Law provisions of the PowerPurchase Agreements are attracted in respect of tariff. [Para 174,175][1131-D-F]

1.12 LPS cannot be equated with carrying cost or actualCcost incurred for the supply of power. The appellant has acontractual obligation to make timely payment of the invoicesraised by the Power Generating Companies, subject, of course,to scrutiny and verification of the same. The counsel for therespondent has a point that if the funding cost was so much lesserDthan the rate of LPS, as contended by the appellant, the appellantcould have raised funds at a lower rate of interest, made timelypayment of the invoices raised by the Power GeneratingCompanies, and avoided LPS. [Para 176][1131-F-G]

1.13 The proposition that Courts cannot rewrite a contractEmutually executed between the parties, is well settled. The Courtcannot, through its interpretative process, rewrite or create anew contract between the parties. The Court has to simply applythe terms and conditions of the agreement as agreed betweenthe parties. As submitted, this appeal is renegotiate the terms ofthe PPA. It is well settled that Courts cannot substitute theirFown view of the presumed understanding of commercial termsby the parties, if the terms are explicitly expressed. The explicitterms of a contract are always the final word with regard to theintention of the parties. [Para 177][1131-H; 1132-A-C]

Shree Ambica Medical Stores and Others. v. SuratGPeople’s Cooperative Bank Limited and Others (2020)13 SCC 564 : [2020] 3 SCR 359; Nabha Power Limitedv. Punjab State ower Corporation Limited (PSPCL) AndAnother (2018) 11 SCC 508 : [2017] 14 SCR 301 –referred to.

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1.14 The appellant is obliged to seek amendment of theprovisions of the Power Purchase Agreement only in accordancewith the agreed procedure for amendment of the terms thereof.The agreed rate of Late Payment Surcharge can only be amendedin the absence of SBI PLR and that too with the mutual consentof the parties to the Power Purchase Agreement.The submissionthat the Power Generating Companies are availing loans at alesser rate of interest, but charging LPS on the basis of a higherrate of interest, leading to unjust enrichment, is untenable in law.LPS under the Power Purchase Agreements do not correspondto the actual interest paid by the Power Generating Companiesfor funds raised by them. The payment of Late Payment SurchargeLPS penalty suffered by the Procurer, that is, the appellant, onaccount of default in timely payment. [Para 178, 179][1132-D-E]

1.15 The parties to the Power Purchase Agreements havemutually and consciously agreed to the incorporation of the PLRas notified by SBI from time to time, as the rate for levy of LPS.Therefore, by virtue of the doctrine of incorporation, the PLR asnotified by SBI each year gets incorporated in the PowerPurchasing Agreements, as binding between the parties. Thus,any other system notified by the Reserve Bank of India by itscirculars has no bearing on the terms of the Power PurchaseAgreement and cannot be deemed to be incorporated in the PowerPurchase Agreement, except in case of mutual agreementbetween the parties, in the event of absence of SBI PLR, andapproved by the MERC. [Para 180][1132-F-H]

1.16 As submitted, conceptually, PLR, Base Rate andMCLR are not comparable. The submission that the definitionof SBAR should be read in the context of MCLR instead of PLR,is therefore not tenable. PLR is the internal benchmark rate forcharging of interest on floating rate loans, calculated on the basisof average cost of funds and the loans were offered at a discounton their existing PLR. However, Base Rate is the lending ratecalculated based on the total cost of funds of the banks and is theminimum interest rate at which a bank can lend, except for loansto its own employees, its retired employees and against bank’sown deposits. MCLR is a lending rate calculated on the cost of A

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Araising new funds for the bank which include the cost ofmaintaining CRR/SLR (Credit Reserve Ratio/Statutory LiquidityRatio), operating costs of banks and tenor premium. MCLR isthe lowest interest rate that a bank or lender can offer. Thus,loans are offered at a markup on the MCLR. Thus, the basis ofboth the rates are different and cannot be compared, as has beenBsought to be done by the appellant. When PLR, Base Rate andMCLR are compared side by side. The difference is that verystark. Loans are advanced at a mark-up over Base Rate andMCLR, while during the PLR regime, loans were offered at adiscount on PLR. [Para 181][1133-A-D]

C1.17 In any case, the appellant cannot submit that theReserve Bank of India circulars are to be considered as Changein Law, since Article 13.3.1 of the Stage 1 agreementscorresponding to Article 10.4.1 of the Stage 2 agreementsprovides that notices of Change in Law events are to be issuedDby the affected party, as soon as reasonably practicable, after theaffected party becomes aware of Change in Law event or when itshould reasonably have known of the Change in Law.In this case,the changes cited by the appellant were effected by RBI fromJuly 2010 and April 2016 and notified in advance. The appellantissued notices of Change in Law as late as in September 2016,Emore than six years after the Reserve Bank of India introducedthe base rate system in place of the BPLR system. Furthermore,while the guidelines on the base rate system were published on9th April 2010 and introduced with effect from 01.07.2010, theappellant entered into Power Purchase Agreements with theFRespondent No. 2 on 9th August 2010 and on 16th February 2013incorporating PLR as the Late Payment Surcharge rate for supplyof contracted quantum of electricity to the appellant.[Para 182, 183][1133-E-H]

1.18 Significantly, the appellant charges interest from itsGconsumers for delay in payment @ 1.25% per month and/or inother words 15% per annum as per the MYT Regulations ofMERC. This also shows that interest rate is not co-related tothe actual interest rate on loans taken by the appellant or byPower Generating Companies. According to the Respondent- H

Power Generating Companies, no other distribution licenceeother than the appellant has raised the claim of Change in Law.All other Distribution Licencees procuring electricity fromproducers of electricity pay LPS in accordance with the respectivePower Purchase Agreements.Admittedly, the appellant has landeditself in its present predicament, due to delay in making timelypayments to the respondent Power Generating Companies. Therewas no pandemic at the time of filing of the petition before theMERC in 2017 and the Appeal before the APTEL in 2018. It,cannot, therefore be said that the appellant defaulted in paymentof bills by reason of its financial predicament as a result of theoutbreak of COVID 19 in India, which was in March 2020.[Para 184, 186][1134-A-B]

1.19 Extensive submissions that the appellant committeddefault in payment of the bills raised by the Power GeneratingCompanies on account of various circumstances, beyond itscontrol. 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. The counselssubmitted in one voice that the delays in payment and/or non-payment of the invoices raised by the Power GeneratingCompanies for the supply of power to the appellant, had put therespondent-Power Generating Companies under immensefinancial stress, as their source of revenue is from the sale andsupply of power generated from their power plants. Therespondent Power Generating Companies cannot be burdenedwith the consequences of the appellant’s defaults.[Para 187][1134-F-H; 1135-A]

M/s Kailash Nath Associates v. Delhi DevelopmentAuthority and Anr (2015) 4 SCC 136 : [2015] 1 SCR627 – distinguished.

Halliburton Offshore Services Inc. v. Vedanta Limited& Anr., O.M.P (I) (COMM.) No. 88/2020, decided on29.05.2020 – referred to.

1.20 In this case, the appellant admittedly did not pay thebills raised by the Power Generating Companies within time. The

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[2021] 5 S.C.R.

APower Purchase Agreements provided for Late PaymentSurcharge on the presumption that delayed payment of bills causesprejudice and loss to the seller whose bill remains outstanding.Accordingly, the appellant also imposes delayed payment chargeson its consumers, who pay their bills after the stipulated due datefor payment of the bills at the rate of 1.5% per month and/or inBother 18% per annum. LPS rate of 2% above the SBAR is neitherunreasonably exorbitant nor arbitrary. It cannot be said that theLPS agreed upon is not a genuine pre estimate of damages.[Para 189][1135-C-E]

Union of India v. Association of Unified Telecom ServiceCProviders of India & Ors. 2020 (3) SCC 525 : [2019]16 SCR 672; Hindustan Steel Ltd. v. State of Orissa1969 (2) SCC 627 : [1970] 1 SCR 753; Akbar BadrudinGiwani v. Collector of Customs 1990 (2) SCC 203 :[1990] 1 SCR 369; Jaiprakash Industries Ltd. v.DCommissioner of Central Excise, Chandigarh 2003 (1)SCC 67; Tecumseh Products India Ltd. v. Commissionerof Central Excise, Hyderabad 2004 (6) SCC 30 : [2004]2 Suppl. SCR 202; J.K. Synthetics Ltd. v. CommercialTaxes Officer 1994 (4) SCC 276:[1994] 3 SCR 964 ;Central Bank of India v. Ravindra and Others 2002 (1)ESCC 367 : [2001] 4 Suppl. SCR 323; M/s Kailash NathAssociates v. Delhi Development Authority and Anr(2015) 4 SCC 136 : [2015] 1 SCR 627 – referred to.

1.21 It would perhaps be pertinent to note that stereotypePower Purchase Agreements containing identical terms andFconditions are executed by the appellant with different PowerGenerating Companies. It is patently obvious that the PowerGenerating Companies only agree to terms and conditions of anagreement prepared by the appellant. It is difficult to accept thatthe appellant should incorporate in their stereotype PowerGPurchase Agreements, a provision for payment of LPS at a rate2% higher than the SBAR, in case of late payment of invoices/bills, without any pre-estimation of the loss likely to be sufferedby a Power Generating Company, by reason of non payment ofbills in time, more so when the Late Payment Surcharge is linked H

to the rate of interest in respect of specific types of loan, chargedby a leading nationalised bank with the largest numbers ofbranches spread all over the country including in mofussil andrural areas. [Para 192][1137-C-E]

1.22 In any case, in this second appeal under Section 125of the Electricity Act 2003, which is only to be heard on asubstantial question of law, this Court would not embark uponthe exercise of making a factual enquiry into the mode and mannerin which the Power Generating Companies meet their workingcapital requirements and interest that individual PowerGenerating Companies pay to their lenders. [Para 193][1137-E-F]

1.23 It is axiomatic that the Power Purchase Agreementsprovide for computation of Late Payment Surcharge in a particularmanner to avoid the time consuming exercise of assessing thelosses of individual Power Generating Companies by reason oflate payment of their bills. The SBAR has been made the benchmark for computation of Late Payment Surcharge, irrespectiveof whether the Power Generating Companies are financed by theState Bank of India or any of its subsidiaries. The LPS provisionis in the nature of a caution to arrange their affairs and financeskeeping the upper limit of LPS of 2% above the SBAR in view,so that the Power Generating Company desists from borrowingat uneconomic rate of interest. [Para 194][1137-G-H]

1.24 There being no dispute in the instant case with regardto the principal sums due under the monthly bills, interest ondelayed payment at 2% in excess of SBI PLR cannot be said tobe arbitrarily high. There is no reason for this Court to reducethe contractual rate of interest and thereby alter or modify thecontract between the parties, in exercise of its powers underArticle 142 of the Constitution of India. [Para 195][1138-B]

1.25 The question whether or not the appellant has fundsto clear its interest liability are not gone into. The appellant cannotcontinue to get supply of electricity without having appropriatefunds. The appellant would necessarily have to raise funds toclear its contractual obligations. [Para 196][1138-C]

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A1.26 Even assuming that the burden of interest would haveto be passed on to the consumers, that cannot be the ground forthe appellant to resile from its contractual commitment to thePower Generating Companies. The appellant cannot pass on theburden for delay in making payment to the Power GeneratingCompanies. In any case the claims pertains to a period of threeByears before filing of the petition before the MERC on 2ndDecember, 2016 and therefore barred by limitation.[Para 197][1138-D]

1.27 Reliance by the appellant, upon the tariff regulationsframed by MERC for determination of tariff for Power GeneratingCCompanies under Section 62 of the Electricity Act 2003, isuntenable since the Tariff Regulations have no application in thiscase where PPAs have been executed pursuant to a biddingprocess, under Section 63 of the Electricity Act. [Para 198][1138-E-F]D1.28 The challenge to the impugned judgment and orderon the ground of the directions on the appellant to make paymentof the LPS found due and payable, within a stipulated date, is alsonot sustainable. [Para 203][1140-B-C]

1.29 APTEL is not bound by the procedure laid down in theECivil Procedure Code. Directions for time bound payment withina prescribed time frame are in conformity with the judgment ofthis Court in Jaipur Vidyut Vitran Nigam Ltd. v. Adani Power’scase which has been upheld by this Court. Moreover, one of theobjectives of the Electricity Act is time bound disposal of matters.FThis is evident from various provisions of the said Act includingin particular Section 111(5) of the Act. Since APTEL and MERCare not bound by the procedure as laid down in the Civil ProcedureCode, it was open to APTEL to pass such orders as would finallyput an end to litigation. [Para 204][1140-C-D]

GJaipur Vidyut Vitaran Nigam Limited & Ors. v. AdaniPower Rajasthan Limited and Anr 2020 SCC OnlineSC 697 – distinguished.

1.30 An Electricity Regulatory Commission such as MERCconstituted under the Electricity Act, 2003 has all the trappingsof a Court. The MERC is a substitute for a Civil Court in respectH

LTD. v. MERC & ORC.

of all disputes between licensees and Power GeneratingCompanies. MERC acted within the scope of its power ofregulatory supervision in directing the appellant to make paymentof LPS within the time stipulated in the order of MERC. TheAPTEL rightly upheld the direction. In any case, such a directioncannot be interfered with in exercise of powers under Section125 of the Electricity Act which corresponds to the power ofSecond Appeal under Section 100 of the CPC, since the sine quanon for entertaining an appeal is the existence of a substantialquestion of law. [Page 205, 207][1140-E-F; 1141-B-C]

Tamil Nadu Generation & Distribution Corporation Ltd.v. PPN Power Generating Company Private Limted(2014) 11 SCC 53 : [2014] 4 SCR 667; Andhra PradeshPower Coordination Committee & Others v. LancoKondapalli Power Ltd & Ors. (2016) 3 SCC 468 :[2015] 12 SCR 447; Gujarat Urja Vikas Nigam Limitedv. Amit Gupta and Others (2021) SCC OnLine 194;State of Karnataka v. Vishwabharathi House BuildingCooperative Society and Others (2003) 2 SCC 412 :[2003] 1 SCR 397; All India Power EngineeringFederation & Ors. vs. Sasan Power Limited & Others(2017) 1 SCC 487 : [2016] 9 SCR 901 – referred to.

1.31 After the the hearing of this appeal was concluded andthe appeal was reserved for judgment, the appellant filed anapplication to bring on record additional facts and documents inthe form of queries under the Right to Information Act, 2005made to the State Bank of India and the responses thereto in anattempt to show that PLR would not apply to short term loansadvanced by SBI after transition to the Base Rate/MCLR system.This Court cannot take note of any documents sought to beintroduced after the conclusion of hearing. In any case, this Courtcannot in a second appeal under Section 125 of the ElectricityAct, 2003 interfere with concurrent factual findings arrived at byMERC and APTEL on the basis of facts admitted by the appellant.The appellant had been accepting the invoices raised by therespondent–Power Generating companies and accounts had dulybeen reconciled by the appellant. The LPS charged by the A

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Arespondent Power Generating Companies was never disputed.Further more, this Court cannot look into documents introducedfor the first time in this second appeal, which were not tenderedin evidence before the MERC or the APTEL. Even otherwise,queries made by a rank outsider as late as on 12th July 2021 orreplies thereto cannot be relied upon in evidence, by theBappellant. [Para 208][1141-C-F]

1.32 There is no ground to interfere with the judgment andorder of the APTEL confirming the judgment and order passedby MERC. [Para 209][1141-G]

CDSR Steel (P). Ltd. v. State of Rajasthan and others(2012) 6 SCC 782 : [2012] 5 SCR 583; Power GridCorporation of India and Ors. v. Tamil Nadu Generationand Distribution Company Limited and Others. (2019)7 SCC 34 : [2019] 7 SCR 724; Bharat Sanchar NigamLtd. v. Pawan Kumar Gupta (2016) 1 SCC 363 : [2015]D11 SCR 402; Adani Power (Mundra) Ltd. v. GujaratElectricity Regulatory Commission and Others (2019)19 SCC 9; Uttar Haryana Bijli Vitran Nigam Limitedand Another v Adani Power Limited and Others (2019)5 SCC 325 : [2019] 4 SCR 487; CLP India PrivateELimited v. Gujarat Urja Vikas Nigam Limited andAnother 2020 (5) SCC 185; Transmission Corporationof Andhra Pradesh Ltd . And Others v. GMR VemagiriPower Generation Ltd. And Another (2018) 3 SCC 716;Indian Council for Enviro-Legal Action v. Union of India(2011) 8 SCC 161 : [2011] 9 SCR 146; Gujarat UrjaFVikas Nigam Ltd. v. Essar Power Limited (2008) 4 SCC755 : [2008] 4 SCR 822 – referred to.

https://www.merriam-webster.com/dictionary/tariff –referred to.

Case Law Reference

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[2012] 5 SCR 583[2019] 7 SCR 724[2015] 11 SCR 402

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MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COM.LTD. v. MERC & ORC.

(2019) 19 SCC 9referred to[2019 ] 4 SCR 487referred to2020 (5) SCC 185referred to(2018) 3 SCC 716referred to[2011] 9 SCR 146referred to[2008] 4 SCR 822referred to[2008] 7 SCR 631referred to(2016) 16 SCC 541referred to(2017) 11 SCC 194referred to[1996] 3 SCR 239referred to[1996] 5 Suppl. SCR 582referred to[1997] 3 SCR 51referred to[2017] 14 SCR 301referred to[2020] 3 SCR 359referred to[2015] 1 SCR 627distinguished[2019] 16 SCR 672referred to[1970] 1 SCR 753referred to[1990] 1 SCR 369referred to2003 (1) SCC 67referred to[2004] 2 Suppl. SCR 202referred to[1994] 3 SCR 964referred to[2001] 4 Suppl. SCR 323referred to[2014] 4 SCR 667referred to[2015] 12 SCR 447referred to[2003] 1 SCR 397referred to[2016] 9 SCR 901referred to Para 95A

Para 112Para 115Para 117BPara 128Para 139Para 151Para 154CPara 155Para 156Para 157Para 163DPara 177Para 177Para 188EPara 190Para 191Para 191Para 191FPara 191Para 191Para 191Para 205GPara 205Para 206Para 206

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ACIVIL APPELLATE JURISDICTION : Civil Appeal No.1843of 2021.

From the Judgment and Order dated 27.04.2021 of the AppellateTribunal for Electricity at New Delhi in Appeal No.77 of 2018.

Vikas Singh, Sr. Adv., G. Saikumar, Samir Malik, Rahul Sinha,BMs. Himangini Mehta, Ms. Deepika Kalia, Satwik Mishra, Ms. FarhaMalik, Chandra Prakash, M/s D. S. K. Legal, Advs. for the Appellant.

Mukul Rohatgi, Sr. Adv., Aman Anand, Vivek Singh, Aman Dixit,Mahesh Agarwal, Ms. Parul Shukla, Arshit Anand, Nishant Rao, E. C.Agrawala, Vishrov Mukherjee, Gaurav Ray, Alok Shankar, Ms. DivyaCAnand, Advs. for the Respondents.

The Judgment of the Court was delivered by INDIRA BANERJEE, J.

This appeal, under Section 125 of the Electricity Act 2003, is againstDa judgment and order dated 27[th] April 2021 passed by the AppellateTribunal for Electricity, hereinafter referred to, in short, as ‘APTEL’,dismissing Appeal No.77 of 2018 filed by the Appellant, MaharashtraState Electricity Distribution Company Ltd., and affirming an order dated16[th] November, 2017 passed by the Maharashtra Electricity Regulatory

Commission, hereinafter referred to, in short, as ‘MERC’, wherebyEMERC dismissed the petition filed by the Appellant under Section 86 ofthe Electricity Act, being Case No.24 of 2017, rejecting the contentionof the Appellant that, introduction by Reserve Bank of India of the BaseRate system and the Marginal Cost of Funds Based Lending Rate systemconstituted a change in law, within the meaning of the expression ‘ChangeFin Law’ as defined in the respective Power Purchase Agreementsbetween the Appellant and the Respondent Nos.2, 3, 4 and 5, hereinaftercollectively referred to as the “Power Generating Companies”, so as toalter the rate of Late Payment Surcharge(LPS) payable by the Appellantto the Power Generating Companies under the respective PowerPurchase Agreements.G

2. The Appellant, incorporated under the Companies Act, 1956,pursuant to the decision of the Government of Maharashtra to reorganizeerstwhile Maharashtra State Electricity Board, is a Distribution Licenseeunder the provisions of the Electricity Act, 2003, with license to supplyelectricity all over the State of Maharashtra, except some parts of theH

city of Mumbai. The Appellant is a bulk purchaser of electricity fromgenerators of electricity.

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3. The Appellant had, from time to time, issued Tender Notices,inviting bids for bulk supply of electricity to the Appellant, pursuant towhich, the Power Generating Companies submitted their bids.

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4. The Appellant has executed Power Purchase Agreements withthe Power Generating Companies, arrayed as Respondent Nos. 2 to 5 inthis appeal in two stages. The two sets of Power Purchase Agreements,hereinafter referred to as the stage 1 and stage 2 Power PurchaseAgreements, contain almost identical terms and conditions. The respectivedates and brief particulars of the respective agreements (five in number)Care as follows:- “Stage 1-PPA

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Stage 2-PPA

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5. The relevant terms and conditions of the Stage 1 PowerPurchase Agreements are set out hereunder:- G

“Article 1 : Definitions and interpretation Change in law – shall have the meaning ascribed thereto inArticle 13.1.1 of this agreement.

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Indian Governmental instrumentality – means the GoI,Government of Maharashtra and any ministry or, departmentof or, board, agency or other regulatory or quasi-judicialauthority controlled by GoI or Government of States wherethe procurer and project are located and includes the CERCand MERC.

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

Law – means, in relation to this Agreement, all laws includingElectricity Laws in force in India and any stature, ordinance,regulation, notification or code, rule, or any interpretationof any of them by an Indian Government Instrumentality andhaving force of law and shall further include all applicablerules, regulations, orders, notifications by an IndianGovernmental Instrumentality pursuant to or under any ofthem and shall include all rules, regulations, decisions andorders of the CERC and the MERC.

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

Article 11: Billing and Payment

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

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Article 13 : Change in Law

13.1. Definitions

In this Article 13, the following terms 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,to the Bid Deadline:

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

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

But shall not include (i) any change in any withholding taxon income or dividends distributed to the shareholders of theseller, or (ii) Change in respect of UI charges or frequencyintervals by an Appropriate Commission.

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13.2 Application and principal for computing impact ofChange in Law While determining the consequence of Change in Law underthis Article 13, the parties shall have due regard to theprinciple that the purpose compensating the party affectedby such change in law, is to restore through monthly tariffpayments to the extent contemplated in this Article 13, theaffected party to the same economic position as if suchChange in Law has not occurred.

a) …………

b) Operation Period –

As a result of change in Law, the compensation for anyincrease/decrease in revenue or cost to the seller shall bedetermined by the Maharashtra State Electricity Regulatory A

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ACommission whose decision shall be final and binding on boththe parties, subject to right of appeal provided underapplicable 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 inBaccordance with Article 13.2 and the Seller wishes to claim aChange in Law under this Article, it shall give notice to theProcurer of such Change in Law as soon as reasonablypracticable after becoming aware of the same or shouldreasonably have known of the Change in Law.

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13.3.2. Notwithstanding Article 13.3.1, the seller shall beobliged to serve notice to the Procurer under this Article 13.3.2if it is beneficially affected by a Change in Law. Withoutprejudice to the factor of materiality or other provisionscontained in this Agreement, the obligation to inform theDprocurer 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 theseller.

13.3.3 Any notice served pursuant to this Article 13.3.2 shallEprovide, 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

F13.4.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-enactment, repeal of the Law or Change in Law, or G

(ii) 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.”

6. The Stage 2 Power Purchase Agreements, as statedhereinbefore, contain terms and conditions almost identical to those ofH

the first set of agreements. The relevant provisions of the second set ofagreements (Stage 2) are as follows:- “Article 1 : Definitions and Interpretation Change in law – shall have the meaning ascribed thereto inArticle 10.1.1 of this agreement.

Indian Governmental Instrumentality – shall mean theGovernment of India, Governments of state(s) ofMaharashtra, and any ministry, department, board, authority,agency, corporation, commission under the direct or indirectcontrol of Government of India or any of the above StateGovernment(s) or both, any political sub-division of any ofthem including any court or Appropriate Commission(s) ortribunal or judicial or quasi-judicial body in India butexcluding the Seller and the Procurer.

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

Law – Shall mean in relation to this Agreement, all lawsincluding Electricity Laws in force in India and any statute,ordinance, regulation, notification or code, rule or anyinterpretation of any of them by an Indian Governmentalinstrumentality and having force of law and shall furtherinclude without limitation all applicable rules, regulations,orders, notifications by an Indian Governmentalinstrumentality pursuant to or under any of them and shallinclude without limitation all rules, regulations, decisions andorders of the Appropriate Commission.

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

Article 8 : Billing and Payment

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A8.3.5 In the event of delay in payment of a monthly bill by theprocurer beyond its due date, a Late Payment Surcharge shallbe payable by such procurer to the seller at the rate of two(2) percent in excess of applicable SBAR per annum, on theamount of outstanding payment, calculated on a day to daybasis (and compounded with monthly rest) for each date ofBthe delay. The Late Payment Surcharge shall be claimed bythe Seller through the Supplementary Bill.

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Article 10 : Change in Law

10.1 Definitions

In this Article 10, the following terms have the followingDmeanings 10.1.1. “Change in Law” means the occurrence of any of thefollowing 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 theSeller:

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* the enactment, coming into effect, adoption, promulgation,amendment, modification or repeal (without re-enactment orconsolidation) in India, of any Law, including rules andregulations framed pursuant to such Law; F

* a change in interpretation or application of any law by anyIndian Governmental Instrumentality having the legal powerto interpret or apply such Law, or any Competent Court ofLaw;

* the imposition of requirement for obtaining any Consents,Clearances and Permits which was not required earlier; G

* a change in the terms of conditions prescribed for obtainingany Consents, Clearances and Permits or the inclusion ofany new terms or conditions for obtaining such Consents,Clearances and Permits; except due to any default of theHSeller;

* any change in tax or introduction of any tax madeapplicable for supply of power by the Seller as per the termsof this Agreement but shall not include (i) any change in anywithholding tax on income or dividends distributed to theshareholders of the Seller, or (ii) Change in respect of UICharges or frequency intervals by an Appropriate Commissionor (iii) any change on account of regulatory measures by theAppropriate Commission including calculation of Availability.

10.2. Application and Principles for computing impact ofChange in Law 10.2.1. While determining the consequence of Change in Lawunder this Article 10, the parties shall have due regard to theprinciple that the purpose compensating the party affectedby such Change in Law, is to restore through monthly tariffPayment, to the extent contemplated in this Article 10, theaffected party to the same economic position as if suchChange 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 inexpenses to the Seller shall be payable only if the decrease inrevenue or increase in expenses of the Seller is in excess ofan amount equivalent to 1% of the value of the Letter of Creditin 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 inaccordance with Article 10.1 and the Seller wishes to claim aChange in Law under this Article 10, it shall give notice tothe Procurer of such Change in Law as soon as reasonablypracticable after becoming aware of the same or shouldreasonably have known of the Change in Law.

10.4.2 Notwithstanding Article 10.4.1, the Seller shall beobliged to serve notice to the Procurer under this Article10.4.2, even if it is beneficially affected by a Change in Law.Without prejudice to the factor of materiality or other AB

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Aprovisions contained in this Agreement, the obligation to informthe 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 theSeller.

B10.4.3. Any notice served pursuant to this Article 10.4.2 shallprovide, amongst other things, precise details of:

a) The Change in Law; and

b) The effects on the Seller.C10.5. Tariff Adjustment Payment on account of Change inLaw 10.5.1. Subject to Article 10.2, the adjustment in monthly TariffPayment shall be effective from:

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

(ii) 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.

E10.5.2. The payment for Change in Law shall be throughSupplementary Bill as mentioned in Article 8.8. However, incase 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 Tariffshall appropriately reflect the changed tariff.”F

7. With the object of bringing transparency in the lending rates,that is, the rates of interest charged by banks on loans and advances, theReserve Bank of India had introduced the Benchmark Prime LendingRate (BPLR) system in 2003.

G8. By a notification dated 1[st] July 2010, the Reserve Bank of Indiaintroduced the Base Rate System, replacing the BPLR system withimmediate effect. The relevant extracts of the notification dated01.07.2010 are set out hereinbelow :- “2.2.1 The Base Rate system, as detailed below and in Annex1 will replace the BPLR system with effect from July 1, 2010.H

For loans sanctioned up to June 30, 2010, BPLR will beapplicable, as given in Annex 3 and 4. However, for thoseloans sanctioned up to June 30, 2010 which come up forrenewal from July 1, 2010 onwards, Base Rate would beapplicable…..

2.3.6. The Base Rate system would be applicable for all newloans and for those old loans that come up for renewal. Existingloans based on the BPLR system may run till their maturity. Incase existing borrowers want to switch to the new system, beforeexpiry of existing contracts, an option may be given to them,on mutually agreed terms. Banks, however, should not chargeany fee for such switch-over.

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

9. Later by a further notification dated 3[rd] March 2016, the ReserveBank of India introduced the Marginal Cost of Funds Based LendingRate (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 renewedbetween July 1, 2010 and March 31, 2016 shall be pricedwith reference to the Base Rate which will be the internalbenchmark for such purposes.

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

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A10. There can be no dispute that the obligation to pay Late PaymentSurcharge (LPS) in case of delay in payment of bills raised by the PowerGenerating Companies on the Appellant arises from the Power PurchaseAgreements, the relevant clauses being Article 11.3.4 of the Stage 1Power Purchase Agreements and Article 8.3.5 of the Stage 2 PowerPurchase Agreements.B

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11. LPS is payable at the rate agreed upon by the parties to thePower Purchase Agreements. The Power Purchase Agreementsstipulate that LPS for delay in payment of bills is to be computed on thebasis of the Prime Lending Rate fixed as per SBAR, that is, the StateBank Advance Rate.

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12. The expression SBAR (State Bank Advance Rate) refers tothe Prime Lending Rate notified by the State Bank of India (hereinafterreferred to as ‘SBI’) from time to time, that is applicable per annum forloans with one year maturity, advanced by SBI. It is only in the absenceof SBAR that the rate of LPS may be substituted by some otherDarrangement, by mutual agreement.

13. On 23.09.2016, the Appellant issued notice of ‘Change in Law’to independent power producers including the Power GeneratingCompanies impleaded as Respondent Nos.2 to 5.

E14. On 02.12.2016, the Appellant filed Case No.24 of 2017 beforethe MERC claiming that the introduction of the Base Rate and MCLRqualifies as Change in Law. Case No.24 of 2017 has been dismissed bya judgment and order dated 16.11.2017, which has been affirmed by theAPTEL in Appeal No.77 of 2018, by the judgment and order impugnedin this Appeal under Section 125 of the Electricity Act, 2003.F

15. Mr. Vikas Singh appearing on behalf of the Appellant submittedthat this appeal raises the following substantial questions of law:

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

(i) Reserve Bank of India discontinued the PLRmethodology and shifted to Base Rate system by itsnotification dated 01.07.2010 and Marginal Cost ofFund-based Lending Rate System (MCLR) by its H

notification dated 03.03.2016 as methodologies forAcalculation of rate of interest?

(ii) Should the State Bank Advance Rate (SBAR) asdefined in the Power Purchase Agreement bedetermined only on the basis of PLR even thoughSBAR is for loans with one year maturity (i.e., shortBterm loans) and not for long term loans?

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

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

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

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16. Mr. Singh argued that none of the above questions of lawhave yet been decided by this Court, in the context of LPS. All thesequestions of law go to the root of the dispute between the Appellant andthe Power Generating Companies and have a direct bearing on theoutcome of the lis between the parties. If any of these substantialquestions of law are decided either way, the same shall not only bedeterminative of inter-se rights between the parties during the entireterm of the Power Purchase Agreements but shall also have wideranging impact across the entire electricity sector.

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17. In support of his argument that this Appeal involves a substantialquestion of law, well within the four corners of Section 125 of theElectricity Act, 2003 Mr. Singh cited State Bank of India and Ors. v.

S.N. Goyal[1], where this Court held:-

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“13. Second appeals would lie in cases which involvesubstantial questions of law. The word “substantial” prefixedto “question of law” does not refer to the stakes involved inthe case, nor intended to refer only to questions of law ofgeneral importance, but refers to impact or effect of thequestion of law on the decision in the lis between the parties.“Substantial questions of law” means not only substantialquestions of law of general importance, but also substantialquestion of law arising in a case as between the parties. Inthe context of Section 100 CPC, any question of law whichaffects the final decision in a case is a substantial question oflaw as between the parties. A question of law which arisesincidentally or collaterally, having no bearing on the finaloutcome, will not be a substantial question of law. Where thereis a clear and settled enunciation on a question of law, by thisCourt or by the High Court concerned, it cannot be said thatthe case involves a substantial question of law. It is said that asubstantial question of law arises when a question of law,which is not finally settled by this Court (or by the High Courtconcerned so far as the State is concerned), arises forconsideration in the case. But this statement has to beunderstood in the correct perspective. Where there is a clearenunciation of law and the lower court has followed or rightlyapplied such clear enunciation of law, obviously the casewill not be considered as giving rise to a substantial questionof law, even if the question of law may be one of generalimportance. On the other hand, if there is a clear enunciationof law by this Court (or by the High Court concerned), butthe lower court had ignored or misinterpreted or misappliedthe same, and correct application of the law as declared orenunciated by this Court (or the High Court concerned) wouldhave led to a different decision, the appeal would involve asubstantial question of law as between the parties. Even wherethere is an enunciation of law by this Court (or the High Courtconcerned) and the same has been followed by the lower court,if the appellant is able to persuade the High Court that theenunciated 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 saidthat a substantial question of law arises for consideration.There cannot, therefore, be a straitjacket definition as to whena substantial question of law arises in a case. Be that as itmay.” (Emphasis supplied)

18. Mr. Singh also cited Nazir Mohamed v. J. Kamala andOthers[2], authored by one of us (Indira Banerjee, J), where this Courtreiterated that :- “32. To be “substantial”, a question of law must be debatable,not previously settled by the law of the land or any bindingprecedent, and must have a material bearing on the decisionof the case and/or the rights of the parties before it, if answeredeither way.” (Emphasis supplied)

19. Mr. Singh submitted that the LPS under the Power PurchaseAgreements must be calculated at prevailing Base Rate/ MCLR Ratesas issued by the RBI from time to time. Mr. Singh argued that, as per thedefinition of SBAR in the Power Purchase Agreement, SBAR meansthe 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, andin the absence of such rate, any other arrangement that substitutes suchPrime Lending Rate, as mutually agreed to by the parties.

20. Mr. Singh argued that the definition of SBAR as providedunder the Power Purchase Agreements expressly refers to the interestrate that is applicable for loans with one year maturity.The interest rateis therefore, to be renewed on a yearly basis, and further, only the interestrates for short term loans would be applicable to LPS under the PowerPurchase Agreements. Upon renewal of the loan, the Base Rate systemand/or MCLR system, as the case may be, is to be applicable, for therelevant period for which LPS is to be calculated.

21. Mr. Singh submitted that no PLR rates are being notified bySBI for short term loans. The PLR rates issued by SBI, after notificationof the Base Rate system and the MCLR rates by the RBI, are only forlong term loans that have not come up for renewal, and for those loanswhich are running to maturity. Even in case of loans there is option ofswitching to the Base Rate / MCLR system.

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A22. Mr. Singh submitted that in Jaipur Vidyut Vitaran NigamLimited & Ors. v. Adani Power Rajasthan Limited and Anr[3]., thisCourt has capped the interest rate on LPS at 9% per annum, inclusive ofthe 2% in excess of the applicable interest rate. Moreover, this Courthas directed that the interest should be compounded annually and notmonthly as provided in the clause therein. The relevant portion of theBsaid judgment cited to by Mr. Singh, is reproduced hereunder:

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“71. Considering the facts of this case and keeping in viewthat the RERC and APTEL have given concurrent findings infavour of the respondent with regard to change in law, withwhich we also concur, we may now deal with the question ofCliability of appellants- Rajasthan Discoms with regard to latepayment surcharge. In this regard, the following Articles 8.3.5and 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 BillDby the Procurers beyond its Due Date, a Late PaymentSurcharge shall be payable by such Procurers to the Sellerat the rate of two percent (2%) in excess of the applicableSBAR per annum, on the amount of outstanding payment,calculated on a day to day basis (and compounded withEmonthly rest), for each day of the delay. The Late PaymentSurcharge shall be claimed by the Seller through theSupplementary Bill.

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72. Liability of the Late Payment Surcharge which has beensaddled upon the appellants is at the rate of 2% in excess ofFapplicable SBAR per annum, on the amount of outstandingpayment, calculated on a day to day basis (and compoundedwith monthly rest) for each day of the delay. Therefore, thereshall be huge liability of payment of Late Payment Surchargeupon the appellants-Rajasthan Discoms.

73. With regard to the question of interest/late paymentsurcharge, we notice that the plea of change in law wasinitially raised by APRL in the year 2013. A case was alsofiled by APRL in the year 2013 itself raising its claim on suchbasis. However, the appellants- Rajasthan Discoms did not G

allow the claim regarding change in law, because of whichAPRL was deprived of raising the bills with effect from thedate of change in law in the year 2013. We are, thus, of theopinion that considering the totality of the facts of this caseand in order to do complete justice and to reduce the liabilityof the appellants-Rajasthan Discoms, payment of 2 per centin excess of the applicable SBAR per annum with monthlyrest would be on higher side. In our opinion, it would beappropriate to direct the appellants-Rajasthan Discoms to payinterest/late payment surcharge as per applicable SBAR forthe relevant years, which should not exceed 9 per cent perannum. It is also provided that instead of monthly rest, theinterest would be compounded per annum.

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

23. Mr. Singh argued that the provisions of the Power PurchaseAgreement considered in Jaipur Vidyut Vitaran Nigam Ltd. (supra)with regard to LPS are in pari materia with the corresponding provisionsin 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 PowerPurchase Agreements, “law means all laws including Electricity Lawsin force in India and any statute, ordinance, regulation, notificationor code, rule, or any interpretation of any of them by an IndianGovernmental Instrumentality and having force of law and shallfurther include all applicable rules, regulations, orders, notificationsby an Indian Governmental Instrumentality pursuant to or underany of them and shall include all rules,” Change in Law has beendefined 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 anIndian Government Instrumentality. The Notifications referred to above,were issued by the Reserve Bank of India under Sections 21 and 35A ofthe Banking Regulation Act, 1949 and have the force of law. Thus, these AB

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ANotifications are well within the definition of law provided in the PowerPurchase Agreements.

26. Mr. Singh emphatically argued that the Reserve Bank of IndiaNotifications dated 01.07.2010 and 03.03.2016, issued after executionof the Power Purchase Agreements with the Respondent Nos. 2 to 5Bconstituted change in Law, as contemplated in the Power PurchaseAgreements.

27. Mr. Singh submitted that the APTEL has erroneously come tothe conclusion that LPS is not tariff and also not part of the income ofthe Respondent Power Generating Companies and thus does notCconstitute change in law. Mr. Singh submitted that any payment madeby a procurer of electricity to the generator of electricity is nothing but afacet of the tariff payable under the Power Purchase Agreement. Theterm ‘tariff’ cannot be restricted to only two facets of tariff, i.e., per unitenergy charge and fixed energy charge on the basis of production capacity(capacity charge). All payments that are payable to a generator ofDelectricity for supply of electricity under the Power Purchase Agreementsincluding LPS are different facets of tariff. Tariff will also include whatthe distribution licencees would ultimately charge the consumers.

28. Referring to the meaning of the word ‘tariff’ as given inMerriam Webster Dictionary, as downloaded from the website https://Ewww.merriam-webster.com/dictionary/tariff on 29.07.2021, whichincludes a charge, Mr. Singh argued that LPS is part of the charges thatare payable by the Appellant to the Respondent Generating Companiesunder their respective Power Purchase Agreements, and is thereforetariff.F

29. Mr. Singh submitted that interest income is considered asincome under the Income Tax Act, 1961. LPS is nothing but interest onaccount of delay in payment of the tariff under the Power PurchaseAgreements, and is payable as a part of the said tariff. However, APTELhas by its impugned judgment and order wrongly held that LPS neitherGhas any bearing on the income of the Respondent Power GeneratingCompanies nor is part of the tariff. APTEL has erroneously held thatchange in methodology in computation of the rate of interest is not changein law.

30. Mr. Singh further argued that the LPS, as a concept, iscompensatory in nature for delayed payment, if any. The Order datedH

16.11.2017 passed by the MERC in Case No.24 of 2017 also holds thatLPS is essentially compensatory in character, in terms of the effecton the seller on account of delay by the procurer in makingpayments.

31. Mr. Singh further argued that LPS is paid to compensate apower generator for delay in making payments of invoices, because thepower generator would have to arrange additional working capital loanto the extent of the amount of outstanding delayed invoice(s). Thus, tooffset the loss that may have been caused on account of additional intereston such additional working capital loan, the Power Purchase Agreementscontain a provision for LPS. The fact that LPS is to be compoundedmonthly is a further benefit to the Power Generating Companies. Thus,LPS in essence is nothing but a kind of liquidated damages for delay inpayment of invoice(s).

32. Mr. Singh emphatically argued that LPS being compensatoryin nature, the same cannot be claimed as a windfall gain. A comparativeanalysis of the LPS rate claimed by the Respondents, with the prevailingrates of interest for availing working capital loans would reveal that theRespondent Power Generating Companies were making profit from LPS,at the cost of the Appellant, contrary to the concept of compensationand/or damages.

33. Mr. Singh submitted that it is well settled that law does notpermit any windfall gain, while awarding any compensation. In this contextMr. Singh cited M/s Kailash Nath Associates v. Delhi DevelopmentAuthority and Anr.[4]where this court held :- “43. …..On a conspectus of the above authorities, the law oncompensation for breach of contract under Section 74canbe stated to be as follows:- 43.1. Where a sum is named in a contract as a liquidatedamount payable by way of damages, the party complainingof a breach can receive as reasonable compensation suchliquidated amount only if it is a genuine pre-estimate ofdamages fixed by both parties and found to be such by theCourt. In other cases, where a sum is named in a contract asa liquidated amount payable by way of damages, onlyreasonable compensation can be awarded not exceeding the 4 (2015) 4 SCC 136

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Aamount so stated. Similarly, in cases where the amount fixedis in the nature of penalty, only reasonable compensation canbe awarded not exceeding the penalty so stated. In both cases,the liquidated amount or penalty is the upper limit beyondwhich the Court cannot grant reasonable compensation.”

B43.2. Reasonable compensation will be fixed on well-knownprinciples that are applicable to the law of contract, whichare to be found inter alia in Section 73 of the Contract Act.43.3. Since Section 74 awards reasonable compensation fordamage or loss caused by a breach of contract, damage orloss caused is a sine qua non for the applicability of theCsection. 43.4. The section applies whether a person is aplaintiff or a defendant in a suit. 43.5. The sum spoken ofmay already be paid or be payable in future. 43.6. Theexpression “whether or not actual damage or loss is provedto have been caused thereby” means that where it is possibleDto prove actual damage or loss, such proof is not dispensedwith. It is only in cases where damage or loss is difficult orimpossible to prove that the liquidated amount named in thecontract, if a genuine pre-estimate of damage or loss, can beawarded.

E43.7. Section 74 will apply to cases of forfeiture of earnestmoney under a contract. Where, however, forfeiture takesplace under the terms and conditions of a public auctionbefore agreement is reached, Section 74 would have noapplication.

F44. The Division Bench has gone wrong in principle. As hasbeen pointed out above, there has been no breach of contractby the appellant. Further, we cannot accept the view of theDivision Bench that the fact that DDA made a profit from re-auction is irrelevant, as that would fly in the face of the mostbasic principle on the award of damages—namely, thatGcompensation can only be given for damage or loss suffered.If damage or loss is not suffered, the law does not provide fora windfall” (emphasis supplied)”

34. To impress upon this Court that the Respondents were makinga huge gain from LPS as claimed by them, Mr. Singh emphasized theH

difference between LPS rates as claimed by the Respondents and therates of LPS which the Appellant seeks, based on rates of interest onloans (excluding an additional 2% as payable in terms of the PowerPurchase Agreements) as given in the Table below:-

35. Mr. Singh also relied on a table reproduced below, of themonetary difference between the LPS claimed by the Respondents andthe LPS if charged as per Base Rate/MCLR methodologies :- A

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A36. Mr. Singh emphatically submitted that the Respondent PowerGenerating Companies have been availing their working capital loans atinterest computed in accordance with the Reserve Bank of IndiaNotifications, but are claiming LPS applying archaic and discontinuedPLR methodology. There are, however, no materials on record tosubstantiate the contention that the Respondent Power Companies areBavailing working capital loans at interest computed in accordance withthe Notification dated 3[rd] March, 2016 of the Reserve Bank of India.

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37. Mr. Singh submitted that the Respondent No.2 sought for billdiscounting from the Appellant during the financial year 2020-2021. Suchbill discounting was done at the rate of 7% per annum. He pointed outCthat other Power Generators had also discounted their energy bills atinterest rates varying from 4 to 6.5%. However, those Power Generatorsare not parties to this appeal.

38. Mr. Singh adverted to the Independent Auditor’s Certificateon computation of actual rate of interest on short term borrowings forDCoastal Gujarat Power Limited (CGPL), which is also an IndependentPower Producer. The actual rates of interest on short term borrowingsby CGPL between 01.04.2018 to 25.01.2021 are as follows:

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CGPL not being a party to these proceedings its borrowings orFthe interest paid by them on borrowings is inconsequential.

39. Mr. Singh further submitted that the Appellant is a revenueneutral entity. The Annual Revenue Requirement of the Appellant isrequired to be approved by the MERC. Expenditure not allowed by theMERC is excluded from the Annual Revenue Requirement that isGapproved by the MERC. The delay in payments made under the PowerPurchase Agreements is due to several extraneous and unavoidablecircumstances, which are beyond the control of the Appellant, includingbut not limited to delayed recovery of dues from the consumers of theAppellant. Even before the outbreak of the COVID-19 pandemic, theHAppellant had been suffering major cashflow crunches.

40. Mr. Singh submitted that the Appellant has been facing severecash flow issues, as the tariff hike approved by the MERC is muchlower than the required tariff hike. The same is evident from the gap inthe revenue sought by the Appellant as against the revenue allowed bythe MERC, the figures of which are as follows:

41. Mr. Singh argued that a Revenue gap of Rs.2433 Crores hasnot been approved by the MERC for the Financial Years 2015-16, 2016-17 and 2017-18. Furthermore, the Appellant has projected/claimedRevenue 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 ofthe MERC a “Regulatory Asset” has been created, in respect of thebalance amount Rs.12,382 Crores. There is, however, no timeline orstipulations provided in the order of the MERC for recovery of theaforesaid amount. This has led to severe financial problems for Appellant.

42. Mr. Singh submitted that the MERC has disallowed variouscomponents of Annual Revenue Requirement sought by the Appellant,such as Agriculture (AG) Sales. The MERC has suo motu disallowedsale of agriculture units for the Financial Years 2014-15 and 2015-16 by2414 and 3399 units respectively, thereby penalizing the Appellant forRs.935 Crores & 2286 Crores, for each of the years, which has widenedthe revenue gap and cannot be met unless the MERC allows the RevenueGap in terms of Case No. 195 of 2017 (supra). Mr. Singh has referredto the yearwise approval of total sales and AG sale, which are not relevantto this appeal and therefore not reproduced in this judgment, to avoidprolixity.

43. Mr. Singh submitted that, even though the AG Sales figuressubmitted by the Appellant were based on actual consumption, the MERC

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Awas of the opinion that the methodology followed by the Appellant neededto be revisited and validated. Pending the enquiry into the methodology,the MERC mechanically devised its own methodology to calculate AGSales, which does not take into consideration the details / actual figuressubmitted by the Appellant. This led to disallowance of a quantum of AGsales. The difference between the AG Sales claimed by the Appellant,Bas against the quantum allowed, has led to shortfall in cash flow andinability of the Appellant to make payments.

44. Mr. Singh further submitted that the tariff for the FinancialYear 2016-2017 came into effect from 01.11.2016 instead of 01.04.2016in view of Tariff Order dated 03.11.2016 passed by the MERC in CaseCNo.48 of 2016, leading to the older tariff to continue to remain in effectafter 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 AppellantDhas therefore been constrained to take loans, the interest component ofwhich is not allowed to be passed on as a tariff component.

46 Mr. Singh submitted that the actual growth in sales of theAppellant in relation to subsidized categories (e.g. HT industrial andCommercial) was very low. Further, tariff subsidy for making promptEpayment 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 uponconsideration of actual gains and losses. He argued that the MERCFconsidered the Gains/Losses of the Appellant at time of passing theMulti Year Tariff (MYT) Order instead of considering the same at thetime of true up of the Appellant as specified in MYT regulations, whichresulted into loss of revenue to the Appellant.

48. Mr. Singh further argued that the data submitted and approvedGin determining Multi Year tariff (MYT) and/or Annual RevenueRequirement (ARR) is based on estimation/ projections/ norms, as againstthe data which is submitted at the time of True-up Petition, which isbased on audited accounts and figures which are actually frozen, as perRegulation 11 of the Maharashtra Electricity Regulatory Commission H

(Multi Year Tariff) Regulations, 2015, referred to hereinafter as the ‘MYTRegulations’.

49. By way of example, Mr. Singh pointed out that, if a particularexpense is approved at a certain amount but during true-up exercise, theactual expenditure is higher than that approved by the MYT Order, theAppellant ends up borrowing additional working capital for which theinterest is not approved by the MERC, if it crosses the normative workingcapital. As per the MYT Regulations, the difference would be subject totreatment of sharing of gains or loss as envisaged under Regulation 11.In other words, only 1/3[rd] of the loss and/or difference would be permittedto be recovered through tariff, and the balance 2/3[rd] amount would haveto be borne by the Appellant as financial loss. This led to further cashflowcrunch for the Appellant.

50. Mr. Singh submitted that the time gap between the approvalof the Annual Revenue Requirement and the final true up has resulted ingrave mismatch in revenue and expenditure thereby increasing theworking capital requirement of the Appellant. The Appellant has beenconstrained to borrow from Financial Institutions/ Banks, on an interestcomponent, which is not passed through in its Annual RevenueRequirement.

51. Mr. Singh argued that another important factor that hasdeepened the financial crisis of the Appellant is low recovery of duesfrom agricultural consumers who consume about 30% of the electricitysupplied through the Appellant. Similarly, the arrears on account of supplyof electricity to Government departments, public water works and forstreet-lights have also accumulated. Under the MYT Regulations MERCallows a provision for bad debts to the extent of 1.5% of receivablesonly, even though the largest consumer base of the Appellant is in ruralareas where consumers are less likely to pay bills on time.

52. Mr. Singh submitted that these issues are not within the controlof the Appellant, but has continued to deeply impact the financial positionof the Appellant for many years. It is not that the Appellant has beenrealising its dues from its consumers in time, but not making payments tothe Power Generating Companies. The Appellant is itself in a precariousfinancial position which becomes worse by levy of interest beyond ratesprescribed in RBI Notifications for delay, which is not in the control ofthe Appellant.

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A53. Mr. Singh submitted that the COVID 19 pandemic has alsoseverely affected the financial viability of the Appellant, and has led tothe Appellant incurring losses to the tune of Rs.7500 crores. Further, thefinancial position of the Appellant has also been affected by the measurestaken to alleviate difficulties of the consumers during the pandemic. TheAppellant has given rebate of 2% to all residential consumers for timelyBpayment of all bills (including arrears) of June-20 and July-20 in full,based on actual readings. Further, residential category consumers whowere not able to pay the electricity bills of June-20 and July-20 at onego, were allowed to pay bills in three equal instalments, without interestor delayed payment charges.C54. Mr. Singh further submitted that on 26.03.2020 the MERCissued the following ‘Practice Direction- Measures to Minimize PublicInterface in View of the Coronavirus Epidemic’.

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

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

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

F(d)In the absence of Meter reading, the Consumers were tobe intimated through digital channels such as email, sms,mobile app about their estimated bill, computed on averagebasis, as per Supply Code Regulations.

(e) For bill payment, Distribution Licensee was required tofacilitate and update alternate payment modes i.e. digitalGpayment mode.

(f) All the above measures were directed to be communicatedthrough social media, electronic media and print media forwider publicity.

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55. Later, on 30.03.2020, the MERC issued an order approving amoratorium for consumers under the Industrial and Commercial category,on payment of electricity bills for three billing cycles beginning from thelockdown date of 25.03.2020. Mr. Singh submitted that the said moratoriumgranted by the MERC has badly affected the revenue mechanism of theAppellant as the Appellant continued to incur expenditure due to itsuniversal service obligations whilst the recovery got badly hit. Further,the MERC, through its practice directions issued on 09.05.2020 and21.05.2020, gave the following relaxations and/or reliefs to the consumers:

(a) It was clarified that moratorium of 3 billing cycles had beengiven to the industrial and commercial establishments forpayment of fixed charges, which they would be liable topay in the subsequent three billing cycles, in equal interestfree instalments.

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

(c) HT Industrial and HT Commercial consumers were allowedto revise their contract Demand upto 3 times in a BillingCycle.

(d) Low Tension Industrial and Low Tension Commercialconsumers having demand-based tariff were allowed torevise their Contract Demand up to 2 times in a BillingCycle.

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

56. Mr. Singh argued that these factors clearly show that theAppellant could not make timely payments for reasons beyond its control,for which the Appellant cannot be blamed. It is for this delay thatcompensation is prescribed under the Power Purchase Agreements byway of LPS. Mr. Singh emphatically reiterated his submission that suchcompensation cannot in law be a windfall gain or unjust enrichment ofthe Respondents at the cost of the Appellant, and the consumers includingmarginalised consumers i.e., agricultural consumers, people living in slumsand the downtrodden strata of the society.

57. Mr. Singh finally argued that the claim of the Appellant is nottime barred, as contended by the Power Generators. In terms of Article A

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A13.3.2 of the Power Purchase Agreements, the seller is obligated toserve the Change in Law notice to the procurer, if it is beneficially affectedby a Change in Law. The Respondent Nos. 2 to 5 however, failedto issue any such notice, and are now attempting to take advantageof their own wrong, in contravention of settled principles of lawto this effect. Moreover, on account of the failure of the RespondentBPower Generating Companies to issue Change in Law notices under thePower Purchase Agreements, the Appellant herein was constrained toissue the Change in Law notices to the Respondent GeneratingCompanies.

58. In conclusion, Mr. Singh submitted the argument that APTELCerred in law in issuing directions on the Appellant for payment of LPS asclaimed. Such directions to make payment to the Respondent PowerGenerators could not have been made, more so in the Appellant’s appeal.No monetary relief could be granted in the Appellant’s appeal. TheRespondents should have been remitted to MERC for execution andDquantification of the Change in Law claims.

59. The only issue in this appeal is whether the change in interestrate system by the RBI from Prime Lending Rate (PLR) to Base Rateand then to MCLR amounts to Change in Law under the Power PurchaseAgreements.

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60. Mr. Mukul Rohatgi, Senior Advocate appearing on behalf ofthe Respondent No.2, followed by Dr. Abhishek Manu Singhvi, SeniorAdvocate appearing on behalf of the Respondent No.3, Mr. VishrovMukherjee appearing on behalf of the Respondent No.4 and Ms. DivyaAnand appearing on behalf of the Respondent No.5 advanced arguments,Fopposing the appeal. There being some overlapping of arguments of therespective Counsel, this Court has not recorded the submission of allCounsel in entirety, to avoid unnecessary repetition.

61. Mr. Rohatgi, Mr. Singhvi, Mr. Vishrov Mukerjee and Ms. DivyaAnand all argued in one voice that this Appeal under Section 125 of theGElectricity 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. Singhviappearing for Respondent No.3, Mr. Mukerjee appearing for theRespondent No.4 and Ms. Divya Anand appearing for the RespondentNo.5 submitted that Article 8.3.5 of the Stage 2 Power PurchaseH

Agreements corresponding to Article 11.3.4 of the Stage 1 PowerPurchase Agreements between the Distribution Licensee, that is, theAppellant, as purchaser, and the Power Generating Companies beingthe Respondent Nos.2 to 5, for supply of electricity, governs the LPSpayable by the Appellant to the Power Generating Companies, wheneverthere is delay in payment of bills. Article 11.3.4. of the Stage 1 PowerPurchase Agreement, and Article 8.3.5 of the Stage 2 Power PurchaseAgreement have been set out earlier in this Judgment.

63. Mr. Rohatgi submitted that the SBAR which is actually therate of interest for grant of loan/finance by the State Bank of India, hasbeen incorporated in the Power Purchase Agreements and the agreedrate for LPS is 2% above the SBAR. This SBAR keeps changing. LPSis therefore 2% in excess of the applicable SBAR during the billingperiod.

64. Mr. Rohatgi pointed out that the SBI rate is existing eventoday, as pleaded by the Respondent No.2 at pages 48 to 50 of its Replyto the application for stay being I.A. No. 69796 of 2021 filed by theAppellant. 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 dated03.03.2016 of the Reserve Bank of India, introducing the MCLR systemwith effect from 01.04.2016, in place of the Base Rate System, in termswhereof existing loans based on the PLR system were to continue underthe PLR System till maturity. She submitted that MCLR System was toapply to loans sanctioned after 01.04.2016, and not loans already inexistence as on that date.

66. Ms. Divya Anand submitted that the State Bank of India hasbeen notifying all three rates, that is, PLR, Base Rate and MCLR asdemonstrated in the Table of interest rates of the State Bank of Indiaduring the year 2020 which is reproduced below:- A

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A67. 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 ReserveBank of India of the MCLR w.e.f. from 2016, is completelymisconceived. The Power Purchase Agreement cannot be deemed tobe amended by introduction of the MCLR. It is open to the Appellant, aBGovernment entity, to take a loan at a cheaper rate if it wants to, andclear the bills raised by the Power Generating Companies.

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68. Mr. Rohatgi submitted that the Appellant is purporting to portraylate 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 ofCdelay in payment beyond the due date. The Appellant cannot circumventthe provisions of the Power Purchase Agreement which is a bindingcontract.

69. Mr. Rohatgi argued that the APTEL has, by its impugnedJudgment and order dated 27.04.2021, correctly dismissed the StatutoryDAppeal filed by the Appellant, and upheld the order of the MERC dated16.11.2017. 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 PurchaseAgreements executed between the Appellant and Mr. Rohatgi’s clientEor as per the Base Rate System introduced in 2010 and Marginal Costof Funds Based Lending Rate System(MCLR) introduced in 2016 asnotified by the Reserve Bank of India. Mr. Rohatgi pointed out that theAppellant had not, at any stage, denied that it had committed a series ofdefaults in timely payments.F70. Mr. Rohatgi emphatically argued that the APTEL had, by theimpugned judgment and order, very rightly held that the notifications,guidelines or circulars issued by the Reserve Bank of India, includingthe Notifications dated 09.04.2010 introducing the Base Rate and03.03.2016 introducing the MCLR, after execution of the Power PurchaseAgreements dated 14.08.2008, 31.03.2010, 09.08.2010 and 16.02.2013Gbetween the Appellant and the Respondent No.2 would not qualify asChange in Law. He argued that the APTEL had correctly held that thepayment of LPS along with interest calculated on the SBAR, hasauthorisation in the express terms of the aforesaid Power PurchaseAgreements. Moreover, since the Circulars dated 09.04.2010 of theHReserve Bank of India, introducing Base Rate had been in existence since 2010, the Change in Law notice, issued only on 23.09.2016, hadrightly been held to be time barred.

71. Mr. Rohatgi submitted that this Appeal does not meet therequirement of Section 125 of the Electricity Act, 2003, which only permitsgrounds as specified under Section 100 of the Code of Civil Procedure,1908 (hereinafter referred to as “CPC”). Section 100 of the CPCmandates that the first Appellate Court is the final Court of facts. Section100 of the CPC does not permit interference with findings of fact of thefirst Appellate Court.

72. Mr. Rohatgi submitted that contrary to the grounds permittedin Section 100 of the CPC, in this Appeal under Section 125 of theElectricity Act, 2003, the Appellant has raised pure questions of fact,which have been concurrently decided in favour of the Power GeneratingCompanies. This Appeal is, therefore not maintainable. In support of theaforesaid argument, Mr. Rohatgi cited DSR Steel (P). Ltd. v. State ofRajasthan and others[5], Tamil Nadu Generation & DistributionCorporation Ltd. v. PPN Power Generating Company Private Limted[6]and Wardha Power Company Limited v. Maharashtra StateElectricity Distribution Co. Limited and Another[7].

73. Mr. Vishrov Mukherjee cited DSR Steel (P) Ltd. v. State ofRajasthan and Ors. (supra) referring to paras 4, 14, 15, 16, 18 & 19and Power Grid Corporation of India and Ors. v. Tamil NaduGeneration and Distribution Company Limited and Others.[8] insupport of the argument that this appeal under Section 125 of the ElectricityAct, 2003 is liable to be dismissed as it does not involve any substantialquestion of law.

74. Mr. Mukherjee also cited Bharat Sanchar Nigam Ltd. v.Pawan Kumar Gupta[9], Wardha Power Co. Ltd. v. MSEDCL & Anr.,(supra) and Tuppadahalli Energy India Private Limited v. KarnatakaElectricity Regulatory Commission and Anr.[10], where this Courtdismissed statutory appeals on the ground of absence of any substantialquestion of law.

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)9. (2016) 1 SCC 36310. (2017) 11 SCC 194

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A75. Mr. Rohatgi pointed out that both the MERC and the APTELhave rendered concurrent findings against the Appellant as shown in thetabular statement given below:

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76. Mr. Rohatgi argued that the Appellant is seeking to raise theabove issues which have been concurrently decided, once again. Nosubstantial question of law has arisen in this Appeal filed under SectionE125 of the Electricity Act, 2003 warranting interference by this Court.Mr. Rohatgi cited Ramanuja Naidu v. V. Kanniah Naidu and Another[11]and Navaneethammal v. Arjuna Chetty[12]in support of his aforesaidargument.

77. Mr. Rohatgi argued that since SBAR continues to be inFoperation, it cannot be said that there is any change in law. The RespondentNo.2 and the Appellant have entered into four Power PurchaseAgreements, the first dated 14.08.2008 for supply of 1320 MW, thesecond dated 31.03.2010 for supply of 1200 MW, the third dated09.08.2010 for supply of 125 MW and the fourth dated 16.02.2013 forGsupply of 440 MW of electricity, pursuant to the competitive biddingprocess initiated by the Appellant. Article 8.3.5 of the Power PurchaseAgreements dated 31.03.2010, 09.8.2010 and 16.02.2013, executed afterintroduction of the Base Rate System, specially provide for computation

11. (1996) 3 SCC 392 (para 11)H12. (1996) 6 SCC 166 (para 11)

of LPS as per the SBAR, in invocation of the principle of incorporationby reference. There is a specific reference to the SBAR in the PowerPurchase Agreements, binding on the parties for the entire term of thecontract i.e., 25 years. The Power Purchase Agreement dated 14.08.2008for supply of 1320 MW entered into between the Appellant and theRespondent No.2 also contains similar provision for LPS.

78. Mr. Rohatgi further argued that the Power PurchaseAgreements define SBAR to mean “the prime lending rate per annumapplicable for loans with one (1) year maturity as fixed from time totime by the State Bank of India. In the absence of such rate, SBARshall mean any other arrangement that substitutes such primelending rate as mutually agreed to by the parties”.

79. Mr. Rohatgi submitted that the definition of SBAR in the PowerPurchase Agreements makes it clear that any reference in the PowerPurchase Agreements to SBAR has to be construed as reference to thePrime Lending Rate as fixed by State Bank of India. These provisionshave no reference at all to the Reserve Bank of India. Further, the PowerPurchase 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 tosubstitute SBI PLR with any other mutually agreed arrangement. Havingagreed to such an arrangement in the Power Purchase Agreements, theclaim of Appellant for treating Base Rate/MCLR as Change in Lawevent cannot be entertained.

80. Mr. Rohatgi argued that, while introducing the Base Ratesystem in 2010 and the MCLR system in 2016, the Reserve Bank ofIndia had provided for the continuation of the earlier Benchmark PrimeLending Rate (BPLR) dispensation for existing loans. Consequently, theSBAR Rate referred to in Clause 8.3.5 and/or 11.3.4 of the two sets ofPower Purchase Agreements, which is the SBI PLR for loans withmaturity of one year, continues to be notified even to this day. The sameis evident from the Notification dated 03.03.2016 of the Reserve Bankof India.

81. Mr. Rohatgi further argued that, in terms of the relevant clausesin the Power Purchase Agreements regarding Change in Law, the pre-requisites are that the event in question must be one that is covered byClause 10.1.1 of the Stage 2 Power Purchase Agreements corresponding A

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Ato Clause 13.1.1. of the Stage 1 Power Purchase Agreements, that is, itmust be a new enactment, or amendment of existing legislation, or newinterpretation by a competent court, the event must have occurred afterthe 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 07.08.2009and such event must have resulted in additional recurring or non-recurringBexpenditure or income for the Seller. The first and third of these conditionsare not fulfilled by the Appellant since the LPS Rate under the PowerPurchase Agreements is not linked to Reserve Bank of India circularsor guidelines and the RBI notifications referred to are not shown to haveresulted in any additional income or expenditure for the Power GeneratingCCompanies. The introduction of Base Rate in 2010 and MCLR in 2016by the Reserve Bank of India by its Notifications/Circulars does not,therefore, amount to Change in Law. Therefore, the contention of theAppellant 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 theDAPTEL.

82. Refuting the argument of Mr. Singh that the RBI circulars areto be considered as Change in Law, Mr. Rohatgi advanced an alternatesubmission that the Appellant is not entitled to claim Change in Lawsince Clause 13.3.1 of the Power Purchase Agreement dated 14.08.2008Efor supply of 1320 MW and Article 10.4.1 of the other three PowerPurchase Agreements provides that notices of Change in Law eventsare to be issued by the affected party as soon as reasonably practicableafter becoming aware of the Change in Law. While the changes citedby the Appellant were effected by Reserve Bank of India from July,F2010 and again April, 2016 and notified in advance, the Appellant issuednotices of Change in Law to the Respondent No.2 only in September2016 i.e. more than 6 years after Reserve Bank of India introduced theBase Rate system in place of the BPLR system. The Appellant couldnot have been unaware of the revision effected by the Reserve Bank ofIndia at that time. Nor has it explained this inordinate delay in raising itsGclaim. Further, while Base Rate was introduced on 09.04.2010, theAppellant entered into Power Purchase Agreements with the RespondentNo.2 on 09.08.2010 and 16.02.2013 incorporating PLR as the LPS ratefor supply of contracted quantum of 125 MW and 440 MW of electricity respectively to the Appellant. As such, the Appellant’s claim isHinadmissible, the same being barred by limitation.

83. Mr. Rohatgi emphatically reiterated that Late PaymentSurcharge ( LPS) is imposed only when there is delay in the payment ofbills. The liability towards LPS was therefore, within the control of theAppellant, for there would be no LPS liability, if the Appellant did notdelay payment of monthly or supplementary bills beyond the due date.Mr. Rohatgi argued that, LPS is a penalty to which the Appellant hasvoluntarily agreed, in case it delays payment to the Power GeneratingCompanies. Any changes by the Reserve Bank of India in respect ofinterest on loans advanced by Banks and Financial Institutions, do notaffect in any manner the rates at which power was agreed to be soldand purchased or the rate at which LPS is chargeable. Mr. Rohatgiemphatically argued that LPS is a deterrent to inculcate paymentdiscipline and is also entirely avoidable.

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84. Mr. Rohatgi pointed out that the APTEL has, by its impugnedjudgment and order (para 21) categorically rejected the Appellant’scontention of there being unjust enrichment of the Respondent PowerGenerating Companies, on account of LPS being calculated at SBARRate. The APTEL has held :- D

(i) In order to be termed as unjust enrichment, benefit gainedby a party must be such as to have been retained withoutany legal basis; E

(ii) The primary purpose of LPS being to compensate the PowerGenerators for the time value of money lost on account ofdelay in payment by the Appellant, it cannot be said thatrecovery of LPS results in the generators being unjustlyenriched; F

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

(iv) The claim of LPS does not represent any benefit accruingto the Respondent Power Generating Companies, but iscompensatory in nature. Moreover, LPS is not economicGrestitution but is a disincentive;

(v) It is wrong to equate LPS with carrying cost or actual costincurred because any interest paid for finances raised cannothave any nexus to the LPS as it is not the same as a loanadvanced, but is a penalty for delay; H

A(vi)The LPS payable in terms of legally enforceable contractscannot be termed as unjust enrichment, as payment of LPSis due to default by the Appellant and not for any actiontaken by the Power Generators. That being the factualposition, it is incorrect on the part of Appellant to allegeunjust enrichment.

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85. Mr. Rohatgi drew the attention of this Court to Paragraph 35of the impugned judgment and order of the APTEL recording itscategorical finding that the Appellant had never denied the serious defaultsit committed, by inordinately delaying the payment of bills to theRespondent Power Generating Companies. The APTEL found that theCAppellant was indisputably liable to pay LPS.

86. Mr. Rohatgi finally argued that even though the proceedingswere initiated before the MERC in 2017, the Appellant is now citing thepandemic related financial hardships caused during the year 2020 torenege on its contractually binding obligation of payment of LPS in termsDof the Power Purchase Agreements and somehow seeking to unilaterallyamend the terms of the Power Purchase Agreements so that they arefavourable to them, which is impermissible in law.

87. Mr. Rohatgi submitted that LPS is calculated on compoundingbasis with monthly rests in terms of the Power Purchase AgreementsEand further the same cannot be passed on to consumers in view of theOrder dated 29.08.2020 of MERC in Case No.45 of 2020.

88. Mr. Rohatgi argued that by way of this Appeal, the Appellantis, in fact, seeking a downward revision of a contractually determinedpenalty in order to unjustly enrich itself at the cost of the RespondentFPower Generating Companies, more so, since admittedly the Appellantrecovers delayed payment surcharge from its consumers at much higherrates than the SBI PLR.

89. Mr. Singhvi appearing on behalf of the Respondent No.3referred to the Power Purchase Agreement dated 23.02.2010 executedGby and between the Appellant and the Respondent No.3 for supply ofelectricity to the Appellant. Mr. Singhvi pointed out that the PowerPurchase Agreement was executed pursuant to a bidding process carriedout by the Appellant under the aegis of the MERC under Section 63 ofthe Electricity Act, 2003. The tariff was adopted by the MERC

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(Respondent No.1) and the Power Purchase Agreement was approvedby the MERC.

90. Mr. Singhvi argued that, it was not in dispute that paymentagainst monthly bill for electricity charges raised by the RespondentNo.3, was agreed to be made by the Appellant within 30 days. It is alsonot disputed that in the event of delay in payment of a monthly, beyondits due date, that is, 30 days, the Appellant would be bound to pay a LatePayment Surcharge (LPS). In this context, Mr. Singhvi referred to Clause11.3.4 of the Power Purchase Agreement which has already beenreproduced hereinbefore.

91. Mr. Singhvi submitted that in this case too the rate of LPSwas 2% in excess of SBAR. Mr. Singhvi referred to the definition ofSBAR in the concerned Power Purchase Agreement, defining SBARto 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.Mr. Singhvi pointed out that it was only in the absence of any primelending rate that the rate of LPS could be fixed at such rate as mightbe mutually agreed to by the parties.

92. Mr. Singhvi questioned the legality of the argument of theAppellant that the purpose of publication of the SBI PLR having undergonea change in view of the RBI circulars/notifications, the SBI PLR, whichadmittedly continues to be published, can no longer be used as abenchmark reference in a Power Purchase Agreement, that the PowerPurchase Agreement reference benchmark rate should be modified inaccordance with the RBI circulars/guidelines. Mr. Singhvi argued thatthe arguments of the Appellant neither had legal nor contractual basis.Both the forums below have rightly rendered concurrent decisions holdingthat the RBI circulars/guidelines have no impact on the rate of LPS inthe contract and the agreed terms of a contract cannot be rewritten.

93. Mr. Singhvi argued that the Power Purchase Agreement forsale and purchase of power, was between a power generating companyand a procurer of electricity, to which the circulars/guidelines of RBIapplicable to banks and financial institutions can have no application.The Power Purchase Agreement does not incorporate or refer to anyRBI circulars or guidelines. Mr. Singhvi cited the judgment of this Courtin B.O.I. Finance Limited v. Custodian and Ors.[13]where this Court AB

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Aheld that RBI circulars/instructions/guidelines cannot result in invalidationof a contract even between a bank and a third party and the consequencefor violation is penalty as provided for in Section 46 of the BankingRegulation Act. The RBI circulars/guidelines cannot therefore vary ormodify a contract between two parties, none of which is a bank or afinancial institutions.B

94. Mr. Singhvi argued that reliance by the Appellant on the RBIcirculars/guidelines, in the context of the agreement between the Appellantand the Respondent is totally misplaced. The RBI circulars/guidelinesare admittedly instructions issued to banks and financial institutions andare not applicable to either the Appellant or the Respondent, who areCengaged in the business of sale and purchase of electricity and not ofadvancing loans. Further, SBAR as defined under the PPA is alsoadmittedly, not linked to the RBI circulars/guidelines. Therefore, theimpact of the RBI circulars/guidelines on the purpose for which theSBI PLR continues to be notified, is totally irrelevant for the purposes ofDthe present case.

95. Mr. Singhvi emphatically argued that the agreement providesfor the parties to mutually agree on a substitute of SBI PLR, in case ofits absence. This dispensation is contained in the definition of SBARitself. This special provision in the agreement applicable to the specificEcase of absence of SBI PLR, excludes the applicability of the general‘Change in Law’ provision contained in Article 13 of the PPA. In thecontext of his arguments Mr. Singhvi cited Adani Power (Mundra)Ltd. v. Gujarat Electricity Regulatory Commission and Others[14]therelevant paragraph whereof is reproduced herein below:- F“38. In the present case, the perusal of various Articles wouldreveal that the provisions under Article 14 are general innature. The provision under Article 3.4.2 is specific, only tobe invoked in the case of non-compliance with any of theconditions as provided under Article G3.1.2. As such, the special provision made in Article 3.4.2will exclude the applicability of general provisions containedin Article 14 of the contract.”

96. Mr. Singhvi argued that the general provisions of the Changein Law clause have been consciously kept out by the parties, in relationH14. (2019) 19 SCC 9

to a situation arising out of absence of the SBI PLR and the consequentcalculation of LPS. Therefore, the Hon’ble APTEL correctly found asunder:

“13.... On the contrary, there is a conscious exclusionregarding any suo moto change in the rate to be applied whilecalculating LPS, it being incorrect to argue on the assumptionthat the contract permits automatic change in system.”

97. Mr. Singhvi submitted that the consequence of a change inlaw event under the Power Purchase Agreement is determination ofcompensation for any increase/decrease in revenues of cost to the Sellerby the MERC. Late payment surcharge is payable only in case paymentagainst the monthly bills is delayed by the Procurer. As such, the LPSrate does not in any manner affect the tariff at which electricity is agreedto be sold and purchased. Therefore, there is absolutely no increase/decrease in the revenues or cost to the Respondent, connected with theobject of the agreement, i.e. generation and sale of electricity, as a resultof the RBI notification/circulars. Consequently, the RBI notifications/circulars relied upon by the Appellant, in the context of LPS, do notrequire any determination of change in law compensation.

98. Mr. Singhvi pointed out that the MERC had, in its order dated16.11.2017, rightly rejected the claim of the Appellant inter aliaobserving:- “12. However, the LPS provision is attracted only when thepayments are not made by MSEDCL against the Monthly Billsof the Seller within the time stipulated in the PPAs Any changesin the basis of the LPS rates consequent to revisions by theRBI do not affect in any manner the rates at which powerwas agreed to be sold and purchased under the PPAs and inthe consequent financial implications for either Party resultingin a liability to compensate the affected Party “

99. Mr. Singhvi submitted that the APTEL, aptly concurred withthe 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 affectedparty for a Change in Law event is essential with regard to tariffonly. The rate of LPS has no bearing or impact on tariff. Any

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Apossible changes in the basis of the LPS rates consequent torevisions by the RBI, or for that matter, SBI would not affect therate at which power was agreed to be sold and purchased underthe PPAs and consequently there is no financial implications onexpenditure or income for either Party.The LPS only recompenseswhat was lost in terms of real value of money due to delay inBpayment.”100. Mr. Singhvi argued that the Appellant has till 24.06.2016,signed reconciliation statements with the Respondent No.3 in which theAppellant calculated the LPS on the basis of the PLR published by theState Bank of India and not the Base Rate or the MCLR, as is nowCbeing claimed by the Appellant. It is, therefore, clear that in this case,there has never been any dispute whatsoever with regard to the principalliability of the Appellant towards energy charges, and no dispute wasraised regarding LPS for over 5 years.

101. Mr. Rohatgi, Mr. Singhvi, Mr. Mukherjee and Ms. Anand allDsubmitted that the contentions of the Appellant are liable to be rejectedoutright, since LPS provision in the Power Purchase Agreements, is notlinked to the rate at which the affected party is able to get loans fromBanks or Financial Institutions. The Appellant having agreed to pay LPSat SBI PLR, till such time it exists, cannot now seek any other rate suchEas MCLR or actual interest rates at which the Respondent PowerGenerating Companies obtain financial accommodation. On behalf ofthe Respondent No.3 Mr. Singhvi supported the submissions of Mr.Rohatgi.

102. Mr. Singhvi distinguished the judgment of this Court in JaipurFVidyut Vitran Nigam Limited v. Adani Power Rajasthan Ltd. AndAnr. (supra) and argued that there is no bona fide dispute in this case.The Appellant has acted in conscious disregard of its obligations underthe Power Purchase Agreements. Mr. Singhvi cited the decision of thisCourt in Union of India v. Association of Unified Telecom ServiceProviders of India & Ors.[15]where this Court considered an identicalGinterest clause in the license. The interest clause, which has beenreproduced in Paragraph 182 of the judgment of this Court, reads:

“In re: Levy of interest, penalty, and interest on penalty. Para182. Levy of licence fee is provided in Clause 20.2. In case of any delay in payment of licence fee beyond the stipulatedperiod would attract penalty at the rate, which would be 2%above the prime lending rate (PLR) of State Bank of India. Asper Clauses 20.5 and 20.8, if the licensee does not pay thedemand, consequences would follow. The clauses areextracted hereunder:

“20.5. Any delay in payment of licence fee payable or anyother dues payable under the Licence beyond the stipulatedperiod will attract interest at a rate which will be 2% abovethe prime lendingrate (PLR) of State Bank of Indiaexistingas on the beginning of the financial year (namely 1st April)in respect of the licence fees pertaining to the said financialyear. The interest shall be compounded monthly and a part ofthe month shall be reckoned as a full month for the purposesof calculation of interest. A month shall be reckoned as anEnglish calendar month.”

103. Mr. Singhvi submitted that in the case of Association ofUnified Telecom Service Providers of India (supra), it was contendedby the Distribution licensee that under section 74 of the Contract Act,compensation must only be reasonable compensation. For this, reliancewas placed on Hindustan Steel Ltd. v. State of Orissa[16], AkbarBadrudin Giwani v. Collector of Customs[17], Jaiprakash IndustriesLtd. v. Commissioner of Central Excise, Chandigarh[18], TecumsehProducts India Ltd. v. Commissioner of Central Excise,Hyderabad[19], J.K. Synthetics Ltd. v. Commercial Taxes Officer[20],Kailash Nath Associates v. Delhi Development Authority andAnother[21]and Central Bank of India v. Ravindra and Others[22].However, this Court found that the dispute raised by the DistributionLicensee with regard to the definition of gross revenue, in that case,was not bona fide and had only been raised to delay payment inaccordance with the Power Purchase Agreement. This Court,accordingly, held that none of the above decisions would come to the aid 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

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Aof the Distribution Licensee and concluded that since there is acontractual 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 reasonthat in the instant matter, it is the contractual rate of interestBand penalty agreed to which cannot be said to be arduous inany manner. The rate of interest has been agreed andparticularly since it is a revenue sharing regime, and thelicensees have acted in conscious disregards of theirobligation. Thus on the anvil of the decision above also, theyare liable to pay the dues with interest and penalty……C

…… There is no such discretion available when the partieshave agreed in default what amount is to be paid. Itautomatically follows that it is not to be determined by thelicensor once over again. Parties (licensor and licensees) arebound by the terms and conditions of the contract. There isDno enabling clause to vary either the rate of interest or thepenalty provided therein and even if permissible, it is not calledfor to vary interest or penalty fixed under the agreement inthe facts and circumstances of the case……

197. It is not levy of penal interest which is involved in theEinstant case. Thus, based on the decision mentioned above,we find thatwhen there is contractual stipulation, the interestcan 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 CourtFhaving taken a view in Association of Unified Telecom Providers ofIndia (supra) that interest on delayed payment at 2% in excess of SBIPLR is not arduous, there is no case made out for this Court to reducethe contractually agreed rate of interest, in exercise of powers underArticle 142 of the Constitution of India. On the other hand, facts wouldGreveal that in this case the Appellant has deliberately and consciouslybeen disregarding its obligation and raising frivolous disputes as anafterthought, only with a view to further delay payment in accordancewith the terms of the Power Purchase Agreement. No indulgence need,therefore, be granted to the Appellant.

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105. Mr. Singhvi submitted that the Appellant has the funds toclear the interest liability. This is apparent from the fact that the Appellanthad, itself made an offer before the MERC, to clear all dues of theRespondent No. 3 in 1 weeks’ time. The Appellant is, therefore notentitled to further time.

106. Mr. Singhvi submitted that, it is wrong for the Appellant tosuggest that the burden of interest shall be passed on to the consumers.The MERC has already held that as the Appellant solely is responsiblefor the delay in making payment and therefore the said burden cannotbe passed on to the consumers.

107. Mr. Singhvi further submitted that in any case, claimspertaining to the period of 3 years prior to the filing of the Petition beforethe MERC that is, before 02.12.2016, are clearly barred by limitation.

108. Mr. Singhvi concluded his arguments with the submissionthat the Regulations relied upon by the Appellant were the TariffRegulations, framed by the MERC for the purpose of determination oftariff for generating stations under Section 62 of the Act, which have noapplication in this case, where the Power Purchase Agreements havebeen executed pursuant to a bid process under Section 63 of the ElectricityAct. Mr. Singhvi submitted that the Appellant as purchaser was in noway concerned with how the Respondent manages the shortfall inworking capital, whether from internal accruals, additional equity infusion,foreign loans, domestic loans etc. in a bid out tariff, adopted by the MERCunder Section 63 of the Electricity Act.

109. Mr. Singhvi submitted that the second appeal filed by theAppellant should be dismissed with directions to the Appellant to makepayment of the balance reconciled outstanding interest liability of Rs.48.55crore (i.e. 47.79 crore + Rs. 0.76 crore as per the Appellant’s affidavitdated 29.06.2021 I.A. No.73474/2021.

110. Mr. Vishrov Mukherjee, appearing on behalf of theRespondent No.4, adopted the arguments advanced by Mr. Rohatgi andMr. Singhvi, and also argued that the Appellant’s contention that thePLR had been replaced with other interest rate systems was incorrect.He argued that Reserve Bank of India had introduced Base Rate andMCLR prospectively. Referring to Annexure R-2 of the reply of therespondent no.4 to the appellant’s stay application being IA 69709/2021, A

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AMr. Mukherjee pointed out that the PLR system was still continuing. Hesubmitted that SBI continues to notify PLR on quarterly basis.

111. Mr. Mukherjee reiterated the submission of Mr. Rohatgi andMr. Singhvi that the introduction of Base Rate and MCLR interest ratesystem does not constitute a Change in Law under the Power PurchaseBAgreements. Mr. Mukherjee argued that in terms of Article 13.1.1 ofthe agreement dated 23.02.2010, between the Appellant and theRespondent No.4, the Change in Law evaluation is a two step processbeing:

a) Occurrence of an event described as a change in law event inCArticle 13.1.1 and;b) Such change in law has to result in any increase/ decreasein cost / revenue of the Seller, i.e.,the Power GeneratingCompanyi.e. the Respondent no.4 [Art. 13.2(b)].

112. Referring to Uttar Haryana Bijli Vitran Nigam LimitedDand Another v Adani Power Limited and Others[23]Mr. Mukherjeeargued that a change or amendment in the LPS rate does not constituteChange in Law because there is no impact on cost or revenue of theGenerating Company. LPS is payment for a default committed by theAppellant in making timely payment. It has no impact on the cost incurredEor the revenue received by the Generating Company. It is in the natureof a contingent liability incurred by the Appellant for failing to adhere toits contractual obligations under the PPA.

113. Mr. Mukherjee argued that compensation to the AffectedParty for a Change in Law event is by adjustment of tariff. LPS has noFbearing or impact on tariff., Therefore, the Appellant’s claim does notqualify as a Change in Law event, as change in the LPS rates do notaffect the tariff under the Power Purchase Agreements, and consequentlythere are no financial implications on expenditure/income for either Party.In support of his argument, Mr. Mukherjee referred to paragraphs ofAdani Power Ltd. (supra).G114. Mr. Mukherjee reiterated the submission of Mr. Rohatgi andMr. Singhvi that the LPS rate under the Power Purchase Agreements,is not linked to RBI Notifications/Circulars/Guidelines. The applicableinterest rate for payment of LPS is contractually defined, and linked to PLR rates notified by State Bank of India. This is independent of anyRBI Notification/Circular/Guideline. Citing Union of India v. Associationof Unified Telecom Service Providers of India and Others[24], Mr.Mukherjee argued that, once a term has been defined contractually, partiescannot vary such terms.

115. Mr. Mukherjee reiterated the submission of Mr. Rohatgi andMr. Singhvi that in terms of Article 11.3.4 read with the definition ofSBAR, the parties have agreed to apply the Prime Lending Rateapplicable for loans with one year maturity as fixed from time totime by State Bank of India in fixing the applicable LPS rate and theparties have also agreed that in case SBI PLR is not available, the partiesare to mutually agree to the interest rate. Therefore, the parties have, bydoctrine of incorporation, included a particular interest rate for calculationof LPS.

It is not open to the Appellant to seek an interest rate differentfrom what has been contractually agreed, as held in CLP India PrivateLimited v. Gujarat Urja Vikas Nigam Limited and Another[25].

116. Mr. Mukerjee argued that State Bank of India is, in any event,still notifying the Prime Lending Rate. Mr. Mukerjee submitted that therate so notified is applicable to all cases and instances irrespective of thetenor, duration and type of transaction, including loans of one year maturity.

117. Mr. Mukherjee further argued that Power PurchaseAgreements are complex technical documents which the parties havingknowingly executed. The express terms of the Power PurchaseAgreements 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 ShreeAmbica Medical Stores and Others. v. Surat People’s CooperativeBank Limited and Others[28], Mr. Mukherjee submitted that it is settledlaw that Courts will neither rewrite nor substitute the terms of a Contract.

118. Mr. Mukherjee argued that, if Change in Law is applied tochange in interest rate it would render the provision relating to parties24. 2020 (3) SCC 52525. 2020 (5) SCC 185 (paras 32 & 34)26 (2018) 11 SCC 508 (paras 45 & 72)27 (2018) 3 SCC 71628 (2020) 13 SCC 564 (para 20)

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Ahaving 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 Agreementshave to be read and interpreted harmoniously in order to give effect toall provisions. Treating change in interest rate system as change in law(despite parties having agreed to mutually decide on the consequences)Bwill render the latter part of the SBAR definition otiose since only theRegulatory Commission can decide change in law claims.

119. Mr Mukerjee submitted that Base Rate was introduced witheffect from 09.04.2010 whereas the appellant entered into the PowerPurchase Agreements with the Respondent No.4 on 22.04.2010 andC05.06.2010. This further establishes the point that parties have consciouslyagreed to apply a particular interest rate (SBI PLR) and not the ReserveBank of India notifed interest rate.

120. Mr.Mukherjee submitted that the present Power PurchaseAgreement has been entered into under Section 63 of the Electricity ActDpursuant to competitive bidding, based on quoted tariff alone. There isno separate element of interest on working capital. Irrespective of theexpenditure / cost incurred by the generating company, it only receivesthe bid tariff. Therefore, the argument that generating companies arebenefitting on account of an arbitrage between the LPS Rate and interestErates being paid by them is incorrect.

121. Mr. Mukherjee finally argued that the APTEL and the MERChave rightly held that payment / imposition of LPS is within the controlof the Appellant. Mr. Mukherjee submitted that, being in defaultadmittedly, the Appellant ought not to be permitted to benefit from itsFdefault and seek a lower penalty for failure to comply with its obligationsof making timely payment. The defaults were during 2011 to 2017 duringwhich time there was no pandemic. The Appellant has recovered theamount it was supposed to pay to the Respondent No. 5 during theperiod in question. Despite recovering this amount as part of its tariff, itdeliberately and wilfully delayed in payment of these amounts to theGRespondent Power Generating Companies. In light of the admitteddefault, the Appellant is not entitled to relief, let alone relief in exerciseof jurisdiction under Article 142 of the Constitution.

122. In response to the submission of the Appellant that theRespondent No.2 and other Power Generating Companies had unjustlyH

enriched themselves by availing bill discounting from the Appellant duringthe Financial Year 2020-21, at the rate of 7% per annum, which rate issubstantially lower than the LPS calculated at MCLR, let alone PLR,Mr. Rohatgi submitted that if the Appellant’s contention were to bebelieved then being a government entity, the Appellant could easily availloans at much lower rate than the rate of LPS in terms of the PowerPurchase Agreements and pay the bills raised by the Power GeneratingCompanies promptly, rather than end up paying LPS. There is noimpediment to the Appellant raising loans to promptly clear the bills dueto the Respondent Power Generating Companies.

123. Mr. Mukerjee also pointed out that the Appellant had beencharging interest for delay in payment from its consumers @ 1.25% permonth, i.e. 15% on an annual basis as per MERC MYT Regulations,2019. This belies the argument of the Appellant that LPS rate is correlatedto the actual interest rate on loans taken by the Appellant or generatingcompanies.

124. Mr. Mukerjee argued that at no stage had the Appellant deniedthat the Reserve Bank of India was continuing to notify PLR. It is onlybefore this Hon’ble Court that the Appellant has submitted that PLR isnot available. The Appellant is precluded from raising such a plea at thisbelated stage. Further, such plea is factually incorrect since SBI isnotifying PLR.

125. Mr. Mukherjee submitted that the Appellant is the only Discomin the country to raise this claim of change in law. None of the otherDiscoms in Maharashtra or other States have claimed this as a changein law.

126. Mr. Mukherjee further submitted that, during the period ofthe alleged financial hardship, the Appellant has not only paid NTPC andother Central Generating Stations, but has also entered into several PowerPurchase Agreements, for additional power.

127. Mr. Mukherjee argued that the Appellant’s contention thatthe consumers in the State of Maharashtra will ultimately bear the allegedcharges is incorrect. As per the MERC Tariff Regulations, only suchexpenditure as is prudently incurred can be claimed as part of tariff. Incase the expenditure is on account of the Appellant’s imprudence ordefault, such amounts cannot be claimed by the Appellant as part oftariff. Mr. Mukerjee submitted that Mr. Singh’s argument of bill A

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Adiscounting has no bearing on this case at hand since RattanIndia is notavailing of bill discounting.

128. Ms. Divya Anand adopted the submissions of Mr. Rohatgiand Mr. Singhvi and added that Court has defined ‘unjust enrichment’ asthe unjust retention of a benefit to the loss of another, or the retention ofBmoney or property of another against the fundamental principles of justiceor equity and good conscience. She argued that a person is enriched ifhe has received a benefit, and he is unjustly enriched if retention of thebenefit would be unjust. In support of her argument, Ms. Anand citedIndian Council for Enviro-Legal Action v. Union of India[29].

C129. Justifying the direction of APTEL on the Appellant to makepayment in terms of the order of MERC, Mr. Rohatgi referred to anOffice Memorandum dated 08.03.2019 of the Ministry of Power,Government of India mandating that Electricity Regulatory Commissionsmust ensure payment of LPS as per the Power Purchase Agreementswhere payment is delayed. Mr. Rohatgi argued that it is in the interest ofDthe Appellant to liquidate the outstanding dues of the Respondent PowerGenerating Companies including LPS, at the earliest. This will also enablethe Respondent No.2 and other Power Generating Companies to complywith their obligations under the Power Purchase Agreements, of supplyinguninterrupted power by procuring coal with available funds.

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130. Mr. Rohatgi argued that under Section 111 (3) of the ElectricityAct, 2003, the APTEL is empowered to pass an order either confirming,modifying or setting aside the order appealed against. The APTEL actedwithin the scope of its powers under Section 111 (3) by directing paymentof the LPS dues to the Respondent Generating Companies. Further, inFterms of Section 120 of the Electricity Act, 2003, the APTEL has thepower to direct the Appellant to pay the outstanding LPS amounts in atime bound manner to ensure that the principles laid down under Section61 of the Electricity Act, 2003 are achieved.

131. Mr. Rohatgi argued that the APTEL directed the AppellantGto pay the LPS within the time stipulated in the impugned judgment andorder, in keeping with the objective of the Electricity Act which is aimedat taking measures conducive to development of the power sector whileprotecting the interest of consumers. Mr. Rohatgi submitted that this isalso consistent with the principles set out in Section 61 of the Electricity

29. (2011) 8 SCC 161H

Act, specifically Sections 61(b) and (d) i.e., to conduct generation,transmission and distribution of electricity on commercial principles andat the same time safeguard consumer interest while ensuring reasonablerecovery of the cost of electricity in a reasonable manner.

132. Mr. Rohatgi submitted that any further delay in payment ofLPS would not be in the interest of the Respondent Generating Companiesas they have been deprived of their legitimate dues for long. Furtherdelay would also be detrimental to the interest of the Appellant as it isnot allowed to pass on LPS to end consumers in terms of the orderdated 29.08.2020 of the MERC in Case No. 45 of 2020, which hasattained finality.

133. Mr. Mukerjee submitted that the directions given by theAPTEL in Paragraphs 35 and 36 of the Impugned Judgment are aimedat quantification rather than execution. The time period for complianceunder the Impugned Judgment was 90 days whereas the period oflimitation for filing an appeal under Section 125 of the Electricity Act is60 days.

134. Mr. Mukerjee further submitted that, in terms of Section 120of the Electricity Act, the APTEL is not bound by the procedure laiddown by the Code of Civil Procedure 1908. The directions for timebound payment or payment within the prescribed timeframe is consistentwith past judgments of the APTEL including the judgment dated14.09.2019 in Appeal 202 of 2018, which was upheld by this Hon’bleCourt in Jaipur Vidyut Vitran Nigam Limited v. Adani PowerRajasthan Limited (supra).

135. Mr. Mukerjee submitted that, one of the objectives of theElectricity Act is time-bound disposal of matters. This is evident fromSection 111(5) of the Electricity Act. Any direction for payment, is onlyin furtherance of such direction.

136. Mr. Mukerjee further argued that the Paragraphs 27 to 34 ofthe Impugned Judgment deal with sectoral issues including delay inadjudication of claims. In this case, the delay in adjudication has resultedin severe stress in the power sector in addition to financial impact in theform of carrying cost and LPS. However, the APTEL held that sincethe Electricity Act does not have a specific provision granting power tothe Electricity Regulatory Commission to execute its orders, it requireslegislative intervention. [Para 33 & 34 @ Pg. 22 - 24 of the Appeal].

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A137. Mr. Mukerjee submitted that this is a fit case for this Hon’bleCourt to consider interpreting the regulatory powers of regulatorycommissions under Section 79 / 86 of the Electricity Act to include thepower to execute their own orders. Mr. Mukerjee cited Gujarat UrjaVikas Nigam Limited v. Amit Gupta and Others[30], wherein thisBHon’ble Court held that pending legislative action, the courts can devisea workable formula that advances the goals and objective of the legislation.

138. Mr. Mukerjee submitted that, while the Electricity Act, 2003does not have a specific provision on execution of decrees/orders by theRegulatory Commissions, Regulatory Commissions have been held toCbe “courts”. In Tamil Nadu Generation & Distribution CorporationLtd. vs. PPN Power (supra), this Court held that the State ElectricityRegulatory Commissions have the trappings of a court. The relevantportion of the aforesaid judgment is reproduced below:-

“59. In view of the aforesaid categorical statement of law, weDwould accept the submission of Mr Nariman that the tribunalsuch as the State Commission in deciding a lis, between theappellant and the respondent discharges judicial functionsand exercises judicial power to the State. It exercises judicialfunctions of far-reaching effect. Therefore, in our opinion,Mr Nariman is correct in his submission that it must haveEessential trapping of the court. This can only be achieved bythe presence of one or more judicial members in the StateCommission which is called upon to decide complicatedcontractual or civil issues which would normally have beendecided by a civil court. Not only the decisions of the StateFCommission have far-reaching consequences, they are finaland binding between the parties, subject, of course, to judicialreview.”

139. Mr. Mukerjee referred to the judgment of this Court in Andhra Pradesh Power Coordination Committee & Others v. LancoGKondapalli Power Ltd & Ors.[31], where the court held that in view ofits judgment in Gujarat Urja Vikas Nigam Ltd. v. Essar PowerLimited[32], the Commission has been elevated to the status of a substitute

30. (2021) SCC OnLine 194 (paras 142 & 188)31. (2016) 3 SCC 468H32. (2008) 4 SCC 755

for Civil Court in respect of all disputes between the licensees and thegenerating companies.

140. It is a settled position of law that Courts have the power toexecute their own orders. The aforesaid position has been confirmed bythe Hon’ble Supreme Court in State of Karnataka v. VishwabharathiHouse Building Cooperative Society and Others[33].

141. Mr. Mukerjee argued that the Electricity Act, 2003 has to beinterpreted to also include and incorporate the power to execute by stepssuch as attachment of accounts, suspension/revocation of license etc.Mr. Mukerjee further argued that the role and function of ElectricityRegulatory Commissions should not be viewed from the perspective of‘civil courts’ alone. Unlike Civil Courts which assume jurisdiction onlywhen a dispute arises, the Regulatory Commissions have an overarchingregulatory power over licensees. The Regulatory Commissions continueto exercise continuous regulatory supervision over the parties (licensees)especially over tariff. In support of his submission Mr. Mukherjee citedAll India Power Engineering Federation & Ors. vs. Sasan PowerLimited & Others[34]. This will protect the financial health of the sectorwhile protecting public interest by abusing the financial liability in theform of carry cost/ sign value for money. This approach is also consistentwith the Preamble to the Electricity Act, 2003 which stipulates that it isaimed at taking measures conducive to development of the power sectorwhile protecting the interest of consumers.

142. Distinguishing the judgment of this Court in Jaipur VidyutVitran Nigam Ltd v. Adani Power Rajasthan Ltd (supra) Mr. Rohatgiargued that the issue involved in that case, was the rate at which intereston carrying cost is to be paid. While a specific rate is stipulated in thePower Purchase Agreement for LPS the interest on delayed paymentof carrying cost is not specified in Power Purchase Agreement.Therefore, APTEL directed that charges for deferred payment ofcarrying cost should be paid at the same rate as LPS, since both aremeant for time value of money. This was disputed in the Appeal. ThisCourt, keeping in view the peculiarities of the facts of the case, wherethe power generator was unable to raise bills while the question of changein law raised by the power generator was pending adjudication beforethe MERC and the APTEL reduced the rate of interest on carrying cost

33. (2003) 2 SCC 412 (paras 59 to 62)

34. (2017) 1 SCC 487 (para 31)

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Ato 9%. Mr. Rohatgi submitted that it is important to note that there wasno dispute in relation to Late Payment Surcharge in the case of JaipurVidyut Vitran Nigam Limited (supra).

143. Mr. Singhvi also submitted that Jaipur Vidyut Vitran NigamLtd. v. Adani Power Rajasthan Ltd. (supra) was distinguishable. InBJaipur Vidyut Vitran Nigam Ltd. (supra), there were change in lawclaims for cost of imported coal, made by the generator which weredisputed by the distribution licensee on the ground that the bid submittedby the generator itself was premised on imported coal. Since the principalclaim was disputed by the distribution licensee in the first instance, thegenerator could not raise any supplementary bills, for change in lawCcompensation.

144. In contrast, in this case the bills, payment against which hasbeen delayed, are energy bills, pertaining to energy supplied to theAppellant; and supplied further by the Appellant to its consumers againstpayment of retail tariff. Secondly, the energy bills in question, raised byDthe Respondent Generating Companies have never been disputed by theAppellant. This has duly been noticed by the APTEL in its judgment andorder 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 inEtimely payments for the period between 01.07.2010 and31.03.2017 had crystallized and the dispute as to the rate ofLPS was raised to vex it further.It is not denied that the appellanthad not disputed any of the Monthly Bills or Supplementary Billsas per the procedure prescribed under the PPA.This renderedFthe demands to have become final and conclusive.The noticebased on plea of CIL was issued in 2016, the issue havingremained pending for 5 years, depriving the generators ofthe recompense for the loss suffered. Payment of LPS istriggered only when there is a default by MSEDCL. LPS islevied under the PPAs which were duly executed by MSEDCL.GIn these circumstances, it is inappropriate to project theoutstanding liability towards LPS as an additional burdenbeing placed upon MSEDCL.. “

145. Mr. Mukerjee submitted that the judgment in Jaipur VidyutVitran Nigam Ltd. v. Adani Power Rajasthan Ltd. (supra) to contendH

that the LPS rate should be limited to 9% is misconceived. He submittedthat reliance of the Appellant, on the judgment is inapplicable in the factsof the present case for the following reasons:- A

(i) The matter pertained to a change in law claim which requiredprior adjudication by the Rajasthan Electricity RegulatoryCommission. The liability to pay arose only after the APTELBdismissed the Appeal filed by the Rajasthan Distributioncompanies 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 RajasthanDistribution Companies and not in the context of LPS. Thisis evident from Paragraphs 62, 69, 70, 71 and 73 of thejudgment. The LPS rate is referenced for determining thecarrying cost rate that would apply given the inordinate delayin adjudication of claims and the inability of Adani PowerRajasthan Ltd. to raise bills till the adjudication wascompleted.

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(iii) This Hon’ble Court limited the interest rate in the facts ofthat case and in order to do complete justice. There was nodefault on the part of the Distribution Licencee, JaipurVidyut Vitran Nigam Ltd.

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(iv) In this case, the Appellant has admitted that it delayedpayment. No adjudication was required prior to payment ofmonthly bills. Therefore, the judgment is inapplicable.Reduction of LPS rate will result in rewarding the Appellantfor repeatedly defaulting on its obligations.

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146. Mr. Rohatgi, Mr. Singhvi, Mr. Mukherjee and Ms. Anand allsubmitted that in Jaipur Vidyut Vitran Nigam Ltd v. Adani PowerRajasthan Ltd. (supra), this Court had reduced the rate of interest toSBAR not exceeding 9% per annum, to be compounded annually, inexercise of its power under Article 142 of the Constitution to do completejustice. A direction given in the facts and circumstances of any particularcase, to do complete justice under Article 142 of the Constitution doesnot operate as a precedent.

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147. This appeal is under Section 125 of the Electricity Act, 2003which is set out out hereinbelow for convenience:- H

“125. Appeal to Supreme Court.—Any person aggrieved byany decision or order of the Appellate Tribunal, may, file anappeal to the Supreme Court within sixty days from the dateof communication of the decision or order of the AppellateTribunal, to him, on any one or more of the grounds specifiedin Section 100 of the Code of Civil Procedure, 1908:

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Provided that the Supreme Court may, if it is satisfied that theappellant was prevented by sufficient cause from filing theappeal within the said period, allow it to be filed within afurther period not exceeding sixty days.”

C148. An appeal lies to this Court under Section 125 only on groundspermitted 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 expresslyprovided in the body of this Code or by any other law for theDtime being in force, an appeal shall lie to the High Court fromevery decree passed in appeal by any Court subordinate tothe High Court, if the High Court is satisfied that the caseinvolves a substantial question of law.

(2) An appeal may lie under this section from an appellateEdecree passed ex parte.

(3) In an appeal under this section, the memorandum of appealshall precisely state the substantial question of law involvedin the appeal.

(4) Where the High Court is satisfied that a substantialFquestion of law is involved in any case, it shall formulate thatquestion.

(5) The appeal shall be heard on the question so formulatedand the respondent shall, at the hearing of the appeal, beallowed to argue that the case does not involve such question:

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Provided that nothing in this sub-section shall be deemed totake away or abridge the power of the Court to hear, forreasons to be recorded, the appeal on any other substantialquestion of law, not formulated by it, if it is satisfied that thecase involves such question.”

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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 oflaw” means not only a substantial question of law of general importance,but also any substantial question of law arising in a case between theparties on which the decision in the lis depends. A question of law whicharises incidentally or collaterally and has no bearing on the final outcome,will not be a substantial question of law. Whether the question raised isa question of law and if so, whether the question is a substantial questionof law is also not determined by the enormity of the stakes involved inthe case.

150. In Nazir Mohamed v. J. Kamala and Others (supra), alsocited by Mr. Singh, this Court held that, to be “substantial”, a question oflaw must be debatable, not previously settled by the law of the land orany binding precedent, and must have a material bearing on the decisionof the case and/or the rights of the parties before it, if answered eitherway.

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 supportthe contention of Mr. Singh that there is a substantial question of lawinvolved in this appeal. Rather, the judgments lend support to thecontention of the Respondent-Power Generating Companies that thereis no substantial question of law involved in this appeal.

152. On a conjoint reading of Section 125 of the Electricity Actwith Section 100 of the CPC, it is absolutely clear that an appeal to thisCourt lies on a substantial question of law. The condition precedent forentertaining an appeal under Section 125 of the Electricity Act, 2003 isthe existence of a substantial question.

153. In DSR Steel (P) Ltd. v. State of Rajasthan (supra) citedby Mr. Singhvi, this Court held:- “14. An appeal under Section 125 of the Electricity Act, 2003is maintainable before this Court only on the grounds specifiedin Section 100 of the Code of Civil Procedure. Section 100CPC in turn permits filing of an appeal only if the caseinvolves a substantial question of law. Findings of factrecorded by the courts below, which would in the present case,imply the Regulatory Commission as the court of first instance A

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Aand the Appellate Tribunal as the court hearing the firstappeal, cannot be reopened before this Court in an appealunder Section 125 of the Electricity Act, 2003. Just as theHigh Court cannot interfere with the concurrent findings offact recorded by the courts below in a second appeal underSection 100 of the Code of Civil Procedure, so also this CourtBwould be loath to entertain any challenge to the concurrentfindings of fact recorded by the A

Regulatory Commission and the Appellate Tribunal. Thedecisions of this Court on the point are a legion. Referenceto Govindaraju v. Mariamman [(2005) 2 SCC 500 : AIR 2005CSC

1008] , Hari Singh v. Kanhaiya Lal [(1999) 7 SCC 288 : AIR1999 SC 3325] , Ramaswamy Kalingaryar v. MathayanPadayachi [1992 Supp D(1) SCC 712 : AIR 1992 SC 115] , Kehar Singh v. Yash Pal[AIR 1990 SC 2212] and Bismillah Begum v. RahmatullahKhan [(1998) 2 SCC 226 : AIR 1998 SC 970] should, however,suffice.”

154. In Wardha Power Co. Ltd. v. Maharashtra StateEElectricity Distribution Co. Ltd. (supra) also cited by Mr. Singhvi, thisCourt held:-

“5. Under Section 125 of the Electricity Act, 2003, an appealto this Court lies only when there is a substantial question oflaw, as required for a second appeal under Section 100 ofFthe Code of Civil Procedure, 1908. Though the appellant hasraised 34 questions, they are actually grounds for attackingthe appellate order. Grounds for attacking an order aredifferent from substantial question of law evolved in theappeal. On appreciation of the correspondence between theparties during the subsistence of the agreement, both theGCommission and the Appellate Tribunal have held against theappellant.”

155. In Tuppadahalli Energy India (P) Ltd. v. KarnatakaElectricity Regulatory Commission and Anr. (supra), this Court heldthat the view taken by the Kerala State Electricity Regulatory CommissionHand APTEL in interpreting of Clause 6(5) of the Power Purchase Agreement as an incentive, being a plausible view, there was nosubstantial question of law to warrant interference under Section 125 ofthe Electricity Act.

156. In Ramanuja Naidu v. V Kanniah Naidu and Another[35],cited by Mr. Rohatgi, this Court held:- “7. The scope of Section 100 of Civil Procedure Code evenbefore the amendment of the section in 1976 has been neatlysummarised 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 recentamendment allowed a second appeal only on the grounds setout in clauses (a), (b) or (c). Therefore, whereas a Court ofFirst Appeal is competent to enter into questions of fact anddecide for itself whether the findings of fact by the lowerCourt are or are not erroneous, a Court of Second Appealwas not and is not competent to entertain the question as tothe soundness of a finding of fact by the court below. A secondappeal, accordingly, could lie only on one or the othergrounds specified in the section. ....

8. In Madamanchi Ramappa v. Muthalur Bojjappa[(1964) 2 SCR 673 : AIR 1963 SC 1633] , speaking for athree-member Bench, Gajendragadkar, J. summarised the lawthus: (SCR pp. 683-85)

“The question about the limits of the powers conferredon the High Court in dealing with second appeals has beenconsidered by High Courts in India and by the Privy Councilon several occasions. One of the earliest pronouncements ofthe Privy Council on this point is to be found in the case ofDurga 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 hadoccasion to refer to the said decision of the Privy Counciland it was constrained to observe that ‘notwithstanding suchclear and authoritative pronouncements on the scope of theprovisions of Section 100, CPC, some learned Judges of the A

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High Courts are disposing of second appeals as if they werefirst appeals. This introduces, apart from the fact that theHigh Court assumes and exercises a jurisdiction which it doesnot possess, a gambling element in litigation and confusionin the mind of the litigant public.’ On this ground, this Courtset aside the second appellate decision which had beenbrought before it by the appellants.

In R. Ramachandran Ayyar v. Ramalingam Chettiar[(1963) 3 SCR 604 : AIR 1963 SC 302] , this Court hadoccasion to revert to the same subject once again. The truelegal position in regard to the powers of the second appellatecourt under Section 100 was once more examined and it waspointed out that the learned Judges of the High Courts shouldbear in mind the caution and warning pronounced by thePrivy Council in the case of Durga Choudhrain and shouldnot interfere with findings of fact.

It appears that the decision of this Court in DeityPattabhiramaswamy, was in fact cited before the learnedSingle Judge, but he was inclined to take the view that someaspects of the provisions contained in Section 100 of the Codehad not been duly considered by this Court and so, he thoughtthat it was open to him to interfere with the conclusions of thecourts below in the present appeal. According to the learnedJudge, it is open to the second appellate court to interferewith the conclusions of fact recorded by the District Judgenot only where the said conclusions are based on no evidence,but also where the said conclusions are based on evidencewhich the High Court considers insufficient to support them.In other words, the learned Judge seems to think that theadequacy or sufficiency of evidence to sustain a conclusionof fact is a matter of law which can be effectively raised in asecond appeal. In our opinion, this is clearly a misconceptionof the true legal position. The admissibility of evidence is nodoubt a point of law, but once it is shown that the evidenceon which courts of fact have acted was admissible and relevant,it is not open to a party feeling aggrieved by the findingsrecorded by the courts of fact to contend before the HighCourt in second appeal that the said evidence is not sufficient to justify the findings of fact in question. It has been alwaysrecognised that the sufficiency or adequacy of evidence tosupport a finding of fact is a matter for decision of the courtof facts and cannot be agitated in a second appeal. Sometimes,this position is expressed by saying that like all questions offact, sufficiency or adequacy of evidence in support of a caseis also left to the jury for its verdict. This position has alwaysbeen accepted without dissent and it can be stated withoutany doubt that it enunciates what can be properlycharacterised as an elementary proposition. Therefore,whenever this Court is satisfied that in dealing with a secondappeal, the High Court has, either unwittingly and in a casualmanner, or deliberately as in this case, contravened the limitsprescribed by Section 100, it becomes the duty of this Courtto intervene and give effect to the said provisions. It may bethat in some cases, the High Court dealing with the secondappeal is inclined to take the view that what it regards to bejustice or equity of the case has not been served by thefindings of fact recorded by courts of fact; but on suchoccasions it is necessary to remember that what is administeredin courts is justice according to law and considerations offair play and equity however important they may be, mustyield to clear and express provisions of the law. If in reachingits decisions in second appeals, the High Court contravenesthe express provisions of Section 100, it would inevitablyintroduce in such decisions an element of disconcertingunpredictability which is usually associated with gambling;and that is a reproach which judicial process must constantlyand scrupulously endeavour to avoid.”

9. In Dudh Nath Pandey v. Suresh Chandra Bhattasali[(1986) 3 SCC 360] , a Bench of this Court held that: (SCCHeadone P.360)

“High Court cannot set aside findings of fact of firstappellate court and come to a different conclusion onreappraisal of evidence.”

10. There are innumerable subsequent decisions of thisCourt which have held that concurrent findings of fact oftrial court and first appellate court cannot be interfered with ABC

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by the High Court in exercise of its jurisdiction under Section100 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. KurungotImbichia Moidu’s son Ayammad [1990 Supp SCC 9] , etc.)

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B11. We are of the view that in interfering with theconcurrent findings of facts of the lower courts, the learnedSingle Judge of the High Court acted in excess of thejurisdiction vested in him under Section 100 of CivilProcedure Code. The learned Judge totally erred in hisapproach to the entire question and in reappraising andCreappreciating the entire evidence and in considering theprobabilities of the case, to hold that the judgments of thecourts below are ‘perverse’ and that the plaintiff is entitled tothe declaration of title to suit property and recovery ofpossession.D[[36]]

157. In Navaneethammal v. Arjuna Chetty[[36]], this Court heldthat interference with concurrent findings of the courts below must beavoided under Section 100 of the CPC unless warranted by compellingreasons. In any case, this Court is not expected to reappreciate theevidence.

E158. The questions of law raised by Mr. Vikas Singh, which havebeen set forth hereinabove in Paragraph 15, would not have a materialbearing on the decision in this appeal, for the reasons discussedhereinafter.

159. The only issue in this appeal is, whether the change applicableFin respect of interest charged by banks and financial institutions fromthe Prime Lending Rate to Base Rate and then to MCLR amounts tochange 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 thisGCourt to reanalyze evidence adduced before the forums below or to sitin appeal over concurrent findings of facts.

160. There can be no doubt that a notification issued by the ReserveBank of India constitutes law. A Reserve Bank of India notification whichalters, modifies, cancels or replaces an earlier notification would tantamount to a change in law. However the notification relating toalteration of the lending rates chargeable by banks and financial institutionsare 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 Stage1 Agreements or Article 10 of the Stage 2 Agreements.

161. The RBI circulars/guidelines referred to above are admittedlyinstructions issued to banks and financial institutions and are not applicableto the Appellant or to the Respondent-Power Generating Companies,who are engaged in the business of production, sale/purchase and/ordistribution of electricity and not of advancing loans. Moreover, SBARas defined in the Power Purchase Agreements is admittedly not linkedto any RBI guidelines or circulars. The guidelines/circulars are thus notrelevant to the issues involved in this appeal.

162. As rightly argued by the counsels appearing for the PowerGenerating Companies, the RBI circulars/guidelines to banks, advisingthe banks to follow certain norms, while setting their benchmark referencerates for loans, and the amendments thereto, have no legal consequenceon the contract between the parties. This has been correctly appreciatedby 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 notresult in invalidation of a contract even between a bank and a third partyand the consequence for violation is penalty as provided for in Section46 of the Banking Regulation Act. The RBI Circulars/Guidelines cannottherefore vary or modify a contract between two parties.

164. As pointed out by Counsel appearing on behalf of theRespondent- Power Generating Companies and admitted on behalf ofthe Appellant, SBI has been notifying and continues to notify PrimeLending Rates for its loans. The Appellant itself has given the averagePLR notified by SBI from 2010 till date in its application being I.A. No.69796 of 2021. Therefore, Late Payment Surcharge as per the PowerPurchase Agreement has been calculated at the rate of 2% in excess ofthe SBI notified Prime Lending Rate.

165. From paragraph 12 of the impugned judgment and order ofthe APTEL, it appears that the Appellant conceded before the APTELthat the SBI continues to issue the PLR rates till date. The relevant partof the impugned judgment and order is reproduced hereinbelow:- A

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A“....It is fairly conceded that SBI continues to issue the PLRrates till date…”

166. The definition of SBAR is clear and has been correctly appliedby both the forums below. There are concurrent findings of fact that theSBI PLR (i.e. the benchmark reference rate mentioned in the PPA) isBstill being published and is available. The Court cannot, at this stage of asecond appeal under Section 125 of the Electricity Act reopen the factualquestion of whether at all PLR rates were being notified by SBI forshort term loans.

167. Therefore, as submitted on behalf of the Respondent-PowerCGenerating Companies, there is no substantial question of law involvedin 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 ofDIndia (SBI) from time to time for loans with one year maturity. LPS is tobe calculated at the rate of 2% in excess of the PLR for loans with 1year maturity, as fixed from time to time by SBI. Moreover, the partieshave consciously agreed that in the absence of such rate, the LPS rateshall be mutually agreed to by the Parties.

E169. As argued by Mr. Rohatagi, Mr. Singhvi and Mr. Mukherjee,the purpose for which the Guidelines/Circulars have been issued by theReserve Bank of India or their impact on the rates of interest on loansand advances, are not relevant to this appeal.

170. The provision in the Power Purchase Agreement, wherebyFthe parties are to mutually agree on a rate of interest, in case there is noSBI Prime Lending Rate, in itself excludes the applicability of the generalprovision for Change in Law contained in Article 13 of the PowerPurchase Agreement to Late Payment Surcharge.

171. In Adani Power (Mundra) Ltd. v. Gujarat ElectricityGRegulatory Commission (supra), this Court found :- “38. In the present case, the perusal of various Articles wouldreveal that the provisions under Article 14 are general innature. The provision under Article 3.4.2 is specific, only tobe invoked in the case of non-compliance with any of theHconditions as provided under Article 3.1.2…..”

172. The APTEL correctly found that:-

“13.... On the contrary, there is a conscious exclusionregarding any suo moto change in the rate to be applied whilecalculating LPS,it being incorrect to argue on the assumptionthat the contract permits automatic change in system.”

173. This Court is unable to accept Mr. Singh’s submission thatthe conclusion of APTEL that LPS is not tariff is erroneous. The meaningof the expression tariff has to be considered, and has rightly beenconsidered by APTEL in the context of the relevant provision of thePower Purchase Agreements. The dictionary meaning of tariff may becharge. However, in Article 13 of the Stage 1 and Article 10 of theStage 2 Power Purchase Agreements, tariff means monthly tariff andtariff adjustment consequential to change in law, is of monthly tariff inrespect of supply of electricity.

174. As argued by the Respondent- Power Generating Companiesappearing through Mr. Rohatagi, Mr. Singhvi, Mr. Mukherjee and Ms.Anand respectively, LPS is only payable when payment against monthlybills is delayed and not otherwise.

175. The object of LPS is to enforce and/or encourage timelypayment of charges by the procurer, i.e. the Appellant. In other words,LPS dissuades the procurer from delaying payment of charges. Therate of LPS has no bearing or impact on tariff. Changes in the basis ofthe rates of LPS do not affect the rate at which power was agreed to besold and purchased under the Power Purchase Agreements. The principleof restitution under the Change in Law provisions of the Power PurchaseAgreements are attracted in respect of tariff.

176. LPS cannot be equated with carrying cost or actual costincurred for the supply of power. The Appellant has a contractualobligation to make timely payment of the invoices raised by the PowerGenerating Companies, subject, of course, to scrutiny and verification ofthe same. Mr. Mukul Rohatgi has a point that if the funding cost was somuch lesser than the rate of LPS, as contended by the Appellant, theAppellant could have raised funds at a lower rate of interest, made timelypayment of the invoices raised by the Power Generating Companies,and avoided LPS.

177. The proposition that Courts cannot rewrite a contract mutuallyexecuted between the parties, is well settled. The Court cannot, through A

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Aits interpretative process, rewrite or create a new contract between theparties. The Court has to simply apply the terms and conditions of theagreement as agreed between the parties, as observed by this Court inShree Ambica Medical Stores and Ors. v. Surat People’s Co-operative Bank (supra), cited by Ms. Divya Anand. This appeal is anattempt to renegotiate the terms of the PPA, as argued by Ms. DivyaBAnand as also other Counsel. It is well settled that Courts cannot substitutetheir own view of the presumed understanding of commercial terms bythe parties, if the terms are explicitly expressed. The explicit terms of acontract are always the final word with regard to the intention of theparties, as held by this Court in Nabha Power Ltd. (NPL) vs. PunjabCState Power Corporation Ltd. (supra) cited by Ms. Anand.

178. There is substance in Ms. Anand’s argument that the Appellantis obliged to seek amendment of the provisions of the Power PurchaseAgreement only in accordance with the agreed procedure for amendmentof the terms thereof. The agreed rate of Late Payment Surcharge canDonly be amended in the absence of SBI PLR and that too with the mutualconsent of the parties to the Power Purchase Agreement.

179. The argument that the Power Generating Companies areavailing loans at a lesser rate of interest, but charging LPS on the basisof a higher rate of interest, leading to unjust enrichment, is untenable inElaw. LPS under the Power Purchase Agreements do not correspond tothe actual interest paid by the Power Generating Companies for fundsraised by them. The payment of Late Payment Surcharge LPS penaltysuffered by the Procurer, that is, the Appellant, on account of default intimely payment.F180. As observed above, the Parties to the Power PurchaseAgreements have mutually and consciously agreed to the incorporationof the PLR as notified by SBI from time to time, as the rate for levy ofLPS. Therefore, by virtue of the doctrine of incorporation, the PLR asnotified by SBI each year gets incorporated in the Power PurchasingAgreements, as binding between the parties. Thus, any other systemGnotified by the Reserve Bank of India by its circulars has no bearing onthe terms of the Power Purchase Agreement and cannot be deemed tobe incorporated in the Power Purchase Agreement, except in case ofmutual agreement between the parties, in the event of absence of SBIPLR, and approved by the MERC.

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181. As argued by Ms. Anand, conceptually, PLR, Base Rate andMCLR are not comparable. The submission that the definition of SBARshould be read in the context of MCLR instead of PLR, is therefore nottenable. PLR is the internal benchmark rate for charging of interest onfloating rate loans, calculated on the basis of average cost of funds andthe loans were offered at a discount on their existing PLR. However,Base Rate is the lending rate calculated based on the total cost of fundsof 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 againstbank’s own deposits. MCLR is a lending rate calculated on the cost ofraising new funds for the bank which include the cost of maintainingCRR/SLR (Credit Reserve Ratio/Statutory Liquidity Ratio), operatingcosts of banks and tenor premium. MCLR is the lowest interest ratethat a bank or lender can offer. Thus, loans are offered at a markup onthe MCLR. Thus, the basis of both the rates are different and cannot becompared, as has been sought to be done by the Appellant. When PLR,Base Rate and MCLR are compared side by side. The difference is thatvery 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 ReserveBank of India circulars are to be considered as Change in Law, sinceArticle 13.3.1 of the Stage 1 agreements corresponding to Article 10.4.1of the Stage 2 agreements provides that notices of Change in Law eventsare to be issued by the affected party, as soon as reasonably practicable,after the affected party becomes aware of Change in Law event orwhen it should reasonably have known of the Change in Law.

183. In this case, the changes cited by the Appellant were effectedby RBI from July 2010 and April 2016 and notified in advance. TheAppellant issued notices of Change in Law as late as in September2016, more than six years after the Reserve Bank of India introducedthe base rate system in place of the BPLR system. Furthermore, whilethe guidelines on the base rate system were published on 9[th] April 2010and introduced with effect from 01.07.2010, the Appellant entered intoPower Purchase Agreements with the Respondent No. 2 on 9[th] August2010 and on 16[th] February 2013 incorporating PLR as the Late PaymentSurcharge rate for supply of contracted quantum of electricity to theAppellant.

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A184. Significantly, the Appellant charges interest from its consumersfor 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 thatinterest rate is not co-related to the actual interest rate on loans taken bythe Appellant or by Power Generating Companies. According to theRespondent- Power Generating Companies, no other distribution licenceeBother than the Appellant has raised the claim of Change in Law. Allother Distribution Licencees procuring electricity from producers ofelectricity pay LPS in accordance with the respective Power PurchaseAgreements.

185. In Halliburton Offshore Services Inc. v. Vedanta LimitedC& Anr., O.M.P (I) (COMM.) No. 88/2020, decided on 29.05.2020to which reference was made by Ms. Anand, the Delhi High Court aptlyremarked that the outbreak of a pandemic cannot be used as an excusefor non-performance of a contract for which the deadlines were muchbefore the outbreak itself. In the aforesaid case, the Delhi High CourtDrightly observed that the Court, while considering the plea of nonperformance of the condition due to outbreak of the COVID-19 pandemic,ought to examine factors such as the conduct of the parties prior to theoutbreak.

186. Admittedly, the Appellant has landed itself in its presentEpredicament, due to delay in making timely payments to the RespondentPower Generating Companies. There was no pandemic at the time offiling of the petition before the MERC in 2017 and the Appeal before theAPTEL in 2018. It, cannot, therefore be said that the Appellant defaultedin payment of bills by reason of its financial predicament as a result ofthe outbreak of COVID 19 in India, which was in March 2020.F

187. Extensive submissions have been made by Mr. Singh, toimpress upon the Court, that the Appellant committed default in paymentof the bills raised by the Power Generating Companies on account ofvarious circumstances, beyond its control. The various circumstancesmentioned by the Appellant, which allegedly impacted the financialGposition of the Appellant, have no bearing on the merits of the Appeal.Mr. Rohatgi, Mr. Singhvi, Mr. Mukerjee and Ms. Anand submitted inone voice that the delays in payment and/or non-payment of the invoicesraised by the Power Generating Companies for the supply of power tothe Appellant, had put the Respondent-Power Generating CompaniesHunder immense financial stress, as their source of revenue is from the sale and supply of power generated from their power plants. TheRespondent Power Generating Companies cannot be burdened with theconsequences of the Appellant’s defaults.

188. The judgment of this Court in M/s Kailash Nath Associatesv. Delhi Development Authority (supra) cited by Mr. Singh is clearlydistinguishable since this Court found that there had been no breach ofcontract by the Appellant (Para 44). Further, the Court did not acceptthe view of the Division Bench, that the fact that DDA had made aprofit from re-auction was irrelevant, since compensation for breach ofa contract can be given for damage or loss suffered. If no damage issuffered by reason of the breach, the law does not provide for a windfall.

189. In this case, the Appellant admittedly did not pay the billsraised by the Power Generating Companies within time. The PowerPurchase Agreements provided for Late Payment Surcharge on thepresumption that delayed payment of bills causes prejudice and loss tothe seller whose bill remains outstanding. Accordingly, the Appellant alsoimposes delayed payment charges on its consumers, who pay their billsafter 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 theSBAR is neither unreasonably exorbitant nor arbitrary. It cannot be saidthat the LPS agreed upon is not a genuine pre estimate of damages.

190. The issues raised in this appeal are almost identical to theissues involved in Union of India v. Association of Unified TelecomService Providers of India & Ors.[37]where this Court was consideringan identical interest clause in a contract which is reproduced hereinbelow:

“In re: Levy of interest, penalty, and interest on penalty. Para182. Levy of licence fee is provided in Clause 20.2. In caseof any delay in payment of licence fee beyond the stipulatedperiod would attract penalty at the rate, which would be 2%above the prime lending rate (PLR) of State Bank of India. Asper Clauses 20.5 and 20.8, if the licensee does not pay thedemand, consequences would follow. The clauses areextracted hereunder:

“20.5. Any delay in payment of licence fee payable or anyother dues payable under the Licence beyond the stipulatedperiod will attract interest at a rate which will be 2% above A

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Athe prime lending rate (PLR) of State Bank of Indiaexistingas on the beginning of the financial year (namely 1st April)in respect of the licence fees pertaining to the said financialyear. The interest shall be compounded monthly and a part ofthe month shall be reckoned asa full month for the purposesof calculation of interest. A month shall be reckoned as anBEnglish calendar month.”

191. In the aforesaid case, the licensee had contended that underSection 74 of the Contract Act, compensation has to be reasonablecompensation. This Court after considering Hindustan Steel Ltd. v.State of Orissa[38], Akbar Badrudin Giwani v. Collector of Customs[39],CJaiprakash Industries Ltd. v. Commissioner of Central Excise,Chandigarh[40], Tecumseh Products (India) Ltd. v. Commissioner ofCentral Excise, Hyderabad[41], J.K. Synthetics Ltd. v. CommercialTaxes Officer[42], Kailash Nath Associates v. Delhi DevelopmentAuthority and Another[43]and Central Bank of India v. Ravindra andDOthers[44]. This Court after considering the above- mentioned judgmentsof this Court cited on behalf of the licensee held that none of the decisionswould come to the aid of the licensee. This Court held:

“192....The ratio of the case, it is not attracted for the reasonthat in the instant matter, it is the contractual rate of interestEand penalty agreed to which cannot be said to be arduous inany manner. The rate of interest has been agreed andparticularly since it is a revenue sharing regime, and thelicensees have acted in conscious disregards of theirobligation. Thus on the anvil of the decision above also, theyare liable to pay the dues with interest and penalty……F

…… There is no such discretion available when the partieshave agreed in default what amount is to be paid. Itautomatically follows that it is not to be determined by thelicensor once over again. Parties (licensor and licensees) arebound by the terms and conditions of the contract. There isG38 1969 (2) SCC 62739 1990 (2) SCC 20340 2003 (1) SCC 6741 2004 (6) SCC 3042 1994 (4) SCC 27643 2015 (4) SCC 136H44 2002 (1) SCC 367

no enabling clause to vary eitherthe rate of interest or thepenalty provided therein and even if permissible, it is not calledfor to vary interest or penalty fixed underthe agreement inthe facts and circumstances of the case……

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

192. It would perhaps be pertinent to note that stereotype PowerPurchase Agreements containing identical terms and conditions areexecuted by the Appellant with different Power Generating Companies.It is patently obvious that the Power Generating Companies only agreeto terms and conditions of an agreement prepared by the Appellant. It isdifficult to accept that the Appellant should incorporate in their stereotypePower Purchase Agreements, a provision for payment of LPS at a rate2% 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 PowerGenerating Company, by reason of non payment of bills in time, more sowhen the Late Payment Surcharge is linked to the rate of interest inrespect of specific types of loan, charged by a leading nationalised bankwith the largest numbers of branches spread all over the country includingin mofussil and rural areas.

193. In any case, in this second appeal under Section 125 of theElectricity Act 2003, which is only to be heard on a substantial questionof law, this Court would not embark upon the exercise of making afactual enquiry into the mode and manner in which the Power GeneratingCompanies meet their working capital requirements and interest thatindividual Power Generating Companies pay to their lenders.

194. It is axiomatic that the Power Purchase Agreements providefor computation of Late Payment Surcharge in a particular manner toavoid the time consuming exercise of assessing the losses of individualPower Generating Companies by reason of late payment of their bills.The SBAR has been made the bench mark for computation of LatePayment Surcharge, irrespective of whether the Power GeneratingCompanies are financed by the State Bank of India or any of itssubsidiaries. The LPS provision is in the nature of a caution to arrangetheir affairs and finances keeping the upper limit of LPS of 2% above A

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195. There being no dispute in the present case with regard to theprincipal sums due under the monthly bills, interest on delayed paymentat 2% in excess of SBI PLR cannot be said to be arbitrarily high. ThereBis no reason for this Court to reduce the contractual rate of interest andthereby alter or modify the contract between the parties, in exercise ofits powers under Article 142 of the Constitution of India.

196. We need not go into the question whether or not the Appellanthas funds to clear its interest liability. The Appellant cannot continue toCget supply of electricity without having appropriate funds. Appellant wouldnecessarily have to raise funds to clear its contractual obligations.

197. Even assuming that the burden of interest would have to bepassed on to the consumers, that cannot be the ground for the Appellantto resile from its contractual commitment to the Power GeneratingCompanies. The Appellant cannot pass on the burden for delay in makingDpayment to the Power Generating Companies. In any case the claims asargued by Mr. Singhvi pertains to a period of three years before filing ofthe petition before the MERC on 2[nd] December, 2016 and thereforebarred by limitation.

198. Reliance by the Appellant, upon the tariff regulations framedEby MERC for determination of tariff for Power Generating Companiesunder Section 62 of the Electricity Act 2003, is untenable since the TariffRegulations have no application in this case where PPAs have beenexecuted pursuant to a bidding process, under Section 63 of the ElectricityAct.F199. MERC, rightly rejected the claim of the Appellant by its orderdated 16.11.2017, holding:

“12 .................................... However, the LPS provision isattracted only when the payments are not made by MSEDCL against the Monthly BillsGof the Seller within the time stipulated in the PPA’s. Any changesin the basis of the LPS rates, consequent to revisions by theRBI do notaffect in any manner, the rates at which the powerwas agreed to be sold and purchased under the PPA’s and inthe consequent financial implication for either party resultingHin 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 awhole, there is no doubt that provision for compensation tothe affected party for a Change in Law event is essential withregard to tariff only. The rate of LPS has no bearing or impacton tariff. Any possible changes in the basis of the LPS ratesconsequent to revisions by the RBI, or for that matter, SBIwould not affect the rate at which powerwas agreed to besold and purchased under the PPAs and consequently thereis no financial implications on expenditure or income for eitherParty. The LPS only recompenses what was lost in terms ofreal value of money due to delay in payment.”

201. The decision of this Court in Jaipur Vidyut Vitran NigamLtd. (supra) is distinguishable on facts. In Jaipur Vidyut Vitran NigamLtd. (supra), there were change in law claims for cost of importedcoal, made by the Power Generating Company which were disputedby the distribution licensee on the ground that the bid submitted bythe Generating Company was premised on imported coal. Since theprincipal claim was disputed by the distribution licenseein the firstinstance, the Generating Company could not raise anysupplementary 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 suppliedfurther by the Appellant to its consumers against payment of retail tariff.Secondly, the energy bills in question, raised by the respondent PowerGenerating Companies have never been disputed by the Appellant, asnoticed by the APTEL in the impugned judgment and order, the relevantpart whereof is extracted hereunder:- “24. It is submitted by the contesting respondents (generators)that LPS liability of the appellant on account of defaults intimely payments for the period between 01.07.2010 and31.03.2017 had crystallised and the dispute as to rate of LPSwas raised to vex it further. It is not denied that the appellanthad not disputed any of the Monthly Bills or SupplementaryBills as per the procedure prescribed under the PPA. Thisrenders the demands to have become final and conclusive.The notice based on plea of CIL was issued in 2016, the issuehaving remained pending for five years, depriving the AB

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Agenerators of the recompense for the loss suffered. Paymentof LPS is triggered only when there is a default by MSEDCL.LPS is levied under the PPAs which were duly executed byMSEDCL. In these circumstances, it is inappropriate to projectthe outstanding liability towards LPS as an additional burdenbeing placed upon MSEDCL..”B203. Mr. Singh’s challenge to the impugned judgment and orderon the ground of the directions on the Appellant to make payment of theLPS found due and payable, within a stipulated date, is also not sustainable.

204. APTEL is not bound by the procedure laid down in the CivilCProcedure Code, as argued by Mr. Mukerjee. Directions for time boundpayment within a prescribed time frame are in conformity with thejudgment of this Court in Jaipur Vidyut Vitran Nigam Ltd. v. AdaniPower (supra) which has been upheld by this Court. Moreover, one ofthe objectives of the Electricity Act is time bound disposal of matters.This is evident from various provisions of the said Act including inDparticular Section 111(5) of the Act. Since APTEL and MERC are notbound by the procedure as laid down in the Civil Procedure Code, it wasopen to APTEL to pass such orders as would finally put an end to litigation.

205. It is now well settled by various decisions of this Court thatan Electricity Regulatory Commission such as MERC constituted underEthe Electricity Act, 2003 has all the trappings of a Court. The MERC isa substitute for a Civil Court in respect of all disputes between licenseesand Power Generating Companies. This proposition finds support fromthe judgments of this Court in Tamil Nadu Generation & DistributionCorporation Ltd. v. PPN Power Generating Co. Pvt. Ltd.[45], AndhraFPradesh Power Coordination Committee & Ors. v. Lanco KondapalliPower Ltd. & Others.[46]and Gujarat Urja Vikas Nigam Limited v.Amit Kumar & Others[47]cited by Mr. Vishrov Mukerjee.

206. As held by this Court in State of Karnataka v.Vishwabharathi House Building Cooperative Society and Others[48],cited by Mr. Mukerjee, Courts have the power to execute their ownGorder. The impugned judgment and order cannot, therefore, be faultedfor giving directions for payment of the outstanding dues of the Appellant.

45 (2014) 11 SCC 53

46 (2016) 3 SCC 468

47 (2021) SCC OnLine 194H48 (2003) 2 SCC 412 (Paras 59-62)

Moreover, State Regulatory Commissions exercise continuous regulatorysupervision as affirmed by this Court in All India Power EngineeringFederation & Ors. v. Sasan Power Limited & Others[49], cited by Mr.Mukerjee.

207. MERC acted within the scope of its power of regulatorysupervision in directing the Appellant to make payment of LPS withinthe time stipulated in the order of MERC. The APTEL rightly upheldthe direction. In any case, such a direction cannot be interfered with inexercise of powers under Section 125 of the Electricity Act whichcorresponds to the power of Second Appeal under Section 100 of theCPC, since the sine qua non for entertaining an appeal is the existenceof a substantial question of law.

208. After the the hearing of this appeal was concluded and theappeal was reserved for judgment, the Appellant filed an application tobring on record additional facts and documents in the form of queriesunder the Right to Information Act, 2005 made by one Alka Mehta tothe State Bank of India and the responses thereto in an attempt to showthat PLR would not apply to short term loans advanced by SBI aftertransition to the Base Rate/MCLR system. This Court cannot take noteof any documents sought to be introduced after the conclusion of hearing.In any case, as observed above, this Court cannot in a second appealunder Section 125 of the Electricity Act, 2003 interfere with concurrentfactual findings arrived at by MERC and APTEL on the basis of factsadmitted by the Appellant. The Appellant had been accepting the invoicesraised by the Respondent–Power Generating companies and accountshad duly been reconciled by the Appellant. The LPS charged by theRespondent Power Generating Companies was never disputed. Furthermore, this Court cannot look into documents introduced for the first timein this second appeal, which were not tendered in evidence before theMERC 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 berelied upon in evidence, by the Appellant.

209. For the reasons discussed above, we find no grounds tointerfere with the judgment and order of the learned APTEL confirmingthe judgment and order passed by MERC. The appeal is accordinglydismissed.

Nidhi Jain

Appeal dismissed.

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