UTTAR HARYANA BIJLI VITRAN NIGAM LTD. AND versus ADANI POWER (MUNDRA) LIMITED AND ANOTHER on 24 August 2022

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SUPREME COURT REPORTS

[2022] 11 S.C.R.

AUTTAR HARYANA BIJLI VITRAN NIGAM LTD. ANDANOTHER

v.

ADANI POWER (MUNDRA) LIMITED AND ANOTHER

(Civil Appeal No. 7129 of 2021)

B

AUGUST 24, 2022

[N. V. RAMANA, CJI, KRISHNA MURARI,HIMA KOHLI, JJ.]

Electricity – Power Purchase Agreements (PPAs) – Arts. 11,C13 – ‘Change in Law’ event – Restitutionary principles – Appellants(distribution licensees) if liable to pay simple interest or compoundinterest on the carrying cost to respondent no.1 (power generatingcompany) – Held: Relief relating to carrying cost was granted torespondent no.1 by the Appellate Tribunal vide order dtd. 13.04.18Dwhich was duly upheld by Supreme Court in a previous litigationbetween the same parties – Once carrying cost has been granted infavour of the respondent no.1, appellants cannot urge that intereston carrying cost should be calculated on simple interest basisinstead of compound interest basis – Idea behind granting intereston carrying cost is aimed at restituting a party that is adverselyEaffected by a Change in Law event and restore it to its originaleconomic position as if such a Change in Law event had not takenplace – In the instant case, the respondent no.1 had to incur expensesto purchase the Flue Gas Desulfurization (FGD) unit and install itin view of the terms and conditions of the Environment ClearanceFgiven by Ministry of Environment and Forests, Union of India, in2010 – For this, it had to arrange finances by borrowing from banks– Respondent no.1 justified in stating that if the banks have chargedit interest on monthly rest basis for giving loans to purchase theFGD, any restitution will be incomplete, if it is not fully compensatedfor the interest paid by it to the banks on compounding basis –GRestitutionary principles encapsulated in Article 13.2 of the PPAswould take effect for computing the impact of Change in Law –Appellate Tribunal justified in allowing interest on carrying cost infavour of respondent no.1 for the period between 2014, when theFGD was installed, till 2021 – Central Commission not justified inHexcluding the period between 2014 and 2018 and grant relief from UTTAR HARYANA BIJLI VITRAN NIGAM LTD. v. ADANIPOWER (MUNDRA) LTD.

the date of the passing of the order i.e., from 28.03.18 to 2021 –Impugned order passed by Appellate Tribunal upheld – ElectricityAct, 2003 – s.125.

Dismissing the appeal, the Court

HELD: 1.1 The appellants have not raised any dispute withregard to grant of interest to the respondent No. 1 by way ofcarrying cost from the date on which the Change in Law eventtook place till the date the amount was determined as payable torespondent No. 1 in terms of the order dated 28th March, 2018,passed by the Central Commission. The only issue that has arisenfor consideration is whether the appellants are liable to pay simpleinterest or compound interest on the carrying cost. The relevantArticles of the PPAs are Article 11, that deals with billing andpayment and Article 13, that deals with Change in Law. This Courtis more specifically concerned with Articles 11.3.4, 11.8.1 and11.8.3 that have been cited by counsel for the appellants to urgethat only Late Payment Surcharge (LPS) is payable by theappellants (procurer) to the respondent No. 1 (seller) at the ratementioned in Article 11.3.4, but not beyond that. The respondentNo. 1 has relied on Articles 13.2 and 13.4 of the PPAs. [Para 12-14][111-D-G]

1.2 Article 13 has been discussed threadbare by this Courtin a previous litigation between the same parties decided on 25thFebruary, 2019. It is clear that the restitutionary principlesencapsulated in Article 13.2 would take effect for computing theimpact of Change in Law. There is no reason to interfere with theimpugned judgment, wherein it has been held by the AppellateTribunal that the respondent No. 1 had started claiming Changein Law event compensation in respect of installation of FGD alongwith carrying cost, right from the year 2012 and that it hasapproached several fora to get this claim settled. The respondentNo. 1 finally succeeded in getting compensation towards FGDonly on 28th March, 2018, but the carrying cost claim was denied.The relief relating to carrying cost was granted to the respondentNo. 1 by the Appellate Tribunal vide order dated 13th April, 2018which was duly tested by this Court and upheld on 25th February,20196. Once carrying cost has been granted in favour of therespondent No. 1, it cannot be urged by the appellants that ABCD

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Ainterest on carrying cost should be calculated on simple interestbasis instead of compound interest basis. Grant of compoundinterest on carrying cost and that too from the date of theoccurrence of the Change in Law event is based on sound logic.The idea behind granting interest on carrying cost is aimed atrestituting a party that is adversely affected by a Change in LawBevent and restore it to its original economic position as if such aChange in Law event had not taken place. [Para 15, 16][114-C-D; 115-G; 116-A-C]

Uttar Pradesh Bijli Vitran Nigan Ltd. (Uhbvnl) & Anr.v. Adani Power Ltd. & Ors. (2019) 5 SCC 325 : [2019]C4 SCR 487 – relied on.

1.3 In the instant case, the respondent No. 1 had to incurexpenses to purchase the FGD and install it in view of the termsand conditions of the Environment Clearance given by theMinistry of Environment and Forests, Union of India, in the yearD2010. For this, it had to arrange finances by borrowing from banks.The interest rate framework followed by Scheduled Commercialbanks and regulated by the Reserve Bank of India mandates thatinterest shall be charged on all advances at monthly rests. In thisview of the matter, the respondent No. 1 is justified in statingEthat if the banks have charged it interest on monthly rest basisfor giving loans to purchase the FGD, any restitution will beincomplete, if it is not fully compensated for the interest paid byit to the banks on compounding basis. Interest on carrying costis nothing but time value for money and the only manner in whicha party can be afforded the benefit of restitution in every whichFway. In the facts of the instant case, the Appellate Tribunal wasjustified in allowing interest on carrying cost in favour of therespondent No. 1 for the period between the year 2014, whenthe FGD was installed, till the year 2021. There was nojustification for the Central Commission to have excluded theGperiod between 2014 and 2018 and grant relief from the date ofthe passing of the order i.e., from 28th March, 2018 to 2021; noris there any logic to such a segregation of time lines, particularlywhen the respondent No. 1 was prompt in raising a claim on theappellants and pursuing its legal remedies. Not persuaded bythe submission made on behalf of the appellants that since noH

fault is attributable to them for the delay caused in determinationof the amount, they cannot be saddled with the liability to payinterest on carrying cost; nor is there any substance in theargument sought to be advanced that there is no provision in thePPAs for payment of compound interest from the date when theChange in Law event had occurred. [Para 17, 18][116-D-H; 117-A-B]

1.4 The entire concept of restitutionary principlesengrained in Article 13 of the PPAs has to be read in the correctperspective. The said principle that governs compensating a partyfor the time value for money, is the very same principle that wouldbe invoked and applied for grant of interest on carrying cost onaccount of a Change in Law event. Therefore, reliance on Articles11.3.4 r/w 11.8.3 on the part of the appellants cannot take theircase further. The impugned judgment and order dated 12thAugust, 2021 passed by the Appellate Tribunal is upheld. [Para19, 20][117-C-E]

Priya Vart And Another v. Union of India (1995) 5 SCC437 : [1995] 2 Suppl. SCR 563 – held inapplicable.

South Eastern Coalfields Ltd. v. State of MadhyaPradesh and Ors. (2003) 8 SCC 648 : [2003] 4 Suppl.SCR 651 – referred to.

Case Law Reference[2019] 4 SCR 487relied onPara 5[1995] 2 Suppl. SCR 563held inapplicablePara 9[2003] 4 Suppl. SCR 651referred toPara 15

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7129of 2021.

From the Judgment and Order dated 12.08.2021 of the AppellateTribunal for Electricity, New Delhi in Appeal No. 421 of 2019.

M.G. Ramachandran, Sr. Adv. Nikunj Dayal, Shubham Arya, RaviNair, Ms. Srishti Khindaria, Ms. Reeha Singh, Advs. for the Appellants.

Mukul Rohatgi, Sr. Adv., Mahesh Agarwal, Hemant Singh, ArshitAnand, Lakshyajit Singh Bagdwal, Ms. Lavanya Panwar, Ms. Geetika A

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ASharma, E.C. Agrawala, Amit Kapur, Ms. Poonam Sengupta, SaunakRajguru, Ms. Sakshi Kapoor, Advs. for the Respondents.

The Judgment of the Court was delivered by HIMA KOHLI, J.

B1. The appellants are aggrieved by the judgment and order dated12th August, 2021, passed by the Appellate Tribunal for Electricity, NewDelhi[1], allowing the appeal filed by the respondent No. 1 – Adani Power(Mundra) Limited[2] against the order dated 28th March, 2018 (in PetitionNo. 104/MP/2017) and order dated 06th June, 2019 (in Petition No. 214/MP/2018) passed by the Central Electricity Regulatory Commission[3].

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2. It may be stated at the outset that the scope of the presentappeal is restricted to the decision of the Appellate Tribunal of grantingcarrying cost interest on compounding basis in favour of the respondentNo. 1 – Adani Power from the date on which the Change in Law eventtook place i.e. 29th January, 2014, till the date of actual payment of theDamount determined by the Central Commission. Stated differently, whilethe appellants are not disputing grant of interest to the respondent No. 1– Adani Power by way of carrying cost from the date on which theChange of Law event took place till the actual payment of the amountdetermined by the Central Commission, their grievance is that theEAppellate Tribunal has not just permitted carrying cost on simple interestbasis, but has imposed interest on carrying cost or what is commonlyknown as interest on interest (compound interest) on carrying cost.

3. To contextualize the aforesaid dispute, a brief conspectus ofthe relevant facts of the case may be outlined. The respondent No. 1 –FAdani Power is a power generating company that has set up a 4620MW (comprising of four units of 330 MW and five units of 660 MW),coal fired power plant in Mundra, Gujarat. The appellants are thedistribution licensees that are supplying electricity to the consumers inthe State of Haryana. On 07th August, 2008 the appellants entered intotwo Power Purchase Agreements[4] with the respondent No. 1 – AdaniGPower for procurement of contracted capacity of 1424 MW from thegenerating units 7, 8 and 9 established at Mundra, Gujarat. In the year 1 in short ‘Appellate Tribunal’

2 in short ‘Adani Power’

3 In short ‘Central Commission’

4 In short ‘PPAs’

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2010, on account of Environment Clearance dated 20[th] May, 2010, givenby the Ministry of Environment and Forests, Union of India, a Change inLaw event took place as the respondent No. 1 – Adani Power had toincur additional costs on installing Flue Gas Desulfurization[5] unit. On17th July, 2014, the respondent No. 1 – Adani Power filed a petitionbefore the Central Commission for adjudication of compensation onaccount of certain Change in Law events including installation of theFGD. By order dated 06th February, 2017, the Central Commissionallowed compensation only for certain Change in Law events butdisallowed the claim for carrying cost raised by the respondent No. 1 –Adani Power. Liberty was however granted to the respondent No. 1 –Adani Power to file a separate petition before the Central Commissionfor the FGD claim along with requisite information and documents.

4. Aggrieved by the order dated 06th February, 2017 passed bythe Central Commission, both the appellants herein and the respondentNo. 1 – Adani Power preferred appeals before the Appellate Tribunal.The limited grievance raised by the appellants in their appeal was relatingto the issue pertaining to the claim of the respondent No. 1 – AdaniPower in respect of levy of customs duty on electricity removed fromSpecial Economic Zone (SEZ) to Domestic Tariff Area (DTA). In itsappeal, respondent No. 1 – Adani Power challenged the rejection of itsclaim for carrying cost. Respondent No. 1 – Adani Power also filed aseparate petition before the Central Commission in terms of the libertygranted to it, for claiming relief on account of installation of FGD whichwas contested by the appellants. On 28th March, 2018, the CentralCommission passed an order on the separate petition preferred by therespondent No. 1 – Adani Power, allowing compensation on account ofthe Change in Law event pertaining to installation of the FGD and at thesame time, disallowing its claim for carrying cost.

5. In another petition filed by the respondent No. 1 – Adani Power,the Central Commission passed an order on 17th September, 2018,granting carrying costs in its favour in terms of the directions issued bythe Appellate Tribunal vide judgment dated 13th April, 2018, passed inAppeal No. 210 of 2017. Pertinently, the judgment dated 13[th] April, 2018passed by the Appellate Tribunal was between the same parties whoare present before us and was challenged by the appellants herein before 5 In short ‘FGD’

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Athe Supreme Court in Civil Appeals No. 5865/2018 and 6190/2018. Thesaid appeals came to be dismissed vide judgment dated 25[th] February,2019[6] wherein it was held that the power generating company would beentitled to carrying cost on restitutionary principles from the date ofChange in Law event, so as to bring the affected party to the sameeconomic position as if such Change in Law had not occurred. For arrivingBat the said conclusion, reliance was placed on Article 13.2 of the PPAsgoverning the parties that contains an in-built restitutionary principle whichcompensates the party affected by such Change in Law.

6. The respondent No. 1 – Adani Power approached the AppellateTribunal with a copy of the order passed by the Central CommissionCallowing the relief of Change in Law for installation of the FGD, butdisallowing the relief of carrying cost and prayed that carrying cost oughtto have been allowed in its favour from the date of Change in Law eventpertaining to installation of FGD along with other Change in Law events.By the impugned judgment dated 12th August, 2021, the Appellate TribunalDhas not only held that the respondent No. 1 – Adani Power is entitled forcarrying cost in respect of compensation for Change in Law eventstowards FGD installation, as approved by the Central Commission,reckoned from the date of Change in Law occurrence, it has furtherheld respondent No. 1 – Adani Power to be entitled for interest on carryingcost. Aggrieved by the said finding, the appellants are before this Court.E

7. Appearing for the appellants, Mr. M.G. Ramachandran, SeniorAdvocate opened his arguments by stating that the appellants do notdispute grant of interest by way of carrying cost from the date on whichChange in Law event took place on account of the delayed recovery ofthe principal amount till the date the amount was determined by theFCentral Commission. The sole grievance raised by the appellants is thatthey are not liable to pay any compound interest to the respondent No. 1– Adani Power as carrying cost interest. It is contended that only simpleinterest is payable by the appellants to the respondent No. 1 – AdaniPower, for the reason that there is no wrongdoing/default/unjustGenrichment that can be attributable to the appellants for the delay causedin determination of the amount by the Central Commission/AppellateTribunal; that there is no stipulation in the PPAs dated 07th August, 2008for payment of compound interest for the period from the date whenChange in Law event had occurred i.e. w.e.f. 29th January, 2014, till the date of adjudication of the claim by the Central Commission and raisingof the Supplementary Bill by the respondent No. 1 – Adani Power interms of Article 11.8.1 (iii) of the PPA; that on the contrary, there arespecific provisions in the PPAs i.e. Article 11.3.4 r/w Article 11.8.3 forthe delay on the part of the appellants in making the payment after raisingof the monthly/Supplementary Bill at the Late Payment Surcharge (LPS)rate which is on a compounding basis; that there is no statutory provisionin the Electricity Act, 2003 or the relevant rules/regulations framed therein,as applicable at the relevant time, which permit payment of compoundinterest for carrying cost.

8. It has also been argued on behalf of the appellants that thoughinterest on interest is prescribed under the Interest Act, 1978 but theexceptions carved out under Section 4 of the said enactment does notcover the facts of the instant case since the appellants had duly paid theamount to the respondent No. 1- Adani Power upon determination bythe Central Commission and within the time stipulated for clearing theSupplementary Bill that was raised on it. It was canvassed that therespondent No. 1 – Adani Power became entitled to raise aSupplementary Bill on the appellants only when the Central Commissiondetermined the amount payable as an impact of Change in Law. Thesaid Supplementary Bill was raised under Article 11.8.1 (iii) and waspayable within 30 days in terms of Article 11.8.2 of the PPA. Contendingthat the Supplementary Bill can include carrying cost only if there isrestitution provision under Article 13 of the PPAs and that if there is norestitution provision, the Supplementary Bill cannot even include thecarrying cost.

9. Learned counsel for the appellants informed us that pursuantto passing of the impugned judgment and order dated 12th August, 2021,when the Appellate Tribunal held that the respondent No. 1- Adani Poweris entitled to carrying cost on compound interest basis and remanded thematter back to the Central Commission for computation, the CentralCommission had passed an order on 23rd October, 2021, determiningthe methodology for calculating the carrying cost. Respondent No. 1 –Adani Power had then raised a Supplementary Bill dated 13th November,2021 on the appellants towards the carrying cost which was paid by theappellants without prejudice to their rights and contentions as raised inthe present appeal. Since there was a delay of about two months reckonedfrom the due date of the Supplementary Bill dated 13th November, 2021, AB

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Athe appellants state that they have paid the late payment surcharge forthe said period of delay. In support of the submission that when compoundinterest is not specified in a Statute, interest payable ought to be construedto be on simple interest basis and not on compound interest basis, thedecision in Priya Vart And Another v. Union of India[7] has been cited.

B10. Repelling the arguments advanced on behalf of the appellants,Mr. Mukul Rohatgi, Senior Advocate appearing for the respondent No.1 – Adani Power has in the first instance, challenged the maintainabilityof the present appeal stating that the same has been filed under Section125 of the Electricity Act, 2003 which permits grounds to be taken akinto those available under Section 100 of the Civil Procedure Code[8] andCno substantial question of law has been raised in the present appeal thatrequires determination by this Court. On merits, learned Senior Advocatehas supported the findings returned in the impugned judgment andsubmitted that the same does not deserve any interference as it has onlyfollowed the law laid down by this Court in the judgment dated 25[th]DFebruary, 2019[6], that was decided between the very same parties to thelis. Referring to the chronology of the dates and events in the instantcase, it was submitted that admittedly, the Change in Law event hadoccurred when the respondent No. 1 – Adani Power had to install theFGD in the year 2014. The claim raised by the respondent No. 1 –Adani Power for installation of the FGD was finally decided by theECentral Commission only in the year 2018, when carrying costcompensation on account of Change in Law event was allowed in itsfavour. However, carrying cost was approved only from the date of thejudgment and not for the period between 2014 and 2018, whereas therespondent No. 1 – Adani Power was entitled for carrying cost rightFfrom the year 2014, when it was required to infuse huge amounts towardsinstallation of the FGD. Reference was made to Articles 13.2 and 13.4of the PPAs that provide for an in-built restitutionary principle and holdthat compensation has to be paid from the date of occurrence of theChange in Law events. Article 11.3.4 of the PPAs was cited to buttress the submission that compound interest is payable for delayed payments,Gin the manner prescribed and since the appellants had agreed to payinterest on compounding basis for delayed payments, the very sameprinciple would apply for carrying cost as well, since both, carrying cost 7 (1995) 5 SCC 437H8 for short ‘CPC’

and late payment surcharge are to be factored in towards time value ofmoney.

11. Alluding to the Reserve Bank of India Circulars dated 14thAugust, 2003 and 03rd March, 2016 that provide for a borrower to payinterest to the lender on compound interest basis, it was submitted onbehalf of the respondent No.1 – Adani Power, that having borrowedmoney from banks to install the FGD and having paid compound intereston the borrowed sum, it was only seeking restitution for the interestincurred by it and paid to the banks at the same rate and that this wasnot a case of unjust enrichment. It was thus argued that, since the litigationin the instant case had commenced in the year 2014 and it took sevenyears to conclude the same, the respondent No. 1 – Adani Power isentitled to carrying cost and interest thereon on compounding basis fromthe date of Change in Law event, strictly in terms of the PPA and thelaw on the issue that has already been expounded by this Court.

12. We have heard the arguments advanced by the counsel forthe parties and perused the relevant provisions of the PPAs. As notedabove, the appellants have not raised any dispute with regard to grant ofinterest to the respondent No. 1 – Adani Power by way of carrying costfrom the date on which the Change in Law event took place till the datethe amount was determined as payable to respondent No. 1 – AdaniPower in terms of the order dated 28[th] March, 2018, passed by theCentral Commission. The only issue that has arisen for our considerationis whether the appellants are liable to pay simple interest or compoundinterest on the carrying cost.

13. The relevant Articles of the PPAs cited before us are Article11, that deals with billing and payment and Article 13, that deals withChange in Law. We are more specifically concerned with Articles 11.3.4,11.8.1 and 11.8.3 that have been cited by learned counsel for theappellants to urge that only Late Payment Surcharge (LPS) is payableby the appellants (procurer) to the respondent No. 1 – Adani Power(seller) at the rate mentioned in Article 11.3.4, but not beyond that. Forpurposes of ready reference, we may extract below Articles 11.3.4,11.8.1 and 11.8.3 as below:

“11 ARTICLE 11: BILLING AND PAYMENT

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11.3 Payment of Monthly Bills

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

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11.8 Payment of Supplementary Bill

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

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

ii. Tariff Payment for change in parameters, pursuant to provisionsin · Schedule-5; or

iii. Change in Law as provided in Article 13

and such Bill shall be paid by the other Party.

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

14. The respondent No. 1 – Adani Power has relied on Articles13.2 and 13.4 of the PPAs which are extracted hereinbelow:

“13 ARTICLE 13 CHANGE IN LAW

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13.2 Application and Principles for computing impact ofChange in Law

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

a) Construction Period

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

For every cumulative increase/decrease of each Rs. 8,90.000.00(Rupees eight crore ninety lakh only) Rupees of the ContractedCapacity in the Capital Cost over the term of this Agreement, theincrease/decrease in Quoted Capacity Charges shall be an amountequal to zero point two two seven (0.227%) percent of the QuotedCapacity Charges. Provided that the Seller provides to the Procurerdocumentary proof of such increase/decrease in Capital Cost forestablishing the impact of such Change in Law. In case of Dispute,Article 17 shall apply.

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

b) Operation Period

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

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

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

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

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

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

15. Article 13 has been discussed threadbare by this Court in aprevious litigation between the same parties decided on 25[th] February,2019[6]. Without being prolix, we may extract below the relevant paras:-

“13. A reading of Article 13 as a whole, therefore, leads to theDposition that subject to restitutionary principles contained in Article13.2, the adjustment in monthly tariff payment, in the facts of thepresent case, has to be from the date of the withdrawal ofexemption which was done by administrative orders dated06.04.2015 and 16.02.2016. The present case, therefore, falls withinEArticle 13.4.1(i). This being the case, it is clear that the adjustmentin monthly tariff payment has to be effected from the date onwhich the exemptions given were withdrawn. This being the case,monthly invoices to be raised by the seller after such change intariff are to appropriately reflect the changed tariff. On the factsof the present case, it is clear that the respondents were entitledFto adjustment in their monthly tariff payment from the date onwhich the exemption notifications became effective. This beingthe case, the restitutionary principle contained in Article 13.2 wouldkick in for the simple reason that it is only after the order dated04.05.2017 that the CERC held that the respondents were entitledGto claim added costs on account of change in law w.e.f. 01.04.2015.This being the case, it would be fallacious to say that therespondents would be claiming this restitutionary amount on somegeneral principle of equity outside the PPA. Since it is clear thatthis amount of carrying cost is only relatable to Article 13 of thePPA, we find no reason to interfere with the judgment of theHAppellate Tribunal.

UTTAR HARYANA BIJLI VITRAN NIGAM LTD. v. ADANIPOWER (MUNDRA) LTD. [HIMA KOHLI, J.]

14. We now come to some of the judgments cited by learnedcounsel on behalf of both sides. In South Eastern Coalfields Ltd.v. State of Madhya Pradesh and Ors[9][“South EasternCoalfields”], this Court held that interest is payable in equity incertain circumstances and finally concluded: (SCC P. 662, para24)

“24. We are, therefore, of the opinion that in the absence ofthere being a prohibition either in law or in the contract enteredinto between the two parties, there is no reason why theCoalfields should not be compensated by payment of interestfor the period for which the consumers/purchasers did not paythe amount of enhanced royalty which is a constituent part ofthe price of the mineral for the period for which it remainedunpaid. The justification for award of interest stands fortifiedby the weighty factor that the Coalfields themselves are obligedto pay interest to the State on such amount. It will be a travestyof justice to hold that though the Coalfields must pay the amountof interest to the State but the consumers/purchasers in whosehands the money was actually withheld be exonerated fromliability to pay the interest.”

What was argued by Shri Giri was that this judgment cannot beapplied to fact situations that arise under the PPA in view of Article18.17 of the PPA which clearly states that the liability of the sellerand the procurer shall be limited to that explicitly provided in thisagreement and that, in no event, shall either procurer or sellerclaim any indirect or consequential losses or damages. Since wehave found that the claim for carrying costs is under Article 13 ofthe PPAs, this judgment would have no application to the facts ofthe present case.”

16. It is clear that the restitutionary principles encapsulated inArticle 13.2 would take effect for computing the impact of Change inLaw. We see no reason to interfere with the impugned judgment, whereinit has been held by the Appellate Tribunal that the respondent No. 1 –Adani Power had started claiming Change in Law event compensationin respect of installation of FGD along with carrying cost, right from theyear 2012 and that it has approached several fora to get this claim settled.

9 (2003) 8 SCC 648

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AThe respondent No. 1 – Adani Power finally succeeded in gettingcompensation towards FGD only on 28[th] March, 2018, but the carryingcost claim was denied. The relief relating to carrying cost was grantedto the respondent No. 1 – Adani Power by the Appellate Tribunal videorder dated 13[th] April, 2018 which was duly tested by this Court andupheld on 25[th] February, 2019[6]. Once carrying cost has been granted inBfavour of the respondent No. 1 – Adani Power, it cannot be urged by theappellants that interest on carrying cost should be calculated on simpleinterest basis instead of compound interest basis. Grant of compoundinterest on carrying cost and that too from the date of the occurrence ofthe Change in Law event is based on sound logic. The idea behind grantingCinterest on carrying cost is not far to see, it is aimed at restituting a partythat is adversely affected by a Change in Law event and restore it to itsoriginal economic position as if such a Change in Law event had nottaken place.

17. In the instant case, the respondent No. 1 – Adani Power hadDto incur expenses to purchase the FGD and install it in view of the termsand conditions of the Environment Clearance given by the Ministry ofEnvironment and Forests, Union of India, in the year 2010. For this, ithad to arrange finances by borrowing from banks. The interest rateframework followed by Scheduled Commercial banks and regulated bythe Reserve Bank of India mandates that interest shall be charged on allEadvances at monthly rests. In this view of the matter, the respondentNo. 1 – Adani Power is justified in stating that if the banks have chargedit interest on monthly rest basis for giving loans to purchase the FGD,any restitution will be incomplete, if it is not fully compensated for theinterest paid by it to the banks on compounding basis. We are of theFopinion that interest on carrying cost is nothing but time value for moneyand the only manner in which a party can be afforded the benefit ofrestitution in every which way. In the facts of the instant case, theAppellate Tribunal was justified in allowing interest on carrying cost infavour of the respondent No. 1 – Adani Power for the period between the year 2014, when the FGD was installed, till the year 2021. ThereGwas no justification for the Central Commission to have excluded theperiod between 2014 and 2018 and grant relief from the date of thepassing of the order i.e., from 28[th] March, 2018 to 2021; nor is there anylogic to such a segregation of time lines, particularly when the respondentNo. 1 – Adani Power was prompt in raising a claim on the appellantsHand pursuing its legal remedies.

18. We are not persuaded by the submission made on behalf ofthe appellants that since no fault is attributable to them for the delaycaused in determination of the amount, they cannot be saddled with theliability to pay interest on carrying cost; nor is there any substance in theargument sought to be advanced that there is no provision in the PPAsfor payment of compound interest from the date when the Change inLaw event had occurred.

19. The entire concept of restitutionary principles engrained inArticle 13 of the PPAs has to be read in the correct perspective. Thesaid principle that governs compensating a party for the time value formoney, is the very same principle that would be invoked and applied forgrant of interest on carrying cost on account of a Change in Law event.Therefore, reliance on Articles 11.3.4 r/w 11.8.3 on the part of theappellants cannot take their case further. Nor does the decision in PriyaVart’S Case[7]have any application to the facts of the present case asthe said case relates to payment of compensation under the LandAcquisition Act and the interest that would be payable in case of delayedpayment of compensation.

20. In view of the aforesaid discussion, the impugned judgmentand order dated 12[th] August, 2021 passed by the Appellate Tribunal isupheld and the present appeal is accordingly dismissed as meritless.

Divya Pandey

Appeal dismissed.

AB

C

D