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

Citation: [2022] 11 S.C.R. 102 · Decided: 24-08-2022 · Supreme Court of India · Bench: N.V. RAMANA · Disposal: Dismissed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2022] 11 S.C.R.
UTTAR HARYANA BIJLI VITRAN NIGAM LTD. AND
ANOTHER
v.
ADANI POWER (MUNDRA) LIMITED AND ANOTHER
(Civil Appeal No. 7129 of 2021)
AUGUST 24, 2022
[N. V. RAMANA, CJI, KRISHNA MURARI,
HIMA KOHLI, JJ.]
Electricity – Power Purchase Agreements (PPAs) – Arts. 11,
13 – ‘Change in Law’ event – Restitutionary principles – Appellants
(distribution licensees) if liable to pay simple interest or compound
interest on the carrying cost to respondent no.1 (power generating
company) – Held: Relief relating to carrying cost was granted to
respondent no.1 by the Appellate Tribunal vide order dtd. 13.04.18
which was duly upheld by Supreme Court in a previous litigation
between the same parties – Once carrying cost has been granted in
favour of the respondent no.1, appellants cannot urge that interest
on carrying cost should be calculated on simple interest basis
instead of compound interest basis – Idea behind granting interest
on carrying cost is aimed at restituting a party that is adversely
affected by a Change in Law event and restore it to its original
economic position as if such a Change in Law event had not taken
place – In the instant case, the respondent no.1 had to incur expenses
to purchase the Flue Gas Desulfurization (FGD) unit and install it
in view of the terms and conditions of the Environment Clearance
given by Ministry of Environment and Forests, Union of India, in
2010 – For this, it had to arrange finances by borrowing from banks
– Respondent no.1 justified in stating that if the banks have charged
it interest on monthly rest basis for giving loans to purchase the
FGD, any restitution will be incomplete, if it is not fully compensated
for the interest paid by it to the banks on compounding basis –
Restitutionary principles encapsulated in Article 13.2 of the PPAs
would take effect for computing the impact of Change in Law –
Appellate Tribunal justified in allowing interest on carrying cost in
favour of respondent no.1 for the period between 2014, when the
FGD was installed, till 2021 – Central Commission not justified in
excluding the period between 2014 and 2018 and grant relief from
[2022] 11 S.C.R. 102
102
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the date of the passing of the order i.e., from 28.03.18 to 2021 –
Impugned order passed by Appellate Tribunal upheld – Electricity
Act, 2003 – s.125.
Dismissing the appeal, the Court
HELD: 1.1 The appellants have not raised any dispute with
regard to grant of interest to the respondent No. 1 by way of
carrying cost from the date on which the Change in Law event
took place till the date the amount was determined as payable to
respondent No. 1 in terms of the order dated 28th March, 2018,
passed by the Central Commission. The only issue that has arisen
for consideration is whether the appellants are liable to pay simple
interest or compound interest on the carrying cost. The relevant
Articles of the PPAs are Article 11, that deals with billing and
payment and Article 13, that deals with Change in Law. This Court
is more specifically concerned with Articles 11.3.4, 11.8.1 and
11.8.3 that have been cited by counsel for the appellants to urge
that only Late Payment Surcharge (LPS) is payable by the
appellants (procurer) to the respondent No. 1 (seller) at the rate
mentioned in Article 11.3.4, but not beyond that. The respondent
No. 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 Court
in a previous litigation between the same parties decided on 25th
February, 2019. It is clear that the restitutionary principles
encapsulated in Article 13.2 would take effect for computing the
impact of Change in Law. There is no reason to interfere with the
impugned judgment, wherein it has been held by the Appellate
Tribunal that the respondent No. 1 had started claiming Change
in Law event compensation in respect of installation of FGD along
with carrying cost, right from the year 2012 and that it has
approached several fora to get this claim settled. The respondent
No. 1 finally succeeded in getting compensation towards FGD
only on 28th March, 2018, but the carrying cost claim was denied.
The relief relating to carrying cost was granted to the respondent
No. 1 by the Appellate Tribunal vide order dated 13th April, 2018
which was duly tested by this Court and upheld on 25th February,
20196. Once carrying cost has been granted in favour of the
respondent No. 1, it cannot be urge

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