9911796707
TMI Blog2021 (10) TMI 1302X X X X Extracts X X X X X X X X Extracts X X X X ..... after referred to, in short, as 'MERC, whereby MERC dismissed the petition filed by the Appellant Under Section 86 of the Electricity Act, being Case No. 24 of 2017, rejecting the contention of the Appellant that, introduction by Reserve Bank of India of the Base Rate system and the Marginal Cost of Funds Based Lending Rate system constituted a change in law, within the meaning of the expression 'Change in Law' as defined in the respective Power Purchase Agreements between the Appellant and the Respondent Nos. 2, 3, 4 and 5, hereinafter collectively referred to as the "Power Generating Companies", so as to alter the rate of Late Payment Surcharge(LPS) payable by the Appellant to the Power Generating Companies under the respective Power Purchase Agreements. 2. The Appellant, incorporated under the Companies Act, 1956, pursuant to the decision of the Government of Maharashtra to reorganize erstwhile Maharashtra State Electricity Board, is a Distribution Licensee under the provisions of the Electricity Act, 2003, with license to supply electricity all over the State of Maharashtra, except some parts of the city of Mumbai. The Appellant is a bulk purchaser of electricity f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntality and having force of law and shall further include all applicable rules, Regulations, orders, notifications by an Indian Governmental Instrumentality pursuant to or under any of them and shall include all rules, Regulations, decisions and orders of the CERC and the MERC. SBAR-means the prime lending Rate per annum applicable for loans with one (1) year maturity as fixed from time to time by the State Bank of India. In the absence of such rate, any other arrangement that substitutes such prime lending rate as mutually agreed to by the parties. Article 11: Billing and Payment . . . 11.3.4 In the event of delay in payment of a monthly bill by the procurer beyond its due date month billing, a Late Payment Surcharge shall be payable by the procurer to the seller at the rate of two (2) percent in excess of applicable SBAR per annum, on the amount of outstanding payment, calculated on a day to day basis (and compounded with monthly rest) for each date of the delay. .. Article 13: Change in Law 13.1. Definitions In this Article 13, the following terms have the following meanings. 13.1.1 "Change in Law" means the occurrence of any of the following events after t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsuant to this Article 13.3.2 shall provide, amongst other things, precise details of: a) The Change in Law; and b) The effects on the Seller of the matters referred to in Article 13.2 13.4 Tariff adjustment payment on account of Change in Law 13.4.1 subject to Article 13.2, the adjustment in monthly tariff payment shall be effective from: (i) the date of adoption, promulgation, amendment, re-enactment, repeal of the Law or Change in Law, or (ii) the date of order/judgment of the competent court or tribunal or Indian Governmental Instrumentality, if the Change in Law is on account of a change in interpretation of law. 6. The Stage 2 Power Purchase Agreements, as stated hereinbefore, contain terms and conditions almost identical to those of the first set of agreements. The relevant provisions of the second set of agreements (Stage 2) are as follows: Article 1: Definitions and Interpretation Change in law-shall have the meaning ascribed thereto in Article 10.1.1 of this agreement. Indian Governmental Instrumentality-shall mean the Government of India, Governments of state(s) of Maharashtra, and any ministry, department, board, authority, agency, corporation, commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retation or application of any law by any Indian Governmental Instrumentality having the legal power to interpret or apply such Law, or any Competent Court of Law; * the imposition of requirement for obtaining any Consents, Clearances and Permits which was not required earlier; * a change in the terms of conditions prescribed for obtaining any Consents, Clearances and Permits or the inclusion of any new terms or conditions for obtaining such Consents, Clearances and Permits; except due to any default of the Seller; * any change in tax or introduction of any tax made applicable for supply of power by the Seller as per the terms of this Agreement but shall not include (i) any change in any withholding tax on income or dividends distributed to the shareholders of the Seller, or (ii) Change in respect of UI Charges or frequency intervals by an Appropriate Commission or (iii) any change on account of regulatory measures by the Appropriate Commission including calculation of Availability. 10.2 Application and Principles for computing impact of Change in Law 10.2.1 While determining the consequence of Change in Law under this Article 10, the parties shall have due regard to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Tariff shall appropriately reflect the changed tariff. 7. With the object of bringing transparency in the lending rates, that is, the rates of interest charged by banks on loans and advances, the Reserve Bank of India had introduced the Benchmark Prime Lending Rate (BPLR) system in 2003. 8. By a notification dated 1st July 2010, the Reserve Bank of India introduced the Base Rate System, replacing the BPLR system with immediate effect. The relevant extracts of the notification dated 01.07.2010 are set out hereinbelow: 2.2.1 The Base Rate system, as detailed below and in Annex 1 will replace the BPLR system with effect from July 1, 2010. For loans sanctioned up to June 30, 2010, BPLR will be applicable, as given in Annex 3 and 4. However, for those loans sanctioned up to June 30, 2010 which come up for renewal from July 1, 2010 onwards, Base Rate would be applicable..... 2.3.6. The Base Rate system would be applicable for all new loans and for those old loans that come up for renewal. Existing loans based on the BPLR system may run till their maturity In case existing borrowers want to switch to the new system, before expiry of existing contracts, an option may be given to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssued notice of 'Change in Law' to independent power producers including the Power Generating Companies impleaded as Respondent Nos. 2 to 5. 14. On 02.12.2016, the Appellant filed Case No. 24 of 2017 before the MERC claiming that the introduction of the Base Rate and MCLR qualifies as Change in Law. Case No. 24 of 2017 has been dismissed by a judgment and order dated 16.11.2017, which has been affirmed by the APTEL in Appeal No. 77 of 2018, by the judgment and order impugned in this Appeal Under Section 125 of the Electricity Act, 2003. 15. Mr. Vikas Singh appearing on behalf of the Appellant submitted that this appeal raises the following substantial questions of law: (a) Whether Late Payment Surcharge (LPS) can be determined on the basis of the Prime Lending Rate (PLR) methodology, particularly when: (i) Reserve Bank of India discontinued the PLR methodology and shifted to Base Rate system by its notification dated 01.07.2010 and Marginal Cost of Fund-based Lending Rate System (MCLR) by its notification dated 03.03.2016 as methodologies for calculation of rate of interest? (ii) Should the State Bank Advance Rate (SBAR) as defined in the Power Purchase Agreement be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vil Procedure, any question of law which affects the final decision in a case is a substantial question of law as between the parties. A question of law which arises incidentally or collaterally, having no bearing on the final outcome, will not be a substantial question of law. Where there is a clear and settled enunciation on a question of law, by this Court or by the High Court concerned, it cannot be said that the case involves a substantial question of law. It is said that a substantial question of law arises when a question of law, which is not finally settled by this Court (or by the High Court concerned so far as the State is concerned), arises for consideration in the case. But this statement has to be understood in the correct perspective. Where there is a clear enunciation of law and the lower court has followed or rightly applied such clear enunciation of law, obviously the case will not be considered as giving rise to a substantial question of law, even if the question of law may be one of general importance. On the other hand, if there is a clear enunciation of law by this Court (or by the High Court concerned), but the lower court had ignored or misinterpreted or misa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notified by SBI for short term loans. The PLR rates issued by SBI, after notification of the Base Rate system and the MCLR rates by the RBI, are only for long term loans that have not come up for renewal, and for those loans which are running to maturity. Even in case of loans there is option of switching to the Base Rate/MCLR system. 22. Mr. Singh submitted that in Jaipur Vidyut Vitaran Nigam Limited and Ors. v. Adani Power Rajasthan Limited and Anr., this Court has capped the interest rate on LPS at 9% per annum, inclusive of the 2% in excess of the applicable interest rate. Moreover, this Court has directed that the interest should be compounded annually and not monthly as provided in the Clause therein. The relevant portion of the said judgment cited to by Mr. Singh, is reproduced hereunder: 71. Considering the facts of this case and keeping in view that the RERC and APTEL have given concurrent findings in favour of the Respondent with regard to change in law, with which we also concur, we may now deal with the question of liability of Appellants-Rajasthan DISCOMS with regard to late payment surcharge. In this regard, the following Articles 8.3.5 and 8.8 of PPA, which are re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LPS are in pari materia with the corresponding provisions in the Power Purchase Agreements under consideration in this case. Thus, the aforesaid judgment squarely covers the present case. 24. Mr. Singh argued that, in terms of Article 1 of the Power Purchase Agreements, "law means all laws including Electricity Laws in force in India and any statute, ordinance, Regulation, notification or code, rule, or any interpretation of any of them by an Indian Governmental Instrumentality and having force of law and shall further include all applicable rules, Regulations, orders, notifications by an Indian Governmental Instrumentality pursuant to or under any of them and shall include all rules," Change in Law has been defined to include the enactment, bringing into effect, adoption, promulgation, amendment, modification or repeal of any law. 25. Mr. Singh further argued that the Reserve Bank of India is an Indian Government Instrumentality. The Notifications referred to above, were issued by the Reserve Bank of India Under Sections 21 and 35A of the Banking Regulation Act, 1949 and have the force of law. Thus, these Notifications are well within the definition of law provided in the Power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the seller on account of delay by the procurer in making payments. 31. Mr. Singh further argued that LPS is paid to compensate a power generator for delay in making payments of invoices, because the power generator would have to arrange additional working capital loan to the extent of the amount of outstanding delayed invoice(s). Thus, to offset the loss that may have been caused on account of additional interest on such additional working capital loan, the Power Purchase Agreements contain a provision for LPS. The fact that LPS is to be compounded monthly is a further benefit to the Power Generating Companies. Thus, LPS in essence is nothing but a kind of liquidated damages for delay in payment of invoice(s). 32. Mr. Singh emphatically argued that LPS being compensatory in nature, the same cannot be claimed as a windfall gain. A comparative analysis of the LPS rate claimed by the Respondents, with the prevailing rates of interest for availing working capital loans would reveal that the Respondent Power Generating Companies were making profit from LPS, at the cost of the Appellant, contrary to the concept of compensation and/or damages. 33. Mr. Singh submitted that it is well s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract by the Appellant. Further, we cannot accept the view of the Division Bench that the fact that DDA made a profit from re-auction is irrelevant, as that would fly in the face of the most basic principle on the award of damages--namely, that compensation can only be given for damage or loss suffered. If damage or loss is not suffered, the law does not provide for a windfall. (emphasis supplied) 34. To impress upon this Court that the Respondents were making a huge gain from LPS as claimed by them, Mr. Singh emphasized the difference between LPS rates as claimed by the Respondents and the rates of LPS which the Appellant seeks, based on rates of interest on loans (excluding an additional 2% as payable in terms of the Power Purchase Agreements) as given in the Table below: Financial Year Average PLR (In %) (LPS Claimed by Respondents* Average Base rate (In %) (Rate sought by Appellant up to Mar 2016) Average MCLR (In %) (Rate sought by Appellant from Apr 2016)** 2010-11 12.17 7.55 -- 2011-12 13.67 8.92 -- 2012-13 14.50 9.73 -- 2013-14 14.48 9.90 -- 2014-15 14.75 9.85 -- 2015-16 14.37 9.62 -- 2016-17 14.05 9.08 2017-18 13.83 7.9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l entity. The Annual Revenue Requirement of the Appellant is required to be approved by the MERC. Expenditure not allowed by the MERC is excluded from the Annual Revenue Requirement that is approved by the MERC. The delay in payments made under the Power Purchase Agreements is due to several extraneous and unavoidable circumstances, which are beyond the control of the Appellant, including but not limited to delayed recovery of dues from the consumers of the Appellant. Even before the outbreak of the COVID-19 pandemic, the Appellant had been suffering major cashflow crunches. 40. Mr. Singh submitted that the Appellant has been facing severe cash flow issues, as the tariff hike approved by the MERC is much lower than the required tariff hike. The same is evident from the gap in the revenue sought by the Appellant as against the revenue allowed by the MERC, the figures of which are as follows: Particulars Claimed by MSEDCL (Rs in Crs.) Approved by MERC (Rs in Crs) True up requirement for F.Y. 15-16 5546 5032 True up requirement for F.Y. 16-17 6704 4897 Revenue Gap for 17-18 5420 5308 Total 17670 15237 41. Mr. Singh argued that a Revenue gap of Rs. 2433 Crores has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leading to the older tariff to continue to remain in effect after 7 months of commencement of the Financial Year. 45. Mr. Singh submitted that the shortfall in actual revenue vis-à-vis the approved revenue requirement was made up after almost 2 years, by an order dated 12.09.2018 in Case No. 195 of 2017. The Appellant has therefore been constrained to take loans, the interest component of which is not allowed to be passed on as a tariff component. 46. Mr. Singh submitted that the actual growth in sales of the Appellant in relation to subsidized categories (e.g. HT industrial and Commercial) was very low. Further, tariff subsidy for making prompt payment has widened the gap between expenditure and revenue receipts, so has the rise in the number of consumers from different categories, who delay payment of their dues. 47. Mr. Singh argued that the MERC determines tariff upon consideration of actual gains and losses. He argued that the MERC considered the Gains/Losses of the Appellant at time of passing the Multi Year Tariff (MYT) Order instead of considering the same at the time of true up of the Appellant as specified in MYT Regulations, which resulted into loss of revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continued to deeply impact the financial position of the Appellant for many years. It is not that the Appellant has been realising its dues from its consumers in time, but not making payments to the Power Generating Companies. The Appellant is itself in a precarious financial position which becomes worse by levy of interest beyond rates prescribed in RBI Notifications for delay, which is not in the control of the Appellant. 53. Mr. Singh submitted that the COVID 19 pandemic has also severely affected the financial viability of the Appellant, and has led to the Appellant incurring losses to the tune of Rs. 7500 crores. Further, the financial position of the Appellant has also been affected by the measures taken to alleviate difficulties of the consumers during the pandemic. The Appellant has given rebate of 2% to all residential consumers for timely payment of all bills (including arrears) of June-20 and July-20 in full, based on actual readings. Further, residential category consumers who were not able to pay the electricity bills of June-20 and July-20 at one go, were allowed to pay bills in three equal instalments, without interest or delayed payment charges. 54. Mr. Singh fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Low Tension Commercial consumers having demand-based tariff were allowed to revise their Contract Demand up to 2 times in a Billing Cycle. (e) for Industrial and Commercial consumers, only a token amount of 10% of the average energy consumption was to be billed in respect of premises under Lockdown. 56. Mr. Singh argued that these factors clearly show that the Appellant could not make timely payments for reasons beyond its control, for which the Appellant cannot be blamed. It is for this delay that compensation is prescribed under the Power Purchase Agreements by way of LPS. Mr. Singh emphatically reiterated his submission that such compensation cannot in law be a windfall gain or unjust enrichment of the Respondents at the cost of the Appellant, and the consumers including marginalised consumers i.e., agricultural consumers, people living in slums and the downtrodden strata of the society. 57. Mr. Singh finally argued that the claim of the Appellant is not time barred, as contended by the Power Generators. In terms of Article 13.3.2 of the Power Purchase Agreements, the seller is obligated to serve the Change in Law notice to the procurer, if it is beneficially affected by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies being the Respondent Nos. 2 to 5, for supply of electricity, governs the LPS payable by the Appellant to the Power Generating Companies, whenever there is delay in payment of bills. Article 11.3.4. of the Stage 1 Power Purchase Agreement, and Article 8.3.5 of the Stage 2 Power Purchase Agreement have been set out earlier in this Judgment. 63. Mr. Rohatgi submitted that the SBAR which is actually the rate of interest for grant of loan/finance by the State Bank of India, has been incorporated in the Power Purchase Agreements and the agreed rate for LPS is 2% above the SBAR. This SBAR keeps changing. LPS is therefore 2% in excess of the applicable SBAR during the billing period. 64. Mr. Rohatgi pointed out that the SBI rate is existing even today, as pleaded by the Respondent No. 2 at pages 48 to 50 of its Reply to the application for stay being I.A. No. 69796 of 2021 filed by the Appellant. The SBAR for the month of March 2021 is 12.15%. 65. Ms. Divya Anand appearing on behalf of the Respondent No. 5, drew the attention of this Court to Clause 10 of the Notification dated 03.03.2016 of the Reserve Bank of India, introducing the MCLR system with effect from 01.04.2016, in place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the APTEL had, by the impugned judgment and order, very rightly held that the notifications, guidelines or circulars issued by the Reserve Bank of India, including the Notifications dated 09.04.2010 introducing the Base Rate and 03.03.2016 introducing the MCLR, after execution of the Power Purchase Agreements dated 14.08.2008, 31.03.2010, 09.08.2010 and 16.02.2013 between the Appellant and the Respondent No. 2 would not qualify as Change in Law. He argued that the APTEL had correctly held that the payment of LPS along with interest calculated on the SBAR, has authorisation in the express terms of the aforesaid Power Purchase Agreements. Moreover, since the Circulars dated 09.04.2010 of the Reserve Bank of India, introducing Base Rate had been in existence since 2010, the Change in Law notice, issued only on 23.09.2016, had rightly been held to be time barred. 71. Mr. Rohatgi submitted that this Appeal does not meet the requirement of Section 125 of the Electricity Act, 2003, which only permits grounds as specified Under Section 100 of the Code of Civil Procedure, 1908 (hereinafter referred to as "CPC"). Section 100 of the Code of Civil Procedure mandates that the first Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w in terms of the Power Purchase Agreements (PPAs). Para 14 @ page 109-111 Para 14 @ page 11-14 The Appellant (MSEDCL) entered into several PPAs, assumably with open eyes, subsequent to the notification of the Base Rate System by RBI. Para 16 @ page 109-111 Para 23 @ page 16 MSEDCL issued Notices of Change in Law to the Respondents only in September, 2016, i.e. more than 6 years after RBI introduced the Base Rate system in place of the BPLR system. Para 15 @ page 109-111 Para 23 @ page 16 76. Mr. Rohatgi argued that the Appellant is seeking to raise the above issues which have been concurrently decided, once again. No substantial question of law has arisen in this Appeal filed Under Section 125 of the Electricity Act, 2003 warranting interference by this Court. Mr. Rohatgi cited Ramanuja Naidu v. V. Kanniah Naidu and Anr. (1996) 3 SCC 392 (para 11) and Navaneethammal v. Arjuna Chetty (1996) 6 SCC 166 (para 11) in support of his aforesaid argument. 77. Mr. Rohatgi argued that since SBAR continues to be in operation, it cannot be said that there is any change in law. The Respondent No. 2 and the Appellant have entered into four Power Purchase Agreements, the first dated 14. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oans with maturity of one year, continues to be notified even to this day. The same is evident from the Notification dated 03.03.2016 of the Reserve Bank of India. 81. Mr. Rohatgi further argued that, in terms of the relevant clauses in the Power Purchase Agreements regarding Change in Law, the prerequisites are that the event in question must be one that is covered by Clause 10.1.1 of the Stage 2 Power Purchase Agreements corresponding to Clause 13.1.1. of the Stage 1 Power Purchase Agreements, that is, it must be a new enactment, or amendment of existing legislation, or new interpretation by a competent court, the event must have occurred after the Cut-off Date, which is in this case, concededly 31.07.2009, that is, the date seven days prior to the Bid Deadline date, which is 07.08.2009 and such event must have resulted in additional recurring or non-recurring expenditure or income for the Seller. The first and third of these conditions are not fulfilled by the Appellant since the LPS Rate under the Power Purchase Agreements is not linked to Reserve Bank of India circulars or guidelines and the RBI notifications referred to are not shown to have resulted in any additional income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Reserve Bank of India in respect of interest on loans advanced by Banks and Financial Institutions, do not affect in any manner the rates at which power was agreed to be sold and purchased or the rate at which LPS is chargeable. Mr. Rohatgi emphatically argued that LPS is a deterrent to inculcate payment discipline and is also entirely avoidable. 84. Mr. Rohatgi pointed out that the APTEL has, by its impugned judgment and order (para 21) categorically rejected the Appellant's contention of there being unjust enrichment of the Respondent Power Generating Companies, on account of LPS being calculated at SBAR Rate. The APTEL has held: (i) In order to be termed as unjust enrichment, benefit gained by a party must be such as to have been retained without any legal basis; (ii) The primary purpose of LPS being to compensate the Power Generators for the time value of money lost on account of delay in payment by the Appellant, it cannot be said that recovery of LPS results in the generators being unjustly enriched; (iii) The payment of LPS, with interest calculated on the Prime Lending Rate, has authorisation in the express terms of the Power Purchase Agreements; (iv) T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly of electricity to the Appellant. Mr. Singhvi pointed out that the Power Purchase Agreement was executed pursuant to a bidding process carried out by the Appellant under the aegis of the MERC Under Section 63 of the Electricity Act, 2003. The tariff was adopted by the MERC (Respondent No. 1) and the Power Purchase Agreement was approved by the MERC. 90. Mr. Singhvi argued that, it was not in dispute that payment against monthly bill for electricity charges raised by the Respondent No. 3, was agreed to be made by the Appellant within 30 days. It is also not disputed that in the event of delay in payment of a monthly, beyond its due date, that is, 30 days, the Appellant would be bound to pay a Late Payment Surcharge (LPS). In this context, Mr. Singhvi referred to Clause 11.3.4 of the Power Purchase Agreement which has already been reproduced hereinbefore. 91. Mr. Singhvi submitted that in this case too the rate of LPS was 2% in excess of SBAR. Mr. Singhvi referred to the definition of SBAR in the concerned Power Purchase Agreement, defining SBAR to mean the prime lending rate per annum applicable for loans with one (1) year maturity as fixed from time to time by the State Bank of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he RBI circulars/guidelines on the purpose for which the SBI PLR continues to be notified, is totally irrelevant for the purposes of the present case. 95. Mr. Singhvi emphatically argued that the agreement provides for the parties to mutually agree on a substitute of SBI PLR, in case of its absence. This dispensation is contained in the definition of SBAR itself. This special provision in the agreement applicable to the specific case of absence of SBI PLR, excludes the applicability of the general 'Change in Law' provision contained in Article 13 of the PPA. In the context of his arguments Mr. Singhvi cited Adani Power (Mundra) Ltd. v. Gujarat Electricity Regulatory Commission and Ors. (2019) 19 SCC 9 the relevant paragraph whereof is reproduced herein below: 38. In the present case, the perusal of various Articles would reveal that the provisions Under Article 14 are general in nature. The provision Under Article 3.4.2 is specific, only to be invoked in the case of non-compliance with any of the conditions as provided Under Article 3.1.2. As such, the special provision made in Article 3.4.2 will exclude the applicability of general provisions contained in Article 14 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consequent to revisions by the RBI, or for that matter, SBI would not affect the rate at which power was agreed to be sold and purchased under the PPAs and consequently there is no financial implications on expenditure or income for either Party. The LPS only recompenses what was lost in terms of real value of money due to delay in payment. 100. Mr. Singhvi argued that the Appellant has till 24.06.2016, signed reconciliation statements with the Respondent No. 3 in which the Appellant calculated the LPS on the basis of the PLR published by the State Bank of India and not the Base Rate or the MCLR, as is now being claimed by the Appellant. It is, therefore, clear that in this case, there has never been any dispute whatsoever with regard to the principal liability of the Appellant towards energy charges, and no dispute was raised regarding LPS for over 5 years. 101. Mr. Rohatgi, Mr. Singhvi, Mr. Mukherjee and Ms. Anand all submitted that the contentions of the Appellant are liable to be rejected outright, since LPS provision in the Power Purchase Agreements, is not linked to the rate at which the affected party is able to get loans from Banks or Financial Institutions. The Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Central Excise, Chandigarh 2003(1) SCC 67, Tecumseh Products India Ltd. v. Commissioner of Central Excise, Hyderabad 2004 (6) SCC 30, J.K. Synthetics Ltd. v. Commercial Taxes Officer 1994 (4) SCC 276, Kailash Nath Associates v. Delhi Development Authority and Anr. 2015(4) SCC 136 and Central Bank of India v. Ravindra and Ors. 2002 (1) SCC 367. However, this Court found that the dispute raised by the Distribution Licensee with regard to the definition of gross revenue, in that case, was not bona fide and had only been raised to delay payment in accordance with the Power Purchase Agreement. This Court, accordingly, held that none of the above decisions would come to the aid of the Distribution Licensee and concluded that since there is a contractual stipulation, the interest can be levied and compounded. Mr. Singhvi referred to the part of said judgment reproduced hereinbelow: 192.... The ratio of the case, it is not attracted for the reason that in the instant matter, it is the contractual rate of interest and penalty agreed to which cannot be said to be arduous in any manner. The rate of interest has been agreed and particularly since it is a revenue sharing regime, and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that in any case, claims pertaining to the period of 3 years prior to the filing of the Petition before the MERC that is, before 02.12.2016, are clearly barred by limitation. 108. Mr. Singhvi concluded his arguments with the submission that the Regulations relied upon by the Appellant were the Tariff Regulations, framed by the MERC for the purpose of determination of tariff for generating stations Under Section 62 of the Act, which have no application in this case, where the Power Purchase Agreements have been executed pursuant to a bid process Under Section 63 of the Electricity Act. Mr. Singhvi submitted that the Appellant as purchaser was in no way concerned with how the Respondent manages the shortfall in working capital, whether from internal accruals, additional equity infusion, foreign loans, domestic loans etc. in a bid out tariff, adopted by the MERC Under Section 63 of the Electricity Act. 109. Mr. Singhvi submitted that the second appeal filed by the Appellant should be dismissed with directions to the Appellant to make payment of the balance reconciled outstanding interest liability of Rs. 48.55 crore (i.e. 47.79 crore + Rs. 0.76 crore as per the Appellant's aff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e referred to paragraphs of Adani Power Ltd. (supra). 114. Mr. Mukherjee reiterated the submission of Mr. Rohatgi and Mr. Singhvi that the LPS rate under the Power Purchase Agreements, is not linked to RBI Notifications/Circulars/Guidelines. The applicable interest rate for payment of LPS is contractually defined, and linked to PLR rates notified by State Bank of India. This is independent of any RBI Notification/Circular/Guideline. Citing Union of India v. Association of Unified Telecom Service Providers of India and Ors. 2020 (3) SCC 525, Mr. Mukherjee argued that, once a term has been defined contractually, parties cannot vary such terms. 115. Mr. Mukherjee reiterated the submission of Mr. Rohatgi and Mr. Singhvi that in terms of Article 11.3.4 read with the definition of SBAR, the parties have agreed to apply the Prime Lending Rate applicable for loans with one year maturity as fixed from time to time by State Bank of India in fixing the applicable LPS rate and the parties have also agreed that in case SBI PLR is not available, the parties are to mutually agree to the interest rate. Therefore, the parties have, by doctrine of incorporation, included a particular interest rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt has been entered into Under Section 63 of the Electricity Act pursuant to competitive bidding, based on quoted tariff alone. There is no separate element of interest on working capital. Irrespective of the expenditure/cost incurred by the generating company, it only receives the bid tariff. Therefore, the argument that generating companies are benefitting on account of an arbitrage between the LPS Rate and interest rates being paid by them is incorrect. 121. Mr. Mukherjee finally argued that the APTEL and the MERC have rightly held that payment/imposition of LPS is within the control of the Appellant. Mr. Mukherjee submitted that, being in default admittedly, the Appellant ought not to be permitted to benefit from its default and seek a lower penalty for failure to comply with its obligations of making timely payment. The defaults were during 2011 to 2017 during which time there was no pandemic. The Appellant has recovered the amount it was supposed to pay to the Respondent No. 5 during the period in question. Despite recovering this amount as part of its tariff, it deliberately and wilfully delayed in payment of these amounts to the Respondent Power Generating Companies. In l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rudently incurred can be claimed as part of tariff. In case the expenditure is on account of the Appellant's imprudence or default, such amounts cannot be claimed by the Appellant as part of tariff. Mr. Mukerjee submitted that Mr. Singh's argument of bill discounting has no bearing on this case at hand since Rattan India is not availing of bill discounting. 128. Ms. Divya Anand adopted the submissions of Mr. Rohatgi and Mr. Singhvi and added that Court has defined 'unjust enrichment' as the unjust retention of a benefit to the loss of another, or the retention of money or property of another against the fundamental principles of justice or equity and good conscience. She argued that a person is enriched if he has received a benefit, and he is unjustly enriched if retention of the benefit would be unjust. In support of her argument, Ms. Anand cited Indian Council for Enviro-Legal Action v. Union of India (2011) 8 SCC 161. 129. Justifying the direction of APTEL on the Appellant to make payment in terms of the order of MERC, Mr. Rohatgi referred to an Office Memorandum dated 08.03.2019 of the Ministry of Power, Government of India mandating that Electricity Regulator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n execution. The time period for compliance under the Impugned Judgment was 90 days whereas the period of limitation for filing an appeal Under Section 125 of the Electricity Act is 60 days. 134. Mr. Mukerjee further submitted that, in terms of Section 120 of the Electricity Act, the APTEL is not bound by the procedure laid down by the Code of Civil Procedure 1908. The directions for time bound payment or payment within the prescribed timeframe is consistent with past judgments of the APTEL including the judgment dated 14.09.2019 in Appeal 202 of 2018, which was upheld by this Hon'ble Court in Jaipur Vidyut Vitran Nigam Limited v. Adani Power Rajasthan Limited (supra). 135. Mr. Mukerjee submitted that, one of the objectives of the Electricity Act is time-bound disposal of matters. This is evident from Section 111(5) of the Electricity Act. Any direction for payment, is only in furtherance of such direction. 136. Mr. Mukerjee further argued that the Paragraphs 27 to 34 of the Impugned Judgment deal with sectoral issues including delay in adjudication of claims. In this case, the delay in adjudication has resulted in severe stress in the power sector in addition to financial i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commission has been elevated to the status of a substitute for Civil Court in respect of all disputes between the licensees and the generating companies. 140. It is a settled position of law that Courts have the power to execute their own orders. The aforesaid position has been confirmed by the Hon'ble Supreme Court in State of Karnataka v. Vishwabharathi House Building Cooperative Society and Ors. (2003) 2 SCC 412 (paras 59 to 62). 141. Mr. Mukerjee argued that the Electricity Act, 2003 has to be interpreted to also include and incorporate the power to execute by steps such as attachment of accounts, suspension/revocation of license etc. Mr. Mukerjee further argued that the role and function of Electricity Regulatory Commissions should not be viewed from the perspective of 'civil courts' alone. Unlike Civil Courts which assume jurisdiction only when a dispute arises, the Regulatory Commissions have an overarching regulatory power over licensees. The Regulatory Commissions continue to exercise continuous regulatory supervision over the parties (licensees) especially over tariff. In support of his submission Mr. Mukherjee cited All India Power Engineering Federation an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Respondent Generating Companies have never been disputed by the Appellant. This has duly been noticed by the APTEL in its judgment and order impugned in Paragraph 24, reproduced below: 24. It is submitted by the contesting Respondents (generators) that LPS liability of the Appellant on account of defaults in timely payments for the period between 01.07.2010 and 31.03.2017 had crystallized and the dispute as to the rate of LPS was raised to vex it further. It is not denied that the Appellant had not disputed any of the Monthly Bills or Supplementary Bills as per the procedure prescribed under the PPA. This rendered the demands to have become final and conclusive. The notice based on plea of CIL was issued in 2016, the issue having remained pending for 5 years, depriving the generators of the recompense for the loss suffered. Payment of LPS is triggered only when there is a default by MSEDCL. LPS is levied under the PPAs which were duly executed by MSEDCL. In these circumstances, it is inappropriate to project the outstanding liability towards LPS as an additional burden being placed upon MSEDCL.. 145. Mr. Mukerjee submitted that the judgment in Jaipur Vidyut Vitran Nigam Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the decision or order of the Appellate Tribunal, to him, on any one or more of the grounds specified in Section 100 of the Code of Civil Procedure, 1908: Provided that the Supreme Court may, if it is satisfied that the Appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. 148. An appeal lies to this Court Under Section 125 only on grounds permitted in Section 100 of the Code of Civil Procedure, 1908 (CPC). Section 100 of Code of Civil Procedure is set out hereinbelow: 100. Second appeal.--(1) Save as otherwise expressly provided in the body of this Code or by any other law for the time being in force, an appeal shall lie to the High Court from every decree passed in appeal by any Court subordinate to the High Court, if the High Court is satisfied that the case involves a substantial question of law. (2) An appeal may lie under this Section from an appellate decree passed ex parte. (3) In an appeal under this section, the memorandum of appeal shall precisely state the substantial question of law involved in the appeal. (4) Where the High Court is satisfied that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l (P) Ltd. v. State of Rajasthan (supra) cited by Mr. Singhvi, this Court held: 14. An appeal Under Section 125 of the Electricity Act, 2003 is maintainable before this Court only on the grounds specified in Section 100 of the Code of Civil Procedure. Section 100 Code of Civil Procedure in turn permits filing of an appeal only if the case involves a substantial question of law. Findings of fact recorded by the courts below, which would in the present case, imply the Regulatory Commission as the court of first instance and the Appellate Tribunal as the court hearing the first appeal, cannot be reopened before this Court in an appeal Under Section 125 of the Electricity Act, 2003. Just as the High Court cannot interfere with the concurrent findings of fact recorded by the courts below in a second appeal Under Section 100 of the Code of Civil Procedure, so also this Court would be loath to entertain any challenge to the concurrent findings of fact recorded by the Regulatory Commission and the Appellate Tribunal. The decisions of this Court on the point are a legion. Reference to Govindaraju v. Mariamman (2005) 2 SCC 500 : AIR 2005 SC 1008], Hari Singh v. Kanhaiya Lal (1999) 7 SCC 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63 SC 1633, speaking for a three-member Bench, Gajendragadkar, J. summarised the law thus: (SCR pp. 683-85) The question about the limits of the powers conferred on the High Court in dealing with second appeals has been considered by High Courts in India and by the Privy Council on several occasions. One of the earliest pronouncements of the Privy Council on this point is to be found in the case of Durga Choudhrain 17 IA 122 : ILR (1891) 18 Cal 23 (PC). In the case of Deity Pattabhiramaswamy v. S. Hanymayya AIR 1959 SC 57: 1958 Andh LT 834, this Court had occasion to refer to the said decision of the Privy Council and it was constrained to observe that 'notwithstanding such clear and authoritative pronouncements on the scope of the provisions of Section 100, Code of Civil Procedure, some learned Judges of the High Courts are disposing of second appeals as if they were first appeals. This introduces, apart from the fact that the High Court assumes and exercises a jurisdiction which it does not possess, a gambling element in litigation and confusion in the mind of the litigant public.' On this ground, this Court set aside the second appellate decision which had been brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be properly characterised as an elementary proposition. Therefore, whenever this Court is satisfied that in dealing with a second appeal, the High Court has, either unwittingly and in a casual manner, or deliberately as in this case, contravened the limits prescribed by Section 100, it becomes the duty of this Court to intervene and give effect to the said provisions. It may be that in some cases, the High Court dealing with the second appeal is inclined to take the view that what it regards to be justice or equity of the case has not been served by the findings of fact recorded by courts of fact; but on such occasions it is necessary to remember that what is administered in courts is justice according to law and considerations of fair play and equity however important they may be, must yield to clear and express provisions of the law. If in reaching its decisions in second appeals, the High Court contravenes the express provisions of Section 100, it would inevitably introduce in such decisions an element of disconcerting unpredictability which is usually associated with gambling; and that is a reproach which judicial process must constantly and scrupulously endeavour to avoid. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be no doubt that a notification issued by the Reserve Bank of India constitutes law. A Reserve Bank of India notification which alters, modifies, cancels or replaces an earlier notification would tantamount to a change in law. However the notification relating to alteration of the lending rates chargeable by banks and financial institutions are not laws which relate to the Power Purchase Agreements in question, and therefore do not attract, as the case may be, Article 13 of the Stage 1 Agreements or Article 10 of the Stage 2 Agreements. 161. The RBI circulars/guidelines referred to above are admittedly instructions issued to banks and financial institutions and are not applicable to the Appellant or to the Respondent-Power Generating Companies, who are engaged in the business of production, sale/purchase and/or distribution of electricity and not of advancing loans. Moreover, SBAR as defined in the Power Purchase Agreements is admittedly not linked to any RBI guidelines or circulars. The guidelines/circulars are thus not relevant to the issues involved in this appeal. 162. As rightly argued by the counsels appearing for the Power Generating Companies, the RBI circulars/guidelin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time to time for loans with one year maturity. LPS is to be calculated at the rate of 2% in excess of the PLR for loans with 1 year maturity, as fixed from time to time by SBI. Moreover, the parties have consciously agreed that in the absence of such rate, the LPS rate shall be mutually agreed to by the Parties. 169. As argued by Mr. Rohatagi, Mr. Singhvi and Mr. Mukherjee, the purpose for which the Guidelines/Circulars have been issued by the Reserve Bank of India or their impact on the rates of interest on loans and advances, are not relevant to this appeal. 170. The provision in the Power Purchase Agreement, whereby the parties are to mutually agree on a rate of interest, in case there is no SBI Prime Lending Rate, in itself excludes the applicability of the general provision for Change in Law contained in Article 13 of the Power Purchase Agreement to Late Payment Surcharge. 171. In Adani Power (Mundra) Ltd. v. Gujarat Electricity Regulatory Commission (supra), this Court found: 38. In the present case, the perusal of various Articles would reveal that the provisions Under Article 14 are general in nature. The provision Under Article 3.4.2 is specific, only to be invoked i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttled. The Court cannot, through its interpretative process, rewrite or create a new contract between the parties. The Court has to simply apply the terms and conditions of the agreement as agreed between the parties, as observed by this Court in Shree Ambica Medical Stores and Ors. v. Surat People's Co-operative Bank (supra), cited by Ms. Divya Anand. This appeal is an attempt to renegotiate the terms of the PPA, as argued by Ms. Divya Anand as also other Counsel. It is well settled that Courts cannot substitute their own view of the presumed understanding of commercial terms by the parties, if the terms are explicitly expressed. The explicit terms of a contract are always the final word with regard to the intention of the parties, as held by this Court in Nabha Power Ltd. (NPL) v. Punjab State Power Corporation Ltd. (supra) cited by Ms. Anand. 178. There is substance in Ms. Anand's argument that the Appellant is obliged to seek amendment of the provisions of the Power Purchase Agreement only in accordance with the agreed procedure for amendment of the terms thereof. The agreed rate of Late Payment Surcharge can only be amended in the absence of SBI PLR and that too with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en PLR, Base Rate and MCLR are compared side by side. The difference is that very stark. Loans are advanced at a mark-up over Base Rate and MCLR, while during the PLR regime, loans were offered at a discount on PLR. 182. In any case, the Appellant cannot contend that the Reserve Bank of India circulars are to be considered as Change in Law, since Article 13.3.1 of the Stage 1 agreements corresponding to Article 10.4.1 of the Stage 2 agreements provides that notices of Change in Law events are to be issued by the affected party, as soon as reasonably practicable, after the affected party becomes aware of Change in Law event or when it should reasonably have known of the Change in Law. 183. In this case, the changes cited by the Appellant were effected by RBI from July 2010 and April 2016 and notified in advance. The Appellant issued notices of Change in Law as late as in September 2016, more than six years after the Reserve Bank of India introduced the base rate system in place of the BPLR system. Furthermore, while the guidelines on the base rate system were published on 9th April 2010 and introduced with effect from 01.07.2010, the Appellant entered into Power Purchase Agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in one voice that the delays in payment and/or non-payment of the invoices raised by the Power Generating Companies for the supply of power to the Appellant, had put the Respondent-Power Generating Companies under immense financial stress, as their source of revenue is from the sale and supply of power generated from their power plants. The Respondent Power Generating Companies cannot be burdened with the consequences of the Appellant's defaults. 188. The judgment of this Court in M/s. Kailash Nath Associates v. Delhi Development Authority (supra) cited by Mr. Singh is clearly distinguishable since this Court found that there had been no breach of contract by the Appellant (Para 44). Further, the Court did not accept the view of the Division Bench, that the fact that DDA had made a profit from re-auction was irrelevant, since compensation for breach of a contract can be given for damage or loss suffered. If no damage is suffered by reason of the breach, the law does not provide for a windfall. 189. In this case, the Appellant admittedly did not pay the bills raised by the Power Generating Companies within time. The Power Purchase Agreements provided for Late Payment Surch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopment Authority and Anr. 2015 (4) SCC 136 and Central Bank of India v. Ravindra and Ors. 2002 (1) SCC 367. This Court after considering the above-mentioned judgments of this Court cited on behalf of the licensee held that none of the decisions would come to the aid of the licensee. This Court held: 192. The ratio of the case, it is not attracted for the reason that in the instant matter, it is the contractual rate of interest and penalty agreed to which cannot be said to be arduous in any manner. The rate of interest has been agreed and particularly since it is a revenue sharing regime, and the licensees have acted in conscious disregards of their obligation. Thus on the anvil of the decision above also, they are liable to pay the dues with interest and penalty...... There is no such discretion available when the parties have agreed in default what amount is to be paid. It automatically follows that it is not to be determined by the licensor once over again. Parties (licensor and licensees) are bound by the terms and conditions of the contract. There is no enabling Clause to vary either the rate of interest or the penalty provided therein and even if permissible, it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 195. There being no dispute in the present case with regard to the principal sums due under the monthly bills, interest on delayed payment at 2% in excess of SBI PLR cannot be said to be arbitrarily high. There is no reason for this Court to reduce the contractual rate of interest and thereby alter or modify the contract between the parties, in exercise of its powers Under Article 142 of the Constitution of India. 196. We need not go into the question whether or not the Appellant has funds to clear its interest liability. The Appellant cannot continue to get supply of electricity without having appropriate funds. Appellant would necessarily have to raise funds to clear its contractual obligations. 197. Even assuming that the burden of interest would have to be passed on to the consumers, that cannot be the ground for the Appellant to resile from its contractual commitment to the Power Generating Companies. The Appellant cannot pass on the burden for delay in making payment to the Power Generating Companies. In any case the claims as argued by Mr. Singhvi pertains to a period of three years before filing of the petition before the MERC on 2nd December, 2016 and therefore barre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plied further by the Appellant to its consumers against payment of retail tariff. Secondly, the energy bills in question, raised by the Respondent Power Generating Companies have never been disputed by the Appellant, as noticed by the APTEL in the impugned judgment and order, the relevant part whereof is extracted hereunder: 24. It is submitted by the contesting Respondents (generators) that LPS liability of the Appellant on account of defaults in timely payments for the period between 01.07.2010 and 31.03.2017 had crystallised and the dispute as to rate of LPS was raised to vex it further. It is not denied that the Appellant had not disputed any of the Monthly Bills or Supplementary Bills as per the procedure prescribed under the PPA. This renders the demands to have become final and conclusive. The notice based on plea of CIL was issued in 2016, the issue having remained pending for five years, depriving the generators of the recompense for the loss suffered. Payment of LPS is triggered only when there is a default by MSEDCL. LPS is levied under the PPAs which were duly executed by MSEDCL. In these circumstances, it is inappropriate to project the outstanding liability towards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lated in the order of MERC. The APTEL rightly upheld the direction. In any case, such a direction cannot be interfered with in exercise of powers Under Section 125 of the Electricity Act which corresponds to the power of Second Appeal Under Section 100 of the Code of Civil Procedure, since the sine qua non for entertaining an appeal is the existence of a substantial question of law. 208. After the hearing of this appeal was concluded and the appeal was reserved for judgment, the Appellant filed an application to bring on record additional facts and documents in the form of queries under the Right to Information Act, 2005 made by one Alka Mehta to the State Bank of India and the responses thereto in an attempt to show that PLR would not apply to short term loans advanced by SBI after transition to the Base Rate/MCLR system. This Court cannot take note of any documents sought to be introduced after the conclusion of hearing. In any case, as observed above, this Court cannot in a second appeal Under Section 125 of the Electricity Act, 2003 interfere with concurrent factual findings arrived at by MERC and APTEL on the basis of facts admitted by the Appellant. The Appellant had been ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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