TaxTMI 
TaxTMI 
2021 (10) TMI 1302
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.... Electricity Regulatory Commission, hereinafter 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 Ap....
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....ws including Electricity Laws in force in India and any stature, ordinance, Regulation, notification or code, rule, or any interpretation of any of them by an Indian Government 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, 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 ....
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....ected by a Change in Law. Without prejudice to the factor of materiality or other provisions contained in this Agreement, the obligation to inform the procurer contained herein shall be material. Provided that in case the seller has not provided such notice, the Procurer shall have the right to issue such notice to the seller. 13.3.3 Any notice served pursuant 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 ag....
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....llowing terms have the following meanings 10.1.1 "Change in Law" means the occurrence of any of the following events after the date, which is seven (7) days prior, to the Bid Deadline resulting into any additional recurring/non-recurring expenditure by the Seller or any income to the Seller: * the enactment, coming into effect, adoption, promulgation, amendment, modification or repeal (without re-enactment or consolidation) in India, of any Law, including Rules and Regulations framed pursuant to such Law; * a change in interpretation 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 Sell....
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....0.5.1 Subject to Article 10.2, 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. 10.5.2 The payment for Change in Law shall be through Supplementary Bill as mentioned in Article 8.8. However, in case any change in Tariff by reason of Change in Law, as determined in accordance with this Agreement, the Monthly Invoice to be raised by the Seller after such change in 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....
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....age 2 Power Purchase Agreements. 11. LPS is payable at the rate agreed upon by the parties to the Power Purchase Agreements. The Power Purchase Agreements stipulate that LPS for delay in payment of bills is to be computed on the basis of the Prime Lending Rate fixed as per SBAR, that is, the State Bank Advance Rate. 12. The expression SBAR (State Bank Advance Rate) refers to the Prime Lending Rate notified by the State Bank of India (hereinafter referred to as 'SBI') from time to time, that is applicable per annum for loans with one year maturity, advanced by SBI. It is only in the absence of SBAR that the rate of LPS may be substituted by some other arrangement, by mutual agreement. 13. On 23.09.2016, the Appellant issued 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, ....
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....peal involves a substantial question of law, well within the four corners of Section 125 of the Electricity Act, 2003 Mr. Singh cited State Bank of India and Ors. v. S.N. Goyal (2008) 8 SCC 92, where this Court held: 13. Second appeals would lie in cases which involve substantial questions of law. The word "substantial" prefixed to "question of law" does not refer to the stakes involved in the case, nor intended to refer only to questions of law of general importance, but refers to impact or effect of the question of law on the decision in the lis between the parties. "Substantial questions of law" means not only substantial questions of law of general importance, but also substantial question of law arising in a case as between the parties. In the context of Section 100 Code of Civil 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 ca....
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....s with one (1) year maturity, as fixed from time to time by the State Bank of India, and in the absence of such rate, any other arrangement that substitutes such Prime Lending Rate, as mutually agreed to by the parties. 20. Mr. Singh argued that the definition of SBAR as provided under the Power Purchase Agreements expressly refers to the interest rate that is applicable for loans with one year maturity. The interest rate is therefore, to be renewed on a yearly basis, and further, only the interest rates for short term loans would be applicable to LPS under the Power Purchase Agreements. Upon renewal of the loan, the Base Rate system and/or MCLR system, as the case may be, is to be applicable, for the relevant period for which LPS is to be calculated. 21. Mr. Singh submitted that no PLR rates are being 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 V....
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....ajasthan Discoms, payment of 2 per cent in excess of the applicable SBAR per annum with monthly rest would be on higher side. In our opinion, it would be appropriate to direct the Appellants-Rajasthan DISCOMS to pay interest/late payment surcharge as per applicable SBAR for the relevant years, which should not exceed 9 per cent per annum. It is also provided that instead of monthly rest, the interest would be compounded per annum. 74. We accordingly direct that the rate of interest/late payment surcharge would be at SBAR, not exceeding 9 per cent per annum, to be compounded annually, and the 2 per cent above the SBAR (as provided in Article 8.3.5 of PPA) would not be charged in the present case. 23. Mr. Singh argued that the provisions of the Power Purchase Agreement considered in Jaipur Vidyut Vitaran Nigam Ltd. (supra) with regard to 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 a....
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....hase Agreements, and is therefore tariff. 29. Mr. Singh submitted that interest income is considered as income under the Income Tax Act, 1961. LPS is nothing but interest on account of delay in payment of the tariff under the Power Purchase Agreements, and is payable as a part of the said tariff. However, APTEL has by its impugned judgment and order wrongly held that LPS neither has any bearing on the income of the Respondent Power Generating Companies nor is part of the tariff. APTEL has erroneously held that change in methodology in computation of the rate of interest is not change in law. 30. Mr. Singh further argued that the LPS, as a concept, is compensatory in nature for delayed payment, if any. The Order dated 16.11.2017 passed by the MERC in Case No. 24 of 2017 also holds that LPS is essentially compensatory in character, in terms of the effect on 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 inv....
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....ion. 43.4. The Section applies whether a person is a Plaintiff or a Defendant in a suit. 43.5. The sum spoken of may already be paid or be payable in future. 43.6. The expression "whether or not actual damage or loss is proved to have been caused thereby" means that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-estimate of damage or loss, can be awarded. 43.7. Section 74 will apply to cases of forfeiture of earnest money under a contract. Where, however, forfeiture takes place under the terms and conditions of a public auction before agreement is reached, Section 74 would have no application. 44. The Division Bench has gone wrong in principle. As has been pointed out above, there has been no breach of contract 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 compensatio....
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....tification dated 3rd March, 2016 of the Reserve Bank of India. 37. Mr. Singh submitted that the Respondent No. 2 sought for bill discounting from the Appellant during the financial year 2020-2021. Such bill discounting was done at the rate of 7% per annum. He pointed out that other Power Generators had also discounted their energy bills at interest rates varying from 4 to 6.5%. However, those Power Generators are not parties to this appeal. 38. Mr. Singh adverted to the Independent Auditor's Certificate on computation of actual rate of interest on short term borrowings for Coastal Gujarat Power Limited (CGPL), which is also an Independent Power Producer. The actual rates of interest on short term borrowings by CGPL between 01.04.2018 to 25.01.2021 are as follows: Period Rate of interest (In %) April 01, 2018- March 31, 2019 9.04% April 01, 2019- March 31, 2020 9.28% April 01, 2020- January 25, 2021 8.18% CGPL not being a party to these proceedings its borrowings or the interest paid by them on borrowings is inconsequential. 39. Mr. Singh further submitted that the Appellant is a revenue neutral entity. The Annual Revenue Requirement of the Ap....
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....venue gap and cannot be met unless the MERC allows the Revenue Gap in terms of Case No. 195 of 2017 (supra). Mr. Singh has referred to the yearwise approval of total sales and AG sale, which are not relevant to this appeal and therefore not reproduced in this judgment, to avoid prolixity. 43. Mr. Singh submitted that, even though the AG Sales figures submitted by the Appellant were based on actual consumption, the MERC was of the opinion that the methodology followed by the Appellant needed to be revisited and validated. Pending the enquiry into the methodology, the MERC mechanically devised its own methodology to calculate AG Sales, which does not take into consideration the details/actual figures submitted by the Appellant. This led to disallowance of a quantum of AG sales. The difference between the AG Sales claimed by the Appellant, as against the quantum allowed, has led to shortfall in cash flow and inability of the Appellant to make payments. 44. Mr. Singh further submitted that the tariff for the Financial Year 2016-2017 came into effect from 01.11.2016 instead of 01.04.2016 in view of Tariff Order dated 03.11.2016 passed by the MERC in Case No. 48 of 2016, leading to....
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.... financial loss. This led to further cashflow crunch for the Appellant. 50. Mr. Singh submitted that the time gap between the approval of the Annual Revenue Requirement and the final true up has resulted in grave mismatch in revenue and expenditure thereby increasing the working capital requirement of the Appellant. The Appellant has been constrained to borrow from Financial Institutions/Banks, on an interest component, which is not passed through in its Annual Revenue Requirement. 51. Mr. Singh argued that another important factor that has deepened the financial crisis of the Appellant is low recovery of dues from agricultural consumers who consume about 30% of the electricity supplied through the Appellant. Similarly, the arrears on account of supply of electricity to Government departments, public water works and for street-lights have also accumulated. Under the MYT Regulations MERC allows a provision for bad debts to the extent of 1.5% of receivables only, even though the largest consumer base of the Appellant is in rural areas where consumers are less likely to pay bills on time. 52. Mr. Singh submitted that these issues are not within the control of the Appellant, b....
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....ugh social media, electronic media and print media for wider publicity. 55. Later, on 30.03.2020, the MERC issued an order approving a moratorium for consumers under the Industrial and Commercial category, on payment of electricity bills for three billing cycles beginning from the lockdown date of 25.03.2020. Mr. Singh submitted that the said moratorium granted by the MERC has badly affected the revenue mechanism of the Appellant as the Appellant continued to incur expenditure due to its universal service obligations whilst the recovery got badly hit. Further, the MERC, through its practice directions issued on 09.05.2020 and 21.05.2020, gave the following relaxations and/or reliefs to the consumers: (a) It was clarified that moratorium of 3 billing cycles had been given to the industrial and commercial establishments for payment of fixed charges, which they would be liable to pay in the subsequent three billing cycles, in equal interest free instalments. (b) If the consumers chose to pay the entire moratorium amount in one go, rebate of 1% would be given to such consumers. (c) HT Industrial and HT Commercial consumers were allowed to revise their cont....
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....w under the Power Purchase Agreements. 60. Mr. Mukul Rohatgi, Senior Advocate appearing on behalf of the Respondent No. 2, followed by Dr. Abhishek Manu Singhvi, Senior Advocate appearing on behalf of the Respondent No. 3, Mr. Vishrov Mukherjee appearing on behalf of the Respondent No. 4 and Ms. Divya Anand appearing on behalf of the Respondent No. 5 advanced arguments, opposing the appeal. There being some overlapping of arguments of the respective Counsel, this Court has not recorded the submission of all Counsel in entirety, to avoid unnecessary repetition. 61. Mr. Rohatgi, Mr. Singhvi, Mr. Vishrov Mukerjee and Ms. Divya Anand all argued in one voice that this Appeal Under Section 125 of the Electricity Act 2003, is not maintainable, there being no question of law, not to speak of substantial question of law raised by the Appellant. 62. Mr. Rohatgi appearing for the Respondent No. 2, Mr. Singhvi appearing for Respondent No. 3, Mr. Mukerjee appearing for the Respondent No. 4 and Ms. Divya Anand appearing for the Respondent No. 5 submitted that Article 8.3.5 of the Stage 2 Power Purchase Agreements corresponding to Article 11.3.4 of the Stage 1 Power Purchase Agreements b....
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....of the MCLR. It is open to the Appellant, a Government entity, to take a loan at a cheaper rate if it wants to, and clear the bills raised by the Power Generating Companies. 68. Mr. Rohatgi submitted that the Appellant is purporting to portray late payments as an act of virtue. If the Appellant did not delay payment, it would not have to pay any LPS. LPS is attracted only in the event of delay in payment beyond the due date. The Appellant cannot circumvent the provisions of the Power Purchase Agreement which is a binding contract. 69. Mr. Rohatgi argued that the APTEL has, by its impugned Judgment and order dated 27.04.2021, correctly dismissed the Statutory Appeal filed by the Appellant, and upheld the order of the MERC dated 16.11.2017. The limited issue involved in the present Civil Appeal is, whether the Appellant is liable to pay LPS calculated as per the SBAR (State Bank Advance Rate) as provided in the Power Purchase Agreements executed between the Appellant and Mr. Rohatgi's client or as per the Base Rate System introduced in 2010 and Marginal Cost of Funds Based Lending Rate System(MCLR) introduced in 2016 as notified by the Reserve Bank of India. Mr. Rohatgi poi....
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....& 19 and Power Grid Corporation of India and Ors. v. Tamil Nadu Generation and Distribution Co. Limited and Ors., (2019) 7 SCC 34 (para 1 and 6) in support of the argument that this appeal Under Section 125 of the Electricity Act, 2003 is liable to be dismissed as it does not involve any substantial question of law. 74. Mr. Mukherjee also cited Bharat Sanchar Nigam Ltd. v. Pawan Kumar Gupta (2016) 1 SCC 363, Wardha Power Co. Ltd. v. MSEDCL and Anr., (supra) and Tuppadahalli Energy India Private Limited v. Karnataka Electricity Regulatory Commission and Anr. (2017) 11 SCC 194, where this Court dismissed statutory appeals on the ground of absence of any substantial question of law. 75. Mr. Rohatgi pointed out that both the MERC and the APTEL have rendered concurrent findings against the Appellant as shown in the tabular statement given below: Concurrent Findings Order of MERC Judgment and Orders of APTEL The Appellant (MSEDCL) is called upon to pay LPS only when it delays payment of monthly or supplementary bills beyond the due date. Para 12 @ pg 109-111 Para 13 @ page 11-14 SBI PLR for loans with maturity of one year, remains in vogue and its value continu....
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....r loans with one (1) year maturity as fixed from time to time by the State Bank of India. In the absence of such rate, SBAR shall mean any other arrangement that substitutes such prime lending rate as mutually agreed to by the parties". 79. Mr. Rohatgi submitted that the definition of SBAR in the Power Purchase Agreements makes it clear that any reference in the Power Purchase Agreements to SBAR has to be construed as reference to the Prime Lending Rate as fixed by State Bank of India. These provisions have no reference at all to the Reserve Bank of India. Further, the Power Purchase Agreements do not contemplate automatic shift to Base Rate/MCLR notified by RBI, even if SBI PLR ceased to be in existence. The agreed position in such situation is for the contracting parties to substitute SBI PLR with any other mutually agreed arrangement. Having agreed to such an arrangement in the Power Purchase Agreements, the claim of Appellant for treating Base Rate/MCLR as Change in Law event cannot be entertained. 80. Mr. Rohatgi argued that, while introducing the Base Rate system in 2010 and the MCLR system in 2016, the Reserve Bank of India had provided for the continuation of the earl....
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....aw. While the changes cited by the Appellant were effected by Reserve Bank of India from July, 2010 and again April, 2016 and notified in advance, the Appellant issued notices of Change in Law to the Respondent No. 2 only in September 2016 i.e. more than 6 years after Reserve Bank of India introduced the Base Rate system in place of the BPLR system. The Appellant could not have been unaware of the revision effected by the Reserve Bank of India at that time. Nor has it explained this inordinate delay in raising its claim. Further, while Base Rate was introduced on 09.04.2010, the Appellant entered into Power Purchase Agreements with the Respondent No. 2 on 09.08.2010 and 16.02.2013 incorporating PLR as the LPS rate for supply of contracted quantum of 125 MW and 440 MW of electricity respectively to the Appellant. As such, the Appellant's claim is inadmissible, the same being barred by limitation. 83. Mr. Rohatgi emphatically reiterated that Late Payment Surcharge (LPS) is imposed only when there is delay in the payment of bills. The liability towards LPS was therefore, within the control of the Appellant, for there would be no LPS liability, if the Appellant did not delay pay....
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....efaults it committed, by inordinately delaying the payment of bills to the Respondent Power Generating Companies. The APTEL found that the Appellant was indisputably liable to pay LPS. 86. Mr. Rohatgi finally argued that even though the proceedings were initiated before the MERC in 2017, the Appellant is now citing the pandemic related financial hardships caused during the year 2020 to renege on its contractually binding obligation of payment of LPS in terms of the Power Purchase Agreements and somehow seeking to unilaterally amend the terms of the Power Purchase Agreements so that they are favourable to them, which is impermissible in law. 87. Mr. Rohatgi submitted that LPS is calculated on compounding basis with monthly rests in terms of the Power Purchase Agreements and further the same cannot be passed on to consumers in view of the Order dated 29.08.2020 of MERC in Case No. 45 of 2020. 88. Mr. Rohatgi argued that by way of this Appeal, the Appellant is, in fact, seeking a downward revision of a contractually determined penalty in order to unjustly enrich itself at the cost of the Respondent Power Generating Companies, more so, since admittedly the Appellant recovers d....
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....ontract cannot be rewritten. 93. Mr. Singhvi argued that the Power Purchase Agreement for sale and purchase of power, was between a power generating company and a procurer of electricity, to which the circulars/guidelines of RBI applicable to banks and financial institutions can have no application. The Power Purchase Agreement does not incorporate or refer to any RBI circulars or guidelines. Mr. Singhvi cited the judgment of this Court in B.O.I. Finance Limited v. Custodian and Ors. (1997) 10 SCC 488 where this Court held that RBI circulars/instructions/guidelines cannot result in invalidation of a contract even between a bank and a third party and the consequence for violation is penalty as provided for in Section 46 of the Banking Regulation Act. The RBI circulars/guidelines cannot therefore vary or modify a contract between two parties, none of which is a bank or a financial institutions. 94. Mr. Singhvi argued that reliance by the Appellant on the RBI circulars/guidelines, in the context of the agreement between the Appellant and the Respondent is totally misplaced. The RBI circulars/guidelines are admittedly instructions issued to banks and financial institutions and ar....
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....n any manner affect the tariff at which electricity is agreed to be sold and purchased. Therefore, there is absolutely no increase/decrease in the revenues or cost to the Respondent, connected with the object of the agreement, i.e. generation and sale of electricity, as a result of the RBI notification/circulars. Consequently, the RBI notifications/circulars relied upon by the Appellant, in the context of LPS, do not require any determination of change in law compensation. 98. Mr. Singhvi pointed out that the MERC had, in its order dated 16.11.2017, rightly rejected the claim of the Appellant inter alia observing: 12. However, the LPS provision is attracted only when the payments are not made by MSEDCL against the Monthly Bills of the Seller within the time stipulated in the PPAs Any changes in the basis of the LPS rates consequent to revisions by the RBI do not affect in any manner the rates at which power was agreed to be sold and purchased under the PPAs and in the consequent financial implications for either Party resulting in a liability to compensate the affected Party.... 99. Mr. Singhvi submitted that the APTEL, aptly concurred with the finding of the MERC an....
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....reproduced in Paragraph 182 of the judgment of this Court, reads: In re: Levy of interest, penalty, and interest on penalty. Para 182. Levy of licence fee is provided in Clause 20.2. In case of any delay in payment of licence fee beyond the stipulated period would attract penalty at the rate, which would be 2% above the prime lending rate (PLR) of State Bank of India. As per Clauses 20.5 and 20.8, if the licensee does not pay the demand, consequences would follow. The clauses are extracted hereunder: 20.5. Any delay in payment of licence fee payable or any other dues payable under the Licence beyond the stipulated period will attract interest at a rate which will be 2% above the prime lending rate (PLR) of State Bank of India existing as on the beginning of the financial year (namely 1st April) in respect of the licence fees pertaining to the said financial year. The interest shall be compounded monthly and a part of the month shall be reckoned as a full month for the purposes of calculation of interest. A month shall be reckoned as an English calendar month. 103. Mr. Singhvi submitted that in the case of Association of Unified Telecom Service Providers of Indi....
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....e, we find that when there is contractual stipulation, the interest can be levied and compounded. 104. Mr. Singhvi submitted that there being no dispute in this case, regarding the principal sums due under the monthly bills; and this Court having taken a view in Association of Unified Telecom Providers of India (supra) that interest on delayed payment at 2% in excess of SBI PLR is not arduous, there is no case made out for this Court to reduce the contractually agreed rate of interest, in exercise of powers Under Article 142 of the Constitution of India. On the other hand, facts would reveal that in this case the Appellant has deliberately and consciously been disregarding its obligation and raising frivolous disputes as an afterthought, only with a view to further delay payment in accordance with the terms of the Power Purchase Agreement. No indulgence need, therefore, be granted to the Appellant. 105. Mr. Singhvi submitted that the Appellant has the funds to clear the interest liability. This is apparent from the fact that the Appellant had, itself made an offer before the MERC, to clear all dues of the Respondent No. 3 in 1 weeks' time. The Appellant is, therefore not ....
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.... a Change in Law under the Power Purchase Agreements. Mr. Mukherjee argued that in terms of Article 13.1.1 of the agreement dated 23.02.2010, between the Appellant and the Respondent No. 4, the Change in Law evaluation is a two step process being: a) Occurrence of an event described as a change in law event in Article 13.1.1 and; b) Such change in law has to result in any increase/decrease in cost/revenue of the Seller, i.e., the Power Generating Company i.e. the Respondent No. 4 [Article 13.2(b)]. 112. Referring to Uttar Haryana Bijli Vitran Nigam Limited and Anr. v. Adani Power Limited and Ors. (2019) 5 SCC 325 (para 11) Mr. Mukherjee argued that a change or amendment in the LPS rate does not constitute Change in Law because there is no impact on cost or revenue of the Generating Company. LPS is payment for a default committed by the Appellant in making timely payment. It has no impact on the cost incurred or the revenue received by the Generating Company. It is in the nature of a contingent liability incurred by the Appellant for failing to adhere to its contractual obligations under the PPA. 113. Mr. Mukherjee argued that compensation to the Affected Par....
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.... Punjab State Power Corporation Limited (PSPCL) and Anr. (2018) 11 SCC 508 (paras 45 & 72), Transmission Corporation of Andhra Pradesh Ltd. and Ors. v. GMR Vemagiri Power Generation Ltd. and Anr. (2018) 3 SCC 716, and Shree Ambica Medical Stores and Ors., v. Surat People's Cooperative Bank Limited and Ors. (2020) 13 SCC 564 (para 20), Mr. Mukherjee submitted that it is settled law that Courts will neither rewrite nor substitute the terms of a Contract. 118. Mr. Mukherjee argued that, if Change in Law is applied to change in interest rate it would render the provision relating to parties having to mutually agree on a different interest rate redundant. Mr. Mukherjee adverted to Article 1.2.13 of the Power Purchase Agreements, which states that different provisions of the Power Purchase Agreements have to be read and interpreted harmoniously in order to give effect to all provisions. Treating change in interest rate system as change in law (despite parties having agreed to mutually decide on the consequences) will render the latter part of the SBAR definition otiose since only the Regulatory Commission can decide change in law claims. 119. Mr. Mukerjee submitted that Base Ra....
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.... Companies promptly, rather than end up paying LPS. There is no impediment to the Appellant raising loans to promptly clear the bills due to the Respondent Power Generating Companies. 123. Mr. Mukerjee also pointed out that the Appellant had been charging interest for delay in payment from its consumers @ 1.25% per month, i.e. 15% on an annual basis as per MERC MYT Regulations, 2019. This belies the argument of the Appellant that LPS rate is correlated to the actual interest rate on loans taken by the Appellant or generating companies. 124. Mr. Mukerjee argued that at no stage had the Appellant denied that the Reserve Bank of India was continuing to notify PLR. It is only before this Hon'ble Court that the Appellant has submitted that PLR is not available. The Appellant is precluded from raising such a plea at this belated stage. Further, such plea is factually incorrect since SBI is notifying PLR. 125. Mr. Mukherjee submitted that the Appellant is the only Discom in the country to raise this claim of change in law. None of the other DISCOMS in Maharashtra or other States have claimed this as a change in law. 126. Mr. Mukherjee further submitted that, during the per....
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....) by directing payment of the LPS dues to the Respondent Generating Companies. Further, in terms of Section 120 of the Electricity Act, 2003, the APTEL has the power to direct the Appellant to pay the outstanding LPS amounts in a time bound manner to ensure that the principles laid down Under Section 61 of the Electricity Act, 2003 are achieved. 131. Mr. Rohatgi argued that the APTEL directed the Appellant to pay the LPS within the time stipulated in the impugned judgment and order, in keeping with the objective of the Electricity Act which is aimed at taking measures conducive to development of the power sector while protecting the interest of consumers. Mr. Rohatgi submitted that this is also consistent with the principles set out in Section 61 of the Electricity Act, specifically Sections 61(b) and (d) i.e., to conduct generation, transmission and distribution of electricity on commercial principles and at the same time safeguard consumer interest while ensuring reasonable recovery of the cost of electricity in a reasonable manner. 132. Mr. Rohatgi submitted that any further delay in payment of LPS would not be in the interest of the Respondent Generating Companies as they....
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....nd objective of the legislation. 138. Mr. Mukerjee submitted that, while the Electricity Act, 2003 does not have a specific provision on execution of decrees/orders by the Regulatory Commissions, Regulatory Commissions have been held to be "courts". In Tamil Nadu Generation & Distribution Corporation Ltd. v. PPN Power (supra), this Court held that the State Electricity Regulatory Commissions have the trappings of a court. The relevant portion of the aforesaid judgment is reproduced below: 59. In view of the aforesaid categorical statement of law, we would accept the submission of Mr. Nariman that the tribunal such as the State Commission in deciding a lis, between the Appellant and the Respondent discharges judicial functions and exercises judicial power to the State. It exercises judicial functions of far-reaching effect. Therefore, in our opinion, Mr. Nariman is correct in his submission that it must have essential trapping of the court. This can only be achieved by the presence of one or more judicial members in the State Commission which is called upon to decide complicated contractual or civil issues which would normally have been decided by a civil court. Not only....
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....d in the Power Purchase Agreement for LPS the interest on delayed payment of carrying cost is not specified in Power Purchase Agreement. Therefore, APTEL directed that charges for deferred payment of carrying cost should be paid at the same rate as LPS, since both are meant for time value of money. This was disputed in the Appeal. This Court, keeping in view the peculiarities of the facts of the case, where the power generator was unable to raise bills while the question of change in law raised by the power generator was pending adjudication before the MERC and the APTEL reduced the rate of interest on carrying cost to 9%. Mr. Rohatgi submitted that it is important to note that there was no dispute in relation to Late Payment Surcharge in the case of Jaipur Vidyut Vitran Nigam Limited (supra). 143. Mr. Singhvi also submitted that Jaipur Vidyut Vitran Nigam Ltd. v. Adani Power Rajasthan Ltd. (supra) was distinguishable. In Jaipur Vidyut Vitran Nigam Ltd. (supra), there were change in law claims for cost of imported coal, made by the generator which were disputed by the distribution licensee on the ground that the bid submitted by the generator itself was premised on imported coal....
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.... Rajasthan Distribution Companies and not in the context of LPS. This is evident from Paragraphs 62, 69, 70, 71 and 73 of the judgment. The LPS rate is referenced for determining the carrying cost rate that would apply given the inordinate delay in adjudication of claims and the inability of Adani Power Rajasthan Ltd. to raise bills till the adjudication was completed. (iii) This Hon'ble Court limited the interest rate in the facts of that case and in order to do complete justice. There was no default on the part of the Distribution Licencee, Jaipur Vidyut Vitran Nigam Ltd. (iv) In this case, the Appellant has admitted that it delayed payment. No adjudication was required prior to payment of monthly bills. Therefore, the judgment is inapplicable. Reduction of LPS rate will result in rewarding the Appellant for repeatedly defaulting on its obligations. 146. Mr. Rohatgi, Mr. Singhvi, Mr. Mukherjee and Ms. Anand all submitted that in Jaipur Vidyut Vitran Nigam Ltd v. Adani Power Rajasthan Ltd. (supra), this Court had reduced the rate of interest to SBAR not exceeding 9% per annum, to be compounded annually, in exercise of its power Under Article 142 of the Con....
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.... (supra) cited by Mr. Singh, the word "substantial question of law" means not only a substantial question of law of general importance, but also any substantial question of law arising in a case between the parties on which the decision in the lis depends. A question of law which arises incidentally or collaterally and has no bearing on the final outcome, will not be a substantial question of law. Whether the question raised is a question of law and if so, whether the question is a substantial question of law is also not determined by the enormity of the stakes involved in the case. 150. In Nazir Mohamed v. J. Kamala and Ors. (supra), also cited by Mr. Singh, this Court held that, to be "substantial", a question of law must be debatable, not previously settled by the law of the land or any binding precedent, and must have a material bearing on the decision of the case and/or the rights of the parties before it, if answered either way. 151. The proposition of law laid down in Nazir Mohamed v. J. Kamala and Ors. (supra) and State Bank of India v. S.N. Goyal (supra) is well settled. The aforesaid judgments do not, however support the contention of Mr. Singh that there is a subst....
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...., 1908. Though the Appellant has raised 34 questions, they are actually grounds for attacking the appellate order. Grounds for attacking an order are different from substantial question of law evolved in the appeal. On appreciation of the correspondence between the parties during the subsistence of the agreement, both the Commission and the Appellate Tribunal have held against the Appellant. 155. In Tuppadahalli Energy India (P) Ltd. v. Karnataka Electricity Regulatory Commission and Anr. (supra), this Court held that the view taken by the Kerala State Electricity Regulatory Commission and APTEL in interpreting of Clause 6(5) of the Power Purchase Agreement as an incentive, being a plausible view, there was no substantial question of law to warrant interference Under Section 125 of the Electricity Act. 156. In Ramanuja Naidu v. V. Kanniah Naidu and Anr. (1996) 3 SCC 392, cited by Mr. Rohatgi, this Court held: 7. The scope of Section 100 of Code of Civil Procedure even before the amendment of the Section in 1976 has been neatly summarised in Mulla's Code of Civil Procedure (15th Edn., Vol. I) at p. 703. It is stated therein as follows: The Section even as....
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.... of this Court in Deity Pattabhiramaswamy, was in fact cited before the learned Single Judge, but he was inclined to take the view that some aspects of the provisions contained in Section 100 of the Code had not been duly considered by this Court and so, he thought that it was open to him to interfere with the conclusions of the courts below in the present appeal. According to the learned Judge, it is open to the second appellate court to interfere with the conclusions of fact recorded by the District Judge not only where the said conclusions are based on no evidence, but also where the said conclusions are based on evidence which the High Court considers insufficient to support them. In other words, the learned Judge seems to think that the adequacy or sufficiency of evidence to sustain a conclusion of fact is a matter of law which can be effectively raised in a second appeal. In our opinion, this is clearly a misconception of the true legal position. The admissibility of evidence is no doubt a point of law, but once it is shown that the evidence on which courts of fact have acted was admissible and relevant, it is not open to a party feeling aggrieved by the findings recorded by ....
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....e. (See: Kamala Devi Budhia v. Hem Prabha Ganguli (1989) 3 SCC 145 Jahejo Devi v. Moharam Ali (1988) 1 SCC 372, P. Velayudhan v. Kurungot Imbichia Moidu's son Ayammad [1990 Supp SCC 9], etc.) 11. We are of the view that in interfering with the concurrent findings of facts of the lower courts, the learned Single Judge of the High Court acted in excess of the jurisdiction vested in him Under Section 100 of Civil Procedure Code. The learned Judge totally erred in his approach to the entire question and in reappraising and reappreciating the entire evidence and in considering the probabilities of the case, to hold that the judgments of the courts below are 'perverse' and that the Plaintiff is entitled to the declaration of title to suit property and recovery of possession. 157. In Navaneethammal v. Arjuna Chetty (1996) 6 SCC 166, this Court held that interference with concurrent findings of the courts below must be avoided Under Section 100 of the Code of Civil Procedure unless warranted by compelling reasons. In any case, this Court is not expected to reappreciate the evidence. 158. The questions of law raised by Mr. Vikas Singh, which have been set forth he....
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....is penalty as provided for in Section 46 of the Banking Regulation Act. The RBI Circulars/Guidelines cannot therefore vary or modify a contract between two parties. 164. As pointed out by Counsel appearing on behalf of the Respondent-Power Generating Companies and admitted on behalf of the Appellant, SBI has been notifying and continues to notify Prime Lending Rates for its loans. The Appellant itself has given the average PLR notified by SBI from 2010 till date in its application being I.A. No. 69796 of 2021. Therefore, Late Payment Surcharge as per the Power Purchase Agreement has been calculated at the rate of 2% in excess of the SBI notified Prime Lending Rate. 165. From paragraph 12 of the impugned judgment and order of the APTEL, it appears that the Appellant conceded before the APTEL that the SBI continues to issue the PLR rates till date. The relevant part of the impugned judgment and order is reproduced hereinbelow: .... It is fairly conceded that SBI continues to issue the PLR rates till date... 166. The definition of SBAR is clear and has been correctly applied by both the forums below. There are concurrent findings of fact that the SBI PLR (i.e. the be....
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....s not tariff is erroneous. The meaning of the expression tariff has to be considered, and has rightly been considered by APTEL in the context of the relevant provision of the Power Purchase Agreements. The dictionary meaning of tariff may be charge. However, in Article 13 of the Stage 1 and Article 10 of the Stage 2 Power Purchase Agreements, tariff means monthly tariff and tariff adjustment consequential to change in law, is of monthly tariff in respect of supply of electricity. 174. As argued by the Respondent-Power Generating Companies appearing through Mr. Rohatagi, Mr. Singhvi, Mr. Mukherjee and Ms. Anand respectively, LPS is only payable when payment against monthly bills is delayed and not otherwise. 175. The object of LPS is to enforce and/or encourage timely payment of charges by the procurer, i.e. the Appellant. In other words, LPS dissuades the procurer from delaying payment of charges. The rate of LPS has no bearing or impact on tariff. Changes in the basis of the rates of LPS do not affect the rate at which power was agreed to be sold and purchased under the Power Purchase Agreements. The principle of restitution under the Change in Law provisions of the Power Pu....
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....rcharge LPS penalty suffered by the Procurer, that is, the Appellant, on account of default in timely payment. 180. As observed above, the Parties to the Power Purchase Agreements have mutually and consciously agreed to the incorporation of the PLR as notified by SBI from time to time, as the rate for levy of LPS. Therefore, by virtue of the doctrine of incorporation, the PLR as notified by SBI each year gets incorporated in the Power Purchasing Agreements, as binding between the parties. Thus, any other system notified by the Reserve Bank of India by its circulars has no bearing on the terms of the Power Purchase Agreement and cannot be deemed to be incorporated in the Power Purchase Agreement, except in case of mutual agreement between the parties, in the event of absence of SBI PLR, and approved by the MERC. 181. As argued by Ms. Anand, conceptually, PLR, Base Rate and MCLR are not comparable. The submission that the definition of SBAR should be read in the context of MCLR instead of PLR, is therefore not tenable. PLR is the internal benchmark rate for charging of interest on floating rate loans, calculated on the basis of average cost of funds and the loans were offered a....
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....t rate on loans taken by the Appellant or by Power Generating Companies. According to the Respondent-Power Generating Companies, no other distribution licencee other than the Appellant has raised the claim of Change in Law. All other Distribution Licencees procuring electricity from producers of electricity pay LPS in accordance with the respective Power Purchase Agreements. 185. In Halliburton Offshore Services Inc. v. Vedanta Limited and Anr., O.M.P. (I) (COMM.) No. 88/2020, decided on 29.05.2020 to which reference was made by Ms. Anand, the Delhi High Court aptly remarked that the outbreak of a pandemic cannot be used as an excuse for non-performance of a contract for which the deadlines were much before the outbreak itself. In the aforesaid case, the Delhi High Court rightly observed that the Court, while considering the plea of non performance of the condition due to outbreak of the COVID-19 pandemic, ought to examine factors such as the conduct of the parties prior to the outbreak. 186. Admittedly, the Appellant has landed itself in its present predicament, due to delay in making timely payments to the Respondent Power Generating Companies. There was no pandemic at the ....
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....aid that the LPS agreed upon is not a genuine pre estimate of damages. 190. The issues raised in this appeal are almost identical to the issues involved in Union of India v. Association of Unified Telecom Service Providers of India and Ors. 2020 (3) SCC 525 where this Court was considering an identical interest Clause in a contract which is reproduced hereinbelow: In re: Levy of interest, penalty, and interest on penalty. Para 182. Levy of licence fee is provided in Clause 20.2. In case of any delay in payment of licence fee beyond the stipulated period would attract penalty at the rate, which would be 2% above the prime lending rate (PLR) of State Bank of India. As per Clauses 20.5 and 20.8, if the licensee does not pay the demand, consequences would follow. The clauses are extracted hereunder: 20.5. Any delay in payment of licence fee payable or any other dues payable under the Licence beyond the stipulated period will attract interest at a rate which will be 2% above the prime lending rate (PLR) of State Bank of India existing as on the beginning of the financial year (namely 1st April) in respect of the licence fees pertaining to the said financial year. Th....
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....chase Agreements containing identical terms and conditions are executed by the Appellant with different Power Generating Companies. It is patently obvious that the Power Generating Companies only agree to terms and conditions of an agreement prepared by the Appellant. It is difficult to accept that the Appellant should incorporate in their stereotype Power Purchase Agreements, a provision for payment of LPS at a rate 2% higher than the SBAR, in case of late payment of invoices/bills, without any pre estimation of the loss likely to be suffered by a Power Generating Company, by reason of non payment of bills in time, more so when the Late Payment Surcharge is linked to the rate of interest in respect of specific types of loan, charged by a leading nationalised bank with the largest numbers of branches spread all over the country including in mofussil and rural areas. 193. In any case, in this second appeal Under Section 125 of the Electricity Act 2003, which is only to be heard on a substantial question of law, this Court would not embark upon the exercise of making a factual enquiry into the mode and manner in which the Power Generating Companies meet their working capital requi....
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....ightly rejected the claim of the Appellant by its order dated 16.11.2017, holding: 12.............However, the LPS provision is attracted only when the payments are not made by MSEDCL against the Monthly Bills of the Seller within the time stipulated in the PPA's. Any changes in the basis of the LPS rates, consequent to revisions by the RBI do not affect in any manner, the rates at which the power was agreed to be sold and purchased under the PPA's and in the consequent financial implication for either party resulting in a liability to compensate the affected party.... 200. The APTEL, concurred with the finding of MERC and held: 16. Having regard to the terms of the contract (PPA) as a whole, there is no doubt that provision for compensation to the affected party for a Change in Law event is essential with regard to tariff only. The rate of LPS has no bearing or impact on tariff. Any possible changes in the basis of the LPS rates 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....
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....gued by Mr. Mukerjee. Directions for time bound payment within a prescribed time frame are in conformity with the judgment of this Court in Jaipur Vidyut Vitran Nigam Ltd. v. Adani Power (supra) which has been upheld by this Court. Moreover, one of the objectives of the Electricity Act is time bound disposal of matters. This is evident from various provisions of the said Act including in particular Section 111(5) of the Act. Since APTEL and MERC are not bound by the procedure as laid down in the Civil Procedure Code, it was open to APTEL to pass such orders as would finally put an end to litigation. 205. It is now well settled by various decisions of this Court that an Electricity Regulatory Commission such as MERC constituted under the Electricity Act, 2003 has all the trappings of a Court. The MERC is a substitute for a Civil Court in respect of all disputes between licensees and Power Generating Companies. This proposition finds support from the judgments of this Court in Tamil Nadu Generation & Distribution Corporation Ltd. v. PPN Power Generating Co. Pvt. Ltd. (2014) 11 SCC 53, Andhra Pradesh Power Coordination Committee and Ors. v. Lanco Kondapalli Power Ltd. and Ors. (201....