Holding

The Court held that the Tribunal’s suo‑moto award of additional interest during construction, financing charges and incidental expenses was improper and set aside that part of the judgment, allowing the appeal only to that limited extent.

Summary

The Electricity Department (appellant) appealed against the Appellate Tribunal for Electricity’s decision that, suo moto, increased interest during construction (JDC), financing charges (FC) and incidental expenses (IEDC) should be awarded to the respondent for delays in project execution. The dispute also involved the determination of the project’s completed cost, with various expert committees having arrived at differing figures. The appellant argued that the Tribunal exceeded its jurisdiction by granting the additional costs without them being part of the appeal, while the respondent contended that the delay was attributable to the appellant and that the Tribunal’s award was justified. The Supreme Court examined whether the Tribunal could lawfully make such suo‑moto awards and whether the expert reports complied with the Power Project Agreement. It held that the Tribunal’s suo‑moto increase of JDC, FC and IEDC was improper and set aside that portion of the judgment, allowing the appeal only to that limited extent and dismissing it on all other points.

Issues considered

Whether the Appellate Tribunal for Electricity could suo moto direct payment of additional interest during construction, financing charges and incidental expenses not raised in the appeal.
Whether the Tribunal erred by relying on expert committee reports that were contrary to the provisions of the Power Project Agreement in computing the completed cost.
Whether the delay in achieving commercial operation was attributable to the respondent or the appellant.

Subjects

Power Purchase AgreementInterest during constructionFinancing chargesIncidental expensesProject cost determinationAppellate Tribunal for ElectricitySuo moto jurisdictionDelay in commercial operationElectricity DepartmentTariff determination

Judgment

[2016] 9 S.C.R. 68

A THE ELECTRICITY DEPARTMENT, REP. BY ITS
SUPERINTENDING ENGINEER, PORT BLAIR AND ANR.
v.
MIS SURYACHAKRA POWER CORPORATION LIMITED
B (Civil Appeal No. 1652of2015)
SEPTEMBER 22, 2016
[KURIAN JOSEPH AND R. F. NARJMAN, JJ.)
·; .••. ·'-' dll t <.:llC111 .1ur jJiiJ 111ea: uj l/t.hlitio11al costs

c and expenses - Power Project Agreement (PPA) - Delay in execution
of project - Increase in various cost components, viz., illleresl during
construction (JDC); financing charges (FC); and incidental
expenses during construction (IEDC) incurred for the delay, suo
moto allowed in appeal by Appellate Tribunal - Propriety of- Held:
Appellants are on solid grou111;f in contending that an increase in
D JDC, FC and IEDC was allowed in appeal by the Appellate Tribunal.
suo moto - Appeal allowed only to this limited extent - On other
points, it is dismissed
Disposing of the appeal, the Court
HELD: 1.1 The appellants are on solid ground when they
E
contend that an increase in interest during construction, financing
charges and incidental expenses incurred for the delay in the
execution of the project due to reasons beyond the control of the
respondent was allowed in appeal by the Appellate Tribunal suo
moto. [Para 6] [72-A-Bl
F 1.2 The appellant argued that the tribunal directed a suo
moto payment of additional JDC, financing cost and incidental
expenses during construction even though this was not the part
of the appeal filed by the respondent (appellant therein) before
the tribunal. The respondent contended that in any \:ase what
G was referred to, in the Commission's judgment in order to arrive
at the figure of Rs.78.29 Crores as the project cost in fact started
with the figure of Rs. 77.595 Crores, being CEA approval as per
"funds tied up" basis, which according to the respondent, included
the aforesaid expenditure. It was argued by the respondent that
certain figures which were referred to and relied upon by the
H
68
ELECTRICITY DEPT., REP. BY ITS S.E., PORT BLAIR v. MIS 69
SURYACHAKRA POWER CORPN. LTD.

CEA to arrive at this figure specifically included the aforesaid. A
No such figures were shown. [Paras 7, 8) [72-C; 73-B-C]
1.3 Therefore, the appeal is allowed only to this limited
extent. Judgment of the Appellate Tribunal insofar as it allowed
an increase in interest during construction (IDC), financing
charges (FC) and incidental expenses during construction (IEDC) B
incurred for the delay in execution of the project for reasons
beyond the control of the respondent, is set aside.[Para 8)(73-D]
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 1652 of
2015.
From the Judgment and Order dated 28.11.2014 of the Appellate c
Tribunal for Electricity at New Delhi in Appeal No. 268 of2013.
Rakesh Khanna, Sr. Adv., Ms. Ruchi Singhwani, Mohit Paul,
Ms. Megha Bharara, Yikash Arora, Ms. Diksha Jhingan, Advs. for the
Appellants.
D
Gurukrishna Kumar, Sr. Adv., Rohit Rao N., Mukund P. Unny,
Ananga Bhattacharyya, Advs. for the Respondent.
The Judgment of the Court was delivered by
R. F. NARIMAN, J, I. We have heard Shri Rakesh Khanna,
learned senior counsel appearing for the appellants for quite some time, E
and Shri. Gurukrishna Kumar, learned senior counsel appearing for the
respondent in reply. Though Shri Rakesh Khanna has taken us through
the PPA, various documents, and various orders in great detail, we do
not find it necessary to go into any of these for the reason that we find
that the appellants had set up various expert committees to go into the
F
bone of contention in this appeal, namely, project cost and completed
cost.
2. We find that Mis. K.P.C.L (Mis. Kamataka Power Corporation
Ltd.) had been appointed by them in order to determine the project cost
which was determined at Rs.73.40 crores. Mis. Tamil Nadu Electricity
Generation and Distribution Corporation Ltd. (TANGEDCO), another G
expert, arrived at a finding of Rs. 82.11 crores, which was reconfirmed
by a subsequent report, and ultimately arrived at a figure of Rs.79.439
crores with other issues which were to be decided separately. A joint
exercise between the appellants and respondent, also carried out in April,
2010, where a figure of Rs. 76.14 crores was arrived at, and the balance H
~ 70 SUPREME COURT REPORTS [2016] 9 S.C.R.

A of Rs. 8.82 crores in respect of roe, that is, interest during construction
and preliminary expenses was left to be examined by the Central Electricity
Authority. The Central Electricity Authority also came out with three
separate reports in which it arrived at certain figures of project cost.
Finally, the administration appointed a five member committee after all
these reports, and in 2013, this five member committee ultimately arrived
B
at Rs.70.61 crores as the final project cost. This was as follows :
"
Description of items Quantum of Para Ref. of
Expenditure Committee
Rs. C rores Report

c Approved Cost 63.14 15,17,29&30

JDC (-) 3.00

Cost excluding !De (+) 60.14

D In crease in co st of (+) 3.30 17
Establishment due to
extended gestation period
Increase due to Exchange (+) 5.67 Allowed as
Rate variation considering per actual
only 5.13 MUS$ utilization
E Rs.11.0445 per dollar
Additional Transformer and (+) 0.31 22
Black Start DG Set-Work
done after COD
Hard Cost ex cl. IDC 69.42
.F Proportionate JDC on the (+) 4.91 Revised on
hard cost of Rs.69.11 Cr. hard cost

Completed cost including 74.33
JDC /Project cost
Liquidated damage@ 5% (-) 3.72
G on Rs.74.33 crores
Project Completed Cost 70.61

3. Subsequently, it has been stated that the said report of the five
member committee has been accepted by the Administration. The
Respondent had prayed that the Hon'ble Commission determine the
H
ELECTRICITY DEPT., REP. BY ITS S.E., PORT BLAIR v. MIS 71
SURYACHAKRA POWER CORPN. LTD. [R. F. NARIMAN, J.]

project cost and tariff thereon in accordance with the provisions of PPA/ A
Techno Economic Clearance issued by A&N Administration and the
report of the five members committee constituted by the A & N
Administration for the purpose of determination of the cost of the project
as Rs. 70.61 crores.
4. When we pointedly referred to these reports and the figures B
contained therein, together with the fact that the respondent itself
accepted the five member committee report, which is then placed before
the commission for acceptance, we find it a little difficult to now allow
the respondent to go behind the said report. None of the expert committee
reports allow certain amounts to be deducted from the project cost which
would, ifthe appellants were to succeed before us, amount to a figure of c
Rs. 18.25 crores as is now argued before us by the appellants. Even the
five member committee report, accepted by the Administration, does
not include any figures to be minused on account of under utilization of
foreign currency component of Rs. 4.149 crores; custom-duty concession
of Rs. 2.80 crores; concession in Land Registration Charges availed by D
the respondent amounting to Rs.0.3234 crores; and cost for start-up fuel
and LUBE oil for trial and test run amounting to Rs.0.1971 crores.
5. Shri Khanna took us through the memo of appeal filed before
the Appellate Tribunal and referred specifically to ground (C) and question
of law 8(b) I which read as follows: E
"The JERC has relied upon the reports of the 'experts' which are
contrary to the PPA. JERC has erred in giving foreign exchange
variation on 7.96 MUSD. Documents submitted by the respondent
clearly show that the respondent had utilised only 9472653 DEM
(equivalent to 5.13 MUSD) as foreign currency for the purpose F
of importing the equipment which is mandated by the PPA.
"8(b) 1. Whether the JERC has not erred by following
recommendations/reports which are in contravention of the
provisions of PPA for computation of completed cost."
6. We are afraid that these grounds do not help the appellants' G
case. Nowhere has it been stated, in any of the grounds thatthe statement
made by the commission that the five member committee report had
been accepted by the Administration is said to be incorrect. On the
contrary, the ground sought to be raised in the appeal is that the
commission has relied upon these reports, which reports are contrary to
H
72 SUPREME COURT REPORTS [2016] 9 S.C.R.

A the Power Project Agreement. We are thus of the opinion that none of
these aspects can be looked into by us in the present appeal. However,
we find that the appellants are on solid ground when they contend that
an increase in interest during construction, financing charges and
incidental expenses incurred for the delay in the execution of the project
due to reasons beyond the control of the respondent has been allowed in
B
appeal by the Appellate Tribunal at para 23 and 36 suo moto.
7. Shri Rakesh Khanna has argued before us and shown us the
ground taken in the present appeal that the tribunal has directed a suo
moto payment of additional JDC, financing cost and incidental expenses
duri11g construction even though this was not part of the appeal filed by
c the appellant M/s. Suryachakra Power Corporation Limited before the
Tribunal. Th is is sought to be answered by the respondent in its counter
affidavit in this Court in paragraph (F) which reads as under:
"In the synopsis the appellant has sought to contend that the
Tribunal has suo-moto directed payment ofadditional interest during
D construction (JDC), financing cost (FC) and incidental expenses
during construction (IEDC) for the period of delay in achieving
commercial operation. The appellants have also sought to contend
that the said issue regarding additional JDC, FC and IEDC was
not a part of the appeal filed before the Tribunal. In this contekt,
E it is respectfully submitted that the said contention of the appellants
is incorrect and misleading. It is respectfully submitted that the
issue regarding t~e delay in achieving commercial operation and
to whom was the delay attributable was pleaded and considered
in detail by both the Joint Electricity Regulatory Commission as
well as the Tribunal. Additional JDC, FC and IEDC are only
F consequences that follow the delay in achieving the commercial
operation. Both the Courts below have concurrently held that the
delay in achieving commercial operation of more than a year was
attributable to the appellants themselves as they did not provide
the transmission lines to evacuate the power from the project
G within the time prescribed under the PPA. Therefore the
Respondents herein had claimed deemed generation charges for
the whole period of delay in achieving commercial operation. It is
pertinent to mention that the deemed generation charges is higher
than the additional IDC, FC and IEDC. Thus, the Tribunal has
granted the Respondents the lower of the two. The deemed
H
ELECTRlCITY DEPT., REP. BY ITS S.E., PORT BLAIR v. M/S 73
SURYACHAKRA POWER CORPN. LTD. [R. F. NARIMAN, J.]

generation charges have been awarded only for a period of four A
months out of the total delay of more than a year in achieving
commercial operation. The Respondent is not claiming additional
JDC, FC and IEDC for the said period of four months for which
deemed generation charges have been granted."
8. In reply, Shri Gurukrishna Kumar, learned senior counsel B
appearing for the respondent, points out before us that in any case what
was referred to in the commission's judgment in order to arrive at the
figure of Rs. 78.29 crores as the project cost in fact started with the
figure of Rs. 77.595 crores, being CEA approval as per "funds tied up"
basis, which according to the lean.ed senior counsel, would include the
aforesaid expenditure. He argued before us that certain figures which c
were referred to and relied upon by the CEA to arrive at this figure
specifically included the aforesaid. We were not shown any such figures.
· We, therefore, allow the appeal only to this limited extent and set aside
the judgment of the Appellate Tribunal insofar as it allows an increase in
interest during construction (!DC), financing charges (FC) and incidental D
expenses during construction (IEDC) incurred for the delay in execution
of the project for reasons beyond the control of the respondent. To this
limited extent alone the appeal stands allowed, and on other points it is
dismissed.
9. We are also of the view that apart from the above, no substantial E
question of law is raised in this appeal.
JO. For the aforesaid reasons, we dispose of the appeal with no
other costs.
Divya Pandey Appeal disposed of.
F