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

102                      [2022]REPORTS
               SUPREME COURT   11 S.C.R. 102               [2022] 11 S.C.R.


A          UTTAR HARYANA BIJLI VITRAN NIGAM LTD. AND
                          ANOTHER
                                        v.
          ADANI POWER (MUNDRA) LIMITED AND ANOTHER
B                        (Civil Appeal No. 7129 of 2021)
                               AUGUST 24, 2022
                [N. V. RAMANA, CJI, KRISHNA MURARI,
                          HIMA KOHLI, JJ.]
             Electricity – Power Purchase Agreements (PPAs) – Arts. 11,
C
      13 – ‘Change in Law’ event – Restitutionary principles – Appellants
      (distribution licensees) if liable to pay simple interest or compound
      interest on the carrying cost to respondent no.1 (power generating
      company) – Held: Relief relating to carrying cost was granted to
      respondent no.1 by the Appellate Tribunal vide order dtd. 13.04.18
D     which was duly upheld by Supreme Court in a previous litigation
      between the same parties – Once carrying cost has been granted in
      favour of the respondent no.1, appellants cannot urge that interest
      on carrying cost should be calculated on simple interest basis
      instead of compound interest basis – Idea behind granting interest
      on carrying cost is aimed at restituting a party that is adversely
E
      affected by a Change in Law event and restore it to its original
      economic position as if such a Change in Law event had not taken
      place – In the instant case, the respondent no.1 had to incur expenses
      to purchase the Flue Gas Desulfurization (FGD) unit and install it
      in view of the terms and conditions of the Environment Clearance
F     given by Ministry of Environment and Forests, Union of India, in
      2010 – For this, it had to arrange finances by borrowing from banks
      – Respondent no.1 justified in stating that if the banks have charged
      it interest on monthly rest basis for giving loans to purchase the
      FGD, any restitution will be incomplete, if it is not fully compensated
      for the interest paid by it to the banks on compounding basis –
G
      Restitutionary principles encapsulated in Article 13.2 of the PPAs
      would take effect for computing the impact of Change in Law –
      Appellate Tribunal justified in allowing interest on carrying cost in
      favour of respondent no.1 for the period between 2014, when the
      FGD was installed, till 2021 – Central Commission not justified in
H     excluding the period between 2014 and 2018 and grant relief from
                                         102
  UTTAR HARYANA BIJLI VITRAN NIGAM LTD. v. ADANI                       103
             POWER (MUNDRA) LTD.

the date of the passing of the order i.e., from 28.03.18 to 2021 –     A
Impugned order passed by Appellate Tribunal upheld – Electricity
Act, 2003 – s.125.
      Dismissing the appeal, the Court
      HELD: 1.1 The appellants have not raised any dispute with
regard to grant of interest to the respondent No. 1 by way of          B
carrying cost from the date on which the Change in Law event
took place till the date the amount was determined as payable to
respondent No. 1 in terms of the order dated 28th March, 2018,
passed by the Central Commission. The only issue that has arisen
for consideration is whether the appellants are liable to pay simple   C
interest or compound interest on the carrying cost. The relevant
Articles of the PPAs are Article 11, that deals with billing and
payment and Article 13, that deals with Change in Law. This Court
is more specifically concerned with Articles 11.3.4, 11.8.1 and
11.8.3 that have been cited by counsel for the appellants to urge
that only Late Payment Surcharge (LPS) is payable by the               D
appellants (procurer) to the respondent No. 1 (seller) at the rate
mentioned in Article 11.3.4, but not beyond that. The respondent
No. 1 has relied on Articles 13.2 and 13.4 of the PPAs. [Para 12-
14][111-D-G]
      1.2 Article 13 has been discussed threadbare by this Court       E
in a previous litigation between the same parties decided on 25th
February, 2019. It is clear that the restitutionary principles
encapsulated in Article 13.2 would take effect for computing the
impact of Change in Law. There is no reason to interfere with the
impugned judgment, wherein it has been held by the Appellate           F
Tribunal that the respondent No. 1 had started claiming Change
in Law event compensation in respect of installation of FGD along
with carrying cost, right from the year 2012 and that it has
approached several fora to get this claim settled. The respondent
No. 1 finally succeeded in getting compensation towards FGD
only on 28th March, 2018, but the carrying cost claim was denied.      G
The relief relating to carrying cost was granted to the respondent
No. 1 by the Appellate Tribunal vide order dated 13th April, 2018
which was duly tested by this Court and upheld on 25th February,
20196. Once carrying cost has been granted in favour of the
respondent No. 1, it cannot be urged by the appellants that            H
104            SUPREME COURT REPORTS                     [2022] 11 S.C.R.


A     interest on carrying cost should be calculated on simple interest
      basis instead of compound interest basis. Grant of compound
      interest on carrying cost and that too from the date of the
      occurrence of the Change in Law event is based on sound logic.
      The idea behind granting interest on carrying cost is aimed at
      restituting a party that is adversely affected by a Change in Law
B
      event and restore it to its original economic position as if such a
      Change in Law event had not taken place. [Para 15, 16][114-C-
      D; 115-G; 116-A-C]
            Uttar Pradesh Bijli Vitran Nigan Ltd. (Uhbvnl) & Anr.
            v. Adani Power Ltd. & Ors. (2019) 5 SCC 325 : [2019]
C           4 SCR 487 – relied on.
             1.3 In the instant case, the respondent No. 1 had to incur
      expenses to purchase the FGD and install it in view of the terms
      and conditions of the Environment Clearance given by the
      Ministry of Environment and Forests, Union of India, in the year
D     2010. For this, it had to arrange finances by borrowing from banks.
      The interest rate framework followed by Scheduled Commercial
      banks and regulated by the Reserve Bank of India mandates that
      interest shall be charged on all advances at monthly rests. In this
      view of the matter, the respondent No. 1 is justified in stating
E     that if the banks have charged it interest on monthly rest basis
      for giving loans to purchase the FGD, any restitution will be
      incomplete, if it is not fully compensated for the interest paid by
      it to the banks on compounding basis. Interest on carrying cost
      is nothing but time value for money and the only manner in which
      a party can be afforded the benefit of restitution in every which
F     way. In the facts of the instant case, the Appellate Tribunal was
      justified in allowing interest on carrying cost in favour of the
      respondent No. 1 for the period between the year 2014, when
      the FGD was installed, till the year 2021. There was no
      justification for the Central Commission to have excluded the
G     period between 2014 and 2018 and grant relief from the date of
      the passing of the order i.e., from 28th March, 2018 to 2021; nor
      is there any logic to such a segregation of time lines, particularly
      when the respondent No. 1 was prompt in raising a claim on the
      appellants and pursuing its legal remedies. Not persuaded by
      the submission made on behalf of the appellants that since no
H
  UTTAR HARYANA BIJLI VITRAN NIGAM LTD. v. ADANI                          105
             POWER (MUNDRA) LTD.

fault is attributable to them for the delay caused in determination       A
of the amount, they cannot be saddled with the liability to pay
interest on carrying cost; nor is there any substance in the
argument sought to be advanced that there is no provision in the
PPAs for payment of compound interest from the date when the
Change in Law event had occurred. [Para 17, 18][116-D-H; 117-
                                                                          B
A-B]
      1.4 The entire concept of restitutionary principles
engrained in Article 13 of the PPAs has to be read in the correct
perspective. The said principle that governs compensating a party
for the time value for money, is the very same principle that would
be invoked and applied for grant of interest on carrying cost on          C
account of a Change in Law event. Therefore, reliance on Articles
11.3.4 r/w 11.8.3 on the part of the appellants cannot take their
case further. The impugned judgment and order dated 12th
August, 2021 passed by the Appellate Tribunal is upheld. [Para
19, 20][117-C-E]                                                          D
      Priya Vart And Another v. Union of India (1995) 5 SCC
      437 : [1995] 2 Suppl. SCR 563 – held inapplicable.
      South Eastern Coalfields Ltd. v. State of Madhya
      Pradesh and Ors. (2003) 8 SCC 648 : [2003] 4 Suppl.
      SCR 651 – referred to.                                              E

                       Case Law Reference
[2019] 4 SCR 487                    relied on            Para 5
[1995] 2 Suppl. SCR 563             held inapplicable Para 9
                                                                          F
[2003] 4 Suppl. SCR 651             referred to          Para 15
      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7129
of 2021.
      From the Judgment and Order dated 12.08.2021 of the Appellate
Tribunal for Electricity, New Delhi in Appeal No. 421 of 2019.            G
      M.G. Ramachandran, Sr. Adv. Nikunj Dayal, Shubham Arya, Ravi
Nair, Ms. Srishti Khindaria, Ms. Reeha Singh, Advs. for the Appellants.
     Mukul Rohatgi, Sr. Adv., Mahesh Agarwal, Hemant Singh, Arshit
Anand, Lakshyajit Singh Bagdwal, Ms. Lavanya Panwar, Ms. Geetika
                                                                          H
106             SUPREME COURT REPORTS                        [2022] 11 S.C.R.


A     Sharma, E.C. Agrawala, Amit Kapur, Ms. Poonam Sengupta, Saunak
      Rajguru, Ms. Sakshi Kapoor, Advs. for the Respondents.
             The Judgment of the Court was delivered by
             HIMA KOHLI, J.
B           1. The appellants are aggrieved by the judgment and order dated
      12th August, 2021, passed by the Appellate Tribunal for Electricity, New
      Delhi1, allowing the appeal filed by the respondent No. 1 – Adani Power
      (Mundra) Limited2 against the order dated 28th March, 2018 (in Petition
      No. 104/MP/2017) and order dated 06th June, 2019 (in Petition No. 214/
      MP/2018) passed by the Central Electricity Regulatory Commission3.
C
             2. It may be stated at the outset that the scope of the present
      appeal is restricted to the decision of the Appellate Tribunal of granting
      carrying cost interest on compounding basis in favour of the respondent
      No. 1 – Adani Power from the date on which the Change in Law event
      took place i.e. 29th January, 2014, till the date of actual payment of the
D     amount determined by the Central Commission. Stated differently, while
      the appellants are not disputing grant of interest to the respondent No. 1
      – Adani Power by way of carrying cost from the date on which the
      Change of Law event took place till the actual payment of the amount
      determined by the Central Commission, their grievance is that the
E     Appellate Tribunal has not just permitted carrying cost on simple interest
      basis, but has imposed interest on carrying cost or what is commonly
      known as interest on interest (compound interest) on carrying cost.
             3. To contextualize the aforesaid dispute, a brief conspectus of
      the relevant facts of the case may be outlined. The respondent No. 1 –
F     Adani Power is a power generating company that has set up a 4620
      MW (comprising of four units of 330 MW and five units of 660 MW),
      coal fired power plant in Mundra, Gujarat. The appellants are the
      distribution licensees that are supplying electricity to the consumers in
      the State of Haryana. On 07th August, 2008 the appellants entered into
      two Power Purchase Agreements4 with the respondent No. 1 – Adani
G     Power for procurement of contracted capacity of 1424 MW from the
      generating units 7, 8 and 9 established at Mundra, Gujarat. In the year
      1
        in short ‘Appellate Tribunal’
      2
        in short ‘Adani Power’
      3
        In short ‘Central Commission’
      4
        In short ‘PPAs’
H
     UTTAR HARYANA BIJLI VITRAN NIGAM LTD. v. ADANI                           107
          POWER (MUNDRA) LTD. [HIMA KOHLI, J.]

2010, on account of Environment Clearance dated 20 th May, 2010, given        A
by the Ministry of Environment and Forests, Union of India, a Change in
Law event took place as the respondent No. 1 – Adani Power had to
incur additional costs on installing Flue Gas Desulfurization 5 unit. On
17th July, 2014, the respondent No. 1 – Adani Power filed a petition
before the Central Commission for adjudication of compensation on
                                                                              B
account of certain Change in Law events including installation of the
FGD. By order dated 06th February, 2017, the Central Commission
allowed compensation only for certain Change in Law events but
disallowed the claim for carrying cost raised by the respondent No. 1 –
Adani Power. Liberty was however granted to the respondent No. 1 –
Adani Power to file a separate petition before the Central Commission         C
for the FGD claim along with requisite information and documents.
       4. Aggrieved by the order dated 06th February, 2017 passed by
the Central Commission, both the appellants herein and the respondent
No. 1 – Adani Power preferred appeals before the Appellate Tribunal.
The limited grievance raised by the appellants in their appeal was relating   D
to the issue pertaining to the claim of the respondent No. 1 – Adani
Power in respect of levy of customs duty on electricity removed from
Special Economic Zone (SEZ) to Domestic Tariff Area (DTA). In its
appeal, respondent No. 1 – Adani Power challenged the rejection of its
claim for carrying cost. Respondent No. 1 – Adani Power also filed a
separate petition before the Central Commission in terms of the liberty       E
granted to it, for claiming relief on account of installation of FGD which
was contested by the appellants. On 28th March, 2018, the Central
Commission passed an order on the separate petition preferred by the
respondent No. 1 – Adani Power, allowing compensation on account of
the Change in Law event pertaining to installation of the FGD and at the      F
same time, disallowing its claim for carrying cost.
       5. In another petition filed by the respondent No. 1 – Adani Power,
the Central Commission passed an order on 17th September, 2018,
granting carrying costs in its favour in terms of the directions issued by
the Appellate Tribunal vide judgment dated 13th April, 2018, passed in        G
Appeal No. 210 of 2017. Pertinently, the judgment dated 13th April, 2018
passed by the Appellate Tribunal was between the same parties who
are present before us and was challenged by the appellants herein before

5
    In short ‘FGD’                                                            H
108               SUPREME COURT REPORTS                         [2022] 11 S.C.R.


A     the Supreme Court in Civil Appeals No. 5865/2018 and 6190/2018. The
      said appeals came to be dismissed vide judgment dated 25th February,
      20196 wherein it was held that the power generating company would be
      entitled to carrying cost on restitutionary principles from the date of
      Change in Law event, so as to bring the affected party to the same
      economic position as if such Change in Law had not occurred. For arriving
B
      at the said conclusion, reliance was placed on Article 13.2 of the PPAs
      governing the parties that contains an in-built restitutionary principle which
      compensates the party affected by such Change in Law.
             6. The respondent No. 1 – Adani Power approached the Appellate
      Tribunal with a copy of the order passed by the Central Commission
C     allowing the relief of Change in Law for installation of the FGD, but
      disallowing the relief of carrying cost and prayed that carrying cost ought
      to have been allowed in its favour from the date of Change in Law event
      pertaining to installation of FGD along with other Change in Law events.
      By the impugned judgment dated 12th August, 2021, the Appellate Tribunal
D     has not only held that the respondent No. 1 – Adani Power is entitled for
      carrying cost in respect of compensation for Change in Law events
      towards FGD installation, as approved by the Central Commission,
      reckoned from the date of Change in Law occurrence, it has further
      held respondent No. 1 – Adani Power to be entitled for interest on carrying
      cost. Aggrieved by the said finding, the appellants are before this Court.
E
             7. Appearing for the appellants, Mr. M.G. Ramachandran, Senior
      Advocate opened his arguments by stating that the appellants do not
      dispute grant of interest by way of carrying cost from the date on which
      Change in Law event took place on account of the delayed recovery of
      the principal amount till the date the amount was determined by the
F     Central Commission. The sole grievance raised by the appellants is that
      they are not liable to pay any compound interest to the respondent No. 1
      – Adani Power as carrying cost interest. It is contended that only simple
      interest is payable by the appellants to the respondent No. 1 – Adani
      Power, for the reason that there is no wrongdoing/default/unjust
G     enrichment that can be attributable to the appellants for the delay caused
      in determination of the amount by the Central Commission/Appellate
      Tribunal; that there is no stipulation in the PPAs dated 07th August, 2008
      for payment of compound interest for the period from the date when
      Change in Law event had occurred i.e. w.e.f. 29th January, 2014, till the

H     6
          Reported as (2019) 5 SCC 325
   UTTAR HARYANA BIJLI VITRAN NIGAM LTD. v. ADANI                                109
        POWER (MUNDRA) LTD. [HIMA KOHLI, J.]

date of adjudication of the claim by the Central Commission and raising          A
of the Supplementary Bill by the respondent No. 1 – Adani Power in
terms of Article 11.8.1 (iii) of the PPA; that on the contrary, there are
specific provisions in the PPAs i.e. Article 11.3.4 r/w Article 11.8.3 for
the delay on the part of the appellants in making the payment after raising
of the monthly/Supplementary Bill at the Late Payment Surcharge (LPS)
                                                                                 B
rate which is on a compounding basis; that there is no statutory provision
in the Electricity Act, 2003 or the relevant rules/regulations framed therein,
as applicable at the relevant time, which permit payment of compound
interest for carrying cost.
       8. It has also been argued on behalf of the appellants that though
interest on interest is prescribed under the Interest Act, 1978 but the          C
exceptions carved out under Section 4 of the said enactment does not
cover the facts of the instant case since the appellants had duly paid the
amount to the respondent No. 1- Adani Power upon determination by
the Central Commission and within the time stipulated for clearing the
Supplementary Bill that was raised on it. It was canvassed that the              D
respondent No. 1 – Adani Power became entitled to raise a
Supplementary Bill on the appellants only when the Central Commission
determined the amount payable as an impact of Change in Law. The
said Supplementary Bill was raised under Article 11.8.1 (iii) and was
payable within 30 days in terms of Article 11.8.2 of the PPA. Contending
that the Supplementary Bill can include carrying cost only if there is           E
restitution provision under Article 13 of the PPAs and that if there is no
restitution provision, the Supplementary Bill cannot even include the
carrying cost.
        9. Learned counsel for the appellants informed us that pursuant
to passing of the impugned judgment and order dated 12th August, 2021,           F
when the Appellate Tribunal held that the respondent No. 1- Adani Power
is entitled to carrying cost on compound interest basis and remanded the
matter back to the Central Commission for computation, the Central
Commission had passed an order on 23rd October, 2021, determining
the methodology for calculating the carrying cost. Respondent No. 1 –            G
Adani Power had then raised a Supplementary Bill dated 13th November,
2021 on the appellants towards the carrying cost which was paid by the
appellants without prejudice to their rights and contentions as raised in
the present appeal. Since there was a delay of about two months reckoned
from the due date of the Supplementary Bill dated 13th November, 2021,
                                                                                 H
110                SUPREME COURT REPORTS                        [2022] 11 S.C.R.


A     the appellants state that they have paid the late payment surcharge for
      the said period of delay. In support of the submission that when compound
      interest is not specified in a Statute, interest payable ought to be construed
      to be on simple interest basis and not on compound interest basis, the
      decision in Priya Vart And Another v. Union of India7 has been cited.
B            10. Repelling the arguments advanced on behalf of the appellants,
      Mr. Mukul Rohatgi, Senior Advocate appearing for the respondent No.
      1 – Adani Power has in the first instance, challenged the maintainability
      of the present appeal stating that the same has been filed under Section
      125 of the Electricity Act, 2003 which permits grounds to be taken akin
      to those available under Section 100 of the Civil Procedure Code 8 and
C     no substantial question of law has been raised in the present appeal that
      requires determination by this Court. On merits, learned Senior Advocate
      has supported the findings returned in the impugned judgment and
      submitted that the same does not deserve any interference as it has only
      followed the law laid down by this Court in the judgment dated 25th
D     February, 20196, that was decided between the very same parties to the
      lis. Referring to the chronology of the dates and events in the instant
      case, it was submitted that admittedly, the Change in Law event had
      occurred when the respondent No. 1 – Adani Power had to install the
      FGD in the year 2014. The claim raised by the respondent No. 1 –
      Adani Power for installation of the FGD was finally decided by the
E     Central Commission only in the year 2018, when carrying cost
      compensation on account of Change in Law event was allowed in its
      favour. However, carrying cost was approved only from the date of the
      judgment and not for the period between 2014 and 2018, whereas the
      respondent No. 1 – Adani Power was entitled for carrying cost right
F     from the year 2014, when it was required to infuse huge amounts towards
      installation of the FGD. Reference was made to Articles 13.2 and 13.4
      of the PPAs that provide for an in-built restitutionary principle and hold
      that compensation has to be paid from the date of occurrence of the
      Change in Law events. Article 11.3.4 of the PPAs was cited to buttress
      the submission that compound interest is payable for delayed payments,
G     in the manner prescribed and since the appellants had agreed to pay
      interest on compounding basis for delayed payments, the very same
      principle would apply for carrying cost as well, since both, carrying cost

      7
          (1995) 5 SCC 437
      8
H         for short ‘CPC’
   UTTAR HARYANA BIJLI VITRAN NIGAM LTD. v. ADANI                                111
        POWER (MUNDRA) LTD. [HIMA KOHLI, J.]

and late payment surcharge are to be factored in towards time value of           A
money.
       11. Alluding to the Reserve Bank of India Circulars dated 14th
August, 2003 and 03rd March, 2016 that provide for a borrower to pay
interest to the lender on compound interest basis, it was submitted on
behalf of the respondent No.1 – Adani Power, that having borrowed                B
money from banks to install the FGD and having paid compound interest
on the borrowed sum, it was only seeking restitution for the interest
incurred by it and paid to the banks at the same rate and that this was
not a case of unjust enrichment. It was thus argued that, since the litigation
in the instant case had commenced in the year 2014 and it took seven
years to conclude the same, the respondent No. 1 – Adani Power is                C
entitled to carrying cost and interest thereon on compounding basis from
the date of Change in Law event, strictly in terms of the PPA and the
law on the issue that has already been expounded by this Court.
       12. We have heard the arguments advanced by the counsel for
the parties and perused the relevant provisions of the PPAs. As noted            D
above, the appellants have not raised any dispute with regard to grant of
interest to the respondent No. 1 – Adani Power by way of carrying cost
from the date on which the Change in Law event took place till the date
the amount was determined as payable to respondent No. 1 – Adani
Power in terms of the order dated 28 th March, 2018, passed by the               E
Central Commission. The only issue that has arisen for our consideration
is whether the appellants are liable to pay simple interest or compound
interest on the carrying cost.
       13. The relevant Articles of the PPAs cited before us are Article
11, that deals with billing and payment and Article 13, that deals with          F
Change in Law. We are more specifically concerned with Articles 11.3.4,
11.8.1 and 11.8.3 that have been cited by learned counsel for the
appellants to urge that only Late Payment Surcharge (LPS) is payable
by the appellants (procurer) to the respondent No. 1 – Adani Power
(seller) at the rate mentioned in Article 11.3.4, but not beyond that. For
purposes of ready reference, we may extract below Articles 11.3.4,               G
11.8.1 and 11.8.3 as below:
       “11 ARTICLE 11: BILLING AND PAYMENT
                  xxx               xxx               xxx
                                                                                 H
112            SUPREME COURT REPORTS                          [2022] 11 S.C.R.


A           11.3 Payment of Monthly Bills
                      xxx              xxx              xxx
            11.3.4 In the event of delay in payment of a Monthly Bill by any
            Procurer beyond its Due Date, a Late Payment Surcharge shall
            be payable by the Procurer to the Seller at the rate of two (2)
B           percent in excess of the applicable SBAR per annum, on the
            amount of outstanding payment, calculated on a day to day basis
            (and compounded with Monthly rest), for each day of the delay.
                      xxx              xxx              xxx

C           11.8 Payment of Supplementary Bill
            11.8.1 Either Party may raise a bill on the other Party
            (“Supplementary Bill”) for payment on account of:
            i. Adjustments required by the Regional Energy Account (if
            applicable);
D
            ii. Tariff Payment for change in parameters, pursuant to provisions
            in · Schedule-5; or
            iii. Change in Law as provided in Article 13
            and such Bill shall be paid by the other Party.
E                     xxx              xxx              xxx
            11.8.3 In the event of delay in payment of a Supplementary Bill
            by either Party beyond one month from the date of billing, a Late
            Payment Surcharge shall be payable at same terms applicable to
            the Monthly Bill in Article 11.3.4.”
F
            14. The respondent No. 1 – Adani Power has relied on Articles
      13.2 and 13.4 of the PPAs which are extracted hereinbelow:
            “13 ARTICLE 13 CHANGE IN LAW
                      xxx              xxx              xxx
G           13.2 Application and Principles for computing impact of
            Change in Law
            While determining the consequence of Change in Law under this
            Article 13, the Parties shall have due regard to the principle that
            the purpose of compensating the Party affected by such Change
H
UTTAR HARYANA BIJLI VITRAN NIGAM LTD. v. ADANI                          113
     POWER (MUNDRA) LTD. [HIMA KOHLI, J.]

  in Law, is to restore through Monthly Tariff Payments, to the         A
  extent contemplated in this Article 13, the affected party to the
  same economic position as if such Change in Law has not occurred.
  a) Construction Period
  As a result of any Change in Law, the impact of increase/decrease
  of Capital Cost of the Project in the Tariff shall be governed by     B
  the formula given below:
  For every cumulative increase/decrease of each Rs. 8,90.000.00
  (Rupees eight crore ninety lakh only) Rupees of the Contracted
  Capacity in the Capital Cost over the term of this Agreement, the
  increase/decrease in Quoted Capacity Charges shall be an amount       C
  equal to zero point two two seven (0.227%) percent of the Quoted
  Capacity Charges. Provided that the Seller provides to the Procurer
  documentary proof of such increase/decrease in Capital Cost for
  establishing the impact of such Change in Law. In case of Dispute,
  Article 17 shall apply.                                               D
  It is clarified that the above mentioned compensation shall be
  payable to either Party, only with effect from the date on which
  the total increase/decrease exceeds amount of Rs. 8,90,000,00
  (Rupees eight crore ninety lakh only)
  b) Operation Period                                                   E
  As a result of Change in Law, the compensation for any increase/
  decrease in revenues or cost to the Seller shall be determined and
  effective from such date, as decided by the Appropriate
  Commission whose decision shall be final and binding on both the
  Parties, subject to rights of appeal provided under applicable Law.   F
  Provided that the above mentioned compensation shall be payable
  only if and for increase/decrease in revenues or cost to the Seller
  is in excess of an amount equivalent to 1 % of Letter of Credit it
  in aggregate for a Contract Year.”
            xxx              xxx              xxx                       G

  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:
                                                                        H
114            SUPREME COURT REPORTS                           [2022] 11 S.C.R.


A           (i) the date of adoption, promulgation, amendment; re-enactment
            or repeal of the Law or Change in Law; or
            (ii) the date of order/judgement 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.
B           13.4.2 The payment for Changes in Law shall be through
            supplementary bill as mentioned in Article 11.8. However, in case
            of 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
C           reflect the changed Tariff.”
            15. Article 13 has been discussed threadbare by this Court in a
      previous litigation between the same parties decided on 25 th February,
      20196. Without being prolix, we may extract below the relevant paras:-
            “13. A reading of Article 13 as a whole, therefore, leads to the
D           position that subject to restitutionary principles contained in Article
            13.2, the adjustment in monthly tariff payment, in the facts of the
            present case, has to be from the date of the withdrawal of
            exemption which was done by administrative orders dated
            06.04.2015 and 16.02.2016. The present case, therefore, falls within
E           Article 13.4.1(i). This being the case, it is clear that the adjustment
            in monthly tariff payment has to be effected from the date on
            which the exemptions given were withdrawn. This being the case,
            monthly invoices to be raised by the seller after such change in
            tariff are to appropriately reflect the changed tariff. On the facts
            of the present case, it is clear that the respondents were entitled
F           to adjustment in their monthly tariff payment from the date on
            which the exemption notifications became effective. This being
            the case, the restitutionary principle contained in Article 13.2 would
            kick in for the simple reason that it is only after the order dated
            04.05.2017 that the CERC held that the respondents were entitled
G           to claim added costs on account of change in law w.e.f. 01.04.2015.
            This being the case, it would be fallacious to say that the
            respondents would be claiming this restitutionary amount on some
            general principle of equity outside the PPA. Since it is clear that
            this amount of carrying cost is only relatable to Article 13 of the
            PPA, we find no reason to interfere with the judgment of the
H           Appellate Tribunal.
     UTTAR HARYANA BIJLI VITRAN NIGAM LTD. v. ADANI                               115
          POWER (MUNDRA) LTD. [HIMA KOHLI, J.]

         14. We now come to some of the judgments cited by learned                A
         counsel on behalf of both sides. In South Eastern Coalfields Ltd.
         v. State of Madhya Pradesh and Ors 9 [“South Eastern
         Coalfields”], this Court held that interest is payable in equity in
         certain circumstances and finally concluded: (SCC P. 662, para
         24)
                                                                                  B
             “24. We are, therefore, of the opinion that in the absence of
             there being a prohibition either in law or in the contract entered
             into between the two parties, there is no reason why the
             Coalfields should not be compensated by payment of interest
             for the period for which the consumers/purchasers did not pay
             the amount of enhanced royalty which is a constituent part of        C
             the price of the mineral for the period for which it remained
             unpaid. The justification for award of interest stands fortified
             by the weighty factor that the Coalfields themselves are obliged
             to pay interest to the State on such amount. It will be a travesty
             of justice to hold that though the Coalfields must pay the amount    D
             of interest to the State but the consumers/purchasers in whose
             hands the money was actually withheld be exonerated from
             liability to pay the interest.”
         What was argued by Shri Giri was that this judgment cannot be
         applied to fact situations that arise under the PPA in view of Article   E
         18.17 of the PPA which clearly states that the liability of the seller
         and the procurer shall be limited to that explicitly provided in this
         agreement and that, in no event, shall either procurer or seller
         claim any indirect or consequential losses or damages. Since we
         have found that the claim for carrying costs is under Article 13 of
         the PPAs, this judgment would have no application to the facts of        F
         the present case.”
       16. It is clear that the restitutionary principles encapsulated in
Article 13.2 would take effect for computing the impact of Change in
Law. We see no reason to interfere with the impugned judgment, wherein
it has been held by the Appellate Tribunal that the respondent No. 1 –            G
Adani Power had started claiming Change in Law event compensation
in respect of installation of FGD along with carrying cost, right from the
year 2012 and that it has approached several fora to get this claim settled.
9
    (2003) 8 SCC 648
                                                                                  H
116             SUPREME COURT REPORTS                            [2022] 11 S.C.R.


A     The respondent No. 1 – Adani Power finally succeeded in getting
      compensation towards FGD only on 28th March, 2018, but the carrying
      cost claim was denied. The relief relating to carrying cost was granted
      to the respondent No. 1 – Adani Power by the Appellate Tribunal vide
      order dated 13th April, 2018 which was duly tested by this Court and
      upheld on 25th February, 20196. Once carrying cost has been granted in
B
      favour of the respondent No. 1 – Adani Power, it cannot be urged by the
      appellants that interest on carrying cost should be calculated on simple
      interest basis instead of compound interest basis. Grant of compound
      interest on carrying cost and that too from the date of the occurrence of
      the Change in Law event is based on sound logic. The idea behind granting
C     interest on carrying cost is not far to see, it is aimed at restituting a party
      that is adversely affected by a Change in Law event and restore it to its
      original economic position as if such a Change in Law event had not
      taken place.
              17. In the instant case, the respondent No. 1 – Adani Power had
D     to incur expenses to purchase the FGD and install it in view of the terms
      and conditions of the Environment Clearance given by the Ministry of
      Environment and Forests, Union of India, in the year 2010. For this, it
      had to arrange finances by borrowing from banks. The interest rate
      framework followed by Scheduled Commercial banks and regulated by
      the Reserve Bank of India mandates that interest shall be charged on all
E     advances at monthly rests. In this view of the matter, the respondent
      No. 1 – Adani Power is justified in stating that if the banks have charged
      it interest on monthly rest basis for giving loans to purchase the FGD,
      any restitution will be incomplete, if it is not fully compensated for the
      interest paid by it to the banks on compounding basis. We are of the
F     opinion that interest on carrying cost is nothing but time value for money
      and the only manner in which a party can be afforded the benefit of
      restitution in every which way. In the facts of the instant case, the
      Appellate Tribunal was justified in allowing interest on carrying cost in
      favour of the respondent No. 1 – Adani Power for the period between
      the year 2014, when the FGD was installed, till the year 2021. There
G     was no justification for the Central Commission to have excluded the
      period between 2014 and 2018 and grant relief from the date of the
      passing of the order i.e., from 28th March, 2018 to 2021; nor is there any
      logic to such a segregation of time lines, particularly when the respondent
      No. 1 – Adani Power was prompt in raising a claim on the appellants
H     and pursuing its legal remedies.
   UTTAR HARYANA BIJLI VITRAN NIGAM LTD. v. ADANI                                117
        POWER (MUNDRA) LTD. [HIMA KOHLI, J.]

        18. We are not persuaded by the submission made on behalf of             A
the appellants that since no fault is attributable to them for the delay
caused in determination of the amount, they cannot be saddled with the
liability to pay interest on carrying cost; nor is there any substance in the
argument sought to be advanced that there is no provision in the PPAs
for payment of compound interest from the date when the Change in
                                                                                 B
Law event had occurred.
       19. The entire concept of restitutionary principles engrained in
Article 13 of the PPAs has to be read in the correct perspective. The
said principle that governs compensating a party for the time value for
money, is the very same principle that would be invoked and applied for
grant of interest on carrying cost on account of a Change in Law event.          C
Therefore, reliance on Articles 11.3.4 r/w 11.8.3 on the part of the
appellants cannot take their case further. Nor does the decision in Priya
Vart’S Case7 have any application to the facts of the present case as
the said case relates to payment of compensation under the Land
Acquisition Act and the interest that would be payable in case of delayed        D
payment of compensation.
      20. In view of the aforesaid discussion, the impugned judgment
and order dated 12th August, 2021 passed by the Appellate Tribunal is
upheld and the present appeal is accordingly dismissed as meritless.
                                                                                 E

Divya Pandey                                                 Appeal dismissed.




                                                                                 F




                                                                                 G




                                                                                 H