Case: T.N.Generation &amp; Distbn. Corpn Ltd Vs. Ppn Power Gen.Co.Pvt.Ltd

to the issue raised about the interest on late payment, APTEL has considered the entire matter and come to the conclusion that interest is payable on compound rate basis in terms of Article 10.6 of the PPA. In coming to the aforesaid conclusion, APTEL has relied on a judgment of this Court in Central Bank of India vs. Ravindra & Ors. [2002 (1) SCC 367 ]. In this judgment it has been held as follows: “………The essence of interest in the opinion of Lord Wright, in Riches v. Westminster Bank Ltd.All ER at p. 472 is that it is a payment which becomes due because the creditor has not had his money at the due date. It may be regarded either as representing the profit he might have made if he had had the use of the money, or, conversely, the loss he suffered because he had not that use. The general idea is that he is entitled to compensation for the deprivation; the money due to the creditor was not paid, or, in other words, was withheld from him by the debtor after the time when payment should have been made, in breach of his legal rights, and interest was a compensation whether the compensation was liquidated under an agreement or statute. A Division Bench of the High Court of Punjab speaking through Tek Chand, J. in CIT v. Dr Sham Lal Narula thus articulated the concept of interest the words ‘interest’ and ‘compensation’ are sometimes used interchangeably and on other occasions they have distinct connotation. ‘Interest’ in general terms is the return or compensation for the use or retention by one person of a sum of money belonging to or owed to another. In its narrow sense, ‘interest’ is understood to mean the amount which one has contracted to pay for use of borrowed money. … In whatever category ‘interest’ in a particular case may be put, it is a consideration paid either for the use of money or for forbearance in demanding it, after it has fallen due, and thus, it is a charge for the use or forbearance of money. In this sense, it is a compensation allowed by law or fixed by parties, or permitted by custom or usage, for use of money, belonging to another, or for the delay in paying money after it has become payable.” 56. Similar observations have been made by this Court in Indian Council of Enviro-Legal Action vs. Union of India & Ors. [2011 (8) SCC 161 ] wherein it has been held as follows: “178. To do complete justice, prevent wrongs, remove incentive for wrongdoing or delay, and to implement in practical terms the concepts of time value of money, restitution and unjust enrichment noted above—or to simply levelise—a convenient approach is calculating interest. But here interest has to be calculated on compound basis—and not simple—for the latter leaves much uncalled for benefits in the hands of the wrongdoer.179. Further, a related concept of inflation is also to be kept in mind and the concept of compound interest takes into account, by reason of prevailing rates, both these factors i.e. use of the money and the inflationary trends, as the market forces and predictions work out.180. Some of our statute law provide only for simple interest and not compound interest. In those situations, the courts are helpless and it is a matter of law reform which the Law Commission must take note and more so, because the serious effect it has on the administration of justice. However, [pic]the power of the Court to order compound interest by way of restitution is not fettered in any way. We request the Law Commission to consider and recommend necessary amendments in relevant laws.” 57. The late payment clause only captures the principle that a person denied the benefit of money, that ought to have been paid on due dates should get compensated on the same basis as his bank would charge him for funds lent together with a deterrent of 0.5% in order to prevent delays. It is submitted by Mr. Salve and Mr. Bhushan that bankers of the respondents have applied quarterly compounding or monthly compounding for cash credits during different periods on the basis of RBI norms. Article 10.6 of the PPA has followed the norms of the bank. This can not be said to be unfair as the same principle would also apply to the appellants.58. This now bring us to applications for impleadment of IOCL and for direction. I.A.No.6 of 2013 is for the impleadment of IOCL. It is submitted that during the pendency of these proceedings, the respondents have received rebates, discounts, credits, refunds in the fuel price being extended by fuel supplier i.e. Indian Oil Corporation Ltd. (IOCL). Such benefits have been received by the respondent from January 2001 till date It is pleaded that the respondents have failed to give details about the discounts and credits received the benefit of which ought to have been passed on to the appellant. Therefore, IOCL be made parties to respondent No.2 to the present appeal. I.A.No.5 of 2013 seeks direction to IOCL to furnish details of all the documents of the matter. Further directions are also sought on the respondent to refund a sum of Rs.240 crores paid by the appellant under the order passed by the State Commission along with interest at the rate as mentioned in PPA.59. The respondents in a common counter statement to the applications have submitted that the applications are not maintainable. The applications have been evidently preferred purely as dilatory tactics, to delay and deny substantial payments that are due and payable to the respondent pursuant to the orders passed by the State Commission which have been upheld by APTEL. We are not inclined to entertain either of the applications at this stage. The issue sought to be raised in both the applications ought to have been raised by the appellant at the relevant time. The applications are, therefore, accordingly dismissed.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]34. We have considered the submissions made by the learned counsel for the parties. In our opinion, the issues raised by the appellant with regard to the constitution of the State Commission and its discretion to either adjudicate or refer a particular dispute to arbitration is no longer res integra. Therefore, even though, Mr. Nariman has very forcefully contended that the issue ought to be reconsidered, we are not inclined to adopt such a course. In our opinion, this Court has comprehensively addressed all the issues, on the scope and ambit of Section 86 in general and Section 86(1)(f) in particular of the Act. We are also not inclined to accept the submission that since the appellant had made a request for a reference of the dispute to arbitration, the State Commission ought to have made the reference. We are also not able to accept the submission of Mr. Nariman that the State Commission was dealing with only a pure and simple money claim. We also do not find much substance in the submission that the issues having been raised being complex and intricate ought to have been left to be decided either by the Arbitral Tribunal or by the Civil Court. APTEL in the impugned order, in our opinion, has correctly culled out the ratio of the judgment of this Court in Gujarat Urja (supra). It is also correctly held that the appellant can not dictate that the State Commission ought to have referred the dispute to arbitration.arbitration.39. Section 86(1)(f) specifically confers jurisdiction on the State Commission to refer the dispute. Undoubtedly, the Commission is required to exercise its discretion reasonably and not arbitrarily. In the present case, the State Commission upon consideration of the entire matter has exercised its discretion. However, in our opinion, the APTEL ought not to have brushed aside the submissions of the appellant with the observation that the State Commission having exercised its discretion, the issue need not be investigated by the APTEL. It would always be open to APTEL to examine as to whether the State Commission has exercised the discretion with regard to the question whether the dispute ought to have been referred to arbitration, in accordance with the well known norms for exercising such discretion. APTEL exercises jurisdiction over the State Commission by way of a First Appeal. Therefore, it is the bounden duty of the Appellate Tribunal to examine as to whether all the decisions rendered by the State Commission suffer from the vice of arbitrariness, unreasonableness or perversity. This would be apart from examining as to whether the State Commission has exercised powers in accordance with the statutory provisions contained in Electricity Act, 2003. Having said this, we are not inclined to interfere with the conclusions reached by APTEL, as in our opinion, the jurisdiction has not been exercised by the State Commission arbitrarily, whimsically or against the statutory provisions.40. We, however, find substance in the submission of Mr. Nariman that adjudicatory functions generally ought not to be conducted by the State Commission in the absence of a Judicial Member. Especially in relation to disputes which are not fairly relative to tariff fixation or the advisory and recommendatory functions of the State Commission.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 the decisions of the State Commission have far reaching consequences, they are final and binding between the parties, subject, of course, to judicial review.Keeping in view the aforesaid observations of this Court, in our opinion, the State of Tamil Nadu ought to make necessary appointments in terms of Section 84(2) of the Act. We have been informed that till date no judicial Member has been appointed in the Tamil Nadu State Commission. We are of the opinion that the matter needs to be considered, with some urgency, by the appropriate State authorities about the desirability and feasibility for making appointments, of any person, as the Chairperson from amongst persons who is, or has been, a Judge of a High Court.Even if the reference had been made under Article 16 of the PPA, the applicability of the Arbitration Act, 1996 and the Arbitration Act of 1940 have been specifically excepted under Article 16(2)(h). In the earlier part of the judgment, we have noticed that Article 16 indeed provides for informal resolution of disputes by way of arbitration. However, Article 16(2) mandates that the arbitration shall be conducted in accordance with the ICC Rules. Under those rules, ICC Court of arbitration is to make the appointment of the Arbitral Tribunal. To make the matters worst for the appellant, it has been provided in Article 16.2(e) that the seat of the arbitration shall be in London. This fact alone would make Part I of the Arbitration Act, 1996 inapplicable to the arbitration proceedings. There is a further provision that notwithstanding Article 17(8), the laws of England shall govern the validity, interpretation, construction, performance and the enforcement of the provision contained in Article 16(2). Clearly then, the applicability of Arbitration Act, 1996 is totally ruled out by the parties. This Court in Bhatia International vs. Bulk Trading S.A. & Anr. [2002 (4) SCC 105 ] has clearly held that the parties are at liberty by agreement to opt out of any or all the provisions of 1996 Act.55. In fact, in our opinion, the appellant has illegally arrogated to itself the right to adjudicate by unilaterally assuming the jurisdiction not available to it. It was required to comply with Article 10 of the PPA which provides for Compensation Payment and Billing. We are also not able to accept the submission of Mr. Nariman that invoices could not be paid in full as they were only estimated invoices. It is true that reconciliation is to be done annually but the payment is to be made on monthly basis. This cannot even be disputed by the appellant in the face of its claim for rebate at the rate of 2.5% for having made part payment of the invoice amount within 5 days. We also do not find any merit in the submission that any prejudice has been caused to the appellant by the delayed submission of annual invoice by the respondents. Pursuant to the directions issued by the State Commission, the monthly invoice and annual invoice for the respective years have been redrawn as on 30th September each year. Therefore, the benefit of interest has been given on such annual invoices. With regard to the issue raised about the interest on late payment, APTEL has considered the entire matter and come to the conclusion that interest is payable on compound rate basis in terms of Article 10.6 of the PPA. In coming to the aforesaid conclusion, APTEL has relied on a judgment of this Court in Central Bank of India vs. Ravindra & Ors. [2002 (1) SCC 367 ].58. This now bring us to applications for impleadment of IOCL and for direction. I.A.No.6 of 2013 is for the impleadment of IOCL. It is submitted that during the pendency of these proceedings, the respondents have received rebates, discounts, credits, refunds in the fuel price being extended by fuel supplier i.e. Indian Oil Corporation Ltd. (IOCL). Such benefits have been received by the respondent from January 2001 till date It is pleaded that the respondents have failed to give details about the discounts and credits received the benefit of which ought to have been passed on to the appellant. Therefore, IOCL be made parties to respondent No.2 to the present appeal. I.A.No.5 of 2013 seeks direction to IOCL to furnish details of all the documents of the matter. Further directions are also sought on the respondent to refund a sum of Rs.240 crores paid by the appellant under the order passed by the State Commission along with interest at the rate as mentioned in PPA.59. The respondents in a common counter statement to the applications have submitted that the applications are not maintainable. The applications have been evidently preferred purely as dilatory tactics, to delay and deny substantial payments that are due and payable to the respondent pursuant to the orders passed by the State Commission which have been upheld by APTEL. We are not inclined to entertain either of the applications at this stage. The issue sought to be raised in both the applications ought to have been raised by the appellant at the relevant time. The applications are, therefore, accordingly dismissed.