Case: UTTAR HARYANA BIJLI VITRAN NIGAM LTD.(UHBVNL) Vs. ADANI POWER LTD

judgments cited by learned counsel on behalf of both sides. In South Eastern Coalfields Ltd. v. State of Madhya Pradesh and Ors., (2003) 8 SCC 648 [ “South Eastern Coalfields”], this Court held that interest is payable in equity in certain circumstances and finally concluded: “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 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 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 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 the present case. 12. Shri Giri also relied upon National Thermal Power Corporation Ltd. (supra), in which, South Eastern Coalfields (supra) was distinguished in the following manner: “25. In this connection, it is material to note that the claim in South Eastern Coalfields [(2003) 8 SCC 648] was essentially covered under Section 61 of the Sale of Goods Act, 1930, and the interest by way of damages was payable as per this statutory provision itself. The liability had been crystallised and the interest had become payable because of the failure to pay the amount as per the liability. Besides, there was nothing in the agreement between the parties to the contrary on the issue of grant of interest. In the present matter, we have the second proviso to Regulation 79(2) of the 1999 Regulations which permitted the generating company to continue to charge the existing tariff for such period as may be specified in the notification by the Commission, and the notifications permitted continuation of the existing tariff as on 31-3-2001, until the final tariff was determined. There was no provision for payment of interest therein. The very fact that interest came to be provided subsequently by a notification under the Regulations of 2004 is also indicative of a contrary situation in the present matter viz. that interest was not payable earlier.” 13. Article 13 of the PPAs provides for payment of carrying costs, as held by us above. This judgment also turned on the interpretation of Regulation 79(2) of the Central Electricity Regulatory Commission (Conduct of Business) Regulations, 1999, and therefore, also has no manner of application to the facts of the present case.14. In Indian Council for Enviro-Legal Action v. Union of India and Ors., (2011) 8 SCC 161 , this Court was concerned with whether a successful party in a litigation should not be compensated by way of restitution for deprivation of its legitimate dues. While dealing with restitutionary principles as applicable in the context of environment pollution, this Court laid down certain principles in paragraph 197. This judgment, again, has no manner of application to the facts of the present case which are confined to the interpretation of Article 13 of the PPAs.15. The next judgment relied upon by Shri Giri was All India Power Engineer Federation and Ors. v. Sasan Power Ltd. and Ors., (2017) 1 SCC 487. Paragraph 31 of this judgment was relied upon to state that in context of Section 63 of the Electricity Act, the Commission alone can accept amended tariff that would impact consumer interest, and therefore, public interest, and waiver of any rights of one of the parties under the PPA, if it impacts such consumer interest, would have to pass muster under the Commission which would look into all factors and then pass a reasoned order. We fail to see how this judgment has any application on the facts of the present case as, in the present case, we are concerned with the interpretation of Article 13 of the PPAs. 16. Lastly, the judgment of this Court in Energy Watchdog v. Central Electricity Regulatory Commission and Ors., (2017) 14 SCC 80 was also relied upon. In this judgment, three issues were set out and decided, one of which was concerned with a change in law provision of a PPA. In holding that change in Indonesian law would not qualify as a change in law under the guidelines read with the PPAs, this Court referred to Clause 13.2 as follows: “57. …… This being so, it is clear that so far as the procurement of Indian coal is concerned, to the extent that the supply from Coal India and other Indian sources is cut down, the PPA read with these documents provides in Clause 13.2 that while determining the consequences of change in law, parties shall have due regard to the principle that the purpose of compensating the party affected by such change in law is to restore, through monthly tariff payments, the affected party to the economic position as if such change in law has not occurred……” There can be no doubt from this judgment that the restitutionary principle contained in Clause 13.2 must always be kept in mind even when compensation for increase/decrease in cost is determined by the CERC.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 0

Reasoning from the judgment:
0[ds]6. It will be seen that Article 13.4.1 makes it clear that adjustment in monthly tariff payment on account of change in law shall be effected from the date of the change in law [see sub-clause (i) of clause 4.1], in case the change in law happens to be by way of adoption, promulgation, amendment, re-enactment or repeal of the law or change in law. As opposed to this, if the change in law is on account of a change in interpretation of law by a judgment of a Court or Tribunal or governmental instrumentality, the case would fall under sub-clause (ii) of clause 4.1, in which case, the monthly tariff payment shall be effected from the date of the said order/judgment of the competent authority/Tribunal or the governmental instrumentality. What is important to notice is that Article 13.4.1 is subject to Article 13.2 of the PPAs.7. Article 13.2 is an in-built restitutionary principle which compensates the party affected by such change in law and which must restore, through monthly tariff payments, the affected party to the same economic position as if such change in law has not occurred. This would mean that by this clause a fiction is created, and the party has to be put in the same economic position is if such change in law has not occurred, i.e., the party must be given the benefit of restitution as understood in civil law. Article 13.2, however, goes on to divide such restitution into two separate periods. The first period is thein which increase/decrease of capital cost of the project in the tariff is to be governed by a certain formula. However, the seller has to provide to the procurer documentary proof of such increase/decrease in capital cost for establishing the impact of such change in law and in the case of dispute as to the same, a dispute resolution mechanism as per Article 17 of the PPA is to be resorted to. It is also made clear that compensation is only payable to either party only with effect from the date on which the total increase/decrease exceeds the amount stated therein.8. So far as theis concerned, compensation for any increase/decrease in revenues or costs to the seller is to be determined and effected from such date as is decided by the appropriate Commission. Here again, this compensation is only payable for increase/decrease in revenue or cost to the seller if it is in excess of an amount equivalent to 1% of the Letter of Credit in aggregate for a contract year. What is clear, therefore, from a reading of Article 13.2, is that restitutionary principles apply in case a certain threshold limit is crossed in both sub-clauses (a) and (b). There is no dispute that the present case is covered by sub-clause (b) and that the aforesaid threshold has been crossed. The mechanism for claiming a change in law is then set out by Article 13.3 of thewill be seen that sub-clause (c) does not occur in the PPA in Civil Appeal No.5865 of 2018. As we have held that the present case is governed by sub-clause (i) of Article 13.4.1, it is obvious that sub- clauses (b) and (c) have no application to the facts of the present case.10. A reading of Article 13 as a whole, therefore, leads to the 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 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 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 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 Appellatewas argued by Shri Giri was that this judgment cannot be applied to fact situations that arise under the PPA in view of Article 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 the present case.Article 13 of the PPAs provides for payment of carrying costs, as held by us above. This judgment also turned on the interpretation of Regulation 79(2) of the Central Electricity Regulatory Commission (Conduct of Business) Regulations, 1999, and therefore, also has no manner of application to the facts of the present case.14. In Indian Council for Enviro-Legal Action v. Union of India and Ors., (2011) 8 SCC 161 , this Court was concerned with whether a successful party in a litigation should not be compensated by way of restitution for deprivation of its legitimate dues. While dealing with restitutionary principles as applicable in the context of environment pollution, this Court laid down certain principles in paragraph 197. This judgment, again, has no manner of application to the facts of the present case which are confined to the interpretation of Article 13 of the PPAs.15. The next judgment relied upon by Shri Giri was All India Power Engineer Federation and Ors. v. Sasan Power Ltd. and Ors., (2017) 1 SCC 487. Paragraph 31 of this judgment was relied upon to state that in context of Section 63 of the Electricity Act, the Commission alone can accept amended tariff that would impact consumer interest, and therefore, public interest, and waiver of any rights of one of the parties under the PPA, if it impacts such consumer interest, would have to pass muster under the Commission which would look into all factors and then pass a reasoned order. We fail to see how this judgment has any application on the facts of the present case as, in the present case, we are concerned with the interpretation of Article 13 of thecan be no doubt from this judgment that the restitutionary principle contained in Clause 13.2 must always be kept in mind even when compensation for increase/decrease in cost is determined by the CERC.