Case: UTTAR HARYANA BIJLI VITRAN NIGAM LTD. AND ANOTHER Vs. ADANI POWER (MUNDRA) LIMITED AND ANOTHER

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 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 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 – 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 Agreements (In short PPAs) with the respondent No. 1 – Adani Power for procurement of contracted capacity of 1424 MW from the generating units 7, 8 and 9 established at Mundra, Gujarat. In the year 2010, on account of Environment Clearance dated 20th May, 2010, given 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 (In short FGD) unit. On 17th July, 2014, the respondent No. 1 – Adani Power filed a petition before the Central Commission for adjudication of compensation on 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 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 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 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 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 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 the Supreme Court in Civil Appeals No. 5865/2018 and 6190/2018. The said appeals came to be dismissed vide judgment dated 25th February, 2019 Reported as (2019) 5 SCC 325 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 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 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 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.

Reasoning: 12. We have heard the arguments advanced by the counsel for the parties and perused the relevant provisions of the PPAs. As noted 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 28th March, 2018, passed by the Central Commission.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 – 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. 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 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 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 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 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 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 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 and pursuing its legal remedies.18. We are not persuaded by the submission made on behalf of 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 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. 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 VartS 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 payment of compensation.