Uttar Haryana Bijli Vitran Nigam Ltd. and Another vs Adani Power (Mundra) Limited and Another

HELD: 1.1 The appellants have not raised any dispute with regard to grant of interest to the respondent No. 1 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 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 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 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 1214][111-D-G]

1.2 Article 13 has been discussed threadbare by this Court 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 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. 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 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 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-CD; 115-G; 116-A-C] Uttar Pradesh Bijli Vitran Nigan Ltd. (Uhbvnl) & Anr. v. Adani Power Ltd. & Ors. (2019) 5 SCC 325 : [2019]

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 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 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 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 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 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. [Para 17, 18][116-D-H; 117A-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 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]

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.