Full Judgment Text
2025 INSC 1502
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.8232 OF 2023
RATTANINDIA POWER LIMITED …APPELLANT
VERSUS
MAHARASHTRA STATE ELECTRICITY DISTRIBUTION
COMPANY LIMITED AND ANOTHER
…RESPONDENTS
J U D G M E N T
MANOJ MISRA, J.
1. This appeal under Section 125 of the
1
Electricity Act, 2003 impugns the order dated
06.10.2023 passed by the Appellate Tribunal For
2
Electricity in Appeal No.341 of 2023 to the extent it
disallows Carrying Cost to RattanIndia Power
3
Limited (the appellant) on compounding interest
basis.
Signature Not Verified
Digitally signed by
CHETAN ARORA
Date: 2025.12.25
14:41:22 IST
Reason:
1 2003 Act
2 APTEL
3 RPL
Civil Appeal No.8232 of 2023 Page 1 of 39
FACTS
2. RPL is supplying power to Maharashtra State
4
Electricity Distribution Co. Ltd. (first respondent)
5
under two long term Power Purchase Agreements
(i.e., dated 22.04.2010 and 05.06.2010 for supply of
450 MW and 750 MW, respectively) with MSEDCL.
3. In connection therewith, RPL filed a petition
(i.e., Case No.84 of 2016) under Section 86 of the
2003 Act before the Maharashtra Electricity
6
Regularity Commission seeking compensation on
account of various Change in Law events affecting
the project from the date of commencement of supply
of power by RPL along with the Carrying Cost, and
requested MERC to allow the compensation with
effect from the date of commencement of supply.
4. MERC vide order dated 05.04.2018 had allowed
certain Change in Law claims. However, it held: (i)
increase in rates of Chhattisgarh Paryavaran Upkar
Cess and Chhattisgarh Vikas Upkar Cess do not
qualify as Change in Law events; (ii) PPAs executed
between MSEDCL and RPL do not provide
compensation for Carrying Cost and therefore, RPL is
not entitled to claim Carrying Cost on its approved
4 MSEDCL
5 PPA
6 MERC
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Civil Appeal No.8232 of 2023
Change in Law events; (iii) compensation for
approved Change in Law events would be payable
from Scheduled Delivery Date (for short SSD) and not
for the period prior to SDD, even though supply of
power commenced prior to SDD.
5. Aggrieved therewith, RPL filed Appeal No.263
of 2018 before APTEL, which was allowed vide its
order dated 18.10.2022. The operative portion of the
order dated 18.10.2022 is reproduced below:
“The impugned order to the extent it ruled against the
appellant on the three above mentioned subjects is set
aside. The matter to that extent is remitted to the State
Commission for fresh decision bearing in mind the
observations recorded as above. We shall also expect the
State Commission to pass all consequential orders
including quantification of the amounts payable by the
licensee unto the appellant. Of course, for such purposes
the Commission will ascertain the calculations from the
appellant and then take the views of the licensee before
determining the actual liability. We direct that the
Commission shall pass all necessary orders in the wake of
such determination including by taking appropriate
measures such that the claims are duly satisfied in a time
bound manner, expeditiously and at an early date, not
later than three months from the date of this judgment.”
(Emphasis supplied)
6. Key observations/ findings in the remand
order of APTEL dated 18.10.2022 are as follows:
(i) Impact of levy of Environment Cess and
Development Cess by the State of
Page 3 of 39
Civil Appeal No.8232 of 2023
Chhattisgarh adds to the burden of RPL
inasmuch as it is passed through
against the procurement of fuel from
sources in the State of Chhattisgarh
( paragraph 5 of the order ).
(ii) Carrying Cost is payable as per the
provisions of PPA to compensate the
affected party for time value of funds
deployed on account of Change in Law
events ( paragraphs 7 to 11 of the order ).
(iii) Liability to compensate for Change in
Law events will arise from the date of
actual supply of power rather than SDD,
particularly, in a case where supply has
commenced prior to SDD ( paragraphs
13 and 14 of the order ).
7. Pursuant to the remand order dated
18.10.2022 requiring MERC to compute the
amounts payable by MSEDCL to RPL for restoring
it to the same economic position as if the Change
in Law event had not occurred, RPL filed an
application (i.e., M.A. in Diary No.257 of 2022)
before MERC with the following prayer:
Page 4 of 39
Civil Appeal No.8232 of 2023
(a) Direct MSEDCL to make payment of
Rs.98.79 Cr. (including Carrying Cost of
Rs.54.13 Cr.) in accordance with the
order dated 18.10.2022 passed by
APTEL in Appeal No.263 of 2018.
(b) In the interim, direct MSEDCL to pay
75% of the claimed amount i.e.,
Rs.74.10 Cr. forthwith (within 7 days)
till pendency of the Application; and
(c) Pass such other and further orders as
the Commission may deem fit and
appropriate.
8. MERC, vide order dated 06.02.2023, partly
allowed the said application i.e., M.A. in Diary
No.257 of 2022, modified its earlier order dated
05.04.2018 to the extent ruled in the order,
awarded Rs.69.38 Cr. as Change in Law
compensation including Carrying Cost, required
RPL to raise supplementary bill and directed
MSEDCL to pay the same as per the provisions of
PPA. Further, in respect of the disputed amount of
Rs.1.56 Cr., a direction was issued requiring
parties to reconcile in terms directed in para 14.7
of the order dated 06.02.2023.
Page 5 of 39
Civil Appeal No.8232 of 2023
9. The dispute inter se parties which was the
subject matter of consideration before MERC and
APTEL, and also under consideration in this
appeal, is captured in paragraph 15.1 of MERC’s
order dated 06.02.2023, which is reproduced
below:
“15.1 On the issue of determination of carrying
costs towards Change in Law compensation, the
Commission notes that RPL has claimed Rs. 54.13
crore whereas MSEDCL has computed Rs. 26.18
crore. The difference in the computation is due to
the reason that MSEDCL has considered interest on
working capital stipulated in Tariff Regulation on
simple interest basis for computing the Carrying
Cost whereas RPL has considered the rate of Late
Payment Surcharge/ DPC stipulated in PPA with
compound interest basis.”
(Emphasis supplied)
10. On the above issue, MERC held:
“15.4 … although ATE (should be read as APTEL)
has allowed Carrying Cost on Change in Law
compensation but it has not stipulated rate at which
such Carrying Cost needs to be computed. RPL has
relied upon earlier ATE judgment dated 22nd March
2022 wherein ATE has directed this Commission to
allow Carrying Cost at the rate of LPS (should be
read as Late Payment Surcharge) stipulated in the
PPA. In this regard, it is important to note that
subsequent to ATE remand order dated 22nd March
2022, this Commission has issued consequential
order dated 8 July 2022 highlighting various orders
of this Commission allowing Carrying Cost at rate of
interest on working capital which has been upheld
by the ATE and judgment of ATE rejecting LPS rate
for carrying cost and thereafter the Commission has
clearly ruled that for maintaining judicial discipline
it is allowing LPS rate for Carrying Cost in that
remand proceeding only. Relevant part of
Commission's ruling in order dated 8 July 2022 is
reproduced below:
Page 6 of 39
Civil Appeal No.8232 of 2023
xxxxx omitted xxxxx
In view of above, the Commission has approved
Carrying Cost at the rate of LPS, limited to that
remand matter only and the same cannot be used
as precedent for other matters. Further, ATE
judgment dated 22 March 2022 allowing Carrying
Cost at LPS rate has been stayed by the Supreme
Court in Adani matter and in RPL matter the
Supreme Court has ruled that they will predicate
the impugned order on the same basis. In this
background, RPL cannot rely upon ATE judgment
dated 22nd March 2022 for claiming Carrying Cost
at LPS rate in the present matter.
15.5 As regards RPL's reliance on Hon’ble Supreme
Court judgement in Uttar Haryana Bijli Vitran
Nigam Limited and another versus Adani Power
(Mundra) limited and another (“SC Carrying Cost
judgment”] wherein Supreme Court has allowed
carrying cost at the rate of LPS on compounding
basis, the Commission notes that factual aspect of
that matter are not identical to present matter. In
case of MSEDCL, Supreme Court in judgment dated
8 October 2021 (reproduced in para 16.4 above) has
clearly ruled that LPS cannot be equated with
Carrying Cost. Said judgment of Supreme Court is
in the matter of PPAs with Generators including
RPL and hence same is applicable in present
matter. Therefore, Carrying Cost cannot be allowed
at the rate of LPS stipulated in the PPA.
15.6 Further, the Commission notes that in the
past the Commission has approved various Change
in Law events for the 450 MW and 750 MW of RPL
allowing carrying cost at the rate of interest on
working capital as per relevant MYT Regulations or
actual whichever is minimum on simple interest
basis. Same was also accepted by the RPL in the
past. Therefore, it cannot be the case where
different basis is used for allowing Carrying Cost on
Change in Law compensation allowed at different
point of time.
15.7 In view of above, the Commission rules that as
per earlier methodology the Carrying Cost to be
Page 7 of 39
Civil Appeal No.8232 of 2023
computed at a rate of interest on working capital as
per relevant MYT Regulations or actual whichever is
minimum on simple interest basis. Such Carrying
Cost needs to be computed from the date of
incurring such additional expenses on account of
Change in Law event till date of this Order.”
11. Aggrieved by the aforesaid order of MERC,
RPL preferred appeal before APTEL. The appeal
was partly allowed by the impugned order and the
matter was remanded to enable MERC to compute
and direct payment of Carrying Cost to RPL at LPS
rates in terms of the order of remand dated
18.10.2022.
12. Key observations/findings of APTEL in the
impugned order are:
(i) The remand order of APTEL dated
18.10.2022 was not challenged before
Supreme Court and, therefore, it has
attained finality in light of decision of
the Apex Court in Jasraj Inder
7
Singh v. Hemraj Multanchand . As
a sequitur, judicial discipline would
require that the said verdict is
followed by MERC as well as APTEL.
(ii) The remand order of APTEL dated
18.10.2022 required MERC to follow
the earlier order passed by APTEL in
7 (1977) 2 SCC 155
Page 8 of 39
Civil Appeal No.8232 of 2023
Appeal No.118 of 2021 dated
22.03.2022, whereunder MERC was
obligated in law to determine the
amounts payable towards Carrying
Cost strictly in terms of the order
passed in Appeal No.118 of 2021
dated 22.03.2022 which required it to
compute and determine Carrying Cost
payable to the appellant at LPS rates.
Therefore, both MERC and APTEL are
bound by the said order and are
required to compute and pay RPL the
Carrying Cost at LPS rates regardless
of a contrary opinion in other
judgments.
(iii) There is nothing in the remand order
of APTEL, dated 18.10.2022,
requiring MERC to compute Carrying
Cost at LPS rates on a compounding
basis. Therefore, as the remand order
has attained finality, such a relief
cannot be claimed.
13. Aggrieved by denial of LPS rate of interest on
compounding basis, RPL is in appeal before us.
Interestingly, no appeal has been preferred by
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Civil Appeal No.8232 of 2023
MSEDCL against the impugned order to the extent
it allows payment of Carrying Cost along with
interest at LPS rate.
14. We have heard learned counsel for the parties
and have perused the materials available on the
record.
Submission on behalf of RPL/ Appellant
15. On behalf of the appellant it is submitted:
(i) Impugned order is contrary to remand
order dated 18.10.2022 and judgment
dated 22.03.2022 in Appeal No.118 of
2021, where it was observed:
“16. It is a settled position of law that
Carrying Cost is payable as per the
provisions of PPA to compensate the affected
party for time value of funds deployed on
account of Change in Law events. The LPS
provision in the PPA is also meant for
compensation towards time value of money
on account of delayed payments. Therefore,
the rate prescribed for LPS in Article 11.3.4
of the PPA (i.e. SBI PLR + 2%) ought to be
considered for the recovery of Carrying Cost.
The appellants cannot be restored to the
same economic position, as it was prior to
the occurrence of the change in law events,
unless the rate of interest applicable for LPS
is granted.
19. The impugned orders denying the reliefs
in favor of the appellants herein are thus set
aside. The cases of each appellant are
remitted to the Regulatory Commission for
consequential orders to be passed in light of
the observations/ directions recorded above.
…”
Page 10 of 39
Civil Appeal No.8232 of 2023
As the judgment in Appeal No.118 was
between same parties, interpreting the
same PPAs, it would have to be
applied.
(ii) Article 8.3.5 of the PPAs provides the
rate of LPS as SBAR per annum plus
2% on compound interest basis. The
rate of LPS itself includes the
component of compounding interest.
Hence, Carrying Cost at LPS rate
envisages compounding of interest.
(iii) The impugned order is in violation of
the well settled principle of restitution
in terms of which the party affected by
Change in Law event is to be restored
to the same economic position as it
was prior to such Change in Law
event. This Court’s decision in Uttar
Haryana Bijli Vitran Nigam Ltd. &
Another v. Adani Power (Mundra)
8
Ltd. & Another , which was
reiterated in
Jaipur Vidyut Vitran
Nigam Ltd. v. Adani Power
9
Rajasthan Ltd. , holds that to effect
8 (2023) 2 SCC 624, paragraphs 20 to 22
9 2025 SCC OnLine SC 1211, paragraphs 18 and 27
Page 11 of 39
Civil Appeal No.8232 of 2023
restitution, Carrying Cost ought to be
granted along with interest on
compounding basis as opposed to
simple interest.
Submissions on behalf of MSEDCL/ First
Respondent
16. On behalf of first respondent it was
submitted:
(i) In Case no.84 of 2016, RPL sought
compensation on account of various
Change in Law events including
Carrying Cost from the date claims
became effective. However, RPL
neither pleaded nor argued about a
specific rate of interest for such
Carrying Cost.
Against the order rejecting claim
(ii)
towards Carrying Cost, in the appeal
(i.e., 263 of 2018), RPL relied on
judgments granting Carrying Cost at
the rate of Interest on Working Capital
10
(for short IOWC) as per MYT
Regulations, but omitted to specify the
rate of grant of Carrying Cost.
10 Multi-Year Tarif
Page 12 of 39
Civil Appeal No.8232 of 2023
(iii) APTEL in the Remand Judgment
dated 18.10.2022, though allowed
claim towards Carrying Cost, did not
direct computation of compensation
with interest on a compounding basis
as there was no such claim.
(iv) Post-remand, for the first time, a claim
for Carrying Cost at the rate of LPS,
relying on judgment in Appeal No.118
of 2021 dated 22.03.2022 was made.
(v) Pursuant to MERC order passed on
remand, MSEDCL has paid Rs.25.90
Cr. to RPL towards carrying cost
computed at IOWC rate as per
applicable MYT Regulations on simple
interest basis. And, thereafter, after
APTEL’s present impugned order,
MSDECL recomputed the Carrying
Cost claim of Rs.38.09 Cr. at LPS rate
on simple interest basis and paid the
balance amount of Rs.12.19 Cr. under
protest to RPL.
(vi) RPL meets its working capital
requirement from internal sources
only, and, therefore, carrying cost at
Page 13 of 39
Civil Appeal No.8232 of 2023
IOWC rate as per MYT Regulations is
already on the higher side and would
over-compensate RPL.
(vii) As per Article 10 of PPA,
compensation is intended to restore
the affected party to the same
economic position as if no Change in
Law event had occurred. Therefore,
allowing Carrying Cost at LPS rate
itself is erroneous.
(viii) Further, the direction of interest at
LPS rate is different from as per the
LPS clause therefore, in absence of
specific direction that Carrying Cost
shall be paid as per LPS clause,
compounding of interest is not
acceptable. There exists a clear
distinction between the grant of
Carrying Cost at the LPS rate and the
grant of Carrying Cost as per LPS
clause. Moreover, the judgment dated
18.10.2022 referred to in the
impugned order confines itself to the
grant of Carrying Cost as per the
Page 14 of 39
Civil Appeal No.8232 of 2023
earlier methodology without specifying
the rate.
Object of LPS is to ensure timely
(ix)
payment therefore the same cannot be
equated with Carrying Cost or actual
cost incurred for the supply of power
as held in Maharashtra State
Electricity Distribution Company
Limited v. Maharashtra Electricity
Regulatory Commission and
11
Others.
(x) RPL having claimed carrying cost as
per MYT Regulations before MERC
cannot raise a contrary claim, as held
in Maharashtra State Electricity
Distribution Company Ltd. v. Adani
Power Maharashtra Ltd. and
12
another .
Relevant Provisions in PPA
17. Before we address the rival contentions, it
would be useful to notice the relevant provisions in
PPA qua principles governing computation of
impact of Change in Law event. Article 10.2.1 lays
11 (2022) 4 SCC 657, paragraph 177
12 (2023) 14 SCC 752, paragraph 35.
Page 15 of 39
Civil Appeal No.8232 of 2023
down the underlying principle for determining the
consequence of Change in Law. It reads thus:
“10.2.1 While determining the consequence of
Change in Law under this Article 10, the party 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 payment,
to the extent compensated in this Article 10, the
affected party to the same economic position as if
such Change in Law has not occurred.”
18. Article 10.3 is regarding the ‘Relief for Change
in Law’. The relevant sub-articles of Article 10.3 of
the PPA are reproduced below:
“10.3.1 During Construction Period
As a result of any Change in Law, the impact of
increase/ decrease of Capital Cost of the Power
Station in the Tariff shall be governed by the
formula given below:
For every cumulative increase/ decrease of
each Rs. 1.25 lakhs in the Capital Cost during the
Construction Period, the increase /decrease in Non
Escalable Capacity Charges shall be an amount
equal to 0.267% of the Non Escalable Capacity
Charges. In case of dispute, Article 14 shall apply.
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.1.25
lakhs in the per MW capital cost, in relation to the
Installed Capacity.
10.3.2 During Operating Period
The compensation for any decrease in revenue or
increase in expenses to the Seller shall be payable
only if the decrease in revenue or increase in
expenses of the seller is in excess of an amount
equivalent to 1% of the value of the letter of credit
in aggregate for the relevant Contract Year.
Page 16 of 39
Civil Appeal No.8232 of 2023
10.3.3 For any claims made under Articles 10.3.1
and 10.3.2 above, the Seller shall provide to the
procurer and the appropriate Commission
documentary proof of such increase /decrease in
cost of the Power Station or revenue/ expense for
establishing the impact of Change in Law.
10.3.4 The decision of the Appropriate Commission,
with regards to the determination of the
compensation mentioned above in Articles 10.3.1
and 10.3.2, and the date from which such
compensation shall become effective, shall be final
and binding on both the parties subject to right of
appeal provided under applicable law.”
19. Article 10.5 provides for Tariff Adjustment
Payment on account of Change in Law. Relevant
sub-articles of Article 10.5 are reproduced below:
“10.5.1 Subject to Article 10.2, the adjustment in
monthly tariff payment shall be effective from:
(i) the date of adoption, promulgation,
amendment, re-enactment or repeal of the
law or Change in Law; or
(ii) the date of order/ judgment 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.
10.5.2 The payment for change in law shall be
through supplementary bill as mentioned in Article
8.8. 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 reflect the changed
Tariff.”
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Civil Appeal No.8232 of 2023
20. Article 8.8 is regarding payment of
Supplementary Bill. Relevant sub-articles of Article
8.8 are reproduced below:
“8.8.1 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);
(ii) Tariff payment for change in parameters,
pursuant to provisions in Schedule 4; or
(iii) Change in law as provided in Article 10,
and such supplementary bill shall be paid by the
other party.
8.8.2 The procurer shall remit all amounts due
under a Supplementary Bill raised by the Seller to
the Seller's Designated Account by the due date and
notify the Seller of such remittance on the same day
or the Seller shall be eligible to draw such amounts
through the Letter of Credit. Similarly, the Seller
shall pay all amounts due under the
Supplementary Bill raised by the Procurer by the
due date to concerned Procurer’s designated bank
account and notify such Procurer of such payment
on the same day. For such payments by the
Procurer, rebate as applicable to Monthly Bills
pursuant to Article 8.3.6 shall equally apply.
8.8.3 In the event of delay in payment of a
Supplementary Bill by either Party beyond its due
date, a late payment surcharge shall be payable at
the same terms applicable to the Monthly Bill in
Article 8.3.5.”
21. Late Payment Surcharge (for short LPS), as
per PPA, shall have the meaning ascribed thereto in
Article 8.3.5 of the PPA. Article 8.3.5 reads thus:
Page 18 of 39
Civil Appeal No.8232 of 2023
“8.3.5 In the event of delay in payment of a monthly
bill by the Procurer beyond its due date, a Late
Payment Surcharge shall be payable by such
Procurer to the Seller at the rate of two percent (2%)
in excess of the applicable SBAR per annum, on the
amount of outstanding payment, regulated on a
day-to-day basis (and compounded with monthly
rest), for each day of delay. The Late Payment
Surcharge shall be claimed by the seller through
the Supplementary Bill.”
22. SBAR, as per PPA, shall mean the prime
lending rate per annum applicable for the loans
with one year maturity as fixed from time to time
by the State Bank of India. In absence of such rate,
SBAR shall mean any other arrangement that
substitutes such prime lending rate as mutually
agreed to by the Parties.
23. A conjoint reading of the aforesaid provisions,
inter alia , make it clear that,-
(i) the object of providing for compensation
on account of a change in law event is to
restore the affected party to the same
economic position as if the change in law
event did not occur (See 10.2.1 of PPA);
(ii) the restoration is through monthly tariff
payment (See 10.2.1 of PPA);
(iii) the adjustment in monthly tariff
payment shall be effective from (a) the
date of adoption, promulgation,
Page 19 of 39
Civil Appeal No.8232 of 2023
amendment, re-enactment or repeal of
the law or change in law; or (b) the date
of order/ judgment 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 (See 10.5.1 of
PPA);
(iv) the payment for change in law shall be
through supplementary bill (See 10.5.2
of PPA);
(v) when a party raises supplementary bill
for change in law event, the procurer
shall remit the amount by the due date
(See 8.8.2 of PPA);
(vi) in the event of delay in payment of a
supplementary bill beyond its due date,
LPS shall be payable at the same terms
applicable to the monthly bill (See 8.8.3
of PPA);
(vii) LPS shall be payable by such Procurer to
the Seller at the rate of two percent (2%)
in excess of the applicable SBAR per
annum, on the amount of outstanding
Page 20 of 39
Civil Appeal No.8232 of 2023
payment, regulated on a day-to-day basis
(and compounded with monthly rest), for
each day of delay (See 8.3.5 of PPA); and
(viii) LPS shall be claimed by the seller
through supplementary bill (See 8.3.5 of
PPA).
24. What is clear from above is that LPS is
payable at the rate of two percent (2%) in excess of
the applicable SBAR per annum, on the amount of
outstanding payment, regulated on a day-to-day
basis (and compounded with monthly rest), for
each day of delay.
Issues
25. Upon consideration of the submissions and
perusal of materials on record, in our view, the
following issues arise for adjudication:
(i) Whether LPS on Carrying Cost had
to be paid to the Appellant under
the remand order dated 18.10.2022
and that too, without compounding
of interest? If so, whether, in
absence of an appeal against the
order dated 18.10.2022, the
Page 21 of 39
Civil Appeal No.8232 of 2023
direction to pay LPS on Carrying
Cost had attained finality?
(ii) Whether, in absence of a cross-
appeal against the impugned order,
the direction to pay LPS on
Carrying Cost cannot be
questioned by the first respondent?
(iii) Whether the direction to pay
Carrying Cost with LPS is liable to
be interfered with in exercise of
powers under Article 136 of the
Constitution?
(iv) Whether direction to pay Carrying
Cost with interest at LPS rate
would include compounding of
interest as per LPS provision in the
PPA?
Relevant provisions regarding appeals under
2003 Act
26. Before addressing the issues framed above, it
would be useful to have an overview of the
statutory provisions regarding appeals under the
2003 Act and the procedure to be followed while
dealing with those appeals.
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Civil Appeal No.8232 of 2023
13
27. Section 111 of the 2003 Act provides for
appeals to APTEL. According to sub-section (1), any
person aggrieved by an order made either by the
adjudicating officer, or an Appropriate Commission,
may prefer an appeal to APTEL within the period
specified in sub-section (2). Sub-section (2)
provides that the appeal ought to be in such form,
verified in such manner and accompanied by such
fee as may be prescribed. However, under sub-
section (6), APTEL may, on its own motion (i.e., suo
motu), for the purpose of examining the legality,
propriety or correctness of any order made by the
adjudicating officer or the Appropriate Commission
under the Act, as the case may be, in relation to
any proceeding, call for the records of such
proceedings and make such order in the case, as it
thinks fit.
13 Section 111. Appeal to Appellate Tribunal. – (1) Any person aggrieved by an order made by an
adjudicating officer under this act except under section 127 or an order made by the appropriate
Commission under this act may prefer an appeal to the appellate tribunal for electricity: ….
(2) Every appeal under sub-section (1) shall be filed within a period of 45 days from the
date on which a copy of the order made by the adjudicating officer or the Appropriate Commission is
received by the aggrieved person and it shall be in such form, verified in such manner and be
accompanied by such fee as may be prescribed: ….
(3) to (5) ….xxxxx …..
(6) The Appellate Tribunal may, for the purpose of examining the legality, proprietary or
correctness of any order made by the adjudicating officer or the Appropriate Commission under this Act,
as the case may be, in relation to proceeding, on its own motion or otherwise, call for the records of
such proceedings and make such order in the case as it thinks fit
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Civil Appeal No.8232 of 2023
14
28. Section 120 of the 2003 Act provides for the
procedure and powers of the Appellate Tribunal.
Interestingly, though, under sub-section (2), it has
various powers as vested in a civil court while
trying a suit, sub-section (1) provides that it is not
bound by the procedure laid down by the Code of
Civil Procedure, but shall be guided by the
principles of natural justice and shall have powers
to regulate its own procedure. As a sequitur, APTEL
is empowered to devise its own procedure in
conformity with the principles of natural justice.
29. However, what is important is that, under
sub-section (3) of Section 120, an order made by
APTEL is executable as a decree of civil court,
which, in effect, means that the order passed by
APTEL is final, unless set aside or modified in an
15
appeal under Section 125 of the 2003 Act.
14 Procedure and powers of Appellate Tribunal. – (1) The Appellate Tribunal shall not be bound by the
procedure laid down by the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the
principles of natural justice and, subject to other provisions of this Act, the Appellate Tribunal shall have
powers to regulate its own procedure.
(2) The Appellate Tribunal shall have for the purposes of discharging its functions
under this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5
of 1908), while truing a suit in respect of the following matters, namely: -
…….xxxxx……
(3) An order made by the appellate tribunal under this act shall be executable by the
Appellate Tribunal as a decree of civil court and, for this purpose, the Appellate Tribunal shall have all the
powers of a civil court.
15 Section 125. Appeal to Supreme Court. - Any person aggrieved by any decision or order of the
Appellate Tribunal, may, file an appeal to the Supreme Court within 60 days from the date of
communication of the decision or order of the Appellate Tribunal, to him, on any one or more of the
grounds specified in section 100 of the Code of Civil Procedure, 1908 (5 of 1908):
Provided that the Supreme Court may, if it is satisfied that the appellant was prevented
by sufficient cause from filing the appeal within the said period allow it to be filed within a further period
Page 24 of 39
Civil Appeal No.8232 of 2023
30. Section 125 of the 2003 Act provides for a
statutory appeal to the Supreme Court. Under
Section 125, any person aggrieved by any decision
or order of APTEL, may, within sixty days from the
date of communication of the decision or order of
APTEL to him, file an appeal on any one or more of
the grounds specified in Section 100 of the Code of
16
Civil Procedure, 1908 .
31. What is important is that, unlike APTEL,
which can exercise suo motu powers under sub-
section (6) of Section 111 of the 2003 Act, the
powers of this Court, under Section 125 of the
2003 Act, are invocable through an appeal filed by
a person aggrieved. In consequence, if the
aggrieved person does not file an appeal, or a
cross-appeal/ cross-objection, under Section 125,
impugning the order, or any portion of it, passed by
APTEL, it cannot question the correctness of the
same in an appeal preferred by another person
questioning that much portion of the order with
which it is aggrieved.
32. No doubt, statutory limitations cannot dilute
the constitutional powers vested in this Court
not exceeding sixty days.
16 CPC
Page 25 of 39
Civil Appeal No.8232 of 2023
17
under Article 136 of the Constitution of India .
Though powers under Article 136/142 can be
exercised by this Court even suo motu and/or to do
complete justice in a lis, there have to be
18
compelling circumstances for its exercise .
33. Now, we shall address the issues formulated
above.
Issue (i)
34. APTEL in the impugned order held that since
the remand order (i.e., order dated 18.10.2022
passed in Appeal No.263 of 2018) had attained
finality, whereby it directed computation of
compensation in the light of observations made
therein, and it cited earlier orders inter se parties
requiring payment of compensation for increase in
Carrying Cost with LPS, interest at LPS rate had to
be paid. However, APTEL observed that since the
remand order did not provide for compounding of
interest, the same would not be permissible as the
remand order binds both sides. In that context,
issue (i) (supra) arises for our consideration.
17 See: Dhakeshwari Cotton Mills Ltd. v. Commissioner of Income Tax, West Bengal, (1954) 2 SCC 602 :
1954 SCC OnLine SC 47, paragraph 8; See also: Laliteshwar Prasad Sahi v. Bateshwar Prasad, AIR 1966 SC
580: 1965 SCC OnLine SC 104
18 See: A. Subash Babu v. State of A.P., (2011) 7 SCC 616, paragraph 66
Page 26 of 39
Civil Appeal No.8232 of 2023
35. What is clear from the record is that Appeal
No.263 of 2018 was filed before APTEL against (a)
denial of compensation on certain change in law
events; (b) denial of Carrying Cost on account of
change in law events; and (c) the date from which
the compensation on account of change in law
events was directed to be paid to the appellant. The
said appeal was allowed vide order dated
18.10.2022, whereby the impugned order, to the
extent it ruled against the appellant on the above
three issues, was set aside and the matter was
remanded to MERC for a fresh decision bearing in
mind the observations made in the remand order.
36. Although there is no specific direction in the
remand order to pay interest at LPS rate on
Carrying Cost but, what is clear is that in the
remand order, MERC was directed to decide the
matter bearing in mind the observations made in
the order. In such circumstances, the observations
in the remand order play a critical role.
37. Upon going through the remand order, we
find that paragraph 11 thereof throws light on how
compensation towards Carrying Cost is to be
computed. The same is reproduced below:
Page 27 of 39
Civil Appeal No.8232 of 2023
“11. Again, in RattanIndia Power Limited v.
Maharashtra Electricity Regulatory Commission
and Anr. (appeal no.118/2021 decided by judgment
dated 22/3/2022), while directing the State
Commission to determine the amounts payable by
the distribution licensee (MSECDL) we had also
directed a revisit to the prayer for carrying cost
bearing in mind the well settled principles on the
subject in light of decisions in the cases of Uttar
Haryana (supra), Energy Watchdog and others v.
CERC and others (2017) 14 SCC 80 and Jaipur
Vidyut Vitran Nigam Ltd. and Ors. v. Adani Power
Rajasthan Ltd. & Anr. 2020 SCC OnLine SC 697.”
38. What is reflected from paragraph 11 of the
remand order is that APTEL had referred to earlier
decision dated 22.03.2022, inter se parties, in
Appeal No.118 of 2021 and certain decisions of this
Court settling the applicable principles. In
consequence, the observations/ directions in the
order dated 22.03.2022 assume importance. In
our view, paragraphs 15 and 16 of the order dated
22.03.2022 are relevant and, therefore, are
reproduced below:
“15. We propose to direct the Commission to
determine the amounts payable by the respondent
distribution licensee in favour of each of these
appellants to compensate them for restoring
through monthly tariff payments to the same
economic position as if such change in law event
had not occurred. It would be appropriate to also
direct the Commission to revisit the prayer for
carrying cost bearing in mind the well settled
principles on the said subject [e.g., Energy
Watchdog (supra); Uttar Haryana and another
(supra); and Jaipur Vidyut Vitran Nigam Limited
and others V. Adani Power Rajasthan Limited and
Anr. 2020 SCC OnLine SC 697].
Page 28 of 39
Civil Appeal No.8232 of 2023
16. It is a settled position of law that
carrying cost is payable as per the provisions of PPA
to compensate the affected party for time value of
funds deployed on account of change in law events.
The LPS provision in the PPA is also meant for
compensation towards time value of money on
account of delayed payments. Therefore, the rate
prescribed for LPS in Article 11.3.4 of the PPA (i.e.,
SBI PLR plus 2%) ought to be considered for the
recovery of carrying cost. The appellants cannot be
restored to the same economic position, as it was
prior to the occurrence of the change in law events,
unless the rate of interest applicable for LPS is
granted.”
(Emphasis supplied)
39. When the extracts of the earlier order dated
22.03.2022 are read with the remand order dated
18.10.2022, it becomes clear that APTEL while
passing the remand order dated 18.10.2022 was of
the view that the observations in the earlier order,
which had referred to certain decisions of this
Court, had settled the law regarding grant of LPS
while compensating a power generator for increase
in Carrying Cost on account of change in law event.
In that light, APTEL observed that MERC was
required to follow those settled principles while
computing the compensation payable.
40. In our view, the remand order dated
18.10.2022 had not decided the issue relating to
grant of LPS though it did indicate, by referring to
certain decisions, that compensation for increase in
Carrying Cost is to be with LPS benefit. Thus,
Page 29 of 39
Civil Appeal No.8232 of 2023
though we do not find fault with the impugned
order of APTEL that the remand order indicated
grant of LPS benefit, we do not agree with the view
of APTEL that MERC or APTEL were bound by
those observations and could not have taken a
decision qua LPS by taking notice of the law
relating to grant of LPS benefit. Reason is simple,
the issue regarding grant of LPS benefit on
Carrying Cost was not decided. Rather, there was a
remand whereunder MERC was required to decide
the issue bearing in mind the observations in the
judgment/ order. Ordinarily, when a matter is
remanded the lis is alive, unless directed otherwise.
Therefore, the lis has to be decided in accordance
with law. Rather, it is duty of a court, whether it is
trying original proceedings or hearing an appeal, to
take notice of the change in law affecting pending
19
actions and to give effect to the same . No doubt,
judicial discipline requires that directions of a
higher court must be followed by the court
subordinate to it. However, there may be a situation
where following a direction may amount to violating
the binding law laid down by a superior court or
the Apex Court. In such a situation, where the lis
is alive, the subordinate court or adjudicating body
19 See: United Bank of India, Calcutta v. Abhijit Tea Co. Pvt. Ltd., (2000) 7 SCC 357, paragraph 20.
Page 30 of 39
Civil Appeal No.8232 of 2023
will have to apply and follow the law which holds
the field on the day it decides the matter.
41. In our view, when a Court or Appellate
Tribunal remands a matter to the subordinate
court, or adjudicating body, for a fresh decision in
the light of observations contained therein, and
while doing so refers to certain decisions, it does
not mean that the subordinate court or
adjudicating body is bound by those decisions and
can look no further, even if, in the interregnum, the
law has changed or developed. We must not be
understood as saying that such a direction has to
be ignored. Rather, such a direction must be given
due consideration unless the law on the subject,
which is binding on the court or adjudicating body,
requires otherwise.
42. For example, the law declared by this Court is
20
binding on all courts within the territory of India .
However, if such declaration comes later i.e., after
the remand order, could it be said that it would not
be followed because of certain general observations
in the order of remand. The answer to it is an
obvious “No”. Reason being, when the remand
order does not itself settles an issue, the issue
20 Article 141 of the Constitution of India
Page 31 of 39
Civil Appeal No.8232 of 2023
remanded is alive and has to be decided as per law
applicable on the date of the decision.
43. For the reasons above, we are of the view that
APTEL, though rightly observed that the remand
order indicated award of LPS benefit, erred in
holding that it can look no further than the order
of remand. Issue (i) is decided in the aforesaid
terms.
Issue (ii)
44. This appeal under Section 125 of the 2003
Act is by a power generator to the extent APTEL
denied compounding of interest at LPS rate on
Carrying Cost. APTEL, however, accepted the
compensation claim for carrying cost along with
interest at LPS rate.
45. Section 125 of the 2003 Act enables a person
aggrieved by an order of APTEL to prefer an appeal
before this Court on any of the grounds specified in
Section 100 of CPC. Admittedly, there is no cross-
appeal or cross-objection by MSEDCL (the first
respondent) against the order of APTEL.
46. Powers of this Court, under Section 125 of
the 2003 Act, are invocable by a person aggrieved
through an appeal filed within a specified period on
Page 32 of 39
Civil Appeal No.8232 of 2023
any of the grounds specified in Section 100 of CPC.
Section 125, unlike Section 111(6) of the 2003 Act,
does not provide for suo motu exercise of those
powers.
47. In general, while hearing an appeal, the
appellate court, in absence of a provision to the
contrary, may allow a respondent to question a
finding returned against him by the court against
whose order the appeal is filed. However, where the
operative order is against the respondent, without
filing an appeal or cross-appeal/ cross-objection,
the respondent cannot question the correctness of
the operative order. More so, when the appellant
has limited its prayer in the appeal to only certain
part of the operative order.
48. The aforesaid legal position has been
20
explained by this Court in Banarsi v. Ram Phal ,
rendered in the context of the provisions of Order
41 Rules 22 and 33 CPC, where it was held:
“10. … A respondent may defend himself without filing
any cross objection to the extent to which the decree is in
his favor; however, if he proposes to attack any part of the
decree he must take cross objection. The amendment
inserted by the 1976 amendment is clarificatory and also
enabling and this may be made precise by analyzing the
provision. There may be three situations:
(1) The impugned decree is partly in favor of the
appellant and partly in favor of the respondent.
20 (2003) 9 SCC 606
Page 33 of 39
Civil Appeal No.8232 of 2023
(2) The decree is entirely in favor of the respondent
though an issue has been decided against the
respondent.
(3) The decree is entirely in favor of the respondent and
all the issues have also been answered in favor of the
respondent but there is a finding in the judgment
which goes against the respondent.
11. In the type of case (1) it was necessary for the
respondent to file an appeal or take cross- objection
against that part of the decree which is against him if he
seeks to get rid of the same though that part of the decree
which is in his favor he is entitled to support without
taking any cross objection. The law remains so post
amendment too. In the type of cases (2) and (3) pre-
amendment CPC did not entitle nor permit the respondent
to take any cross-objection as he was not the person
aggrieved by the decree. Under the amended CPC, read in
the light of the explanation, though it is still not necessary
for the respondent to take any cross-objection laying
challenge to any finding adverse to him as the decree is
entirely in his favor and he may support the decree
without cross-objection; the amendment made in the text
of sub-rule (1), read with explanation newly inserted, gives
him a right to take cross-objection to a finding recorded
against him either while answering an issue or while
dealing with an issue. The advantage of preferring such
cross-objection is spelled out by sub-rule (4). In spite of
the original appeal having been withdrawn or dismissed
for default the cross objection taken to any finding by the
respondent shall still be available to be adjudicated upon
on merits which remedy was not available to the
respondent under the unamended CPC. In the pre-
amendment era, the withdrawal or dismissal for default of
the original appeal disabled the respondent to question
the correctness or otherwise of any finding recorded
against the respondent
12. The fact remains that to the extent to which the decree
is against the respondent and he wishes to get rid of it he
should have either filed an appeal of his own or taken
cross- objection failing which the decree to that extent
cannot be insisted on by the respondent for being
interfered, set aside or modified to his advantage. …”
Page 34 of 39
Civil Appeal No.8232 of 2023
49. We are conscious that provisions of CPC are
not strictly applicable to a statutory appeal under
Section 125 of the 2003 Act, but general principles
thereof can be applied, particularly, when powers
under Section 125 of the 2003 Act are invocable by
a person aggrieved through an appeal, filed within
a specified time, on any one or more of the grounds
specified in Section 100 CPC.
50. Besides above, when a person fails to file an
appeal or a cross-appeal, it can be taken that he is
not aggrieved by the operative part of the order
against which, or some part of which, the appeal is
filed by some other person.
51. In such circumstances, we are of the view
that by not preferring an appeal or cross-appeal
/objection against the order of APTEL, MSEDCL
has given up its right to challenge the award of
compensation to the appellant of Carrying Cost
with interest at LPS rate. Issue (ii) is decided
accordingly.
Issue (iii)
52. No doubt, statutory limitations cannot
override constitutional powers of this Court under
Articles 136/142 of the Constitution. However, in
Page 35 of 39
Civil Appeal No.8232 of 2023
commercial matters, where a statutory regime is in
place, exercise of constitutional powers should be
in exceptional or rare circumstances and not as a
matter of course. We do not find any such
circumstances obtaining as to warrant exercise of
those powers. Issue (iii) is decided accordingly.
Issue (iv)
21
53. In , a three-Judge
Uttar Haryana Bijli
Bench of this Court held:
“20. … Once carrying cost has been granted in favor
of Respondent 1, Adani Power, it cannot be urged by
the appellants that interest on carrying costs
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 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. ..
23. 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.”
(Emphasis supplied)
21 See: Footnote 8
Page 36 of 39
Civil Appeal No.8232 of 2023
22
54. In Jaipur Vidyut Vitran Nigam Ltd . , this
Court reiterated the principle laid down in Uttar
Haryana Bijli (supra) and clarified that the
payment for change in law event shall be through
Supplementary Bill, which can be raised only after
due adjudication by the competent forum.
55. What is important is that compensation for
the change in law event is to be paid with effect
from the date the change in law event occurred (See
Article 10.5.1 of PPA). But as Supplementary Bill in
respect thereof can be raised only after
adjudication, this Court has applied the principle
of restitution and allowed charging of interest from
the date of occurrence of the change in law event.
However, whether compounding of interest would
be necessary to restitute a power generator to its
original economic position is a question which
would have to be addressed on the facts of the
case. It may be observed here that in Uttar
Haryana Bijli (supra) there was a specific case of
the power generator that it had paid interest with
23
monthly rests . Therefore, in our view, this aspect
would have to be determined on facts.
22 See: Footnote 9
23 See: Paragraph 21 of the judgment
Page 37 of 39
Civil Appeal No.8232 of 2023
56. The argument on behalf of the first
respondent that appellant had claimed carrying
cost as per MYT Regulations before MERC and,
therefore, cannot raise a claim at LPS rate has no
legs to stand as no appeal has been preferred by
the first respondent against the impugned order
which allowed carrying cost with interest at LPS
rate.
57. No doubt, LPS clause in the PPA includes
compounding of interest but APTEL allowed
interest at LPS rate and not as per LPS clause,
therefore, whether compounding of interest is to be
allowed would have to be decided. Since APTEL
denied compounding of interest on the ground that
it was not specifically provided for in the remand
order, in view of our finding on issue (i) (supra),
this issue would have to be decided afresh.
58. As we have already held that remand order
dated 18.10.2022 had issued no specific direction
to apply a particular rate, observations contained
therein were by way of guidance and did not limit
the power of MERC or APTEL to decide the issue as
per the law. In this view of the matter, we deem it
appropriate to remand the matter back to APTEL to
decide the issue of compounding of interest based
Page 38 of 39
Civil Appeal No.8232 of 2023
on the facts of the case, and in accordance with the
law. We, however, clarify that grant of interest at
LPS rate as directed by APTEL in the impugned
order shall not be disturbed. The only issue left for
APTEL to decide is qua compounding of interest.
Rest of the issues stand closed.
59. Appeal is allowed in the aforesaid terms.
60. There is no order as to costs. Pending
applications, if any, stand disposed of.
….…………....................................... J .
(MANOJ MISRA )
……………...................................... J.
(JOYMALYA BAGCHI )
New Delhi;
December 10, 2025
Page 39 of 39
Civil Appeal No.8232 of 2023
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.8232 OF 2023
RATTANINDIA POWER LIMITED …APPELLANT
VERSUS
MAHARASHTRA STATE ELECTRICITY DISTRIBUTION
COMPANY LIMITED AND ANOTHER
…RESPONDENTS
J U D G M E N T
MANOJ MISRA, J.
1. This appeal under Section 125 of the
1
Electricity Act, 2003 impugns the order dated
06.10.2023 passed by the Appellate Tribunal For
2
Electricity in Appeal No.341 of 2023 to the extent it
disallows Carrying Cost to RattanIndia Power
3
Limited (the appellant) on compounding interest
basis.
Signature Not Verified
Digitally signed by
CHETAN ARORA
Date: 2025.12.25
14:41:22 IST
Reason:
1 2003 Act
2 APTEL
3 RPL
Civil Appeal No.8232 of 2023 Page 1 of 39
FACTS
2. RPL is supplying power to Maharashtra State
4
Electricity Distribution Co. Ltd. (first respondent)
5
under two long term Power Purchase Agreements
(i.e., dated 22.04.2010 and 05.06.2010 for supply of
450 MW and 750 MW, respectively) with MSEDCL.
3. In connection therewith, RPL filed a petition
(i.e., Case No.84 of 2016) under Section 86 of the
2003 Act before the Maharashtra Electricity
6
Regularity Commission seeking compensation on
account of various Change in Law events affecting
the project from the date of commencement of supply
of power by RPL along with the Carrying Cost, and
requested MERC to allow the compensation with
effect from the date of commencement of supply.
4. MERC vide order dated 05.04.2018 had allowed
certain Change in Law claims. However, it held: (i)
increase in rates of Chhattisgarh Paryavaran Upkar
Cess and Chhattisgarh Vikas Upkar Cess do not
qualify as Change in Law events; (ii) PPAs executed
between MSEDCL and RPL do not provide
compensation for Carrying Cost and therefore, RPL is
not entitled to claim Carrying Cost on its approved
4 MSEDCL
5 PPA
6 MERC
Page 2 of 39
Civil Appeal No.8232 of 2023
Change in Law events; (iii) compensation for
approved Change in Law events would be payable
from Scheduled Delivery Date (for short SSD) and not
for the period prior to SDD, even though supply of
power commenced prior to SDD.
5. Aggrieved therewith, RPL filed Appeal No.263
of 2018 before APTEL, which was allowed vide its
order dated 18.10.2022. The operative portion of the
order dated 18.10.2022 is reproduced below:
“The impugned order to the extent it ruled against the
appellant on the three above mentioned subjects is set
aside. The matter to that extent is remitted to the State
Commission for fresh decision bearing in mind the
observations recorded as above. We shall also expect the
State Commission to pass all consequential orders
including quantification of the amounts payable by the
licensee unto the appellant. Of course, for such purposes
the Commission will ascertain the calculations from the
appellant and then take the views of the licensee before
determining the actual liability. We direct that the
Commission shall pass all necessary orders in the wake of
such determination including by taking appropriate
measures such that the claims are duly satisfied in a time
bound manner, expeditiously and at an early date, not
later than three months from the date of this judgment.”
(Emphasis supplied)
6. Key observations/ findings in the remand
order of APTEL dated 18.10.2022 are as follows:
(i) Impact of levy of Environment Cess and
Development Cess by the State of
Page 3 of 39
Civil Appeal No.8232 of 2023
Chhattisgarh adds to the burden of RPL
inasmuch as it is passed through
against the procurement of fuel from
sources in the State of Chhattisgarh
( paragraph 5 of the order ).
(ii) Carrying Cost is payable as per the
provisions of PPA to compensate the
affected party for time value of funds
deployed on account of Change in Law
events ( paragraphs 7 to 11 of the order ).
(iii) Liability to compensate for Change in
Law events will arise from the date of
actual supply of power rather than SDD,
particularly, in a case where supply has
commenced prior to SDD ( paragraphs
13 and 14 of the order ).
7. Pursuant to the remand order dated
18.10.2022 requiring MERC to compute the
amounts payable by MSEDCL to RPL for restoring
it to the same economic position as if the Change
in Law event had not occurred, RPL filed an
application (i.e., M.A. in Diary No.257 of 2022)
before MERC with the following prayer:
Page 4 of 39
Civil Appeal No.8232 of 2023
(a) Direct MSEDCL to make payment of
Rs.98.79 Cr. (including Carrying Cost of
Rs.54.13 Cr.) in accordance with the
order dated 18.10.2022 passed by
APTEL in Appeal No.263 of 2018.
(b) In the interim, direct MSEDCL to pay
75% of the claimed amount i.e.,
Rs.74.10 Cr. forthwith (within 7 days)
till pendency of the Application; and
(c) Pass such other and further orders as
the Commission may deem fit and
appropriate.
8. MERC, vide order dated 06.02.2023, partly
allowed the said application i.e., M.A. in Diary
No.257 of 2022, modified its earlier order dated
05.04.2018 to the extent ruled in the order,
awarded Rs.69.38 Cr. as Change in Law
compensation including Carrying Cost, required
RPL to raise supplementary bill and directed
MSEDCL to pay the same as per the provisions of
PPA. Further, in respect of the disputed amount of
Rs.1.56 Cr., a direction was issued requiring
parties to reconcile in terms directed in para 14.7
of the order dated 06.02.2023.
Page 5 of 39
Civil Appeal No.8232 of 2023
9. The dispute inter se parties which was the
subject matter of consideration before MERC and
APTEL, and also under consideration in this
appeal, is captured in paragraph 15.1 of MERC’s
order dated 06.02.2023, which is reproduced
below:
“15.1 On the issue of determination of carrying
costs towards Change in Law compensation, the
Commission notes that RPL has claimed Rs. 54.13
crore whereas MSEDCL has computed Rs. 26.18
crore. The difference in the computation is due to
the reason that MSEDCL has considered interest on
working capital stipulated in Tariff Regulation on
simple interest basis for computing the Carrying
Cost whereas RPL has considered the rate of Late
Payment Surcharge/ DPC stipulated in PPA with
compound interest basis.”
(Emphasis supplied)
10. On the above issue, MERC held:
“15.4 … although ATE (should be read as APTEL)
has allowed Carrying Cost on Change in Law
compensation but it has not stipulated rate at which
such Carrying Cost needs to be computed. RPL has
relied upon earlier ATE judgment dated 22nd March
2022 wherein ATE has directed this Commission to
allow Carrying Cost at the rate of LPS (should be
read as Late Payment Surcharge) stipulated in the
PPA. In this regard, it is important to note that
subsequent to ATE remand order dated 22nd March
2022, this Commission has issued consequential
order dated 8 July 2022 highlighting various orders
of this Commission allowing Carrying Cost at rate of
interest on working capital which has been upheld
by the ATE and judgment of ATE rejecting LPS rate
for carrying cost and thereafter the Commission has
clearly ruled that for maintaining judicial discipline
it is allowing LPS rate for Carrying Cost in that
remand proceeding only. Relevant part of
Commission's ruling in order dated 8 July 2022 is
reproduced below:
Page 6 of 39
Civil Appeal No.8232 of 2023
xxxxx omitted xxxxx
In view of above, the Commission has approved
Carrying Cost at the rate of LPS, limited to that
remand matter only and the same cannot be used
as precedent for other matters. Further, ATE
judgment dated 22 March 2022 allowing Carrying
Cost at LPS rate has been stayed by the Supreme
Court in Adani matter and in RPL matter the
Supreme Court has ruled that they will predicate
the impugned order on the same basis. In this
background, RPL cannot rely upon ATE judgment
dated 22nd March 2022 for claiming Carrying Cost
at LPS rate in the present matter.
15.5 As regards RPL's reliance on Hon’ble Supreme
Court judgement in Uttar Haryana Bijli Vitran
Nigam Limited and another versus Adani Power
(Mundra) limited and another (“SC Carrying Cost
judgment”] wherein Supreme Court has allowed
carrying cost at the rate of LPS on compounding
basis, the Commission notes that factual aspect of
that matter are not identical to present matter. In
case of MSEDCL, Supreme Court in judgment dated
8 October 2021 (reproduced in para 16.4 above) has
clearly ruled that LPS cannot be equated with
Carrying Cost. Said judgment of Supreme Court is
in the matter of PPAs with Generators including
RPL and hence same is applicable in present
matter. Therefore, Carrying Cost cannot be allowed
at the rate of LPS stipulated in the PPA.
15.6 Further, the Commission notes that in the
past the Commission has approved various Change
in Law events for the 450 MW and 750 MW of RPL
allowing carrying cost at the rate of interest on
working capital as per relevant MYT Regulations or
actual whichever is minimum on simple interest
basis. Same was also accepted by the RPL in the
past. Therefore, it cannot be the case where
different basis is used for allowing Carrying Cost on
Change in Law compensation allowed at different
point of time.
15.7 In view of above, the Commission rules that as
per earlier methodology the Carrying Cost to be
Page 7 of 39
Civil Appeal No.8232 of 2023
computed at a rate of interest on working capital as
per relevant MYT Regulations or actual whichever is
minimum on simple interest basis. Such Carrying
Cost needs to be computed from the date of
incurring such additional expenses on account of
Change in Law event till date of this Order.”
11. Aggrieved by the aforesaid order of MERC,
RPL preferred appeal before APTEL. The appeal
was partly allowed by the impugned order and the
matter was remanded to enable MERC to compute
and direct payment of Carrying Cost to RPL at LPS
rates in terms of the order of remand dated
18.10.2022.
12. Key observations/findings of APTEL in the
impugned order are:
(i) The remand order of APTEL dated
18.10.2022 was not challenged before
Supreme Court and, therefore, it has
attained finality in light of decision of
the Apex Court in Jasraj Inder
7
Singh v. Hemraj Multanchand . As
a sequitur, judicial discipline would
require that the said verdict is
followed by MERC as well as APTEL.
(ii) The remand order of APTEL dated
18.10.2022 required MERC to follow
the earlier order passed by APTEL in
7 (1977) 2 SCC 155
Page 8 of 39
Civil Appeal No.8232 of 2023
Appeal No.118 of 2021 dated
22.03.2022, whereunder MERC was
obligated in law to determine the
amounts payable towards Carrying
Cost strictly in terms of the order
passed in Appeal No.118 of 2021
dated 22.03.2022 which required it to
compute and determine Carrying Cost
payable to the appellant at LPS rates.
Therefore, both MERC and APTEL are
bound by the said order and are
required to compute and pay RPL the
Carrying Cost at LPS rates regardless
of a contrary opinion in other
judgments.
(iii) There is nothing in the remand order
of APTEL, dated 18.10.2022,
requiring MERC to compute Carrying
Cost at LPS rates on a compounding
basis. Therefore, as the remand order
has attained finality, such a relief
cannot be claimed.
13. Aggrieved by denial of LPS rate of interest on
compounding basis, RPL is in appeal before us.
Interestingly, no appeal has been preferred by
Page 9 of 39
Civil Appeal No.8232 of 2023
MSEDCL against the impugned order to the extent
it allows payment of Carrying Cost along with
interest at LPS rate.
14. We have heard learned counsel for the parties
and have perused the materials available on the
record.
Submission on behalf of RPL/ Appellant
15. On behalf of the appellant it is submitted:
(i) Impugned order is contrary to remand
order dated 18.10.2022 and judgment
dated 22.03.2022 in Appeal No.118 of
2021, where it was observed:
“16. It is a settled position of law that
Carrying Cost is payable as per the
provisions of PPA to compensate the affected
party for time value of funds deployed on
account of Change in Law events. The LPS
provision in the PPA is also meant for
compensation towards time value of money
on account of delayed payments. Therefore,
the rate prescribed for LPS in Article 11.3.4
of the PPA (i.e. SBI PLR + 2%) ought to be
considered for the recovery of Carrying Cost.
The appellants cannot be restored to the
same economic position, as it was prior to
the occurrence of the change in law events,
unless the rate of interest applicable for LPS
is granted.
19. The impugned orders denying the reliefs
in favor of the appellants herein are thus set
aside. The cases of each appellant are
remitted to the Regulatory Commission for
consequential orders to be passed in light of
the observations/ directions recorded above.
…”
Page 10 of 39
Civil Appeal No.8232 of 2023
As the judgment in Appeal No.118 was
between same parties, interpreting the
same PPAs, it would have to be
applied.
(ii) Article 8.3.5 of the PPAs provides the
rate of LPS as SBAR per annum plus
2% on compound interest basis. The
rate of LPS itself includes the
component of compounding interest.
Hence, Carrying Cost at LPS rate
envisages compounding of interest.
(iii) The impugned order is in violation of
the well settled principle of restitution
in terms of which the party affected by
Change in Law event is to be restored
to the same economic position as it
was prior to such Change in Law
event. This Court’s decision in Uttar
Haryana Bijli Vitran Nigam Ltd. &
Another v. Adani Power (Mundra)
8
Ltd. & Another , which was
reiterated in
Jaipur Vidyut Vitran
Nigam Ltd. v. Adani Power
9
Rajasthan Ltd. , holds that to effect
8 (2023) 2 SCC 624, paragraphs 20 to 22
9 2025 SCC OnLine SC 1211, paragraphs 18 and 27
Page 11 of 39
Civil Appeal No.8232 of 2023
restitution, Carrying Cost ought to be
granted along with interest on
compounding basis as opposed to
simple interest.
Submissions on behalf of MSEDCL/ First
Respondent
16. On behalf of first respondent it was
submitted:
(i) In Case no.84 of 2016, RPL sought
compensation on account of various
Change in Law events including
Carrying Cost from the date claims
became effective. However, RPL
neither pleaded nor argued about a
specific rate of interest for such
Carrying Cost.
Against the order rejecting claim
(ii)
towards Carrying Cost, in the appeal
(i.e., 263 of 2018), RPL relied on
judgments granting Carrying Cost at
the rate of Interest on Working Capital
10
(for short IOWC) as per MYT
Regulations, but omitted to specify the
rate of grant of Carrying Cost.
10 Multi-Year Tarif
Page 12 of 39
Civil Appeal No.8232 of 2023
(iii) APTEL in the Remand Judgment
dated 18.10.2022, though allowed
claim towards Carrying Cost, did not
direct computation of compensation
with interest on a compounding basis
as there was no such claim.
(iv) Post-remand, for the first time, a claim
for Carrying Cost at the rate of LPS,
relying on judgment in Appeal No.118
of 2021 dated 22.03.2022 was made.
(v) Pursuant to MERC order passed on
remand, MSEDCL has paid Rs.25.90
Cr. to RPL towards carrying cost
computed at IOWC rate as per
applicable MYT Regulations on simple
interest basis. And, thereafter, after
APTEL’s present impugned order,
MSDECL recomputed the Carrying
Cost claim of Rs.38.09 Cr. at LPS rate
on simple interest basis and paid the
balance amount of Rs.12.19 Cr. under
protest to RPL.
(vi) RPL meets its working capital
requirement from internal sources
only, and, therefore, carrying cost at
Page 13 of 39
Civil Appeal No.8232 of 2023
IOWC rate as per MYT Regulations is
already on the higher side and would
over-compensate RPL.
(vii) As per Article 10 of PPA,
compensation is intended to restore
the affected party to the same
economic position as if no Change in
Law event had occurred. Therefore,
allowing Carrying Cost at LPS rate
itself is erroneous.
(viii) Further, the direction of interest at
LPS rate is different from as per the
LPS clause therefore, in absence of
specific direction that Carrying Cost
shall be paid as per LPS clause,
compounding of interest is not
acceptable. There exists a clear
distinction between the grant of
Carrying Cost at the LPS rate and the
grant of Carrying Cost as per LPS
clause. Moreover, the judgment dated
18.10.2022 referred to in the
impugned order confines itself to the
grant of Carrying Cost as per the
Page 14 of 39
Civil Appeal No.8232 of 2023
earlier methodology without specifying
the rate.
Object of LPS is to ensure timely
(ix)
payment therefore the same cannot be
equated with Carrying Cost or actual
cost incurred for the supply of power
as held in Maharashtra State
Electricity Distribution Company
Limited v. Maharashtra Electricity
Regulatory Commission and
11
Others.
(x) RPL having claimed carrying cost as
per MYT Regulations before MERC
cannot raise a contrary claim, as held
in Maharashtra State Electricity
Distribution Company Ltd. v. Adani
Power Maharashtra Ltd. and
12
another .
Relevant Provisions in PPA
17. Before we address the rival contentions, it
would be useful to notice the relevant provisions in
PPA qua principles governing computation of
impact of Change in Law event. Article 10.2.1 lays
11 (2022) 4 SCC 657, paragraph 177
12 (2023) 14 SCC 752, paragraph 35.
Page 15 of 39
Civil Appeal No.8232 of 2023
down the underlying principle for determining the
consequence of Change in Law. It reads thus:
“10.2.1 While determining the consequence of
Change in Law under this Article 10, the party 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 payment,
to the extent compensated in this Article 10, the
affected party to the same economic position as if
such Change in Law has not occurred.”
18. Article 10.3 is regarding the ‘Relief for Change
in Law’. The relevant sub-articles of Article 10.3 of
the PPA are reproduced below:
“10.3.1 During Construction Period
As a result of any Change in Law, the impact of
increase/ decrease of Capital Cost of the Power
Station in the Tariff shall be governed by the
formula given below:
For every cumulative increase/ decrease of
each Rs. 1.25 lakhs in the Capital Cost during the
Construction Period, the increase /decrease in Non
Escalable Capacity Charges shall be an amount
equal to 0.267% of the Non Escalable Capacity
Charges. In case of dispute, Article 14 shall apply.
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.1.25
lakhs in the per MW capital cost, in relation to the
Installed Capacity.
10.3.2 During Operating Period
The compensation for any decrease in revenue or
increase in expenses to the Seller shall be payable
only if the decrease in revenue or increase in
expenses of the seller is in excess of an amount
equivalent to 1% of the value of the letter of credit
in aggregate for the relevant Contract Year.
Page 16 of 39
Civil Appeal No.8232 of 2023
10.3.3 For any claims made under Articles 10.3.1
and 10.3.2 above, the Seller shall provide to the
procurer and the appropriate Commission
documentary proof of such increase /decrease in
cost of the Power Station or revenue/ expense for
establishing the impact of Change in Law.
10.3.4 The decision of the Appropriate Commission,
with regards to the determination of the
compensation mentioned above in Articles 10.3.1
and 10.3.2, and the date from which such
compensation shall become effective, shall be final
and binding on both the parties subject to right of
appeal provided under applicable law.”
19. Article 10.5 provides for Tariff Adjustment
Payment on account of Change in Law. Relevant
sub-articles of Article 10.5 are reproduced below:
“10.5.1 Subject to Article 10.2, the adjustment in
monthly tariff payment shall be effective from:
(i) the date of adoption, promulgation,
amendment, re-enactment or repeal of the
law or Change in Law; or
(ii) the date of order/ judgment 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.
10.5.2 The payment for change in law shall be
through supplementary bill as mentioned in Article
8.8. 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 reflect the changed
Tariff.”
Page 17 of 39
Civil Appeal No.8232 of 2023
20. Article 8.8 is regarding payment of
Supplementary Bill. Relevant sub-articles of Article
8.8 are reproduced below:
“8.8.1 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);
(ii) Tariff payment for change in parameters,
pursuant to provisions in Schedule 4; or
(iii) Change in law as provided in Article 10,
and such supplementary bill shall be paid by the
other party.
8.8.2 The procurer shall remit all amounts due
under a Supplementary Bill raised by the Seller to
the Seller's Designated Account by the due date and
notify the Seller of such remittance on the same day
or the Seller shall be eligible to draw such amounts
through the Letter of Credit. Similarly, the Seller
shall pay all amounts due under the
Supplementary Bill raised by the Procurer by the
due date to concerned Procurer’s designated bank
account and notify such Procurer of such payment
on the same day. For such payments by the
Procurer, rebate as applicable to Monthly Bills
pursuant to Article 8.3.6 shall equally apply.
8.8.3 In the event of delay in payment of a
Supplementary Bill by either Party beyond its due
date, a late payment surcharge shall be payable at
the same terms applicable to the Monthly Bill in
Article 8.3.5.”
21. Late Payment Surcharge (for short LPS), as
per PPA, shall have the meaning ascribed thereto in
Article 8.3.5 of the PPA. Article 8.3.5 reads thus:
Page 18 of 39
Civil Appeal No.8232 of 2023
“8.3.5 In the event of delay in payment of a monthly
bill by the Procurer beyond its due date, a Late
Payment Surcharge shall be payable by such
Procurer to the Seller at the rate of two percent (2%)
in excess of the applicable SBAR per annum, on the
amount of outstanding payment, regulated on a
day-to-day basis (and compounded with monthly
rest), for each day of delay. The Late Payment
Surcharge shall be claimed by the seller through
the Supplementary Bill.”
22. SBAR, as per PPA, shall mean the prime
lending rate per annum applicable for the loans
with one year maturity as fixed from time to time
by the State Bank of India. In absence of such rate,
SBAR shall mean any other arrangement that
substitutes such prime lending rate as mutually
agreed to by the Parties.
23. A conjoint reading of the aforesaid provisions,
inter alia , make it clear that,-
(i) the object of providing for compensation
on account of a change in law event is to
restore the affected party to the same
economic position as if the change in law
event did not occur (See 10.2.1 of PPA);
(ii) the restoration is through monthly tariff
payment (See 10.2.1 of PPA);
(iii) the adjustment in monthly tariff
payment shall be effective from (a) the
date of adoption, promulgation,
Page 19 of 39
Civil Appeal No.8232 of 2023
amendment, re-enactment or repeal of
the law or change in law; or (b) the date
of order/ judgment 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 (See 10.5.1 of
PPA);
(iv) the payment for change in law shall be
through supplementary bill (See 10.5.2
of PPA);
(v) when a party raises supplementary bill
for change in law event, the procurer
shall remit the amount by the due date
(See 8.8.2 of PPA);
(vi) in the event of delay in payment of a
supplementary bill beyond its due date,
LPS shall be payable at the same terms
applicable to the monthly bill (See 8.8.3
of PPA);
(vii) LPS shall be payable by such Procurer to
the Seller at the rate of two percent (2%)
in excess of the applicable SBAR per
annum, on the amount of outstanding
Page 20 of 39
Civil Appeal No.8232 of 2023
payment, regulated on a day-to-day basis
(and compounded with monthly rest), for
each day of delay (See 8.3.5 of PPA); and
(viii) LPS shall be claimed by the seller
through supplementary bill (See 8.3.5 of
PPA).
24. What is clear from above is that LPS is
payable at the rate of two percent (2%) in excess of
the applicable SBAR per annum, on the amount of
outstanding payment, regulated on a day-to-day
basis (and compounded with monthly rest), for
each day of delay.
Issues
25. Upon consideration of the submissions and
perusal of materials on record, in our view, the
following issues arise for adjudication:
(i) Whether LPS on Carrying Cost had
to be paid to the Appellant under
the remand order dated 18.10.2022
and that too, without compounding
of interest? If so, whether, in
absence of an appeal against the
order dated 18.10.2022, the
Page 21 of 39
Civil Appeal No.8232 of 2023
direction to pay LPS on Carrying
Cost had attained finality?
(ii) Whether, in absence of a cross-
appeal against the impugned order,
the direction to pay LPS on
Carrying Cost cannot be
questioned by the first respondent?
(iii) Whether the direction to pay
Carrying Cost with LPS is liable to
be interfered with in exercise of
powers under Article 136 of the
Constitution?
(iv) Whether direction to pay Carrying
Cost with interest at LPS rate
would include compounding of
interest as per LPS provision in the
PPA?
Relevant provisions regarding appeals under
2003 Act
26. Before addressing the issues framed above, it
would be useful to have an overview of the
statutory provisions regarding appeals under the
2003 Act and the procedure to be followed while
dealing with those appeals.
Page 22 of 39
Civil Appeal No.8232 of 2023
13
27. Section 111 of the 2003 Act provides for
appeals to APTEL. According to sub-section (1), any
person aggrieved by an order made either by the
adjudicating officer, or an Appropriate Commission,
may prefer an appeal to APTEL within the period
specified in sub-section (2). Sub-section (2)
provides that the appeal ought to be in such form,
verified in such manner and accompanied by such
fee as may be prescribed. However, under sub-
section (6), APTEL may, on its own motion (i.e., suo
motu), for the purpose of examining the legality,
propriety or correctness of any order made by the
adjudicating officer or the Appropriate Commission
under the Act, as the case may be, in relation to
any proceeding, call for the records of such
proceedings and make such order in the case, as it
thinks fit.
13 Section 111. Appeal to Appellate Tribunal. – (1) Any person aggrieved by an order made by an
adjudicating officer under this act except under section 127 or an order made by the appropriate
Commission under this act may prefer an appeal to the appellate tribunal for electricity: ….
(2) Every appeal under sub-section (1) shall be filed within a period of 45 days from the
date on which a copy of the order made by the adjudicating officer or the Appropriate Commission is
received by the aggrieved person and it shall be in such form, verified in such manner and be
accompanied by such fee as may be prescribed: ….
(3) to (5) ….xxxxx …..
(6) The Appellate Tribunal may, for the purpose of examining the legality, proprietary or
correctness of any order made by the adjudicating officer or the Appropriate Commission under this Act,
as the case may be, in relation to proceeding, on its own motion or otherwise, call for the records of
such proceedings and make such order in the case as it thinks fit
Page 23 of 39
Civil Appeal No.8232 of 2023
14
28. Section 120 of the 2003 Act provides for the
procedure and powers of the Appellate Tribunal.
Interestingly, though, under sub-section (2), it has
various powers as vested in a civil court while
trying a suit, sub-section (1) provides that it is not
bound by the procedure laid down by the Code of
Civil Procedure, but shall be guided by the
principles of natural justice and shall have powers
to regulate its own procedure. As a sequitur, APTEL
is empowered to devise its own procedure in
conformity with the principles of natural justice.
29. However, what is important is that, under
sub-section (3) of Section 120, an order made by
APTEL is executable as a decree of civil court,
which, in effect, means that the order passed by
APTEL is final, unless set aside or modified in an
15
appeal under Section 125 of the 2003 Act.
14 Procedure and powers of Appellate Tribunal. – (1) The Appellate Tribunal shall not be bound by the
procedure laid down by the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the
principles of natural justice and, subject to other provisions of this Act, the Appellate Tribunal shall have
powers to regulate its own procedure.
(2) The Appellate Tribunal shall have for the purposes of discharging its functions
under this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5
of 1908), while truing a suit in respect of the following matters, namely: -
…….xxxxx……
(3) An order made by the appellate tribunal under this act shall be executable by the
Appellate Tribunal as a decree of civil court and, for this purpose, the Appellate Tribunal shall have all the
powers of a civil court.
15 Section 125. Appeal to Supreme Court. - Any person aggrieved by any decision or order of the
Appellate Tribunal, may, file an appeal to the Supreme Court within 60 days from the date of
communication of the decision or order of the Appellate Tribunal, to him, on any one or more of the
grounds specified in section 100 of the Code of Civil Procedure, 1908 (5 of 1908):
Provided that the Supreme Court may, if it is satisfied that the appellant was prevented
by sufficient cause from filing the appeal within the said period allow it to be filed within a further period
Page 24 of 39
Civil Appeal No.8232 of 2023
30. Section 125 of the 2003 Act provides for a
statutory appeal to the Supreme Court. Under
Section 125, any person aggrieved by any decision
or order of APTEL, may, within sixty days from the
date of communication of the decision or order of
APTEL to him, file an appeal on any one or more of
the grounds specified in Section 100 of the Code of
16
Civil Procedure, 1908 .
31. What is important is that, unlike APTEL,
which can exercise suo motu powers under sub-
section (6) of Section 111 of the 2003 Act, the
powers of this Court, under Section 125 of the
2003 Act, are invocable through an appeal filed by
a person aggrieved. In consequence, if the
aggrieved person does not file an appeal, or a
cross-appeal/ cross-objection, under Section 125,
impugning the order, or any portion of it, passed by
APTEL, it cannot question the correctness of the
same in an appeal preferred by another person
questioning that much portion of the order with
which it is aggrieved.
32. No doubt, statutory limitations cannot dilute
the constitutional powers vested in this Court
not exceeding sixty days.
16 CPC
Page 25 of 39
Civil Appeal No.8232 of 2023
17
under Article 136 of the Constitution of India .
Though powers under Article 136/142 can be
exercised by this Court even suo motu and/or to do
complete justice in a lis, there have to be
18
compelling circumstances for its exercise .
33. Now, we shall address the issues formulated
above.
Issue (i)
34. APTEL in the impugned order held that since
the remand order (i.e., order dated 18.10.2022
passed in Appeal No.263 of 2018) had attained
finality, whereby it directed computation of
compensation in the light of observations made
therein, and it cited earlier orders inter se parties
requiring payment of compensation for increase in
Carrying Cost with LPS, interest at LPS rate had to
be paid. However, APTEL observed that since the
remand order did not provide for compounding of
interest, the same would not be permissible as the
remand order binds both sides. In that context,
issue (i) (supra) arises for our consideration.
17 See: Dhakeshwari Cotton Mills Ltd. v. Commissioner of Income Tax, West Bengal, (1954) 2 SCC 602 :
1954 SCC OnLine SC 47, paragraph 8; See also: Laliteshwar Prasad Sahi v. Bateshwar Prasad, AIR 1966 SC
580: 1965 SCC OnLine SC 104
18 See: A. Subash Babu v. State of A.P., (2011) 7 SCC 616, paragraph 66
Page 26 of 39
Civil Appeal No.8232 of 2023
35. What is clear from the record is that Appeal
No.263 of 2018 was filed before APTEL against (a)
denial of compensation on certain change in law
events; (b) denial of Carrying Cost on account of
change in law events; and (c) the date from which
the compensation on account of change in law
events was directed to be paid to the appellant. The
said appeal was allowed vide order dated
18.10.2022, whereby the impugned order, to the
extent it ruled against the appellant on the above
three issues, was set aside and the matter was
remanded to MERC for a fresh decision bearing in
mind the observations made in the remand order.
36. Although there is no specific direction in the
remand order to pay interest at LPS rate on
Carrying Cost but, what is clear is that in the
remand order, MERC was directed to decide the
matter bearing in mind the observations made in
the order. In such circumstances, the observations
in the remand order play a critical role.
37. Upon going through the remand order, we
find that paragraph 11 thereof throws light on how
compensation towards Carrying Cost is to be
computed. The same is reproduced below:
Page 27 of 39
Civil Appeal No.8232 of 2023
“11. Again, in RattanIndia Power Limited v.
Maharashtra Electricity Regulatory Commission
and Anr. (appeal no.118/2021 decided by judgment
dated 22/3/2022), while directing the State
Commission to determine the amounts payable by
the distribution licensee (MSECDL) we had also
directed a revisit to the prayer for carrying cost
bearing in mind the well settled principles on the
subject in light of decisions in the cases of Uttar
Haryana (supra), Energy Watchdog and others v.
CERC and others (2017) 14 SCC 80 and Jaipur
Vidyut Vitran Nigam Ltd. and Ors. v. Adani Power
Rajasthan Ltd. & Anr. 2020 SCC OnLine SC 697.”
38. What is reflected from paragraph 11 of the
remand order is that APTEL had referred to earlier
decision dated 22.03.2022, inter se parties, in
Appeal No.118 of 2021 and certain decisions of this
Court settling the applicable principles. In
consequence, the observations/ directions in the
order dated 22.03.2022 assume importance. In
our view, paragraphs 15 and 16 of the order dated
22.03.2022 are relevant and, therefore, are
reproduced below:
“15. We propose to direct the Commission to
determine the amounts payable by the respondent
distribution licensee in favour of each of these
appellants to compensate them for restoring
through monthly tariff payments to the same
economic position as if such change in law event
had not occurred. It would be appropriate to also
direct the Commission to revisit the prayer for
carrying cost bearing in mind the well settled
principles on the said subject [e.g., Energy
Watchdog (supra); Uttar Haryana and another
(supra); and Jaipur Vidyut Vitran Nigam Limited
and others V. Adani Power Rajasthan Limited and
Anr. 2020 SCC OnLine SC 697].
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Civil Appeal No.8232 of 2023
16. It is a settled position of law that
carrying cost is payable as per the provisions of PPA
to compensate the affected party for time value of
funds deployed on account of change in law events.
The LPS provision in the PPA is also meant for
compensation towards time value of money on
account of delayed payments. Therefore, the rate
prescribed for LPS in Article 11.3.4 of the PPA (i.e.,
SBI PLR plus 2%) ought to be considered for the
recovery of carrying cost. The appellants cannot be
restored to the same economic position, as it was
prior to the occurrence of the change in law events,
unless the rate of interest applicable for LPS is
granted.”
(Emphasis supplied)
39. When the extracts of the earlier order dated
22.03.2022 are read with the remand order dated
18.10.2022, it becomes clear that APTEL while
passing the remand order dated 18.10.2022 was of
the view that the observations in the earlier order,
which had referred to certain decisions of this
Court, had settled the law regarding grant of LPS
while compensating a power generator for increase
in Carrying Cost on account of change in law event.
In that light, APTEL observed that MERC was
required to follow those settled principles while
computing the compensation payable.
40. In our view, the remand order dated
18.10.2022 had not decided the issue relating to
grant of LPS though it did indicate, by referring to
certain decisions, that compensation for increase in
Carrying Cost is to be with LPS benefit. Thus,
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Civil Appeal No.8232 of 2023
though we do not find fault with the impugned
order of APTEL that the remand order indicated
grant of LPS benefit, we do not agree with the view
of APTEL that MERC or APTEL were bound by
those observations and could not have taken a
decision qua LPS by taking notice of the law
relating to grant of LPS benefit. Reason is simple,
the issue regarding grant of LPS benefit on
Carrying Cost was not decided. Rather, there was a
remand whereunder MERC was required to decide
the issue bearing in mind the observations in the
judgment/ order. Ordinarily, when a matter is
remanded the lis is alive, unless directed otherwise.
Therefore, the lis has to be decided in accordance
with law. Rather, it is duty of a court, whether it is
trying original proceedings or hearing an appeal, to
take notice of the change in law affecting pending
19
actions and to give effect to the same . No doubt,
judicial discipline requires that directions of a
higher court must be followed by the court
subordinate to it. However, there may be a situation
where following a direction may amount to violating
the binding law laid down by a superior court or
the Apex Court. In such a situation, where the lis
is alive, the subordinate court or adjudicating body
19 See: United Bank of India, Calcutta v. Abhijit Tea Co. Pvt. Ltd., (2000) 7 SCC 357, paragraph 20.
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Civil Appeal No.8232 of 2023
will have to apply and follow the law which holds
the field on the day it decides the matter.
41. In our view, when a Court or Appellate
Tribunal remands a matter to the subordinate
court, or adjudicating body, for a fresh decision in
the light of observations contained therein, and
while doing so refers to certain decisions, it does
not mean that the subordinate court or
adjudicating body is bound by those decisions and
can look no further, even if, in the interregnum, the
law has changed or developed. We must not be
understood as saying that such a direction has to
be ignored. Rather, such a direction must be given
due consideration unless the law on the subject,
which is binding on the court or adjudicating body,
requires otherwise.
42. For example, the law declared by this Court is
20
binding on all courts within the territory of India .
However, if such declaration comes later i.e., after
the remand order, could it be said that it would not
be followed because of certain general observations
in the order of remand. The answer to it is an
obvious “No”. Reason being, when the remand
order does not itself settles an issue, the issue
20 Article 141 of the Constitution of India
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Civil Appeal No.8232 of 2023
remanded is alive and has to be decided as per law
applicable on the date of the decision.
43. For the reasons above, we are of the view that
APTEL, though rightly observed that the remand
order indicated award of LPS benefit, erred in
holding that it can look no further than the order
of remand. Issue (i) is decided in the aforesaid
terms.
Issue (ii)
44. This appeal under Section 125 of the 2003
Act is by a power generator to the extent APTEL
denied compounding of interest at LPS rate on
Carrying Cost. APTEL, however, accepted the
compensation claim for carrying cost along with
interest at LPS rate.
45. Section 125 of the 2003 Act enables a person
aggrieved by an order of APTEL to prefer an appeal
before this Court on any of the grounds specified in
Section 100 of CPC. Admittedly, there is no cross-
appeal or cross-objection by MSEDCL (the first
respondent) against the order of APTEL.
46. Powers of this Court, under Section 125 of
the 2003 Act, are invocable by a person aggrieved
through an appeal filed within a specified period on
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Civil Appeal No.8232 of 2023
any of the grounds specified in Section 100 of CPC.
Section 125, unlike Section 111(6) of the 2003 Act,
does not provide for suo motu exercise of those
powers.
47. In general, while hearing an appeal, the
appellate court, in absence of a provision to the
contrary, may allow a respondent to question a
finding returned against him by the court against
whose order the appeal is filed. However, where the
operative order is against the respondent, without
filing an appeal or cross-appeal/ cross-objection,
the respondent cannot question the correctness of
the operative order. More so, when the appellant
has limited its prayer in the appeal to only certain
part of the operative order.
48. The aforesaid legal position has been
20
explained by this Court in Banarsi v. Ram Phal ,
rendered in the context of the provisions of Order
41 Rules 22 and 33 CPC, where it was held:
“10. … A respondent may defend himself without filing
any cross objection to the extent to which the decree is in
his favor; however, if he proposes to attack any part of the
decree he must take cross objection. The amendment
inserted by the 1976 amendment is clarificatory and also
enabling and this may be made precise by analyzing the
provision. There may be three situations:
(1) The impugned decree is partly in favor of the
appellant and partly in favor of the respondent.
20 (2003) 9 SCC 606
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Civil Appeal No.8232 of 2023
(2) The decree is entirely in favor of the respondent
though an issue has been decided against the
respondent.
(3) The decree is entirely in favor of the respondent and
all the issues have also been answered in favor of the
respondent but there is a finding in the judgment
which goes against the respondent.
11. In the type of case (1) it was necessary for the
respondent to file an appeal or take cross- objection
against that part of the decree which is against him if he
seeks to get rid of the same though that part of the decree
which is in his favor he is entitled to support without
taking any cross objection. The law remains so post
amendment too. In the type of cases (2) and (3) pre-
amendment CPC did not entitle nor permit the respondent
to take any cross-objection as he was not the person
aggrieved by the decree. Under the amended CPC, read in
the light of the explanation, though it is still not necessary
for the respondent to take any cross-objection laying
challenge to any finding adverse to him as the decree is
entirely in his favor and he may support the decree
without cross-objection; the amendment made in the text
of sub-rule (1), read with explanation newly inserted, gives
him a right to take cross-objection to a finding recorded
against him either while answering an issue or while
dealing with an issue. The advantage of preferring such
cross-objection is spelled out by sub-rule (4). In spite of
the original appeal having been withdrawn or dismissed
for default the cross objection taken to any finding by the
respondent shall still be available to be adjudicated upon
on merits which remedy was not available to the
respondent under the unamended CPC. In the pre-
amendment era, the withdrawal or dismissal for default of
the original appeal disabled the respondent to question
the correctness or otherwise of any finding recorded
against the respondent
12. The fact remains that to the extent to which the decree
is against the respondent and he wishes to get rid of it he
should have either filed an appeal of his own or taken
cross- objection failing which the decree to that extent
cannot be insisted on by the respondent for being
interfered, set aside or modified to his advantage. …”
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49. We are conscious that provisions of CPC are
not strictly applicable to a statutory appeal under
Section 125 of the 2003 Act, but general principles
thereof can be applied, particularly, when powers
under Section 125 of the 2003 Act are invocable by
a person aggrieved through an appeal, filed within
a specified time, on any one or more of the grounds
specified in Section 100 CPC.
50. Besides above, when a person fails to file an
appeal or a cross-appeal, it can be taken that he is
not aggrieved by the operative part of the order
against which, or some part of which, the appeal is
filed by some other person.
51. In such circumstances, we are of the view
that by not preferring an appeal or cross-appeal
/objection against the order of APTEL, MSEDCL
has given up its right to challenge the award of
compensation to the appellant of Carrying Cost
with interest at LPS rate. Issue (ii) is decided
accordingly.
Issue (iii)
52. No doubt, statutory limitations cannot
override constitutional powers of this Court under
Articles 136/142 of the Constitution. However, in
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Civil Appeal No.8232 of 2023
commercial matters, where a statutory regime is in
place, exercise of constitutional powers should be
in exceptional or rare circumstances and not as a
matter of course. We do not find any such
circumstances obtaining as to warrant exercise of
those powers. Issue (iii) is decided accordingly.
Issue (iv)
21
53. In , a three-Judge
Uttar Haryana Bijli
Bench of this Court held:
“20. … Once carrying cost has been granted in favor
of Respondent 1, Adani Power, it cannot be urged by
the appellants that interest on carrying costs
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 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. ..
23. 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.”
(Emphasis supplied)
21 See: Footnote 8
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Civil Appeal No.8232 of 2023
22
54. In Jaipur Vidyut Vitran Nigam Ltd . , this
Court reiterated the principle laid down in Uttar
Haryana Bijli (supra) and clarified that the
payment for change in law event shall be through
Supplementary Bill, which can be raised only after
due adjudication by the competent forum.
55. What is important is that compensation for
the change in law event is to be paid with effect
from the date the change in law event occurred (See
Article 10.5.1 of PPA). But as Supplementary Bill in
respect thereof can be raised only after
adjudication, this Court has applied the principle
of restitution and allowed charging of interest from
the date of occurrence of the change in law event.
However, whether compounding of interest would
be necessary to restitute a power generator to its
original economic position is a question which
would have to be addressed on the facts of the
case. It may be observed here that in Uttar
Haryana Bijli (supra) there was a specific case of
the power generator that it had paid interest with
23
monthly rests . Therefore, in our view, this aspect
would have to be determined on facts.
22 See: Footnote 9
23 See: Paragraph 21 of the judgment
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Civil Appeal No.8232 of 2023
56. The argument on behalf of the first
respondent that appellant had claimed carrying
cost as per MYT Regulations before MERC and,
therefore, cannot raise a claim at LPS rate has no
legs to stand as no appeal has been preferred by
the first respondent against the impugned order
which allowed carrying cost with interest at LPS
rate.
57. No doubt, LPS clause in the PPA includes
compounding of interest but APTEL allowed
interest at LPS rate and not as per LPS clause,
therefore, whether compounding of interest is to be
allowed would have to be decided. Since APTEL
denied compounding of interest on the ground that
it was not specifically provided for in the remand
order, in view of our finding on issue (i) (supra),
this issue would have to be decided afresh.
58. As we have already held that remand order
dated 18.10.2022 had issued no specific direction
to apply a particular rate, observations contained
therein were by way of guidance and did not limit
the power of MERC or APTEL to decide the issue as
per the law. In this view of the matter, we deem it
appropriate to remand the matter back to APTEL to
decide the issue of compounding of interest based
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Civil Appeal No.8232 of 2023
on the facts of the case, and in accordance with the
law. We, however, clarify that grant of interest at
LPS rate as directed by APTEL in the impugned
order shall not be disturbed. The only issue left for
APTEL to decide is qua compounding of interest.
Rest of the issues stand closed.
59. Appeal is allowed in the aforesaid terms.
60. There is no order as to costs. Pending
applications, if any, stand disposed of.
….…………....................................... J .
(MANOJ MISRA )
……………...................................... J.
(JOYMALYA BAGCHI )
New Delhi;
December 10, 2025
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