Interest on Refund of Excess Charges Must Equate to Bank Rate for Restitutionary Parity

The Appellant, Tata Steel, a licensee and electricity procurer from Damodar Valley Corporation (DVC), challenged an order dated 24.07.2019 passed by the Jharkhand State Electricity Regulatory Commission (JSERC).

In 2002, DVC raised bills for Additional Minimum Guarantee (AMG) charges totaling ₹37.57 Crore.

Tata Steel requested payment in installments, which DVC allowed but refused to waive the Delayed Payment Surcharge (DPS).

DVC subsequently adjusted ₹77.60 lacs as DPS against Tata Steel’s monthly advance payments.

The State Commission later ruled that DVC was not entitled to DPS on these AMG installments and ordered a refund with 6% annual interest.

Tata Steel appealed, seeking a higher interest rate on the refund.

1. Whether the rate of interest (6% per annum) allowed by the State Commission on the refund of DPS realized on AMG bills was adequate and compensatory.

Section 62(6) of the Electricity Act, 2003, which mandates that if a licensee recovers charges exceeding the determined tariff, the excess is recoverable with interest equivalent to the "bank rate".

JSERC (Electricity Supply Code) Regulations, 2015, specifically Clause 10.7.4 (disputed bills) and Clause 10.6.3 (advance deposits).

The principle of restitution and fairness as discussed in Rajnesh Sharma v. Business Park (2025 SCC OnLine SC 2061).

The Tribunal rejected DVC’s new argument that no DPS was ever actually realized, noting that DVC had admitted to the State Commission that it adjusted the surcharge against the Appellant's advance payments.

Regarding the interest rate, the Tribunal found that Clause 10.7.4 of the JSERC Supply Code did not apply because the refund did not arise from a formal "disputed bill" complaint process.

Similarly, Clause 10.6.3 was inapplicable as the amount was not a voluntary advance deposit but an unauthorized recovery.

Consequently, the Tribunal determined that the State Commission’s 6% interest rate lacked a regulatory basis.

By invoking the spirit of Section 62(6) of the Electricity Act, the Tribunal reasoned that any recovery exceeding the authorized tariff/charge must be compensated at a rate equivalent to the bank rate to ensure justice and restitution.

The Tribunal directed DVC to pay interest equivalent to the SBI Prime Lending Rate (applicable from time to time) instead of 6% on the DPS amount realized from the date of recovery until the date of refund or adjustment.

All pending applications were disposed of accordingly.