# MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LIMITED v. MAHARASHTRA ELECTRICITY REGULATORY COMMISSION & ORS

- **Citation:** [2021] 5 S.C.R. 1056
- **Court:** Supreme Court of India
- **Decided:** 2021-10-08
- **Case number:** Civil Appeal No.1843 of 2021
- **Bench:** Indira Banerjee, V. Ramasubramanian
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/maharashtra-state-electricity-distribution-company-limited-v-maharashtra-35303
- **Pages:** 86

## Headnote

Electricity Act, 2003:
s.125 - Appeal to Supreme Court - Interference with - Power
purchase agreements - Change in law -On facts, petition u/s. 86 by
the appellant-State Electricity Distribution Company seeking that
the change in interest rate system by the RBI from Prime Lending
Rate (PLR) to Base Rate and then to Marginal cost of funds based
lending rate (MCLR) constituted change in law under the power
purchase agreements between the appellant and the "Power
Generating Companies", so as to alter the rate of Late Payment
Surcharge(LPS) payable by the appellant to the power generating
companies - Dismissed by the Maharashtra Electricity Regulatory
Commission(MERC)and issuance of direction to the appellant to
make payment of LPS within the time stipulated - Said order upheld
by the Appellate Tribunal for Electricity - On appeal, held: Existence
of substantial question of law is sine qua non for second appeal u/
s 125 r/w s. 100 CPC - This Court would not make a factual enquiry
into the mode and manner in which the Power Generating Companies
meet their working capital requirements and interest that individual
Power Generating Companies pay to their lenders - Thus, no
substantial question of law involved in the instant appeal - RBI
notifications would tantamount to a change in law, however the
notification relating to alteration of the lending rates chargeable
by banks and financial institutions are not laws which relate to the
Power Purchase Agreements and are not applicable to the appellant
or to the Power Generating Companies engaged in distribution of
electricity and not of advancing loans -Furthermore, courts cannot
rewrite contract mutually executed by parties - Explicit terms of
contract always the final word with regard to intention of parties -
Thus, MERC acted within the scope of its power of regulatory
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supervision in directing the appellant to make payment of LPS within
the time stipulated - APTEL rightly upheld the direction - In any
case, such a direction cannot be interfered with in exercise of powers
u/s. 125 - Code of Civil Procedure, 1908 - s. 100.
s. 125 - Appeal to Supreme Court - Grounds for - Held:
Appeal lies to this Court u/s 125 only on grounds permitted u/s 100
CPC - Condition precedent for entertaining an appeal u/s 124 is
the existence of a substantial question - Code of Civil Procedure,
1908 - s. 100.
Maharashtra Electricity Regulatory Commission(MERC) -
Power of - Held: MERC constituted under the Electricity Act, 2003
has all the trappings of a Court - MERC is a substitute for a Civil
Court in respect of all disputes between licensees and Power
Generating Companies.
Dismissing the appeal, the Court
HELD : 1.1 An appeal lies to this Court under Section 125
of the Electricity Act, 2003 only on grounds permitted in Section
100 of the Code of Civil Procedure, 1908. On a conjoint reading
of Section 125 of the 2003 Act with Section 100 CPC, it is
absolutely clear that an appeal to this Court lies on a substantial
question of law. The condition precedent for entertaining an appeal
under Section 125 is the existence of a substantial question.
[Para 148, 152][1122-C; 1123-E-F]
State Bank of India and Ors. v. S.N. Goyal (2008) 8
SCC 92 : [2008] 7 SCR 631; Nazir Mohamed v. J.
Kamala and Others 2020 SCC OnLine SC 676; Wardha
Power Company Limited v. Maharashtra State Electricity
Distribution Co. Limited and Another (2016) 16 SCC
541; Tuppadahalli Energy India Private Limited v.
Karnataka Electricity Regulatory Commission and Anr
(2017) 11 SCC 194; Ramanuja Naidu v. V. Kanniah
Naidu and Another (1996) 3 SCC 392 : [1996] 3 SCR
239; Navaneethammal v. Arjuna Chetty (1996) 6 SCC
166 : [1996] 5 Suppl. SCR 582 - referred to.
1.2 It is not for this Court to re-analyze evidence adduced
before the forums below or to sit in appeal over concurrent findings
of facts. [Para 159][1128-G]
MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COM.
LTD. v. MERC & ORC.
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 [2021] 5 S.C.R. 1056
1056
MAHARASHTRA STATE ELECTRICITY DISTRIBUTION
COMPANY LIMITED
v.
MAHARASHTRA ELECTRICITY REGULATORY
COMMISSION & ORS.
(Civil Appeal No.1843 of 2021)
OCTOBER 08, 2021
[INDIRA BANERJEE AND V. RAMASUBRAMANIAN, JJ.]
Electricity Act, 2003:
s.125 - Appeal to Supreme Court - Interference with - Power
purchase agreements - Change in law -On facts, petition u/s. 86 by
the appellant-State Electricity Distribution Company seeking that
the change in interest rate system by the RBI from Prime Lending
Rate (PLR) to Base Rate and then to Marginal cost of funds based
lending rate (MCLR) constituted change in law under the power
purchase agreements between the appellant and the "Power
Generating Companies", so as to alter the rate of Late Payment
Surcharge(LPS) payable by the appellant to the power generating
companies - Dismissed by the Maharashtra Electricity Regulatory
Commission(MERC)and issuance of direction to the appellant to
make payment of LPS within the time stipulated - Said order upheld
by the Appellate Tribunal for Electricity - On appeal, held: Existence
of substantial question of law is sine qua non for second appeal u/
s 125 r/w s. 100 CPC - This Court would not make a factual enquiry
into the mode and manner in which the Power Generating Companies
meet their working capital requirements and interest that individual
Power Generating Companies pay to their lenders - Thus, no
substantial question of law involved in the instant appeal - RBI
notifications would tantamount to a change in law, however the
notification relating to alteration of the lending rates chargeable
by banks and financial institutions are not laws which relate to the
Power Purchase Agreements and are not applicable to the appellant
or to the Power Generating Companies engaged in distribution of
electricity and not of advancing loans -Furthermore, courts cannot
rewrite contract mutually executed by parties - Explicit terms of
contract always the final word with regard to intention of parties -
Thus, MERC acted within the scope of its power of regulatory
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supervision in directing the appellant to make payment of LPS within
the time stipulated - APTEL rightly upheld the direction - In any
case, such a direction cannot be interfered with in exercise of powers
u/s. 125 - Code of Civil Procedure, 1908 - s. 100.
s. 125 - Appeal to Supreme Court - Grounds for - Held:
Appeal lies to this Court u/s 125 only on grounds permitted u/s 100
CPC - Condition precedent for entertaining an appeal u/s 124 is
the existence of a substantial question - Code of Civil Procedure,
1908 - s. 100.
Maharashtra Electricity Regulatory Commission(MERC) -
Power of - Held: MERC constituted under the Electricity Act, 2003
has all the trappings of a Court - MERC is a substitute for a Civil
Court in respect of all disputes between licensees and Power
Generating Companies.
Dismissing the appeal, the Court
HELD : 1.1 An appeal lies to this Court under Section 125
of the Electricity Act, 2003 only on grounds permitted in Section
100 of the Code of Civil Procedure, 1908. On a conjoint reading
of Section 125 of the 2003 Act with Section 100 CPC, it is
absolutely clear that an appeal to this Court lies on a substantial
question of law. The condition precedent for entertaining an appeal
under Section 125 is the existence of a substantial question.
[Para 148, 152][1122-C; 1123-E-F]
State Bank of India and Ors. v. S.N. Goyal (2008) 8
SCC 92 : [2008] 7 SCR 631; Nazir Mohamed v. J.
Kamala and Others 2020 SCC OnLine SC 676; Wardha
Power Company Limited v. Maharashtra State Electricity
Distribution Co. Limited and Another (2016) 16 SCC
541; Tuppadahalli Energy India Private Limited v.
Karnataka Electricity Regulatory Commission and Anr
(2017) 11 SCC 194; Ramanuja Naidu v. V. Kanniah
Naidu and Another (1996) 3 SCC 392 : [1996] 3 SCR
239; Navaneethammal v. Arjuna Chetty (1996) 6 SCC
166 : [1996] 5 Suppl. SCR 582 - referred to.
1.2 It is not for this Court to re-analyze evidence adduced
before the forums below or to sit in appeal over concurrent findings
of facts. [Para 159][1128-G]
MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COM.
LTD. v. MERC & ORC.
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1.3 There can be no doubt that a notification issued by the
Reserve Bank of India constitutes law. A Reserve Bank of India
notification which alters, modifies, cancels or replaces an earlier
notification would tantamount to a change in law. However the
notification relating to alteration of the lending rates chargeable
by banks and financial institutions are not laws which relate to
the Power Purchase Agreements in question, and therefore do
not attract, as the case may be, Article 13 of the Stage 1
Agreements or Article 10 of the Stage 2 Agreements.
[Para 160][1128-H; 1129-A-B]
1.4 The RBI circulars/guidelines referred to, are admittedly
instructions issued to banks and financial institutions and are not
applicable to the appellant or to the respondent-Power Generating
Companies, who are engaged in the business of production, sale/
purchase and/or distribution of electricity and not of advancing
loans. Moreover, State Bank Advanced Rate (SBAR) as defined
in the Power Purchase Agreements is admittedly not linked to
any RBI guidelines or circulars. The guidelines/circulars are thus
not relevant to the issues involved in this appeal. [Para 161]
[1129-B-C]
1.5 The RBI circulars/guidelines to banks, advising the
banks to follow certain norms, while setting their benchmark
reference rates for loans, and the amendments thereto, have no
legal consequence on the contract between the parties. This has
been correctly appreciated by both the forums below.
[Para 162][1129-D]
B.O.I. Finance Limited v. Custodian and Ors. (1997)
10 SCC 488 : [1997] 3 SCR 51 - referred to.
1.6 SBI has been notifying and continues to notify Prime
Lending Rates(PLR) for its loans. The appellant itself has given
the average PLR notified by SBI from 2010 till date in its
application being I.A. No. 69796 of 2021. Therefore, Late
Payment Surcharge(LPS) as per the Power Purchase Agreement
has been calculated at the rate of 2% in excess of the SBI notified
Prime Lending Rate.From the impugned judgment and order of
the APTEL, it appears that the appellant conceded before the
APTEL that the SBI continues to issue the PLR rates till date.
[Para 164, 165][1129-F-H]
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1.7 The definition of SBAR is clear and has been correctly
applied by both the forums below. There are concurrent findings
of fact that the SBI PLR (i.e. the benchmark reference rate
mentioned in the PPA) is still being published and is available.
The Court cannot, at this stage of a second appeal under Section
125 of the Electricity Act reopen the factual question of whether
at all PLR rates were being notified by SBI for short term loans.
Therefore, there is no substantial question of law involved in
this appeal filed under section 125 of the Electricity Act, 2003.
[Para 166, 167][1130-B-C]
1.8 The definition of SBAR in the Power Purchase
Agreements is clear. SBAR is the Prime Lending Rate per annum
fixed by the State Bank of India (SBI) from time to time for loans
with one year maturity. LPS is to be calculated at the rate of 2%
in excess of the PLR for loans with 1 year maturity, as fixed from
time to time by SBI. Moreover, the parties have consciously
agreed that in the absence of such rate, the LPS rate shall be
mutually agreed to by the Parties. [Para 168][1130-D-E]
1.9 The provision in the Power Purchase Agreement,
whereby the parties are to mutually agree on a rate of interest, in
case there is no SBI Prime Lending Rate, in itself excludes the
applicability of the general provision for Change in Law contained
in Article 13 of the Power Purchase Agreement to Late Payment
Surcharge. [Para 170][1130-F]
1.10 This Court is unable to accept the submission that the
conclusion of APTEL that LPS is not tariff is erroneous. The
meaning of the expression tariff has to be considered, and has
rightly been considered by APTEL in the context of the relevant
provision of the Power Purchase Agreements. The dictionary
meaning of tariff may be charge. However, in Article 13 of the
Stage 1 and Article 10 of the Stage 2 Power Purchase Agreements,
tariff means monthly tariff and tariff adjustment consequential to
change in law, is of monthly tariff in respect of supply of electricity.
[Para 173][1131-B-C]
1.11 It was submitted by the Power Generating Companies
respectively, LPS is only payable when payment against monthly
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bills is delayed and not otherwise.The object of LPS is to enforce
and/or encourage timely payment of charges by the procurer, i.e.
the appellant. In other words, LPS dissuades the procurer from
delaying payment of charges. The rate of LPS has no bearing or
impact on tariff. Changes in the basis of the rates of LPS do not
affect the rate at which power was agreed to be sold and purchased
under the Power Purchase Agreements. The principle of
restitution under the Change in Law provisions of the Power
Purchase Agreements are attracted in respect of tariff. [Para 174,
175][1131-D-F]
1.12 LPS cannot be equated with carrying cost or actual
cost incurred for the supply of power. The appellant has a
contractual obligation to make timely payment of the invoices
raised by the Power Generating Companies, subject, of course,
to scrutiny and verification of the same. The counsel for the
respondent has a point that if the funding cost was so much lesser
than the rate of LPS, as contended by the appellant, the appellant
could have raised funds at a lower rate of interest, made timely
payment of the invoices raised by the Power Generating
Companies, and avoided LPS. [Para 176][1131-F-G]
1.13 The proposition that Courts cannot rewrite a contract
mutually executed between the parties, is well settled. The Court
cannot, through its interpretative process, rewrite or create a
new contract between the parties. The Court has to simply apply
the terms and conditions of the agreement as agreed between
the parties. As submitted, this appeal is renegotiate the terms of
the PPA. It is well settled that Courts cannot substitute their
own view of the presumed understanding of commercial terms
by the parties, if the terms are explicitly expressed. The explicit
terms of a contract are always the final word with regard to the
intention of the parties. [Para 177][1131-H; 1132-A-C]
Shree Ambica Medical Stores and Others. v. Surat
People's Cooperative Bank Limited and Others (2020)
13 SCC 564 : [2020] 3 SCR 359; Nabha Power Limited
v. Punjab State ower Corporation Limited (PSPCL) And
Another (2018) 11 SCC 508 : [2017] 14 SCR 301 -
referred to.
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1.14 The appellant is obliged to seek amendment of the
provisions of the Power Purchase Agreement only in accordance
with the agreed procedure for amendment of the terms thereof.
The agreed rate of Late Payment Surcharge can only be amended
in the absence of SBI PLR and that too with the mutual consent
of the parties to the Power Purchase Agreement.The submission
that the Power Generating Companies are availing loans at a
lesser rate of interest, but charging LPS on the basis of a higher
rate of interest, leading to unjust enrichment, is untenable in law.
LPS under the Power Purchase Agreements do not correspond
to the actual interest paid by the Power Generating Companies
for funds raised by them. The payment of Late Payment Surcharge
LPS penalty suffered by the Procurer, that is, the appellant, on
account of default in timely payment. [Para 178, 179][1132-D-E]
1.15 The parties to the Power Purchase Agreements have
mutually and consciously agreed to the incorporation of the PLR
as notified by SBI from time to time, as the rate for levy of LPS.
Therefore, by virtue of the doctrine of incorporation, the PLR as
notified by SBI each year gets incorporated in the Power
Purchasing Agreements, as binding between the parties. Thus,
any other system notified by the Reserve Bank of India by its
circulars has no bearing on the terms of the Power Purchase
Agreement and cannot be deemed to be incorporated in the Power
Purchase Agreement, except in case of mutual agreement
between the parties, in the event of absence of SBI PLR, and
approved by the MERC. [Para 180][1132-F-H]
1.16 As submitted, conceptually, PLR, Base Rate and
MCLR are not comparable. The submission that the definition
of SBAR should be read in the context of MCLR instead of PLR,
is therefore not tenable. PLR is the internal benchmark rate for
charging of interest on floating rate loans, calculated on the basis
of average cost of funds and the loans were offered at a discount
on their existing PLR. However, Base Rate is the lending rate
calculated based on the total cost of funds of the banks and is the
minimum interest rate at which a bank can lend, except for loans
to its own employees, its retired employees and against bank's
own deposits. MCLR is a lending rate calculated on the cost of
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raising new funds for the bank which include the cost of
maintaining CRR/SLR (Credit Reserve Ratio/Statutory Liquidity
Ratio), operating costs of banks and tenor premium. MCLR is
the lowest interest rate that a bank or lender can offer. Thus,
loans are offered at a markup on the MCLR. Thus, the basis of
both the rates are different and cannot be compared, as has been
sought to be done by the appellant. When PLR, Base Rate and
MCLR are compared side by side. The difference is that very
stark. Loans are advanced at a mark-up over Base Rate and
MCLR, while during the PLR regime, loans were offered at a
discount on PLR. [Para 181][1133-A-D]
1.17 In any case, the appellant cannot submit that the
Reserve Bank of India circulars are to be considered as Change
in Law, since Article 13.3.1 of the Stage 1 agreements
corresponding to Article 10.4.1 of the Stage 2 agreements
provides that notices of Change in Law events are to be issued
by the affected party, as soon as reasonably practicable, after the
affected party becomes aware of Change in Law event or when it
should reasonably have known of the Change in Law.In this case,
the changes cited by the appellant were effected by RBI from
July 2010 and April 2016 and notified in advance. The appellant
issued notices of Change in Law as late as in September 2016,
more than six years after the Reserve Bank of India introduced
the base rate system in place of the BPLR system. Furthermore,
while the guidelines on the base rate system were published on
9th April 2010 and introduced with effect from 01.07.2010, the
appellant entered into Power Purchase Agreements with the
Respondent No. 2 on 9th August 2010 and on 16th February 2013
incorporating PLR as the Late Payment Surcharge rate for supply
of contracted quantum of electricity to the appellant.
[Para 182, 183][1133-E-H]
1.18 Significantly, the appellant charges interest from its
consumers for delay in payment @ 1.25% per month and/or in
other words 15% per annum as per the MYT Regulations of
MERC. This also shows that interest rate is not co-related to
the actual interest rate on loans taken by the appellant or by
Power Generating Companies. According to the Respondent-
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Power Generating Companies, no other distribution licencee
other than the appellant has raised the claim of Change in Law.
All other Distribution Licencees procuring electricity from
producers of electricity pay LPS in accordance with the respective
Power Purchase Agreements.Admittedly, the appellant has landed
itself in its present predicament, due to delay in making timely
payments to the respondent Power Generating Companies. There
was no pandemic at the time of filing of the petition before the
MERC in 2017 and the Appeal before the APTEL in 2018. It,
cannot, therefore be said that the appellant defaulted in payment
of bills by reason of its financial predicament as a result of the
outbreak of COVID 19 in India, which was in March 2020.
[Para 184, 186][1134-A-B]
1.19 Extensive submissions that the appellant committed
default in payment of the bills raised by the Power Generating
Companies on account of various circumstances, beyond its
control. The various circumstances mentioned by the appellant,
which allegedly impacted the financial position of the appellant,
have no bearing on the merits of the Appeal. The counsels
submitted in one voice that the delays in payment and/or nonpayment of the invoices raised by the Power Generating
Companies for the supply of power to the appellant, had put the
respondent-Power Generating Companies under immense
financial stress, as their source of revenue is from the sale and
supply of power generated from their power plants. The
respondent Power Generating Companies cannot be burdened
with the consequences of the appellant's defaults.
[Para 187][1134-F-H; 1135-A]
M/s Kailash Nath Associates v. Delhi Development
Authority and Anr (2015) 4 SCC 136 : [2015] 1 SCR
627 - distinguished.
Halliburton Offshore Services Inc. v. Vedanta Limited
& Anr., O.M.P (I) (COMM.) No. 88/2020, decided on
29.05.2020 - referred to.
1.20 In this case, the appellant admittedly did not pay the
bills raised by the Power Generating Companies within time. The
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Power Purchase Agreements provided for Late Payment
Surcharge on the presumption that delayed payment of bills causes
prejudice and loss to the seller whose bill remains outstanding.
Accordingly, the appellant also imposes delayed payment charges
on its consumers, who pay their bills after the stipulated due date
for payment of the bills at the rate of 1.5% per month and/or in
other 18% per annum. LPS rate of 2% above the SBAR is neither
unreasonably exorbitant nor arbitrary. It cannot be said that the
LPS agreed upon is not a genuine pre estimate of damages.
[Para 189][1135-C-E]
Union of India v. Association of Unified Telecom Service
Providers of India & Ors. 2020 (3) SCC 525 : [2019]
16 SCR 672; Hindustan Steel Ltd. v. State of Orissa
1969 (2) SCC 627 : [1970] 1 SCR 753; Akbar Badrudin
Giwani v. Collector of Customs 1990 (2) SCC 203 :
[1990] 1 SCR 369; Jaiprakash Industries Ltd. v.
Commissioner of Central Excise, Chandigarh 2003 (1)
SCC 67; Tecumseh Products India Ltd. v. Commissioner
of Central Excise, Hyderabad 2004 (6) SCC 30 : [2004]
2 Suppl. SCR 202; J.K. Synthetics Ltd. v. Commercial
Taxes Officer 1994 (4) SCC 276:[1994] 3 SCR 964 ;
Central Bank of India v. Ravindra and Others 2002 (1)
SCC 367 : [2001] 4 Suppl. SCR 323; M/s Kailash Nath
Associates v. Delhi Development Authority and Anr
(2015) 4 SCC 136 : [2015] 1 SCR 627 - referred to.
1.21 It would perhaps be pertinent to note that stereotype
Power Purchase Agreements containing identical terms and
conditions are executed by the appellant with different Power
Generating Companies. It is patently obvious that the Power
Generating Companies only agree to terms and conditions of an
agreement prepared by the appellant. It is difficult to accept that
the appellant should incorporate in their stereotype Power
Purchase Agreements, a provision for payment of LPS at a rate
2% higher than the SBAR, in case of late payment of invoices/
bills, without any pre-estimation of the loss likely to be suffered
by a Power Generating Company, by reason of non payment of
bills in time, more so when the Late Payment Surcharge is linked
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to the rate of interest in respect of specific types of loan, charged
by a leading nationalised bank with the largest numbers of
branches spread all over the country including in mofussil and
rural areas. [Para 192][1137-C-E]
1.22 In any case, in this second appeal under Section 125
of the Electricity Act 2003, which is only to be heard on a
substantial question of law, this Court would not embark upon
the exercise of making a factual enquiry into the mode and manner
in which the Power Generating Companies meet their working
capital requirements and interest that individual Power
Generating Companies pay to their lenders. [Para 193]
[1137-E-F]
1.23 It is axiomatic that the Power Purchase Agreements
provide for computation of Late Payment Surcharge in a particular
manner to avoid the time consuming exercise of assessing the
losses of individual Power Generating Companies by reason of
late payment of their bills. The SBAR has been made the bench
mark for computation of Late Payment Surcharge, irrespective
of whether the Power Generating Companies are financed by the
State Bank of India or any of its subsidiaries. The LPS provision
is in the nature of a caution to arrange their affairs and finances
keeping the upper limit of LPS of 2% above the SBAR in view,
so that the Power Generating Company desists from borrowing
at uneconomic rate of interest. [Para 194][1137-G-H]
1.24 There being no dispute in the instant case with regard
to the principal sums due under the monthly bills, interest on
delayed payment at 2% in excess of SBI PLR cannot be said to
be arbitrarily high. There is no reason for this Court to reduce
the contractual rate of interest and thereby alter or modify the
contract between the parties, in exercise of its powers under
Article 142 of the Constitution of India. [Para 195][1138-B]
1.25 The question whether or not the appellant has funds
to clear its interest liability are not gone into. The appellant cannot
continue to get supply of electricity without having appropriate
funds. The appellant would necessarily have to raise funds to
clear its contractual obligations. [Para 196][1138-C]
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1.26 Even assuming that the burden of interest would have
to be passed on to the consumers, that cannot be the ground for
the appellant to resile from its contractual commitment to the
Power Generating Companies. The appellant cannot pass on the
burden for delay in making payment to the Power Generating
Companies. In any case the claims pertains to a period of three
years before filing of the petition before the MERC on 2nd
December, 2016 and therefore barred by limitation.
[Para 197][1138-D]
1.27 Reliance by the appellant, upon the tariff regulations
framed by MERC for determination of tariff for Power Generating
Companies under Section 62 of the Electricity Act 2003, is
untenable since the Tariff Regulations have no application in this
case where PPAs have been executed pursuant to a bidding
process, under Section 63 of the Electricity Act. [Para 198][1138E-F]
1.28 The challenge to the impugned judgment and order
on the ground of the directions on the appellant to make payment
of the LPS found due and payable, within a stipulated date, is also
not sustainable. [Para 203][1140-B-C]
1.29 APTEL is not bound by the procedure laid down in the
Civil Procedure Code. Directions for time bound payment within
a prescribed time frame are in conformity with the judgment of
this Court in Jaipur Vidyut Vitran Nigam Ltd. v. Adani Power's
case which has been upheld by this Court. Moreover, one of the
objectives of the Electricity Act is time bound disposal of matters.
This is evident from various provisions of the said Act including
in particular Section 111(5) of the Act. Since APTEL and MERC
are not bound by the procedure as laid down in the Civil Procedure
Code, it was open to APTEL to pass such orders as would finally
put an end to litigation. [Para 204][1140-C-D]
Jaipur Vidyut Vitaran Nigam Limited & Ors. v. Adani
Power Rajasthan Limited and Anr 2020 SCC Online
SC 697 - distinguished.
1.30 An Electricity Regulatory Commission such as MERC
constituted under the Electricity Act, 2003 has all the trappings
of a Court. The MERC is a substitute for a Civil Court in respect
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of all disputes between licensees and Power Generating
Companies. MERC acted within the scope of its power of
regulatory supervision in directing the appellant to make payment
of LPS within the time stipulated in the order of MERC. The
APTEL rightly upheld the direction. In any case, such a direction
cannot be interfered with in exercise of powers under Section
125 of the Electricity Act which corresponds to the power of
Second Appeal under Section 100 of the CPC, since the sine qua
non for entertaining an appeal is the existence of a substantial
question of law. [Page 205, 207][1140-E-F; 1141-B-C]
Tamil Nadu Generation & Distribution Corporation Ltd.
v. PPN Power Generating Company Private Limted
(2014) 11 SCC 53 : [2014] 4 SCR 667; Andhra Pradesh
Power Coordination Committee & Others v. Lanco
Kondapalli Power Ltd & Ors. (2016) 3 SCC 468 :
[2015] 12 SCR 447; Gujarat Urja Vikas Nigam Limited
v. Amit Gupta and Others (2021) SCC OnLine 194;
State of Karnataka v. Vishwabharathi House Building
Cooperative Society and Others (2003) 2 SCC 412 :
[2003] 1 SCR 397; All India Power Engineering
Federation & Ors. vs. Sasan Power Limited & Others
(2017) 1 SCC 487 : [2016] 9 SCR 901 - referred to.
1.31 After the the hearing of this appeal was concluded and
the appeal was reserved for judgment, the appellant filed an
application to bring on record additional facts and documents in
the form of queries under the Right to Information Act, 2005
made to the State Bank of India and the responses thereto in an
attempt to show that PLR would not apply to short term loans
advanced by SBI after transition to the Base Rate/MCLR system.
This Court cannot take note of any documents sought to be
introduced after the conclusion of hearing. In any case, this Court
cannot in a second appeal under Section 125 of the Electricity
Act, 2003 interfere with concurrent factual findings arrived at by
MERC and APTEL on the basis of facts admitted by the appellant.
The appellant had been accepting the invoices raised by the
respondent-Power Generating companies and accounts had duly
been reconciled by the appellant. The LPS charged by the
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respondent Power Generating Companies was never disputed.
Further more, this Court cannot look into documents introduced
for the first time in this second appeal, which were not tendered
in evidence before the MERC or the APTEL. Even otherwise,
queries made by a rank outsider as late as on 12th July 2021 or
replies thereto cannot be relied upon in evidence, by the
appellant. [Para 208][1141-C-F]
1.32 There is no ground to interfere with the judgment and
order of the APTEL confirming the judgment and order passed
by MERC. [Para 209][1141-G]
DSR Steel (P). Ltd. v. State of Rajasthan and others
(2012) 6 SCC 782 : [2012] 5 SCR 583; Power Grid
Corporation of India and Ors. v. Tamil Nadu Generation
and Distribution Company Limited and Others. (2019)
7 SCC 34 : [2019] 7 SCR 724; Bharat Sanchar Nigam
Ltd. v. Pawan Kumar Gupta (2016) 1 SCC 363 : [2015]
11 SCR 402; Adani Power (Mundra) Ltd. v. Gujarat
Electricity Regulatory Commission and Others (2019)
19 SCC 9; Uttar Haryana Bijli Vitran Nigam Limited
and Another v Adani Power Limited and Others (2019)
5 SCC 325 : [2019] 4 SCR 487; CLP India Private
Limited v. Gujarat Urja Vikas Nigam Limited and
Another 2020 (5) SCC 185; Transmission Corporation
of Andhra Pradesh Ltd . And Others v. GMR Vemagiri
Power Generation Ltd. And Another (2018) 3 SCC 716;
Indian Council for Enviro-Legal Action v. Union of India
(2011) 8 SCC 161 : [2011] 9 SCR 146; Gujarat Urja
Vikas Nigam Ltd. v. Essar Power Limited (2008) 4 SCC
755 : [2008] 4 SCR 822 - referred to.
https://www.merriam-webster.com/dictionary/tariff -
referred to.
Case Law Reference
[2012] 5 SCR 583
referred to
Para 72
[2019] 7 SCR 724
referred to
Para 73
[2015] 11 SCR 402
referred to
Para 74
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(2019) 19 SCC 9
referred to
Para 95
[2019 ] 4 SCR 487
referred to
Para 112
2020 (5) SCC 185
referred to
Para 115
(2018) 3 SCC 716
referred to
Para 117
[2011] 9 SCR 146
referred to
Para 128
[2008] 4 SCR 822
referred to
Para 139
[2008] 7 SCR 631
referred to
Para 151
(2016) 16 SCC 541
referred to
Para 154
(2017) 11 SCC 194
referred to
Para 155
[1996] 3 SCR 239
referred to
Para 156
[1996] 5 Suppl. SCR 582
referred to
Para 157
[1997] 3 SCR 51
referred to
Para 163
[2017] 14 SCR 301
referred to
Para 177
[2020] 3 SCR 359
referred to
Para 177
[2015] 1 SCR 627
distinguished
Para 188
[2019] 16 SCR 672
referred to
Para 190
[1970] 1 SCR 753
referred to
Para 191
[1990] 1 SCR 369
referred to
Para 191
2003 (1) SCC 67
referred to
Para 191
[2004] 2 Suppl. SCR 202
referred to
Para 191
[1994] 3 SCR 964
referred to
Para 191
[2001] 4 Suppl. SCR 323
referred to
Para 191
[2014] 4 SCR 667
referred to
Para 205
[2015] 12 SCR 447
referred to
Para 205
[2003] 1 SCR 397
referred to
Para 206
[2016] 9 SCR 901
referred to
Para 206
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CIVIL APPELLATE JURISDICTION : Civil Appeal No.1843
of 2021.
From the Judgment and Order dated 27.04.2021 of the Appellate
Tribunal for Electricity at New Delhi in Appeal No.77 of 2018.
Vikas Singh, Sr. Adv., G. Saikumar, Samir Malik, Rahul Sinha,
Ms. Himangini Mehta, Ms. Deepika Kalia, Satwik Mishra, Ms. Farha
Malik, Chandra Prakash, M/s D. S. K. Legal, Advs. for the Appellant.
Mukul Rohatgi, Sr. Adv., Aman Anand, Vivek Singh, Aman Dixit,
Mahesh Agarwal, Ms. Parul Shukla, Arshit Anand, Nishant Rao, E. C.
Agrawala, Vishrov Mukherjee, Gaurav Ray, Alok Shankar, Ms. Divya
Anand, Advs. for the Respondents.
The Judgment of the Court was delivered by
INDIRA BANERJEE, J.
This appeal, under Section 125 of the Electricity Act 2003, is against
a judgment and order dated 27th April 2021 passed by the Appellate
Tribunal for Electricity, hereinafter referred to, in short, as 'APTEL',
dismissing Appeal No.77 of 2018 filed by the Appellant, Maharashtra
State Electricity Distribution Company Ltd., and affirming an order dated
16th November, 2017 passed by the Maharashtra Electricity Regulatory
Commission, hereinafter referred to, in short, as 'MERC', whereby
MERC dismissed the petition filed by the Appellant under Section 86 of
the Electricity Act, being Case No.24 of 2017, rejecting the contention
of the Appellant that, introduction by Reserve Bank of India of the Base
Rate system and the Marginal Cost of Funds Based Lending Rate system
constituted a change in law, within the meaning of the expression 'Change
in Law' as defined in the respective Power Purchase Agreements
between the Appellant and the Respondent Nos.2, 3, 4 and 5, hereinafter
collectively referred to as the "Power Generating Companies", so as to
alter the rate of Late Payment Surcharge(LPS) payable by the Appellant
to the Power Generating Companies under the respective Power
Purchase Agreements.
2. The Appellant, incorporated under the Companies Act, 1956,
pursuant to the decision of the Government of Maharashtra to reorganize
erstwhile Maharashtra State Electricity Board, is a Distribution Licensee
under the provisions of the Electricity Act, 2003, with license to supply
electricity all over the State of Maharashtra, except some parts of the
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city of Mumbai. The Appellant is a bulk purchaser of electricity from
generators of electricity.
3. The Appellant had, from time to time, issued Tender Notices,
inviting bids for bulk supply of electricity to the Appellant, pursuant to
which, the Power Generating Companies submitted their bids.
4. The Appellant has executed Power Purchase Agreements with
the Power Generating Companies, arrayed as Respondent Nos. 2 to 5 in
this appeal in two stages. The two sets of Power Purchase Agreements,
hereinafter referred to as the stage 1 and stage 2 Power Purchase
Agreements, contain almost identical terms and conditions. The respective
dates and brief particulars of the respective agreements (five in number)
are as follows:-
"Stage 1-PPA
Stage 2-PPA
5. The relevant terms and conditions of the Stage 1 Power
Purchase Agreements are set out hereunder:-
"Article 1 : Definitions and interpretation
Change in law - shall have the meaning ascribed thereto in
Article 13.1.1 of this agreement.
MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COM.
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Indian Governmental instrumentality - means the GoI,
Government of Maharashtra and any ministry or, department
of or, board, agency or other regulatory or quasi-judicial
authority controlled by GoI or Government of States where
the procurer and project are located and includes the CERC
and MERC.
Late Payment Surcharge - shall have the meaning ascribed
there to in Article 11.3.4
Law - means, in relation to this Agreement, all laws including
Electricity Laws in force in India and any stature, ordinance,
regulation, notification or code, rule, or any interpretation
of any of them by an Indian Government Instrumentality and
having force of law and shall further include all applicable
rules, regulations, orders, notifications by an Indian
Governmental Instrumentality pursuant to or under any of
them and shall include all rules, regulations, decisions and
orders of the CERC and the MERC.
SBAR - means the prime lending Rate per annum applicable
for loans with one (1) year maturity as fixed from time to time
by the State Bank of India. In the absence of such rate, any
other arrangement that substitutes such prime lending rate
as mutually agreed to by the parties.
Article 11: Billing and Payment
.
.
.
11.3.4 In the event of delay in payment of a monthly bill by
the procurer beyond its due date month billing, a Late Payment
Surcharge shall be payable by the procurer to the seller at
the rate of two (2) percent in excess of applicable SBAR per
annum, on the amount of outstanding payment, calculated
on a day to day basis (and compounded with monthly rest)
for each date of the delay.
..
Article 13 : Change in Law
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13.1. Definitions
In this Article 13, the following terms have the following
meanings.
13.1.1 "Change in Law" means the occurrence of any of the
following events after the date, which is seven (7) days prior,
to the Bid Deadline:
(i) the enactment, bringing into effect, adoption, promulgation,
amendment, modification or repeal or any law or
(ii) a change in interpretation of any law by a competent court
of law, tribunal or Indian governmental instrumentality
provided such court of law, tribunal or Indian governmental
instrumentality is final authority under law for such
interpretation.
But shall not include (i) any change in any withholding tax
on income or dividends distributed to the shareholders of the
seller, or (ii) Change in respect of UI charges or frequency
intervals by an Appropriate Commission.
.
.
.
13.2 Application and principal for computing impact of
Change in Law
While determining the consequence of Change in Law under
this Article 13, the parties shall have due regard to the
principle that the purpose compensating the party affected
by such change in law, is to restore through monthly tariff
payments to the extent contemplated in this Article 13, the
affected party to the same economic position as if such
Change in Law has not occurred.
a) ............
b) Operation Period -
As a result of change in Law, the compensation for any
increase/decrease in revenue or cost to the seller shall be
determined by the Maharashtra State Electricity Regulatory
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Commission whose decision shall be final and binding on both
the parties, subject to right of appeal provided under
applicable law and effective from the date specified in 13.4.1
13.3. Notification of Change in Law:
13.3.1. If the seller is affected by a Change in Law in
accordance with Article 13.2 and the Seller wishes to claim a
Change in Law under this Article, it shall give notice to the
Procurer of such Change in Law as soon as reasonably
practicable after becoming aware of the same or should
reasonably have known of the Change in Law.
13.3.2.Notwithstanding Article 13.3.1, the seller shall be
obliged to serve notice to the Procurer under this Article 13.3.2
if it is beneficially affected by a Change in Law. Without
prejudice to the factor of materiality or other provisions
contained in this Agreement, the obligation to inform the
procurer contained herein shall be material.
Provided that in case the seller has not provided such notice,
the Procurer shall have the right to issue such notice to the
seller.
13.3.3 Any notice served pursuant to this Article 13.3.2 shall
provide, amongst other things, precise details of:
a) The Change in Law; and
b) The effects on the Seller of the matters referred to in Article
13.2
13.4.Tariff adjustment payment on account of Change in Law
13.4.1. subject to Article 13.2, the adjustment in monthly tariff
payment shall be effective from:
(i) the date of adoption, promulgation, amendment, reenactment, 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."
6. The Stage 2 Power Purchase Agreements, as stated
hereinbefore, contain terms and conditions almost identical to those of
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the first set of agreements. The relevant provisions of the second set of
agreements (Stage 2) are as follows:-
"Article 1 : Definitions and Interpretation
Change in law - shall have the meaning ascribed thereto in
Article 10.1.1 of this agreement.
Indian Governmental Instrumentality - shall mean the
Government of India, Governments of state(s) of
Maharashtra, and any ministry, department, board, authority,
agency, corporation, commission under the direct or indirect
control of Government of India or any of the above State
Government(s) or both, any political sub-division of any of
them including any court or Appropriate Commission(s) or
tribunal or judicial or quasi-judicial body in India but
excluding the Seller and the Procurer.
Late Payment Surcharge - shall have the meaning ascribed
thereto in Article 8.3.5 of this Agreement.
Law - Shall mean in relation to this Agreement, all laws
including Electricity Laws in force in India and any statute,
ordinance, regulation, notification or code, rule or any
interpretation of any of them by an Indian Governmental
instrumentality and having force of law and shall further
include without limitation all applicable rules, regulations,
orders, notifications by an Indian Governmental
instrumentality pursuant to or under any of them and shall
include without limitation all rules, regulations, decisions and
orders of the Appropriate Commission.
SBAR - Shall mean the prime lending Rate per annum
applicable for loans with one (1) year maturity as fixed from
time to time by the State Bank of India. In the absence of such
rate, SBAR shall mean any other arrangement that substitutes
such prime lending rate as mutually agreed to by the parties.
Article 8 : Billing and Payment
.
.
.
MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COM.
LTD. v. MERC & ORC. [INDIRA BANERJEE, J.