RATTANINDIA POWER LIMITED v. MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LIMITED
Carrying Cost Computation in "Change in Law" Events: Supreme Court Clarifies APTEL's Role, Cross-Appeal Necessity, and Remands on Compounding Interest.
Court: Supreme Court of India
Citation: 2025 INSC 1502
Decision Date: 10-12-2025
List of Laws
The Electricity Act, 2003; Power Purchase Agreement (PPA); Code of Civil Procedure, 1908; Constitution of India, Article 136; Principle of Restitution; Late Payment Surcharge (LPS); Carrying Cost
- Facts: RattanIndia Power Limited (RPL) is supplying power to Maharashtra State Electricity Distribution Company Limited (MSEDCL) under two long-term Power Purchase Agreements (PPAs). Disputes arose regarding compensation for "Change in Law" events, specifically concerning the carrying cost and the rate at which it should be computed. RPL sought compensation, including carrying costs, from the date of commencement of power supply. MERC (Maharashtra Electricity Regulatory Commission) initially allowed certain claims but denied carrying costs, stating the PPAs did not provide for it.
- Procedural Posture: RPL appealed to APTEL (Appellate Tribunal For Electricity), which partly allowed the appeal and remanded the matter to MERC for fresh decision. MERC then partly allowed RPL's application, awarding compensation including carrying costs, but computed the carrying cost at a simple interest rate based on working capital, not the Late Payment Surcharge (LPS) rate with compounding interest as claimed by RPL. RPL then appealed to the Supreme Court against the denial of LPS rate of interest on a compounding basis.
- Issue: The core issues before the Supreme Court were: (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? (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?
- Holding: The Supreme Court held that APTEL erred in holding that it could not look beyond the remand order regarding the grant of LPS benefit. The Court also held that MSEDCL, by not filing a cross-appeal, had given up its right to challenge the award of carrying cost with interest at LPS rate. The Court deemed it appropriate to remand the matter back to APTEL to decide the issue of compounding of interest based on the facts of the case and in accordance with the law, clarifying that the grant of interest at LPS rate should not be disturbed.
- Reasoning: The Court reasoned that while the remand order directed MERC to consider observations in earlier orders, it did not preclude MERC or APTEL from taking notice of the law relating to the grant of LPS benefit. The Court emphasized that when a matter is remanded, the lis remains alive and must be decided according to the law applicable on the date of the decision. Regarding the absence of a cross-appeal, the Court relied on the principle established in Banarsi v. Ram Phal, stating that a respondent cannot question the correctness of an operative order without filing a cross-appeal. The Court also noted that while statutory limitations cannot override constitutional powers, the exercise of such powers in commercial matters should be exceptional. Finally, regarding compounding of interest, the Court referred to Uttar Haryana Bijli Vitran Nigam Ltd. v. Adani Power (Mundra) Ltd., which supported the grant of compound interest on carrying costs to restore the affected party's economic position, but stated that the specific determination of whether compounding is necessary depends on the facts of the case.
🔒 For Members Only