2021 Supreme(SC) 613

SUPREME COURT OF INDIA
INDIRA BANERJEE, V. RAMASUBRAMANIAN, JJ.
Maharashtra State Electricity Distribution Company Limited – Appellant
Versus
Maharashtra Electricity Regulatory Commission and Others – Respondents
Civil Appeal No. 1843 of 2021
Decided On : 08-10-2021

IMPORTANT POINTS
(1) Condition precedent for entertaining appeal under Section 125 of Electricity Act, 2003 is existence of a substantial question – A question of law which arises incidentally or collaterally and has no bearing on final outcome, will not be a substantial question of law.
(2) Courts cannot rewrite a contract mutually executed between parties – Explicit terms of a contract are always final word with regard to intention of parties.
(3) Electricity Regulatory Commission such as MERC constituted under Electricity Act, 2003 has all trappings of a Court – MERC is a substitute for a Civil Court in respect of all disputes between licensees and Power Generating Companies.

Headnote:

(A) Electricity Act, 2003 – Section 125 – Civil Procedure Code, 1908 – Section 100 – Appeal – Appeal to this Court lies on a substantial question of law – Condition precedent for entertaining appeal under Section 125 of Electricity Act, 2003 is existence of a substantial question – Substantial question of law means not only a substantial question of law of general importance, but also any substantial question of law arising in a case between parties on which decision in lis depends – A question of law which arises incidentally or collaterally and has no bearing on final outcome, will not be a substantial question of law – Whether question raised is a question of law and if so, whether question is a substantial question of law is also not determined by enormity of stakes involved in the case – It is not for this Court to reanalyze evidence adduced before forums below or to sit in appeal over concurrent findings of facts. (Paras 149, 152 and 159)

(B) Electricity Act, 2003 – Section 125 – Power Purchase Agreements – Rate of Interest – Alteration of – Introduction by Reserve Bank of India of Base Rate system and Marginal Cost of Funds Based Lending Rate system – Notification issued by 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, notification relating to alteration of lending rates chargeable by banks and financial institutions are not laws which relate to Power Purchase Agreements in question and do not attract Article 13 of the Stage 1 Agreements or Article 10 of the Stage 2 Agreements – RBI circulars/guidelines in question are admittedly instructions issued to banks and financial institutions and are not applicable to Appellant or to Respondent-Power Generating Companies, who are engaged in business of production, sale/purchase and/or distribution of electricity and not of advancing loans – RBI circulars/guidelines to banks, advising banks to follow certain norms, while setting their benchmark reference rates for loans, and amendments thereto, have no legal consequence on contract between parties – This has been correctly appreciated by both Fora below – RBI Circulars/Guidelines cannot vary or modify a contract between two parties – There are concurrent findings of fact that SBI PLR (i.e. benchmark reference rate mentioned in PPA) is still being published and is available – Court cannot, at this stage of a second appeal under Section 125 of Electricity Act reopen factual question of whether at all PLR rates were being notified by SBI for short term loans – There is no substantial question of law involved in this appeal filed under Section 125 of Electricity Act, 2003. (Paras 160, 161, 162, 163, 166 and 167)

(C) Interpretation of Contract – Parameters – Courts cannot rewrite a contract mutually executed between parties – Court cannot, through its interpretative process, rewrite or create a new contract between parties – Court has to simply apply terms and conditions of agreement as agreed between parties – Courts cannot substitute their own view of presumed understanding of commercial terms by parties, if terms are explicitly expressed – Explicit terms of a contract are always final word with regard to intention of parties. (Para 177)

(D) Electricity Act, 2003 – Section 125 – Power Purchase Agreements – Rate of Interest – Alteration of – Introduction by Reserve Bank of India of Base Rate system and Marginal Cost of Funds Based Lending Rate system – Power Purchase Agreements provide for computation of Late Payment Surcharge in a particular manner to avoid time consuming exercise of assessing the losses of individual Power Generating Companies by reason of late payment of their bills – SBAR has been made bench mark for computation of Late Payment Surcharge, irrespective of whether Power Generating Companies are financed by State Bank of India or any of its subsidiaries – LPS provision is in nature of a caution to arrange their affairs and finances keeping upper limit of LPS of 2% above SBAR in view, so that Power Generating Company desists from borrowing at uneconomic rate of interest – There being no dispute in present case with regard to principal sums due under 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 contractual rate of interest and thereby alter or modify contract between parties, in exercise of its powers under Article 142 of Constitution of India – Even assuming that burden of interest would have to be passed on to consumers, that cannot be the ground for Appellant to resile from its contractual commitment to Power Generating Companies – Appellant cannot pass on burden for delay in making payment to Power Generating Companies – This Court cannot in a second appeal under Section 125 of Electricity Act, 2003 interfere with concurrent factual findings arrived at by MERC and APTEL on the basis of facts admitted by Appellant – No grounds to interfere with judgment and order of APTEL confirming judgment and order passed by MERC – Appeal dismissed. (Paras 194, 195, 197, 208 and 209)

(E) Civil Procedure Code, 1908 – Section 9 – Civil Court – Electricity Regulatory Commission such as MERC constituted under Electricity Act, 2003 has all trappings of a Court – MERC is a substitute for a Civil Court in respect of all disputes between licensees and Power Generating Companies – Courts have power to execute their own order – Impugned judgment and order cannot be faulted for giving directions for payment of outstanding dues of Appellant – State Regulatory Commissions exercise continuous regulatory supervision – MERC acted within scope of its power of regulatory supervision in directing Appellant to make payment of LPS within time stipulated in order of MERC – APTEL rightly upheld direction – In any case, such a direction cannot be interfered with in exercise of powers under Section 125 of Electricity Act which corresponds to power of Second Appeal under Section 100 of CPC, since sine qua non for entertaining an appeal is existence of a substantial question of law. (Paras 205, 206 and 207)

Facts of the case:

Present appeal, under Section 125 of the Electricity Act 2003, is against a judgment and order dated 27th April 2021 passed by Appellate Tribunal for Electricity (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 (MERC), whereby MERC dismissed the petition filed by Appellant under Section 86 of Electricity Act, being Case No.24 of 2017, rejecting the contention of 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 meaning of the expression ‘Change in Law’ as defined in the respective Power Purchase Agreements between Appellant and the Respondent Nos. 2, 3, 4 and 5 (Power Generating Companies), so as to alter rate of Late Payment Surcharge (LPS) payable by Appellant to the Power Generating Companies under the respective Power Purchase Agreements. The only issue in this appeal is whether change in interest rate system by the RBI from Prime Lending Rate (PLR) to Base Rate and then to MCLR amounts to Change in Law under the Power Purchase Agreements.

Findings of Court:

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 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.

Result : Appeal dismissed.