The central legal point established in the judgment is the entitlement to compound interest on carrying cost under the restitutionary principle of the PPAs, emphasizing the aim of restituting the affected party to its original economic position.

JUDGMENT :

HIMA KOHLI, J.

1. The appellants are aggrieved by the judgment and order dated 12th August, 2021, passed by the Appellate Tribunal for Electricity, New Delhi¹ [in short ‘Appellate Tribunal’] allowing the appeal filed by the respondent No. 1-Adani Power (Mundra) Limited² [in short ‘Adani Power’] against the order dated 28th March, 2018 (in Petition No. 104/MP/2017) and order dated 06th June, 2019 (in Petition No. 214/MP/2018) passed by the Central Electricity Regulatory Commission³ [in short ‘Central Commission’].

2. It may be stated at the outset that the scope of the present appeal is restricted to the decision of the Appellate Tribunal of granting carrying cost interest on compounding basis in favour of the respondent No. 1-Adani Power from the date on which the Change in Law event took place i.e. 29th January, 2014, till the date of actual payment of the amount determined by the Central Commission. Stated differently, while the appellants are not disputing grant of interest to the respondent No. 1-Adani Power by way of carrying cost from the date on which the Change of Law event took place till the actual payment of the amount determined by the Central Commission, their grievance is that the Appellate Tribunal has not just permitted carrying cost on simple interest basis, but has imposed interest on carrying cost or what is commonly known as interest on interest (compound interest) on carrying cost.

3. To contextualize the aforesaid dispute, a brief conspectus of the relevant facts of the case may be outlined. The respondent No. 1-Adani Power is a power generating company that has set up a 4620 MW (comprising of four units of 330 MW and five units of 660 MW), coal fired power plant in Mundra, Gujarat. The appellants are the distribution licensees that are supplying electricity to the consumers in the State of Haryana. On 07th August, 2008 the appellants entered into two Power Purchase Agreements⁴ [In short ‘PPAs’] with the respondent No. 1-Adani Power for procurement of contracted capacity of 1424 MW from the generating units 7, 8 and 9 established at Mundra, Gujarat. In the year 2010, on account of Environment Clearance dated 20th May, 2010, given by the Ministry of Environment and Forests, Union of India, a Change in Law event took place as the respondent No. 1-Adani Power had to incur additional costs on installing Flue Gas Desulfurization⁵ [in short ‘FGD’] unit. On 17th July, 2014, the respondent No. 1-Adani Power filed a petition before the Central Commission for adjudication of compensation on account of certain Change in Law events including installation of the FGD. By order dated 06th February, 2017, the Central Commission allowed compensation only for certain Change in Law events but disallowed the claim for carrying cost raised by the respondent No. 1-Adani Power. Liberty was however granted to the respondent No. 1-Adani Power to file a separate petition before the Central Commission for the FGD claim along with requisite information and documents.

4. Aggrieved by the order dated 06th February, 2017 passed by the Central Commission, both the appellants herein and the respondent No. 1-Adani Power preferred appeals before the Appellate Tribunal. The limited grievance raised by the appellants in their appeal was relating to the issue pertaining to the claim of the respondent No. 1-Adani Power in respect of levy of customs duty on electricity removed from Special Economic Zone (SEZ) to Domestic Tariff Area (DTA). In its appeal, respondent No. 1-Adani Power challenged the rejection of its claim for carrying cost. Respondent No. 1-Adani Power also filed a separate petition before the Central Commission in terms of the liberty granted to it, for claiming relief on account of installation of FGD which was contested by the appellants. On 28th March, 2018, the Central Commission passed an order on the separate petition preferred by the respondent No. 1-Adani Power, allowing compensation on account of the Change in Law