NICAI Update

[CA Raj Chawla]

Respected Members,

Quotes of the day:

1.      Life gives two Gifts to us. First is Chance & The Second is Choice. Chance to Meet many people in LIFE & Choice to Select the Best ones for LIFE.


2.      Waves are inspiring, not because they rise and fall But because they never fail to rise again. So be positive. Hard rime will go soon.

NICAI Update:

1. The Supreme Court has held that when a matter is remanded for fresh consideration, the adjudicating authority is not irrevocably bound by the observations in the remand order if the issue itself was not finally decided, and must instead apply the binding law as it stands on the date of decision.
2. In our view, when a Court or Appellate Tribunal remands a matter to the subordinate court, or adjudicating body, for a fresh decision in the light of observations contained therein, and while doing so refers to certain decisions, it does not mean that the subordinate court or adjudicating body is bound by those decisions and can look no further, even if, in the interregnum, the law has changed or developed. We must not be understood as saying that such a direction has to be ignored. Rather, such a direction must be given due consideration unless the law on the subject, which is binding on the court or adjudicating body, requires otherwise.”, observed a bench comprising Justices Manoj Misra and Joymalya Bagchi.
3. Background:The bench considered an appeal from a power supplier against an APTEL order. APTEL had rejected the supplier's plea for compound interest on the grounds that its own earlier remand order to the subordinate commission did not contemplate compounded interest. APTEL ruled that, since the remand order was silent on compounding, it could not grant such relief in a subsequent appeal.
4. Briefly put, the Appellant-RPL had entered into two long-term PPAs in 2010 for the supply of 450 MW and 750 MW of power. Subsequently, Change in Law events, particularly the levy of a cess by the State of Chhattisgarh, resulted in increased operational costs for the generator. While RPL sought compensation to neutralize this financial impact, it also claimed Carrying Cost, i.e., interest on the delayed payment of such compensation, contending that mere reimbursement without interest would not restore it to its original economic position.
5. RPL further argued that the interest should be calculated at the Late Payment Surcharge (LPS) rate prescribed under the PPA and on a compounding basis.
6. The dispute occurred when the Maharashtra Electricity Regulatory Commission in 2018, allowed Change in Law compensation but denied Carrying Cost, prompting Appellant to approach APTEL, which in 2022 remanded the matter for determination of compensation to restore RPL's economic position.
7. On remand, MERC in 2023 granted Carrying Cost at simple interest using the Interest on Working Capital (IOWC) rate, leading to further appeals before the APTEL.
8. In the impugned 2023 order, APTEL held that Carrying Cost must be paid at the contractual LPS rate but rejected RPL's claim for compounding interest, citing the absence of a specific direction in the 2022 remand order with respect to awarding compound interest, leading to an appeal before the Supreme Court.
9. The issue before the Supreme Court was whether APTEL's denial of compound interest, on the ground that its earlier remand order did not provide for such interest, would preclude the Tribunal from subsequently granting compound interest, even though the question had been left open and had not been finally adjudicated in the earlier round of proceedings.
10. Observation: Answering in negative, the judgment authored by Justice Misra held that APTEL erred in treating the absence of a specific direction on compounding in the remand order as a bar to granting it. Since the question of compounding interest had never been finally decided in the earlier round, it remained open for consideration. 
11. The Court emphasized that observations made while remanding a matter cannot be treated as binding determinations unless the issue was expressly and finally adjudicated.
12. With the help of an example, the Court explained: For example, the law declared by this Court is binding on all courts within the territory of India. However, if such declaration comes later i.e., after the remand order, could it be said that it would not be followed because of certain general observations in the order of remand. The answer to it is an obvious “No”. Reason being, when the remand order does not itself settle an issue, the issue remanded is alive and has to be decided as per law applicable on the date of the decision.”
13. Since the question of compounding interest had never been finally decided in the earlier round, it remained open for consideration. Accordingly, the Court remanded the limited issue of compounding of Carrying Cost back to APTEL for fresh adjudication on merits.
14. The appeal was allowed in terms of the aforesaid observation. Cause Title: RATTANINDIA POWER LIMITED VERSUS MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LIMITED AND ANOTHER
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With best regards

CA (Dr) Raj Chawla

B.Com (Hons), FCA, FCS, FCMA, LLB 

MIMA, DISA, MICA, Phd, ASA (Aust), CMP (USA)

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