JSA represented RattanIndia Power Limited (“RattanIndia”) before the Hon’ble Supreme Court (“SC”) in proceedings contesting the claim by Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL) that change in interest rate by RBI qualifies as Change in Law under power purchase agreements. MSEDCL’s claim had been rejected by Maharashtra Electricity Regulatory Commission and Appellate Tribunal for Electricity (APTEL).
JSA’s team led by Vishrov Mukerjee strategized and argued the matter including on the question of law on powers of Regulatory Commissions to execute their orders.
The Supreme Court dismissed the Civil Appeal filed by MSEDCL and held that:
- In second appeals, substantial question of law must relate to the lis between the parties. The enormity of the stakes involved have no bearing on whether an issue is a substantial question of law.
- Inability or financial difficulty of a distribution licensee (Discom) cannot be a ground to avoid payment of dues of generating companies. Discoms are obliged to arrange funds to fulfil contractual obligations.
- Discoms cannot pass on the burden for delay in payments to consumers or avoid their contractual commitments on the basis of consumer interest.
- Regulatory Commissions are substitute for civil courts in respect of all disputes between generating companies and licensees and have the power to execute their orders.
The judgment has far-reaching consequences for the power sector. By treating Regulatory Commissions as substitute for civil courts, the Supreme Court has granted execution powers to the Commissions. This will ease enforcement of orders of Commissions and reduce delays in recovery of amounts. The Supreme Court has also rejected insufficiency of funds as a reason for Discoms not performing their contractual obligations. Increasingly, Regulatory Commissions were granting time to Discoms to make payments on the ground of lack of funds. This defence may no longer be available. Significantly, by holding that contractual obligations cannot be avoided in consumer interest, the Supreme Court has in effect addressed an issue which has been plaguing the renewable sector where several States are either delaying payment of dues or seeking reopening of contracts on the ground of high tariff.
JSA team comprised Partner – Vishrov Mukerjee, Senior Associate – Yashaswi Kant, and Senior Associate – Girik Bhalla.
