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REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.  4126 OF 2013

T.N. Generation & Distbn.  Corpn. Ltd.         … Appellant  

VERSUS

PPN power Gen. Co. Pvt. Ltd.                 ...Respondent

J U D G M E N T

SURINDER SINGH NIJJAR, J.

1. This  statutory  appeal  under  Section  125  of  the  

Electricity Act,  2003 (hereinafter referred to as the  

“Act”)  is  directed  against  the  final  judgment  and  

order  dated   22nd February,  2013  passed  by  the  

Appellate Tribunal for Electricity (hereinafter referred  

to as “APTEL” or “Appellate Tribunal”), at New Delhi  

in Appeal No. 176 of 2011, whereby it has dismissed  

the  appeal  preferred  by  the  appellant  against  the  

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final  judgment  and order  dated 17th June,  2011  of  

Tamil  Nadu  Electricity  Regulatory  Commission  

(hereinafter referred to as the “State Commission”)  

in  D.R.P.  No.  12  of  2009.   The  facts  have  been  

noticed in detail both by the State Commission and  

the APTEL, therefore, we shall make a reference only  

to the very essential facts necessary for deciding this  

appeal.  

2. The respondent, a generating company, has entered  

into  a  Power  Purchase  Agreement  (PPA)  with  the  

appellant  on 3rd January, 1997 for the supply of the  

entire Electricity to be generated by the respondent  

for  a  period  of  30  years.   The  respondent  

commenced  commercial  operations  on  26th April,  

2001.  Under the PPA, the respondent has to submit  

an annual invoice indicating the amounts owed under  

the  Tariff.   The  amounts  receivable  from  the  

appellant for the previous year are to be reconciled  

against  the  sum  of  monthly  estimated  payment  

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made by the appellant as soon as possible after the  

end of each year.   Accordingly,  respondent started  

raising monthly invoices from 26th April, 2001 for the  

Electricity supplied by it to the appellant.  According  

to the appellant, invoices of the respondent inter alia  

included  interest  on  debt  sanctioned  but  not  

disbursed, charges towards energy consumed at the  

residential  quarters  at  the  generating  station  etc.  

The  appellant  claims  that  substantial  payments  

towards  the  monthly  invoices  raised  by  the  

Respondent for every month were paid against the  

admitted  amount  in  the  invoice.   The  disputed  

amount was withheld.  The respondent accepted the  

admitted amount paid against each invoice without  

raising  any  dispute  either  with  respect  to  the  

disputed amount or  the substantial  payment made  

by the appellant.  

3. Government  of  India  by  Notification  dated  30th  

March,  1992  incorporated  a  rebate  scheme on  

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the  receivables.   Under  this  scheme,  the  

purchaser, i.e., appellant is entitled to a rebate @  

2.5% if  the payment  is  released within  5  days  

from  the  date  of  invoice  and  @  1%  if  the  

payment is released within 30 days from the date  

of  invoice.   Accordingly,  while  making  the  

payment  of  the  admitted  amount  under  each  

invoice, the appellant deducted the 2.5% rebate,  

as payments were made within 5 days from the  

date  of  the  receipt  of  the  invoice.   These  

payments were accepted by the appellants.  On  

the other hand, respondent adjusted the amount  

received by it in the following month against the  

unpaid  amount  of  the  previous  month.   The  

balance was carried forward by the respondent.  

Since June, 2001, the appellant had been making  

payments as noticed above, and the respondent  

had been adjusting the same on a “FIFO” basis.  

The appellant  claims that  the monthly  invoices  

raised  by  the  respondent  were  only  estimated  

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invoices.   On  the  other  hand,  the  respondent  

claims  that  the  appellant,  from  inception  only  

made  adhoc  payments  periodically  against  the  

monthly invoices raised.  Therefore, each side is  

claiming  that  the  other  did  not  provide  any  

details with regard to the amounts due and the  

amounts  paid.   It  is  also  the  claim  of  the  

respondent  that  the  appellant  had  unilaterally  

made  several  disallowances  without  informing  

the respondent of the same.   

4. It appears that both the parties were dissatisfied  

with  accounting details  provided by the other.  

Ultimately,  the  respondent  issued  a  notice  of  

dispute  resolution  on  26th April,  2007  and  

appointed  its  Vice  President,  Shri  B.  

Sundaramurthy  as  the  representative.  

Continuous  correspondence  was  exchanged  

between the parties from August, 2007 to March,  

2009.   On  1st April,  2009,  respondent  sent  a  

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Notice to the appellant in terms of Article 16 of  

the PPA claiming amounts due/overdue from the  

appellant  and  interest  on  late  payments.   The  

Notice  gives  a  summary  of  claims  of  the  

respondent  till  30th March,  2009  other  than  

towards specified taxes, which was stated to be  

subjudice,  and,  therefore,  not  included  therein.  

The balance of amount payable, according to the  

respondent  was  Rs.1,787,272,534.    The  

appellant  in  reply  informed  the  respondent  on  

16th April,  2009  that  the  matter  was  under  

scrutiny and examination.  Since, there was no  

response,  the  respondent  sent  a  reminder.  

Instead of making the payment of the amounts  

claimed,  the appellant  issued letter  dated 4/5th  

May,  2009  claiming  that  according  to  its  

accounts, sum of Rs.31.12 crores was due to the  

appellant.   On  8th May,  2009,  the  respondent  

requested  the  appellant  “to  provide  the  

particulars and details forming the basis of your  

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claim before 15th May,  2009.”   The respondent  

also requested the appellant to fix a meeting on  

or  before 19th May,  2009 to  discuss  the issues  

and resolve the same.  A meeting took place on  

19th May, 2009 but the dispute was not resolved.

5. Since  the  dispute  was  not  resolved,  the  

respondent filed the petition – D.R.P.  No. 12 of  

2009  before  the  State  commission,  seeking  a  

direction to the appellant to make a payment of  

sum of Rs. 1,89,91,17,264 being a sum due as on  

19th March, 2009, under the invoices raised under  

the PPA and interest thereon in terms of Article  

10.6 of the PPA from the due date till the date of  

actual payment.  After setting out the details of  

the  amounts  due  as  narrated  above,  the  

respondent claimed that, under Article 10.2(b) of  

the PPA, in the event of any dispute as to all or  

any of  the portion of  an invoice,  the appellant  

was  required  to  pay  the  full  amount  of  the  

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disputed charges and thereafter  serve a notice  

on  the  respondent  indicating  the  amount  in  

dispute.   The  dispute  is  to  be  resolved  under  

Article 16, which provides for informal resolution  

of dispute.  Firstly, under Article 16(1), by mutual  

discussions  through  the  designated  

representatives of the parties.  Secondly, in case  

the  parties  are  unable  to  resolve  the  dispute  

pursuant  to  Article  16.1,  it  is  to  be  resolved  

through finally by arbitration in accordance with  

Article 16.2.   

6. Under  Article  16.2,  the  arbitration  has  to  be  

conduced  in  accordance  with  the  rules  of  

Conciliation  and  Arbitration  of  International  

Chamber  of  Commerce  (ICC),  in  effect on  the  

date of the agreement.  The Arbitration Tribunal  

is to consist of three arbitrators, of whom each  

party  should  select  one.   The  two  arbitrators  

appointed  by  the  parties  shall  select  the  third  

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arbitrator, to act as the Chairman of the Tribunal.  

If  the two arbitrators  appointed by the parties,  

fail to agree on a third arbitrator, the ICC Court of  

Arbitration  shall  make  the  appointment.   The  

arbitration shall be held in England.  It is further  

provided  that  notwithstanding  Article  16.8,  the  

laws  of  England  shall  govern  the  validity,  

interpretation,  construction,  performance  and  

enforcement  of  the  provisions  contained  in  

Article 16.2.  The arbitration proceedings shall be  

conducted and the  award  shall  be  rendered in  

English language.  It is further provided that the  

rights and obligations of the parties shall remain  

in full force and effect pending the award in any  

arbitration  proceedings.   The  costs  of  the  

arbitration  shall  be  determined  by  the  arbitral  

tribunal  in  accordance  with  the  Rules.   The  

arbitration  clause  specifically  provides  that  the  

Indian Arbitration Act (Act No. X(10) of 1940/The  

Arbitration and Conciliation Act, 1996 shall not be  

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applicable  to  this  arbitration  provision,  to  any  

arbitration  proceedings  or  award  rendered   or  

any  dispute  or  difference  arising  out  of  or  in  

relation to the agreement.  It is further provided  

that award rendered hereunder shall be a foreign  

award within the meaning of the Foreign Awards  

Act, 1961.   

7. Clause  16.2(i)  specifically  provides  that  the  

parties hereby waive any rights of application or  

appeal to the Courts of India to the fullest extent  

permitted by law in connection with any question  

of law arising in the course of arbitration or with  

respect to any award made.  

8. Clause  16.3  of  the  arbitration  agreement  

provides that the award of the arbitrators shall  

be final and binding.  The other provisions with  

regard  to  the  arbitration  clause  are  incidental  

and, therefore, not necessary to be mentioned.  

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Article 17.8 of the PPA provides as under:-

“17.8 Governing Law: Subject to Sections 16.2(b)  and 16.2(e) hereof, this agreement and the rights  and  obligations  hereunder  shall  be  interpreted,  construed and governed by the substantive laws  of India.”

9. As  noticed  above,  Article  16.2(b)  provides  that  

the arbitration shall be conducted in accordance  

with the ICC Rules notwithstanding Article 17.8.  

Similarly, Article 16.2(e) provides for exclusion of  

Article 17.8.

10. Upon completion of the pleadings and after  

hearing the parties, the State Commission by an  

order dated 17th June, 2011, allowed the petition  

filed by the respondent for refund of the excess  

rebate availed by the appellant contrary to the  

terms of PPA and also ordered the respondent to  

redraw the monthly invoices in accordance with  

the directions issued by the State Commission.  

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The State Commission held that it is competent  

to  adjudicate upon the dispute.   The limitation  

period  prescribed  in  the  Limitation  Act,  1963  

would  not  apply  to  the  proceeding  before  the  

Commission, delay and laches would apply.  The  

appellant  is  liable  to  pay  interest  to  the  

respondent in terms of Clause 10.6 of the PPA till  

payment.  Conversely, if the appellant has made  

excess  payment  against  each  monthly  invoice  

compared to the corresponding redrawn monthly  

invoice, the respondent is liable to pay interest in  

terms  of  Article  10.6  of  the  PPA.   The  rebate  

would  be  admissible  to  the  appellant,  if  the  

redrawn  monthly  invoice  and  the  original  

payment  made  by  the  appellant  against  the  

invoice of that month matches or if the appellant  

has made excess payment, the respondents were  

directed to redraw the annual invoice for 2001-

2002, 2002-2003, 2003-2004, 2004-2005, 2005-

2006 and 2006-2007, as at September of each  

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year  to  capture  the  gains  to  the  appellant  on  

account of lower interest rates and gains to the  

respondent  on  account  of  higher  floating  rate.  

Certain  other  directions  were  also  issued.  The  

petition was accordingly disposed of.  

11. Aggrieved  by  the  aforesaid  directions,  the  

appellant filed Appeal No. 176 of 2011before the  

APTEL.  Before  the  APTEL,  in  the  appeal,  the  

appellant raised the following issues:-

(a) Entitlement of the Appellant to Rebate.

(b) Jurisdiction of the State Commission u/s 86(1)

(f) of the Act, 2003;  

(c) First  in  First  Out  method;  for  adjustment  of  

payment.

(d) Limitation, delay and laches;

(e) Bar under Order 2 Rule 2 CPC;

(f) Non filing of Annual Invoices;

(g) Determination of capital cost;

(h) Deduction on the monthly invoices;

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(i) Excess Claims in the monthly invoice – unjust  

enrichment;

(j) Interest on Late Payments.  

12. After  hearing  the  learned  counsel  for  the  

parties,  APTEL  has  held  that  under  Article  

10.2(a),  10.2(b)(i)  and 10.2(e),  the appellant  is  

obliged to pay full amount of the invoice within  

the due date to be eligible for the rebate of 2.5%  

or  1%  as  the  case  may  be.   Admittedly,  the  

appellant neither paid the full amount for every  

invoice nor  raised the dispute within  one year.  

The  appellant  was  held  to  be  not  eligible  for  

rebate for reduction of the invoice funds.  

13. With  regard  to  the  second  issue,  i.e.,  

jurisdiction and scope of Section 86(1)(f) of the  

Act, relying on the judgment of this Court in the  

case  of  Gujarat  Urja  Vikas  Nigam  Ltd. Vs.  

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Essar  Power  Ltd.  1  ,  it  is  held  that  the  State  

Commission  has  the  discretion  to  decide  as  to  

whether  the  dispute  should  be  adjudicated  by  

itself  or  it  should  be  referred  to  an  arbitrator.  

The  appellant  can  not  dictate  that  the  State  

Commission ought to have referred the dispute  

to an arbitrator.  It is further held that the State  

Commission  can  adjudicate  all  the  disputes  

including the dispute on money claims between  

the Licensees and the Generating Companies.  In  

coming to the aforesaid conclusion, APTEL relied  

on its earlier order rendered in  Neyveli Ignite  

Corporation Vs. Tamil Nadu Electricity Board  

in Appeal No. 49 of 2010 dated 10th September,  

2010.

14. On the third issue on the method adopted by  

the  respondent  for  adjustment  of  the  payment  

made by the appellant on the “FIFO” basis, APTEL  

has  approved  the  decision  of  the  State  

1 (2008) 4 SCC 755

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Commission that the respondent was justified in  

adopting  the  aforesaid  method,  in  accordance  

with Section 60 of the Indian Contract Act, 1872.  

15. On  the  fourth  issue  relating  to  the  

applicability  of  the  limitation  Act  or  delay  and  

laches, it has been held that the Limitation Act  

would  not  apply  to  the  proceedings  under  the  

Electricity Act.  On facts, it has been held that the  

issue of limitation does not arise since Sections  

60  and  61  of  the  Indian  Contract  Act  would  

permit  the  creditor  to  adjust  the  amount  on  

“FIFO” method.  APTEL has also held that the bar  

under Order 2 Rule 2 of the CPC would not be  

applicable in the facts of this case.  With regard  

to  the  non-filing  of  the  annual  invoices  by  the  

respondent, it has been held that the respondent  

should  have  filed  the  annual  invoices  in  time.  

Therefore,  the  direction  issued  by  the  State  

Commission  to  the  respondent  to  redraw  the  

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annual  invoices has been affirmed.  The seventh  

issue  related  to  determination  of  capital  costs,  

the State Commission in its order under appeal  

had directed the appellant to pay the invoice in  

full  as  claimed  by  the  respondent  without  

determining  the  capital  costs  by  getting  the  

petition for finalization of capital costs, which was  

pending  in  the  State  Commission  finally  

adjudicated.  APTEL has approved the findings of  

the  State  Commission  that  the  appellant  had  

adopted  delaying  tactics  by  not  cooperating  in  

the finalization of the capital costs.   

16. On issue No. 9, it has been held that as the  

respondent has given up the claim on account of  

capital  costs  incurred  on  Gas  Boosting  Station  

and  Conditioning  System  and  that  the  Power  

Company  has  been  directed  to  redraw  the  

monthly invoices by the State Commission,  the  

issue would not survive.  Finally, on issue No. 10,  

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which related to interest on late payments, it has  

been  held  that  the  respondent  company  is  

entitled  to  interest  on  late  payment  of  dues  

under the provisions of the PPA.

17. The  present  appeal  is  directed  against  the  

aforesaid directions issued by APTEL.  

18. We  have  heard  learned  counsel  for  the  

parties.  

19. Mr.  R.F.Nariman,  learned  senior  counsel  

appearing for  the appellant  has submitted that  

the disputes raised in the present proceeding are  

not  adjudicable  by  the  State  Commission.  Mr.  

Nariman submitted that the primary functions of  

the State Commission being advisory, regulatory  

and recommendatory, the adjudication permitted  

under  Section  86(1)(f)  is  only  restricted  to  the  

disputes which are fairly relatable to the primary  

functions.  The  cardinal  issue,  according  to  Mr.  

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Nariman, which ought to have been decided by  

the  State  Commission,  was  with  regard  to  the  

nature of a dispute.  The State Commission has  

failed to address the issue whether the dispute is  

unconnected  to  advisory  functions.  This  was  

necessary  as  the  respondent  had made only  a  

pure  money  claim  which  could  only  be  

adjudicated  either  by  the  Civil  Court  or  the  

Arbitral Tribunal upon a reference being made to  

that effect. Mr. Nariman submits that the State  

Commission  illegally  declined  to  exercise  its  

discretion to refer the dispute to arbitration. The  

dispute between the parties being purely of civil  

nature  required  decision  on  complex  issues  of  

fact and law. Since the dispute arises out of the  

working and interpretation of the PPA, the State  

Commission would not have sufficient knowledge  

of law to adjudicate the issues involved.       

20. The next submission of Mr.  Nariman is  that  

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the State Commission cannot be an adjudicatory  

body,  as  it  does  not  have  the  trappings  of  a  

court, which is normally manned exclusively by  

Judges.  Under  Section  84,  there  is  no  

requirement  for  the  Chairperson  or  member  of  

the State Commission to  be a  Judge of  a  High  

Court. The Members are required to be persons  

of  ability,  integrity  and  standing  who  have  

adequate  knowledge  of,  and  have  shown  

capacity  in  dealing  with  problems  relating  to  

engineering, finance, commerce, economics, law  

or  management.  Although  sub-section  (2)  

permits  the  State  Commission  to  appoint  any  

person as the Chairperson from amongst person  

who is or has been a Judge of a High Court, no  

appointment  from  the  aforesaid  category  of  

persons has been made to the State Commission.  

Mr.  Nariman  pointed  out  that  the  State  

Commission which heard the petition filed by the  

respondent did not have a Judicial  Member. He  

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further  submits  that  the  State  Commission  

functioning without a Judicial Member is contrary  

to the law laid down by this Court in  Union of  

India  vs.  R.Gandhi,  President,  Madras  Bar  

Association  2  .    Learned  senior  counsel  

elaborated  that  by  virtue  of  Section  94(1),  the  

State  Commission  has  been  vested  with  the  

power  of  a  Civil  Court  under  the  Code  of  Civil  

Procedure. Under sub-section (2) of Section 94,  

the  State  Commission  has  the  power  to  issue  

interim  orders.  Section  55  provides  that  all  

proceedings  before  the  State  Commission  shall  

be  deemed  to  be  judicial  proceedings  within  

Sections  193  and  228  of  the  IPC.  It  is  further  

provided  that  appropriate  commission  shall  be  

deemed  to  be  a  civil  court  for  the  purpose  of  

Sections  345  and  346  of  the  Code  of  Criminal  

Procedure, 1903. (2 of 1974). By virtue of Section  

146, the State Commission has been empowered  

2 (2010 (11) SCC 1)

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to  impose  punishment  including  imprisonment,  

fine and additional  fine.  He further emphasized  

that  the  State  Commission  in  deciding  a  lis,   

between  the  respondent  and  the  appellant,  

discharged  judicial  functions  and  exercised  

judicial  power  of  the  State.  Such  exercise  of  

judicial power can be either by the Civil Court or  

a  Tribunal  having  atleast  one  Judicial  Member.  

The State Commission exercises judicial functions  

of  far  reaching  effect,  therefore,  it  must  have  

essential trappings of a court. In support of this  

submission,  learned  senior  counsel  relied  on  

Kihoto Hollohan vs. Zachillhu3. Subsequently,  

the  appellant  has  submitted  additional  written  

submission  which  can  also  be  appropriately  

noticed  at  this  stage.  It  is  submitted  that  the  

aforesaid infirmity in the constitution of the State  

Commission can not be cured on the basis that  

the Appellate Tribunal would always be headed  

3 (1992 Supp.(2) SCC 651)

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by  either  a  sitting  Judge/former  Judge  of  the  

Supreme  Court  or  Chief  Justice/former  Chief  

Justice of a High Court as well  as having other  

Judicial Members. In support of this submission,  

learned  senior  counsel  relied  on  Institute  of  

Chartered  Accountants  of  India  vs.  

L.K.Ratna  &  Ors.  4   and  Union  Carbide  

Corporation  &  Ors.  vs.  Union  of  India  &  

Ors.  5  .    Learned senior counsel submitted that an  

adjudication  of  a  lis by  a  tribunal  without  a  

judicial  member  would  be  an  anathema  to  

judicial process. It would directly impinge on the  

impartiality  and  the  independence  of  the  

Judiciary. It would also undermine the principle of  

separation  of  powers  which  is  sought  to  be  

strictly maintained by the Constitution of India.  

Mr. Nariman emphasized that this Court carved  

out an exception to the rule of necessarily having  

a Judicial Member of a Tribunal, only, in the case  

4 (1986 ) 4 SCC 537  5 (1991) 4  SCC 584

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of  highly  specialized  fact  -  finding  tribunals.  In  

the written submissions,  the appellant  has also  

relied  upon  judgments  of  this  Court  in  Brahm  

Dutt  vs.  Union  of  India  6  ,  S.P.  Sampath  

Kumar vs. Union of India & Ors.  7  . It is further  

submitted  by  Mr.  Nariman  that  the  disputes  

arising between the generating company and a  

licensee  are  decided  by  the  Commission  by  

holding  meetings  of  the  Members.  In  case  the  

members of the Commission are equally divided,  

the  Presiding  Member  would  have  the  casting  

vote. Such procedure, submits Mr. R.F. Nariman,  

is unknown to judicial proceedings.

21. Mr.  Nariman  then  submitted  that  the  

Chairman of APTEL is required under Section 113  

of the Electricity Act to be a person who is or has  

been a Judge of the Supreme Court or the Chief  

Justice  of  a  High  Court.  A  person  can  also  be  

6 (2005) (2) SCC 431 7 (1987) (1) SCC 124

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appointed as a Member of the Appellate Tribunal  

who is or has been or is qualified to be a Judge of  

the  High  Court.  This,  according  to  him,  clearly  

shows that the adjudicatory functions performed  

by the State Commission as well as the Appellate  

Tribunal  are judicial  in  nature and ought  to  be  

performed only by the tribunal which has either a  

Chairman or a Member(s) who are or were Judges  

of  the  Supreme  Court  or  a  High  Court.  Mr.  

Nariman  submitted  that  since  the  State  

Commission  was  not  constituted  in  accordance  

with  law  and  the  order  having  been  passed  

without any judicial member, is a nullity  non-est  

in law. He submitted that the proceedings of the  

Commission are coram non judice and, therefore,  

liable to be set aside.  

22. The next submission of Mr.  Nariman is  that  

the  claim  of  the  respondent  would  have  been  

held  to  be  time  barred  on  reference  to  

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arbitration. The respondent made a money claim  

in  the  year  2009  for  the  alleged dues  starting  

from the year 2001 onwards. Therefore, had the  

dispute been referred to arbitration in terms of  

dispute resolution clause, contained in Article 16  

of the PPA, the proceeding of the arbitral tribunal  

would be governed by the Limitation Act, 1963.  

The State Commission has erred in law in holding  

that by virtue of Section 2(4) of the Arbitration  

Act, 1996, the applicability of Section 43 would  

be excluded. This, according to Mr.  Nariman, is  

one  more  reason  why  the  State  Government  

ought not to have entertained the money claim  

of the respondent and ought to have relegated  

the parties to arbitration. In any event, the claim  

of the respondent ought to have been dismissed  

for delay and laches. He submits that even if the  

Limitation Act was not applicable, the maximum  

period of time for filing a suit,  in a Civil  Court,  

ought to be taken as a reasonable standard by  

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which the issues with regard to such delay and  

laches  can  be  measured.  In  support  of  this  

submission  learned  counsel  relied  on  the  

judgment  of  this  Court  in  State of   M.P.  vs.  

Bhailal Bhai & Ors.  8  . He made a reference to  

the observations made by this Court at Para 273.  

Learned senior counsel also relied on Municipal  

Corporation of greater Bombay vs. Bombay  

Tyres  International  Ltd.  &  Ors.  9   and  

Corporation Bank & Anr. vs. Navin J. Shah  10  .    

23. Mr.  Nariman  then  submits  that  the  “FIFO”  

method  of  adjustment  of  payment  was  not  

available to the respondents. It is submitted that  

the reliance placed on Sections 60 and 61 of the  

Contract Act by the respondents is misconceived.  

He submits  that  the respondents  have wrongly  

claimed  that  they  have  been  adjusting  the  8 (1964 (6) SCR 261 9 1998 (4) SCC 100 (at page 104 para 9) 10 2000 (2) SCC 628 (at page 635 para 12)  

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monthly  payment  made  by  the  appellant  not  

against  the  monthly  invoices  but  against  the  

earlier  pending  bills.  The  respondents  are  also  

wrongly  claiming  that  the  appellant  had  been  

duly  informed  that  the  payments  have  been  

received on “FIFO” basis. Mr. Nariman points out  

that the respondents are wrongly relied on letters  

dated 25th June, 2001, 2nd December, 2003 and  

10th September, 2001. According to Mr. Nariman,  

none  of  three  letters  support  the  case  of  the  

respondents that the appellant had either agreed  

to or acquiesced in the monthly payments made  

by him within 5 business days of the presentation  

of  the  monthly  invoices  being  adjusted  on  the  

FIFO  basis.  Mr.  Nariman  points  out  that  the  

respondent’s  own  letter  dated  20th November,  

2006 demolishes the case of respondent based  

on FIFO. He further submits that if the parties are  

agreed to the FIFO and had been acting on the  

same, as claimed by the respondents, then there  

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would have been no need for the respondents to  

write letters dated 20th November, 2006 and 23rd  

April,  2007  regarding  their  objections  to  the  

disallowance made by the appellant  or  seeking  

an  explanation/clarification  from  the  appellant  

with  respect  to  the  payments  made  by  the  

appellant and referred to in the said letters. The  

respondent  was  well  aware  that  the  appellant  

had been making the monthly payments against  

the respective monthly invoices.  Therefore,  the  

respondents can take no benefit of Sections 60  

and  61  of  the  Contract  Act.  Therefore,  the  

impugned order passed by the State Commission  

as  well  as  APTEL  being  based  on  these  two  

sections are unsustainable.  

24. It  is  further  submitted by Mr.  Nariman that  

the  respondents  have  failed  to  file  annual  

invoices at  the end of  each year  for  the years  

2001-2006.  The  invoices  for  these  years  were  

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filed only on 18th July, 2007. This is in breach of  

Clause 10.2(b)(ii) of the PPA which required the  

respondents to submit annual invoices setting of  

the details of the amounts owed under the tariff  

and  reconciliation  of  the  actual  amounts  

receivable from the appellant for the prior year  

against the sum of monthly estimated payments  

made by the appellant. Similarly, if payments are  

due  by  the  respondent  to  the  appellant,  the  

stated amount has to be paid to  the appellant  

and vice versa.  The State Commission rejected  

the  explanation  given  by  the  respondent  for  

failure to submit the annual invoices, but instead  

of  dismissing  the  claim  of  the  respondents,  a  

direction has been made to redraw  the annual  

invoices  of  each year  as  on 30th September  of  

each year.  Mr.  Nariman further  points  out  that  

the  respondent,  upon redrawal  of  the invoices,  

had  agreed  to  refund/adjust  a  sum  of  Rs.45  

crores, being the excess amount charged by the  

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respondent from the appellant. The said amount  

has not been paid till date.

25. Mr. Nariman points out that the only dispute  

between the  parties  in  the  present  litigation  is  

only with regard to the question as to whether  

the appellant was entitled to avail rebate of 2.5  

% on the part  payment of the monthly invoice  

within  5  business  days  from  the  date  of  the  

presentation  of  the  monthly  invoice.  It  is  

submitted that in the initial petition filed by the  

State  Commission  it  was  not  the  claim  of  the  

respondent  that  the  appellant  wrongly  availed  

rebate of 2.5%. There were no pleadings to that  

effect. Therefore, the findings and conclusions of  

the State Commission are liable to be set aside.  

Mr. Nariman submits that if one reads the PPA as  

a  whole,  it  would  become  apparent  that  the  

payment of the full invoice amount within 5 days  

of  the  date  of  raising  of  invoice  is  not  a  pre-

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condition  for  seeking  a  rebate  of  2.5%  of  the  

invoice amount. Clause 10.2(a) does not make it  

a pre-condition for payment of the full amount of  

invoice within 5 business days in order to avail  

the  rebate  of  2.5%.  Clause  10.2(b)(i)  indicates  

that the full amount is to be paid on the due date  

of an invoice. Due date is defined in Article 10.2  

(a) as 30 days from the date of handing over of  

the invoice.   Mr.  Nariman then submits that a  

conjoint  reading  of  these  clauses  would  show  

that in order to be eligible for a rebate, at the  

rate of 2.5%, the payment has to be made on the  

30th day  of  the  presentation  of  the  invoice.  

Therefore, any payment made within 5 business  

days entitled the appellant to claim 2.5% rebate  

on such payment. It is further submitted by Mr.  

Nariman that rebate is  nothing but refund of a  

part  of  the  interest  loaded  upfront  on  the  

Working  Capital.   The  estimated  monthly  tariff  

invoice  has  two  components  –  (i)  the  fixed  

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capacity  charges  (FCC)  and  (ii)  variable  fuel  

charges (VFC). The rebate of 2.5 % is allowed in  

view of the notification dated 30th March,  1992  

issued by the Ministry of Power, Government of  

India, in exercise of powers under sub-section (2)  

of Section 43 of the Electricity Supply Act, 1948.  

The aforesaid notification has been made part of  

the PPA as Schedule U thereof. Schedule A of the  

PPA deals with Tariff. Interest on the receivable  

equivalent to 2 months’ average billing for sale of  

electricity  is  loaded  upfront  on  the  monthly  

invoice. Part of this is refunded by way of rebate  

of 2.5 % if payment is made within 5 days and at  

1% if it is made after 5 days but upto the 29 th day  

from  the  presentation  of  the  monthly  invoice.  

Interest  of  the  respondent  upto  the  30th day  

loaded  upfront  in  the  invoice.  Thereafter  the  

interest of the respondent is protected from the  

due date till payment is made in accordance with  

the  Clause  10.6(e)  of  the  PPA.  Therefore,  the  

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appellant is entitled to rebate if payment is made  

within  5  days  or  within  29th day  of  the  

presentation of the invoice. Lastly, it is submitted  

by  Mr.  Nariman  that  the  appellant  has  been  

made the payment  within  5  days only  to  avail  

rebate of  2.5%.  One such payment  was made,  

the respondent had the use of money for a period  

of 25 days and correspondingly the appellant had  

been deprived of  the use of  such money for  a  

period of 25 days every month. He submits that  

absent  the  contract  between  the  parties,  the  

appellant would have made the payment only on  

the 30th day and not within 5 days.  In any event,  

60 days of interest on the Working Capital  had  

already  been  loaded  upfront.   Only  30  days  

interest was being returned in the form of rebate  

on  the  amount  paid  by  the  appellant  within  5  

days.   In  order  to  make the payment  within  5  

days, the appellant often had to avail  the loan.  

Out  of  Rs.240  crores,  which  the  appellant  has  

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already paid to the respondent under the Orders  

of the State Commission, almost Rs.235 crores is  

rebate.   The respondent is now claiming more  

than Rs.500 crores towards interest at compound  

rate  on  Rs.  240  crores  paid  by  the  appellant,  

contrary  to  the provisions  of  the  PPA.   On the  

basis of the above, he submits that allowing the  

claim of the respondent for refund of the rebate  

amount  would  amount  to  unjust  enrichment.  

Further,  the award of  interest  on the aforesaid  

amount  of  rebate  would  amounts  to  double  

unjust enrichment.   

26. On  the  other  hand,  it  is  submitted  by  Mr.  

Harish  Salve  and  Mr.  Jayant  Bhushan  learned  

senior counsel  that orders passed by the State  

Commission as well as the Appellate Tribunal are  

just  and  proper  and  do  not  call  for  any  

interference.  The  appellant  has  been  granted  

instalments  to  make  the  payment  of  Rs.  240  

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crores.  It  is  also pointed out  that  the following  

order  passed  by  the  State  Commission  in  the  

independent legal proceeding relating to fixation  

of capital cost on 15th July, 2013, the claim was  

updated  upto  20th August,  2013  for  invoices  

raised  till  30th June,  2011,  in  a  gross  sum  of  

Rs.695 crores. After giving credit of Rs.145 crores  

(including interest computed at the interest rates  

applicable to PPN) the net claim, subject-matter  

of the present appeal, stands at Rs.550 crores.  

27. With  regard  to  the  submission  of  the  

appellant  relating  to  Section  86(1)(f),  it  is  

submitted  that  the  matter  is  no  longer  res  

integra as it is squarely covered by the judgment  

of this Court in Gujarat Urja Vikas Nigam Ltd.  

(supra).  It  is  submitted  by  Mr.  Salve  and  Mr.  

Bhushan learned senior counsel appearing for the  

respondent  that  Section  86(1)(f)  gives  the  

discretion  the  State  Commission  either  to  

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adjudicate the disputes itself or to refer the same  

to  arbitration.  By  making  detailed  reference  to  

the findings recorded by APTEL, Mr. Salve and Mr.  

Bhushan submit that all the issues raised by the  

appellant are without any merit as it cannot be  

supported either in facts or in law.  

28. It is submitted by the learned senior counsel  

that even Article 16(2) provides for international  

arbitration  under  the  ICC  Rules.  Article  16.2(h)  

specifically  excludes  the  application  of  the  

Arbitration and Conciliation Act of 1996 and the  

Arbitration Act of 1940. Article 16.2(e) provides  

that  the  laws  of  England  shall  govern  the  

arbitration  agreement  in  contra-distinction  to  

Indian law applying to the PPA. In any event, the  

appellant  cannot  be  permitted  to  claim  a  

reference of arbitration as a matter of right. He  

points out that at the initial stage, the appellant  

only  referred  to  the  existence  of  an  informal  

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dispute  resolution  provision  and  provision  for  

arbitration  under  Article  16 of  the PPA.  Having  

taken such a preliminary objection, the appellant  

proceeded to subject itself to the jurisdiction of  

the State Commission. In fact the entire claim of  

the respondent was answered by the appellant  

on merit in the written statement, filed before the  

State  Commission.  Even  if  the  written  

submissions  before  the  State  Commission,  the  

appellant  principally  contended that  the matter  

ought to be referred to the adjudication by a civil  

court.   The  appellant  failed  to  make  any  

application either under Section 8 or Section 45  

of  the  Arbitration  and  Conciliation  Act,  1996  

seeking  reference  to  arbitration.  It  is  further  

pointed  out  that  this  Court  in  Gujarat  Urja  

Vikas Nigam Ltd. (supra) has clearly laid down  

the law that the existence of an arbitration clause  

in  a  contract  does  not  act  as  an  ouster  of  

jurisdiction  of  the  jurisdictional  forum.  The  

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appellant having submitted to the jurisdiction of  

the  State  Commission  and  having  invited  the  

findings  cannot  now  seek  to  challenge  the  

jurisdiction  on  the  ground  of  existence  of  

arbitration  clause.   Mr.  Salve  and Mr.  Bhushan  

relied on the judgment of this Court in Svenska  

Handelsbanken  vs.  Indian  Charge  Chrome  

Ltd. 11 and Booz Allen & Hamilton Inc. vs. SBI  

Home Finance Ltd.  12.  It  is  further  submitted  

that the proceeding before the State Commission  

would  not  be  vitiated  on  the  ground  that  its  

constitution  is  contrary  to  the ratio  of  law laid  

down  in  the  case  of  R.  Gandhi (supra).  The  

appellant has not even raised a single ground of  

any prejudice being caused by the absence of a  

judicial member before the State Commission. In  

any event, the aforesaid submission contradicts  

the appellant’s other submission that the matter  

ought to have been referred to arbitration under  

11 1994 (2) SCC 155 12 2011 (5) SCC 532  

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the Arbitration Act. There is no requirement that  

the arbitrator should be a judicial person. Even in  

the  absence  of  Electricity  Act,  2003  and  the  

regulatory  bodies  contemplated  therein,  the  

instant dispute would have been subject matter  

of an arbitration proceeding as per the provision  

of the PPA and not a civil suit in the civil court.  

29. Answering  the  submission  of  the  appellant  

that  the  respondent  has  illegally  adjusted  the  

payments on the concept of FIFO.  It is submitted  

that  the  State  Commission  as  well  as  the  

Appellate  Tribunal  have correctly  held  that  the  

procedure adopted by the respondent is covered  

under Section 60 and 61 of the Contract Act.  Mr.  

Salve  and  Mr.  Bhushan  submit  that  admittedly  

the  appellant  did  not  make  full  payment  in  

relation  to  any  of  the  invoices.   The  State  

Commission  as  well  as  the  Appellate  Tribunal  

have concurrent findings that the appellant was  

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duly  notified  that  the  payment/part  payment  

made  were  being  adjusted  on  FIFO  basis.  The  

appellant  never  refuted  or  rejected  to  such  

practice  adopted  by  the  respondent.  The  

appellant  submitted  that  it  was  undergoing  

temporary financial strain.  It is also pointed out  

by Mr. Salve and Mr. Bhushan that the invoices  

were accepted in full.  The statement was made  

by the appellant that part payment being made  

would  not  prejudice  the  right  of  respondent  to  

receive  the  full  payment  against  the  invoices.  

The  correspondence  between  the  parties  has  

been noticed by the APTEL in extenso. Coming to  

the  legal  position,  Mr.  Salve  and  Mr.  Bhushan  

submit  that  APTEL  having  considered  the  

statutory provisions as well as judicial precedents  

have come to the conclusion that the appellant  

was duly intimated that the payment made would  

be  applied  by  the  respondents  on  FIFO  basis.  

Therefore, Section 59 of the Indian Contract Act  

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would  not  be  applicable.   On  the  issue  of  

limitation,  it  is  submitted  that  neither  the  

Limitation  Act  nor  the  principle  of  delay  and  

laches  would  apply  to  the  present  case.   It  is  

submitted by Mr. Salve and Mr. Bhushan that the  

provision  of  Limitation  Act,  1963  would  not  be  

applicable  to  the  proceedings  before  the  State  

Commission.   The Electricity  Act,  2003 being a  

complete  code,  which  is  self  contained  and  

comprehensive,  the provision of  Limitation  Act,  

1963 would not apply. Mr. Salve and Mr. Bhushan  

relied  on  the  Consolidated  Engineering  

Enterprises Vs.  Principal  Secretary,  

Irrigation Department & Ors.  13    In support of  

this  submission,  the  Limitation  Act  would  be  

inapplicable  to  Tribunals  and  quasi-judicial  

authorities.   Replying  to  the  submission  of  Mr.  

Nariman  that  in  arbitration  proceedings,  the  

appellant  would  be  entitled  to  the  benefit  of  

13 (2008) 7 SCC 169

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Limitation Act, 1963, Mr. Salve and                 Mr.   

Bhushan  submit  that  in  view  of  the  specific  

provisions  contained  in  Section  2(4)  of  the  

Arbitration and Conciliation Act, 1996, Section 43  

of the Arbitration Act would not be applicable.  In  

any event, the matter is squarely covered by the  

judgment  in  Gujarat  Urja (supra).   Mr.  Salve  

and  Mr.  Bhushan  reiterated  that  the  issue  of  

limitation  does  not  even  arise  in  the  present  

dispute due to the FIFO adjustment effected by  

the respondent.   

30. Addressing  the  issue  of  the  rebate  being  

available  to  the  appellant,  Mr.  Salve  and  Mr.  

Bhushan  submit  that  APTEL  has  rendered  

detailed findings on the issue.  The submissions  

made  before  this  Court  is  a  repetition  of  the  

submissions  made  before  the  APTEL.    They  

submit that such findings recorded by the APTEL  

can not be reopened in this Court except on the  

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ground that such findings are either arbitrary or  

based on no evidence.  In fact, the appellant has  

illegally arrogated to itself the right to adjudicate,  

by  unilaterally  assuming  rights,  which  are  not  

available  to  it.  Rather  than complying with  the  

requirements  of  the  PPA  of  making  payment  

within  due  date,  the  appellant  had  disallowed  

certain payments on the ground that the claims  

of the appellant were doubted.  These actions of  

the appellant were contrary to Articles 10.3 and  

10.4 of the PPA which deals with Letter of Credit  

and Escrow.  Even if the claim of the appellant is  

accepted that the invoices were only based on  

the estimates the appellant had no authority of  

making  unilateral  deductions  in  the  monthly  

invoices  and  make  only  ad-hoc  payments  

contrary to the provisions of PPA.  It is submitted  

that the monthly invoices consists of both actual  

as also estimates in respect of certain items.  The  

annual  invoices  raised  on  the  basis  of  a  

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reconciliation  at  the  end  of  the  year,  since  

actuals  become  known  in  respect  of  such  

portions  of  monthly  invoices,  which  were  

calculated on the basis  of  the estimates.    Mr.  

Salve and Mr. Bhushan then submit that interest  

on late payments have been rightly granted both  

by the State Commission as well as the APTEL.  

The interest has been calculated on the basis of  

Article 10.6 of the PPA.  Since the loans taken by  

the  respondent  are  payable  at  compounded  

interest rates, the later payment interest payable  

by  the  appellant  would  also  be  at  the  

compounded interest rate as per Article 10.6 of  

the PPA.  Mr. Salve and Mr. Bhushan relied on the  

judgment of this Court in Central Bank of India  

Vs.  Ravindra & Ors.  14   and  Indian Council for  

Legal Action Vs. Union of India  15    

31. During the course of  hearing,  the appellant  

14 (2002) 1 SCC 367 15 (2011)  8 SCC 161

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had taken out I.A. No. 5 of 2013 and I.A. No. 6 of  

2013.  I.A. No. 6 is for the impleadment and I.A.  

No. 5 is for the direction.  

I.A. Nos. 5 and 6 of 2013

32. It is submitted by Mr. Salve and Mr. Bhushan  

that  in  I.A.  No.  6,  the  appellant  has  made  a  

prayer to implead IOCL as the respondent.  This  

application can not be allowed as IOCL is not a  

party to the contract.   The attempt to implead  

third  party  is  only  an  effort  to  delay  the  

proceedings by the appellant.   It is pointed out  

that IOCL is either necessary or a proper party for  

adjudication of the disputes arising between the  

appellant and the respondents.  

33. I.A. No. 5 of 2013, according to Mr. Salve and  

Mr. Bhushan has been filed with the sole object of  

avoiding payments.  The appellant has made wild  

allegations  of  fraud  without  any  foundational  

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facts  being  pleaded  either  before  the  State  

Commission or before the APTEL.  The appellant  

ought  not  to  be  permitted  to  resolve  such  

disputes. The application according to Mr. Salve  

and Mr. Bhushan deserves to be dismissed.  

34. We have considered the  submissions  made  

by the learned counsel  for  the parties.   In  our  

opinion, the issues raised by the appellant with  

regard  to  the  constitution  of  the  State  

Commission  and  its  discretion  to  either  

adjudicate  or  refer  a  particular  dispute  to  

arbitration is  no longer  res integra.   Therefore,  

even  though,  Mr.  Nariman  has  very  forcefully  

contended  that  the  issue  ought  to  be  

reconsidered, we are not inclined to adopt such a  

course.  In  our  opinion,  this  Court  has  

comprehensively addressed all the issues, on the  

scope and  ambit  of  Section  86  in  general  and  

Section 86(1)(f) in particular of the Act. We are  

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also not inclined to accept the submission that  

since  the  appellant  had  made  a  request  for  a  

reference of the dispute to arbitration, the State  

Commission ought to have made the reference.  

We are also not able to accept the submission of  

Mr.  Nariman  that  the  State  Commission  was  

dealing with only a pure and simple money claim.  

We  also  do  not  find  much  substance  in  the  

submission  that  the  issues  having  been  raised  

being complex and intricate ought to have been  

left to be decided either by the Arbitral Tribunal  

or by the Civil  Court.   APTEL in the impugned  

order, in our opinion, has correctly culled out the  

ratio  of  the  judgment  of  this  Court  in  Gujarat  

Urja (supra).   It is also correctly held that the  

appellant  can  not  dictate  that  the  State  

Commission ought to have referred the dispute  

to arbitration.  

35.  In the aforesaid judgment, the question that  

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arose  before  this  Court  was  whether  the  

application  for  appointment  of  an  arbitrator  

under  Section  11  of  the  Arbitration  and  

Conciliation Act, 1996 was maintainable in view  

of  the  statutory  provisions  contained  in  the  

Electricity Act, 2003.  

36.  It was submitted on behalf of the appellant  

(licensee) that by Virtue of Section 86(1)(f) of the  

Act of 2003, the dispute between the licensees  

and  the  generating  companies  can  only  be  

adjudicated upon by the State Commission either  

by  itself  or  by  an  arbitrator  to  whom  the  

Commission  refers  the  dispute.   Therefore,  the  

High  Court  had  no  jurisdiction  under  Section  

11(6) to refer the dispute between the licensees  

and  the  generating  company  to  an  arbitrator,  

since such power of adjudication of reference has  

been specifically vested in the State Commission.  

Since the Electricity Act is a special law, dealing  

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with  arbitrations  of  dispute  between  the  

licensees  and  the  generating  companies,  the  

provision  of  Section  11  of  the  Arbitration  and  

Conciliation Act would be inapplicable.  The High  

Court  has,  therefore,  committed  an  error  of  

jurisdiction  in  allowing  the  application  under  

Section  11(6)  and  referring  the  matter  to  

arbitration to a Former Chief Justice of India.  On  

the other hand, it was submitted on behalf of the  

generating companies that the provisions of the  

Electricity  Act  are  in  addition  to  and  not  in  

derogation of any other law for the time being in  

force.  The provisions contained in Sections 173  

and 174 would not affect the applicability of the  

Arbitration Act,  1996,  in  view of  the provisions  

contained in  Section 175 of  the Electricity  Act.  

Upon consideration of the aforesaid submission,  

this Court has held as follows:-

“26. It may be noted that Section 86(1)(f) of the  Act of 2003 is a special provision for adjudication  

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of  disputes  between  the  licensee  and  the  generating  companies.  Such  disputes  can  be  adjudicated upon either by the State Commission  or the person or persons to whom it is referred for  arbitration.  In  our  opinion  the  word  “and”  in  Section  86(1)(f)  between  the  words  “generating  companies”  and  “to  refer  any  dispute  for  arbitration”  means  “or”.  It  is  well  settled  that  sometimes “and” can mean “or” and sometimes  “or” can mean “and” (vide G.P. Singh’s Principles  of  Statutory  Interpretation,  9th  Edn.,  2004,  p.  404).

27. In  our  opinion  in  Section  86(1)(f)  of  the  Electricity Act, 2003 the word “and” between the  words  “generating  companies”  and  the  words  “refer any dispute” means “or”,  otherwise it  will  lead to an anomalous situation because obviously  the  State  Commission  cannot  both  decide  a  dispute itself and also refer it to some arbitrator.  Hence the word “and” in Section 86(1)(f) means  “or”.

28. Section  86(1)(f)  is  a  special  provision  and  hence  will  override  the  general  provision  in  Section 11 of the Arbitration and Conciliation Act,  1996  for  arbitration  of  disputes  between  the  licensee  and  generating  companies.  It  is  well  settled that the special law overrides the general  law.  Hence,  in  our  opinion,  Section  11  of  the  Arbitration  and  Conciliation  Act,  1996  has  no  application  to  the  question  who  can  adjudicate/arbitrate  disputes  between  licensees  and generating companies, and only Section 86(1) (f) shall apply in such a situation.

37. This Court also negated the submission that  

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the provision contained in Section 86(1)(f) would  

be violative of Article 14 (See Para 30-31).   

38. Considering  the  provisions  contained  in  

Sections 173, 174 and 175 of the Electricity Act,  

this  Court  observed  that  since  Section  86(1)(f)  

provides a special manner of making reference to  

an arbitrator in disputes between a licensee and  

a  generating company,  by implication all  other  

methods  are  barred.   Considering  the  

applicability of Sections 174 and 175, this Court  

has  held  that  Section  174  would  prevail  over  

Section 175 in matters where the where there is  

any conflict (but no further).  In our opinion, the  

observations made by this  Court  in  Paragraphs  

59  and  60  are  a  complete  answer  to  the  

submissions  of  Mr.  Nariman  that  upon  an  

application  being  made,  the  State  Commission  

was bound to refer the matter to arbitration.   

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39. Section  86(1)(f)  specifically  confers  

jurisdiction on the State Commission to refer the  

dispute.   Undoubtedly,  the  Commission  is  

required to exercise its discretion reasonably and  

not  arbitrarily.   In  the  present  case,  the  State  

Commission  upon  consideration  of  the  entire  

matter has exercised its discretion.  However, in  

our opinion, the APTEL ought not to have brushed  

aside the submissions of the appellant with the  

observation  that  the  State  Commission  having  

exercised  its  discretion,  the  issue  need  not  be  

investigated by the APTEL.  It  would always be  

open  to  APTEL  to  examine  as  to  whether  the  

State  Commission  has  exercised  the  discretion  

with regard to the question whether the dispute  

ought  to  have  been  referred  to  arbitration,  in  

accordance  with  the  well  known  norms  for  

exercising  such  discretion.   APTEL  exercises  

jurisdiction over the State Commission by way of  

a First Appeal. Therefore, it is the bounden duty  

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of  the  Appellate  Tribunal  to  examine  as  to  

whether all the decisions rendered by the State  

Commission suffer from the vice of arbitrariness,  

unreasonableness  or  perversity.   This would be  

apart  from examining  as  to  whether  the  State  

Commission has exercised powers in accordance  

with  the  statutory  provisions  contained  in  

Electricity Act, 2003.  Having said this, we are not  

inclined to interfere with the conclusions reached  

by APTEL, as in our opinion, the jurisdiction has  

not  been  exercised  by  the  State  Commission  

arbitrarily,  whimsically  or  against  the  statutory  

provisions.  

40. We,  however,  find  substance  in  the  

submission of        Mr. Nariman that adjudicatory  

functions generally ought not to be conducted by  

the State Commission in the absence of a Judicial  

Member. Especially in relation to disputes which  

are  not  fairly  relative  to  tariff  fixation or  the  

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advisory and  recommendatory functions  of  the  

State Commission.

41. A Constitution Bench of this Court in  Kihoto  

Hollohan (supra)  has  examined  the  nature  of  

the power of the Speaker or the Chairman under  

paragraph  6(1)  of  the  Tenth  Schedule  of  the  

Constitution of India which contains “PROVISIONS  

AS  TO  DISQUALIFICATION  ON  GROUND  OF  

DEFECTION”  of  a  Member  of  either  House  of  

Parliament.  Upon  consideration  of  the  entire  

matter, it was observed as follows :

“95. In  the  present  case,  the  power  to  decide  disputed  disqualification  under  Paragraph 6(1)  is  pre-eminently  of  a  judicial  complexion.”

42.     The  Constitution  Bench  relied  on  the  earlier  

judgment of this Court in Harinagar Sugar Mills Ltd.  

vs.  Shyam  Sundar  Jhunjhunwala  16  .  In  that  case,  

16 1962 (2) SCR 339

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Hidayatullah, J. said   

“…  By  ‘courts’  is  meant  courts  of  civil  judicature and by ‘tribunals’, those bodies of  men  who  are  appointed  to  decide  controversies  arising  under  certain  special  laws.  Among  the  powers  of  the  State  is  included  the  power  to  decide  such  controversies. This is undoubtedly one of the  attributes of the State, and is aptly called the  judicial power of the State. In the exercise of  this power, a clear division is thus noticeable.  Broadly speaking, certain special matters go  before tribunals, and the residue goes before  the ordinary courts of civil  judicature.  Their  procedures may differ but the functions are  not  essentially  different.  What  distinguishes  them  has  never  been  successfully  established.  Lord  Stamp  said  that  the  real  distinction is that the courts have ‘an air of  detachment’. But this is more a matter of age  and tradition and is not of the essence. Many  tribunals,  in  recent  years,  have  acquitted  themselves  so  well  and  with  such  detachment as to make this test insufficient.”

Again in para 99, it is observed as follows :  

 “99. Where there is a lis — an affirmation  

by one party and denial  by another — and  the dispute necessarily involves a decision on  the rights and obligations of the parties to it  and the authority is called upon to decide it,  there is  an exercise of  judicial  power.  That  authority  is  called a Tribunal,  if  it  does not  have  all  the  trappings  of  a  Court.  In  

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Associated  Cement  Companies  Ltd. v.  P.N.  Sharma36 this Court said: (SCR pp. 386-87)

“… The main and the basic test however,  is  whether  the  adjudicating  power  which  a  particular  authority  is  empowered  to  exercise,  has  been  conferred  on  it  by  a  statute and can be described as a part of the  State’s  inherent  power  exercised  in  discharging its judicial function. Applying this  test,  there can be no doubt that the power  which the State Government exercises under  Rule  6(5)  and  Rule  6(6)  is  a  part  of  the  State’s  judicial  power….  There  is,  in  that  sense, a lis; there is affirmation by one party  and  denial  by  another,  and  the  dispute  necessarily  involves  the  rights  and  obligations  of  the  parties  to  it.  The  order  which  the  State  Government  ultimately  passes is described as its decision and it is  made final and binding.”

43.  In  view of  the aforesaid categorical  statement  of  

law, we would accept the submission of Mr.  Nariman  

that  the  tribunal  such  as  the  State  Commission  in  

deciding  a  lis, between  the  appellant  and  the  

respondent discharges judicial functions and exercises  

judicial  power  to  the  State.   It  exercises  judicial  

functions  of  far  reaching  effect.  Therefore,  in  our  

opinion,       Mr. Nariman is correct in his submission  

that it must have essential trapping of the court. This  

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can only be achieved by the presence of one or more  

judicial  members  in  the  State  Commission  which  is  

called upon to decide complicated contractual or civil  

issues which would normally have been decided by a  

Civil  Court.  Not  only  the  decisions  of  the  State  

Commission have far reaching consequences, they are  

final  and  binding  between  the  parties,  subject,  of  

course, to judicial review.  

44. As noticed earlier, Section 84(2) enables the State  

Government to appoint any person as the Chairperson  

from amongst persons who is, or has been, a Judge of a  

High  Court.  Such  appointment  shall  be  made  after  

consultation with the Chief  Justice of  the High Court.  

The  provision  contained  in  Section  84(2)  is  

notwithstanding  the  provision  contained  in  Section  

84(1).  In our opinion, the State Government ought to  

have  exercised  its  power  under  sub-section  (2)  to  

appoint  one  or  more  Judicial  Members  on  the  State  

Commission  especially  when  complicated  issues  are  

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raised  involving  essentially  civil  and  contractual  

matters. A Constitution Bench of this Court in the case  

of R.Gandhi (supra) recognized that :  

“87. ………..that the legislature has the power  to create tribunals with reference to specific  enactments and confer jurisdiction on them  to  decide  disputes  in  regard  to  matters  arising  from  such  special  enactments.  Therefore  it  cannot  be  said  that  legislature  has  no  power  to  transfer  judicial  functions  traditionally  performed  by  courts  to  tribunals.”

“90. But when we say that the legislature has  the  competence  to  make  laws,  providing  which disputes will be decided by courts, and  which disputes will be decided by tribunals, it  is  subject  to  constitutional  limitations,  without encroaching upon the independence  of  the  judiciary  and  keeping  in  view  the  principles of the rule of law and separation of  powers.  If  tribunals  are  to  be  vested  with  judicial power hitherto vested in or exercised  by courts, such tribunals should possess the  independence,  security  and  capacity  associated  with  courts.  If  the  tribunals  are  intended  to  serve  an  area  which  requires  specialised knowledge or expertise, no doubt  there can be technical members in addition  to judicial members………….”  

45. Keeping in view the aforesaid observations of this  

Court, in our opinion, the State of Tamil Nadu ought to  

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make necessary appointments in terms of Section 84(2)  

of  the  Act.  We have been informed that  till  date  no  

judicial Member has been appointed in the Tamil Nadu  

State  Commission.  We  are  of  the  opinion  that  the  

matter needs to be considered, with some urgency, by  

the appropriate State authorities about the desirability  

and feasibility for making appointments, of any person,  

as  the Chairperson from amongst  persons who is,  or  

has been, a Judge of a High Court.

46. We have noticed earlier that Section 113 of the Act  

mandates that the Chairman of APTEL shall be a person  

who is or has been a Judge of the Supreme Court or the  

Chief Justice of a High Court. A person can be appointed  

as the Member of the Appellate Tribunal who is or has  

been or is qualified to be a Judge of a High Court.  This  

would clearly show that the legislature was aware that  

the functions  performed by the State Commission as  

well  as  the  Appellate  Tribunal  are  judicial  in  nature.  

Necessary provision has been made in Section 113 to  

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ensure that the APTEL has the trapping of a court. This  

essential feature has not been made mandatory under  

Section 84 although provision has been made in Section  

84(2) for appointment of any person as the Chairperson  

from amongst persons who is or has been a Judge of a  

High Court. In our opinion, it would be advisable for the  

State  Government  to  exercise  the  enabling  power  

under Section 84(2) to make appointment of a person  

who  is  or  has  been  a  Judge  of  a  High  Court  as  

Chairperson of the State Commission.   

47. These observations, however, do not in any manner  

affect  the  jurisdiction  exercised  by  the  State  

Commission in the present matter. It has been rightly  

pointed  out  by  the  respondent  that  having  filed  the  

written statement in reply to the petition filed by the  

respondent,  the appellant willingly participated in the  

proceedings and invited the findings recorded by the  

State Commission. It would be too late in the day, to  

interfere  with  the  jurisdiction  exercised  by  the  State  

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Commission in these proceedings.   

48.   The next submission of Mr. Nariman is that the  

claim of the respondents would have been held to be  

time barred on reference to arbitration. We are not able  

to accept the aforesaid submission of Mr. Nariman. On  

the facts of this case, in our opinion, the principle of  

delay  and  laches  would  not  apply,  by  virtue  of  the  

adjustment  of  payments  being  made  on  FIFO  basis.  

The procedure adopted by the respondent, as observed  

by  the  State  Commission  as  well  as  by  the  APTEL,  

would  be  covered  under  Sections  60  and  61  of  the  

Contract Act. APTEL, upon a detailed consideration of  

the correspondence between the parties, has confirmed  

the findings of fact recorded by the State Commission  

that the appellant had been only making part payment  

of the invoices. During the course of the hearing, Mr.  

Salve  has  pointed  out  that  the  payment  of  entire  

invoices was to be made each time which was never  

adhered  to  by  the  appellant.  Therefore,  the  

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respondents were constrained to adopt  FIFO method.  

Learned senior counsel also pointed out that there was  

no complaint or objection ever raised by the appellant.  

The  objection  to  the  method  adopted  by  the  

respondents on the method of FIFO, was only raised in  

the  counter  affidavit  to  the  petition  filed  by  the  

appellant  before  the  State  Commission.  According  to  

learned senior counsel, the plea is an afterthought and  

has been rightly rejected by the State Commission as  

well  as  the  APTEL.  We  also  have  no  hesitation  in  

rejecting the submission of Mr. Nariman on this issue. In  

any  event,  the  Limitation  Act  is  inapplicable  to  

proceeding before the State Commission.  

49. The submission of the appellant that the Limitation  

Act would be available in case the reference was to be  

made  to  arbitration,  in  our  opinion,  is  also  without  

merit.  Firstly,  the  State  Commission  exercised  its  

jurisdiction to decide the dispute itself. The matter was  

not referred to arbitration, therefore, the Limitation act  

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would not  be applicable.  Secondly,  Section 43 of  the  

Arbitration and Conciliation Act would not be applicable  

even if the matter was referred to arbitration by virtue  

of Section 2(4) of the Arbitration Act, 1996. Section 2(4)  

of the Arbitration Act reads as under :         

“This  part  except sub-section (1)  of  section  40, sections 41 and 43 shall apply to every  arbitration under any other enactment for the  time being in force, as if the arbitration were  pursuant to an arbitration agreement and as  if  that  other  enactment  were an arbitration  agreement, except in so far as the provisions  of this Part  are inconsistent with that other  enactment  or  with  any  rules  made  thereunder.”

50. By virtue of the aforesaid provision, the provision  

with  regard  to  the  Limitation  Act  under  Section  43  

would  not  be  applicable,  to  statutory  arbitrations  

conducted  under  the  Electricity  Act,  2003.  We  are  

unable to accept the submission of Mr.  Nariman that  

the State Commission failed to exercise its discretion by  

not making a reference to arbitration and the request  

made by the appellant.  Such a submission cannot be  

countenanced  in  the  particular  facts  of  this  case.  

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Having  taken  the  plea  that  the  matter  ought  to  be  

referred to arbitration, the appellant chose to contest  

the  claim of  the  respondent  on  merits  and  filed  the  

written  statement  before  the  State  Commission.  Not  

only  this,  the  appellant  participated  in  the  entire  

proceedings  and  invited  the  findings  on  merits.  

Therefore,  the appellant  cannot  now be permitted to  

raise such a plea. This view of ours will find support in  

two  earlier  judgments  of  this  Court.  In  Svenska  

Handelsbanken (supra)  it  has  been  observed  as  

follows:

“53. It may be that even after entering into  an arbitration clause any party may institute  legal proceedings. It is for the other party to  seek  stay  of  the  suit  by  showing  the  arbitration clause and satisfying the terms of  the provisions of law empowering the court to  stay the suit……..”      

Admittedly, in this case the appellant did not file  

any application under Section 8 or Section 45 of  the  

Arbitration  Act,  1996.  No  prayer  for  stay  of  the  

proceedings was filed.  

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51.  In the case of Booz Allen & Hamilton Inc.(supra)  

this Court observed a follows:

“29. Though Section 8 does not  prescribe  any time-limit for filing an application under  that  section,  and  only  states  that  the  application under Section 8 of the Act should  be  filed  before  submission  of  the  first  statement  on  the  substance  of  the  dispute,  the  scheme  of  the  Act  and  the  provisions of the section clearly indicate that  the application thereunder should be made at  the earliest. Obviously, a party who willingly  participates in the proceedings in the suit and  subjects  himself  to  the  jurisdiction  of  the  court  cannot  subsequently  turn  around and  say  that  the  parties  should  be  referred  to  arbitration  in  view  of  the  existence  of  an  arbitration agreement.  Whether a party has  waived  his  right  to  seek  arbitration  and  subjected  himself  to  the  jurisdiction  of  the  court,  depends  upon  the  conduct  of  such  party in the suit.”

These observations are squarely applicable to the  

facts in this case.   

52.     Even  if  the  reference  had  been  made  under  

Article 16 of the PPA, the applicability of the Arbitration  

Act,  1996 and the Arbitration Act of 1940 have been  

specifically  excepted  under  Article  16(2)(h).  In  the  

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earlier  part  of  the  judgment,  we  have  noticed  that  

Article  16  indeed  provides  for  informal  resolution  of  

disputes by way of arbitration. However, Article 16(2)  

mandates  that  the  arbitration  shall  be  conducted  in  

accordance with the ICC Rules. Under those rules, ICC  

Court  of arbitration is to make the appointment of the  

Arbitral  Tribunal.   To make the matters worst for the  

appellant, it has been provided in Article 16.2(e) that  

the seat of the arbitration shall be in London. This fact  

alone would make Part  I  of  the Arbitration Act,  1996  

inapplicable to the arbitration proceedings. There is a  

further provision that notwithstanding Article 17(8), the  

laws of England shall govern the validity, interpretation,   

construction, performance and the  enforcement  of the  

provision contained in Article 16(2).  Clearly  then,  the  

applicability of Arbitration Act, 1996 is totally ruled out  

by the parties. This Court in Bhatia International vs.  

Bulk Trading S.A. & Anr.17 has clearly held that the  

parties are at liberty by agreement to opt out of any or  

17 2002 (4) SCC 105

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all  the  provisions  of  1996  Act.  It  would  be  useful  to  

make  a  reference  to  the  observations  made  by  this  

Court in paragraph 21 and 32 which are as follows:

“21. The legislature is emphasising that the  provisions of Part I would apply to arbitrations  which take place in India, but not providing  that the provisions of Part I will not apply to  arbitrations which take place out of India. The  wording  of  sub-section  (2)  of  Section  2  suggests that the intention of the legislature  was to make provisions of Part I compulsorily  applicable  to  an  arbitration,  including  an  international  commercial  arbitration,  which  takes  place  in  India.  Parties  cannot,  by  agreement,  override  or  exclude  the  non- derogable  provisions  of  Part  I  in  such  arbitrations. By omitting to provide that Part I  will  not  apply  to  international  commercial  arbitrations  which  take  place  outside  India  the  effect  would  be  that  Part  I  would  also  apply to international commercial arbitrations  held  out  of  India.  But  by  not  specifically  providing that the provisions of Part I apply to  international commercial arbitrations held out  of  India,  the  intention  of  the  legislature  appears  to  be  to  ally  (sic allow)  parties  to  provide  by  agreement  that  Part  I  or  any  provision  therein  will  not  apply.  Thus  in  respect  of  arbitrations  which  take  place  outside  India  even  the  non-derogable  provisions of Part I can be excluded. Such an  agreement may be express or implied.”

“32. To conclude, we hold that the provisions  of Part I would apply to all arbitrations and to  

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all proceedings relating thereto. Where such  arbitration is  held in India the provisions of  Part  I  would compulsorily  apply and parties  are  free  to  deviate  only  to  the  extent  permitted by the derogable provisions of Part  I.  In  cases  of  international  commercial  arbitrations  held  out  of  India  provisions  of  Part  I  would  apply  unless  the  parties  by  agreement, express or implied, exclude all or  any of its provisions. In that case the laws or  rules  chosen  by  the  parties  would  prevail.  Any provision, in Part I, which is contrary to  or  excluded  by  that  law  or  rules  will  not  apply.”

The aforesaid observations will be fully applicable  

to  the  facts  and  circumstances  of  this  case  as  the  

agreement  is  prior  to  6th September,  2012.  The  

declaration of law in Bharat Aluminium Company vs.  

Kaisar  Aluminium  Technical  Services  Inc.  18   that  

Part  I  of  the  arbitration  would  not  be  applicable  to  

International  Commercial  Arbitration  outside  India  

applies  to  the  Arbitration  Agreements  executed after  

6th September, 2012. Though by virtue of the provisions  

contained  in  Article  16  of  the  PPA,  the  legal  effect  

remains the same, that is applicability of 1996 Act is  18 2012 (9) SCC 552

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ruled  out,  therefore,  the  appellant  cannot  claim  the  

benefit of Section 43 of the Arbitration Act, 1996.  

53.    We also do not find any merit in the submission of  

Mr. Nariman that the appellants have wrongly adopted  

the  system  of  FIFO  for  adjustment  of  the  payments  

made by the appellant. The State Commission as well  

as the APTEL having considered the matter in detail, we  

are inclined to accept the submission of Mr. Salve and  

Mr.  Bhushan  that  it  would  not  be  appropriate  to  re-

examine the issue in these proceedings. Under Section  

125 of the Electricity Act, 2003, the appeal lies in the  

Supreme  Court  on  any  one  or  more  of  the  grounds  

specified in Section 100 of the Code of Civil Procedure,  

1908. Therefore, unless the court is satisfied that the  

findings of fact recorded by the State Commission are  

perverse, irrational and based on no evidence, it would  

not  interfere.  The  findings  recorded  by  the  State  

Commission  and  APTEL  would  not  give  rise  to  a  

substantial question of law. In any event, the appellant  

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never refuted or rejected the practice adopted by the  

respondent.  Rather  the appellant  claimed that  it  was  

under  temporary  financial  strain  and,  therefore,  

requested  to  make  only  part  payment.  The  invoices  

having been accepted in full, the appellant unilaterally  

withheld some of the payments on the ground that the  

claims were disputed. Under Article 10 of the PPA, the  

appellant  was required to make the payment for  the  

entire  invoice  and,  thereafter,  raise  the  dispute.  The  

appellant  had  been  duly  informed  that  the  part  

payments made would be adjusted by the respondents  

under the FIFO system. It has been correctly held that  

in such circumstances, Section 59 of the Contract Act  

would not be applicable. We see no reason to interfere  

with the conclusions reached by the APTEL.  

54. The real dispute between the parties seems to be  

on the question whether the appellant was entitled to  

avail  2.5%  rebate  on  part  payment of  the  monthly  

invoices  within  5  business  days.  We  have  noticed  

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earlier that it was a pre- condition under Article 10 that  

the payment of the monthly invoice had to be made in  

full. In addressing the issue of rebate, APTEL has come  

to  the  conclusion  that  merely  because  substantial  

payment had been made in relation to monthly invoices  

would not entitle the appellant to claim the rebate of  

2.5%  on  the  invoice  amount.  We  see  no  reason  to  

interfere  with  the  findings  recorded  by  the  APTEL.  

Under Article 10.2(b)(i), the payments have to be made  

in  full  for  every  invoice  by  due  date.  Under  Article  

10.2(e), the payment had to be made in full when due  

even if the entire portion or a portion of the invoice is  

disputed. Under Article 10.3(a) to (c) of the PPA, Letter  

of  Credit  is  to  be  established covering  three months  

estimated  billing,  one  month  prior  to  Commercial  

Operation Date. Under Article 10.3 (d) of the PPA, an  

Escrow Account is to be established by the appellant in  

favour  of  the  Power  Company  into  which  collections  

from designated circles are to flow in and be available  

as  collateral  security.  Under  Article  10.4,  the  

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Government of Tamil  Nadu has guaranteed all  of  the  

financial obligations of the appellant. Under Article 10.2  

(e)  of  the  PPA  agreement,  the  right  to  dispute  any  

invoice by the appellant is limited to one year from due  

date of such invoice. Thus it would be evident that even  

if  the amount of invoice is  disputed,  the appellant  is  

obliged to make full payments of the invoice when due  

and then raise the dispute. Undoubtedly, early payment  

is encouraged by offering rebate of 2.5% if paid within  

5 days of the date of the invoice. Similarly,  1% rebate  

would be available if the payment of the entire invoice  

is made within  30 days.  The rebate is in the form of  

incentive and  is  an  exception  to  the  general  rule  

requiring payment in full on due date. Therefore, in our  

opinion, the appellant had no legal right to claim rebate  

at the rate of  2.5% not having paid the entire invoice  

amount within 5 days. Similarly, the appellant would be  

entitled to 1% rebate if payment is made within 30 days  

of the invoice. We are of the opinion that the findings of  

APTEL on this issue do not call for any interference.   

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55.   In fact, in our opinion, the appellant has illegally  

arrogated to itself the right to adjudicate by unilaterally  

assuming  the  jurisdiction  not  available  to  it.  It  was  

required  to  comply  with  Article  10  of  the  PPA  which  

provides for Compensation Payment and Billing. We are  

also not able to accept the submission of Mr. Nariman  

that invoices could not be paid in full as they were only  

estimated invoices. It is true that reconciliation is to be  

done  annually  but  the  payment  is  to  be  made  on  

monthly  basis.  This  cannot  even  be  disputed  by  the  

appellant in the face of its claim for rebate at the rate  

of  2.5% for having made part payment of the invoice  

amount within 5 days. We also do not find any merit in  

the submission that any prejudice has been caused to  

the  appellant  by  the  delayed  submission  of  annual  

invoice by the respondents. Pursuant to the directions  

issued by the State Commission,  the monthly invoice  

and annual invoice for the respective years have been  

redrawn as on 30th September each year. Therefore, the  

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benefit  of  interest  has  been  given  on  such  annual  

invoices.  With  regard  to  the  issue  raised  about  the  

interest  on  late  payment,  APTEL  has  considered  the  

entire matter and come to the conclusion that interest  

is payable on compound rate basis in terms of Article  

10.6 of the PPA. In coming to the aforesaid conclusion,  

APTEL has relied on a judgment of this Court in Central  

Bank  of  India  vs.  Ravindra  &  Ors.  19.  In  this  

judgment it has been held as follows:  

  “………The essence of interest in the opinion  of  Lord  Wright,   in  Riches v.  Westminster  Bank  Ltd.All  ER  at  p.  472  is  that  it  is  a  payment  which  becomes  due  because  the  creditor  has not  had his  money at  the due  date.  It  may  be  regarded  either  as  representing the profit he might have made if  he  had  had  the  use  of  the  money,  or,  conversely, the loss he suffered because he  had not that use. The general idea is that he  is  entitled  to  compensation  for  the  deprivation;  the  money  due  to  the  creditor  was not paid, or, in other words, was withheld  from him by the debtor after the time when  payment should have been made, in breach  of  his  legal  rights,  and  interest  was  a  compensation whether the compensation was  liquidated under an agreement or statute. A  Division Bench of  the  High Court  of  Punjab  

19 2002 (1) SCC 367

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speaking through Tek Chand, J. in  CIT v.  Dr  Sham Lal Narula thus articulated the concept  of  interest  the  words  ‘interest’  and  ‘compensation’  are  sometimes  used  interchangeably and on other occasions they  have  distinct  connotation.  ‘Interest’  in  general terms is the return or compensation  for the use or retention by one person of a  sum  of  money  belonging  to  or  owed  to  another.  In  its  narrow  sense,  ‘interest’  is  understood to mean the amount which one  has  contracted  to  pay  for  use  of  borrowed  money. … In whatever category ‘interest’ in a  particular  case  may  be  put,  it  is  a  consideration  paid  either  for  the  use  of  money  or  for  forbearance  in  demanding  it,  after it has fallen due, and thus, it is a charge  for the use or forbearance of money. In this  sense, it is a compensation allowed by law or  fixed by parties,  or permitted by custom or  usage,  for  use  of  money,  belonging  to  another,  or  for  the  delay  in  paying  money  after it has become payable.”

56. Similar observations have been made by this Court  

in Indian Council of Enviro-Legal Action vs. Union  

of India & Ors.   20   wherein it has been held as follows:  

“178. To  do  complete  justice,  prevent  wrongs, remove incentive for wrongdoing or  delay,  and  to  implement  in  practical  terms  the  concepts  of  time  value  of  money,  restitution  and  unjust  enrichment  noted  above—or  to  simply  levelise—a  convenient  

20 2011 (8) SCC 161

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approach  is  calculating  interest.  But  here  interest  has  to  be  calculated  on  compound  basis—and not  simple—for  the latter  leaves  much uncalled  for  benefits  in  the  hands  of  the wrongdoer.

179. Further, a related concept of inflation  is also to be kept in mind and the concept of  compound  interest  takes  into  account,  by  reason of prevailing rates, both these factors  i.e.  use  of  the  money  and  the  inflationary  trends, as the market forces and predictions  work out.

180. Some of our statute law provide only  for  simple  interest  and  not  compound  interest.  In  those  situations,  the  courts  are  helpless  and  it  is  a  matter  of  law  reform  which  the  Law Commission must  take note  and  more  so,  because  the  serious  effect  it  has on the administration of justice. However,  

the  power  of  the  Court  to  order  compound  interest  by  way  of  restitution  is  not fettered in any way. We request the Law  Commission  to  consider  and  recommend  necessary amendments in relevant laws.”

57.    The  late  payment  clause  only  captures  the  

principle  that  a person denied the benefit  of  money,  

that ought to have been paid on due dates should get  

compensated  on  the  same  basis  as  his  bank  would  

charge him for funds lent together with a deterrent of  

0.5% in order to prevent delays. It is submitted by Mr.  

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Salve and Mr. Bhushan that bankers of the respondents  

have  applied  quarterly  compounding  or  monthly  

compounding for cash credits during different periods  

on the basis of RBI norms. Article 10.6 of the PPA has  

followed the norms of the bank. This can not be said to  

be unfair as the same principle would also apply to the  

appellants.  

58.   This now bring us to applications for impleadment  

of  IOCL and for  direction.  I.A.No.6 of  2013 is  for  the  

impleadment  of  IOCL.  It  is  submitted that  during the  

pendency of these proceedings, the respondents have  

received rebates, discounts, credits, refunds in the fuel  

price  being  extended  by  fuel  supplier  i.e.  Indian  Oil  

Corporation  Ltd.  (IOCL).  Such  benefits  have  been  

received by the respondent from January 2001 till date  

It is pleaded that the respondents have failed to give  

details  about  the  discounts  and  credits  received  the  

benefit of which ought to have been passed on to the  

appellant.  Therefore,  IOCL  be  made  parties  to  

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respondent No.2 to the present appeal. I.A.No.5 of 2013  

seeks  direction  to  IOCL  to  furnish  details  of  all  the  

documents of the matter. Further  directions are also  

sought on the respondent to refund a sum of Rs.240  

crores paid by the appellant under the order passed by  

the State Commission along with interest at the rate as  

mentioned in PPA.

59. The respondents in a common counter statement to  

the applications have submitted that  the applications  

are  not  maintainable.  The  applications  have  been  

evidently preferred purely as dilatory tactics, to delay  

and  deny  substantial  payments  that  are  due  and  

payable  to  the  respondent  pursuant  to  the  orders  

passed  by  the  State  Commission  which  have  been  

upheld by APTEL. We are not inclined to entertain either  

of the applications at this stage. The issue sought to be  

raised  in  both  the  applications  ought  to  have  been  

raised  by  the  appellant  at  the  relevant  time.  The  

applications are, therefore, accordingly dismissed.

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60. For the foregoing reasons, we see no merit in the  

appeal and the same is accordingly dismissed.     

…………………………….J. [Surinder Singh Nijjar]

……………………………J. [A.K.Sikri]

New Delhi; April 04, 2014.

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