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REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 1652 OF 2015

THE ELECTRICITY DEPARTMENT, REP. BY ITS SUPERINTENDING ENGINEER,PORT BLAIR  AND ANR.   APPELLANTS

                               VERSUS M/S SURYACHAKRA POWER CORPORATION LIMITED.     RESPONDENT

J U D G M E N T  

NARIMAN, J.

1 We  have  heard  Shri  Rakesh  Khanna,  learned  senior counsel appearing for the appellants for quite some time, and   Shri.  Gurukrishna  Kumar,  learned  senior  counsel appearing for the respondent in reply. Though Shri Rakesh Khanna has taken us through the PPA, various documents, and various orders in great detail, we do not find it necessary to go into any of these for the reason that we find  that  the  appellants  had  set  up  various  expert committees to go into the bone of contention in this appeal, namely, project cost and completed cost.

2 We find that M/s. K.P.C.L  (M/s. Karnataka Power Corporation Ltd.)  had been appointed by them in order to determine the  project  cost  which  was  determined  at

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Rs.73.40 crores.  M/s. Tamil Nadu Electricity Generation and  Distribution  Corporation  Ltd.  (TANGEDCO),  another expert, arrived at a finding of Rs. 82.11 crores, which was reconfirmed by a subsequent report, and ultimately arrived at a figure of Rs.79.439 crores with other issues which were to be decided separately. A joint exercise between the appellants and respondent, also carried out in April, 2010, where a figure of  Rs. 76.14 crores was arrived at, and the balance of Rs. 8.82 crores in respect of  IDC,  that  is,  interest  during  construction  and preliminary  expenses  was  left  to  be  examined  by  the Central  Electricity  Authority.  The  Central  Electricity Authority also came out with three separate reports in which  it  arrived  at  certain  figures  of  project  cost. Finally,  the  administration  appointed  a  five  member committee after all these reports, and in 2013, this five member committee ultimately arrived at Rs.70.61 crores as the final project cost. This was as follows :

“ Description of items Quantum of

Expenditur e Rs.  Crores

Para Ref. of  Committee Report

Approved Cost 63.14 15,17,29&30 IDC (-)  3.00 Cost excluding IDc (+) 60.14 Increase in cost of  Establishment due to  extended gestation period

(+)  3.30 17

Increase due to Exchange  Rate variation  considering only 5.13  

(+) 5.67 Allowed as per  actual  utilization

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MUS$ Rs.11.0445 per  dollar Additional Transformer  and Black Start DG  Set-Work done after COD  

(+)  0.31 22

Hard Cost excl. IDC 69.42 Proportionate IDC on the  hard cost of Rs.69.11 Cr.

(+)  4.91 Revised on hard cost

Completed cost including  IDC/Project cost

74.33

Liquidated damage @ 5% on Rs.74.33 crores

(-)  3.72

Project Completed Cost 70.61

3 Subsequently,  it  has  been  stated  that  the  said report of the five member committee has been accepted by the Administration.  The Respondent had prayed that the Hon'ble Commission determine the project cost and tariff thereon in accordance with the provisions of PPA/Techno Economic Clearance issued by A&N Administration and the report of the five members committee constituted by the A & N Administration for the purpose of determination of the cost of the project as Rs. 70.61 crores.  

4 When we pointedly referred to these reports and the figures contained therein, together with the fact that the respondent itself accepted the five member committee report, which is then placed before the commission for acceptance, we find it a little difficult to now allow the respondent to go behind the said report. None of the expert  committee  reports  allow  certain  amounts  to  be deducted  from  the  project  cost  which  would,  if  the

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appellants were to succeed before us, amount to a figure of Rs. 18.25 crores as is now argued before us by the appellants.   Even  the  five  member  committee  report, accepted  by  the  Administration,  does  not  include  any figures to be minused on account of under utilization of foreign  currency  component  of  Rs.  4.149  crores; custom-duty concession of Rs. 2.80 crores; concession in Land  Registration  Charges  availed  by  the  respondent amounting to Rs.0.3234 crores; and cost for start-up fuel and  LUBE  oil  for  trial  and  test  run  amounting  to Rs.0.1971 crores.   

5. Shri Khanna took us through the memo of appeal filed before the Appellate Tribunal and referred specifically to ground (C) and question of law 8(b)1 which read as follows:    

“The  JERC  has  relied  upon  the  reports  of  the `experts' which are contrary to the PPA.  JERC has erred in giving foreign exchange variation on 7.96 MUSD.   Documents  submitted  by  the  respondent clearly show that the respondent had utilised only 9472653 DEM (equivalent to 5.13 MUSD) as foreign currency  for  the  purpose  of  importing  the equipment which is mandated by the PPA. “8(b)1.  Whether  the  JERC  has  not  erred  by

following  recommendations/reports  which  are  in contravention  of  the  provisions  of  PPA  for computation of completed cost.”

6. We are afraid that these grounds do not help the appellants' case.  Nowhere has it been stated, in any of the grounds that the statement made by the commission

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that the five member committee report had been accepted by the Administration is said to be incorrect. On the contrary, the ground sought to be raised in the appeal is that the commission has relied upon these reports, which  reports  are  contrary  to  the  Power  Project Agreement.  We are thus of the opinion that none of these aspects  can be looked into by us in the present appeal.  However,  we  find  that  the  appellants  are  on solid  ground  when  they  contend  that  an  increase  in interest  during  construction,  financing  charges  and incidental  expenses  incurred  for  the  delay  in  the execution  of  the  project  due  to  reasons  beyond  the control of the respondent has been allowed in appeal by the Appellate Tribunal at para 23 and 36 suo moto.

7. Shri Rakesh Khanna has argued before us and shown us the ground taken in the present appeal that the tribunal has  directed  a  suo  moto  payment  of  additional  IDC, financing  cost  and  incidental  expenses  during construction even though this was not part of the appeal filed  by  the  appellant  M/s.  Suryachakra  Power Corporation Limited before the Tribunal. This is sought to  be  answered  by  the  respondent  in  its  counter affidavit in this Court in paragraph (F) which reads as under:  

“In  the  synopsis  the  appellant  has  sought  to contend  that  the  Tribunal  has  suo-moto  directed payment of additional interest during construction

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(IDC), financing cost (FC) and incidental expenses during construction (IEDC) for the period of delay in achieving commercial operation.  The appellants have also sought to contend that the said issue regarding additional IDC, FC and IEDC was not a part of the appeal filed before the Tribunal.  In this context, it is respectfully submitted that the said contention of the appellants is incorrect and misleading.  It is respectfully submitted that the issue regarding the delay in achieving commercial operation and to whom was the delay attributable was pleaded and considered in detail by both the Joint Electricity Regulatory Commission as well as the Tribunal.  Additional IDC, FC and IEDC are only consequences that follow the delay in achieving the commercial operation.  Both the Courts below have concurrently  held  that  the  delay  in  achieving commercial  operation  of  more  than  a  year  was attributable to the appellants themselves as they did not provide the transmission lines to evacuate the  power  from  the  project  within  the  time prescribed  under  the  PPA.   Therefore  the Respondents  herein had  claimed deemed  generation charges for the whole period of delay in achieving commercial operation.  It is pertinent to mention that the deemed generation charges is higher than the  additional  IDC,  FC  and  IEDC.   Thus,  the Tribunal has granted the Respondents the lower of the two.  The deemed generation charges have been awarded only for a period of four months out of the total  delay  of  more  than  a  year  in  achieving commercial  operation.   The  Respondent  is  not claiming additional IDC, FC and IEDC for the said period of four months for which deemed generation charges have been granted.”

8. In  reply,  Shri  Gurukrishna  Kumar,  learned  senior counsel appearing for the respondent, points out before us  that  in  any  case  what  was  referred  to  in  the commission's judgment in order to arrive at the figure of Rs. 78.29 crores as the project cost in fact started with the figure of Rs. 77.595 crores, being CEA approval as per “funds tied up” basis, which according to the learned  senior  counsel,   would  include  the  aforesaid

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expenditure. He argued before us that certain figures which were referred to and relied upon by the CEA to arrive  at  this  figure  specifically  included  the aforesaid.   We  were  not  shown  any  such  figures.  We, therefore, allow the appeal only to this limited extent and set aside the judgment of the Appellate Tribunal insofar as it allows an increase in  interest during construction  (IDC),  financing  charges  (FC)  and incidental expenses  during construction (IEDC) incurred for the delay in execution of the project for reasons beyond the control of the respondent. To this limited extent alone the appeal stands allowed, and on other points it is dismissed.  

9 We are also of the view that apart from the above, no substantial question of law is raised in this appeal.

10 For the aforesaid reasons, we dispose of the appeal with no other costs.

      ...................J.     [KURIAN JOSEPH]

   ....................J.          [ROHINTON FALI NARIMAN]

NEW DELHI;  SEPTEMBER 22, 2016

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