Supreme Court Upholds Carrying Cost at LPS Rate but Remands Compounding Issue to APTEL

A bench of Justices Manoj Misra and Joymalya Bagchi heard an appeal under Section 125 of the Electricity Act, 2003 by RattanIndia Power Limited challenging the Appellate Tribunal for Electricity (APTEL) order insofar as it disallowed compounding of carrying cost at the Late Payment Surcharge (LPS) rate. The question concerned whether carrying cost awarded for Change‑in‑Law compensation must bear interest at the PPA’s LPS rate and, if so, whether such interest must be compounded.

The Court allowed the appeal in part. It upheld APTEL’s direction that carrying cost be paid at the LPS rate but held that the question of compounding of interest required fresh consideration on facts and law. The Court emphasised that a remand did not bind the subordinate forum to the observations in the remand if the law had evolved in the interregnum, and that the lis remained alive on remand. The Court, in its reasoning, observed: “When a Court or Appellate Tribunal remands a matter to the subordinate court, or adjudicating body, for a fresh decision in the light of observations contained therein, and while doing so refers to certain decisions, it does not mean that the subordinate court or adjudicating body is bound by those decisions and can look no further, even if, in the interregnum, the law has changed or developed.” The judgment further noted that “the remand order dated 18.10.2022 had not decided the issue relating to grant of LPS” and therefore APTEL and MERC could reconsider the compounding question; accordingly the matter was remitted to APTEL to decide compounding “based on the facts of the case, and in accordance with the law.” The Court clarified that the grant of interest at LPS rate as directed by APTEL would not be disturbed.

Background RattanIndia Power Limited (RPL) supplied power to Maharashtra State Electricity Distribution Company Limited (MSEDCL) under two long‑term PPAs and filed a petition before the Maharashtra Electricity Regulatory Commission (MERC) under Section 86 seeking Change‑in‑Law compensation and carrying cost from the date of commencement of supply. MERC’s 5 April 2018 order allowed certain Change‑in‑Law claims but denied carrying cost and held compensation was payable from Scheduled Start Date. RPL appealed to APTEL (Appeal No.263/2018); APTEL allowed the appeal by judgment dated 18 October 2022 and remitted the matter for quantification, observing that carrying cost and entitlement should be revisited in light of earlier decisions including this Court’s precedents. On remand MERC awarded carrying cost computed on simple interest at the rate of interest on working capital under MYT regulations. RPL then sought carrying cost at the PPA LPS rate (SBI PLR + 2%) on compounding basis, contending restitution required compounding as held in Uttar Haryana Bijli Vitran Nigam Ltd. v. Adani Power (Mundra) Ltd. APTEL partly allowed RPL’s appeal, directed MERC to compute and pay carrying cost at LPS rates but declined to allow compounding on the ground that the remand order had not specifically directed compounding. RPL appealed to the Supreme Court under Section 125. MSEDCL did not file a cross‑appeal against APTEL’s direction to pay carrying cost with LPS interest.

The Supreme Court reviewed the PPA provisions (Articles 10.2, 10.5, 8.8 and 8.3.5) and prior authorities, held that the remand did not settle the compounding issue and that subordinate fora must apply binding law prevailing at the time of decision. The Court found that by not filing an appeal or cross‑objection APTEL’s operative direction for carrying cost at LPS rate had attained finality as against MSEDCL. The Court remanded the limited issue of compounding to APTEL for fresh decision in accordance with law and facts, left the grant of LPS interest intact, and closed other issues. The appeal was allowed in part; there was no order as to costs.

Case Details: Case No.: Civil Appeal No. 8232 of 2023 (2025 INSC 1502) Case Title: RattanIndia Power Limited v. Maharashtra State Electricity Distribution Company Limited and Another Appearances: For the Petitioner(s): [Advocates not indicated in the judgment] For the Respondent(s): [Advocates not indicated in the judgment]