Shashwati Chowdhury
Published on: August 26, 2022 at 17:38 IST
The Supreme Court has held, a change in the law requires Uttar Haryana Bijli Vitran Nigam Ltd to pay compound interest to Adani Power Limited.
The Bench, comprising of Chief Justice NV Ramana, Justice Krishna Murari, and Justice Hima Kohli, held that any restitution will be insufficient if Adani Power is not fully reimbursed for the interest it paid to the banks on a compounding basis. The banks had charged Adani Power interest on a monthly rest basis for providing loans to buy the installations required due to a change in the law.
The appellant and respondent signed two Power Purchase Agreements (PPAs) in 2008. Due to a change in the law that occurred in 2010 as a result of the Ministry of Environment and Forests’ Environment Clearance, the respondent had to pay extra money to build a Flue Gas Desulfurization (FGD) unit.
The Central Commission disallowed the carrying cost claim made by Adani Power and only approved compensation for specific Change in Law events. Both the appellant and the respondent, who were both offended by the Central Commission’s decision, filed appeals with the Appellate Tribunal.
By the impugned judgement of August 12, 2021, the Appellate Tribunal determined that Adani Power was entitled to interest on carrying costs as well as carrying expenses from the day a change in the law occurred. The applicant approached the Supreme Court in aggrievance over the aforementioned finding.
The court stated that in computing the impact of the change in law, the restitutionary principles encapsulated in the PPA would apply. According to the document, Adani Power began claiming Change in Law Event Compensation for the installation of FGD and carrying costs as early as 2012 and pursued numerous forums to have the claim settled.
Only in 2018 did it eventually succeed in receiving reimbursement for FGD, but the carrying cost claim was denied. When Adani ultimately received the relief pertaining to carrying costs, the appellants were unable to urge that interest on carrying costs should be calculated on a simple interest basis rather than a compound interest basis.
According to the court, granting interest on carrying costs due to a change in law would be governed by the same approach that is used to compensate a party for their time value of money. As a result, the Appellate Tribunal’s impugned decision was affirmed, and the current appeal was dismissed for lack of merit.