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Maharashtra State Electricity Distribution Company Limited v. Maharashtra Electricity Regulatory Commission & Ors.

Civil Appeal · 2021 INSC 644Decided 8 Oct 2021
Civil Appeal No. 1843 of 2021
Justice Indira Banerjee · Justice V. Ramasubramanian

Background

Maharashtra State Electricity Distribution Company Ltd. (MSEDCL) had Power Purchase Agreements with several power generating companies (Adani Power, JSW Energy, GMR Warora, Rattan India) that required it to pay a Late Payment Surcharge (LPS) of 2% above the State Bank of India's Benchmark Prime Lending Rate (SBAR) whenever it delayed paying monthly bills. After the RBI replaced the PLR system with the Base Rate and then the Marginal Cost of Funds based Lending Rate (MCLR) systems, MSEDCL argued this was a "Change in Law" under the PPAs that should let it recompute (and reduce) the LPS it owed. The Maharashtra Electricity Regulatory Commission (MERC) and the Appellate Tribunal for Electricity (APTEL) both rejected this claim, and MSEDCL appealed to the Supreme Court.

Decision Breakdown

The Supreme Court dismissed the appeal, agreeing with MERC and APTEL that the RBI's switch from PLR to Base Rate/MCLR was not a "Change in Law" under the PPAs because SBAR was merely a contractually chosen benchmark for calculating LPS, not a law or regulation governing the tariff itself. The Court held that LPS compensates generators for the time-value of money lost due to delayed payment and has no bearing on the tariff for which Change-in-Law relief is meant; MSEDCL had never disputed the underlying energy bills, and could not use a change in RBI's interest-rate mechanism to escape or reduce an admitted payment obligation. The Court also rejected MSEDCL's attempt to introduce fresh RTI documents after the hearing had concluded, and upheld APTEL/MERC's authority to direct time-bound payment of the outstanding LPS.

Lesson Learnt

A contractual benchmark used for calculating damages or surcharges (like a bank's lending rate) is not automatically a "law" whose change triggers special contractual relief: parties must honour admitted payment obligations and cannot use unrelated regulatory changes to escape liabilities they never disputed on the merits.

Official source (sci.gov.in)View Judgment (PDF)

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