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Saturday, April 5, 2014

Electricity Act, 2003 (hereinafter referred to as the “Act”)- Power Purchase Agreement (PPA) -- supply of the entire Electricity to be generated by the respondent for a period of 30 years. - Disputes arose regarding payments - 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. - The State Commission held that it is competent to adjudicate upon the dispute.-Appellate Tribunal for Electricity (hereinafter referred to as“APTEL” or “Appellate Tribunal”), at New Delhi dismissed the appeal - Apex court too dismissed the civil appeal = T.N. Generation & Distbn. Corpn. Ltd. …Appellant VERSUS PPN power Gen. Co. Pvt. Ltd. ...Respondent=2014 ( Apr.Part ) judis.nic.in/supremecourt/filename=41381

Electricity  Act, 2003 (hereinafter referred to as the “Act”)-    Power Purchase Agreement (PPA) -- supply of the entire Electricity to  be  generated  by  the respondent for a period of  30  years. - Disputes arose regarding payments - 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.  - The State Commission held that it is competent  to adjudicate upon the dispute.-Appellate Tribunal for  Electricity  (hereinafter  referred  to  as“APTEL” or “Appellate Tribunal”), at New Delhi dismissed the appeal - Apex court too dismissed the civil appeal =
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 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 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 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.
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. =
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.  
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 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.=
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 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.=

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  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.

 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.
2014 ( Apr.Part ) judis.nic.in/supremecourt/filename=41381                             SURINDER SINGH NIJJAR, A.K. SIKRI

                  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 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 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 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 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 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 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 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
             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  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.  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.  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 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;
           (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.  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  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 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, 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.
             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 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 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  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. Zachillhu[3]. 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 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 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  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 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 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 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 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  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 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-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  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 29th 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  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 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 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 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 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 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 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  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 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
             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
             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
             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 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  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 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 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 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  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  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.

         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 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 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, 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 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 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  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 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 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 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  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  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. 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.


      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 [pic]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 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
      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  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  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 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 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 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.


      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 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  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
           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,
           [pic]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. 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  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.








      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.



      -----------------------
[1]    (2008) 4 SCC 755
[2]    (2010 (11) SCC 1)
[3]    (1992 Supp.(2) SCC 651)
[4]    (1986 ) 4 SCC 537
[5]    (1991) 4  SCC 584
[6]    (2005) (2) SCC 431
[7]    (1987) (1) SCC 124
[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)

[11]   1994 (2) SCC 155
[12]   2011 (5) SCC 532
[13]   (2008) 7 SCC 169
[14]   (2002) 1 SCC 367
[15]   (2011)  8 SCC 161
[16]   1962 (2) SCR 339
[17]   2002 (4) SCC 105
[18]   2012 (9) SCC 552
[19]   2002 (1) SCC 367
[20]   2011 (8) SCC 161

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