In a setback to Haryana discoms, Uttar Haryana Bijli Vitran Nigam and and Dakshin Haryana Bijli Vitran Nigam, the Supreme Court on Wednesday held that they need to pay Adani Power carrying cost interest on compounding basis from January 29, 2014 on account of a “Change in Law” event.
The event had taken place when Adani Power had to incur additional costs on installing Flue Gas Desulfurization (FGD) unit, as directed by the Ministry of Environment and Forests in 2010, at its 4620 MW coal-fired power plant at Mundra, Gujarat.
A Bench comprising Chief Justice NV Ramana, justices Krishna Murari and Hima Kohli said that once Adani was granted carrying cost by the Aptel, it cannot be urged by the Haryana discoms that interest on carrying cost should be calculated on simple interest basis instead of compound interest basis.
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Upholding the Aptel’s order, Justice Kohli, writing for the Bench said that Adani had to arrange finances by borrowing from banks. “The interest rate framework followed by Scheduled Commercial banks and regulated b RBI mandates that interest shall be charged on all advances at monthly rests. In this view of the matter, Adani Power is justified in stating that if the banks have charged it interest on monthly rest basis for giving loans to purchase the FGD, any restitution will be incomplete, if it is not fully compensated for the interest paid by it to the banks on compounding basis. We are of the opinion that interest on carrying cost is nothing but time value for money and the only manner in which a party can be afforded the benefit of restitution in every which way.”
It rejected the Harayan discom’s stand that since no fault is attributable to them for the delay caused in determination of the amount, they cannot be saddled with the liability to pay interest on carrying cost
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The Appellate Tribunal for Electricity had on August 12, 2021 not only held that Adani Power was entitled for carrying cost in respect of compensation for Change in Law events towards FGD installation, as approved by the CERC on June 2019, reckoned from the date of change in law occurrence, it had further held Adani Power to be entitled for interest on carrying cost.
The SC had in February 2019 while holding that Adani Power was eligible for carrying cost had ruled that the generating company was entitled to adjustment in their monthly tariff payment from the date on which the exemption notifications became effective.