Remand Does Not Close the Door to Justice: Supreme Court Allows Compounding Claim in Carrying Cost Dispute Under Electricity Act

"Remand Order Did Not Conclude Issue – Tribunal Must Decide Compounding of Interest on Carrying Cost Anew in Light of Supreme Court Precedents", In a significant judgment delivered on 10 December 2025, a Bench of Justice Manoj Misra and Justice Joymalya Bagchi of the Supreme Court of India held that an appellate tribunal cannot treat remand observations as conclusive when binding Supreme Court precedents evolve subsequently. The ruling came in Civil Appeal No. 8232 of 2023 titled RattanIndia Power Limited v. Maharashtra State Electricity Distribution Co. Ltd. & Anr., involving complex issues under the Electricity Act, 2003, concerning the entitlement of compounding of interest on Carrying Cost arising out of Change in Law compensation under long-term Power Purchase Agreements (PPAs).

Setting aside a partial order of the Appellate Tribunal for Electricity (APTEL) dated 06.10.2023, the Supreme Court remanded the matter back to APTEL solely for fresh adjudication on the limited issue of compounding of interest, clarifying that the grant of interest at LPS (Late Payment Surcharge) rate had already attained finality and shall not be disturbed.

"Remand Keeps the Dispute Alive – Tribunal Cannot Ignore Binding Precedents Citing Past Observations"

The core legal issue was whether Carrying Cost, awarded to the appellant RattanIndia Power Limited (RPL) under its long-term PPAs with Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL), should be calculated with compounding of interest as per the LPS clause of the PPA, or whether the APTEL was justified in denying the same on the ground that its earlier remand order was silent on compounding.

Refusing to accept this reasoning, the Supreme Court ruled:

“Though we do not find fault with the APTEL’s finding that the remand order indicated grant of LPS benefit, we do not agree that it was thereby barred from considering whether compounding was permissible. The lis was alive.” [Para 40]

The Court emphasized that a remand order requiring fresh decision "in light of observations" cannot foreclose adjudication on points not finally decided:

“Ordinarily, when a matter is remanded, the lis is alive, unless directed otherwise. The subordinate court must apply and follow the law which holds the field on the day it decides the matter.” [Para 40–41]

This holding affirms that remand does not render the tribunal functus officio on undecided legal issues, especially when binding precedents emerge thereafter.

LPS Rate Affirmed – Cross-Appeal is Mandatory to Contest Operative Directions

The Supreme Court also dealt with the objection raised by MSEDCL regarding the correctness of awarding LPS rate for Carrying Cost. The Court dismissed this challenge solely on procedural grounds, making a vital pronouncement on appellate discipline under Section 125 of the Electricity Act:

“By not preferring an appeal or cross-appeal/objection against the APTEL order, MSEDCL has given up its right to challenge the award of Carrying Cost with interest at LPS rate.” [Para 51]

Relying on Banarsi v. Ram Phal, (2003) 9 SCC 606, and the analogy of Order 41 Rules 22 and 33 CPC, the Bench held:

“A respondent cannot attack any part of the decree without cross-appeal. If he wants to get rid of the part of the decree which is against him, he must file appeal or cross-objection.” [Para 48]

Thus, Carrying Cost with interest at LPS rate stands final and binding — only the method of computing interest (simple vs compound) remains open for adjudication.

Restitution Means Full Economic Restoration – Compound Interest May Be Necessary

In a detailed consideration of restitution principles, the Supreme Court noted that Carrying Cost is granted to ensure that the generator is restored to its “same economic position” as if the Change in Law had not occurred. Referring to its binding precedents in:

• Uttar Haryana Bijli Vitran Nigam Ltd. v. Adani Power (Mundra) Ltd., (2023) 2 SCC 624
• Jaipur Vidyut Vitran Nigam Ltd. v. Adani Power Rajasthan Ltd., 2025 SCC OnLine SC 1211

The Court held:

“Grant of compound interest on Carrying Cost… is aimed at restituting a party adversely affected by a Change in Law event and restoring it to its original economic position.” [Para 53]

However, it clarified that entitlement to compounding must be assessed on facts, not presumed:

“Whether compounding of interest is necessary to restitute a generator to its original economic position is a question to be addressed on the facts of the case.” [Para 55]

Accordingly, APTEL was directed to re-examine the issue of compounding based on the governing law and factual record, without disturbing the grant of LPS rate.

Rate vs. Method – Grant of LPS Rate Is Distinct from LPS Clause Application

Importantly, the Supreme Court distinguished between granting Carrying Cost at the LPS rate and applying the LPS clause in toto:

“No doubt, LPS clause in the PPA includes compounding of interest but APTEL allowed interest at LPS rate and not as per LPS clause. Therefore, whether compounding of interest is to be allowed would have to be decided.” [Para 57]

This nuanced interpretation safeguards against automatic application of compounding unless found appropriate under the PPA, restitution principles, and case-specific facts.

Constitutional Restraint in Commercial Disputes under Statutory Regime

On the issue of whether the Supreme Court could interfere with the award of LPS interest at all under Article 136, the Bench exercised constitutional restraint, stating:

“In commercial matters where a statutory regime is in place, exercise of constitutional powers should be in exceptional or rare circumstances. We do not find any such circumstances.” [Para 52]

Thus, the Court declined to interfere with the merits of the LPS award granted in favour of the generator, reaffirming its consistent approach of minimal intervention in commercial and regulatory disputes where sectoral appellate structures exist.

The Supreme Court's ruling in RattanIndia Power Ltd. v. MSEDCL significantly clarifies the interplay between remand orders, binding precedents, and restitution principles in the context of Change in Law compensation under PPAs governed by the Electricity Act, 2003.

By holding that tribunals must decide pending lis in accordance with law prevailing at the time of decision, and that procedural rights to challenge adverse directions must be exercised through cross-appeal, the Court reinforced both judicial discipline and fair adjudication.

The case now returns to APTEL, which will determine whether compounding of interest must be allowed on facts and law, but the right to interest at the LPS rate is beyond dispute.

Date of Decision: 10 December 2025