Page 1 C.A.No.6036/2012 etc.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.6036 OF 2012

A.P. Power Coordination Committee & Ors. …..Appellants

Versus

M/s. Lanco Kondapalli Power Ltd. & Ors. …..Respondents

W I T H

C.A.Nos. 6061 of 2012; 6138 of 2012; 9304 of 2013

and 6835 of 2015

J U D G M E N T

SHIVA KIRTI SINGH, J.

1. The leading matter – C.A.No.6036 of 2012 as well as

C.A.No.6061 of 2012 are statutory appeals arising out of a common

order dated 2.7.2012 passed by Appellate Tribunal for Electricity (for

short, ‘APTEL’) whereby pleas under Section 14 of the Limitation Act,

1963 to explain the alleged delay in preferring claims by the common

respondent – M/s. Lanco Kondapalli Power Ltd. (for brevity referred to

as ‘M/s. LANCO’) a power generating company before the Andhra

Pradesh Electricity Regulatory Commission (hereinafter referred to as

‘the Commission’) has been accepted and as a result the main claim in

the leading matter relating to Bill for Capacity Charges and in the

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other appeal for Minimum Alternate Tax (MAT) for 2001-2005 have

been remanded for a follow up order by the Commission on the actual

claims and interest. In respect of MAT, a concession on merits was

recorded in respect of period 2006-2009 and for the earlier period

(2001-2005) the contest was confined only to issue of limitation, as

evidenced by Original Order of Commission dated 13.6.2011. Hence,

through a SLP leading to C.A.No.6835 of 2015, the Appellant has

chosen to make a direct challenge to aforesaid order to explain and

overcome the alleged concession in respect of claim for reimbursement

of MAT for the entire period of 2001-2009. C.A. No.6138 of 2012 is a

statutory appeal to again challenge MAT for 2006-2009 but directed

against appellate order dated 20.7.2012 by APTEL. The last matter,

C.A.No.9304 of 2013 arises out of a SLP against the original order of

Commission dated 8.8.2013 relating to MAT claim for the period

2009-2012. Since issues are same or similar between the same

appellant and respondent in all these appeals, they have been heard

together and shall be governed by this common judgment. Unless

otherwise indicated the facts have been noted from the records of the

main matter, i.e., C.A.No.6036 of 2012.

2. Instead of merits of bills raised by M/s. LANCO for capacity

charges the issue of limitation has assumed greater significance and

has thrown up two important points. First, whether the Limitation

Act is applicable to a claim before the Commission and if the answer

is in positive, then second, whether APTEL’s order reversing the views

of Commission and accepting claim under Section 14 of the Limitation

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Act is in accordance with law or not. It is not in dispute that if the

order of APTEL is upheld, the issue of correctness or validity of

capacity charges will stand remanded for decision by the Commission

in accordance with law. So far as claim of M/s. LANCO for

reimbursement of MAT for the period 2001-2005 is concerned, it shall

stand rejected if APTEL’s order on the issue of limitation is reversed,

otherwise such claim for the aforesaid period as well as for later

period upto 2012 will be governed by the present judgment on the

issue of legality and admissibility of claim for MAT.

3. Before adverting to the issues noticed above and the rival

contentions, it will be useful to notice the essential facts relevant for

deciding the issues. M/s. LANCO is engaged in the generation and

sale of electricity. Its Registered Office is at Hyderabad and it has set

up its power project at Kondapalli Industrial Development Area in

Krishna District of Andhra Pradesh. A.P. Power Co-ordination

Committee, the appellant no.1, as the name suggests, was constituted

on 07.06.2005 to ensure coordination between the four distribution

companies of Andhra Pradesh who are appellant nos.3 to 6. M/s.

Transmission Corporation of Andhra Pradesh (APTRANSCO) is the

second appellant. At the relevant time the appellant no.2 was

engaged in procurement of power for the Distribution Companies. In

the first phase of power sector reforms, Andhra Pradesh State

Electricity Board was unbundled into Generation and Transmission

Corporation and subsequently the four Distribution Companies were

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notified by the Government on 31.3.2000 on account of unbundling of

the Transmission Corporation in the subsequent phase of reforms.

4. There is no dispute between the parties that the erstwhile A.P.

State Electricity Board had invited bids for short gestation power

projects. M/s. LANCO also submitted its bid which was accepted by

the Board and approved by the Government of Andhra Pradesh

leading to a Power Purchase Agreement (for brevity, ‘PPA’) dated

31.3.1997. M/s. LANCO then set up a 355 MW (ISO) Combined Cycle

Gas Power Plant. The completion of the plant took more than the

scheduled period of 16 months. It is not necessary to go into reasons

for the delay in the present proceeding. It will suffice to note that

M/s. LANCO declared 25.10.2000 as the date of commissioning of

their project but this was not accepted as the Commercial Operation

Date (COD) by APTRANSCO. However, M/s. LANCO continued to

generate power and delivered it to grid. It raised bills from 19.9.2000.

While the charges for the energy delivered were accepted, the bill for

capacity charges was disallowed on the ground that it was not in

accordance with the PPA. On 8.9.2003 M/s. LANCO issued a notice of

arbitration under Article 14 of the PPA. There is some dispute as to

whether this notice was only for invoking the mechanism for informal

dispute resolution or also a notice for resolution of dispute by

Arbitration. The appellants through a reply dated 24.9.2003

requested for an ordinary meeting to discuss pending problems before

considering the request for arbitration. On 14.10.2003 M/s. LANCO

wrote a letter intimating the nomination of its Company’s Secretary as

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Page 5 C.A.No.6036/2012 etc.

its representative to participate in the proceeding for informal dispute

resolution required by Article 14.1. It requested the other side to

designate their representative and to intimate the date and venue of

the meeting. The appellants through a letter dated 25.11.2003

designated their Chief General Manager to act as their representative

but the meeting scheduled could not take place. On 26.3.2004, M/s.

LANCO issued another notice for arbitration and intimated the name

of Justice B.P. Jeevan Reddy as its arbitrator. Through a letter dated

8.4.2004, APTRANSCO raised various grounds in support of its stance

that the arbitration clause was not enforceable, particularly in the

light of Section 86(1)(f) of the Electricity Act, 2003.

5. M/s. LANCO did not accept the stand of appellants and filed an

Arbitration Application bearing No.31 of 2004 on 27.4.2004 before the

High Court of Andhra Pradesh at Hyderabad under Section 11(4) of

the Arbitration and Conciliation Act, 1996 seeking appointment of

arbitrator for APTRANSCO so that the disputes raised by it could be

resolved through arbitration. APTRANSCO contested the

maintainability of arbitration proceedings on various grounds

including Section 86(1)(f) of the Electricity Act, 2003. While the

matter before the High Court was still pending, the scope and effect of

Section 86(1)(f) of the Electricity Act was decided by a judgment of this

Court dated March 13, 2008 in the case of Gujarat Urja Vikas Nigam

Ltd. v. Essar Power Ltd. (2008) 4 SCC 755. This Court held that all

disputes between the licencee such as the appellants and generating

companies such as M/s. LANCO require adjudication only by the

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Page 6 C.A.No.6036/2012 etc.

State Commission which is alone competent to either adjudicate the

disputes or refer them for arbitration and to appoint arbitrator. It was

clearly held that it is the State Commission or its nominee under

Section 86(1)(f) of the Electricity Act, 2003 and not the Chief Justice

or his nominee under Section 11 of the Arbitration and Conciliation

Act, 1996 who will have the authority to appoint an arbitrator if it

decides to refer the disputes to arbitration. This Court further

clarified that except the power of appointing arbitrator getting shifted

to the State Commission, conduct of arbitration even under Section

86(1)(f) of the Electricity Act would be governed by provisions of the

Arbitration and Conciliation Act, 1996. Only in cases of conflict the

Electricity Act would prevail.

6. In view of law settled by the judgment in the case of Gujarat

Urja (supra), the Arbitration Application No.31 of 2004 was closed by

the High Court on 18.3.2009 with liberty to M/s. LANCO to approach

the Commission under Section 86(1)(f) of the Electricity Act. M/s.

LANCO filed O.P.No.33 of 2009 before the Commission on 5.6.2009 to

claim capacity charges on the basis of bills raised from 15.9.2000

onwards to 11.1.2001. The appellants resisted the claim inter alia on

the ground of limitation. The appellants preferred a specific

application for rejecting the O.P.No.33 of 2009 on the ground of

limitation. M/s. LANCO preferred a reply in which Section 14 of the

Limitation Act was invoked for seeking exclusion of time when the

arbitration proceeding had remained pending with the High Court in

the form of Arbitration Application No.31 of 2004. The Commission

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rejected the claim by order dated 13.6.2011 on the ground of

limitation by holding that the time spent in the arbitration

proceedings did not merit exclusion under Section 14 of the Limitation

Act because it had not been pursued in good faith. M/s. LANCO

preferred Appeal No.129 of 2011 before APTEL. That appeal was

allowed by the impugned judgment presently under appeal, dated

2.7.2012. APTEL reversed the findings of the Commission on the

issue of limitation and directed the Commission to pass appropriate

follow up order on the actual claims and interest.

7. So far as claim of M/s. LANCO for reimbursement of MAT for

various periods is concerned, the claim for the period 2001-2005 was

rejected by the Commission on the ground of limitation but it got

revived on account of common appellate order by APTEL dated

2.7.2012 and after the remand only a consequential order is required

to be passed by the Commission. For other periods, the claim for

reimbursement of MAT has been allowed in favour of M/s. LANCO.

The Commission allowed the claim for the periods 2006-2009 and

2009-2012 on account of its earlier order in respect of similar claim in

another case which elicited a concession by the counsel for the

appellants, although in the written statement before the Commission

the appellants had seriously contested such claim on merits. It is

contended by Mr. V. Giri, learned senior counsel for the appellant that

the concession was misconceived and unauthorized. Learned senior

counsel for M/s. LANCO, Mr. Sundaram, fairly conceded that the

issue relating to claim for reimbursement of MAT may be heard and

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Page 8 C.A.No.6036/2012 etc.

decided by us on merits and accordingly the parties have been heard

in detail on the merits of such claim for the entire period, i.e., from

2001 to 2012. But in case the claim of MAT for 2001-2005 is held by

us to be barred by limitation, it will not be considered on merits.

8. Appearing for the appellants, learned senior advocate Mr. V. Giri

pointed out that in the impugned order under appeal APTEL has not

considered the claim of capacity charges on merits and therefore this

Court is not required to go into facts for deciding the merits of bills for

capacity charges. On the issue of limitation he contended that there

was no issue raised before the Commission that bar of limitation as

per Limitation Act is not applicable to the proceedings before the

Commission. He referred to the arguments advanced on behalf of

M/s. LANCO before APTEL to highlight that even in appeal it claimed

exclusion of time spent in arbitration proceedings under Section 14(2)

of the Limitation Act and hence this Court should not allow M/s.

LANCO to now urge that the Limitation Act cannot apply and hence

there will be no bar of any limitation in preferring a claim before the

State Commission. We have noticed that in para 28 of the judgment

under appeal APTEL has noted that the appellant no.1 (M/s. LANCO)

does not seriously dispute the fact that the Limitation Act would be

applicable to the present case. But learned counsels have conceded

that the issue whether Limitation Act is applicable or not is one of law

and accordingly the parties have advanced detailed submissions on

this issue. Hence we propose to consider these submissions also.

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Page 9 C.A.No.6036/2012 etc.

9. From the above stand of the parties, the following issues emerge

for our consideration and adjudication :-

(i) Whether the Limitation Act, 1963, particularly

Section 3 and the Schedule will apply to any action instituted

before the Commission under Section 86(1)(f) of the Electricity

Act, 2003?

(ii) Whether the impugned order passed by APTEL

permitting application of principles emerging from Section 14 of

the Limitation Act, is against Law so as to warrant interference?

(iii) And whether on merits the claim for

reimbursement of MAT is in contravention of relevant terms and

conditions of the Power Purchase Agreement (PPA)?

10.At this juncture, relevant provisions or articles of PPA need to

be noticed. They are as follows:

“Article 3.8 - Claims for Taxes on Income

Any advance Income tax payable for the Project

in any month supported by a certificate of a chartered

accountant approved by the Board (such approval not

to be unreasonably withheld or delayed) shall be

reimbursed by the Board. After the tax assessment is

completed for any year, and the liability thereon is

determined by the taxation authorities in India, the

excess or shortfall in the tax liability so determined

will be adjusted in the supplementary bill (as defined

in Article 5.5) for the succeeding month or on the due

date of payment thereof, whichever is later, subject to

Article 3.9. Tax to be reimbursed will be calculated on

the income from the project only, and calculated on

the assumption that the Company is engaged solely in

the ownership, design, financing, construction,

operation and maintenance of the Project and will not

include tax reimbursements of the previous year.

9

Page 10 C.A.No.6036/2012 etc.

5.5.- Supplementary Bills

For payments due to the Company for reimbursement

of taxes on income, incentives or taxes and duties

levied on generation and/or sale of electricity,

payments for periods of political Force Majeure

affecting either Party or Non-Political Force Majeure

affecting the Board or any other adjustments or

payments due to the Company hereunder, the

Company shall present a supplementary bill, in such

form as may be mutually agreed upon by the Board

and the Company, (duly supported by supporting

data). Each supplementary bill shall be payable by the

Board on the Due Date of Payment, except in case of

supplementary bill for taxes on income. At least thirty

(30) days prior to the date when income tax is required

to be paid by the Company, the Company shall submit

to the Board a supplementary bill for the same. This

bill shall be payable by the Board within twenty-five

(25) days of its presentation to the Board by the

Company or at least five (5) days before the date on

which the tax is required to be paid by the Company,

whichever is later.

5.7- Billing Disputes

Notwithstanding any dispute as to all or any portion of

any bill submitted by the company to the Board, the

Board shall pay the full amount of the bill provided

that the amount of the bill is based on (a) a meter

reading that has either been signed by both Parties or

certified by the Company with respect to the Board’s

refusal to sign within three (3) days of the meter

reading date and (b) the provisions of this Agreement.

The Board shall notify the Company of any disputed

amount, and the Company shall rectify the defect or

otherwise notify its rejection of the disputed amount,

with reasons, within five (5) days of the reference by

the Board, falling agreement on which the provisions

of Article 14 shall apply with respect thereto. If the

resolution of any dispute requires the Company to

reimburse the Board, the amount to be reimbursed

shall bear interest at the Working Capital Rate

applicable to the Board from the date of payment by

the Board to the date of reimbursement. The Board

may not dispute any amount after sixty (60) days

following the Due Date of Payment therefor.

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Page 11 C.A.No.6036/2012 etc.

11.1- Definition of Law

For the purposes of this Agreement, “Law” means the

constitution of India and any act, rule, regulation,

directive, notification, order or instruction having the

force of Law enacted or issued by any competent

legislature, or Government Agency.

11.2- Definition of Change in Law

For the purposes of this agreement, “Change in Law”

means

(i)any enactment or issue of any new Law,

(ii)any amendment, alteration, modification or

repeal of any existing Law or any new or modified

directive or order thereunder,

(iii)any change in the application or interpretation

of any Law by a competent legislature or Government

Agency in India which is contrary to the existing

accepted application or interpretation thereof, in each

case coming into effect after the date of this

Agreement, provision for which has not been made

elsewhere in the Agreement.

11.4 - Additional/Reduced Expenditures or Other

Increased/Reduced Costs due to a Change in Law

or Change in Permits

(a)Within sixty (60) days after the COD of the first

Generating Unit or the end of any Tariff Year, the

Company shall determine after accounting for the net

economic effects on the Company during the period

prior to the COD of the first Generating Unit or, as the

case may be, such Tariff Year of any Changes in Law

or Changes in Permits, based on an accounting

conducted by an independent chartered accountant

reasonably acceptable to the Board. If as a result of

such accounting, the company suffers an increase in

costs or a reduction in after-tax cash flow or any other

net economic burden which it would not have

experienced but for such changes in Law or Changes

in Permits (taking into account the reasonable costs of

financing of any capital improvement in the period

prior to the COD of the first Generating Unit or, as the

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Page 12 C.A.No.6036/2012 etc.

case may be, such Tariff Year), the aggregate economic

affect of which exceeds the equivalent of Rupees three

(3) crores per 100 MW or pro-rata for any part thereof

during the period prior to the COD of the first

generating unit and Rupees one (1) crore per 100 MW

or pro-rata for any part thereof during the period after

the COD of the first Generating Unit, during any Tariff

Year (excluding cost adjustments in respect of

Changes in Law or Changes in Permits from any prior

period), the Company may notify the Board of any

proposed amendments to this Agreement required to

put the Company in the same economic position it

would have occupied in the absence of such cost

increase reduction in the net after-tax cash flow or

any other economic burden. Such notice shall be

accompanied by a certification of the Company’s

independent chartered accountant and a reasonably

detailed explanation of certification of any officer of the

Company respecting the basis for such net economic

burden increase. The amount of an net economic

burden claimed by the Company shall be net of any

insurance proceeds received in respect thereof.

(b)Within sixty (60) days after the COD of the first

Generating Unit or the end of any Tariff Year, if after

accounting as provided in subsection (a) for the net

economic effects on the Company during the period

prior to the COD of the first Generating Unit or as the

case may be, such tariff year of any changes in law or

Changes in Permits, the Company experiences a

reduction in costs or an increase in after-tax cash flow

or any other net economic benefit which it would not

have experienced but for such Changes in Law or

Changes in Permits, the aggregate economic effect of

which exceeds the equivalent of Rs.3 crore per 100

MW or pro-rata for any part thereof during the period

prior to the COD of the first Generating Unit or Rupees

one (1) crore per 100 MW or pro-rata for any part

thereof, following the COD of the first Generating Unit,

during any tariff Year, the Company shall provide to

the Board results of such accounting together with a

certificate of the Independent chartered accountant

and the Board, in response thereto may notify the

company of any proposed amendments to this

Agreement required in its good faith judgment to put

the Company in the same economic position it would

have occupied in the absence of such cost reduction,

increase in the net after-tax cash flow or any other

economic benefit. Such notice shall be accompanied

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Page 13 C.A.No.6036/2012 etc.

by a reasonably detailed explanation of a certification

of an officer of the Company respecting the basis for

such decrease.

(c)Only increased costs which are necessarily and

unavoidably incurred in complying with or as a direct

result of the Changes in Law or Changes in Permits

taking into account, all reasonable steps which may be

taken by the Company to minimize such increased

costs, shall be considered as increased costs for the

purposes of this Article.

(d)As soon as practicable during the period prior to

the COD of the first Generating Unit or any Tariff Year

after the Company becomes aware of any Change in

Law or Change in Permits which could reasonably be

expected to give rise to an increase/reduction in costs

or reduction/increase in after-tax cash flow pursuant

to paragraph (a) and (b), the Company shall provide an

interim notice thereof to the Board describing, to the

extent possible, the expected effect on the costs and

the cash flow of the Company. The Company shall

consult with the Board regarding such increased

expenditures and the Company shall use all

reasonable efforts to implement the Board’s

recommendations, if any, to minimize such increased

expenditures consistent with Prudent Utility Practices

and the Company’s obligations under this Agreement.

If prior to the end of any Tariff year the Company

demonstrates on the basis of a certification of its

chartered accountant that any Change in Law or

Change in Permits would result in the Company’s

being unable to meet its payment obligations to its

lenders under the Financing Documents on a current

basis, then in addition to the Company’s right under

sub-section (a) but notwithstanding the time period for

exercising such rights specified therein, the Company

shall be entitled to propose amendments to this

Agreement as provided in sub-section(a) and the

Parties shall consider such proposal as provided in

subsection (e) below, provided that any benefits which

the Company is eligible to receive under subsection (a)

shall be reduced by any benefits received by the

Company prior to the end of the relevant period under

this subsection.

(e)Within thirty (30) days after receiving any proposal

pursuant to paragraph (a), (b) or (d), the Parties shall

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Page 14 C.A.No.6036/2012 etc.

meet and agree on either amendments to this

Agreement or alternative arrangements to implement

the foregoing. If no such agreement has been reached

within ninety (90) days after any meeting pursuant to

Article 11.3(a), (b) or (d), as the case may be, the

proposals of the Parties shall be submitted to the

Independent chartered accountant referred to in

paragraphs (a), (b) and (d), as the case may be.

14.1 - Informal Dispute Resolution

(a)Each Party shall designate in writing to the

other Party a representative who shall be authorized to

resolve any dispute arising under this Agreement in an

equitable manner.

(b)If the designated representatives are unable to

resolve a dispute under this Agreement within fifteen

(15) days, such dispute shall be referred by such

representatives to a senior officer designated by the

Company and a senior officer designated by the Board,

respectively, who shall attempt to resolve the dispute

within a further period of fifteen (15) days.

(c)The Parties hereto agree to use their best efforts

to attempt to resolve all disputes arising hereunder

promptly, equitably and in good faith, and further

agree to provide each other with reasonable access

during normal business hours to any and all non-

privileged records, information and data pertaining to

any such dispute.

14.2 - Arbitration

(a) In the event that any dispute is not

resolved between the Parties pursuant to Article 14.1,

then such disputes shall be settled exclusively and

finally by arbitration. It is specifically understood and

agreed that any dispute that cannot be resolved

between the Parties, including any matter relating to

the interpretation of this Agreement, shall be

submitted to arbitration irrespective of the magnitude

thereof, and the amount in dispute or whether such

dispute would otherwise be considered justiciable or

ripe for resolution by any court or arbitral tribunal.

This Agreement and the rights and obligations of the

Parties hereunder shall remain in full force and effect

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Page 15 C.A.No.6036/2012 etc.

pending the award in such arbitration proceedings,

which award shall determine whether and when

termination of this Agreement if relevant shall become

effective.”

11.Although, we were taken through various other Articles of PPA

but it is not imperative to reproduce all such provisions. Article 3.1

provides for capacity charge which is required to be computed as per

Article 3.2 and is meant to be paid by the Board. This is in respect of

the Cumulative Available Energy provided by the Project in respect of

any tariff year, upto (but not exceeding) an amount calculated on the

basis of Prescribed Plant Load factor. Since the issue of capacity

charge is not required to be addressed by us on merits, further details

need not detain us. Clause 3.8 has been read over again and again

because it is of immense significance in deciding the issue relating to

MAT. Article 5 contains various sub-articles relating to billing and

payment. They provide for monthly tariff bills which are payable by

the Board or the licensee on the Due Date of Payment. The

supplementary bills are covered by Article 5.5. They cover different

items and are required to be supported by supporting data. Such bills

are also payable on the Due Date of Payment, except the

supplementary bill for taxes on income which is to be submitted at

least 30 days prior to the time when the income tax is required to be

paid by the generating company. Such bill is payable by the Board

within 25 days of presentation or at least 5 days before the date on

which the tax is required to be paid by the company, whichever is

later.

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Page 16 C.A.No.6036/2012 etc.

12.Article 5.7 relates to billing disputes and it refers to the

provisions of Article 14 which governs Arbitration including Informal

Dispute Resolution. Article 11 caters to the effects of Change in Law

upon the rights and liabilities of the parties. This has assumed

relevance in the present context on account of stand taken by the

appellant that MAT does not fall under Article 3.8 governing claims for

Taxes on Income but under Article 11.4 which provides an altogether

different procedure for making claim for additional costs by the

company on account of any Change in Law etc. In this context it may

usefully be noted that Article 1 of PPA contains definitions for the

purposes of the agreement. Article 1.2 adopts definition of several

terms as defined in the Indian Electricity (Supply Act) 1948 and set

out in Schedule B to the Agreement. Article 1.4 contains various

general provisions such as - unless the context otherwise requires, the

singular shall include plural etc. and vice versa and that “ …….a

reference to any Law shall be construed as a reference to such Law as

from time to time amended or re-enacted.”

13.Mr. Giri drew our attention to various provisions of the

Electricity Act, 2003 particularly to Section 86 providing for various

functions of a State Commission which include the function under

clause (f) in Sub-Section (1) empowering the Commission to

“adjudicate upon the disputes between the licensees and generating

companies and to refer any dispute for arbitration.” He also referred

to Section 94 which vests the Commission, for purposes of any

inquiry or proceedings under this Act, with same powers as are vested

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Page 17 C.A.No.6036/2012 etc.

in Civil Court under the Code of Civil Procedure, 1908 in respect of

various matters such as summoning and enforcing the attendance of

any person and examining him on oath; discovery and production of

any document etc; receiving evidence on affidavit; requisitioning of

any public record; issuing commission for the examination of

witnesses; reviewing its decisions, directions and orders; and any

other matter which may be prescribed by the Commission. The

Commission shall also have powers to pass suitable interim order and

authorize any suitable person to represent the interest of the

consumers in the proceedings before it. Section 95 declares that all

proceedings before the Commission shall be deemed to be judicial

proceedings within the meaning of Sections 193 and 228 of the Indian

Penal Code and it shall be deemed to be a Civil Court for the purposes

of Sections 345 and 346 of the Code of Criminal Procedure, 1973.

Section 158 is a solitary provision in Part XVI which provides for

arbitration under the heading “Dispute Resolution”. According to

Section 158, any matter directed to be determined by Arbitration,

unless there is expressed provision to the contrary in the license of a

licensee, shall be determined by such person or persons as the

Commission may nominate in that behalf on the application of either

party; but in all other respects the Arbitration shall be subject to the

provisions of the Arbitration and Conciliation Act, 1996.

14.On the basis of powers and functions of the Commission

highlighted above and on account of law declared in Gujarat Urja

(supra) as well as in Tamil Nadu Generation & Distribution Corpn.

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Page 18 C.A.No.6036/2012 etc.

Ltd. v. PPN Power Generating Co. (P) Ltd., (2014) 11 SCC 53, the

contention of Mr. Giri is that in discharge of its functions to

adjudicate all disputes between the licensees and generating

companies and/or in referring a dispute to arbitration under Section

86(1)(f) of the Electricity Act, the Commission deserves to be treated as

a substitute and therefore equivalent of civil court for the purpose of

attracting the bar of limitation provided under the Limitation Act,

1963. According to him the law laid down by this Court that

Limitation Act applies only to civil courts in the strict sense of the

term requires reconsideration in an appropriate case but in the

present matter, since in the case of PPN Power Generating Co. (P)

Ltd.(supra) it has been categorically held that the State Commission

discharges judicial functions and judicial power of far reaching effect

and has essential trapping of the Courts, the same should be

sufficient to make the Limitation Act applicable to petitions or

applications that come before the Commission requiring adjudication

even of matters arising purely out of contract like in the present case

and not from the statutory provisions of the Electricity Act. He also

advanced a supplementary or alternative submission that there is

nothing in the Electricity Act, 2003 to restore to any party the right to

sue for a cause which has already become barred by law of Limitation,

rather under the mandate of Section 175 of the Electricity Act, the

Limitation Act has to be given full respect as a law for the time being

in force unless any provision of the Limitation Act is found to be

inconsistent with the Electricity Act. Only in a situation of conflict,

18

Page 19 C.A.No.6036/2012 etc.

the electricity Act will have a superior or overriding force by virtue of

Section 174 of the Electricity Act.

15.Yet another submission of Mr. Giri is that the matter does not

attract Section 2(4) of the Arbitration and Conciliation Act, 1996 (for

brevity ‘Arbitration Act’) rather Section 43 of the Arbitration Act shall

govern the rights of the parties and it mandates that the Limitation

Act, 1963 shall apply to arbitrations as it applies to proceedings in

courts. It may however be noted here that in the case of PPN Power

Generating Co. (P) Ltd. (supra) in para 65, the Court held that the

Limitation Act would not be applicable in such matters for various

reasons including Section 2(4) of the Arbitration Act which was

extracted to highlight that sub-section (1) of Section 40, Sections 41

and 43 all in Part I of the Arbitration Act, would not apply to

arbitration under any other enactment. Only rest of the Limitation

Act would be applicable to the extent not inconsistent with the other

enactment or any Rule made thereunder. On that basis in Paragraph

66 it was held that the provisions with regard to Limitation Act under

Section 43 of the Arbitration Act would not be applicable to statutory

arbitrations conducted under the Electricity Act, 2003.

16.In fairness to the submission of Mr. Giri, it is noted that in the

PPN Power Generating Co. (P) Ltd.(supra), in Paragraphs 64 and 68,

this Court was satisfied on facts itself that the principle of delay and

laches was not attracted. Further, the provisions in the PPA in that

case provided that the seat of Arbitration shall be in London and that

19

Page 20 C.A.No.6036/2012 etc.

alone made part I of the Arbitration Act inapplicable to the arbitration

proceeding and ruled out applicability of Section 43 also.

17.Mr. Giri has placed considerable reliance upon a judgment by

three Judges of this Court in State of Kerala v. V.R. Kalliyanikutty

(1999) 3 SCC 657. The question of law in that case was whether a

debt which is barred by the law of limitation can be recovered by

resorting to recovery proceedings under the Kerala Revenue Recovery

Act of 1968. The High Court held that in the absence of any provision

in the aforesaid Kerala Act creating a substantive right to recover time

barred debts, such debts could not be recovered through the

summary proceedings under that Act. As per Section 71 of the Kerala

Act the Government could issue a notification making the provisions

of the Act applicable to the recovery of “amounts due” from any person

or class of persons to any specified institution or any class of

institutions. The say of State Government and the State Financial

Corporation was that the words “amounts due” will encompass time

barred claims also. This Court placed reliance upon judgment of the

Privy Council in the case of Hans Raj Gupta v. Dehra Dun-Mussoorie

Electric Tramway Co. Ltd. AIR 1933 PC 63. It found that the Kerala

Act did not create any new right rather it only provided a process for

speedy recovery of moneys due. Therefore the person claiming

recovery cannot claim amounts which are not legally recoverable nor

can a defence of limitation available to a debtor in a suit or other legal

proceeding be taken away under the provisions of the Kerala Act. The

State supported its stand by highlighting the settled legal principle

20

Page 21 C.A.No.6036/2012 etc.

that the statute of limitation merely bars the remedy without touching

the right. But such submission did not cut any ice. Relevant

provisions of the Kerala Act led to a conclusion that although the

necessity of filing a suit stood avoided, the claim which could be

legally recovered was not enlarged. In para 16 this Court concluded

thus :

“……… An Act must expressly provide for such enlargement

of claims which are legally recoverable, before it can be

interpreted as extending to the recovery of those amounts

which have ceased to be legally recoverable on the date when

recovery proceedings are undertaken. …..”

In fact this Court looked to the scheme of the Kerala Act to

come to a conclusion that “amounts due” are those amounts which

the creditor could have recovered had he filed a suit.

18.It is noteworthy that besides drawing relevant inference from

the provisions of the Kerala Act, in paragraph 11 the Court acted

cautiously in interpreting the words “amounts due” in view of Article

14 of the Constitution. It expressed its views thus :

“….. Moreover, such a wide interpretation of “amounts due”

which destroys an important defence available to a debtor in

a suit against him by the creditor, may attract

Article 14 against the Act. It would be ironic if an Act for

speedy recovery is held as enabling a creditor who has

delayed recovery beyond the period of limitation to recover

such delayed claims.”

In para 12 the Court referred to and relied upon judgment in the case

of New Delhi Municipal Committee v. Kalu Ram (1976) 3 SCC 407

wherein this Court had similarly interpreted Section 7 of the Public

21

Page 22 C.A.No.6036/2012 etc.

Premises (Eviction of Unauthorised Occupants) Act, 1958. The words

“arrears of rent payable” were given a limited meaning by holding

thus:

“….. In the context of recovery of arrears of rent under

Section 7, this Court said that if the recovery is barred by

the law of limitation, it is difficult to hold that the Estate

Officer could still insist that the said amount was payable.

When a duty is cast on an authority to determine the arrears

of rent the determination must be in accordance with law.

….”

(emphasis added)

19.Mr. Giri referred to paragraphs 98 and 99 of the judgment in

the case of Kihoto Hollohan v. Zachillhu 1992 Supp. (2) SCC 651 to

highlight the attributes of a “Court” and those of a Tribunal and also

the relevant tests which led the court to hold that the Speaker while

deciding certain disputes is a Tribunal. Similarly in the case of

Thakur Jugal Kishore Sinha v. Sitamarhi Central Co-operative

Bank Ltd. 1967 (3) SCR 163, this Court held that the Assistant

Registrar of Co-operative Societies was a court within the meaning of

the Contempt of Courts Act, 1952. This inference was based on the

pronounced view that the subordination for the purpose of Section 3

of the Contempt of Courts Act means judicial subordination under the

constitutional provisions and not subordination under the usual

hierarchy of courts as per Civil Procedure Code or the Criminal

Procedure Code. The next case in this series is that of Brajnandan

Sinha v. Jyoti Narain AIR 1956 SC 66. In this case it was found that

the Commissioner appointed under the Public Servants (Inquiries) Act

22

Page 23 C.A.No.6036/2012 etc.

1850 (Act 37 of 1850) is not a court within the meaning of the term

under Section 3 of the Contempt of Courts Act. This view found

favour largely because the Commissioner did not have the legal

capacity under that Act to deliver “definitive judgment”. Mr. Giri has

however sought to highlight paragraphs 14 to 18 of the judgment

which deal with the essential attributes of a Tribunal so as to clothe it

with the status of a court. Those paragraphs are as follows :

“(14) The pronouncement of a definitive judgment is thus

considered the essential ‘sine qua non’ of a Court and unless

and until a binding and authoritative judgment can be

pronounced by a person or body of persons it cannot be

predicated that he or they constitute a Court.

(15) The Privy Council in the case of ‘Shell Co. of Australia v.

Federal Commissioner of Taxation’, 1931 AC 275 (A) thus

defined ‘Judicial Power’ at p.295:

‘Is this right? What is ‘Judicial power’? Their

Lordships are of opinion that one of the best

definitions is that given by Griffith C.J. in –

‘Huddart, Parker & Co. v. Moorehead’, (1909) 8 CLR

330 at p.357 (B) where he says: ‘I am of opinion

that the words ‘judicial power’ as used in S.71 of

the Constitution mean the power which every

sovereign authority must of necessity have to

decide controversies between its subjects, or

between itself and its subjects, whether the rights

relate to life, liberty or property. The exercise of

this power does not begin until some tribunal

which has power to give a binding and authoritative

decision (whether subject to appeal or not) is called

upon to take action’.

Their Lordships further enumerated at p.297 certain

negative propositions in relation to this subject :

‘1. A tribunal is not necessarily a Court in this

strict sense because it gives a final decision;

2. Nor because it hears witnesses on oath;

23

Page 24 C.A.No.6036/2012 etc.

3. Nor because two or more contending parties

appear before it between whom it has to decide;

4. Nor because it gives decisions which affect the

rights of subjects;

5. Nor because there is an appeal to a Court;

6. Nor because it is a body to which a matter is

referred by another body.

See ‘Rex v. Electricity Commissioners’ 1924-1KB

171(C)’

and observed at page 298:

‘An administrative tribunal may act judicially, but

still remain an administrative tribunal as

distinguished from a Court, strictly so-called. Mere

externals do not make a direction to an

administrative officer by an ad hoc tribunal an

exercise by a Court of judicial power.’

(16) The same principle was reiterated by this Court in –

‘Bharat Bank Ltd. v. Employees of Bharat Bank Ltd.’, AIR

1950 SC 188 (D); and – ‘Meqbool Hussain v. State of

Bombay’, AIR 1953 SC 325 (E), where the test of a judicial

tribunal as laid down in a passage from – ‘Cooper v. Willson’,

1937-2 KB 309 (F) at p.340, was adopted by this Court :

‘A true judicial decision presupposes an existing

dispute between two or more parties, and then

involves four requisites: - (1) The presentation (not

necessarily orally) of their case by the parties to the

dispute, (2) if the dispute between them is a

question of fact, the ascertainment of the fact by

means of evidence adduced by the parties to the

dispute and often with the assistance of argument

by or on behalf of the parties on the evidence; (3) if

the dispute between them is a question of law, the

submission of legal arguments by the parties; and

(4) a decision which disposes of the whole matter by

a finding upon the facts in dispute and an

application of the law of the land to the facts so

found, including where required a ruling upon any

disputed question of law’.

(17) ‘Maqbool Hussain’s case (E)’, above referred to, was

followed by this Court in – ‘S.A. Venkataraman v. Union of

24

Page 25 C.A.No.6036/2012 etc.

India’, AIR 1954 SC 375 (G), where a Constitution Bench of

this Court also laid down that both finality and

authoritativeness were the essential tests of a judicial

pronouncement.

(18) It is clear, therefore, that in order to constitute a Court

in the strict sense of the term, an essential condition is that

the Court should have, apart from having some of the

trappings of a judicial tribunal, power to give a decision or a

definitive judgment which has finality and authoritativeness

which are the essential tests of a judicial pronouncement.”

20.On behalf of appellants reliance was next placed upon case of P.

Sarathy v. State Bank of India (2000) 5 SCC 355. A Bench of two

Judges considered the scope of the word “Court” occurring in Section

14 of the Limitation Act and held that any authority or tribunal having

trappings of a court is covered because “Court” does not necessarily

have to be a civil court. On such reasonings the appellate authority

under Section 41 of Tamil Nadu Shops and Establishments Act was

held to be a court. One must notice here only that the judgment in

the case of P. Sarathy (supra) has been considered in a recent

judgment of this Court rendered by a Bench of two Judges in the case

of M.P. Steel Corporation v. Commissioner of Central Excise (2015)

7 SCC 58. In this case it was held that although the Limitation Act

including Section 14 thereof would not apply to appeals filed before a

quasi-judicial tribunal such as the Collector (Appeals) mentioned in

Section 128 of the Customs Act, 1962 but the principles underlying

Section 14 of the Limitation Act would nevertheless apply as they

advance the cause of justice. The Court repelled the submission that

25

Page 26 C.A.No.6036/2012 etc.

Section 128 of the Customs Act excludes the application of the

principles underlying Section 14 of the Limitation Act. In order to

reach the conclusion that only principles underlying Section 14 and

not the very Section itself can apply to tribunals having attributes of

Court, in M.P. Steel Corporation (supra) the Court analysed the

precedents and the Limitation Act 1963. It concluded that a quasi-

judicial Tribunal will suffer Limitation Act only as per the statutory

scheme under which it is created and functions. On the other hand,

on its own the Limitation Act is applicable in respect of proceedings

before courts proper, i.e., courts as understood in the strict sense of

being part of the Judicial Branch of the State. In support of this

principle several judgments of this Court were noted such as a three-

Judge Bench judgment in Commissioner of Sales Tax v. Parson

Tools and Plants (1975)4 SCC 22 in which reliance was placed upon

Ujjam Bai v. State of U.P. AIR 1962 SC 1621. For the same purpose

reliance was also placed upon judgment in the case of Jagannath

Prasad v. State of U.P. AIR 1963 SC 416. A contrary view taken by a

two-Judge Bench in the case of Mukri Gopalan v. Cheppilat

Puthanpurayil Aboobacker (1995) 5 SCC 5 was therefore held to be

at variance with at least five earlier binding judgments and also at odd

with a later judgment in the case of Consolidated Engg. Enterprises

v. Irrigation Deptt. (2008) 7 SCC 169. The latter judgment was

considered in detail because the three-Judge Bench examined the

provisions of the Arbitration and Conciliation Act 1996 and held that

provisions of Section 14 of the Limitation Act 1963 would be

26

Page 27 C.A.No.6036/2012 etc.

applicable to an application under Section 34 of the 1996 Act filed

before a Civil Court for setting aside an Arbitral Award. This view in

Consolidated Engg.(supra) has been further clarified by Ravindran, J.

(as he then was) in his separate but concurring judgment, particularly

in paragraph 44.

21.In an attempt to show that the word “Court” has been

interpreted differently in context of different statutes, Mr. Giri referred

to the case of Trans Mediterranean Airways v. Universal Exports

(2011) 10 SCC 316. In paragraphs 44 and onwards a number of

precedents were noticed as to the meaning and interpretation of the

word “Court” and in paragraph 57 it was held that the word “Court” in

Rule 29 of the Second Schedule of the Carriage by Air Act 1972 has

been borrowed from the Warsaw Convention and had not been used in

the strict sense as used in the procedural laws of this country. The

word “Court” was, therefore, held to include the consumer forums. In

para 58 it was reiterated that in legislations like the Consumer

Protection Act the word “Court” cannot be given a strict meaning.

22.In reply on this issue, learned senior advocate Mr. Sundaram

took a frontal stand that Limitation Act does not apply to a proceeding

before the Commission because it is not a court stricto-sensu. For

this proposition he relied upon judgments in the case of PPN Power

Generating Co. (P) Ltd. (supra) and M.P. Steel Corporation (supra).

He however floated a suggestion that even when no period of

limitation is applicable for initiating action before the Commission, if

this Court finds it necessary and in the interest of justice, then a

27

Page 28 C.A.No.6036/2012 etc.

reasonable period may be indicated by this Court for the aforesaid

purpose. He hastened to add that such reasonable period can only be

as an illustration and not as a fixed period. According to him, a

reasonable illustrative period indicated by the court, in practical

application, can vary from case to case as per facts of each case. He

also contended that even if a definite limitation period is found to be

attracted, in view of law laid down clearly in M.P. Steel Corporation

(supra), the principles underling Section 14 will be applicable and the

same has been rightly applied by APTEL while rendering the

impugned order under appeal.

23.Mr. Sundaram referred to PPN Power Generating Co. (P) Ltd.

(supra) and placed reliance upon a solitary sentence at the end of

paragraph 64 which reads thus :

“In any event, the Limitation Act is inapplicable to

proceeding before the State Commission.”

He also placed reliance upon paragraph 65 which is as follows:

“65. 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 :

‘2(4) 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

28

Page 29 C.A.No.6036/2012 etc.

arbitration agreement and as if that other

enactment were an arbitration agreement, except

insofar as the provisions of this Part are

inconsistent with that other enactment or with any

rules made thereunder.”

24.Mr. Sundaram placed reliance upon judgment in the case of

M.P. Steel Corporation (supra) to support his submission that

Limitation Act applies only to courts stricto-sensu and not to quasi-

judicial tribunals. It may be noted here that the matter in M.P. Steel

Corporation (supra) had arisen from proceedings under the Customs

Act and hence in that case there was no occasion to consider the issue

whether the Limitation Act is applicable to an action initiated before

the Commission by virtue of provisions of the Electricity Act, 2003.

However, this judgment does help the respondents to an extent by

holding that principles underlying Section 14 of the Limitation Act will

be applicable even in matters filed before a quasi-judicial tribunal

such as the Commission. But the moot question remains to be

answered – whether the bar of limitation is required to be respected by

the Commission on the ground that there is no provision in the

Electricity Act conferring additional rights upon a party moving the

Commission for relief so as to claim even such reliefs which stand

barred by limitation before the Civil Court or even for arbitral

proceedings. The other ancillary issue required to be answered is –

whether by virtue of provisions of the Electricity Act 2003 the

Limitation Act has been made applicable to an action before the

Commission by express provision or even by necessary intendment.

29

Page 30 C.A.No.6036/2012 etc.

25.Before answering the aforesaid two issues and then adverting to

the question whether principles of Section 14 were rightly applied by

APTEL (in case any period of limitation is held to be attracted), it will

be proper to note some relevant contentions advanced by learned

senior advocate Mr. Jayant Bhushan who has appeared for some of

the respondents.

26.Mr. Bhushan pointed out that Commission is a creature of

Statute and hence it cannot reject a claim on the ground of limitation

unless limitation is found to be applicable by virtue of the provisions

of the Electricity Act 2003. According to him if Limitation Act does not

apply, courts cannot import limitation and the exceptional cases

where this Court has introduced principles of delay and laches relate

to proceedings before quasi-judicial tribunals which are vested with

discretionary or suo motu jurisdiction like revisional power; the other

exception being courts having extraordinary or equity jurisdiction

such as writ jurisdiction vested in the High Courts or the Supreme

Court. In support of the limited and exceptional applicability of

principles of delay and laches as distinguished from limitation, Mr.

Bhushan placed reliance upon an old judgment of Supreme Court of

United States in the case of Henry Hauenstein v. John A. Lynham

100 U.S. 483 and also upon extracts from Halsbury’s Laws of England

and a judgment of Chancery Division in the case of Re. Jarvis

(Deceased) Edge v. Jarvis (1958) 2 All.ER 336. Since the principle

noted above is well settled, the above authorities need not be

discussed particularly when this Court has taken similar view in the

30

Page 31 C.A.No.6036/2012 etc.

case of Bombay Gas Co. Ltd. v. Gopal Bhiva 1964(3) SCR 709 and

Hindustan Times Ltd. v. Union of India (1998) 2 SCC 242. In the

latter case the issue under consideration was of delay in passing order

levying damages under Employees Provident Funds and Miscellaneous

Provisions Act, 1952. The Court distinguished long line of cases such

as State of Gujarat v. Patil Raghav Natha (1969) 2 SCC 187 and

Ram Chand v. Union of India (1994) 1 SCC 44 by pointing out that

same principles will not apply to moneys withheld by a defaulter when

he actually holds the money in Trust for the beneficiaries. Paragraph

19 of that judgment highlights that the concerned Statute does not

contain any provision prescribing a period of limitation either for

assessment or recovery and although the moneys payable into the

Fund are for the ultimate benefit of the employees but there is no

provision by which the employees can directly recover the due

amounts. The power of recovery is vested in the statutory authorities

to be exercised in the manner provided by the Statute and not by way

of suit.

27.Mr. Bhushan also referred to some judgments in support of the

principle that Statute of limitation only bars a remedy through

ordinary suit and not a remedy provided under a special Statute such

as the Industrial Disputes Act which must be given effect to on the

basis of various provisions contained therein. For this purpose he

relied upon a Constitution Bench judgment in the case of Bombay

Dyeing & Manufacturing Co. Ltd. v. The State of Bombay AIR 1958

SC 328. He sought to explain the Constitution Bench judgment in the

31

Page 32 C.A.No.6036/2012 etc.

case of M/s. Tilokchand and Motichand v. H.B. Munshi (1969) 1

SCC 110 by pointing out that delay and laches were held to be

applicable to a petition under Article 32 of the Constitution of India for

the reason that such jurisdiction was always recognized and held to

be a discretionary one.

28.Coming back to the issues relating to limitation, in view of law

noticed above and for the reasons noted in M.P. Steel Corporation

(supra), we respectfully concur and hold that by itself the Limitation

Act will not be applicable to the Commission under the Indian

Electricity Act 2003 as the Commission is not a Court stricto sensu.

Further stand of the respondents that the Commission being a

statutory tribunal, cannot act beyond the four walls of the Electricity

Act also does not brook any exception. In the case of PPN Power

Generating Co. (P) Ltd. (supra) this Court examined the issue of

limitation in a very summary manner and without referring to the

relevant provisions of the Electricity Act 2003, at the end of para 64 it

was observed in a single sentence that the Limitation Act is

inapplicable to proceeding before the State Commission. But in view of

detailed discussion in the case of M.P. Steel Corporation (supra), we

have held above that by itself the Limitation Act is inapplicable to

proceeding or action brought before the State Commission. However,

the Electricity Act 2003 requires a further scrutiny to find out whether

by virtue of Section 175 of the Electricity Act or otherwise it can be

inferred that the provisions of Limitation Act will govern or curtail the

32

Page 33 C.A.No.6036/2012 etc.

powers of the Commission in entertaining a claim under Section 86(1)

(f) of the Electricity Act. Section 175 reads thus:

“175. Provisions of this Act to be in addition to

and not in derogation of other laws. – The provisions of

this Act are in addition to and not in derogation of any

other law for the time being in force.”

A plain reading of this Section leads to a conclusion that unless

the provisions of the Electricity Act are in conflict with any other law

when this Act will have overriding effect as per Section 174, the

provisions of Electricity Act will not adversely affect any other law for

the time being in force. In other words, as stated in the Section the

provisions of the Electricity Act will be additional provisions without

adversely affecting or substracting anything from any other law which

may be in force. Such provision cannot be stretched to infer adoption

of the Limitation Act for the purpose of regulating the varied and

numerous powers and functions of authorities under Electricity Act

2003. In this context it is relevant to keep in view that the State

Commission or the Central Commission have been entrusted with

large number of diverse functions, many being administrative or

regulatory and such powers do not invite the rigours of the Limitation

Act. Only for controlling the quasi judicial functions of the

Commission under Section 86(1)(f), it will not be possible to accept the

contention of the appellant that by Section 175 the Electricity Act,

2003 adopts the Limitation Act either explicitly or by necessary

implication.

33

Page 34 C.A.No.6036/2012 etc.

29.The only other weighty contention of Mr. Giri that there is

nothing in the Electricity Act 2003 to create a right in a suitor before

the Commission to seek claims which are barred by law of limitation

merits a serious consideration. There is no possibility of any difference

of opinion in accepting that on account of judgment of this Court in

Gujarat Urja (supra) the Commission has been elevated to the status

of a substitute for the Civil Court in respect of all disputes between

the licencees and generating companies. Such dispute need not arise

from the exercise of powers under the Electricity Act. Even claims or

disputes arising purely out of contract like in the present case have to

be either adjudicated by the Commission or the Commission itself has

the discretion to refer the dispute for arbitration after exercising its

power to nominate the arbitrator. It is in view of such far reaching

judicial powers vested in the Commission that in the case of PPN

Power Generating Co. (P) Ltd. (supra) this Court advised the State to

exercise enabling power under Section 84(2) to appoint a person who

is/has been a Judge of a High Court as Chairperson of the State

Commission. In such a situation it falls for consideration whether the

principle of law enunciated in State of Kerala v. V.R. Kalliyanikutty

(supra) and in the case of New Delhi Municipal Committee v. Kalu

Ram (supra) is attracted so as to bar entertainment of claims which

are legally not recoverable in a suit or other legal proceeding on

account of bar created by the Limitation Act. On behalf of respondents

those judgments were explained by pointing out that in the first case

the peculiar words in the statute – “amount due” and in the second

34

Page 35 C.A.No.6036/2012 etc.

case “arrears of rent payable” fell for interpretation in the context of

powers of concerned tribunal and on account of aforesaid particular

words of the statute this Court held that the duty cast upon the

authority to determine what is recoverable or payable implies a duty

to determine such claims in accordance with law. In our considered

view a statutory authority like the Commission is also required to

determine or decide a claim or dispute either by itself or by referring it

to arbitration only in accordance with law and thus Section 174 and

175 of the Electricity Act assume relevance. Since no separate

limitation has been prescribed for exercise of power under Section

86(1)f) nor this adjudicatory power of the Commission has been

enlarged to entertain even the time barred claims, there is no conflict

between the provisions of the Electricity Act and Limitation Act to

attract the provisions of Section 174 of the Electricity Act. In such a

situation on account of provisions in Section 175 of the Electricity Act

or even otherwise the power of adjudication and determination or even

the power of deciding whether a case requires reference to arbitration

must be exercised in a fair manner and in accordance with law. In the

absence of any provision in the Electricity Act creating a new right

upon a claimant to claim even monies barred by law of limitation, or

taking away a right of the other side to take a lawful defence of

limitation, we are persuaded to hold that in the light of nature of

judicial power conferred on the Commission, claims coming for

adjudication before it cannot be entertained or allowed if it is found

legally not recoverable in a regular suit or any other regular

35

Page 36 C.A.No.6036/2012 etc.

proceeding such as arbitration, on account of law of limitation. We

have taken this view not only because it appears to be more just but

also because unlike Labour laws and Industrial Disputes Act, the

Electricity Act has no peculiar philosophy or inherent underlying

reasons requiring adherence to a contrary view.

30.We have taken the aforesaid view to avoid injustice as well as

possibility of discrimination. We have already extracted a part of

paragraph 11 of the judgment in the case of State of Kerala v. V.R.

Kalliyanikutty (supra) wherein Court considered the matter also in

the light of Article 14 of the Constitution. In that case the possibility of

Article 14 being attracted against the statute was highlighted to justify

a particular interpretation as already noted. It was also observed that

it would be ironic if in the name of speedy recovery contemplated by

the statute, a creditor is enabled to recover claims beyond the period

of limitation. In this context, it would be fair to infer that the special

adjudicatory role envisaged under Section 86(1)(f) also appears to be

for speedy resolution so that a vital developmental factor - electricity

and its supply is not adversely affected by delay in adjudication of

even ordinary civil disputes by the Civil Court. Evidently, in absence

of any reason or justification the legislature did not contemplate to

enable a creditor who has allowed the period of limitation to set in, to

recover such delayed claims through the Commission. Hence we hold

that a claim coming before the Commission cannot be entertained or

allowed if it is barred by limitation prescribed for an ordinary suit

before the civil court. But in appropriate case, a specified period may

36

Page 37 C.A.No.6036/2012 etc.

be excluded on account of principle underlying salutary provisions

like Section 5 or 14 of the Limitation Act. We must hasten to add here

that such limitation upon the Commission on account of this decision

would be only in respect of its judicial power under clause (f) of sub-

section (1) of Section 86 of the Electricity Act, 2003 and not in respect

of its other powers or functions which may be administrative or

regulatory.

31.In the light of above there can be no difficulty in appreciating

that M/s. LANCO rightly appreciated the hurdle of limitation in its

way when such an objection was taken by the appellant and it rightly

chose to seek exclusion of the period it was pursuing arbitration

proceeding before the High Court, on the basis of principles

underlying Section 14 of the Limitation Act.

32.The issue as to whether the impugned order by APTEL

permitting application of principles on Section 14 of the Limitation Act

is in accordance with law or warrants interference now requires to be

answered on the basis of law as well as facts. In law, the APTEL could

grant exclusion of certain period on the basis of principles under

Section 14 in view of law laid down or clarified in M.P. Steel

Corporation (supra). On facts, although the parties have argued at

length, we find no difficulty in holding that APTEL has adopted a just

and lawful approach in examining the relevant facts and in excluding

the entire period claimed by M/s. LANCO which starts from the notice

for arbitration dated 8.9.2003 given by M/s. LANCO, till the

application of M/s. LANCO under Section 11 of the Arbitration Act

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Page 38 C.A.No.6036/2012 etc.

before the High Court was finally disposed of on 18.3.2009. The issue

whether the first notice dated 8.9.2003 or the next notice dated

26.3.2004 should be treated as notice for arbitration for the purpose

of Section 21 of the Arbitration Act was rightly not pursued further by

Mr. Giri after some initial arguments. But since this issue was

touched, we have looked at the entire Article 14 of the PPA as well as

the notice dated 8.9.2003 and we find no difficulty in holding it as the

notice for arbitration which amounted to initiation of arbitral

proceedings as contemplated by Section 21 of the Arbitration Act. A

spirited argument was advanced on behalf of appellant that after the

judgment of this Court in Gujarat Urja (supra) on 13.3.2008, the

continuance of the arbitral proceedings before the High Court at the

instance of M/s. LANCO should not be accepted as bona fide and that

the commission was justified in not excluding this period of about one

year on the ground that it was not bona fide and in such facts APTEL

should not have taken a contrary view. Having considered

submissions of the parties we find no merit in the aforesaid

contention advanced on behalf of appellant. The view which we are

going to take has been indicated by this Court in several judgments

including M.P. Steel Corporation (supra). But the point requires no

debate in view of clear stipulation in explanation (a) to sub-section (3)

of Section 14 of the Limitation Act. This explanation reads as follows:

“Explanation – For the purposes of this section, -

(a) in excluding the time during which a former

civil proceeding was pending, the day on which that

proceeding was instituted and the day on which it ended

shall both be counted………..”

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The same conclusion is inevitable even on other relevant facts.

The appellant had notice of the arbitral proceeding and after judgment

in Gujarat Urja (supra), the appellant also took no steps to get the

application under Section 11 listed and disposed of earlier to

18.3.2009. The averments and the materials are not sufficient to

establish the claim of the appellant that the proceeding ceased to be

bona fide after 13.3.2008. As a consequence of aforesaid discussion,

the challenge to impugned order in respect of views taken on the issue

of limitation in the light of principles of Section 14 of the Limitation

Act fails.

Issues relating to MAT

33. The notice of Arbitration dated 8.9.2003, inter alia, made a

demand for reimbursement of income tax payment made by M/s.

LANCO, as per Article 3.8 of the PPA. No doubt the claim on this head

for the subsequent years was not and could not be in this notice but

the difference between the parties on the issue had already arisen. In

the notice claims for advance income tax for the period 1.4.2001 to

15.6.2003 amounting to Rs.13.14 crores were included under the

heading “General Nature of Claims” and under the heading “Relief

Sought”, M/s. LANCO claimed – “a declaration that the claimant is

entitled to reimbursement of advance income tax paid by the

claimant”. Under the same heading M/s. LANCO mentioned that it

reserves its rights to seek such other reliefs or amend/supplement the

reliefs in the Statement of Claim as it may deem appropriate whenever

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Page 40 C.A.No.6036/2012 etc.

the same is filed before the Arbitral Tribunal. Thus the issue whether

MAT is covered by article 3.8 of the PPA was clearly covered by

Arbitration notice. The filing of upto date claims through amendment

or otherwise before the Arbitral Tribunal could not happen for the

obvious reason that application under Section 11 of the Arbitration

Act itself remained pending till 18

th

March, 2009 before the High

Court and thereafter before the Commission.

34. It has already been noted that the claim for reimbursement of

MAT for the period 2001-2005 was rejected by the Commission on the

ground of limitation and after impugned order by APTEL reversing

such order, that claim stands remitted to the Commission for passing

a consequential order. The claims for other periods have been allowed

by the Commission. On account of our view indicated earlier

upholding the order of APTEL on the issue of limitation, the claim of

MAT for 2001-2005 cannot be treated as barred by limitation. Thus

the claim of MAT for entire concerned period that is from 2001-2012

will be covered by our decision on Merits of Claim relating to MAT.

The argument of Mr. Giri that MAT cannot be covered by the

provisions in Article 3.8 of the PPA providing for claims for taxes on

income because the appellant had not foreseen such eventuality in

view of the then prevailing tax regime under which income from such

power projects stood exempted, is noticed only to be rejected. The

entire phraseology used in Article 3.8 of the PPA leaves no manner of

doubt that parties were aware that tax regime keeps changing and

therefore any advance income tax payable for the income from the

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Page 41 C.A.No.6036/2012 etc.

project only had to be reimbursed by the Board. As a successor of the

Board the appellant cannot avoid the liability to reimburse advance

income tax paid by the M/s. LANCO, on the ground that MAT was a

new variety of tax concept introduced subsequently in which

minimum tax became payable on the basis of mere book profits of

even power generating companies. The argument that such tax is not

on income from the project and therefore, not covered by Article 3.8 of

the PPA is also found to be without any substance.

35. The objective of levying MAT, as declared by the Income Tax

Department is to bring into the tax net “Zero Tax Companies” which

inspite of having earned substantial book profits and having paid

handsome dividends, do not pay any tax due to various tax

concessions and incentives provided under the Income Tax Law. It is

no body’s case that in fact M/s. LANCO had not generated income

from the project during the relevant years. The taxable income, of

course, became amenable to MAT on account of Section 115JB. The

Legislative changes in respect of MAT show that it came into force

initially with effect from 1.4.1988 by introduction of Section 115J in

the Income Tax Act, 1961 but this provision was amended to exempt

power generating companies with effect from 1.4.1989 and from

1.4.1991 MAT became inapplicable because of deletion of Section

115J which was reintroduced with effect from 1.4.1997 by insertion of

Section 115JA. But it was not made applicable to power generating

companies till 31.3.2001. However, Section 115JA was withdrawn

and Section 115JB was inserted with effect from 1.4.2001 to make

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Page 42 C.A.No.6036/2012 etc.

MAT applicable to all targeted corporate entities including power

generating companies. The submission on behalf of the appellant that

Section 115JB is a tax not on profit but of different character is based

on misconception. No doubt this Section has a special provision for

payment of tax by certain companies on the basis of its book profit

which is deemed to be the total income of the assessee and is

subjected to income tax at a specified rate. The provisions of Sections

115JA and 115JB have been also construed as a self-contained code

in Ajanta Pharma Limited vs. CIT, 2010 (9) SCC 455 and in several

other judgments as stand alone sections. But that does not change

the basic nature of the provision. It remains a provision under the

Income Tax Act and what is levied is income tax on the assessment of

income as per such a special provision.

36. Article 1.4 of the PPA provides inter alia that reference to any

‘Law’ shall be construed as a reference to such Law as from time to

time amended or re-enacted. This general provision in our view is

sufficient to take care of all the taxes on income under Article 3.8 of

the PPA notwithstanding different rates of income tax or other

changes which may be brought about in the Income Tax Act. This

view commends itself to us because such change in Law relating to

Income Tax does not require any additional claim to be raised by the

power generating companies. There is no specific amount - or rate

which is to be reimbursed by the Board. Rather, the entire advance

income tax payable requires reimbursement on account of Article 3.8

of the PPA provided of course that the accounts are maintained in the

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Page 43 C.A.No.6036/2012 etc.

manner required by the Agreement so that tax is only on the basis of

income from the project. No such dispute has been raised in the

present case.

37. The claim of the appellant that liability of MAT is on account of

change in Law and therefore required M/s. LANCO to adopt the

procedure for making claims under Article 11.4 of the PPA does not

appeal to us for the aforesaid reasons. The entire stipulation in

Article 11.4 of the PPA is in respect of additional or reduced

expenditures or costs which have not been catered for and arise later

due to change in Law. The burden on account of income tax as per

Article 3.9 of the PPA cannot be treated as additional or reduced

burden because the entire actual advance income tax payable for the

project is required to be reimbursed by the Board. It is immaterial

whether the income tax payable is high or low in any particular year.

When there is already a special provision in respect of entire payable

taxes on income under Article 3.8 of the PPA, that should have

precedence over the general provisions in Article 11.4 of the PPA.

38. We have also considered other relevant provisions of the Income

Tax such as definition of income, total income, tax and find that they

do not help the case of the appellant in any manner. Section 2(43)

defines ‘Tax’ to mean income tax chargeable under the provisions of

Income Tax Act and ‘Total Income’ has been defined with reference to

Section 5 which enlarges the scope of total income not only to income

received or accrued but also deemed to be received or deemed to be

accrued in India (for a resident). Simply because the exemption earlier

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Page 44 C.A.No.6036/2012 etc.

granted to power generating companies has been withdrawn so as to

subject them to income tax liability under a special provision, cannot

lead to any inference as suggested on behalf of the appellant that it is

not an income tax but some other tax which is levied under Section

115JB of the Income Tax Act. Hence we hold the claim for MAT

covered by Article 3.8 of the PPA and payable as such when requisite

conditions stand satisfied.

39. In the final conclusion, we find no scope to interfere with the

impugned order in these appeals. The appeals are dismissed but

without any order as to costs.

……………………………… .J.

[VIKRAMAJIT SEN]

..……………………………..J.

[SHIVA KIRTI SINGH]

New Delhi.

October 16, 2015

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