Supreme Court: Remand Orders Do Not Freeze Law Applicable on Date of Final Decision

The Supreme Court has held that when a matter is remanded for fresh consideration, the adjudicating authority is not irrevocably bound by the observations in the remand order if the issue itself was not finally decided, and must instead apply the binding law as it stands on the date of decision.

“When a Court or Appellate Tribunal remands a matter… it does not mean that the subordinate court or adjudicating body is bound by those decisions and can look no further, even if, in the interregnum, the law has changed or developed.”, observed a Bench comprising Justices Manoj Misra and Joymalya Bagchi. The Court clarified that such directions in a remand order must be given due consideration, unless the binding law on the subject requires otherwise.

Background of the Case

The Bench considered an appeal by a power supplier against an order of the Appellate Tribunal for Electricity (APTEL). APTEL had rejected the supplier’s plea for compound interest, holding that its own earlier remand order to the subordinate commission did not contemplate such relief.

APTEL ruled that since the remand order was silent on compounding, it could not grant compound interest in a subsequent appeal.

Facts of the Dispute

The Appellant, RattanIndia Power Limited (RPL), had entered into two long-term Power Purchase Agreements (PPAs) in 2010 for the supply of 450 MW and 750 MW of power.

Subsequently, Change in Law events, particularly the levy of a cess by the State of Chhattisgarh, resulted in increased operational costs for the generator. RPL sought compensation to neutralise the financial impact and also claimed Carrying Cost, i.e., interest on delayed payment, contending that reimbursement without interest would not restore its original economic position. RPL further argued that the interest should be calculated at the Late Payment Surcharge (LPS) rate prescribed under the PPA and on a compounding basis.

Proceedings Before MERC and APTEL

In 2018, the Maharashtra Electricity Regulatory Commission (MERC) allowed Change in Law compensation but denied Carrying Cost, prompting RPL to approach APTEL.

In 2022, APTEL remanded the matter, directing determination of compensation necessary to restore RPL’s economic position.

On remand, MERC in 2023 granted Carrying Cost at simple interest, applying the Interest on Working Capital (IOWC) rate, leading to further appeals before APTEL.

In the impugned 2023 order, APTEL held that Carrying Cost must be paid at the contractual LPS rate, but rejected RPL’s claim for compound interest, citing the absence of a specific direction in the 2022 remand order. This led to the appeal before the Supreme Court.

Issue Before the Supreme Court

The issue was whether APTEL’s denial of compound interest, solely on the ground that its earlier remand order did not provide for such interest, would preclude the Tribunal from granting compound interest later, even though the issue had been left open and not finally adjudicated earlier.

Supreme Court’s Observations

Answering in the negative, the judgment authored by Justice Manoj Misra held that APTEL erred in treating the absence of a specific direction on compounding in the remand order as a bar. The Court held that since the question of compound interest had never been finally decided in the earlier round, it remained open for consideration. The Court emphasized that observations made while remanding a matter cannot be treated as binding determinations unless the issue was expressly and finally adjudicated.

Explaining with an example, the Court observed: “If the law declared by this Court comes later, after the remand order, it cannot be ignored merely because of general observations in the remand order.” It further clarified: “When the remand order does not itself settle an issue, the issue remanded is alive and has to be decided as per law applicable on the date of the decision.”

Since the issue of compounding of Carrying Cost had never been conclusively determined, the Supreme Court remanded the limited issue back to APTEL for fresh adjudication on merits. The appeal was allowed in terms of the aforesaid observations.

Case Title: RattanIndia Power Limited v. Maharashtra State Electricity Distribution Company Limited & Anr.