Remand Observations Do Not Freeze the Law; No Cross-Appeal Bars Challenge to Operative Relief; Compounding on Carrying Cost Turns on Facts

1. Introduction

RattanIndia Power Limited (“RPL”, seller/generator) supplies electricity to Maharashtra State Electricity Distribution Company Limited (“MSEDCL”, procurer/discom) under two long-term Power Purchase Agreements (“PPAs”) dated 22.04.2010 and 05.06.2010. RPL invoked Change in Law relief under the Electricity Act, 2003 and the PPAs, seeking compensation for increased costs and Carrying Cost (time value of money) from the date the Change in Law impacts arose.

The Maharashtra Electricity Regulatory Commission (“MERC”) initially denied, inter alia, Carrying Cost and restricted the effective date. APTEL, by remand order dated 18.10.2022 (Appeal No.263 of 2018), set aside MERC’s adverse findings and remitted the matter with observations referencing earlier inter se litigation and Supreme Court precedent on restitution and Carrying Cost.

On remand, MERC allowed Carrying Cost but computed it on simple interest at “interest on working capital” rates; RPL insisted Carrying Cost must be at the Late Payment Surcharge (“LPS”) rate under the PPA, which (as drafted) is compounded monthly. APTEL’s impugned order granted LPS-rate Carrying Cost but denied compounding, reasoning the earlier remand did not expressly direct compounding. RPL appealed to the Supreme Court under Section 125 of the Electricity Act, 2003, limited to the denial of compounding.

The Supreme Court’s judgment (10.12.2025) clarifies three important appellate/administrative-law points: (i) the legal effect of remand observations when law evolves, (ii) consequences of not filing a cross-appeal, and (iii) how compounding on Carrying Cost must be adjudicated.

2. Summary of the Judgment

The Court held APTEL was wrong to treat the 18.10.2022 remand observations as binding in a manner that prevented looking beyond them; when a lis is remanded and “alive”, the deciding forum must apply the law as it stands at the time of decision.
Because MSEDCL filed no cross-appeal/cross-objection under Section 125 against APTEL’s operative direction granting Carrying Cost at the LPS rate, MSEDCL cannot challenge that operative relief in RPL’s appeal. The LPS-rate award is therefore not to be disturbed in this proceeding.
The question whether LPS-rate Carrying Cost entails compounding cannot be rejected merely because the remand order did not specify it; the issue must be decided afresh on facts and law.
Result: the appeal was allowed and the matter was remanded back to APTEL only to decide the limited issue of compounding, while keeping intact the grant of LPS-rate interest.

3. Analysis

3.1 Precedents Cited

(A) Finality / judicial discipline and remand context

Jasraj Inder Singh v. Hemraj Multanchand: APTEL relied on it to say the unchallenged remand order attained finality. The Supreme Court did not dispute the general idea that unchallenged orders attain finality, but clarified that finality of a remand order does not mean the remanded issue is already decided. If the remand keeps the lis alive, the adjudicator must still decide the issue under governing law.
United Bank of India, Calcutta v. Abhijit Tea Co. Pvt. Ltd.: Cited for the principle that courts must take notice of changes in law affecting pending actions. The Supreme Court used it to underline that a remanded dispute is not “frozen” by earlier observations when the law has since developed.

(B) Restitution and Carrying Cost jurisprudence in power PPAs

Uttar Haryana Bijli Vitran Nigam Ltd. & Another v. Adani Power (Mundra) Ltd. & Another: Recognizes Carrying Cost as part of restitution to restore the affected party to its economic position, and upheld compound interest on Carrying Cost on the facts there. The Supreme Court in the present case treated it as controlling on principle but emphasized that whether compounding is necessary may depend on evidence (e.g., how the generator actually financed the gap).
JAIPUR VIDYUT VITRAN NIGAM LTD. v. ADANI POWER RAJASTHAN LTD.: Reiterates restitution/Carrying Cost principles and clarifies the mechanism of recovery through supplementary billing post-adjudication. The present judgment relied on it to frame why interest may run from the Change in Law event, even if billing occurs later.
Energy Watchdog and others v. CERC and others: Referred to in the APTEL remand context as part of the “well settled principles” on Change in Law and restitution. The Supreme Court accepted that such citations guide, but they do not prevent applying the law as it stands when the remanded issue is finally determined.

(C) LPS cannot be equated with carrying cost (as argued by MSEDCL) and related disputes

Maharashtra State Electricity Distribution Company Limited v. Maharashtra Electricity Regulatory Commission and Others: MSEDCL relied on it to argue LPS’s object is timely payment and cannot be equated to Carrying Cost. The Supreme Court did not adjudicate that broader contention here because MSEDCL did not appeal against APTEL’s operative grant of LPS-rate Carrying Cost.
Maharashtra State Electricity Distribution Company Ltd. v. Adani Power Maharashtra Ltd. and another: Cited by MSEDCL to argue parties cannot shift positions. Again, the Court treated this as irrelevant to disturbing the operative grant in the absence of MSEDCL’s cross-appeal.

(D) Appellate procedure principles (cross-appeal necessity) and constitutional powers

Banarsi v. Ram Phal: Though rendered under Order 41 Rules 22 and 33 CPC, the Supreme Court applied its general principle: a respondent may support a decree without cross-objection, but cannot seek to set aside/modify the operative part against it without filing a cross-appeal/cross-objection. This became decisive in holding MSEDCL cannot challenge the LPS-rate award in RPL’s appeal under Section 125.
Dhakeshwari Cotton Mills Ltd. v. Commissioner of Income Tax, West Bengal and Laliteshwar Prasad Sahi v. Bateshwar Prasad: Cited for the breadth of Article 136 powers. The Court acknowledged these powers remain untouched by Section 125’s limits, but declined to use them routinely in a commercial/statutory regime.
A. Subash Babu v. State of A.P.: Cited to stress Article 136/142 is reserved for compelling circumstances. The Court found none here.

3.2 Legal Reasoning

(i) Remand orders: guidance is not a legal straitjacket

The Court drew a critical distinction between: (a) a remand that decides an issue (binding final determination), and (b) a remand that keeps the issue open, directing reconsideration “bearing in mind” observations.

In category (b), the lis remains alive; the deciding forum must apply the binding law as on the date of decision. Judicial discipline requires due regard to remand observations, but those observations cannot compel an adjudicator to decide contrary to later-binding law (including later Supreme Court declarations under Article 141).

On facts, APTEL’s 18.10.2022 remand did not itself finally decide the LPS/compounding question; it referenced earlier cases as guidance. Therefore, APTEL erred in treating the remand as foreclosing a fresh determination on compounding.

(ii) Section 125 appeals and the bar created by absence of cross-appeal

The Court explained Section 125 is an appeal “by a person aggrieved” on Section 100 CPC-type grounds, unlike APTEL’s wider supervisory/suo motu powers under Section 111(6).

Applying the principle in Banarsi v. Ram Phal, the Court held: since MSEDCL did not appeal/cross-appeal against the operative part of APTEL’s order granting LPS-rate Carrying Cost, MSEDCL cannot use RPL’s appeal (confined to compounding) as a vehicle to challenge the LPS-rate award itself.

(iii) Article 136/142: acknowledged, but not routinely deployed in commercial/statutory disputes

While affirming constitutional powers are not curtailed by statutory appeal limits, the Court declined to invoke them to reopen the LPS-rate grant in absence of MSEDCL’s appeal, especially in a commercial setting with a structured appellate regime.

(iv) Compounding on LPS-rate Carrying Cost: not automatic, not barred—fact-sensitive adjudication required

The Court recognized two competing propositions:

The PPA’s LPS clause (Article 8.3.5) expressly provides interest “compounded with monthly rest”.
However, APTEL had granted “interest at LPS rate” and not expressly “as per the LPS clause”; and the question whether compounding is required to achieve restitution may depend on facts (e.g., financing structure, actual carrying/borrowing cost, and evidence that the generator incurred monthly-rest interest).

APTEL’s denial of compounding solely because the remand order did not specify it was therefore legally flawed. The Court remanded the matter to APTEL to decide compounding based on facts and in accordance with law, while protecting the already-granted LPS-rate award from disturbance.

3.3 Impact

Remand discipline clarified: Regulatory commissions and APTEL must treat remand observations as guiding, not as freezing adjudication against subsequently binding law. This reduces the risk that “remand citations” are misread as conclusive determinations.
Cross-appeal practice strengthened in electricity litigation: Discoms (and generators) must file timely cross-appeals/cross-objections if they seek to challenge operative relief; otherwise, they may be confined to merely defending the appealed portion. This promotes procedural certainty under Section 125.
Compounding on Carrying Cost becomes evidence-driven: Even where LPS rates are adopted, compounding may require factual foundation. Parties will likely lead evidence on actual financing/interest incidence (internal accruals vs borrowing; monthly-rest interest exposure), and tribunals must record reasons.
Commercial finality: The Court’s restraint in not using Article 136/142 to reopen unappealed operative relief reinforces finality in tariff/contractual disputes within the statutory appellate design.

4. Complex Concepts Simplified

Change in Law (PPA Article 10): A contractual mechanism allocating risk of legal/regulatory changes. If a legal change increases a generator’s costs (or reduces revenue), compensation is designed to restore the affected party to the same economic position as if the change had not occurred (Article 10.2.1).
Carrying Cost: The “time value of money” for the period the generator bears the additional cost before it is recovered through tariff/supplementary billing (often akin to interest for being kept out of money).
Late Payment Surcharge (LPS): A contractually agreed surcharge/interest for delayed payment of bills. Here, Article 8.3.5 pegs it to “SBAR + 2%” and states it is “compounded with monthly rest.”
Simple vs compound interest: Simple interest accrues only on principal; compound interest accrues on principal plus accumulated interest at defined intervals (“monthly rest” = compounding each month).
Remand: When an appellate forum sends a matter back for fresh decision. Unless the appellate forum has finally determined an issue, the remanded issues remain “alive” and must be decided under the governing law at the time of the fresh decision.
Cross-appeal/cross-objection: If a respondent wants the operative part of the order changed in its favour, it must file its own appeal/cross-appeal; it cannot achieve that merely by arguing in the other side’s appeal.

5. Conclusion

The Supreme Court’s decision in RATTANINDIA POWER LIMITED v. Maharashtra State ELECTRICITY DISTRIBUTION COMPANY LIMITED AND ANOTHER (10.12.2025) lays down an important procedural and substantive clarification for electricity-regulatory adjudication: a remand does not immobilize the applicable law, and adjudicators must apply the law as it stands when deciding remanded issues. Additionally, absence of a cross-appeal under Section 125 prevents a respondent from attacking the operative grant against it. Finally, the judgment positions compounding of interest on Carrying Cost as a matter requiring fresh determination on facts and law, while preserving the unchallenged award of LPS-rate interest.