A.P. POWER COORDINATION COMMITTEE & Ors. v. MIS. LANCO KONDAPALLI POWER LTD & Ors.

Judgment

12 S.C.R. 447 A.P. POWER COORDINATION COMMITTEE & ORS. A v. MIS. LANCO KONDAPALLI POWER LTD. & ORS. (Civil Appeal No. 6036 of 2012) OCTOBER 16, 2015 B [VIKRAMAJIT SEN AND SHIVA KIRTI SINGH, JJ.] Electricity Act, 2003 - s. 86(1 )(f), 17 4 - Limitation Act, 1963 - ss. 3, 14, Schedule - Disputes between /icencees c and power generating company- Bill for capacity charges Claim for reimbursement of minimum alternate Tax (MAT) - Whether the Limitation Act, s. 3 and the Schedule would apply to any action instituted before the Commission uls. 86(1)(f) - Whether the impugned order passed by APTEL D permitting application of principles emerging from s. 14, is against law - Whether the claim for reimbursement of MAT is in contravention of relevant terms and conditions of the Power Purchase Agreement (PPA) - Held: A claim coming before the Commission cannot be entertained or allowed if it E is barred by limitation prescribed for an ordinary suit before the civil court - However, in appropriate case, a specified period may be excluded on account of principle underlying salutary provisions like s. 5 or 14 - Further, such limitation upon the Commission would be only in respect of its judicial F power uls. 86(1 )(f) and not in respect of its other powers or functions which may be administrative or regulatory - As regards order passed by APTEL, in law, the APTEL could grant exclusion of certain period on the basis of principles ul G s. 14 - On facts, AP TEL adopted a just and lawful approach in examining the relevant facts and in excluding the entire. period claimed by respondent which starts from the notice for arbitration dated 8.9.2003 given by the respondent, till the application of the respondent u/s. 11 of the Arbitration H 448 SUPREME COURT REPORTS [2015] 12 S.C.R. A Act before the High Court was finally disposed of on 18. 3. 2009 - Challenge to impugned order in respect of views taken on the issue of limitation in the light of principles of s. 14 fails - As regards the claim for reimbursement, entire phraseology used in Article 3.8 of the PPA clarifies that B parties were aware that tax regime keeps changing and therefore any advance income tax payable for the income from the project only had to be reimbursed by the Board - As a successor of the Board the appeliant cannot avoid the liability to reimburse advance income tax paid by_ the respondent, 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 - It cannot be said that such, tax is not on income from the project and thus, not covered by Article 3.8- Taxable income became amenable to MAT on account of s. 115JB - Claim for MAT covered by Article 3. 8 and payable as such when requisite conditions stand ~~~d . 0 C E Dismissing the appeals, the Court HELD: 1.1 There is no possibility of any difference of opinion in accepting that on account of judgment of this Court in Gujarat Urja the Commission has been F 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 instant 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. A statutory authority like the Commission is also required to determine or H G A.P. POWER COORDINATION COMMITTEE v. LANCO KONDAPALLI POWER LTD. 449 decide a claim or dispute either by itself or by referring it A 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 B 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 17 4 of the Electricity Act. In such a situation on account of provisions in Section 175 of the Act or even otherwise C 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, in the light of nature of judicial power conferred on the Commission, claims coming for E adjudication before it cannot be entertained or allowed if it is found legally not recoverable in a regular suit or any other regular proceeding such as arbitration, on account of law of limitation. This view is taken not only because it appears to be more just but also because F unlike Labour laws and Industrial Disputes Act, the Electricity Act has no peculiar philosophy or inherent underlying reasons requiring adherence to a contrary view. [Para 29] [489-B-D, H; 490-A-F] o·

1.2Aclaim coming beforethe 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 be excluded on account of principle underlying salutary provisions H G 450 SUPREME COURT REPORTS [2015] 12 S.C.R. A like Section 5 or 14 of the Limitation Act. Further, such limitation upon the Commission on account of the decision in V.R.Kal/iyanikutty would be only in respect of its judicial power under clause (f) of sub-section (1) of s. 86 of the Electricity Act, 2003 and not in respect of ifs B other powers or functions which may be administrative or regulatory. [Para 30] [491-C-E]

1.3 The respondent rightly appreciated the hurdle of limitation in its way when such an objection was taken C 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. [Para 31] [491- F-G] D

1.4 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. On facts, there is no difficulty in holding that E APTEL has adopted a just and lawful approach in examining the relevant facts and in excluding the entire period claimed by the respondent which starts from the notice for arbitration dated 8.9.2003 given by the respondent, till the application of the respondent under F Section 11 of the Arbitration Act 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 G rightly not pursued further by the counsel. But since this issue was touched, the entire Article 14 of the PPA as well as the notice dated 8.9.2003 is looked at and there is no difficulty in holding it as the notice for arbitration which amounted to initiation of arbitral proceedings as H contemplated by Section 21 of the Arbitration Act. The A.P. POWER COORDINATION COMMITTEE v. LANCO KONDAPALLI POWER LTD. 451 submission on behalf of appellant that after the judgment A of this Co.urt in Gujarat Urja on 13.3.2008, the continuance of the arbitral proceedings before the High Court at the instance of the respondent should not be accepted as bona fide and that the commission was justified in not excluding this period of about one year B on the ground that it was not bona fide and in such facts APTEL should not have taken a contrary view, cannot be accepted. [Para 32] [492-A-E]

1.5 The appellant had notice of the arbitral C proceeding and after judgment in. Gujarat Urja, 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 D ceased to be bona fide after 13.3.2008. As a consequence thereof, 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. [Para 32][493-C-D] E

1.6 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 F for the obvious reason that application under Section 11 of the Arbitration Act itself remained pending till 18.03.2009 before the High Court and thereafter before the Commission. [Para 33] [494-A-B]

1.7 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. H G 452 SUPREME COURT REPORTS [2015] 12 S.C.R. C A The claims for other periods have been allowed by the Commission. On account of the 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 B concerned period that is from 2001-2012 will be covered by the decision on Merits of Claim relating to MAT. The submission 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 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 respondent, 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 F not on income from the project and thus, not covered by Article 3.8 of the PPA is without any substance. [Para 34] [494C-H; 495-A] E 0 G

1.8 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 H Tax Law. It is no body's case that in fact the respondent AP. POWER COORDINATION COMMITTEE v. LANCO KONDAPALLI POWER LTD. 453 had not generated income from the project during the A 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 e·ffect from 1.4.1988 by introduction of Section 115J in the Income Tax Act, 1961 B 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 C made applicable ~o power generating companies till 31.3.2001. However, Section 115JAwas withdrawn and Section ·115JB was inserted with effect from 1.4.2001 to make 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 E 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 11 SJB have been also construed as a self-contained code But that does not change the basic nature of the F 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. [Para 35] [495-B-H; 496-A] 0

1.9 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 H G 454 SUPREME COURT REPORTS [2015] 12 S.C.R. A PPA notwithstanding different rates of income tax or other changes which may be brought about in the Income Tax Act. This view commends itself because such change in Law relating to Income Tax does not require any additional claim to be raised by the power B 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 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 instant case. (Para 36] (496-B-D] C D

1.10 The claim of the appellant that liability of MAT is on account of change in Law and therefore required the respondent to adopt the procedure for making claims under Article 11.4 of the PPA does not appeal for the aforesaid reasons. The entire stipulation in Article 11.4 of the PPA is in respect of additional or reduced E 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 G general provisions in Article 11.4 of the PPA. [Para 37] F (496-E-H]

1.11 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 H A.P. POWER COORDINATION COMMITTEE v. LANGO KONDAPALLI POWER LTD. 455 5 which enlarges the scope of total income not only to A 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 granted to power generating companies has been withdrawn so as to subject them to income tax liability under a special B 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 s.115JB of the Income Tax Act. Hence the claim for MAT covered by Article 3.8 of the PPA and payable as such when C requisite conditions stand satisfied. [Para 38] [497-B-D]