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Jan 05- 2026
REMAND DOES NOT FREEZE LEGAL POSITION; FRESH DECISION MUST APPLY CURRENT LAW: SUPREME COURT
In a significant ruling clarifying the scope and effect of remand orders, the Supreme Court of India has held that when a matter is remanded for fresh consideration, the adjudicating authority is not irrevocably bound by observations in the remand order if the issue itself was not finally decided. Instead, the authority must apply the binding law as it stands on the date of decision.
A Bench comprising Justice Manoj Misra and Justice Joymalya Bagchi underscored that remand directions are to be given due consideration, but they cannot override subsequently evolved or binding law.
The Court observed:
“In our view, when a Court or Appellate Tribunal remands a matter to the subordinate court, or adjudicating body, for a fresh decision in the light of observations contained therein, and while doing so refers to certain decisions, 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. We must not be understood as saying that such a direction has to be ignored. Rather, such a direction must be given due consideration unless the law on the subject, which is binding on the court or adjudicating body, requires otherwise.”
Background of the Case
The appeal arose from an order passed by the Appellate Tribunal for Electricity (APTEL). The dispute concerned a power supplier, RPL, which had entered into two long-term Power Purchase Agreements (PPAs) in 2010 for the supply of 450 MW and 750 MW of electricity.
Subsequently, Change in Law events most notably the imposition of a cess by the State of Chhattisgarh substantially increased the generator’s operational costs. While RPL sought compensation to neutralise this impact, it also claimed Carrying Cost, i.e., interest on delayed payment of compensation, arguing that reimbursement without interest would not restore it to its original economic position.
RPL further contended that such interest should be calculated at the Late Payment Surcharge (LPS) rate provided under the PPAs and should be compounded.
In 2018, the Maharashtra Electricity Regulatory Commission (MERC) allowed Change in Law compensation but denied Carrying Cost. This led RPL to approach APTEL, which in 2022 remanded the matter to determine compensation sufficient to restore RPL’s economic position.
On remand, MERC in 2023 granted Carrying Cost at simple interest using the Interest on Working Capital (IOWC) rate. This order again travelled to APTEL, which held that Carrying Cost must be paid at the contractual LPS rate but rejected the claim for compound interest, reasoning that its 2022 remand order had not expressly contemplated compounding.
Aggrieved by this rejection, RPL approached the Supreme Court.
Issue Before the Supreme Court
The central issue before the Court was whether APTEL was justified in denying compound interest solely on the ground that its earlier remand order did not specifically direct the grant of compound interest, even though the issue had not been finally adjudicated earlier.
Observations and Ruling
Answering the issue in the negative, the judgment authored by Justice Manoj Misra held that APTEL had erred in treating the absence of a specific direction on compounding in the remand order as a bar to granting such relief.
The Court clarified that unless an issue is expressly and finally decided, it remains open for adjudication upon remand. Mere observations or silence in a remand order cannot be elevated to the status of binding determinations.
Illustrating this principle, the Court stated:
“For example, the law declared by this Court is binding on all courts within the territory of India. However, if such declaration comes later i.e., after the remand order, could it be said that it would not be followed because of certain general observations in the order of remand. The answer to it is an obvious ‘No’. Reason being, when the remand order does not itself settles an issue, the issue remanded is alive and has to be decided as per law applicable on the date of the decision.”
Reinforcing this position, the Court emphasized that since the question of compound interest had never been finally decided in the earlier round of proceedings, it remained open for consideration.
Final Thoughts
The Supreme Court allowed the appeal and remanded the limited issue of compounding of Carrying Cost back to APTEL for fresh adjudication on merits, in accordance with the law prevailing at the time of decision.
This judgment is a crucial reaffirmation that remand orders do not fossilize the legal position. Adjudicating authorities must remain responsive to evolving law and cannot deny relief merely because a remand order was silent on a particular aspect so long as that issue was never conclusively settled.