Court’s Decision
The Supreme Court dismissed the civil appeal filed by Rajasthan DISCOMs against the order of the Appellate Tribunal for Electricity (APTEL), which had directed them to compensate the power generator, Adani Power Rajasthan Ltd., for a ‘change in law’ event arising from the imposition of Evacuation Facility Charges (EFC) by Coal India Ltd. on 19.12.2017. The Court upheld APTEL’s decision to award compensation with carrying cost at Late Payment Surcharge (LPS) rates and clarified:
“There is no change in the interpretation of law involved in the case at hand… Clause (ii) of Article 10.5.1 of the PPA will have no application.”
The Court emphasized that recognition of a change in law cannot be treated as a change in interpretation and held that the contractual restitutionary principle under Article 10.2.1 of the Power Purchase Agreement (PPA) must prevail.
Facts
- A Power Purchase Agreement (PPA) was entered into on 28.01.2010 between Rajasthan DISCOMs and Adani Power Rajasthan Ltd. for supply of 1200 MW electricity at a levelized tariff of Rs.3.238/unit.
- On 19.12.2017, Coal India Limited imposed a levy of Rs. 50 per tonne as Evacuation Facility Charges (EFC) effective from 20.12.2017.
- Adani Power informed the DISCOMs on 20.12.2017 that the notification constituted a ‘change in law’ under the PPA.
- On failing to get relief, Adani Power filed Petition No. 1373/2018 before the Rajasthan Electricity Regulatory Commission (RERC), which partially granted relief.
- Adani Power then filed an appeal before APTEL with a delay of 332 days in filing and 236 days in re-filing, both of which were condoned. This condonation was not challenged and thus attained finality.
- APTEL granted relief with carrying cost at LPS rates and remanded the matter to RERC to compute the exact amount payable.
Issues
- Whether the imposition of EFC by Coal India Limited constitutes a ‘change in law’ under the PPA.
- Whether Article 10.5.1(i) or 10.5.1(ii) of the PPA governs the effective date of compensation.
- Whether Adani Power was required to raise a supplementary bill immediately for claiming LPS.
- Whether awarding carrying cost at LPS rates was justified.
Petitioner’s Arguments (Rajasthan DISCOMs)
- Delay was attributable to the conduct of Adani Power; thus, Article 10.5.1(ii) applied, and compensation should start only from the date of adjudication, not the date of the notification.
- Supplementary bills were not raised immediately by Adani Power, violating Article 8 of the PPA.
- LPS is only applicable when there is delay in paying a supplementary bill, which must first be raised.
- GMR Warora case is distinguishable as the generator there had raised a supplementary bill.
- Relied on Prem Cottex v. Uttar Haryana Bijli Vitran Nigam Ltd., (2021) 20 SCC 200.
Respondent’s Arguments (Adani Power Rajasthan Ltd.)
- Preliminary objection: DISCOMs raised arguments beyond the scope of the limited issue permitted by the Supreme Court in its 09.09.2024 order.
- The legal issue regarding EFC as a change in law has been settled in GMR Warora and UHBVNL 2019 & 2023 cases.
- DISCOMs would not have honoured the bill even if raised earlier.
- APTEL already denied LPS for the delay period, and that ruling has attained finality.
- RERC has already passed implementation orders on remand from APTEL, which are also unchallenged.
Analysis of the Law
- Under Section 125 of the Electricity Act, 2003, the Supreme Court’s jurisdiction is limited to substantial questions of law akin to Section 100 CPC.
- Only one substantial question of law was framed by the Court: the applicability of Article 10.5.1(i) versus 10.5.1(ii) of the PPA.
- Article 10.2.1 aims to restore the affected party to its original economic position through restitution, and is a substantive right.
- Article 10.5.1(i) applies when change in law arises from a statutory notification, whereas 10.5.1(ii) applies where there is a change in interpretation by a court or tribunal.
Precedent Analysis
- GMR Warora Energy Ltd. v. CERC (2023) 10 SCC 401
- Imposition of EFC by Coal India Limited qualifies as ‘change in law.’
- Restitutionary principle mandates compensation from the date of change, not from adjudication.
- Carrying cost must be computed with LPS, even on compounding basis.
- UHBVNL v. Adani Power Ltd. (2019) 5 SCC 325
- Change in law adjustment must begin from the date of change, not from adjudication.
- Restitution is essential under Article 13.2 of PPA.
- UHBVNL v. Adani Power (Mundra) Ltd. (2023) 2 SCC 624
- Compound interest is permitted on carrying cost from the date of change in law.
- LPS rates justified in the interest of complete restitution.
- MSEDCL v. MERC (2022) 4 SCC 657
- LPS is distinct from tariff and is applicable as per contract terms.
Court’s Reasoning
- No adjudication or change in interpretation occurred; the notification itself constituted change in law.
- Article 10.5.1(i) applied; Article 10.5.1(ii) was inapplicable as no interpretative order/judgment was involved.
- Raising a supplementary bill can only happen after competent adjudication of change in law, per Article 10.5.2 read with Article 8.8.
- DISCOMs’ arguments to deny carrying cost or delay compensation were legally unsustainable.
- Reopening settled issues would be an academic exercise and contrary to the judicial discipline required under the Electricity Act framework.
Conclusion
The Supreme Court dismissed the appeal, upholding APTEL’s decision and ruling that:
“The contention that the supplementary bill ought to have been raised earlier… has neither a factual basis nor a legal one.”
Pending applications were also disposed of.
Implications
- Clarifies that tariff adjustment due to a change in law takes effect from the date of change, not adjudication.
- Reinforces restitutionary principles in regulatory contracts to protect generators.
- Prevents re-litigation of settled issues under the Electricity Act to ensure regulatory certainty.
- Emphasizes strict construction of jurisdictional limits under Sections 111 and 125 of the Electricity Act.