GMR WARORA ENERGY LIMITED versus CENTRAL ELECTRICITY REGULATORY COMMISSION (CERC) & ORS. on 20 April 2023

[2023] 8 S.C.R. 183

GMR WARORA ENERGY LIMITED

v.

CENTRAL ELECTRICITY REGULATORY COMMISSION(CERC) & ORS.

(Civil Appeal No.11095 of 2018)

APRIL 20, 2023

[B. R. GAVAI AND VIKRAM NATH, JJ.]

Electricity – Components to be considered as “Change inLaw” events – Held: The term “Law” has been defined in the PowerPurchase Agreements – ‘Law’ would mean all laws includingElectricity Laws in force in India and any statute, ordinance,regulations, orders, Notification or code, rules, or any interpretationof any of them by an Indian Governmental Instrumentality andhaving force of law – It shall also include all rules, regulations,decisions and orders of the CERC and the MERC – Thus, all suchadditional charges which are payable on account of orders,directions, Notifications, Regulations, etc., issued by theinstrumentalities of the State after the cut-off date will have to beconsidered to be ‘Change in Law’ events – The Generators wouldbe entitled to compensation on the restitutionary principle on suchchanges occurring after the cut-off date – Revision of charges tobe paid on Busy Season Surcharge, Development Surcharge andPort Congestion Charges from time to time by the ‘Railway Board’would come within the ambit of ‘Change in Law’ – Notifications bywhich MoEF mandated power projects to use beneficiated coal withash content lower than 34% would also amount to “Change in Law’– Further, change in NCDP would also amount to ‘Change in Law’– With regard to forest tax, as on the cut-off date there was noForest Tax applicable on coal mined and transported from SouthEastern Coalfields Limited mines located in Forest area – For thefirst time, vide Notification of the Forest Department, Governmentof Chhattisgarh a fee was levied – Said notification issued by theForest Department of the Government of Chhattisgarh, which is aninstrumentality of the State would also be a ‘Change in Law’ – Noerror in the finding of the APTEL in that regard – Also, ‘add onpremium’ was required to be paid on account of cancellation of

A

B

CD

EF

G

H

Acaptive coal blocks and inordinate delay on account of Go-No-Gopolicy – As such, it cannot be said that the reasoning adopted bythe APTEL is perverse and arbitrary – EFC imposed by CIL whichis an instrumentality of the State, circular of CIL would also amountto ‘Change in Law’ – In the light of said findings, each of the appealsconsidered independently, dismissed – Electricity Act, 2003.B

Electricity – Carrying cost – Grant of interest – Held: Oncecarrying cost has been granted, it cannot be urged that interest oncarrying cost should be calculated on simple interest basis insteadof compound interest basis – Grant of compound interest on carryingcost and that too from the date of the occurrence of the ‘Change inCLaw’ event is based on sound logic – It aimed at restituting a partythat is adversely affected by a ‘Change in Law’ event and restore itto its original economic position as if such a ‘Change in Law’ eventhad not taken place – In view of the consistent position of law andapplication of restitutionary principles and privity of contractualDobligations between the parties as contained in the Power PurchaseAgreements, the view taken by the APTEL with regard to carryingcost warrants no interference – Electricity Act, 2003.

Conclusion

Electricity Act, 2003 – s.125 – Appeals arising from concurrentfindings of fact arrived at by two statutory bodies having expertiseEin the field – Held: CERC, SERCs and APTEL are bodies consistingof experts in the field – This Court should be slow in interferingwith the concurrent findings of fact unless they are found to beperverse, arbitrary and either in ignorance of or contrary to thestatutory provisions – Appeal to this Court u/s.125 is only permissibleon any of the grounds as specified in s.100 of the Code of CivilFProcedure, 1908 – As such, the appeal to this Court would bepermissible only on substantial questions of law – However, even incases where well-reasoned concurrent orders are passed by the ERCand APTEL, the same are challenged by the DISCOMS as well asthe Generators – On account of pendency of litigation, which inGsome of the cases in this batch has been more than 5 years, non-payment of dues would entail paying of heavy carrying cost to theGenerators by the DISCOMS, which, in turn, will be passed over tothe end consumer – As a result, it will be the end consumer whowould be at sufferance – Therefore, such unnecessary andunwarranted litigation needs to be curbed – Union of India, throughH

Ministry of Power, may evolve a mechanism to ensure timely paymentby the DISCOMS to the Generating Companies, which would avoidhuge carrying cost to be passed over to the end consumers – Amechanism may also be evolved to avoid unnecessary andunwarranted litigation, the cost of which is also passed on to theultimate consumer – Code of Civil Procedure, 1908 – s.100.

Dismissing the appeals, the Court

HELD: 1. The term “Law”, has been defined in the PPAs.Perusal of the definition of the term “Law” itself would clearlyshow that the term “Law” would mean all laws including ElectricityLaws in force in India and any statute, ordinance, regulation,Notification or code, rule, or any interpretation of any of them byan Indian Governmental Instrumentality and having force of law.It would further reveal that the term “Law” shall also include allapplicable rules, regulations, orders, Notifications by an IndianGovernmental Instrumentality and shall also include all rules,regulations, decisions and orders of the CERC and the MERC.CIL is an instrumentality of the Government of India and itsorders, insofar as price of fuel are concerned, are binding on allits subsidiaries. Price of coal includes the sum of base price, othercharges and statutory charges as applicable at the time of deliveryof coal. As discussed, the term ‘Law’ would also include allapplicable rules, regulations, orders, Notifications issued by anIndian Governmental Instrumentality. It would thus be clear thatall such additional charges which are payable on account of orders,directions, Notifications, Regulations, etc., issued by theinstrumentalities of the State, after the cut-off date, will have tobe considered to be ‘Change in Law’ events. The Generatorswould be entitled to compensation on the restitutionary principleon such changes occurring after the cut-off date. [Paras 93, 94,96-99][218-C, E-F; 219-E, G-H; 220-A]

Energy Watchdog v. Central Electricity RegulatoryCommission and others (2017) 14 SCC 80; JaipurVidyut Vitaran Nigam Ltd. and others v. Adani PowerRajasthan Limited and another 2020 SCC Online SC697; Maharashtra State Electricity DistributionCompany Limited v. Adani Power Maharashtra Limited& Ors. 2023 SCC OnLine 233 – relied on.

AB

CD

EF

G

H

186SUPREME COURT REPORTS

A2. Insofar as increase in Busy Season Surcharge,Development Surcharge on transportation of coal, and PortCongestion Surcharge by the Indian Railways are concerned, thelearned APTEL had found that the Indian Railways is aninstrumentality of the State. It has been found that the BusySeason Surcharge, Development Surcharge and Port CongestionBSurcharge were increased from time to time vide Circulars/Notifications issued by the Ministry of Railways, through theRailway Board. A Constitution Bench of this Court, in the case ofRailway Board, Government of India v. M/s Observer Publications(P) Ltd., has held the Railway Board to be a State within theCmeaning of Article 12 of the Constitution of India. As such, noerror could be found in the finding of the learned APTEL that therevision of charges to be paid on Busy Season Surcharge,Development Surcharge and Port Congestion Charges from timeto time by the ‘Railway Board’ would come within the ambit of‘Change in Law’. [Paras 101-103][220-C-E]DRailway Board, Government of India v. M/s ObserverPublications (P) Ltd. (1972) 2 SCC 266 : [1972] 3 SCR865 – relied on.

3. Insofar as MoEF notification on coal quality is concerned,Ethe MoEF, vide Notification dated 2nd January 2014, i.e.subsequent to the particular cut-off date, i.e. 1st June 2012, hasmandated power projects to use beneficiated coal with ash contentlower than 34%. The draft notification of MoEF dated 11th July2012 culminated into the final Notification dated 2nd January 2014.By no stretch of imagination, can it be said that MoEF is not anFinstrumentality of the State. By the said Notification, MoEF hasmandated power projects to use beneficiated coal with ash contentlower than 34%. Admittedly, prior to the cut-off date, the samewas not a requirement. It is thus clear that the said Notificationsdated 11[th] July 2012 and 2nd January 2014 would amount toG“Change in Law’. As such, no fault can be found with the findingof the learned APTEL that the same would amount to ‘Change inLaw’. [Paras 104, 105][220-F-H; 221-A]

4. This Court in the case of Energy Watchdog so also inAdani Rajasthan case and recently in MSEDCL v. APML & Ors.

H

has held that the change in NCDP would amount to ‘Change inLaw’. [Paras 106][221-C]

5. Insofar as Forest Tax is concerned, perusal of the materialplaced on record would reveal that, as on the cut-off date, therewas no Forest Tax applicable on coal mined and transported fromSouth Eastern Coalfields Limited (“SECL” for short) mineslocated in Forest area. For the first time, vide Notification of theChhattisgarh State Government, Department of Forest, under53 the provisions of Chhattisgarh Transit (Forest Produce Rule)2001, a fee at the rate of Rs.7 per ton was levied. Undisputedly,the said Notification is issued by the Forest Department of theGovernment of Chhattisgarh, which is an instrumentality of theState. As such, no error can be found with the finding of the learnedAPTEL in that regard. [Para 107][221-D-E]

6. Insofar as ‘Add on premium price’ is concerned,undisputedly, ‘add on premium’ was required to be paid on accountof cancellation of captive coal blocks and inordinate delay onaccount of Go-No-Go policy. As such, it cannot be said that thereasoning adopted by the learned APTEL is perverse andarbitrary. [Para 108][221-F]

7. EFC was imposed by CIL vide its Circular dated 19thDecember 2017. CIL is an instrumentality of the State. It is thusclear that, on the cut-off date, there was no requirement of EFC,which has been brought into effect only on 19th December 2017.As such, the circular of CIL dated 19th December 2017 wouldalso amount to ‘Change in Law’. It is also not in dispute thatEFC has been paid by the generators while paying the base price,other charges and statutory charges at the time of delivery ofcoal. As such, no interference would be warranted with the saidfinding. [Paras 109-111][221-G-H; 222-A]

8. A perusal of Article 11.3.4 of the PPA would reveal thatin the event of delay in payment of a monthly bill by any procurerbeyond its due date, a late payment surcharge shall be payableby the procurer to the seller at the rate of 2% in excess of theapplicable State Bank Advance Rate (“SBAR” for short) perannum, on the amount of outstanding payment, calculated on aday to day basis (and compounded with monthly rest), for each AB

C

D

E

F

G

H

Aday of the delay. Article 11.8 of the PPA deals with Payment ofSupplementary Bill. It enables either party to raise asupplementary bill on the other party for payment on account ofcertain events. Clause (iii) of Article 11.8.1 of the PPA deals with‘Change in Law’ as provided in Article 13. It requires the bill tobe paid by the other party. Article 11.8.3 of the PPA also providesBthat in the event of delay in payment of a supplementary bill byeither party beyond one month from the date of billing, a latepayment surcharge shall be payable at same terms applicable tothe monthly bill in Article 11.3.4. This Court in the case of UttarHaryana Bijli Vitran Nigam Limited (UNHVNL) and another v.CAdani Power Limited and others has held that insofar as the“operation period” is concerned, compensation for any increase/decrease in revenues or costs to the seller is to be determinedand effected from such date as is decided by the appropriateCommission. It has further been held that the compensation isonly payable for increase/decrease in revenue or cost to the sellerDif it is in excess of an amount equivalent to 1% of the Letter ofCredit in aggregate for a contract year. It has been held thatrestitutionary principles apply in case a certain threshold limit iscrossed. It has been held that an in-built restitutionary principlecompensates the party affected by such ‘Change in Law’ and theEaffected party must be restored through monthly tariff paymentto the same economic position as if such ‘Change in Law’ had notoccurred. In case the ‘Change in Law’ happens to be by way ofadoption, promulgation, amendment, re-enactment or repeal ofthe law or ‘Change in Law’, it has to be effected from the date onwhich such change occurs. In Maharashtra State ElectricityFDistribution Company Limited v. Maharashtra Electricity RegulatoryCommission and Others, this Court has clearly held that theDISCOMS have a contractual obligation to make timely paymentof the invoices raised by the power generating companies, subjectto scrutiny and verification of the same. This Court has rejectedGthe contention that the funding cost was much lesser than therate of LPS. This Court has reiterated the proposition that thecourts cannot rewrite a contract which is executed between theparties. This Court has emphasized that it cannot substitute itsown view of the presumed understanding of commercial termsby the parties, if the terms are explicitly expressed. It has beenH

held that the explicit terms of a contract are always the final wordwith regard to the intention of the parties. Article 11.8 of the PPAentitles either party to raise a supplementary bill on the otherparty on account of ‘Change in Law’ as provided in Article 13 andsuch bills are required to be paid by the either party. Article 11.8.3of the PPA specifically provides that in the event of delay inpayment of a supplementary bill by either party beyond one monthfrom the date of billing, a late payment surcharge shall be payableat the same terms applicable to the monthly bill in Article 11.3.4.Article 11.3.4 of the PPA specifically provides a late paymentsurcharge to be paid by the procurer to the seller at the rate of2% in excess of the applicable SBAR per annum on the amountof outstanding payment calculated on day to day basis (andcompounded with monthly rest), for each day of the delay. In UttarHaryana Bijli Vitran Nigam Limited and Another v. Adani Power(Mundra) Limited and Another this Court has reiterated that oncecarrying cost has been granted, it cannot be urged that intereston carrying cost should be calculated on simple interest basisinstead of compound interest basis. It has been held that grant ofcompound interest on carrying cost and that too from the date ofthe occurrence of the ‘Change in Law’ event is based on soundlogic. It has been held that it is aimed at restituting a party that isadversely affected by a ‘Change in Law’ event and restore it toits original economic position as if such a ‘Change in Law’ eventhad not taken place. The argument that there is no provision inthe PPAs for payment of compound interest from the date whenthe ‘Change in Law’ event had occurred, has been specificallyrejected by this Court. In view of this consistent position of lawand application of restitutionary principles and privity of contractualobligations between the parties as contained in the PPAs, theview taken by the learned APTEL with regard to carrying costdoes not warrants interference. [Paras 116-126][223-D-G; 225-B-F; 227-D-H; 228-A; 229-D-G]

Uttar Haryana Bijli Vitran Nigam Limited (UNHVNL)and another v. Adani Power Limited and others (2019)5 SCC 325 : [2019] 4 SCR 487; Maharashtra StateElectricity Distribution Company Limited v.Maharashtra Electricity Regulatory Commission and ABC

D

EF

G

H

AOthers (2022) 4 SCC 657; Uttar Haryana Bijli VitranNigam Limited and Another v. Adani Power (Mundra)Limited and Another (2023) 2 SCC 624 – relied on.

9. Civil Appeal No. 11095 of 2018 and Civil Appeal Nos.11910 - 11911 of 2018B

In these batch of appeals, insofar as the appeal ofDNHDISCOM is concerned, they are aggrieved by the order ofthe learned APTEL allowing Busy Season Surcharge andDevelopment Surcharge, MoEF Notification on coal quality andChange in NCDP. They are also aggrieved by the finding of theClearned APTEL with regard to carrying cost. Insofar as the BusySeason Surcharge and Development Surcharge are concerned,they are issued under the Circulars/Notifications of IndianRailways. The notification on coal quality is issued by MoEF. Allthese are the instrumentalities of the State, and these would,therefore, amount to ‘Change in Law’. Insofar as rest of the claims,Dwhich are concurrently allowed and disallowed by both the CERCand the learned APTEL, are concerned, in view of the judgmentsof this Court on this issue, as stated above, there is no-reason tointerfere with the same, not noticing any perversity, arbitrarinessand/or any contravention of the statutory provisions. The appealsEof both the Generator and the DNH-DISCOM are, therefore,liable to be dismissed. [Paras 132, 134, 135][231-G-H; 232-A,B-D]

The learned APTEL allowed the claim of the Generator onlyFon the ground of Busy Season Surcharge and DevelopmentSurcharge on transportation of coal, and the Carrying Cost. Inview of finding on the issues as above, no error can be found withthe finding of the learned APTEL in that regard. No merit in theappeals. The appeals are, accordingly, liable to be dismissed.G[Paras 136, 137][232-E-F]

11. Civil Appeal Nos. 12055-12056 of 2018

The issue of Busy Season Surcharge, DevelopmentSurcharge and Port Congestion Surcharge have already beenconsidered by us herein above. All these are charges under the H

Notifications issued by the Indian Railways, through the RailwayBoard. As such, no error can be found with the finding of thelearned APTEL that they would amount to ‘Change in Law’ events.Insofar as levy of ‘Forest Tax’ is concerned, the same is leviedby the State Government under the statutory provisions. In thatview of the matter, there is no reason to interfere with the orderof the learned APTEL. The appeals are, accordingly, liable to bedismissed. [Paras 138, 139, 141][232-F-G; 233-A]

In addition to the ‘Change in Law’ benefits granted by theState Commission, ‘Coal Terminal Surcharge’, ‘ChhattisgarhParyavaran Upkar’ and ‘Chhattisgarh Vikas Upkar’ were alsoconsidered to be ‘Change in Law’ events by the learned APTEL.The ‘Coal Terminal Surcharge’ was levied by the Indian Railwayssubsequent to the cut-off date. Similarly, the Government ofChhattisgarh, under Section 8 of the Chhattisgarh AdhosanrachnaVikas Evam Paryavaran Upkar Adhiniyam, 2005, vide Notificationdated 16th June 2015, which is admittedly after the cut-off date,introduced ‘Chhattisgarh Paryavaran Upkar’ and ‘ChhattisgarhVikas Upkar’. Even the Change in Swacch Bharat Cess at therate of 0.5% on Service Tax for Operation Period and Change inKrishi Kalyan Cess at the rate of 5% on Service Tax for OperationPeriod, which had beengranted concurrently by the StateCommission and the learned APTEL, were notified by the Unionof India after the cut-off date. It could thus be seen that all theseadditional taxes or cesses were introduced by theinstrumentalities of the Government of India or by theGovernment of Chhattisgarh. The same are issued under theprovisions of the concerned statutes, rules, notifications, orders,etc. It is thus clear that they would amount to ‘Law’ within themeaning of the term ‘Law’ as defined in the PPAs. As such, noerror can be found with the order of the learned APTEL. Thereis no merit in the appeals. The appeals are, accordingly, liable tobe dismissed. [Paras 142 – 145][232-B-F]

13. Civil Appeal No. 3123 of 2019 and Civil Appeal No.5372

of 2019

A

B

CD

EF

G

H

AIn the present matter, in addition to the claims granted bythe CERC, the learned APTEL also granted the following claims:(i) Change in NCDP (cancellation of Captive Block vis-à-vistapering linkage), (ii) Busy Season Surcharge and DevelopmentalSurcharge, (iii) Carrying Cost; and (iv) Add on Premium Price.Insofar as other claims which were concurrently allowed andBdisallowed by the CERC and the learned APTEL are concerned,in view of the concurrent findings, there is no reason to interferewith the same. The appeals of both DISCOMS as well asGenerating Companies are, therefore, liable to be dismissed.[Paras 146, 151, 152][233-G-H; 234-A, E-F]

C14. Civil Appeal No. 6641 of 2019

This appeal is filed by GKEL, being aggrieved by theconcurrent denial of benefits on certain components. As alreadydiscussed herein above in view of the concurrent findingsrecorded by the CERC as well as the learned APTEL forDdisallowing the claims, there is no reason to interfere with thesame. The appeal is, accordingly, liable to be dismissed. [Paras153, 154][234-F-G]

EIn the present case, the benefit is granted on followinggrounds: (i) Shortfall in domestic coal on account of Change inNCDP; (ii) Add on premium on account of existing taperinglinkage by three years; (iii) Busy Season Surcharge. Insofar asBusy Season Surcharge is concerned, apart from there beingconcurrent findings of facts, reasons are already given hereinFabove, as to how the same would amount to ‘Change in Law’.There is no merit in the appeals. The same are, accordingly, liableto be dismissed. [Paras 155, 157, 158][234-H; 235-A-C]

16. Civil Appeal No. 39 of 2021

The CERC has granted benefit on the following grounds. i.GShortfall in linkage coal on account of NCDP 2013 and SHAKTIPolicy; ii. Change in coal quality pursuant to amendment of theEnvironment (Protection) Rules, 1986; iii. Increase in BusySeason Surcharge and Development Surcharge on transportation H

of coal by Indian Railways; and iv. Carrying cost on allowed‘Change in Law’ claims. The view taken by the CERC has beenaffirmed by the learned APTEL. As such, the appeal arises out ofthe concurrent findings of fact. The other components, i.e. changein coal quality pursuant to amendment of the Environment(Protection) Rules, 1986, and increase in Busy Season Surchargeand Development Surcharge on transportation of coal by IndianRailways, have already been considered by us herein to amountto ‘Change in Law’ events. The issue regarding ‘Carrying Cost’has also ben considered. As such, no interference is warrantedin the concurrent findings by the learned APTEL, especially inview of the judgments of this Court. The appeal is, accordingly,liable to be dismissed. [Paras 159, 160, 163][235-D-F; 236-B-C]

17. Civil Appeal No. 5005 of 2022 and Civil Appeal No.4089 of 2022

The appeals are filed being aggrieved by the order of thelearned APTEL granting compensation on account of ‘EFC’ and‘carrying cost’. Undisputedly, the EFC was imposed by CIL videits Circular dated 19th December 2017. it is not in dispute thatEFC has been paid by the Generators while paying the base price,other charges and statutory charges at the time of delivery ofcoal. As such, no interference is warranted with the said finding.Insofar as ‘carrying cost’ is concerned, As such, no interference,therefore, is warranted on the said issue also. There is no meritin the appeals. The same are, accordingly, liable to be dismissed.[Paras 164 – 168][236-D-F]

18.1 The CERC, SERCs and the learned APTEL are bodiesconsisting of experts in the field. Several appeals in the presentbatch arise out of concurrent findings of fact arrived at by twostatutory bodies having expertise in the field. In some of thematters, the appeals have been filed only for the sake of filingthe same. Several rounds of litigation have taken place in someof the proceedings. Recently, this Court, in the case of MSEDCLv. APML & Ors. has noted that one of the reasons for enactingthe Electricity Act, 2003 was that the performance of the ElectricityBoards had deteriorated on account of various factors. TheStatement of Objects and Reasons of the Electricity Act, 2003would reveal that one of the main features for enactment of the ABC

DE

FGH

ABC

DE

FGH

AElectricity Act was delicensing of generation and freely permittingcaptive generation. In the said judgment, the statement of thelearned Attorney General made in the case of Energy Watchdogthat the electricity sector, having been privatized, had largelyfulfilled the object sought to be achieved by the Electricity ActBwas recorded. He had stated that delicensed electricity generationresulted in production of far greater electricity than was earlierproduced. The learned Attorney General had further urged theCourt not to disturb the delicate balance sought to be achievedby the Electricity Act, i.e. that the producers or generators ofelectricity, in order that they set up power plants, be entitled to aCreasonable margin of profit and a reasonable return on theircapital, so that they are induced to set up more and more powerplants. At the same time, the interests of the end consumers alsoneed to be protected. However, in spite of this position, litigationsafter litigations are pursued. Though the concurrent orders ofDstatutory expert bodies cannot be said to be perverse, arbitraryor in violation of the statutory provisions, the same are challenged.Even the Standing Committee of Parliament, in its report, hasrecommended that there should be consistency and uniformitywith regard to orders emanating from the status of ‘Change inLaw’. It has also recommended that the provisions should alsoEbe made for certain percentage of payments of regulatory duesto be paid by DISCOMS in case the orders of regulators arebeing taken to learned APTEL/higher judiciary for theirconsideration and decision. The learned APTEL has also referredto the Policy Directive dated 27th August 2018 issued in termsFof Section 107 of the Electricity Act, 2003 by the MoP to theCERC, where it emphasized the need to ensure expeditiousrecovery of ‘Change in Law’ compensation. The learned APTELhas also referred to the Electricity (Timely Recovery of Costsdue to Change in Law) Rules, 2021, notified by MoP on 22ndGOctober 2021, which provide for timely recovery of compensationon account of occurrence of ‘Change in Law’ events. The learnedAPTEL found that the Haryana Utilities have been adoptingdilatory tactics, which not only defeat the public policy but alsohave the undesirable fallout of adding to the burden of the end- H

consumers they profess to serve on account of increasing‘Carrying Cost’. The learned APTEL further found thatwithholding of past payments, including towards taxes and dutiesby the DISCOMS, is in violation of the provisions of the PPAs,which casts a specific mandate on the procurer to honour theinvoices raised, irrespective of dispute, and impose a specificbar against unilateral deductions/setting off. The ‘Change in Law’events will have to accrue from the date on which Rules, Orders,Notifications are issued by the instrumentalities of the State. Evenin spite of this finding, the DISCOMS are pursuing litigationsafter litigations. When the PPA itself provides a mechanism forpayment of compensation on the ground of ‘Change in Law’,unwarranted litigation, which wastes the time of the Court as wellas adds to the ultimate cost of electricity consumed by the endconsumer, ought to be avoided. Ultimately, the huge cost oflitigation on the part of DISCOMS as well as the Generators addsto the cost of electricity that is supplied to the end consumers.[Paras 128, 169 , 174-176][230-A; 237-A-E; 240-C-G; 241-A-C]

18.2 It is further to be noted that the appeal to this Courtunder Section 125 of the Electricity Act, 2003 is only permissibleon any of the grounds as specified in Section 100 of the Code ofCivil Procedure, 1908. As such, the appeal to this Court wouldbe permissible only on substantial questions of law. However, asalready observed herein, even in cases where well-reasonedconcurrent orders are passed by the Electricity RegulatoryCommissions and the learned APTEL, the same are challengedby the DISCOMS as well as the Generators. On account ofpendency of litigation, which in some of the cases in this batchhas been more than 5 years, non-payment of dues would entailpaying of heavy carrying cost to the Generators by the DISCOMS,which, in turn, will be passed over to the end consumer. As aresult, it will be the end consumer who would be at sufferance.Such unnecessary and unwarranted litigation needs to be curbed.[Paras 179][241-E-H]

18.3 The Union of India through Ministry of Power (“MoP”)is therefore, appealed to evolve a mechanism so as to ensuretimely payment by the DISCOMS to the Generating Companies, AB

C

D

E

FG

H

Awhich would avoid huge carrying cost to be passed over to theend consumers. The Union of India, through MoP, may alsoevolve a mechanism to avoid unnecessary and unwarrantedlitigation, the cost of which is also passed on to the ultimateconsumer. [Paras 181, 182][242-B-C]

BMaharashtra State Electricity Distribution CompanyLimited v. GMR Warora Energy Ltd. & ors. Civil AppealNo. 6927 of 2021; Manohar Lal Sharma v. The PrincipalSecretary & Ors. (2014) 9 SCC 516 : [2014] 8 SCR446; and 2014 (9) SCC 614 : [2014] 12 SCR 110;Ashoka Smokeless Coal India (P) Limited and Others v.CUnion of India and Others (2007) 2 SCC 640 : [2006]9 Suppl. SCR 954; Uttar Haryana Bijli Vitran NigamLimited and another v. Adani Power (Mundra) Limitedand another Civil Appeal No. 5684 of 2021;Maharashtra State Electricity Distribution CompanyDLimited v. Adani Power Maharashtra Limited andanother Civil Appeal Nos. 677- 678 of 2021 – referredto.

E

From the Judgment and Order dated 14.08.2018 of the AppellateTribunal for Electricity at New Delhi in Appeal No.111 of 2017.

GWith

Civil Appeal Nos.11910-11911, 12055-12056 of 2018, 3123, 5372,6641 of 2019, 2935-2936 of 2020, 4628-4629, 5583-5584, 39 of 2021,5005, 4089 of 2022

Balbir Singh, ASG, G. Saikumar, Samir Malik, Ms. Nikita Choukse,Akash Lamba, Naman Tandan, Ms. Farha Malik, Chandra Prakash,Ms. Swapna Sinha, M/s D.S.K. Legal, Anup Jain, Udit Gupta,Raghavendra Pratap Singh, M/s Udit Kishan and Associates, ShubhamArya, Ms. Poorva Saigal, Nikunj Dayal, Ms. Pallavi Saigal, Ms. ShikhaSood, Ms. Reeha Singh, Ms. Anumeha Smiti, Ravi Nair, Advs. for theAppellant.

A

B

Dr. A. M. Singhvi, Sajan Poovayya, Sr. Advs., Mahesh Agarwal,Ms. Poonam Sengupta, Arshit Anand, Saunak Rajguru, Nidhiram Sharma,Ms. Nidhiram Sharma, Ms. Sakshi Kapoor, E. C. Agrawala, VishrovMukherjee, Pukhrambam Ramesh Kumar, Girik Bhalla, Karun Sharma,Ms. Priyanka Vyas, Suraj Dasguru, Advs. for the Respondents.

C

The Judgment of the Court was delivered byB. R. GAVAI, J.

SUPREME COURT REPORTS

G1. When we heard this batch of Electricity appeals, it was agreedbetween all the parties that this Court should first decide Civil AppealNo. 684 of 2021 (Maharashtra State Electricity DistributionCompany Limited v. Adani Power Maharashtra Limited & Ors.[1])[“MSEDCL v. APML & Ors.” for short] and Civil Appeal No. 6927 of1 2023 SCC OnLine 233H

2021 (Maharashtra State Electricity Distribution Company Limitedv. GMR Warora Energy Ltd. & ors.), inasmuch as three of the issuesinvolved in all the appeals in the batch were common. It was submittedthat those two appeals could be decided by deciding the three commonissues. However, insofar as the other appeals are concerned, it wassubmitted that, in addition to the three common issues, certain additionalissues were also involved and it was agreed that after those two appealsare decided, the other appeals should be heard for considering theseadditional issues.

2. The said three common issues are thus:

(i) Whether ‘Change in Law’ relief on account of New CoalDistribution Policy, 2013 (“NCDP 2013” for short) shouldbe on ‘actuals’ viz. as against 100% of normative coalrequirement assured in terms of New Coal DistributionPolicy, 2007 (“NCDP 2007” for short) OR restricted totrigger levels in NCDP 2013 viz. 65%, 65%, 67% and 75%of ACQ?

(ii) Whether for computing ‘Change in Law’ relief, theoperating parameters should be considered on ‘actuals’ ORas per technical information submitted in bid?

(iii) Whether ‘Change in Law’ relief compensation is to begranted from 1[st] April 2013 (start of Financial Year) or 31[st]July 2013 (date of NCDP 2013)?

3. After extensively hearing all the learned counsel for the parties,vide the judgment and order dated 3[rd] March 2023 in the case of MSEDCLv. APML & Ors. (supra), this Court decided those two appeals afterconsidering the aforesaid three issues.

4. The first issue was answered by this Court, holding that the‘Change in Law’ relief for domestic coal shortfall should be on ‘actuals’,i.e. as against 100% of normative coal requirement assured in terms ofthe NCDP, 2007. Insofar as the second issue is concerned, it was heldthat the Station Heat Rate (“SHR” for short) and Auxiliary consumptionshould be considered as per the Regulations or actuals, whichever islower. The third issue was answered holding that the Start date for the‘Change in Law’ event for the NCDP, 2013 is 1[st] April 2013.

5. After we decided those appeals, we have heard the presentappeals in which some of the issues which were decided by us vide the A

B

C

D

E

F

G

H

Asaid judgment in the case of MSEDCL v. APML & Ors. (supra) alsoarose for consideration along with other issues. However, most of theissues in all these appeals are overlapping and, therefore, we propose todecide these appeals by this common judgment.

II. BRIEF FACTS AND SUBMISSIONS

B-Civil Appeal No. 11095 of 2018 and Civil Appeal Nos. 1191011911 of 2018

6. These cross appeals challenge the common judgment and orderdated 14[th] August 2018 passed by the learned Appellate Tribunal forElectricity, New Delhi (hereinafter referred to as “APTEL”) in AppealCNo. 111 of 2017 & I.A. No.450 of 2018 and in Appeal No.290 of 2017 &I.A. No.519 of 2017.

7. Civil Appeal No.11095 of 2018 is filed by GMR Warora EnergyLtd. (hereinafter referred to as “GWEL”/”Generator”) to the extent itwas denied compensatory benefits on certain components on the groundDof ‘Change in Law’.

8. Civil Appeal Nos. 11910-11911 of 2018 have been filed by DNHPower Distribution Co. Ltd. (DPDCL) (hereinafter referred to as “DNH-DISCOM”), being aggrieved by the order of the learned APTEL acceptingthe claim of GWEL on certain issues and holding the same to be ‘ChangeEin Law’.

9. The facts, in brief, giving rise to these appeals are as under:

10. GWEL had set up a Thermal Power Station at Warora, DistrictChandrapur in the State of Maharashtra with an installed capacity of600 MW (2 x 300 MW). The Commercial Operation Date (“COD” forFshort) of Unit 1 was 19[th] March 2013 and that of Unit 2 was 1[st] September2013.

11. GWEL had entered into long term Power Purchase Agreements(“PPAs” for short) with DNH-DISCOM for supply of 200 MW powerto Maharastra State Electricity Distribution Company LimitedG(“MSEDCL” for short) on 17[th] March 2010 [“MSEDCL PPA”) and forsupply of 200 MW power on 21[st] March 2013 (“DNH PPA”), after itemerged as the successful bidder for supply of power to MSEDCL/DNH-DISCOM. The Scheduled delivery date under the MSEDCL PPAwas 17[th] March 2014, whereas under the DNH PPA, it was 1[st] AprilH2013. GWEL is also supplying 150 MW power from its power plant to Tamil Nadu Generation and Distribution Corporation (“TANGEDCO”for short) by way of back-to-back arrangement with trading companyGMR Energy Trading Limited, for which purpose, a PPA was signed on27[th] November 2013 (“TANGEDCO PPA”).

12. In terms of the PPAs, the cut-off date, which is 7 days prior tothe bid deadline, is to be considered for the purpose of claims under‘Change in Law’. Following are the cut-off dates under the said PPAs.

A

B

13. Certain ‘Change in Law’ events occurred with regard toMSEDCL PPA and DNH PPA after the cut-off date. The same werenotified by GWEL to MSEDCL/ DNH-DISCOM.

C

14. GWEL filed Petition No. 8/MP/2014 before the CentralElectricity Regulatory Commission (hereinafter referred to as “CERC”)seeking relief for ‘Change in Law’.

D

15. Vide Order dated 1[st] February 2017, certain claims wereallowed and certain claims were disallowed by the CERC.

16. The claims which were allowed by the CERC are thus:

“i.Increase in CVD from 8% to 10% and 10% to 12%;

ii.Increase in Excise Duty;

E

iii.Increase in Service Tax;

iv.Increase in other taxes [Work Contract Tax (WCT),VAT, CST];

v.Change in Excise Duty on coal;

vi.Increase in the rate of Royalty on coal; F

vii.Levy of Clean Energy Cess by Government of India (Gol);

viii.Increase in service tax on transportation of goods byIR;

ix.Levy of Swachh Bharat Cess.”

G

17. The claims which were disallowed by the CERC are thus:

“i.Withdrawal of deemed export benefit by DGFT;

ii.Design changes in Coal Handling Plant (CHP);

iii.Increase in the rate of Minimum Alternate Tax (MAT);H

Aiv.Increase in Busy Season Surcharge and Developmentsurcharge on transportation of coal by IndianRailways (IR);

v.Increase in sizing charges and surface transportationcharges by Coal India Ltd. (CIL);

vi.Increase in operating cost on account of specificationof coal quality to be used for the TPS; B

vii.Change from UHV to GCV based pricing of coal;

viii.Incremental increase in Interest on Working Capital(IWC) on account of increase in Project costs.”

C18. Being aggrieved by the judgment and order passed by theCERC, cross-appeals were filed by both GWEL and DNH-DISCOM.

19. Vide the impugned judgment, the learned APTEL, whileconcurring with the view of CERC on the claims allowed by it, furtherallowed the claims on the ground of ‘Change in Law’ on the followingcomponents:D

(i) Busy Season Surcharge and Development Surcharge;

(ii) Ministry of Environment and Forest (“MoEF”) Notificationon coal quality; and

(iii) Change in NCDP and Carrying Cost.

20. However, the rest of the claims were disallowed by the learnedEAPTEL, concurring with the view taken by the CERC. Insofar as theappeal filed by DNH-DISCOM is concerned, the same was dismissedby the learned APTEL. Hence, these cross-appeals.

21. We have heard Mr. Vishrov Mukherjee, learned counselappearing on behalf of the GWEL and Mr. Samir Malik, learned counselFappearing on behalf of MSEDCL and Mr. M.G. Ramachandran, learnedSenior Counsel appearing on behalf of the DNH-DISCOM.22. Mr. Vishrov Mukherjee submits that the learned APTEL haserred in disallowing the claim on the following items:

(i) Withdrawal of Deemed Export Benefit by way of Circulardated 28[th] December 2011 and Notification dated 28[th]GDecember 2011 issued by the Directorate General of ForeignTrade (“DGFT”) and amendment to the Foreign Trade Policydated 21[st] March 2012;

(ii) Imposition of Crushing/Sizing charges and SurfaceTransportation Charges by Notification dated 15[th] OctoberH2009;

(iii) Change in system of classification of coal by Coal IndiaALimited (“CIL” for short) from Useful Heat Value (“UHV”for short) to Gross Calorific Value (“GCV” for short) systemof pricing by way of Notification dated 30[th] December 2011;

(iv) Increase in levy of Minimum Alternate Tax (“MAT” forshort) pursuant to amendment of Section 115JB of theBIncome Tax Act, 2012;

(v) Design changes in Coal Handling Plant in terms of letterissued by the Central Electricity Authority (“CEA” for short)dated 19[th] April 2011;

(vi) Increase in working capital.

C

23. It is submitted that all these changes have taken place onaccount of the Notifications/Orders/Circulars issued by theinstrumentalities of the State and as such, the learned APTEL ought tohave allowed the claim for compensation on account of ‘Change in Law’on the aforesaid items also.

D

24. It is submitted that the compensation on account of the ‘Changein Law’ is based on the principle of restitution so as to put back the partyto the same economic position it was in, had the ‘Change in Law’ eventnot taken place. However, this has not been considered in the correctperspective by the learned APTEL.

25. Learned counsel appearing on behalf of the DNH-DISCOMand MSEDCL, on the contrary, submit that the learned APTEL haserred in considering the Busy Season Surcharge and DevelopmentSurcharge, MoEF Notification on coal quality, Change in NCDP andCarrying Cost as ‘Change in Law’ events. He submits that when theGenerator had submitted its bid, it was aware that there was a likelihoodof variations on certain payments to be made and the same were factoredin while submitting the bid. It is, therefore, submitted that the learnedAPTEL erred in granting ‘Change in Law’ benefits on the said issues.

EF

26. These appeals have been filed by Uttar Haryana Bijli VitranNigam Limited and Dakshin Haryana Bijli Vitran Nigam Limited(hereinafter referred to as “Haryana Discoms”) challenging the commonjudgment and order dated 7[th] June 2021 passed by the learned APTELin Appeal No.158 of 2017 & I.A. No.575 of 2018 and Appeal No. 316 of2017. Appeal No.158 of 2017 & I.A. No.575 of 2018 were filed byAdani Power (Mundra) Limited (hereinafter referred to as “AP(M)L”), G

H

Abeing aggrieved by the order passed by the CERC dated 6[th] February2017, whereby the CERC had denied certain claims for compensationon certain components on account of ‘Change in Law’, whereas AppealNo.316 of 2017 was filed by Haryana Discoms challenging grant ofclaim of compensation on certain components on the ground of ‘Changein Law’.B

27. The Chart of claims which were allowed and disallowed bythe CERC is as under:

“107. Based on the above analysis and decisions, the summary ofour decision under the Change in Law during the operating period of the project is as under:C

D

E

F

G

H

28. Being aggrieved by the order of the CERC, cross-appealswere filed by AP(M)L so also by Haryana Discoms before the learnedAPTEL. The Haryana Discoms challenged that part of the order of theCERC which allowed claim on components on the ground of ‘Change inLaw’, whereas AP(M)L challenged that part of the order of the CERCwhich disallowed its claim on various components.

29. Though AP(M)L had sought ‘Change in Law’ compensationon various components, the same was allowed by the learned APTELby the impugned order only on the ground of:

(i) ‘Busy Season Surcharge and Developmental Surcharge ontransportation of coal’, and

(ii) ‘Carrying Cost’.

30. The claim of AP(M)L pertaining to increase in SurfaceTransportation Charges so also Sizing Charges of coal were denied bythe learned APTEL, concurring with the view taken by the CERC.

31. Being aggrieved by the orders passed by the CERC and thelearned APTEL allowing ‘Change in Law’ on certain components, theHaryana Discoms have approached this Court.

32. We have heard Ms. Poorva Saigal, learned counsel appearingon behalf of the Haryana Discoms and Dr. A.M. Singhvi, learned SeniorCounsel appearing on behalf of AP(M)L.

33. Ms. Poorva Saigal submits that the learned APTEL grosslyerred in reversing the well-reasoned findings of the CERC on the issueof Busy Season Surcharge and Developmental Surcharge ontransportation of coal. She, therefore, submits that the finding of thelearned APTEL with regard to the same needs to be set aside.

34. Dr. A.M. Singhvi, on the contrary, submits that the Busy SeasonSurcharge as well as the Developmental Surcharge are revised as perthe Notifications/Circulars issued by the Ministry of Railways and assuch, they would come within the definition of ‘Change in Law’.

35. These appeals, filed by Jaipur Vidyut Vitran Nigam Ltd., AjmerVidyut Vitaran Nigam Ltd. and Jodhpur Vidhyut Vitaran Nigam Ltd.(hereafter referred to as “Rajasthan Discoms”), challenge the commonjudgment and order dated 14[th] August 2018, passed by the learned APTEL

A

B

C

D

E

F

G

H

Ain Appeal No. 119 of 2016 & I.A. Nos. 668 and 674 of 2016 and inAppeal No.277 of 2016 & I.A. No.572 of 2016.

36. Appeal No. 119 of 2016 & I.A. Nos. 668 & 674 of 2016 werefiled by M/s Adani Power Rajasthan Ltd. (“APRL” for short), beingaggrieved by the judgment and order dated 15[th] March 2016, passed byBthe Rajasthan Electricity Regulatory Commission (hereinafter referredto as “State Commission”) thereby disallowing some of its claims onaccount of ‘Change in Law’, whereas Appeal No. 277 of 2016 and I.A.No.572 of 2016 were filed by the Rajasthan Discoms, being aggrievedby the order of the State Commission of the same date vide which someof the ‘Change in Law’ claims were allowed by the CERC.

C

37. The ‘Change in Law’ claims which were allowed by the StateCommission are as under:

i.Change in Rate of Royalty Payable on Domestic Coal;

ii.Levy of Service Tax on Transportation of Goods by IndianDRailways (IR); and

iii.Increase in Fee for ‘Consent to Operate’.

38. The ‘Change in Law’ claims which were not allowed by theState Commission are thus:

E

F

G

H

39. Vide the impugned judgment, the learned APTEL dismissedthe appeal of the Rajasthan Discoms and partly allowed the appeal ofAPRL allowing its claims on the ground of ‘Busy Season Surcharge’,‘Development Surcharge’, ‘Port Congestion Surcharge, ‘Forest Tax’and ‘Carrying Cost’. Being aggrieved thereby, the Rajasthan Discomshave approached this Court.

40. We have heard Mr. V. Giri, learned Senior Counsel appearingon behalf of the Rajasthan Discoms and Dr. A.M. Singhvi, learned SeniorCounsel appearing on behalf of the APRL.

41. Mr. V. Giri submits that clause 10 in the PPA is referable onlyto taxes under Article 268 of the Constitution of India. He submits thatthe learned APTEL has, therefore, erred in allowing ‘Change in Law’benefits on the issues related to Busy Season Surcharge, DevelopmentSurcharge, Port Congestion Charges, Forest Tax and Carrying Cost whichare not taxes referable to Article 268 of the Constitution.

42. Dr. Singhvi made arguments on similar lines as have beenmade in the other appeals.

43. These appeals have been filed by the Rajasthan Discoms andRajasthan Urja Vikas Nigam Ltd. challenging the common judgmentand order dated 29[th] January 2020, passed by the learned APTEL inAppeal no.284 of 2017 and Appeal No. 09 of 2018.

44. Appeal No. 284 of 2017 was filed by APRL challenging theorder dated 8[th] June 2017 passed by the State Commission, beingaggrieved by the disallowance of its claim on some components on theground of ‘Change in Law’ and carrying cost, whereas Appeal No.9 of2018 was filed by Rajasthan Discoms being aggrieved by the claimswhich were allowed by the State Commission.

45. The list of the components which were allowed and whichwere not allowed on the ground of ‘Change in Law’ is thus:

A

B

C

D

E

F

G

H

ABCDEF

46. As stated above, being aggrieved by that part of the orderwhich disallowed its claim, APRL preferred the aforesaid Appeal beforethe learned APTEL, whereas the Rajasthan Discoms, being aggrievedby that part of the order which allowed claims on certain components,also filed an Appeal before the learned APTEL.G

47. The learned APTEL, while dismissing the appeal of theRajasthan Discoms, partly allowed the appeal of the APRL by allowingcompensation on certain other components on the ground of ‘Change inLaw’.

H

48. The components on which ‘Change in Law’ benefits weregranted by the learned APTEL are thus:

(i) Coal Terminal Surcharge;

(ii) Chhattisgarh Paryavaran Upkar;

(iii) Chhattisgarh Vikas Upkar;

(iv) Change in Swacch Bharat Cess at the rare of 0.5% onService Tax for Operation Period;

(v) Change in Krishi Kalyan Cess at the rate 5% on ServiceTax for Operation Period;

49. In addition to grant of relief on the ground of ‘Change in Law’,the learned APTEL also granted ‘Carrying Cost’.

50. Arguments similar to the ones advanced in Civil Appeal No.12055-12056 of 2018 were advanced by Mr. V. Giri, learned SeniorCounsel appearing on behalf of the Rajasthan Discoms, as well as bythe learned counsel for the respondents.

Civil Appeal No. 3123 of 2019 and Civil Appeal No.5372 of

51. These are cross appeals. Civil Appeal No.3123 of 2019 hasbeen filed by Bihar State Power (Holding) Company Ltd. (hereinafterreferred to as “Bihar Discoms”) and Civil Appeal No.5372 of 2019 hasbeen filed by GMR Kamalanga Energy Limited and GMR EnergyLimited (hereinafter referred to as “GKEL”), challenging the judgmentand order dated 21[st] December 2018 passed by the learned APTEL inAppeal No.193 of 2017 & I.A. No. 449 of 2018.

52. Appeal No.193 of 2017 & I.A. No.449 of 2018 were filed byGKEL challenging the order of the CERC dated 7[th] April 2017, aggrievedby the denial of its claims on certain components on the ground of ‘Changein Law’. The Bihar Discoms have challenged that part of the order ofthe learned APTEL which allowed claims of GKEL on the ground of‘Change in Law’.

53. By the impugned order, the learned APTEL granted claims onthe ground of:

(i) Change in NCDP (cancellation of Captive Block vis-à-vistapering linkage), A

B

C

D

E

F

G

H

A(ii)busy season surcharge and developmental surcharge,

(iii) carrying cost; and

(iv) add on premium price.

54. We have heard Mr. Vishrov Mukerjee, learned counselBappearing on behalf of the GKEL/Generator and Ms. Anushree Bardhan,learned Counsel appearing on behalf of the Bihar Discoms.

55. Mr. Vishrov Mukerjee submits that the learned APTEL aswell as the CERC have grossly erred in rejecting the claim forcompensation on the ground of:C(i)change in source of coal from Mahanadi Coalfields Ltd.(“MCL” for short) to Eastern Coalfields Ltd. (“ECL” forshort) vide Notification dated 26[th] February 2014 issued bythe CIL;

(ii) change in mode of transportation from rail to road videDNotification dated 29[th] September 2014 issued by MCL;

(iii) increase in levy of Minimum Alternate Tax (“MAT” forshort); and

(iv) interest on working capital.

E56. Learned counsel submitted that change in source of coal fromMCL to ECL was on account of the notification issued by the CIL,which is an instrumentality of the State. Similarly, he submitted that thechange in mode of transportation from rail to road was on account of thenotification issued by the MCL. Learned counsel submits that, since, onaccount of these notifications, the cost of transportation of coal increased,Fapplying the restitutionary principle, the CERC as well as the learnedAPTEL ought to have granted claims on the basis of ‘Change in Law’.He further submits that increase in levy of MAT has also been increasedby the Union of India and, as such, the same would also amount to‘Change in Law’. It is further submitted that interest on working capitalGwas also increased on account of the orders of the instrumentalities ofthe State and, as such, compensation also ought to have been grantedfor the same.

57. Learned counsel for the Bihar Discoms submits that the CERCas well as the learned APTEL have grossly erred in allowing claims onHcertain components on the ground of ‘Change in Law’.

A

58. This appeal filed by GKEL arises out of the judgment andorder dated 27[th] May 2019, passed by the learned APTEL in AppealNo.195 of 2016, thereby partly allowing the appeal.

59. GKEL filed Petition No.79/MP/2013 before the CERC claimingcompensation on various component on the ground of ‘Change in Law’events.

B

60. The CERC, vide order dated 3[rd] February 2016, disallowedcompensation for the following components:

(a) Change from UHV to GCV based pricing of coal pursuantto notification issued by the Government of India; C

(b) Increase/revision in the railway freight charges pursuant tonotifications issued by Ministry of Railways and Ministryof Finance;

(c) Increase in the rate of Minimum Alternate Tax (“MAT”)Drates; (d)Increase in Value Added Tax in the State of Odisha; (e)Increase in water charges pursuant to notifications issuedby the Government of Odisha; E

(f) Incremental increase in interest on working capital onaccount of increase in costs during the operating period.

61. Being aggrieved thereby, Appeal No.195 of 2016. waspreferred by GKEL. As stated above, the learned APTEL partly allowedthe appeal and held that GKEL was entitled to compensation on followinggrounds.

F

(i) Increase/revision in the railway freight charges in terms ofnotifications issued by the Ministry of Railways and Ministryof Finance on account of imposition of developmentsurcharge, busy season surcharge and service tax; G

(ii) VAT rate enhancement from 4% to 5% from 30.03.2012onwards;

(iii) Carrying cost/interest on compensation on the above itemsafter ascertainment of the same by computation, which shallbe assessed from the date of respective notification/circular/

H

212SUPREME COURT REPORTS

Aorder from the concerned Ministry/Department/Governmental instrumentality till payment is made.

62. Appellant-GKEL, being unsatisfied with the same, hasapproached this Court praying for a direction that it is also entitled tocompensation on various other components, viz., B

(i) Increase in Water Charges;

(ii) Shift from UHV to GCV methodology of pricing of coal;

(iii) Increase in rate of MAT; and

(iv) Interest on working capital.

C

63. Arguments similar to the ones advanced in Civil Appeal No.3123 of 2019 and Civil Appeal No.5372 of 2019 were advanced by thelearned counsel for the parties.

D64. These appeals, filed by Bihar Discoms, arise out of the judgmentand order dated 6[th] August 2021, passed by the learned APTEL in AppealNo. 423 of 2019 and in Appeal No.173 of 2021.

65. In the said case, the learned APTEL, vide order dated 21[st]December 2018, had allowed the following claims as ‘Change in Law’Eand remanded the matter back to the CERC to determine compensationdue to GKEL:

(a) Shortfall in linkage coal and deviation in NCDP; (b)Cancellation of captive coal block; F(c)Imposition of Busy Season Surcharge and DevelopmentSurcharge; (d)Levy of Add-On Premium over and above the notified priceof coal; and (e)Carrying Cost.

G

66. Upon remand, the CERC passed order dated 16[th] September2019, thereby granting compensation on certain components on the groundof ‘Change in Law’ including carrying cost.

67. Contending that the order passed by the CERC did not giveeffect to the ‘Change in Law’ components as directed by the learned H

APTEL, an appeal being Appeal No. 423 of 2019 came to be preferredby GKEL before the learned APTEL.

68. Bihar Discoms had also filed an appeal being Appeal No.173of 2021, before the learned APTEL, being aggrieved by the benefitswhich were granted by the CERC.

69. By the impugned order, the learned APTEL held that the GKELwas entitled to recover expenditure involved in procurement of alternatecoal due to shortfall in domestic coal supply corresponding to scheduledgeneration pertaining to the obligations under the Bihar PPA. The learnedAPTEL held that this was required to be done in order to restore theappellant-GKEL to the same economic position as before as if no ‘Changein Law’ event had occurred.

70. We have heard Ms. Anushree Bardhan, learned counselappearing on behalf of the appellant-Bihar Discoms and Mr. ManinderSingh, learned Senior Counsel appearing on behalf of GKEL.

71. Ms. Anushree Bardhan submits that the learned APTEL oughtto have granted benefit of ‘Change in Law’ restricting it to shortfall foronly 894.5 MW, which was the amount specified in the PPA, and not forthe entire 1050 MW, which is the installed capacity. She further submitsthat the learned APTEL had also erred in granting add on premium onaccount of extension of tapering linkage by three years.

72. Shri Maninder Singh, learned Senior Counsel submits thatinsofar as the first issue with regard to shortfall of coal supply isconcerned, the same is squarely covered by the judgments of this Courtin the cases of Energy Watchdog v. Central Electricity RegulatoryCommission and others[2], Jaipur Vidyut Vitaran Nigam Ltd. andothers v. Adani Power Rajasthan Limited and another[3](hereinafterreferred to as “Adani Rajasthan case”) and MSEDCL v. APML &Ors. (supra).

73. He further submits that the delay in operationalization of thecaptive mines was not on account of any reason attributable to GKEL.He submits that, since the allotment of coal blocks was cancelled onaccount of the judgment of this Court in the case of Manohar LalSharma v. The Principal Secretary & Ors.[4], GKEL was also entitledfor the benefit for the said period.

2 (2017) 14 SCC 803 2020 SCC Online SC 6974 (2014) 9 SCC 516 and 2014 (9) SCC 614

A

B

C

D

EF

G

H

A74. Insofar as Busy Season Surcharge is concerned, he submitsthat there is a concurrent finding of fact. He submits that, in any case,the said charges are issued by the Railway Board by issuing Notifications/Circulars. He submits that since the Railway is an instrumentality of theState, both the CERC and the learned APTEL have concurrently heldthat the Generator would be entitled to compensation on the ground ofB‘Change in Law’.

A

75. This appeal filed by the DNH-DISCOM arises out of thejudgment and order dated 13[th] October 2020, passed by the learnedCAPTEL in Appeal No.283 of 2019 & I.A. Nos. 2188 & 1229 of 2019,thereby dismissing the said appeal arising out of the judgment and orderpassed by the CERC dated 16[th] May 2019.

76. The DNH-DISCOM had initiated a competitive biddingprocess through issuance of a Request for Proposal (“RFP” for short)Din March 2012 for procurement of power on Long Term Basis underCase-1 bidding procedure. As per the RFP, the cut-off date was 1[st] June2012.

77. The respondent-GWEL emerged as the successful bidder forsupplying Aggregated Contracted Capacity of 200 MW at a levelizedEtariff of Rs.4.618 per Unit.

78. Accordingly, Letter of Intent (LoI) was issued by DNH-DISCOM on 14[th] August 2012. An application/petition being PetitionNo.87/2012 came to be filed before the Joint Electricity RegulatoryCommission (hereinafter referred to as “Joint Commission”) for approvalFof the PPA and adoption of tariff. GWEL was also joined as a co-petitionerin the said Petition. The Joint Commission, vide order dated 19[th] February2013, approved the PPA. Accordingly, the PPA came to be executed on21[st] March 2013.

79. GWEL filed Petition No. 8/MP/2014 before the CERC seekingcompensation on certain components on the ground of ‘Change in Law’.GThe same was decided by the CERC vide order dated 1[st] February2017. Aggrieved thereby, both the appellant-DNH-DISCOM and therespondent-GWEL filed appeals before the learned APTEL. In appeal,the learned APTEL remanded the matter to the CERC vide order dated14[th] August 2018 for considering certain issues. Being aggrieved by theHorder dated 14[th] August 2018, the appellant-DNH-DISCOM filed an appeal, being Civil Appeal No.11910 of 2018, before this Court. The saidappeal is also being decided in the present batch of appeals, by thiscommon judgment.

80. On remand, the CERC passed an order dated 16[th] May 2019and allowed the claim of GWEL/Generator on the ground of ‘Change inLaw’ occurring on account of the enforcement of the ‘Scheme forHarnessing and Allocating Koyala (Coal) Transparently in India’(“SHAKTI Policy” for short). Being aggrieved thereby, DNH-DISCOMhad filed an appeal before the learned APTEL. As stated herein above,the same was dismissed by the learned APTEL vide the impugnedjudgment.

81. We have heard Mr. C.A. Sundaram, learned Senior Counselappearing on behalf of the DNH-DISCOM and Mr. Niranjan Reddy,learned Senior Counsel appearing on behalf of the respondent-GWEL.

82. Mr. C.A. Sundaram submits that, from the presentation whichwas given by the GWEL, it was apparent that it was given on the basisthat coal supply would be restricted only to 65%. He submits that, assuch, the grant of benefit on account of ‘Change in Law’ on the groundthat there was 100% assurance by CIL is not permissible. He, therefore,submits that the judgment and order of the learned APTEL deserves tobe set aside to that extent.

83. Mr. Niranjan Reddy, on the contrary, submits that the bid ofGWEL was submitted on 8[th] June 2012, on which date NCDP 2007 wasin force. He submits that, subsequently, the NCDP 2007 was modifiedon 31[st] July 2013 and thereafter SHAKTI Policy has come into effecton 22[nd] May 2017 and, as such, judgment and order of the learned APTELwarrants no interference.

Civil Appeal No. 5005 of 2022 and Civil Appeal No. 4089 of2022

84. These appeals challenge the common judgment and order dated22[nd] March 2022 passed by the learned APTEL in Appeal No. 118 of2021 and 40 of 2022, filed by Rattan India Power Limited (hereinafterreferred to as “Rattan India”) and Adani Power Maharashtra Limited(for short, “APML”) respectively, thereby challenging the orders dated1[st] January 2019 and 3[rd] August 2018, passed by Maharashtra ElectricityRegulatory Commission (hereinafter referred to as ‘MERC’) in CaseNo. 227 of 2018 and Case No. 124 of 2018 respectively.

AB

C

D

E

F

GH

A85. The facts in brief giving rise to the present appeals are asunder:

Rattan India has entered into PPAs dated 22[nd] April 2010 and 5[th]June 2010 with MSEDCL for supply of 1200 MW aggregate power atlevelized tariff of Rs.3.260 KWH for a period of 25 years. It filed aBpetition before MERC, being Case No. 227 of 2018, claimingcompensation on the ground of ‘Change in Law’ occurring on accountof the circular dated 19[th] December 2017 issued by CIL, vide which itlevied the Evacuation Facility Charges (for short, “EFC”). The samewas rejected by MERC, vide order dated 1[st] January 2019. A similarpetition being Case No. 124 of 2018 was also filed by APML, raising aCsimilar claim before MERC, which was also rejected by MERC, vide itsearlier order dated 3[rd] August 2018.

86. Being aggrieved thereby, Rattan India had filed an AppealNo. 118 of 2021 and APML had preferred an Appeal No. 40 of 2022.By the impugned order, the learned APTEL had held EFC imposed byDCIL vide Circular dated 19[th] December 2017 to be a ‘Change in Law’event and, accordingly, held the Generators to be entitled to compensationon the said ground. Being aggrieved thereby, the MSEDCL has preferredthese appeals.

87. We have heard Shri Balbir Singh, learned Additional SolicitorEGeneral (for short, “ASG”) and Shri G. Saikumar, learned counselappearing on behalf of the appellant and Shri Sajan Poovayya, learnedSenior Counsel for the respondents in Civil Appeal No. 5005 of 2022and Shri Vishrov Mukherjee, learned counsel appearing on behalf of therespondents in Civil Appeal No. 4089 of 2022.

F

88. Shri Balbir Singh, relying on Clause 9.1 of the Coal SupplyAgreement (for short, “CSA”) dated 28[th] December 2012 entered intobetween Southeastern Coalfields Limited and APML, submitted thatCSA defines as to what shall be the base price of coal. He submittedthat Clause 9.2 of the said CSA specifically provides for other chargesGwhich are permissible. Relying on Clause 9.4 of the CSA, he submittedthat in all cases, the entire freight charges, irrespective of the mode oftransportation of coal supplied, shall be borne by the purchaser. Thelearned ASG submitted that the EFC does not partake the character ofa statutory levy. However, he submitted that, in any case, it does nothave the force of law. He, therefore, submitted that APTEL has grosslyH

erred in holding the circular of CIL dated 19[th] December 2017 to qualifyas ‘Change in Law’.

89. Shri Singh further submitted that the direction to pay thecarrying cost at the rate provided for Late Payment Surcharge (for short,“LPS”) is also not permissible in law. He submitted that this Court, inAdani Rajasthan case (supra), has directed the carrying cost to bepaid at the rate of 9% and as such, in the present case, it ought to havebeen directed to be paid at the same rate.

90. Shri Singh also relies on the judgment of this Court in the caseof Ashoka Smokeless Coal India (P) Limited and Others v. Union ofIndia and Others[5] in support of the proposition that CIL is free to fixthe price of coal and that the Union of India has no control over it.

91. Shri Poovayya, on the contrary, submitted that the levy ismandatory in nature. Unless the said levies are paid, the coal would notbe supplied. He further submitted that since the CIL is an instrumentalityof the Government, the order issued by it would amount to a law withinthe definition of “Law” as defined in the PPA. He further submitted thatinsofar as the carrying cost is concerned, there is a specific provision inthe PPA in Article 11.8.3, which is binding on the parties. He submittedthat on account of non-payment of the dues of the generating companiesby DISCOMS, the generating companies are required to borrow thefunds at the market rate and as such, applying the restitutionary principle,it is entitled to carrying cost as provided under the agreement.

III. ADDITIONAL ISSUES

92. After hearing the learned counsel for the parties at length, wefind that, apart from the three issues that were already decided by thisCourt in the case of MSEDCL v. APML & Ors. (supra), the issues as towhether the following components could be considered as ‘Change inLaw’ events fall for consideration herein:

(i) Busy Season Surcharge & Development Surcharge andPort Congestion Surcharge;

(ii) MoEF Notification on coal quality;

(iii) Shortfall in linkage coal due to Change in NCDP;

(iv) Forest Tax;

5 (2007) 2 SCC 640

A

B

C

D

E

F

G

H

A(v)Add on Premium price.

(vi) Evacuation Facility Charges (EFC).

Apart from that, another question that requires consideration is,as to whether various taxes/charges imposed by various StateGovernments would also fall under ‘Change in Law’ events or not.B

The other question that requires considerations is, as to whetherat what rate the Generators would be entitled to ‘carrying cost’.

IV. CONSIDERATION

93. For appreciating the rival submissions, we will have to construeCthe term “Law”, which has been defined in the PPAs, which reads thus:

“”Law” means, in relation to this Agreement, all laws includingElectricity Laws in force in India and any statute, ordinance,regulation, Notification or code, rule, or any interpretation of anyof them by an Indian Governmental Instrumentality and havingDforce of law and shall further include all applicable rules,regulations, orders, Notifications by an Indian GovernmentalInstrumentality pursuant to or under any of them and shall includeall rules, regulations, decisions and orders of the CERC and theMERC.”

E94. Perusal of the definition of the term “Law” itself would clearlyshow that the term “Law” would mean all laws including ElectricityLaws in force in India and any statute, ordinance, regulation, Notificationor code, rule, or any interpretation of any of them by an IndianGovernmental Instrumentality and having force of law. It would furtherreveal that the term “Law” shall also include all applicable rules,Fregulations, orders, Notifications by an Indian GovernmentalInstrumentality and shall also include all rules, regulations, decisions andorders of the CERC and the MERC.

95. In any case, the issue as to what would amount to “Law” isno more res integra. This Court, in the case of Energy Watchdog (supra),Ghas observed thus:

“57. Both the letter dated 31-7-2013 and the revised Tariff Policyare statutory documents being issued under Section 3 of the Actand have the force of law. This being so, it is clear that so far asthe procurement of Indian coal is concerned, to the extent that H

the supply from Coal India and other Indian sources is cut down,the PPA read with these documents provides in Clause 13.2 thatwhile determining the consequences of change in law, parties shallhave due regard to the principle that the purpose of compensatingthe party affected by such change in law is to restore, throughmonthly tariff payments, the affected party to the economic positionas if such change in law has not occurred. Further, for the operationperiod of the PPA, compensation for any increase/decrease incost to the seller shall be determined and be effective from suchdate as decided by the Central Electricity Regulation Commission.This being the case, we are of the view that though change inIndonesian law would not qualify as a change in law under theguidelines read with the PPA, change in Indian law certainlywould.”

96. The aforesaid view of this Court taken in the case of EnergyWatchdog (supra) has been approved by a Bench of three learned Judgesof this Court in Adani Rajasthan case (supra) and also followed by thisCourt when the two linked matters out of this batch of appeals weredecided by this Court in the case of MSEDCL v. APML & Ors.(supra).It cannot be denied that CIL is an instrumentality of the Government ofIndia and its orders, insofar as price of fuel are concerned, are bindingon all its subsidiaries.

97. It will further be relevant to refer to Clause 9.0 of the CSA,which reads thus:

“9.0 PRICE OF COAL:

The “As Delivered Price of Coal” for the Coal supplies pursuantto this Agreement shall be the sum of Base Price, Other Chargesand Statutory Charges, as applicable at the time of delivery ofCoal.”

It is thus clear that price of coal includes the sum of base price,other charges and statutory charges as applicable at the time of deliveryof coal.

98. As discussed herein above, the term ‘Law’ would also includeall applicable rules, regulations, orders, Notifications issued by an IndianGovernmental Instrumentality.

99. It would thus be clear that all such additional charges whichare payable on account of orders, directions, Notifications, Regulations, AB

C

D

E

F

G

H

Aetc., issued by the instrumentalities of the State, after the cut-off date,will have to be considered to be ‘Change in Law’ events. The Generatorswould be entitled to compensation on the restitutionary principle on suchchanges occurring after the cut-off date.

100. Having held thus, we will now consider some of theBcomponents which are common in most of these appeals.

Busy Season Surcharge, Development Surcharge And PortCongestion Surcharge

101. Insofar as increase in Busy Season Surcharge, DevelopmentSurcharge on transportation of coal, and Port Congestion Surcharge byCthe Indian Railways are concerned, the learned APTEL had found thatthe Indian Railways is an instrumentality of the State. It has been foundthat the Busy Season Surcharge, Development Surcharge and PortCongestion Surcharge were increased from time to time vide Circulars/Notifications issued by the Ministry of Railways, through the RailwayBoard.D

102. A Constitution Bench of this Court, in the case of RailwayBoard, Government of India v. M/s Observer Publications (P) Ltd.[6],has held the Railway Board to be a State within the meaning of Article12 of the Constitution of India.

103. As such, no error could be found in the finding of the learnedEAPTEL that the revision of charges to be paid on Busy Season Surcharge,Development Surcharge and Port Congestion Charges from time to timeby the ‘Railway Board’ would come within the ambit of ‘Change inLaw’.MoEF Notification on Coal QualityF

104. Insofar as MoEF notification on coal quality is concerned,the MoEF, vide Notification dated 2[nd] January 2014, i.e. subsequent tothe particular cut-off date, i.e. 1[st] June 2012, has mandated power projectsto use beneficiated coal with ash content lower than 34%. The draftnotification of MoEF dated 11[th] July 2012 culminated into the finalGNotification dated 2[nd] January 2014. By no stretch of imagination, can itbe said that MoEF is not an instrumentality of the State.

105. By the said Notification, MoEF has mandated power projectsto use beneficiated coal with ash content lower than 34%. Admittedly, 6 (1972) 2 SCC 266H

prior to the cut-off date, the same was not a requirement. It is thus clearthat the said Notifications dated 11[th] July 2012 and 2[nd] January 2014would amount to “Change in Law’. As such, no fault can be found withthe finding of the learned APTEL that the same would amount to ‘Changein Law’.

Shortfall in Linkage Coal due to Change in NCDP

106. Insofar as shortfall in linkage coal due to changes in theNCDP issued by the Ministry of Coal (“MoC” for short) is concerned,the issue is no more res integra. This Court in the case of EnergyWatchdog (supra) so also in Adani Rajasthan case (supra) and recentlyin MSEDCL v. APML & Ors. (Supra) has held that the change in NCDPwould amount to ‘Change in Law’.

Forest Tax

107. Insofar as Forest Tax is concerned, perusal of the materialplaced on record would reveal that, as on the cut-off date, there was noForest Tax applicable on coal mined and transported from South EasternCoalfields Limited (“SECL” for short) mines located in Forest area. Forthe first time, vide Notification of the Chhattisgarh State Government,Department of Forest, under the provisions of Chhattisgarh Transit (ForestProduce Rule) 2001, a fee at the rate of Rs.7 per ton was levied.Undisputedly, the said Notification is issued by the Forest Departmentof the Government of Chhattisgarh, which is an instrumentality of theState. As such, no error can be found with the finding of the learnedAPTEL in that regard.

Add on Premium Price

108. Insofar as ‘Add on premium price’ is concerned, undisputedly,‘add on premium’ was required to be paid on account of cancellation ofcaptive coal blocks and inordinate delay on account of Go-No-Go policy.As such, it cannot be said that the reasoning adopted by the learnedAPTEL is perverse and arbitrary.

Evacuation Facility Charges (EFC)

109. Undisputedly, EFC was imposed by CIL vide its Circulardated 19[th] December 2017.

110. As already discussed herein above, CIL is an instrumentalityof the State. It is thus clear that, on the cut-off date, there was no A

B

C

D

E

F

G

H

Arequirement of EFC, which has been brought into effect only on 19[th]December 2017. As such, the circular of CIL dated 19[th] December 2017would also amount to ‘Change in Law’.

111. As discussed herein above, it is also not in dispute that EFChas been paid by the generators while paying the base price, other chargesBand statutory charges at the time of delivery of coal. As such, nointerference would be warranted with the said finding.

112. That leaves us with the issue with regard to carrying cost.

Carrying Cost

113. This is the issue on which there is a serious contest betweenCthe DISCOMS and the Generators.

114. On one hand, it is the submission of the DISCOMS thatsince there is no description of the same in the PPAs, the rate for grantingcarrying cost should be a reasonable rate. On the contrary, it is theDsubmission of the Generators that there is a specific provision in thePPAs, which provides that the carrying cost has to be paid at the rate asper the rate specified for late payment surcharge. It is submitted thatthis is provided in the PPA so as to give effect to the restitutionaryprinciple.

115. For considering the rival submissions, it will be apposite toErefer to the following Articles, which are almost common in most of thePPAs.

“11. Billing and payment.—

***

F

11.3. Payment of monthly bills.—

***

11.3.4. In the event of delay in payment of a monthly bill by anyprocurer beyond its due date, a late payment surcharge shall beGpayable by the procurer to the seller at the rate of two (2) percent in excess of the applicable SBAR per annum, on the amountof outstanding payment, calculated on a day to day basis (andcompounded with monthly rest), for each day of the delay.

***

11.8. Payment of supplementary bill.—

11.8.1. Either party may raise a bill on the other party(“supplementary bill”) for payment on account of:

(i) Adjustments required by the Regional Energy Account (ifapplicable);

(ii) Tariff payment for change in parameters, pursuant to provisionsin Schedule 5; or

(iii) Change in law as provided in Article 13 and such Bill shall bepaid by the other party.

***

11.8.3. In the event of delay in payment of a supplementary billby either party beyond one month from the date of billing, a latepayment surcharge shall be payable at same terms applicable tothe monthly bill in Article 11.3.4.”

116. A perusal of Article 11.3.4 of the PPA would reveal that inthe event of delay in payment of a monthly bill by any procurer beyondits due date, a late payment surcharge shall be payable by the procurerto the seller at the rate of 2% in excess of the applicable State BankAdvance Rate (“SBAR” for short) per annum, on the amount ofoutstanding payment, calculated on a day to day basis (and compoundedwith monthly rest), for each day of the delay. Article 11.8 of the PPAdeals with Payment of Supplementary Bill. It enables either party toraise a supplementary bill on the other party for payment on account ofcertain events. Clause (iii) of Article 11.8.1 of the PPA deals with ‘Changein Law’ as provided in Article 13. It requires the bill to be paid by theother party. Article 11.8.3 of the PPA also provides that in the event ofdelay in payment of a supplementary bill by either party beyond onemonth from the date of billing, a late payment surcharge shall be payableat same terms applicable to the monthly bill in Article 11.3.4.

117. This Court in the case of Uttar Haryana Bijli Vitran NigamLimited (UNHVNL) and another v. Adani Power Limited andothers[7],after considering the provisions of Article 11, which deals with‘Billing’ and Article 13, which deals with ‘Change in Law’, has observedthus:

7 (2019) 5 SCC 325

A

B

C

D

E

F

G

H

A

B

C

D

E

F

G

H

“9. It will be seen that Article 13.4.1 makes it clear that adjustmentin monthly tariff payment on account of change in law shall beeffected from the date of the change in law [see sub-clause (i) ofclause 4.1], in case the change in law happens to be by way ofadoption, promulgation, amendment, re-enactment or repeal of thelaw or change in law. As opposed to this, if the change in law is onaccount of a change in interpretation of law by a judgment of aCourt or Tribunal or governmental instrumentality, the case wouldfall under sub-clause (ii) of clause 4.1, in which case, the monthlytariff payment shall be effected from the date of the said order/judgment of the competent authority/Tribunal or the governmentalinstrumentality. What is important to notice is that Article 13.4.1is subject to Article 13.2 of the PPAs.

10. Article 13.2 is an in-built restitutionary principle whichcompensates the party affected by such change in law and whichmust restore, through monthly tariff payments, the affected partyto the same economic position as if such change in law has notoccurred. This would mean that by this clause a fiction is created,and the party has to be put in the same economic position as ifsuch change in law has not occurred i.e. the party must be giventhe benefit of restitution as understood in civil law. Article 13.2,however, goes on to divide such restitution into two separateperiods. The first period is the “construction period” in whichincrease/decrease of capital cost of the project in the tariff is tobe governed by a certain formula. However, the seller has toprovide to the procurer documentary proof of such increase/decrease in capital cost for establishing the impact of such changein law and in the case of dispute as to the same, a dispute resolutionmechanism as per Article 17 of the PPA is to be resorted to. It isalso made clear that compensation is only payable to either partyonly with effect from the date on which the total increase/decreaseexceeds the amount stated therein.

11. So far as the “operation period” is concerned, compensationfor any increase/decrease in revenues or costs to the seller is tobe determined and effected from such date as is decided by theappropriate Commission. Here again, this compensation is onlypayable for increase/decrease in revenue or cost to the seller if itis in excess of an amount equivalent to 1% of the Letter of Credit GMR WARORA ENERGY LTD. v. CENTRAL ELECTRICITYREGULATORY COMMISSION (CERC) [B. R. GAVAI, J.]

in aggregate for a contract year. What is clear, therefore, from areading of Article 13.2, is that restitutionary principles apply incase a certain threshold limit is crossed in both sub-clauses (a)and (b). There is no dispute that the present case is covered bysub-clause (b) and that the aforesaid threshold has been crossed.The mechanism for claiming a change in law is then set out byArticle 13.3 of the PPA.”

118. It could thus be seen that this Court has held that insofar asthe “operation period” is concerned, compensation for any increase/decrease in revenues or costs to the seller is to be determined and effectedfrom such date as is decided by the appropriate Commission. It hasfurther been held that the compensation is only payable for increase/decrease in revenue or cost to the seller if it is in excess of an amountequivalent to 1% of the Letter of Credit in aggregate for a contract year.It has been held that restitutionary principles apply in case a certainthreshold limit is crossed. It has been held that an in-built restitutionaryprinciple compensates the party affected by such ‘Change in Law’ andthe affected party must be restored through monthly tariff payment tothe same economic position as if such ‘Change in Law’ had not occurred.

119. From the perusal of paragraph 9, it would also be clear thatin case the ‘Change in Law’ happens to be by way of adoption,promulgation, amendment, re-enactment or repeal of the law or ‘Changein Law’, it has to be effected from the date on which such changeoccurs.

120. In this respect, it will also be apposite to refer to the followingobservations of this Court in the case of Maharashtra State ElectricityDistribution Company Limited v. Maharashtra Electricity RegulatoryCommission and Others[8]:

“173. The APTEL correctly found that: (Maharashtra PradeshElectricity Regulatory Commission case [Maharashtra StateElectricity Distribution Co. Ltd. v. Maharashtra PradeshElectricity Regulatory Commission, 2021 SCC OnLine APTEL13] , SCC OnLine APTEL para 13)

“13. … On the contrary, there is a conscious exclusionregarding any suo motu change in the rate to be appliedwhile calculating LPS, it being incorrect to argue on the 8 (2022) 4 SCC 657

AB

C

D

E

F

G

H

A

B

C

D

E

F

G

H

assumption that the contract permits automatic change insystem.”

(emphasis supplied)

174. This Court is unable to accept Mr Singh’s submission thatthe conclusion of APTEL that LPS is not tariff is erroneous. Themeaning of the expression tariff has to be considered, and hasrightly been considered by APTEL in the context of the relevantprovision of the power purchase agreements. The dictionarymeaning of tariff may be charge. However, in Article 13 of theStage 1 and Article 10 of the Stage 2 power purchase agreements,tariff means monthly tariff and tariff adjustment consequential tochange in law, is of monthly tariff in respect of supply of electricity.

175. As argued by the respondent power generating companiesappearing through Mr Rohatgi, Mr Singhvi, Mr Mukherjee andMs Anand respectively, LPS is only payable when payment againstmonthly bills is delayed and not otherwise.

176. The object of LPS is to enforce and/or encourage timelypayment of charges by the procurer i.e. the appellant. In otherwords, LPS dissuades the procurer from delaying payment ofcharges. The rate of LPS has no bearing or impact on tariff.Changes in the basis of the rates of LPS do not affect the rate atwhich power was agreed to be sold and purchased under thepower purchase agreements. The principle of restitution underthe change in law provisions of the power purchase agreementsare attracted in respect of tariff.

177. LPS cannot be equated with carrying cost or actual costincurred for the supply of power. The appellant has a contractualobligation to make timely payment of the invoices raised by thepower generating companies, subject, of course, to scrutiny andverification of the same. Mr Mukul Rohatgi has a point that if thefunding cost was so much lesser than the rate of LPS, as contendedby the appellant, the appellant could have raised funds at a lowerrate of interest, made timely payment of the invoices raised bythe power generating companies, and avoided LPS.

178. The proposition that courts cannot rewrite a contract mutuallyexecuted between the parties, is well settled. The Court cannot,through its interpretative process, rewrite or create a new contract between the parties. The Court has to simply apply the terms andconditions of the agreement as agreed between the parties, asobserved by this Court in Shree Ambica Medical Stores v. SuratPeople’s Coop. Bank [Shree Ambica Medical Stores v. SuratPeople’s Coop. Bank Ltd., (2020) 13 SCC 564, para 20] , citedby Ms Divya Anand. This appeal is an attempt to renegotiate theterms of the PPA, as argued by Ms Divya Anand as also othercounsel. It is well settled that courts cannot substitute their ownview of the presumed understanding of commercial terms by theparties, if the terms are explicitly expressed. The explicit terms ofa contract are always the final word with regard to the intentionof the parties, as held by this Court in Nabha PowerLtd. v. Punjab SPCL [Nabha Power Ltd. v. Punjab SPCL,(2018) 11 SCC 508, paras 45 and 72 : (2018) 5 SCC (Civ) 1],cited by Ms Anand.”

121. This Court has clearly held that the DISCOMS have acontractual obligation to make timely payment of the invoices raised bythe power generating companies, subject to scrutiny and verification ofthe same. This Court has rejected the contention that the funding costwas much lesser than the rate of LPS. This Court has reiterated theproposition that the courts cannot rewrite a contract which is executedbetween the parties. This Court has emphasized that it cannot substituteits own view of the presumed understanding of commercial terms by theparties, if the terms are explicitly expressed. It has been held that theexplicit terms of a contract are always the final word with regard to theintention of the parties.

122. As already discussed hereinabove, Article 11.8 of the PPAentitles either party to raise a supplementary bill on the other party onaccount of ‘Change in Law’ as provided in Article 13 and such bills arerequired to be paid by the either party. Article 11.8.3 of the PPAspecifically provides that in the event of delay in payment of asupplementary bill by either party beyond one month from the date ofbilling, a late payment surcharge shall be payable at the same termsapplicable to the monthly bill in Article 11.3.4. Article 11.3.4 of the PPAspecifically provides a late payment surcharge to be paid by the procurerto the seller at the rate of 2% in excess of the applicable SBAR perannum on the amount of outstanding payment calculated on day to daybasis (and compounded with monthly rest), for each day of the delay.

AB

C

D

E

F

G

H

A123. Recently, this Court, in the case of Uttar Haryana BijliVitran Nigam Limited and Another v. Adani Power (Mundra)Limited and Another[9], had an occasion to consider the similar issue.The Court observed thus:

“20. It is clear that the restitutionary principles encapsulated inBArticle 13.2 would take effect for computing the impact of changein law. We see no reason to interfere with the impugned judgment[Adani Power (Mundra) Ltd. v. CERC, 2021 SCC OnLineAPTEL 67] , wherein it has been held by the Appellate Tribunalthat Respondent 1 Adani Power had started claiming change inlaw event compensation in respect of installation of FGD unitCalong with carrying cost, right from the year 2012 and that it hasapproached several fora to get this claim settled. Respondent 1Adani Power finally succeeded in getting compensation towardsFGD unit only on 28-3-2018, but the carrying cost claim was denied.The relief relating to carrying cost was granted to Respondent 1DAdani Power by the Appellate Tribunal vide order dated 13-4-2018 [Adani Power Ltd. v. CERC, 2018 SCC OnLine APTEL 5]which was duly tested by this Court and upheld on 25-2-2019[Uttar Haryana Bijli Vitran Nigam Ltd. v. Adani Power Ltd.,(2019) 5 SCC 325 : (2019) 2 SCC (Civ) 657] . Once carrying costhas been granted in favour of Respondent 1 Adani Power, it cannotEbe urged by the appellants that interest on carrying cost should becalculated on simple interest basis instead of compound interestbasis. Grant of compound interest on carrying cost and that toofrom the date of the occurrence of the change in law event isbased on sound logic. The idea behind granting interest on carryingFcost is not far to see, it is aimed at restituting a party that is adverselyaffected by a change in law event and restore it to its originaleconomic position as if such a change in law event had not takenplace.

xxx xxx xxx

G23. We are not persuaded by the submission made on behalf ofthe appellants that since no fault is attributable to them for thedelay caused in determination of the amount, they cannot besaddled with the liability to pay interest on carrying cost; nor isthere any substance in the argument sought to be advanced that H9 (2023) 2 SCC 624

there is no provision in the PPAs for payment of compound interestfrom the date when the change in law event had occurred.

24. The entire concept of restitutionary principles engrained inArticle 13 of the PPAs has to be read in the correct perspective.The said principle that governs compensating a party for the timevalue for money, is the very same principle that would be invokedand applied for grant of interest on carrying cost on account of achange in law event. Therefore, reliance on Article 11.3.4 readwith Article 11.8.3 on the part of the appellants cannot take theircase further. Nor does the decision in Priya Vart case [PriyaVart v. Union of India, (1995) 5 SCC 437] have any applicationto the facts of the present case as the said case relates to paymentof compensation under the Land Acquisition Act and the interestthat would be payable in case of delayed payment ofcompensation.”

124. It is thus clear that this Court has reiterated that once carryingcost has been granted, it cannot be urged that interest on carrying costshould be calculated on simple interest basis instead of compound interestbasis. It has been held that grant of compound interest on carrying costand that too from the date of the occurrence of the ‘Change in Law’event is based on sound logic. It has been held that it is aimed at restitutinga party that is adversely affected by a ‘Change in Law’ event and restoreit to its original economic position as if such a ‘Change in Law’ eventhad not taken place.

125. The argument that there is no provision in the PPAs forpayment of compound interest from the date when the ‘Change in Law’event had occurred, has been specifically rejected by this Court.

126. In view of this consistent position of law and application ofrestitutionary principles and privityof contractual obligations between theparties as contained in the PPAs, we do not find that the view taken bythe learned APTEL with regard to carrying cost warrants interference.

Concurrent Finding of Fact

127. Apart from the aforesaid issues, there is one another commonthread in all these appeals. Many of these appeals arise out of concurrentfindings recorded by the Central/State Electricity Regulatory Commissionsand the learned APTEL.

ABC

D

E

F

G

H

A

B

C

D

E

F

G

H

128. This Court, in the case of MSEDCL v. APML & Ors. (supra),after considering the statutory provisions in the Electricity Act, 2003,held that the CERC, SERCs and the learned APTEL are bodies consistingof experts in the field.

129. This Court, in the said case, observed thus:

“120. It could thus be seen that two expert bodies i.e. the CERCand the learned APTEL have concurrently held, after examiningthe material on record, that the factors of SHR and GCV shouldbe considered as per the Regulations or actuals, whichever islower. The CERC as well as the State Regulatory bodies, afterextensive consultation with the stakeholders, had specified theSHR norms in respective Tariff Regulations. In addition, insofaras GCV is concerned, the CEA has opined that the margin of 85-100 kcal/kg for a non-pit head station may be considered as a lossof GCV measured at wagon top till the point of firing of coal inboiler.

121. In this respect, we may refer to the following observationsof this Court in the case of Reliance InfrastructureLimited v. State of Maharashtra [(2019) 3 SCC 352].

“38. MERC is an expert body which is entrusted with theduty and function to frame regulations, including the terms andconditions for the determination of tariff. The Court, whileexercising its power of judicial review, can step in where a caseof manifest unreasonableness or arbitrariness is made out. Similarly,where the delegate of the legislature has failed to follow statutoryprocedures or to take into account factors which it is mandatedby the statute to consider or has founded its determination of tariffson extraneous considerations, the Court in the exercise of its powerof judicial review will ensure that the statute is not breached.However, it is no part of the function of the Court to substitute itsown determination for a determination which was made by anexpert body after due consideration of material circumstances.

39. In Assn. of Industrial Electricity Users v. State ofA.P. [Assn. of Industrial Electricity Users v. State of A.P., (2002)3 SCC 711] a three-Judge Bench of this Court dealt with thefixation of tariffs and held thus : (SCC p. 717, para 11)

GMR WARORA ENERGY LTD. v. CENTRAL ELECTRICITYREGULATORY COMMISSION (CERC) [B. R. GAVAI, J.]

“11. We also agree with the High Court [S. BharatKumar v. State of A.P., 2000 SCC OnLine AP 565 : (2000) 6ALD 217] that the judicial review in a matter with regard tofixation of tariff has not to be as that of an appellate authorityin exercise of its jurisdiction under Article 226 ofthe Constitution. All that the High Court has to be satisfiedwith is that the Commission has followed the proper procedureand unless it can be demonstrated that its decision is on theface of it arbitrary or illegal or contrary to the Act, the courtwill not interfere. Fixing a tariff and providing for cross-subsidyis essentially a matter of policy and normally a court wouldrefrain from interfering with a policy decision unless the powerexercised is arbitrary or ex facie bad in law.”

xxx xxx xxx

xxx xxx xxx

123. Recently, the Constitution Bench of this Court in the caseof Vivek Narayan Sharma v. Union of India [2023 SCC OnLineSC 1] has held that the Courts should be slow in interfering withthe decisions taken by the experts in the field and unless it isfound that the expert bodies have failed to take into considerationthe mandatory statutory provisions or the decisions taken are basedon extraneous considerations or they are ex facie arbitrary andillegal, it will not be appropriate for this Court to substitute itsviews with that of the expert bodies.”

130. As is indicated in the aforesaid judgments, this Court shouldbe slow in interfering with the concurrent findings of fact unless theyare found to be perverse, arbitrary and either in ignorance of or contraryto the statutory provisions.

V. CONCLUSION

131. In the light of our aforesaid findings, we will now considereach of the appeals independently.

-Civil Appeal No. 11095 of 2018 and Civil Appeal Nos. 1191011911 of 2018

132. In these batch of appeals, insofar as the appeal of DNH-DISCOM is concerned, they are aggrieved by the order of the learnedAPTEL allowing Busy Season Surcharge and Development Surcharge,MoEF Notification on coal quality and Change in NCDP. They are also AB

C

D

E

F

G

H

Aaggrieved by the finding of the learned APTEL with regard to carryingcost.

133. Insofar as the compensation on the ground of Change inNCDP is concerned, as already discussed, the same is squarely coveredby the judgment of this Court in the case of MSEDCL v. APML & Ors.B(supra)

134. Insofar as the Busy Season Surcharge and DevelopmentSurcharge are concerned, they are issued under the Circulars/Notificationsof Indian Railways. The notification on coal quality is issued by MoEF.All these are the instrumentalities of the State, and these would, therefore,Camount to ‘Change in Law’.

135. Insofar as rest of the claims, which are concurrently allowedand disallowed by both the CERC and the learned APTEL, are concerned,in view of the judgments of this Court on this issue, as stated above, wedo not find any reason to interfere with the same, not noticing anyperversity, arbitrariness and/or any contravention of the statutoryDprovisions. The appeals of both the Generator and the DNH-DISCOMare, therefore, liable to be dismissed.

-Civil Appeal Nos.46284629 of 2021

136. The learned APTEL allowed the claim of the Generator onlyon the ground of Busy Season Surcharge and Development SurchargeEon transportation of coal, and the Carrying Cost.

137. In view of our finding on the issues as above, no error can befound with the finding of the learned APTEL in that regard. We find nomerit in the appeals. The appeals are, accordingly, liable to be dismissed.

-FCivil Appeal Nos. 1205512056 of 2018

138. The issue of Busy Season Surcharge, DevelopmentSurcharge and Port Congestion Surcharge have already been consideredby us herein above. All these are charges under the Notifications issuedby the Indian Railways, through the Railway Board. As such, no errorcan be found with the finding of the learned APTEL that they wouldGamount to ‘Change in Law’ events.

139. Insofar as levy of ‘Forest Tax’ is concerned, the same islevied by the State Government under the statutory provisions.

140. The issue with regard to ‘Carrying Cost’ has also beendiscussed by us herein above.H

141. In that view of the matter, we do not find any reason tointerfere with the order of the learned APTEL. The appeals are,accordingly, liable to be dismissed.

142. In addition to the ‘Change in Law’ benefits granted by theState Commission, ‘Coal Terminal Surcharge’, ‘Chhattisgarh ParyavaranUpkar’ and ‘Chhattisgarh Vikas Upkar’ were also considered to be‘Change in Law’ events by the learned APTEL.

143. The ‘Coal Terminal Surcharge’ was levied by the IndianRailways subsequent to the cut-off date. Similarly, the Government ofChhattisgarh, under Section 8 of the Chhattisgarh Adhosanrachna VikasEvam Paryavaran Upkar Adhiniyam, 2005, vide Notification dated 16[th]June 2015, which is admittedly after the cut-off date, introduced‘Chhattisgarh Paryavaran Upkar’ and ‘Chhattisgarh Vikas Upkar’. Eventhe Change in Swacch Bharat Cess at the rate of 0.5% on Service Taxfor Operation Period and Change in Krishi Kalyan Cess at the rate of5% on Service Tax for Operation Period, which had been grantedconcurrently by the State Commission and the learned APTEL, werenotified by the Union of India after the cut-off date.

144. It could thus be seen that all these additional taxes or cesseswere introduced by the instrumentalities of the Government of India orby the Government of Chhattisgarh. The same are issued under theprovisions of the concerned statutes, rules, notifications, orders, etc. It isthus clear that they would amount to ‘Law’ within the meaning of theterm ‘Law’ as defined in the PPAs. As such, no error can be found withthe order of the learned APTEL.

145. We, therefore, find no merit in the appeals. The appeals are,accordingly, liable to be dismissed.

Civil Appeal No. 3123 of 2019 and Civil Appeal No.5372 of2019

146. In the present matter, in addition to the claims granted by theCERC, the learned APTEL also granted the following claims:

(i) Change in NCDP (cancellation of Captive Block vis-à-vistapering linkage),

(ii) Busy Season Surcharge and Developmental Surcharge, A

B

C

D

E

F

G

H

A(iii)Carrying Cost; and

(iv) Add on Premium Price.

147. Insofar as the issue with regard to change in NCDP isconcerned, this Court in the case of Energy Watchdog (supra)so alsoin Adani Rajasthan case (supra) and recently in MSEDCL v. APMLB& Ors.(Supra)has held that the change in NCDP would amount to‘Change in Law’. As such, the finding in that regard warrants nointerference.

148. Insofar as Busy Season Surcharge and DevelopmentSurcharge are concerned, we have already discussed hereinabove as toChow it would amount to ‘Change in Law’.

149. Insofar as ‘Add on premium price’ is concerned, undisputedly,‘add on premium’ was required to be paid on account of cancellation ofcaptive coal blocks and inordinate delay on account of Go-No-Go policy.As such, it cannot be said that the reasoning adopted by the learnedDAPTEL is perverse and arbitrary.

150. Insofar as the issue with regard to ‘carrying cost’ isconcerned, we have already discussed the issue at length in the foregoingparagraphs. As such, no interference is warranted on that finding also.

151. Insofar as other claims which were concurrently allowedEand disallowed by the CERC and the learned APTEL are concerned, inview of the concurrent findings, we are not inclined to interfere with thesame.

152. The appeals of both DISCOMS as well as GeneratingCompanies are, therefore, liable to be dismissed.

FCivil Appeal No. 6641 of 2019

153. This appeal is filed by GKEL, being aggrieved by theconcurrent denial of benefits on certain components.

154. As already discussed herein above by us, in view of theconcurrent findings recorded by the CERC as well as the learned APTELGfor disallowing the claims, we are not inclined to interfere with the same.The appeal is, accordingly, liable to be dismissed.

155. In the present case, the benefit is granted on followinggrounds:H

(i) Shortfall in domestic coal on account of Change in NCDP;A

(ii) Add on premium on account of existing tapering linkage bythree years;

(iii) Busy Season Surcharge

156. The first issue sands covered by the judgments of this Courtin the cases of Energy Watchdog (supra), Adani Rajasthan case(supra) and MSEDCL v. APML & Ors.(supra) and as such, nointerference is warranted.

B

157. Insofar as Busy Season Surcharge is concerned, apart fromthere being concurrent findings of facts, we have already given reasonsherein above as to how the same would amount to ‘Change in Law’.

C

158. We do not find any merit in the appeals. The same are,accordingly, liable to be dismissed.

D

159. The CERC has granted benefit on the following grounds.

i.Shortfall in linkage coal on account of NCDP 2013 andSHAKTI Policy;

ii.Change in coal quality pursuant to amendment of theEnvironment (Protection) Rules, 1986;E

iii.Increase in Busy Season Surcharge and DevelopmentSurcharge on transportation of coal by Indian Railways;and

iv.Carrying cost on allowed ‘Change in Law’ claims.

F

160. The view taken by the CERC has been affirmed by thelearned APTEL. As such, the appeal arises out of the concurrent findingsof fact.

161. Insofar as first issue with regard to benefit of ‘Change inLaw’ event on account of NCDP 2013 is concerned, the same is squarelycovered by the judgments of this Court in the cases of Energy Watchdog(supra), Adani Rajasthan case (supra) and MSEDCL v. APML &Ors.(supra).

G

162. Insofar as the benefit of ‘Change in Law’ on account ofSHAKTI Policy is concerned, it is covered by the judgment and order of H

Athe even date of this Court in the case of Civil Appeal No. 5684 of2021[10] and in the case of Civil Appeal Nos. 677-678 of 2021[11].

163. The other components, i.e. change in coal quality pursuant toamendment of the Environment (Protection) Rules, 1986, and increasein Busy Season Surcharge and Development Surcharge on transportationBof coal by Indian Railways, have already been considered by us hereinto amount to ‘Change in Law’ events. We have also considered theissue regarding ‘Carrying Cost’. As such, no interference is warrantedin the concurrent findings by the learned APTEL, especially in view ofthe judgments of this Court. The appeal is, accordingly, liable to bedismissed.C

Civil Appeal No. 5005 of 2022 and Civil Appeal No. 4089 of2022

164. The appeals are filed being aggrieved by the order of thelearned APTEL granting compensation on account of ‘EFC’ and ‘carryingcost’.D165. Undisputedly, the EFC was imposed by CIL vide its Circulardated 19[th] December 2017.

166. As discussed herein above, it is not in dispute that EFC hasbeen paid by the Generators while paying the base price, other chargesEand statutory charges at the time of delivery of coal. As such, nointerference is warranted with the said finding.

167. Insofar as ‘carrying cost’ is concerned, we have elaboratelydiscussed the said issue herein above. As such, no interference, therefore,is warranted on the said issue also.

F168. We do not find any merit in the appeals. The same are,accordingly, liable to be dismissed.

VI. EPILOGUE

169. Before we part with the judgment, we must note that weGhave come across several appeals in the present batch which arise outof concurrent findings of fact arrived at by two statutory bodies havingexpertise in the field. We have also found that in some of the matters, 10 Uttar Haryana Bijli Vitran Nigam Limited and another v. Adana Power (Mundra)Limited and another11 Maharashtra State Electricity Distribution Company Limited v. Adani PowerHMaharashtra Limited and another

the appeals have been filed only for the sake of filing the same. We alsofind that several rounds of litigation have taken place in some of theproceedings.

170. Recently, this Court, in the case of MSEDCL v. APML &Ors.(supra), has noted that one of the reasons for enacting the ElectricityAct, 2003 was that the performance of the Electricity Boards haddeteriorated on account of various factors. The Statement of Objectsand Reasons of the Electricity Act, 2003 would reveal that one of themain features for enactment of the Electricity Act was delicensing ofgeneration and freely permitting captive generation. In the said judgment,we have recorded the statement of the learned Attorney General madein the case of Energy Watchdog (supra) that the electricity sector,having been privatized, had largely fulfilled the object sought to be achievedby the Electricity Act. He had stated that delicensed electricity generationresulted in production of far greater electricity than was earlier produced.The learned Attorney General had further urged the Court not to disturbthe delicate balance sought to be achieved by the Electricity Act, i.e.that the producers or generators of electricity, in order that they set uppower plants, be entitled to a reasonable margin of profit and a reasonablereturn on their capital, so that they are induced to set up more and morepower plants. At the same time, the interests of the end consumers alsoneed to be protected.

171. However, we find that, in spite of this position, litigationsafter litigations are pursued. Though the concurrent orders of statutoryexpert bodies cannot be said to be perverse, arbitrary or in violation ofthe statutory provisions, the same are challenged.

172. It will be relevant to note the following observations of theCERC in its judgment and order dated 16[th] May 2019, passed in PetitionNo. 8/MP/2014, which falls for consideration in Civil Appeal No. 39 of2021 before this Court:

“(d) Approaching the Commission every year for allowance ofcompensation for such Change in Law is a time-consumingprocess. Accordingly, the mechanism prescribed above may beadopted for payment of compensation due to Change in Lawevents allowed as per PPA for the subsequent period as well.”

173. It will also be relevant to refer to some of the observations ofthe learned APTEL in its order dated 21[st] December 2021, which falls AB

C

D

E

F

G

H

Afor consideration in Civil Appeal No.2908 of 2022 before this Court,which read thus:

“115. The Standing Committee of Parliament in its Report (dated07.03.2018) on Energy titled ‘Stressed/ Non-PerformingAssets in Electricity Sector’ has recognized the financialstress faced by generating companies on account of delayin recovery of Change in Law compensations and hasrecommended thus:

B

“The Committee, therefore, recommend thatappropriate steps should be taken to ensure thatCthere should be consistency and uniformity withregard to orders emanating from the status ofchange in law. Provisions should also be made forcertain percentage of payments of regulatory duesto be paid by Discoms in case the orders ofregulators are being taken to APTEL/ higherDjudiciary for their consideration and decision”

116. The Report lays stress on the obligation of the distributioncompanies to pay the approved Change in Lawcompensation even while Regulatory Commission’s ordersare challenged. The Policy directive dated 27.08.2018issued in terms of Section 107 of the Electricity Act,2003 by the Ministry of Power (MoP) to the CERCemphasized on the need to ensure expeditious recoveryof Change in Law compensation. The desirability of thiswas recognized by this tribunal in its judgment dated14.09.2019 in Jaipur Vidyut Vitran Nigam Limited vs.RERC & Ors, 2019 SCC Online APTEL 98. It is againstsuch backdrop that Electricity (Timely Recovery of Costsdue to Change in Law) Rules, 2021, notified by MoP on22.10.2021, providing for timely recovery ofcompensation on account of occurrence of Change inLaw events have been framed. The MoP, vide notificationdated 09.11.2021, put in public domain the policy directiveon “Automatic pass through of the fuel and powerprocurement cost in tariff for ensuring the viability ofthe power” recognizing that in order to ensure that thepower sector does not face any constraints in maintaining E

F

G

H

assured power supply to meet the demand, all thestakeholders in the value chain of power sector must ensurethat there is timely recovery of cost. This involves the costpass through by the generating companies to the distributioncompanies.

117. In sharp contrast, it is seen from the factual narrative ofthe events leading to the appeal at hand that the appellants(Haryana Utilities) have been adopting dilatory tactics whichnot only defeats the public policy but also has the undesirablefall-out of adding to the burden of the end-consumers theyprofess to serve on account of increasing Carrying Cost.

118. Concededly, in compliance with the Taxes and Duties Orderdated 06.02.2017, the appellants paid to the generator thetaxes and duties for certain period but, thereafter, unilaterallywithheld such claims, raising issues (found merit-less)regarding IPT of coal for first time in January 2018. It isafter the impugned order was passed that the appellantsare stated to have started complying, to an extent, by makingpayments. It is the case of the first respondent that theappellants have withheld past payments including towardstaxes and duties its entitlement to recover correspondingLate Payment Surchage (“LPS”) being over and above thesame to be computed after discharge of the former liability.We agree that such withholding is in violation of Articles11.3.2 and 11.6.9 of the PPAs (quoted earlier) whichcast a specific mandate on the procurer (HaryanaUtilities) to honor the invoices raised, irrespective ofdispute, and impose a specific bar against unilateraldeductions/setting off.

119. We find the dilatory conduct of the Haryana Utilities, todelay the implementation of the binding orders concerningcompensation on account of coal shortfall and correspondingtaxes and duties, detrimental to the interest of endconsumers since it burdens the consumers with incrementalLPS for delay in making payments to the generator. Thiscannot be countenanced, given the earlier dispensation onthe subject by the statutory regulator and appellate forum(s),since it smacks of approach that is designed to frustrate A

B

C

D

EF

G

H

A

B

C

D

EF

G

H

the legislative command, and extant State policy, as indeedconstitutes abject indiscipline infringing the rule of law.Borrowing THE WORDS OF Hon’ble Supreme Court inSEBI vs. Sahara India Real Estate Corpn. Ltd., (2014) 5SCC 429 “non-compliance with the orders passed …shakes the very foundation of our judicial system andundermines the rule of law” which this tribunal is alsoduty-bound to “honour and protect”, so essential “tomaintain faith and confidence of the people of thiscountry in the judiciary”.”

A

B

[emphasis supplied]

C

174. It could thus be seen that even the Standing Committee ofParliament, in its report, has recommended that there should beconsistency and uniformity with regard to orders emanating from thestatus of ‘Change in Law’. It has also recommended that the provisionsshould also be made for certain percentage of payments of regulatoryDdues to be paid by DISCOMS in case the orders of regulators are beingtaken to learned APTEL/higher judiciary for their consideration anddecision. The learned APTEL has also referred to the Policy Directivedated 27[th] August 2018 issued in terms of Section 107 of the ElectricityAct, 2003 by the MoP to the CERC, where it emphasized the need toEensure expeditious recovery of ‘Change in Law’ compensation. Thelearned APTEL has also referred to the Electricity (Timely Recovery ofCosts due to Change in Law) Rules, 2021, notified by MoP on 22[nd]October 2021, which provide for timely recovery of compensation onaccount of occurrence of ‘Change in Law’ events. The learned APTELfound that the Haryana Utilities have been adopting dilatory tactics, whichFnot only defeat the public policy but also have the undesirable fallout ofadding to the burden of the end-consumers they profess to serve onaccount of increasing ‘Carrying Cost’. The learned APTEL further foundthat withholding of past payments, including towards taxes and duties bythe DISCOMS, is in violation of the provisions of the PPAs, which castsGa specific mandate on the procurer to honour the invoices raised,irrespective of dispute, and impose a specific bar against unilateraldeductions/setting off.

175. It is further to be noted that this Court, in the case of UttarHaryana Bijli Vitran Nigam Limited (UNHVNL) and another v.

H

Adani Power Limited and others[12], has specifically observed that the‘Change in Law’ events will have to accrue from the date on whichRules, Orders, Notifications are issued by the instrumentalities of theState. Even in spite of this finding, the DISCOMS are pursuing litigationsafter litigations.

176. We find that, when the PPA itself provides a mechanism forpayment of compensation on the ground of ‘Change in Law’, unwarrantedlitigation, which wastes the time of the Court as well as adds to theultimate cost of electricity consumed by the end consumer, ought to beavoided. Ultimately, the huge cost of litigation on the part of DISCOMSas well as the Generators adds to the cost of electricity that is suppliedto the end consumers.

177. We further find that non-quantification of the dues by theElectricity Regulatory Commissions and the untimely payment of thedues by the DISCOMS is also detrimental to the interests of the endconsumers. If timely payment is not made by DISCOMS, under theclauses in the PPA, they are required to pay late payment surcharges,which are much higher. Even in case of ‘Change in Law’ claims, thesame procedure is required to be followed.

178. Ultimately, these late payment surcharges are added to thecost of electricity supplied to the end consumers. It is, thus, the endconsumers who suffer by paying higher charges on account of theDISCOMS not making timely payment to the Generators.

179. It is further to be noted that the appeal to this Court underSection 125 of the Electricity Act, 2003 is only permissible on any of thegrounds as specified in Section 100 of the Code of Civil Procedure,1908. As such, the appeal to this Court would be permissible only onsubstantial questions of law. However, as already observed herein, evenin cases where well-reasoned concurrent orders are passed by theElectricity Regulatory Commissions and the learned APTEL, the sameare challenged by the DISCOMS as well as the Generators. On accountof pendency of litigation, which in some of the cases in this batch hasbeen more than 5 years, non-payment of dues would entail paying ofheavy carrying cost to the Generators by the DISCOMS, which, in turn,will be passed over to the end consumer. As a result, it will be the endconsumer who would be at sufferance. We are of the opinion that suchunnecessary and unwarranted litigation needs to be curbed.12 (2019) 5 SCC 325

A

BC

D

E

F

G

H

180. To a pointed query, the learned counsel for the DISCOMSfairly conceded the position that the prices at which the electricity ispurchased from the ‘Independent Power Producers’ is substantially lesserthan the power purchased from the ‘State Generating Companies’.

A

181. We, therefore, appeal to the Union of India through MinistryBof Power (“MoP” for short) to evolve a mechanism so as to ensuretimely payment by the DISCOMS to the Generating Companies, whichwould avoid huge carrying cost to be passed over to the end consumers.

182. The Union of India, through MoP, may also evolve amechanism to avoid unnecessary and unwarranted litigation, the cost ofCwhich is also passed on to the ultimate consumer.

183. Before we part with the judgment, we place on record ourappreciation for the valuable assistance rendered by Mr. Balbir Singh,learned Additional Solicitor General, Dr. A. M. Singhvi, Mr. V. Giri, Mr.M.G. Ramachandran, Mr. C.A. Sundaram, Mr. Maninder Singh, Mr.DSajan Poovayya and Mr. Niranjan Reddy, learned Senior Counsel, andMr. Vishrov Mukerjee, Ms. Poorva Saigal, Ms. Anushree Bardhan, andMs. Poonam Sengupta, learned counsel.

184. In view of the above, all the appeals are dismissed. No costs.

EDivya Pandey(Assisted by : Roopanshi Virang, LCRA)

Appeals dismissed.

F

G

H