JAIPUR VIDYUT VITARAN NIGAM LTD. & ORS. versus ADANI POWER RAJASTHAN LIMITED & ANR. on 31 August 2020

[2020] 12 S.C.R. 301

JAIPUR VIDYUT VITARAN NIGAM LTD. & ORS.

v.

ADANI POWER RAJASTHAN LIMITED & ANR.(Civil Appeal Nos. 8625-8626 of 2019)

AUGUST 31, 2020

[ARUN MISHRA, VINEET SARAN AND M. R. SHAH, JJ.]

Electricity Act, 2003 – s.63 – ‘Change in law’ compensation– Appellant is electricity Distribution Licensee in the State ofRajasthan – It entered into a Power Purchase Agreement (PPA) on28.1.2010 with Adani Power Rajasthan Limited (APRL), agenerating company in pursuance to a tariff-based competitive bidprocess in terms of s.63 of the Act – The terms of PPA contained atariff, which could be varied only as per the specific provisionscontained in the PPA, and not otherwise – The PPA postulateddomestic coal usage as the primary fuel – Meanwhile, the New CoalDistribution Policy, 2013 (NCDP of 2013), was notified on26.7.2013 by the Central Government – Claim of APRL for increasedtariff under the change in law provisions in the PPA – Tenability of– Held: The parties had agreed ad idem that bid was evaluated basedon domestic coal, and escalations were also based on domestic coal– It was binding on both the parties – The Policy having beenthereafter revised in terms of NCDP of 2013, thus assurance givenby the Government of India under the NCDP of 2007 was takenaway – The PPA was based on the domestic law and there was achange in domestic law – Submission that the bid and the PPA werebased on imported coal, cannot be accepted – When there was achange in policy with respect to obtaining coal itself, which wasagreed to in the PPA, the change in law would be applicable –Requirement to compensate due to change in law – The same isbased on the principle of restitution – APRL accordingly entitled toclaim compensation under the change in law as provided in Article10 of the PPA – Doctrines/ Principles – Principle of restitution.

Electricity Act – s.125 – Appeal under – Scope – Held: Scopeof appeal u/s.125 of the Electricity Act is akin to s.100 CPC –Concurrent findings based upon the facts cannot be disturbed inappeal – Appeal.

301

A

B

CDEF

G

H

APartly allowing the appeals, the Court

HELD:1.1. Considering the documents on record, it isapparent that APRL’s bid was premised only on domestic coal.It was evaluated as such, and the Power Purchase Agreement (PPA)also records the same. The parties agreed ad idem that bid wasBevaluated based on domestic coal, and escalations were also basedon domestic coal. Accordingly, the PPA was entered into, andprimary fuel in the PPA was mentioned to be domestic coal fromcaptive coal block/coal linkage and imported coal as a fallbacksupport arrangement. It was binding on both the parties. UnderArticle 1.1 of the PPA, the primary fuel was mentioned as domesticCcoal, as such the submission that the bid and the PPA were basedon imported coal, cannot be accepted. [Paras 39, 40][329-C-D,F-G; 330-A-B]

1.2. The PPA is final and binding on parties, and approvalof tariff by the Rajasthan Electricity Regulatory CommissionD(RERC) was based on domestic coal. Rajasthan Discoms(including the appellant) agreed to use domestic coal on accountof likely advantage of lower escalation in tariff on a bid based ondomestic coal than that of imported coal. The decision of the BidEvaluation Committee was found to be in their best interest.EThus, APRL bid was not based on imported coal, that would nothave been in favour of Rajasthan Discoms and would haveresulted in more escalations in the tariff. Thus, APRL could notbe denied the benefit of the very foundational basis on which theRERC approved its bid. APRL could not be made to suffer fromboth the ends. Various documents and the PPA make it clearFthat its bid was premised on domestic coal and approved tariffwas based on domestic coal, the order of RERC is final,conclusive, and binding on the parties; it has not been questionedand attained finality. No stand contrary to the same waspermissible to be taken by the Rajasthan Discoms. [Para 41][330-GB-E]

1.3. It is further apparent from reply dated 31.7.2013 filedby the Rajasthan Discoms before the RERC in which it was clearlyadmitted that non-availability of domestic coal from the CentralGovernment would put the case of APRL within the scope ofHchange in law. Rajasthan Discoms before the RERC admitted that the bid was based on domestic coal, non-availability of whichentitles APRL to claim compensation under the change in law asprovided in Article 10 of the PPA. [Para 42][330-F]

1.4. It is apparent that the concurrent findings recorded bythe RERC, as well as the Appellate Tribunal for Electricity(APTEL) do not suffer from any infirmity or perversity, and theyare binding. As the scope of appeal under Section 125 of theElectricity Act is akin to Section 100 of the CPC and the concurrentfindings based upon the facts cannot be disturbed in the appeal.[Para 45][331-B-C]

Energy Watchdog v. Central Electricity RegulatoryCommission and Ors. (2017) 14 SCC 80 : [2017] 3SCR 153 ; DSR Steel (Private) Ltd. v. State of Rajasthanand Ors. (2012) 6 SCC 782 : [2012] 5 SCR 583 ; TamilNadu Generation and Distribution Corporation Limitedv. PPN Power Generating Company Private Limited(2014) 11 SCC 53 : [2014] 4 SCR 667 and WardhaPower Company Limited v. Maharashtra State ElectricityDistribution Company Limited and Anr. (2016) 16 SCC541– relied on.

1.5. Also, once having admitted before the RERC at thetime of approval of tariff and evaluated the tariff of domestic coaland making admissions again on 31.7.2013 and 4.8.2017, it is notopen to reprobate as parties are not permitted to approbate andreprobate at different stages. The Fuel Supply Agreement (FSA)for imported coal was a standby arrangement, but the entire bid,tariff, and the agreement were based on domestic coal. Thus,the consequences of non-availability due to change in law couldnot be escaped. [Paras 46, 47][331-D-E; 331-G-H]

Suzuki Parasrampuria Suitings Private Limited v.Official Liquidator of Mahendra Petrochemicals Limited(in Liquidation) and Ors. (2018) 10 SCC 707 : [2018]12 SCR 906 and R.N. Gosain v. Yashpal Dhir, (1992) 4SCC 683 : [1992] 2 Suppl. SCR 257 – relied on.

A

B

C

D

E

F

G

H

A

A1.6. Apart from that, it is found from the order of the APTEL,that change in law provision would be limited to a shortfall in thesupply of domestic linkage coal. It was clarified in the order thatAPRL would be entitled to relief under the change in law provisionto the extent of shortage in supply in domestic linkage coal. Thefindings of the APTEL are reasonable, proper, and unexceptional.B[Paras 48, 49][332-B-C; 333-D]

2.1. Para 3.2 of the Statutory Guidelines of 2005 issuedunder Section 63 of the Electricity Act provided that in case ofdomestic coal, the bidder shall have made firm arrangements forfuel tie-up either by way of coal block allocation or fuel linkage.CThere is no doubt about it that the Government of Rajasthanentered into an MoU with APRL in 2008 to ensure supply ofdomestic coal and it had undertaken to facilitate theimplementation of the Kawai Project for getting the coal blockfrom the Central Government or coal from any other source forDthe project. Once the Government of Rajasthan entered intoMoU dated 20.3.2008, containing Article 2.2, it was incumbentupon the State of Rajasthan to provide coal from any other sourcefor the project, in case the Central Government could not allotcoal linkage/coal block. The Central Government had evenwritten to the Government of Rajasthan to provide coal to APRLEfrom the coal mine, but due to paucity, it could not be supplied toAPRL. Thus, there was a failure on the part of the Governmentof Rajasthan to provide coal from any other source. [Para 50][333-D-H]

2.2 It is apparent that 100 percent of the quantity as perFthe consumers’ normative requirement was to be made by CIL,obviously on the approval of the application by the StandingLinkage Committee. It was kept pending due to a shortage ofcoal supplies and was ultimately processed under the SHAKTIPolicy, and linkage for 100 percent was given from January 2018.GThus, earlier as the quantity of coal was not available, sufficientsupply could not be made. It is not a case where APRL wasadjudged ineligible, but prior commitments and the non-availability of coal came in the way of failure to obtain domesticcoal linkage under the NCDP of 2007, which itself was changedwith effect from 26.7.2013. [Para 51][334-G-H; 335-A]H

3.1. APRL’s claim is based on the date of change of law in2013. Admittedly, earlier NCDP of 2007 prevailed on theappointed date, i.e., 7 days before submission of the bid. ThePPA was based upon the domestic coal, and its availability wasbased upon NCDP of 2007. In NCDP dated 26.7.2013, the NCDPof 2007 was modified to the effect that power projects would onlyget a certain percentage of what was earlier allowable. [Paras 52,53][335-B; 335-E-F]

3.2. It is apparent from the decision dated 31.5.2013 of theStanding Linkage Committee (Long-Term) that the applicationof APRL was kept in abeyance. It applied for coal linkage on2.7.2009 on the basis of NCDP of 2007. The bid cut-off date was30.7.2009, 7 days prior to the bid deadline, the NCDP of 2007was applicable. A decision was taken by the Standing LinkageCommittee on 14.2.2012 read with the decision dated 31.5.2013indicating a shortage in domestic coal and dependence onimported coal. For the shortage of coal, APRL could not havebeen made to suffer, on that it had no control. It was decided notto issue fresh LoAs, and all pending applications were kept inabeyance. The Cabinet Committee on Economic Affairs decidedon 21.6.2013 to reduce coal supply to 65 percent and 75 percentof ACQ for the remaining four years of the 12th Five Year Plan.It allowed passing through of higher cost of imported coal. TheMinistry of Coal was directed to suitably amend the NCDP. TheMinistry of Coal on 26.7.2013 amended the NCDP of 2007, andthe Ministry of Power issued a letter on 31.7.2013, which providedfor pass-through of additional cost incurred to meet the coalrequirements. The Cabinet Committee on Economic Affairs inits decision dated 21.6.2013, recognised coal supply, subject toavailability, to 4660 MW having no fuel linkage. The Kawai Projectwas included in the same. The Policy was revised, thus assurancegiven by the Government of India under the NCDP of 2007 wastaken away. The provision of 100 per cent supply was takenaway. [Para 54][335-F-H; 336-A-C]

3.3. The submission raised on behalf of appellant that thereis no question seeking benefit due to change in foreign law is AB

C

D

E

F

G

Abased on wrong factual premise. The relief was not claimed onthe basis of change in foreign law. The PPA was based on thedomestic law and there was a change in domestic law. Thus,consequences must follow. [Para 56][341-D-E]

3.4. The purpose of change in law is to restore throughBmonthly tariff payment to the extent contemplated that theaffected party is placed in the same economic position as if sucha change in law has not occurred. As monthly tariff was workedout on domestic law, the requirement is to compensate on thatbasis due to change in law. The same is based on the principle ofrestitution. When there was a change in policy with respect toCobtaining coal itself, which was agreed to in the PPA, the changein law would be applicable. [Paras 58, 59][341-G-H; 342-A, G]

4.1. The PPA under Article 1.1 and Schedule V provide fordomestic coal as primary fuel and imported coal as a fallbackarrangement. Whereas change in law was provided in Article 10.DArticle 10 of the PPA is clearly attracted that the change in lawwas in contemplation. Article 10 cannot be made redundant; theagreement is binding and must prevail. [Paras 62, 63][346-F-H;347-B-C]

4.2. The RERC and APTEL have given concurrent findingsEin favour of the respondent with regard to change in law, withwhich this Court also concurs. [Para 66][347-E-F]

5. The plea of change in law was initially raised by APRL inthe year 2013. A case was also filed by APRL in the year 2013itself raising its claim on such basis. However, the appellants-FRajasthan Discoms did not allow the claim regarding change inlaw, because of which APRL was deprived of raising the bills witheffect from the date of change in law in the year 2013. Liability ofthe Late Payment Surcharge which has been saddled upon theappellants is at the rate of 2% in excess of applicable SBAR perGannum, on the amount of outstanding payment, calculated on aday to day basis (and compounded with monthly rest) for eachday of the delay. Considering the totality of the facts of this caseand in order to do complete justice and to reduce the liability ofthe appellants-Rajasthan Discoms, payment of 2 per cent in excess H

of the applicable SBAR per annum with monthly rest would be onhigher side. It would be appropriate to direct the appellants-Rajasthan Discoms to pay interest/late payment surcharge as perapplicable SBAR for the relevant years, which should not exceed9 per cent per annum. It is also provided that instead of monthlyrest, the interest would be compounded per annum. It isaccordingly directed that the rate of interest/late paymentsurcharge would be at SBAR, not exceeding 9 per cent per annum,to be compounded annually, and the 2 per cent above the SBAR(as provided in Article 8.3.5 of PPA) would not be charged in thepresent case. [Paras 66, 67 and 68][349-A-E]

A

B

C

6. A submission was raised with respect to over-invoicing.It was submitted that 40 importers of coal are under investigationby the DRI concerning alleged over-invoicing. However, it wasalso conceded that there is no ultimate conclusion in theinvestigation reached so far. Until and unless there is a findingrecorded by the competent court as to invoicing, the submissioncannot be accepted. At this stage, it cannot be said that there isover-invoicing. [Para 69][349-E-G]

D

Case Law Reference

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 8625-8626 of 2019.

From the Judgment and Order dated 14.09.2019 of the AppellateGTribunal for Electricity, New Delhi in Appeal Nos. 202 and 305 of 2018.

With

Civil Appeal Nos. 3021, 3022-3023 of 2020.

H

AC. Aryama Sundaram, Basava Prabhu Patil, Dr. A.M. Singhvi,Arvind Datar, Sr. Advs., Prashant Bhushan, Pranav Sachdeva, JatinBhardwaj, Ms. Neha Rathi, Ms. Ranjitha Ramachandran, Nikunj Dayal,Shubham Arya, Geet Ahuja, Mahesh Agarwal, Amit Kapoor, Ms. PoonamVerma, Arshit Anand, M.S. Ananth, Ms. Sakshi Kapoor, Malav Deliwala,Azeem Samuel, E. C. Agrawala, Advs. for the appearing parties.B

A

The following Judgment of the Court was delivered :

JUDGMENT

1. The appellant herein Jaipur Vidyut Vitran Nigam Limited is theelectricity Distribution Licensee in the State of Rajasthan. It enteredCinto a Power Purchase Agreement (for short, ‘PPA’) on 28.1.2010 withAdani Power Rajasthan Limited (for short, ‘APRL’), a generatingcompany in pursuance to a tariff-based competitive bid process in termsof Section 63 of the Electricity Act, 2003 (for short, ‘the Electricity Act’).The terms of PPA contained a tariff, and that could be varied only as perDthe specific provisions contained in the PPA, not otherwise.

2. APRL made a claim for an increased tariff under the change inlaw provisions in the PPA (Article 10). On 23.10.2006, Rajasthan RajyaVidyut Utpadan Nigam Limited (for short, ‘RVUN’) conveyed to AdaniExports Limited its selection as a joint venture partner for the formationEof a Joint Venture Company. It was stated that business activities of theproposed Joint Venture Company shall be limited to mining and supply ofcoal from allotted captive coal block for the requirement of existing/newthermal power stations of RVUN and/or for new projects of the State.

3. On 2.8.2007, a Letter of Intent (for short, ‘LoI’) was issued byFRVUN in favour of Adani Enterprise Limited (for short, ‘AEL’) fordeveloping the coal block under a joint venture at Parsa East and KenteBasan, wherein it was provided that the coal can be utilised at thediscretion of the Government of Rajasthan for new upcoming projects inthe State under the joint venture or IPP.

4. On 18.10.2007, New Coal Distribution Policy (NCDP) wasGintroduced by the Ministry of Coal, assuring 100 per cent of domesticcoal to power plants that is 85 per cent of normative capacity.

5. On 20.3.2008, an MoU was entered into between theGovernment of Rajasthan and AEL to set up a coal-based Thermal Power H

Generation Project of 1200 MW ± 10 percent capacity near Kawai,District Baran, Rajasthan. The estimated cost of the project wasapproximately Rs.5,000 crores. It was provided that the State of Rajasthanwas to make the best efforts to facilitate getting the coal linkage fromthe Central Government or coal from any other source for the Project.

6. On 16.5.2008, APRL requested the Government of Rajasthanto allocate coal from Parsa East and Kente Basan coal block.

7. On 21.5.2008, it was conveyed to APRL that the State willmake the best efforts to facilitate for getting coal linkage from theGovernment of India. It was informed that it would not be possible tosupply coal from Parsa East and Kente Basan coal blocks as they barelymeet RVUN projects’ requirements. APRL repeated the request on28.5.2008, 9.6.2008, 11.6.2008, and 16.6.2008. On 29.8.2008, a requestwas made to the Government of Rajasthan to advise RVUN to enterinto an MoU and to apply to the Ministry of Coal for allocation of coalblocks to the Kawai Project under the Government Dispensation Scheme.

8. On 25.2.2009, a Request for Proposal (for short, ‘RFP’) wasissued by Rajasthan Rajya Vidyut Prasaran Nigam Limited (for short,‘RVPN’) for procurement of power for long-term through tariff-basedcompetitive bidding process under Case-1 bidding procedure for meetingthe baseload requirement of the procurers.

9. On 19.3.2009, a request was made by AEL to the Governmentof Rajasthan to extend the validity of the MoU for one year. On 2.4.2009,a Standard Bidding Document for Case-1 was notified by the Ministryof Power. On 22.6.2009, APRL made a request in terms of the MoU tothe Government of Rajasthan to allocate the surplus coal mine from theexisting coal blocks and for extension of MoU, which was to expire on20.3.2009. As an alternative, AEL was able to negotiate Indonesiancoal at a discounted price of USD 36 per MT. The Coal SupplyAgreement (for short, ‘CSA’) was signed for supplying standard coalfor the project from Indonesia. The said agreement was terminated on10.6.2010.

10. On 2.7.2009, APRL prayed to the Ministry of Coal for grantinglong-term coal linkage of ‘F’ grade coal from South Eastern CoalfieldsLimited for the Kawai Project for 7.082 MT per annum of coal. The A

BC

D

E

F

G

H

AGovernment of Rajasthan extended the validity of the MoU up to20.3.2010. RVUN was advised to apply for the allocation of coal blocksfor meeting coal requirements for its projects and the Kawai Projectunder the Government Dispensation Scheme. It may invite tenders formining and delivery of coal, as was done in Parsa East and Kente Basancoal blocks.B

11. According to the RFP, APRL submitted its bid on 6.8.2009. Itoffered a total contracted capacity of 1200 MW from the Kawai Project.The levelized tariff after negotiation was settled at Rs.3.238/KWh for25 years. The tariff in the bid was quoted based on domestic coal. Theimported coal was limited, being a temporary measure, as fallback supportCoption till the Government instrumentality resumed domestic coal supply.

12. On 12.8.2009, AEL requested to allot Kente (Extn.) coal blockfor meeting the coal requirement of the Kawai Project inter alia theinstalled capacities of the projects. As against the earlier commitmentof sale of 50 per cent of the power generated from the Kawai Project toDthe State of Rajasthan, AEL committed the entire power generated tothe State provided it succeeds in the bidding process.

13. A clarification was sought concerning the bid submitted byAPRL to evaluate its bid as to the fuel arrangement in the bid, bothdomestic coal and imported coal were indicated. APRL was asked toEclarify on which basis of fuel, the bid should be evaluated. APRL clarifiedon 12.9.2009, that its bid should be evaluated based on domestic coal tie-up. APRL undertook that the payment considering domestic coalescalations would be acceptable during the term of the PPA.

14. On 3.12.2009, APRL issued a communication to RVPN.FBecause of the support offered by the Government of Rajasthanregarding the development of the Kawai Project, the levelized tariff wasbeing reduced by 1 paisa to Rs.3.238 Kwh. On 17.12.2009, pursuant tothe bid submitted, an LoI was issued by RVPN to APRL. On 18.12.2009,an unconditional acceptance was communicated to RVPN.G15. On 28.1.2010, APRL executed the PPA with three procurers, G15. On 28.1.2010, APRL executed the PPA with three procurers,namely, Jaipur Vidyut Vitran Nigam Limited, Jodhpur Vidyut Vitran NigamLimited, and Ajmer Vidyut Vitran Nigam Limited, for the supply ofaggregate contracted capacity of 1200 MW. The PPA postulatesdomestic coal usage as the primary fuel, while imported coal may beused as a backup arrangement.H

16. On 15.2.2010, APRL conveyed to the CMD-RRVUNL forgetting the allocation of captive coal block for the supply of coal to theKawai Power Project and conveyed confirmation to accept washedcoal.

17. On 20.2.2010, AEL conveyed to the Government of Rajasthanthat it would supply 91 per cent power from the Kawai Project to theJaipur Vidyut Vitran Nigam Limited, Jodhpur Vidyut Vitran Nigam Limited,and Ajmer Vidyut Vitran Nigam Limited – Rajasthan Discoms, withwhom the PPA was entered into on 28.1.2010. A prayer was made toextend the validity of MoU for a further period of one year w.e.f.20.3.2010.

18. On 25.2.2010, RVPN filed a petition before the StateCommission on behalf of Rajasthan Discoms for approval of theCommission for the adoption of tariff quoted by APRL throughcompetitive bidding. The State Commission passed an order on 31.5.2010with respect to the adoption of a tariff for 1000 MW procurement andhad made specific observations.

19. On 24.3.2011, the Director General of Mineral and Coal issueda regulation specifying the formula for calculation of benchmark pricewith reference to the international market price of coal.

20. APRL wrote a letter to the Ministry of Power, Government ofIndia on 11.10.2011 for grant of coal linkage to it along with other 12[th]Five Year Plan Projects; however, it was delayed for more than a oneyear for various reasons, due to which conditions subsequent under thePPA could not be fulfilled, and lenders of money to the Kawai Projecthad started levying penal interest due to delay in coal linkage allocation.A request was made for grant of coal linkage for the Kawai Project. Itwas stated that CIL was directed to execute an FSA for the 11[th] FiveYear Plan Projects, did not address the problems that continue to affectthe 12[th] Five Year Plan Projects. In the light of the non-availability ofdomestic coal and the prohibitive cost of the alternate fuel, the KawaiProject became unviable for the tariff committed. Therefore, a requestwas made to grant coal linkage. The Ministry of Power, on 26.4.2012 inresponse to letter dated 17.2.2012 of the Government of Rajasthan,informed that the Kawai Project had been recommended for linkage asa 12[th] Five Year Plan Project. In the meantime, the Government of A

B

C

D

E

F

G

H

ARajasthan may consider revising the mining plan capacity of the captivecoal blocks allocated to them, namely Parsa East and Kante Basanupward to mitigate the demand of coal for power projects in Rajasthan.

21. On 21.6.2012, APRL informed the Rajasthan Discoms aboutthe uncertainties in the availability of coal supplies and the same beingBbeyond their control. Despite various efforts by the Government ofRajasthan, neither the coal block nor the coal linkage was allocated. Itwas also informed that following the regulatory change in Indonesia,which mandates the export of coal only at the notified price, w.e.f.11.9.2011, the cost of imported coal has risen too high to make the use ofimported coal prohibitive. In case an early arrangement of coal linkageCor allotment of captive coal was not made, the operation of theGovernment’s projects would be hampered. On 5.11.2012, theGovernment of Rajasthan informed that there was no surplus coal inParsa East and Kente Basan coal blocks, which could be allocated tothe Kawai Project. However, the Government of Rajasthan onD22.11.2012, wrote a letter to the Ministry of Power and Ministry of Coalinforming that Rajasthan Discoms have executed long-term PPA withAPRL. It was stated that in case long-term coal linkage was not provided,then the State would be deprived of 1200 MW power at competitiverates, and Rajasthan was already facing an acute shortage. On26.11.2012, another letter was written by the Government of RajasthanEfor allocating coal linkage to 12[th] Five Year Plan Projects.

22. As no coal linkage was granted, on 24.4.2013 AEL filed aPetition No.392 of 2013 before the State Commission claimedcompensatory tariffs for the higher cost of coal. Ultimately, the StandingLinkage Committee (Long-Term) of the Government of India held aFmeeting on 31.5.2013. On 21.6.2013, the Cabinet Committee of EconomicAffairs approved a mechanism for signing the Fuel Supply Agreement(for short, ‘FSA’) for 78000 MW. AEL was not part of the same. On17.7.2013, a Presidential Directive was issued by the Ministry of Coal tothe Coal India Limited (for short, ‘CIL’) to sign the FSAs for the capacityGmentioned above. The New Coal Distribution Policy, 2013 (NCDP of2013), was notified on 26.7.2013 by the Central Government for therevised arrangement for the supply of coal to identified thermal powerstations of 78000 MW. AEL was not one of the thermal power stationsincluded in the same.

H

H

23. The Ministry of Power issued a letter on 31.7.2013, in whichthe change in law was considered regarding a shortfall in domestic coalin the quantity indicated in the Letter of Assurance (for short, ‘LoA’) orFSA. The Revised Tariff Policy under the Electricity Act was issued on28.1.2016. AEL was given the coal supply to the fullest extent in 2018under the SHAKTI Policy. It entered into an FSA with NCL/SECL forprocurement of coal under the SHAKTI Policy.

24. The State Commission ultimately decided the Petition No.392of 2013, filed by AEL on 17.5.2018. AEL was held entitled to reliefunder the change in law on account of NCDP of 2013. The amount ofcompensation payable to AEL was not computed. Dissatisfied with theorder passed by the State Commission, Rajasthan Discoms filed an appealbefore the Appellate Tribunal for Electricity (for short, ‘the APTEL’).The APTEL vide judgment dated 14.9.2019, held that the bid of APRLwas based on domestic coal and accordingly covered under the Changein Law event in terms of the PPA and of the decision of this Court inEnergy Watchdog v. Central Electricity Regulatory Commission andOrs., (2017) 14 SCC 80. APRL was also held entitled for change in lawunder the Shakti Scheme as well as payment towards carrying cost. Afurther direction was issued to pay the amount of change in lawcompensation and Carrying Cost by duly verifying the relevant supportingdocuments for fuel cost and as per applicable Tariff Regulations foroperating parameters. Aggrieved thereby, appeals have been preferredby Rajasthan Discoms. Another appeal has been filed by All India PowerEngineers Federation (for short, ‘the Federation’).

25. Shri C. Aryama Sundaram, learned senior counsel urged thefollowing arguments:

(a) APRL cannot claim any compensation for the use of importedcoal for the supply of power either before January 2018 or after that asthe use of such imported coal was as per the bid submitted by APRLand was covered as a part of its quoted tariff.

(b) According to the bid documents submitted and the PPA enteredinto pursuant to it, demonstrate that APRL had duly stipulated and agreedfor the imported coal also as a fuel source and quoted the tariff-basedthereon.

A

B

C

D

E

F

G

H

A

A(c) Without prejudice to the aforesaid, there was no change inlaw as APRL could have claimed no compensation. Even as per its bestcase, APRL could not be entitled to relief in relation to 100 percent coalrequirement, but could only claim concerning the balance percentage,after considering the quantum under the FSA dated 25.6.2009 for importedcoal.B

(d) There is no computation, no determination of methodology orformula for the computation of the compensation; the same is requiredto be undertaken with verification of quantification of coal, parameters,computation of coal costs, etc. APRL cannot be permitted to unilaterallyraise the invoices and claim compensation.C

(e) The finding recorded by the APTEL that the State Commissionhad computed the amount, is factually incorrect.

(f) Any compensation paid to APRL would have to be recoveredfrom the consumers; therefore, it affects the public interest. TheDcomputation and determination of the compensatory tariff, in any event,would have to be done by the State Commission.

(g) The Generator cannot raise the invoice, and the liability tomake payment by the appellants does not crystallise. Therefore, thereis no question of liability of late payment surcharge for such a period. AtEbest, depending on the conduct of the Generator and in terms of restitutionprinciple, simple interest may be considered for the period prior todetermination by the State Commission. However, the application oflate payment surcharge cannot be applied when there is no delay ordefault in payment of bills.

F(h) APRL had admitted that two periods are separate until thedetermination of change in law, which is carrying cost, and thereafterraising of invoices, there may be a default by the procurer, which is latepayment surcharge. As the two periods are separate, there is no logic toapply the late payment surcharge, which is for the second period to thefirst one.G

26. Shri Prashant Bhushan, learned counsel appearing on behalfof Federation argued as under:

(a) the main question is whether the bid submitted by APRL waspremised on domestic coal or imported coal. He attracted our attention H

to the PPA, RFP, LoI, and other bid documents. The bid and PPA werebased on imported coal. APRL quantified as per RFP only on the basisof imported coal. It did not have any firm coal linkage or LoA or FSAfor the domestic coal.

(b) The MoU dated 20.3.2008, entered into between APRL andthe Government of Rajasthan, was of no avail. Only the CentralGovernment was the sole deciding authority as is clear from Article 2.2of the MoU. He attracted the attention of this Court to the RPF dated26.2.2009. MoU dated 20.3.2008, would not count as firm coalarrangement. APRL had entered into a CSA with its own companyAEL to qualify for the bid. Once it has qualified based on imported coal,it cannot take a contrary stand.

(c) A clarification was sought from APRL on 7.9.2009 on whichbasis of fuel, its bid was to be evaluated. In response to clarification, itwas submitted by APRL that bid should be evaluated on the basis ofdomestic coal tie-up, and an undertaking was given that the paymentconsidering ‘domestic coal escalation’ would be acceptable to it duringthe term of the PPA.

(d) On 17.12.2009, Rajasthan Discoms informed APRL that ratesmentioned at Annexure 1 (to provide 1200 MW power) and escalationsthereof on domestic coal is based on APRL’s commitment that the aboverates would be applicable even if coal requirement is met by way of abackup arrangement with imported coal. APRL gave an unconditionalacceptance on 18.12.2009.

(e) Reliance was placed on the order dated 31.5.2010, passed bythe Rajasthan Electricity Regulatory Commission (for short, ‘the RERC’).The APTEL failed to comprehensively consider the PPA and otherdocuments. The bid documents also formed part of the PPA enteredinto between the parties.

(f) The NCDP of 2007 did not create a vested right to get domesticcoal even for those who did not have the LoA/FSA or recommendationof the Standing Linkage Committee (Long-Term). Our attention hasbeen invited to Clauses 2.1 and 2.2 of the NCDP of 2007 and approvalof the Standing Linkage Committee (Long-Term). As APRL did nothave any coal linkage approval, it was not entitled to claim compensation A

BC

D

E

F

G

H

Aon the basis of change in law. The CIL couldn’t make the supply. Thegrant of linkage or LoA is not a ministerial act.

(g) The Statutory Guidelines of 2005 issued under Section 63 ofthe Electricity Act lay down that to participate in the competitive biddingfor a PPA, an entity has to show ready availability of fuel source for theBpower plant. In the case of domestic coal, the bidder shall have madefirm arrangements for fuel tie-up either by way of coal block allocationor fuel linkage. These Guidelines have been issued by the Governmentof India, which issued the NCDP of 2007. If the grant of LoA/FSA/linkage was to be considered automatic on entering into a PPA, thenthere was no need for having this criterion for eligibility. The decision inCEnergy Watchdog and the Policy have not been appreciated correctly.

(h) The SHAKTI Policy was notified on 22.5.2017. Those IPPs,which were having PPAs based on domestic coal, but were having noLoA or FSA for coal supply either under NCDP of 2007 or NCDP of2013, could now participate in the auction and get 100 per cent of theirDnormative requirement of coal supply. Under the SHAKTI Policy, APRLwas given coal supply to the full extent of the normative requirementsfor generating and supply of electricity to the Rajasthan Discoms withinfive years. The SHAKTI Allocation in the year 2018 does not changethe fact that APRL had considered imported coal as other coal for 5Eyears. The change in law, thus, could have been considered only after 5years. Therefore, the question of change in law did not arise as APRLwas given coal supply under the SHAKTI Policy within 5 years ofCommercial Operation Date (for short, ‘COD’).

(i) It was also submitted that APRL had done over-invoicing, andFconcerning that, the investigation is pending. A letter of rogatory hasbeen issued and, in that regard, S.L.P. (Crl.) No.10683 of 2019 is pendingin this Court, in which interim stay has been granted. Thus, the claim ofAPRL is not tenable. It was also urged that the Federation has locus tofile the appeal for quashing the order passed by the APTEL.

G27. On behalf of APRL, Dr. A.M. Singhvi and Shri Arvind Datar,learned senior counsel, raised the following arguments:

(a) (i) the bid by APRL was premised only on domestic coal.

H

(ii) The submission of the imported coal agreement submitted withthe bid was only to indicate that the bidder is eligible for the bid.

(iii) Non-availability of domestic coal is a change in law event.

(iv) The decision in Energy Watchdog squarely applies to thecase, in which it was held that changes in imported coal regime is not achange in law, changes in domestic coal regime is a change in law event.

(b) APRL is entitled to carrying cost from the date the change inlaw event came into force as held by this Court in Uttar Haryana BijliVitran Nigam Limited (UHBVNL) & Anr. v. Adani Power Limited &Ors., (2019) 5 SCC 325.

(c) The bid was premised only on domestic coal. The RFPprovides six scenarios for quoting tariffs, and the bidder can submit thebid under any one of the scenarios viz. (i) Captive Coal Block (ii) LinkageCoal (iii) Imported Coal (iv) Imported Gas (v) Domestic Gas and (vi)Hydro.

(d) APRL submitted its financial bid as per linkage coal format,i.e., domestic coal. The tariff was allowed to be quoted in linkage coalformat applicable to domestic coal. The Government of Rajasthan madeconsistent efforts by writing letters to various authorities of theGovernment of India to grant domestic coal linkage to the Kawai Projectof APRL. The Imported Coal Supply Agreement was submitted as apart of bid only to demonstrate the raw material’s readiness as APRLwas required to submit proof of linkage/fuel arrangement to qualify as abidder.

(e) Rajasthan Discoms admitted in their affidavit dated 31.7.2013before the RERC that non-availability of coal from the CentralGovernment put the case of APRL within the scope of change in law.Once they have admitted that bid was based on domestic coal, non-availability of which entitles APRL to claim compensation under thechange in law as per Article 10 of the PPA. They cannot wriggle out oftheir obligation. The eligibility to get coal linkage under the SHAKTIPolicy to APRL confirms that the PPA was based on domestic coal.The PPA was based on domestic coal, and the concurrent findings donot suffer from any infirmity or perversity.

A

B

C

D

E

F

G

318SUPREME COURT REPORTS

A

(f) The non-allocation of domestic coal linkage to APRL is achange in law event as is apparent from various documents, affidavitdated 31.7.2013 and entitlement under the SHAKTI Policy.

(g) In Energy Watchdog, this Court recognised the change inNCDP of 2007 as change in law event for a project which did not haveBany LoA or FSA at the time of bid submission. It was not necessary tohave linkage/allocation at the time of submission of the bid. A notificationwas issued on 26.7.2013 to change the NCDP of 2007. Following changein law events occurred:

(i) the decision of Standing Linkage Committee on 14.2.2012; and C

(ii) the resolution dated 21.6.2013 of the Cabinet Committee ofEconomic Affairs and the advice of the Ministry of Power dated31.7.2013, based on which the Tariff Policy has been revised by theGovernment of India on 28.1.2016 to cover the cases which do not havecoal linkage. The NCDP of 2007 was the only policy prevailing whenDthe bid was submitted and was changed.

The decision in Energy Watchdog is squarely applicable to thepresent appeals, in which it was laid down that modification of the NCDPof 2007 is a change in law. It was further observed that the fact that thefuel supply agreement has to be appended to the PPA is only to indicateEthat the raw material for the working of the plant was in order. Thecopy of the FSA was to be furnished after 10 months of the signing ofthe PPA.

(h) APRL has been continuously supplying power to the RajasthanDiscoms since May 2013 without any interruption. Thus, with effectFfrom the change in law, APRL is entitled to compensation as concurrentlyheld.In Re. Whether the bid submitted was premised ondomestic coal?

28. Considering the rival submissions, it is necessary to take noteGof Statutory Guidelines framed by the Central Government under Section63 of the Electricity Act. The relevant portion of Para 3.2(II) of theGuidelines of 2005 is extracted hereunder:

JAIPUR VIDYUT VITARAN NIGAM LTD. v. ADANI POWERRAJASTHAN LIMITED

“3.2 (II) In Case-1 procurement, to ensure serious participation inthe bid process and timely completion of commencement of supplyof power, the bidder, in case the supply is proposed from a stationto be set-up, should be required to submit along with its bid,documents in support of having undertaken specific actions forproject preparatory activities in respect of matters mentioned in(i) to (v) below.

i)****

ii)****iii)****

iv) Fuel Arrangements: (a) In the following cases fuel arrangementsshall have to be made for the quantity of fuel required to generatepower from the phase of the power station from which power isproposed to be supplied at Normative Availability for the term ofthe PPA.

In case of domestic coal, the Bidder shall have madefirm arrangements for fuel tie up either by way of coal blockallocation or fuel linkage In case of domestic gas, …..

b) Fuel arrangements in the following cases shall have to be madefor the quantity of fuel required to generate power from the powerstation for the total installed capacity.

In case of imported coal, the Bidder shall have eitheracquired mines having proven reserves for at least 50% ofthe quantity of coal required OR shall have a fuel supplyagreement for at least 50% of the quantity of coal requiredfor a term of at least five (5) years or the term of the PPA,which ever is less. ….”

29. In the MoU dated 20.3.2008, which was entered into betweenAPRL and the Government of Rajasthan, the Government of Rajasthanhad only agreed to provide assistance in securing coal linkage/coal block.Article 2.2 of the MoU is extracted hereunder:

A

B

C

D

E

F

G

H

SUPREME COURT REPORTS

A

“2.2 The State will facilitatesmooth implementation of theProject as may be required including making it’s best effort tofacilitategetting coal linkage/coal block from the CentralGovernment or coal from any other source for the Project. …”

B

30. The RFP formed part of the bid documents regarding fuel,provided as under:

“5. Fuel: The choice of fuel, including but not limited to coal orgas, it’s sourcing and transportation is left entirely to the discretionof the Bidder. The Successful Bidder(s) shall bear completeresponsibility to tie up the fuel linkage and the infrastructuralrequirements for fuel transportation, handling and storage.

C

2. INFORMATION AND INSTRUCTIONS FOR BIDDERS

2.1.2.2 Consents, Clearances and Permits: ****

Db. Fuel:

i. In case of domestic coal, the Bidder shallhave made firmarrangements for fuel tie up either by way of mine allocationor fuel linkage.Such arrangement shall be for the quantity offuel required to generate power from the power station atNormative Availability for the total installed capacity for the termof the PPA.

E

ii.In case of imported coal, the Bidder shall have either acquiredmines having proven reserves for at least fifty percent (50%) ofthe quantity of coal required to generate power from the powerFstation at Normative Availability for the total installed capacityOR shall have fuel supply agreement for at least fifty percent(50%) of the quantity of fuel required for a term of at least five(5) years or the term of the PPA (which ever is less) to generatepower from the generation source for the total installed capacityfor the term of the PPA.

G

iii. In case of domestic gas, …..

iv. In case of RLNG, …..”

H

JAIPUR VIDYUT VITARAN NIGAM LTD. v. ADANI POWERRAJASTHAN LIMITED

31. APRL concerning fuel in the bid documents dated 6.8.2009,indicated as under:

“Domestic Coal:

Imported Coal:

Captive coal block/coal linkage will be made available for theKawai Project with the support of Govt. of Rajasthan. However,we have also made an arrangement for supply of importedcoal for at least 50% of the total requirement of the powerproject for 5 years, as fall back support arrangement.

A

B

C

D

E

F

G

H

A

B

C

D

E

F

G

H

The computation of coal consumption of normative availabilitywas given as under:

JAIPUR VIDYUT VITARAN NIGAM LTD. v. ADANI POWERRAJASTHAN LIMITED

31. A letter was written on 7.9.2009 by the Rajasthan Discomsseeking clarification from APRL as to on which basis of fuel, its bid tobe evaluated. Following clarification was sought:

“With respect to the aforesaid Bid submitted by you in responseto RIP dated 25.02.09, the following clarifications/documents arerequired for your bids to be evaluated:

1. For fuel arrangement, in the Bid both Domestic Coal aswell as Imported Coal has indicated. You should clarifythrough a letter from MD/CEO, being full time Director/Manager on which basis of fuel, the Bid should beavaluated.”

33. In response to letter dated 7.9.2009, APRL clarified its position videletter dated 12.9.2009 inter alia as under:

“1. As per the provision of the RFP under clause No.2.4.1.1(B)(ii),a bidder can submit only one price bid from a generation source,even if different types of fuels are used.

We contemplate to use Domestic as well as Imported coalfor the Kawai Project. A duly executed Fuel Supply Agreement(FSA) for more than 50% if the coal requirement for a period of5 years (as specified in RfP for meeting the fuel requirement onthe basis of imported coal) has been submitted with the bid.Further, we have also submitted with the bid a MoU, executedbetween the Government of Rajasthan and Adani Enterprises Ltd.,wherein at clause 2.2, the State has assuredin making its bestefforts to facilitatein getting Coal Linkage/Block or Coal fromany other sources for the Power Project.

We meet the fuel requirement on the basis of imported coaltie-up. However, we are sure to get domestic fuel tie-upwith support of the Government of Rajasthan. In view ofthis, we submit that our bid should be evaluated on thebasis of Domestic Coal tie-up. We undertake that paymentconsidering domestic coal escalations will be acceptable tous during the terms of the PPA.”

A

B

C

D

E

F

G

H

A34. The Rajasthan Discoms issued an LoI dated 17.12.2009 toAPRL inter alia containing the following condition:

“Your offerto provide 1200 MW power at therates mentioned at Annexure-1 andescalationsthereof on domestic coal is based on yourBcommitment that the above rates would beapplicable even in case of coal requirement being met by you by way of back uparrangement with imported coal.”

(emphasis supplied)

C35. APRL on 18.12.2009, communicated its unconditionalacceptance to the LoI thus:

“We acknowledge with thank receipt of RRVPNL LoI No.RVPN/CE(NPP&R)/D 81 dated 17[th] December 2009 in favour of AdaniPower Rajasthan Limited (APRL). We have noted content ofDthe LoI and we hereby communicate our “unconditionalacceptance” of the same. Please find enclosed herewithduplicate copy of LoI duly signed by authorized signatory,confirming “Accepted Unconditionally”.

We are making necessary arrangements for submission ofEPerformance Guarantee as per Article 2.2.9 of the final RfP FOR1200 MW. We shall be grateful if approval of RERC forprocurement of additional 200 MW is conveyed at the earliestand the draft PPA, prepared based on our offer/bid, for executionis submitted to us for scrutiny at our end.”

F(emphasis supplied)

36. The PPA entered into between the parties provided inter aliaas under:

“”Fuel” shall mean the primary fuel used to generateelectricity namelydomestic coal/imported coal as back upGarrangement.

“Fuel Supply Agreement(s)” shall mean the agreement(s) enteredinto between the Seller and the fuel supplier for the purchase,transportation and handling of the Fuel, required for the operationof the Power Station.

H

JAIPUR VIDYUT VITARAN NIGAM LTD. v. ADANI POWERRAJASTHAN LIMITED

In case the transportation of the Fuel is not the responsibility ofAthe fuel supplied, the Fuel Supply Agreement shall also includethe separate agreement between the Seller and the fuel transporterfor the transportation of Fuel in addition to the agreement betweenthe Seller and the fuel supplier for the supply of the Fuel;

………5 SCHEDULE 5: DETAILS OF GENERATION SOURCE ANDSUPPLY OF POWER

B

(A) Details of generation source

CDEFGH

A(B) Details of primary fuel

B

C

D

E

F

37. The RERC’s order dated 31.5.2010, adopting APRL’s tariffunder Section 63 of the Electricity Act, has been relied upon. The sameGis extracted hereunder:

“39. The other important point raised by the party relates to relaxingthe qualifying requirements for the fuel in case of M/s. AdaniPower Rajasthan Limited. This matter has been elaborately dealtwith in the first report of the Bid Evaluation Committee, who foundH

the party to be qualified as far as requirement for fuel is concernedbased on tie-up for imported coal and at the same time foundthe option of use of domestic coal worth consideration on accountof likely advantage of lower escalation in tariff for domestic fuelthan that of imported coal. The procurer has subsequently takenundertaking from the bidder that lower escalation in two situationsi.e. domestic coal or imported coal would be applied in tariff andby this they have tried to derive advantage of incurring lower fuelescalation cost. It may be mentioned that neither the guidelinesof GoI nor the bid documents anticipate such a situation whereinimported coal and domestic coal both could be used by adeveloper and obviously in such a situation the Bid EvaluationCommittee and procurer are required to take a decision, which isin their best interest.”

38. In this regard, Shri C. Aryama Sundaram, learned seniorcounsel, argued that:

(a) concerning fuel in the column pertaining to the domestic coalthat APRL, it was mentioned, had entered into an MoU with theGovernment of Rajasthan for development of the Kawai Power Project.The Government of Rajasthan initially supported the allocation of captivecoal block or coal linkage, and APRL and the Government of Rajasthantook the necessary action in this regard. At the same time, it was alsomade clear that as fallback support, APRL had arranged imported coalfor at least 50 per cent of the total requirement.

(b) The arrangement of fuel, as per bid, was the responsibility ofthe bidder/generator. The Generator cannot claim compensation for itsinability to arrange domestic coal or any other fuel source. Forqualification under the bid, the bidder had to secure documentary evidencefor various requirements, including fuel source. For domestic coal, therequirement was of firm arrangement for fuel tie-up and imported coal,acquired mines with proven coal reserves or FSA to meet at least 50percent of the normative requirement for at least 5 years. APRL did nothave any arrangement for the domestic coal at the time of the bid. TheFSA dated 25.6.2009 for imported coal was the only firm arrangementwith APRL. Besides that, it had MoU dated 20.3.2008, with theGovernment of Rajasthan concerning domestic coal. The allocation of AB

C

D

E

F

G

H

Acoal was by the Government of India. Under the SHAKTI Policy inJanuary 2018, the coal was allocated to APRL. APRL had sought fordomestic coal escalation, which was allowed as a concession; however,this did not change the fact that the qualification was based on importedcoal. In the Board Meeting of Rajasthan Rajya Vidyut Prasaran NigamLimited held on 3.12.2009, the following resolution was passed:B

“3. The L-1 bidder, M/s. Adani Power Rajasthan Ltd., hascommitted to provide 1200 MW power at the rates mentioned at(1) above irrespective of the availability of domestic coal,by meeting the coal requirements from imported orwhatever sources as their backup arrangement. ThisCcondition shall be specifically mentioned in the LOI to be issuedto L-1 bidder, M/s Adani Power Rajasthan Ltd., and the PowerPurchase Agreement (PPA) to be entered into with them byRajasthan Discoms.”

D

(c) APRL unconditionally accepted the LoI. The PPA is adocument governing the rights and obligations of the parties. It recognisesthe possible use of domestic coal. There was no allotment of coal linkageor coal block to APRL until January 2018. As APRL did not receive thedomestic coal allocation and thereafter, if there was a change in lawEaffecting such domestic coal, APRL could have possibly claimed changein law. APRL was obliged to supply power even without such domesticcoal.

(d) Alternatively, it was argued that the PPA was primarily basedon domestic coal. The imported coal was a backup arrangement. EvenFotherwise assuming that compensation can be permitted for change inlaw, it has to be restricted only to the extent of domestic coal contemplatedto be used for fuel as the PPA provided for both domestic and importedcoal and the imported coal accounted for more than 50 per cent of therequirement, the compensation has to be limited to the said extent. TheGaforesaid was 61 per cent of the fuel requirement.

39. Dr. A.M. Singhvi, learned senior counsel in this regard onbehalf of APRL, argued that the bid and the PPA were based on domesticcoal. The tariff was also quoted on the domestic coal linkage format.As the bid was premised on domestic coal, the bid’s evaluation wasmade on the domestic coal. The PPA also provided for the same, whichH

is binding. The FSA was for imported coal with the bid was only toassess bid eligibility. In the order dated 31.5.2010 of the RERC, thedomestic coal was considered the basis and to be used as the primaryfuel. He also relied upon the admissions made in the affidavit and thecommunications dated 31.7.2013 and 4.8.2017 and the fact thatparticipation in the SHAKTI Policy was permissible only when the PPAwas based on domestic coal. The Rajasthan Discoms cannot reprobatefrom their stand. The entire bid was premised and accepted only ondomestic coal. Hence, the claim of APRL cannot be restrained to 40per cent.

When we consider the documents on record, it is apparent thatAPRL’s bid was premised only on domestic coal. It was evaluated assuch, and the PPA also records the same. In para 2 of the bid withrespect to coal, the bid of APRL was premised on the domestic coal. Itis apparent that APRL relied upon MoU entered into with the Governmentof Rajasthan for development of the Kawai Power Project and otherprojects, and the Government assured its support for allocation of thecaptive coal block or coal linkage. An arrangement of FSA relating toimported coal for at least 50 percent of the total requirement was reliedupon; however, the bid was premised and accepted on domestic coal,which did not change the bid’s nature. A query was made by the RajasthanDiscoms on 7.9.2009 from APRL to indicate whether the bid should beevaluated on domestic coal or imported coal. It was made clear byAPRL in its letter dated 12.9.2009 quoted above, that bid should beevaluated on the basis of domestic coal tie-up, and an undertaking wasgiven that domestic coal escalations would be acceptable to it during theterm of the PPA. In the LoI dated 17.12.2009, the offer was accepted,and escalations thereof on domestic coal was based on the commitmentthat the quoted rates would be applicable even in case of coal requirementbeing met by APRL by way of a backup arrangement with importedcoal. APRL sent an unconditional acceptance on 18.12.2009. Thus, theparties agreed ad idem that bid was evaluated based on domestic coal,and escalations were also based on domestic coal. Accordingly, the PPAwas entered into, and primary fuel in the PPA was mentioned to bedomestic coal from captive coal block/coal linkage and imported coal asa fallback support arrangement. It was binding on both the parties.

40. APRL applied for long term coal linkage with the Governmentof Rajasthan on 2.7.2009, i.e., prior to the submission of bid on 6.8.2009.

AB

C

D

E

F

G

H

AIt submitted the bid by adopting linkage coal format, and the tariff wasquoted in Rs./Kwh. It submitted the bid as per RFP of April 2009 ParaIX under Format 4.10, clause 2.4.1, which related to linkage coal formatbid, i.e., domestic coal. Under Article 1.1 of the PPA, the primary fuelwas mentioned as domestic coal. The FSA was submitted for importedcoal to assess bid eligibility for meeting the technical criteria. TheBdomestic coal was primary fuel as such the submission cannot be acceptedthat the bid and the PPA were based on imported coal.

41. The PPA is final and binding on parties, and approval oftariff by the RERC was based on domestic coal as apparent from para39 of the order dated 31.5.2010. Rajasthan Discoms agreed to useCdomestic coal on account of likely advantage of lower escalation in tariffon a bid based on domestic coal than that of imported coal. The decisionof the Bid Evaluation Committee was found to be in their best interest.Thus, APRL bid was not based on imported coal, that would not havebeen in favour of Rajasthan Discoms and would have resulted in moreDescalations in the tariff. Thus, APRL could not be denied the benefit ofthe very foundational basis on which the RERC approved its bid. APRLcould not be made to suffer from both the ends. Various documents andthe PPA make it clear that its bid was premised on domestic coal andapproved tariff was based on domestic coal, the order of RERC is final,conclusive, and binding on the parties; it has not been questioned andEattained finality. No stand contrary to the same was permissible to betaken by the Rajasthan Discoms.

42. It is further apparent that reply dated 31.7.2013 filed by theRajasthan Discoms before the RERC in which it was clearly admittedthat non-availability of domestic coal from the Central Government wouldFput the case of APRL within the scope of change in law. RajasthanDiscoms before the RERC admitted that the bid was based on domesticcoal, non-availability of which entitles APRL to claim compensation underthe change in law as provided in Article 10 of the PPA.

43. It was argued that incorrect admissions made could not haveGbeen relied upon. It could not be said to be incorrect and stated factuallycorrect position in view of the aforesaid material and order of the RERC.

44. Apart from that, an eligibility to get coal linkage under theSHAKTI Policy was based upon the fact that the Generators, who werenot within the coal linkage and their PPAs were based on domesticH

linkage coal, were eligible for grant of coal linkage. In case, the PPAwas not based on domestic coal, the case of APRL would not have beenrecommended to include the Kawai Project under 4660 MW capacity toreceive domestic coal under special dispensation.

45. It is apparent that the concurrent findings recorded by theRERC, as well as the APTEL, in this regard, do not suffer from anyinfirmity or perversity, and they are binding. As the scope of appealunder Section 125 of the Electricity Act is akin to Section 100 of theCPC and the concurrent findings based upon the facts cannot bedisturbed in the appeal as held in DSR Steel (Private) Ltd. v. State ofRajasthan and Ors., (2012) 6 SCC 782, Tamil Nadu Generation andDistribution Corporation Limited v. PPN Power GeneratingCompany Private Limited, (2014) 11 SCC 53 and Wardha PowerCompany Limited v. Maharashtra State Electricity DistributionCompany Limited and Anr., (2016) 16 SCC 541.

46. We also note that once having admitted before the RERC atthe time of approval of tariff and evaluated the tariff of domestic coaland making admissions again on 31.7.2013 and 4.8.2017, it is not open toreprobate as parties are not permitted to approbate and reprobate atdifferent stages as laid down in Suzuki Parasrampuria Suitings PrivateLimited v. Official Liquidator of Mahendra Petrochemicals Limited(in Liquidation) and Ors., (2018) 10 SCC 707 and R.N. Gosain v.Yashpal Dhir, (1992) 4 SCC 683.

47. It was argued that FSA was appended to demonstrate theraw material’s readiness for the supply of contracted electricity by theGenerator. It did not change the basis of the bid, whether it was basedupon the domestic coal or imported coal. In case the bid was basedupon the imported coal, the tariff would have been differently fixed asobserved by the RERC, and it was not advantageous to RajasthanDiscoms to fix tariff on imported coal. The RERC observed that theFSA was only to demonstrate the raw material’s readiness and was notdeterminative of terms and conditions of the contract. The FSA forimported coal was a standby arrangement, but the entire bid, tariff, andthe agreement were based on domestic coal. Thus, the consequencesof non-availability due to change in law could not be escaped. In EnergyWatchdog, it was observed that the FSA is only for demonstrating theraw material’s readiness and is not determinative of the terms andconditions of the contract.

A

BC

DE

F

G

H

A

A48. Shri C. Aryama Sundaram argued that the FSA relatedapproximately 61 per cent of the fuel requirement. Thus, the change inlaw claim may be confined to 35 to 40 per cent. The argument cannotbe accepted as bidding was not based on dual fuel, but was evaluated ondomestic coal. There was no such stipulation that evaluation of biddingwas done on domestic basis; the tariff was to be worked out in theBaforesaid ratio of 60:40 per cent of imported coal and domestic coalrespectively. Apart from that, we find from the order of the APTEL,that change in law provision would be limited to a shortfall in the supplyof domestic linkage coal. The finding recorded by the APTEL is extractedhereunder:C

“12.5 In the instant case, we have found in the previous paragraphsthat Adani Rajasthan’s bid was premised on domestic coal on thebasis of the 100% domestic coal supply assurance contained inNCDP 2007. Since SHAKTI Policy and the FSA executedthereunder still do not meet the assurance of 100% supply ofDdomestic coal to Adani Rajasthan, it would follow that AdaniRajasthan would need to be compensated for any shortfall in supplyof domestic linkage coal even post grant of coal linkage under theSHAKTI Policy. Rajasthan Discoms have not disputed that theintroduction of SHAKTI Policy constitutes a Change in Law underthe PPA. Their contention is that any shortfall of coal under theESHAKTI FSA by the coal companies is a contractual matter tobe sorted out between Adani Rajasthan and the coal companies.We are not persuaded by this argument for the reason that wehave already held in GMR Kamalanga case that the contractualconditions or limitations were not present in NCDP 2007 at theFtime of bid submission by Adani Rajasthan. This contention ofRajasthan Discoms is also against the principle laid down in EnergyWatchdog judgment. The SHAKTI Policy continues the earliercoal supply restriction to 75% of ACQ. If actual supply of domesticlinkage coal under the SHAKTI FSA is higher, it goes withoutsaying that the generator’s relief or compensation under theGChange in Law provisions would be limited to the actual shortfallin supply of domestic linkage coal.We also note that there is norational basis to assume that the supply under the SHAKTI FSAswould be higher or better than that under the pre-SHAKTI FSAs.

H

JAIPUR VIDYUT VITARAN NIGAM LTD. v. ADANI POWERRAJASTHAN LIMITED

12.6 The Supreme Court in Energy Watchdog judgment hasalready concluded as follows:

“57. …… This being so, it is clear that so far as the procurementof Indian coal is concerned, to the extent that the supply fromCoal India and other Indian sourcesis cut down, the PPA readwith these documents provides in Clause 13.2 that whiledetermining the consequences of change in law, parties shallhave due regard to the principle that the purpose ofcompensating the party affected by such change in law is torestore, through monthly tariff payments, the affected party to the economic position as if such change in law has notoccurred……”

49. It was clarified that APRL would be entitled to relief underthe change in law provision to the extent of shortage in supply in domesticlinkage coal. Thus, we find no merit in the submission raised. We findthe findings of the APTEL to be reasonable, proper, and unexceptional.

50. Our attention was also invited to para 3.2 of the StatutoryGuidelines of 2005. It provided with respect to fuel arrangements. Thesame provided that in case of domestic coal, the bidder shall have madefirm arrangements for fuel tie-up either by way of coal block allocationor fuel linkage. There is no doubt about it that the Government ofRajasthan entered into an MoU with APRL in 2008 to ensure supply ofdomestic coal and it had undertaken to facilitate the implementation ofthe Kawai Project for getting the coal block from the Central Governmentor coal from any other source for the project. Once the Government ofRajasthan entered into MoU dated 20.3.2008, containing Article 2.2quoted above, it was incumbent upon the State of Rajasthan to providecoal from any other source for the project, in case the Central Governmentcould not allot coal linkage/coal block. The Central Government hadeven written to the Government of Rajasthan to provide coal to APRLfrom the coal mine, but due to paucity, it could not be supplied to APRL.Thus, there was a failure on the part of the Government of Rajasthan toprovide coal from any other source. The NCDP of 2007 prevailed aslaw 7 days prior to the bid with respect to the supply of coal, the cut-offdate of the bid was 30.7.2009. It was provided in Clauses 2.1 and 2.2 of A

B

C

D

E

F

G

H

ANCDP of 2007 dated 18.10.2007 that 100 per cent of the quantity as perthe normative requirement of the consumers would be considered forsupply of coal through FSA by CIL. Para 5.2 of the NCDP of 2007provided that for power utilities, including Independent Power Producers(IPPs) and Captive Power Plants, cement sector and sponge iron sector,the present system of linkage committee at the level of the GovernmentBwould continue. CIL will issue LoA after approval of applications by theStanding Linkage Committee (Long-term). Clause 6.1 provides thatnew consumers from the State/Central power utilities, CPPs, IndependentPower Producers (IPPs), Fertilizers, Cement, and Sponge Iron unitsmay be issued LoA based on prevailing norms and recommendations ofCthe Administrative Ministry. Para 6.1 of the policy is extracted hereunder:

“6.1 New consumers from State/Central power utilities, CPPs,Independent Power Producers (IPPs), Fertilizer, Cement andSponge Iron units may be issued LOA, based on prevailing normsand recommendation of Administrative Ministry, which may interDalia have regard to LoA/Linkage already granted to the consumerof specific sector, existing capacity, requirement for capacityaddition during a plan period etc.”

51. Para 7 deals with FSAs with new consumers. Paras 7.1 and7.2 are extracted hereunder:

E“7.1 On successfully achieving the milestones stipulated in LOAcoal companies would execute FSA with the applicant consumercovering commercial arrangement for supply of coal. FSAs wouldbe, inter-alia, based on ‘Take or Pay’ principle.

7.2 The FSAs would cover 100% of normative coal requirementsFof the Power Utilities, including Independent Power Producers(IPPs) and Captive Power Plants (CPPs), Fertilizer units and 75%of normative coal requirement of other consumers.”

It is apparent that 100 percent of the quantity as per the consumers’normative requirement was to be made by CIL, obviously on the approvalGof the application by the Standing Linkage Committee. It was keptpending due to a shortage of coal supplies and was ultimately processedunder the SHAKTI Policy, and linkage for 100 percent was given fromJanuary 2018. Thus, earlier as the quantity of coal was not available,sufficient supply could not be made. It is not a case where APRL was H

adjudged ineligible, but prior commitments and the non-availability ofcoal came in the way of failure to obtain domestic coal linkage under theNCDP of 2007, which itself was changed with effect from 26.7.2013.

In Re. Change in Law

52. APRL’s claim is based on the date of change of law in 2013.Admittedly, earlier NCDP of 2007 prevailed on the appointed date, i.e.,7 days before submission of the bid. In Energy Watchdog also, similarwas the position. Though the application was submitted, coal linkagewas not provided, and then there was a change in law in terms of theNCDP of 2013. This Court held that the benefit of change in law w.e.f.2013 was available. The PPA was based upon the domestic coal, andits availability was based upon NCDP of 2007. The application wasfiled before submitting the bid. The application for linkage was filed interms of the agreement when the bid was premised and accepted, andthe agreement was entered into on the basis of domestic coal, the changein law of 2007 in 2013 has to be applied. Thus, the submission raisedthat even in the absence of any LoA or FSA granted to APRL by CIL,there was an impact of change of law on the PPA on account of NCDPof 2013.

53. It was argued that there was no domestic coal linkage underwhich supply was cut down due to any law, and APRL was not allocatedcoal block, and its bid was premised on the imported coal. In EnergyWatchdog, it was opined that only changes in Indian law could beconsidered under the PPA and not in foreign law. In NCDP dated26.7.2013, the NCDP of 2007 was modified to the effect that powerprojects would only get a certain percentage of what was earlierallowable.

54. It is apparent from the decision dated 31.5.2013 of the StandingLinkage Committee (Long-Term) that the application of APRL was keptin abeyance. It applied for coal linkage on 2.7.2009 on the basis ofNCDP of 2007. The bid cut-off date was 30.7.2009, 7 days prior to thebid deadline, the NCDP of 2007 was applicable. A decision was takenby the Standing Linkage Committee on 14.2.2012 read with the decisiondated 31.5.2013 indicating a shortage in domestic coal and dependenceon imported coal. For the shortage of coal, APRL could not have beenmade to suffer, on that it had no control. It was decided not to issuefresh LoAs, and all pending applications were kept in abeyance. The A

BC

D

E

F

G

H

A

BC

D

E

F

G

H

ACabinet Committee on Economic Affairs decided on 21.6.2013 to reducecoal supply to 65 percent and 75 percent of ACQ for the remaining fouryears of the 12[th] Five Year Plan. It allowed passing through of highercost of imported coal. The Ministry of Coal was directed to suitablyamend the NCDP. The Ministry of Coal on 26.7.2013 amended theNCDP of 2007, and the Ministry of Power issued a letter on 31.7.2013,Bwhich provided for pass-through of additional cost incurred to meet thecoal requirements. The Cabinet Committee on Economic Affairs in itsdecision dated 21.6.2013, recognised coal supply, subject to availability,to 4660 MW having no fuel linkage. The Kawai Project was included in the same. The Policy was revised, thus assurance given by theCGovernment of India under the NCDP of 2007 was taken away. Theprovision of 100 per cent supply was taken away. With respect to theapplicability of Energy Watchdog, a dispute has been raised. In EnergyWatchdog, it was laid down that change in law is applicable to changein domestic law, not change in foreign law. It is not applicable to importedcoal/change in foreign law. It was urged that application for grant ofDcoal linkage was submitted to the Ministry of Coal for the supply of coalin the light of assurance given under the NCDP of 2007 in both thecases and those assurances, which were given in the Policy, were dilutedor taken away by the subsequent scheme of the Governmentinstrumentality. Consequently, no coal linkage or LoA or FSA wasEavailable in the hands of the Generator in Energy Watchdog. The cut-off date for applicability of law was 7 days prior to the bid deadline andchange in law provision of Article 10 of the PPA in question is similar toArticle 13 of the PPA in Energy Watchdog. Article 10 is extractedhereunder:

F“ARTICLE 10: CHANGE IN LAW10.1 Definitions In this Article 10, the following terms shall have the followingmeanings:

G10.1.1 “Change in Law” means the occurrence of any of thefollowing events after the date, which is seven (7) days prior to-the Bid Deadline resulting into any additional recurring/nonrecurring expenditure by the Seller or any income to the Seller:

• the enactment, coming into effect, adoption, promulgation,amendment, modification or repeal (without re-enactment orH

consolidation) in India, of any Law, including rules andregulations framed pursuant to such Law;

• a change in the interpretation or application of any Law byany Indian Governmental Instrumentality having the legal powerto interpret or apply such Law, or any Competent Court ofLaw;

• the imposition of a requirement for obtaining any Consents,Clearances and Permits which was not required earlier;

• a change in the terms and conditions prescribed for obtainingany Consents, Clearances and Permits or the inclusion of anynew terms or conditions for obtaining such Consents,Clearances and Permits; except due to any default of the Seller;

• any change in tax or introduction of any tax made applicablefor supply of power by the Seller as per the terms of thisAgreement.

but shall not include (i) any change in any withholding tax on incomeor dividends distributed to the shareholders of the Seller, or (ii)change in respect of UI Charges or frequency intervals by anAppropriate Commission or (iii) any change on account ofregulatory measures by the Appropriate Commission includingcalculation of Availability.

10.2 Application and Principles for computing impact ofChange in Law 10.2.1 While determining the consequence of Changein Law underthis Article 10, the Parties shall have due regard to the principlethat the purpose of compensating the Party affected by suchChange in Law, is to restore through monthly Tariff Payment, tothe extent contemplated in this Article 10, the affected Party tothe same economic position as if such Change in Law has notoccurred.

10.3 Relief for Change in Law

10.3.1 During Construction Period

As a result of any Change in Law, the impact of increase/decreaseof Capital Cost of the Power Station in the Tariff shall be governedby the formula given below:

A

B

C

D

E

F

G

H

A

For every cumulative increase/ decrease of each Rupees Sixteencrore Fifty Lakh (Rs.16.50 crore) in the Capital Cost during theConstruction Period, the increase/ decrease in Non EscalableCapacity Charges shall be an amount equal to zero point two sixseven (0.267%) of the Non Escalable Capacity Charges. In caseof Dispute, Article 14 shall apply.

B

It is clarified that the above mentioned compensation shall bepayable to either Party, only with effect from the date on whichthe total increase/ decrease exceeds amount of Rupees Sixteencrore Fifty Lakh (Rs.16.50 crore).

C10.3.2 During Operating Period

The compensation for any decrease in revenue or increase inexpenses to the Seller shall be payable only if the decrease inrevenue or increase in expenses of the Seller is in excess of anamount equivalent to 1 % of the value of the Letter of Credit inaggregate for the relevant Contract Year.

D

10.3.3 For any claims made under Articles 10.3.1 and 10.3.2 above,the Seller shall provide to the Procurers and the AppropriateCommission documentary proof of such increase/ decrease incost of the Power Station or revenue/ expense for establishingthe impact of such Change in Law.

E

10.3.4 The decision of the Appropriate Commission, with regardsto the determination of the compensation mentioned above inArticles 10.3.1 and 10.3.2, and the date from which suchcompensation shall become effective, shall be final and bindingon both the Parties subject to right of appeal provided underapplicable Law.

F

10.4 Notification of Change in Law

10.4.1 If the Seller is affected by a Change in Law in accordancewith Article 10.1 and the Seller wishes to claim relief for such aChange in Law under this Article 10, it shall give notice to theProcurers of such Change in Law as soon as reasonablypracticable after becoming aware of the same or shouldreasonably have known of the Change in Law.

G

10.4.2 Notwithstanding Article 10.4.1, the Seller shall be obligedto serve a notice to the Procurers under this Article 10.4.2, even H

if it is beneficially affected by a Change in Law. Without prejudiceto the factor of materiality or other provisions contained in thisAgreement, the obligation to inform the Procurers contained hereinshall be material.

Provided that in case the Seller has not provided such notice, theProcurers shall have the right to issue such notice to the Seller.

10.4.3 Any notice served pursuant to this Article 10.4.2 shallprovide, amongst other things, precise details of:

(a) the Change in Law; and

(b) the effects on the Seller

10.5 Tariff Adjustment Payment On account of Change inLaw 10.5.1 Subject to Article 10.2, the adjustment in monthly TariffPayment shall be effective from:

(i) the date of adoption, promulgation, amendment, re-enactmentor repeal of the Law or Change in Law; or

(ii) the date of order/ judgment of the Competent Court or tribunalor Indian Governmental Instrumentality, if the Change in Law ison account of a change in interpretation of Law.

10.5.2 The payment for Change in Law shall be throughSupplementary Bill as mentioned in Article 8.8. However, in caseof any change in Tariff by reason of Change in Law, as determinedin accordance with this Agreement, the Monthly Invoice to beraised by the Seller after such change in Tariff shall appropriatelyreflect the changed Tariff.”

55. The said factual position is not disputed and was noticed bythe APTEL in para 11.5, which is extracted hereunder:

“11.5 It may be seen from the above that in both the PPAs,Change in Law is defined as the occurrence of any event afterthe date, which is seven (7) days prior to the Bid Deadline.Therefore, for reckoning the change in law the position prevailingas on cut-off date is relevant. In both cases, the basis for the bidin respect of the fuel was assurance under NCDP, 2007 and there A

B

C

D

E

F

G

H

A

Awas no Letter of Assurance or FSA for the project at the time ofthe bidding. The Rajasthan Discoms have not denied the factualposition/comparison of the PPAs. That being the case, there is nomerit in the argument of Rajasthan Discoms that Energy Watchdogcase is not applicable to the present case. We note that as on cut-off date the law prevailing is NCDP 2007 in both the cases. TheBsupply assurance contained in NCDP 2007 was changed or alteredfor the Kawai Project by the decision of SLC(LT) on 31.05.2013.The main thrust of Adani Rajasthan’s arguments is that even beforethe amendment of 2013 in NCDP 2007, the decision taken bySLC(LT) in May 2013 amounts to a Change in Law event underCthe PPA. The 2013 amendment to NCDP 2007 may be seen as acontinuum of the SLC(LT)’s decision in May 2013 since it wasCoal India’s inability to meet the committed/assured coal supplythat prompted the Ministry of Coal to issue the amendment toNCDP in July 2013, based on the CCEA decision in June 2013.The CCEA decision of June 2013 directed as follows:

D

“The Cabinet Committee on Economic Affairs (CCEA) todayapproved the following mechanism for supply of coal to powerproducers:

(i) Coal India Ltd. (CIL) to sign Fuel Supply Agreements (FSA)Efor a total capacity of 78000 MW including cases of taperinglinkage, which are likely to be commissioned by 31.03.2015. Actualcoal supplies would however commence when long term PowerPurchase agreements (PPAs) are tied up.

(ii) Taking into account the overall domestic availability and actualFrequirements, FSAs to be signed for domestic coal quantity of 65percent, 65 percent, 67 percent and 75 percent of AnnualContracted Quantity (ACQ) for the remaining four years of the12th Five Year Plan.

(iii) To meet its balance FSA obligations, CIL may import coal andGsupply the same to the willing Thermal Power Plants (TPPs) oncost plus basis. TPPs may also import coal themselves. MoC toissue suitable instructions

(iv) Higher cost of imported coal to be considered for pass throughas per modalities suggested by CERC. MoC to issue suitable orders H

supplementing the New Coal Distribution Policy (NCDP). MoPto issue appropriate advisory to CERC/SERCs includingmodifications if any in the bidding guidelines to enable theappropriate Commissions to decide the pass through of highercost of imported coal on case to case basis.

(v) Mechanism will be explored to supply coal subject to itsavailability to the TPPs with 4660 MW capacity and other similarcases which are not having any coal linkage but are likely to becommissioned by 31.03.2015, having long term PPAs and a highBank exposure and without affecting the above decisions.”

56. The change in policy and in the terms and conditions prescribedfor obtaining any consents, clearances and permits or the inclusion ofany new terms or conditions for obtaining such consents, clearances,and permits are also included. The submission raised on behalf of appellantthat there is no question seeking benefit due to change in foreign law isbased on wrong factual premise. The relief was not claimed on thebasis of change in foreign law. Apart from that, admission has beenrelied upon change in law. The PPA was based on the domestic law andthere was a change in domestic law. Thus, consequences must follow.The Government of Rajasthan entered into a MoU with APRL withrespect to coal linkage in 2008 to provide coal linkage or coal from othersources.

57. We find similarity in the present case as well as the EnergyWatchdog. The factual matrix was similar with the present case. Wefind that the RERC and the APTEL have recorded the concurrent findingon facts. We find no ground to interfere. No substantial question of lawis involved. It was held in Energy Watchdog, that change in law wasbrought about in the NCDP of 2007 by the decision of 26.7.2013. It isprovided in Article 10.2.1 how the change in law is to be applied tocompensate for the impact.

58. The purpose of change in law is to restore through monthlytariff payment to the extent contemplated that the affected party is placedin the same economic position as if such a change in law has not occurred.As monthly tariff was worked out on domestic law, the requirement is to A

B

C

D

E

F

G

H

Acompensate on that basis due to change in law. The same is based onthe principle of restitution. In Uttar Haryana Bijli Vitran Nigam Limited(UHBVNL), it was laid down by this Court thus:

“10. Article 13.2 is an in-built restitutionary principle whichcompensates the party affected by such change in law and whichBmust 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,Chowever, 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/Ddecrease 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.”

E

It was also held that carrying cost is payable from the date thechange in law has taken place, and carrying cost is passed on the restitutionprinciple. Article 10.2.1 of the PPA in question is similar to Article 13.2Fconsidered in Energy Watchdog. The carrying cost is nothing but acompensation towards the time value of month/deferred payment. Article8.3.5 provides for methodology in case of delayed payment.

59. When there was a change in policy with respect to obtainingcoal itself, which was agreed to in the PPA, the change in law would beGapplicable. In Energy Watchdog it was observed thus:

“56. However, insofar as the applicability of Clause 13 to a changein Indian law is concerned, the respondents are on firm ground. Itwill be seen that under Clause 13.1.1 if there is a change in anyconsent, approval or licence available or obtained for the project, H

otherwise than for the default of the seller, which results in anychange in any cost of the business of selling electricity, then thesaid seller will be governed under Clause 13.1.1. It is clear from areading of the Resolution dated 21-6-2013, which resulted in theletter of 31-7-2013, issued by the Ministry of Power, that the earliercoal distribution policy contained in the letter dated 18-3-2007stands modified as the Government has now approved a revisedarrangement for supply of coal. It has been decided that, seeingthe overall domestic availability and the likely requirement of powerprojects, the power projects will only be entitled to a certainpercentage of what was earlier allowable. This being the case, on31-7-2013, the following letter, which is set out in extenso statesas follows:

AB

C

FU-12/2011-IPC (Vol-III)Government of IndiaMinistry of Power Shram Shakti Bhawan, New Delhi DDated: 31-7-2013

To,

The Secretary,Central Electricity Regulatory Commission,Chanderlok Building, Janpath, E

New Delhi

Subject: Impact on tariff in the concluded PPAs due to shortagein domestic coal availability and consequent changes in NCDP.

Ref. CERC’s D.O. No. 10/5/2013-Statutory Advice/CERC dated20-5-2013.

F

Sir,

In view of the demand for coal of power plants that wereprovided coal linkage by Govt. of India and CIL not signing anyfuel supply agreement (FSA) after March 2009, several meetingsat different levels in the Government were held to review thesituation. In February 2012, it was decided that FSAs will be signedfor full quantity of coal mentioned in the letter of assurance (LoAs)for a period of 20 years with a trigger level of 80% for levy of G

H

A

B

C

D

E

F

G

H

disincentive and 90% for levy of incentive. Subsequently, MoCindicated that CIL will not be able to supply domestic coal at 80%level of ACQ and coal will have to be imported by CIL to bridgethe gap. The issue of increased cost of power due to import ofcoal/e-auction and its impact on the tariff of concluded PPAswere also discussed and CERC’s advice sought.

2. After considering all aspects and the advice of CERC in thisregard, Government has decided the following in June 2013:

(i) taking into account the overall domestic availability and actualrequirements, FSAs to be signed for domestic coal componentfor the levy of disincentive at the quantity of 65%, 65%, 67% and75% of annual contracted quantity (ACQ) for the remaining fouryears of the 12th Plan.

(ii) to meet its balance FSA obligations, CIL may import coaland supply the same to the willing TPPs on cost plus basis. TPPsmay also import coal themselves if they so opt.

(iii) higher cost of imported coal to be considered for passthrough as per modalities suggested by CERC.

3. Ministry of Coal vide letter dated 26-7-2013 has notified thechanges in the New Coal Distribution Policy (NCDP) as approvedby the CCEA in relation to the coal supply for the next four yearsof the 12th Plan (copy enclosed).

4. As per decision of the Government, the higher cost of import/market based e-auction coal be considered for being made a passthrough on a case-to-case basis by CERC/SERC to the extent ofshortfall in the quantity indicated in the LoA/FSA and the CILsupply of domestic coal which would be minimum of 65%, 65%,67% and 75% of LoA for the remaining four years of the 12thPlan for the already concluded PPAs based on tariff basedcompetitive bidding.

5. The ERCs are advised to consider the request of individualpower producers in this regard as per due process on a case-to-case basis in public interest. The appropriate Commissions arerequested to take immediate steps for the implementation of theabove decision of the Government.

JAIPUR VIDYUT VITARAN NIGAM LTD. v. ADANI POWERRAJASTHAN LIMITED

This issues with the approval of MOS(P)I/C.Encl: As above.

Yours faithfully,

sd/-

(V. Apparao)

Director

This is further reflected in the revised Tariff Policy dated 28-1-2016, which in Para 1.1 states as under:

1.1. In compliance with Section 3 of the Electricity Act,2003, the Central Government notified the Tariff Policy on 6-1-2006. Further amendments to the Tariff Policy were notifiedon 31-3-2008, 20-1-2011 and 8-7-2011. In exercise of powersconferred under Section 3(3) of the Electricity Act, 2003, theCentral Government hereby notifies the revised Tariff Policyto be effective from the date of publication of the resolution inthe Gazette of India.

Notwithstanding anything done or any action taken orpurported to have been done or taken under the provisions ofthe Tariff Policy notified on 6-1-2006 and amendments madethereunder, shall, insofar as it is not inconsistent with this Policy,be deemed to have been done or taken under provisions of thisrevised policy.

Clause 6.1 states:

6.1. Procurement of power

As stipulated in Para 5.1, power procurement for futurerequirements should be through a transparent competitivebidding mechanism using the guidelines issued by the CentralGovernment from time to time. These guidelines provide forprocurement of electricity separately for base load requirementsand for peak load requirements. This would facilitate settingup of generation capacities specifically for meeting suchrequirements.

However, some of the competitively bid projects as per theguidelines dated 19-1-2005 have experienced difficulties in A

B

CDE

F

G

H

A

Agetting the required quantity of coal from Coal India Limited(CIL). In case of reduced quantity of domestic coal suppliedby CIL, vis-à-vis the assured quantity or quantity indicated inletter of assurance/FSA the cost of imported/market based e-auction coal procured for making up the shortfall, shall beconsidered for being made a pass through by appropriateBCommission on a case-to-case basis, as per advisory issuedby Ministry of Power vide OM No. FU-12/2011-IPC (Vol-III)dated 31-7-2013.”

In the aforesaid para, a discussion was made with respect tochange in terms and conditions prescribed for obtaining any consents,Cclearances, and permits. The change in law does not provide that letterof approval should be issued by CIL, as provided in Article 10.1 relatingto change in law. Even if the procedure is changed, that is to be giveneffect to.

In Re. SHAKTI Policy 2017D

60. Under the SHAKTI Policy notified on 22.5.2017, thoseIndependent Power Producers (IPPs), who were having PPAs basedon domestic coal, but were not having LoA or FSA for coal supply eitherunder NCDP of 2007 or NCDP of 2013, could participate in the auctionto get 100 per cent of the normative requirement of coal supply. TheEeligibility was based upon the fact that the PPA was based upon thedomestic supply. Under the SHAKTI Policy, APRL was given coalsupply to the full extent of the normative requirements for generatingand supplying electricity to the Rajasthan Discoms due to aforesaidsignificant terms in the PPA.F

61. It was argued that the imported coal as alternate coal wasavailable for 5 years, as such no relief could have been granted to APRLon the basis of change in law. As we have already discussed that therewas a change in law as per Article 10.1; thus, the submission to thecontrary is untenable.G26. It was argued that APRL unconditionally accepted stipulations

26. It was argued that APRL unconditionally accepted stipulationsin the LoI dated 17.12.2009 on 18.12.2009. The submission is equallyfutile as the PPA under Article 1.1 and Schedule V provide for domesticcoal as primary fuel and imported coal as a fallback arrangement.Whereas change in law was provided in Article 10. Article 15.6.2 of the H

PPA supersedes all prior written or oral understanding. The same isextracted hereunder:

“15.6.2 Except as provided in this Agreement, all prior written ororal understandings, offers or other communications of every kindpertaining to this Agreement or supply of power up to theContracted Capacity under this Agreement to the Procurers bythe Seller shall stand superseded and abrogated.”

63. Article 10 of the PPA is clearly attracted that the change inlaw was in contemplation. Article 10 cannot be made redundant; theagreement is binding and must prevail.

64. The argument raised by Shri C. Aryama Sundaram that carryingcost is a penal provision, cannot be accepted in view of the decision ofthis Court in Uttar Haryana Bijli Vitran Nigam Limited (UHBVNL),in which with respect to carrying cost, it was held that carrying cost waspayable in terms of restitution principle. The carrying cost is to be paidon the same basis as provided for other dues in the PPA.

65. It was argued that the RERC and the APTEL had notdetermined the amount. It is apparent that the principle has been workedout by the RERC as well as the APTEL. The quantification directionshave been issued to Rajasthan Discoms to verify the documents submittedby APRL and make payment in terms of the judgment and order. Nothingfurther was required to be done by the RERC as well as the APTEL.

66. Considering the facts of this case and keeping in view that theRERC and APTEL have given concurrent findings in favour of therespondent with regard to change in law, with which we also concur, wemay now deal with the question of liability of appellants-RajasthanDiscoms with regard to late payment surcharge. In this regard, thefollowing Articles 8.3.5 and 8.8 of PPA, which are relevant for the presentpurpose, are extracted hereunder:

“8.3.5. In the event of delay in payment of a Monthly Bill by theProcurers beyond its Due Date, a Late Payment Surcharge shallbe payable by such Procurers to the Seller at the rate of twopercent (2%) in excess of the applicable SBAR per annum, onthe amount of outstanding payment, calculated on a day to daybasis (and compounded with monthly rest), for each day of the A

B

C

D

E

F

G

H

Adelay. The Late Payment Surcharge shall be claimed by the Sellerthrough the Supplementary Bill.

8.8 Payment of Supplementary Bill

B

8.8.1 Either Party may raise a bill on the other Party (supplementarybill) for payment on account of:

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

ii) Tariff Payment for change in parameters, pursuant to provisionsin Schedule 4; or

iii) Change in Law as provided in Article 10, and suchSupplementary Bill shall be paid by the others party.

8.8.2 The Procurers shall remit all amounts due under aSupplementary Bill raised by the Seller to the Seller’s DesignatedDAccount by the Due Date and notify the Seller of such remittanceon the same day or the Seller shall be eligible to draw such amountsthrough the Letter of Credit. Similarly, the Seller shall pay allamounts due under a Supplementary Bill raised by Procurer(s) bythe Due Date to concerned Procurer’s designated bank accountEand notify such Procurer(s) of such payment on the same day.For such payments by the Procurer(s), Rebate as applicable toMonthly Bills pursuant to Article 8.3.6 shall equally apply.

8.8.3 In the event of delay in payment of a Supplementary Bill byeither Party beyond its Due Date, a Late Payment SurchargeFshall be payable at the same terms applicable to the Monthly Billin Article 8.3.5.

G

H

8.9 The copies of all; notices/offers which are required to be sentas per the provisions of this Article 8, shall be sent by a party,simultaneously to all parties.”

Liability of the Late Payment Surcharge which has been saddledupon the appellants is at the rate of 2% in excess of applicable SBARper annum, on the amount of outstanding payment, calculated on a dayto day basis (and compounded with monthly rest) for each day of the delay. Therefore, there shall be huge liability of payment of Late PaymentSurcharge upon the appellants-Rajasthan Discoms.

67. With regard to the question of interest/late payment surcharge,we notice that the plea of change in law was initially raised by APRL inthe year 2013. A case was also filed by APRL in the year 2013 itselfraising its claim on such basis. However, the appellants-RajasthanDiscoms did not allow the claim regarding change in law, because ofwhich APRL was deprived of raising the bills with effect from the dateof change in law in the year 2013. We are, thus, of the opinion thatconsidering the totality of the facts of this case and in order to do completejustice and to reduce the liability of the appellants-Rajasthan Discoms,payment of 2 per cent in excess of the applicable SBAR per annum withmonthly rest would be on higher side. In our opinion, it would beappropriate to direct the appellants-Rajasthan Discoms to pay interest/late payment surcharge as per applicable SBAR for the relevant years,which should not exceed 9 per cent per annum. It is also provided thatinstead of monthly rest, the interest would be compounded per annum.

68. We accordingly direct that the rate of interest/late paymentsurcharge would be at SBAR, not exceeding 9 per cent per annum, tobe compounded annually, and the 2 per cent above the SBAR (as providedin Article 8.3.5 of PPA) would not be charged in the present case.

69. Before we part with the case, we may notice that Shri PrashantBhushan, raised the submission with respect to over-invoicing. Heattracted our attention to the investigation pending before the DRI. Hehas submitted that 40 importers of coal are under investigation by theDRI concerning alleged over-invoicing. The letter of rogatory was issued.However, learned counsel conceded that there is no ultimate conclusionin the investigation reached so far. Thus, we are of the opinion that untiland unless there is a finding recorded by the competent court as toinvoicing, the submission cannot be accepted. At this stage, it cannot besaid that there is over-invoicing. We have examined the case on meritswith abundant caution, and we find that there are concurrent findings offacts recorded by the RERC and the APTEL. With respect to the aspectthat bid was premised on domestic coal, we find that findings recordeddo not call for any interference.

A

B

C

D

E

F

G

A70. A question was raised concerning the maintainability of theappeal of the Federation. It is important to mention that the Federationwas not the party before the RERC, and the APTEL rejected itsintervention application. The order was not interfered with by this Court.Be that as it may. Given the appeal preferred by Rajasthan Discoms,we have not examined the maintainability of the Federation’s appeal andBlocus to file an appeal. We leave the question open.

71. In view of the preceding discussion, the appeals are partlyallowed to the extent as indicated above.

No order as to costs.

C

Devika Gujral

Appeals partly allowed.

D

E

F

G

H