Jaipur Vidyut Vitaran Nigam Ltd. vs Adani Power Rajasthan Limited

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2020 Supreme(SC) 516

SUPREME COURT OF INDIA
Arun Mishra, Vineet Saran, M.R. Shah, JJ.
Jaipur Vidyut Vitaran Nigam Ltd. & Ors. – Appellants
Versus
Adani Power Rajasthan Limited & Anr. – Respondents
CIVIL APPEAL NOS.8625-8626 OF 2019 WITH CIVIL APPEAL NO(S). 3021 OF 2020 (DIARY NO.27976 OF 2019) AND CIVIL APPEAL NO(S). 3022-3023 OF 2020 (DIARY NO.39030 OF 2019)
Decided On : 31-08-2020

Headnote:(A) Electricity Act, 2003 - Section 63 - Power Purchase Agreement - Claim for increased tariff under change in law provisions denied - Appellant, as electricity distribution licensee, entered into PPA with generating company, whose bid was based on domestic coal, subsequently transitioning to reliance on imported coal due to non-allocation of domestic coal linkage - Court held that change in law events recognized and entitled generating company to compensation for shortfall in domestic linkage coal as defined under Article 10 of PPA. (Paras 10, 24, 46)

(B) Change in Law - Definition and implications under PPA - Court emphasized that change in domestic coal law affects tariff and warrants compensation to restore economic position as if the change had not occurred. (Paras 10.1, 10.2)

(C) Late Payment Surcharge - Court modified terms from 2% above applicable SBAR per annum to a limit of 9% per annum compounded annually. (Paras 68)

Facts of the case:
Appellants (discoms) denied claims made by Respondent (generating company) for increased tariff under change in law provisions due to non-availability of domestic coal, thereby infringing the agreed tariff terms in the PPA.

Findings of Court:
The Court affirmed the decision of the APTEL regarding the applicability of change in law, holding that generating company was eligible for compensation due to non-allocation of domestic coal.

Issues: Whether the bid was premised on domestic coal, the implications of coal allocation policies, and entitlement to compensation under change in law provisions.

Ratio Decidendi: The PPA based its economic rationale on domestic coal utilization and subsequent revisions in coal policy affecting domestic coal allocations warranted compensation for the generator, thereby upholding the principle of restitution in tariff adjustments.

Result: Appeals partly allowed.

Table of Content
1. electricity distribution agreement background. (Para 1 , 2 , 3 , 4 , 5 , 6)
2. coal supply agreements and compliance. (Para 7 , 8 , 9 , 10 , 11)
3. clarification on fuel and bid conditions. (Para 12 , 13 , 14)
4. power purchase agreement terms. (Para 15 , 16 , 17 , 18)
5. regulatory framework on coal distribution. (Para 19 , 20 , 21 , 22)
6. judicial ruling on compensation claims. (Para 23 , 24)
7. arguments on liability for coal supply. (Para 25 , 26 , 27)
8. analysis of statutory guidelines. (Para 28 , 29 , 30 , 31)
9. clarification on bid evaluations. (Para 32 , 33 , 34 , 35 , 36)
10. findings regarding fuel supply agreement. (Para 37 , 38 , 39)
11. court's reasoning based on prior agreements. (Para 40 , 41 , 42 , 43)
12. implications of coal supply policy changes. (Para 44 , 45 , 46)
13. effect of coal supply disruptions on contracts. (Para 47 , 48 , 49 , 50)
14. legal interpretation of changes in coal distribution law. (Para 51 , 52 , 53 , 54)
15. consequences of legal changes on power agreements. (Para 55 , 56 , 57)
16. discussion on shakti policy's impact on allocations. (Para 58 , 59 , 60)
17. reliance on commitments in ppa under new policies. (Para 61 , 62 , 63)
18. assessment of late payment and interest obligations. (Para 64 , 65 , 66)
19. final orders on payment terms and distribution. (Para 67 , 68)
20. conclusions and implications of appeals. (Para 69 , 70 , 71)

JUDGMENT :

1. The appellant herein Jaipur Vidyut Vitran Nigam Limited is the electricity Distribution Licensee in the State of Rajasthan. It entered into a Power Purchase Agreement (for short, ‘PPA’) on 28.1.2010 with Adani Power Rajasthan Limited (for short, ‘APRL’), a generating company in pursuance to a tariff-based competitive bid process in terms of 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 per the specific provisions contained in the PPA, not otherwise.

2. APRL made a claim for an increased tariff under the change in law provisions in the PPA (Article 10). On 23.10.2006, Rajasthan Rajya Vidyut Utpadan Nigam Limited (for short, ‘RVUN’) conveyed to Adani Exports Limited its selection as a joint venture partner for the formation of a Joint Venture Company. It was stated that business activities of the proposed Joint Venture Company shall be limited to mining and supply of coal from allotted captive coal block for the requirement of existing/new thermal 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 by RVUN in favour of Adani Enterprise Limited (for short, ‘AEL’) for developing the coal block under a joint venture at Parsa East and Kente Basan, wherein it was provided that the coal can be utilised at the discretion of the Government of Rajasthan for new upcoming projects in the State under the joint venture or IPP.

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

5. On 20.3.2008, an MoU was entered into between the Government of Rajasthan and AEL to set up a coal-based Thermal Power Generation Project of 1200 MW ±10 percent capacity near Kawai, District Baran, Rajasthan. The estimated cost of the project was approximately Rs.5,000 crores. It was provided that the State of Rajasthan was to make the best efforts to facilitate getting the coal linkage from the Central Government or coal from any other source for the Project.

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

7. On 21.5.2008, it was conveyed to APRL that the State will make the best efforts to facilitate for getting coal linkage from the Government of India. It was informed that it would not be possi

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