The judgment deals with the interpretation of the term 'Change in Law' under various Power Purchase Agreements (PPAs) and the entitlement of Generators to compensation for changes in law occurring after the cut-off date. The Court held that all additional charges payable on account of orders, directions, Notifications, Regulations, etc., issued by the instrumentalities of the State, after the cut-off date, will have to be considered to be 'Change in Law' events. The Generators would be entitled to compensation on the restitutionary principle on such changes occurring after the cut-off date.

Fact of the Case:

Numerous cross-appeals were filed challenging the common judgment and order dated 14th August 2018 passed by the learned Appellate Tribunal for Electricity, New Delhi (hereinafter referred to as “APTEL”) in Appeal No. 111 of 2017 & I.A. No.450 of 2018 and in Appeal No.290 of 2017 & I.A. No.519 of 2017. The appeals arose out of long term Power Purchase Agreements (“PPAs”) for supply of power to various Distribution Companies (“DISCOMS”). The main issue in the appeals was whether certain changes in law, such as changes in coal prices, railway freight charges, and environmental regulations, constituted “Change in Law” events under the PPAs, entitling the Generators to compensation.

Finding of the Court:

The Court held that all additional charges payable on account of orders, directions, Notifications, Regulations, etc., issued by the instrumentalities of the State, after the cut-off date, will have to be considered to be “Change in Law” events. The Generators would be entitled to compensation on the restitutionary principle on such changes occurring after the cut-off date. The Court further held that the term “Law” in the PPAs would include all applicable rules, regulations, orders, Notifications issued by an Indian Governmental Instrumentality and shall also include all rules, regulations, decisions and orders of the Central Electricity Regulatory Commission (CERC) and the MERC.

Issues: 1. Whether 'Change in Law' relief on account of New Coal Distribution Policy, 2013 ("NCDP 2013") should be on 'actuals' viz. as against 100% of normative coal requirement assured in terms of New Coal Distribution Policy, 2007 ("NCDP 2007") OR restricted to trigger levels in NCDP 2013 viz. 65%, 65%, 67% and 75% of ACQ? 2. Whether for computing 'Change in Law' relief, the operating parameters should be considered on 'actuals' OR as per technical information submitted in bid? 3. Whether 'Change in Law' relief compensation is to be granted from 1st April 2013 (start of Financial Year) or 31st July 2013 (date of NCDP 2013)? 4. Whether Busy Season Surcharge and Development Surcharge and Port Congestion Surcharge; MoEF Notification on coal quality; Shortfall in linkage coal due to Change in NCDP; Forest Tax; Add on Premium price; Evacuation Facility Charges (EFC) would amount to 'Change in Law' events? 5. Whether various taxes/charges imposed by various State Governments would also fall under 'Change in Law' events? 6. At what rate the Generators would be entitled to 'carrying cost'.

Ratio Decidendi: The Court held that the term “Law” in the PPAs would include all applicable rules, regulations, orders, Notifications issued by an Indian Governmental Instrumentality and shall also include all rules, regulations, decisions and orders of the CERC and the MERC. Therefore, all additional charges payable on account of orders, directions, Notifications, Regulations, etc., issued by the instrumentalities of the State, after the cut-off date, will have to be considered to be “Change in Law” events. The Generators would be entitled to compensation on the restitutionary principle on such changes occurring after the cut-off date.

Final Decision: The appeals were dismissed.