# HARYANA POWER PURCHASE CENTRE v. SASAN POWER LTD. & ORS

- **Citation:** [2023] 8 S.C.R. 1
- **Court:** Supreme Court of India
- **Decided:** 2023-04-06
- **Case number:** Civil Appeal No. 11826 of 2018
- **Bench:** K. M. Joseph, B. V. Nagarathna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/haryana-power-purchase-centre-v-sasan-power-ltd-ors-37544
- **Pages:** 84

## Headnote

Electricity Laws - Appellate Tribunal for Electricity (APTEL)
and Central Electricity Regulatory Commission (CERC), if
empowered to disregard the express words of a contract and create
a new bargain - Held: In a case where the matter is governed by
express terms of the contract, it may not be open to the Central
Electricity Regulatory Commission even donning the garb of a
regulatory body to go beyond the express terms of the contract -
While it may be open for a regulation to extricate a party from its
contractual obligations, in the course of its adjudicatory power it
may not be open to the Commission by using the nomenclature
regulation to usurp this power to disregard the terms of the contract
- The Appellate Tribunal for Electricity cannot indeed make a new
bargain for the parties - The Tribunal cannot rewrite a contract
solemnly entered into - It cannot ink a new agreement - Such
residuary powers to act which varies the written contract cannot be
located in the power to regulate - The power cannot, at any rate,
be exercised in the teeth of express provisions of the contract - In a
matter where the parties have entered into a contract with express
provisions, it cannot be said that the Tribunal would have power to
disregard the express provisions of the contract on the score that as
it turns out that with passage of time and even change in
circumstances, it is found that the contract cannot be worked except
at a loss for the contractor - Contract.
Electricity Act, 2003: s.79 - Power Plant Project - Special
Purpose Vehicle - Power Purchase Agreement (PPA) - Compensation
due to 'change in law' - Special purpose vehicle formed to set up
an Ultra Mega Power Project - Power generated by the successful
bidder was to be supplied through procurers/distribution licensees
(appellant) - Petition u/s.79 of Electricity Act read with the statutory
framework governing procurement of power through competitive
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SUPREME COURT REPORTS
[2023] 8 S.C.R.
bidding and Articles 13 and 17 of the PPA for compensation due to
change in law 'during the construction period' - Held: The matter
must be viewed from the prism of the specific provisions defining
the change in law and the actual change in law - On facts, the PPA
contemplates that if the seller is affected by change in law and
wishes to claim change in law, it has to notify the procurers of the
change in law as soon as is reasonably practicable after becoming
aware of the same - There is no material made available indicating
that the procurers have held out that they will be liable - It could
not be a change in law as contemplated in the agreement as it was
not a change in initial consent which was the only case which was
argued in this regard - Parties were clear about how the change in
law had to be compensated and methodology has been set out clearly
- Therefore, any appeal made to the general part in Article 13.2
which speaks about the affected party being restored to the same
economic condition as if such change in law had not occurred cannot
result in departing from the specific formula which has been set in
place - If a certain timelimit is crossed by the procurers in the
performance of its obligations in this regard, the seller (the first
respondent) has been given the right to repudiate the contract - It
is not the case of the first respondent that it purported to repudiate
the contract - On the other hand, it is the common case that the
contract continued to be alive and it has survived subject to the
claims which have been raised thereunder - This would mean that
as the consequences of failure to perform the task having been
provided in the contract in the manner provided, one should not
ordinarily tarry further to ask as to whether this would provide the
premise for a change in law as contemplated under Article 13.1.1 -
Even in terms of the case built around Part II of Schedule 2 to the
PPA under which the performing of the task mentioned in Article
3.1.2A within

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 [2023] 8 S.C.R. 1
HARYANA POWER PURCHASE CENTRE
v.
SASAN POWER LTD. & ORS.
(Civil Appeal No. 11826 of 2018)
APRIL 06, 2023
[K. M. JOSEPH AND B. V. NAGARATHNA, JJ.]
Electricity Laws - Appellate Tribunal for Electricity (APTEL)
and Central Electricity Regulatory Commission (CERC), if
empowered to disregard the express words of a contract and create
a new bargain - Held: In a case where the matter is governed by
express terms of the contract, it may not be open to the Central
Electricity Regulatory Commission even donning the garb of a
regulatory body to go beyond the express terms of the contract -
While it may be open for a regulation to extricate a party from its
contractual obligations, in the course of its adjudicatory power it
may not be open to the Commission by using the nomenclature
regulation to usurp this power to disregard the terms of the contract
- The Appellate Tribunal for Electricity cannot indeed make a new
bargain for the parties - The Tribunal cannot rewrite a contract
solemnly entered into - It cannot ink a new agreement - Such
residuary powers to act which varies the written contract cannot be
located in the power to regulate - The power cannot, at any rate,
be exercised in the teeth of express provisions of the contract - In a
matter where the parties have entered into a contract with express
provisions, it cannot be said that the Tribunal would have power to
disregard the express provisions of the contract on the score that as
it turns out that with passage of time and even change in
circumstances, it is found that the contract cannot be worked except
at a loss for the contractor - Contract.
Electricity Act, 2003: s.79 - Power Plant Project - Special
Purpose Vehicle - Power Purchase Agreement (PPA) - Compensation
due to 'change in law' - Special purpose vehicle formed to set up
an Ultra Mega Power Project - Power generated by the successful
bidder was to be supplied through procurers/distribution licensees
(appellant) - Petition u/s.79 of Electricity Act read with the statutory
framework governing procurement of power through competitive
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SUPREME COURT REPORTS
[2023] 8 S.C.R.
bidding and Articles 13 and 17 of the PPA for compensation due to
change in law 'during the construction period' - Held: The matter
must be viewed from the prism of the specific provisions defining
the change in law and the actual change in law - On facts, the PPA
contemplates that if the seller is affected by change in law and
wishes to claim change in law, it has to notify the procurers of the
change in law as soon as is reasonably practicable after becoming
aware of the same - There is no material made available indicating
that the procurers have held out that they will be liable - It could
not be a change in law as contemplated in the agreement as it was
not a change in initial consent which was the only case which was
argued in this regard - Parties were clear about how the change in
law had to be compensated and methodology has been set out clearly
- Therefore, any appeal made to the general part in Article 13.2
which speaks about the affected party being restored to the same
economic condition as if such change in law had not occurred cannot
result in departing from the specific formula which has been set in
place - If a certain timelimit is crossed by the procurers in the
performance of its obligations in this regard, the seller (the first
respondent) has been given the right to repudiate the contract - It
is not the case of the first respondent that it purported to repudiate
the contract - On the other hand, it is the common case that the
contract continued to be alive and it has survived subject to the
claims which have been raised thereunder - This would mean that
as the consequences of failure to perform the task having been
provided in the contract in the manner provided, one should not
ordinarily tarry further to ask as to whether this would provide the
premise for a change in law as contemplated under Article 13.1.1 -
Even in terms of the case built around Part II of Schedule 2 to the
PPA under which the performing of the task mentioned in Article
3.1.2A within the time provided was to be treated as a deemed initial
consent, the consequence of failure to do that have been expressly
spelt out - At best or at worst, it could have empowered the first
respondent to rescind the contract - The first respondent has not
been able to demonstrate that there was a change in law.
Doctrines / Principles - Principle of contra proferentem -
Explained - Held: The principle of contra proferentem is ordinarily
utilised in contracts of insurance and standard form contracts -
The principle apparently in substance is that in case of any doubt
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in its terms, the doubt should be resolved against the party who
drafted the contract.
PTC India Limited v. Central Electricity Regulatory
Commission (2010) 4 SCC 603 : [2010] 3 SCR 609 -
held inapplicable.
Energy Watchdog v. Central Electricity Regulatory
Commission and Others (2017) 14 SCC 80 : [2017]
3 SCR 153 and Uttar Haryana Bijli Vitran Nigam Ltd.
& Anr. v. Adani Power Limited & Ors. (2019) 5 SCC
325 : [2019] 4 SCR 487 - relied on.
Gujarat Urja Vikas Nigam Ltd. v. Essar Power (2008)
4 SCC 755 : [2008] 4 SCR 822; Skandia Insurance
Co. Ltd. v. Kokilaben Chandravan & Ors. (1987) 2 SCC
654 : [1987] 2 SCR 752; DLF Universal Limited v.
Director, Town and Country Planning Department,
Haryana (2010) 14 SCC 1 : [2010] 15 SCR 85;
Sumitomo Heavy Industries v. Oil and Natural Gas
Commission of India (2010) 11 SCC 296 : [2010] 9
SCR 176; Nabha Power Limited v. PSPCL (2018) 11
SCC 508 : [2017] 14 SCR 301; Prahlad & Ors. v. State
of Maharashtra & Anr. (2010) 10 SCC 458 : [2010]
11 SCR 916; State of Punjab & Ors. v. Bakshish Singh
(1998) 8 SCC 222 : [1998] 1 Suppl. SCR 478; Mahant
Dhangir & Anr. v. Madan Mohan & Ors. (1987) (Supp)
SCC 528 : [1988] 1 SCR 679; Uttar Pradesh Power
Corporation Limited v. National Thermal Power
Corporation Limited and Others (2009) 6 SCC 235 :
[2009] 3 SCR 1060; Gujarat Urja Vikas Nigam Limited
v. Tarini Infrastructure Limited and Others (2016) 8 SCC
743 : [2016] 5 SCR 990 and Manohar Lal Sharma v.
Principal Secretary & Ors. (2014) 9 SCC 614 : [2014]
12 SCR 110 - referred to.
Case Law Reference
[2017] 3 SCR 153
relied on
Para 28
[2019] 4 SCR 487
relied on
Para 28
[2008] 4 SCR 822
referred to
Para 28
HARYANA POWER PURCHASE CENTRE v. SASAN POWER
LTD. & ORS.
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SUPREME COURT REPORTS
[2023] 8 S.C.R.
[1987] 2 SCR 752
referred to
Para 28
[2010] 15 SCR 85
referred to
Para 28
[2010] 9 SCR 176
referred to
Para 28
[2017] 14 SCR 301
referred to
Para 28
[2010] 11 SCR 916
referred to
Para 29
[1998] 1 Suppl. SCR 478
referred to
Para 29
[1988] 1 SCR 679
referred to
Para 29
[2009] 3 SCR 1060
referred to
Para 37
[2016] 5 SCR 990
referred to
Para 39
[2019] 4 SCR 487
referred to
Para 84
[2017] 3 SCR 153
referred to
Para 86
[2010] 3 SCR 609
held inapplicable
Para 94
[2014] 8 SCR 446
referred to
Para 118
[2014] 12 SCR 110
referred to
Para118
CIVIL APPELLATE JURISDICTION : Civil Appeal No.11826
Of 2018.
From the Judgment and Order dated 20.11.2018 of the Appellate
Tribunal for Electricity, New Delhi in Appeal No.121 of 2015.
With
Civil Appeal Nos.11927, 12190 of 2018, 1670 Of 2019, 12232 of
2018 and 1742 of 2019
G. Umapathy, P. Chidambaram, M.G. Ramachandran, Rana
Mukherjee, Sajan Povayya, Sr. Advs., Rohit K. Singh, Anand K.
Ganesan, Ms. Poorva Saigal, Nikunj Dayal, Shubham Arya, Amal Nair,
Ms. Kritika Khanna, Ms. Pallavi Saigal, Ms. Reeha Singh, Ms. Shikha
Sood, Ms. Anumeha Smiti, K. V. Mohan, K.V. Balakrishnan, Ravi Nair,
Rahul Kumar Sharma, Rakesh K. Sharma, Rajiv Srivastava, Nishant
Sharma, Ms. Gargi Srivastava, Ms. Adviteeya, Ms. Aparna Bhat, Amit
Kapur, Pukhrambam Ramesh Kumar, Rahul Kinra, Aditya Ajay, Karun
Shrama, Girdhar Gopal Khattar, Ms. Aliva Ahmed, Ms. Raksha Agrawal,
Ms. Divyya Kaul, Hasan Murtaza, Advs. for the appearing parties.
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The Judgment of the Court was delivered by
K. M. JOSEPH, J.
(1) The six appeals with which we are concerned have been filed
under Section 125 of the Electricity Act, 2003 (hereinafter referred to as
'Act' for brevity). The appeals are directed against the order passed by
the Appellate Tribunal for Electricity (hereinafter referred to as 'Tribunal'
for brevity) in an appeal carried by the first respondent under Section
111 of the Act.
(2) The appeal before the Tribunal, in turn, was lodged against the
order passed by the Central Electricity Regulatory Commission
(hereinafter referred to as 'Commission' for brevity). The Commission
passed the order purporting to be one under Section 79(b) inter alia of
the Act in a petition filed by the first respondent.
FACTS
(3) It was decided to set up an Ultra Mega Power Project. Towards
this end, the Power Finance Corporation Limited of India was to be the
nodal agency. It incorporated a Special Purpose Vehicle, which is the
first respondent. The idea was to set up the Ultra Mega Power Project
which would be operated by the successful bidder selected through an
international competitive bidding. The power generated by the successful
bidder was to be supplied through procurers (the appellants before us),
who can be described also as the distribution licensees under the Act.
The appellants were to supply the power so procured finally to the
consumers.
(4) Since what was contemplated was seeking shelter under
Section 63 of the Act, we must refer to the guidelines which have been
issued by the Central Government purporting to act under Section 63.
Guidelines were issued on 19.01.2005. We deem it appropriate to set out
the following guidelines:
"2.1 These guidelines are being issued under the provisions of
Section 63 of the Electricity Act, 2003 for procurement of electricity
by distribution licensees (Procurer) for:
(a) long-term procurement of electricity for a period of 7 years
and above;
(b) Medium term procurement for a period of upto 7 years but
exceeding 1 year.
HARYANA POWER PURCHASE CENTRE v. SASAN POWER
LTD. & ORS.
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[2023] 8 S.C.R.
2.2 The guidelines shall apply for procurement of base-load and
seasonal power requirements through competitive bidding, through
the following mechanisms:
i. Where the location, technology, or fuel is not specified by the
procurer (Case 1);
ii. For hydro-power projects, load center projects or other location
specific projects with specific fuel allocation such as captive mines
available, which the procurer intends to set up under tariff based
bidding process (Case 2)."
(5) The guidelines are binding on the procurers. Guideline 3.2
which is related to preparation for the invitation of bids would assume
relevance. It reads as follows:
"3.2 For long-term procurement from hydro electric projects or
for projects for which pre-identified sites are to be utilized (Case
2), the following activities should be completed by the procurer or
authorized representative of the procurer, before commencing the
bid process:
- Site identification and land acquisition required for the project
- Environmental clearance
- Fuel linkage, if required (may also be asked from bidder)
- Water linkage
- Requisite Hydrological, geological, meteorological and
seismological data necessary for preparation of Detailed Project
Report (DPR), where applicable.
The bidder shall be free to verify geological data through his own
sources, as the geological risk would lie with the project developer.
The project site shall be transferred to the successful bidder at a
declared price.
Provided that for the projects from which more than one distribution
licensees located in different States intend to procure power and
if the preparations for such projects are being facilitated by the
Central Government, the activities referred to above shall be
initiated before the bidding process and should be completed before
signing the power purchase agreement with the selected bidder.
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(6) Under the guidelines, tariff structure is contemplated which
consists of capacity charges and energy charges which are dealt with in
detail. It also deals with bidding process. The bidding process itself is
divided into two stages, viz., a determination of the qualification by a
pre-qualification system and thereafter submission and consideration of
essentially what consists of the financial bid. There is a guideline which
deals with arbitration and it was contained in guideline 5.17:
"5.17 The procurer will establish an Amicable Dispute Resolution
(ADR) mechanism in accordance with the provisions of the Indian
Arbitration and Conciliation Act, 1996. The ADR shall be
mandatory and time-bound to minimize disputes regarding the bid
process and the documentation thereof.
If the ADR fails to resolve the dispute, the same will be subject to
jurisdiction of the appropriate Regulatory Commission under the
provisions of the Electricity Act 2003."
(7) It is, accordingly, purporting to act in terms of the guidelineS
that a Request for Qualification (for short RFQ) came to be issued on
31.03.2006. Reliance Power Limited was one of the bidders which was
pre-qualified in terms of the RFQ. On 18.08.2006, there was a change
notified in the guidelines. It brought about the following changes in the
guidelines 5.17 besides guideline No. 4.7. The unamended and the
amended guidelines 4.7 and 5.17 read as follows:
HARYANA POWER PURCHASE CENTRE v. SASAN POWER
LTD. & ORS. [K. M. JOSEPH, J.]
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SUPREME COURT REPORTS
[2023] 8 S.C.R.
(8) On 21.08.2006, a Request for Proposal, for short RFP, came
to be issued. We deem it appropriate to refer to the following provisions
of the RFP.
"4. While this RFP has been prepared in good faith, neither the
Procurers, Authorised Representative and Power Finance
Corporation Limited (PFC) nor their directors or employees or
advisors/consultants make any representation or warranty, express
or implied, or accept any responsibility or liability, whatsoever, in
respect of any statements or omissions herein, or the accuracy,
completeness or reliability of information contained herein, and
shall incur no liability under any law, statute, rules or regualations
as to the accuracy, reliability or completeness of this RFP, even if
any loss or damage is caused to the Bidder by any act or omission
on their part.
1.3 The objective of the bidding process is to select a
SuccessfulBidder for development of the Project as per the terms
of the RFP. The Project will have a Contracted Capactiy of
minimum of 3500 MW and maximum of 3800 MW in accordance
witht he terms of the PPA. The Selected Bidder shall purchase
the entire shareholding of the Authorised Representative from
PFC and its nominees in accordance with Share Purchase
Agreement and cause the Seller to enter into the RFP Project
Documents. The Selected Bidder shall be responsible for ensuring
that the Seller undertakes development, finance, ownership, design,
engineering procurement, construction, commissioning, operation
and maintenance of the Project as per the terms of the RFP Project
Documents. The Selected Bidder shall also ensure:
(i) All equipment and auxiliaries shall be suitable for continuous
operation in the frequency range of 47.5 to 51.5 Hz (-5% to +3%
of rated frequency of 50.0 Hz).
(ii)The plant shall be capable of delivering contracted capacity
continously at 47.5 Hz grid frequency.
1.4 The Procurers through the Authorised Representative, have
initiated development of the Project at Sasan, District Sidhi,
Madhya Pradesh and shall complete the following tasks in this
regard by such time as specified hereunder:
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iv. Allocation of main Captive Coal Mine(s) and providing
geological report (GR) for the same; at least ninety (90) days
prior to Bid Deadline. Allocation of other Captive Coal Mine(s)
and available information regarding quality and quantity of coal
(GR related information) would be made available at least thirty
(30) days prior to Bid Deadline. The Seller shall pay the final cost
of geological reports (Grs). The Indicative Cost of geological
reports (Grs), would be made available at least thirty (30) days
prior to bid Deadline;
v. Tying up water linkage for the Project requirement along with
approval of Central Water Commission, at least thirty (30) days
prior to Bid Deadline;
Water intake study report and Project Report including geotechnical study, topographical survey, area drainage study, socioeconomic study and EIA study (rapid) would be made available
at least ninety (90) days prior to Bid Deadline;
vi. issue of certificate by Ministry of Power, Government of India
extending the benefits to power generation projects under Mega
Power Policy upto the Scheduled COD of the Power Station by
Government of India at least thrity (30) days prior to Bid Deadline;
It may be noted that noe of the Procurers, Authorised
Representative and PfC, nor their directors, employees or advisors/
consultants make any representation or warranty, express or
implied, or accept any responsibility or liability, whatsoever, in
respect of any statements or omissions made in the water intake
study report and Project Report, or the accuracy, completeness
or reliablility of information contained therein, and shal incur no
liability under any law, statute, rules or regualtions as to the
accuracy, reliability or completeness of such water intake study
report and Project Report, even if any loss or damage is caused
to the Selected Bidder by any act or omission on their part. The
Ministry of Power and the State Government of Madhya Pradesh
have expressed their support to the Seller, on best endeavour basis,
in enabling the Seller to develop the Project.
2.7.2.1 The Bidder shall make independent enquiry and satisfy
itself with respect to all the required information, inputs, conditions
and cirumstances and factors that may have any effect on his
HARYANA POWER PURCHASE CENTRE v. SASAN POWER
LTD. & ORS. [K. M. JOSEPH, J.]
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[2023] 8 S.C.R.
Bid. In assessing the Bid, it is deemed that the Bidder has inspected
and examined the site conditions and its surroundings, examined
the laws and regulations in force in India, the transportation facilities
available in India, the grid conditions, the conditions of roads,
bridges, ports, etc. For unloading and/or transporting heavy pieces
of material and has based its design, equipment size and fixed its
price taking into account all such relevant conditions and also the
risks, contingencies and other circumstances which mayh influence
or affect the supply of power.
2.7.2.2 In their own interest, the Bidders are requested to
familiarize themselves with the Electricity Act, 2003, the Income
Tax Act 1961, the Companies Act, 1956, the Customs Act, the
Foreign Exchange Management Act, IEGC, the regulations
framed by regulatory commissions and all other related acts, laws,
rules and regulations prevalent in India. The procuers shall not
entertain any request for clarifications from the Bidders regarding
the same. Non-awareness of these laws or such information shall
not be a reason for the Bidder to request for extension of the Bid
Deadline. The Bidder undertakes and agrees that before
submission of its Bid all such factors, as generally brought out
above, have been fully investigated and considered while submitting
the Bid.
ANNEXURE 5
SITE DETAILS ALONG WITH SITE MAP
The Site is located near Sasan village in Singrauli Tehsil in District
Sidhi of Madhya Pradesh. The nearest Railway Station is Shakti
Nagar (18km) and nearest Airport is Varanasi (250 km). The site
is situated at 23°58'30"N latitude and 82°37'03"E longtitue.
About 3500 acres of land has been identified for the project
covering villages of Sidhikala, Harhawa, Tiara, Jhanjitola and
Sidhikhud. Out of this, about 2000 acres of land has been identified
for main plant, about 1100 acres for ash disposal/dyke and 400
acres for colony.
Water source for the project is Govind Ballabh Pant Sagar (Rihand
Reservoir), which is about 6-7 km from the main plant site. Water
will be brought to site by suitable pumping arrangement and
pipelines.
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Coal blocks (mines) in Singrauli area with reserves of about 700800 million tons will be allocated as Captive Coal Blocks (mines)
for this Project. The Project will require the development of a
coalmine with production of 18-20 million tons per annum (MTPA)
Vicinity map of Site is enclosed.
Further details are provided in the Project Report."
(9) We may, at this juncture, notice also that the Special Purpose
Vehicle which was put in place for carrying out the activities also,
commissioned a study by WAPCOS (a public sector body of the Central
Government). It was tasked with the project to ascertain about the
availability of water inter alia. Water is an indispensable factor for the
successful running of the power plant which was contemplated.
WAPCOS made available its report on 03.08.2006.
(10) Reliance Power Limited applied pursuant to the RFP. Though,
initially, its bid was not the lowest, but on account of the fact that the
lowest bidder was found to be not eligible, Reliance Power Limited
emerged as the lowest bidder. In keeping with the conditions, Reliance
Power Limited acquired 100 per cent share holding of the first respondent
and it was favoured with the Letter of Intent on 01.08.2007. It entered
into a Power Purchase Agreement (hereinafter referred to as 'PPA')
on 07.08.2007. In the second week of December, 2007, it would appear
that the first respondent which now stood transformed as a fully owned
company of the successful bidder Reliance Power Limited, commissioned
a new Study by WAPCOS. WAPCOS submitted its report on 04.04.2008.
We must at this juncture notice that '21.07.2007' has been determined
as the cut off date, the relevance of which will be unfolded in the later
part of the judgment.
(11) The PPA contemplated two phases. The first phase was the
construction of the power plant. The second was the operation of the
power plant. The PPA was to be enforced for a period of 25 years.
Therefore, we can safely characterise it as along term agreement to
purchase power. Since this was a case of competitive bidding, leading to
the finding out of the lowest bidder, but faced with the regime under
Section 63 of the Act which stood attracted, after the PPA was entered
into, a petition was moved before the Commission for adopting the rates
as contemplated in the PPA. By order dated 17.10.2007, the Commission
after considering the relevant matters, adopted the rates in accordance
with the PPA. It is, thereafter, that the present petition was moved by
HARYANA POWER PURCHASE CENTRE v. SASAN POWER
LTD. & ORS. [K. M. JOSEPH, J.]
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SUPREME COURT REPORTS
[2023] 8 S.C.R.
the first respondent on 19.02.2013. It is relevant at this stage to set out
certain portions of the petition. The petition has been filed under Section
79 of the Act read with the statutory framework governing procurement
of power through competitive bidding and articles 13 and 17 of the PPA
between the parties for compensation due to change in law 'during the
construction period'. After setting out the facts which we do not consider
relevant to advert to, the following is noticed.
"5. It is submitted that the following Changes in Law have occurred
during the Construction Period of the Project which have caused
the Capital Cost of the Project to increase substantially:
a) Increase in Declared price of Land for the Project which
includes the land for the Power Station, the Moher, Moher-Amlohri
Extension and Chhatrasal captive coal blocks;
b) Increase in cost of implementation of the Resettlement and
Rehabilitation Plan ("R&R Plan") for the Moher, Moher-Amlohri
Extension and Chhatrasal captive coal blocks;
c) Increase in cost of Geological Reports for the Moher, MoherAmlohri Extension and Chhatrasal captive coal blocks;
d) Increase in cost of compensatory afforestation for the Moher,
Moher-Amlohri Extension and Chhatrasal captive coal blocks;
e) Increase in cost of Water Intake system due to an incorrect
assessment of conditions in the original report supplied to the
bidders at the RFP stage;
f) Levy of excise duty on cement and steel used in the Project;
and
g) Levy of Customs Duty on mining equipment imported for the
Project."
(12) Since, in this case, we are concerned only with two aspects,
namely claims under clause(e) and clause(g) we deem it appropriate
only to refer to the pleadings of the first respondent in regard to the
same.
Increase in cost of Water Intake System
"65. As per Clause 1.4(v) of RFP for Sasan UMPP, the Procurers
through the Authorized Representative had to provide water intake
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study report. WAPCOS (a premier Government of India agency)
was appointed to conduct the water intake study. WAPCOS, as
the expert agency identified the water intake pump house location
and the pipeline route from the intake pump house to the power
plant in its Report. This report was made available to all the bidders
before bid submission so that the bidders could factor in the cost
of the water intake system in preparation of their financial bid i.e.,
the tariff at which power would be supplied to the Procurers. The
total estimated cost for the construction of water intake system
for the location and route indicated in the report by WAPCOS
was estimated to be approximately Rs.92 Crores. The WAPCOS
Report along with the estimated cost are annexed herewith and
marked as Annexure P-24 (Colly)."
"66. After RPower acquired the Petitioner, WAPCOS was
appointed to confirm the technical feasibility as part of detailed
engineering exercise. During this process, it was discovered that
the water intake location as finalized by WAPCOS before the
bidding was not an appropriate location and does not ensure reliable
supply of water to the power plant. It was also found that the
water intake at the original location indicated by WAPCOS in the
pre-bid report would have resulted in shutdown of power plant
for a considerable period during the lean season."
"67. Thereafter, WAPCOS conducted detailed bathymetric studies
and recommended a new location for water intake, which was 23
km from the power plant as against 12.5 km initially indicated at
the time of bidding (original location). It was highlighted that new
location would ensure reliable water supply to the power plant.
Due to increase in distance, submergence area along the route
and construction time, there has been considerable increase in
the cost of the water intake system as detailed below. The report
of WAPCOS recommending the revised location is annexed
herewith and marked as Annexure p-25."
"68. The cost for the construction of water system for the new
location is Rs. 244 Cr. Out of the aforesaid amount, a sum of
Rs.185 Crores has already been incurred and balance of Rs.
59Crores is to be spent. The estimated increase in cost of the
water intake system due to the change in location of the water
intake system is Rs.152 Crores. Since this increase is directly
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attributable to the error in the WAPCOS report provided to the
bidders at the pre-bid stage, the Petitioner is required to be
compensated for the same. The cost break up for the new/
appropriate location which will ensure reliable water supply is
annexed herewith and marked as Annexure P-26."
"75. It is submitted that the UMPP Policy envisages domestic
coal based UMPPs as integrated projects where the power station
and the captive coal mines are treated as an integrated unit. This
is also recognized in the PPA as well as other project documents
like the RFQ and the RFP."
"76.As per Notification 21 of 2002-Customs dated 01.03.2002
issued by the Ministry of Finance, Government of India, the
customs duty on goods required for setting up mega power projects
has been prescribed as nil meaning thereby that no customs duty
will be levied on goods imported for setting up a mega power
project. A copy of Notification 21 of 2002-Customs is annexed
herewith and marked as Annexure P-32."
"77.Sasan UMPP was accorded in-principle mega power project
status as per Ministry of Power's letter no. F.No. 12/18/2006P&P dated 20.10.2006. The final certificate was issued on
21.09.2007."
"78.Sasan UMPP is an integrated power project with captive coal
mines viz. Moher, Moher Amlohri Extension and Chhatrasal Coal
Blocks. The captive coal mines allocated for Sasan UMPP form
an integral and essential part of the Project and any equipment
imported in relation to the captive coal mines would therefore be
treated as goods imported for setting up the Project."
"79.The Petitioner was required to import mining equipment for
setting up the captive coal mines from which coal will be sourced
for the Project since the required mining equipments were not
available in India."
"80.On 05.05.2011, the Petitioner applied to the Energy
Department, Government of Madhya Pradesh for
recommendation letter to import mining equipments for Sasan
UMPP under nil custom duty as is applicable for the other
equipment such as power plants of the Project. This application
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was premised on Notification 21 of 2002-Customs. However, vide
an Office Memorandum dated 17.06.2011, the Ministry of Power
has intimated that the exemption for customs duty for UMPPs is
given only with respect to power equipment, which was forwarded
to Petitioner by Government of Madhya Pradesh on 20.06.2011.
Copies of letters dated 05.05.2011 and 17.06.2011 are annexed
herewith and marked as Annexure P-33(Colly)"
"81.Based on Ministry of Power's Office Memorandum's, the
Energy Department, Government of Madhya Pradesh declined
to issue the recommendation letter which was required by the
Petitioner to claim nil customs duty. In view of the refusal by
Energy Department, Government of Madhya Pradesh and in the
interest of the Project and power consumers, Petitioner had to
seek recommendation letter from Energy Department, Government
of Madhya Pradesh to import mining equipments at project import
rate of 20.94%, which is now reduced to 16.85% with effect
from 17.03.2012."
"82.The decision of the Ministry of Power detailed in its office
memorandum dated 17.06.2011 and refusal by Energy
Department, Goverment of Madhya Pradesh to provide
recommendation letter to import mining equipments for Sasan
UMPP under nil custom duty amounts to a Change in Law under
Article 13.1 of the PPA and Petitioner is entitled to be compensated
for the same."
"83.The total amount of customs duty paid by the Petitioner on
mining equipments imported for Sasan UMPP is Rs. 361.47 Crores
till date. The total custom duty for mining equipments is estimated
to be about Rs. 531 Crores. The details of the custom duty paid
on mining equipments and estimated to be paid in future are
annexed herewith in Annexure P-34 (Colly)."
"84.It is submitted that the Petitioner has already surpassed the
indicative costs provided by the Procurers and in certain instances
as indicated hereinabove, the Petitioner will be required to pay
the increased Capital Cost in the future. In this regard, the Petitioner
is claiming the following reliefs:
(a) In relation to the Changes in Law where the additional Capital
Cost has already been incurred, this Hon'ble Commission may
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direct the Procurers to compensate the Petitioner for such increase
in Capital Cost; and
(b) In relation to the Changes in Law for which the liability is yet
to be incurred, the Petitioner is seeking a declaration from this
Hon'ble Commission that the increased expenditure amounts to
Change in Law. The actual payment will be claimed as and when
it falls due."
"89.From the above discussions and facts, it is clear that:-
(a) One of the objectives of the National Electricity Policy and
the Tariff Policy is to secure commercial viability of electricity
sector while ensuring fair pricing and quality of supply.
(b) Power procurement under Section 63 of the Act is governed
by the statutory framework comprising (i) Section 63 of the Act,
(ii) Government of India's Guidelines and (iii) standard documents
being RFP and PPA.
(c) In terms of Section 63 of the Act the successful bid must be
selected consistent with the guiding principles under Section 61 of
the Act meaning thereby that while adoption of tariff under Section
63 of the Act, the principles as laid down under Section 61 need to
be complied.
(d) Power procurement pursuant to the statutory framework
constitutes a statutory contract in terms of the pre-approved and
finalized PPA governed by provisions of the Act as well as the
Guidelines.
(e) The PPA envisages the adjustment of tariff by this Hon'ble
Commission to restore/restitute the party adversely affected (the
Petitioner in the present case)."
"90. It is also pertinent to note that under Section 79(1)(b) of the
Act, this Hon'ble Commission has been given the power to regulate
the tariff of generating companies like the Petitioner which have
a composite scheme for generation and sale of electricity in more
than one state."
"91.The present Petition has been filed for compensation on
account of Changes in Law which have impacted the Capital
Cost of the Project as well as for compensation for costs incurred
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in excess of the indicative costs provided by the Procurers, which
were the basis for formulation of the financial bid of Rpower."
"92.The Petitioner had approached the Procurers for an amicable
resolution. However, all efforts made by the Petitioner to seek an
amicable resolution to the unforeseen and undeserved commercial
implication with the Procurers have proved fruitless. In this
backdrop, it has become imperative and necessary for the
Petitioner to invoke jurisdiction of this Hon'ble Commission to
issue appropriate orders as prayed for in the Petition."
"93.It is submitted that the present Petition has been filed invoking:-
(a) Section 79(1)b) of the Act under which this Hon'ble
Commission has the power to regulate the tariff of the Petitioner.
(b) Section 79(1)(f) of the Act which gives this Hon'ble
Commission the power to adjudicate upon disputes involving the
Petitioner.
(c) Regulations 82, 92 and 113 of the Central Electricity Regulatory
Commission (Conduct of Business) Regulations, 1999.
(d) Article 13 of the PPA read with Article 17 and Paragraph 5.17
of the Competitive Bidding Guidelines in terms of which this
Hon'ble Commission has the power to adjudicate upon any dispute
that arises claiming any change in or regarding determination of
the tariff or any tariff related matters, or which partly or wholly
could result in change in tariff."
"104. As detailed in Paragraphs 75-83 above, Notification 21 of
2002-Customs issued by the Ministry of Finance, Government of
India granted 100% exemption from Customs duty to goods required
for setting up mega power projects. The Petitioner was required
to import equipment for operation of the coal mine which is an
integral part of the Project."
"105. It is submitted that as per the said Notification, any entity
which intended to claim the customs duty exemption was required
to apply to the Sponsoring Authority for an exemption certificate.
This was essential to claim the customs duty exemption. In this
regard, the Petitioner wrote to the Government of Madhya Pradesh
to recommend the Petitioner's case to the Commissioner of
Customs on 5.5.2011 for nil custom duty on mining equipments."
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"106.It is submitted that vide an Office Memorandum dated
17.06.2011, the Ministry of Power intimated Government of
Madhya Pradesh that the exemption for customs duty for UMPPs
is given only with respect to power equipment. The total amount
of customs duty paid by the Petitioner on mining equipments
imported for Sasan UMPP is Rs.361.47 Crores till date. Total
custom duty for mining equipments is estimated to be about Rs.
531 Crores."
"107. It is submitted that the decision of the Ministry of Power
amounts to a Change in Law under Article 13.1 of the PPA and
the Petitioner is entitled to be compensated for the same. It is
further submitted that the Petitioner not being allowed to import
mining equipment under nil customs duty as is granted for the
other equipment such as power plants of the Project qualifies as
Change in Law under Article 13.1 of the PPA."
"108. It is submitted that as per RFP for Sasan UMPP, the
Procurers had to provide water intake study report. This study
was conducted by WAPCOS and the report was made available
to all the bidders before bid submission. The cost of the water
intake system as per the report was approximately Rs.92 Crores.
This estimation was factored into the bid at the time of submission
of the financial bid."
"109. It is submitted that after Rpower acquired the Petitioner,
WAPCOS was tasked with confirming the technical feasibility
during the detailed engineering exercise. During this process, it
was discovered that the water intake location as intimated in the
pre-bid report was not appropriate. After, conducting another
detailed study, WAPCOS determined that a new location would
be suitable. The new location is 23 km from the power plant as
against 12.5 km initially indicated at the time of bidding (original
location)."
"110. It is submitted that due to the increase in distance,
submergence area along the route and construction time there
has been considerable increase in cost of the water intake system.
The cost for the construction of water system for the new location
is Rs. 244 Cr. The estimated increase in cost of the water intake
system due to the change in location of the water intake system is
Rs.152 Crores."
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"111.It is submitted that the increase in cost of the water intake
system is on account of the errors in the report provided by the
Procurers and therefore, the Procurers are obligated for
compensating the Petitioner for the difference in cost. It is further
submitted that since the water pipeline corridor is part of the Power
Station Land and the water intake pipeline is an integral part of
the Power Station, any change in the indicative cost of the water
intake system will be covered under Change in Law."
"120.Section 79 of the Act, inter alia, empowers the Hon'ble
Commission to:-
(a) Regulate the tariff of generating companies other than those
owned or controlled by the Central Government if such generating
companies entered into or otherwise have a composite scheme
for generation and sale of electricity in more than one State; and
(b) To adjudicate upon the disputes involving the distribution
companies or transmission licensees with regard to the matters
connected with regulation of tariff of generating companies."
"128. It is submitted that the present case involves a situation
where the compensatory mechanism under the PPA for
compensation for Change in Law has failed. It does not meet the
objective of restoring an affected party to the same economic
condition as if the change in law had not occurred. Therefore, this
is a fit case for this Hon'ble Commission to exercise its powers
under Section 79 and devise a mechanism to uphold the objective
and purpose of Article 13 - to provide economic restitution."
"129.