# MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LIMITED v. ADANI POWER MAHARASHTRA LIMITED & ORS

- **Citation:** [2023] 8 S.C.R. 85
- **Court:** Supreme Court of India
- **Decided:** 2023-03-03
- **Case number:** Civil Appeal No. 684 of 2021
- **Bench:** B. R. Gavai, Vikram Nath
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/maharashtra-state-electricity-distribution-company-limited-v-adani-power-37834
- **Pages:** 67

## Headnote

Power - Long-term Power Purchase Agreements (PPAs) -
Supply of coal to power producers - Change of New Coal
Distributional Policy, 2007 (NCDP, 2007) by New Coal
Distributional Policy, 2013 (NCDP 2013) - Claim for 'Change in
Law' relief compensation - Operating parameters - Held: In the
Energy Watchdog case as well as in Adani Rajasthan case, the
Supreme Court held that on account of the Change in Law, the
generating companies were entitled to compensation so as to restore
the party to the same economic position as if such Change in Law
had not occurred - Had the Change in Law not occurred, the
generating companies would have been entitled to the supply as
assured by the Coal India Ltd. (CIL)/Coal Companies under the
Fuel Supply Agreement (FSA) - The submission that when the bidders
submitted their bids, this was a risk they knowingly took, is without
substance - The generators are not claiming compensation on the
basis of rise in price of coal or on the ground of force majeure -
Their claims, in fact, are on the basis of the Change in Law, which
this Court, in the case of Energy Watchdog as well as in Adani
Rajasthan case, has upheld on the ground of Change in Law - The
contention of the Distribution companies (DISCOMS) that the Adani
Rajasthan case is not applicable to the facts of the present case
inasmuch as in Adani Rajasthan case, the State of Rajasthan had
assured 100% coal supply and that it was not a case of FSA, is
without substance - In the present case also, the NCDP 2007 had
assured 100% fuel/coal supply of the normative value - The
restitutionary principle has been stated by this Court in the case of
Uttar Haryana Bijli Vitran Nigam Limited (UHBVNL) - Undisputedly,
the claim of respondent no.1-APML stands on the basis of the Change
in Law - The DISCOMS, which are instrumentalities of the State,
cannot be expected to argue contrary to the stand of the Government,
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which clearly provides that the generators would be entitled to passthrough for the coal required to be imported or purchased from the
open market on the ground of Change in Law - The stand taken by
the DISCOMS that, since the loss being sustained by the generating
companies is on account of non-fulfillment of obligation by CIL/
Coal Companies, they should be relegated to the remedy available
to them in law against the CIL/Coal Companies, is totally
unreasonable - The claim is based on change of NCDP 2007 by
NCDP 2013, which, undisputedly, is covered by the term 'Change
in Law' - Compensation - 'Change in law' compensation.
Judicial Review - Of decision taken by expert bodies - Central
Electricity Authority (CEA), Central Electricity Regulatory
Commission (CERC) and Appellate Tribunal for Electricity (APTEL)
-Held: - These bodies are bodies consisting of experts in the field
- Courts should be slow in interfering with the decisions taken by
the experts in the field and unless it is found that the expert bodies
have failed to take into consideration the mandatory statutory
provisions or the decisions taken are based on extraneous
considerations or they are ex facie arbitrary and illegal, it will not
be appropriate for the Court to substitute its views with that of the
expert bodies.
Electricity Act, 2003 - Purpose and Object - One of the major
reasons for the enactment of the Electricity Act was the deterioration
in performance of the State Electricity Boards - It is seen that in a
number of matters, concurrent orders passed by the Regulatory Body
and the Appellate Forum are assailed - Such litigation would, in
fact, efface the purpose of the Electricity Act.
Vivek Narayan Sharma v. Union of India 2023 SCC
OnLine SC 1 - followed.
Energy Watchdog v. Central Electricity Regulatory
Commission and others (2017) 14 SCC 80 and Jaipur
Vidyut Vitaran Nigam Ltd. and others v. Adani Power
Rajasthan Limited and another 2020 SCC Online SC
697 - relied on.
Uttar Haryana Bijli Vitran Nigam Limited (UHBVNL)
and ano

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 [2023] 8 S.C.R. 85
85
MAHARASHTRA STATE ELECTRICITY DISTRIBUTION
COMPANY LIMITED
v.
ADANI POWER MAHARASHTRA LIMITED & ORS.
(Civil Appeal No. 684 of 2021)
MARCH 03, 2023
[B. R. GAVAI AND VIKRAM NATH, JJ.]
Power - Long-term Power Purchase Agreements (PPAs) -
Supply of coal to power producers - Change of New Coal
Distributional Policy, 2007 (NCDP, 2007) by New Coal
Distributional Policy, 2013 (NCDP 2013) - Claim for 'Change in
Law' relief compensation - Operating parameters - Held: In the
Energy Watchdog case as well as in Adani Rajasthan case, the
Supreme Court held that on account of the Change in Law, the
generating companies were entitled to compensation so as to restore
the party to the same economic position as if such Change in Law
had not occurred - Had the Change in Law not occurred, the
generating companies would have been entitled to the supply as
assured by the Coal India Ltd. (CIL)/Coal Companies under the
Fuel Supply Agreement (FSA) - The submission that when the bidders
submitted their bids, this was a risk they knowingly took, is without
substance - The generators are not claiming compensation on the
basis of rise in price of coal or on the ground of force majeure -
Their claims, in fact, are on the basis of the Change in Law, which
this Court, in the case of Energy Watchdog as well as in Adani
Rajasthan case, has upheld on the ground of Change in Law - The
contention of the Distribution companies (DISCOMS) that the Adani
Rajasthan case is not applicable to the facts of the present case
inasmuch as in Adani Rajasthan case, the State of Rajasthan had
assured 100% coal supply and that it was not a case of FSA, is
without substance - In the present case also, the NCDP 2007 had
assured 100% fuel/coal supply of the normative value - The
restitutionary principle has been stated by this Court in the case of
Uttar Haryana Bijli Vitran Nigam Limited (UHBVNL) - Undisputedly,
the claim of respondent no.1-APML stands on the basis of the Change
in Law - The DISCOMS, which are instrumentalities of the State,
cannot be expected to argue contrary to the stand of the Government,
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[2023] 8 S.C.R.
which clearly provides that the generators would be entitled to passthrough for the coal required to be imported or purchased from the
open market on the ground of Change in Law - The stand taken by
the DISCOMS that, since the loss being sustained by the generating
companies is on account of non-fulfillment of obligation by CIL/
Coal Companies, they should be relegated to the remedy available
to them in law against the CIL/Coal Companies, is totally
unreasonable - The claim is based on change of NCDP 2007 by
NCDP 2013, which, undisputedly, is covered by the term 'Change
in Law' - Compensation - 'Change in law' compensation.
Judicial Review - Of decision taken by expert bodies - Central
Electricity Authority (CEA), Central Electricity Regulatory
Commission (CERC) and Appellate Tribunal for Electricity (APTEL)
-Held: - These bodies are bodies consisting of experts in the field
- Courts should be slow in interfering with the decisions taken by
the experts in the field and unless it is found that the expert bodies
have failed to take into consideration the mandatory statutory
provisions or the decisions taken are based on extraneous
considerations or they are ex facie arbitrary and illegal, it will not
be appropriate for the Court to substitute its views with that of the
expert bodies.
Electricity Act, 2003 - Purpose and Object - One of the major
reasons for the enactment of the Electricity Act was the deterioration
in performance of the State Electricity Boards - It is seen that in a
number of matters, concurrent orders passed by the Regulatory Body
and the Appellate Forum are assailed - Such litigation would, in
fact, efface the purpose of the Electricity Act.
Vivek Narayan Sharma v. Union of India 2023 SCC
OnLine SC 1 - followed.
Energy Watchdog v. Central Electricity Regulatory
Commission and others (2017) 14 SCC 80 and Jaipur
Vidyut Vitaran Nigam Ltd. and others v. Adani Power
Rajasthan Limited and another 2020 SCC Online SC
697 - relied on.
Uttar Haryana Bijli Vitran Nigam Limited (UHBVNL)
and another v. Adani Power Limited and others (2019)
5 SCC 325 : [2019] 4 SCR 487; Reliance Infrastructure
Limited v. State of Maharashtra and others (2019) 3
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SCC 352: [2019] 1 SCR 886; Central Warehousing
Corporation v. Adani Ports Special Economic Zone
Limited (APSEZL) and others 2022 SCC OnLine SC
1398;Maharashtra State Electricity Distribution
Company Limited v. Maharashtra Electricity Regulatory
Commission and others (2022) 4 SCC 657; Tamil Nadu
Generation & Distribution Corporation Limited v. PPN
Power Generating Company Private Limited (2014) 11
SCC 53 : [2014] 4 SCR 667 and Nabha Power Limited
(NPL) v. Punjab State Power Corporation Limited
(PSPCL) and another (2018) 11 SCC 508: [2017] 14
SCR 301 - referred to.
Case Law Reference
(2017) 14 SCC 80
relied on
Para 22
[2017] 14 SCR 301
referred to
Para 43 (xxvi)
[2019] 4 SCR 487
referred to
Para 44 (xviii)
(2022) 4 SCC 657
referred to
Para 45 (ix)
[2014] 4 SCR 667
referred to
Para 45 (ix)
[2019] 1 SCR 886
referred to
Para 121
CIVIL APPELLATE JURISDICTION : Civil Appeal No.684 of
2021.
From the Judgment and Order dated 14.09.2020 of the Appellate
Tribunal for Electricity in Appeal No.182 of 2019.
With
Civil Appeal No.6927 of 2021.
Balbir Singh, A.S.G., Gopal Jain, G. Umapathy, M. G.
Ramachandran, Dr. A. M. Singhvi, Darius Khambata, Sajan Poovayya,
Siddhartha Dave, S. B. Upadhyay, Sr. Advs., Anup Jain, Udit Gupta for
M/s. Udit Kishan and Associates, G. Sai Kumar, Samir Malik, Ms. Ekssha
for M/s. D.S.K. Legal, Anand K. Ganesan, Nikunj Dayal, Ms. Poorva
Saigal, Amal Nair, Shubham Arya, Ms. Kriti Soni, Ms. Ritu Apurva, Ms.
Pallavi Saigal, Ms. Ritu Apurv, Ravi Nair, Ms. Shikha Sood, Ms. Reeha
Singh, Ms. Anumeha Smiti, Aneesh Bajaj, Navin Prakash, Ms. Anushree
Bardhan, Ms. Srishti Khindaria, Vishrov Mukherjee, Pukhrambam
MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. v.
ADANI POWER MAHARASHTRA LTD.
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Ramesh Kumar, Girik Bhalla, Yasashwi Kant, Mrs. Priyanka Vyas,
Mahesh Agarwal, Amit Kapur, Ms. Geetika Sharma, Ms. Poonam
Sengupta, Ms. Sakshi Kapoor, Avishkar Singhvi, Arshit Anand, Saunak
Rajguru, Aman Sharma, Ms. Deepsika Mishra, Ankitesh Ojha, Karan
Rukhana, E. C. Agrawala, Ms. Pallavi Sharma, Vaibhav Kalra, Nishant
Kumar, Ms. Anisha Upadhyay, Advs. for the appearing parties.
The Judgment of the Court was delivered by
B. R. GAVAI, J.
INDEX*
I.
INTRODUCTION.............................Paras 1 and 2
II.
FACTS IN CIVIL APPEAL NO.684 OF
2021........................................................Paras 3 to 29
III.
FACTS IN CIVIL APPEAL NO.6927 OF
2021.....................................................Paras 30 to 39
IV.
SUBMISSIONS ON BEHALF OF THE
DISCOMS ................................................... Paras 43
V.
SUBMISSIONS ON BEHALF OF THE
GENERATING COMPANIES ............Paras 44 and 45
V.
RELEVANT DOCUMENTS................ Paras 46 to 83
VI.
JUDGMENTS CITED........................Paras 84 to 93
VII.
STATUTORY PROVISIONS WITH REGARD TO
REGULATORY MECHANISM...........Paras 94 to 104
VIII. CONSIDERATIONS.....................Para 105 onwards
List of abbreviations:
1.
ACQ
-
Annual Contracted Quantity
2.
APML
-
Adani Power Maharashtra
Limited
3.
APTEL
-
Appellate Tribunal for
Electricity
4.
C&AG
-
Comptroller and Auditor
General of India
*Ed Note : Pagination in the Index is as per the original judgment.
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5.
CCEA
-
Cabinet Committee on
Economic Affairs
6.
CERC
-
Central Electricity Regulatory
Commission
7.
CIL
-
Coal India Limited
8.
CPP
-
Captive Power Plants
9.
DISCOMS
-
Distribution Companies
10.
FSA
-
Fuel Supply Agreement
11.
GCV
-
Gross Calorific Value
12.
GMR
-
GMR Warora Energy Ltd.
13.
GMRETLGMR Energy Trading Limited
14.
IPPs
-
Independent Power Producers
15.
LoA
-
Letter of Assurance
16.
MERC
-
Maharashtra Electricity
Regulatory Commission
17.
MoC
-
Ministry of Coal
18.
MoP
-
Ministry of Power
19.
MSEDCL
-
Maharashtra State Electricity
Distribution Company Limited
20.
NCDP
-
New Coal Distributional Policy
21.
PLF
-
Plant Load Factor
22.
PPAs
-
Power Purchase Agreements
23.
PSA
-
Power Sale Agreement
24.
RFP
-
Request for Proposal
25.
SECL
-
South Eastern Coal Limited
26.
SHR
-
Station Heat Rate
27.
TPPs
-
Thermal Power Stations
28.
UHBVNL
-
Uttar Haryana Bijli Vitran
Nigam Limited
29.
WCL
-
Western Coal Limited
MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. v.
ADANI POWER MAHARASHTRA LTD. [B. R. GAVAI, J.]
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INTRODUCTION
1. The questions involved in both these appeals, as in several other
appeals, are common.
2. Three of the issues involved in the present appeals are also
involved in the other appeals which were listed along with these two
appeals. However, the other appeals also involve some other ancillary
and incidental issues. As such, at the request of the learned counsel for
the parties, we have heard the present appeals. We have also heard the
learned counsel appearing in the other appeals on the three questions
which are common.
FACTS IN CIVIL APPEAL NO. 684 OF 2021
3. The facts, in brief, which arise in Civil Appeal No.684 of 2021
are thus:
4. The appellant-Maharashtra State Electricity Distribution
Company Limited (hereinafter referred to as "MSEDCL") has entered
into a long-term Power Purchase Agreements ("PPAs" for short) with
Adani Power Maharashtra Limited (hereinafter referred to as "APML").
The first of the PPAs is dated 8th September 2008 for 1320 MW ("1320
MW PPA" for short); the second one is dated 31st March 2010 for 1200
MW ("1200 MW PPA" for short); the third one is dated 9th August 2010
for 125 MW ("125 MW PPA" for short); and the fourth one is dated
16th February 2013 for 440 MW ("440 MW PPA" for short). These
PPAs were entered into in pursuance of the competitive bidding
processes conducted by the appellant-MSEDCL under Section 63 of
the Electricity Act, 2003 (hereinafter referred to as "the Electricity Act")
read with the Standard Bidding Guidelines issued by the Ministry of
Power ("MoP" for short).
5. Article 10 of the 1200 MW PPA dated 31st March 2010 entered
into between the appellant-MSEDCL and respondent No.1-APML deals
with "Change in Law".
6. Article 10.1.2 defines the term "Change in Law".
7. Article 10.2 deals with the application and principles for
computing the impact of Change in Law. Article 10.2.1 provides that
while determining the consequence of a Change in Law under Article
10, due regard has to be given to the principle, that to compensate the
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Party affected by such Change in Law is to restore through monthly
Tariff Payment, to the extent contemplated in Article 10, the affected
Party to the same economic position as if such Change in Law has not
occurred.
8. Article 10.3 deals with "Relief for Change in Law". Article
10.3.1 provides relief for Change in Law during the Construction Period,
whereas Article 10.3.2 provides for compensation to be paid on account
of Change in Law during Operating Period. For claiming relief on account
of a Change in Law, the Party is required to approach the Appropriate
Commission along with documentary proof of such increase/decrease
in the cost of the Power Station or revenue/expense for establishing the
impact of such Change in Law. Article 10.3.4 provides finality to the
decision of the Appropriate Commission with regard to compensation
determined under Articles 10.3.1 and 10.3.2.
9. On 18th October 2007, the Government of India, through the
Ministry of Coal ("MoC" for short), issued the New Coal Distributional
Policy, 2007 (hereinafter referred to as "the NCDP, 2007"). As per the
NCDP 2007, 100% of the quantity as per the normative requirement of
the consumers was to be considered for the supply of coal, through Fuel
Supply Agreement ("FSA" for short) by Coal India Limited ("CIL" for
short) at fixed prices to be declared/notified by CIL. The NCDP, 2007
also provided that to meet the domestic requirement of coal, CIL may
have to import coal as may be required from time to time, if feasible.
CIL was to adjust its overall price accordingly. It further provided that it
was the responsibility of CIL/Coal Companies to meet the full
requirement of coal under FSAs even by resorting to imports, if necessary.
10. It is not in dispute that in accordance with the NCDP, 2007,
APML had applied for coal linkage to MoC. It is also not in dispute that
Western Coal Limited ("WCL" for short) and South Eastern Coal Limited
("SECL" for short) issued two Letters of Assurance (LoAs) in favour
of APML and assured supply of coal.
11. Undisputedly, FSA was executed between APML and WCL
for domestic coal linkage. Subsequently, the FSA was amended and the
quantum of coal assured by WCL was transferred to SECL.
12. It is also not in dispute that subsequently, on 21st June 2013,
the Cabinet Committee on Economic Affairs ("CCEA" for short), in
view of the persistent shortage of domestic coal, approved a revised
mechanism for coal supply to power producers.
MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. v.
ADANI POWER MAHARASHTRA LTD. [B. R. GAVAI, J.]
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13. Thereafter, the Government of India, through the Ministry of
Coal, issued Office Memorandum dated 26th July 2013 (hereinafter
referred to as "NCDP 2013"), thereby approving a revised arrangement
for the supply of coal to the identified Thermal Power Stations ("TPPs"
for short). The said Office Memorandum provided that FSAs will be
signed for the domestic coal quantity of 65%, 65%, 67%, and 75% of
Annual Contracted Quantity ("ACQ" for short) for the remaining four
years of the 12th Plan for the power plants having normal coal linkages.
It further provided that to meet the balance FSA obligations towards the
requirement of the said 78,000 MW TPPs, CIL may import coal and
supply the same to the willing power plants on a cost-plus basis. It further
provided that the power plants may also directly import coal themselves,
if they so opt, in which case, the FSA obligations on the part of CIL to
the extent of import component would be deemed to have been
discharged.
14. On 31st July 2013, the MoP issued a letter to the Central
Electricity Regulatory Commission ("CERC" for short) and State
Electricity Regulatory Commissions to consider as pass-through in tariff
the cost of alternate coal (procured to meet the shortfall in supply of
domestic linkage coal) on a case to case basis.
15. Contending that on account of the Change in Law, APML
was entitled to compensation, APML filed a Petition bearing Case No.189
of 2013 on 17th December 2013 before the Maharashtra Electricity
Regulatory Commission ("MERC" for short).
16. MERC, vide order dated 15th July 2014, disposed the said
Petition (i.e. Case No. 189 of 2013) by approving a framework for
determination of compensatory fuel charge, in view of the CCEA decision
of 21st June 2013 and the MoP's advice dated 31st July 2013.
17. In compliance with the MERC's order dated 15th July 2014,
APML filed another Petition before the MERC bearing Case No. 140
of 2014 on 23rd July 2014, inter alia, for approving a mechanism for the
determination of compensatory tariff.
18. The MERC, vide its order dated 20th August 2014, formulated
a mechanism for the pass-through in tariff of the compensatory fuel
charge that had been allowed in Case No.189 of 2013.
19. Subsequently, APML filed a Review Petition before the MERC
bearing Case No.159 of 2014. The same was disallowed by the MERC
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as being devoid of merits except on the issue of the effectiveness of the
compensatory fuel charge.
20. On 28th January 2016, the MoP issued the revised Tariff Policy.
As per clause 6.1 of the revised Tariff Policy, the Appropriate Commission
was required to consider the cost of imported/market-based e-auction
coal procured for making up the shortfall in the domestic coal for passthrough in tariff of competitively bid projects.
21. Thereafter, on 9th March 2016, APML filed appeals before
the Appellate Tribunal for Electricity (hereinafter referred to as
"APTEL"), being Appeal Nos. 129 of 2016 and 130 of 2016, challenging
the orders passed by the MERC in Case Nos.189 of 2013 and 140 of
2014. MSEDCL too filed cross-appeals against the MERC orders being
Appeal Nos. 187 and 188 of 2016.
22. On 4th May 2017, the learned APTEL remanded the issues
raised in the cross-appeals filed by APML and MSEDCL for fresh
consideration by the MERC in the light of the judgment of this Court in
the case of Energy Watchdog v. Central Electricity Regulatory
Commission and others1 which was decided on 11th April 2017.
23. By order dated 7th March 2018, the MERC decided Case
No.189 of 2013 and 140 of 2014, wherein, while allowing the claims of
APML for relief on account of a Change in Law for 1180 MW capacity,
it restricted it to the extent of the minimum supply obligations specified
for the CIL subsidiaries for the last four years of the 12th Five Year Plan
period i.e. Financial Year 2013-14 to Financial Year 2016-17 as per the
NCDP, 2013. It further held that the alternate coal quantity for meeting
the domestic coal shortfall shall be computed based on the Station Heat
Rate ("SHR" for short) mentioned by APML in the bid documents and
the middle value of the Gross Calorific Value ("GCV" for short) range
of assured coal grade for domestic coal as per the FSA/LoA/MoU.
24. Being aggrieved thereby, APML preferred appeals before the
learned APTEL. The learned APTEL framed the following three issues:
"Issue No. 1:
Whether the MERC was correct in holding
that the net SHR submitted by the Appellant
in its bid or SHR and Auxiliary Consumption
norms specified for new generating stations
1 (2017) 14 SCC 80
MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. v.
ADANI POWER MAHARASHTRA LTD. [B. R. GAVAI, J.]
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under the MYT Regulations, 2011, whichever
is superior shall form the basis for computing
Change in Law compensation under the
PPAs?
Issue No. 2:
Whether the MERC was correct in holding
that the reference GCV of domestic coal
supplied by CIL shall be the middle value of
GCV range of assured coal grade in LoA/FSA/
MoU and not the GCV as received?
Issue No. 3:
Whether the MERC was correct in holding
that for the purpose of Change in Law
compensation for 1180 MW capacity, shortfall
in domestic linkage coal shall be assessed by
considering the coal supply as the maximum
of (1) actual quantum of coal offered for
offtake by CIL under the LoA/FSA and (2)
the minimum assured quantum in NCDP 2013
for the respective year?"
25. On Issue No.1, the learned APTEL held that APML was
entitled to compensation on the ground of Change in Law based on the
SHR specified in the MERC MYT Regulations 2011 or the actual SHR
achieved by APML, whichever is lower.
26. On Issue No.2, the learned APTEL held that the compensation
for the Change in Law approved by the MERC shall be computed based
on the actual GCV of coal received.
27. On Issue No.3, the learned APTEL held that under the NCDP,
2007, there was an assurance of 100% coal supply and as such, while
granting compensation on the ground of Change in Law, it was not justified
to restrict it to the maximum of 35% to 25% for the respective four
years of the 12th Plan.
28. The learned APTEL held that the restitution principle has to
be applied. It further held that to protect the interests of consumers, the
Generators had itself indicated that the parameters which are more
beneficial to the consumers i.e. the lower amongst the actual or as per
the Regulations would protect the interests of the consumers.
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29. Being aggrieved thereby, the MSEDCL has approached this
Court by way of Civil Appeal No.684 of 2021.
FACTS IN CIVIL APPEAL NO.6927 OF 2021
30. In Civil Appeal No.6927 of 2021, the MSEDCL challenges
the concurrent orders passed by the CERC dated 15th November 2018
and the order passed by the learned APTEL dated 16th July 2021.
31. MSEDCL issued a Request for Proposal (RFP) on 15th May
2009 and initiated the competitive bidding process for procurement of
power on long-term basis. GMR Warora Energy Ltd. ("GMR" for short)
submitted its bid on 7th August 2009 and emerged as one of the successful
bidders with a levelized tariff of Rs. 2.879/kWh. Accordingly, the PPA
was executed for the procurement of 200 MW of power on 17th March
2010 by MSEDCL on long-term basis. Similarly in March 2012,
Respondent No. 2-Union Territory of Dadra & Nagar Haveli ("DNH"
for short) issued an RFP for the procurement of power through
competitive bidding and GMR emerged as one of the successful bidders.
32. Consequently, respondent No. 1 in Civil Appeal No.6927 of
2021 i.e. GMR entered into the following long-term PPAs for the supply
of power from the Project:
(a) Supply and sale of 200 MW of power on a long-term basis to
MSEDCL in terms of PPA dated 17th March 2010. The cut-off
date for this PPA is 31st July 2009. Supply of power in terms of
the PPA commenced from 17th March 2014.
(b) Supply and sale of 200 MW of power on long term basis to
Electricity Department, DNH in terms of PPA dated 21st March
2013. The cut-off date of this PPA is 1st June 2012. Supply of
power in terms of the PPA commenced from 1st April 2013.
(c) Supply and sale of 150 MW of power on long term basis to
TANGEDCO through back-to-back arrangements as follows:
(i) Power Sale Agreement (PSA) dated 1st March 2013
between GMR Energy Trading Limited (GMRETL) and GMR,
based on which a bid was submitted to TANGEDCO;
(ii) PPA dated 27th November 2013 between GMRETL
and TANGEDCO for the supply of power from GMR to
TANGEDCO. The cut-off date of this PPA is 27th February
2013.
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(iii) PPA dated 3rd May 2014 between GMR and
GMRETL recording the terms and conditions in accordance
with PPA between GMRETL and TANGEDCO. The supply
of power under the PPA commenced on 22nd October 2015.
33. Petition No. 8/MP/2014 was filed by GMR claiming
compensation on account of the impact of the Change in Law events
during the Operation period and Construction period under MSEDCL
and DNH PPAs. The Commission, by order dated 1st February 2017,
had allowed some of the claims of GMR on the ground of Change in
law. Vide the said order, it has also disallowed some of the claims.
Aggrieved by the said order, GMR filed Appeal No. 111 of 2017 before
the learned APTEL in respect of the compensation claims disallowed by
the Commission. Similarly, Appeal No. 290/2017 was filed by DNH Power
Distribution Company Ltd against the said order dated 1st February 2017
disputing the compensation claims allowed to GMR under some Change
in Law events.
34. During the pendency of the above said appeals, GMR has
filed Petition (i.e. Petition No.88/MP/2018) seeking the following reliefs:
"(a) Confirms that the following operational parameters which
are imperative of calculation of compensation due to the Petitioner
on account of change in law events, are to be considered on actuals:
(i) Auxiliary Power Consumption
(ii) Station Heat Rate
(iii) Gross calorific Value
(b) Confirm that levy of Service Tax & Swachh Bharat Cess on
coal transportation is on all components as per rail invoice;
(c) Release of amounts due to the Petitioner from Respondent
No. 1, MSEDCL in light of the Commission's order dated 1.2.2017
in Petition No. 8/MP/2014."
35. Two of the issues involved in the present appeals with regard
to SHR and GCV also fell for consideration before the CERC.
36. The CERC found that the CERC norms applicable for the
period 2009-14 and 2014-19 do not provide the norms for 300 MW units.
It further found that the CERC norms provide for a degradation factor
of 6.5% and 4.5% respectively towards Heat Rate over and above the
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Design Heat Rate. It found that since the Design Heat Rate is 2211
kcal/kWh, the gross Heat Rate works out to 2355 kcal/kWh and 2310
kcal/kWh for the period 2009-14 and 2014-19 respectively. It directed
that the SHR of 2355 kcal/kWh during the period 2009-14 and 2310
kcal/kWh during the period 2014-19 or the actual SHR, whichever was
lower, shall be considered for calculating the coal consumption for
compensation under the Change in Law.
37. Insofar as the GCV is concerned, the CERC found that in the
2014 Tariff Regulations of the Commission, the measurement of GCV
has been specified on "as received" basis. It, therefore, found that it
would be appropriate if the GCV on "as received" basis is considered
for computation of compensation for Change in Law.
38. Being aggrieved by the order passed by the CERC dated 15th
November 2018, the MSEDCL preferred an appeal being Appeal No.342
of 2019 before the learned APTEL. The learned APTEL did not find
merit in the submission of the MSEDCL and as such, dismissed the
appeal by judgment and order dated 16th July 2021.
39. Being aggrieved thereby, MSEDCL has approached this Court
by way of Civil Appeal No.6927 of 2021.
40. The arguments on behalf of the appellant-MSEDCL in Civil
Appeal No.684 of 2021 were advanced by Shri Gopal Jain, learned Senior
Counsel, whereas arguments in Civil Appeal No.6927 of 2021 were
advanced by Shri G. Sai Kumar, learned counsel.
41. We have also heard Shri Balbir Singh, learned Additional
Solicitor General and Shri M.G. Ramachandran, learned Senior Counsel
appearing for some of the State Electricity Distribution Companies, whose
matters are not being decided by this judgment, but wherein the aforesaid
three questions/issues are common.
42. On behalf of the respondent-APML as well as the respondentGMR, Dr. Abhishek Manu Singhvi, learned Senior Counsel advanced
the arguments. His arguments were supplemented by Shri Vishrov
Mukherjee, learned Counsel.
SUBMISSIONS ON BEHALF OF THE DISCOMS
43. The main arguments that were advanced on behalf of the
Distribution Companies (hereinafter referred to "DISCOMS") are as
under:
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(i)
The SHR and GCV value are declared in the bid document
and it is not permissible for the Generating Companies to
claim advantage on the basis of SHR value which is different
than the one quoted i.e. the SHR value as provided in the
Tariff Regulations or the actual. It is their submission that
the declaration of operational parameters i.e. SHR and GCV
were the mandate of the bid in case of Case-1 competitive
bidding process. It is submitted that if deviation from such
declared bid parameters for compensating the bidder/
Generating Companies/ Generators under the PPA on the
ground of Change in Law is permitted, it will take away the
very sanctity of the bid.
(ii)
It is submitted that to ensure serious participation in the bid
process and for timely completion of commencement of
supply of power, the Competitive Bidding Guidelines 2005
itself mandates the bidder/generator/Generating Companies
to have a 'firm' fuel arrangement. It is their submission
that it is mandatory for the bidder/generator to declare the
'quantity' of fuel required to generate power for the entire
term of the PPA. The DISCOMS argued that the quantity
of fuel can only be ascertained by applying the SHR and
GCV components as declared in the bid.
(iii)
It is submitted that the RFP itself mandated the participating
bidders/generators to submit documentary evidence with
regard to the 'quantity' of fuel required to generate power
for the entire term of 25 years of the PPA.
(iv)
It is submitted that for ascertaining the 'quantity', it was
also necessary for the bidder/generator to provide
'supporting computation' by declaring the SHR and GCV
value applicable for the entire term of the PPA.
(v)
It is the contention on behalf of the DISCOMS that the
bidder/generator, while submitting his/its bids, is required to
submit the bids by taking into consideration all factors,
including risks regarding fluctuations, availability of fuel/
coal, etc. It is submitted that if there is any change with
regard to the availability of fuel or the rate at which a bidder/
generator is required to procure the coal, then the bidder/
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generator has to suffer the consequences thereof as he/it
has submitted his/its bid with eyes open.
(vi)
The thrust of the argument of the DISCOMS is that in a
competitive bid based PPA under Section 63 of the
Electricity Act, the quoted tariff is sacrosanct and it is not
open for the respondent/generator to seek higher tariff or
extra compensation under the PPA, except as per Article
13 of the PPA dealing with impact of Change in Law. It is
submitted that the reliance placed by the learned APTEL
on the judgment of this Court in the Case of Energy
Watchdog (supra) is totally misconceived.
(vii)
It is, therefore, submitted that the relief for the impact of
NCDP 2013 is admissible only to the extent of the changes
brought about by the NCDP 2013 and not in excess thereof.
It is submitted that the Change in Law made by the Central
Government on 31st July 2013 was vis-à-vis the NCDP 2007
which was in force as on the cut-off date provided in Article
13.1 of the PPA i.e. 7 days before the bid submission date.
It is submitted that the very purpose of compensating the
party affected by Change in Law is to restore, through
monthly tariff payments, the affected party to the same
economic position as if the Change in Law had not occurred.
(viii) It is submitted that as per para 2.2 of the NCDP 2007 read
with para 5.2, CIL was entitled to meet the shortfall in the
availability of domestic coal by importing coal. In such event,
the Generators were required to pay the higher cost of
imported coal to CIL. It is submitted that while submitting
the bids, the bidders/generators, therefore, had submitted
their bids for supply of electricity to the DISCOMS knowing
the position that they will not be compensated for higher
cost of imported coal separately, over and above the quoted
tariff /quoted energy charges, in the event of supply of
imported coal by CIL.
(ix)
It is contended that, if in the event the Generator could
have procured the fuel/coal at a lesser price, then the benefit
which would have occurred to him/it on account of such
saving in procurement would have gone to him/it. On the
same analogy, if the Generator is required to obtain the fuel/
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coal at a higher price then he/it cannot be heard to say that
he/it should be compensated for the same.
(x)
It is submitted that, as a matter of fact, till 31st July 2013 i.e.
when the NCDP 2013 was brought into effect, there could
have been no claims from the Generators for increase in
tariff to be allowed for higher coal cost on account of
imported coal supply. It is submitted that if the NCDP 2013
had not brought about a Change in Law, the position as
prevalent before would have continued. It is submitted that
this Court has consistently held that an unprecedented
increase in input cost cannot be a ground for a supplier not
to perform the obligations under a binding contract or seek
higher price or compensation for such performance.
(xi)
It is the submission of the DISCOMS that the benefit on
account of the Change in Law brought into effect by the
NCDP 2013 has to be restricted only to the extent of shortfall
as provided by the said policy. It is submitted that if it was
the intention of the NCDP 2013 to provide for relief through
the Change in Law/policy decision for the shortfall even
below the specified percentages i.e. for entire shortfall on
actual basis, then there was no rationale in specifying the
percentages in the NCDP 2013.
(xii)
It is further contended by the DISCOMS that the contention
of the Generating Companies that Shakti Policy 2017 was
a continuation of NCDP 2013 is incorrect. It is submitted
that the first part under (A) of the Shakti Policy 2017 deals
with the old regime of LoA/FSA which is the NCDP aspect.
The second part under (B) deals with the new transparent
coal allocation policy called SHAKTI. It is submitted that,
as a matter of fact, SHAKTI and allocation of coal
thereunder was admissible only to Entities which did not
have any LoA/FSA under the NCDP 2007 or the NCDP
2013. Reliance in this respect has been placed on the
judgment of this Court in the case of Jaipur Vidyut Vitaran
Nigam Ltd. and others v. Adani Power Rajasthan
Limited and another2 (hereinafter referred to as "Adani
Rajasthan case")
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(xiii) It is submitted that the law laid down by this Court in the
case of Energy Watchdog (supra) has been applied by the
learned APTEL in a patently erroneous and perverse
manner.
(xiv) It is submitted that the total quantum of coal required is to
be computed not in an abstract manner but is to be
necessarily based on the SHR of the power station. It is
submitted that the SHR has nothing to do with coal quality
or GCV of coal. It is submitted that the SHR is the boiler
and turbine characteristic of a thermal power station and,
therefore, indicative of the quality and efficiency of the
machine. It is submitted that the quantum of coal requirement
is less with lower SHR and increases with higher SHR,
inasmuch as it relates to the ability and efficiency of the
machines to extract heat energy from coal to produce per
unit of electricity.
(xv)
It is submitted that in Case 2 bidding, the net SHR is a
bidding parameter as coal linkage is arranged by the entity
inviting bids, and actual cost of coal is allowed as a passthrough in the tariff as per the formula specified. It is their
submission that there are no quoted energy charges in Case
2 bidding but only quoted fixed charges. It is submitted that,
whereas, in Case 1 bidding, SHR may not, as such, be the
criteria for selection but is a necessary requirement/
condition to be given for identifying the quantum of coal
required to generate electricity over the length of the PPA.
While submitting his/its bid and quoting energy charges, the
bidder/generator was required to take into consideration the
quantum of coal requirement which, in turn, is based on the
SHR and auxiliary consumption parameters to be given by
the bidder/generator. It is submitted that the coal Supply
Agreement for quantum of coal is signed by CIL only for
the quantum as determined above, based on the SHR and
operating parameters provided by the bidder/generator. It
is submitted that the view taken by the learned APTEL is
contrary to the view taken by it between the same parties
in its judgment dated 13th April 2018 in Appeal No. 210 of
2017.
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(xvi) It is submitted that if the SHR which is higher than the one
quoted by the bidder/generator is to be taken into
consideration, then it will amount to granting premium to
the Generator for its inefficiency. It is submitted that if the
coal consumption increases on account of highest SHR,
the excess expenditure on quantum of coal is to be borne
by the Generator.
(xvii) It is submitted that if the bid assumed SHR is 2200 kcal/kg
and actual SHR is 2300 kcal/kg, when the quoted tariff is
based on the SHR of 2200 kcal/kg, for Change in Law
impact, SHR of 2300 kcal/kg cannot be permitted to be
used for computation of compensation for Change in Law.
(xviii) It is submitted that the impugned judgment permitting the
actual SHR or the SHR given in Tariff Regulations,
whichever is lower, if upheld, would amount to converting
the scope of Section 63 tariff determination into a Section
62 cost plus tariff determination. It is submitted that this is
impermissible in a competitive bid based PPA.
(xix) It is further submitted that the MERC Tariff Regulations
expressly provides that the Tariff Regulations will have no
application to Section 63 tariff determination and the same
is governed by the guidelines of the Central Government
under Section 63 of the Electricity Act.
(xx)
It is submitted that perusal of Regulation 2(2)(a) of the
Central Electricity Regulatory Commission (Terms and
Conditions of Tariff) Regulations, 2019 would reveal that
they are not applicable where the tariff has been discovered
through tariff based competitive bidding in accordance with
the guidelines issued by the Central Government and adopted
by the Commission under Section 63 of the Electricity Act.
(xxi) It is submitted that when admittedly there is bid assumed
SHR as per bidding conditions, the learned APTEL cannot
ignore the same on the purported ground of equity and
provide for an alternate parameter for computational
purpose of actual SHR with the ceiling as under the Tariff
Regulations. It is submitted that this will result in changing
the bidding terms and conditions after the bid was accepted
and became final.
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(xxii) It is further submitted that the finding that the GCV
computation is to be made on 'as received' basis, is also
patently erroneous. It is submitted that the real purpose
behind relying on the said methodology of computation is to
recover the grade slippage in the coal grade actually supplied
as against the coal grade billed by the Coal Company and
all the losses in the heat value of the coal during the time
period when the coal is taken delivery from the coal mines
and transported to the Power Plant and unloading at the
Power Plant site.
(xxiii) It is submitted that the evaluation of GCV on air dried basis
by Coal Company was well known/existing even prior to
bidding and the Generators were very much aware of it.
Accordingly, the same has already been factored into while
the Generators submitted their bids. As such, if the
computation of GCV is permitted on 'as received' basis,
the Generators will be doubly compensated. In any case, it
is submitted that if the Generators had any issues with
regard to the grade of coal i.e. GCV range and quantum,
then that is an issue between the Generators and the
respective Coal Companies, which is required to be resolved
under the FSA between them. The DISCOMS cannot be
roped into for the resolution of such disputes between the
Generators/Generating Companies and the Coal Companies.
(xxiv) Lastly, it is submitted that since the letter of the MoP, which
has been considered as a Change in Law event, is dated
31st July 2013, the learned APTEL could not have given
effect to the same from 1st April 2013. It is submitted that
this would permit giving the benefit of compensation with
retrospective effect.
(xxv) Insofar as the reliance placed by the Generating Companies
on the judgment of this Court in Adani Rajasthan case is
concerned, it is submitted that the said judgment would not
be applicable to the facts of the present case. It is submitted
that in the said case, there was no FSA and the State
Government had undertaken to supply the entire coal
quantum.
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(xxvi) It is further submitted that the judgment of this Court in the
case of Nabha Power Limited (NPL) v.