Case Note & Summary
The present appeals arise from a dispute between Maharashtra State Electricity Distribution Company Limited (MSEDCL), the appellant, and Adani Power Maharashtra Limited (APML), respondent No. 1, concerning the interpretation of 'Change in Law' provisions in four long-term Power Purchase Agreements (PPAs) entered into between them. The PPAs were executed on 8th September 2008 (1230 MW), 21st March 2010 (1200 MW), 9th August 2010 (120 MW), and 16th February 2013 (440 MW), following a competitive bidding process. Prior to the PPAs, APML had applied for and received allocation of Lohara Coal Blocks from the Ministry of Coal on 6th November 2007. On 27th December 2007, the Government of Maharashtra issued a notification under Section 38(V) of the Wild Life (Protection) Act, 1972, declaring a Critical Tiger Habitat (CTH) covering 625.82 sq. km. of Tadoba National Park and Andheri Wildlife Sanctuary. At that time, the CTH did not include the Lohara Coal Blocks area. APML submitted its bid on 21st February 2008, with a cut-off date of 14th February 2008, specifying the Lohara Coal Blocks as the fuel source for 800 MW out of 1320 MW. After the cut-off date, on 21st February 2008, the Conservator of Tadoba Andheri Tiger Reserve approved the constitution of an Expert Committee for creating a Buffer Zone around the core area. The legal issue is whether the notification and subsequent buffer zone creation constitute a 'Change in Law' under the PPAs, entitling APML to compensatory tariff. MSEDCL argued that the notification was issued before the bid deadline and thus was not a Change in Law, while APML contended that the notification and buffer zone impacted coal mining, making it a Change in Law. The Maharashtra Electricity Regulatory Commission (MERC) rejected APML's claim, but the Appellate Tribunal for Electricity (APTEL) allowed the appeal in part, holding that the notification was a Change in Law but only for the 1230 MW PPA. The Supreme Court, in its analysis, held that the notification dated 27th December 2007 was a Change in Law as it was issued after the bid cut-off date and affected coal mining operations. The Court further held that the Change in Law impacted all four PPAs, as the coal blocks were the designated fuel source for a portion of the capacity under each PPA. The Supreme Court allowed MSEDCL's appeal in part, setting aside APTEL's restriction to the 1230 MW PPA, and remanded the matter to MERC for determination of the exact compensation for all PPAs.
Headnote
A) Electricity Law - Change in Law - Power Purchase Agreement - The notification under Section 38(V) of the Wild Life (Protection) Act, 1972 declaring a Critical Tiger Habitat and the subsequent creation of a buffer zone constitute a 'Change in Law' event under the PPAs, as the notification was issued after the bid cut-off date and impacted coal mining operations. Held that the Appellate Tribunal for Electricity (APTEL) correctly held that the notification dated 27th December 2007 was a Change in Law, but erred in restricting compensation to only the 1230 MW PPA. (Paras 1-6) B) Electricity Law - Tariff Determination - Compensatory Tariff - The Supreme Court held that the Change in Law event affected all four PPAs (1230 MW, 1200 MW, 120 MW, and 440 MW) as the coal blocks were the designated fuel source for a portion of the capacity under each PPA. Held that APML is entitled to compensatory tariff for all PPAs, and the matter is remanded to MERC for determination of the exact compensation. (Paras 2-6)
Issue of Consideration
Whether the notification dated 27th December 2007 declaring a Critical Tiger Habitat and the subsequent creation of a buffer zone around Tadoba Andheri Tiger Reserve constitute a 'Change in Law' under the Power Purchase Agreements between MSEDCL and APML, entitling APML to compensatory tariff.
Final Decision
The Supreme Court allowed the appeals in part, setting aside the APTEL order to the extent it restricted the Change in Law to the 1230 MW PPA. The Court held that the Change in Law event affected all four PPAs and remanded the matter to MERC for determination of the exact compensation for all PPAs.
Law Points
- Change in Law
- Force Majeure
- Electricity Tariff
- Power Purchase Agreement
- Regulatory Commission
- Appellate Tribunal for Electricity
