Case Note & Summary
The case involves appeals by Uttar Haryana Bijli Vitran Nigam Ltd. and Dakshin Haryana Bijli Vitran Nigam Ltd. (Haryana Discoms) and Gujarat Urja Vikas Nigam Ltd. (GUVNL) against Adani Power Ltd. regarding the payment of carrying cost under Power Purchase Agreements (PPAs) due to change in law events. Adani Power Ltd., a generating company under the Electricity Act, 2003, operates a 4620 MW coal-fired power plant at Mundra, Gujarat, established in a Special Economic Zone (SEZ) approved by the Ministry of Commerce and Industry. The SEZ Act, 2005 provided exemptions from customs, excise, and service tax, which were withdrawn by notifications dated 06.04.2015 and 16.02.2016. Adani Power filed a petition before the Central Electricity Regulatory Commission (CERC) seeking compensation for change in law under Article 13 of the PPAs. The CERC allowed compensation for the added costs but denied carrying cost from the date of change in law till the date of approval, relying on its earlier order and distinguishing the Supreme Court judgment in National Thermal Power Corporation Ltd. v. Madhya Pradesh State Electricity Board. The Appellate Tribunal for Electricity reversed this decision, holding that Article 13.2 of the PPAs, which aims to restore the affected party to the same economic position as if the change in law had not occurred, implies entitlement to carrying cost on restitutionary principles. The Supreme Court, after hearing arguments, upheld the Appellate Tribunal's judgment. The Court examined the relevant provisions of the PPAs, particularly Article 13.2, which expressly provides for restoration to the same economic position. The Court noted that the PPA includes provisions for late payment surcharge and supplementary bills, but does not exclude carrying cost. The Court held that the restitutionary principle in Article 13.2, combined with the absence of any prohibition, entitles the respondent to carrying cost from the effective date of change in law till the date of approval. The appeals were dismissed, affirming the decision of the Appellate Tribunal.
Headnote
A) Electricity Law - Change in Law - Carrying Cost - Article 13 of Power Purchase Agreement - Restitutionary Principle - The issue was whether the generating company was entitled to carrying cost from the effective date of change in law till approval by the Commission. The Supreme Court held that Article 13.2 expressly provides for restoration to the same economic position as if change in law had not occurred, which includes carrying cost to compensate for the time gap. The Court upheld the Appellate Tribunal's decision allowing carrying cost, distinguishing the case from National Thermal Power Corporation Ltd. v. Madhya Pradesh State Electricity Board. (Paras 1-5) B) Contract Law - Interpretation of Contracts - Express Provision for Restitution - Article 13.2 of PPA - The Court interpreted Article 13.2 of the PPA, which states that the purpose of compensating the affected party is to restore it to the same economic position as if the change in law had not occurred. This restitutionary principle, combined with the absence of any exclusion of carrying cost, led to the conclusion that carrying cost is payable from the date of change in law. (Paras 4-5)
Issue of Consideration
Whether the respondent is entitled to carrying cost from the date of change in law till the date of approval by the Commission under Article 13 of the PPAs.
Final Decision
The Supreme Court dismissed the appeals, upholding the judgment of the Appellate Tribunal for Electricity that the respondent is entitled to carrying cost from the effective date of change in law till the date of approval by the Commission, based on the restitutionary principle in Article 13.2 of the PPAs.
Law Points
- Change in Law
- Carrying Cost
- Restitution
- Electricity Act 2003
- PPA Interpretation
