Summary
In cross appeals by generators and distribution companies from APTEL orders on Change in Law compensation under competitively bid PPAs, the Supreme Court held that all additional charges payable under orders, notifications or circulars of instrumentalities of the State issued after the cut-off date are Change in Law events attracting restitutionary compensation. It upheld APTEL's findings that Railway Board surcharges, the MoEF coal quality notification, NCDP coal shortfall, Chhattisgarh forest tax and cesses, add-on premium and Coal India's Evacuation Facility Charges are Change in Law, that carrying cost is payable at the PPA's late payment surcharge rate with compound interest, and that concurrent findings of expert bodies stand absent perversity. All appeals were dismissed.
Issues
- Whether increases in Busy Season Surcharge, Development Surcharge, Port Congestion Surcharge and Coal Terminal Surcharge by the Railway Board, the MoEF notification on coal quality, shortfall in linkage coal due to change in the NCDP, Forest Tax and cesses levied by the Chhattisgarh Government, add-on premium price and Coal India's Evacuation Facility Charges amount to 'Change in Law' under the PPAs.
- At what rate carrying cost on Change in Law compensation is payable, and whether compound interest from the date of the event is permissible.
- To what extent the Supreme Court will interfere with concurrent findings of the Electricity Regulatory Commissions and APTEL in appeals under Section 125 of the Electricity Act, 2003.
Provisions considered
- Definition of 'Law'; Article 13 (Change in Law) including Article 13.2, Power Purchase Agreements (standard bidding documents)'Law' includes all rules, regulations, orders and notifications by an Indian Governmental Instrumentality; charges imposed by such instrumentalities after the cut-off date are Change in Law events, and Article 13.2 embodies a restitutionary principle restoring the affected party to its economic position. (¶¶ 93, 94, 98, 99, 117, 118)
- Articles 11.3.4, 11.8.1 and 11.8.3, Power Purchase Agreements (standard bidding documents)A supplementary bill may be raised for Change in Law compensation and, if unpaid beyond one month, attracts late payment surcharge at 2% above SBAR compounded monthly; carrying cost is accordingly payable at that contractual rate, courts being unable to rewrite the contract. (¶¶ 115, 116, 121, 122, 126)
- Clause 9.0 (Price of Coal), Coal Supply Agreement with Coal India subsidiariesThe 'as delivered' price of coal is the sum of base price, other charges and statutory charges applicable at delivery; Evacuation Facility Charges imposed by Coal India's circular of 19 December 2017 were paid as part of that price and are a Change in Law. (¶¶ 97, 109, 110, 111)
- Sections 107 and 125, Electricity Act, 2003An appeal to the Supreme Court lies only on substantial questions of law as under Section 100 CPC; the Court should be slow to interfere with concurrent decisions of the expert bodies constituted under the Act, and noted the Ministry of Power's Section 107 directive on expeditious recovery of Change in Law compensation. (¶¶ 128, 129, 130, 174, 179)
- Article 12, Constitution of IndiaThe Railway Board is 'State' under Article 12 as held by the Constitution Bench in Railway Board v. Observer Publications, so its revisions of freight surcharges are orders of a Governmental Instrumentality. (¶¶ 101, 102, 103)
Held
- All additional charges payable on account of orders, directions, notifications or regulations issued by instrumentalities of the State after the cut-off date are Change in Law events, and generators are entitled to compensation for them on the restitutionary principle; Coal India is an instrumentality of the Government of India whose orders on fuel price bind its subsidiaries. (¶¶ 94, 96, 98, 99)
- Revisions of Busy Season Surcharge, Development Surcharge, Port Congestion Surcharge and Coal Terminal Surcharge by the Railway Board, the MoEF notifications of 11 July 2012 and 2 January 2014 mandating beneficiated coal with ash content below 34%, shortfall in linkage coal due to change in the NCDP, the Chhattisgarh forest transit fee and the Paryavaran and Vikas Upkar under the 2005 Adhiniyam, Swachh Bharat and Krishi Kalyan cesses, add-on premium necessitated by cancellation of captive blocks and the Go-No-Go policy, and Coal India's Evacuation Facility Charges are all Change in Law events; APTEL's findings to that effect were neither perverse nor arbitrary. (¶¶ 103, 105, 106, 107, 108, 110, 111, 134, 139, 143, 144, 149)
- Carrying cost on Change in Law compensation is payable at the late payment surcharge rate prescribed by Article 11.3.4 read with Article 11.8.3 of the PPAs, compounded and running from the date of the Change in Law event; the contention that interest should be simple or at a reasonable rate was rejected following UHBVNL v. Adani Power and UHBVNL v. Adani Power (Mundra), since courts cannot rewrite the explicit commercial terms agreed by the parties. (¶¶ 116, 121, 122, 124, 125, 126)
- The Commissions and APTEL are expert bodies, and the Court should be slow to interfere with their concurrent findings unless perverse, arbitrary or in ignorance of or contrary to statutory provisions; claims concurrently allowed or disallowed by them, including the generators' claims on deemed export benefit, sizing and surface transportation charges, UHV to GCV pricing, MAT, coal handling plant design, working capital, change of coal source and mode of transport and water charges, were therefore not interfered with. (¶¶ 127, 128, 130, 135, 151, 154)
- Repetitive litigation by DISCOMs and generators against well-reasoned concurrent orders, and untimely payment of dues, burden end consumers with late payment surcharge and carrying cost; the Court appealed to the Union of India through the Ministry of Power to evolve mechanisms ensuring timely payment to generators and avoiding unwarranted litigation. (¶¶ 171, 176, 177, 178, 179, 181, 182)
Result
All appeals dismissed; APTEL's orders upholding Change in Law compensation on Railway surcharges, MoEF coal quality notification, NCDP and SHAKTI shortfall, Forest Tax and Chhattisgarh cesses, add-on premium, Evacuation Facility Charges and carrying cost at the late payment surcharge rate affirmed, and concurrent disallowances of other claims left undisturbed. No costs.