Summary
The developer of the Sasan Ultra Mega Power Project sought compensation under the change in law clause of a tariff-based bidding power purchase agreement for the increased cost of a relocated water intake system, after it commissioned a second WAPCOS study, and for customs duty on mining equipment for its captive coal mines after a Ministry of Power office memorandum said the mega power exemption covered only power equipment. The Central Commission rejected both claims; the Appellate Tribunal agreed there was no change in law but remanded the water intake claim on equity and held the exemption had applied. The Supreme Court set the Tribunal's order aside, holding that the Commission and Tribunal cannot rewrite a Section 63 contract or grant relief outside its express change in law provisions and disclaimers, and that no change in law was shown on either count.
Issues
- Whether increased cost of a water intake system relocated on the seller's own post-bid study is a change in law under Article 13.1.1 of the PPA, or can be compensated on equitable or regulatory grounds despite the RFP and PPA disclaimers.
- Whether Article 13.2 or Article 17.3.1 of the PPA, or the Commission's regulatory power under Section 79(1)(b) of the Electricity Act, 2003, permits compensation beyond the formula and events agreed in the PPA.
- Whether a Ministry of Power office memorandum stating that the mega power customs exemption covers only power equipment constituted a change in law regarding duty on equipment imported for captive coal mines.
Provisions considered
- Sections 63 and 79(1)(b), Electricity Act, 2003Under a tariff adopted after competitive bidding under Section 63, the Commission's general regulatory power under Section 79(1)(b), as explained in Energy Watchdog, operates where the guidelines do not cover a situation; it does not permit the Commission or the Tribunal to disregard the express terms of the PPA, make a new bargain or discover a change in law the parties did not contemplate. (¶¶ 86, 87, 88, 89, 90, 91, 92, 95, 96)
- Sections 111 and 125, Electricity Act, 2003The appeal lies on a substantial question of law; the seller faced concurrent findings of no change in law which it had not independently challenged, though the Court proceeded on the basis that it could impugn the Tribunal's finding without a cross appeal. (¶¶ 52, 53)
- Sections 18 and 19, Indian Contract Act, 1872Where the RFP and PPA expressly state that the water intake study report and project information are not representations and attract no liability, the report cannot be treated as a representation founding relief for misrepresentation. (¶¶ 36, 93)
- Section 25 and Notification No. 21/2002-Customs (Entry 400, as amended by Notification No. 49/2006), Customs Act, 1962The exemption for goods required for setting up a mega power project is confined by the words that is to say to the power plant; no material showed that equipment for captive mines was treated as exempt before the cut-off date of 21 July 2007, and the customs authorities' stand before the Authority for Advance Rulings pointed the other way. (¶¶ 112, 113, 116, 118, 123, 126, 129, 130, 132, 135)
Held
- The claim for the relocated water intake system is not a change in law under Article 13.1.1: the argument that it was a change in an initial consent was never pleaded; the water linkage from the Rihand reservoir never changed; delay by the procurers in making land available carried its own contractual consequences under Articles 3.3.3 and 3.3.3A, namely a right to terminate, and no notice under Article 13.3.1 was given contemporaneously. The seller commissioned a second WAPCOS study four months after the PPA without involving the procurers and without any failed attempt to draw water under the first report. (¶¶ 49, 50, 51, 54, 57, 60, 62, 65, 66, 67, 69, 72, 73)
- The Tribunal, having agreed that there was no change in law, could not remand the claim for redressal on principles of equity; its finding that the first WAPCOS report was grossly erroneous had no basis, there being no comparative study of the two reports, and it wrongly brushed aside the specific disclaimers in paragraphs 4, 1.4 and 2.7.2.1 of the RFP and Article 5.2 of the PPA under which bidders took the site and the water intake report at their own peril. A bidder in an international competitive bid who ignores such caveats acts at its own risk. (¶¶ 75, 76, 77, 78, 80, 81, 82)
- The restitutionary principle in Article 13.2 operates only to the extent contemplated in Article 13, that is through the specific formula in Article 13.2(a) for the construction period and Article 13.2(b) for the operation period; the general words cannot be used to depart from the agreed formula, consistently with Uttar Haryana Bijli Vitran Nigam v. Adani Power. (¶¶ 83, 84, 85)
- The Tribunal cannot make a new bargain for the parties or rewrite a contract solemnly entered into; residuary power to vary the written contract cannot be located in the power to regulate and cannot be exercised in the teeth of express provisions. PTC India concerns regulations under Section 178 which may override contracts, but in its adjudicatory function the Commission cannot use the nomenclature of regulation to disregard the contract. The opening words of Article 17.3.1 are not a free-standing source of power and must be read harmoniously with the rest of the PPA, and contra proferentem, ordinarily applied to insurance and standard form contracts, has no application absent genuine doubt. (¶¶ 90, 91, 92, 94, 95, 96, 98, 99, 101, 103, 104)
- The office memorandum of 17 June 2011 did not constitute a change in law: it is doubtful that a Joint Secretary in the Ministry of Power is the final authority for interpreting a customs notification, but more fundamentally the seller produced no material that goods for captive mines were treated as exempt before the cut-off date, the memorandum does not purport to change any earlier interpretation, the PPA itself distinguishes the power station from the captive coal mine, and Entry 400 confines the exemption to the power plant. To invoke Article 13.1.1 the seller must show an interpretation favourable to it at the cut-off date and a later change. (¶¶ 105, 114, 116, 117, 118, 127, 129, 130, 132, 133, 134, 135, 140)
Result
Appeals allowed; Appellate Tribunal for Electricity order dated 20.11.2018 set aside, the benefit extending also to the three non-appealing procurer respondents; the Commission's consequential order on remand allowing the water intake claim cannot survive and the pending appeals against it lose their force; parties to bear their own costs.