Uttar Haryana Bijli Vitran Nigam Ltd vs Adani Power (Mundra) Limited

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.4143 OF 2020

UTTAR HARYANA BIJLI VITRAN NIGAM LTD. & ANR. ...APPELLANT (S)

VERSUS ADANI POWER (MUNDRA) LIMITED & ORS. ...RESPONDENT (S)

JUDGMENT

B.R. GAVAI, J.

1. The appellants challenge the judgment and order passed

by the Appellate Tribunal for Electricity, New Delhi (hereinafter

referred to as “APTEL”) dated 3rd November 2020, thereby

dismissing the appeal filed by them and maintaining the

judgment and order dated 31 st May 2018 passed by the Central

Electricity Regulatory Commission (“CERC” for short) in Petition

No. 97/MP/2017.

Signature Not Verified

2. The facts, in brief, giving rise to the present appeal are as Digitally signed by Narendra Prasad Date: 2023.04.20 11:59:44 IST Reason: under:

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3. Uttar Haryana Bijli Vitran Nigam Ltd. and Dakshin

Haryana Bijli Vitran Nigam Ltd. (hereinafter referred to as

“Haryana Utilities”/“Appellants”) are distribution licensees

undertaking the distribution and retail supply of electricity to

consumers in the State of Haryana. Haryana Utilities had

entered into two Power Purchase Agreements (“PPAs” for short)

on 7th August 2008 with Adani Power Mundra Limited

(hereinafter referred to as “AP(M)L”) for procurement of

contracted capacity of 1424 MW from generating units 7, 8 and

9 established by AP(M)L at Mundra in the State of Gujarat.

4. The PPAs were entered into pursuant to a tariff based

Competitive Bidding Process initiated by the Haryana Utilities

under the provisions of Section 63 of the Electricity Act, 2003,

as per the Standard Bidding Guidelines notified by the Central

Government.

5. AP(M)L had filed Petition No. 155/MP/2012 on 5 th July

2012 before the CERC seeking, inter alia, relief of increase in

tariff on various grounds. One of the grounds was that the

Indonesian Regulations, promulgated by the Government of

2 Indonesia, providing for the application of benchmark price for

export of coal from Indonesia resulted in higher price of coal

resulting in higher cost of generation of power.

6. AP(M)L had also claimed Force Majeure Event within the

scope of Article 12 and Change in Law within the scope of

Article 13 of the PPAs.

7. The orders dated 2nd April 2013 and 21st February 2014

passed by the CERC in the said Petition No.155/MP/2012 were

challenged before the learned APTEL by way of a batch of

appeals, the lead being Appeal No. 100 of 2013. The order

dated 7th April 2016 passed by the learned APTEL in Appeal No.

100 of 2013 and the batch of appeals were challenged before

this Court in the case of Energy Watchdog v. Central

Electricity Regulatory Commission and others1. This Court

disposed of the said appeals on 11 th April 2017 in terms of the

following directions:

“57. Both the letter dated 31-7-2013 and the revised Tariff Policy are statutory documents being issued under Section 3 of the Act and have the force of law. This

1 (2017) 14 SCC 80

3 being so, it is clear that so far as the procurement of Indian coal is concerned, to the extent that the supply from Coal India and other Indian sources is cut down, the PPA read with these documents provides in Clause 13.2 that while determining the consequences of change in law, parties shall have due regard to the principle that the purpose of compensating the party affected by such change in law is to restore, through monthly tariff payments, the affected party to the economic position as if such change in law has not occurred. Further, for the operation period of the PPA, compensation for any increase/decrease in cost to the seller shall be determined and be effective from such date as decided by the Central Electricity Regulation Commission. This being the case, we are of the view that though change in Indonesian law would not qualify as a change in law under the guidelines read with the PPA, change in Indian law certainly would.

58. ……….The Central Electricity Regulatory Commission will, as a result of this judgment, go into the matter afresh and determine what relief should be granted to those power generators who fall within Clause 13 of the PPA as has been held by us in this judgment.”

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8. It may be mentioned that this Court, in the case of Energy

Watchdog (supra), specifically rejected the claim that the

increase in price of coal due to change in Indonesian

Regulations would also amount to Change in Law. This Court

held that only Change in Law in India would entitle the

Generator to the benefit of restitution on account of such

Change in Law.

9. Pursuant to the orders passed by this Court in the case of

Energy Watchdog (supra), AP(M)L filed Petition

No.97/MP/2017 before the CERC. The CERC, vide order dated

31st May, 2018, allowed the Petition and directed the working

out of the relief based on the formulation given in Paragraph 46

of its judgment for the period from 1 st April 2013 to 31st March

2017. Subsequently, a Review Petition bearing No.24/RP/2018

also came to be filed. The same was rejected by the CERC vide

order dated 3rd December 2018. Being aggrieved thereby, the

appellants preferred appeal before the learned APTEL.

10. The learned APTEL framed the following four issues for

consideration:

5 “Issue No.1:-

Whether the Central Commission was justified in holding that Adani Power's bid was based entirely on domestic coal availability and hence entitled to Change in Law relief on account of domestic coal shortfall?

Issue No.2:-

Whether shortfall in domestic coal was due to Change in Law and compensation should be limited to the difference between 100% of ACQ and 65%, 65%, 67% and 75% of ACQ as specified in NCDP 2013?

Issue No.3:-

Whether the start date of Change in Law compensation allowed by the Central Commission amounts to retrospective operation of Ministry of Power's letter dated 31.07.2013?

Issue No.4:-

Whether the Central Commission erred in ignoring the methodology for computation of Change in Law compensation laid down in its earlier Order in Petition No. 79/MP/2013 - GMR Kamalanga Energy Ltd. & Anr.

6 vs. DHBVNL &Ors. ("GMR Case")?

11. After hearing the learned counsel for the parties, the

learned APTEL held all the issues in favour of the respondent

No.1-Generator and dismissed the appeal. Being aggrieved

thereby, the appellants have filed the present appeal.

12. We have heard Shri M.G. Ramachandran, learned Senior

Counsel appearing on behalf of the appellants and Dr. A.M.

Singhvi, learned Senior Counsel appearing on behalf of the

respondent No.1- AP(M)L.

13. Shri Ramachandran submits that the CERC as well as the

learned APTEL have grossly erred in granting Change in Law

relief for the shortfall in the availability of 100% coal. He

submits that AP(M)L’s bid and the PPA were admittedly

premised both on domestic coal and imported coal in the ratio

of 70:30. As such, the relief could be granted only insofar as

the shortfall in the 70% domestic coal is concerned. He

submits that AP(M)L has submitted the bid on the premise that

30% of the coal would be imported, while 70% of the coal would

7 be procured indigenously. He submits that the effect of the

orders passed by the CERC and the learned APTEL is that

AP(M)L has been granted benefit on the consideration that its

bid was premised on 100% domestic coal.

14. Shri Ramachandran further submits that a perusal of the

various pleadings of AP(M)L would clearly reveal that AP(M)L’s

bid was premised on domestic and imported coal in the

proportion of 70:30. However, all these documents have been

ignored by the learned APTEL. Shri Ramachandran submits

that the documents placed on record would reveal that AP(M)L

had represented that it will use imported coal for generation of

power. He submits that the Executive Summary of the bid

submitted by AP(M)L would reveal that AP(M)L had represented

therein that the strategic advantage of the Power Plant was its

proximity to Mundra Port, where coal is being imported.

Learned counsel submits that in view of the pleadings of

AP(M)L, it was clear that it was its responsibility to procure 30%

imported coal. He, therefore, submits that granting of relief for

shortfall of 30% imported coal is nothing else but a perversity.

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15. Shri Ramachandran further submits that the methodology

of computation of compensation on account of the Change in

Law event has also been erroneously applied by the CERC and

affirmed by the learned APTEL. He submits that the

methodology that ought to have been applied was the difference

between landed cost of alternate coal on the one part and the

prevalent landed cost of domestic coal or quoted energy

charges, whichever was higher, on the other part. He submits

that had there been no Change in Law and AP(M)L had received

the entire quantum of domestic coal, it would have had to bear

the prevalent price of landed domestic coal on its own,

irrespective of whether such cost is below or above the quoted

energy charges in the bid. He submits that if such landed cost

of domestic coal is higher than the quoted energy charges,

AP(M)L was not entitled to claim the difference between the

landed cost of domestic coal and the quoted energy charges.

16. Shri Ramachandran further submits that the learned

APTEL is wrong in proceeding on the basis that there was no

objection by the appellants before the CERC on the

9 methodology for computation of Change in Law compensation

laid down in its order in Petition No. 79/MP/2013-GMR

Kamalanga Energy Ltd. & Anr. v. DHBVNL & Ors.

(hereinafter referred to as “GMR Case”)

17. Shri Ramachandran further submitted that the appellants

have no objection for giving benefit on account of Change in

Law for shortfall in 70% of coal to be procured indigenously.

18. Dr. A.M. Singhvi, on the contrary, submits that the bid

submitted by AP(M)L was on the basis of National Coal

Distribution Policy, 2007 (for short, “NCDP 2007”). He submits

that there was no bifurcation in the bid with regard to 70%

domestic coal and 30% imported coal. Learned Senior Counsel

submits that the cut-off date for Change in Law claim would be

17th November 2007, i.e. minus 7 days from the last date for

submission of the bid, i.e. 24th November 2007. It is submitted

that even in the PPAs signed with Haryana Utilities on 7 th

August 2008, there is no bifurcation of domestic and imported

coal. He submits that though the Standing Linkage Committee

(Long-Term) (hereinafter referred to as “SLC (LT)”) has

10 considered AP(M)L’s application for 100% coal of its total

capacity, it has granted linkage only for 70% of 1980 MW, i.e.

1386 MW only. He submitted that linkage of balance 30% was

deferred to the future.

19. Dr. Singhvi further submitted that the SLC (LT) is a

statutory body and its decision would amount to Change in

Law. In this respect, he relies on the judgment of this Court in

the case of Ashoka Smokeless Coal India (P) Ltd. and others

v. Union of India and others2

20. When we heard this batch of Electricity appeals, it was

agreed between all the parties that this Court should first

decide Civil Appeal No. 684 of 2021 (Maharashtra State

Electricity Distribution Company Limited v. Adani Power

Maharashtra Limited and Others3) [“MSEDCL v. APML and

Others”, for short] and Civil Appeal No. 6927 of 2021

(Maharashtra State Electricity Distribution Company

Limited v. GMR Warora Energy Ltd. and Others) inasmuch

as three of the issues involved in all the appeals in the batch 2 (2007) 2 SCC 640

3 2023 SCC OnLine SC 233

11 were common. It was submitted that those two appeals could

be decided by deciding the three common issues. However,

insofar as the other appeals are concerned, it was submitted

that, in addition to the three common issues, certain additional

issues were also involved and it was agreed that after those two

appeals are decided, the other appeals should be heard for

considering these additional issues.

21. The said three common issues are thus:

(i) Whether ‘Change in Law’ relief on account of NCDP

2013 should be on ‘actuals’ viz. as against 100% of

normative coal requirement assured in terms of

NCDP 2007 OR restricted to trigger levels in NCDP

2013 viz. 65%, 65%, 67% and 75% of Assured Coal

Quantity (ACQ)?

(ii) Whether for computing ‘Change in Law’ relief, the

operating parameters be considered on ‘actuals’ OR

as per technical information submitted in bid?

12 (iii) Whether ‘Change in Law’ relief compensation is to be

granted from 1st April 2013 (start of Financial Year) or

31st July 2013 (date of NCDP 2013)?

22. After extensively hearing all the learned counsel for the

parties, vide the judgment and order dated 3rd March 2023 in

the case of MSEDCL v. APML and Others (supra), this Court

decided those two appeals after considering the aforesaid three

issues.

23. The first issue was answered by this Court, holding that

the ‘Change in Law’ relief for domestic coal shortfall should be

on ‘actuals’ i.e. as against 100% of normative coal requirement

assured in terms of NCDP, 2007. Insofar as the second issue is

concerned, it was held that the Station Heat Rate (“SHR” for

short) and Auxiliary consumption should be considered as per

the Regulations or actuals, whichever is lower. The third issue

was answered holding that the Start date for the ‘Change in

Law’ event for the NCDP, 2013 is 1st April 2013.

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24. As such, Issue Nos. 2 and 3, which were framed by the

learned APTEL in the impugned judgment and order dated 3 rd

November 2020 stand fully covered by the judgment of this

Court in the case of MSEDCL v. APML and Others (supra). The

remaining two issues that are required to be considered in the

present appeal are thus:

“Issue No.1:- Whether the Central [as framed by Commission was justified in the learned holding that Adani Power's bid APTEL] was based entirely on domestic coal availability and hence entitled to Change in Law relief on account of domestic coal shortfall?

Issue No.4:- [as framed by Whether the Central the learned Commission erred in ignoring APTEL] the methodology for computation of Change in Law compensation laid down in its earlier Order in Petition No. 79/MP/2013 - GMR Kamalanga Energy Ltd. & Anr. vs. DHBVNL &Ors. ("GMR Case")?

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25. Before we proceed to consider the aforesaid two issues, we

may note that the present appeal arises out of the concurrent

orders passed by the CERC and the learned APTEL.

26. This Court, in the case of MSEDCL v. APML and Others

(supra), after considering the relevant provisions under the

Electricity Act, 2003 with regard to constitution of various

expert bodies like the CEA, CERC and the learned APTEL, held

that these bodies are bodies consisting of experts in the field.

After considering various judgments on the issue, this Court

observed thus:

“123. Recently, the Constitution Bench of this Court in the case of Vivek Narayan Sharma v. Union of India has held that the 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 this Court to substitute its views with that of the expert bodies.” 15

27. Though the present appeal arises out of the concurrent

orders passed by CERC as well as APTEL, in view of the

submissions made, we will proceed to consider the rival

submissions.

28. Insofar as the first issue with regard to the bifurcation of

70% domestic and 30% imported coal is concerned, we have

examined the documents placed on record by the parties.

29. None of the documents placed on record would reveal that

a representation was given by AP(M)L that its bid is based on

70% domestic and 30% imported coal. Insofar as the document

on which Shri Ramachandran has relied i.e. the Executive

Summary of the bid is concerned, the same reads thus:

“Adani Enterprises Ltd., the promoter of APL, is the largest coal importing company of the country. The strategic advantage of the Power Plant is its proximity to MUNDRA PORT, where coal is being imported. Mundra Port possesses World Class Coal handling facilities with 17 meter deep draft permitting capsize vessels to berth alongside.”

30. It could thus be seen that what has been stated in the

Executive Summary by AP(M)L is that its Power Plant had a

16 strategic advantage inasmuch as it had proximity to Mundra

Port. It further states that Mundra Port possesses World Class

Coal handling facilities with 17 meter deep draft permitting

capsize vessels to berth alongside. By the said document, it has

proposed to supply 1425 MW to Haryana Power Generation

Corporation Limited (HPGCL) from 1980 MW (3 x 660 MW)

Phase IV extension of Mundra Project. The representation given

is that it will use either imported or indigenous coal.

31. If the argument of the appellants is to be accepted that at

the time of bid there was no assurance of domestic coal supply,

then the contention of the appellants that AP(M)L is entitled to

shortfall of 70% of the coal itself is contradictory.

32. In any case, even on facts, it is to be noted that the

contention is without substance. AP(M)L has offered to supply

1425 MW of power from its Phase IV extension of Mundra

Project, having a capacity of 1980 MW. The PPA entered into

between Haryana Utilities and AP(M)L is for 1424 MW.

33. The SLC(LT), in its meeting dated 12th November 2008,

based on the recommendation of the Central Electricity

17 Authority (“CEA” for short), Ministry of Power (“MoP” for short)

had authorized the issuance of LoA for 1386 MW i.e. 70% of

1980 MW installed capacity of Phase IV extension of the

Mundra Project. This was done in accordance with the

provisions of the NCDP 2007. Insofar as the remaining capacity

is concerned, the decision was deferred to be taken by the SLC

(LT) in the future, based on the recommendation of MoP and

other relevant factors.

34. It could thus be seen that AP(M)L would be entitled to

benefit on account of the Change in Law if there was any

shortfall of 70% of the domestic coal as was decided to be

allotted by the SLC (LT) in its meeting dated 12 th November

2008, culminating in the Ministry of Coal (for short, “MoC”)

issuing a LoA dated 25th June 2009 and the Fuel Supply

Agreement (for short, “FSA”) being signed by AP(M)L with CIL on

9th June 2012.

35. Undisputedly, the claim of AP(M)L is with regard to

shortfall in the assured quantity of 70%, and not above that.

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36. From the order passed by the learned APTEL, it is clear

that it has been the consistent stand of the appellants that

AP(M)L was in a position to generate and supply contracted

capacity of 1424 MW out of the fuel linkage arising out of the

FSA dated 9th June 2012 with Mahanadi Coal Field Limited

(“MCL” for short). It has been its stand that AP(M)L should use

the entire domestic coal availability towards the contracted

capacity of the appellants first, and then use the imported coal

for the deficit to reach the targeted PLF. It has further been its

stand that the entire domestic coal available should be

accounted towards 1424 MW contracted to Haryana Utilities.

37. In its reply dated 31st July 2017, Haryana Utilities have

categorically stated thus:

“Thus the actual coal received from MCL is required to be considered towards power supplied under Haryana PPAs for the purpose of relief under force majeure."

38. In its I.A. No.12 of 2018 dated 4 th March 2018 in Petition

No.97/MP/2017, the Haryana Utilities have reiterated thus:

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“It is submitted that the entire quantum of domestic coal available from MCL under the FSA dated 9.6.2012 was to be exclusively used for generation and supply of electricity to the Haryana Utilities under the PPA dated 7.8.2008.

39. It is further to be noted that the learned APTEL had,

during the course of the hearing, put a pertinent query to the

learned counsel appearing for Haryana Utilities, as to whether

the entire actual coal received from MCL was used towards the

power supplied under the Haryana PPAs. To this query, it was

replied thus:

“During the hearing, Mr. Ramachandran admitted that Adani Power has been using entire actual coal received from MCL towards the power supplied under the Haryana PPAs”

40. In view of this factual position that the entire domestic

coal linkage came to be utilized for supplying power to Haryana

Utilities, it is unjust, in our opinion, on the part of Haryana

Utilities to say that 70% of the installed capacity should be

further bifurcated and the Change in Law benefit should be

restricted only to 70% of the 70% of the installed capacity which

was allotted by the SLC (LT).

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41. Even according to Haryana Utilities, the entire coal

covered under FSA was required to be utilized for generating

power to be supplied to it as per the Memorandum of

Understanding (“MoU” for short). Therefore, denial of the benefit

of shortfall of the coal assured under FSA, in our view, would be

contrary to the restitutionary principle, as held by this Court in

the cases of Energy Watchdog (supra) and Jaipur Vidyut

Vitaran Nigam Ltd. and others v. Adani Power Rajasthan

Limited and another4.

42. In any case, the learned APTEL has clarified that AP(M)L

was neither claiming nor was entitled to claim any Change in

Law compensation beyond the one which was covered by

linkage coal, i.e. 1386 MW.

43. The other limb of argument in this regard is that AP(M)L

had MoUs with foreign companies for import of coal.

44. To a specific query by the learned APTEL, it was fairly

conceded by the learned counsel for Haryana Utilities that the

MoUs were general in nature and not specific for Phase IV

4 2020 SCC Online SC 697

21 Mundra Power Plant. As such, the finding of the learned APTEL

that the MoUs annexed with the bid were only to show its

competence to participate in the bid, and that it cannot be

stretched to hold that the bidder was to procure imported coal

to the extent of 30% for the project, cannot be said to be

perverse.

45. In the case of MSEDCL v. APML and Others (supra), this

Court has elaborately referred to the earlier judgments of this

Court and observed thus:

“132. Undisputedly, in the case of Energy Watchdog (supra) as well as in Adani Rajasthan case (supra) this Court has 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 CIL/Coal Companies under the FSA.”

46. We are, therefore, of the considered view that no error

could be found with the concurrent findings that AP(M)L was

entitled to Change in Law relief for 100% of the contracted

22 capacity i.e. 1386 MW, which is 70% of the installed capacity of

1980 MW of the Phase IV extension of Mundra Project. In other

words, the finding of the CERC and the learned APTEL is to the

effect that AP(M)L would not be entitled to any benefit of Change

in Law beyond 70% of the installed capacity i.e. 1386 MW. The

said findings cannot be said to not be based on the material on

record, or based on extraneous considerations.

47. We are now left with the second issue with regard to

methodology.

48. The grievance of Haryana Utilities is that the methodology

for granting benefit on account of the Change in Law adopted

by the CERC and affirmed by the learned APTEL is contrary to

the one which was previously arrived at in the earlier cases of

GMR, DB Power etc.

49. Perusal of the order passed by the learned APTEL would

reveal that AP(M)L had proposed a methodology based on the

methodology approved by the CERC in the GMR Kamalanga

Energy Limited and Another v. Dakshin Haryana Bijli

23 Vitran Nigam Limited and Others5 considering the quoted

tariff under the PPAs as the base.

50. The learned APTEL had referred to the Record of

Proceedings of the CERC dated 10th August, 2017, which read

thus:

“3. In response to the Commission’s query as to whether the methodology adopted by the Petitioner in the light of the methodology given in GMR case is acceptable to the Haryana Utilities, learned counsel replied in the positive.”

51. The learned APTEL had also referred to the order of the

CERC dated 28th September 2017 in I.A. No.57 of 2017 in

Petition No.97/MP/2017, which reads thus:

“7…… Haryana Utilities who is the only respondent has not objected to the calculation made by the Applicant.”

52. The learned APTEL had also referred to the order dated 3 rd

December 2018 passed by the CERC in Review Petition bearing

No.24/RP/2018, which reads thus:

"25... It is apparent from the above that the Commission, after due consideration of the submissions of the Adani Power 5 Petition No. 79/MP/2013 dated 03.02.2016 24 and Prayas had consciously decided on the methodology for computation of relief due to shortage of domestic coal under change in law for the period from 1.4.2013 to 31.3.2017 in Para 46 of the impugned order. The Review Petitioners had not suggested any methodology of calculation of the relief due to shortage of domestic coal. On the other hand, the Review Petitioners in their reply dated 28.7.2017 in the Petition No. 97/MP/2017 had stated that "the reliance to the decision of GMR is wholly in appropriate". The Review Petitioners are now suggesting an alternative formula for computation of the relief under change in law. As already reiterated in the earlier part of the order, the review cannot be used for substitution of a view already taken with a new view. Therefore, the review on the ground is not maintainable."

53. We find that Haryana Utilities are indulging into

approbation and reprobation. They cannot be permitted to blow

hot and cold at the same time. After accepting before the CERC

that they would adopt the methodology as given in the case of

GMR Kamalanga Energy Limited (supra), it would not be

appropriate, in our view, on the part of the appellants, which

are, after all, instrumentalities of the State, to change its stand

after final orders are passed by the CERC.

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54. In the case of MSEDCL v. APML and Others (supra), this

Court observed thus:

“150. In spite of this legal position and the stand taken by the Union of India, the DISCOMS are taking a stand which is contrary to the stand of the Union of India. In Energy Watchdog (supra), it was also sought to be urged by DISCOMS that even on account of Change in Law, adjustments would not be permissible, which contention was outrightly rejected. We have come across a number of matters wherein concurrent orders passed by the Regulatory Body and the Appellate Forum are assailed. Such a litigation would, in fact, efface the purpose of the Electricity Act. As already discussed herein above, one of the major reasons for the enactment of the Electricity Act was the deterioration in performance of the State Electricity Boards.”

55. In the present case also, we find that the concurrent

findings of fact recorded by the two expert bodies could have

been interfered with only if they failed to take into consideration

the mandatory statutory provisions or if the decisions had been

taken by them on extraneous considerations or that they were

26 ex facie arbitrary and illegal. Nothing of that sort can be found

in the impugned judgment and order to warrant interference.

56. The appeal is, therefore, found to be without substance

and the same is accordingly dismissed. No costs.

…….........................J. [B.R. GAVAI]

…….........................J. [VIKRAM NATH] NEW DELHI;

APRIL 20, 2023

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