23 May 2025 Civil Appeals >> Civil & Consumer Law   |   Environment Protection >> Environmental Law  

In a recent judgment delivered on May 23, 2025, the Supreme Court of India dismissed Civil Appeal No. 4336 of 2025, filed by Jaipur Vidyut Vitran Nigam Ltd. & Others against Adani Power Rajasthan Ltd. & Another. The ruling, presided over by Justice M.M. Sundresh and Justice Rajesh Bindal, affirmed Adani Power Rajasthan Ltd.'s (Respondent No. 1) entitlement to compensation for "Evacuation Facility Charges" (EFC) imposed by Coal India Limited (CIL). The Supreme Court's decision primarily reinforced existing precedents on "change in law" events in Power Purchase Agreements (PPAs) and clarified the limited scope of appeals under the Electricity Act, 2003.

Background of the Dispute:

The case originated from a Power Purchase Agreement (PPA) dated January 28, 2010, between Rajasthan Discoms (appellant Nos. 1, 2, and 3) and Adani Power Rajasthan Ltd. (Respondent No. 1) for the supply of 1200 MW of electricity. On December 19, 2017, Coal India Limited (CIL) issued a notification imposing an "Evacuation Facility Charge" (EFC) of Rs. 50 per tonne on all despatches, effective from December 20, 2017. Adani Power immediately informed the appellants that this notification constituted a "change in law" event under the PPA.

Following a lack of response, Adani Power filed a petition with the Rajasthan Electricity Regulatory Commission (RERC), invoking Section 86 of the Electricity Act, 2003, read with Article 10 of the PPA. While the RERC granted some reliefs, Adani Power appealed the denied claims to the Appellate Tribunal for Electricity (APTEL). APTEL condoned a significant delay in filing and re-filing the appeal, an order that attained finality due to lack of further challenge.

On April 18, 2024, APTEL ruled that the CIL notification amounted to a "change in law" and that Adani Power was entitled to compensation from the date of the notification, along with carrying cost at Late Payment Surcharge (LPS) rates, compounded. APTEL also rejected the appellants' argument that a supplementary bill was mandatory before seeking LPS relief.

Supreme Court's Limited Review and Key Findings:

When the case reached the Supreme Court, its scope of consideration was specifically limited to the interpretation of Article 10.2.1 vis-à-vis 10.5 of the PPA, with specific reference to 10.5.1 (ii). The Court explicitly noted that most other issues, including the "change in law" itself, were covered by previous Supreme Court decisions.

Despite this limitation, the appellants attempted to re-argue issues such as the condonation of delay by APTEL and the award of carrying cost at LPS rates, contending that a supplementary bill should have been raised earlier.

The Supreme Court, however, upheld its earlier stance and rejected these arguments:

• "Change in Law" Interpretation: The Court reiterated that the levy of EFC by CIL, an instrumentality of the Government of India, indeed constitutes a "change in law". This aligns with previous judgments, including GMR Warora Energy Ltd. v. CERC and UHBVNL v. Adani Power (Mundra) Limited, which have consistently held that notifications or orders issued by governmental instrumentalities having the force of law fall under the definition of "Law" in PPAs.
• Restitutionary Principle and Carrying Cost: The Court affirmed the restitutionary principle enshrined in Article 10.2.1 of the PPA, which aims to restore the affected party to the same economic position as if the "change in law" had not occurred. It strongly reiterated that carrying cost at compound interest from the date of the "change in law" event is justified and necessary for full restitution, as held in UHBVNL 2023. The argument that there is no PPA provision for compound interest from the date of the change in law was specifically rejected.
• Supplementary Bill: The Supreme Court clarified that a supplementary bill under Article 10.5.2 read with Article 8.8 of the PPA is to be raised only after due adjudication by the competent forum. It rejected the appellants' contention that the supplementary bill ought to have been raised earlier, stating this argument had "neither a factual basis nor a legal one". The Court noted that Adani Power had promptly notified the "change in law" event the day after the CIL notification.
• Scope of Appeals under Electricity Act: The judgment provided an elaborate discussion on the scope of appeals under the Electricity Act, 2003. It emphasized that appeals to the Supreme Court under Section 125 are circumscribed by Section 100 of the Code of Civil Procedure, 1908, meaning they must involve a "substantial question of law". A mere question of law is insufficient, and the substantial question of law must be capable of reversing APTEL's decision if answered affirmatively. The Court will only interfere with APTEL's findings of fact in exceptional cases of perversity.
• Article 10.5.1 (ii) Inapplicability: The Court clarified that Article 10.5.1 (ii) of the PPA, which pertains to "change in law" due to an interpretation of law by a court or tribunal, was not applicable in this case. The CIL notification was a direct change in law, and its applicability was not in dispute, only whether it constituted a "change in law".

In conclusion, the Supreme Court found no reason to interfere with APTEL's judgment, emphasizing that the liability had been properly fastened upon the appellants under the agreement. The appeal was accordingly dismissed.

  ELECTRICITY ACT, 2003