Justice M.M. Sundresh, Justice Rajesh Bindal, Supreme Court
Supreme Court: Mere Difference In Understanding Of “Change In Law” By One Party To Agreement Doesn’t Preclude Other From Deriving Benefit
|The Supreme Court said that recognising a change in law is different from interpreting a notification as the one applicable to the parties.
The Supreme Court held that a mere difference in the understanding of a “change in law” by one party to the agreement does not by itself preclude the other party from deriving a benefit.
The Court held thus in a Civil Appeal filed by Jaipur Vidyut Vitran Nigam Ltd. against Adani Power Rajasthan Ltd.
The two-Judge Bench comprising Justice M.M. Sundresh and Justice Rajesh Bindal observed, “… a mere difference in the understanding of a ‘change in law’ by one party to the PPA, does not, by itself, preclude the other party from deriving a benefit by invoking Article 10.5.1 (i) of the PPA. In other words, a different understanding would not result in a different interpretation of law, that would bar entitlement under Article 10.5.1 (i) of the PPA and, therefore, such a situation would not fall within the purview of Article 10.5.1 (ii) of the PPA.”
The Bench said that recognising a change in law is different from interpreting a notification as the one applicable to the parties.
Senior Advocate Shyam Divan and Advocate Karthik Seth appeared for the Appellants while Senior Advocate Abhishek Manu Singhvi appeared for the Respondents.
Facts of the Case
In pursuance of the Letter of Intent (LOI) issued to Adani Power Rajasthan Ltd. (Respondent/Power Generator) in 2009, a Power Purchase Agreement (PPA) was entered into between the Appellants, who are the Rajasthan Discoms engaged in the distribution and supply of electricity, on one side and Respondent on the other, for the supply of 1200 MW Aggregate Contracted Capacity at a levelized tariff of Rs. 3.238 per unit. The same was duly approved by Respondent No.2. While the agreement was in operation, a Notification was issued at the instance of M/s. Coal India Limited (CIL) in 2017, imposing a levy of Evacuation Facility Charges (EFC) with effect from December 20, 2017. Immediately, on the very next day, the Respondent informed the Appellant No. 4 that the Notification constituted a “change in law” event. On its failure in eliciting a suitable reply, the Respondent filed a Petition before the Rajasthan Electricity Regulatory Commission (RERC), invoking Section 86 of the Electricity Act, 2003 read with Article 10 of PPA.
While rejecting some of the reliefs, the RERC did allow some of the other prayers sought for by the Respondent. Against the refusal of some of the claims, the Respondent filed an Appeal before the Appellate Tribunal for Electricity (APTEL). The Appeal under Section 111 of the Electricity Act was so made along with an Application seeking condonation of delay of 332 days in filing. Another Application was filed seeking to condone the delay of 236 days in re-filing the Appeal. Upon hearing both sides, the said applications were allowed and, thereafter, the Appeal was decided on merits. The APTEL held that the notification would amount to a change in law and the Respondent would be entitled to the grant of compensation from the date of notification. This was challenged before the Apex Court.
Reasoning
The Supreme Court in view of the above facts, noted, “While Article 10 of the PPA, with specific reference to Article 10.2, deals with application and principles for computing impact of change in law, Article 10.5, being a facet of Article 10.2 of the PPA, concerns itself with tariff adjustment payment on account of change in law.”
The Court said that Article 10.2.1 of PPA was incorporated based on the principle of restitution and the idea of this principle is to compensate the affected party in order to restore it to the same economic position, but for the change in law.
“This particular provision is a substantive one, which in a normal circumstance, has to be given effect to in letter and spirit. … Article 10.5 of the PPA deals with tariff adjustment payment occasioned on account of change in law. Under Article 10.5.1 (i) of the PPA, the adjustment would start from the date of change in law. Therefore, as a matter of course, the adjustment in monthly tariff payment shall become effective from the date notified in the change in law”, it added.
The Court observed that Article 10.5.1 (ii) of the PPA is not applicable to the facts of this case since there is no change in law which has occasioned by way of an interpretation given by a Court or a Tribunal or an Indian Governmental Instrumentality.
“We are only clarifying the position that there is no change in the interpretation of law involved in the case at hand, particularly when the said issue was not before the APTEL, for which the author of the change in law should have been made a party to the proceedings, in order to defend it”, it further remarked.
Conclusion
The Court elucidated that a supplementary bill has to be raised only after due adjudication by the competent forum. It also said that one has to read Article 10.5.2 along with Article 8.8 of the PPA and it is only thereafter that Article 8.6 of the PPA might come into the picture when there exists a dispute on the quantum of amount claimed in the supplementary bill raised after the completion of due adjudication by the competent forum, on the issue pertaining to the change in law.
“… we find absolutely no reason to interfere with the impugned judgment. Liability has been fastened upon the appellants under the agreement. The contention that the supplementary bill ought to have been raised earlier and, therefore, the payment can only be made thereafter has neither a factual basis nor a legal one. We would only point out the fact that respondent No.1 did notify the change in law event immediately on the very next day of the notification having been issued”, it concluded.
Accordingly, the Apex Court dismissed the Appeal.
Cause Title- Jaipur Vidyut Vitran Nigam Ltd. & Ors. v. Adani Power Rajasthan Ltd. & Anr. (Neutral Citation: 2025 INSC 770)
Appearance:
Appellants: Senior Advocate Shyam Divan, Advocates Karthik Seth, Raghav Sharma, Saurabh Chaturvedi, and Manni Sethi.
Respondents: Senior Advocate Abhishek Manu Singhvi, AOR E. C. Agrawala, Advocates Mahesh Agarwal, Amit Kapur, Poonam Sengupta, Arshit Anand, Shashwat Singh, Saunak Rajguru, Subham Bhut, and Siddharth Seem.