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2020 (8) TMI 957 - SC - Indian LawsBid submitted by Adani Power Rajasthan Limited (APRL) was based on domestic coal or imported coal - non-availability of domestic coal constitutes a change in law under Article 10 of the Power Purchase Agreement (PPA) - applicability of the National Coal Distribution Policy (NCDP) of 2007 - Interest/late payment surcharge. Whether the bid submitted was premised on domestic coal? - HELD THAT - There is no doubt about it that the Government of Rajasthan entered into an MoU with APRL in 2008 to ensure supply of domestic coal and it had undertaken to facilitate the implementation of the Kawai Project for getting the coal block from the Central Government or coal from any other source for the project. Once the Government of Rajasthan entered into MoU dated 20.3.2008 containing Article 2.2 quoted above it was incumbent upon the State of Rajasthan to provide coal from any other source for the project in case the Central Government could not allot coal linkage/coal block. The Central Government had even written to the Government of Rajasthan to provide coal to APRL from the coal mine but due to paucity it could not be supplied to APRL. Thus there was a failure on the part of the Government of Rajasthan to provide coal from any other source. The NCDP of 2007 prevailed as law 7 days prior to the bid with respect to the supply of coal the cut-off date of the bid was 30.7.2009. It is apparent that 100 percent of the quantity as per the consumers normative requirement was to be made by CIL obviously on the approval of the application by the Standing Linkage Committee. It was kept pending due to a shortage of coal supplies and was ultimately processed under the SHAKTI Policy and linkage for 100 percent was given from January 2018. Thus earlier as the quantity of coal was not available sufficient supply could not be made. It is not a case where APRL was adjudged ineligible but prior commitments and the non-availability of coal came in the way of failure to obtain domestic coal linkage under the NCDP of 2007 which itself was changed with effect from 26.7.2013. Change in law - HELD THAT - A decision was taken by the Standing Linkage Committee on 14.2.2012 read with the decision dated 31.5.2013 indicating a shortage in domestic coal and dependence on imported coal. For the shortage of coal APRL could not have been made to suffer on that it had no control. It was decided not to issue fresh LoAs and all pending applications were kept in abeyance. The Cabinet Committee on Economic Affairs decided on 21.6.2013 to reduce coal supply to 65 percent and 75 percent of ACQ for the remaining four years of the 12th Five Year Plan. It allowed passing through of higher cost of imported coal. The Ministry of Coal was directed to suitably amend the NCDP. The Ministry of Coal on 26.7.2013 amended the NCDP of 2007 and the Ministry of Power issued a letter on 31.7.2013 which provided for pass-through of additional cost incurred to meet the coal requirements. The Cabinet Committee on Economic Affairs in its decision dated 21.6.2013 recognised coal supply subject to availability to 4660 MW having no fuel linkage. The change in policy and in the terms and conditions prescribed for obtaining any consents clearances and permits or the inclusion of any new terms or conditions for obtaining such consents clearances and permits are also included - The relief was not claimed on the basis of change in foreign law. Apart from that admission has been relied upon change in law. The PPA was based on the domestic law and there was a change in domestic law. Thus consequences must follow. The Government of Rajasthan entered into a MoU with APRL with respect to coal linkage in 2008 to provide coal linkage or coal from other sources. The change in law does not provide that letter of approval should be issued by CIL as provided in Article 10.1 relating to change in law. Even if the procedure is changed that is to be given effect to. Interest/late payment surcharge - HELD THAT - A case was also filed by APRL in the year 2013 itself raising its claim on such basis. However the Appellants-Rajasthan DISCOMS did not allow the claim regarding change in law because of which APRL was deprived of raising the bills with effect from the date of change in law in the year 2013 - considering the totality of the facts of this case and in order to do complete justice and to reduce the liability of the Appellants-Rajasthan DISCOMS payment of 2 per cent in excess of the applicable SBAR per annum with monthly rest would be on higher side. In our opinion it would be appropriate to direct the Appellants-Rajasthan DISCOMS to pay interest/late payment surcharge as per applicable SBAR for the relevant years which should not exceed 9 per cent per annum. It is also provided that instead of monthly rest the interest would be compounded per annum. Conclusion - i) APRL s bid was based on domestic coal and the non-availability of domestic coal due to changes in the NCDP constituted a change in law. ii) APRL s entitlement to compensation for the shortfall in domestic coal supply confirmed and it is directed that Rajasthan DISCOMS to calculate and pay the compensation. Appeal disposed off.
1. ISSUES PRESENTED and CONSIDERED
The core legal issues considered by the Court in this judgment revolve around:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Basis of APRL's Bid - Domestic or Imported Coal The Court examined the statutory guidelines under Section 63 of the Electricity Act, 2003, which required firm arrangements for fuel tie-up for domestic coal. The bid documents submitted by APRL indicated reliance on domestic coal, supported by a Memorandum of Understanding (MoU) with the Government of Rajasthan. The Court noted that the bid was evaluated on domestic coal tie-up, and the PPA recognized domestic coal as the primary fuel, with imported coal as a fallback arrangement. The Court found that the bid was premised on domestic coal, supported by concurrent findings of the Rajasthan Electricity Regulatory Commission (RERC) and the Appellate Tribunal for Electricity (APTEL). Issue 2: Non-availability of Domestic Coal as Change in Law The Court considered the definition of "Change in Law" under Article 10 of the PPA, which includes changes in law that result in additional expenditure or income to the seller. The Court found that the non-allocation of domestic coal linkage due to changes in the NCDP of 2013 constituted a change in law. The Court referenced the decision in Energy Watchdog v. Central Electricity Regulatory Commission, which recognized changes in domestic coal policy as a change in law event. Issue 3: Applicability of NCDP 2007 and 2013 Amendment The Court analyzed the NCDP of 2007, which assured 100% supply of domestic coal, and its amendment in 2013, which reduced the assured supply. The Court found that the amendment constituted a change in law, impacting APRL's ability to secure domestic coal. The Court held that APRL was entitled to compensation for the shortfall in domestic coal supply due to this change in law. Issue 4: Compensation and Calculation under Change in Law The Court emphasized the restitution principle under Article 10.2.1 of the PPA, which aims to restore the affected party to the economic position as if the change in law had not occurred. The Court directed Rajasthan DISCOMS to verify documents submitted by APRL and calculate compensation based on the shortfall in domestic coal supply. Issue 5: SHAKTI Policy 2017 The Court noted that under the SHAKTI Policy, APRL was eligible for coal supply based on its PPA being premised on domestic coal. The policy allowed APRL to secure 100% of its normative coal requirements, reinforcing the Court's finding that the PPA was based on domestic coal. Issue 6: Late Payment Surcharge and Interest The Court addressed the liability of Rajasthan DISCOMS for late payment surcharge under Articles 8.3.5 and 8.8 of the PPA. The Court reduced the interest rate to the applicable State Bank Advance Rate (SBAR), not exceeding 9% per annum, compounded annually, instead of the 2% above SBAR as stipulated in the PPA, considering the totality of circumstances and to reduce the liability on Rajasthan DISCOMS. 3. SIGNIFICANT HOLDINGS The Court held that APRL's bid was based on domestic coal, and the non-availability of domestic coal due to changes in the NCDP constituted a change in law. The Court affirmed APRL's entitlement to compensation for the shortfall in domestic coal supply and directed Rajasthan DISCOMS to calculate and pay the compensation. The Court also adjusted the late payment surcharge to a more reasonable rate. The Court's significant legal reasoning included:
The Court concluded that the concurrent findings of the RERC and APTEL were binding and did not warrant interference, affirming the applicability of the change in law provisions and the entitlement to compensation under the PPA.
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