Power Purchase Agreement -claim for an increased tariff -VIDYUT VITARAN NIGAM LTD. & ORS. VS. ADANI POWER RAJASTHAN LIMITED & ANR

Power Purchase Agreement -claim for an increased tariff -VIDYUT VITARAN NIGAM LTD. & ORS.   VS.  ADANI POWER RAJASTHAN LIMITED & ANR
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS.8625­8626 OF 2019
JAIPUR VIDYUT VITARAN NIGAM LTD. & ORS.       … APPELLANTS
VS.
ADANI POWER RAJASTHAN LIMITED & ANR.         … RESPONDENTS
WITH
CIVIL APPEAL  NO(S).    3021   OF 2020
(DIARY NO.27976 OF 2019)
AND
CIVIL APPEAL  NO(S).     3022­3023     OF 2020
(DIARY NO.39030 OF 2019)
J U D G M E N T
1. The appellant herein Jaipur Vidyut Vitran Nigam Limited is the
electricity Distribution Licensee in the State of Rajasthan.  It entered
into a Power Purchase Agreement (for short, ‘PPA’) on 28.1.2010 with
Adani   Power   Rajasthan   Limited   (for   short,   ‘APRL’),   a   generating
company in pursuance to a tariff­based competitive bid process in
terms   of   Section   63   of   the   Electricity   Act,   2003   (for   short,   ‘the
Electricity Act’).  The terms of PPA contained a tariff, and that could be
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varied only as per the specific provisions contained in the PPA, not
otherwise.
2. APRL made a claim for an increased tariff under the change in
law provisions in the PPA (Article 10).   On 23.10.2006, Rajasthan
Rajya Vidyut Utpadan Nigam Limited (for short, ‘RVUN’) conveyed to
Adani Exports Limited its selection as a joint venture partner for the
formation of a Joint Venture Company.  It was stated that business
activities of the proposed Joint Venture Company shall be limited to
mining and supply of coal from allotted captive coal block for the
requirement of existing/new thermal power stations of RVUN and/or
for new projects of the State.
3. On 2.8.2007, a Letter of Intent (for short, ‘LoI’) was issued by
RVUN   in   favour   of   Adani   Enterprise   Limited   (for   short,   ‘AEL’)   for
developing the coal block under a joint venture at Parsa East and
Kente Basan, wherein it was provided that the coal can be utilised at
the   discretion   of   the   Government   of   Rajasthan   for   new   upcoming
projects in the State under the joint venture or IPP.
4. On   18.10.2007,   New   Coal   Distribution   Policy   (NCDP)   was
introduced by the Ministry of Coal, assuring 100 per cent of domestic
coal to power plants that is 85 per cent of normative capacity.
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5. On   20.3.2008,   an   MoU   was   entered   into   between   the
Government of Rajasthan and AEL to set up a coal­based Thermal
Power Generation Project of 1200 MW  ± 10 percent capacity near
Kawai, District Baran, Rajasthan.   The estimated cost of the project
was approximately Rs.5,000 crores. It was provided that the State of
Rajasthan was to make the best efforts to facilitate getting the coal
linkage from the Central Government or coal from any other source for
the Project. 
6. On 16.5.2008, APRL requested the Government of Rajasthan to
allocate coal from Parsa East and Kente Basan coal block.
7. On 21.5.2008, it was conveyed to APRL that the State will make
the   best   efforts   to   facilitate   for   getting   coal   linkage   from   the
Government of India.  It was informed that it would not be possible to
supply coal from Parsa East and Kente Basan coal blocks as they
barely meet RVUN projects' requirements.  APRL repeated the request
on 28.5.2008, 9.6.2008, 11.6.2008, and 16.6.2008.  On 29.8.2008, a
request was made to the Government of Rajasthan to advise RVUN to
enter into an MoU and to apply to the Ministry of Coal for allocation of
coal blocks to the Kawai Project under the Government Dispensation
Scheme.
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8. On   25.2.2009,   a   Request   for   Proposal   (for   short,   ‘RFP’)   was
issued by Rajasthan Rajya Vidyut Prasaran Nigam Limited (for short,
‘RVPN’) for procurement of power for long­term through tariff­based
competitive   bidding   process   under   Case­1   bidding   procedure   for
meeting the baseload requirement of the procurers.
9. On 19.3.2009, a request was made by AEL to the Government of
Rajasthan   to   extend   the   validity   of   the   MoU   for   one   year.     On
2.4.2009, a Standard Bidding Document for Case­1 was notified by
the Ministry of Power.  On 22.6.2009, APRL made a request in terms
of the MoU to the Government of Rajasthan to allocate the surplus
coal mine from the existing coal blocks and for extension of MoU,
which was to expire on 20.3.2009.  As an alternative, AEL was able to
negotiate Indonesian coal at a discounted price of USD 36 per MT.
The Coal Supply Agreement (for short, ‘CSA’) was signed for supplying
standard coal for the project from Indonesia.  The said agreement was
terminated on 10.6.2010.
10. On 2.7.2009, APRL prayed to the Ministry of Coal for granting
long­term coal linkage of ‘F’ grade coal from South Eastern Coalfields
Limited for the Kawai Project for 7.082 MT per annum of coal.  The
Government of  Rajasthan  extended   the  validity  of  the  MoU  up  to
20.3.2010.   RVUN was advised to apply for the allocation of coal
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blocks for meeting coal requirements for its projects and the Kawai
Project under the Government Dispensation Scheme. It may invite
tenders for mining and delivery of coal, as was done in Parsa East and
Kente Basan coal blocks.
11. According to the RFP, APRL submitted its bid on 6.8.2009.   It
offered a total contracted capacity of 1200 MW from the Kawai Project.
The levelized tariff after negotiation was settled at Rs.3.238/KWh for
25 years.   The tariff in the bid was quoted based on domestic coal.
The imported coal was limited, being a temporary measure, as fallback
support option till the Government instrumentality resumed domestic
coal supply.
12. On 12.8.2009, AEL requested to allot Kente (Extn.) coal block for
meeting   the   coal   requirement   of   the   Kawai   Project  inter   alia  the
installed capacities of the projects.  As against the earlier commitment
of sale of 50 per cent of the power generated from the Kawai Project to
the State of Rajasthan, AEL committed the entire power generated to
the State provided it succeeds in the bidding process.
13. A clarification was sought concerning the bid submitted by APRL
to evaluate its bid as to the fuel arrangement in the bid, both domestic
coal and imported coal were indicated. APRL was asked to clarify on
which basis of fuel, the bid should be evaluated.   APRL clarified on
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12.9.2009, that its bid should be evaluated based on domestic coal
tie­up.  APRL undertook that the payment considering domestic coal
escalations would be acceptable during the term of the PPA.
14. On 3.12.2009, APRL issued a communication to RVPN. Because
of the support offered by the Government of Rajasthan regarding the
development   of   the   Kawai   Project,   the   levelized   tariff   was   being
reduced by 1 paisa to Rs.3.238 Kwh.  On 17.12.2009, pursuant to the
bid submitted, an LoI was issued by RVPN to APRL.  On 18.12.2009,
an unconditional acceptance was communicated to RVPN.
15. On 28.1.2010, APRL executed the PPA with  three procurers,
namely, Jaipur Vidyut Vitran Nigam Limited, Jodhpur Vidyut Vitran
Nigam Limited, and Ajmer Vidyut Vitran Nigam Limited, for the supply
of aggregate contracted capacity of 1200 MW.   The PPA postulates
domestic coal usage as the primary fuel, while imported coal may be
used as a backup arrangement.
16. On 15.2.2010, APRL conveyed to the CMD­RRVUNL for getting
the allocation of captive coal block for the supply of coal to the Kawai
Power Project and conveyed confirmation to accept washed coal.
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17. On 20.2.2010, AEL conveyed to the Government of Rajasthan
that it would supply 91 per cent power from the Kawai Project to the
Jaipur Vidyut Vitran Nigam Limited, Jodhpur Vidyut Vitran Nigam
Limited, and Ajmer Vidyut Vitran Nigam Limited – Rajasthan Discoms,
with whom the PPA was entered into on 28.1.2010.   A prayer was
made to extend the validity of MoU for a further period of one year
w.e.f. 20.3.2010.
18. On 25.2.2010, RVPN filed a petition before the State Commission
on behalf of Rajasthan Discoms for approval of the Commission for the
adoption of tariff quoted by APRL through competitive bidding.  The
State Commission passed an order on 31.5.2010 with respect to the
adoption of a tariff for 1000 MW procurement and had made specific
observations.
19. On 24.3.2011, the Director General of Mineral and Coal issued a
regulation specifying the formula for calculation of benchmark price
with reference to the international market price of coal.
20. APRL wrote a letter to the Ministry of Power, Government of
India on 11.10.2011 for grant of coal linkage to it along with other 12th
Five Year Plan Projects; however, it was delayed for more than a one
year for various reasons, due to which conditions subsequent under
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the PPA could not be fulfilled, and lenders of money to the Kawai
Project had started levying penal interest due to delay in coal linkage
allocation.  A request was made for grant of coal linkage for the Kawai
Project.  It was stated that CIL was directed to execute an FSA for the
11th  Five   Year   Plan   Projects,   did   not   address   the   problems   that
continue to affect the 12th Five Year Plan Projects.  In the light of the
non­availability   of   domestic   coal   and   the   prohibitive   cost   of   the
alternate   fuel,   the   Kawai   Project   became   unviable   for   the   tariff
committed.  Therefore, a request was made to grant coal linkage.  The
Ministry of Power, on 26.4.2012 in response to letter dated 17.2.2012
of the Government of Rajasthan, informed that the Kawai Project had
been recommended for linkage as a 12th Five Year Plan Project. In the
meantime, the Government of Rajasthan may consider revising the
mining plan capacity of the captive coal blocks allocated to them,
namely Parsa East and Kante Basan upward to mitigate the demand
of coal for power projects in Rajasthan.
21. On 21.6.2012, APRL informed the Rajasthan Discoms about the
uncertainties in the availability of coal supplies and the same being
beyond their control.   Despite various efforts by the Government of
Rajasthan, neither the coal block nor the coal linkage was allocated.
It was also informed that following the regulatory change in Indonesia,
which mandates the export of coal only at the notified price, w.e.f.
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11.9.2011, the cost of imported coal has risen too high to make the
use of imported coal prohibitive.  In case an early arrangement of coal
linkage or allotment of captive coal was not made, the operation of the
Government’s   projects   would   be   hampered.     On   5.11.2012,   the
Government of Rajasthan informed that there was no surplus coal in
Parsa East and Kente Basan coal blocks, which could be allocated to
the   Kawai   Project.     However,   the   Government   of   Rajasthan   on
22.11.2012, wrote a letter to the Ministry of Power and Ministry of
Coal informing that Rajasthan Discoms have executed long­term PPA
with APRL.  It was stated that in case long­term coal linkage was not
provided, then the State would be deprived of 1200 MW power at
competitive   rates,   and   Rajasthan   was   already   facing   an   acute
shortage.     On   26.11.2012,   another   letter   was   written   by   the
Government of Rajasthan for allocating coal linkage to 12th Five Year
Plan Projects.
22. As no coal linkage was granted, on 24.4.2013 AEL filed a Petition
No.392 of 2013 before the State Commission claimed compensatory
tariffs for the higher cost of coal.   Ultimately, the Standing Linkage
Committee (Long­Term) of the Government of India held a meeting on
31.5.2013. On 21.6.2013, the Cabinet Committee of Economic Affairs
approved a mechanism for signing the Fuel Supply Agreement (for
short, ‘FSA’) for 78000 MW.   AEL was not part of the same.   On
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17.7.2013, a Presidential Directive was issued by the Ministry of Coal
to the Coal India Limited (for short, ‘CIL’) to sign the FSAs for the
capacity mentioned above.   The New Coal Distribution Policy, 2013
(NCDP of 2013), was notified on 26.7.2013 by the Central Government
for the revised arrangement for the supply of coal to identified thermal
power stations of 78000 MW.  AEL was not one of the thermal power
stations included in the same.
23. The Ministry of Power issued a letter on 31.7.2013, in which the
change in law was considered regarding a shortfall in domestic coal in
the quantity indicated in the Letter of Assurance (for short, ‘LoA’) or
FSA.  The Revised Tariff Policy under the Electricity Act was issued on
28.1.2016.  AEL was given the coal supply to the fullest extent in 2018
under the SHAKTI Policy.  It entered into an FSA with NCL/SECL for
procurement of coal under the SHAKTI Policy. 
24. The State Commission ultimately decided the Petition No.392 of
2013, filed by AEL on 17.5.2018.  AEL was held entitled to relief under
the change in law on account of NCDP of 2013.   The amount of
compensation payable to AEL was not computed.   Dissatisfied with
the order passed by the State Commission, Rajasthan Discoms filed
an appeal before the Appellate Tribunal for Electricity (for short, ‘the
APTEL’).  The APTEL vide judgment dated 14.9.2019, held that the bid
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of APRL was based on domestic coal and accordingly covered under
the Change in Law event in terms of the PPA and of the decision of
this   Court   in  Energy   Watchdog   v.   Central   Electricity   Regulatory
Commission and Ors., (2017) 14 SCC 80.  APRL was also held entitled
for   change   in   law   under   the   Shakti   Scheme   as   well   as   payment
towards carrying cost.   A further direction was issued to  pay the
amount of change in law compensation and Carrying Cost by duly
verifying the relevant supporting documents for fuel cost and as per
applicable   Tariff   Regulations   for   operating   parameters.   Aggrieved
thereby, appeals have been preferred by Rajasthan Discoms.  Another
appeal has been filed by All India Power Engineers Federation (for
short, ‘the Federation’).
25. Shri C. Aryama Sundaram, learned senior counsel urged the
following arguments:
(a) APRL cannot claim any compensation for the use of imported
coal for the supply of power either before January 2018 or after that
as the use of such imported coal was as per the bid submitted by
APRL and was covered as a part of its quoted tariff.
(b) According to the bid documents submitted and the PPA entered
into pursuant to it, demonstrate that APRL had duly stipulated and
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agreed for the imported coal also as a fuel source and quoted the
tariff­based thereon.
(c) Without prejudice to the aforesaid, there was no change in law
as APRL could have claimed no compensation.  Even as per its best
case, APRL could not be entitled to relief in relation to 100 percent
coal   requirement,   but   could   only   claim   concerning   the   balance
percentage,   after   considering   the   quantum   under   the   FSA   dated
25.6.2009 for imported coal.
(d) There is no computation, no determination of methodology or
formula for the computation of the compensation; the same is required
to   be   undertaken   with   verification   of   quantification   of   coal,
parameters, computation of coal costs, etc.  APRL cannot be permitted
to unilaterally raise the invoices and claim compensation.
(e) The finding recorded by the APTEL that the State Commission
had computed the amount, is factually incorrect.
(f) Any compensation paid to APRL would have to be recovered from
the   consumers;   therefore,   it   affects   the   public   interest.     The
computation  and  determination   of  the  compensatory tariff,  in  any
event, would have to be done by the State Commission.
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(g) The Generator cannot raise the invoice, and the liability to make
payment by the appellants does not crystallise.  Therefore, there is no
question of liability of late payment surcharge for such a period.  At
best, depending on the conduct of the Generator and in terms of
restitution principle, simple interest may be considered for the period
prior   to   determination   by   the   State   Commission.     However,   the
application of late payment surcharge cannot be applied when there is
no delay or default in payment of bills.
(h) APRL   had   admitted   that   two   periods   are   separate   until   the
determination of change in law, which is carrying cost, and thereafter
raising of invoices, there may be a default by the procurer, which is
late payment surcharge.  As the two periods are separate, there is no
logic to apply the late payment surcharge, which is for the second
period to the first one.
26. Shri Prashant Bhushan, learned counsel appearing on behalf of
Federation argued as under:
(a) the main question is whether the bid submitted by APRL was
premised   on   domestic   coal   or   imported   coal.     He   attracted   our
attention to the PPA, RFP, LoI, and other bid documents.  The bid and
PPA were based on imported coal.  APRL quantified as per RFP only on
the basis of imported coal.  It did not have any firm coal linkage or LoA
or FSA for the domestic coal. 
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(b) The MoU dated 20.3.2008, entered into between APRL and the
Government   of   Rajasthan,   was   of   no   avail.   Only   the   Central
Government was the sole deciding authority as is clear from Article 2.2
of the MoU. He attracted the attention of this Court to the RPF dated
26.2.2009.   MoU   dated   20.3.2008,   would   not   count   as   firm   coal
arrangement.   APRL had entered into a CSA with its own company
AEL to qualify for the bid.  Once it has qualified based on imported
coal, it cannot take a contrary stand.
(c)   A clarification was sought from APRL on 7.9.2009 on which
basis of fuel, its bid was to be evaluated.  In response to clarification,
it was submitted by APRL that bid should be evaluated on the basis of
domestic coal tie­up, and an undertaking was given that the payment
considering ‘domestic coal escalation’ would be acceptable to it during
the term of the PPA.
(d) On 17.12.2009, Rajasthan Discoms informed APRL that rates
mentioned at Annexure 1 (to provide 1200 MW power) and escalations
thereof on domestic coal is based on APRL’s commitment that the
above rates would be applicable even if coal requirement is met by way
of   a   backup   arrangement   with   imported   coal.     APRL   gave   an
unconditional acceptance on 18.12.2009.
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(e) Reliance was placed on the order dated 31.5.2010, passed by the
Rajasthan Electricity Regulatory Commission (for short, ‘the RERC’).
The   APTEL   failed   to   comprehensively   consider   the   PPA   and   other
documents.  The bid documents also formed part of the PPA entered
into between the parties.
(f) The NCDP of 2007 did not create a vested right to get domestic
coal even for those who did not have the LoA/FSA or recommendation
of the Standing Linkage Committee (Long­Term).   Our attention has
been invited to Clauses 2.1 and 2.2 of the NCDP of 2007 and approval
of the Standing Linkage Committee (Long­Term).   As APRL did not
have   any   coal   linkage   approval,   it   was   not   entitled   to   claim
compensation on the basis of change in law.  The CIL couldn't make
the supply.  The grant of linkage or LoA is not a ministerial act. 
(g) The Statutory Guidelines of 2005 issued under Section 63 of the
Electricity Act lay down that to participate in the competitive bidding
for a PPA, an entity has to show ready availability of fuel source for the
power plant.  In the case of domestic coal, the bidder shall have made
firm arrangements for fuel tie­up either by way of coal block allocation
or   fuel   linkage.     These   Guidelines   have   been   issued   by   the
Government of India, which issued the NCDP of 2007.  If the grant of
LoA/FSA/linkage was to be considered automatic on entering into a
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PPA, then there was no need for having this criterion for eligibility.
The   decision   in  Energy   Watchdog  and   the   Policy   have   not   been
appreciated correctly.
(h) The SHAKTI Policy was notified on 22.5.2017.  Those IPPs, which
were having PPAs based on domestic coal, but were having no LoA or
FSA for coal supply either under NCDP of 2007 or NCDP of 2013,
could now participate in the auction and get 100 per cent of their
normative requirement of coal supply.  Under the SHAKTI Policy, APRL
was given coal supply to the full extent of the normative requirements
for  generating   and   supply  of   electricity   to   the   Rajasthan   Discoms
within five years.  The SHAKTI Allocation in the year 2018 does not
change the fact that APRL had considered imported coal as other coal
for 5 years.  The change in law, thus, could have been considered only
after 5 years. Therefore, the question of change in law did not arise as
APRL was given coal supply under the SHAKTI Policy within 5 years of
Commercial Operation Date (for short, ‘COD’).
(i) It was also submitted that APRL had done over­invoicing, and
concerning that, the investigation is pending. A letter of rogatory has
been issued and, in that regard, S.L.P. (Crl.) No.10683 of 2019 is
pending in this Court, in which interim stay has been granted.  Thus,
the claim of APRL is not tenable.  It was also urged that the Federation
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has locus to file the appeal for quashing the order passed by the
APTEL.
27. On behalf of APRL, Dr. A.M. Singhvi and Shri Arvind Datar,
learned senior counsel, raised the following arguments:
(a)(i) the bid by APRL was premised only on domestic coal.
(ii) The submission of the imported coal agreement submitted with the
bid was only to indicate that the bidder is eligible for the bid.
(iii) Non­availability of domestic coal is a change in law event.
(iv) The decision in Energy Watchdog squarely applies to the case, in
which it  was held that changes in imported coal  regime is not a
change in law, changes in domestic coal regime is a change in law
event.
(b) APRL is entitled to carrying cost from the date the change in law
event came into force as held by this Court in  Uttar Haryana Bijli
Vitran Nigam Limited (UHBVNL) & Anr. v. Adani Power Limited & Ors.,
(2019) 5 SCC 325.
(c) The bid was premised only on domestic coal.  The RFP provides
six scenarios for quoting tariffs, and the bidder can submit the bid
under any one of the scenarios viz. (i) Captive Coal Block (ii) Linkage
Coal (iii) Imported Coal (iv) Imported Gas (v) Domestic Gas and (vi)
Hydro.
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(d) APRL submitted its financial bid as per linkage coal format, i.e.,
domestic coal.   The tariff was allowed to be quoted in linkage coal
format applicable to domestic coal.   The Government of Rajasthan
made consistent efforts by writing letters to various authorities of the
Government  of   India   to   grant  domestic   coal   linkage   to   the   Kawai
Project of APRL.  The Imported Coal Supply Agreement was submitted
as a part of bid only to demonstrate the raw material's readiness as
APRL was required to submit proof of linkage/fuel arrangement to
qualify as a bidder.
(e) Rajasthan Discoms admitted in their affidavit dated 31.7.2013
before   the   RERC   that   non­availability   of   coal   from   the   Central
Government put the case of APRL within the scope of change in law.
Once they have admitted that bid was based on domestic coal, nonavailability of which entitles APRL to claim compensation under the
change in law as per Article 10 of the PPA.  They cannot wriggle out of
their obligation.  The eligibility to get coal linkage under the SHAKTI
Policy to APRL confirms that the PPA was based on domestic coal.  The
PPA was based on domestic coal, and the concurrent findings do not
suffer from any infirmity or perversity.
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(f) The non­allocation of domestic coal linkage to APRL is a change
in law event as is apparent from various documents, affidavit dated
31.7.2013 and entitlement under the SHAKTI Policy.
(g) In Energy Watchdog, this Court recognised the change in NCDP
of 2007 as change in law event for a project which did not have any
LoA or FSA at the time of bid submission.   It was not necessary to
have   linkage/allocation   at   the   time   of   submission   of   the   bid.     A
notification was issued on 26.7.2013 to change the NCDP of 2007.
Following change in law events occurred:
(i) the decision of Standing Linkage Committee on 14.2.2012; and
(ii)   the   resolution   dated   21.6.2013   of   the   Cabinet   Committee   of
Economic   Affairs   and   the   advice   of   the   Ministry   of   Power   dated
31.7.2013, based on which the Tariff Policy has been revised by the
Government of India on 28.1.2016 to cover the cases which do not
have coal linkage.  The NCDP of 2007 was the only policy prevailing
when the bid was submitted and was changed.
The decision in  Energy Watchdog  is squarely applicable to the
present appeals, in which it was laid down that modification of the
NCDP of 2007 is a change in law.  It was further observed that the fact
that the fuel supply agreement has to be appended to the PPA is only
to indicate that the raw material for the working of the plant was in
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order.  The copy of the FSA was to be furnished after 10 months of the
signing of the PPA.
(h) APRL has been continuously supplying power to the Rajasthan
Discoms since May 2013 without any interruption.  Thus, with effect
from   the   change   in   law,   APRL   is   entitled   to   compensation   as
concurrently held.
In Re. Whether the bid submitted was premised on domestic coal?
28. Considering the rival submissions, it is necessary to take note of
Statutory Guidelines framed by the Central Government under Section
63 of the Electricity Act.   The relevant portion of Para 3.2(II) of the
Guidelines of 2005 is extracted hereunder:
“3.2   (II)   In   Case­1   procurement,   to   ensure   serious
participation in the bid process and timely completion of
commencement of supply of power, the bidder, in case
the   supply   is   proposed   from   a   station   to   be   set­up,
should   be   required   to   submit   along   with   its   bid,
documents   in   support   of   having   undertaken   specific
actions   for   project   preparatory   activities   in   respect   of
matters mentioned in (i) to (v) below.
i)****
ii)****
iii)****
iv)   Fuel   Arrangements:   (a)   In   the   following   cases   fuel
arrangements shall have to be made for the quantity of
fuel required to generate power from the phase of the
power   station   from   which   power   is   proposed   to   be
supplied at Normative Availability for the term of the PPA.
 In   case   of   domestic   coal,   the   Bidder   shall   have
made firm arrangements for fuel tie up either by way
of coal block allocation or fuel linkage
 In case of domestic gas, …..
21
b) Fuel arrangements in the following cases shall have to
be made for the quantity of fuel required to generate
power   from   the   power   station   for   the   total   installed
capacity.
 In   case   of   imported   coal,   the   Bidder   shall   have
either  acquired  mines  having  proven  reserves   for  at
least  50%  of  the  quantity  of  coal  required  OR   shall
have a fuel supply agreement for at least 50% of the
quantity of coal required for a term of at least five (5)
    years or the term of the PPA, which ever is less. ….”
(emphasis supplied)
29. In the MoU dated 20.3.2008, which was entered into between
APRL and the Government of Rajasthan, the Government of Rajasthan
had only agreed to provide assistance in securing coal linkage/coal
block.  Article 2.2 of the MoU is extracted hereunder:
“2.2  The State will facilitate smooth implementation of
the Project as may be required including  making   it’s
best  effort  to  facilitate  getting coal linkage/coal block
from   the   Central   Government   or   coal   from   any   other
source for the Project. …” 
(emphasis supplied)
30. The   RFP   formed   part   of   the   bid   documents   regarding   fuel,
provided as under:
“5. Fuel: The choice of fuel, including but not limited to
coal   or   gas,   it’s   sourcing   and   transportation   is   left
entirely to the discretion of the Bidder. The Successful
Bidder(s) shall bear complete responsibility to tie up the
fuel linkage and the infrastructural requirements for fuel
transportation, handling and storage.
2. INFORMATION AND INSTRUCTIONS FOR BIDDERS
2.1.2.2 Consents, Clearances and Permits: ****
b. Fuel:
22
i. In   case   of  domestic   coal,   the   Bidder  shall  have
made firm arrangements for fuel tie up either by way
of  mine  allocation  or   fuel   linkage.  Such arrangement
shall   be   for   the   quantity   of   fuel   required   to   generate
power from the power station at Normative Availability for
the total installed capacity for the term of the PPA.
ii. In case of imported coal, the Bidder shall have either
acquired mines having proven reserves for at least fifty
percent (50%) of the quantity of coal required to generate
power from the power station at Normative Availability for
the  total installed  capacity OR  shall  have  fuel  supply
agreement for at least fifty percent (50%) of the quantity
of fuel required for a term of at least five (5) years or the
term of the PPA (which ever is less) to generate power
from the generation source for the total installed capacity
for the term of the PPA.
iii. In case of domestic gas, …..
iv. In case of RLNG, …..”
(emphasis supplied)
31. APRL   concerning   fuel   in   the   bid   documents   dated   6.8.2009,
indicated as under:
  “Domestic Coal:
Name of the allocated mine
(in case of mine allocation)
Not applicable
Proven reserves of the mine
(in case of mine allocation)
Not applicable
Quantity of coal required for
the   power   station   at
Normative   Availability   on   an
annual basis and supporting
computation for the same:
5.544   MMTPA   of   domestic
coal.     Supporting
computation attached.
Particulars   of   documents
enclosed   in   support   of   the
above.
Adani   Group   has   entered
into  a  MoU  with  Govt.  of
Rajasthan   (GoR)   for
development   of   Kawai
Power   Project   (Copy
enclosed).     Under   this
MoU, GoR has assured its
support   for   allocation   of
captive coal block or coal
linkage.     The   necessary
actions in this regard  are
being  taken  by  APRL  and
GoR.
23
Imported Coal:
Captive coal block/coal linkage will be made available for
the Kawai Project with the support of Govt. of Rajasthan.
However,   we   have   also   made   an   arrangement   for
supply of imported coal for at least 50% of the total
requirement of the power project for 5 years, as fall
back support arrangement.
Name of the mine acquired or
owned and country
Not applicable
Proven reserves of the mine
(in case of mine allocation)
Not applicable
At least fifty percent (50%) of
the quantity of coal required
for   the   power   station   at
Normative   Availability   on   an
annual basis and supporting
computation for the same.
2.54   Million   MT   with   coal
having GCV (ARB) of 4250
Kcal/Kg.   Supporting
computation attached.
Copy   of   the   fuel   supply
agreement(s) for at least fifty
percent (50%) of the total the
quantity of coal required for a
term of  at least  five (5) years
or the term of the PPA (which
even   is   less)   for   the   power
station   at   Normative
Availability   on   an   annual
basis.
Copy   of   the   Fuel   Supply
Agreement   dated   25th
June   2009   with   Adani
Enterprises   Ltd.   for
supply of 3 Million MT of
Imported  coal  up  to  Sept
2018   is   attached.     Our
Fuel supplier AEL, who is
the   largest   coal   trading
company   of   the   country,
has   long   term
arrangements   with   coal
mines   in   Indonesia,
Australia and South Africa
for trading of coal.
Particular   of   documents
enclosed   in   support   of   the
above.
FSA dated 25th June 2009
The computation of coal consumption of normative availability
was given as under:
Computation of coal consumption at Normative Availability
Name of the
Power Project
Total Capacity
Kawai Thermal Power Project
1320 MW
24
Particular Domestic
Coal
Imported
Capacity MW 1320 1320
Normative
Availability
% 85% 85%
Annual
Generation
Mus 9829 9829
SHR Kcal/Kwh 2200 2200
GCV Kcal/Kg 3900 4250
SCC Kg/Kwh 0.564 0.518
100%   Coal
Requirement   at
Normative
Availability
MMTPA 5.544 5.088
50%   Coal
Requirement   at
Normative
Availability
MMTPA 2.544
32. A   letter   was   written   on   7.9.2009   by   the   Rajasthan   Discoms
seeking clarification from APRL as to on which basis of fuel, its bid to
be evaluated.  Following clarification was sought:
“With respect to the aforesaid Bid submitted by you in
response   to   RIP   dated   25.02.09,   the   following
clarifications/documents are required for your bids to be
evaluated:
1. For   fuel   arrangement,   in   the   Bid   both   Domestic
Coal   as   well   as   Imported   Coal   has   indicated.     You
should  clarify  through  a   letter   from  MD/CEO,  being
full time Director/Manager on which basis of fuel, the
Bid should be avaluated.”
(emphasis supplied)
33. In response to letter dated 7.9.2009, APRL clarified its position
vide letter dated 12.9.2009 inter alia as under:
“1.     As   per   the   provision   of   the   RFP   under   clause
No.2.4.1.1(B)(ii), a bidder can submit only one price bid
from   a   generation   source,  even   if   different   types   of
fuels are used.
25
We contemplate to use Domestic as well as Imported
    coal   for   the   Kawai   Project.    A   duly   executed   Fuel
Supply Agreement (FSA) for more than 50% if the coal
requirement for a period of 5 years (as specified in RfP for
meeting the fuel requirement on the basis of imported
coal) has been submitted with the bid.  Further, we have
also submitted with the bid a MoU, executed between the
Government   of   Rajasthan   and   Adani  Enterprises   Ltd.,
wherein at clause 2.2, the State has assured in making
its best efforts to facilitate in getting Coal Linkage/Block
or Coal from any other sources for the Power Project.
We   meet   the   fuel   requirement   on   the   basis   of
    imported   coal   tie­up    .   However,  we   are   sure   to   get
domestic fuel tie­up with support of the Government
of Rajasthan.  In view of this, we submit that our bid
should be evaluated on the basis of Domestic Coal tieup.     We   undertake   that   payment   considering
domestic   coal   escalations   will   be   acceptable   to   us
    during the terms of the PPA.”
(emphasis supplied)
34. The Rajasthan Discoms issued an LoI dated 17.12.2009 to APRL
inter alia containing the following condition:
“Your   offer  to   provide   1200   MW   power   at   the   rates
mentioned at Annexure­1 and  escalations   thereof   on
domestic coal is based on your commitment that the
above rates would be applicable even in case of coal
requirement   being  met   by   you   by   way   of   back   up
    arrangement with imported coal.”
(emphasis supplied)
35. APRL   on   18.12.2009,   communicated   its   unconditional
acceptance to the LoI thus:
“We   acknowledge   with   thank   receipt   of   RRVPNL   LoI
No.RVPN/CE(NPP&R)/D 81 dated 17th December 2009 in
favour of Adani Power Rajasthan Limited (APRL).   We
have   noted   content   of   the   LoI   and   we   hereby
26
communicate  our  “unconditional  acceptance”  of  the
same.   Please find enclosed herewith duplicate copy of
LoI   duly   signed   by   authorized   signatory,   confirming
“Accepted Unconditionally”.
We are making necessary arrangements for submission of
Performance Guarantee as per Article 2.2.9 of the final
RfP FOR 1200 MW.   We shall be grateful if approval of
RERC for procurement of additional 200 MW is conveyed
at the earliest and the draft PPA, prepared based on our
offer/bid, for execution is submitted to us for scrutiny at
our end.”
(emphasis supplied)
36. The PPA entered into between the parties provided inter alia as
under:
““Fuel”   shall   mean   the  primary   fuel   used   to   generate
electricity namely domestic coal/imported coal as back up
arrangement.
“Fuel   Supply   Agreement(s)”   shall   mean   the   agreement(s)
entered into between the Seller and the fuel supplier for the
purchase, transportation and handling of the Fuel, required
for the operation of the Power Station.
In case the transportation of the Fuel is not the responsibility
of the fuel supplied, the Fuel Supply Agreement shall also
include the separate agreement between the Seller and the fuel
transporter for the transportation of Fuel in addition to the
agreement between the Seller and the fuel supplier for the
supply of the Fuel;
………
5 SCHEDULE 5: DETAILS OF GENERATION SOURCE AND
SUPPLY OF POWER
(A)   Details of generation source
Sl.No. Particulars Details   (as   per   Format   4.13   of   the
Selected Bid of Seller)
1. Location   of   power
station   (Specify
place,   district   and
state)
Village   Kawai,   District   Baran,
Rajasthan
2. No.   of
existing/proposed
units   and   installed
Existing
Sl
No.
No. of
Units
Installed
Capacity
COD
27
capacity   of   each
unit (in MW)
1. Not Applicable
Proposed
Sl
No.
No. of
Units
Installed
Capacity
Expected
COD
1. 1 660 MW   July 2012
2. 2 660 MW   November
2012
3. Primary Fuel Coal
4. Dates of last major
R&M (unit wise)
Not applicable
5. Duration   of   Fuel
Supply   Agreement
(FSA)
Imported   Coal   supply   FSA   for   five
years  and  Captive  Coal  Block/Long
Term Coal Linkage
6. Quantum   of   power
contracted   with
other purchasers, if
any (in MW)
NIL
7. Details   of   surplus
capacity (in MW)
Total Capacity : 1320 MW
Net Capacity
(after Aux Consumption
@ 8%
: 1215 MW
PPA executed so far : NIL
Surplus Capacity : 1215 MW
(B)   Details of primary fuel
Sl.No. Particulars Details (to be furnished by the
Bidder)
1. Primary fuel
(Insert   as   applicable:
“Domestic   coal/Imported
Coal/Domestic   (pipeline)
gas/Imported gas (RLNG)”
Domestic Coal from Captive
Coal/Coal   Linkage   and
Imported   coal   as   fallback
support arrangement
2. Fuel Source
(Insert   as   applicable:   “Coal
India   Limited   (CIL)   coal
linkage/domestic   captive
coal   mine/imported
coal/domestic   (pipeline)
gas/imported gas (R­LNG)
Captive   Coal   Block/Long
Term   Coal   Linkage   and
Imported   Coal   Supply   FSA
for five year of PPA term
3. Fuel grade
(Applicable   only   in   case   of
coal)
­­
4. Name of the CIL subsidiary
from which coal is proposed
to be sourced or name and
location of the captive mine
(as applicable).
­­
5. Bidder   to   insert   the
applicable price mechanism,
Not applicable
28
based   on   whether   the
primary   fuel   is   covered
under:
1.   Administered   Price
Mechanism (“APM”); or
2. Controlled and notified by
an independent Regulator; or
3. Controlled and notified by
the  Government  of  India  or
Government   of   India
Instrumentality.
(Applicable only for gas)
(emphasis supplied)
37. The RERC’s order dated 31.5.2010, adopting APRL’s tariff under
Section 63 of the Electricity Act, has been relied upon.  The same is
extracted hereunder:
“39.     The   other   important   point   raised   by   the   party
relates to relaxing the qualifying requirements for the fuel
in case of M/s. Adani Power Rajasthan Limited.   This
matter has been elaborately dealt with in the first report
of the Bid Evaluation Committee, who found the party to
be qualified as far as requirement for fuel is concerned
    based on tie­up for     imported coal and at the same time
found   the   option   of   use   of      domestic   coal  worth
consideration   on   account   of   likely   advantage   of   lower
escalation in tariff for domestic fuel than that of imported
coal.   The procurer has subsequently taken undertaking
from the bidder that lower escalation in two situations
i.e. domestic coal or imported coal would be applied in
tariff and by this they have tried to derive advantage of
incurring lower fuel escalation cost.  It may be mentioned
that neither the guidelines of GoI nor the bid documents
    anticipate such a situation wherein      imported  coal and
    domestic  coal both could be used by a developer and
obviously   in   such   a   situation   the   Bid   Evaluation
Committee and procurer are required to take a decision,
which is in their best interest.”
(emphasis supplied)
38. In   this   regard,   Shri   C.   Aryama   Sundaram, learned   senior
counsel, argued that:
29
(a) concerning fuel in the column pertaining to the domestic coal
that  APRL,   it  was   mentioned,   had   entered   into   an   MoU  with   the
Government of Rajasthan for development of the Kawai Power Project.
The   Government   of   Rajasthan   initially   supported   the   allocation   of
captive coal block or coal linkage, and APRL and the Government of
Rajasthan took the necessary action in this regard.  At the same time,
it was also made clear that as fallback support, APRL had arranged
imported coal for at least 50 per cent of the total requirement.
(b) The arrangement of fuel, as per bid, was the responsibility of the
bidder/generator.   The Generator cannot claim compensation for its
inability   to   arrange   domestic   coal   or   any   other   fuel   source.     For
qualification under the bid, the bidder had to secure documentary
evidence   for   various   requirements,   including   fuel   source.     For
domestic coal, the requirement was of firm arrangement for fuel tie­up
and imported coal, acquired mines with proven coal reserves or FSA to
meet at least 50 percent of the normative requirement for at least 5
years.  APRL did not have any arrangement for the domestic coal at
the time of the bid.  The FSA dated 25.6.2009 for imported coal was
the only firm arrangement with APRL.  Besides that, it had MoU dated
20.3.2008, with the Government of Rajasthan concerning domestic
coal.  The allocation of coal was by the Government of India.  Under
the SHAKTI Policy in January 2018, the coal was allocated to APRL.
30
APRL had sought for domestic coal escalation, which was allowed as a
concession; however, this did not change the fact that the qualification
was based on imported coal.  In the Board Meeting of Rajasthan Rajya
Vidyut   Prasaran   Nigam   Limited   held   on   3.12.2009,   the   following
resolution was passed:
“3.   The L­1 bidder, M/s. Adani Power Rajasthan Ltd.,
has committed to provide 1200 MW power at the rates
mentioned at (1) above irrespective of the availability
of  domestic  coal,  by  meeting  the  coal  requirements
from   imported  or  whatever   sources   as   their  backup
arrangement.    This   condition   shall   be   specifically
mentioned in the LOI to be issued to L­1 bidder, M/s
Adani  Power  Rajasthan  Ltd.,  and   the   Power  Purchase
Agreement   (PPA)   to   be   entered   into   with   them   by
Rajasthan Discoms.”
(emphasis supplied)
(c) APRL unconditionally accepted the LoI.  The PPA is a document
governing the rights and obligations of the parties.  It recognises the
possible use of domestic coal.  There was no allotment of coal linkage
or coal block to APRL until January 2018.  As APRL did not receive the
domestic coal allocation and thereafter, if there was a change in law
affecting   such   domestic   coal,   APRL   could   have   possibly   claimed
change in law.  APRL was obliged to supply power even without such
domestic coal.
(d) Alternatively, it was argued that the PPA was primarily based on
domestic coal.  The imported coal was a backup arrangement.  Even
otherwise assuming that compensation can be permitted for change in
31
law,   it   has   to   be   restricted   only   to   the   extent   of   domestic   coal
contemplated to be used for fuel as the PPA provided for both domestic
and imported coal and the imported coal accounted for more than 50
per cent of the requirement, the compensation has to be limited to the
said extent.  The aforesaid was 61 per cent of the fuel requirement.
39. Dr. A.M. Singhvi, learned senior counsel in this regard on behalf
of APRL, argued that the bid and the PPA were based on domestic
coal.  The tariff was also quoted on the domestic coal linkage format.
As the bid was premised on domestic coal, the bid's evaluation was
made on the domestic coal.   The PPA also provided for the same,
which is binding.   The FSA was for imported coal with the bid was
only to assess bid eligibility.   In the order dated 31.5.2010 of the
RERC, the domestic coal was considered the basis and to be used as
the primary fuel.   He also relied upon the admissions made in the
affidavit and the communications dated 31.7.2013 and 4.8.2017 and
the fact that participation in the SHAKTI Policy was permissible only
when the PPA was based on domestic coal.  The Rajasthan Discoms
cannot reprobate from their stand.   The entire bid was premised and
accepted only on domestic coal.  Hence, the claim of APRL cannot be
restrained to 40 per cent.
When we consider the documents on record, it is apparent that
APRL's bid was premised only on domestic coal.  It was evaluated as
32
such, and the PPA also records the same.  In para 2 of the bid with
respect to coal, the bid of APRL was premised on the domestic coal.  It
is   apparent   that   APRL   relied   upon   MoU   entered   into   with   the
Government of Rajasthan for development of the Kawai Power Project
and   other   projects,   and   the   Government   assured   its   support   for
allocation of the captive coal block or coal linkage.  An arrangement of
FSA relating to  imported coal for at least 50 percent of the total
requirement was relied upon; however, the bid was premised and
accepted on domestic coal, which did not change the bid's nature.  A
query was made by the Rajasthan Discoms on 7.9.2009 from APRL to
indicate whether the bid should be evaluated on domestic coal or
imported coal.  It was made clear by APRL in its letter dated 12.9.2009
quoted above, that bid should be evaluated on the basis of domestic
coal   tie­up,   and   an   undertaking   was   given   that  domestic   coal
escalations would be acceptable to it during the term of the PPA.  In
the LoI dated 17.12.2009, the offer was accepted, and escalations
thereof   on   domestic   coal   was   based   on   the   commitment   that   the
quoted rates would be applicable even in case of coal requirement
being met by APRL by way of a backup arrangement with imported
coal.  APRL sent an unconditional acceptance on 18.12.2009.  Thus,
the parties agreed ad idem that bid was evaluated based on domestic
coal, and escalations were also based on domestic coal. Accordingly,
33
the PPA was entered into, and primary fuel in the PPA was mentioned
to be domestic coal from captive coal block/coal linkage and imported
coal as a fallback support arrangement.  It was binding on both the
parties.
40. APRL applied for long term coal linkage with the Government of
Rajasthan   on   2.7.2009,   i.e.,   prior   to   the   submission   of   bid   on
6.8.2009.  It submitted the bid by adopting linkage coal format, and
the tariff was quoted in Rs./Kwh.  It submitted the bid as per RFP of
April 2009 Para IX under Format 4.10, clause 2.4.1, which related to
linkage coal format bid, i.e., domestic coal.  Under Article 1.1 of the
PPA, the primary fuel was mentioned as domestic coal.  The FSA was
submitted for imported coal to assess bid eligibility for meeting the
technical criteria.   The domestic coal was primary fuel as such the
submission cannot be accepted that the bid and the PPA were based
on imported coal.
41. The PPA is final and binding on parties, and approval of tariff by
the RERC was based on domestic coal as apparent from para 39 of the
order dated 31.5.2010. Rajasthan Discoms agreed to use domestic
coal on account of likely advantage of lower escalation in tariff on a
bid based on domestic coal than that of imported coal.  The decision of
the Bid Evaluation Committee was found to be in their best interest.
34
Thus, APRL bid was not based on imported coal, that would not have
been in favour of Rajasthan Discoms and would have resulted in more
escalations in the tariff.  Thus, APRL could not be denied the benefit of
the very foundational basis on which the RERC approved its bid.
APRL   could   not   be   made   to   suffer  from   both   the   ends.     Various
documents and the PPA make it clear that its bid was premised on
domestic coal and approved tariff was based on domestic coal, the
order of RERC is final, conclusive, and binding on the parties; it has
not been questioned and attained finality.  No stand contrary to the
same was permissible to be taken by the Rajasthan Discoms.
42. It is further apparent that reply dated 31.7.2013 filed by the
Rajasthan Discoms before the RERC in which it was clearly admitted
that non­availability of domestic coal from the Central Government
would   put   the   case   of   APRL   within   the   scope   of   change   in   law.
Rajasthan Discoms before the RERC admitted that the bid was based
on domestic coal, non­availability of which entitles APRL to  claim
compensation under the change in law as provided in Article 10 of the
PPA.
43. It was argued that incorrect admissions made could not have
been relied upon.   It could not be said to be incorrect and stated
35
factually correct position in view of the aforesaid material and order of
the RERC.
44. Apart   from   that,   an   eligibility   to   get   coal   linkage   under   the
SHAKTI Policy was based upon the fact that the Generators, who were
not within the coal linkage and their PPAs were based on domestic
linkage coal, were eligible for grant of coal linkage.  In case, the PPA
was not based on domestic coal, the case of APRL would not have been
recommended to include the Kawai Project under 4660 MW capacity
to receive domestic coal under special dispensation.
45. It   is   apparent   that   the   concurrent   findings   recorded   by   the
RERC, as well as the APTEL, in this regard, do not suffer from any
infirmity or perversity, and they are binding.  As the scope of appeal
under Section 125 of the Electricity Act is akin to Section 100 of the
CPC and the concurrent findings based upon the facts cannot be
disturbed in the appeal as held in DSR Steel (Private) Ltd. v. State of
Rajasthan and Ors.,  (2012) 6 SCC 782,  Tamil Nadu Generation and
Distribution   Corporation   Limited   v.   PPN   Power   Generating   Company
Private   Limited,  (2014)   11   SCC   53   and  Wardha   Power   Company
Limited v. Maharashtra State Electricity Distribution Company Limited
and Anr., (2016) 16 SCC 541.
36
46. We also note that once having admitted before the RERC at the
time of approval of tariff and evaluated the tariff of domestic coal and
making admissions again on 31.7.2013 and 4.8.2017, it is not open to
reprobate as parties are not permitted to approbate and reprobate at
different stages as laid down in Suzuki Parasrampuria Suitings Private
Limited v. Official Liquidator of Mahendra Petrochemicals Limited (in
Liquidation) and Ors., (2018) 10 SCC 707 and R.N. Gosain v. Yashpal
Dhir, (1992) 4 SCC 683.
47. It was argued that FSA was appended to demonstrate the raw
material's readiness for the supply of contracted electricity by the
Generator.   It did not change the basis of the bid, whether it was
based upon the domestic coal or imported coal.  In case the bid was
based upon the imported coal, the tariff would have been differently
fixed   as   observed   by   the   RERC,   and   it   was   not   advantageous   to
Rajasthan Discoms to fix tariff on imported coal.  The RERC observed
that the FSA was only to demonstrate the raw material's readiness
and was not determinative of terms and conditions of the contract.
The FSA for imported coal was a standby arrangement, but the entire
bid, tariff, and the agreement were based on domestic coal.  Thus, the
consequences of non­availability due to change in law could not be
escaped.  In Energy Watchdog, it was observed that the FSA is only for
37
demonstrating the raw material's readiness and is not determinative of
the terms and conditions of the contract.
48. Shri   C.   Aryama   Sundaram   argued   that   the   FSA   related
approximately 61 per cent of the fuel requirement.  Thus, the change
in law claim may be confined to 35 to 40 per cent.   The argument
cannot be accepted as bidding was not based on dual fuel, but was
evaluated   on   domestic   coal.     There   was   no   such   stipulation   that
evaluation of bidding was done on domestic basis; the tariff was to be
worked out in the aforesaid ratio of 60:40 per cent of imported coal
and domestic coal respectively.   Apart from that, we find from the
order of the APTEL, that change in law provision would be limited to a
shortfall in the supply of domestic linkage coal.  The finding recorded
by the APTEL is extracted hereunder:
“12.5 In the instant case, we have found in the previous
paragraphs that Adani Rajasthan’s bid was premised on
domestic coal on the basis of the 100% domestic coal
supply   assurance   contained   in   NCDP   2007.   Since
SHAKTI Policy and the FSA executed thereunder still do
not meet the assurance of 100% supply of domestic coal
to Adani Rajasthan, it would follow that Adani Rajasthan
would need to be compensated for any shortfall in supply
of domestic linkage coal even post grant of coal linkage
under the SHAKTI Policy. Rajasthan Discoms have not
disputed   that   the   introduction   of   SHAKTI   Policy
constitutes   a   Change   in   Law   under   the   PPA.   Their
contention is that any shortfall of coal under the SHAKTI
FSA by the coal companies is a contractual matter to be
sorted   out   between   Adani   Rajasthan   and  the   coal
companies. We are not persuaded by this argument for
the reason that we have already held in GMR Kamalanga
case that the contractual conditions or limitations were
38
not present in NCDP 2007 at the time of bid submission
by   Adani   Rajasthan.   This   contention   of   Rajasthan
Discoms is also against the principle laid down in Energy
Watchdog judgment. The SHAKTI Policy continues the
earlier coal supply restriction to 75% of ACQ.  If actual
supply of domestic linkage coal under the SHAKTI FSA is
higher, it goes without saying that the generator’s relief
or compensation under  the  Change  in  Law  provisions
would   be   limited   to   the   actual   shortfall   in   supply   of
domestic   linkage   coal.  We   also   note   that   there   is   no
rational   basis   to   assume   that   the   supply   under   the
SHAKTI FSAs would be higher or better than that under
the pre­SHAKTI FSAs.
12.6 The Supreme Court in Energy Watchdog judgment
has already concluded as follows:
“57. …… This 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
sourcesis   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……”
(emphasis supplied)
49. It was clarified that APRL would be entitled to relief under the
change in law provision to the extent of shortage in supply in domestic
linkage coal.  Thus, we find no merit in the submission raised.  We
find   the   findings   of   the   APTEL   to   be   reasonable,   proper,   and
unexceptional.
50. Our   attention   was   also   invited   to   para   3.2   of   the   Statutory
Guidelines of 2005.   It provided with respect to fuel arrangements.
The same provided that in case of domestic coal, the bidder shall have
39
made firm arrangements for fuel tie­up either by way of coal block
allocation   or   fuel   linkage.     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 cut­off date of the bid was
30.7.2009. It was provided in Clauses 2.1 and 2.2 of NCDP of 2007
dated   18.10.2007   that   100   per   cent   of   the   quantity   as   per   the
normative   requirement   of   the   consumers   would   be   considered   for
supply of coal through FSA by CIL.   Para 5.2 of the NCDP of 2007
provided   that   for   power   utilities,   including   Independent   Power
Producers (IPPs) and Captive Power Plants, cement sector and sponge
40
iron sector, the present system of linkage committee at the level of the
Government would continue.   CIL will issue LoA after approval of
applications by the Standing Linkage Committee (Long­term).  Clause
6.1   provides   that   new   consumers   from   the   State/Central   power
utilities,   CPPs,   Independent   Power   Producers   (IPPs),   Fertilizers,
Cement, and Sponge Iron units may be issued LoA based on prevailing
norms and recommendations of the Administrative Ministry.  Para 6.1
of the policy is extracted hereunder:
“6.1 New consumers from State/Central power utilities,
CPPs,   Independent   Power   Producers   (IPPs),   Fertilizer,
Cement and Sponge Iron units may be issued LOA, based
on   prevailing   norms   and   recommendation   of
Administrative Ministry, which may inter alia have regard
to   LoA/Linkage   already   granted   to   the   consumer   of
specific sector, existing capacity, requirement for capacity
addition during a plan period etc.”
51. Para 7 deals with FSAs with new consumers.  Paras 7.1 and 7.2
are extracted hereunder:
“7.1 On successfully achieving the milestones stipulated
in   LOA   coal   companies   would   execute   FSA   with   the
applicant consumer covering commercial arrangement for
supply of coal.  FSAs would be, inter­alia, based on ‘Take
or Pay’ principle.
7.2   The   FSAs   would   cover   100%   of   normative   coal
requirements   of   the   Power   Utilities,   including
Independent Power Producers (IPPs) and Captive Power
Plants (CPPs), Fertilizer units and 75% of normative coal
requirement of other consumers.”
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.
41
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   non­availability   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.
In Re. Change in Law
52. APRL’s claim is based on the date of change of law in 2013.
Admittedly, earlier NCDP of 2007 prevailed on the appointed date, i.e.,
7 days before submission of the bid.  In Energy Watchdog also, similar
was the position.  Though the application was submitted, coal linkage
was not provided, and then there was a change in law in terms of the
NCDP of 2013.  This Court held that the benefit of change in law w.e.f.
2013 was available.  The PPA was based upon the domestic coal, and
its availability was based upon NCDP of 2007.  The application was
filed before submitting the bid.  The application for linkage was filed in
terms of the agreement when the bid was premised and accepted, and
the agreement was entered into on the basis of domestic coal, the
change   in   law   of   2007   in   2013   has   to   be   applied.     Thus,   the
submission raised that even in the absence of any LoA or FSA granted
42
to APRL by CIL, there was an impact of change of law on the PPA on
account of NCDP of 2013.
53. It was argued that there was no domestic coal linkage under
which   supply   was   cut   down   due   to   any   law,   and   APRL   was   not
allocated coal block, and its bid was premised on the imported coal.
In  Energy Watchdog, it was opined that only changes in Indian law
could be considered under the PPA and not in foreign law.  In NCDP
dated 26.7.2013, the NCDP of 2007 was modified to the effect that
power projects would only get a certain percentage of what was earlier
allowable.
54. It is apparent from the decision dated 31.5.2013 of the Standing
Linkage Committee (Long­Term) that the application of APRL was kept
in abeyance.  It applied for coal linkage on 2.7.2009 on the basis of
NCDP of 2007.  The bid cut­off date was 30.7.2009, 7 days prior to the
bid deadline, the NCDP of 2007 was applicable.  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
43
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
pass­through   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 Kawai Project
was included in the same.   The Policy was revised, thus assurance
given by the Government of India under the NCDP of 2007 was taken
away.  The provision of 100 per cent supply was taken away.  With
respect to the applicability of  Energy Watchdog, a dispute has been
raised.  In Energy Watchdog, it was laid down that change in law is
applicable to change in domestic law, not change in foreign law.  It is
not applicable to imported coal/change in foreign law.  It was urged
that application for grant of coal linkage was submitted to the Ministry
of Coal for the supply of coal in the light of assurance given under the
NCDP of 2007 in both the cases and those assurances, which were
given in the Policy, were diluted or taken away by the subsequent
scheme of the Government instrumentality.   Consequently, no coal
44
linkage or LoA or FSA was available in the hands of the Generator in
Energy Watchdog.  The cut­off date for applicability of law was 7 days
prior to the bid deadline and change in law provision of Article 10 of
the PPA in question is similar to Article 13 of the PPA in  Energy
Watchdog.  Article 10 is extracted hereunder:
“ARTICLE 10: CHANGE IN LAW
10.1 Definitions
In   this   Article   10,   the   following   terms   shall   have   the
following meanings:
10.1.1 "Change in Law" means the occurrence of any of
the following events after the date, which is seven (7)
days   prior   to   the   Bid   Deadline   resulting   into   any
additional   recurring/non­recurring   expenditure   by   the
Seller or any income to the Seller:
•  the   enactment,   coming   into   effect,   adoption,
promulgation,   amendment,   modification   or   repeal
(without re­enactment or consolidation) in India, of any
Law, including rules and regulations framed pursuant
to such Law;
• a change in the interpretation or application of any
Law   by   any   Indian   Governmental   Instrumentality
having the legal power to interpret or apply such Law,
or any Competent Court of Law;
•  the imposition of a requirement for obtaining any
Consents,   Clearances   and   Permits   which   was   not
required earlier;
• a change 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; except due to
any default of the Seller;
• any change in tax or introduction of any tax made
applicable for supply of power by the Seller as per the
terms of this Agreement.
45
but shall not include (i) any change in any withholding
tax   on   income   or   dividends   distributed   to   the
shareholders of the Seller, or (ii) change in respect of UI
Charges   or   frequency   intervals   by   an   Appropriate
Commission or (iii) any change on account of regulatory
measures   by   the   Appropriate   Commission   including
calculation of Availability.
10.2 Application and Principles for computing impact
of Change in Law
10.2.1 While determining the consequence of Change in
Law under this Article 10, the 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   Payment,   to   the   extent
contemplated in this Article 10, the affected Party to the
same economic position as if such Change in Law has not
occurred.
10.3 Relief for Change in Law
10.3.1 During Construction Period
As   a   result   of   any   Change   in   Law,   the   impact   of
increase/decrease of Capital Cost of the Power Station in
the Tariff shall be governed by the formula given below:
For every cumulative increase/ decrease of each Rupees
Sixteen crore Fifty Lakh (Rs.16.50 crore) in the Capital
Cost   during   the   Construction   Period,   the   increase/
decrease in Non Escalable Capacity Charges shall be an
amount equal to zero point two six seven (0.267%) of the
Non   Escalable   Capacity   Charges.   In   case   of   Dispute,
Article 14 shall apply.
It   is   clarified   that   the   above   mentioned   compensation
shall be payable to either Party, only with effect from the
date   on   which   the   total   increase/   decrease   exceeds
amount   of   Rupees   Sixteen   crore   Fifty   Lakh   (Rs.16.50
crore).
10.3.2 During Operating Period
The   compensation   for   any   decrease   in   revenue   or
increase in expenses to the Seller shall be payable only if
the decrease in revenue or increase in expenses of the
Seller is in excess of an amount equivalent to 1 % of the
46
value of the Letter of Credit in aggregate for the relevant
Contract Year.
10.3.3 For any claims made under Articles 10.3.1 and
10.3.2 above, the Seller shall provide to the Procurers
and the Appropriate Commission documentary proof of
such increase/ decrease in cost of the Power Station or
revenue/   expense   for   establishing   the   impact   of   such
Change in Law.
10.3.4 The decision of the Appropriate Commission, with
regards   to   the   determination   of   the   compensation
mentioned above in Articles 10.3.1 and 10.3.2, and the
date   from   which   such   compensation   shall   become
effective, shall be final and binding on both the Parties
subject to right of appeal provided under applicable Law.
10.4 Notification of Change in Law
10.4.1 If the Seller is affected by a Change in Law in
accordance with Article 10.1 and the Seller wishes to
claim relief for such a Change in Law under this Article
10, it shall give notice to the Procurers of such Change in
Law as soon as reasonably practicable after becoming
aware of the same or should reasonably have known of
the Change in Law.
10.4.2 Notwithstanding Article 10.4.1, the Seller shall be
obliged   to   serve   a   notice   to   the   Procurers   under   this
Article   10.4.2,   even   if   it   is   beneficially   affected   by   a
Change   in   Law.   Without   prejudice   to   the   factor   of
materiality   or   other   provisions   contained   in   this
Agreement,   the   obligation   to   inform   the   Procurers
contained herein shall be material.
Provided that in case the Seller has not provided such
notice, the Procurers shall have the right to issue such
notice to the Seller.
10.4.3 Any notice served pursuant to this Article 10.4.2
shall provide, amongst other things, precise details of:
(a) the Change in Law; and
(b) the effects on the Seller
10.5   Tariff   Adjustment   Payment   On   account   of
Change in Law
10.5.1 Subject to Article 10.2, the adjustment in monthly
Tariff Payment shall be effective from:
47
(i) the date of adoption, promulgation, amendment, reenactment or repeal of the Law or Change in Law; or
(ii) the date of order/ judgment of the Competent Court or
tribunal or Indian Governmental Instrumentality, if the
Change   in   Law   is   on   account   of   a   change   in
interpretation of Law.
10.5.2 The payment for Change in Law shall be through
Supplementary Bill as mentioned in Article 8.8. However,
in case of any change in Tariff by reason of Change in
Law, as determined in accordance with this Agreement,
the Monthly Invoice to be raised by the Seller after such
change in Tariff shall appropriately reflect the changed
Tariff.”
(emphasis supplied)
55. The said factual position is not disputed and was noticed by the
APTEL in para 11.5, which is extracted hereunder:
“11.5  It may be seen from the above that in both the
PPAs, Change in Law is defined as the occurrence of any
event after the date, which is seven (7) days prior to the
Bid Deadline. Therefore, for reckoning the change in law
the position prevailing as on cut­off date is relevant.  In
both cases, the basis for the bid in respect of the fuel was
assurance under NCDP, 2007 and there was no Letter of
Assurance   or   FSA   for   the   project   at   the   time   of   the
bidding.   The   Rajasthan   Discoms   have   not   denied   the
factual position/comparison of the PPAs. That being the
case, there is no merit in the argument of Rajasthan
Discoms that Energy Watchdog case is not applicable to
the present case.  We note that as on cut­off date the law
prevailing is NCDP 2007 in both the cases. The supply
assurance   contained   in   NCDP   2007   was   changed   or
altered for the Kawai Project by the decision of SLC(LT)
on  31.05.2013. The main thrust  of Adani  Rajasthan’s
arguments is that even before the amendment of 2013 in
NCDP 2007, the decision taken by SLC(LT) in May 2013
amounts to a Change in Law event under the PPA. The
2013   amendment   to   NCDP   2007   may   be   seen   as   a
continuum of the SLC(LT)’s decision in May 2013 since it
was Coal India’s inability to meet the committed/assured
coal supply that prompted the Ministry of Coal to issue
the amendment to NCDP in July 2013, based on the
48
CCEA decision in June 2013. The CCEA decision of June
2013 directed as follows:
“The   Cabinet   Committee   on   Economic   Affairs   (CCEA)
today approved the following mechanism for supply of
coal to power producers:
(i) Coal India Ltd. (CIL) to sign Fuel Supply Agreements
(FSA) for a total capacity of 78000 MW including cases of
tapering linkage, which are likely to be commissioned by
31.03.2015.   Actual   coal   supplies   would   however
commence when long term Power Purchase agreements
(PPAs) are tied up.
(ii) Taking into account the overall domestic availability
and actual requirements, FSAs to be signed for domestic
coal quantity of 65 percent, 65 percent, 67 percent and
75 percent of Annual Contracted Quantity (ACQ) for the
remaining four years of the 12th Five Year Plan.
(iii) To meet its balance FSA obligations, CIL may import
coal and supply the same to the willing Thermal Power
Plants (TPPs) on cost plus basis.  TPPs may also import
coal themselves.  MoC to issue suitable instructions
(iv) Higher cost of imported coal to be considered for pass
through as per modalities suggested by CERC. MoC to
issue   suitable   orders   supplementing   the   New   Coal
Distribution   Policy   (NCDP).   MoP   to   issue   appropriate
advisory to CERC/SERCs including modifications if any
in   the   bidding   guidelines   to   enable   the   appropriate
Commissions to decide the pass through of higher cost of
imported coal on case to case basis.
(v) Mechanism will be explored to supply coal subject to
its availability to the TPPs with 4660 MW capacity and
other similar cases which are not having any coal linkage
but are likely to be commissioned by 31.03.2015, having
long term PPAs and a high Bank exposure and without
affecting the above decisions.”
(emphasis supplied)
56. 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,
49
and permits are also included.   The submission raised on behalf of
appellant that there is no question seeking benefit due to change in
foreign law is based on wrong factual premise.   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.
57. We find similarity in the present case as well as the  Energy
Watchdog.  The factual matrix was similar with the present case.  We
find that the RERC and the APTEL have recorded the concurrent
finding on facts.   We find no ground to interfere.   No substantial
question of law is involved.   It was held in  Energy Watchdog,  that
change in law was brought about in the NCDP of 2007 by the decision
of 26.7.2013.  It is provided in Article 10.2.1 how the change in law is
to be applied to compensate for the impact.
58. The purpose of change in law is to restore through monthly tariff
payment to the extent contemplated that the affected party is placed
in the same economic position as if such a change in law has not
occurred.   As monthly tariff was worked out on domestic law, the
50
requirement is to compensate on that basis due to change in law.  The
same is based on the principle of restitution.  In Uttar Haryana Bijli
Vitran Nigam Limited (UHBVNL), it was laid down by this Court thus:
“10.  Article 13.2 is an  in­built restitutionary principle
which compensates the party affected by such change in
law   and   which   must   restore,   through   monthly   tariff
payments,   the   affected   party   to   the   same   economic
position as if such change in law has not occurred. This
would mean that by this clause a fiction is created, and
the party has to be put in the same economic position as
if such change in law has not occurred i.e. the party
must be given the benefit of restitution as understood in
civil law. Article 13.2, however, goes on to divide such
restitution into two separate periods. The first period is
the “construction period” in which increase/decrease of
capital cost of the project in the tariff is to be governed by
a certain formula. However, the seller has to provide to
the   procurer   documentary   proof   of   such
increase/decrease   in   capital   cost   for   establishing   the
impact of such change in law and in the case of dispute
as to the same, a dispute resolution mechanism as per
Article 17 of the PPA is to be resorted to. It is also made
clear that compensation is only payable to either party
only   with   effect   from   the   date   on   which   the   total
increase/decrease exceeds the amount stated therein.”
(emphasis supplied)
It was also held that carrying cost is payable from the date the
change in law has taken place, and carrying cost is passed on the
restitution principle.  Article 10.2.1 of the PPA in question is similar to
Article 13.2 considered in  Energy Watchdog.    The carrying cost is
nothing but a compensation towards the time value of month/deferred
payment.   Article 8.3.5 provides for methodology in case of delayed
payment.
51
59. When there was a change in policy with respect to obtaining coal
itself, which was agreed to in the PPA, the change in law would be
applicable.  In Energy Watchdog it was observed thus:
“56. However, insofar as the applicability of Clause 13 to
a change in Indian law is concerned, the respondents are
on firm ground. It will be seen that under Clause 13.1.1 if
there is a change in any consent, approval or licence
available or obtained for the project, otherwise than for
the default of the seller, which results in any change in
any cost of the business of selling electricity, then the
said seller will be governed under Clause 13.1.1. It is
clear from a reading of the Resolution dated 21­6­2013,
which resulted in the letter of 31­7­2013, issued by the
Ministry of Power, that the earlier coal distribution policy
contained in the letter dated 18­3­2007 stands modified
as   the   Government   has   now   approved   a   revised
arrangement for supply of coal. It has been decided that,
seeing   the   overall   domestic   availability   and   the   likely
requirement of power projects, the power projects will
only   be   entitled   to   a   certain   percentage   of   what   was
earlier allowable. This being the case, on 31­7­2013, the
following  letter,  which is set  out  in extenso states as
follows:
FU­12/2011­IPC (Vol­III)
Government of India
Ministry of Power
Shram Shakti Bhawan, New Delhi
Dated: 31­7­2013
To,
The Secretary,
Central Electricity Regulatory Commission,
Chanderlok Building, Janpath,
New Delhi
Subject: Impact on tariff in the concluded PPAs due to
shortage   in   domestic   coal   availability   and   consequent
changes in NCDP.
Ref. CERC’s D.O. No. 10/5/2013­Statutory Advice/CERC
dated 20­5­2013.
Sir,
52
In view of the demand for coal of power plants that
were provided coal linkage by Govt. of India and CIL not
signing   any   fuel   supply   agreement   (FSA)   after   March
2009,   several   meetings   at   different   levels   in   the
Government   were   held   to   review   the   situation.   In
February 2012, it was decided that FSAs will be signed
for   full   quantity   of   coal   mentioned   in   the   letter   of
assurance (LoAs) for a period of 20 years with a trigger
level of 80% for levy of disincentive and 90% for levy of
incentive. Subsequently, MoC indicated that CIL will not
be able to supply domestic coal at 80% level of ACQ and
coal will have to be imported by CIL to bridge the gap.
The issue of increased cost of power due to import of
coal/e­auction and its impact on the tariff of concluded
PPAs were also discussed and CERC’s advice sought.
2.   After   considering   all   aspects   and   the   advice   of
CERC   in   this   regard,   Government   has   decided   the
following in June 2013:
(i) taking into account the overall domestic availability
and actual requirements, FSAs to be signed for domestic
coal component for the levy of disincentive at the quantity
of   65%,   65%,   67%   and   75%   of   annual   contracted
quantity (ACQ) for the remaining four years of the 12th
Plan.
(ii)   to   meet   its   balance   FSA   obligations,   CIL   may
import coal and supply the same to the willing TPPs on
cost plus basis. TPPs may also import coal themselves if
they so opt.
(iii) higher cost of imported coal to be considered for
pass through as per modalities suggested by CERC.
3. Ministry of Coal vide letter dated 26­7­2013 has
notified the changes in the New Coal Distribution Policy
(NCDP) as approved by the CCEA in relation to the coal
supply for the next four years of the 12th Plan (copy
enclosed).
4. As per decision of the Government, the higher cost
of import/market based e­auction coal be considered for
being made a pass through on a case­to­case basis by
CERC/SERC to the extent of shortfall in the quantity
indicated in the LoA/FSA and the CIL supply of domestic
coal which would be minimum of 65%, 65%, 67% and
75% of LoA for the remaining four years of the 12th Plan
for   the   already   concluded   PPAs  based   on   tariff   based
competitive bidding.
5. The ERCs are advised to consider the request of
individual  power   producers   in   this   regard   as  per   due
process on a case­to­case basis in public interest. The
53
appropriate   Commissions   are   requested   to   take
immediate   steps   for   the   implementation   of   the   above
decision of the Government.
This issues with the approval of MOS(P)I/C.
Encl: As above.
Yours faithfully,
sd/­       
(V. Apparao) 
Director 
This is further reflected in the revised Tariff Policy dated
28­1­2016, which in Para 1.1 states as under:
1.1. In compliance with Section 3 of the Electricity
Act, 2003, the Central Government notified the Tariff
Policy on 6­1­2006. Further amendments to the Tariff
Policy were notified on 31­3­2008, 20­1­2011 and 8­7­
2011. In exercise of powers conferred under Section
3(3)   of   the   Electricity   Act,   2003,   the   Central
Government hereby notifies the revised Tariff Policy to
be   effective   from   the   date   of   publication   of   the
resolution in the Gazette of India.
Notwithstanding anything done or any action taken
or purported to have been done or taken under the
provisions of the Tariff Policy notified on 6­1­2006 and
amendments made thereunder, shall, insofar as it is
not inconsistent with this Policy, be deemed to have
been done or taken under provisions of this revised
policy.
Clause 6.1 states:
6.1. Procurement of power
As stipulated in Para 5.1, power procurement for
future requirements should be through a transparent
competitive bidding mechanism using the guidelines
issued by the Central Government from time to time.
These guidelines provide for procurement of electricity
separately for  base load requirements and  for  peak
load requirements. This would facilitate setting up of
generation   capacities   specifically   for   meeting   such
requirements.
However, some of the competitively bid projects as
per the guidelines dated 19­1­2005 have experienced
difficulties in getting the required quantity of coal from
Coal India Limited (CIL). In case of reduced quantity of
domestic coal supplied by CIL, vis­à­vis the assured
quantity   or   quantity   indicated   in   letter   of
assurance/FSA the cost of imported/market based e­
54
auction   coal   procured   for   making   up   the   shortfall,
shall be considered for being made a pass through by
appropriate Commission on a case­to­case basis, as
per advisory issued by Ministry of Power vide OM No.
FU­12/2011­IPC (Vol­III) dated 31­7­2013.”
In the aforesaid para, a discussion was made with respect to
change in terms and conditions prescribed for obtaining any consents,
clearances, and permits.   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.
In Re. SHAKTI Policy 2017
60. Under   the   SHAKTI   Policy   notified   on   22.5.2017,   those
Independent Power Producers (IPPs), who were having PPAs based on
domestic coal, but were not having LoA or FSA for coal supply either
under   NCDP   of   2007   or   NCDP   of   2013,   could   participate   in   the
auction to get 100 per cent of the normative requirement of coal
supply.   The eligibility was based upon the fact that the PPA was
based upon the domestic supply.  Under the SHAKTI Policy, APRL was
given coal supply to the full extent of the normative requirements for
generating and supplying electricity to the Rajasthan Discoms due to
aforesaid significant terms in the PPA.
55
61. It   was   argued   that   the   imported   coal   as   alternate   coal   was
available for 5 years, as such no relief could have been granted to
APRL on the basis of change in law.   As we have already discussed
that   there   was   a   change   in   law   as   per   Article   10.1;   thus,   the
submission to the contrary is untenable.
62. It was argued that APRL unconditionally accepted stipulations in
the LoI dated 17.12.2009 on 18.12.2009.  The submission is equally
futile   as   the   PPA   under   Article   1.1   and   Schedule   V   provide   for
domestic   coal   as   primary   fuel   and   imported   coal   as   a   fallback
arrangement.   Whereas change in law was provided in Article 10.
Article   15.6.2   of   the   PPA   supersedes   all   prior   written   or   oral
understanding.  The same is extracted hereunder:
“15.6.2 Except as provided in this Agreement, all prior
written   or   oral   understandings,   offers   or   other
communications   of   every   kind   pertaining   to   this
Agreement   or   supply   of   power   up   to   the   Contracted
Capacity under this Agreement to the Procurers by the
Seller shall stand superseded and abrogated.”
63. Article 10 of the PPA is clearly attracted that the change in law
was in contemplation.   Article 10 cannot be made redundant; the
agreement is binding and must prevail.
64. The argument raised by Shri C. Aryama Sundaram that carrying
cost is a penal provision, cannot be accepted in view of the decision of
56
this Court in  Uttar Haryana Bijli Vitran Nigam Limited (UHBVNL),  in
which with respect to carrying cost, it was held that carrying cost was
payable in terms of restitution principle.   The carrying cost is to be
paid on the same basis as provided for other dues in the PPA.
65. It was argued that the RERC and the APTEL had not determined
the amount.  It is apparent that the principle has been worked out by
the RERC as well as the APTEL.   The quantification directions have
been issued to Rajasthan Discoms to verify the documents submitted
by APRL and make payment in terms of the judgment and order.
Nothing further was required to be done by the RERC as well as the
APTEL.
66. Considering the facts of this case and keeping in view that the
RERC and APTEL have given concurrent findings in favour of the
respondent with regard to change in law, with which we also concur,
we may now deal with the question of liability of appellants­Rajasthan
Discoms with regard to late payment surcharge.  In this regard, the
following Articles 8.3.5 and 8.8 of PPA, which are relevant for the
present purpose, are extracted hereunder:
“8.3.5. In the event of delay in payment of a Monthly
Bill   by   the   Procurers   beyond   its   Due   Date,   a   Late
Payment Surcharge shall be payable by such Procurers to
the Seller at the rate of two percent (2%) in excess of the
applicable   SBAR   per   annum,   on   the   amount   of
outstanding payment, calculated on a day to day basis
57
(and compounded with monthly rest), for each day of the
delay.  The Late Payment Surcharge shall be claimed by
the Seller through the Supplementary Bill.
8.8 Payment of Supplementary Bill
8.8.1   Either Party may raise a bill on the other Party
(supplementary bill) for payment on account of:
i)  Adjustments required by the Regional Energy Account
(if applicable);
ii)  Tariff Payment for change in parameters, pursuant to
provisions in Schedule 4; or
iii)Change in Law as provided in Article 10, and such
Supplementary Bill shall be paid by the others party.
8.8.2 The Procurers shall remit all amounts due under
a Supplementary Bill raised by the Seller to the Seller’s
Designated Account by the Due Date and notify the Seller
of such remittance on the same day or the Seller shall be
eligible   to   draw   such   amounts   through   the   Letter   of
Credit.   Similarly, the Seller shall pay all amounts due
under a Supplementary Bill raised by Procurer(s) by the
Due   Date   to   concerned   Procurer’s   designated   bank
account and notify such Procurer(s) of such payment on
the same day.   For such payments by the Procurer(s),
Rebate as applicable to Monthly Bills pursuant to Article
8.3.6 shall equally apply.
8.8.3     In   the   event   of   delay   in   payment   of   a
Supplementary Bill by either Party beyond its Due Date,
a Late Payment Surcharge shall be payable at the same
terms applicable to the Monthly Bill in Article 8.3.5.
8.9  The copies of all; notices/offers which are required to
be sent as per the provisions of this Article 8, shall be
sent by a party, simultaneously to all parties.”
Liability of the Late Payment Surcharge which has been saddled
upon the appellants is at the rate of 2% in excess of applicable SBAR
per annum, on the amount of outstanding payment, calculated on a day
to day basis (and compounded with monthly rest) for each day of the
58
delay.     Therefore,   there   shall   be   huge   liability   of   payment   of   Late
Payment Surcharge upon the appellants­Rajasthan Discoms.
67. With regard to the question of interest/late payment surcharge,
we notice that the plea of change in law was initially raised by APRL in
the year 2013.  A case was also filed by APRL in the year 2013 itself
raising its claim on such basis.   However, the appellants­Rajasthan
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.  We are, thus, of the opinion that
considering the totality of the facts of this case and in order to do
complete justice and to reduce the liability of the appellants­Rajasthan
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 appellants­Rajasthan 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.
68. We   accordingly   direct   that   the   rate   of   interest/late   payment
surcharge would be at SBAR, not exceeding 9 per cent per annum, to
be compounded annually, and the 2 per cent above the SBAR (as
59
provided in Article 8.3.5 of PPA) would not be charged in the present
case.
69. Before we part with the case, we may notice that Shri Prashant
Bhushan, raised the submission with respect to over­invoicing.   He
attracted our attention to the investigation pending before the DRI.  He
has submitted that 40 importers of coal are under investigation by the
DRI  concerning   alleged   over­invoicing.     The   letter  of   rogatory   was
issued.  However, learned counsel conceded that there is no ultimate
conclusion in the investigation reached so far.   Thus, we are of the
opinion   that   until   and   unless   there   is   a   finding   recorded   by   the
competent court as to invoicing, the submission cannot be accepted.
At this stage, it cannot be said that there is over­invoicing.  We have
examined the case on merits with abundant caution, and we find that
there are concurrent findings of facts recorded by the RERC and the
APTEL.  With respect to the aspect that bid was premised on domestic
coal, we find that findings recorded do not call for any interference.
70. A   question   was   raised   concerning   the   maintainability   of   the
appeal   of   the   Federation.     It   is   important   to   mention   that   the
Federation was not the party before the RERC, and the APTEL rejected
its intervention application.  The order was not interfered with by this
Court.  Be that as it may.  Given the appeal preferred by Rajasthan
60
Discoms, we have not examined the maintainability of the Federation's
appeal and locus to file an appeal.  We leave the question open.
71. In   view   of   the   preceding   discussion,   the   appeals   are   partly
allowed to the extent as indicated above.
No order as to costs.
                 ...………………….J.
                 (Arun Mishra)
…….……………….J.
(Vineet Saran)
…….……………….J.
(M.R. Shah)
New Delhi;
August 31, 2020.