Case: UTTAR HARYANA BIJLI VITRAN NIGAM LTD.(UHBVNL) Vs. ADANI POWER LTD

1. The appellants in Civil Appeal No. 5865 of 2018 are Uttar Haryana Bijli Vitran Nigam Ltd. and Dakshin Haryana Bijli Vitran Nigam Ltd. [collectively referred to as the, which are distribution licensees in the State of Haryana. The appellant in Civil Appeal No. 6190 of 2018 is the Gujarat Urja Vikas Nigam Ltd. [which has been assigned with the task of procuring power by the State of Gujarat. The respondent, Adani Power Ltd., is a generating company in terms of Section 2(18) of the Electricity Act, 2003 and has a 4620 MW coal-fired power plant at Mundra, District Kutch, Gujarat. On 23.06.2005, the Special Economic Zones Act, 2005 [] was enacted. Section 26 of this Act provides that every Developer shall be entitled to various exemptions, such as duty leviable under the Customs Act, 1962, Customs Tariff Act, 1975, Central Excise Act, 1944, etc. The Government of India approved the respondent as a Co-Developer (which is included within the termThe Ministry of Commerce and Industry [by a letter dated 19.12.2006, granted approval to the appellant for setting up a power plant in the aforesaid SEZ. Thus, the appellant has established the aforesaid power plant in four phases consisting of four units of 330 MW in Phase I and II, two units of 660 MW in Phase III, and three units of 660 MW in Phase IV. The respondent has entered into various Power Purchase Agreements [with the appellant. We are concerned in the present case with the PPAs dated 07.08.2008 and 02.02.2007. The MoC&I, vide notification dated 06.04.2015 has withdrawn the exemption of all duties under the Customs Act, Customs Tariff Act, Central Excise Act, etc. on goods imported/procured by the respondent for authorized operations w.e.f. 01.04.2015. Equally, vide notification dated 16.02.2016, fiscal benefits including exemption of service tax on power plants approved prior to 27.02.2009 was promulgated, as a result of which, exemption from service tax, to which the respondent was entitled, has been withdrawn. On 15.10.2015, the respondent filed Petition No. 235/MP/2015 before the Central Electricity Regulatory Commission [], seeking compensation for change in law by invoking Article 13 of the respective PPAs. On 04.05.2017, the CERC allowed, as a change in law, the added cost by way of payment of tax consequent to withdrawal of the exemption notifications…… However, the change in rates of custom duty, excise duty, withholding tax and service tax on taxable services which have been imposed pursuant to the Acts passed by the Parliament shall be covered under Change in Law. As regards the Green Energy Cess, it was imposed after the cut-off date and satisfied the requirements of Change in Law. Accordingly, the Petitioner shall therefore be entitled for reimbursement of custom duty, excise duty on import/procurement of any other goods and service tax on the spares and consumables payable by it from 1.4.2015 on account of the withdrawal of exemption to the power plants located in the SEZ by the Ministry of Commercial [sic Commerce] and Industry only to the extent of difference in the duty or tax as on the cut-off date and as prevailing as on 1.4.2015 andthe CERC followed its earlier order dated 06.02.2017 in Petition No.156/MP/2014, in which it stated thater Article 13 of the PPA must be given to the respondent as it is to be restored to the same economic position as if the change in law – which is withdrawal of the exemption notifications – did not take place. After setting out Article 13 of the PPA and distinguishing a Supreme Court judgment in National Thermal Power Corporation Ltd. v. Madhya Pradesh State Electricity Board, (2011) 15 SCC 580 [Thermal Power Corporationthe Commission came to the conclusion that there is no provision in the PPA for payment of carrying cost for the period from the date of the change in law till the date of approval by the Commission. This being the case, the Commission held that the prayer of the respondent to grant carrying cost on restitutionary principles from the date of change in law till the date of decision cannot be allowed. By the impugned judgment of the Appellate Tribunal for Electricity [] dated 13.04.2018, the Appellate Tribunal went through the relevant provisions of the PPAs and finally observedFurther, the provisions of Article 13.2 i.e. restoring the Appellant to the same economic position as if Change in Law has not occurred is in consonance with the principle ofi.e. restoration of some specific thing to its rightful status. Hence, in view of the provisions of the PPA, the principle of restitution and judgment of theSupreme Court in case of Indian Council for Enviro-Legal Action vs. Union of India & Ors., we are of the considered opinion that the Appellant is eligible for Carrying Cost arising out of approval of the Change in Law events from the effective date of Change in Law till the approval of the said event by appropriate authority. It is also observed that the Gujarat Bid-01 PPA have no provision for restoration to the same economic position as if Change in Law has not occurred. Accordingly, this decision of allowing Carrying Cost will not be applicable to the Gujarat Bid-01carrying cost was allowed and the judgment of the Commission was set aside.

Court's reasoning:
6. It will be seen that Article 13.4.1 makes it clear that adjustment in monthly tariff payment on account of change in law shall be effected from the date of the change in law [see sub-clause (i) of clause 4.1], in case the change in law happens to be by way of adoption, promulgation, amendment, re-enactment or repeal of the law or change in law. As opposed to this, if the change in law is on account of a change in interpretation of law by a judgment of a Court or Tribunal or governmental instrumentality, the case would fall under sub-clause (ii) of clause 4.1, in which case, the monthly tariff payment shall be effected from the date of the said order/judgment of the competent authority/Tribunal or the governmental instrumentality. What is important to notice is that Article 13.4.1 is subject to Article 13.2 of the PPAs.7. Article 13.2 is an in-built 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 is 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 thein 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.8. So far as theis concerned, compensation for any increase/decrease in revenues or costs to the seller is to be determined and effected from such date as is decided by the appropriate Commission. Here again, this compensation is only payable for increase/decrease in revenue or cost to the seller if it is in excess of an amount equivalent to 1% of the Letter of Credit in aggregate for a contract year. What is clear, therefore, from a reading of Article 13.2, is that restitutionary principles apply in case a certain threshold limit is crossed in both sub-clauses (a) and (b). There is no dispute that the present case is covered by sub-clause (b) and that the aforesaid threshold has been crossed. The mechanism for claiming a change in law is then set out by Article 13.3 of thewill be seen that sub-clause (c) does not occur in the PPA in Civil Appeal No.5865 of 2018. As we have held that the present case is governed by sub-clause (i) of Article 13.4.1, it is obvious that sub- clauses (b) and (c) have no application to the facts of the present case.10. A reading of Article 13 as a whole, therefore, leads to the position that subject to restitutionary principles contained in Article 13.2, the adjustment in monthly tariff payment, in the facts of the present case, has to be from the date of the withdrawal of exemption which was done by administrative orders dated 06.04.2015 and 16.02.2016. The present case, therefore, falls within Article 13.4.1(i). This being the case, it is clear that the adjustment in monthly tariff payment has to be effected from the date on which the exemptions given were withdrawn. This being the case, monthly invoices to be raised by the seller after such change in tariff are to appropriately reflect the changed tariff. On the facts of the present case, it is clear that the respondents were entitled to adjustment in their monthly tariff payment from the date on which the exemption notifications became effective. This being the case, the restitutionary principle contained in Article 13.2 would kick in for the simple reason that it is only after the order dated 04.05.2017 that the CERC held that the respondents were entitled to claim added costs on account of change in law w.e.f. 01.04.2015. This being the case, it would be fallacious to say that the respondents would be claiming this restitutionary amount on some general principle of equity outside the PPA. Since it is clear that this amount of carrying cost is only relatable to Article 13 of the PPA, we find no reason to interfere with the judgment of the Appellatewas argued by Shri Giri was that this judgment cannot be applied to fact situations that arise under the PPA in view of Article 18.17 of the PPA which clearly states that the liability of the seller and the procurer shall be limited to that explicitly provided in this agreement and that, in no event, shall either procurer or seller claim any indirect or consequential losses or damages. Since we have found that the claim for carrying costs is under Article 13 of the PPAs, this judgment would have no application to the facts of the present case.Article 13 of the PPAs provides for payment of carrying costs, as held by us above. This judgment also turned on the interpretation of Regulation 79(2) of the Central Electricity Regulatory Commission (Conduct of Business) Regulations, 1999, and therefore, also has no manner of application to the facts of the present case.14. In Indian Council for Enviro-Legal Action v. Union of India and Ors., (2011) 8 SCC 161 , this Court was concerned with whether a successful party in a litigation should not be compensated by way of restitution for deprivation of its legitimate dues. While dealing with restitutionary principles as applicable in the context of environment pollution, this Court laid down certain principles in paragraph 197. This judgment, again, has no manner of application to the facts of the present case which are confined to the interpretation of Article 13 of the PPAs.15. The next judgment relied upon by Shri Giri was All India Power Engineer Federation and Ors. v. Sasan Power Ltd. and Ors., (2017) 1 SCC 487. Paragraph 31 of this judgment was relied upon to state that in context of Section 63 of the Electricity Act, the Commission alone can accept amended tariff that would impact consumer interest, and therefore, public interest, and waiver of any rights of one of the parties under the PPA, if it impacts such consumer interest, would have to pass muster under the Commission which would look into all factors and then pass a reasoned order. We fail to see how this judgment has any application on the facts of the present case as, in the present case, we are concerned with the interpretation of Article 13 of thecan be no doubt from this judgment that the restitutionary principle contained in Clause 13.2 must always be kept in mind even when compensation for increase/decrease in cost is determined by the CERC.