LEVY OF EVACUATION FACILITY CHARGES AS ‘CHANGE IN LAW’ UNDER POWER PURCHASE AGREEMENT

The Judgment in the Case of “Jaipur Vidyut Vitran Nigam Ltd. & Ors. v. Adani Power Rajasthan Ltd. & Anr.CIVIL APPEAL NO. 4336 OF 2025 (Arising out of CIVIL APPEAL DIARY NO. 26876 OF 2024) was delivered by a Division Bench of the Supreme Court of India, comprising Hon’ble Justice M. M. Sundresh and Justice Rajesh Bindal On 23^rd  May 2025. This Case Mainly Addresses Whether the levy of Evacuation Facility Charges (EFC) by Coal India Limited amounts to a ‘Change in Law’ under the Power Purchase Agreement (PPA), and if compensation, including carrying costs, is payable from the date of the said Notification.

Facts

According to a Letter of Intent dated 17.12.2009, a Power Purchase Agreement (PPA) was executed on 28.01.2010 between Adani Power Rajasthan Ltd. (Respondent No.1 – the power generator) and the Rajasthan Discoms (Appellants), for the supply of 1200 MW of power. While the agreement was still in force, Coal India Limited (CIL) issued a Notification on 19.12.2017 introducing Evacuation Facility Charges (EFC) of ₹50 per tonne effective from 20.12.2017. On the same day, Adani Power notified the Appellants, claiming this constituted a ‘Change in Law’ under Article 10 of the PPA. Upon receiving no satisfactory response, Adani Power filed a petition before the Rajasthan Electricity Regulatory Commission (RERC) under Section 86 of the Electricity Act, 2003 and Article 10 of the PPA. While RERC partially allowed relief, Adani Appealed to the Appellate Tribunal for Electricity (APTEL), which allowed the Appeal and granted compensation from the date of the Notification along with carrying cost at Late Payment Surcharge (LPS) rates. The Appellants challenged this before the Supreme Court.

Main Issues

• Whether the CIL Notification dated 19.12.2017 imposing EFC constitutes a ‘Change in Law’ under the PPA

 

• Whether compensation and carrying costs are payable from the date of the Notification or from the date of adjudication

 

 

• Whether a supplementary bill was a precondition to claim compensation and LPS

 

• Whether Article 10.5.1(i and ii) applies to determine the effective date of compensation

Contentions by Both Parties

Appellant’s Contentions

The Appellants (Rajasthan Discoms) contended that the Appeal filed before the APTEL was delayed and should not have been entertained. They argued that without a supplementary bill raised by Adani Power, no compensation or carrying cost can be claimed. They also argued that compensation can only accrue post-adjudication, as per Article 10.5.1(ii) of the PPA, and that the EFC Notification does not constitute a change in law applicable from the date of its issuance.

Respondents (Adani Power)

TheRespondents argued that the Notification clearly qualified as a ‘Change in Law’ event and relied on precedent judgments like GMR Warora Energy Ltd. v. CERC and UHBVNL v. Adani Power. They stated that there was no fault in delay and that compensation must flow from the date the change occurred, i.e., the date of the Notification. Further, Adani argued that raising a supplementary bill before adjudication was unnecessary when liability was already disputed.

Supreme Court Judgment:

The Supreme Court dismissed the Appeal and upheld the APTEL’s decision. It held that the CIL Notification dated 19.12.2017 did constitute a ‘Change in Law’ under Article 10.5.1(i) of the PPA, and that compensation, including carrying cost at LPS rates, is payable from the date the Notification came into effect (20.12.2017). The Court clarified that Article 10.5.1(ii) which applies when a change in law arises from judicial interpretation, did not apply here, as there was no such interpretation involved. It further held that a supplementary bill need not be raised before adjudication and rejected the Appellant’sarguments as lacking factual and legal basis. Recognizing the obligation to restore Adani Power to its original economic position, the Court reaffirmed the applicability of restitutionary principles. Therefore, APTEL’s Order granting compensation with carrying cost was upheld in full.

 

 

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:

(i) the date of adoption, promulgation, amendment, re-enactment 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.

 

Parichaya Reddy

Associate

The Indian Lawyer & Allied Services

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