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Jaipur Vidyut Vitran Nigam Ltd. & Ors. v. Adani Power Rajasthan Ltd. & Anr.

Civil Appeal · 2020 INSC 521Decided 31 Aug 2020
Civil Appeal Nos. 8625-8626 of 2019
Justice Arun Mishra · Justice Vineet Saran · Justice M.R. Shah

Background

Jaipur Vidyut Vitran Nigam Ltd. (a Rajasthan state power distribution company, "Discom") had a long-term Power Purchase Agreement with Adani Power Rajasthan Ltd. (APRL) to buy electricity at a tariff fixed through competitive bidding. APRL later claimed its costs had risen due to a "change in law" (regulatory/policy changes affecting coal supply and pricing for its plant) and sought additional compensation, including interest/late payment surcharge on delayed dues. Both the Rajasthan electricity regulator (RERC) and the Appellate Tribunal for Electricity (APTEL) ruled in APRL's favour on the change-in-law claim. The Discoms appealed to the Supreme Court, along with related tagged appeals.

Decision Breakdown

The Supreme Court upheld the concurrent factual findings of the RERC and APTEL that APRL was entitled to change-in-law compensation, finding no reason to interfere with those findings. It also rejected, for lack of proof, a separate argument (raised by an intervening federation) alleging over-invoicing of imported coal, since the related investigation was still inconclusive. However, the Court found the contractual Late Payment Surcharge rate of 2% above the applicable bank rate, compounded monthly, too harsh given that the Discoms had genuinely disputed the change-in-law claim since 2013. It reduced the applicable interest rate to the bank rate itself (capped at 9% per annum), compounded annually instead of monthly, to "do complete justice" between the parties. The appeals were partly allowed on this limited point.

Lesson Learnt

Even where a court or tribunal upholds a company's basic contractual entitlement (like extra compensation under a "change in law" clause), it can still step in to moderate harsh penalty or interest terms if a genuine, long-running dispute justified the delay in payment: full legal entitlement does not always mean the full contractual interest rate will be enforced without scrutiny.

Official source (sci.gov.in)View Judgment (PDF)

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