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Uttar Haryana Bijli Vitran Nigam Limited vs Adani Power (Mundra) Limited

Civil Appeal · 2023 INSC 403Decided 20 Apr 2023
Civil Appeal No. 2908 of 2022

Background

Adani Power (Mundra) Limited had a long-term power supply agreement with Haryana's electricity distribution utilities. A dispute arose over whether a 2013 circular from Coal India Limited, permitting power generators to transfer coal between their own plants ("Inter Plant Transfer" or IPT), counted as a "Change in Law" event under their power purchase agreement, which would entitle Adani Power to extra compensation. The Central Electricity Regulatory Commission (CERC) and the Appellate Tribunal for Electricity (APTEL) had both ruled that this coal-transfer circular was not a "Change in Law," and Haryana's utilities appealed that finding to the Supreme Court.

Decision Breakdown

The Supreme Court held that APTEL was wrong: since Coal India Limited is a government instrumentality, its circular allowing inter-plant coal transfer does qualify as "Change in Law" under the wide definition of "Law" in the agreement. The Court noted that permitting such transfers changes transportation costs (since coal moved to a different, possibly closer or farther plant costs more or less to transport), and any savings in transport cost must be passed on to the distribution companies and ultimately to consumers. Because working out the exact financial adjustment requires technical expertise the Court doesn't have, it sent the matter back to CERC to recalculate the actual compensation, directing CERC to involve the other two affected distribution companies (in Maharashtra and Rajasthan) and finish the recalculation within six months.

Lesson Learnt

Government instrumentalities' internal circulars and administrative decisions can qualify as "Change in Law" under long-term commercial contracts if they materially affect performance costs, and any resulting savings or costs must ultimately be shared fairly down the supply chain to protect end consumers.

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

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