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West Bengal State Electricity Distribution Company Limited v. Adhunik Power and Natural Resources Limited

Civil Appeal · 2026 INSC 202Decided 27 Feb 2026
C.A. No.-002584-002585 - 2026
Justice B.V. Nagarathna · Justice Joymalya Bagchi

Background

WBSEDCL had a long-term power purchase arrangement under which Adhunik Power and Natural Resources Ltd. (APNRL) was to supply 100 MW of electricity generated using coal from its own captive coal block at Ganeshpur, Jharkhand. When the Supreme Court's 2014 judgment in Manohar Lal Sharma cancelled coal block allocations nationwide (including Ganeshpur) and a new law changed how coal blocks were allocated, APNRL was forced to buy costlier coal from the open market and sought compensation from WBSEDCL under the "Change in Law" clause of their agreement. The regulatory commission (CERC) and the Appellate Tribunal for Electricity (APTEL) gave partly conflicting rulings on how much compensation, and for what period, APNRL was entitled to, leading both sides to appeal to the Supreme Court.

Decision Breakdown

The Supreme Court held that although the written agreement did not explicitly name Ganeshpur as the captive coal source, surrounding documents (meeting minutes and correspondence) made clear that both parties always understood Ganeshpur to be that source, and it is legally permissible to look at such surrounding circumstances to clarify an ambiguous contract term. It agreed that the cancellation of the coal block by the Court's 2014 ruling and the subsequent new coal allocation law qualified as a "Change in Law" event entitling APNRL to compensation from 25.08.2014 onward, since a separate contractual clause (indemnifying WBSEDCL against ordinary cost escalation) applied to a different situation and did not bar this claim. However, the Court held APTEL was wrong to also award APNRL compensation for coal shortfalls before the 2014 cancellation, since before that date any delay in operationalizing the coal block was a normal commercial risk already covered by the indemnity clause, not a Change in Law event. The appeals were therefore partly allowed: compensation for the pre-2014 shortfall period was disallowed, while the post-2014 Change in Law compensation with carrying costs was upheld.

Lesson Learnt

In interpreting a written commercial contract, courts may look at prior negotiations, meeting minutes, and subsequent correspondence to clarify ambiguous terms, but must still carefully distinguish between ordinary commercial risks a party agreed to bear and genuine "change in law" events caused by later legal or judicial developments, only the latter typically justifies extra compensation.

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

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