Supreme Court rules in favour of the Haryana Discoms allowing Inter-Plant Transfer of Coal as a “Change in Law Event”
Supreme Court ruling on Inter-Plant Transfer of Coal
On 20.04.2023, the Division Bench of the Hon’ble Supreme Court of India consisting of Justice B. R. Gavai and Justice Vikram Nath pronounced Judgment in the matter between Uttar Haryana Bijli Vitran Nigam Limited & Anr. (“Haryana Discoms”) and Adani Power (Mundra) Ltd. (“Adani Power”) wherein it was held that “Inter Plant Transfer” (“IPT”) of coal qualifies as a Change in Law Event in terms of the Power Purchase Agreements (“PPA”) executed between the parties. While doing so, the Hon’ble Supreme Court has ruled in favour of Haryana Discoms and observed that the Coal India Limited (“CIL”) Communication dated 19th June, 2013 is an instrument having “a force of law” and consequently allowed IPT of coal as a change in law event.
BACKGROUND
Adani Power has set up a generating station of capacity 4620 MW at Mundra in the State of Gujarat. Adani Power had entered into PPAs dated 7th August 2008 with Haryana Discoms for the supply of 1424 MW power from Phase IV of the generating station.
In terms of Article 13 of the PPA, if there occurs a change in law event resulting in an increase in cost or decrease in revenue to the Generator (Adani Power), the resultant benefit is to be given to compensate Adani Power being affected by such change in law event. Similarly, if such a change in law event results in a decrease in the cost or an increase in revenue to Adani Power, the resultant benefit is to be given to compensate in favour of the Procurer. [ref. Principle of Restitution]
Vide Communication dated 19th June 2013, CIL allowed IPT of domestic coal, in modification of the condition prevalent, where the coal allocated to a specific generating station was prohibited from being used in any other generating stations of the same entity or any group companies.
Before the Hon’ble Supreme Court, one of the fundamental questions of law was whether the CIL Communication dated 19.06.2013 constituted a “force of law” in terms of Article 13 of the PPA to be qualified as a change in law event.
SUBMISSIONS OF HARYANA DISTRIBUTION LICENSEES
Haryana Discoms emphasised the fact that as of the cut-off date, Adani Power was not entitled to use any part of the coal under the Fuel Supply Agreement (“FSA”) for any end-use purpose other than for the generation and supply of electricity to Haryana Utilities. In other words, prior to the IPT scheme, there was a legal and absolute bar on diverting any part of the coal allocated to a particular generating station/unit under the FSA. However, by way of the said IPT Policy, the Government of India changed the pre-existing norms and permitted the IPT of coal, which constituted a Change in Law Event in terms of Article 13 of the PPA.
Haryana Discoms further, also apprised the Bench that the Appellate Tribunal had erroneously disallowed the IPT Scheme vide the CIL (Government Instrumentality) Letter dated 19th June 2013, even when the same constituted a ‘force of law’. This was despite the fact that the Central Commission had not given a particular finding on the same.
The mere fact that Adani had the ‘option’ but was not mandated to transfer the coal from one plant to another does not mean that IPT cannot be construed as Change in Law. The CIL event to be considered is the right given to Adani and similarly placed generator to avail IPT as a cost-saving measure as against the prohibition contained before.
On account of a scheme/policy of the Government, Adani has benefitted and is saving costs, the same has to be given adjustments to the Appellants in terms of Article 13.2 of the PPA.
OBSERVATIONS AND FINDINGS
The Hon’ble Supreme Court while appreciating the submissions of Haryana Discoms took a significantly distinct view and overruled the decision of the Appellate Tribunal and held that “CIL is an instrumentality of the Government of India” and that the “APTEL erred in holding the said communication dated 19th June 2013 not to amount to ‘Change in Law”. The Hon’ble Supreme Court also noted that “the definition of “Law” is wide enough to include all rules, regulations, orders notification by the Government instrumentalities.”
The Hon’ble Bench also noted the contention of the Haryana Discoms that the Appellate Tribunal’s findings are in contradiction to its own decisions, wherein vide Order dated 22.03.2022 in the matter of Rattan India Power Limited v. Maharashtra Electricity Regulatory Commission and Another, Appeal Nos. 118 of 2021 and 40 of 2022, the Appellate Tribunal has held that Coal India Notification dated 19.12.2017 to constitutes a force of law and consequently, allowed the Change in Law relief sought with respect to Evacuation Facility Charge.
In addition to the above, the Hon’ble Supreme Court held that “the savings made in the cost of transportation” by Adani Power “will have to be passed on” to the end consumers.
Thus, the Hon’ble Supreme Court set aside the findings with respect to the Inter-Plant Transfer and set aside the Order of the Tribunal, partly allowing the Civil Appeal No. 2908 of 2022.
Reeha Singh comments, “The decision is a landmark judgment in the electricity sector as though changes in the law have been claimed and allowed by the Courts in favour of the Generators in the past, however, the Hon’ble Supreme Court has now laid the law that if the change in law has the effect of a decrease in cost or increase in revenue of the Generator, the same has to be passed on to the Distribution Licensees and eventually to the consumers.“
Navigating Inter Plant Transfers and Supreme Court Rules
Inter-plant transfer and inter-circle transfer refer to the movement of employees within an organization from one location or department to another. These transfers can help optimize resource allocation and improve workforce management. The term “reeha” doesn’t have a widely recognized meaning in this context. It’s important to be aware of the latest Supreme Court rules, as they can have a significant impact on legal matters and judicial procedures. Additionally, the phrase “coal change into” may require further context to provide a meaningful explanation.
