In a significant ruling on power purchase agreements and coal supply disputes, the Supreme Court on Thursday partly allowed appeals filed by West Bengal State Electricity Distribution Co. Ltd. (WBSEDCL), while upholding compensation to a private power producer for “Change in Law” events arising from cancellation of coal block allocations.
The judgment was delivered in Civil Appeal Nos. 2584-2585 of 2026 in the case of West Bengal State Electricity Distribution Co. Ltd. vs. Adhunik Power & Natural Resources Ltd. & Ors.
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Background of the Case
The dispute traces back to a 2011 power supply arrangement. WBSEDCL entered into a Power Supply Agreement (PSA) with PTC India Limited for procurement of 100 MW power for 25 years. In a back-to-back arrangement, PTC signed a Power Purchase Agreement (PPA) with Adhunik Power & Natural Resources Ltd. (APNRL).
Though the PPA did not expressly name a coal source, minutes of a meeting held before signing the agreement recorded that APNRL had a captive coal block at Ganeshpur in Jharkhand. Subsequent correspondence from WBSEDCL also sought updates about coal extraction from this block.
However, the Ganeshpur coal block never became operational. APNRL began sourcing coal under a tapering linkage from Central Coalfields Ltd., and to bridge shortfalls, procured coal through e-auction and imports.
The controversy deepened after the Supreme Court’s 2014 judgment in Manohar Lal Sharma v. Principal Secy. cancelled numerous coal block allocations across the country, including Ganeshpur. Parliament later enacted the Coal Mines (Special Provisions) Act, 2015.
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APNRL claimed that cancellation of the coal block and the new law amounted to a “Change in Law” under the PPA, entitling it to compensation. The claim was partly accepted by the Appellate Tribunal for Electricity (APTEL), leading WBSEDCL to approach the Supreme Court.
Key Legal Issue
The central question was whether:
- Cancellation of the coal block and subsequent legislation constituted a “Change in Law” event under the PPA; and
- APNRL was entitled to compensation for coal purchased through e-auction/import even before the 2014 cancellation.
WBSEDCL argued that the PPA did not specifically bind the parties to coal from Ganeshpur and that the agreement protected it from any price escalation due to alternative sourcing.
Court’s Observations
The Bench rejected WBSEDCL’s contention that the coal source was irrelevant.
Referring to the meeting minutes and letters exchanged between the parties, the Court held that the “captive source” mentioned in the agreement clearly referred to the Ganeshpur coal block.
The Court observed that contractual terms can be understood in light of surrounding circumstances. It noted that WBSEDCL itself had written to APNRL seeking updates on coal lifting from Ganeshpur, and therefore could not later deny that it was the intended source.
On the “Change in Law” issue, the Court agreed with APTEL. It held that the 2014 judgment interpreting coal laws differently from the Government’s earlier understanding, followed by the 2015 legislation, squarely fell within the definition of “Change in Law” under the PPA.
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“The change in interpretation of mining laws by this Court resulting in cancellation of coal blocks… materially affected the right of APNRL to procure coal,” the Bench noted.
It further clarified that the clause protecting WBSEDCL from escalation in coal prices operated in a different field and could not override compensation for a genuine “Change in Law” event.
Decision
However, the Court drew a clear distinction between the period before and after 25 August 2014 - the date of the coal block cancellation judgment.
It disagreed with APTEL’s view that APNRL should be compensated for procuring coal through e-auction or imports to meet shortfalls in tapering linkage prior to the cancellation.
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The Court held that delays in operationalising the coal block could not shift the burden to WBSEDCL under the indemnity clause of the agreement.
In conclusion, the Supreme Court partly allowed the appeals. It set aside APTEL’s order to the extent it granted compensation for e-auction/imported coal used before 25 August 2014.
However, it upheld compensation for “Change in Law” events from 25 August 2014 onwards, along with carrying costs until actual payment.
The Central Electricity Regulatory Commission has been directed to modify its consequential order accordingly within four weeks.
Case Title: West Bengal State Electricity Distribution Co. Ltd. vs. Adhunik Power & Natural Resources Ltd. & Ors.
Case No.: Civil Appeal Nos. 2584–2585 of 2026
Decision Date: February 27, 2026
