The Supreme Court has recently ruled that Adani Power Rajasthan Ltd. (APRL) is entitled to claim compensation and Late Payment Surcharge (LPS) due to changes in law under its Power Purchase Agreement (PPA) with Jaipur Vidyut Vitran Nigam Ltd. (JVVNL). The case involved a dispute over a PPA for the supply of 1200 MW of power at a fixed tariff.
APRL sought compensation under the PPA’s “Change in Law” clause after Coal India Limited (CIL) issued a notification on December 19, 2017, introducing an Evacuation Facility Charge (EFC) of ₹50 per tonne of coal. This additional charge increased APRL’s operational costs. The Appellate Tribunal for Electricity (APTEL) had earlier allowed APRL’s claim for compensation, but JVVNL challenged this decision in the Supreme Court.
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The Supreme Court, with Justices M.M. Sundresh and Rajesh Bindal on the bench, upheld APTEL’s order. It ruled that the parties should be restored to their original economic position as if the change in law had not occurred. The Court observed that CIL’s notification introducing EFC amounted to a change in law that impacted APRL’s costs. Therefore, as per the restitution principle, APRL was entitled to compensation to restore its financial position.
In support of this principle, the Court referred to the decision in GMR Warora Energy Ltd. v. CERC, where it was held:
“It would thus be clear that all such additional charges which are payable on account of orders, directions, notifications, regulations, etc., issued by the instrumentalities of the State, after the cut-off date, will have to be considered to be ‘change in law’ events. The generators would be entitled to compensation on the restitutionary principle on such changes occurring after the cut-off date.”
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The Supreme Court also held that APRL was entitled to Late Payment Surcharge (LPS) at the agreed rate of 2% above SBAR from the date of the EFC notification (19.12.2017). The judgment, authored by Justice Sundresh, noted that LPS constitutes compound interest with monthly rests and compensates for the financing costs of delayed payments, as per Article 10 of the PPA.
The Court stated:
“As held by this Court in the decisions referred to supra, Article 10.2.1 in the instant PPA was incorporated based on the principle of restitution. The idea of this principle is to compensate the affected party in order to restore it to the same economic position, but for the change in law. This particular provision is a substantive one, which in a normal circumstance, has to be given effect to in letter and spirit.”
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Consequently, the Supreme Court dismissed JVVNL’s appeal and confirmed the APTEL’s decision that APRL was entitled to both compensation and Late Payment Surcharge from the date of the EFC notification. The Court’s decision reinforces the principle that regulatory changes impacting operational costs, when recognized as a Change in Law, entitle power generators to claim compensation under the terms of their agreements.
Case Title: JAIPUR VIDYUT VITRAN NIGAM LTD. & ORS. VERSUS ADANI POWER RAJASTHAN LTD. & ANR.
Appearance:
For Petitioner(s) Mr. Shyam Divan, Sr. Adv. Mr. Kartik Seth, Adv. Ms. Shriya Gilhotra, Adv. Mr. Raghav Sharma, Adv. Mr. Saurabh Chaturvedi, Adv. Mr. Chiranjeev Sharma, Adv. M/S. Chambers Of Kartik Seth, AOR
For Respondent(s) Dr. A.M. Singhvi, Sr. Adv. Mr. Mahesh Agarwal, Adv. Mr. Amit Kapur, Adv. Ms. Poonam Sengupta, Adv. Mr. Arshit Anand, Adv. Mr. Shashwat Singh, Adv. Mr. Saunak Rajguru, Adv. Mr. Subham Bhut, Adv. Mr. Siddharth Seem, Adv. Mr. E. C. Agrawala, AOR
