HARYANA POWER PURCHASE CENTRE v. SASAN POWER LTD. & ORS

Citation: [2023] 8 S.C.R. 1

Court: Supreme Court of India

Bench: K. M. JOSEPH AND B. V. NAGARATHNA, JJ.

Judgment text

SUPREME COURT OF INDIA HARYANA POWER PURCHASE CENTRE v. SASAN POWER LTD. & ORS. Civil Appeal No. 11826 of 2018 HARYANA POWER PURCHASE CENTRE v. SASAN POWER LTD. & ORS. (Civil Appeal No. 11826 of 2018) APRIL 06, 2023 [K. M. JOSEPH AND B. V. NAGARATHNA, JJ.

] Electricity Laws - Appellate Tribunal for Electricity (APTEL) and Central Electricity Regulatory Commission (CERC), if empowered to disregard the express words of a contract and create a new bargain - Held: In a case where the matter is governed by express terms of the contract, it may not be open to the Central Electricity Regulatory Commission even donning the garb of a regulatory body to go beyond the express terms of the contract - While it may be open for a regulation to extricate a party from its contractual obligations, in the course of its adjudicatory power it may not be open to the Commission by using the nomenclature regulation to usurp this power to disregard the terms of the contract - The Appellate Tribunal for Electricity cannot indeed make a new bargain for the parties - The Tribunal cannot rewrite a contract solemnly entered into - It cannot ink a new agreement - Such residuary powers to act which varies the written contract cannot be located in the power to regulate - The power cannot, at any rate, be exercised in the teeth of express provisions of the contract - In a matter where the parties have entered into a contract with express provisions, it cannot be said that the Tribunal would have power to disregard the express provisions of the contract on the score that as it turns out that with passage of time and even change in circumstances, it is found that the contract cannot be worked except at a loss for the contractor -Contract.

Electricity Act, 2003: s. 79 - Power Plant Project - Special Purpose Vehicle - Power Purchase Agreement (PPA) - Compensation due to 'change in law' - Special purpose vehicle formed to set up an Ultra Mega Power Project - Power generated by the successful bidder was to be supplied through procurers/distribution licensees (appellant) - Petition u/s.

79 of Electricity Act read with the statutory framework governing procurement of power through competitive 1 bidding and Articles 13 and 17 of the PPA for compensation due to change in law 'during the construction period' - Held: The matter must be viewed from the prism of the specific provisions defining the change in law and the actual change in law - On facts, the PPA contemplates that if the seller is affected by change in law and wishes to claim change in law, it has to notify the procurers of the change in law as soon as is reasonably practicable after becoming aware of the same - There is no material made available indicating that the procurers have held out that they will be liable - It could not be a change in law as contemplated in the agreement as it was not a change in initial consent which was the only case which was argued in this regard - Parties were clear about how the change in law had to be compensated and methodology has been set out clearly - Therefore, any appeal made to the general part in Article 13.

2 which speaks about the affected party being restored to the same economic condition as if such change in law had not occurred cannot result in departing from the specific formula which has been set in place - If a certain timelimit is crossed by the procurers in the performance of its obligations in this regard, the seller (the first respondent) has been given the right to repudiate the contract - It is not the case of the first respondent that it purported to repudiate the contract - On the other hand, it is the common case that the contract continued to be alive and it has survived subject to the claims which have been raised thereunder - This would mean that as the consequences of failure to perform the task having been provided in the contract in the manner provided, one should not ordinarily tarry further to ask as to whether this would provide the premise for a change in law as contemplated under Article 13. 1.

1 - Even in terms of the case built around Part II of Schedule 2 to the PPA under which the performing of the task mentioned in Article 3. 1. 2A within the time provided was to be treated as a deemed initial consent, the consequence of failure to do that have been expressly spelt out - At best or at worst, it could have empowered the first respondent to rescind the contract - The first respondent has not been able to demonstrate that there was a change in law. Doctrines / Principles - Principle of contra proferentem - Explained - Held: The principle of contra proferentem is ordinarily utilised in contracts of insurance and standard form contracts - The principle apparently in substance is that in case of any doubt HARYANA POWER PURCHASE CENTRE v. SASAN POWER LTD. & ORS. in its terms, the doubt should be resolved against the party who drafted the contract. PTC India Limited v. Central Electricity Regulatory Commission (2010) 4 SCC 603 : [2010] 3 SCR 609 held inapplicable.

Energy Watchdog v. Central Electricity Regulatory Commission and Others (2017) 14 SCC 80 : [2017] 3 SCR 153 and Uttar Haryana Bijli Vitran Nigam Ltd. & Anr. v. Adani Power Limited & Ors. (2019) 5 SCC 325 : [2019] 4 SCR 487 - relied on. Gujarat Urja Vikas Nigam Ltd. v. Essar Power (2008) 4 SCC 755 : [2008] 4 SCR 822; Skandia Insurance Co. Ltd. v. Kokilaben Chandravan & Ors. (1987) 2 SCC 654 : [1987] 2 SCR 752;DLF Universal Limited v. Director, Town and Country Planning Department, Haryana (2010) 14 SCC 1 : [2010] 15 SCR 85; Sumitomo Heavy Industries v. Oil and Natural Gas Commission of India (2010) 11 SCC 296 : [2010] 9 SCR 176;Nabha Power Limited v. PSPCL (2018) 11 SCC 508 : [2017] 14 SCR 301;Prahlad & Ors. v. State of Maharashtra & Anr. (2010) 10 SCC 458 : [2010] 11 SCR 916;State of Punjab & Ors. v. Bakshish Singh (1998) 8 SCC 222 : [1998] 1 Suppl. SCR 478; Mahant Dhangir & Anr. v. Madan Mohan & Ors. (1987) (Supp) SCC 528 : [1988] 1 SCR 679; Uttar Pradesh Power Corporation Limited v.

National Thermal Power Corporation Limited and Others (2009) 6 SCC 235 : [2009] 3 SCR 1060; Gujarat Urja Vikas Nigam Limited v. Tarini Infrastructure Limited and Others (2016) 8 SCC 743 : [2016] 5 SCR 990 and Manohar Lal Sharma v. Principal Secretary & Ors. (2014) 9 SCC 614 : [2014] 12 SCR 110 - referred to. Case Law Reference [2017] 3 SCR 153 relied on Para 28 [2019] 4 SCR 487 relied on Para 28 [2008] 4 SCR 822 referred to Para 28 [1987] 2 SCR 752 referred to Para 28 [2010] 15 SCR 85 referred to Para 28 [2010] 9 SCR 176 referred to Para 28 [2017] 14 SCR 301 referred to Para 28 [2010] 11 SCR 916 referred to Para 29 [1998] 1 Suppl.

SCR 478 referred to Para 29 [1988] 1 SCR 679 referred to Para 29 [2009] 3 SCR 1060 referred to Para 37 [2016] 5 SCR 990 referred to Para 39 [2019] 4 SCR 487 referred to Para 84 [2017] 3 SCR 153 referred to Para 86 [2010] 3 SCR 609 held inapplicable Para 94 [2014] 8 SCR 446 referred to Para 118 [2014] 12 SCR 110 referred to Para118 CIVIL APPELLATE JURISDICTION : Civil Appeal No. 11826 Of 2018. From the Judgment and Order dated 20. 11. 2018 of the Appellate Tribunal for Electricity, New Delhi in Appeal No. 121 of 2015. With Civil Appeal Nos. 11927, 12190 of 2018, 1670 Of 2019, 12232 of 2018 and 1742 of 2019 G. Umapathy, P. Chidambaram, M. G. Ramachandran, Rana Mukherjee, Sajan Povayya, Sr. Advs. , Rohit K. Singh, Anand K. Ganesan, Ms. Poorva Saigal, Nikunj Dayal, Shubham Arya, Amal Nair, Ms. Kritika Khanna, Ms. Pallavi Saigal, Ms. Reeha Singh, Ms. Shikha Sood, Ms. Anumeha Smiti, K. V. Mohan, K. V. Balakrishnan, Ravi Nair, Rahul Kumar Sharma, Rakesh K.

Sharma, Rajiv Srivastava, Nishant Sharma, Ms. Gargi Srivastava, Ms. Adviteeya, Ms. Aparna Bhat, Amit Kapur, Pukhrambam Ramesh Kumar, Rahul Kinra, Aditya Ajay, Karun Shrama, Girdhar Gopal Khattar, Ms. Aliva Ahmed, Ms. Raksha Agrawal, Ms. Divyya Kaul, Hasan Murtaza, Advs. for the appearing parties. HARYANA POWER PURCHASE CENTRE v. SASAN POWER LTD. & ORS. The Judgment of the Court was delivered by K. M. JOSEPH, J. (1) The six appeals with which we are concerned have been filed under Section 125 of the Electricity Act, 2003 (hereinafter referred to as 'Act' for brevity). The appeals are directed against the order passed by the Appellate Tribunal for Electricity (hereinafter referred to as 'Tribunal' for brevity) in an appeal carried by the first respondent under Section 111 of the Act. (2) The appeal before the Tribunal, in turn, was lodged against the order passed by the Central Electricity Regulatory Commission (hereinafter referred to as 'Commission' for brevity).

The Commission passed the order purporting to be one under Section 79(b) inter alia of the Act in a petition filed by the first respondent. FACTS (3) It was decided to set up an Ultra Mega Power Project. Towards this end, the Power Finance Corporation Limited of India was to be the nodal agency. It incorporated a Special Purpose Vehicle, which is the first respondent. The idea was to set up the Ultra Mega Power Project which would be operated by the successful bidder selected through an international competitive bidding. The power generated by the successful bidder was to be supplied through procurers (the appellants before us), who can be described also as the distribution licensees under the Act. The appellants were to supply the power so procured finally to the consumers. (4) Since what was contemplated was seeking shelter under Section 63 of the Act, we must refer to the guidelines which have been issued by the Central Government purporting to act under Section 63.

Guidelines were issued on 19. 01. 2005. We deem it appropriate to set out the following guidelines: "2. 1 These guidelines are being issued under the provisions of Section 63 of the Electricity Act, 2003 for procurement of electricity by distribution licensees (Procurer) for: (a) long-term procurement of electricity for a period of 7 years and above; (b) Medium term procurement for a period of upto 7 years but exceeding 1 year. 2. 2 The guidelines shall apply for procurement of base-load and seasonal power requirements through competitive bidding, through the following mechanisms: i. Where the location, technology, or fuel is not specified by the procurer (Case 1); ii. For hydro-power projects, load center projects or other location specific projects with specific fuel allocation such as captive mines available, which the procurer intends to set up under tariff based bidding process (Case 2). " (5) The guidelines are binding on the procurers. Guideline 3.

2 which is related to preparation for the invitation of bids would assume relevance. It reads as follows: "3. 2 For long-term procurement from hydro electric projects or for projects for which pre-identified sites are to be utilized (Case 2), the following activities should be completed by the procurer or authorized representative of the procurer, before commencing the bid process: - Site identification and land acquisition required for the project - Environmental clearance - Fuel linkage, if required (may also be asked from bidder) - Water linkage - Requisite Hydrological, geological, meteorological and seismological data necessary for preparation of Detailed Project Report (DPR), where applicable. The bidder shall be free to verify geological data through his own sources, as the geological risk would lie with the project developer. The project site shall be transferred to the successful bidder at a declared price.

Provided that for the projects from which more than one distribution licensees located in different States intend to procure power and if the preparations for such projects are being facilitated by the Central Government, the activities referred to above shall be initiated before the bidding process and should be completed before signing the power purchase agreement with the selected bidder. HARYANA POWER PURCHASE CENTRE v. SASAN POWER LTD. & ORS. [K. M. JOSEPH, J. ] (6) Under the guidelines, tariff structure is contemplated which consists of capacity charges and energy charges which are dealt with in detail. It also deals with bidding process. The bidding process itself is divided into two stages, viz. , a determination of the qualification by a pre-qualification system and thereafter submission and consideration of essentially what consists of the financial bid. There is a guideline which deals with arbitration and it was contained in guideline 5. 17: "5.

17 The procurer will establish an Amicable Dispute Resolution (ADR) mechanism in accordance with the provisions of the Indian Arbitration and Conciliation Act, 1996. The ADR shall be mandatory and time-bound to minimize disputes regarding the bid process and the documentation thereof. If the ADR fails to resolve the dispute, the same will be subject to jurisdiction of the appropriate Regulatory Commission under the provisions of the Electricity Act 2003. " (7) It is, accordingly, purporting to act in terms of the guidelineS that a Request for Qualification (for short RFQ) came to be issued on 31. 03. 2006. Reliance Power Limited was one of the bidders which was pre-qualified in terms of the RFQ. On 18. 08. 2006, there was a change notified in the guidelines. It brought about the following changes in the guidelines 5. 17 besides guideline No. 4. 7. The unamended and the amended guidelines 4. 7 and 5. 17 read as follows: (8) On 21. 08.

2006, a Request for Proposal, for short RFP, came to be issued. We deem it appropriate to refer to the following provisions of the RFP. "4. While this RFP has been prepared in good faith, neither the Procurers, Authorised Representative and Power Finance Corporation Limited (PFC) nor their directors or employees or advisors/consultants make any representation or warranty, express or implied, or accept any responsibility or liability, whatsoever, in respect of any statements or omissions herein, or the accuracy, completeness or reliability of information contained herein, and shall incur no liability under any law, statute, rules or regualations as to the accuracy, reliability or completeness of this RFP, even if any loss or damage is caused to the Bidder by any act or omission on their part. 1. 3 The objective of the bidding process is to select a SuccessfulBidder for development of the Project as per the terms of the RFP.

The Project will have a Contracted Capactiy of minimum of 3500 MW and maximum of 3800 MW in accordance witht he terms of the PPA. The Selected Bidder shall purchase the entire shareholding of the Authorised Representative from PFC and its nominees in accordance with Share Purchase Agreement and cause the Seller to enter into the RFP Project Documents. The Selected Bidder shall be responsible for ensuring that the Seller undertakes development, finance, ownership, design, engineering procurement, construction, commissioning, operation and maintenance of the Project as per the terms of the RFP Project Documents. The Selected Bidder shall also ensure: (i) All equipment and auxiliaries shall be suitable for continuous operation in the frequency range of 47. 5 to 51. 5 Hz (-5% to +3% of rated frequency of 50. 0 Hz). (ii)The plant shall be capable of delivering contracted capacity continously at 47. 5 Hz grid frequency. 1.

4 The Procurers through the Authorised Representative, have initiated development of the Project at Sasan, District Sidhi, Madhya Pradesh and shall complete the following tasks in this regard by such time as specified hereunder: HARYANA POWER PURCHASE CENTRE v. SASAN POWER LTD. & ORS. [K. M. JOSEPH, J. ] iv. Allocation of main Captive Coal Mine(s) and providing geological report (GR) for the same; at least ninety (90) days prior to Bid Deadline. Allocation of other Captive Coal Mine(s) and available information regarding quality and quantity of coal (GR related information) would be made available at least thirty (30) days prior to Bid Deadline. The Seller shall pay the final cost of geological reports (Grs). The Indicative Cost of geological reports (Grs), would be made available at least thirty (30) days prior to bid Deadline; v.

Tying up water linkage for the Project requirement along with approval of Central Water Commission, at least thirty (30) days prior to Bid Deadline; Water intake study report and Project Report including geotechnical study, topographical survey, area drainage study, socioeconomic study and EIA study (rapid) would be made available at least ninety (90) days prior to Bid Deadline; vi.

issue of certificate by Ministry of Power, Government of India extending the benefits to power generation projects under Mega Power Policy upto the Scheduled COD of the Power Station by Government of India at least thrity (30) days prior to Bid Deadline; It may be noted that noe of the Procurers, Authorised Representative and PfC, nor their directors, employees or advisors/ consultants make any representation or warranty, express or implied, or accept any responsibility or liability, whatsoever, in respect of any statements or omissions made in the water intake study report and Project Report, or the accuracy, completeness or reliablility of information contained therein, and shal incur no liability under any law, statute, rules or regualtions as to the accuracy, reliability or completeness of such water intake study report and Project Report, even if any loss or damage is caused to the Selected Bidder by any act or omission on their part.

The Ministry of Power and the State Government of Madhya Pradesh have expressed their support to the Seller, on best endeavour basis, in enabling the Seller to develop the Project. 2. 7. 2. 1 The Bidder shall make independent enquiry and satisfy itself with respect to all the required information, inputs, conditions and cirumstances and factors that may have any effect on his Bid. In assessing the Bid, it is deemed that the Bidder has inspected and examined the site conditions and its surroundings, examined the laws and regulations in force in India, the transportation facilities available in India, the grid conditions, the conditions of roads, bridges, ports, etc. For unloading and/or transporting heavy pieces of material and has based its design, equipment size and fixed its price taking into account all such relevant conditions and also the risks, contingencies and other circumstances which mayh influence or affect the supply of power. 2. 7. 2.

2 In their own interest, the Bidders are requested to familiarize themselves with the Electricity Act, 2003, the Income Tax Act 1961, the Companies Act, 1956, the Customs Act, the Foreign Exchange Management Act, IEGC, the regulations framed by regulatory commissions and all other related acts, laws, rules and regulations prevalent in India. The procuers shall not entertain any request for clarifications from the Bidders regarding the same. Non-awareness of these laws or such information shall not be a reason for the Bidder to request for extension of the Bid Deadline. The Bidder undertakes and agrees that before submission of its Bid all such factors, as generally brought out above, have been fully investigated and considered while submitting the Bid. ANNEXURE 5 SITE DETAILS ALONG WITH SITE MAP The Site is located near Sasan village in Singrauli Tehsil in District Sidhi of Madhya Pradesh. The nearest Railway Station is Shakti Nagar (18km) and nearest Airport is Varanasi (250 km).

The site is situated at 23°58'30"N latitude and 82°37'03"E longtitue. About 3500 acres of land has been identified for the project covering villages of Sidhikala, Harhawa, Tiara, Jhanjitola and Sidhikhud. Out of this, about 2000 acres of land has been identified for main plant, about 1100 acres for ash disposal/dyke and 400 acres for colony. Water source for the project is Govind Ballabh Pant Sagar (Rihand Reservoir), which is about 6-7 km from the main plant site. Water will be brought to site by suitable pumping arrangement and pipelines. HARYANA POWER PURCHASE CENTRE v. SASAN POWER LTD. & ORS. [K. M. JOSEPH, J. ] Coal blocks (mines) in Singrauli area with reserves of about 700- 800 million tons will be allocated as Captive Coal Blocks (mines) for this Project. The Project will require the development of a coalmine with production of 18-20 million tons per annum (MTPA) Vicinity map of Site is enclosed. Further details are provided in the Project Report.

" (9) We may, at this juncture, notice also that the Special Purpose Vehicle which was put in place for carrying out the activities also, commissioned a study by WAPCOS (a public sector body of the Central Government). It was tasked with the project to ascertain about the availability of water inter alia. Water is an indispensable factor for the successful running of the power plant which was contemplated. WAPCOS made available its report on 03. 08. 2006. (10) Reliance Power Limited applied pursuant to the RFP. Though, initially, its bid was not the lowest, but on account of the fact that the lowest bidder was found to be not eligible, Reliance Power Limited emerged as the lowest bidder. In keeping with the conditions, Reliance Power Limited acquired 100 per cent share holding of the first respondent and it was favoured with the Letter of Intent on 01. 08. 2007. It entered into a Power Purchase Agreement (hereinafter referred to as 'PPA') on 07. 08. 2007.

In the second week of December, 2007, it would appear that the first respondent which now stood transformed as a fully owned company of the successful bidder Reliance Power Limited, commissioned a new Study by WAPCOS. WAPCOS submitted its report on 04. 04. 2008. We must at this juncture notice that '21. 07. 2007' has been determined as the cut off date, the relevance of which will be unfolded in the later part of the judgment. (11) The PPA contemplated two phases. The first phase was the construction of the power plant. The second was the operation of the power plant. The PPA was to be enforced for a period of 25 years. Therefore, we can safely characterise it as along term agreement to purchase power.

Since this was a case of competitive bidding, leading to the finding out of the lowest bidder, but faced with the regime under Section 63 of the Act which stood attracted, after the PPA was entered into, a petition was moved before the Commission for adopting the rates as contemplated in the PPA. By order dated 17. 10. 2007, the Commission after considering the relevant matters, adopted the rates in accordance with the PPA. It is, thereafter, that the present petition was moved by the first respondent on 19. 02. 2013. It is relevant at this stage to set out certain portions of the petition. The petition has been filed under Section 79 of the Act read with the statutory framework governing procurement of power through competitive bidding and articles 13 and 17 of the PPA between the parties for compensation due to change in law 'during the construction period'. After setting out the facts which we do not consider relevant to advert to, the following is noticed. "5.

It is submitted that the following Changes in Law have occurred during the Construction Period of the Project which have caused the Capital Cost of the Project to increase substantially: a) Increase in Declared price of Land for the Project which includes the land for the Power Station, the Moher, Moher-Amlohri Extension and Chhatrasal captive coal blocks; b) Increase in cost of implementation of the Resettlement and Rehabilitation Plan ("R&R Plan") for the Moher, Moher-Amlohri Extension and Chhatrasal captive coal blocks; c) Increase in cost of Geological Reports for the Moher, MoherAmlohri Extension and Chhatrasal captive coal blocks; d) Increase in cost of compensatory afforestation for the Moher, Moher-Amlohri Extension and Chhatrasal captive coal blocks; e) Increase in cost of Water Intake system due to an incorrect assessment of conditions in the original report supplied to the bidders at the RFP stage; f) Levy of excise duty on cement and steel used in the Project; and g) Levy of Customs Duty on mining equipment imported for the Project.

" (12) Since, in this case, we are concerned only with two aspects, namely claims under clause(e) and clause(g) we deem it appropriate only to refer to the pleadings of the first respondent in regard to the same. Increase in cost of Water Intake System "65. As per Clause 1. 4(v) of RFP for Sasan UMPP, the Procurers through the Authorized Representative had to provide water intake HARYANA POWER PURCHASE CENTRE v. SASAN POWER LTD. & ORS. [K. M. JOSEPH, J. ] study report. WAPCOS (a premier Government of India agency) was appointed to conduct the water intake study. WAPCOS, as the expert agency identified the water intake pump house location and the pipeline route from the intake pump house to the power plant in its Report. This report was made available to all the bidders before bid submission so that the bidders could factor in the cost of the water intake system in preparation of their financial bid i. e. , the tariff at which power would be supplied to the Procurers.

The total estimated cost for the construction of water intake system for the location and route indicated in the report by WAPCOS was estimated to be approximately Rs. 92 Crores. The WAPCOS Report along with the estimated cost are annexed herewith and marked as Annexure P-24 (Colly). " "66. After RPower acquired the Petitioner, WAPCOS was appointed to confirm the technical feasibility as part of detailed engineering exercise. During this process, it was discovered that the water intake location as finalized by WAPCOS before the bidding was not an appropriate location and does not ensure reliable supply of water to the power plant. It was also found that the water intake at the original location indicated by WAPCOS in the pre-bid report would have resulted in shutdown of power plant for a considerable period during the lean season. " "67.

Thereafter, WAPCOS conducted detailed bathymetric studies and recommended a new location for water intake, which was 23 km from the power plant as against 12. 5 km initially indicated at the time of bidding (original location). It was highlighted that new location would ensure reliable water supply to the power plant. Due to increase in distance, submergence area along the route and construction time, there has been considerable increase in the cost of the water intake system as detailed below. The report of WAPCOS recommending the revised location is annexed herewith and marked as Annexure p-25. " "68. The cost for the construction of water system for the new location is Rs. 244 Cr. Out of the aforesaid amount, a sum of Rs. 185 Crores has already been incurred and balance of Rs. 59Crores is to be spent. The estimated increase in cost of the water intake system due to the change in location of the water intake system is Rs. 152 Crores.

Since this increase is directly attributable to the error in the WAPCOS report provided to the bidders at the pre-bid stage, the Petitioner is required to be compensated for the same. The cost break up for the new/ appropriate location which will ensure reliable water supply is annexed herewith and marked as Annexure P-26. " "75. It is submitted that the UMPP Policy envisages domestic coal based UMPPs as integrated projects where the power station and the captive coal mines are treated as an integrated unit. This is also recognized in the PPA as well as other project documents like the RFQ and the RFP. " "76. As per Notification 21 of 2002-Customs dated 01. 03. 2002 issued by the Ministry of Finance, Government of India, the customs duty on goods required for setting up mega power projects has been prescribed as nil meaning thereby that no customs duty will be levied on goods imported for setting up a mega power project.

A copy of Notification 21 of 2002-Customs is annexed herewith and marked as Annexure P-32. " "77. Sasan UMPP was accorded in-principle mega power project status as per Ministry of Power's letter no. F. No. 12/18/2006- P&P dated 20. 10. 2006. The final certificate was issued on 21. 09. 2007. " "78. Sasan UMPP is an integrated power project with captive coal mines viz. Moher, Moher Amlohri Extension and Chhatrasal Coal Blocks. The captive coal mines allocated for Sasan UMPP form an integral and essential part of the Project and any equipment imported in relation to the captive coal mines would therefore be treated as goods imported for setting up the Project. " "79. The Petitioner was required to import mining equipment for setting up the captive coal mines from which coal will be sourced for the Project since the required mining equipments were not available in India. " "80. On 05. 05.

2011, the Petitioner applied to the Energy Department, Government of Madhya Pradesh for recommendation letter to import mining equipments for Sasan UMPP under nil custom duty as is applicable for the other equipment such as power plants of the Project. This application HARYANA POWER PURCHASE CENTRE v. SASAN POWER LTD. & ORS. [K. M. JOSEPH, J. ] was premised on Notification 21 of 2002-Customs. However, vide an Office Memorandum dated 17. 06. 2011, the Ministry of Power has intimated that the exemption for customs duty for UMPPs is given only with respect to power equipment, which was forwarded to Petitioner by Government of Madhya Pradesh on 20. 06. 2011. Copies of letters dated 05. 05. 2011 and 17. 06. 2011 are annexed herewith and marked as Annexure P-33(Colly)" "81. Based on Ministry of Power's Office Memorandum's, the Energy Department, Government of Madhya Pradesh declined to issue the recommendation letter which was required by the Petitioner to claim nil customs duty.

In view of the refusal by Energy Department, Government of Madhya Pradesh and in the interest of the Project and power consumers, Petitioner had to seek recommendation letter from Energy Department, Government of Madhya Pradesh to import mining equipments at project import rate of 20. 94%, which is now reduced to 16. 85% with effect from 17. 03. 2012. " "82. The decision of the Ministry of Power detailed in its office memorandum dated 17. 06. 2011 and refusal by Energy Department, Goverment of Madhya Pradesh to provide recommendation letter to import mining equipments for Sasan UMPP under nil custom duty amounts to a Change in Law under Article 13. 1 of the PPA and Petitioner is entitled to be compensated for the same. " "83. The total amount of customs duty paid by the Petitioner on mining equipments imported for Sasan UMPP is Rs. 361. 47 Crores till date. The total custom duty for mining equipments is estimated to be about Rs. 531 Crores.

The details of the custom duty paid on mining equipments and estimated to be paid in future are annexed herewith in Annexure P-34 (Colly). " "84. It is submitted that the Petitioner has already surpassed the indicative costs provided by the Procurers and in certain instances as indicated hereinabove, the Petitioner will be required to pay the increased Capital Cost in the future. In this regard, the Petitioner is claiming the following reliefs: (a) In relation to the Changes in Law where the additional Capital Cost has already been incurred, this Hon'ble Commission may direct the Procurers to compensate the Petitioner for such increase in Capital Cost; and (b) In relation to the Changes in Law for which the liability is yet to be incurred, the Petitioner is seeking a declaration from this Hon'ble Commission that the increased expenditure amounts to Change in Law. The actual payment will be claimed as and when it falls due. " "89.

From the above discussions and facts, it is clear that:- (a) One of the objectives of the National Electricity Policy and the Tariff Policy is to secure commercial viability of electricity sector while ensuring fair pricing and quality of supply. (b) Power procurement under Section 63 of the Act is governed by the statutory framework comprising (i) Section 63 of the Act, (ii) Government of India's Guidelines and (iii) standard documents being RFP and PPA. (c) In terms of Section 63 of the Act the successful bid must be selected consistent with the guiding principles under Section 61 of the Act meaning thereby that while adoption of tariff under Section 63 of the Act, the principles as laid down under Section 61 need to be complied. (d) Power procurement pursuant to the statutory framework constitutes a statutory contract in terms of the pre-approved and finalized PPA governed by provisions of the Act as well as the Guidelines.

(e) The PPA envisages the adjustment of tariff by this Hon'ble Commission to restore/restitute the party adversely affected (the Petitioner in the present case). " "90. It is also pertinent to note that under Section 79(1)(b) of the Act, this Hon'ble Commission has been given the power to regulate the tariff of generating companies like the Petitioner which have a composite scheme for generation and sale of electricity in more than one state. " "91. The present Petition has been filed for compensation on account of Changes in Law which have impacted the Capital Cost of the Project as well as for compensation for costs incurred HARYANA POWER PURCHASE CENTRE v. SASAN POWER LTD. & ORS. [K. M. JOSEPH, J. ] in excess of the indicative costs provided by the Procurers, which were the basis for formulation of the financial bid of Rpower. " "92. The Petitioner had approached the Procurers for an amicable resolution.

However, all efforts made by the Petitioner to seek an amicable resolution to the unforeseen and undeserved commercial implication with the Procurers have proved fruitless. In this backdrop, it has become imperative and necessary for the Petitioner to invoke jurisdiction of this Hon'ble Commission to issue appropriate orders as prayed for in the Petition. " "93. It is submitted that the present Petition has been filed invoking:- (a) Section 79(1)b) of the Act under which this Hon'ble Commission has the power to regulate the tariff of the Petitioner. (b) Section 79(1)(f) of the Act which gives this Hon'ble Commission the power to adjudicate upon disputes involving the Petitioner. (c) Regulations 82, 92 and 113 of the Central Electricity Regulatory Commission (Conduct of Business) Regulations, 1999. (d) Article 13 of the PPA read with Article 17 and Paragraph 5.

17 of the Competitive Bidding Guidelines in terms of which this Hon'ble Commission has the power to adjudicate upon any dispute that arises claiming any change in or regarding determination of the tariff or any tariff related matters, or which partly or wholly could result in change in tariff. " "104. As detailed in Paragraphs 75-83 above, Notification 21 of 2002-Customs issued by the Ministry of Finance, Government of India granted 100% exemption from Customs duty to goods required for setting up mega power projects. The Petitioner was required to import equipment for operation of the coal mine which is an integral part of the Project. " "105. It is submitted that as per the said Notification, any entity which intended to claim the customs duty exemption was required to apply to the Sponsoring Authority for an exemption certificate. This was essential to claim the customs duty exemption.

In this regard, the Petitioner wrote to the Government of Madhya Pradesh to recommend the Petitioner's case to the Commissioner of Customs on 5. 5. 2011 for nil custom duty on mining equipments. " "106. It is submitted that vide an Office Memorandum dated 17. 06. 2011, the Ministry of Power intimated Government of Madhya Pradesh that the exemption for customs duty for UMPPs is given only with respect to power equipment. The total amount of customs duty paid by the Petitioner on mining equipments imported for Sasan UMPP is Rs. 361. 47 Crores till date. Total custom duty for mining equipments is estimated to be about Rs. 531 Crores. " "107. It is submitted that the decision of the Ministry of Power amounts to a Change in Law under Article 13. 1 of the PPA and the Petitioner is entitled to be compensated for the same.

It is further submitted that the Petitioner not being allowed to import mining equipment under nil customs duty as is granted for the other equipment such as power plants of the Project qualifies as Change in Law under Article 13. 1 of the PPA. " "108. It is submitted that as per RFP for Sasan UMPP, the Procurers had to provide water intake study report. This study was conducted by WAPCOS and the report was made available to all the bidders before bid submission. The cost of the water intake system as per the report was approximately Rs. 92 Crores. This estimation was factored into the bid at the time of submission of the financial bid. " "109. It is submitted that after Rpower acquired the Petitioner, WAPCOS was tasked with confirming the technical feasibility during the detailed engineering exercise. During this process, it was discovered that the water intake location as intimated in the pre-bid report was not appropriate.

After, conducting another detailed study, WAPCOS determined that a new location would be suitable. The new location is 23 km from the power plant as against 12. 5 km initially indicated at the time of bidding (original location). " "110. It is submitted that due to the increase in distance, submergence area along the route and construction time there has been considerable increase in cost of the water intake system. The cost for the construction of water system for the new location is Rs. 244 Cr. The estimated increase in cost of the water intake system due to the change in location of the water intake system is Rs. 152 Crores. " HARYANA POWER PURCHASE CENTRE v. SASAN POWER LTD. & ORS. [K. M. JOSEPH, J. ] "111. It is submitted that the increase in cost of the water intake system is on account of the errors in the report provided by the Procurers and therefore, the Procurers are obligated for compensating the Petitioner for the difference in cost.

It is further submitted that since the water pipeline corridor is part of the Power Station Land and the water intake pipeline is an integral part of the Power Station, any change in the indicative cost of the water intake system will be covered under Change in Law. " "120. Section 79 of the Act, inter alia, empowers the Hon'ble Commission to:- (a) Regulate the tariff of generating companies other than those owned or controlled by the Central Government if such generating companies entered into or otherwise have a composite scheme for generation and sale of electricity in more than one State; and (b) To adjudicate upon the disputes involving the distribution companies or transmission licensees with regard to the matters connected with regulation of tariff of generating companies. " "128. It is submitted that the present case involves a situation where the compensatory mechanism under the PPA for compensation for Change in Law has failed.

It does not meet the objective of restoring an affected party to the same economic condition as if the change in law had not occurred. Therefore, this is a fit case for this Hon'ble Commission to exercise its powers under Section 79 and devise a mechanism to uphold the objective and purpose of Article 13 - to provide economic restitution. " "129. It is further submitted that PPA envisages a scenario where this Hon'ble Commission can interfere with the issues relating to the claim made by a party for any change and/or determination of the tariff or any matter relating to the tariff or claims made by any party which partly or wholly related to any change in the tariff or determination of any such claim which can result in change in the tariff. In this context, Articles 13 and 17 are noteworthy.

While Article 13 of the PPA envisages tariff adjustment in the event of "Change in Law", Article 17 of the PPA provides for dispute resolution, by the Hon'ble Commission in case of claim made by any party for any change in or determination of tariff or any matter related to tariff or claims made by any party, which partly or wholly relate to any change in the tariff or determination of any of such claims could result in change in tariff. " "142.

The Petitioner therefore most humbly and respectfully prays that this Hon'ble Commission be pleased to adjudicate upon the present Petition to:- (a) Declare that the items set out in Paragraph 5 above as Change in Law during Construction Period and/or changes which has led to an increase in the Capital Cost of the Project; (b) Restitute the Petitioner to the same economic condition as if the said Changes in Law had not occurred and devise a mechanism by which the Petitioner is compensated for the aggregate financial impact and increase in capital cost of account of the Changes in Law, the details of which are set out in Paragraph 113 above; and (c) Pass any such other and further reliefs as this Hon'ble Commission deems just and proper in the nature and circumstances of the present case. " (13) After exchange of pleadings, the Commission passed the order dated 04. 02. 2015. Since we are in these appeals to be detained only by two aspects, we notice the following findings: "30.

The petitioner has submitted that as per Clause 1. 4(V) of RFP for Sasan UMPP, the Procurers through the Authorized Representative had to provide water intake study report. WAPCOS (a premier Government of India agency) was appointed to conduct the water intake study. WAPCOS, as the expert agency identified the water intake pump house location and the pipeline route from the intake pump house to the power plant in its Report. This report was made available to all the bidders before bid submission so that the bidders could factor in the cost of the water intake system in preparation of their financial bid i. e. the tariff at which power would be supplied to the Procurers. The total estimated cost for the construction of water intake system for the location and route indicated in the report by WAPCOS was estimated to be approximately 92 Crore. After RPower acquired the project, WAPCOS was appointed to confirm the technical feasibility as part of detailed engineering exercise.

During this process, it was discovered that the water intake location as finalized by WAPCOS before the bidding was not an appropriate location and does not HARYANA POWER PURCHASE CENTRE v. SASAN POWER LTD. & ORS. [K. M. JOSEPH, J. ] ensure reliable supply of water to the power plant. It was also found that the water intake at the original location indicated by WAPCOS in the pre-bid report would have resulted in shutdown of power plant for a considerable period during the lean season. Thereafter, WAPCOS conducted detailed bathymetric studies and recommended a new location for water intake, which was 23 km from the power plant as against 12. 5 km initially indicated at the time of bidding (original location). It was highlighted that new location would ensure reliable water supply to the power plant.

Due to increase in distance, submergence area along the route and construction time, there has been considerable increase in cost of the water intake system as per following details (Annexure P-26 of the petition) and as per the earlier report of WAPCOS:- 31. MPPMCL has submitted that it is an expense incurred by the petitioner but is not covered under "Change in Law" under Article 13. 1. 1 of the PPA. However, it is concluded that the cost has been incurred by the petitioner and exceeds the estimates given by the procurer's authorized representative prior to bid submission. HPCC has submitted that the price and other details given in the bidding document were by way of information and it was for the bidders to conduct independent enquiry and verify the information and details. There is no misrepresentation by the procurers or by the Bid Process Coordinators at the time of bidding in relation to water intake for the project.

In view of the specific disclaimer and the requirement to conduct independent enquiry, the petitioner was required to make appropriate enquiries into the matter before bidding and the bidders were not entitled to proceed only on the basis indicative information given by the Bid Process Coordinator. 32. We have considered the submission of the petitioner and respondent. As against the indicative cost of 92. 40 crore, the cost for the construction of water system for the new location is 244 crore out of the aforesaid amount, a sum of 185 crore has already been incurred and balance of 59 crore is to be spent. The estimated increase in cost of the water intake system due to the change in location of the water intake system is 152 crore. The petitioner has submitted that since this increase is directly attributable to the error in the WAPCOS report provided to the bidders at the pre-bid stage, the petitioner is required to be compensated for the same. 33.

In our view, the claim is not covered under any of the provisions of Article 13. 1. 1 of the PPA. The petitioner being aware that the cost of water intake system being indicative in nature and being not covered under the "Change in Law" under Article 13 should have informed itself fully with the actual site conditions before preparing the bid and accordingly factored the possible estimates of water intake system while quoting the bid instead of relying on the indicative cost. In this connection, para 2. 7. 2. 1 of the RfP document provides as under: "2. 7. 2. 1 The Bidder shall make independent enquiry and satisfy itself with respect to all the required information, inputs, conditions and circumstances and factors that may have any effect on his Bid. In assessing the Bid, it is deemed that the Bidder has inspected and examined the site conditions of roads, bridges, ports etc.

for unloading and/or transporting heavy pieces of material and has based its design, equipment size and fixed its price taking into account all such relevant conditions and also the risks, contingencies and other circumstances which may influence or affect supply of power. " Further para 4 of the RfP document provides that the pricing and other details given in the bidding documents are by way of information only and it was for the bidders to conduct independent enquiry and verify the details and information. Para 4 are extracted as under: "4. While the RFP has been prepared in good faith, neither the Procurers, Authorised Representative and Power Finance Corporation (PFC) nor their directors or employees or advisors/ HARYANA POWER PURCHASE CENTRE v. SASAN POWER LTD. & ORS. [K. M. JOSEPH, J.

] consultants make any representation or warranty, express or implied, or accept any responsibility or liability, whatsoever, in respect of any statements or omission herein, or the accuracy, completeness or reliability of information contained herein, and shall incur no liability under any law, statute, rules or regulations as to the accuracy, reliability or completeness of this RFP, even if any loss or damage is caused to the Bidder by any act or omission on their part. " Therefore, it is the responsibility of the petitioner to verify the suitability of the location of water intake and ensure reliable water supply for the power plant and workout the relevant approximate cost of water intake system independently and factor in the estimates in the bid so that a realistic cost is reflected in the bid. The petitioner having failed to do so, the increase in cost on account of this head is not admissible.

" (14) As far as the question relating to imposition of customs duty on mining equipment is concerned, the same is dealt with in paragraphs 40 and 41. "40. We have considered the submission of the petitioner and respondents. The Notification No. 49/2006 provides as under: Notification No. 49/2006-Customs In exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 21/2002- Customs, dated the 1st March, 2002, which was published in the Gazette of India, Extraordinary vide number G. S. R. 118(E), dated the 1st March, 2002, namely:- In the said notification,- (I) in the Table, against S. No.

400, for the entry in column (3), the following entry shall be substituted, namely:- "Goods required for setting up of any Mega Power Project, so certified by an officer not below the rank of a Joint Secretary to the Government of India in the Ministry of Power, that is to say- (a) an inter-state thermal power plant of a capacity of 700MW or more, located in the States of Jammu and Kashmir, Sikkim, Arunachal Pradesh, Assam, Meghalaya, Manipur, Mizoram, Nagaland and Tripura; or (b) an inter-state thermal power plant of a capacity of 1000MW or more, located in States other than those specified in clause (a) above; or (c) an inter-state hydel power plant of a capacity of 350MW or more, located in the States of Jammu and Kashmir, Sikkim, Arunachal Pradesh, Assam, Meghalaya, Manipur, Mizoram, Nagaland and Tripura; or (d) an inter-state hydel power plant of a capacity of 500MW or more, located in States other than those specified in clause (c) above"; (II) in the Annexure, in Condition No.

86, for sub-clauses (ii) and (iii) of clause (a), the following shall be substituted, namely:- "(ii) the power purchasing State undertakes, in principle, to privatize distribution in all cities, in that State, each of which has a population of more than one million, within a period to be fixed by the Ministry of Power. ". [F. No. 354/104/2003-TRU] It is noticed that the revised policy guidelines issued by Government of India, Ministry of Power vide its letter No. A-118/2003-IPC dated 2. 8. 2006 has stated that an inter-State thermal power plant of a capacity of 1000 MW or more is eligible for grant of mega power status. It further states as under: "Zero Customs Duty: In terms of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 21/2002-Customs dated 1. 3. 2002 read together with No. 49/2006-Customs dated 26. 5. 2006, the import of capital equipment would be free of customs duty for these projects. " 41.

It is to be considered whether under the notification as stated above, mining equipments were exempted from customs duty. General Exemption No. 122 under the Customs Notification No. 21/ HARYANA POWER PURCHASE CENTRE v. SASAN POWER LTD. & ORS. [K. M. JOSEPH, J. ] 2002 as amended from time to time contains the list of items which are exempted from customs duty. It is observed that Notification 21 of 2002-Customs clearly demarcates the power projects and mining projects separately. It is seen that at Ser No. 399 of the list, coal mining projects are liable to pay customs duty. Ser No. 400 only exempts the mega power project from payment of customs duty and there is no mention that it includes captive power plants. Therefore, it cannot be said that as on the cut-off date, there was exemption on mining equipment and the petitioner had taken into consideration such exemption while quoting the bids.

Nothing has been produced in the petition which could indicate that any such impression was given by the procurers or their representative prior to bidding. In view of the foregoing discussion, the submission of the petitioner that the decision of the Ministry of Power detailed in its office memorandum dated 17. 06. 2011 and refusal by Energy Department, Government of Madhya Pradesh to provide recommendation letter to import mining equipments for Sasan UMPP under nil custom duty amounts to a "Change in Law" under Article 13. 1 of the PPA and the petitioner is entitled to be compensated for the same is not acceptable and hence no compensation would be available in this regard. " THE APPEAL BEFORE THE TRIBUNAL (15) This led to the appeal being filed by the first respondent under Section 111 of the Act. It is apposite that we set out the exact case which has been set up by the first respondent before the Tribunal. "9.

5 The Report identified the water intake pump house location and pipeline route from the intake pump house to the power plant in its report. This report was made available to all the bidders before bid submission so that the bidders could factor in the cost of water intake system in preparation of their financial bids i. e. , the tariff at which power be supplied to the Procurers. The total cost for the construction of water intake system for the location and route of indicated in the report by WAPCOS was estimated to be Rs. 92 Crores. The water intake system is an integral part of the Project without with it is not possible to set up and operate the Project. The WAPCOS report along with estimated cost are annexed herewith and marked as Annexure A-14. 9. 6 After RPower was declared the successful bidder and the Appellant Company was transferred to RPower, WAPCOS was re-appointed to confirm the technical feasibility as part of the detailed engineering exercise.

During this process, it emerged that the water intake location as finalized by WAPCOS vide its earlier report prepared for PFC/ Procurers and made available to all bidders prior to bid submission was not an appropriate location and does not ensure reliable supply of water to the power plant. It also emerged that the water intake at the original location indicated by WAPCOS in the pre-bid report would have resulted in shutdown of the power plant for a considerable period in a year during the lean season. Therefore, WAPCOS recommended a new location for water intake, which was 23 km from the power plant as against the 12. 5 kms initially indicated at the time of bidding (original location). It was highlighted that the new location would ensure reliable water supply to the power plant. Due to increase in the distance, submergence area along the route and construction time, there has been considerable increase in the cost of water intake system due to change in location as detailed below.

The report of WAPCOS recommending the revised location is annexed herewith and marked as Annexure A-15. 9. 7 It is submitted that due to the change in location, cost for water intake system has increased on following counts: (a) While the route length itself increased to 23 kms, the increase in piping length increased from 24 km (2 Pipe Lines each of 12 Kms) to 59. 5 km (2 Pipe Lines each of 8 km & 3 Pipes each of 14. 5 km) (b) Increased cost due to deeper Pump House. (c) Additional dredging for creation of intake channel for the offshore pump house. (d) Additional cost due to HT transmission line. There has been considerable increase of approximately Rs. 176 Crores in cost of the water intake system, which now is estimated to be approximately Rs. 268 Crores. The cost break-up for the new location for the water intake system is annexed herewith and marked as Annexure A-16. 9.

8 It is submitted that the increase in cost of the water intake system is on account of the errors in the report provided by the Procurers and therefore, the Procurers are required to compensate the Appellant for the difference in cost. HARYANA POWER PURCHASE CENTRE v. SASAN POWER LTD. & ORS. [K. M. JOSEPH, J. ] 9. 9 It is further submitted that since the water pipeline corridor is part of the Land for the Power Station and the water intake pipeline is an integral part of the Power Station, any change in the indicative cost of the water intake system is covered under Change in Law in terms of Article 13 of the PPA since it amounts to change in cost of land of the Project. In fact, the Ld. General Commission has noted in the impugned Order that the estimate for Declared Price of Land for the Power Station includes the Water Intake System. The operative part of the Impugned Order is reproduced below: "19. Change in the declared price of land is covered under "Change in Law".

The procurers have also agreed that this item of expenditure is admissible under "Change in Law". The declared price of land for the Power Station was stated to be 190. 677 crore. This has been verified from the communication dated 23. 10. 2006 from the representative of the procurers to the bidders. This included the power plant area, the fuel transport system land, the water pipeline corridor and the ash pipeline corridor. " 9. 11 It is submitted that pre-bid site visit and project reports were prepared and made available by Authorized Representative (Power Finance Corporation) to all bidders. The disclaimer, if at all applicable, will only apply to such instances where the bidders were able to identify any issues or liability with reasonable diligence. Based on the information and material provided, there was no indication that the water intake system proposed in the WAPCOS Report was unfeasible.

Therefore, the disclaimer does not absolve the Procurers of their liability to compensate the Appellant for the increase in cost. It is submitted that due to the error in WAPCOS's report, the Appellant is faced with an additional burden of Rs. 176 Crore which has adversely impacted the project economics. It is submitted that the disclaimers contained in Para 2. 7. 2. 1 and Para 4 of the RFQ ought not to be considered absolute in nature so as to prevent loading of costs which are incurred by the Appellant as a direct result of omission or error on part of the Procurers in providing information during the pre-bid stage. This approach is counter-intuitive to ensuring that the Appellants Project is able to supply cheap and affordable power to over 42 million consumers in the Procurer States. It is further submitted that the disclaimers cannot act as an absolute bar to the liability of the Procurers. Any duty to independently verify inputs, information factors etc.

require only a reasonable duty of care. The grave technical deficiencies and huge differences between actual cost and estimates provided to the bidders defeat the fundamental objective of providing information to the bidders especially when the nature of expense in this case was of buying a report from a Government Company which had carried out a detailed study. The Appellant had no other option but to rely on the information provided by the authorized representative of the Procurers. Therefore, Ld. Commission's reliance on the disclaimers contained in the bid documents to reject the claim of the Appellant is not sustainable. " (16) In regard to the complaint about the notification issued by the Joint Secretary in the Ministry of Power having brought about a change in law, we find the following complaint, inter alia: "9. 20. It is submitted that as per Notification 21 of 2022- Customs dated 01. 03.

2002 issued by the Ministry of Finance, Government of India, the customs duty on goods required for setting up mega projects has been prescribed as nil meaning thereby that no customs duty will be levied on goods imported for setting up a mega power project. Notification 21/2022- Customs which provides as under: " 9. 22 It is submitted that captive Coal Blocks being an integral part of the Project, the mining equipment would be covered under this provision as well. It is submitted that RFP clearly stated that Procurers through the Appellant (which was a wholly-owned HARYANA POWER PURCHASE CENTRE v. SASAN POWER LTD. & ORS. [K. M. JOSEPH, J. ] subsidiary of PFC at that time) will procure a certificate from the Ministry of Power that the benefits of the Mega Power Policy would be extended to the Project till scheduled Commercial Operations Date of the Power Station.

As per definition, Project includes captive mine and hence, it was Procurer's obligation to provide for the exemption to the coal mining equipment. 9. 24 It may also noted that:- Xxx xxx xxx (b) PPA defines Project as power plant along with captive coal mines. 9. 35 It is submitted that the Appellant has set up an ultra-mega power project which comprises of captive coal mines. It is not separately indulging in mining activities. Moreover, the coal from the Project is being used only for the Project. The entire capital cost of the power project includes the cost of the coal mines. This is also evident from Article 13 of the PPA where increase in cost of land and R&R expenditure for the coal mines is included as change in law. Therefore, the finding that the captive coal mines are a separate activity and will fall under Serial No. 399 is incorrect and ought to be set aside.

FINDINGS OF THE TRIBUNAL (17) As far as the complaint about the increased costs on account of change in water intake system, the following is the finding of the Tribunal. "12. 4 After due consideration of the rival contentions of both the parties, what emerges is that after being declared as the successful bidder, the SPL with a view to affirm the technical suitability of the preliminary report of the WAPCOS on Water Intake System, re-engaged the same agency for finalization of the said report. It is not in dispute that the Consultant, WAPCOS reviewed its earlier report and came to a conclusion that the earlier location of Water Intake was not at proper place and would result in non-availability of water for the plant during lean period.

It is relevant to note that based on the recommendations of WAPCOS, SPL decided to go ahead for selection of new location as recommended and got carried out the requisite design and engineering of the entire Water Intake System which resulted into longer piping system, increased submergence area along the route, additional construction period etc.. On account of these factors, the cost of Water Intake System went up by over Rs. 176 crores. The learned counsel appearing for the Appellant pointed out that the judgment of this Tribunal in Nabha Power case is not applicable to the present case since no cost relating to seismic zone data was provided to Nabha whereas in the instant case, costs were provided to the bidders. The Appellant has further reiterated that para 2. 7. 2.

1 and para 4 of RFP which were relied upon by the Respondent procurers cannot be taken as obsolute in nature so as to absolve procurers of their responsibility for providing grossly incorrect information leading to substantial increase in cost of Water Intake System. 12. 5 After thoughtful consideration of the submissions made by the learned counsel for the Appellant and the Respondents and the findings of the Central Commission, we find that while the responsibility of carrying out due diligence before bidding and verifying the correctness of information provided in the bid documents rested with the bidders, at the same time, Respondent procurers cannot justify providing grossly erroneous report on Water Intake System taking shelter under the disclaimer in the bid document. As a matter of fact, the water availability for a thermal power station of this magnitude on regular, reliable and uninterrupted basis is essential and is a vital input for successful operation of the plant.

It is noticed that the report of WAPCOS supplied to bidders at the time of bidding was deficient in ensuring adequate water supplies throughout the year uninterrupted and if the same would have been taken for construction and implementation, the same could have resulted into huge loss to the Respondent procurers being deprived of power supply for some period of the year due to less/ non-availability of water during the lean period. It is not in dispute that Sasan UMPP is supplying power to the Respondent procurer at one of the most competitive tariff in the country. It is noted from the contentions of the Respondent procurers that such an issue has not been dealt with either in the PPA or in the competitive bidding guidelines issued by Ministry of Power under Section 63 of the Act, however, in view of the criticality of such situation, we opine that the matter needs afresh re-look for suitable redressal. While the Central HARYANA POWER PURCHASE CENTRE v. SASAN POWER LTD. & ORS. [K. M.

JOSEPH, J. ] Commission has correctly concluded that it does not qualify as change in law under Articles 13. 1. 1 of the PPA, it, however, needs to be addressed on the basis of settled principles of law and equity also, in the light of the Hon'ble Supreme Court findings in its judgment at Para 19 in Energy Watchdog vs. CERC dated 11. 04. 2017. Thus, we are of the considered view that this issue involving substantial additional expenditure basically arising out of erroneous report of the consultants needs to be re-examined afresh by the Central Commission. Hence, this issue is answered in favour of the Appellant. " (18) In regard to the complaint relating to the O. M. dated 17. 06. 2011 forming change in law, we note the following findings: "14.

5 We have considered the submissions of the learned counsel for the Appellant and learned counsel for the Respondents along with the consideration of the Central Commission on this issue pertaining to the claims of the Appellant regarding compensation on account of additional payment towards custom duty on mining equipment. After careful consideration and critical evaluation of the same, the key question arises for consideration, whether the equipment required for captive coal mines allocated to UMPP should be considered at par with the equipment required for setting up the power plants as far as exemption from the custom duty is concerned. The contention of the Appellant that the captive coal mines allocated to Sasan UMPP are integral & essential part of the project as a whole and as such, the exemption of custom duty was applicable to all equipments being imported for the entire project i. e. captive coal mines as well as power plants.

It is not in dispute that the captive coal mines were allotted for UMPP for its exclusive use for power generation and in no way, meant for commercial utilization elsewhere. 14. 6 In this regard, we also take the note of Hon'ble Supreme Court directions in judgment dated 24. 08. 2014 in Manohar Lal Sharma Vs. Principal Secy. , in W. P. (CRL) 120 of 2012 (Para 158) that coal from captive coal mines is to be used for UMPP alone and no diversion of coal for commercial exploitation would be permitted. Keeping these facts in view, we notice the glowing difference between an independent coal mines up for exploitation and selling coal on commercial lines and a captive coal mine set up to meet requirement of UMPP only to generate power for the ultimate benefit of the Respondent procurers and in turn, consumers for obtaining electricity at cheaper rates.

The actual positions purported the assumption made by the Appellant that the customs duty exemptions will be available for import of the equipment for the entire project including captive mines and power plants. We find force in the argument of the learned counsel for the Appellant that being the integral and inseparable part of the UMPP, the custom duty rates applicable for stand alone coal mining projects would not be applicable in the present case and the exemption would need to be given effect to. We, thus opine that the Central Commission appears to have been mechanically guided by the mere description of the relevant entry (Sl. No. 399 & 400) in the said custom duty notifications and has not appreciated that the captive coal mines being integral part of the UMPP cannot be equated to a stand alone coal mines, having commercial line of utilization. The Appellant was thus right in assuming that Custom Duty exemption will be available for the coal mining equipments.

As such, this issue needs to be examined afresh in accordance with law and various provisions of the RFQ/RFP/PPA. Therefore, we answer this issue in favour of the Appellant. " (19) On the basis of the aforesaid findings, the Tribunal remanded the matter back to the Commission. We may also notice the sequel to the impugned judgment. Pursuant to the remand, the Commission reconsidered the matter in regard to the water intake. The Commission ordered payment of sum of Rs. 176 crores. As far as the claim for compensation on the basis that the issuance of the office memorandum by the Joint Secretary in the Ministry of Power having brought about a change in law, it was found that the goods in question had been imported not by the first respondent but by its parent company. This, in turn, has triggered two sets of appeals again before the Tribunal and they are still pending. Their fate, undoubtedly, will depend upon the decision which we will be rendering in these cases.

(20) We have heard Mr. P. Chidambaram, Mr. Dhruv Mehta, Mr. Rana Mukherjee, Mr. M. G. Ramachandran, Mr. G. Umapathy, learned senior counsel, assisted by Mr. Nikunj Dayal and Ms. Pallavi Sehgal. We have also heard Mr. Shubham Arya, learned counsel appearing on behalf of the appellant in one of the appeals. On the other hand, we also HARYANA POWER PURCHASE CENTRE v. SASAN POWER LTD. & ORS. [K. M. JOSEPH, J. ] heard Mr. Sajjan Poovayya, learned senior counsel assisted by Mr. Rahul Kinra, learned counsel and Mr. Amit Kapoor, learned counsel. SUBMISSION OF APPELLANTS (21) Shri P. Chidambaram, learned senior counsel appearing for the appellant, would submit that the Tribunal has clearly acted in error and illegally in passing the impugned order. (22) He would submit that as far as the finding given by the Tribunal in regard to the water intake system being located at a different place, is concerned, the Tribunal agreed with the Commission that there was no change in law.

Once, it was found that there was no change in law, there is no power with the Tribunal to do what it did. The PPA signifies an agreement between the parties. The PPA goes into meticulous details. It follows an internationally competitive bidding and the obligations of the parties have been carved out and articulated with great care. Once the party, viz. , the first respondent went to the Commission complaining that there is a change in law and it was found that there is no change in law, there ended the jurisdiction of the Tribunal. Instead of terminating the lis, the Tribunal has clearly strayed outside its jurisdiction in granting relief on the basis that report of WAPCOS was grossly erroneous. In this regard, he enlisted in support of his contention, various clauses which unambiguously disclaimed any liability with the procurers on account of any inaccuracies which may be reflected in the WAPCOS report.

A report submitted by WAPCOS which is a public sector body was only by way of providing information. The bidders were provided with the report well before they decided to put in their bids. Having regard to the various disclaimer clauses, it did not lie in their mouth to thereafter seek to construct a case based on the report being erroneous. In this regard, it is pointed out that the clauses clearly indicate that the bidder was to satisfy itself by conducting a study of the site. Nothing prevented the first respondent from carrying out inspection of the site and verifying for itself the information which was provided through the report of the WAPCOS. (23) Mr. P. Chidambaram, learned senior counsel, further pointed out that a perusal of the second WAPCOS report, which is the sole basis for the huge claim raised by the first respondent, would show that the second report does not, in any manner, rubbish the first report.

It is not in dispute, it is pointed out, that the procurers were in no way associated with the carrying out of the second WAPCOS report. Unilaterally, the first respondent without any basis gets the second report commissioned and it is on the said basis alone that the claim was made and what is more, allowed by the Tribunal. This is clearly impermissible. As regards the claim for compensation alleging change in law brought about by the Office Memorandum issued by the Joint Secretary is concerned, in the first place, it is pointed out that the proper thing for the first respondent to do would have been to take up the matter with the Department and claim a refund and he would submit it is strange instead of doing that the burden is sought to be passed on to the procurers and which, in turn, would necessarily be passed on to the ultimate consumers.

(24) Further, it is pointed out that the Tribunal has actually proceeded to take into consideration the earlier notifications which prevailed at the time of the cut off date with reference to which alone change in law is projected. Thereafter, it has come to the conclusion that for the goods imported from abroad for the purpose of the captive mines, there was an exemption. Such an inquiry itself could not have been done. In other words, it is not a case where the first respondent had indisputable material on hand which established unambiguously that there was a change in law. This is for the reason that there is no material to establish that prior to the cut off date, the goods which are the subject matter of dispute, were exempt under the notification. On the other hand, our attention is drawn to the decision of the Advance ruling authority which has gone into the issue and found that goods in question were not exempt.

In fact, it is the contention of the appellants that the office memorandum issued by the Joint Secretary, Ministry of Power, merely follows the advance ruling. (25) Another argument which is raised in this regard is that the Joint Secretary in the Ministry of Power is not the final Governmental authority within the meaning of clause 13. 1. 1. What we are concerned with is notification issued under Section 25 of the Customs Act. It is not as if any authority which is competent within the meaning of Article 13. 1. 1 has issued a notification or even an interpretation within the meaning of the said article which has resulted in a change in law within the meaning of Article 13. 1. 1. (26) We have also heard Shri Dhruv Mehta, as we have already stated. We have heard the other senior counsel who have essentially adopted the arguments which have been addressed by Mr. HARYANA POWER PURCHASE CENTRE v. SASAN POWER LTD. & ORS. [K. M. JOSEPH, J. ] P.

Chidambaram, learned senior counsel, and they are one in contending that the Tribunal has strayed outside the contours of its jurisdiction and this has resulted in an order which is clearly illegal and erroneous. SUBMISSIONS OF THE FIRST RESPONDENT (27) Per contra, Mr. Sajjan Poovayya, learned senior counsel for the first respondent, took us through the other side of the picture and projected a totally different scenario. He would point out, in the first place, that the Court may not view the PPA in question as an ordinary contract. He pointed out that what is at stake is the interpretation to be placed on a long term power procurement contract. It is not as if in such a contract, the matters are fixed with reference to the point of time when the contract is entered into. It is not cast in stone, in other words. It is open to change. More appropriately, it is open to regulation.

We are invited to consider that the Act represents a paradigm shift from the previous regime under which the price of power was fixed essentially at the whims and caprice of the State Electricity Boards. There was a stagnation in the production and supply of power. It is realising the need for increasing private participation in the generation of power that the Act was enacted in the year 2003. Being the subject matter of regulations means that tariff was open to be revisited from time to time. It is precisely this regime which is reflected by Section 79 of the Act. It is further pointed out that the complaint of the appellants regarding the Tribunal in regard to the water intake system despite agreeing with the Commission that there was no change in law rendering the findings it did and therefore, being unsustainable, the Court may consider that in fact there was a change in law. This argument is sought to be buttressed with reference to the provisions of clause (iii) of Article 13.

1. 1. It is contended, in other words, that a perusal of the various clauses of the PPA would show that the procurers (the appellants) were obliged under the contract to provide initial consent. One of the initial consents related to the water linkage for the project. He would submit that in view of the provisions of Schedule II to the PPA the initial consent also consisted of carrying out the task of making available land for the power plant and for the laying of the pipeline. Since as it turned out and as supported by the second report of the WAPCOS, there was clearly insufficient availability of water at the site supported by the first report, the first respondent was compelled to take water from a distant point of the reservoir in question. This led to the colossal increase in the expenditure towards laying of the pipeline inter alia. This constituted, therefore, a change in law.

(28) As far as the contention based on the disclaimer clauses which are relied upon by the appellant is concerned, it is pointed out that the width of the disclaimer clause could not be stretched to the point that is canvassed by the appellants. We are dealing with a case where a public sector unit viz. , WAPCOS has given its report. Not unnaturally, the first respondent relied upon the same. It is factored in its price and once it is found that the report was entirely fallacious, no shelter can be sought by the appellants under the disclaimer clauses. Our attention was drawn to various judgments. They include Energy Watchdog v. Central Electricity Regulatory Commission and Others (2017) 14 SCC 80, Uttar Haryana Bijli Vitran Nigam Ltd. &Anr. v. Adani Power Limited &Ors. (2019) 5 SCC 325, Gujarat Urja Vikas Nigam Ltd. v. Essar Power (2008) 4 SCC 755, Skandia Insurance Co. Ltd. v. Kokilaben Chandravan & Ors. (1987) 2 SCC 654, DLF Universal Limited v.

Director, Town and Country Planning Department, Haryana (2010) 14 SCC 1 and Sumitomo Heavy Industries v. Oil and Natural Gas Commission of India (2010) 11 SCC 296, Nabha Power Limited v. PSPCL (2018) 11 SCC 508. (29) The respondents have also relied upon the judgments of this Court which are detailed hereinafter essentially for the proposition that there is power under Order XLI Rule 22 and Rule 33:Prahlad&Ors. v. State of Maharashtra &Anr. (2010) 10 SCC 458, State of Punjab &Ors. v. Bakshish Singh (1998) 8 SCC 222, Mahant Dhangir & Anr. v. Madan Mohan &Ors. (1987) (Supp) SCC 528. (30) It is contended by Mr. Sajjan Povayya, learned senior counsel that there is indeed power, at any rate, under the provisions of Section 79(1)(b) of the Act to revisit the fixation of tariff de hors even the specific relief which is contemplated under the contract. In this regard, emphasis is laid on the fact that clauses 4. 7 and 5. 1.

17 of the guidelines came to be amended and it is the amended guidelines which apply to the facts of the case. That it is the amended guidelines which were applied can be perceived from the fact that the amended guidelines are seen reflected in the PPA. The amended provisions are found in 17. 3. 1 and 13. 1. 1 (31) Amended Guideline 4. 7 is reflected in 13. 1. 1 whereas amended guideline 5. 17 is reflected in Article 17. 3. 1. (32) With regard to 17. 3. 1, it is pointed out that a reading of the same, in particular, the opening limb of the provision would show that HARYANA POWER PURCHASE CENTRE v. SASAN POWER LTD. & ORS. [K. M. JOSEPH, J. ] there is clearly general power for the purpose of changing determiningor increasing the tariff. It is sought to be contrasted with specific instances which would notify the jurisdiction of the Commission which included Article 13. 1 which deals with change in law.

In other words, the contention is that de hors a change in law, it becomes the duty of the Commission and the Tribunal and of this Court to factor in the need to arm the Tribunal and the Commission with ample power in the interest of justice, to deal with situations which call out for a fair and equitable treatment to be meted out to the private player as well in a long term contract. (33) Mr. Amit Kapoor, learned counsel, who supplemented the submissions of