MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LIMITED v. ADANI POWER MAHARASHTRA LIMITED & ORS

Citation: [2023] 8 S.C.R. 85, (2017) 14 SCC 80, (2019) 5 SCC 325

Court: Supreme Court of India

Bench: B. R. GAVAI AND VIKRAM NATH, JJ.

Judgment text

SUPREME COURT OF INDIA COMPANY LIMITED v. ADANI POWER MAHARASHTRA LIMITED & ORS. Civil Appeal No. 684 of 2021 MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LIMITED v. ADANI POWER MAHARASHTRA LIMITED & ORS. (Civil Appeal No. 684 of 2021) MARCH 03, 2023 [B. R. GAVAI AND VIKRAM NATH, JJ. ] Power - Long-term Power Purchase Agreements (PPAs) - Supply of coal to power producers - Change of New Coal Distributional Policy, 2007 (NCDP, 2007) by New Coal Distributional Policy, 2013 (NCDP 2013) - Claim for 'Change in Law' relief compensation - Operating parameters - Held: In the Energy Watchdog case as well as in Adani Rajasthan case, the Supreme Court held that on account of the Change in Law, the generating companies were entitled to compensation so as to restore the party to the same economic position as if such Change in Law had not occurred - Had the Change in Law not occurred, the generating companies would have been entitled to the supply as assured by the Coal India Ltd.

(CIL)/Coal Companies under the Fuel Supply Agreement (FSA) - The submission that when the bidders submitted their bids, this was a risk they knowingly took, is without substance - The generators are not claiming compensation on the basis of rise in price of coal or on the ground of force majeure - Their claims, in fact, are on the basis of the Change in Law, which this Court, in the case of Energy Watchdog as well as in Adani Rajasthan case, has upheld on the ground of Change in Law - The contention of the Distribution companies (DISCOMS) that the Adani Rajasthan case is not applicable to the facts of the present case inasmuch as in Adani Rajasthan case, the State of Rajasthan had assured 100% coal supply and that it was not a case of FSA, is without substance - In the present case also, the NCDP 2007 had assured 100% fuel/coal supply of the normative value - The restitutionary principle has been stated by this Court in the case of Uttar Haryana Bijli Vitran Nigam Limited (UHBVNL) - Undisputedly, the claim of respondent no.

1-APML stands on the basis of the Change in Law - The DISCOMS, which are instrumentalities of the State, cannot be expected to argue contrary to the stand of the Government, 85 which clearly provides that the generators would be entitled to passthrough for the coal required to be imported or purchased from the open market on the ground of Change in Law - The stand taken by the DISCOMS that, since the loss being sustained by the generating companies is on account of non-fulfillment of obligation by CIL/ Coal Companies, they should be relegated to the remedy available to them in law against the CIL/Coal Companies, is totally unreasonable - The claim is based on change of NCDP 2007 by NCDP 2013, which, undisputedly, is covered by the term 'Change in Law' - Compensation - 'Change in law' compensation.

Judicial Review - Of decision taken by expert bodies - Central Electricity Authority (CEA), Central Electricity Regulatory Commission (CERC) and Appellate Tribunal for Electricity (APTEL) -Held: - These bodies are bodies consisting of experts in the field - Courts should be slow in interfering with the decisions taken by the experts in the field and unless it is found that the expert bodies have failed to take into consideration the mandatory statutory provisions or the decisions taken are based on extraneous considerations or they are ex facie arbitrary and illegal, it will not be appropriate for the Court to substitute its views with that of the expert bodies.

Electricity Act, 2003 - Purpose and Object - One of the major reasons for the enactment of the Electricity Act was the deterioration in performance of the State Electricity Boards - It is seen that in a number of matters, concurrent orders passed by the Regulatory Body and the Appellate Forum are assailed - Such litigation would, in fact, efface the purpose of the Electricity Act. Vivek Narayan Sharma v. Union of India2023 SCC OnLine SC 1 - followed. Energy Watchdog v. Central Electricity Regulatory Commission and others(2017) 14 SCC 80 and Jaipur Vidyut Vitaran Nigam Ltd. and others v. Adani Power Rajasthan Limited and another2020 SCC Online SC 697 - relied on. Uttar Haryana Bijli Vitran Nigam Limited (UHBVNL) and another v. Adani Power Limited and others(2019) 5 SCC 325 : [2019] 4 SCR 487;Reliance Infrastructure Limited v. State of Maharashtra and others(2019) 3 MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. v. ADANI POWER MAHARASHTRA LTD.

SCC 352: [2019] 1 SCR 886;Central Warehousing Corporation v. Adani Ports Special Economic Zone Limited (APSEZL) and others2022 SCC OnLine SC 1398;Maharashtra State Electricity Distribution Company Limited v. Maharashtra Electricity Regulatory Commission and others(2022) 4 SCC 657;Tamil Nadu Generation & Distribution Corporation Limited v. PPN Power Generating Company Private Limited(2014) 11 SCC 53 : [2014] 4 SCR 667 and Nabha Power Limited (NPL) v. Punjab State Power Corporation Limited (PSPCL) and another (2018) 11 SCC 508: [2017] 14 SCR 301 - referred to. Case Law Reference (2017) 14 SCC 80 relied on Para 22 [2017] 14 SCR 301 referred to Para 43 (xxvi) [2019] 4 SCR 487 referred to Para 44 (xviii) (2022) 4 SCC 657 referred to Para 45 (ix) [2014] 4 SCR 667 referred to Para 45 (ix) [2019] 1 SCR 886 referred to Para 121 CIVIL APPELLATE JURISDICTION : Civil Appeal No. 684 of 2021. From the Judgment and Order dated 14. 09. 2020 of the Appellate Tribunal for Electricity in Appeal No.

182 of 2019. With Civil Appeal No. 6927 of 2021. Balbir Singh, A. S. G. , Gopal Jain, G. Umapathy, M. G. Ramachandran, Dr. A. M. Singhvi, Darius Khambata, Sajan Poovayya, Siddhartha Dave, S. B. Upadhyay, Sr. Advs. , Anup Jain, Udit Gupta for M/s. Udit Kishan and Associates, G. Sai Kumar, Samir Malik, Ms. Ekssha for M/s. D. S. K. Legal, Anand K. Ganesan, Nikunj Dayal, Ms. Poorva Saigal, Amal Nair, Shubham Arya, Ms. Kriti Soni, Ms. Ritu Apurva, Ms. Pallavi Saigal, Ms. Ritu Apurv, Ravi Nair, Ms. Shikha Sood, Ms. Reeha Singh, Ms. Anumeha Smiti, Aneesh Bajaj, Navin Prakash, Ms. Anushree Bardhan, Ms. Srishti Khindaria, Vishrov Mukherjee, Pukhrambam Ramesh Kumar, Girik Bhalla, Yasashwi Kant, Mrs. Priyanka Vyas, Mahesh Agarwal, Amit Kapur, Ms. Geetika Sharma, Ms. Poonam Sengupta, Ms. Sakshi Kapoor, Avishkar Singhvi, Arshit Anand, Saunak Rajguru, Aman Sharma, Ms. Deepsika Mishra, Ankitesh Ojha, Karan Rukhana, E. C. Agrawala, Ms. Pallavi Sharma, Vaibhav Kalra, Nishant Kumar, Ms.

Anisha Upadhyay, Advs. for the appearing parties. The Judgment of the Court was delivered by B. R. GAVAI, J. INDEX* I. INTRODUCTION............................. Paras 1 and 2 II. FACTS IN CIVIL APPEAL NO. 684 OF 2021........................................................ Paras 3 to 29 III. FACTS IN CIVIL APPEAL NO. 6927 OF 2021..................................................... Paras 30 to 39 IV. SUBMISSIONS ON BEHALF OF THE DISCOMS ................................................... Paras 43 V. SUBMISSIONS ON BEHALF OF THE GENERATING COMPANIES ............ Paras 44 and 45 V. RELEVANT DOCUMENTS................ Paras 46 to 83 VI. JUDGMENTS CITED........................ Paras 84 to 93 VII. STATUTORY PROVISIONS WITH REGARD TO REGULATORY MECHANISM........... Paras 94 to 104 VIII. CONSIDERATIONS..................... Para 105 onwards List of abbreviations: 1. ACQ - Annual Contracted Quantity 2. APML - Adani Power Maharashtra Limited 3. APTEL - Appellate Tribunal for Electricity 4.

C&AG - Comptroller and Auditor General of India *Ed Note : Pagination in the Index is as per the original judgment. MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. v. ADANI POWER MAHARASHTRA LTD. [B. R. GAVAI, J. ] 5. CCEA - Cabinet Committee on Economic Affairs 6. CERC - Central Electricity Regulatory Commission 7. CIL - Coal India Limited 8. CPP - Captive Power Plants 9. DISCOMS - Distribution Companies 10. FSA - Fuel Supply Agreement 11. GCV - Gross Calorific Value 12. GMR - GMR Warora Energy Ltd. 13. GMRETL- GMR Energy Trading Limited 14. IPPs - Independent Power Producers 15. LoA - Letter of Assurance 16. MERC - Maharashtra Electricity Regulatory Commission 17. MoC - Ministry of Coal 18. MoP - Ministry of Power 19. MSEDCL - Maharashtra State Electricity Distribution Company Limited 20. NCDP - New Coal Distributional Policy 21. PLF - Plant Load Factor 22. PPAs - Power Purchase Agreements 23. PSA - Power Sale Agreement 24. RFP - Request for Proposal 25.

SECL - South Eastern Coal Limited 26. SHR - Station Heat Rate 27. TPPs - Thermal Power Stations 28. UHBVNL - Uttar Haryana Bijli Vitran Nigam Limited 29. WCL - Western Coal Limited INTRODUCTION 1. The questions involved in both these appeals, as in several other appeals, are common. 2. Three of the issues involved in the present appeals are also involved in the other appeals which were listed along with these two appeals. However, the other appeals also involve some other ancillary and incidental issues. As such, at the request of the learned counsel for the parties, we have heard the present appeals. We have also heard the learned counsel appearing in the other appeals on the three questions which are common. FACTS IN CIVIL APPEAL NO. 684 OF 2021 3. The facts, in brief, which arise in Civil Appeal No. 684 of 2021 are thus: 4.

The appellant-Maharashtra State Electricity Distribution Company Limited (hereinafter referred to as "MSEDCL") has entered into a long-term Power Purchase Agreements ("PPAs" for short) with Adani Power Maharashtra Limited (hereinafter referred to as "APML"). The first of the PPAs is dated 8th September 2008 for 1320 MW ("1320 MW PPA" for short); the second one is dated 31st March 2010 for 1200 MW ("1200 MW PPA" for short); the third one is dated 9th August 2010 for 125 MW ("125 MW PPA" for short); and the fourth one is dated 16th February 2013 for 440 MW ("440 MW PPA" for short). These PPAs were entered into in pursuance of the competitive bidding processes conducted by the appellant-MSEDCL under Section 63 of the Electricity Act, 2003 (hereinafter referred to as "the Electricity Act") read with the Standard Bidding Guidelines issued by the Ministry of Power ("MoP" for short). 5.

Article 10 of the 1200 MW PPA dated 31st March 2010 entered into between the appellant-MSEDCL and respondent No. 1-APML deals with "Change in Law". 6. Article 10. 1. 2 defines the term "Change in Law". 7. Article 10. 2 deals with the application and principles for computing the impact of Change in Law. Article 10. 2. 1 provides that while determining the consequence of a Change in Law under Article 10, due regard has to be given to the principle, that to compensate the MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. v. ADANI POWER MAHARASHTRA LTD. [B. R. GAVAI, J. ] Party affected by such Change in Law is to restore through monthly Tariff Payment, to the extent contemplated in Article 10, the affected Party to the same economic position as if such Change in Law has not occurred. 8. Article 10. 3 deals with "Relief for Change in Law". Article 10. 3. 1 provides relief for Change in Law during the Construction Period, whereas Article 10. 3.

2 provides for compensation to be paid on account of Change in Law during Operating Period. For claiming relief on account of a Change in Law, the Party is required to approach the Appropriate Commission along with documentary proof of such increase/decrease in the cost of the Power Station or revenue/expense for establishing the impact of such Change in Law. Article 10. 3. 4 provides finality to the decision of the Appropriate Commission with regard to compensation determined under Articles 10. 3. 1 and 10. 3. 2. 9. On 18th October 2007, the Government of India, through the Ministry of Coal ("MoC" for short), issued the New Coal Distributional Policy, 2007 (hereinafter referred to as "the NCDP, 2007"). As per the NCDP 2007, 100% of the quantity as per the normative requirement of the consumers was to be considered for the supply of coal, through Fuel Supply Agreement ("FSA" for short) by Coal India Limited ("CIL" for short) at fixed prices to be declared/notified by CIL.

The NCDP, 2007 also provided that to meet the domestic requirement of coal, CIL may have to import coal as may be required from time to time, if feasible. CIL was to adjust its overall price accordingly. It further provided that it was the responsibility of CIL/Coal Companies to meet the full requirement of coal under FSAs even by resorting to imports, if necessary. 10. It is not in dispute that in accordance with the NCDP, 2007, APML had applied for coal linkage to MoC. It is also not in dispute that Western Coal Limited ("WCL" for short) and South Eastern Coal Limited ("SECL" for short) issued two Letters of Assurance (LoAs) in favour of APML and assured supply of coal. 11. Undisputedly, FSA was executed between APML and WCL for domestic coal linkage. Subsequently, the FSA was amended and the quantum of coal assured by WCL was transferred to SECL. 12.

It is also not in dispute that subsequently, on 21st June 2013, the Cabinet Committee on Economic Affairs ("CCEA" for short), in view of the persistent shortage of domestic coal, approved a revised mechanism for coal supply to power producers. 13. Thereafter, the Government of India, through the Ministry of Coal, issued Office Memorandum dated 26th July 2013 (hereinafter referred to as "NCDP 2013"), thereby approving a revised arrangement for the supply of coal to the identified Thermal Power Stations ("TPPs" for short). The said Office Memorandum provided that FSAs will be signed for the domestic coal quantity of 65%, 65%, 67%, and 75% of Annual Contracted Quantity ("ACQ" for short) for the remaining four years of the 12th Plan for the power plants having normal coal linkages. It further provided that to meet the balance FSA obligations towards the requirement of the said 78,000 MW TPPs, CIL may import coal and supply the same to the willing power plants on a cost-plus basis.

It further provided that the power plants may also directly import coal themselves, if they so opt, in which case, the FSA obligations on the part of CIL to the extent of import component would be deemed to have been discharged. 14. On 31st July 2013, the MoP issued a letter to the Central Electricity Regulatory Commission ("CERC" for short) and State Electricity Regulatory Commissions to consider as pass-through in tariff the cost of alternate coal (procured to meet the shortfall in supply of domestic linkage coal) on a case to case basis. 15. Contending that on account of the Change in Law, APML was entitled to compensation, APML filed a Petition bearing Case No. 189 of 2013 on 17th December 2013 before the Maharashtra Electricity Regulatory Commission ("MERC" for short). 16. MERC, vide order dated 15th July 2014, disposed the said Petition (i. e. Case No.

189 of 2013) by approving a framework for determination of compensatory fuel charge, in view of the CCEA decision of 21st June 2013 and the MoP's advice dated 31st July 2013. 17. In compliance with the MERC's order dated 15th July 2014, APML filed another Petition before the MERC bearing Case No. 140 of 2014 on 23rd July 2014, inter alia, for approving a mechanism for the determination of compensatory tariff. 18. The MERC, vide its order dated 20th August 2014, formulated a mechanism for the pass-through in tariff of the compensatory fuel charge that had been allowed in Case No. 189 of 2013. 19. Subsequently, APML filed a Review Petition before the MERC bearing Case No. 159 of 2014. The same was disallowed by the MERC MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. v. ADANI POWER MAHARASHTRA LTD. [B. R. GAVAI, J. ] as being devoid of merits except on the issue of the effectiveness of the compensatory fuel charge. 20. On 28th January 2016, the MoP issued the revised Tariff Policy.

As per clause 6. 1 of the revised Tariff Policy, the Appropriate Commission was required to consider the cost of imported/market-based e-auction coal procured for making up the shortfall in the domestic coal for passthrough in tariff of competitively bid projects. 21. Thereafter, on 9th March 2016, APML filed appeals before the Appellate Tribunal for Electricity (hereinafter referred to as "APTEL"), being Appeal Nos. 129 of 2016 and 130 of 2016, challenging the orders passed by the MERC in Case Nos. 189 of 2013 and 140 of 2014. MSEDCL too filed cross-appeals against the MERC orders being Appeal Nos. 187 and 188 of 2016. 22. On 4th May 2017, the learned APTEL remanded the issues raised in the cross-appeals filed by APML and MSEDCL for fresh consideration by the MERC in the light of the judgment of this Court in the case of Energy Watchdog v. Central Electricity Regulatory Commission and others1 which was decided on 11th April 2017. 23.

By order dated 7th March 2018, the MERC decided Case No. 189 of 2013 and 140 of 2014, wherein, while allowing the claims of APML for relief on account of a Change in Law for 1180 MW capacity, it restricted it to the extent of the minimum supply obligations specified for the CIL subsidiaries for the last four years of the 12th Five Year Plan period i. e. Financial Year 2013-14 to Financial Year 2016-17 as per the NCDP, 2013. It further held that the alternate coal quantity for meeting the domestic coal shortfall shall be computed based on the Station Heat Rate ("SHR" for short) mentioned by APML in the bid documents and the middle value of the Gross Calorific Value ("GCV" for short) range of assured coal grade for domestic coal as per the FSA/LoA/MoU. 24. Being aggrieved thereby, APML preferred appeals before the learned APTEL. The learned APTEL framed the following three issues: "Issue No.

1: Whether the MERC was correct in holding that the net SHR submitted by the Appellant in its bid or SHR and Auxiliary Consumption norms specified for new generating stations 1 (2017) 14 SCC 80 under the MYT Regulations, 2011, whichever is superior shall form the basis for computing Change in Law compensation under the PPAs? Issue No. 2: Whether the MERC was correct in holding that the reference GCV of domestic coal supplied by CIL shall be the middle value of GCV range of assured coal grade in LoA/FSA/ MoU and not the GCV as received? Issue No. 3: Whether the MERC was correct in holding that for the purpose of Change in Law compensation for 1180 MW capacity, shortfall in domestic linkage coal shall be assessed by considering the coal supply as the maximum of (1) actual quantum of coal offered for offtake by CIL under the LoA/FSA and (2) the minimum assured quantum in NCDP 2013 for the respective year? " 25. On Issue No.

1, the learned APTEL held that APML was entitled to compensation on the ground of Change in Law based on the SHR specified in the MERC MYT Regulations 2011 or the actual SHR achieved by APML, whichever is lower. 26. On Issue No. 2, the learned APTEL held that the compensation for the Change in Law approved by the MERC shall be computed based on the actual GCV of coal received. 27. On Issue No. 3, the learned APTEL held that under the NCDP, 2007, there was an assurance of 100% coal supply and as such, while granting compensation on the ground of Change in Law, it was not justified to restrict it to the maximum of 35% to 25% for the respective four years of the 12th Plan. 28. The learned APTEL held that the restitution principle has to be applied. It further held that to protect the interests of consumers, the Generators had itself indicated that the parameters which are more beneficial to the consumers i. e.

the lower amongst the actual or as per the Regulations would protect the interests of the consumers. MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. v. ADANI POWER MAHARASHTRA LTD. [B. R. GAVAI, J. ] 29. Being aggrieved thereby, the MSEDCL has approached this Court by way of Civil Appeal No. 684 of 2021. FACTS IN CIVIL APPEAL NO. 6927 OF 2021 30. In Civil Appeal No. 6927 of 2021, the MSEDCL challenges the concurrent orders passed by the CERC dated 15th November 2018 and the order passed by the learned APTEL dated 16th July 2021. 31. MSEDCL issued a Request for Proposal (RFP) on 15th May 2009 and initiated the competitive bidding process for procurement of power on long-term basis. GMR Warora Energy Ltd. ("GMR" for short) submitted its bid on 7th August 2009 and emerged as one of the successful bidders with a levelized tariff of Rs. 2. 879/kWh. Accordingly, the PPA was executed for the procurement of 200 MW of power on 17th March 2010 by MSEDCL on long-term basis.

Similarly in March 2012, Respondent No. 2-Union Territory of Dadra & Nagar Haveli ("DNH" for short) issued an RFP for the procurement of power through competitive bidding and GMR emerged as one of the successful bidders. 32. Consequently, respondent No. 1 in Civil Appeal No. 6927 of 2021 i. e. GMR entered into the following long-term PPAs for the supply of power from the Project: (a) Supply and sale of 200 MW of power on a long-term basis to MSEDCL in terms of PPA dated 17th March 2010. The cut-off date for this PPA is 31st July 2009. Supply of power in terms of the PPA commenced from 17th March 2014. (b) Supply and sale of 200 MW of power on long term basis to Electricity Department, DNH in terms of PPA dated 21st March 2013. The cut-off date of this PPA is 1st June 2012. Supply of power in terms of the PPA commenced from 1st April 2013.

(c) Supply and sale of 150 MW of power on long term basis to TANGEDCO through back-to-back arrangements as follows: (i) Power Sale Agreement (PSA) dated 1st March 2013 between GMR Energy Trading Limited (GMRETL) and GMR, based on which a bid was submitted to TANGEDCO; (ii) PPA dated 27th November 2013 between GMRETL and TANGEDCO for the supply of power from GMR to TANGEDCO. The cut-off date of this PPA is 27th February 2013. (iii) PPA dated 3rd May 2014 between GMR and GMRETL recording the terms and conditions in accordance with PPA between GMRETL and TANGEDCO. The supply of power under the PPA commenced on 22nd October 2015. 33. Petition No. 8/MP/2014 was filed by GMR claiming compensation on account of the impact of the Change in Law events during the Operation period and Construction period under MSEDCL and DNH PPAs. The Commission, by order dated 1st February 2017, had allowed some of the claims of GMR on the ground of Change in law.

Vide the said order, it has also disallowed some of the claims. Aggrieved by the said order, GMR filed Appeal No. 111 of 2017 before the learned APTEL in respect of the compensation claims disallowed by the Commission. Similarly, Appeal No. 290/2017 was filed by DNH Power Distribution Company Ltd against the said order dated 1st February 2017 disputing the compensation claims allowed to GMR under some Change in Law events. 34. During the pendency of the above said appeals, GMR has filed Petition (i. e. Petition No.

88/MP/2018) seeking the following reliefs: "(a) Confirms that the following operational parameters which are imperative of calculation of compensation due to the Petitioner on account of change in law events, are to be considered on actuals: (i) Auxiliary Power Consumption (ii) Station Heat Rate (iii) Gross calorific Value (b) Confirm that levy of Service Tax & Swachh Bharat Cess on coal transportation is on all components as per rail invoice; (c) Release of amounts due to the Petitioner from Respondent No. 1, MSEDCL in light of the Commission's order dated 1. 2. 2017 in Petition No. 8/MP/2014. " 35. Two of the issues involved in the present appeals with regard to SHR and GCV also fell for consideration before the CERC. 36. The CERC found that the CERC norms applicable for the period 2009-14 and 2014-19 do not provide the norms for 300 MW units. It further found that the CERC norms provide for a degradation factor of 6. 5% and 4.

5% respectively towards Heat Rate over and above the MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. v. ADANI POWER MAHARASHTRA LTD. [B. R. GAVAI, J. ] Design Heat Rate. It found that since the Design Heat Rate is 2211 kcal/kWh, the gross Heat Rate works out to 2355 kcal/kWh and 2310 kcal/kWh for the period 2009-14 and 2014-19 respectively. It directed that the SHR of 2355 kcal/kWh during the period 2009-14 and 2310 kcal/kWh during the period 2014-19 or the actual SHR, whichever was lower, shall be considered for calculating the coal consumption for compensation under the Change in Law. 37. Insofar as the GCV is concerned, the CERC found that in the 2014 Tariff Regulations of the Commission, the measurement of GCV has been specified on "as received" basis. It, therefore, found that it would be appropriate if the GCV on "as received" basis is considered for computation of compensation for Change in Law. 38.

Being aggrieved by the order passed by the CERC dated 15th November 2018, the MSEDCL preferred an appeal being Appeal No. 342 of 2019 before the learned APTEL. The learned APTEL did not find merit in the submission of the MSEDCL and as such, dismissed the appeal by judgment and order dated 16th July 2021. 39. Being aggrieved thereby, MSEDCL has approached this Court by way of Civil Appeal No. 6927 of 2021. 40. The arguments on behalf of the appellant-MSEDCL in Civil Appeal No. 684 of 2021 were advanced by Shri Gopal Jain, learned Senior Counsel, whereas arguments in Civil Appeal No. 6927 of 2021 were advanced by Shri G. Sai Kumar, learned counsel. 41. We have also heard Shri Balbir Singh, learned Additional Solicitor General and Shri M. G. Ramachandran, learned Senior Counsel appearing for some of the State Electricity Distribution Companies, whose matters are not being decided by this judgment, but wherein the aforesaid three questions/issues are common. 42.

On behalf of the respondent-APML as well as the respondent- GMR, Dr. Abhishek Manu Singhvi, learned Senior Counsel advanced the arguments. His arguments were supplemented by Shri Vishrov Mukherjee, learned Counsel. SUBMISSIONS ON BEHALF OF THE DISCOMS 43. The main arguments that were advanced on behalf of the Distribution Companies (hereinafter referred to "DISCOMS") are as under: (i) The SHR and GCV value are declared in the bid document and it is not permissible for the Generating Companies to claim advantage on the basis of SHR value which is different than the one quoted i. e. the SHR value as provided in the Tariff Regulations or the actual. It is their submission that the declaration of operational parameters i. e. SHR and GCV were the mandate of the bid in case of Case-1 competitive bidding process.

It is submitted that if deviation from such declared bid parameters for compensating the bidder/ Generating Companies/ Generators under the PPA on the ground of Change in Law is permitted, it will take away the very sanctity of the bid. (ii) It is submitted that to ensure serious participation in the bid process and for timely completion of commencement of supply of power, the Competitive Bidding Guidelines 2005 itself mandates the bidder/generator/Generating Companies to have a 'firm' fuel arrangement. It is their submission that it is mandatory for the bidder/generator to declare the 'quantity' of fuel required to generate power for the entire term of the PPA. The DISCOMS argued that the quantity of fuel can only be ascertained by applying the SHR and GCV components as declared in the bid.

(iii) It is submitted that the RFP itself mandated the participating bidders/generators to submit documentary evidence with regard to the 'quantity' of fuel required to generate power for the entire term of 25 years of the PPA. (iv) It is submitted that for ascertaining the 'quantity', it was also necessary for the bidder/generator to provide 'supporting computation' by declaring the SHR and GCV value applicable for the entire term of the PPA. (v) It is the contention on behalf of the DISCOMS that the bidder/generator, while submitting his/its bids, is required to submit the bids by taking into consideration all factors, including risks regarding fluctuations, availability of fuel/ coal, etc. It is submitted that if there is any change with regard to the availability of fuel or the rate at which a bidder/ generator is required to procure the coal, then the bidder/ MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. v. ADANI POWER MAHARASHTRA LTD. [B. R. GAVAI, J.

] generator has to suffer the consequences thereof as he/it has submitted his/its bid with eyes open. (vi) The thrust of the argument of the DISCOMS is that in a competitive bid based PPA under Section 63 of the Electricity Act, the quoted tariff is sacrosanct and it is not open for the respondent/generator to seek higher tariff or extra compensation under the PPA, except as per Article 13 of the PPA dealing with impact of Change in Law. It is submitted that the reliance placed by the learned APTEL on the judgment of this Court in the Case of Energy Watchdog (supra) is totally misconceived. (vii) It is, therefore, submitted that the relief for the impact of NCDP 2013 is admissible only to the extent of the changes brought about by the NCDP 2013 and not in excess thereof. It is submitted that the Change in Law made by the Central Government on 31st July 2013 was vis-à-vis the NCDP 2007 which was in force as on the cut-off date provided in Article 13. 1 of the PPA i. e.

7 days before the bid submission date. It is submitted that the very purpose of compensating the party affected by Change in Law is to restore, through monthly tariff payments, the affected party to the same economic position as if the Change in Law had not occurred. (viii) It is submitted that as per para 2. 2 of the NCDP 2007 read with para 5. 2, CIL was entitled to meet the shortfall in the availability of domestic coal by importing coal. In such event, the Generators were required to pay the higher cost of imported coal to CIL. It is submitted that while submitting the bids, the bidders/generators, therefore, had submitted their bids for supply of electricity to the DISCOMS knowing the position that they will not be compensated for higher cost of imported coal separately, over and above the quoted tariff /quoted energy charges, in the event of supply of imported coal by CIL.

(ix) It is contended that, if in the event the Generator could have procured the fuel/coal at a lesser price, then the benefit which would have occurred to him/it on account of such saving in procurement would have gone to him/it. On the same analogy, if the Generator is required to obtain the fuel/ coal at a higher price then he/it cannot be heard to say that he/it should be compensated for the same. (x) It is submitted that, as a matter of fact, till 31st July 2013 i. e. when the NCDP 2013 was brought into effect, there could have been no claims from the Generators for increase in tariff to be allowed for higher coal cost on account of imported coal supply. It is submitted that if the NCDP 2013 had not brought about a Change in Law, the position as prevalent before would have continued.

It is submitted that this Court has consistently held that an unprecedented increase in input cost cannot be a ground for a supplier not to perform the obligations under a binding contract or seek higher price or compensation for such performance. (xi) It is the submission of the DISCOMS that the benefit on account of the Change in Law brought into effect by the NCDP 2013 has to be restricted only to the extent of shortfall as provided by the said policy. It is submitted that if it was the intention of the NCDP 2013 to provide for relief through the Change in Law/policy decision for the shortfall even below the specified percentages i. e. for entire shortfall on actual basis, then there was no rationale in specifying the percentages in the NCDP 2013. (xii) It is further contended by the DISCOMS that the contention of the Generating Companies that Shakti Policy 2017 was a continuation of NCDP 2013 is incorrect.

It is submitted that the first part under (A) of the Shakti Policy 2017 deals with the old regime of LoA/FSA which is the NCDP aspect. The second part under (B) deals with the new transparent coal allocation policy called SHAKTI. It is submitted that, as a matter of fact, SHAKTI and allocation of coal thereunder was admissible only to Entities which did not have any LoA/FSA under the NCDP 2007 or the NCDP 2013. Reliance in this respect has been placed on the judgment of this Court in the case of Jaipur Vidyut Vitaran Nigam Ltd. and others v. Adani Power Rajasthan Limited and another2 (hereinafter referred to as "Adani Rajasthan case") 2 2020 SCC Online SC 697 MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. v. ADANI POWER MAHARASHTRA LTD. [B. R. GAVAI, J. ] (xiii) It is submitted that the law laid down by this Court in the case of Energy Watchdog (supra) has been applied by the learned APTEL in a patently erroneous and perverse manner.

(xiv) It is submitted that the total quantum of coal required is to be computed not in an abstract manner but is to be necessarily based on the SHR of the power station. It is submitted that the SHR has nothing to do with coal quality or GCV of coal. It is submitted that the SHR is the boiler and turbine characteristic of a thermal power station and, therefore, indicative of the quality and efficiency of the machine. It is submitted that the quantum of coal requirement is less with lower SHR and increases with higher SHR, inasmuch as it relates to the ability and efficiency of the machines to extract heat energy from coal to produce per unit of electricity. (xv) It is submitted that in Case 2 bidding, the net SHR is a bidding parameter as coal linkage is arranged by the entity inviting bids, and actual cost of coal is allowed as a passthrough in the tariff as per the formula specified.

It is their submission that there are no quoted energy charges in Case 2 bidding but only quoted fixed charges. It is submitted that, whereas, in Case 1 bidding, SHR may not, as such, be the criteria for selection but is a necessary requirement/ condition to be given for identifying the quantum of coal required to generate electricity over the length of the PPA. While submitting his/its bid and quoting energy charges, the bidder/generator was required to take into consideration the quantum of coal requirement which, in turn, is based on the SHR and auxiliary consumption parameters to be given by the bidder/generator. It is submitted that the coal Supply Agreement for quantum of coal is signed by CIL only for the quantum as determined above, based on the SHR and operating parameters provided by the bidder/generator. It is submitted that the view taken by the learned APTEL is contrary to the view taken by it between the same parties in its judgment dated 13th April 2018 in Appeal No.

210 of 2017. (xvi) It is submitted that if the SHR which is higher than the one quoted by the bidder/generator is to be taken into consideration, then it will amount to granting premium to the Generator for its inefficiency. It is submitted that if the coal consumption increases on account of highest SHR, the excess expenditure on quantum of coal is to be borne by the Generator. (xvii)It is submitted that if the bid assumed SHR is 2200 kcal/kg and actual SHR is 2300 kcal/kg, when the quoted tariff is based on the SHR of 2200 kcal/kg, for Change in Law impact, SHR of 2300 kcal/kg cannot be permitted to be used for computation of compensation for Change in Law. (xviii)It is submitted that the impugned judgment permitting the actual SHR or the SHR given in Tariff Regulations, whichever is lower, if upheld, would amount to converting the scope of Section 63 tariff determination into a Section 62 cost plus tariff determination.

It is submitted that this is impermissible in a competitive bid based PPA. (xix) It is further submitted that the MERC Tariff Regulations expressly provides that the Tariff Regulations will have no application to Section 63 tariff determination and the same is governed by the guidelines of the Central Government under Section 63 of the Electricity Act. (xx) It is submitted that perusal of Regulation 2(2)(a) of the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2019 would reveal that they are not applicable where the tariff has been discovered through tariff based competitive bidding in accordance with the guidelines issued by the Central Government and adopted by the Commission under Section 63 of the Electricity Act.

(xxi) It is submitted that when admittedly there is bid assumed SHR as per bidding conditions, the learned APTEL cannot ignore the same on the purported ground of equity and provide for an alternate parameter for computational purpose of actual SHR with the ceiling as under the Tariff Regulations. It is submitted that this will result in changing the bidding terms and conditions after the bid was accepted and became final. MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. v. ADANI POWER MAHARASHTRA LTD. [B. R. GAVAI, J. ] (xxii)It is further submitted that the finding that the GCV computation is to be made on 'as received' basis, is also patently erroneous.

It is submitted that the real purpose behind relying on the said methodology of computation is to recover the grade slippage in the coal grade actually supplied as against the coal grade billed by the Coal Company and all the losses in the heat value of the coal during the time period when the coal is taken delivery from the coal mines and transported to the Power Plant and unloading at the Power Plant site. (xxiii)It is submitted that the evaluation of GCV on air dried basis by Coal Company was well known/existing even prior to bidding and the Generators were very much aware of it. Accordingly, the same has already been factored into while the Generators submitted their bids. As such, if the computation of GCV is permitted on 'as received' basis, the Generators will be doubly compensated. In any case, it is submitted that if the Generators had any issues with regard to the grade of coal i. e.

GCV range and quantum, then that is an issue between the Generators and the respective Coal Companies, which is required to be resolved under the FSA between them. The DISCOMS cannot be roped into for the resolution of such disputes between the Generators/Generating Companies and the Coal Companies. (xxiv) Lastly, it is submitted that since the letter of the MoP, which has been considered as a Change in Law event, is dated 31st July 2013, the learned APTEL could not have given effect to the same from 1st April 2013. It is submitted that this would permit giving the benefit of compensation with retrospective effect. (xxv)Insofar as the reliance placed by the Generating Companies on the judgment of this Court in Adani Rajasthan case is concerned, it is submitted that the said judgment would not be applicable to the facts of the present case. It is submitted that in the said case, there was no FSA and the State Government had undertaken to supply the entire coal quantum.

(xxvi) It is further submitted that the judgment of this Court in the case of Nabha Power Limited (NPL) v. Punjab State Power Corporation Limited (PSPCL) and another3 would also not be applicable to the facts of the present case inasmuch as the said case was under Case-2. (xxvii)It is submitted that the inability of a Generator to seek sufficient relief from the Coal Companies cannot be a reason to claim relief from the Distribution Licensees/DISCOMS or the consumers. The DISCOMS cannot be penalized on account of failure by the Coal Companies of supplying sufficient coal. (xxviii) An additional ground in Civil Appeal No. 6927 of 2021 raised is that CERC has erred in holding that the principle of late payment surcharge envisaged in Articles 8. 3. 5 and 8. 8. 3 of the PPA is applicable towards payment of the balance amounts by MSEDCL in respect of the relief under Change in Law. SUBMISSIONS ON BEHALF OF THE GENERATING COMPANIES 44.

As against this, it is submitted on behalf of the Generating Companies as under: (i) It is submitted that under the NCDP 2007, 100% normative coal requirement of Generating Companies was assured to be supplied by the CIL. However, by NCDP 2013, the responsibility of CIL to supply coal was reduced to 65%, 65%, 67% and 75% of ACQ for the remaining years of the 12th Five Year Plan i. e. Financial Year 2013-14 to Financial Year 2016-17. (ii) It is submitted that the NCDP has been held to be a law for the purposes of the Electricity Act. It is, therefore, submitted that the Generating Companies are entitled to compensation for the shortfall of coal in terms of NCDP 2013 and the same has to be paid on actuals, i. e. to the extent the shortfall in coal supply actually exists. (iii) It is submitted that the said issue is no more res integra and is covered by the judgment of this Court in the case of 3 (2018) 11 SCC 508 MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. v.

ADANI POWER MAHARASHTRA LTD. [B. R. GAVAI, J. ] Energy Watchdog (supra) and in Adani Rajasthan case (supra). (iv) It is submitted that, as per the guideless issued by the MoP, for Case-1 bidding, SHR and GCV are not bid parameters. The SHR and GCV mentioned in the bid is part of technical information and is not relevant for computing Change in Law compensation. It is submitted that there are substantial distinctions between Case-1 and Case-2 bid. The first one is that in Case-1 bid, SHR and GCV are not bid parameters, whereas in Case-2, SHR and GCV are bid parameters. Secondly, in Case-1 bidding, energy charge is not computed since the energy charge forms part of quoted tariff, whereas in Case-2 bidding, energy charge is computed based on the net heat rate quoted in the financial bid. Thirdly, in Case-1 bidding, the PPA has no definition of quoted Net Heat Rate/ SHR, whereas in Case-2 bid, the PPA defines quoted Net Heat Rate/SHR.

It is, therefore, submitted that in Case-1 bid there is no consideration of SHR and GCV in the formula of energy charge, whereas in Case-2 bid, these two parameters provide the formula for computing energy charge. (v) It is submitted that the learned APTEL in the case of Wardha Power v. Reliance Infrastructure & Ors. 4 has held that if SHR and GCV as submitted in the bid are considered for Change in Law compensation, it may result in over or under recovery and should be considered only on 'actuals'. It is submitted that the said judgment in Wardha Power (supra) has not been challenged/appealed against and has thus attained finality. (vi) The Generators further rely on the judgment of this Court in Adani Rajasthan case (supra). It is submitted that in the said case, the learned APTEL had held that operational parameters (like SHR and Auxiliary consumption) must be considered as per 'normative' value, and this view has been upheld by this Court.

(vii) It is further submitted that the MERC in its order dated 7th March 2018 in Case No. 123 of 2017 (JSW v. MSEDCL) 4 Appeal No. 288 of 2013 has held that the lower of actual or normative parameter for Auxiliary consumption (an operational parameter like SHR) has to be considered for Change in Law compensation. It is submitted that the MSEDCL has not challenged the said judgment, which has thus attained finality. (viii) It is submitted that the SHR is continuously being monitored and its actual value, as certified by Energy Auditors, is submitted to MSEDCL along with claims. As such, 'actuals' can be ascertained and verified for computation purposes. (ix) It is submitted that, equally, the GCV of coal is certified by third party sampling agencies. A GCV certificate is submitted to MSEDCL for each railway rake separately, along with claim. Such 'actuals' on 'as received' basis can be ascertained/verified for computational purposes.

(x) It is further submitted that some of the DISCOMS in the proceedings before the CERC have contended that the SHR shall be considered after ascertaining actual design heat rate and margin as per CERC Regulations from time to time. They have further taken a stand that Auxiliary Consumption shall be considered as per CERC Regulations. On affidavit, it is also stated that GCV of alternate coal shall be as certified by a Third Party Sampling Agency, for which the Commission should provide appropriate guideline. It is, however, submitted that now the DISCOMS are taking a U-turn by contending that the SHR should be based on bid assumed parameters. (xi) It is submitted that, in any case, to maintain balance, APML had itself offered for the benefit to be granted on the lower of 'actual' or 'normative' SHR as per Regulations. The same has been accepted by the learned APTEL.

It is submitted that this will ensure that no inefficiency is passed on to consumers and, at the same time, the Generator is restituted. (xii) It is submitted that had there been no occurrence of Change in Law event, i. e. there was no shortfall in coal supply, the tariff payment to the Generating Companies would have been based on quoted energy charge. In such a situation, SHR and GCV of coal would not have come into the picture. MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. v. ADANI POWER MAHARASHTRA LTD. [B. R. GAVAI, J. ] However, when there is an occurrence of Change in Law event, the principle of 'Restitution' comes into play. It is submitted that 'restitution' can take place only with consideration of 'actual' parameters. (xiii) It is submitted that taking this into consideration, expert bodies like the CERC and APTEL have allowed the SHR and GCV to be determined on 'actual' basis.

(xiv) It is submitted that the SHR indicated in the bid as part of technical information does not conform to the mandate of restitution as it cannot put the Generator back to the same economic position had Change in Law event not occurred. (xv) It is submitted as per the NCDP 2007, 100% normative requirement of coal was to be supplied by the CIL. However, due to shortfall of coal in the country, the responsibility of CIL to supply coal was reduced to 65%, 65%, 67% and 75% of the ACQ. The shortfall in coal was to be met either by the CIL or by the Generating Companies/Generators by importing coal. It is submitted that the higher cost of such imported coal was allowed to be a pass-through. (xvi) It is submitted that a conjoint reading of CERC statutory advice dated 20th May 2013, CCEA decision dated 21st June 2013, MoP letter dated 31st July 2013, and clause 6.

1 of the Tariff Policy 2016 issued by the MoP would reveal that pass-through of the higher cost of quantity of shortfall in coal procured from alternate sources was to be allowed. It is submitted that this position has been upheld by the judgments of this Court in the case of Energy Watchdog (supra) and Adani Rajasthan case (supra). (xvii)It is submitted that this pass-through is by way of restitution due to shortfall in 100% assured quantity of coal and it cannot be limited to the percentages/trigger levels specified in the NCDP 2013. It is submitted that the principle of restitution would require the pass-through to the extent the supply from CIL was cut down. It is submitted that an argument to the contrary has already been rejected by this Court in the case of Adani Rajasthan case (supra).

(xviii)In addition to the judgments of this Court in the cases of Energy Watchdog (supra) and Adani Rajasthan case (supra), the Generating Companies also rely on the judgment of this court in the case of Uttar Haryana Bijli Vitran Nigam Limited (UHBVNL) and another v. Adani Power Limited and others5. (xix) It is also submitted that the contention on the part of the DISCOMS that Adani Rajasthan case (supra) would not be applicable to the facts of the present case, inasmuch as there was no FSA scenario, is also factually incorrect. 45. In addition to the aforesaid submissions, the respondent in Civil Appeal No. 6927 of 2021 i. e. GMR, the following submissions have been made. (i) That Schedule 10 of the PPA executed between GMR and MSEDCL clearly mentions that the levelized tariff will be as per CERC Regulations. (ii) It is submitted that the normative SHR as mentioned in the bid is computed assuming power plant is operating at 85% of the Plant Load Factor ("PLF" for short).

It is, however, submitted that the PLF is at the sole discretion of the procurer-DISCOMS as they decide the quantum of power to off-take. (iii) It is submitted that the SHR is a real-time operating parameter which varies from time to time, and it is computed by working out the total electricity generated from the amount of coal consumed in heat value (kCal) terms. (iv) It is further submitted that the GCV of coal actually delivered at site and fed to the boiler varies from wagon to wagon. It cannot be a homogeneous value. (v) It is further submitted that the details given in the bid with regard to SHR and GCV were only indicative of the coal linkage to show that GMR had the necessary means to supply power on sustained basis and was a serious bidder, and to further demonstrate its meeting of the eligibility requirement prescribed under the RFP. 5 (2019) 5 SCC 325 MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. v. ADANI POWER MAHARASHTRA LTD. [B. R. GAVAI, J.

] (vi) It is submitted that the supporting documents/information regarding fuel only provides the quantity of coal required for the project at Normative PLF and SHR computed as per CERC norms, which is 2355 kCal/kWh. It is submitted that MSEDCL is now insisting on Design Gross Heat Rate of 2211 kCal/kWh, which was not considered even for computation of quantum of coal at the time of bid submission. (vii) It is further submitted that the Central Electricity Authority, vide Notifications dated 17th October 2017 and 18th October 2017, has even allowed for loss in GCV from 'as received basis' to 'as fired basis' and as such, there is no reason as to why GCV could not be computed on 'as received basis'. (viii) It is further submitted that the MSEDCL cannot be permitted to equate GMR's case with APML and Rattan India Power Limited inasmuch as GMR falls under the jurisdiction of CERC, whereas the other two fall under the jurisdiction of MERC.

(ix) Insofar as late payment charges are concerned, it is submitted that MSEDCL had unilaterally deducted the amount, which is contrary to the provisions of the PPA and as such, both CERC and learned APTEL have rightly held that GMR was entitled to late payment surcharge in terms of Article 8. 3. 5. Reliance in this respect is placed on the judgment of this Court in the case of Maharashtra State Electricity Distribution Company Limited v. Maharashtra Electricity Regulatory Commission and others6and Tamil Nadu Generation & Distribution Corporation Limited v. PPN Power Generating Company Private Limited7 RELEVANT DOCUMENTS 46. For considering the rival submissions, it will be relevant to refer to certain documents placed on record. 47. The MoP notified the Competitive Bidding Guidelines, 2005 (hereinafter referred to as "the said Guidelines") on 19th January 2005. The said Guidelines were framed under Section 63 of the Electricity 6 (2022) 4 SCC 657 7 (2014) 11 SCC 53 Act.

It will be relevant to refer to the following part of the preamble of the said Guidelines. "1. Preamble ........... These guidelines have been framed under the above provisions of section 63 of the Act. The specific objectives of these guidelines are as follows: 1. Promote competitive procurement of electricity by distribution licensees; 2. Facilitate transparency and fairness in procurement processes; 3. Facilitate reduction of information asymmetries for various bidders; 4. Protect consumer interests by facilitating competitive conditions in procurement of electricity; 5. Enhance standardization and reduce ambiguity and hence time for materialization of projects; 6. Provide flexibility to suppliers on internal operations while ensuring certainty on availability of power and tariffs for buyers. " 48. Paragraph 2 of the said Guidelines deals with the scope of the Guidelines. Para 2. 2 of the said Guidelines reads thus: "2. 2.

The guidelines shall apply for procurement of base-load, peak-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). However separate RFP shall be used for procuring base load or peak load or seasonal load requirements as the case may be. " 49. It can thus be seen that Para 2. 2 distinguishes two types of cases, viz. , Case-1 and Case-2. Case-1 deals with the case where the MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. v. ADANI POWER MAHARASHTRA LTD. [B. R. GAVAI, J. ] location, technology, or fuel is not specified by the procurer.

Case-2 deals with 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. 50. Paragraph 3 of the said Guidelines deals with preparation for inviting bids. Clause (I) of Para 3. 2 deals with Case-2, whereas clause (II) of Para 3. 2 deals with Case-1. Sub-clause (i) of clause (II) of Para 3. 2 requires the bidder to undertake site identification and land acquisition. The bidder is required to submit a copy of notification issued for the land in question under Section 4 of the Land Acquisition Act, 1894. For the part of land excluding that which is to be acquired under the Land Acquisition Act, 1894, the bidder is required to furnish documentary evidence to establish allotment/ lease/ ownership/ vesting of at least one-third area of the said land.

Under sub-clause (ii), the bidder is required to submit environmental clearance for the power station. Under sub- clause (iii), the bidder is required to supply forest clearance, if applicable, for the land for the power station. Sub-clause (iv) is the most important for the resolution of the present dispute, which reads thus: "3. Preparation for inviting bids 3. 1 ............ 3. 2 (I) ............... (II) .................. (i) .................. (ii) .................. (iii) .................. iv) Fuel Arrangements: (a) In the following cases fuel arrangements shall have to be made for the quantity of fuel required to generate power from the phase of the power station from which power is proposed to be supplied at Normative Availability for the term of the PPA.

In case of domestic coal, the Bidder shall have made firm arrangements for fuel tie up either by way of coal block allocation or fuel linkage In case of domestic gas, the Bidder shall have made firm arrangements for fuel tie up by way of long term fuel supply agreement for the term & quantity as per Government of India gas allocation policy b) Fuel arrangements in the following cases shall have to be made for the quantity of fuel required to generate power from the power station for the total installed capacity. In case of imported coal, the Bidder shall have either acquired mines having proven reserves for at least 50% of the quantity of coal required OR shall have a fuel supply agreement for at least 50% of the quantity of coal required for a term of at least five (5) years or the term of the PPA, whichever is less.

In case of RLNG, the Bidder shall have made firm arrangements for fuel tie up by way of fuel supply agreement for at least 50% of the quantity of fuel required for a term of at least five (5) years or the term of the PPA, whichever is less. Blending of Imported and Domestic coal may be used in which case, criteria for imported and domestic coal shall be met separately in the ratio of blending. " 51. It can thus be seen that in case of domestic coal, the bidder is required to make firm arrangements for fuel tie up either by way of coal block allocation or fuel linkage. 52. Clause (b) of sub-clause (iv) of clause (II) of Para 3. 2 deals with imported coal, in which case the bidder shall have either acquired mines having proven reserves for at least 50% of the quantity of coal required OR shall have a fuel supply agreement for at least 50% of the quantity of coal required for a term of at least five years or the term of the PPA, whichever is less. 53.

Paragraph 4 of the said Guidelines deals with Tariff Structure. It will be relevant to refer to Para 4. 2, which reads thus: "4. Tariff Structure MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. v. ADANI POWER MAHARASHTRA LTD. [B. R. GAVAI, J. ] 4. 1 ........ 4. 2. In case of long term procurement with specific fuel allocation (Case 2), the procurer shall invite bids on the basis of capacity charge and net quoted heat rate. The net heat rate shall be ex-bus taking into account internal power consumption of the power station. The energy charges shall be payable as per the following formula: Energy Charges = Net quoted heat rate X Scheduled Generation X Monthly Weighted Average Price of Fuel/ Monthly Average Gross Calorific Value of Fuel If the price of the fuel has not been determined by the Government of India, government approved mechanism or the Fuel Regulator, the same shall have to be approved by the appropriate Regulatory Commission.

In case of coal/lignite fuel, the cost of secondary fuel oil shall be factored in the capacity charges. " 54. It can thus be seen that insofar as Case-2 is concerned, the procurer is required to invite bids on the basis of capacity charge and net quoted heat rate. The net heat rate is required to be ex-bus taking into account internal power consumption of the power station. It further provides that if the price of the fuel is not determined by the Government of India, government approved mechanism or the Fuel Regulator, the same shall have to be approved by the appropriate Regulatory Commission. 55. Para 4. 4 provides that the capacity charge shall be paid based on actual availability, as per charges quoted in Rs. /kwh and shall be limited to the normative availability. It further provides that the normative availability for Case-1 and thermal stations under Case-2 shall be a maximum of 85%. 56. Para 4.

7 is another important clause for the resolution of the present dispute, which reads thus: "4. 7. Any change in law impacting cost or revenue from the business of selling electricity to the procurer with respect to the law applicable on the date which is 7 days before the last date for RFP bid submission shall be adjusted separately. In case of any dispute regarding the impact of any change in law, the decision of the Appropriate Commission shall apply. " 57. It can thus be seen that any Change in Law impacting cost or revenue from the business of selling electricity to the procurer with respect to the law applicable on the date which is 7 days before the last date for RFP bid submission shall be adjusted separately. It provides that in case of any dispute regarding the impact of any Change in Law, the decision of the Appropriate Commission shall apply. 58. It will also be relevant to refer to Para 4. 12, which reads thus: "4.

12 No adjustment shall be provided for heat rate degradation of the generating stations. Even in case of bids based on net heat rate, the bidder shall factor in site conditions, loading conditions, frequency variations etc and no adjustment shall be allowed on the quoted net heat rate for the duration of the contract. " 59. It can thus be seen that no adjustment is to be provided for heat rate degradation of the generating stations. Even in case of bids based on net heat rate, the bidder shall factor in site conditions, loading conditions, frequency variations etc. and no adjustment shall be allowed on the quoted net heat rate for the duration of the contract. 60. The NCDP 2007 would be of vital importance. Clause 2. 2 thereof deals with Power Utilities including Independent Power Producers (IPPs)/Captive Power Plants (CPPs) and Fertilizer Sector. Clause 2. 2 reads thus: "2. Distribution and Pricing of coal to different consumers/ sector(s): 2. 1. .................. 2.

2 Power Utilities including Independent Power Producers (IPPs)/Captive Power Plants(CPPs) and Fertilizer Sector 100% of the quantity as per the normative requirement of the consumers would be considered for supply of coal, through Fuel Supply Agreement (FSA) by Coal India Limited (CIL) at fixed prices to be declared/notified by CIL. The units/power plants, which are yet to be commissioned but whose coal requirements has already been assessed and accepted by Ministry of Coal and MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. v. ADANI POWER MAHARASHTRA LTD. [B. R. GAVAI, J. ] linkage/Letter of Assurance (LoA) approved as well as future commitments would also be covered accordingly. " 61. It can thus be seen that the NCDP 2007 assured 100% of the quantity as per the normative requirement of the consumers for supply of coal, through FSA by CIL at fixed prices to be declared/notified by CIL.

It further provided that the units/power plants, which are yet to be commissioned but whose coal requirements has already been assessed and accepted by MoC and linkage/Letter of Assurance (LoA) approved as well as future commitments would also be covered in accordance therewith. 62. It will also be relevant to note the following part of clause 5. 2 of the NCDP 2007. "5. Policy for New Consumers 5. 1. ............... 5. 2. ............... In order to meet the domestic requirement of coal, CIL may have to import coal as may be required from time to time, if feasible. CIL may adjust its overall price accordingly. Thus, it will be the responsibility of CIL/Coal companies to meet full requirement of coal under FSAs even by resorting to imports, if necessary. " 63. It can thus be seen that clause 5. 2 of the NCDP 2007 provides that in order to meet the domestic requirement of coal, CIL may have to import coal as may be required from time to time, if feasible.

It further provided that CIL would adjust its overall price accordingly. The NCDP 2007 emphasizes the responsibility of CIL/Coal Companies to meet full requirement of coal under FSAs even by resorting to imports, if necessary. 64. It will also be relevant to refer to the communication addressed by the MoP dated 9th May 2013 to the Secretary, CERC. "Subject:Impact on tariff on the concluded PPAs due to domestic coal availability. Sir, Coal linkages have been granted for power projects under the New Coal Distribution Policy 2007 (NCDP), which mandates that CIL will meet 100% of normative requirement of power sector. Para 5. 2 of NCDP provides that "In order to meet the domestic requirement of coal, CIL may have to import coal as may be required from time to time, if feasible. CIL may adjust its overall price accordingly. Thus, it will be the responsibility of CIL/ Coal companies to meet full requirement of coal under FSAs even by resorting to imports, if necessary".

Post NCDP MoC granted linkages between 2008-2010 with the assumption that it would meet coal requirement at around 85% PLF. On this basis LoAs were issued by coal companies, after getting commitment guarantees in the form of Bank Guarantee from the developers thereby undertaking an explicit obligation to supply coal to the extent of the specified quantity to the power developer. Having obtained the LOA the developers would have proceeded on the assumption of getting the requisite quantity of domestic coal with the disincentive trigger of 90% of LoA quantity prevailing under the then Fuel Supply Agreement (FSA) with a provision for CIL resorting to import of coal to bridge the gap, if any. It is assumed that the power producers would have factored this assurance regarding coal supply while submitting their bids in response to Case 1 and Case 2 competitive bidding for long term power purchase agreements.

Thus, while the fuel price risk would have been taken into account and factored in the escalable component of energy charges, it is assumed that no fuel availability risk would have been taken into consideration on account of the LOAs given by CIL. 2. It now transpires that on account of the limited availability of coal Ministry of Col has indicated that CIL may not be in a position to supply more than 60 to 65% of ACQ to those power producers who had been earlier issued LOAs of normative quantities corresponding to 85% PLF. Simultaneously, it has been proposed that the disincentive trigger for coal supply would be brought down from 90% to 60 to 65% by CIL in the new fuel supply agreements to be signed with these power producers. This obviously would create a situation where the power producers would have to arrange fuel from open market including imports either through CIL or directly.

In view of this scenario, PPAs which are already concluded between the developers and discoms as a result of competitive bidding in the last few years based on domestic coal linkage (LOA) may have to use imported coal to bridge the shortage of domestic coal in order to fulfil that contractual MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. v. ADANI POWER MAHARASHTRA LTD. [B. R. GAVAI, J. ] obligations. The Association of Power Producers represented on this issue of shortage of domestic coal and its consequential effect on the concluded PPAs through competitive bidding route. 3. The Cabinet Committee on Economic Affairs (CCEA) has also considered the situation arising out of the inadequate availability of coal leading to this non-fulfilment of the LOA commitments on the part of CIL. CCEA has decided the following guidelines in its meeting held on 06. 02. 2013 in respect of generating plants commissioned/to be commissioned during the period 1. 4. 09 to 31. 03.

15: i) CIL will provide imported coal on cost plus basis to all producers willing to take such cost; ii) That the higher cost of imported coal will be allowed as a pass through. 3. In view of the circumstances stated above CERC is requested to advice the Government on the manner in which the issue of fuel availability risk arising out of CIL's inability to meet its LOA commitments could be addressed with regard to power producers who have already entered into long term PPAs with distribution companies based on such commitments and the feasibility of passing on the additional cost of procuring market fuel incurred by the power developers on account of the circumstances stated in the aforesaid paras. CERC is also requested to suggest appropriate ways for issuing advisory to SERCs/State Governments which may necessitated to be issued by MoP for the implementation of the above. 4. CERC's considered advice is requested in this matter at the earliest. 5.

This issues with the approval of MOSP (I/C). " 65. Perusal of the communication dated 9th May 2013 would clearly show that the NCDP 2007 mandates that CIL will meet 100% of normative requirement of power sector. It states that, post NCDP 2007, MoC has granted linkages between 2008-2010 with the assumption that it would meet coal requirement at around 85% of the PLF. On that basis, the LoAs were issued by Coal Companies, after getting commitment guarantees in the form of Bank Guarantees from the developers, thereby undertaking an explicit obligation to supply coal to the extent of the specified quantify to the power developer. It further states that having obtained the LoA, the developers would have proceeded on the assumption of getting the requisite quantity of domestic coal with the disincentive trigger of 90% of LoA quantity prevailing under the then FSA with a provision for CIL resorting to import of coal to bridge the gap, if any.

It specifically mentions that the power producers would have factored in this assurance regarding coal supply while submitting their bids in response to Case-1 and Case-2 competitive bidding for long-term PPAs. 66. The said communication further records that it now transpires that on account of the limited availability of coal, MoC has indicated that CIL may not be in a position to supply more than 60 to 65% of ACQ to those power producers who had been earlier issued LoAs of normative quantities corresponding to 85% of the PLF. It was proposed that the disincentive trigger for coal supply would be brought down from 90% to 60 to 65% by CIL in the new FSAs to be signed with these power producers.

It further states that in view of this scenario, PPAs which are already concluded between the developers and the DISCOMS as a result of competitive bidding in the last few years based on domestic coal linkage (LoA) may have to use imported coal to bridge the shortage of domestic coal in order to fulfil their contractual obligations. 67. The communication further records that the CCEA has also considered the situation arising out of the inadequate availability of coal leading to the non-fulfilment of its LOA commitments on the part of the CIL. The CCEA, therefore, in its meeting held on 6th February 2013 has decided the following guidelines in respect of generating plants commissioned/to be commissioned during the period 1st April 2009 to 31st March 2015: ii) That CIL will provide imported coal on cost plus basis to all producers willing to take such cost; iii) That the higher cost of imported coal will be allowed as a pass-through. 68.

The communication therefore requested the CERC to advise the Government on the manner in which the issue of fuel availability risk, arising out of CIL's inability to meet its LOA commitments, could be addressed. The CERC was also requested to suggest appropriate MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. v. ADANI POWER MAHARASHTRA LTD. [B. R. GAVAI, J. ] ways for issuing advisories to SERCs/State Governments by the MoP, which may be necessitated for the implementation of the above. 69. In pursuance of the aforesaid Communication dated 9th May 2013, the CERC issued Statutory Advice on 20th May 2013 under Section 79(2) of the Electricity Act regarding impact on tariff of the concluded PPAs due to domestic coal availability. It will be relevant to refer to the following part of the said statutory advice. "2. The matter was considered in the Commission.

The Commission appreciates the need for securing fuel supply for various projects in order to ensure optimum generation from the power plants in the country. Non-availability of adequate quantum of coal has posed serious challenge to power generation as reflected in the data compiled by the Central Electricity Authority (CEA): the Plant Load Factor (PLF) of the generating stations across the country has been severely affected for want of adequate coal supply by CIL/Coal Companies. 3. The proposal to make CIL supply imported coal on cost plus basis to all power projects commissioned or to be commissioned during the period 1. 4. 2009 to 31. 3. 2015 and willing to take such coal would require appropriate change in the NCDP, as at present it is the full responsibility of CIL to meet full requirement of coal under FSAs even by resorting to import; if necessary.

As a follow up, the FSAs between the CIL/its subsidiaries and the power producers will have to be modified through Supplementary Agreements. " 70. It can thus clearly be seen that the CERC has noted that the non-availability of adequate quantum of coal has posed serious challenge to power generation as reflected in the data compiled by the Central Electricity Authority (CEA). It further noted that the PLF of the generating stations across the country has been severely affected for want of adequate coal supply by CIL/Coal Companies. It further records that to give effect to the proposal to make CIL supply imported coal on cost plus basis to all power projects commissioned or to be commissioned during the period from 1st April 2009 to 31st March 2015 and willing to take such coal, would require appropriate change in the NCDP, as at present it is the full responsibility of CIL to meet full requirement of coal under FSAs even by resorting to import, if necessary.

It further states that as a follow up, the FSAs between the CIL/its subsidiaries and the power producers will have to be modified through Supplementary Agreements. 71. After referring to clause 10. 1. 1 of the Standard PPA for Procurement of Power under Case-1 Bidding Procedure, which deals with 'Change in Law', the statutory advice states thus: "For claiming any benefits under change in law, the Project Developer would have to move the appropriate Commission and the decision of that Commission in this regard would be final, in terms of the provisions of Articles 10. 3. 3 and 10. 3. 4 of the Standard PPA. The appropriate Commissions are expected to take decisions on the merits of each case including the claims of the Project Developers for compensation on account of imported coal after consultation with the stakeholders. " 72.

It can thus be seen that the CERC states that for claiming any benefits under the Change in Law, the Project Developer would have to move the appropriate Commission. It further records that the appropriate Commissions are expected to take decisions on the merits of each case including the claims of the Project Developers for compensation on account of imported coal after consultation with the stakeholders. 73. Subsequent to the aforesaid communication, the MoC issued a Press Release on 21st June 2013. It will be relevant to refer to the following part of the said Press Release. "The Cabinet Committee on Economic Affairs (CCEA) today approved the following mechanism for supply of coal to power producers: (i) Coal India Ltd. (CIL) to sign Fuel Supply Agreements (FSA) for a total capacity of 78000 MW including cases of tapering linkage, which are likely to be commissioned by 31. 03. 2015.

Actual coal supplies would however commence when long term Power Purchase Agreements (PPAs) are tied up. (ii) Taking into account the overall domestic availability and actual requirements, FSAs to be signed for domestic coal quantity of 65 percent, 65 percent, 67 percent and 75 percent of Annual Contracted Quantity (ACQ) for the running four years of the 12th Five Year Plan. MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. v. ADANI POWER MAHARASHTRA LTD. [B. R. GAVAI, J. ] (iii) To meet its balance FSA obligations, CIL may import coal and supply the same to the willing Thermal Power Plants (TPSs) on cost plus basis. TPPs may also import coal themselves. MoC to issue suitable instructions. (iv) Higher cost of imported coal to be considered for pass through as per modalities suggested by CERC. MoC to issue suitable orders supplementing the New Coal Distribution Policy (NCDP).

MoP to issue appropriate advisory to CERC/SERCs including modifications if any in the bidding guidelines to enable the appropriate Commissions to decide the pass through of higher cost of imported coal on case to case basis. " 74. It is thus clear that taking into account the overall domestic availability and actual requirements, FSAs were to be signed for domestic coal quantity of 65%, 65%, 67% and 75% of ACQ for the running/ remaining four years of the 12th Five Year Plan. It can further be seen that the CCEA has also taken a decision that CIL may import coal to meet its balance FSA obligations and supply the same to the willing TPPs on cost plus basis. TPPs may also be permitted to import coal themselves. It further provided that the higher cost of imported coal was to be considered for pass-through as per the modalities suggested by the CERC. 75. In pursuance thereof, the Government of India, through MoC, issued Office Memorandum dated 26th July 2013.

The said Office Memorandum reads thus: "Sub: New Coal Distribution Policy - further instructions regarding implementation thereof. The New Coal Distribution Policy (NCDP) was issued vide this Ministry's Office Memorandum NO. 23011/4/2007-CPD dated 18. 10. 2007, laying down the guidelines for distribution and pricing of coal to various sectors. As per para 2. 2 of the said policy, Power Utilities including Independent Power Producer were to be supplied 100 per cent of the quantity as per their normative requirement through Fuel Supply Agreement(s) (FSAs) by Coal India Limited (CIL) at fixed prices to be declared/notified by CIL. As per para 5. 2, in order to meet the domestic requirement, CIL was to import coal as required from time to time, if feasible and adjust the overall price accordingly. 2.

Government has now approved a revised arrangement for supply of coal to the identified Thermal Power Stations (TPPs) of 78,000 MW capacity commissioned or likely to be commissioned during the period from 01. 04. 2009 to 31. 03. 2015. Taking into account the overall domestic availability and the likely actual requirements of these TPPs, it has been decided that FSAs will be signed for the domestic coal quantity of 65%, 65%, 67% and 75% of ACQ for the remaining four years of the 12th Plan for the power plants having normal coal linkages. Cases of tapering linkage would get coal supplies as per the Tapering Linkage Police. To meet its balance FSA obligations towards the requirement of the said 78,000 MW TPPs, CIL may import coal and supply the same to the willing power plants on cost plus basis.

Power plants may also directly import coal themselves, if they so opt, in which case, the FSA obligations on the part of CIL to the extent of import component would be deemed to have been discharged. 3. Para 2. 2 and 5. 2 of the New Coal Distribution Policy issued vide OM No. 23011/4/2007-CPD dated 18. 10. 2007 stand modified to the above extent. 4. The above guidelines will also be applicable to the distribution of coal from Singreni Collieries Company Limited (SCCL). 5. CIL and its subsidiaries and SCCL are advised to take further action accordingly. " 76. It can thus be seen that the NCDP 2013 also specifically states that, as per NCDP 2007 and specifically paragraph 2. 2 thereof, Power Utilities, including IPPs, were to be supplied 100% of the quantity as per their normative requirement through FSAs by CIL at fixed prices to be declared/notified by CIL. It further reiterates that, as per para 5.

2, in order to meet the domestic requirement, CIL was to import coal as required from time to time, if feasible, and adjust the overall price accordingly. 77. Para 2 of the NCDP 2013 states that the Government has now approved a revised arrangement for supply of coal to the identified TPPs of 78,000 MW capacity commissioned or likely to be commissioned during the period from 1st April 2009 to 31st March 2015. It states that, taking into account the overall domestic availability and the likely actual requirements of these TPPs, it was decided that FSAs will be signed for MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. v. ADANI POWER MAHARASHTRA LTD. [B. R. GAVAI, J. ] the domestic coal quantity of 65%, 65%, 67% and 75% of ACQ for the remaining four years of the 12th Plan for the power plants having normal coal linkages.

It further states that to meet the balance FSA obligations towards the requirement of the said 78,000 MW TPPs, CIL may import coal and supply the same to the willing power plants on cost plus basis. It further states that the power plants may also directly import coal themselves, if they so opt, in which case, the FSA obligations on the part of CIL to the extent of import component would be deemed to have been discharged. 78. Immediately thereafter, on 31st July 2013, the MoP addressed a communication to the Secretary, CERC. It will be relevant to refer to Para 2 of the said communication, which reads thus: "2.

After considering all aspects and the advice of CERC in this regard, Government has decided the following in June, 2013: i) taking into account the overall domestic availability and actual requirements, FSAs to be signed for domestic coal component for the levy of disincentive at the quantity of 65%, 65%, 67% and 75% of Annual Contracted Quantity (ACQ) for the remaining four years of the 12th Plan. ii) to meet its balance FSA o