Change in law under power purchase contracts cannot arise from flawed reports or later clarifications without a real legal change.

A power procurement contract with an express change-in-law mechanism did not permit recovery of costs arising from a higher water intake system estimate, because bidders were required to verify site conditions and the pre-bid report was disclaimed as non-binding; an erroneous or inadequate report could not itself create a compensable legal change. The office memorandum dated 17.06.2011 also did not amount to a change in law for customs duty on mining equipment, as the record did not show a pre-existing exemption for captive coal mine imports or a proven shift in the legal position. In both respects, the contractual claims failed.

---

---

Issues: (i) whether the increase in cost of the water intake system could be treated as a change in law under the power purchase agreement; (ii) whether the office memorandum dated 17.06.2011 amounted to a change in law so as to justify compensation for customs duty on mining equipment.

Issue (i): whether the increase in cost of the water intake system could be treated as a change in law under the power purchase agreement.

Analysis: The agreement contemplated a specific change in law mechanism, and the bidders were required to conduct their own inquiry and satisfy themselves about site conditions and project inputs. The pre-bid documents contained express disclaimers that the procurers and their representative made no warranty or representation regarding the accuracy or reliability of the water intake report. The contractual framework also provided consequences for delay or failure in furnishing the required land and related facilities, and the claim was not founded on any actual change in the agreed water source or on any contemporaneous notice under the change in law clause. The later study commissioned by the successful bidder could not, by itself, convert an erroneous or inadequate pre-bid report into a change in law, and the Tribunal could not rewrite the bargain by invoking general regulatory power or equity outside the express contractual mechanism.

Conclusion: The water intake cost escalation did not amount to a change in law, and the relief granted on that basis was unsustainable.

Issue (ii): whether the office memorandum dated 17.06.2011 amounted to a change in law so as to justify compensation for customs duty on mining equipment.

Analysis: The customs exemption regime in force on the cut-off date did not establish, on the material produced, that goods imported for captive coal mines were treated as exempt. The notification structure distinguished between power projects and mining projects, and there was no reliable pre-cut-off authority or consistent practice showing exemption for such equipment. The office memorandum did not demonstrate a change from an earlier legal position favourable to the seller, nor did it show that the Joint Secretary of the Ministry of Power was the final authority for interpreting the customs exemption. In the absence of clear pre-existing exemption and a proved change in interpretation, the memorandum could not be treated as a change in law under the agreement.

Conclusion: The office memorandum dated 17.06.2011 did not constitute a change in law, and no compensation was payable on that basis.

Final Conclusion: The contractual change-in-law claims failed on both grounds, and the appellate interference was justified. The Tribunal's direction granting relief on the water intake issue could not stand, and the consequential proceedings based on that remand also fell.

Ratio Decidendi: Where a power procurement contract sets out an express change-in-law formula and allocates the risk of site and input verification to the bidder, neither a flawed pre-bid report nor a later administrative clarification can be used to rewrite the bargain or create a compensable change in law without proof of an actual post-cut-off legal change within the contract.

---