TaxTMI 
TaxTMI 
2020 (8) TMI 957
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....he Electricity Act, 2003 (for short, 'the Electricity Act'). The terms of PPA contained a tariff, and that could be varied only as per the specific provisions contained in the PPA, not otherwise. 2. APRL made a claim for an increased tariff under the change in law provisions in the PPA (Article 10). On 23.10.2006, Rajasthan Rajya Vidyut Utpadan Nigam Limited (for short, 'RVUN') conveyed to Adani Exports Limited its selection as a joint venture partner for the formation of a Joint Venture Company. It was stated that business activities of the proposed Joint Venture Company shall be limited to mining and supply of coal from allotted captive coal block for the requirement of existing/new thermal power stations of RVUN and/or for new projects of the State. 3. On 2.8.2007, a Letter of Intent (for short, 'LoI') was issued by RVUN in favour of Adani Enterprise Limited (for short, 'AEL') for developing the coal block under a joint venture at Parsa East and Kente Basan, wherein it was provided that the coal can be utilised at the discretion of the Government of Rajasthan for new upcoming projects in the State under the joint venture or IPP. 4. On 18.10.200....
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....ement was terminated on 10.6.2010. 10. On 2.7.2009, APRL prayed to the Ministry of Coal for granting long-term coal linkage of 'F' grade coal from South Eastern Coalfields Limited for the Kawai Project for 7.082 MT per annum of coal. The Government of Rajasthan extended the validity of the MoU up to 20.3.2010. RVUN was advised to apply for the allocation of coal blocks for meeting coal requirements for its projects and the Kawai Project under the Government Dispensation Scheme. It may invite tenders for mining and delivery of coal, as was done in Parsa East and Kente Basan coal blocks. 11. According to the RFP, APRL submitted its bid on 6.8.2009. It offered a total contracted capacity of 1200 MW from the Kawai Project. The levelized tariff after negotiation was settled at Rs. 3.238/KWh for 25 years. The tariff in the bid was quoted based on domestic coal. The imported coal was limited, being a temporary measure, as fallback support option till the Government instrumentality resumed domestic coal supply. 12. On 12.8.2009, AEL requested to allot Kente (Extn.) coal block for meeting the coal requirement of the Kawai Project inter alia the installed capacities of the project....
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....vations. 19. On 24.3.2011, the Director General of Mineral and Coal issued a Regulation specifying the formula for calculation of benchmark price with reference to the international market price of coal. 20. APRL wrote a letter to the Ministry of Power, Government of India on 11.10.2011 for grant of coal linkage to it along with other 12th Five Year Plan Projects; however, it was delayed for more than a one year for various reasons, due to which conditions subsequent under the PPA could not be fulfilled, and lenders of money to the Kawai Project had started levying penal interest due to delay in coal linkage allocation. A request was made for grant of coal linkage for the Kawai Project. It was stated that CIL was directed to execute an FSA for the 11th Five Year Plan Projects, did not address the problems that continue to affect the 12th Five Year Plan Projects. In the light of the non-availability of domestic coal and the prohibitive cost of the alternate fuel, the Kawai Project became unviable for the tariff committed. Therefore, a request was made to grant coal linkage. The Ministry of Power, on 26.4.2012 in response to letter dated 17.2.2012 of the Government of Rajasthan, in....
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....otified on 26.7.2013 by the Central Government for the revised arrangement for the supply of coal to identified thermal power stations of 78000 MW. AEL was not one of the thermal power stations included in the same. 23. The Ministry of Power issued a letter on 31.7.2013, in which the change in law was considered regarding a shortfall in domestic coal in the quantity indicated in the Letter of Assurance (for short, 'LoA') or FSA. The Revised Tariff Policy under the Electricity Act was issued on 28.1.2016. AEL was given the coal supply to the fullest extent in 2018 under the SHAKTI Policy. It entered into an FSA with NCL/SECL for procurement of coal under the SHAKTI Policy. 24. The State Commission ultimately decided the Petition No. 392 of 2013, filed by AEL on 17.5.2018. AEL was held entitled to relief under the change in law on account of NCDP of 2013. The amount of compensation payable to AEL was not computed. Dissatisfied with the order passed by the State Commission, Rajasthan DISCOMS filed an appeal before the Appellate Tribunal for Electricity (for short, 'the APTEL'). The APTEL vide judgment dated 14.9.2019, held that the bid of APRL was based on domestic c....
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....invoice, and the liability to make payment by the Appellants does not crystallise. Therefore, there is no question of liability of late payment surcharge for such a period. At best, depending on the conduct of the Generator and in terms of restitution principle, simple interest may be considered for the period prior to determination by the State Commission. However, the application of late payment surcharge cannot be applied when there is no delay or default in payment of bills. (h) APRL had admitted that two periods are separate until the determination of change in law, which is carrying cost, and thereafter raising of invoices, there may be a default by the procurer, which is late payment surcharge. As the two periods are separate, there is no logic to apply the late payment surcharge, which is for the second period to the first one. 26. Shri. Prashant Bhushan, learned Counsel appearing on behalf of Federation argued as under: (a) the main question is whether the bid submitted by APRL was premised on domestic coal or imported coal. He attracted our attention to the PPA, RFP, LoI, and other bid documents. The bid and PPA were based on imported coal. APRL quantified as per RFP....
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....power plant. In the 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. These Guidelines have been issued by the Government of India, which issued the NCDP of 2007. If the grant of LoA/FSA/linkage was to be considered automatic on entering into a PPA, then there was no need for having this criterion for eligibility. The decision in Energy Watchdog and the Policy have not been appreciated correctly. (h) The SHAKTI Policy was notified on 22.5.2017. Those IPPs, which were having PPAs based on domestic coal, but were having no LoA or FSA for coal supply either under NCDP of 2007 or NCDP of 2013, could now participate in the auction and get 100 per cent of their normative requirement of coal supply. Under the SHAKTI Policy, APRL was given coal supply to the full extent of the normative requirements for generating and supply of electricity to the Rajasthan DISCOMS within five years. The SHAKTI Allocation in the year 2018 does not change the fact that APRL had considered imported coal as other coal for 5 years. The change in law, thus, could have been considered only after 5 years. Therefore, the que....
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.... coal from the Central Government put the case of APRL within the scope of change in law. Once they have admitted that bid was based on domestic coal, non-availability of which entitles APRL to claim compensation under the change in law as per Article 10 of the PPA. They cannot wriggle out of their obligation. The eligibility to get coal linkage under the SHAKTI Policy to APRL confirms that the PPA was based on domestic coal. The PPA was based on domestic coal, and the concurrent findings do not suffer from any infirmity or perversity. (f) The non-allocation of domestic coal linkage to APRL is a change in law event as is apparent from various documents, affidavit dated 31.7.2013 and entitlement under the SHAKTI Policy. (g) In Energy Watchdog, this Court recognised the change in NCDP of 2007 as change in law event for a project which did not have any LoA or FSA at the time of bid submission. It was not necessary to have linkage/allocation at the time of submission of the bid. A notification was issued on 26.7.2013 to change the NCDP of 2007. Following change in law events occurred: (i) the decision of Standing Linkage Committee on 14.2.2012; and (ii) the resolution dated 21.....
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....rted 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. .... (emphasis supplied) 29. In the MoU dated 20.3.2008, which was entered into between APRL and the Government of Rajasthan, the Government of Rajasthan had only agreed to provide assistance in securing coal linkage/coal block. Article 2.2 of the MoU is extracted hereunder: 2.2 The State will facilitate smooth implementation of the Project as may be required including making it's best effort to facilitate getting coal linkage/coal block from the Central Government or coal from any other source for the Project. ... (emphasis supplied) 30. The RFP formed part of the bid documents regarding fuel, provided as under: 5. Fuel: The choice of fuel, including but not limited to coal or gas, it's sourcing and transportation is left entirely to the discretion of the Bidder. The Successful Bidder(s) shall bear complete responsibility to tie up the fuel linkage and the infrastructural....
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....percent (50%) of the quantity of coal required for the power station at Normative Availability on an annual basis and supporting computation for the same. 2.54 Million MT with coal having GCV (ARB) of 4250 Kcal/Kg. Supporting computation attached. Copy of the fuel supply agreement(s) for at least fifty percent (50%) of the total the quantity of coal required for a term of at least five (5) years or the term of the PPA (which even is less) for the power station at Normative Availability on an annual basis. Copy of the Fuel Supply Agreement dated 25th June 2009 with Adani Enterprises Ltd. for supply of 3 Million MT of Imported coal up to Sept 2018 is attached. Our Fuel supplier AEL, who is the largest coal trading company of the country, has long term arrangements with coal mines in Indonesia, Australia and South Africa for trading of coal. Particular of documents enclosed in support of the above. FSA dated 25th June 2009 The computation of coal consumption of normative availability was given as under: Computation of coal consumption at Normative Availability Name of the Power Project Total Capacity Kawai Thermal Power Project 1320 MW Particular Domestic....
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.... to provide 1200 MW power at the rates mentioned at Annexure-1 and escalations thereof on domestic coal is based on your commitment that the above rates would be applicable even in case of coal requirement being met by you by way of back up arrangement with imported coal. (emphasis supplied) 35. APRL on 18.12.2009, communicated its unconditional acceptance to the LoI thus: We acknowledge with thank receipt of RRVPNL LoI No. RVPN/CE(NPP&R)/D 81 dated 17th December 2009 in favour of Adani Power Rajasthan Limited (APRL). We have noted content of the LoI and we hereby communicate our "unconditional acceptance" of the same. Please find enclosed herewith duplicate copy of LoI duly signed by authorized signatory, confirming "Accepted Unconditionally. We are making necessary arrangements for submission of Performance Guarantee as per Article 2.2.9 of the final RfP FOR 1200 MW. We shall be grateful if approval of RERC for procurement of additional 200 MW is conveyed at the earliest and the draft PPA, prepared based on our offer/bid, for execution is submitted to us for scrutiny at our end. (emphasis supplied) 36. The PPA entered into between the parties provided inter alia as unde....
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....oal is proposed to be sourced or name and location of the captive mine (as applicable). ­­ 5. Bidder to insert the applicable price mechanism, based on whether the primary fuel is covered under: 1. Administered Price Mechanism ("APM"); or 2. Controlled and notified by an independent Regulator; or 3. Controlled and notified by the Government of India or Government of India Instrumentality. (Applicable only for gas) Not applicable (emphasis supplied) 37. The RERC's order dated 31.5.2010, adopting APRL's tariff Under Section 63 of the Electricity Act, has been relied upon. The same is extracted hereunder: 39. The other important point raised by the party relates to relaxing the qualifying requirements for the fuel in case of M/s. Adani Power Rajasthan Limited. This matter has been elaborately dealt with in the first report of the Bid Evaluation Committee, who found the party to be qualified as far as requirement for fuel is concerned based on tie-up for imported coal and at the same time found the option of use of domestic coal worth consideration on account of likely advantage of lower escalation in tariff for domestic fuel than that of imported coal. The p....
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....12.2009, the following resolution was passed: 3. The L-1 bidder, M/s. Adani Power Rajasthan Ltd., has committed to provide 1200 MW power at the rates mentioned at (1) above irrespective of the availability of domestic coal, by meeting the coal requirements from imported or whatever sources as their backup arrangement. This condition shall be specifically mentioned in the LOI to be issued to L-1 bidder, M/s. Adani Power Rajasthan Ltd., and the Power Purchase Agreement (PPA) to be entered into with them by Rajasthan DISCOMS. (emphasis supplied) (c) APRL unconditionally accepted the LoI. The PPA is a document governing the rights and obligations of the parties. It recognises the possible use of domestic coal. There was no allotment of coal linkage or coal block to APRL until January 2018. As APRL did not receive the domestic coal allocation and thereafter, if there was a change in law affecting such domestic coal, APRL could have possibly claimed change in law. APRL was obliged to supply power even without such domestic coal. (d) Alternatively, it was argued that the PPA was primarily based on domestic coal. The imported coal was a backup arrangement. Even otherwise assuming tha....
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....hat domestic coal escalations would be acceptable to it during the term of the PPA. In the LoI dated 17.12.2009, the offer was accepted, and escalations thereof on domestic coal was based on the commitment that the quoted rates would be applicable even in case of coal requirement being met by APRL by way of a backup arrangement with imported coal. APRL sent an unconditional acceptance on 18.12.2009. Thus, the parties agreed ad idem that bid was evaluated based on domestic coal, and escalations were also based on domestic coal. Accordingly, the PPA was entered into, and primary fuel in the PPA was mentioned to be domestic coal from captive coal block/coal linkage and imported coal as a fallback support arrangement. It was binding on both the parties. 40. APRL applied for long term coal linkage with the Government of Rajasthan on 2.7.2009, i.e., prior to the submission of bid on 6.8.2009. It submitted the bid by adopting linkage coal format, and the tariff was quoted in Rs. /Kwh. It submitted the bid as per RFP of April 2009 Para IX under Format 4.10, Clause 2.4.1, which related to linkage coal format bid, i.e., domestic coal. Under Article 1.1 of the PPA, the primary fuel was menti....
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....ct under 4660 MW capacity to receive domestic coal under special dispensation. 45. It is apparent that the concurrent findings recorded by the RERC, as well as the APTEL, in this regard, do not suffer from any infirmity or perversity, and they are binding. As the scope of appeal Under Section 125 of the Electricity Act is akin to Section 100 of the Code of Civil Procedure and the concurrent findings based upon the facts cannot be disturbed in the appeal as held in DSR Steel (Private) Ltd. v. State of Rajasthan and Ors., MANU/SC/0350/2012 : (2012) 6 SCC 782, Tamil Nadu Generation and Distribution Corporation Limited v. PPN Power Generating Company Private Limited, MANU/SC/0271/2014 : (2014) 11 SCC 53 and Wardha Power Company Limited v. Maharashtra State Electricity Distribution Company Limited and Anr., MANU/SC/0988/2016 : (2016) 16 SCC 541. 46. We also note that once having admitted before the RERC at the time of approval of tariff and evaluated the tariff of domestic coal and making admissions again on 31.7.2013 and 4.8.2017, it is not open to reprobate as parties are not permitted to approbate and reprobate at different stages as laid down in....
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....supply of domestic linkage coal even post grant of coal linkage under the SHAKTI Policy. Rajasthan DISCOMS have not disputed that the introduction of SHAKTI Policy constitutes a Change in Law under the PPA. Their contention is that any shortfall of coal under the SHAKTI FSA by the coal companies is a contractual matter to be sorted out between Adani Rajasthan and the coal companies. We are not persuaded by this argument for the reason that we have already held in GMR Kamalanga case that the contractual conditions or limitations were not present in NCDP 2007 at the time of bid submission by Adani Rajasthan. This contention of Rajasthan DISCOMS is also against the principle laid down in Energy Watchdog judgment. The SHAKTI Policy continues the earlier coal supply restriction to 75% of ACQ. If actual supply of domestic linkage coal under the SHAKTI FSA is higher, it goes without saying that the generator's relief or compensation under the Change in Law provisions would be limited to the actual shortfall in supply of domestic linkage coal. We also note that there is no rational basis to assume that the supply under the SHAKTI FSAs would be higher or better than that under the pre-S....
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....nt of the consumers would be considered for supply of coal through FSA by CIL. Para 5.2 of the NCDP of 2007 provided that for power utilities, including Independent Power Producers (IPPs) and Captive Power Plants, cement sector and sponge iron sector, the present system of linkage committee at the level of the Government would continue. CIL will issue LoA after approval of applications by the Standing Linkage Committee (Long-term). Clause 6.1 provides that new consumers from the State/Central power utilities, CPPs, Independent Power Producers (IPPs), Fertilizers, Cement, and Sponge Iron units may be issued LoA based on prevailing norms and recommendations of the Administrative Ministry. Para 6.1 of the policy is extracted hereunder: 6.1 New consumers from State/Central power utilities, CPPs, Independent Power Producers (IPPs), Fertilizer, Cement and Sponge Iron units may be issued LOA, based on prevailing norms and recommendation of Administrative Ministry, which may inter alia have regard to LoA/Linkage already granted to the consumer of specific sector, existing capacity, requirement for capacity addition during a plan period etc. 51. Para 7 deals with FSAs with new consumers.....
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....emised on the imported coal. In Energy Watchdog, it was opined that only changes in Indian law could be considered under the PPA and not in foreign law. In NCDP dated 26.7.2013, the NCDP of 2007 was modified to the effect that power projects would only get a certain percentage of what was earlier allowable. 54. It is apparent from the decision dated 31.5.2013 of the Standing Linkage Committee (Long-Term) that the application of APRL was kept in abeyance. It applied for coal linkage on 2.7.2009 on the basis of NCDP of 2007. The bid cut-off date was 30.7.2009, 7 days prior to the bid deadline, the NCDP of 2007 was applicable. A decision was taken by the Standing Linkage Committee on 14.2.2012 read with the decision dated 31.5.2013 indicating a shortage in domestic coal and dependence on imported coal. For the shortage of coal, APRL could not have been made to suffer, on that it had no control. It was decided not to issue fresh LoAs, and all pending applications were kept in abeyance. The Cabinet Committee on Economic Affairs decided on 21.6.2013 to reduce coal supply to 65 percent and 75 percent of ACQ for the remaining four years of the 12th Five Year Plan. It allowed passing throu....
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....* the imposition of a requirement for obtaining any Consents, Clearances and Permits which was not required earlier; * a change in the terms and conditions prescribed for obtaining any Consents, Clearances and Permits or the inclusion of any new terms or conditions for obtaining such Consents, Clearances and Permits; except due to any default of the Seller; * any change in tax or introduction of any tax made applicable for supply of power by the Seller as per the terms of this Agreement. but shall not include (i) any change in any withholding tax on income or dividends distributed to the shareholders of the Seller, or (ii) change in respect of UI Charges or frequency intervals by an Appropriate Commission or (iii) any change on account of regulatory measures by the Appropriate Commission including calculation of Availability. 10.2 Application and Principles for computing impact of Change in Law 10.2.1 While determining the consequence of Change in Law under this Article 10, the Parties shall have due regard to the principle that the purpose of compensating the Party affected by such Change in Law, is to restore through monthly Tariff Payment, to the extent contemplated in....
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....neficially affected by a Change in Law. Without prejudice to the factor of materiality or other provisions contained in this Agreement, the obligation to inform the Procurers contained herein shall be material. Provided that in case the Seller has not provided such notice, the Procurers shall have the right to issue such notice to the Seller. 10.4.3 Any notice served pursuant to this Article 10.4.2 shall provide, amongst other things, precise details of: (a) the Change in Law; and (b) the effects on the Seller 10.5 Tariff Adjustment Payment On account of Change in Law 10.5.1 Subject to Article 10.2, the adjustment in monthly Tariff Payment shall be effective from: (i) the date of adoption, promulgation, amendment, re-enactment or repeal of the Law or Change in Law; or (ii) the date of order/judgment of the Competent Court or tribunal or Indian Governmental Instrumentality, if the Change in Law is on account of a change in interpretation of Law. 10.5.2 The payment for Change in Law shall be through Supplementary Bill as mentioned in Article 8.8. However, in case of any change in Tariff by reason of Change in Law, as determined in accordance with this Agreement, the....
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....Year Plan. (iii) To meet its balance FSA obligations, CIL may import coal and supply the same to the willing Thermal Power Plants (TPPs) 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. (v) Mechanism will be explored to supply coal subject to its availability to the TPPs with 4660 MW capacity and other similar cases which are not having any coal linkage but are likely to be commissioned by 31.03.2015, having long term PPAs and a high Bank exposure and without affecting the above decisions. (emphasis supplied) 56. The change in policy and in the terms and conditions prescribed for obtaining any consents, clearances and permits or the inclusion of any new terms or conditions for obtaining such consents, clearances, and permit....
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.... cost for establishing the impact of such change in law and in the case of dispute as to the same, a dispute resolution mechanism as per Article 17 of the PPA is to be resorted to. It is also made clear that compensation is only payable to either party only with effect from the date on which the total increase/decrease exceeds the amount stated therein." (emphasis supplied) It was also held that carrying cost is payable from the date the change in law has taken place, and carrying cost is passed on the restitution principle. Article 10.2.1 of the PPA in question is similar to Article 13.2 considered in Energy Watchdog. The carrying cost is nothing but a compensation towards the time value of month/deferred payment. Article 8.3.5 provides for methodology in case of delayed payment. 59. When there was a change in policy with respect to obtaining coal itself, which was agreed to in the PPA, the change in law would be applicable. In Energy Watchdog it was observed thus: 56. However, insofar as the applicability of Clause 13 to a change in Indian law is concerned, the Respondents are on firm ground. It will be seen that under Clause 13.1.1 if there is a change in any consent, appr....
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....f 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 obligations, CIL may import coal and supply the same to the willing TPPs on cost plus basis. TPPs may also import coal themselves if they so opt. (iii) higher cost of imported coal to be considered for pass through as per modalities suggested by CERC. 3. Ministry of Coal vide letter dated 26-7-2013 has notified the changes in the New Coal Distribution Policy (NCDP) as approved by the CCEA in relation to the coal supply for the next four years of the 12th Plan (copy enclosed). 4. As per decision of the Government, the higher cost of import/market based e-auction coal be considered for being made a pass through on a case-to-case basis by CERC/SERC to the extent of shortfall in the quantity indicated in the LoA/FSA and the CIL supply of domestic coal which would be minimum of 65%, 65%, 67% and 75% of LoA for the remaining four years of the 12th Plan for the already concluded PPAs based on tariff based competitive bidding. 5. The ERCs are advised to consider the request of individual power producers in this reg....
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....s and conditions prescribed for obtaining any consents, clearances, and permits. The change in law does not provide that letter of approval should be issued by CIL, as provided in Article 10.1 relating to change in law. Even if the procedure is changed, that is to be given effect to. In Re. SHAKTI Policy 2017 60. Under the SHAKTI Policy notified on 22.5.2017, those Independent Power Producers (IPPs), who were having PPAs based on domestic coal, but were not having LoA or FSA for coal supply either under NCDP of 2007 or NCDP of 2013, could participate in the auction to get 100 per cent of the normative requirement of coal supply. The eligibility was based upon the fact that the PPA was based upon the domestic supply. Under the SHAKTI Policy, APRL was given coal supply to the full extent of the normative requirements for generating and supplying electricity to the Rajasthan DISCOMS due to aforesaid significant terms in the PPA. 61. It was argued that the imported coal as alternate coal was available for 5 years, as such no relief could have been granted to APRL on the basis of change in law. As we have already discussed that there was a change in law as per Article 10.1; thus, the....
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....f two percent (2%) in excess of the applicable SBAR per annum, on the amount of outstanding payment, calculated on a day to day basis (and compounded with monthly rest), for each day of the delay. The Late Payment Surcharge shall be claimed by the Seller through the Supplementary Bill. 8.8 Payment of Supplementary Bill 8.8.1 Either Party may raise a bill on the other Party (supplementary bill) for payment on account of: i) Adjustments required by the Regional Energy Account (if applicable); ii) Tariff Payment for change in parameters, pursuant to provisions in Schedule 4; or iii) Change in Law as provided in Article 10, and such Supplementary Bill shall be paid by the others party. 8.8.2 The Procurers shall remit all amounts due under a Supplementary Bill raised by the Seller to the Seller's Designated Account by the Due Date and notify the Seller of such remittance on the same day or the Seller shall be eligible to draw such amounts through the Letter of Credit. Similarly, the Seller shall pay all amounts due under a Supplementary Bill raised by Procurer(s) by the Due Date to concerned Procurer's designated bank account and notify such Procurer(s) of such payme....