JSA represented Adani before the Appellate Tribunal for Electricity (“APTEL”) in an appeal filed against the order of MERC dated 03.08.2018 (“Impugned Order”). Adani assailed the Impugned Order of MERC which denied Change in Law reliefs to Adani for the additional recurring expenditure incurred on account of levy of Evacuation Facility Charges (on despatch of coal) through Coal India Limited’s (“Coal India”) notification dated 19.12.2017.
On 22nd March 2022, APTEL set aside the Impugned Order and held that levy of Evacuation Facility Charges through Coal India’s notification has force of law and qualifies as a Change in Law event. While deciding the issue in favour of Adani, APTEL made the following observations which are significant and make the Judgment a landmark Judgment in the power sector: –
- Coal India manages coal mines in India in terms of Coal Mines (Nationalization) Act, 1973, and is statutorily empowered to determine the prices of coal.
- Coal India’s notification has all the trappings of a ‘law’ as (i) it admittedly applies in rem, (ii) there is no element of mutuality (in absence of contract with generator), (iii) it is a statutory levy, and (iv) it binds the conduct of the parties.
- Coal India being a Governmental Instrumentality, the notifications, circulars, etc. issued by it have force of law under Article 77(3) of the Constitution of India, 1950.
- An instrument can have force of law even without it being published in the official gazette. The purpose of publication in official gazette is merely for facilitating dissemination of knowledge of law, statutes, etc. to the public at large.
- In competitive bidding guidelines governed by Section 63 of the Electricity Act, 2003, the bidder only assumes the price of coal to the extent of its mitigation by escalation index. Central Electricity Regulatory Commission in several of its Orders has clarified that Evacuation Facility Charges is not covered under escalation index.
- To restitute Adani, rate prescribed for Late Payment Surcharge (“LPS”) is to be considered for the recovery of carrying cost.
The judgment is significant as it clears the air on the issue that whether the notifications issued by Coal India have a force of law. The judgment not only lays to rest the question that whether the levy of Evacuation Facility Charges by Coal India would qualify as a Change in Law event, but also addresses the significant questions regarding the requirement of publication in an official gazette, and basic characteristics of ‘law’. Most importantly, the judgment emphasizes upon the significance of restitution in Change in Law claims by allowing carrying cost at the rate of LPS as provided under PPA.
This judgment will hold the field for two aspects –
- For the first time, APTEL has held any notification by Coal India Limited to qualify as Change in Law event
- Carrying cost to be paid at the rate prescribed for LPS under the PPA.
JSA team comprised Lead Partner – Poonam Verma, Associate – Saunak Kumar Rajguru, Associate – Ankitesh Ojha.