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Airtract Monika Mukherjee Lets understand the use of law together.

Case Brief: Energy Watchdog Vs. Central Electricity Regulatory on 11th April, 2017. 28 June, 2020   

Bench: Pinaki Chandra Ghose, Rohinton Fali Nariman

Facts:-

In this case, the Adani Enterprises Consortium, who was selected by GUVNL as the successful bidder indicated that they already had an arrangement with Gujarat Mineral Development Corporation. And a Memorandum of Understanding was entered into with German Company and with a Japanese agent. Adani Power was also declared as the successful bidder in Haryana on 17th July, 2008. Every act was in according to the guidelines, which the Central Government issued on 19th January, 2005, which were amended from time to time.

The Haryana State Commission and The Gujarat State Commission adopted the tariff on 31st July, 2008 and 20th December, 2007 respectively. And then, Adani Consortium signed several Power Purchase Agreements for different projects.

Then, a sudden change in law in Indonesia occur in 2010 and 2011, which aligned the export price of coal from Indonesia to international market prices instead of the price that was prevailing for the last 40 years.

Therefore, Adani Power filed a petition before the Central Electricity Regulatory Commission seeking relief either discharge them from the performance of the PPA on account of frustration, or to evolve a mechanism to restore the petitioners to the same economic condition prior to occurrence of the change in law in Indonesian Regulation.

On 16th October, 2012, the Central Commission held that the Power Purchase Agreements entered into by Adani in both the cases constituted a composite scheme for generation and sale of electricity. So, being an appropriate Commission and not the respective State Commissions, it does not had jurisdiction in the matter.

Then, a review petition was again filled against this order and on 2nd April, 2013, the Central Commission passed an order, whereby the claim of Adani Power on the grounds of force majeure and/or change in law was held not to be admissible but it can provide redressal of grievances under Section 79 of the Act.

The Committee submitted a report, rejecting the cross-objection filed by Adani Power and on 31st October, 2014, the Appellate Tribunal rejected the prayer for condonation of delay. So, Adani Power filed an appeal before the Supreme Court.

 

Issue:-

Whether the decision of the Appellate Tribunal in declining to condone the delay in preferring the appeal against the order dated 2nd April, 2013 of the Central Commission was correct.

 

Judgment:-

Supreme Court, in its judgement held:

1)      Section 63 of the Electricity Act, 2003 provides for procurement of power and determination of tariff by a transparent competitive bidding process. The appropriate Commission only “adopts” tariff which is already determined through a transparent process of bidding which must be in accordance with the guidelines issued by the Central Government. Therefore, the appropriate Commission certainly has the jurisdiction to look into whether the tariff determined through the process of bidding accords because of the following points:-

1.1.            Tariff has been determined through a transparent process of bidding.

1.2.            Guidelines have been issued under this Section on 19th January, 2005 by the Central Government.

2.       “Composite scheme” under Section 79(1) (b) is that the generating companies can have, in any manner, a scheme for generation and sale of electricity which must be in more than one State.

3.       Therefore, in answering about the jurisdiction of the Central Commission, the Supreme Court finds it necessary to set out Section 2(5) of the Act which, which gives the definition of appropriate Government.

 

4.       The Court in dealing with an appeal arising out of an order in which the Appellate Tribunal declined to condone a delay of 481 days said that, as long as the appellant is not desirous of seeking a declaration that the appellant is relieved of the obligation to perform the contracts in question, the appellant is entitled to argue any proposition of law, be it “force majeure” or “change of law” in support quantifying the compensatory tariff.

5.       In the context, that the rise in price of coal consequent to change in Indonesian law would be a force majeure event which would entitle the respondents to claim compensatory tariff, the Supreme Court relied on Sections 32 and Section 56 of the Indian Contract Act, 1872, governing “force majeure”.

The Court concluded that the Procurer shall pay the Tariff to the Seller, provided during such period of Natural Force Majeure Event for the balance part of the Contracted Capacity and the balance part of the Power Station is stated to be available for scheduling and dispatch as per availability- based tariff for supply of power.

Hence, the Supreme Court set aside the Appellate Tribunal’s judgment and the Commission’s orders following the said judgment and also directed the Central Electricity Regulatory Commission to go into the matter afresh and determine the relief, which should be granted to those power generators.

Finally, the Tribunal, agreeing with the Commission, held that generation and sale of power by Adani Power to more than one state was a composite scheme within the meaning of Section 79(1) (b) of the Act and the Central Commission have jurisdiction to proceed further in the matter. The Commission has determined the amount for the compensatory tariff to be granted due to force majeure event by its order dated 6th December, 2016.

 

contract law force majeure

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