TMI Blog2017 (4) TMI 1385X X X X Extracts X X X X X X X X Extracts X X X X ..... n 19th January, 2005, which guidelines have been amended from time to time. Clause 4, in particular, deals with tariff and the appropriate Commission certainly has the jurisdiction to look into whether the tariff determined through the process of bidding accords with clause 4. It is clear that this Court did not give any truncated right to argue force majeure or change of law. This Court explicitly stated that both force majeure and change of law can be argued in all its plenitude to support an order quantifying compensatory tariff so long as the appellants do not claim that they are relieved of performance of the PPAs altogether - the Appellate Tribunal rightly went into force majeure and change of law. Neither was the fundamental basis of the contract dislodged nor was any frustrating event, except for a rise in the price of coal, excluded by clause 12.4, pointed out. Alternative modes of performance were available, albeit at a higher price. This does not lead to the contract, as a whole, being frustrated. Consequently, we are of the view that neither clause 12.3 nor 12.7, referable to Section 32 of the Contract Act, will apply so as to enable the grant of compensatory tari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commission and the Haryana State Regulatory Commission approved the bid documents and the process proposed by GUVNL and the Haryana Utilities, after which Requests for Proposal were issued by both of them. On 2nd/4th January, 2007, Adani Enterprises Consortium submitted its bid for generation and supply of 1000 MW to GUVNL, quoting a levelised tariff of ₹ 2.3495/kWh (Rs.1/kWh as the capacity charge and ₹ 1.3495/kWh as non- escalable energy charge). In the bid, the Consortium indicated that the lead member, Adani Enterprises, had an arrangement for indigenous coal requirement of the project with Gujarat Mineral Development Corporation, as the said Corporation had been allotted a certain coal block in the State of Chhattisgarh. Also, a Memorandum of Understanding was entered into between Adani Enterprises Ltd. and a German Company for supply of non- coking coal of 3 to 5 million tons (imported coal) on a long term basis till the year 2032. A similar Memorandum of Understanding was also entered into between Adani Enterprises and a Japanese agent for supply of 3 to 5 million tons of coal again on a long term basis. The two Memoranda of Understanding were attached to the bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the appropriate Commission under the Act and not the respective State Commissions, which had jurisdiction in the matter. A review petition against this order was dismissed on 16th January, 2013. 7. 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. However, the Commission held that in exercise of the regulatory powers provided under Section 79 of the Act, the Central Commission can provide redressal of grievances to generating companies, considering the larger public interest, and hence constituted a committee to look into the alleged difficulties faced by Adani and to find an acceptable solution thereto. 8. On 16th August, 2013, pursuant to the order dated 2nd April, 2013, the Committee constituted by the Commission submitted a report. Based on the Committee s report, on 21st February, 2014, the Central Commission proceeded to grant compensatory tariff. Appeals and cross-appeals were filed against this order, including cross objections. On 1st August, 2014, cross-objection filed by Adani Power was rejected by the Appellate Tribunal as not maintainab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd learned counsel for the parties. On behalf of the appellants Senior Counsel Shri Ramachandran, and Shri Prashant Bhushan have argued that the liberty given to Adani Power by the order dated 31st March, 2015 of this Court was only limited to support the quantification of compensatory tariff granted by the Central Commission by its order dated 21st February, 2014. Hence, Adani Power is not entitled to raise the issue of force majeure and change in law as a substantive issue, the force majeure claim and the change in law claim having been rejected by the Central Commission in its earlier order; and there being no valid appeal against the said order, force majeure and change in law cannot be gone into. It is further argued, in the alternative, that in any case, force majeure either under Section 56 of the Indian Contract Act, 1872 or under clauses 12.3 and 7 of the respective PPAs make it clear that it must be an unforeseen event or circumstance that wholly or partly prevents the affected party in the performance of its obligations under the agreement. According to learned counsel, Adani voluntarily decided to quote energy charges as non-escalable in order to be competitive and, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l judgment on this aspect. 12. Learned Senior counsel Shri Kapil Sibal, Shri Harish Salve, Dr. Abhishek Manu Singhvi, and Shri C.S. Vaidyanathan, on behalf of the respondents, on the other hand, countered each one of these submissions. According to learned counsel, first and foremost the Central Commission alone would have jurisdiction on the facts of these cases, inasmuch as Sections 79 and 86 form part of one scheme. It was argued by them that all cases fall within either Section 79 or Section 86. It is clear that under Section 86, the State Commissions have only to deal with generation and sale of electricity within the State. When generation and sale takes place outside the State, as is the case here, the State Commission would have no jurisdiction under Section 86, and consequently Section 79(1)(b) has to be read as part of a scheme in which the moment generation and sale of electricity is inter-State and not intra State, the Central Commission alone would have jurisdiction. Judged in this light, the expression composite scheme would only mean that generation and sale of electricity would be in more than one State. For this they also relied on the definition of composite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hanks to a change in law, has certainly hindered performance. They also argued that in any event the change in law clause is very wide and since the PPA deals with imported coal, obviously change in law would cover foreign law. They also went on to add that when the PPA wanted to restrict a particular clause to Indian law, it did so expressly. They also stated that it is significant that neither GUVNL nor Haryana Utilities had filed appeals in the present case, and the Government had in several policy decisions and statements made it clear that in cases like the present, where there is grave unforeseen hardship on account of non-allocation of Indian coal, the rise in cost should be adequately compensated. They, therefore, questioned the locus standi of the consumer groups, who are the only appellants before us, stating that on the estimation made by the respondents, the impact of increase in both cases on tariff would be extremely minimal as opposed to the huge accumulated losses suffered by these entities which would make them fold up. Ultimately, it was argued that even the Central Commission did not give them the entire benefit of rise in price in coal, and consequently in the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abinet Committee for Economic Affairs recognizing the overall shortfall in manufacture of domestic coal and the new coal distribution policy issued in July, 2013 pursuant to the Cabinet Committee which, according to him, are in the nature of binding directions making it clear that as generators of electricity, who depend upon indigenous coal, have been given less coal than was anticipated, should be allowed either to import the coal themselves, or purchase imported coal from Coal India Ltd., with the difference in price being passed through to them. He further referred to and relied upon the revised tariff policy of 28th January, 2016 for the same purpose. Relevant provisions of the Electricity Act, 2003 16. The 2003 Act did away with three earlier statutes in which a completely different regime for generating and supply of electricity was provided for, namely, the Indian Electricity Act, 1910, the Electricity (Supply) Act, 1928 and the Electricity Regulatory Commissions Act, 1998. The Statement of Objects of Reasons for this Act reads as follows: The Electricity Supply Industry in India is presently governed by three enactments namely, the Indian Electricity Act, 1910, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their State Electricity Boards into separate companies. Delhi and Madhya Pradesh have also enacted their Reforms Acts which, inter alia, envisage unbundling/corporatisation of SEBs. 3. With the policy of encouraging private sector participation in generation, transmission and distribution and the objective of distancing the regulatory responsibilities from the Government to the Regulatory Commissions, the need for harmonizing and rationalizing the provisions in the Indian Electricity Act, 1910, the Electricity (Supply) Act, 1948 and the Electricity Regulatory Commissions Act, 1998 in a new self-contained comprehensive legislation arose. Accordingly, it became necessary to enact a new legislation for regulating the electricity supply industry in the country which would replace the existing laws, preserve its core features other than those relating to the mandatory existence of the State Electricity Board and the responsibilities of the State Government and the State Electricity Board with respect to regulating licensees. There is also need to provide for newer concepts like power trading and open access. There is also need to obviate the requirement of each State Government to pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a consumer and a generating company or a trader the price of power would not be regulated and only the transmission and wheeling charges with surcharge would be regulated. (xi) There is provision for a transfer scheme by which company/companies can be created by the State Governments from the State Electricity Boards. The State Governments have the option of continuing with the State Electricity Boards which under the new scheme of things would be a distribution licensee and the State Transmission Utility which would also be owning generation assets. The service conditions of the employees would as a result of restructuring not be inferior. (xii) An Appellate Tribunal has been created for disposal of appeals against the decision of the CERC and State Electricity Regulatory Commissions so that there is speedy disposal of such matters. The State Electricity Regulatory Commission is a mandatory requirement. (xiii) Provisions relating to theft of electricity have a revenue focus. 5. The Bill seeks to replace the Indian Electricity Act, 1910, the Electricity (Supply) Act, 1948 and the Electricity Regulatory Commissions Act, 1998. 6. The Bill seeks to achieve the above ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r; (e) the principles rewarding efficiency in performance; (f) multi-year tariff principles; (g) that the tariff progressively reflects the cost of supply of electricity and also reduces cross-subsidies in the manner specified by the Appropriate Commission; (h) the promotion of co-generation and generation of electricity from renewable sources of energy; (i) the National Electricity Policy and tariff policy: Provided that the terms and conditions for determination of tariff under the Electricity (Supply) Act, 1948, the Electricity Regulatory Commissions Act, 1998 and the enactments specified in the Schedule as they stood immediately before the appointed date, shall continue to apply for a period of one year or until the terms and conditions for tariff are specified under this section, whichever is earlier. 62. Determination of Tariff. (1) The Appropriate Commission shall determine the tariff in accordance with provisions of this Act for (a) supply of electricity by a generating company to a distribution licensee: Provided that the Appropriate Commission may, in case of shortage of supply of electricity, fix the minimum and maximum ceiling of tariff for sale or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f tariff under section 62 shall be made by a generating company or licensee in such manner and accompanied by such fee, as may be determined by regulations. (2) Every applicant shall publish the application, in such abridged form and manner, as may be specified by the Appropriate Commission. (3) The Appropriate Commission shall, within one hundred and twenty days from receipt of an application under sub-section (1) and after considering all suggestions and objections received from the public,- (a) issue a tariff order accepting the application with such modifications or such conditions as may be specified in that order; (b) reject the application for reasons to be recorded in writing if such application is not in accordance with the provisions of this Act and the rules and regulations made thereunder or the provisions of any other law for the time being in force: Provided that an applicant shall be given a reasonable opportunity of being heard before rejecting his application. (4) The Appropriate Commission shall, within seven days of making the order, send a copy of the order to the Appropriate Government, the Authority, and the concerned licensees and to the person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion shall determine only the wheeling charges and surcharge thereon, if any, for the said category of consumers; (b) regulate electricity purchase and procurement process of distribution licensees including the price at which electricity shall be procured from the generating companies or licensees or from other sources through agreements for purchase of power for distribution and supply within the State; (c) facilitate intra-state transmission and wheeling of electricity; (d) issue licences to persons seeking to act as transmission licensees, distribution licensees and electricity traders with respect to their operations within the State; (e) promote cogeneration and generation of electricity from renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity to any person, and also specify, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee; (f) adjudicate upon the disputes between the licensees, and generating companies and to refer any dispute for arbitration; (g) levy fee for the purposes of this Act; (h) specify State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace under the Central Government s guidelines. For another, in a situation where there are no guidelines or in a situation which is not covered by the guidelines, can it be said that the Commission s power to regulate tariff is completely done away with? According to us, this is not a correct way of reading the aforesaid statutory provisions. The first rule of statutory interpretation is that the statute must be read as a whole. As a concomitant of that rule, it is also clear that all the discordant notes struck by the various Sections must be harmonized. Considering the fact that the non-obstante clause advisedly restricts itself to Section 62, we see no good reason to put Section 79 out of the way altogether. The reason why Section 62 alone has been put out of the way is that determination of tariff can take place in one of two ways either under Section 62, where the Commission itself determines the tariff in accordance with the provisions of the Act, (after laying down the terms and conditions for determination of tariff mentioned in Section 61) or under Section 63 where the Commission adopts tariff that is already determined by a transparent process of bidding. In either ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, having jurisdiction under this Act; Sections 25 and 30 also have some bearing and are set out as under : 25. Inter-State, regional and inter-regional transmission. For the purposes of this Part, the Central Government may, make region-wise demarcation of the country, and, from time to time, make such modifications therein as it may consider necessary for the efficient, economical and integrated transmission and supply of electricity, and in particular to facilitate voluntary interconnections and co-ordination of facilities for the inter-State, regional and inter-regional generation and transmission of electricity. 30. Transmission within a State. The State Commission shall facilitate and promote transmission, wheeling and inter-connection arrangements within its territorial jurisdiction for the transmission and supply of electricity by economical and efficient utilisation of the electricity. 22. The scheme that emerges from these Sections is that whenever there is inter-State generation or supply of electricity, it is the Central Government that is involved, and whenever there is intra-State generation or supply of electricity, the State Government or the State Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being in more than one State, this could be referred to as composite . 24. Even otherwise, the expression used in Section 79(1)(b) is that generating companies must enter into or otherwise have a composite scheme . This makes it clear that the expression composite scheme does not have some special meaning it is enough that generating companies have, in any manner, a scheme for generation and sale of electricity which must be in more than one State. 25. We must also hasten to add that the appellant s argument that there must be commonality and uniformity in tariff for a composite scheme does not follow from the Section. 26. Another important facet of dealing with this argument is that the tariff policy dated 6th June, 2006 is the statutory policy which is enunciated under Section 3 of the Electricity Act. The amendment of 28th January, 2016 throws considerable light on the expression composite scheme , which has been defined for the first time as follows: 5.11 (j) Composite Scheme: Sub-section (b) of Section 79(1) of the Act provides that Central Commission shall regulate the tariff of generating company, if such generating company enters into or otherwise have a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant portion of this judgment. By the judgment dated 31st March, 2015, this Court held: 13. By order dated 1-8-2014, the Appellate Tribunal dismissed the cross- objections of the appellant herein as not maintainable. On 16-9-2014, the appellant preferred Appeal No. DFR No. 2355 of 2014 before the Appellate Tribunal against that part of the order dated 2-4-2013 which went against the appellant. Obviously, there was a delay in preferring that appeal. Therefore, the appellant filed an application bearing IA No. 380 of 2014 seeking condonation of delay in preferring the appeal which was rejected by the impugned order. Hence, the instant appeal. 14. The issue before this Court is limited. It is the correctness of the decision of the Appellate Tribunal in declining to condone the delay in preferring the appeal against the order dated 2-4-2013 of the Central Commission. 15. However, elaborate submissions were made regarding the scope of Order 41 Rule 22 of the Code of Civil Procedure, 1908 (for short CPC ), and its applicability to an appeal under Section 111 of the Act by the appellant relying upon earlier decisions of this Court. The respondents submitted that such an enquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o long as the appellant does not seek a declaration, such as the one mentioned above, the appellant is entitled to argue any proposition of law, be it force majeure or change of law in support of the order dated 21-2-2014 quantifying the compensatory tariff, the correctness of which is under challenge before the Appellate Tribunal in Appeal No. 98 of 2014 and Appeal No. 116 of 2014 preferred by the respondents, so long as such an argument is based on the facts which are already pleaded before the Central Commission. 30. This Court dealt with an appeal arising out of an order of the Appellate Tribunal dated 31st October, 2014, in which the Appellate Tribunal declined to condone a delay of 481 days in preferring an appeal against an order dated 2nd April, 2013. 31. As has been stated by this Court, the issue before the Court was limited. This Court held that the appellant is entitled to argue force majeure and change in law in pending Appeals Nos.98 and 116 of 2014. This was because what was concluded by the Central Commission was force majeure and change of law for the purpose of seeking the relief of declaration of frustration of the contract between the appellant and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promise for any loss which such promisee sustains through the non-performance of the promise. 33. Prior to the decision in Taylor vs. Caldwell, (1861-73) All ER Rep 24, the law in England was extremely rigid. A contract had to be performed, notwithstanding the fact that it had become impossible of performance, owing to some unforeseen event, after it was made, which was not the fault of either of the parties to the contract. This rigidity of the common law in which the absolute sanctity of contract was upheld was loosened somewhat by the decision in Taylor vs. Caldwell in which it was held that if some unforeseen event occurs during the performance of a contract which makes it impossible of performance, in the sense that the fundamental basis of the contract goes, it need not be further performed, as insisting upon such performance would be unjust. 34. The law in India has been laid down in the seminal decision of Satyabrata Ghose v. Mugneeram Bangur Co., 1954 SCR 310. The second paragraph of Section 56 has been adverted to, and it was stated that this is exhaust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trated merely because the circumstances in which it was made are altered. The Courts have no general power to absolve a party from the performance of its part of the contract merely because its performance has become onerous on account of an unforeseen turn of events. 37. It has also been held that applying the doctrine of frustration must always be within narrow limits. In an instructive English judgment namely, Tsakiroglou Co. Ltd. v. Noblee Thorl GmbH, 1961 (2) All ER 179, despite the closure of the Suez canal, and despite the fact that the customary route for shipping the goods was only through the Suez canal, it was held that the contract of sale of groundnuts in that case was not frustrated, even though it would have to be performed by an alternative mode of performance which was much more expensive, namely, that the ship would now have to go around the Cape of Good Hope, which is three times the distance from Hamburg to Port Sudan. The freight for such journey was also double. Despite this, the House of Lords held that even though the contract had become more onerous to perform, it was not fundamentally altered. Where performance is otherwise possible, it is clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances. 40. It is clear from the above that the doctrine of frustration cannot apply to these cases as the fundamental basis of the PPAs remains unaltered. Nowhere do the PPAs state that coal is to be procured only from Indonesia at a particular price. In fact, it is clear on a reading of the PPA as a whole that the price payable for the supply of coal is entirely for the person who sets up the power plant to bear. The fact that the fuel supply agreement has to be appended to the PPA is only to indicate that the raw material for the working of the plant is there and is in order. It is clear that an unexpected rise in the price of coal will not absolve the generating companies from performing their part of the contract for the very good reason that when they submitted their bids, this was a risk they knowingly took. We are of the view that the mere fact that the bid may be non-escalable does not mean that the respondents are precluded from raising the plea of frustration, if otherwise it is available in law and can be pleaded by them. But the fact that a non-escalable tariff has been paid for, for example, in the Adani case, is a factor which may be taken into account only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riot, insurrection, terrorist or military action; or Radio active contamination or ionising radiation originating from a source in India or resulting from another Indirect Non Natural Force Majeure Event excluding circumstances where the source or cause of contamination or radiation is brought or has been brought into or near the site by the affected party or those employed or engaged by the affected party; or Industry wide strikes and labor disturbances having a nationwide impact in India. 12.7 Available Relief for a Force Majeure Event Subject to this Article 12: No Party shall be in breach of its obligations pursuant to this Agreement to the extent that the performance of its obligations was prevented, hindered or delayed due to a Force Majeure Event; Every Party shall be entitled to claim relief in relation to a Force Majeure Event in regard to its obligations, including but not limited to those specified under Article 4.5. For the avoidance of doubt, it is clarified that no Tariff shall be paid by the Procurers for the part of Contracted Capacity affected by a Natural Force Majeure Event affecting the Seller, for the duration of such Natural Force Majeure Event. Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of the Power Station continues to be reduced below eighty (80) percent as a result of a Direct Non Natural Force Majeure of any kind, the Seller may elect in a written notice to the Procurers, to deem the Availability of the Power Station to be eighty (80) percentage from the end of such period, regardless of its actual Available Capacity. In such a case, the Procurers shall be liable to make payment to the Seller of Capacity Charges calculated on such deemed Normative Availability, after the cessation of the effects of Non Natural Direct Force Majeure in the form of an increase in Capacity Charge. Provided such Capacity Charge increase shall be determined by CERC on the basis of putting the Seller in the same economic position as the Seller would have been in case the Seller had been paid Capacity Charges in a situation where the Direct Non Natural Force Majeure had not occurred. For so long as the Seller is claiming relief due to any Non Natural Force Majeure Event (or Natural Force Majeure Event affecting the Procurer/s) under this Agreement, the Procurers may from time to time on one (1) days notice inspect the Project and the Seller shall provide Procurer s personnel wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated Contracted Capacity. 42. It has strongly been contended by counsel for the respondents that, first and foremost, the force majeure clause is not exhaustive, but is only inclusive. Further, it may wholly or partly prevent an affected party from performance of obligations under the agreement. Rise in the price of Indonesian coal, according to them, was unforeseen inasmuch as the PPAs have been entered into sometime in 2006 to 2008, and the rise in price took place only in 2010 and 2011. Such rise in price is also not within their control at all and, therefore, clause 12.3 read with clause 12.7 would apply. They further argued that the force majeure clause in the present case went further and stated that so long as performance of their obligation was hindered due to a force majeure event, they can claim compensatory tariff. 43. First and foremost, the respondents are correct in stating that the force majeure clause does not exhaust the possibility of unforeseen events occurring outside natural and/or non-natural events. But the thrust of their argument was really that so long as their performance is hindered by an unforeseen event, the clause applies. Chitty on Contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... navian ships, and although the difficulty in obtaining tonnage may be reflected in the increase of freight, it was not a mere matter of increase of freight; if so, there were standing contracts that ought to have been fulfilled. Counsel for the respondents urged that certain shipowners, for reasons of their own, chose not to fulfil standing contracts. It was not only shipowners but pulp buyers and sellers. The whole trade was dislocated, by reason of the difficulty that had arisen in tonnage. It seems to me that the language of Lord Dunedin in Tennants, Ld. v. Wilson Co. is applicable to the present case: Where I think, with deference to the learned judges, the majority of the Court below have gone wrong is that they have seemingly assumed that price was the only drawback. I do not think that price as price has anything to do with it. Price may be evidence, but it is only one of many kinds of evidence as to shortage. If the appellants had alleged nothing but advanced price they would have failed. But they have shown much more. That is exactly so here. Price, as price only, would not have affected it. They were all standing contracts, but the position has so changed by reason of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciate a submission that in the alternative Section 56 will apply. As has been held in particular, in the Satyabrata Ghose case, when a contract contains a force majeure clause which on construction by the Court is held attracted to the facts of the case, Section 56 can have no application. On this short ground, this alternative submission stands disposed of. Change in Law 46. It has been submitted on behalf of the counsel for the respondents, that the guidelines of 19th January, 2005, as amended by the 18th August, 2006 amendment, make it clear that any change in law, either abroad or in India, would result in the consequential rise in price of coal being given to the power generators. Since various provisions of the guidelines as well as the power purchase agreements are referred to, we set them out herein: Guidelines Clause 2.3. 2.3 Unless explicitly specified in these guidelines, the provisions of these guidelines shall be binding on the procurer. The process to be adopted in event of any deviation proposed from these guidelines is specified later in these guidelines under para 5.16. Clause 4.3 4.3. Tariffs shall be designated in Indian Rupees only. Foreign excha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1996. The ADR shall be mandatory and time-bound to minimize disputes regarding the bid process and the documentation thereof. If the ADR fails to resolve the dispute, the same will be subject to jurisdiction of the appropriate Regulatory Commission under the provisions of the Electricity Act, 2003. Clause 5.16 (new) Deviation from process defined in the guidelines 5.16 In case there is any deviation from these guidelines, the same shall be subject to approval by the Appropriate Commission. The Appropriate Commission shall approve or require modification to the bid documents within a reasonable time not exceeding 90 days. Clause 5.17 (new) Arbitration Clause 5.17 Where any dispute arises claiming any change in or regarding determination of the tariff or any tariff related matters, or which partly or wholly could result in change in tariff, such dispute shall be adjudicated by the Appropriate Commission. All other disputes shall be resolved by arbitration under the Indian Arbitration and Conciliation Act, 1996. Power purchase agreement Bid Deadline shall mean the last date for submission of the Bid in response to the RFP, specified in Clause 2.8 of the RFP; Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any Law by a competent Court of law, tribunal or Indian Governmental Instrumentality provided such Court of law, tribunal or Indian Governmental Instrumentality is final authority under law for such interpretation or (iii) change in any consents, approvals or licenses available or obtained for the Project, otherwise than for default of the Seller, which results in any change in any cost of or revenue from the business of selling electricity by the Seller to the Procurers under the terms of this Agreement, or (iv) any change in the (a) Declared value of Land for the Project or (b) the cost of implementation of resettlement and rehabilitation package of the land for the Project mentioned in the RFP or (c) the cost of implementing Environmental Management Plan for the Power Station mentioned in the RFP, indicated under the RFP and the PPA; 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. Provided that if Government of India does not extend the income tax holiday for power generation projects under Section 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with Article 13.2 and wishes to claim a Change in Law under this Article, it shall give notice to the Procurers of such Change in Law as soon as reasonably practicable after becoming aware of the same or should reasonably have known of the Change in Law. 13.3.2 Notwithstanding Article 13.3.1, the Seller shall be obliged to serve a notice to all the Procurers under this Article 13.3.2 if it is beneficially 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 jointly have the right to issue such notice to the Seller. 13.3.3 Any notice served pursuant to this Article 13.3.2 shall provide, amongst other things, precise details of: (a) the Change in Law; and (b) the effects on the Seller of the matters referred to in Article 13.2. 13.4 Tariff Adjustment Payment on account of Change in Law 13.4.1 Subject to Article 13.2, the adjustment in Monthly Tariff Payment shall be effective from: (i) the date of adoption, promulgation, amendment, re-enactm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have to be read in the light of the PPA provisions and so read it would not include changes in Indonesian law, being foreign and not Indian Law. 48. Both the guidelines and the model PPA, of which clause 13 is a part, have been drafted by the Central Government itself. It is, therefore, clear that the PPA only fleshes out what is mentioned in clause 4.7 of the guidelines, and goes on to explain what the expression any change in law means. This being the case, it is clear that the definition of law speaks of all laws including electricity laws in force in India. Electricity laws, as has been seen from the definition, means the Electricity Act, rules and regulations made thereunder from time to time, and any other law pertaining to electricity. This being so, it is clear that the expression in force in India in the definition of law goes with all laws . This is for the reason that otherwise the said expression would become tautologous, as electricity laws that are in force in India are already referred to in the definition of electricity laws as contained in the PPA. Once this is clear, at least textually it is clear that all laws would have to be read with in force ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law and Electricity Laws leads unequivocally to the conclusion that it refers only to the law of India, it would be unsafe to rely upon the other clauses of the agreement where Indian law is specifically mentioned to negate this conclusion. 52. It was also argued, placing reliance upon the fact that a commercial contract is to be interpreted in a manner which gives business efficacy to such contract, that the subject matter of the PPA being imported coal , obviously the expression any law would refer to laws governing coal that is imported from other countries. We are afraid, we cannot agree with this argument. There are many PPAs entered into with different generators. Some generators may source fuel only from India. Others, as is the case in the Adani Haryana matter, would source fuel to the extent of 70% from India and 30% from abroad, whereas other generators, as in the case of Gujarat Adani and the Coastal case, would source coal wholly from abroad. The meaning of the expression change in law in clause 13 cannot depend upon whether coal is sourced in a particular PPA from outside India or within India. The meaning will have to remain the same whether coal is sourc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l quantity of coal mentioned in the Letter of Assurance (LOAs) for a period of 20 years with a trigger level of 80% for levy of disincentive and 90% for levy of incentive. Subsequently, MOC indicated that CIL will not be able to supply domestic coal at 80% level of ACQ and coal will have to be imported by CIL to bridge the gap. The issue of increased cost of power due to import of coal/e-auction and its impact on the tariff of concluded PPAs were also discussed and CERC s advice sought. 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 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. Ministr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would facilitate setting up of generation capacities specifically for meeting such requirements. However, some of the competitively bid projects as per the guidelines dated 19th January, 2005 have experienced difficulties in getting the required quantity of coal from Coal India Limited (CIL). In case of reduced quantity of domestic coal supplied by CIL, vis- -vis the assured quantity or quantity indicated in Letter of Assurance/FSA the cost of imported/market based e-auction coal procured for making up the shortfall, shall be considered for being made a pass through by Appropriate Commission on a case to case basis, as per advisory issued by Ministry of Power vide OM NO.FU-12/2011-IPC (Vol-III) dated 31.7.2013. Both the letter dated 31st July, 2013 and the revised tariff policy are statutory documents being issued under Section 3 of the Act and have the force of law. This being so, it is clear that so far as the procurement of Indian coal is concerned, to the extent that the supply from Coal India and other Indian sources is cut down, the PPA read with these documents provides in clause 13.2 that while determining the consequences of change in law, parties shall have due regard ..... X X X X Extracts X X X X X X X X Extracts X X X X
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