In a big relief for Adani Power Maharashtra Ltd (APML) and GMR Warora Energy, the Supreme Court dismissed the appeals filed by Maharashtra State Electricity Distribution Company (MSEDCL) and upheld a judgment of the appellate tribunal of electricity (APTEL) in favour of the two power companies.
Hearing the matter on Friday, the SC bench of Justice Bhushan Gavai and Justice Vikram Nath allowed the compensation on account of a change in law for non-supply of committed domestic coal.
Senior counsel A M Singhvi represented Adani while senior counsel M G Ramachandran argued for MSEDCL. The SC observed that the litigation filed by MSEDCL is unwarranted when there are clear guidelines by the ministry of power and committee of economic affairs on the issue.
The apex court passed the judgment in two appeals filed in 2021 by MSEDCL.
The MSEDCL has signed long-term power purchase agreements (PPAs) with Adani Power Maharashtra, the first in 2008 under the Electricity Act, 2003. A clause of the agreement determined the consequence of ‘change in law’ and provided for compensating the affected party through monthly tariff payment, reported TOI.
The case pertains to the change in the law concerning the coal distribution policy from 2007 to 2013 when due to a persistent shortage of domestic coal, a revised mechanism for coal supply to power producers was approved, reported TOI.
In 2013, AMPL said that it should be given compensation due to the 2013 change in law. Following this in July 2018, the Maharashtra Electricity Regulatory Commission (MERC) passed an order that was taken to APTEL which passed an order that MSEDCL was aggrieved with and hence moved the SC.
The SC noted, as reported by TOI, “the stand taken by the distribution companies that, since the loss being sustained by the generating companies is on account of non-fulfillment of obligation by Coal India or Coal companies, they should be relegated to the remedy available to them in law against the Coal companies, is totally unreasonable”.
The top court further said that it had earlier in the ‘Energy Watchdog’ case held that on account of the Change in Law, the generating companies were eligible for compensation to restore the party to the same economic position as if such Change in Law had not occurred.
Had the Change in Law not occurred, the generating companies would have been entitled to the supply as assured by the Coal Companies under the FSA, reported TOI.
“Undisputedly, the claim of APML stands on the basis of the Change in Law. The DISCOMS, which are instrumentalities of the State, cannot be expected to argue contrary to the stand of the Government, which clearly provides that the generators would be entitled to pass-through for the coal required to be imported or purchased from the open market on the ground of Change in Law,” noted the SC.
The SC also said despite a clear legal position and the stand taken by the Centre, “the DISCOMS are taking a stand which is contrary to the stand of the Union of India”.
“We have come across several matters wherein concurrent orders passed by the Regulatory Body and the Appellate Forum are assailed. Such litigation would, in fact, efface the purpose of the Electricity Act,” stated the SC.