JAIPUR VIDYUT VITRAN NIGAM LTD. & ORS. V. ADANI POWER RAJASTHAN LTD. & ANR 2025 INSC 770:

DATE: 23/05/2025

COURT: Suprme Court of India

BENCH: Justice M.M. Sundresh and Justice Rajesh Bindal

FACTS:

Pursuant to the issuance of a Letter of Intent (LOI) to Adani Power Rajasthan Ltd. (the Respondent/Power Generator) in 2009, a Power Purchase Agreement (PPA) was executed between the Appellants, who are the Rajasthan Discoms engaged in the distribution and supply of electricity, and the Respondent, for the supply of 1200 MW of Aggregate Contracted Capacity at a levelized tariff of Rs. 3.238 per unit. This agreement was duly approved by Respondent No. 2. While the said agreement was in force, a Notification was issued in 2017 at the instance of M/s. Coal India Limited (CIL), imposing a levy known as Evacuation Facility Charges (EFC), with effect from December 20, 2017. On the very next day, the Respondent informed Appellant No. 4 that the said Notification constituted a “change in law” event under the terms of the PPA. Upon failing to receive an appropriate response, the Respondent filed a Petition before the Rajasthan Electricity Regulatory Commission (RERC), invoking the provisions of Section 86 of the Electricity Act, 2003, read with Article 10 of the PPA.

The RERC, after considering the matter, rejected certain reliefs but granted some of the other prayers made by the Respondent. Dissatisfied with the refusal of some of its claims, the Respondent preferred an Appeal before the Appellate Tribunal for Electricity (APTEL) under Section 111 of the Electricity Act. Along with the Appeal, the Respondent filed an Application seeking condonation of a delay of 332 days in filing the Appeal, and a separate Application seeking condonation of a delay of 236 days in re-filing the same. Upon hearing both parties, the APTEL allowed both Applications and proceeded to adjudicate the Appeal on merits. The Tribunal held that the said Notification amounted to a “change in law” event and ruled that the Respondent was entitled to compensation from the date of issuance of the Notification. This decision was subsequently challenged before the Hon’ble Supreme Court.

ISSUES:

The primary issues presented in this case revolved around whether the imposition of Evacuation Facility Charges (EFC) by Coal India Limited in 2017 constituted a "change in law" under the Power Purchase Agreement (PPA) between Adani Power Rajasthan Ltd. and the Rajasthan Discoms, and whether the Respondent was entitled to claim compensation for the same. The case also involved procedural questions regarding the delay in filing and re-filing the appeal before the Appellate Tribunal for Electricity (APTEL), and whether such delays could be condoned. Additionally, the Appellants contested the timing and validity of the supplementary bill raised by the Respondent. The courts ultimately upheld the Respondent's claim, confirming that the notification constituted a change in law and that the compensation was justly claimable from the date of the notification.

JUDGEMENT WITH REASONING:

The Supreme Court dismissed the appeal filed by the Rajasthan Discoms, upholding the Appellate Tribunal for Electricity’s (APTEL) decision that the imposition of Evacuation Facility Charges (EFC) constituted a "change in law" under the Power Purchase Agreement (PPA). The Court affirmed the Respondent’s entitlement to tariff adjustment compensation effective from the date of the change in law notification and found no legal or factual basis for the Appellants’ objections, including the timing of the supplementary bill.

The Court reasoned that Article 10 of the PPA comprehensively governs the treatment of "change in law" events, specifically noting that Article 10.2.1 incorporates the principle of restitution. This principle is aimed at restoring the affected party, in this case the power generator, to the same economic position it would have been in had the change in law not occurred. The Court emphasized that Article 10.5.1(i) of the PPA mandates that tariff adjustments due to a change in law are to be applied from the date of such change, which in this instance was December 20, 2017. The Court also clarified that Article 10.5.1(ii), which applies when a change in law results from judicial or governmental reinterpretation, was not applicable here as there was no such reinterpretation involved.

In response to the argument that the supplementary bill should have been raised earlier, the Court held that this contention lacked both legal and factual merit. It highlighted that Respondent No. 1 had promptly notified the change in law on the very next day after the EFC notification was issued. The Court further explained that, as per the PPA, a supplementary bill can only be raised after the competent forum adjudicates the matter, aligning Article 10.5.2 with Article 8.8. Only then could Article 8.6 become relevant, particularly when disputes arise over the quantum of compensation. Since the regulatory and adjudicatory processes had been duly followed and no challenge was made against the final RERC order dated 19.06.2024, the Court concluded that the Appellants’ liability had been rightly established and there was no reason to interfere with the impugned judgment.

ANALYSIS:

This case highlights the importance of contractual certainty and the enforceability of specific clauses in long-term infrastructure agreements, particularly in the power sector. The Supreme Court’s ruling reinforces the principle of restitution embedded within Article 10.2.1 of the Power Purchase Agreement (PPA), ensuring that any unforeseen statutory or regulatory changes, such as the imposition of Evacuation Facility Charges (EFC), do not unduly harm a contracting party's financial viability. By recognizing the EFC notification as a “change in law,” the Court upheld the sanctity of the agreement and ensured that the generator (Adani Power Rajasthan Ltd.) was compensated for increased costs directly arising from regulatory developments. This protects investor interests and promotes legal and commercial predictability in public-private partnerships, particularly in capital-intensive sectors like energy.

The Court’s detailed interpretation of Articles 10.5.1 and 10.5.2 of the PPA, in conjunction with Articles 8.6 and 8.8, provides a significant precedent on the procedural sequencing of claims arising from change in law events. It clarified that compensation claims must follow adjudication by a competent forum before any supplementary billing and dispute resolution can occur. Moreover, by rejecting the Discoms’ procedural objections regarding delay and the timing of the supplementary bill, the Court emphasized substance over form, prioritizing fairness and contractual intent over technical defences. This judgment thus underscores the judiciary’s commitment to balancing regulatory oversight with commercial obligations, ensuring that legitimate claims under a validly executed agreement are not frustrated by procedural technicalities.