Supreme Court upholds compensation for Adani and GMR in case of non-supply of coal
The Supreme Court has granted relief to Adani Power Maharashtra Ltd (APML) and GMR Warora Energy by dismissing appeals filed by Maharashtra State Electricity Distribution Company (MSEDCL) and upholding a judgment of the Appellate Tribunal of Electricity (APTEL) in favour of the two power companies.
During the hearing on Friday, Justice Bhushan Gavai and Justice Vikram Nath allowed compensation for the non-supply of committed domestic coal due to a change in the law.
Adani was represented by senior counsel A M Singhvi, while senior counsel M G Ramachandran represented MSEDCL. The Supreme Court observed that MSEDCL’s litigation was unnecessary, as the Ministry of Power and the Committee of Economic Affairs have clear guidelines.
According to TOI, Maharashtra State Electricity Distribution Company Limited (MSEDCL) signed long-term power purchase agreements (PPAs) with Adani Power Maharashtra in 2008 under the Electricity Act of 2003. The agreement included a clause that determined the consequences of a ‘change in law’ and provided for compensating the affected party through monthly tariff payments.
TOI reported that the case relates to the change in the law regarding the coal distribution policy from 2007 to 2013. Due to a persistent shortage of domestic coal during this period, a revised mechanism for coal supply to power producers was approved.
In 2013, Adani Power Maharashtra Ltd (APML) requested compensation due to the change in law. In July 2018, the Maharashtra Electricity Regulatory Commission (MERC) issued an order, which was challenged by MSEDCL and taken to the Appellate Tribunal for Electricity (APTEL). APTEL’s judgment was in favour of the power companies, and MSEDCL then appealed to the Supreme Court.
According to TOI, the SC remarked that the argument presented by the distribution companies, stating that the loss suffered by the generating companies due to non-fulfilment of obligation by Coal India or Coal companies, should be dealt with in law against the Coal companies, was not reasonable.
The apex court also referred to the ‘Energy Watchdog’ case and noted that the generating companies were entitled to compensation due to the Change in Law, which would restore the parties to the same economic position as if the Change in Law had not occurred.
TOI reported that the generating companies would have been eligible for assured supply by the Coal Companies under the FSA had the Change in Law not occurred.
According to a report by TOI, the SC noted that “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,” adding that APML’s claim was based on the Change in Law.
The SC also remarked that, despite the Centre’s clear legal position and stance, “the DISCOMS are taking a stand which is contrary to the stand of the Union of India.”
The SC commented that it had encountered several cases where concurrent orders passed by the Regulatory Body and the Appellate Forum were challenged, and such litigation would efface the purpose of the Electricity Act. This was reported by TOI.
Recommended reading: Alex Murdaugh convicted of killing his wife and son: Everthing you need to know!
