Energy Watchdog v. Central Electricity Regulatory Commission

Power generators won competitive bids to supply electricity at fixed tariffs. When Indonesian coal prices rose, they asked for extra tariff. Their first ground was force majeure (an event outside the parties' control that a contract treats as an excuse). Their second ground was change in law (a defined event that changes the cost of performing). The Supreme Court held that a rise in coal price is not force majeure. It allowed relief only for a change in Indian law on coal supply (paras 40-45, 53-54).

Quick Revision

Read the full judgment: Supreme Court of India (sci.gov.in)

Parties

Energy Watchdog — appellant in Civil Appeal Nos. 5399-5400 of 2016, the lead appeal (title page).

Prayas (Energy Group) — appellant in Civil Appeal Nos. 5347 and 5348 of 2016. The Court took the facts from No. 5348 of 2016 (para 1).

Punjab State Power Corpn. Ltd. — appellant in Civil Appeal No. 5364 of 2016; Coastal Gujarat Power Ltd. and others are the respondents (title page).

Ajmer Vidyut Nigam Ltd. and Ors. — appellants in Civil Appeal No. 5346 of 2016 (title page).

Maharashtra State Electricity Distribution Company Ltd. — appellant in Civil Appeal Nos. 5351-5352 of 2016 (title page).

GRIDCO Ltd. — appellant in Civil Appeal No. 5415 of 2016; GMR-Kamalanga Energy Ltd. and others are the respondents (title page).

M/s Coastal Gujarat Power Ltd. — appellant in Civil Appeal Nos. 9635-9642 of 2016 and No. 9035 of 2014 (title page).

Central Electricity Regulatory Commission (the Central Commission) and Ors. — respondents in the appeals against the Tribunal's judgment. The Commission held it was the appropriate Commission (paras 6-7).

Adani Power — the generating company that petitioned the Central Commission and won the Tribunal's ruling. It supplied power to Gujarat and Haryana from the Mundra project (paras 4-5, 9).

Gujarat Urja Vikas Nigam Limited (GUVNL) and the Haryana Utilities — the buyers (procurers) under the PPAs. They did not appeal (paras 2-5, 14).

Union of India — appeared through the Attorney General, who said he was not interested in the outcome (para 15).

Procedural History

1. 5 July 2012: Adani Power filed Petition No. 155 of 2012 before the Central Commission under Section 79. It asked to be discharged on the ground of frustration, or for a mechanism to restore its earlier economic position (para 5).
2. 16 October 2012: the Central Commission held the two PPAs formed a composite scheme under Section 79(1)(b). It held it, and not the State Commissions, had jurisdiction (para 6).
3. 16 January 2013: a review petition against that order was dismissed (para 6).
4. 2 April 2013: the Central Commission held Adani Power's force majeure and change in law claims not admissible. It used its regulatory powers under Section 79 and constituted a committee to look into Adani's difficulties (para 7).
5. 16 August 2013: the Committee submitted its report (para 8).
6. 21 February 2014: the Central Commission granted compensatory tariff. Appeals, cross-appeals and cross-objections followed (para 8).
7. 1 August 2014: the Appellate Tribunal rejected Adani Power's cross-objection as not maintainable (paras 8, 29).
8. 16 September 2014: Adani Power appealed against the part of the 2 April 2013 order that went against it (para 29).
9. 31 October 2014: the Appellate Tribunal refused to condone a delay of 481 days in that appeal. Adani Power filed an appeal in the Supreme Court (paras 8, 29-30).
10. 31 March 2015: the Supreme Court held that Adani Power could argue force majeure or change in law to support the 21 February 2014 order. It could do so on facts already pleaded before the Central Commission (paras 8, 29).
11. 7 April 2016: the Appellate Tribunal for Electricity gave the impugned judgment (the judgment under challenge). It upheld Central Commission jurisdiction and found force majeure made out. It reversed the Commission on the use of regulatory powers under Section 79, and held foreign law and Government policies were not law for change in law. It remanded the matter to the Commission to find the impact of force majeure (paras 1, 9).
12. 6 December 2016: the Commission passed an order on compensatory tariff on account of force majeure (para 9).
13. Appeals against the Tribunal's judgment were filed in the Supreme Court. This judgment covers all of them (para 1).

Facts

1. On 19 January 2005, the Central Government issued guidelines under Section 63 of the Electricity Act, 2003. They were amended from time to time (para 2).
2. On 1 February 2006, GUVNL issued a public notice for long-term supply of power under three competitive bid processes. Bidders could quote escalable, non-escalable or partly escalable tariffs. The lowest levelised tariff won (para 2).
3. On 25 May 2006, the Haryana Utilities began a separate bidding process to buy 2000 MW on a long-term basis. Both State Commissions approved the bid documents, and Requests for Proposal were issued (para 3).
4. On 2/4 January 2007, Adani Enterprises Consortium bid to supply 1000 MW to GUVNL. Its levelised tariff was Rs.2.3495/kWh, made of Rs.1/kWh capacity charge and Rs.1.3495/kWh non-escalable energy charge (para 3).
5. The bid said Adani Enterprises had an arrangement for indigenous coal with Gujarat Mineral Development Corporation, which had a coal block in Chhattisgarh. Adani Enterprises also had a Memorandum of Understanding with a German company for 3 to 5 million tons of imported non-coking coal till 2032. A similar MoU with a Japanese agent was also attached (para 3).
6. On 11 January 2007, GUVNL selected the Consortium as successful bidder and issued a Letter of Intent (para 4).
7. On 2 February 2007, GUVNL and Adani Power signed a Power Purchase Agreement (a set of promises the parties accept) (PPA) for supply from a project at Korba in Chhattisgarh. The project was changed to Mundra in Gujarat by a supplementary PPA on 18 April 2007 (para 4).
8. A Ministry letter of 18 March 2007 set out a coal distribution policy. A policy of 18 October 2007 said coal might not be given for the entire quantity allocated (paras 53-54).
9. On 24 November 2007, Adani Power bid to supply 1425 MW to the Haryana Utilities from Mundra. The levelised tariff was Rs.2.94/kWh and the energy charges were non-escalable (para 5).
10. On 20 December 2007, the Gujarat Commission adopted the tariff under Section 63 (para 5).
11. On 17 July 2008, Adani Power was declared successful bidder in Haryana for 1424 MW contracted capacity, and a Letter of Intent was issued. Two PPAs were signed for 712 MW each with two Haryana entities. The Haryana Commission adopted the tariff under Section 63 on 31 July 2008 (para 5).
12. In 2010 and 2011, a change in law in Indonesia aligned the export price of Indonesian coal with international market prices. The earlier price had prevailed for 40 years (para 5).
13. In June and July 2013, the Government decided on a revised coal arrangement. Power projects would get only a set percentage of coal allowed earlier. A Resolution of 21 June 2013 led to a Ministry of Power letter of 31 July 2013 (para 53).
14. On 28 January 2016, the Central Government notified a revised Tariff Policy (paras 26, 53).

Issues Raised

The judgment does not list issues in numbered form. These are the questions the Court decides, in the order of its own headings.

1. How is Section 63 to be read with Section 79 and the other provisions? Can the Central Commission use its regulatory power over a tariff adopted under Section 63 (para 18)?
2. Does the Central Commission have jurisdiction? What does composite scheme in Section 79(1)(b) mean (paras 20-27)?
3. Did the Supreme Court order of 31 March 2015 limit the right to argue force majeure and change in law (paras 28-31)?
4. Is force majeure, or frustration, made out under Sections 32 and 56 of the Contract Act and clause 12 of the PPA (paras 32-45)?
5. Does change in law under the guidelines and clause 13 of the PPA cover Indonesian law, or Indian policies (paras 46-54)?

Arguments Contended

For the appellants, through Senior Counsel Shri Ramachandran and Shri Prashant Bhushan:

• The liberty given by the order of 31 March 2015 was only to support quantification of the compensatory tariff granted on 21 February 2014 (para 10).
• Adani Power cannot raise force majeure and change in law as a substantive issue. The Central Commission had rejected both claims, and no valid appeal was filed against that order (para 10).
• In the alternative, force majeure under Section 56 or under clauses 12.3 and 7 needs an unforeseen event that wholly or partly prevents performance (para 10).
• Adani voluntarily quoted non-escalable energy charges to win the contract. It cannot now turn that into an escalable tariff by pleading force majeure (para 10).
• The bid was not premised on imported coal from Indonesia only. It was open to Adani to get coal from any source (para 10).
• The price of coal is the price of raw material. A contract is not frustrated because it becomes commercially onerous, as clause 12.4 of the PPA says (para 10).
• The fundamental basis of the PPAs was not the price of Indonesian coal (para 10).
• Section 63 is a standalone provision and applies notwithstanding Section 62 (para 11).
• Under Section 62 read with Sections 61 and 64, the Commission determines tariff. Under Section 63 it only adopts tariff found through a transparent bidding process (para 11).
• So there is no residuary power in Section 79 or elsewhere to fix compensatory tariffs once the tariff is adopted. Such a tariff can be changed only under the Central Government's guidelines (para 11).
• The Central Commission has no jurisdiction because there is no composite scheme. The PPAs were independent, with different tariffs and different generating units, selected in different bidding processes (para 11).
• So no single composite scheme with uniform tariffs exists, and the State Commissions alone have jurisdiction (para 11).
• There is no change in law. The Commission said change in law applies to Indian law, not Indonesian law. A change in Indian tariff policy is also not a change in law (para 11).
• They supported the Tribunal's judgment on the change in law issue (para 11).

For the respondents, through Senior Counsel Shri Kapil Sibal, Shri Harish Salve, Dr. Abhishek Manu Singhvi and Shri C.S. Vaidyanathan:

• Only the Central Commission has jurisdiction, because Sections 79 and 86 form one scheme (para 12).
• Under Section 86, State Commissions deal only with generation and sale of electricity within the State. Where generation and sale takes place outside the State, they have no jurisdiction (para 12).
• Section 79(1)(b) is part of that scheme. Once generation and sale is inter-State, only the Central Commission has jurisdiction (para 12).
• Composite scheme only means generation and sale of electricity in more than one State. They relied on the definition in the 2016 Central Government Policy (para 12).
• Neither Section 61 nor Section 79 is done away with when Section 63 applies. Section 63 does not say notwithstanding anything contained in this Act, so all these Sections must be construed harmoniously (para 13).
• Section 79 is a repository of power to fix, or to modify, tariffs even when Section 63 applies (para 13).
• Shri Sibal argued that where there are no guidelines, or a matter arises outside the guidelines, the gap in the law cannot remain unfilled. The Commission's residuary power comes in under Section 79 (para 13).
• The amended guidelines allow change in law and tariff disputes to be resolved before the Central Commission (para 13).
• The fundamental basis of the contract was the fuel supply agreement. Various PPA clauses show that the fuel supply agreement and imported coal were important in both the bid and the PPAs (para 14).
• A non-escalable tariff does not mean the tariff cannot be adjusted if a source of coal becomes unavailable in a way that undermines the basis of the bid. The mere quoting of a non-escalable tariff makes no difference if the change in law or force majeure provision otherwise applies (para 14).
• Much of the argument centred on the meaning of frustration in the Contract Act and the construction of clause 12 of the PPA. Many English and Indian authorities were cited to show the contract had become commercially impracticable (para 14).
• The generators would have to fold up operations. That would not be in the public interest, as consumers would have to buy electricity at much higher rates (para 14).
• A force majeure event under clause 12 arises when performance is hindered. An astronomical rise in Indonesian coal prices, caused by a change in law, hindered performance (para 14).
• The change in law clause is very wide. As the PPA deals with imported coal, it covers foreign law. Where the PPA wanted to restrict a clause to Indian law, it said so expressly (para 14).
• Neither GUVNL nor the Haryana Utilities appealed. The Government's policy decisions and statements say that where there is grave unforeseen hardship from non-allocation of Indian coal, the rise in cost should be adequately compensated (para 14).
• They questioned the locus standi (right to bring the case) of the consumer groups, who they said were the only appellants. The impact on tariff would be minimal compared with the huge accumulated losses of the generators (para 14).
• The Central Commission did not give the full benefit of the coal price rise. Its relief on force majeure should not be disturbed, and relief on change in law should also have been given (para 14).

For the Union of India, through the Attorney General (not interested in the outcome of the appeals):

• The electricity sector, having been privatised, has largely met the aim of the 2003 Act. Generation was delicensed to produce far more electricity (para 15).
• The Court should not disturb the delicate balance in the Act. Generators must get a reasonable margin of profit and a reasonable return on capital, to induce them to set up more plants (para 15).
• That must be consistent with competition among them, which leads to reasonable tariffs for consumers (para 15).
• He relied on Section 3, under which the Central Government prepares a National Electricity Policy and a tariff policy. These are statutory and binding on all concerned (para 15).
• Section 61(i) recognises this, as the Commission must be guided by the National Electricity Policy and tariff policy (para 15).
• The Central Government's guidelines under Section 63 are binding on all. Section 79(4) also says the Central Commission is guided by the National Electricity Policy, National Electricity Plan and tariff policy (para 15).
• He referred to the Cabinet Committee on Economic Affairs, which recognised the shortfall in domestic coal. The new coal distribution policy of July 2013 was said to be binding directions (para 15).
• Generators that depend on indigenous coal but received less than expected should be allowed to import coal, or buy imported coal from Coal India Ltd. The difference in price should be passed through to them (para 15).
• He also relied on the revised tariff policy of 28 January 2016 for the same purpose (para 15).

Court's Reasoning

Opinion of R.F. Nariman, J. (for the Bench)

Background and the Statement of Objects and Reasons

1. Noted: The appeals arise from the Appellate Tribunal's judgment of 7 April 2016. The facts are taken only from Civil Appeal No. 5348 of 2016, which covers all the cases. (para 1)
2. Noted: Section 63 provides for procurement of power and tariff through transparent competitive bidding. The appropriate Commission adopts the tariff accepted in the bid, subject to Central Government guidelines. The guidelines issued on 19 January 2005 were amended from time to time. (para 2)
3. Noted: GUVNL's public notice of 1 February 2006 invited bids on three processes. Bidders chose escalable or non-escalable tariff to cover their own risks. (para 2)
4. Noted: Haryana Utilities began a separate bidding for 2000 MW on 25 May 2006. Both State Commissions approved the bid documents and process. (para 3)
5. Noted: Adani Enterprises Consortium bid on 2/4 January 2007 at a levelised tariff of Rs.2.3495/kWh. Its coal arrangements were the Gujarat Mineral Development Corporation block and two MoUs for imported coal. (para 3)
6. Noted: GUVNL selected the Consortium on 11 January 2007. The PPA of 2 February 2007 was for the Korba project, later changed to Mundra by the supplementary PPA of 18 April 2007. (para 4)
7. Noted: In Haryana, Adani Power bid on 24 November 2007 at Rs.2.94/kWh with non-escalable energy charges. It was declared successful on 17 July 2008 and signed two PPAs of 712 MW each. (para 5)
8. Noted: The Gujarat Commission adopted the tariff on 20 December 2007. The Haryana Commission adopted it on 31 July 2008. (para 5)
9. Noted: The respondents' case rests on a change in Indonesian law in 2010 and 2011 that aligned coal export prices with international market prices. Adani Power filed Petition No.155 of 2012 on 5 July 2012 under Section 79. (para 5)
10. Noted: The Central Commission held the PPAs were a composite scheme under Section 79(1)(b) on 16 October 2012. A review was dismissed on 16 January 2013. (para 6)
11. Noted: On 2 April 2013, the Commission held the force majeure and change in law claim not admissible. It formed a committee under its Section 79 regulatory powers. (para 7)
12. Noted: The Committee reported on 16 August 2013. On 21 February 2014, the Commission granted compensatory tariff. On 1 August 2014, the Tribunal rejected Adani Power's cross-objection. On 31 October 2014, it refused condonation of delay. (para 8)
13. Noted: The Supreme Court order of 31 March 2015 let Adani Power argue any proposition of law, whether force majeure or change in law. It could do so in support of the 21 February 2014 order, on facts already pleaded. (para 8)
14. Noted: The Tribunal agreed the PPAs were a composite scheme. It found force majeure made out under the Contract Act and the PPAs. It held Section 79 powers could not be used once a Section 63 PPA existed. (para 9)
15. Noted: The Tribunal held change in law did not cover foreign law and that Government Policies were not law. It remanded the matter to the Commission, which passed an order on 6 December 2016. (para 9)
16. Noted: The Court recorded the appellants' submissions on the scope of the 2015 order, force majeure and frustration, Section 63, composite scheme and change in law. (paras 10-11)
17. Noted: The Court recorded the respondents' submissions on jurisdiction, harmonious reading of the Sections, force majeure, change in law and the locus standi of the appellants. (paras 12-14)
18. Noted: The Court recorded the Attorney General's submission on the Act's purpose and the statutory force of the National Electricity Policy and tariff policy. (para 15)
19. Noted: The 2003 Act replaced three earlier statutes: the Indian Electricity Act, 1910, the Electricity (Supply) Act and the Electricity Regulatory Commissions Act, 1998. The Court quoted the Statement of Objects and Reasons. (para 16)
20. Noted: The quoted Statement says the 1910 Act created the basic framework for private licensees. It says the 1948 Act created State Electricity Boards. It says their performance deteriorated, tariffs were set by State Governments, and cross-subsidies became unsustainable. (para 16)
21. Noted: The Statement says the 1998 Act created the Central Electricity Regulatory Commission and let States create their own Commissions. Some States passed Reform Acts that unbundled their Boards. (para 16)
22. Noted: The Statement says a new self-contained law was needed to encourage private participation and to distance regulation from Government. It also says the law should cover power trading and open access. (para 16)
23. Noted: The Statement lists the main features. Generation is delicensed and captive generation is free. There are Transmission Utilities at Central and State level, and private transmission licensees. (para 16)
24. Noted: It lists open access in transmission with a surcharge, and freedom for distribution licensees to generate and for generators to distribute. It lists phased open access in distribution, stand-alone systems for rural and remote areas, and decentralised rural distribution. (para 16)
25. Noted: It lists trading as a distinct activity with ceilings on trading margins, and no regulation of price where a consumer deals directly with a generator or trader. It lists transfer schemes, an Appellate Tribunal for appeals, and stronger provisions on theft of electricity. (para 16)
26. Noted: The Statement says the Bill replaces the 1910, 1948 and 1998 Acts and seeks to achieve these objects. (para 16)
27. Noted: The Court set out Sections 3, 61, 62, 63, 64, 79 and 86 as the provisions with which it was concerned. They are summarised under Provisions discussed. (para 17)

Construction of Section 63 with Section 79

28. Noted: The construction of Section 63, read with the other provisions, is what comes up for decision. (para 18)
29. Noted: The non-obstante clause in Section 63 covers only Section 62. The Commission adopts a tariff already determined. Adoption is only if the tariff was found through a transparent bidding process, and that process must follow the Central Government's guidelines. (para 18)
30. Held: "the appropriate Commission does not act as a mere post office under Section 63". It must adopt only in accordance with the Central Government's guidelines. The appellants had argued that nothing but the bid itself can be looked at. (para 18)
31. Held: Clause 4 of the guidelines deals with tariff. The Commission certainly has jurisdiction to check whether the tariff found through bidding accords with clause 4. (para 18)
32. Held: The Central Commission's regulatory powers on tariff are mentioned in Section 79(1). This general power continues when tariff is adopted under Section 63. (para 19)
33. Why: The statute must be read as a whole. Discordant notes struck by various Sections must be harmonised. The non-obstante clause deliberately limits itself to Section 62, so there is no good reason to put Section 79 out of the way. (para 19)
34. Held: Tariff can be fixed in one of two ways. Under Section 62, the Commission determines it. Under Section 63, it adopts a tariff already found through bidding. In both cases, the general regulatory power in Section 79(1)(b) is the source of the power to regulate. Sections 62 and 63 deal with determination of tariff, which is part of regulating it. (para 19)
35. Held: Section 79(1)(d) deals with determining tariff for inter-State transmission. Section 79(1)(b) is the wider source of power to regulate tariff. (para 19)
36. Held: Where the Central Government's guidelines cover a situation, the Central Commission is bound by them. It must then act under Section 79(1)(b) only in accordance with those guidelines. (para 19)
37. Held: Only where no guidelines exist, or the guidelines do not deal with a situation, can the general regulatory powers under Section 79(1)(b) be used. (para 19)

Jurisdiction of the Central Commission

38. Noted: The appellants argued that composite scheme needs uniformity of tariff under a PPA. Generation and sale in more than one State was not enough. (para 20)
39. Noted: The Court set out Section 2(5), which defines appropriate Government. It is the Central Government for inter-State generation, transmission, trading or supply. In any other case it is the State Government. (para 21)
40. Noted: Sections 25 and 30 also bear on the point. Section 25 lets the Central Government make region-wise demarcation to help inter-State and inter-regional transmission. Section 30 says the State Commission promotes transmission within the State. (para 21)
41. Held: Inter-State generation or supply involves the Central Government. Intra-State generation or supply involves the State Government or State Commission. This is the scheme of the whole Act, including Sections 79 and 86. (para 22)
42. Noted: Section 79(1)(c), (d) and (e) speak of inter-State transmission and operations. Section 86 uses within the State in sub-clauses (a), (b) and (d), and intra-state in sub-clause (c). (para 22)
43. Held: A PPA is governed by either the State Commission or the Central Commission. The State Commission has jurisdiction only where generation and supply is within the State. Once generation and sale is in more than one State, the Central Commission is the appropriate Commission. (para 22)
44. Why: If the appellants were right, neither Commission would have jurisdiction. That would be absurd. (para 22)
45. Held: The Court held that composite scheme "does not mean anything more than a scheme for generation and sale of electricity in more than one State". (para 22)
46. Noted: Dictionary meanings of composite point the same way. The Court cited the McGraw-Hill Dictionary and P. Ramanatha Aiyar's Advanced Law Lexicon, which describe a unit made of two or more elements. (para 23)
47. Held: Composite only means consisting of at least two elements. Generation and sale in more than one State can be called composite. (para 23)
48. Held: Section 79(1)(b) speaks of generators who enter into or otherwise have a composite scheme. So the phrase has no special meaning. It is enough that the generators have, in any manner, a scheme for generation and sale in more than one State. (para 24)
49. Held: The argument that a composite scheme needs commonality and uniformity of tariff does not follow from the Section. (para 25)
50. Noted: The tariff policy of 6 June 2006 is the statutory policy under Section 3. Its amendment of 28 January 2016 defines composite scheme for the first time, in clause 5.11(j). (para 26)
51. Noted: That clause says a composite scheme is one by a generating company for generation and sale in more than one State. The company must have signed a long-term or medium-term PPA before commercial operation, for sale of at least 10% of the project's capacity to a distribution licensee outside the State. (para 26)
52. Held: That definition is an important aid to construing Section 79(1)(b). It correctly shows the meaning is nothing more than generation and sale in more than one State. (para 27)
53. Held: The appellants relied on Section 64(5) to argue State Commission jurisdiction over inter-State tariff. It begins with a non-obstante clause, which shows that in inter-State cases the Central Commission alone has jurisdiction. That supports the respondents. (para 27)
54. Why: Section 64(5) applies only if jurisdiction is otherwise with the Central Commission. The parties then apply to give jurisdiction to the State Commission of the licensee that will distribute and pay for the electricity. (para 27)
55. Held: The Central Commission had jurisdiction to go into the issues raised. (para 27)

The order of 31 March 2015

56. Noted: The appellants argued that force majeure could be argued only for a restricted purpose, under the Supreme Court order of 31 March 2015. The Court first dealt with this. (para 28)
57. Noted: The Court set out the relevant part of the 2015 judgment. It recorded that the issue there was limited to the Tribunal's refusal to condone delay in appealing against the 2 April 2013 order. (para 29)
58. Noted: The 2015 judgment also recorded submissions on Order 41 Rule 22 of the Code of Civil Procedure, 1908. They asked how it applies to an appeal under Section 111 of the Act. The 2015 Court held it need not decide that, because the rejection of the cross-objections had become final. (para 29)
59. Noted: The 2015 judgment held it need not decide whether the 2 April 2013 order was independently appealable, as no such appeal was filed. It held that the delay question would be academic if Adani Power did not seek a declaration that it was relieved of the contracts. (para 29)
60. Noted: It held Adani Power was entitled to argue any proposition of law, whether force majeure or change of law, in support of the 21 February 2014 order. That was subject to the argument resting on facts already pleaded before the Central Commission. (para 29)
61. Noted: The 2015 appeal arose from a Tribunal order of 31 October 2014 that refused to condone a delay of 481 days. (para 30)
62. Held: The 2015 issue was limited. The Central Commission had decided force majeure and change in law only for a declaration of frustration relieving Adani Power of its obligations. (para 31)
63. Held: Adani Power did not seek such a declaration. So it could argue force majeure or change in law to support the order quantifying compensatory tariff. (para 31)
64. Held: The 2015 Court gave no truncated right. Force majeure and change in law can be argued in full to support an order quantifying compensatory tariff. This is so long as the appellants do not claim to be relieved of performing the PPAs altogether. (para 31)
65. Held: The appellants' preliminary submission is without force. The Appellate Tribunal rightly went into force majeure and change in law. (para 31)

Force majeure

66. Held: Force majeure is governed by the Indian Contract Act, 1872. Where it arises from an express or implied contract clause, as in the PPAs, Section 32 applies. It sits in Chapter III on contingent contracts (contracts that depend on an uncertain future event). (para 32)
67. Held: Where a force majeure event occurs outside the contract, it is dealt with under Section 56 of the Contract Act. (para 32)
68. Noted: Section 32 says a contingent contract cannot be enforced until the event happens. If the event becomes impossible, the contract becomes void. (para 32)
69. Noted: Section 56 says an agreement to do an impossible act is void. A contract to do an act that later becomes impossible, or unlawful by an event the promisor could not prevent, becomes void when the act becomes impossible or unlawful. A promisor who knew, or with reasonable diligence might have known, of the impossibility must compensate the promisee. (para 32)
70. Noted: Before Taylor v. Caldwell, English law was rigid. A contract had to be performed even if later events made it impossible. (para 33)
71. Noted: Taylor v. Caldwell loosened this. If an unforeseen event makes performance impossible, in the sense that the fundamental basis of the contract goes, the contract need not be performed. (para 33)
72. Noted: In Satyabrata Ghose v. Mugneeram Bangur & Co., the Court held that the second paragraph of Section 56 is exhaustive of Indian law. (para 34)
73. Noted: Satyabrata Ghose held that impossible does not mean only physical or literal impossibility. Performance may be impracticable and useless for the parties' object. If an untoward event totally upsets the foundation of the agreement, the promisor finds it impossible to perform. (para 34)
74. Noted: Satyabrata Ghose also held that where the contract itself has a term discharging performance in certain circumstances, dissolution takes place under the contract and Section 32 applies. Frustration outside the contract falls under Section 56. (para 34)
75. Noted: Alopi Parshad & Sons Ltd. v. Union of India held that the Act does not let a party ignore express covenants and claim different rates on a vague plea of equity. (para 35)
76. Noted: Alopi Parshad also held that a wholly abnormal rise or fall in prices does not by itself end the bargain. The contract ceases to bind only if its terms, read with the circumstances when it was made, show the parties never agreed to be bound in a fundamentally different situation. (para 35)
77. Noted: Alopi Parshad held that performance is never discharged merely because it becomes onerous to one party. (para 35)
78. Noted: Naihati Jute Mills Ltd. v. Hyaliram Jagannath reviewed English law on frustration and cited Satyabrata Ghose. It held a contract is not frustrated merely because the circumstances in which it was made have changed. (para 36)
79. Noted: Naihati Jute Mills held Courts have no general power to excuse a party because performance has become onerous through an unforeseen turn of events. (para 36)
80. Held: The doctrine of frustration must always be applied within narrow limits. (para 37)
81. Noted: In Tsakiroglou & Co. Ltd. v. Noblee Thorl GmbH, the Suez canal was closed. Shipping around the Cape of Good Hope was three times the distance and the freight was double. (para 37)
82. Noted: The House of Lords held the sale contract was not frustrated. It had become more onerous but was not fundamentally altered. (para 37)
83. Held: Where performance is otherwise possible, a mere rise in freight price does not let a party say the contract was discharged by impossibility. (para 37)
84. Noted: Chitty on Contracts, 31st edition, at 14-151, says a rise in cost or expense does not frustrate a contract. (para 38)
85. Noted: Treitel on Frustration and Force Majeure, 3rd edition, at 12-034, says a force majeure clause is not normally applied. That is so where the contract provides an alternative mode of performance. (para 38)
86. Noted: Treitel, at 15-158, says a mere rise in price that makes performance more expensive is not frustration. The Court concluded that a more onerous method of performance is not by itself a frustrating event. (para 38)
87. Noted: The Court quoted the Sea Angel case, which says frustration needs a multi-factorial approach. The factors are the contract's terms and context, the parties' expectations about risk at the time, the supervening event, and their reasonable calculations about future performance. (para 39)
88. Noted: Sea Angel says the test of radically different shows that mere expense, delay or onerousness is not enough. There must be a break in identity between the contract as contemplated and its performance in the new circumstances. (para 39)
89. Held: Frustration cannot apply, because the fundamental basis of the PPAs remains unaltered. The PPAs do not say coal is to be bought only from Indonesia at a particular price. (para 40)
90. Why: On a reading of the PPA as a whole, the price of coal is for the person who sets up the plant to bear. The fuel supply agreement is appended only to show that the raw material is in order. (para 40)
91. Held: An unexpected rise in the price of coal does not absolve generating companies. They took this risk knowingly when they bid. (para 40)
92. Held: A non-escalable bid does not stop the respondents from pleading frustration if it is otherwise available in law. But a non-escalable tariff may be considered to show the risk of supplying at that tariff was on the generator. (para 40)
93. Noted: The force majeure clause in all the PPAs is in a standard form. Clause 12.3 defines force majeure as an event that wholly or partly prevents or unavoidably delays an Affected Party's performance. It applies only if the event is beyond that party's reasonable control and could not be avoided by reasonable care or Prudent Utility Practices. (para 41)
94. Noted: Clause 12.3 lists Natural Force Majeure Events, such as act of God, earthquake, flood, cyclone and exceptionally adverse weather. It lists Direct Non-Natural events, such as nationalisation and unlawful action of an Indian Government Instrumentality declared unlawful by a court. It lists Indirect Non-Natural events, such as war, radioactive contamination in India and nationwide industry-wide strikes. (para 41)
95. Noted: Clause 12.7 gives relief. No Party is in breach to the extent performance was prevented, hindered or delayed by a force majeure event. Every Party may claim relief. (para 41)
96. Noted: Clause 12.7 also says no tariff is paid for capacity hit by a Natural Force Majeure Event. It gives debt service or capacity charge relief where availability falls below 60% (indirect) or 80% (direct) for stated periods. It allows inspection and Repeat Performance Tests, and shares charges in proportion to allocated capacity. (para 41)
97. Noted: The respondents argued the clause is inclusive, not exhaustive. They said the coal price rise was unforeseen and outside their control, because the PPAs were signed in 2006 to 2008 and the rise came in 2010 and 2011. (para 42)
98. Noted: They also argued that clause 12.7 covers any performance that is hindered. (para 42)
99. Held: The respondents are right that the force majeure clause does not exhaust unforeseen events outside natural and non-natural events. (para 43)
100. Noted: Chitty, at 14-151, cites cases that hindered must be read with the words before and after it and the nature of the contract. (para 43)
101. Held: The PPA must be read as a whole. Clauses 12.3 and 12.7(a) are part of one scheme, so hindered in clause 12.7(a) goes with partly prevents in clause 12.3. (para 43)
102. Held: "Force majeure clauses are to be narrowly construed". (para 43)
103. Why: Prevented in clause 12.7(a) goes with wholly in clause 12.3, and hindered goes with partly. So something must partly prevent performance. (para 43)
104. Noted: Treitel, at 15-158, cites Tennants (Lancashire) Ltd. v. G.S. Wilson and Co. Ltd. for the point that a mere rise in price does not amount to hindrance. (para 43)
105. Noted: Peter Dixon & Sons Ltd. v. Henderson, Craig & Co. Ltd. held that hinders the delivery needs serious hindrance to the contract as a whole, not only a price rise. (para 43)
106. Noted: At the start of the First World War, British ships were unavailable. Foreign ships could be had at higher freight but risked capture, mines and detention. (para 43)
107. Noted: The Court of Appeal applied Tennants. It said price as price is not the issue. The whole trade was dislocated, so buyers and sellers were hindered or prevented from performing their standing contracts. (para 43)
108. Noted: Clause 12.4 lists force majeure exclusions. They include events within the parties' reasonable control. They include unavailability, late delivery or changes in cost of fuel and other inputs, and insufficient funds or an agreement becoming onerous to perform. They also include negligent acts, failure to comply with Indian law and breach of the agreement. (para 44)
109. Held: The clause shows that "changes in the cost of fuel, or the agreement becoming onerous to perform, are not treated as force majeure events". (para 44)
110. Held: The fundamental basis of the contract was not dislodged. No frustrating event was pointed out, other than a rise in coal price, which clause 12.4 excludes. (para 45)
111. Held: Alternative modes of performance were available, though at a higher price. The contract as a whole was not frustrated. (para 45)
112. Held: Neither clause 12.3 nor clause 12.7, referable to Section 32, applies to allow compensatory tariff to the respondents. (para 45)
113. Held: Dr. Singhvi argued that Section 56 would apply even if clause 12 did not. The Court held that once clause 12.4 applies, a rise in fuel price is not a force majeure event contractually. (para 45)
114. Held: When a contract has a force majeure clause that the Court holds attracted to the facts, Section 56 has no application, as Satyabrata Ghose held. On this short ground the alternative submission fails. (para 45)

Change in law

115. Noted: The respondents argued that the guidelines of 19 January 2005, as amended on 18 August 2006, give generators the rise in coal price on any change in law. That change could be abroad or in India. The Court set out the guidelines and the PPA provisions. (para 46)
116. Noted: The guidelines say their provisions bind the procurer unless stated otherwise (clause 2.3). Tariffs are in Indian rupees and the supplier bears foreign exchange risk, with a proviso for imported fuel (clause 4.3). (para 46)
117. Noted: Unamended clause 4.7 adjusts any change in tax on generation or sale of electricity from a change in law. Amended clause 4.7 adjusts any change in law that affects cost or revenue, as against the law applicable 7 days before the last date for bid submission. The Appropriate Commission decides any dispute on its impact. (para 46)
118. Noted: Clauses 5.4 and 5.6 deal with standard documents, including risk allocation and force majeure clauses. Clauses 5.16 and 5.17, old and new, deal with deviation from the guidelines and with disputes. Under new clause 5.17, tariff disputes go to the Appropriate Commission and all others go to arbitration. (para 46)
119. Noted: The PPA defines Law as all laws including Electricity Laws in force in India. It defines Electricity Laws as the Electricity Act and rules, regulations and other laws pertaining to electricity. (para 46)
120. Noted: Article 13 of the PPA defines Change in Law as any of four events after the date 7 days before the Bid Deadline. The first is a new or changed Law. The second is a changed interpretation of Law by a final authority. The third is a change in consents, approvals or licences. The fourth is a change in land value, resettlement cost or environmental plan cost. (para 46)
121. Noted: Change in Law excludes changes in withholding tax on dividends and changes in UI Charges or frequency intervals. It has a proviso deeming non-extension of the Section 80 IA income tax holiday to be a Change in Law. (para 46)
122. Noted: A Competent Court means the Supreme Court, a High Court or a tribunal in India. Clause 13.2 restores the affected party to the same economic position. It sets a formula for the construction period and CERC decides compensation for the operation period. (para 46)
123. Noted: Compensation for the operation period is payable only if the increase or decrease in revenue or cost exceeds 1% of the Letter of Credit in a Contract Year. (para 46)
124. Noted: Clause 13.3 requires notice of Change in Law, and clause 13.4 sets when tariff adjustment takes effect and how it is billed. Clause 17.3.1 sends tariff disputes to the Appropriate Commission, and clause 18.1 deals with amendment of the agreement. (para 46)
125. Noted: The respondents argued that any change in law in clause 4.7 is not qualified and so includes foreign law. They said the PPA is subservient to the guidelines and must be read as including foreign laws. (para 47)
126. Noted: They read clause 4.7 with clause 5.17. They said the guidelines bind all parties, including procurers, and any deviation needs the Appropriate Commission's approval. (para 47)
127. Noted: The appellants replied that clause 13 must be read with the definition of electricity laws, so it would not include foreign Indonesian law. (para 47)
128. Held: The guidelines and the model PPA were both drafted by the Central Government. The PPA only fleshes out clause 4.7 and explains any change in law. (para 48)
129. Held: In force in India in the definition of law goes with all laws. Otherwise the phrase would repeat what electricity laws already says. So all laws refers only to Indian laws. (para 48)
130. Why: Clause 13.1.1 has four parts. The first is enacted laws. The second is court interpretation of those laws. The third is changes in consents, approvals or licences. The fourth is changes in the declared law of the land for the project, resettlement cost or environment plan cost. Competent Court means only the Indian judicial system. (para 48)
131. Held: Any law appears in both sub-clauses (1) and (2) of clause 13.1.1 and must mean the same in both. In sub-clause (2) it refers only to Indian law, so it does in sub-clause (1). (para 49)
132. Why: Sub-clauses (1) and (2) form one contractual scheme. One deals with enactment and the other with interpretation of the same laws by an Indian court or instrumentality. (para 49)
133. Noted: The respondents pointed to clauses 12.4(f)(ii), 4.1.1(a) and 17.1, which say Indian law expressly. They argued that where the parties meant Indian law they said so, so law otherwise includes all laws. (para 50)
134. Noted: That argument rests on the Latin maxim expressio unius est exclusio alterius (express mention of one thing excludes others). (para 51)
135. Noted: The Court has called this maxim a useful servant but a dangerous master, citing CCE v. National Tobacco Co. of India Ltd., (1972) 2 SCC 560. (para 51)
136. Held: Suppose any law in clause 13, read with law and Electricity Laws, unequivocally refers only to Indian law. Then it is unsafe to rely on other clauses that mention Indian law to negate that. (para 51)
137. Noted: The respondents argued that a commercial contract must be read to give business efficacy (the unstated terms a contract needs to work as the parties meant). As the PPA's subject was imported coal, they said any law means laws governing coal imported from other countries. (para 52)
138. Held: The Court could not agree. Different PPAs have different coal sources. Some generators source only from India. In the Adani Haryana matter, 70% is from India and 30% from abroad. In the Gujarat Adani and Coastal cases, coal is wholly from abroad. (para 52)
139. Held: The meaning of change in law in clause 13 cannot depend on where coal is sourced. It must be the same whether coal is sourced wholly in India, partly in India, or wholly abroad. (para 52)
140. Held: English authorities say that if a contract is performed in a foreign country, foreign law is relevant. That is true as a general statement but does not apply to the PPAs here. (para 52)
141. Held: As to a change in Indian law, the respondents are on firm ground. Under clause 13.1.1, a change in any consent, approval or licence for the project that changes cost of selling electricity, not due to the seller's default, is covered. (para 53)
142. Noted: The Resolution of 21 June 2013 led to the Ministry of Power letter of 31 July 2013. It modified the earlier coal distribution policy of 18 March 2007. Power projects now get only a set percentage of what was earlier allowable. (para 53)
143. Noted: The letter of 31 July 2013 recorded that Coal India did not sign Fuel Supply Agreements after March 2009. It recorded the February 2012 decision on FSAs for the full quantity in the Letters of Assurance for 20 years. It recorded the June 2013 decision to sign FSAs at 65%, 65%, 67% and 75% of Annual Contracted Quantity for the remaining four years of the 12th Plan. (para 53)
144. Noted: The letter also said Coal India may import coal and supply it on cost plus basis, and generators may import themselves. It said the higher cost of imported or e-auction coal is to be considered for pass through by the Commissions case to case. (para 53)
145. Noted: The letter also recalls that in February 2012 the trigger levels for FSAs were 80% for disincentive and 90% for incentive. It notes the Ministry of Coal letter of 26 July 2013 on NCDP changes. It advises the Commissions to take up individual requests case to case, in public interest, and to take immediate steps. (para 53)
146. Noted: The revised tariff policy of 28 January 2016 has clause 6.1. It says the cost of imported or e-auction coal, used to make up a Coal India shortfall, is to be considered for pass through case to case. It refers to the Ministry of Power advisory of 31 July 2013. (para 53)
147. Held: The letter of 31 July 2013 and the revised tariff policy are statutory documents issued under Section 3. They have the force of law. (para 53)
148. Held: Where supply from Coal India and other Indian sources is cut down, the PPA read with these documents applies. Clause 13.2 restores the affected party to the same economic position, and CERC decides the effective date of compensation for the operation period. (para 53)
149. Held: A change in Indonesian law does not qualify as change in law under the guidelines read with the PPA. A change in Indian law certainly does. (para 53)
150. Noted: Shri Ramachandran argued that the policy of 18 October 2007 was announced before the PPAs took effect. It made clear that coal might not be given for the entire quantity allocated. (para 54)
151. Held: The Court could not accept this. The change in law took place only in 2013, and it modified the 2007 policy. To that extent relief is available under the PPA to those who source coal from indigenous sources. (para 54)
152. Held: "It is to this limited extent that change in law is held in favour of the respondents." (para 54)
153. Noted: Certain other minor contentions of both sides were not addressed, as the Court found it unnecessary. (para 54)
154. Held: The Tribunal's judgment and the Commission's orders following it are set aside. The Central Commission must go into the matter afresh. It must decide what relief to give to generators who fall within clause 13 of the PPA. (para 54)
155. Noted: All the appeals are disposed of accordingly. (para 55)

Provisions discussed

• Section 2(5), Electricity Act, 2003: appropriate Government is the Central Government for inter-State generation, transmission, trading or supply. In any other case it is the State Government (para 21).
• Section 3: the Central Government prepares and publishes the National Electricity Policy and tariff policy, and the Authority prepares the National Electricity Plan (paras 15, 17, 26, 53).
• Section 25: the Central Government may make region-wise demarcation to help inter-State and inter-regional transmission (para 21).
• Section 30: the State Commission promotes transmission and wheeling within the State (para 21).
• Section 61: the Commission specifies terms for determining tariff, guided by listed principles. These include commercial principles, competition, consumer interest and the National Electricity Policy and tariff policy (paras 15, 17).
• Section 62: the Commission determines tariff for supply by a generator to a distribution licensee and for transmission, wheeling and retail sale (paras 11, 17-19).
• Section 63: notwithstanding Section 62, the Commission adopts a tariff found through transparent bidding under the Central Government's guidelines (paras 2, 17-19).
• Section 64: sets the procedure for tariff orders. Section 64(5) lets parties to an inter-State supply apply to the State Commission of the distributing licensee (paras 17, 27).
• Section 79(1)(a) to (k): functions of the Central Commission. These include Section 79(1)(b), to regulate tariff of generators with a composite scheme in more than one State, and Section 79(1)(d), to determine inter-State transmission tariff. Section 79(4) says it is guided by the National Electricity Policy, Plan and tariff policy (paras 5, 15, 17, 19, 22).
• Section 86: functions of the State Commission, largely within the State (paras 12, 17, 22).
• Section 111: appeal to the Appellate Tribunal, mentioned in the 2015 judgment (para 29).
• Section 32, Indian Contract Act, 1872: a contingent contract cannot be enforced until the event happens; if the event becomes impossible, the contract becomes void (paras 32, 34, 45).
• Section 56, Indian Contract Act, 1872: an agreement to do an impossible act is void. A contract to do an act that later becomes impossible or unlawful becomes void (paras 10, 32, 34, 45).
• Order 41 Rule 22, Code of Civil Procedure, 1908: cross-objections in appeal, mentioned in the 2015 judgment (para 29).
• Section 80 IA, Income Tax Act: non-extension of the tax holiday is deemed a Change in Law under the PPA (para 46).
• Guidelines of 19 January 2005, clauses 2.3, 4.3, 4.7, 5.4, 5.6, 5.16 and 5.17 (para 46).
• PPA clauses 12.3, 12.4, 12.7, Article 13 (13.1 to 13.4), 17.3.1 and 18.1, and the definitions of Law, Electricity Laws, Fuel and Project Documents (paras 41, 44, 46).
• Section 42, Electricity Act, 2003: open access, referred to in the proviso to Section 86(1)(a) (para 17).
• PPA Article 12 (force majeure), Article 13 (change in law), Article 17 (disputes) and clause 18.1 (amendment) (paras 41, 46, 50).
• PPA Article 8.1 and Article 8.1.1 (Repeat Performance Test), Article 11.8 (supplementary bill), Article 4.5, Article 4.7.1 and Article 4.1.1(a) (paras 41, 46, 50).
• Tariff policy of 6 June 2006 and its amendment of 28 January 2016, clauses 5.11(j) and 6.1 (paras 26, 53).
• Indian Electricity Act, 1910, Electricity (Supply) Act and Electricity Regulatory Commissions Act, 1998: replaced by the 2003 Act (para 16).

Authorities

• Order of this Court dated 31 March 2015 (Adani Power's appeal; the case name is not stated). The appellant may argue force majeure and change of law to support the tariff order. The Court held this was no truncated right (paras 8, 28-31).
• Prayas (Energy) Group v. Central Electricity Regulatory Commission (Civil Appeal No. 5348 of 2016): the appeal from which the Court took the facts for all the cases (para 1).
• Taylor v. Caldwell, (1861-73) All ER Rep 24: loosened English rigidity; a contract need not be performed if its fundamental basis goes (para 33).
• Satyabrata Ghose v. Mugneeram Bangur & Co., 1954 SCR 310: Section 56 second paragraph is exhaustive; impossible means impracticable; Section 32 applies when the contract has its own term. Followed (paras 34, 45).
• Alopi Parshad & Sons Ltd. v. Union of India, 1960 (2) SCR 793: no relief on a vague plea of equity; abnormal price rise does not end the bargain; onerousness does not discharge. Followed (para 35).
• Naihati Jute Mills Ltd. v. Hyaliram Jagannath, 1968 (1) SCR 821: a contract is not frustrated because circumstances change. Followed (para 36).
• Tsakiroglou & Co. Ltd. v. Noblee Thorl GmbH, 1961 (2) All ER 179: Suez closure did not frustrate the sale contract. Followed (para 37).
• Chitty on Contracts, 31st edition, at 14-151: a rise in cost does not frustrate; hindered is read with the words around it (paras 38, 43).
• Treitel on Frustration and Force Majeure, 3rd edition, at 12-034 and 15-158: no force majeure where an alternative mode of performance exists. A price rise is not frustration or hindrance (paras 38, 43).
• Sea Angel, 2013 (1) Lloyds Law Report 569: multi-factorial approach to frustration; the test of radically different. Quoted (para 39).
• Tennants (Lancashire) Ltd. v. G.S. Wilson and Co. Ltd., 1917 Appeal Cases 495: a mere price rise is not hindrance. Applied in Peter Dixon (para 43).
• Peter Dixon & Sons Ltd. v. Henderson, Craig & Co. Ltd., 1919 (2) KB 778: hinders the delivery needs a serious hindrance to the contract as a whole. Quoted in part (para 43).
• CCE v. National Tobacco Co. of India Ltd., (1972) 2 SCC 560: the maxim expressio unius is a useful servant but a dangerous master. Cited (para 51).
• Dictionaries: McGraw-Hill Dictionary of Scientific and Technical Terms (6th edition) and P. Ramanatha Aiyar's Advanced Law Lexicon (3rd edition), for the meaning of composite (para 23).
• No cases are cited in footnotes.

Judgement

1. The Appellate Tribunal's judgment and the Central Commission's orders following that judgment are set aside (para 54).
2. The Central Electricity Regulatory Commission must go into the matter afresh. It must decide what relief to give to those power generators who fall within clause 13 of the PPA, as held in this judgment (para 54).
3. All the appeals are disposed of accordingly (para 55).
4. Costs: the judgment states no order on costs.

Legal Principle / Ratio

The Central Commission's general regulatory power under Section 79(1)(b) continues when tariff is adopted under Section 63. It is bound by the Central Government's guidelines where they apply (paras 18-19). Composite scheme only means generation and sale in more than one State (paras 22, 27).

A rise in the price of fuel is neither frustration under Section 56 nor force majeure under a clause like clause 12 of the PPAs (paras 40, 44-45). Change in Indian law that cuts coal supply is a change in law under clause 13 (paras 53-54).

No obiter is marked in the judgment.

Key holding: "an unexpected rise in the price of coal will not absolve the generating companies from performing their part of the contract" (para 40).

Subsequent Treatment

GMR Warora Energy v. CERC

Full title: GMR Warora Energy Limited v. Central Electricity Regulatory Commission (CERC) & Ors. Supreme Court of India, Civil Appeal No.11095 of 2018 with connected appeals, B.R. Gavai and Vikram Nath, JJ., decided 20 April 2023 (B.R. Gavai, J. writing).

• The Court first decided Civil Appeal No. 684 of 2021, MSEDCL v. APML & Ors., and Civil Appeal No. 6927 of 2021. Three issues were common to the whole batch (para 1).
• In the batch, one respondent's counsel said the coal shortfall issue was squarely covered by Energy Watchdog (2017) 14 SCC 80, the Adani Rajasthan case and MSEDCL v. APML (para 72).
• The Court held the meaning of Law was no longer open to argument. It quoted paragraph 57 of Energy Watchdog, on the 31 July 2013 letter and the revised Tariff Policy being statutory documents. That paragraph says a change in Indonesian law does not qualify as change in law, but a change in Indian law does (para 95).
• The Court said Energy Watchdog was approved by a three-Judge Bench in the Adani Rajasthan case. It was also followed in MSEDCL v. APML & Ors., decided on two linked matters from the batch (para 96).
• On shortfall in linkage coal due to the New Coal Distribution Policy (NCDP), the Court said the issue was no longer open. It said Energy Watchdog, Adani Rajasthan and MSEDCL v. APML held that a change in the NCDP is a change in law (para 106).
• The Court repeated this for an appeal granting the same relief and refused to interfere with the finding on the change in the NCDP (para 147).
• In two other appeals, it held the NCDP 2013 issue squarely covered by Energy Watchdog, Adani Rajasthan and MSEDCL v. APML (paras 156, 161).
• The Court recalled that in MSEDCL v. APML it had recorded the Attorney General's statement in Energy Watchdog. The statement was that a privatised electricity sector had largely met the aims of the 2003 Act. It also referred to the balance between a reasonable return for generators and consumers' interests (para 170).
• The Court dismissed all the appeals with no costs (para 184).

Other later cases (not summarized)

• Jaipur Vidyut Vitaran Nigam Ltd. v. Adani Power Rajasthan Limited (the Adani Rajasthan case), a three-Judge Bench decision: named in GMR Warora as approving Energy Watchdog (para 96). GMR Warora prints the footnote 2020 SCC Online SC 697 on the page where this case is first named; it does not tie the footnote to the case in words. The text of this case was not fetched.
• Maharashtra State Electricity Distribution Company Limited v. Adani Power Maharashtra Limited & Ors. (Civil Appeal No. 684 of 2021), decided 3 March 2023 (para 3). GMR Warora prints the footnote 2023 SCC OnLine 233 on the page of para 1. It names this case as following Energy Watchdog (paras 1, 96). The text of this case was not fetched.

Critical Analysis

Analysis based on the judgment text.

• The Court left the amount of relief to the Central Commission. It said only that generators within clause 13 get relief to this limited extent (para 54).
• The Court did not decide the appellants' other minor contentions, saying it found it unnecessary (para 54).
• The respondents called the appellants consumer groups, the only appellants. The cause title lists State power and distribution companies as appellants too (para 14, title page).
• The Court names the earlier Electricity (Supply) Act as 1928 in its own words and 1948 in the quoted Statement. The tariff policy is dated 6 June 2006 in one paragraph and 6 January 2006 in another (paras 16, 26, 53).
• The Court rejected the argument that the October 2007 policy made the coal shortfall foreseeable. It held that the 2013 change modified that policy (para 54).

Significance

• It settles that a Section 63 tariff does not remove the Central Commission's Section 79(1)(b) regulatory power (paras 18-19).
• It gives composite scheme a plain meaning: generation and sale in more than one State (paras 22-27).
• It reaffirms that frustration is applied within narrow limits, and that a mere rise in cost does not frustrate a contract (paras 36-40).
• It reads force majeure clauses narrowly, so hindered needs something that partly prevents performance (para 43).
• It limits change in law under the PPA to Indian law, but gives relief for Indian coal supply policy changes (paras 48-54).

Exam-Important Points

• Rule: a force majeure clause in a contract falls under Section 32 of the Contract Act. Section 56 applies only outside the contract (para 32). Trap: where the clause applies, Section 56 has no application (para 45).
• Rule: a rise in price or cost does not frustrate a contract or amount to force majeure (paras 37-38, 40, 44). Trap: a non-escalable tariff does not bar a frustration plea, but the risk stays with the generator (para 40).
• Rule: clause 12.4 excludes changes in fuel cost and onerousness from force majeure (para 44).
• Rule: hindered in clause 12.7(a) goes with partly prevents in clause 12.3, and force majeure clauses are read narrowly (para 43).
• Rule: Section 63 adopts, while Section 62 determines. The Commission is not a mere post office (para 18). Its power under Section 79(1)(b) continues (para 19).
• Rule: composite scheme means generation and sale in more than one State. No uniform tariff is needed (paras 22, 25).
• Rule: change in law under the PPA means Indian law only (paras 48-49). Trap: the maxim expressio unius is a dangerous master and cannot override this (para 51).
• Rule: change in Indian coal supply policy of 2013 is a change in law. The relief is limited (paras 53-54).
• Result: the Tribunal's judgment and the Commission's consequent orders are set aside, and the Commission decides relief afresh (para 54).

Prepared from the full text of the judgment. Paragraph numbers follow the official Supreme Court judgment text; law reports may number the same paragraph differently.