1

‘REPORTABLE’

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 11826 OF 2018

HARYANA POWER PURCHASE CENTRE Appellant(s)

VERSUS

SASAN POWER LTD & ORS. Respondent(s)

WITH

CIVIL APPEAL NO. 11927 OF 2018

CIVIL APPEAL NO. 12190 OF 2018

CIVIL APPEAL NO. 1670 OF 2019

CIVIL APPEAL NO. 12232 OF 2018

CIVIL APPEAL NO. 1742 OF 2019

J U D G M E N T

K. M. JOSEPH, J.

(1) The six appeals with which we are concerned

have been filed under Section 125 of the Electricity

Act, 2003 (hereinafter referred to as ‘Act’ for

CIVIL APPEAL NO. 11826 OF 2018 etc.

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brevity). The appeals are directed against the

order passed by the Appellate Tribunal for

Electricity (hereina fter referred to as ‘Tribunal’

for brevity) in an appeal carried by the first

respondent under Section 111 of the Act.

(2) The appeal before the Tribunal, in turn, was

lodged against the order passed by the Central

Electricity Regulatory Commission (hereinafte r

referred to as ‘Commission’ for brevity). The

Commission passed the order purporting to be one

under Section 79(b) inter alia of the Act in a

petition filed by the first respondent.

F A C T S

(3) It was decided to set up an Ultra Mega Power

Project. Towards this end, the Power Finance

Corporation Limited of India was to be the nodal

agency. It incorporated a Special Purpose Vehicle,

which is the first respondent. The idea was to set

up the Ultra Mega Power Project which would be

operated by the successful bidder selected through

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an international competitive bidding. The power

generated by the successful bidder was to be

supplied through procurers (the appellants before

us), who can be described a lso as the distribution

licensees under the Act. The appellants were to

supply the power so procured finally to the

consumers.

(4) Since what was contemplated was seeking shelter

under Section 63 of the Act, we must refer to the

guidelines which have been i ssued by the Central

Government purporting to act under Section 63.

Guidelines were issued on 19.01.2005. We deem it

appropriate to set out the following guidelines:

“2.1 These guidelines are being issued under

the provisions of Section 63 of the

Electricity Act, 2003 for procurement of

electricity by distribution licensees

(Procurer) for:

(a) long-term procurement of electricity for

a period of 7 years and above;

(b) Medium term procurement for a period of

upto 7 years but exceeding 1 year.

2.2 The guidelines shall apply for

procurement of base -load and seasonal power

requirements through competitive bidding,

through the following mechanisms:

i. Where the location, technology, or fuel is

not specified by the procurer (Case 1);

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ii. For hydro -power projects, load center

projects or other location specific projects

with specific fuel allocation such as captive

mines available, which the procurer intends

to set up under tariff based bidding process

(Case 2).”

(5) The guidelines are binding on the procurers .

Guideline 3.2 which is related to preparation for the

invitation of bids would assume relevance . It reads

as follows:

“3.2 For long-term procurement from hydro

electric projects or for projects for which

pre-identified sites are to be utilized (Case

2), the following activities should be

completed by the procurer or authorized

representative of the procurer, before

commencing the bid process:

- Site identification and land acquisition

required for the project

- Environmental clearance

- Fuel linkage, if required (may also be

asked from bidder)

- Water linkage

- Requisite Hydrological, geological,

meteorological and seismological data

necessary for preparation of Detailed Project

Report (DPR), where applicable.

The bidder shall be free to veri fy geological

data through his own sources, as the

geological risk would lie with the project

developer.

The project site shall be transferred to the

successful bidder at a declared price.

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Provided that for the projects from which

more than one distribut ion licensees located

in different States intend to procure power

and if the preparations for such projects are

being facilitated by the Central Government,

the activities referred to above shall be

initiated before the bidding process and

should be completed before signing the power

purchase agreement with the selected bidder.

(6) Under the guidelines, tariff structure is

contemplated which consists of capacity charges and

energy charges which are dealt with in detail. It

also deals with bidding process. The bidding

process itself is divided into two stages, viz., a

determination of the qualification by a pre -

qualification system and thereafter submission and

consideration of essentially what consists of the

financial bid. There is a guideline which deals with

arbitration and it was contained in guideline 5.17:

“5.17 The procurer will establish an Amicable

Dispute Resolution (ADR) mechanism in

accordance with the provisions of the Indian

Arbitration and Conciliation Act, 1996. The

ADR shall be mandatory an d 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

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provisions of the Electricity Ac t 2003.”

(7) It is, accordingly, purporting to act in terms

of the guidelineS that a Request for Qualification

(for short RFQ) came to be issued on 31.03.2006.

Reliance Power Limited was one of the bidders which

was pre-qualified in terms of the RFQ. On

18.08.2006, there was a change notified in the

guidelines. It brought about t he following changes

in the guidelines 5.17 besides guideline No. 4.7.

The unamended and the amended guidelines 4.7 and

5.17 read as follows:

S.

No.

CBG as on 19.01.2005 CBG as amended on 18.08.2006

1. 4.7 Any change in tax on

generation or sale of electricity

as a result of any change in Law

with respect to that applicable

on the date of bid submission

shall be adjusted separately.

[Pg. 345,CC-I]

4.7 Any change in law impacting

cost or revenue from the business

of selling electricity to the

procurer with respect to the law

applicable on the date which is 7

days before the last date of RFP bid

submission shall be adjusted

separately. In case of any dispute

regarding the impact of any

change in law, the decision of the

Appropriate Commission shall

apply.

2. Arbitration

5.17 The procurer will establish

an Amicable Dispute Resolution

(ADR) mechanism in

accordance with the provisions

Arbitration

5.17 Where any dispute arises

claiming any change in or

regarding determination of the

tariff or any tariff related matters,

CIVIL APPEAL NO. 11826 OF 2018 etc.

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of the Indian Arbitration and

Conciliation Act, 1996. The

ADR shall be mandatory and

time-bound to minimize

disputes regarding the bid

process and the documentation

thereof.

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.

(8) On 21.08.2006, a Request for Proposal, for

short RFP, came to be issued. We deem it appropriate

to refer to the following provisions of the RFP.

“4. While this RFP has been prepared in good

faith, neither the Procurers, Authorised

Representative and Power Finance Corporation

Limited (PFC) nor their directors or

employees or advisors/consultants make any

representation or warranty, express or

implied, or accept any responsibility or

liability, whatsoever, in respect of any

statements or omissions herein, or the

accuracy, completeness or reliability of

information contained herein, and shall incur

no liability under any law, statute, rules or

regualations as to the accuracy, reliability

or completeness of this RFP, even if any loss

or damage is caused to the Bidder by any act

or omission on their part.

1.3 The objective of the bidding process is

to select a SuccessfulBidder for development

of the Project as per the terms of the RFP.

The Project will have a Contracted Capactiy

of minimum of 3500 MW and maximum of 3800 MW

in accordance witht he terms of the PPA. The

Selected Bidder shall purchase the entire

shareholding of the Authorised Representative

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from PFC and its nominees in accordance with

Share Purchase Agreement and cause the Seller

to enter into the RFP Project Documents. The

Selected Bidder shall be responsible for

ensuring that the Seller undertakes

development, finance, ownership, design,

engineering procurement, construction,

commissioning, operation and maintenance of

the Project as per the terms of the RFP

Project Documents. The Selected Bidder shall

also ensure:

(i) All equipment and auxiliaries shall be

suitable for continuous operation in the

frequency range of 47.5 to 51.5 Hz ( -5% to

+3% of rated frequency of 50.0 Hz).

(ii)The plant shall be capable of delivering

contracted capacity continously at 47.5 Hz

grid frequency.

1.4 The Procurers through the Authorised

Representative, have initiated development of

the Project at Sasan, District Sidhi, Madhya

Pradesh and shall complete the following

tasks in this regard by such time as

specified hereunder:

iv. Allocation of main Captive Coal Mine(s)

and providing geolog ical report (GR) for the

same; at least ninety (90) days prior to Bid

Deadline. Allocation of other Captive Coal

Mine(s) and available information regarding

quality and quantity of coal (GR related

information) would be made available at least

thirty (30) days prior to Bid Deadline. The

Seller shall pay the final cost of geological

reports (Grs). The Indicative Cost of

geological reports (Grs), would be made

available at least thirty (30) days prior to

bid Deadline;

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v. Tying up water linkage for the Proje ct

requirement along with approval of Central

Water Commission, at least thirty (30) days

prior to Bid Deadline;

Water intake study report and Project Report

including geo-technical study, topographical

survey, area drainage study, socio -economic

study and EIA study (rapid) would be made

available at least ninety (90) days prior to

Bid Deadline;

vi. issue of certificate by Ministry of

Power, Government of India extending the

benefits to power generation projects under

Mega Power Policy upto the Scheduled COD of

the Power Station by Government of India at

least thrity (30) days prior to Bid Deadline;

It may be noted that noe of the Procurers,

Authorised Representative and PfC, nor their

directors, employees or advisors/consultants

make any representation o r warranty, express

or implied, or accept any responsibility or

liability, whatsoever, in respect of any

statements or omissions made in the water

intake study report and Project Report, or

the accuracy, completeness or reliablility of

information containe d therein, and shal incur

no liability under any law, statute, rules or

regualtions as to the accuracy, reliability

or completeness of such water intake study

report and Project Report, even if any loss

or damage is caused to the Selected Bidder by

any act or omission on their part. The

Ministry of Power and the State Government of

Madhya Pradesh have expressed their support

to the Seller, on best endeavour basis, in

enabling the Seller to develop the Project.

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2.7.2.1 The Bidder shall make independent

enquiry and satisfy itself with respect to

all the required information, inputs,

conditions and cirumstances and factors that

may have any effect on his Bid. In assessing

the Bid, it is deemed that the Bidder has

inspected and examined the site conditions

and its surroundings, examined the laws and

regulations in force in India, the

transportation facilities available in India,

the grid conditions, the conditions of roads,

bridges, ports, etc. For unloading and/or

transporting heavy pieces of material and has

based its design, equipment size and fixed

its price taking into account all such

relevant conditions and also the risks,

contingencies and other circumstances which

mayh influence or affect the supply of power.

2.7.2.2 In their own interest, the Bidders

are requested to familiarize themselves with

the Electricity Act, 2003, the Income Tax Act

1961, the Companies Act, 1956, the Customs

Act, the Foreign Exchange Management Act,

IEGC, the regulations framed by regul atory

commissions and all other related acts, laws,

rules and regulations prevalent in India. The

procuers shall not entertain any request for

clarifications from the Bidders regarding the

same. Non-awareness of these laws or such

information shall not be a reason for the

Bidder to request for extension of the Bid

Deadline. The Bidder undertakes and agrees

that before submission of its Bid all such

factors, as generally brought out above, have

been fully investigated and considered while

submitting the Bid.

ANNEXURE 5

SITE DETAILS ALONG WITH SITE MAP

The Site is located near Sasan village in

Singrauli Tehsil in District Sidhi of Madhya

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Pradesh. The nearest Railway Station is

Shakti Nagar (18km) and nearest Airport is

Varanasi (250 km). The site is situated a t

23°58’30”N latitude and 82°37’03”E longtitue.

About 3500 acres of land has been identified

for the project covering villages of

Sidhikala, Harhawa, Tiara, Jhanjitola and

Sidhikhud. Out of this, about 2000 acres of

land has been identified for main plant ,

about 1100 acres for ash disposal/dyke and

400 acres for colony.

Water source for the project is Govind

Ballabh Pant Sagar (Rihand Reservoir), which

is about 6-7 km from the main plant site.

Water will be brought to site by suitable

pumping arrangement and pipelines.

Coal blocks (mines) in Singrauli area with

reserves of about 700 -800 million tons will

be allocated as Captive Coal Blocks (mines)

for this Project. The Project will require

the development of a coalmine with production

of 18-20 million ton s per annum (MTPA)

Vicinity map of Site is enclosed.

Further details are provided in the Project

Report."

(9) We may, at this juncture, notice also that the

Special Purpose Vehicle which was put in place for

carrying out the activities also, commissioned a

study by WAPCOS (a public sector body of the Central

Government). It was tasked with the project to

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ascertain about the availability of water inter

alia. Water is an indispensable factor for the

successful running of the power plant which was

contemplated. WAPCOS made available its report on

03.08.2006.

(10) Reliance Power Limited applied pursuant to the

RFP. Though, initially, its bid was not the lowest,

but on account of the fact that the lowest bidder

was found to be not eligible, Reliance Power Limited

emerged as the lowest bidder. In keeping with the

conditions, Reliance Power Limited acquired 100 per

cent share holding of the first respondent and it

was favoured with the Letter of Intent on

01.08.2007. It entered into a Power Purchase

Agreement (hereinafter referred to as ‘PPA’) on

07.08.2007. In the second week of December, 2007,

it would appear that the first respondent which now

stood transformed as a fully owned company of the

successful bidder Reliance Power Limited,

commissioned a new Study by WAPCOS. WAPCOS

submitted its report on 04.04.2008. We must at this

juncture notice that ‘21.07.2007’ has been

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determined as the cut off date, the relevance of

which will be unfolded in the later part of the

judgment.

(11) The PPA contemplated two phases. The first

phase was the construction of the power plant. The

second was the operation of the power plant. The PPA

was to be enforced for a period of 25 years.

Therefore, we can safely characterise it as a long

term agreement to purchase power. Since this was a

case of competitive bidding, leading to the finding

out of the lowest bidder, but faced with the regime

under Section 63 of the Act which stood attracted,

after the PPA was entered into, a petition was moved

before the Commission for adopting the rates as

contemplated in the PPA. By order dated 17.10.2007,

the Commission after considering the relevant

matters, adopted the rates in accordance with the

PPA. It is, thereafter, that the present petition

was moved by the first respondent on 19.02.2013. It

is relevant at this stage to set out certain

portions of the petition. The petition has been

filed under Section 79 of the Act read with the

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statutory framework governing procurement of power

through competitive bidding and articles 13 and 17

of the PPA between the parties for compensation due

to change in law ‘during the construction period ’.

After setting out the facts which we do not consider

relevant to advert to, the following is noticed.

“5. It is submitted that the following

Changes in Law have occurred during the

Construction Period of the Project which

have caused the Capital Cost of the Project

to increase substantially:

a) Increase in Declared price of Land for

the Project which includes the la nd for the

Power Station, the Moher, Moher -Amlohri

Extension and Chhatrasal captive coal

blocks;

b) Increase in cost of implementation of the

Resettlement and Rehabilitation Plan (“R&R

Plan”) for the Moher, Moher -Amlohri

Extension and Chhatrasal captive co al

blocks;

c) Increase in cost of Geological Reports

for the Moher, Moher -Amlohri Extension and

Chhatrasal captive coal blocks;

d) Increase in cost of compensatory

afforestation for the Moher, Moher -Amlohri

Extension and Chhatrasal captive coal

blocks;

e) Increase in cost of Water Intake system

due to an incorrect assessment of conditions

in the original report supplied to the

bidders at the RFP stage;

f) Levy of excise duty on cement and steel

used in the Project; and

g) Levy of Customs Duty on mining equi pment

CIVIL APPEAL NO. 11826 OF 2018 etc.

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imported for the Project.”

(12) Since, in this case, we are concerned only with

two aspects, namely claims under clause(e) and

clause(g) we deem it appropriate only to refer to

the pleadings of the first respondent in regard to

the same.

Increase in cost of Water Intake System

“65. As per Clause 1.4(v) of RFP for Sasan

UMPP, the Procurers through the Authorized

Representative had to provide water intake

study report. WAPCOS (a premier Government

of India agency) was appointed to conduct

the water intake study. WAPCOS, as the

expert agency identified the water intake

pump house location and the pipeline route

from the intake pump house to the power

plant in its Report. This report was made

available to all the bidders before bid

submission so that the bid ders could factor

in the cost of the water intake system in

preparation of their financial bid i.e.,

the tariff at which power would be supplied

to the Procurers. The total estimated cost

for the construction of water intake system

for the location and rou te indicated in the

report by WAPCOS was estimated to be

approximately Rs.92 Crores. The WAPCOS

Report along with the estimated cost are

annexed herewith and marked as Annexure P -

24 (Colly).”

“66. After RPower acquired the Petitioner,

WAPCOS was appointed to confirm the

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technical feasibility as part of detailed

engineering exercise. During this process,

it was discovered that the water intake

location as finalized by WAPCOS before the

bidding was not an appropriate location and

does not ensure reliable sup ply of water to

the power plant. It was also found that the

water intake at the original location

indicated by WAPCOS in the pre -bid report

would have resulted in shutdown of power

plant for a considerable period during the

lean season.”

“67. Thereafter, WAPCOS conducted detailed

bathymetric studies and recommended a new

location for water intake, which was 23 km

from the power plant as against 12.5 km

initially indicated at the time of bidding

(original location). It was highlighted

that new location wou ld ensure reliable

water supply to the power plant. Due to

increase in distance, submergence area

along the route and construction time,

there has been considerable increase in the

cost of the water intake system as detailed

below. The report of WAPCOS rec ommending

the revised location is annexed herewith

and marked as Annexure p -25.”

“68. The cost for the construction of water

system for the new location is Rs. 244 Cr.

Out of the aforesaid amount, a sum of

Rs.185 Crores has already been incurred and

balance of Rs. 59Crores is to be spent. The

estimated increase in cost of the water

intake system due to the change in location

of the water intake system is Rs.152

Crores. Since this increase is directly

attributable to the error in the WAPCOS

report provided to the bidders at the pre -

bid stage, the Petitioner is required to be

compensated for the same. The cost break up

CIVIL APPEAL NO. 11826 OF 2018 etc.

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for the new/appropriate location which will

ensure reliable water supply is annexed

herewith and marked as Annexure P -26.”

“75. It is submitted that the UMPP Policy

envisages domestic coal based UMPPs as

integrated projects where the power station

and the captive coal mines are treated as an

integrated unit. This is also recognized in

the PPA as well as other project documents

like the RFQ and the RFP. ”

“76. As per Notification 21 of 2002 -Customs

dated 01.03.2002 is sued by the Ministry of

Finance, Government of India, the customs

duty on goods required for setting up mega

power projects has been prescribed as nil

meaning thereby that no customs duty will be

levied on goods imported for setting up a

mega power project . A copy of Notification

21 of 2002-Customs is annexed herewith and

marked as Annexure P-32.”

“77. Sasan UMPP was accorded in -principle

mega power project status as per Ministry of

Power's letter no. F.No. 12/18/2006 -P&P

dated 20.10.2006. The final certif icate was

issued on 21.09.2007. ”

“78. Sasan UMPP is an integrated power

project with captive coal mines viz. Moher,

Moher Amlohri Extension and Chhatrasal Coal

Blocks. The captive coal mines allocated for

Sasan UMPP form an integral and essential

part of the Project and any equipment

imported in relation to the captive coal

mines would therefore be treated as goods

imported for setting up the Project. ”

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“79. The Petitioner was required to import

mining equipment for setting up the captive

coal mines from w hich coal will be sourced

for the Project since the required mining

equipments were not available in India. ”

“80. On 05.05.2011, the Petitioner applied

to the Energy Department, Government of

Madhya Pradesh for recommendation letter to

import mining equip ments for Sasan UMPP

under nil custom duty as is applicable for

the other equipment such as power plants of

the Project. This application was premised

on Notification 21 of 2002 -Customs. However,

vide an Office Memorandum dated 17.06.2011,

the Ministry of Power has intimated that the

exemption for customs duty for UMPPs is

given only with respect to power equipment,

which was forwarded to Petitioner by

Government of Madhya Pradesh on 20.06.2011.

Copies of letters dated 05.05.2011 and

17.06.2011 are annexed herewith and marked

as Annexure P-33(Colly)”

“81. Based on Ministry of Power's Office

Memorandum's, the Energy Department,

Government of Madhya Pradesh declined to

issue the recommendation letter which was

required by the Petitioner to claim nil

customs duty. In view of the refusal by

Energy Department, Government of Madhya

Pradesh and in the interest of the Project

and power consumers, Petitioner had to seek

recommendation letter from Energy

Department, Government of Madhya Pradesh to

import mining equipm ents at project import

rate of 20.94%, which is now reduced to

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16.85% with effect from 17.03.2012. ”

“82. The decision of the Ministry of Power

detailed in its office memorandum dated

17.06.2011 and refusal by Energy Department,

Goverment of Madhya Pradesh to provide

recommendation letter to import mining

equipments for Sasan UMPP under nil custom

duty amounts to a Change in Law under

Article 13.1 of the PPA and Petitioner is

entitled to be compensated for the same. ”

“83. The total amount of customs duty p aid

by the Petitioner on mining equipments

imported for Sasan UMPP is Rs. 361.47 Crores

till date. The total custom duty for mining

equipments is estimated to be about Rs. 531

Crores. The details of the custom duty paid

on mining equipments and estimated t o be

paid in future are annexed herewith in

Annexure P-34 (Colly).”

“84. It is submitted that the Petitioner has

already surpassed the indicative costs

provided by the Procurers and in certain

instances as indicated hereinabove, the

Petitioner will be req uired to pay the

increased Capital Cost in the future. In

this regard, the Petitioner is claiming the

following reliefs:

(a) In relation to the Changes in Law where

the additional Capital Cost has already been

incurred, this Hon'ble Commission may direct

the Procurers to compensate the Petitioner

for such increase in Capital Cost; and

(b) In relation to the Changes in Law for

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which the liability is yet to be incurred,

the Petitioner is seeking a declaration from

this Hon'ble Commission that the increased

expenditure amounts to Change in Law. The

actual payment will be claimed as and when

it falls due.”

“89. From the above discussions and facts,

it is clear that:-

(a) One of the objectives of the National

Electricity Policy and the Tariff Policy is

to secure commercial viability of

electricity sector while ensuring fair

pricing and quality of supply.

(b) Power procurement under Section 63 of

the Act is governed by the statutory

framework comprising (i) Section 63 of the

Act, (ii) Governme nt of India's Guidelines

and (iii) standard documents being RFP and

PPA.

(c) In terms of Section 63 of the Act the

successful bid must be selected consistent

with the guiding principles under Section 61

of the Act meaning thereby that while

adoption of tariff under Section 63 of the

Act, the principles as laid down under

Section 61 need to be complied.

(d) Power procurement pursuant to the

statutory framework constitutes a statutory

contract in terms of the pre -approved and

finalized PPA governed by pro visions of the

Act as well as the Guidelines.

(e) The PPA envisages the adjustment of

CIVIL APPEAL NO. 11826 OF 2018 etc.

21

tariff by this Hon'ble Commission to

restore/restitute the party adversely

affected (the Petitioner in the present

case).”

“90. It is also pertinent to note that

under Section 79(1)(b) of the Act, this

Hon'ble Commission has been given the power

to regulate the tariff of generating

companies like the Petitioner which have a

composite scheme for generation and sale of

electricity in more than one state. ”

“91. The present Petition has been filed for

compensation on account of Changes in Law

which have impacted the Capital Cost of the

Project as well as for compensation for

costs incurred in excess of the indicative

costs provided by the Procurers, which were

the basis for formulation of the financial

bid of Rpower.”

“92. The Petitioner had approached the

Procurers for an amicable resolution.

However, all efforts made by the Petitioner

to seek an amicable resolution to the

unforeseen and undeserved commercial

implication with the Procurers have proved

fruitless. In this backdrop, it has become

imperative and necessary for the Petitioner

to invoke jurisdiction of this Hon’ble

Commission to issue appropriate orders as

prayed for in the Petition. ”

“93. It is submitted that t he present

Petition has been filed invoking: -

(a) Section 79(1)b) of the Act under which

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this Hon'ble Commission has the power to

regulate the tariff of the Petitioner.

(b) Section 79(1)(f) of the Act which gives

this Hon'ble Commission the power to

adjudicate upon disputes involving the

Petitioner.

(c) Regulations 82, 92 and 113 of the

Central Electricity Regulatory Commission

(Conduct of Business) Regulations, 1999.

(d) Article 13 of the PPA read with Article

17 and Paragraph 5.17 of the Competit ive

Bidding Guidelines in terms of which this

Hon’ble Commission has the power to

adjudicate upon any dispute that 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.”

“104. As detailed in Paragraphs 75 -83

above, Notification 21 of 2002 -Customs

issued by the Ministry of Finance,

Government of India granted 100% exemption

from Customs duty to goods required for

setting up mega power projects. The

Petitioner was required to import equipment

for operation of the coal mine which is an

integral part of the Project. ”

“105. It is submitted that as per the said

Notification, any entity which intended to

claim the customs duty exemption was

required to ap ply to the Sponsoring

Authority for an exemption certificate. This

was essential to claim the customs duty

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exemption. In this regard, the Petitioner

wrote to the Government of Madhya Pradesh to

recommend the Petitioner’s case to the

Commissioner of Customs on 5.5.2011 for nil

custom duty on mining equipments. ”

“106. It is submitted that vide an Office

Memorandum dated 17.06.2011, the Ministry of

Power intimated Government of Madhya Pradesh

that the exemption for customs duty for

UMPPs is given only with re spect to power

equipment. The total amount of customs duty

paid by the Petitioner on mining equipments

imported for Sasan UMPP is Rs.361.47 Crores

till date. Total custom duty for mining

equipments is estimated to be about Rs. 531

Crores.”

“107. It is submitted that the decision of

the Ministry of Power amounts to a Change in

Law under Article 13.1 of the PPA and the

Petitioner is entitled to be compensated for

the same. It is further submitted that the

Petitioner not being allowed to import

mining equipment under nil customs duty as

is granted for the other equipment such as

power plants of the Project qualifies as

Change in Law under Article 13.1 of the

PPA.”

“108. It is submitted that as per RFP for

Sasan UMPP, the Procurers had to provide

water intake study report. This study was

conducted by WAPCOS and the report was made

available to all the bidders before bid

submission. The cost of the water intake

system as per the report was approximately

Rs.92 Crores. This estimation was factored

CIVIL APPEAL NO. 11826 OF 2018 etc.

24

into the bid at the time of submission of

the financial bid.”

“109. It is submitted that after Rpower

acquired the Petitioner, WAPCOS was tasked

with confirming the technical feasibility

during the detailed engineering exercise.

During this process, it was discovered that

the water intake location as intimated in

the pre-bid report was not appropriate.

After, conducting another detailed study,

WAPCOS determined that a new location would

be suitable. The new location is 23 km from

the power plant as against 12.5 km initially

indicated at the time of bidding (original

location).”

“110. It is submitted th at due to the

increase in distance, submergence area along

the route and construction time there has

been considerable increase in cost of the

water intake system. The cost for the

construction of water system for the new

location is Rs. 244 Cr. The esti mated

increase in cost of the water intake system

due to the change in location of the water

intake system is Rs.152 Crores. ”

“111. It is submitted that the increase in

cost of the water intake system is on

account of the errors in the report provided

by the Procurers and therefore, the

Procurers are obligated for compensating the

Petitioner for the difference in cost. It

is further submitted that since the water

pipeline corridor is part of the Power

Station Land and the water intake pipeline

CIVIL APPEAL NO. 11826 OF 2018 etc.

25

is an integral part of the Power Station,

any change in the indicative cost of the

water intake system will be covered under

Change in Law.”

“120. Section 79 of the Act, inter alia,

empowers the Hon’ble Commission to: -

(a) Regulate the tariff of generating

companies other than those owned or

controlled by the Central Government if such

generating companies entered into or

otherwise have a composite scheme for

generation and sale of electricity in more

than one State; and

(b) To adjudicate upon the disputes

involving the distribution companies or

transmission licensees with regard to the

matters connected with regulation of tariff

of generating companies. ”

“128. It is submitted that the present case

involves a situation where the compensatory

mechanism under the PPA for compensation for

Change in Law has failed. It does not meet

the objective of restoring an affected party

to the same economic condition as if the

change in law had not occurred. Therefore,

this is a fit case for this Hon’ble

Commission to exercise its powers under

Section 79 and devise a mechanism to uphold

the objective and purpose of Article 13 – to

provide economic restitution. ”

“129. It is further submitted that PPA

envisages a scenario where this Hon’ble

CIVIL APPEAL NO. 11826 OF 2018 etc.

26

Commission can interfere wit h the issues

relating to the claim made by a party for

any change and/or determination of the

tariff or any matter relating to the tariff

or claims made by any party which partly or

wholly related to any change in the tariff

or determination of any such cl aim which can

result in change in the tariff. In this

context, Articles 13 and 17 are noteworthy.

While Article 13 of the PPA envisages tariff

adjustment in the event of “Change in Law”,

Article 17 of the PPA provides for dispute

resolution, by the Hon’ble Commission in

case of claim made by any party for any

change in or determination of tariff or any

matter related to tariff or claims made by

any party, which partly or wholly relate to

any change in the tariff or determination of

any of such claims could result in change in

tariff.”

“142. The Petitioner therefore most humbly

and respectfully prays that this Hon’ble

Commission be pleased to adjudicate upon the

present Petition to:-

(a) Declare that the items set out in

Paragraph 5 above as Change in Law during

Construction Period and/or changes which has

led to an increase in the Capital Cost of

the Project;

(b) Restitute the Petitioner to the same

economic condition as if the said Changes in

Law had not occurred and devise a mechanism

by which the Peti tioner is compensated for

the aggregate financial impact and increase

CIVIL APPEAL NO. 11826 OF 2018 etc.

27

in capital cost of account of the Changes in

Law, the details of which are set out in

Paragraph 113 above; and

(c) Pass any such other and further reliefs

as this Hon’ble Commission dee ms just and

proper in the nature and circumstances of

the present case.”

(13) After exchange of pleadings, the Commission

passed the order dated 04.02.2015. Since we are in

these appeals to be detained only by two aspects, we

notice the following findings:

“30. The petitioner has submitted that as per

Clause 1.4(V) of RFP for Sasan UMPP, the

Procurers through the Authorized

Representative had to provide water intake

study report. WAPCOS (a premier Government of

India agency) was appointed to conduct the

water intake study. WAPCOS, as the expert

agency identified the water intake pump house

location and the pipeline route from the

intake pump house to the power plant in its

Report. This report was made available to all

the bidders before bid submission so that the

bidders could factor in the cost of the water

intake system in preparation of their

financial bid i.e. the tariff at which power

would be supplied to the Procurers. The total

estimated cost for the construction of water

intake system for the location and route

indicated in the report by WAPCOS was

estimated to be approximately ₹92 Crore.

CIVIL APPEAL NO. 11826 OF 2018 etc.

28

After RPower acquired the project, WAPCOS was

appointed to confirm the technical

feasibility as part of detailed engineering

exercise. During this process, it was

discovered that the water intake location as

finalized by WAPCOS before the bidding was

not an appropriat e location and does not

ensure reliable supply of water to the power

plant. It was also found that the water

intake at the original location indicated by

WAPCOS in the pre -bid report would have

resulted in shutdown of power plant for a

considerable period during the lean season.

Thereafter, WAPCOS conducted detailed

bathymetric studies and recommended a new

location for water intake, which was 23 km

from the power plant as against 12.5 km

initially indicated at the time of bidding

(original location). It wa s highlighted that

new location would ensure reliable water

supply to the power plant. Due to increase in

distance, submergence area along the route

and construction time, there has been

considerable increase in cost of the water

intake system as per follo wing details

(Annexure P-26 of the petition) and as per

the earlier report of WAPCOS: -

S.

No.

Cost Item As per

earlier

WAPCOS Report

Current

estimate

(₹ Crore) (₹

Crore)

1 Cost of Pump House 21.00 62.97

2 Cost of Bridge 10.50

3 Supply of Pipe

line

30.50 73.91

CIVIL APPEAL NO. 11826 OF 2018 etc.

29

4 Laying of pipe

line

16.70 57.97

5 Mechanical 10.20 20.32

6 Electrical 3.50 4.02

7 Dredging for Pump

House

25.13

8 Total 92.40 244.32

31. MPPMCL has submitted that it is an

expense incurred by the petitioner but is not

covered under “Change in Law” under Article

13.1.1 of the PPA. However, it is concluded

that the cost has been incurred by the

petitioner and exceeds the estimates given by

the procurer's authorized representative

prior to bid submission. HPCC has submitte d

that the price and other details given in the

bidding document were by way of information

and it was for the bidders to conduct

independent enquiry and verify the

information and details. There is no

misrepresentation by the procurers or by the

Bid Process Coordinators at the time of

bidding in relation to water intake for the

project. In view of the specific disclaimer

and the requirement to conduct independent

enquiry, the petitioner was required to make

appropriate enquiries into the matter before

bidding and the bidders were not entitled to

proceed only on the basis indicative

information given by the Bid Process

Coordinator.

32. We have considered the submission of the

petitioner and respondent. As against the

indicative cost of ₹92.40 crore, the co st for

the construction of water system for the new

CIVIL APPEAL NO. 11826 OF 2018 etc.

30

location is ₹244 crore out of the aforesaid

amount, a sum of ₹185 crore has already been

incurred and balance of ₹59 crore is to be

spent. The estimated increase in cost of the

water intake system due to the change in

location of the water intake system is ₹152

crore. The petitioner has submitted that

since this increase is directly attributable

to the error in the WAPCOS report provided to

the bidders at the pre -bid stage, the

petitioner is required to be compensated for

the same.

33. In our view, the claim is not covered

under any of the provisions of Article 13.1.1

of the PPA. The petitioner being aware that

the cost of water intake system being

indicative in nature and being not covered

under the “Cha nge in Law” under Article 13

should have informed itself fully with the

actual site conditions before preparing the

bid and accordingly factored the possible

estimates of water intake system while

quoting the bid instead of relying on the

indicative cost. In this connection, para

2.7.2.1 of the RfP document provides as

under:

“2.7.2.1 The Bidder shall make

independent enquiry and satisfy

itself with respect to all the

required information, inputs,

conditions and circumstances and

factors that may have any effect on

his Bid. In assessing the Bid, it is

deemed that the Bidder has inspected

and examined the site conditions of

roads, bridges, ports etc. for

CIVIL APPEAL NO. 11826 OF 2018 etc.

31

unloading and/or transporting heavy

pieces of material and has based its

design, equipment size and fixed its

price taking into account all such

relevant conditions and also the

risks, contingencies and other

circumstances which may influence or

affect supply of power.”

Further para 4 of the RfP document provides

that the pricing and other details given in

the bidding documents are by way of

information only and it was for the bidders

to conduct independent enquiry and verify the

details and information. Para 4 are extracted

as under:

“4. While the RFP has been prepared

in good faith, neither the

Procurers, Authorised Representative

and Power Finance Corporation (PFC)

nor their directors or employees or

advisors/consultants make any

representation or warranty, express

or implied, or accept any

responsibility or liability,

whatsoever, in respect of any

statements or omission herein, or

the accuracy, completeness or

reliability of information contained

herein, and shall incur no liability

under any law, statute, rules or

regulations as to the accuracy,

reliability or completeness of this

RFP, even if any loss or damage is

caused to the Bidder by any act or

omission on their part.”

CIVIL APPEAL NO. 11826 OF 2018 etc.

32

Therefore, it is the responsibility of the

petitioner to verify the suitability of the

location of water intake and ensure reliable

water supply for the power plant and workout

the relevant approximate cost of water intake

system independently and factor in the

estimates in the bid so that a realistic cost

is reflected in the bid. The petitioner

having failed to do so, the increase in cost

on account of this head is not admissible. ”

(14) As far as the question relating to imposition

of customs duty on mining equipment is concerned,

the same is dealt with in paragraphs 40 and 41.

“40. We have considered the submission of

the petitioner and respondents. The

Notification No.49/2006 provides a s under:

Notification No. 49/2006 -Customs

In exercise of the powers conferred by sub -

section (1) of Section 25 of the Customs Act,

1962 (52 of 1962), the Central Government, on

being satisfied that it is necessary in the

public interest so to do, hereby makes the

following further amendments in the

notification of the Government of India in

the Ministry of Finance (Department of

Revenue) No. 21/2002 - Customs, dated the 1st

March, 2002, which was published in the

Gazette of India, Extraordinary vide number

G.S.R. 118(E), dated the 1st March, 2002,

namely:-

CIVIL APPEAL NO. 11826 OF 2018 etc.

33

In the said notification, -

(I) in the Table, against S.No.400,

for the entry in column (3), the

following entry shall be

substituted, namely:-

“Goods required for setting up of

any Mega Power Project, so certified

by an officer not below the rank of

a Joint Secretary to the Government

of India in the Ministry of Power,

that is to say-

(a) an inter -state thermal power

plant of a capacity of 700MW or

more, located in the States of Jammu

and Kashmir, Sikkim, Arunachal

Pradesh, Assam, Meghalaya, Manipur,

Mizoram, Nagaland and Tripura; or

(b) an inter -state thermal power

plant of a capacit y of 1000MW or

more, located in States other than

those specified in clause (a) above;

or

(c) an inter-state hydel power plant

of a capacity of 350MW or more,

located in the States of Jammu and

Kashmir, Sikkim, Arunachal Pradesh,

Assam, Meghalaya, Manipu r, Mizoram,

Nagaland and Tripura; or

(d) an inter-state hydel power plant

of a capacity of 500MW or more,

located in States other than those

specified in clause (c) above”;

CIVIL APPEAL NO. 11826 OF 2018 etc.

34

(II) in the Annexure, in Condition

No. 86, for sub -clauses (ii) and

(iii) of clause (a), the following

shall be substituted, namely: -

“(ii) the power purchasing State

undertakes, in principle, to

privatize distribution in all

cities, in that State, each of which

has a population of more than one

million, within a period to be fixed

by the Ministry of Power.”.

[F.No.354/104/2003-TRU]

It is noticed that the revised policy

guidelines issued by Government of India,

Ministry of Power vide its letter No. A -

118/2003-IPC dated 2.8.2006 has stated that

an inter-State thermal power plant of a

capacity of 1000 MW or more is eligible for

grant of mega power status. It further states

as under:

“Zero Customs Duty: In terms of the

notification of the Government of

India in the Ministry of Finance

(Department of Revenue) No. 21/2002-

Customs dated 1.3.2002 read together

with No. 49/2006 -Customs dated

26.5.2006, the import of capital

equipment would be free of customs

duty for these projects.”

41. It is to be considered whether under the

notification as stated above, mining

equipments were exempted from customs duty.

General Exemption No.122 under the Customs

CIVIL APPEAL NO. 11826 OF 2018 etc.

35

Notification No.21/2002 as amended from time

to time contains the list of items which are

exempted from customs duty. It is observed

that Notification 21 of 2002 -Customs clearly

demarcates the power projects and mining

projects separately. It is seen that at Ser

No.399 of the list, coal mining projects are

liable to pay customs duty. Ser No. 400 only

exempts the mega power project from payment

of customs duty and there is no mention that

it includes captive power plants. Therefore,

it cannot be said that as on the cut -off

date, there was exemption on mining equipment

and the petitioner had taken into

consideration such exemption while quoting

the bids. Nothing has been produc ed in the

petition which could indicate that any such

impression was given by the procurers or

their representative prior to bidding. In

view of the foregoing discussion, the

submission of the petitioner that the

decision of the Ministry of Power detailed in

its office memorandum dated 17.06.2011 and

refusal by Energy Department, Government of

Madhya Pradesh to provide recommendation

letter to import mining equipments for Sasan

UMPP under nil custom duty amounts to a

"Change in Law" under Article 13.1 of th e PPA

and the petitioner is entitled to be

compensated for the same is not acceptable

and hence no compensation would be available

in this regard.”

THE APPEAL BEFORE THE TRIBUNAL

(15) This led to the appeal being filed by the first

respondent under Section 111 of the Act. It is

CIVIL APPEAL NO. 11826 OF 2018 etc.

36

apposite that we set out the exact case which has

been set up by the first respondent before the

Tribunal.

“9.5 The Report identified the water intake

pump house location and pipeline route from

the intake pump house to the power plant in

its report. This report was made available

to all the bidders before bid submission so

that the bidders could factor in the cost of

water intake system in preparation of their

financial bids i.e., the tariff at which

power be supplied to the Procurers. The

total cost for the construction of water

intake system for the location and route of

indicated in the report by WAPCOS was

estimated to be Rs.92 Crores. The water

intake system is an integral part of the

Project without with it is not possible to

set up and operate the Project. The WAPCOS

report along with estimated cost are annexed

herewith and marked as Annexure A -14.

9.6 After RPower was declared the successful

bidder and the Appellant Company was

transferred to RPower, WAPCOS was re -

appointed to co nfirm the technical

feasibility as part of the detailed

engineering exercise. During this process,

it emerged that the water intake location as

finalized by WAPCOS vide its earlier report

prepared for PFC/ Procurers and made

available to all bidders prior to bid

submission was not an appropriate location

and does not ensure reliable supply of water

to the power plant. It also emerged that the

water intake at the original location

indicated by WAPCOS in the pre -bid report

would have resulted in shutdown of t he power

plant for a considerable period in a year

CIVIL APPEAL NO. 11826 OF 2018 etc.

37

during the lean season. Therefore, WAPCOS

recommended a new location for water intake,

which was 23 km from the power plant as

against the 12.5 kms initially indicated at

the time of bidding (original loca tion). It

was highlighted that the new location would

ensure reliable water supply to the power

plant. Due to increase in the distance,

submergence area along the route and

construction time, there has been

considerable increase in the cost of water

intake system due to change in location as

detailed below. The report of WAPCOS

recommending the revised location is annexed

herewith and marked as Annexure A -15.

9.7 It is submitted that due to the change

in location, cost for water intake system

has increased on following counts:

(a) While the route length itself increased

to 23 kms, the increase in piping length

increased from 24 km (2 Pipe Lines each of

12 Kms) to 59.5 km (2 Pipe Lines each of 8

km & 3 Pipes each of 14.5 km)

(b) Increased cost due to deeper Pump House.

(c) Additional dredging for creation of

intake channel for the offshore pump house.

(d) Additional cost due to HT transmission

line.

There has been considerable increase of

approximately Rs.176 Crores in cost of the

water intake system, which now is estimated

to be approximately Rs.268 Crores. The cost

break-up for the new location for the water

intake system is annexed herewith and marked

as Annexure A-16.

9.8 It is submitted that the increase in

cost of the water intake system is on

account of the errors in the report provided

CIVIL APPEAL NO. 11826 OF 2018 etc.

38

by the Procurers and therefore, the

Procurers are required to compensate the

Appellant for the difference in cost.

9.9 It is further submitted that since the

water pipeline corridor is part of the Land

for the Power Station and the water intake

pipeline is an integral part of the Power

Station, any change in the indicative cost

of the water intake system is covered under

Change in Law in terms of Article 13 of the

PPA since it amounts to change in cost of

land of the Project. In fact, the Ld.

General Commission has noted in the impugned

Order that the estimate for Declared Price

of Land for the Power Station includes the

Water Intake System. The operative part of

the Impugned Order is reproduced below:

“19. Change in the declared price of land is

covered under “Change in Law”. The procurers

have also agreed that this item of

expenditure is admissible under “Change in

Law”. The declared price of land for the

Power Station was stated to be 190.677

crore. This has been verified from the

communication dated 23.10.2006 from the

representative of the procurers to the

bidders. This included the power plant area,

the fuel transport system land, the water

pipeline corridor and the ash pipeline

corridor.”

9.11 It is submitted that pre-bid site visit

and project reports were prepared and made

available by Authorized Representative

(Power Finance Corporation) to all bidders.

The disclaimer, if at all applicable, will

only apply to such instances where the

bidders were able to id entify any issues or

liability with reasonable diligence. Based

on the information and material provided,

there was no indication that the water

CIVIL APPEAL NO. 11826 OF 2018 etc.

39

intake system proposed in the WAPCOS Report

was unfeasible. Therefore, the disclaimer

does not absolve the Proc urers of their

liability to compensate the Appellant for

the increase in cost. It is submitted that

due to the error in WAPCOS’s report, the

Appellant is faced with an additional burden

of Rs.176 Crore which has adversely impacted

the project economics. It is submitted that

the disclaimers contained in Para 2.7.2.1

and Para 4 of the RFQ ought not to be

considered absolute in nature so as to

prevent loading of costs which are incurred

by the Appellant as a direct result of

omission or error on part of the Pr ocurers

in providing information during the pre -bid

stage. This approach is counter -intuitive to

ensuring that the Appellants Project is able

to supply cheap and affordable power to over

42 million consumers in the Procurer States.

It is further submitted that the disclaimers

cannot act as an absolute bar to the

liability of the Procurers. Any duty to

independently verify inputs, information

factors etc. require only a reasonable duty

of care. The grave technical deficiencies

and huge differences between ac tual cost and

estimates provided to the bidders defeat the

fundamental objective of providing

information to the bidders especially when

the nature of expense in this case was of

buying a report from a Government Company

which had carried out a detailed st udy. The

Appellant had no other option but to rely on

the information provided by the authorized

representative of the Procurers. Therefore,

Ld. Commission’s reliance on the disclaimers

contained in the bid documents to reject the

claim of the Appellant is not sustainable.”

(16) In regard to the complaint about the

notification issued by the Joint Secretary in the

CIVIL APPEAL NO. 11826 OF 2018 etc.

40

Ministry of Power having brought about a change in

law, we find the following complaint, inter alia:

“9.20. It is submitted that as per Notification

21 of 2022- Customs dated 01.03.2002 issued by

the Ministry of Finance, Government of India,

the customs duty on goods required for setting

up mega projects has been prescribed as nil

meaning thereby that no customs duty will be

levied on goods imported for setting up a mega

power project. Notification 21/2022 - Customs

which provides as under:

“

S.

No.

Chapter or

Heading or

sub-heading

Description of Goods Standard

Rate

Additional

Duty Rate

Condition

No.

(1) (2) (3) (4) (5) (6)

98.01 Goods required for setting

up any Mega Power Project

specified in List 42 if such

Mega Power is (a) An inter-

state thermal power plant of

1000 MW or more (b) an

inter-state hydel power plant

of a capacity of 500 MW or

more As certified by an

officer not below the rank of

joint secretary to the

Government of India in the

Ministry of Power.

9.22 It is submitted that captive Coal Blocks

being an integral part of the Project, the

mining equipment would be covered under this

provision as well. It is submit ted that RFP

clearly stated that Procurers through the

Appellant (which was a wholly -owned

subsidiary of PFC at that time) will procure

a certificate from the Ministry of Power that

the benefits of the Mega Power Policy would

CIVIL APPEAL NO. 11826 OF 2018 etc.

41

be extended to the Project til l scheduled

Commercial Operations Date of the Power

Station. As per definition, Project includes

captive mine and hence, it was Procurer’s

obligation to provide for the exemption to

the coal mining equipment.

9.24 It may also noted that: -

Xxx xxx xxx

(b) PPA defines Project as power plant along

with captive coal mines.

9.35 It is submitted that the Appellant has

set up an ultra -mega power project which

comprises of captive coal mines. It is not

separately indulging in mining activities.

Moreover, the coal from the Project is being

used only for the Project. The entire capital

cost of the power project includes the cost

of the coal mines. This is also evident from

Article 13 of the PPA where increase in cost

of land and R&R expenditure for the coal

mines is included as change in law.

Therefore, the finding that the captive coal

mines are a separate activity and will fall

under Serial No. 399 is incorrect and ought

to be set aside.

FINDINGS OF THE TRIBUNAL

(17) As far as the complaint about the increased

costs on account of change in water intake system,

the following is the finding of the Tribunal.

“12.4 After due consideration of the rival

contentions of both the parties, what emerges

is that after being declared as the

CIVIL APPEAL NO. 11826 OF 2018 etc.

42

successful bidder, the SPL with a view to

affirm the technical suitability of the

preliminary report of the WAPCOS on Water

Intake System, re-engaged the same agency for

finalization of the said report. It is not in

dispute that the Consultant, WAPCOS revi ewed

its earlier report and came to a conclusion

that the earlier location of Water Intake was

not at proper place and would result in non -

availability of water for the plant during

lean period. It is relevant to note that

based on the recommendations of W APCOS, SPL

decided to go ahead for selection of new

location as recommended and got carried out

the requisite design and engineering of the

entire Water Intake System which resulted

into longer piping system, increased

submergence area along the route, add itional

construction period etc.. On account of these

factors, the cost of Water Intake System went

up by over Rs.176 crores. The learned counsel

appearing for the Appellant pointed out that

the judgment of this Tribunal in Nabha Power

case is not applicab le to the present case

since no cost relating to seismic zone data

was provided to Nabha whereas in the instant

case, costs were provided to the bidders. The

Appellant has further reiterated that para

2.7.2.1 and para 4 of RFP which were relied

upon by the Respondent procurers cannot be

taken as obsolute in nature so as to absolve

procurers of their responsibility for

providing grossly incorrect information

leading to substantial increase in cost of

Water Intake System.

12.5 After thoughtful consideration of the

submissions made by the learned counsel for

CIVIL APPEAL NO. 11826 OF 2018 etc.

43

the Appellant and the Respondents and the

findings of the Central Commission, we find

that while the responsibility of carrying out

due diligence before bidding and verifying

the correctness of informatio n provided in

the bid documents rested with the bidders, at

the same time, Respondent procurers cannot

justify providing grossly erroneous report on

Water Intake System taking shelter under the

disclaimer in the bid document. As a matter

of fact, the water availability for a thermal

power station of this magnitude on regular,

reliable and uninterrupted basis is essential

and is a vital input for successful operation

of the plant. It is noticed that the report

of WAPCOS supplied to bidders at the time of

bidding was deficient in ensuring adequate

water supplies throughout the year

uninterrupted and if the same would have been

taken for construction and implementation,

the same could have resulted into huge loss

to the Respondent procurers being deprived of

power supply for some period of the year due

to less/ non-availability of water during the

lean period. It is not in dispute that Sasan

UMPP is supplying power to the Respondent

procurer at one of the most competitive

tariff in the country. It is noted from the

contentions of the Respondent procurers that

such an issue has not been dealt with either

in the PPA or in the competitive bidding

guidelines issued by Ministry of Power under

Section 63 of the Act, however, in view of

the criticality of such situation , we opine

that the matter needs afresh re -look for

suitable redressal. While the Central

Commission has correctly concluded that it

does not qualify as change in law under

CIVIL APPEAL NO. 11826 OF 2018 etc.

44

Articles 13.1.1 of the PPA, it, however,

needs to be addressed on the basis of sett led

principles of law and equity also, in the

light of the Hon’ble Supreme Court findings

in its judgment at Para 19 in Energy Watchdog

vs. CERC dated 11.04.2017. Thus, we are of

the considered view that this issue involving

substantial additional expendit ure basically

arising out of erroneous report of the

consultants needs to be re -examined afresh by

the Central Commission. Hence, this issue is

answered in favour of the Appellant. ”

(18) In regard to the complaint relating to the O.M.

dated 17.06.2011 forming change in law, we note the

following findings:

“14.5 We have considered the submissions of

the learned counsel for the Appellant and

learned counsel for the Respondents along

with the consideration of the Central

Commission on this issue pertaining to the

claims of the Appellant regarding

compensation on account of additional payment

towards custom duty on mining equipment.

After careful consideration and critical

evaluation of the s ame, the key question

arises for consideration, whether the

equipment required for captive coal mines

allocated to UMPP should be considered at par

with the equipment required for setting up

the power plants as far as exemption from the

custom duty is conc erned. The contention of

the Appellant that the captive coal mines

allocated to Sasan UMPP are integral &

essential part of the project as a whole and

CIVIL APPEAL NO. 11826 OF 2018 etc.

45

as such, the exemption of custom duty was

applicable to all equipments being imported

for the entire proj ect i.e. captive coal

mines as well as power plants. It is not in

dispute that the captive coal mines were

allotted for UMPP for its exclusive use for

power generation and in no way, meant for

commercial utilization elsewhere.

14.6 In this regard, we als o take the note

of Hon’ble Supreme Court directions in

judgment dated 24.08.2014 in Manohar Lal

Sharma Vs. Principal Secy., in W.P.(CRL) 120

of 2012 (Para 158) that coal from captive

coal mines is to be used for UMPP alone and

no diversion of coal for comm ercial

exploitation would be permitted. Keeping

these facts in view, we notice the glowing

difference between an independent coal mines

up for exploitation and selling coal on

commercial lines and a captive coal mine set

up to meet requirement of UMPP only to

generate power for the ultimate benefit of

the Respondent procurers and in turn,

consumers for obtaining electricity at

cheaper rates. The actual positions purported

the assumption made by the Appellant that the

customs duty exemptions will be availabl e for

import of the equipment for the entire

project including captive mines and power

plants. We find force in the argument of the

learned counsel for the Appellant that being

the integral and inseparable part of the

UMPP, the custom duty rates applicable for

stand alone coal mining projects would not be

applicable in the present case and the

exemption would need to be given effect to.

We, thus opine that the Central Commission

CIVIL APPEAL NO. 11826 OF 2018 etc.

46

appears to have been mechanically guided by

the mere description of the relevan t entry

(Sl.No.399 & 400) in the said custom duty

notifications and has not appreciated that

the captive coal mines being integral part of

the UMPP cannot be equated to a stand alone

coal mines, having commercial line of

utilization. The Appellant was thus right in

assuming that Custom Duty exemption will be

available for the coal mining equipments. As

such, this issue needs to be examined afresh

in accordance with law and various provisions

of the RFQ/RFP/PPA. Therefore, we answer this

issue in favour of the Appellant.”

(19) On the basis of the aforesaid findings, the

Tribunal remanded the matter back to the Commission.

We may also notice the sequel to the impugned

judgment. Pursuant to the remand, the Commission

reconsidered the matter in regard to the water

intake. The Commission ordered payment of sum of

Rs.176 crores. As far as the claim for compensation

on the basis that the issuance of the office

memorandum by the Joint Secretary in the Ministry of

Power having brought about a change in law, it was

found that the goods in question had been imported

not by the first respondent but by its parent

company. This, in turn, has triggered two sets of

CIVIL APPEAL NO. 11826 OF 2018 etc.

47

appeals again before the Tribunal and they are still

pending. Their fate, undoubtedly, will depend upon

the decision which we will be rendering in these

cases.

(20) We have heard Mr. P. Chidambaram, Mr. Dhruv

Mehta, Mr. Rana Mukherjee, Mr. M. G. Ramachandran,

Mr. G. Umapathy, learned senior counsel, assisted by

Mr. Nikunj Dayal and Ms. Pallavi Sehgal. We have

also heard Mr. Shubham Arya, learned counsel

appearing on behalf of the appellant in one of the

appeals. On the other hand, we also heard Mr.

Sajjan Poovayya, learned senior counsel assisted by

Mr.Rahul Kinra, learned counsel and Mr. Amit Kapoor,

learned counsel.

SUBMISSION OF APPELLANTS

(21) Shri P. Chidambaram, learned senior counsel

appearing for the appellant, would submit that the

Tribunal has clearly acted in error and illegally in

passing the impugned order.

(22) He would submit that as far as the finding

CIVIL APPEAL NO. 11826 OF 2018 etc.

48

given by the Tribunal in regard to the water intake

system being located at a different place, is

concerned, the Tribunal agreed with the Commission

that there was no change in law. Once, it was found

that there was no change in law, there is no power

with the Trib unal to do what it did. The PPA

signifies an agreement between the parties. The PPA

goes into meticulous details. It follows an

internationally competitive bidding and the

obligations of the parties have been carved out and

articulated with great care. Once the party, viz.,

the first respondent went to the Commission

complaining that there is a change in law and it was

found that there is no change in law, there ended

the jurisdiction of the Tribunal. Instead of

terminating the lis, the Tribunal has cle arly

strayed outside its jurisdiction in granting relief

on the basis that report of WAPCOS was grossly

erroneous. In this regard, he enlisted in support

of his contention, various clauses which

unambiguously disclaimed any liability with the

procurers on account of any inaccuracies which may

CIVIL APPEAL NO. 11826 OF 2018 etc.

49

be reflected in the WAPCOS report. A report

submitted by WAPCOS which is a public sector body

was only by way of providing information. The

bidders were provided with the report well before

they decided to put in th eir bids. Having regard to

the various disclaimer clauses, it did not lie in

their mouth to thereafter seek to construct a case

based on the report being erroneous. In this

regard, it is pointed out that the clauses clearly

indicate that the bidder was t o satisfy itself by

conducting a study of the site. Nothing prevented

the first respondent from carrying out inspection of

the site and verifying for itself the information

which was provided through the report of the WAPCOS.

(23) Mr. P. Chidambaram, learned s enior counsel,

further pointed out that a perusal of the second

WAPCOS report, which is the sole basis for the huge

claim raised by the first respondent, would show

that the second report does not, in any manner,

rubbish the first report. It is not in dis pute, it

is pointed out, that the procurers were in no way

associated with the carrying out of the second

CIVIL APPEAL NO. 11826 OF 2018 etc.

50

WAPCOS report. Unilaterally, the first respondent

without any basis gets the second report

commissioned and it is on the said basis alone that

the claim was made and what is more, allowed by the

Tribunal. This is clearly impermissible. As

regards the claim for compensation alleging change

in law brought about by the Office Memorandum issued

by the Joint Secretary is concerned, in the first

place, it is pointed out that the proper thing for

the first respondent to do would have been to take

up the matter with the Department and claim a refund

and he would submit it is strange instead of doing

that the burden is sought to be passed on to the

procurers and which, in turn, would necessarily be

passed on to the ultimate consumers.

(24) Further, it is pointed out that the Tribunal

has actually proceeded to take into consideration

the earlier notifications which prevailed at the

time of the cut off date with ref erence to which

alone change in law is projected. Thereafter, it

has come to the conclusion that for the goods

imported from abroad for the purpose of the captive

CIVIL APPEAL NO. 11826 OF 2018 etc.

51

mines, there was an exemption. Such an inquiry

itself could not have been done. In other w ords, it

is not a case where the first respondent had

indisputable material on hand which established

unambiguously that there was a change in law. This

is for the reason that there is no material to

establish that prior to the cut off date, the goods

which are the subject matter of dispute, were exempt

under the notification. On the other hand, our

attention is drawn to the decision of the Advance

ruling authority which has gone into the issue and

found that goods in question were not exempt. In

fact, it is the contention of the appellants that

the office memorandum issued by the Joint Secretary,

Ministry of Power, merely follows the advance

ruling.

(25) Another argument which is raised in this regard

is that the Joint Secretary in the Ministry of Power

is not the final Governmental authority within the

meaning of clause 13.1.1. What we are concerned

with is notification issued under Section 25 of the

Customs Act. It is not as if any authority which is

CIVIL APPEAL NO. 11826 OF 2018 etc.

52

competent within the meaning of Article 13.1.1 has

issued a notification or even an interpretation

within the meaning of the said article which has

resulted in a change in law within the meaning of

Article 13.1.1.

(26) We have also heard Shri Dhruv Mehta, as we have

already stated. We have heard the other senior

counsel who have essentially adopted the arguments

which have been addressed by Mr. P.Chidambaram,

learned senior counsel, and they are one in

contending that the Tribunal has strayed outside the

contours of its jurisdiction and this has resulted

in an order which is clearly illegal and erroneous.

SUBMISSIONS OF THE FIRST RESPONDENT

(27) Per contra, Mr. Sajjan Poovayya , learned senior

counsel for the first respondent, took us through

the other side of the picture and projected a

totally different scenario. He would point out, in

the first place, that the Court may not view the PPA

in question as an ordinary contract. He pointed out

that what is at stake is the interpretation to be

CIVIL APPEAL NO. 11826 OF 2018 etc.

53

placed on a long term power procurement contract.

It is not as if in such a contract, the matters are

fixed with reference to the point of time when the

contract is entered into. It is not cast in stone,

in other words. It is open to change. More

appropriately, it is open to regulation. We are

invited to consider that the Act represents a

paradigm shift from the previous regime under which

the price of power was fixed essentially at the

whims and caprice of the State Electricity Boards.

There was a stagnation in the production and supply

of power. It is realising the need for increasing

private participation in the generation of power

that the Act was enacted in the year 2003. Being

the subject matter of regulations means that tariff

was open to be revisited from time to time. It is

precisely this regime which is reflected by Section

79 of the Act. It is further pointed out that the

complaint of the appellants regarding the Tribunal

in regard to the water intake system despite

agreeing with the Commission that there was no

change in law rendering the findings it did and

CIVIL APPEAL NO. 11826 OF 2018 etc.

54

therefore, being unsustainable, the Court may

consider that in fact there was a change in law.

This argument is sough t to be buttressed with

reference to the provisions of clause (iii) of

Article 13.1.1. It is contended, in other words,

that a perusal of the various clauses of the PPA

would show that the procurers (the appellants) were

obliged under the contract to prov ide initial

consent. One of the initial consents related to the

water linkage for the project. He would submit that

in view of the provisions of Schedule II to the PPA

the initial consent also consisted of carrying out

the task of making available land f or the power

plant and for the laying of the pipeline. Since as

it turned out and as supported by the second report

of the WAPCOS, there was clearly insufficient

availability of water at the site supported by the

first report, the first respondent was com pelled to

take water from a distant point of the reservoir in

question. This led to the colossal increase in the

expenditure towards laying of the pipeline inter

alia. This constituted, therefore, a change in law.

CIVIL APPEAL NO. 11826 OF 2018 etc.

55

(28) As far as the contention based on the

disclaimer clauses which are relied upon by the

appellant is concerned, it is pointed out that the

width of the disclaimer clause could not be

stretched to the point that is canvassed by the

appellants. We are dealing with a case where a

public sector uni t viz., WAPCOS has given its

report. Not unnaturally, the first respondent

relied upon the same. It is factored in its price

and once it is found that the report was entirely

fallacious, no shelter can be sought by the

appellants under the disclaimer cla uses. Our

attention was drawn to various judgments. They

include Energy Watchdog v. Central Electricity

Regulatory Commission and Others (2017) 14 SCC 80,

Uttar Haryana Bijli Vitran Nigam Ltd. & Anr. v.

Adani Power Limited & Ors. (2019) 5 SCC 325, Gujarat

Urja Vikas Nigam Ltd. v. Essar Power (2008) 4 SCC

755, Skandia Insurance Co. Ltd. v. Kokilaben

Chandravan & Ors. (1987) 2 SCC 654, DLF Universal

Limited v. Director, Town and Country Planning

Department, Haryana (2010) 14 SCC 1 and Sumitomo

CIVIL APPEAL NO. 11826 OF 2018 etc.

56

Heavy Industries v. Oil and Natural Gas Commission

of India (2010) 11 SCC 296, Nabha Power Limited v.

PSPCL (2018) 11 SCC 508.

(29) The respondents have also relied upon the

judgments of this Court which are detailed

hereinafter essentially for the proposition that

there is power under Order XLI Rule 22 and Rule 33 :

Prahlad & Ors. v. State of Maharashtra & Anr. (2010)

10 SCC 458, State of Punjab & Ors. v. Bakshish Singh

(1998) 8 SCC 222, Mahant Dhangir & Anr. v. Madan

Mohan & Ors. (1987) (Supp) SCC 528 .

(30) It is contended by Mr. Sajjan Povayya, learned

senior counsel that there is indeed power, at any

rate, under the provisions of Section 79(1)(b) of

the Act to revisit the fixation of tariff de hors

even the specific relief which is contemplated under

the contract. In this regard, emphasis is laid on

the fact that clauses 4.7 and 5.1.17 of the

guidelines came to be amended and it is the amended

guidelines which apply to the facts of the case.

That it is the amended guidelines which were applied

can be perceived from the fact that the amended

CIVIL APPEAL NO. 11826 OF 2018 etc.

57

guidelines are seen reflected in the PPA . The

amended provisions are found in 17.3.1 and 13.1.1

(31) Amended Guideline 4.7 is reflected in 13.1.1

whereas amended guideline 5.17 is reflected in

Article 17.3.1.

(32) With regard to 17.3.1, it is pointed out that a

reading of the same, in particular, the opening limb

of the provision would show that there is clearly

general power for the purpose of changing

determining or increasing the tariff. It is sought

to be contrasted with spe cific instances which would

notify the jurisdiction of the Commission which

included Article 13.1 which deals with change in

law. In other words, the contention is that de hors

a change in law, it becomes the duty of the

Commission and the Tribunal and of this Court to

factor in the need to arm the Tribunal and the

Commission with ample power in the interest of

justice, to deal with situations which call out for

a fair and equitable treatment to be meted out to

the private player as well in a long term con tract.

CIVIL APPEAL NO. 11826 OF 2018 etc.

58

(33) Mr. Amit Kapoor, learned counsel, who

supplemented the submissions of Mr.Sajjan Poovayya,

learned senior counsel, would draw our attention to

Section 61 of the Act. He would submit that Section

61 read with Sections 63 to 79(b) provided a

statutory framework which enabled the Commission to

devise an equitable tariff even in a PPA governed

scenario having regard to the very nature of the

services involved and the changed system evolved

under the Act.

(34) Mr. Amit Kapoor, learned counsel, laid stress

on the principle of c ontra proferentem. He would

point out along with Mr. Sajjan Poovyya, learned

senior counsel, that the Court must not be oblivious

of the fact that this case represents a case 2

scenario under the RFP. This means that unlike a

situation where the contractor is free to cho ose the

site and the other facilities, in a case 2 situation

which is the situation prevailing in this case ,

everything is dictated to by the employer viz., SPV.

Expatiating the said point, it is pointed out that

the bidders did not have a control over the water

CIVIL APPEAL NO. 11826 OF 2018 etc.

59

source from which water had to be taken. In other

words, the water could not have been sourced from

any other water body. This aspect is relevant for

the purpose of considering the free play with the

Commission in the matter of fixing tariff based on a

situation which was created as are exemplified by

two grounds which have been made out and which are

the subject matter of the appeals. Another point

which is projected is that in regard to geological

matters, the bidders were warned that they would

have to on their own make an assessment. But such a

caveat was not entered with regard to pertinently

the hydrological conditions. Since water intake

system related to hydrology, it is not open to the

appellants to ward off a just fixation of tariff

based on the discovery of the fact that the first

WAPCOS report was highly flawed. We are reminded

that it was of the greatest importance for the first

respondent that it ran the power plant on a yearly

basis. The second report of the WAPCOS would

clearly indicate that if the appellant had to take

water in terms of the first WAPCOS report, during

CIVIL APPEAL NO. 11826 OF 2018 etc.

60

the lean months, the first respondent would not get

sufficient water supply to operate the plant. If

such an eventuality had taken place, the result

would be that the procurers would end up paying the

charges towards capacity charge even though, it

would not get power. T he appellants would be

compelled to buy power from outside and finally the

end consumer would have to bear the brunt of the

loss. It is to avoid all this that the first

respondent has acted in a manner which was not only

in tune with its best interest but also ensuring

that the procurers and finally the consumers were

best protected. It is further pointed out by the

learned counsel that the Court must bear in mind

that the contract in question permits the passing of

the benefit not only to the contractor but also to

the employer viz., the appellants. In other words,

if it was a case where the first respondent were to

be found to be making an unjust enrichment under the

regulatory mechanism, the appellants could have

moved the Commission for bringing down the rates.

Therefore, the regulatory mechanism is meant to work

CIVIL APPEAL NO. 11826 OF 2018 etc.

61

both ways, in both directions and the Court must

bear in mind the unique nature of a regulated

contract.

(35) Shri Amit Kapoor also referred to the theory of

incomplete contracts. This is expla ined as meaning

that being a long term contact, the parties may not

expect and factor in all possible developments which

may take place. This also necessitates the

Commission being endowed with sufficient power to

reach the contractor as also the employer a just

tariff bearing in mind the regime under Section 61

of the Act.

(36) Upon being queried as to what would be the

position at law outside of the PPA and of the

jurisdiction of the Commission and if the matter

were to be considered with reference to the la w of

contract, Shri Amit Kapoor drew our attention to

Sections 18 and 19 of the Indian Contract Act, 1872.

He would point out that even an innocent

representation within the meaning of Section 18 can

result in the contact becoming voidable under

Section 19. Section 19 contemplates that the party

CIVIL APPEAL NO. 11826 OF 2018 etc.

62

whose consent is obtained by misrepresentation

within the meaning of Section 18 can insist upon the

other side to perform the contact. But the wronged

party retained the right to insist that it shall be

put in the same position it would have occupied if

there was no misrepresentation. Therefore, it is

pointed out that there is foundation even in the law

of contract for contending that the Commission armed

with its powers under Section 79(b) could compensate

the contractor in the situation we are concerned

with.

(37) The judgment of this Court reported in Uttar

Pradesh Power Corporation Limited v. National

Thermal Power Corporation Limited and Others (2009)

6 SCC 235 rendered by a Bench of three learned

judges with Justice S. B. Sinha speaking for the

Court had occasion to consider the impact of

regulations made purporting to act under the

Electricity Regulatory Commission Act, 1998. In the

said judgment, it has been inter alia held that

there is power under regulatio n 92, in particular,

to revise the tariff (see para 35 read with 38 and

CIVIL APPEAL NO. 11826 OF 2018 etc.

63

40)

(38) Noticing this aspect, when we sought assistance

from the learned counsel . We heard the following

submissions. Mr. M. G. Ramachandran, learned senior

counsel, would point out that the observations

relating to the power under Section 92 must be

understood as confined to the situation obtaining

under Section 61 read with Section 62 of the Act.

The said power may not be available when the tariff

is fixed under Section 63 of the Act. When we

queried as to whether the provisions of Section 61

are totally unconnected with Section 63, Mr. M. G.

Ramachandran, learned senior counsel, would submit

that Section 61 may not be entirely inapplicable. He

would submit that particular provisions of Section

61 may, in fact, apply. They include Section 61(b).

He would submit that even the guidelines issued

under Section 63 have their echo in Section 61 and,

therefore, it cannot be said that Section 61 and 63

are strange bedfellows.

(39) He would, however , contend that in no

circumstances can the power under regulation 92 of

CIVIL APPEAL NO. 11826 OF 2018 etc.

64

1999 regulations apply when parties have after

competitive bidding and approval of the tariff under

Section 63 become bound by a long term cont ract

under the PPA. In a case where ther e is a

determination of tariff within the meaning of

Section 62, on the other hand, Regulations of 1999

may apply. He would further point out that the

power under regulation 92 which provides for

reviewing of tariff and which has been understood as

power of revision of tariff as a whole must be

subject to the rider that the revision of tariff can

be done only strictly in accordance with the tariff

regulations brought in the year 2001 and as

subsequently, amended from time to time. In fact,

he would draw o ur attention to the Regulations of

2014 which expressly excludes tariff determination

done under Section 63 of the Act from the ambit of

the said regulation. In this regard, Shri Sajjan

Povayya, learned senior counsel, on the other hand,

drew our attentio n to the judgment of this Court

Gujarat Urja Vikas Nigam Limited v. Tarini

Infrastructure Limited and Others (2016) 8 SCC 743

CIVIL APPEAL NO. 11826 OF 2018 etc.

65

2022 SCC Online SC 1615 2023 SCC Online SC 233. He

would on the strength of these judgments point out

that there is regulatory po wer available even in a

case covered by Section 63 of the Act.

ANALYSIS

(40) We, in these cases, are concerned only with two

issues. As we have noticed, the first respondent

filed a petition before the Commission invoking its

power inter alia under Section 79(b). The matter

relates expressly to the construction period. It is

at this point apposite to notice the relevant

provisions under the PPA.

(41) Article 13 deals with change in law. Article

13.1.1. defines what a change in law is. It reads

as follows:

“ARTICLE 13: CHANGE IN LAW

13.1 Definitions

In this Article 13, the fo llowing terms

shall have the following meanings:

13.1.1 “Change in Law” means the

occurrence of any of the following events after

the date, which is seven(7) days prior to the

CIVIL APPEAL NO. 11826 OF 2018 etc.

66

Bid Deadline:

(i) the enactment, bringing into effect,

adoption, promulgation, amendment,

modification or repeal, of any Law or (ii)

a change in the interpretation 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 of 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 Price of Land for the Project

or (b) the cost of impleme ntation of the

resettlement and rehabilitation package of

the land for the Project mentioned in RFP

or (c) the cost of implementing

Environmental Management Plan for the Power

Station mentioned in the RFP or (d) the

cost of implementing compensatory

afforestation for the Coal Mine, 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 int ervals by an

Appropriate Commission.

Provided that if Government of India

does not extend the income tax holiday for

power generation projects under Section 80

IA of the Income Tax Act, upto the

Scheduled Commercial Operation Date of the

Power Station, such non-extension shall be

deemed to be a Change in Law. ”

CIVIL APPEAL NO. 11826 OF 2018 etc.

67

(42) Article 13.1.2 declares that the Supreme Court

or High Court or a Tribunal or in similar judicial

or quasi judicial body in India that has

jurisdiction to adjudicate upon issues relating to

the project will be treated as competent Court.

(43) Article 13.2 provides for the actual

application and the principles for computing the

impact of change in law. It reads as follows:

“13.2 Application and Principles for computing

impact of Change in Law.

While determining the consequence of Change

in Law under this Article 13, the Parties shall

have due regard to the principle that the

purpose of compensating the Party affected by

such Change in Law, is to restore through

Monthly Tariff Payments, to the extent

contemplated in this Article 13, the affected

Party to the same economic position as if such

Change in Law has not occurred.

a) Construction Period

As a result of any Change in Law, the

impact of increase/decrease of Capital

Cost of the Project in the Tariff shall

be governed by the formula given below:

For every cumulative increase/decrease of

each Rupees Fifty crores (Rs.50 crores)

in the Capital Cost over the term of this

Agreement, the increase/decrease in Non

CIVIL APPEAL NO. 11826 OF 2018 etc.

68

Escalable Capacity Cha rges shall be an

amount equal to zero point two six seven

(0.267%) of the Non Escalable Capacity

Charges.

Provided that the Seller provides to the

Procurers documentary proof of such

increase/decrease in Capital cost for

establishing the impact of such C hange in

Law. In case of Dispute, Article 17

shall apply.

It is clarified that the above mentioned

compensation shall be payable to either

Party, only with effect from the date

on which the total increase/decrease

exceeds amount of Rs. Fifty (50)crores.

b) Operation Period

As a result of Change in Law, the

compensation for any increase/decrease in

revenues or cost to the Seller shall be

determined and effect from such date, as

decided by the Central Electricity

Regulatory Commission whose decision

shall be final and binding on both the

Parties, subject to rights of appeal

provided under applicable Law.

Provided that the above mentioned

compensation shall be payable only if and

for increase/decrease in revenues or cost

to the seller is in excess of an amount

equivalent to 1% of Letter of Credit in

aggregate for a Contact Year.

(44) Article 13.4.2 provides for the manner in which

CIVIL APPEAL NO. 11826 OF 2018 etc.

69

the payment for changes in law is to be effected.

It reads as follows:

“13.4.2 The payment for Changes in Law shall

be through Supplementary Bill as mentioned in

Article 11.8. However, in case of any change

in Tariff by reason of Change in Law, as

determined in accordance with this Agreement,

the Monthly Invoice to be raised by the

Seller after such change in Tariff shall

appropriately reflect the changed Tariff.”

(45) We may notice the other foundational articles

relied upon by the first respondent. Article 17

relates to Governing law and Dispute resolution.

Article 17.2.1 reads as follows:

“17.2.1 Either Party is entitl ed to raise any

claim, dispute or difference of whatever

nature arising under, out of or in connection

with this Agreement including its existence or

validity or termination (collectively

“Dispute”) by giving a written notice to the

other Party, which shal l contain:

(i) a description of the Dispute;

(ii) the grounds for such Dispute; and

(iii) all written material in support of its

claim.”

(46) The further articles which we need not capture

contemplate that the claim may be met even with a

counter claim and an attempt should be made to

CIVIL APPEAL NO. 11826 OF 2018 etc.

70

settle the dispute amicably (see Article 17.2.3).

Failure to arrive at a settlement opens the doors of

Article 17.3. It is justifiable as the caption is

‘Dispute Resolution’.

(47) Article 17.3.1 is the crucial article. It

reads: -

“Where any Dispute arises from a claim made

by any Party for any change in or

determination of the Tariff or any matter

related to Tariff or claims made by any

Party which partly or wholly relate to any

change in the Tariff or determination of

any of such claims could result in change

in the Tariff or (ii) relates to any matter

agreed to be referred to the Appropriate

Commission under Articles 4.7.1, 13.2, 18.1

or clause 10.1.3 of Schedule l 7 hereof,

such Dispute shall be submitted to

adjudication by the Appropriate Commission.

Appeal against the decisions of the

Appropriate Commission shall be made only

as per the provi sions of the Electricity

Act, 2003, as amended from time to time.

The obligations of the Procurers under this

Agreement towards the Seller shall not be

affected in any manner by reason of inte r-

se disputes amongst the Procurers. ”

(48) It is thereafter that as we have noticed,

Article 17.3.2 appears which we are not setting out,

deals with the settlement of disputes which are

outside the ambit of Article 17.3.1.

CIVIL APPEAL NO. 11826 OF 2018 etc.

71

(49) We may at the very beginning notice the change

that is brought about in the guideline. True it is

that as we have noticed that the earlier guideline s

which were formulated on 19.01.2005 contemplated a

different regime both as regards change in law and

also dispute resolution. The question would however

be the extent to which the first respondent can

derive benefit out of the same. As far as Article

13.1.1 is concerned, clauses 1 and 2 are clearly an

inapplicable in regard to the claim based on the

change brought about in the water intake system.

(50) It is clause (iii) which is referred to and

relied upon by Mr. Sajjan Povayya. It reads as

follows:

“(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.”

(51) It is the case of the first respondent that

since in the schedule the initial consent which was,

CIVIL APPEAL NO. 11826 OF 2018 etc.

72

in fact, a deemed initial consent consisting of

performing of the task of making available land for

the power plant and for the pipeline and there is a

change in the same in view of what transpired

pursuant to the second report of the WAPCOS, the

first respondent was entitled to relief. In regard

to the said argument, we must notice the following

obstacles which are indisputable. We notice that

the pleadings which we have set out, position before

the Commission and what is more, even before the

Tribunal, do not reveal that the first respondent

has taken such a stand. No express reference is

found to Schedule 2 containing the alleged deemed

initial consent being overridden by the subsequent

consent as a foundation for the claim based on

change in law.

(52) The second obstacle which we must notice is

that we are dealing with an appeal under Section 125

which is based on the existence of a substantial

question of law. In this regard, indisputably both

the Commission and the Tribunal have rendered the

concurrent finding that the first respondent has

CIVIL APPEAL NO. 11826 OF 2018 etc.

73

failed to establish any change in law. Thus, the

first respondent is up against concurrent findings

which we cannot lightly disregard.

(53) Thirdly, we may notice that the first

respondent has not independently challeng ed the

finding rendered by the Tribunal holding that there

is no change in law. We have noticed that the

Tribunal has proceeded to premise the grant of

relief to the first respondent and remanding the

matter on a totally different basis. Here, we may

notice no doubt that treating it as a part of the

power of appellate Court to correct errors in the

findings in the impugned order passed may extend in

appropriate cases by the principle of Order XLI Rule

22. However, objection is seen raised by the

Appellants to permitting of the principle in Order

XLI Rule 22 CPC to govern in the situation such as

in an appeal under Section 125 of the Act. We

proceed on the basis that there is power to permit

the respondent to impugn a finding given by the

Tribunal against the respondent even without filing

any appeal or cross petition.

CIVIL APPEAL NO. 11826 OF 2018 etc.

74

(54) Examining the claim on merits, we find that the

first respondent would fail. It is categorically

stated in para 68 of the petition that the increase

in the cost is directly attributable to the error in

the WAPCOS report provided to the bidders at the

pre-bid stage. It is contended that the first

respondent is required to be compensated for the

same.

(55) In para 108, it is stated that as per the RFP,

the procurers had to provide the water inta ke study

report. As per the said report, the cost of water

intake system was approximately Rs.92 crores . It is

further stated in para 110 that there was

considerable increase in the cost of water due to

the water intake system. It is stated that it is o n

account of errors in the report. It is, however, no

doubt, in para 111 stated that since water pipeline

is part of the power station land and the water

intake pipeline is an integral part of the power

station, the indicative cost of the water intake

system will be covered by change in law. In the

appeal also, we have noticed the stand elaborately.

CIVIL APPEAL NO. 11826 OF 2018 etc.

75

(56) Initial consent, has been defined in the PPA as

meaning the consents listed in Schedule 2 . Article

5.5 of the PPA reads as follows:

“5.5 Consents

The Seller shall be responsible for obtaining

all Consents (other than those required for

the Interconnection and Transmission

Facilities and the Initial Consents ) required

for developing, financing, constructing,

operating and maintenance of the Project and

maintaining/renewing all such Consents in

order to carry out its obligations under this

Agreement in general and this Article 5 in

particular and shall supply to the Lead

Procurer promptly with copies of each

application that it submits, and copy/ies of

each con sent/approval/license which it

obtains. For the avoidance of doubt, it is

clarified that the Seller shall also be

responsible for maintaining/renewing the

Initial Consents and for fulfilling all

conditions specified therein.”

(57) It is true that the procurer s were to secure

certain initial consents whereas the vast majority

of the consents were to be procured by the seller.

Whatever was to be procured by the procurers

apparently has been described as initial consents.

It is also not in dispute that though the word

consent is used in Article 13.1.1, the initial

consent would also qualify as consent. The

CIVIL APPEAL NO. 11826 OF 2018 etc.

76

contention of the appellants is that as far as the

initial consent contemplated which was to be

performed by the procurers it was to provide the

water linkage. The water linkage consisted of

making available the source of water which consisted

of the Govind Ballabh Pant Sagar(Rihand Reservoir).

There has been no change in the said consent. It is

not a case of the first respondent, in other words,

that the first respondent has been forced to take

water from any other water source. In this regard

by communication dated 23.10.2006, we find the

following:

“6. Reference Clause: RFP 1.4(v) –

regarding tying up water linkage for the

Project requirement alongwith app roval of

Central Water Commissioner

(i) This has already been provided on 12

th

October, 2006.

(ii) The water intake study report and

Project Report including geo -technical

study, topographical survey, area drainage

study, socio -economic study and EIA

(rapid), were provided on 3

rd

August, 2006.”

(58) While on this document, we may also notice the

following in regard to the declared price of land

contemplated in the RFP under clause 1.4 (ii):

CIVIL APPEAL NO. 11826 OF 2018 etc.

77

“2. Reference Clause: RFP 1.4(ii) – regarding

Declared Price of Land for Power Station

Indicative Declared Price of Land for Power

Station is as follows:

(i) Power Plant Area – Rs.110 Crores

(ii) MGR Land – Rs.80 Crores.

(iii) Water Pipeline Corridor – Rs.0.63 Crores

(iv) Ash Pipeline Corridor – Rs.0.047 Crores”

(59) There is no dispute regarding this aspect. In

this regard, we notice that under Schedule 1A to the

PPA it has been clearly indicated that water source

in the project is Govind Ballabh Pant Sagar(Rihand

Reservoir).

(60) It is, thereafter, we must notice that under

the caption initial consent in Schedule 2, on behalf

of the procurers, the SPV was expected to issue the

notification under Section 6 of the Land Acquisition

Act, obtain necessarily environmental and forest

clearance for the power stations, allocate captive

coal mines and finally, give the water linkage for

the reasonable project requirements. It is this

water linkage for the reasonable project

requirements which was contemplated to be fulfilled

from the water source Govind Ballabh Pant

CIVIL APPEAL NO. 11826 OF 2018 etc.

78

Sagar(Rihand Reservoir). The communication dated

23.10.2006 would indicate that the Central Water

Commission had given its approval for sourcing the

water need from the water body in question. In the

said sense, the procurers had fulfilled their

obligation as contemplated in RFP.

(61) The RFP which preceded the PPA provided for

certain conditions which we have already indicated.

Clause 1.4 inter alia contained undertaking for

providing the water linkage for the project with the

requisite approval of the Central Water Commission

at least 30 days prior to Bid deadline. In the PPA,

it is indicated that the procurers have completed

the initial studies as contained in the project

report and obtained initial consent required for the

project which are set out in Part I of Schedule 2

and have been made available to the seller on the

date of the PPA except two matters: (1) Forest

clearance and the declaration under Section 6 of the

Land Acquisition Act. It is in Part I Schedule 2 of

the PPA stated that the notification under Section 6

of the Land Acquisition Act was an act to be

CIVIL APPEAL NO. 11826 OF 2018 etc.

79

performed by the procurers. It is this act which was

not done initially at the stage of the PPA. Also

forest clearance is mentioned in the Part I of

Schedule 2. Even the said clearance was also

apparently not obtained as is indicated at the

beginning of the PPA. Th ereafter, Part II of

Schedule 2 contains the clause which is the

fountainhead of the argument based on initial

consent.

(62) It contemplated performing of the task

mentioned in Article 3.1.2A also shall be part of

the initial consent on their completion withi n the

time provided. Article 3.1.2A contemplated

performance of the task with which we are concerned

viz., making available the land for the power plant

and for the water intake pipeline. This task was to

be performed within a period of eight months from

the date of the letter of intent being issued or six

months from the PPA whichever is later. It is true

that the task which was to be performed by the

procurers in terms of Article 3.1.2A was performed

belatedly by the procurers. In other words, the

CIVIL APPEAL NO. 11826 OF 2018 etc.

80

time limit was overshot by nearly 18 months. But

this delay is not the basis for the claim based on

change in law.

(63) The question would then arise as to whether the

delay in the performance of the task which has been

characterised on its performance within the time as

a deemed initial consent would lead to a change in

law within the meaning of Article 13.1.1. We find

that Article 3.3.3 of the PPA reads as follows:

“3.3.3 In case of inability of the Seller to

fulfil the conditions specified in Article

3.1.2 due to any Force Majeure event, the

time period for fulfilment of the Condition

Subsequent as mentioned in Article 3.1.2 and

Article 3.1.2A, shall be extended for the

period of such Force Majeure event, subject

to a maximum extension period of ten (1 0)

Months, continuous or non -continuous in

aggregate. Thereafter, this Agreement may be

terminated by either the Procurers (jointly)

or the Seller by giving a notice of at least

seven (7) days, in writing to the other

Party.

Similarly, in case of inability of the

Procurers to fulfil the conditions specified

in Article 3.1.2A due to any Force Majeure

event, the time period for fulfillment of

the Condition subsequent as mentioned in

Article 3.1.2 and Article 3.1.2A, shall be

extended period of ten (10) Months ,

continuous or non -continuous in aggregate.

Thereafter, this Agreement may be terminated

by either the Procurers (jointly) or the

CIVIL APPEAL NO. 11826 OF 2018 etc.

81

Seller by giving a notice of at least seven

(7) days, in writing to the other Party.”

(64) We must next notice Article 3.3.3A whi ch

follows:

“3.3.3A In case of inability of the Procurers

to perform the activities specified in Article

3.1.2A within the time period specified

therein, otherwise than for the reasons

directly attributable to the Seller or Force

Majeure event, the Condit ion Subsequent as

mentioned in Article 3.1.2 would be extended on

a ‘day for day’ basis, equal to the additional

time which may be required by the Procurers to

complete the activities mentioned in Article

3.1.2A, subject to a maximum additional time of

six (6) Months. Thereafter, this Agreement may

be terminated by the Seller at its option, by

giving a notice of at least seven (7) days, in

writing to the Procurers. If the Seller elects

to terminate this Agreement, the Procurers

shall, within a period of thi rty days, purchase

the entire shareholding in the Seller for the

following amount. Provided such purchase of

shares shall be undertaken by the Procurers in

the ratio of their then existing Allocated

Contracted Capacity:

a) total amount of purchase price pa id by

the Successful Bidder to the shareholders

of the Seller acquire the equity shares

of the Seller as per the RFP; plus

b) total amount of the Declared Price of

Land and Geological Report (GR) to the

extent already paid by the Seller after

the acquisition of its 100% shareholding

by the Selected Bidder; plus

c) an additional sum equal to ten percent

(10%) of the sum total of the amounts

CIVIL APPEAL NO. 11826 OF 2018 etc.

82

mentioned in sub-clauses (a) and (b).

In addition, the Performance Guarantee of

the Seller shall also be released

forthwith.”

(65) A perusal of the aforesaid articles would

reveal that the parties have provided for the

consequences of failure on the part of the procurers

to make available land as contemplated in Article

3.1.2A. The long and short of it is that if a

certain timelimit is crossed by the procurers in the

performance of its obligations in this regard, the

seller (the first respondent) has been given the

right to repudiate the contract. What is more, it

could insist on the procurers purchasing the entire

share capital of the company viz., the first

respondent as provided therein. It is not the case

of the first respondent that by invoking the

aforesaid articles, the first respondent purported

to repudiate the contract. On the other hand, it is

the common case th at the contract continued to be

alive and it has survived subject to the claims

which have been raised thereunder. This would mean

CIVIL APPEAL NO. 11826 OF 2018 etc.

83

that as the consequences of failure to perform the

task having been provided in the contract in the

manner provided, we shou ld not ordinarily tarry

further to ask as to whether this would provide the

premise for a change in law as contemplated under

Article 13.1.1. We necessarily pose the question

still, whether this would be change in law. Not

that we are unmindful of the fa ct that the two

bodies have concurrently found that there is no

change in law and the attempt is to dislodge such a

finding by a side wind in the manner of speaking by

an attack lodged by the respondent in the appeal .

This is not a case where the first res pondent has

made use of the land for the purpose of laying the

pipeline through the corridor as contemplated and

found that drawing water from the water intake

system as contemplated would have resulted in water

not being available in sufficient quantity t hrough

the length of the year. There is no such case.

(66) The case of the first respondent, on the other

hand, is that the PPA having been signed on

07.08.2007, in the second week of December of the

CIVIL APPEAL NO. 11826 OF 2018 etc.

84

very same year -2007, in order to confirm the

availability of water through water intake system as

contemplated in the first WAPCOS report, the second

report was commissioned ironically through the very

same consultant. There is no case, whatsoever, that

having made attempts to draw water in terms of the

first WAPCOS report and having found that such an

effort failed, they were compelled to seek recourse

to a second study albeit by the same body. No

reasons are forthcoming as to what inspired the

first respondent to commission the second study.

Secondly, this is n ot a case where the procurers

brought about any change in law in the study on

their own or they persuaded or compelled the first

respondent to change the corridor for the route for

laying of the pipeline. The first respondent did

not even involve the proc urers in the second study.

There is no intimation given that the first

respondent was commissioning a new study. There is

no basis forthcoming as to what prompted the first

respondent to commission a fresh study. What is

stated is only that it wished to confirm the

CIVIL APPEAL NO. 11826 OF 2018 etc.

85

availability of water in terms of the first water

intake study. In other words, we must sum up as

follows:

(67) Even in terms of the case built around Part II

of Schedule 2 to the PPA under which the performing

of the task mentioned in Article 3. 1.2A within the

time provided was to be treated as a deemed initial

consent, the consequence of failure to do that have

been expressly spelt out as we have already noticed.

At best or at worst, it could have empowered the

first respondent to rescind the contract. That

apart, we are not in a position, for the reasons

which we have indicated already, to come to the

conclusion that it would amount to change in law.

While on change in law, we may notice another aspect

of the matter.

(68) Article 13.3.1 reads as follows:

“13.3.1 If the Seller is affected by a Change

in Law in accordance 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.”

CIVIL APPEAL NO. 11826 OF 2018 etc.

86

(69) Thus, the PPA contemplates that if the seller

is affected by change in law and wishes to claim

change in law, it has to notify the procurers of the

change in law as soon as is reasonably practicable

after becoming aware of the same. It may be true

that on the basis of the request made by the first

respondent apparently based on the second WAPCOS

report that the first respondent has taken steps for

acquiring the land needed for laying the pipeline.

It may be true that the said pipeline had to cross a

greater distance. It is not as if it was on the

basis that the procurers rendered themselves liable

in law or held themselves liable in law to make good

the escalation in cost. There is no such material

made available indicating that the procurers have

held out that they will be liable. It is not in

dispute that the first unit from the power plant was

in fact commissioned in August, 2012. In fact, when

we asked as to whether a notice was given in terms

of Article 13.3.1, Shri Amit Kapur, learned counsel,

could not point out to any such notice except the

notice which was given on 15.12.2012. In this regard

CIVIL APPEAL NO. 11826 OF 2018 etc.

87

also, we may notice the contents of the said notice:

“5.2 Additional expenditure incurred due to

change in Declared Price of Land, cost of

implementation of resettlemen t and

rehabilitation package of land, change in

customs duty on mining equipment, water

intake system etc.

(a) the actual expenditure incurred by SPL

towards land, implementation of resettlement

and rehabilitation package of land for the

project, water int akes system, customs duty

on mining equipment and excise duty on

cement and steel.”

(70) Therein all that is indicated is that for the

water intake the original cost was put Rs.92 crores

whereas the estimated cost has been Rs.238 crores

Contemporaneous with th e change in law alleged and

in keeping with Article 13.3.1, there is no notice

brought to our notice.

(71) No doubt, Shri Amit Kapur, learned counsel for

the first respondent, did attempt to draw

inspiration from the Minutes of the Meeting which

took place on 20.03.2013 as per which the lead

procurer appears to have agreed to the change. The

case of Mr. Amit Kapur, learned counsel, that the

lead procurer can bind the other procurers is

CIVIL APPEAL NO. 11826 OF 2018 etc.

88

contested by Shri M. G. Ramachandran, learned senior

counsel.

(72) We have notic ed that a notice in terms of

Article 13.3.1 notifying the change in law as

claimed today before the Court was not given at the

relevant time.

(73) The argument that the procurers agreed to the

acquisition of the land through which the new route

had to travel also does not appeal to us as firmly

founding the claim of the first respondent in law.

The matter must be viewed from the prism of the

specific provisions defining the change in law and

the actual change in law which is as we have

explained above. In sho rt, being awarded a contract

and having entered into the PPA and without any

basis as such in facts, the first respondent

ventured to commission a new study and acting on the

same, a new pipeline corridor came on the scene.

Necessarily the cost may go up. But the question we

are to decide is as to whether it is change in law

and we are of the view that it could not be a change

in law as contemplated in the agreement as it is not

CIVIL APPEAL NO. 11826 OF 2018 etc.

89

a change in initial consent which is the only case

which has been argued in th is regard.

(74) The argument further is only that the estimated

cost was Rs.92 crores and a further sum in excess of

the same had to be spent. In this regard, we may

notice the following clause in the PPA:

“5.2 The Site

The Seller acknowledges that, before e ntering

into this Agreement, it has had sufficient

opportunity to investigate the Site and

accepts full responsibility for its condition

(including but not limited to its geological

condition, on the Site, the adequacy of the

road and rail links to the Site and the

availability of adequate supplies of water)

and agrees that it shall not be relieved from

any of its obligations under this Agreement

or be entitled to any extension of time or

financial compensation by reason of the

unsuitability of the Site for whatever

reason.

The State Government authorities would be

implementing the resettlement and

rehabilitation package (“R&R”) in respect of

the Site for the Project, for which the costs

is to be borne by the Seller. The Procurers

shall endeavour to ensure that the State

Government implements such R&R ensuring that

land for different construction activities

becomes available in time so as to ensure

that the Power Station and each Unit is

commissioned in a timely manner. Assistance

of the Seller may be sought , which he will

provide on best endeavour basis, in execution

of those activities of the R&R package and as

per estimated costs, if execution of such

CIVIL APPEAL NO. 11826 OF 2018 etc.

90

activities is in the interest of expeditious

implementation of the package and is

beneficial to the Projec t affected persons.”

(75) Moving on to the findings actually which have

been rendered by the Tribunal, the Tribunal has, in

the impugned order, found that the first report of

the WAPCOS is grossly erroneous. We are at a loss

to understand as to what was the b asis for rendering

such a finding. Without any material, it is a

little inexplicable as to how the Tribunal could

have rendered such a finding which has serious

consequences as we have noticed. This is after

finding undoubtedly that there is no change in law.

Virtually, the Tribunal has brushed aside the

disclaimer clauses. Before we go to the disclaimer

clauses, we may also indicate that a perusal of the

first WAPCOS report indicates that it is a fairly

elaborate report. The second WAPCOS report apart

from it being prepared without reference to the

procurers as we have noticed does not appear to say

anything which is critical of the first WAPCOS

report. At least, there is, in fact, no express

CIVIL APPEAL NO. 11826 OF 2018 etc.

91

whisper about the first report. All that the second

WAPCOS report seems to indicate is upon being

awarded the work, WAPCOS has gone about preparing

another report. At least we are unable to find as

to how the Tribunal could on the basis of the second

report find that the first WAPCOS report was grossly

erroneous. The Tribunal has not undertaken a

comparative study of the two reports. There is no

discussion whatsoever of the two reports. Nor is

there any other material provided to render such a

finding. The only area where we find what could

perhaps be underst ood as a reference to the first

report is clause 4.2.2. It reads as follows:

“4.2.2. As intimated by project authority

that and acquisition of pipeline corridor on

the right side of Vallabhh Pant Sagar is in

the final stages and other information

gathered during site visit by WAPCOS/CWPRS

team by local enquiry survey area ‘A’ was

identified for detailed survey during

detailed survey it is found that sufficient

depth is not available for intake well as bed

level of the reservoir is around 252.5 and

this was also in a small patches. So, this

area is discarded.”

(76) It would appear that the word ‘project

CIVIL APPEAL NO. 11826 OF 2018 etc.

92

authority’ according to Shri M.G. Ramachandran is to

be understood as the first respondent. All that

even clause 4.2.2 indicates is that the first

respondent intimated that the acquisition for the

pipeline corridor was in its final stages and

thereafter it is indicated that during the detailed

survey, it was found sufficient depth is not

available.

(77) We do not think this can be the basis for

acting upon the second report after describing the

first report as grossly erroneous.

(78) Now we may consider the discl aimer clauses.

The disclaimers have their genesis in the

guidelines. Note 4 of the RFP indicates that the

procurers apart from their Directors, employees must

not be treated as having made any representation or

warranting whatsoever in respect of any stat ements

or omissions or the accuracy, completeness or

reliability of information contained therein. They

were not to incur any liability under any law inter

alia even if any loss or damage is caused to the

bidder by any act or omission on their part. Agai n

CIVIL APPEAL NO. 11826 OF 2018 etc.

93

clause 1.4 of the RFP clearly indicated to the

bidders that the procurers inter alia do not make

any representation or accept any responsibility or

liability in respect of any statements or omissions

made in the water intake study report and the

project report. There is a specific disclaimer also

about the accuracy, completeness or reliability of

information contained therein. This is even if any

loss or damage is caused to the selected bidder by

any act or omission on their part. Thus, in respect

of the water intake study report, the prospective

seller or the bidders were specifically told in no

uncertain terms that any statements or omissions in

water intake study report would not result in the

procurers being visited with liability even if there

was loss or damage caused to the selected bidder.

This must be borne in mind at this juncture for the

following reasons.

(79) The first respondent has a case that water

intake system goes to hydrology whereas in relation

to geology, the first respondent was duty bound to

make its own inquiries. Since the connect between

CIVIL APPEAL NO. 11826 OF 2018 etc.

94

hydrology and water intake system is real and since

in regard to conditions about hydrology, the first

respondent relied on the procurers or the report

prepared by a public sector unit, in particular,

they should stand relieved of any obligation to

conduct any further inquiry on their own, runs the

argument.

(80) We are afraid that this argument cannot hold

water as the need for making more inquiry in

relation to geology cannot relieve the bidder from

the operation of other clauses. A just result in

the matter of what a contract produces by way of a

legal relationship must be viewed holistically on a

harmonious survey of all the relevant clauses. In

any other approach, the result would have the effect

of rendering specific clauses dealing with the topic

in question dead letter. In view of clause 1.4 of

the RFP, in other words, the bidder was duty bound

if it felt advised to check the correctness of the

report made by the WAPCOS. It could have undertaken

its own study. What it did four months after it was

granted the contract and entered into the PPA, it

CIVIL APPEAL NO. 11826 OF 2018 etc.

95

could have done before it decided to make the bid

and enter into the PPA. At least we are not shown

anything which stood in the way of the bidder

conducting its own study and being convinced by the

correctness of the report. We say this for the

reason that what is involved is an international

competitive bid. The bidding process is the

foundation for the determination of the price in

terms of section 63 of the Act. The Commission

approves the rates on being convinced that the rates

are fair and competitive and ar rived at on the basis

of a fair bidding process. The provisions of the

RFP must, therefore, be viewed from the perspective

of it placing on alert the bidders about the

imponderables which are inevitably involved in

pricing process. This means that having regard to

clause 1.4 of the RFP, no bidder could possibly come

forward with the claim that the contents of the

WAPCOS report must be treated as sacrosanct and

infallible and that it should not be taken without a

generous pinch of salt as it stands. At le ast this

was the message which is writ large in the said

CIVIL APPEAL NO. 11826 OF 2018 etc.

96

clause. He who acted disregarding the caveat about

the report acted at his own peril.

(81) Again, we do notice clause 2.7.2 of the RFP

which we have indicated already. It contemplates

the duty on the part of the bidder to make

independent inquiry and to satisfy itself with

regard to the required information, inputs,

conditions, circumstances, which may affect the bid.

This is apart from the site as referred to in the

PPA in clause 5.2 which we have al ready referred to.

(82) With the wealth of disclaimer clauses which we

have noticed, we are unable to subscribe to the

reasoning adopted by the Tribunal. We are of the

view that the Tribunal was wrong in brushing aside

the specific and unambiguous disclaimers under which

the procurers stood exonerated from liability.

(83) One argument which we must notice at this stage

is the effect of Article 13.2. We have already

adverted to Article 13.2. Article 13.2, no doubt,

indicates that while determining the consequence of

change in law, the parties shall have due regard to

CIVIL APPEAL NO. 11826 OF 2018 etc.

97

the principle that the purpose of compensating the

party affected by any change in law is to restore

through monthly tariff payments the affected party

to the same economic position as if such change has

not occurred. We have tested the hypothesis by

deliberately omitting a crucial part in Article 13.2

which are the words ‘to the extent contemplated in

this Article 13’. When we read the words ‘to the

extent contemplated in this Article 13’ as part of

the Article 13.2, it necessarily brings in clause

(a) and (b) of Article 13.2. In other words, what

the parties have contemplated is that consequence of

change in law would result in it being addressed

through the mechanism of monthly tariff payments

through supplementary bills(see Article 13.4.2).

But it is to the extent as contemplated in Article

13. The question would arise as to whether the

parties contemplated that it gave authority to the

competent body viz., the Commission to discard the

formula which is provided in Article 13.2(a) and

(b). We are of the view that what the parties

contemplated under Article 13.2 was that change in

CIVIL APPEAL NO. 11826 OF 2018 etc.

98

law must be viewed through the specific provisions

of clauses (a) and (b). In other words, a change in

law may occur during the period of construction.

Then it is to be treated as falling under Article

13.2(a). A change in law may occur during the

period of its operation. It would then appear to be

dealt with under clause (b). If a change in law

takes place during t he period of construction then

its impact is to be measured with reference to the

capital cost of the project. The word ‘capital

cost’ understandably has been defined in PPA. A

formula has been engrafted. The formula

contemplates that for every increase /decrease of

each Rs.50 crores in the capital cost as a result of

the change in law, the increase/decrease in the non -

escalable capacity charges is to be 0.267 per cent

of the non-escalable capacity charges. No doubt,

this is if the seller provides to the procurers

documentary proof of such increase/decrease in

establishing the impact of such change.

(84) In other words, the effect of change in law

during the construction period is captured by

CIVIL APPEAL NO. 11826 OF 2018 etc.

99

13.2(a). We must understand that this is a

meticulously thought through contract which emerged

after a long rigorous process. Parties were clear

about how the change in law had to be compensated

and methodology has been set out clearly.

Therefore, any appeal made to the general part in

Article 13.2 which speaks about the affected party

being restored to the same economic condition as if

such change in law had not occurred cannot result in

departing from the specific formula which has been

set in place. This meaning is inevitable from the

words “to the extent contempl ated in this Article

13, which precedes the general words. In this

regard, we may refer to the judgment of this Court

in Uttar Haryana Bijli Vitran Nigam Ltd. & Anr.

1

.

In the said judgment, it has been relied upon

understandably by the first respondent also and

which also arose under the same clause (Article

13.2), this Court has held inter alia as follows:

“10. Article 13.2 is an in -built

restitutionary principle which compensates

1 Uttar Haryana Bijli Vitran Nigam Ltd. & Anr. v. Adani

Power Limited & Ors. (2019) 5 SCC 325

CIVIL APPEAL NO. 11826 OF 2018 etc.

100

the party affected by such change in law and

which must restore, through monthly tariff

payments, the affected party to the same

economic position as if such change in law

has not occurred. This would mean that by

this clause a fiction is created, and the

party has to be put in the same economic

position as if such change in l aw has not

occurred i.e. the party must be given the

benefit of restitution as understood in civil

law. Article 13.2, however, goes on to divide

such restitution into two separate periods.

The first period is the “construction period”

in which increase/dec rease of capital cost of

the project in the tariff is to be governed

by a certain formula. However, the seller has

to provide to the procurer documentary proof

of such increase/decrease in capital cost for

establishing the impact of such change in law

and in the case of dispute as to the same, a

dispute resolution mechanism as per Article

17 of the PPA is to be resorted to. It is

also made clear that compensation is only

payable to either party only with effect from

the date on which the total increase/decr ease

exceeds the amount stated therein .

13. A reading of Article 13 as a whole,

therefore, leads to the position that subject

to restitutionary principles contained in

Article 13.2, the adjustment in monthly

tariff payment, in the facts of the present

case, has to be from the date of the

withdrawal of exemption which was done by

administrative orders dated 6 -4-2015 and 16-

2-2016. The present case , therefore, falls

within Article 13.4.1( i). This being the

case, it is clear that the adjustment in

monthly tariff payment has to be effected

from the date on which the exemptions given

were withdrawn. This being the case, monthly

invoices to be raised by the seller after

such change in tariff are to appropriately

CIVIL APPEAL NO. 11826 OF 2018 etc.

101

reflect the changed tariff. On the facts of

the present case, it is clear that the

respondents were entitled to adjustment in

their monthly tariff payment from the date on

which the exemption not ifications became

effective. This being the case, the

restitutionary principle contained in Article

13.2 would kick in for the simple reason that

it is only after the order dated 4 -5-2017

[Adani Power Ltd. v. Uttar Haryana Bijli

Vitran Nigam Ltd. , 2017 SCC OnLine CERC 66]

that CERC held that the respondents were

entitled to claim added costs on account of

change in law w.e.f. 1 -4-2015. This being the

case, it would be fallacious to say that the

respondents would be claiming this

restitutionary amount on som e general

principle of equity outside the PPA. Since it

is clear that this amount of carrying cost is

only relatable to Article 13 of the PPA, we

find no reason to interfere with the judgment

of the Appellate Tribunal.

19. Lastly, the judgment of this Cou rt in

Energy Watchdog v. CERC [Energy Watchdog v.

CERC, (2017) 14 SCC 80 : (2018) 1 SCC (Civ)

133] was also relied upon. In this judgment,

three issues were set out and decided, one of

which was concerned with a change in law

provision of a PPA. In holding that change in

Indonesian law would not qualify as a change

in law under the guidelines read with the

PPAs, this Court referred to Clause 13.2 as

follows : (SCC p. 131, para 57)

“57. … This being so, it is clear that so far

as the procurement of Indian co al 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 to the

CIVIL APPEAL NO. 11826 OF 2018 etc.

102

principle that the purpose of compensating

the party affected by such change in law is

to restore, through monthly tariff payments,

the affected party to the economic position

as if such change in law has not occurred.”

There can be no doubt from this judgme nt that

the restitutionary principle contained in

Clause 13.2 must always be kept in mind even

when compensation for increase/decrease in

cost is determined by CERC.”

(Emphasis supplied)

(85) We are of the view that the view which we have

taken does not in any way conflict with the view

which has been laid down by this Court.

(86) No doubt, in Energy Watchdog

2

again a judgment

which is relied upon by both the sides, the Court

was dealing with a case under the Act and has

expressed the following view:

"19. The cons truction of Section 63, when

read with the other provisions of this Act,

is what comes up for decision in the present

appeals. It may be noticed that Section 63

begins with a non obstante clause, but it is

a non obstante clause covering only Section

62. Secondly, unlike Section 62 read with

Sections 61 and 64, the appropriate

Commission does not “determine” tariff but

only “adopts” tariff already determined under

Section 63. Thirdly, such “adoption” is only

2 Energy Watchdog v. Central Electricity Regulatory

Commission and Others (2017) 14 SCC 80

CIVIL APPEAL NO. 11826 OF 2018 etc.

103

if such tariff has been determined through a

transparent process of bidding, and,

fourthly, this transparent process of bidding

must be in accordance with the guidelines

issued by the Central Government. What has

been argued before us is that Section 63 is a

standalone provision and has to be construed

on its own terms, and that, therefore, in the

case of transparent bidding nothing can be

looked at except the bid itself which must

accord with guidelines issued by the Central

Government. One thing is immediately clear,

that the appropriate Commission does not act

as a mere post office under Section 63. It

must adopt the tariff which has been

determined through a transparent process of

bidding, but this can only be done in

accordance with the guidelines issued by the

Central Government. Guidelines have been

issued under this section on 19 -1-2005, 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.

20. It is important to note that the

regulatory powers of the Central Commission,

so far as tariff is concerned, are

specifically mentioned in Section 79(1). This

regulatory power is a general one, and it is

very difficult to state that when the

Commission adopts tariff under Section 63, it

functions dehors its general regulatory power

under Section 79(1)( b). For one thing, such

regulation takes place 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

CIVIL APPEAL NO. 11826 OF 2018 etc.

104

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 harmonised.

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 case, the

general regulatory power of the Commission

under Section 79(1)( b) is the source of the

power to regulate, which includes the power

to determine or adopt tariff. In fact,

Sections 62 and 63 deal with “determination”

of tariff, which is part of “regulating”

tariff. Whereas “determining” tariff for

inter-State transmission of electricity is

dealt with by Section 79(1)( d), Section

79(1)(b) is a wid er source of power to

“regulate” tariff. It is clear that in a

situation where the guidelines issued by the

Central Government under Section 63 cover the

situation, the Central Commission is bound by

those guidelines and must exercise its

regulatory functi ons, albeit under Section

79(1)(b), only in accordance with those

guidelines. As has been stated above, it is

only in a situation where there are no

guidelines framed at all or where the

guidelines do not deal with a given situation

that the Commission's g eneral regulatory

CIVIL APPEAL NO. 11826 OF 2018 etc.

105

powers under Section 79(1)( b) can then be

used.”

(87) It is true that as far as the said case is

concerned, the case arose from claims which were

made under the PPA on the basis that there were

changes in law apart from the argument that a case

of Force Majeure was made out. It is not a case

which actually on facts involved the Court dealing

with a case arising from the fixation of tariff

under Section 63. In fact, it arose after a PPA was

approved and the rates were fixed already under

Section 63. However, if we notice the contents of

para 19 and 20, the p rinciple which the first

respondent seeks to canvas before us does not appear

to emerge. The argument of the first respondent is

that even de hors the terms of the contract, there

is general regulatory power available under Section

79 of the Act. There i s an overarching authority

with the Commission exercising power under Section

79 which would enable it and which would empower it

to grant compensation even de hors the terms of the

contract it is contended. The argument appears to

CIVIL APPEAL NO. 11826 OF 2018 etc.

106

be that unlike generali ty of contracts, a regulated

contract which is a long term contract or an

incomplete contract generates space for power with

the appropriate regulatory body to revisit the rates

and thereby vouchsafe a fair deal to both sides, be

it a seller or the procure r.

(88) What this Court has laid down in para 19 and 20

in Energy Watchdog

3

may be summarized as follows:

(89) In the case of fixation of tariff under Section

63 of the Act, what is contemplated is to begin with

guidelines which have been issued under Section 63.

When the Commission is asked to exercise power under

Section 63, it is beholden to the guidelines as it

cannot depart from the same. In a area where the

guidelines do not occupy the field, undoubtedly, the

Commission is clothed with power as a regulatory

body to act in the best interest of all sides and to

fix the tariff in a manner which is fair in the

sense bearing in mind the paramount interest of

increased generation of power, the interest of the

3 Energy Watchdog v. Central Electricity Regulatory

Commission and Others (2017) 14 SCC 80

CIVIL APPEAL NO. 11826 OF 2018 etc.

107

consumer, as also ensuring of a fair return to the

seller. So far so good. When the Commission

exercises the power under Section 63, this power is

not abridged when there are no guidelines holding

the field.

(90) We are not dealing with a case where the

exercise of power of the Commission under Section 63

is under review. In a case where, however, the

rates are approved under Section 63 and PPA is

entered into, the question would undoubtedly arise

as to whether there is a power which can be

described in a manner of speaking to be plenary

power with the Commission under Section 79? Can

there be a power which can be christened as omnibus?

Can the Tribunal, in other words, disregard the

express words of the contract? Can it discover a

new change in law which the parties have not

contemplated as change in law? In short, can the

Tribunal rewrite the contract and create a new

bargain?

(91) We are of the view that the Tribunal cannot

indeed make a new bargain for the parties. The

CIVIL APPEAL NO. 11826 OF 2018 etc.

108

Tribunal cannot rewrite a contract solemnly entered

into. It cannot ink a new agreement. S uch

residuary powers to act which varies the written

contract cannot be located in the power to regulate.

The power cannot, at any rate, be exercised in the

teeth of express provisions of the contract.

(92) We notice this for the reason that the first

respondent has a case that what is provided in

Article 13.2(a) (since we are dealing with the case

of alleged change in law during the construction

period) does not do justice to the parties or that

it is incapable of producing a fair result and

therefore, the Tribunal would necessarily be clothed

with power bearing in mind its regulatory nature.

In a matter where the parties have entered into a

contract with express provisions, we are unable to

agree with the first respondent that the Tribunal

would have power to disregard the express provisions

of the contract on the score that as it turns out

that with passage of time and even change in

circumstances, it is found that the contract cannot

be worked except at a loss for the contractor.

CIVIL APPEAL NO. 11826 OF 2018 etc.

109

(93) We may, at this juncture, also notice an

argument which has been raised by Shri Amit Kapur,

learned counsel for the first respondent, when

queried as to what would be the position if a claim

of the nature were canvassed in a civil suit. The

answer came that Section 18 and 19 of th e Indian

Contract Act, 1872 (hereinafter referred to as

‘Contract Act’ for brevity), provided the gateway.

Section 18 of the Contract Act deals with the effect

of representation or rather misrepresentation by a

party made to another party to the contract. It,

undoubtedly, includes a representation, however,

innocent it may be. In other words, an innocent

representation made to one party by another party

which forms the basis for consent of the person can

lead to the contract becoming voidable under Secti on

19. It is undoubtedly true that Section 19 also

contemplates that the wronged party can insist upon

the contract being performed and further, however,

persevere in requiring that he be placed in the same

position if he had not been led astray by the

misrepresentation. There may be no dispute about

CIVIL APPEAL NO. 11826 OF 2018 etc.

110

this principle. However, we have noticed the

various clauses as contained in the disclaimer

clauses. When a party to the contract states that

what is contained in the first WAPCOS report and

anything else as contemplated in the RFP and the PPA

does not amount to a representation, we are unable

to agree with the contention that it would still be

considered as a representation within the meaning of

Section 18 and thereby leading to a claim under

Section 19 of the Contract Act. Therefore, we find

that the contentions which the first respondent

seeks to raise under the provisions of Section 18

and 19 untenable.

(94) Reliance was placed on the judgment of this

Court PTC India Limited v. Central Electricity

Regulatory Commission (2010) 4 SCC 603. In PTC

India Limited

4

, the actual question which arose was

as to whether the appellate Tribunal under the Act

has jurisdiction under Section 111 to examine the

validity of regulations framed in exercise of power

4 PTC India Limited v. Central Electricity Regulatory

Commission (2010) 4 SCC 603

CIVIL APPEAL NO. 11826 OF 2018 etc.

111

under Section 178 of the Act. The further question

which arose was whether Parliament has conferred

power of judicial review on the Tribunal under

Section 121 of the Act. In the course of this

judgment, the Court inter alia held as follows:

“53. Applying the aboveme ntioned tests to the

scheme of the 2003 Act, we find that under

the Act, the Central Commission is a

decision-making as well as regulation -making

authority, simultaneously. Section 79

delineates the functions of the Central

Commission broadly into two cate gories —

mandatory functions and advisory functions.

Tariff regulation, licensing (including

inter-State trading licensing), adjudication

upon disputes involving generating companies

or transmission licensees fall under the head

“mandatory functions” wherea s advising the

Central Government on formulation of National

Electricity Policy and tariff policy would

fall under the head “advisory functions”. In

this sense, the Central Commission is the

decision-making authority. Such decision -

making under Section 79( 1) is not dependent

upon making of regulations under Section 178

by the Central Commission. Therefore,

functions of the Central Commission

enumerated in Section 79 are separate and

distinct from functions of the Central

Commission under Section 178. The fo rmer are

administrative/adjudicatory functions whereas

the latter are legislative.

55. To regulate is an exercise which is

different from making of the regulations.

However, making of a regulation under Section

178 is not a precondition to the Central

Commission taking any steps/measures under

Section 79(1). As stated, if there is a

CIVIL APPEAL NO. 11826 OF 2018 etc.

112

regulation, then the measure under Section

79(1) has to be in conformity with such

regulation under Section 178. This principle

flows from various judgments of this Court

which we have discussed hereinafter. For

example, under Section 79(1)( g) the Central

Commission is required to levy fees for the

purpose of the 2003 Act. An order imposing

regulatory fees could be passed even in the

absence of a regulation under Section 178. If

the levy is unreasonable, it could be the

subject-matter of challenge before the

appellate authority under Section 111 as the

levy is imposed by an order/decision -making

process. Making of a regulation under Section

178 is not a precondition to passing of an

order levying a regulatory fee under Section

79(1)(g). However, if there is a regulation

under Section 178 in that regard then the

order levying fees under Section 79(1)( g) has

to be in consonance with such regulation.”

(95) We are unable to see how the said judgment can

advance the case of the first respondent. The

question which fell for consideration and the

opinion which has been rendered do not in any way

detract from the view which we have taken.

Substantially, it was held that the making of

regulation was not a pre condition for levying a

regulatory fee under Section 79(1)(g). It is no

doubt true that Commission has an adjudicatory

function. It is also empowered to give opinions.

CIVIL APPEAL NO. 11826 OF 2018 etc.

113

Power to frame regulations indicates that it also

has legislative powers. The point is that since in

this case we are concerned with the adjudicatory

function of the Commission, we are concerned with

the trammels to which it is subject in the form of

the express terms of the contract. All that we are

holding is that in a case where the matter is

governed by express terms of the contract, it may

not be open to the Commission even donning the garb

of a regulatory body to go beyond the express terms

of the contract. It is apposite that we notice para

58 reads as follows:

“58. One must understand the reason why a

regulation has been made in the matter of

capping the trading margin under Section 178

of the Act. Instead of fixing a trading

margin (including capping) on a case -to-case

basis, the Central Commission thought it fit

to make a regulation which has a general

application to the entire trading activity

which has been recognised, for the first

time, under the 2003 Act. Further, it is

important to bear in mind that making of a

regulation under Section 178 became necessa ry

because a regulation made under Section 178

has the effect of interfering and overriding

the existing contractual relationship between

the regulated entities. A regulation under

Section 178 is in the nature of a subordinate

legislation. Such subordinate legislation can

even override the existing contracts

CIVIL APPEAL NO. 11826 OF 2018 etc.

114

including power purchase agreements which

have got to be aligned with the regulations

under Section 178 and which could not have

been done across the board by an order of the

Central Commission under Se ction 79(1)(j).”

(96) While it may be open as indicated therein for a

regulation to extricate a party from its contractual

obligations, in the course of its adjudicatory power

it may not be open to the Commission by using the

nomenclature regulation to usurp this power to

disregard the terms of the contract.

(97) Another argument which has been raised on

behalf of the first respondent is that the

guidelines were framed on 19.01.2005. Clauses 4.7

and 5.17 came to be, however, modified before the

PPA was entered into and even prior t o the RFP and

therefore, the PPA and Article 17.3 therein has been

cast in the widest terms.

(98) We have already perused Article 17.3.1.

Article 17.3 to begin with, speaks of specific

instances which can trigger the dispute resolution

mechanism. A case in point and close to facts is a

dispute arising from a change in law, after a claim

CIVIL APPEAL NO. 11826 OF 2018 etc.

115

is denied and a resolution through settlement not

being arrived at. There are other specific clauses

which are part of the PPA which are adverted to in

the later part of Art icle 17.3.1. Therefore, the

argument is raised on behalf of the first respondent

that the opening words of Article 17.3.1 are

designedly broad to cater to situations such as are

represented by the facts of this case. In other

words, even irrespective of a situation being not

governed by Article 13.1 in order that the

restitutionary principle or the principle of an

incomplete contract leading to a lifelong regulation

assuring a fair return to the seller is observed,

the power of revisiting of the rates is w hat is

contemplated in the amended guideline which finds

enshrinement in Article 17.3.1., it is contended.

(99) In fact, when we notice the PPA, we find that

apart from matters which are expressly referred to

in Article 17.3.1, viz., Articles 4.7.1, Article

13.2, Article 18.1 or clause 10.1.3 of Schedule 17,

there are other Articles in the PPA with which

Article 17.3.1 can bear nexus with. They include

CIVIL APPEAL NO. 11826 OF 2018 etc.

116

apparently, Articles 4.5.2, 11.6.6 and 11.6.7. This

is besides 12.7(e) which relates to enforcement of

claims under Force Majeure. Therefore, it is not as

if Article 17.3.1 is not to be understood without

reference to the other parts of the contract. No

Court should attempt to read a part of the contract

in isolation. The draftsm an of a contract of the

nature we are dealing with would have not left any

stone unturned in making the contract one to be

construed with a great sense of harmony and care.

Therefore, we do not accept the contention of the

first respondent that the Commission, Tribunal and

this Court must pour in meaning into the opening

words of Article 17.3.1 so that in the facts, the

first respondent can claim compensation on the basis

that it has incurred expenditure acting on the first

WAPCOS report.

(100) Here, we must notice finally, that

substantially, the claim in regard to the water

intake system was founded on the reliance placed on

the first WAPCOS report and on the strength of the

second WAPCOS report.

CIVIL APPEAL NO. 11826 OF 2018 etc.

117

(101) We also find reinforcement in our view from the

following clauses 1.2.12:

“1.2.12 Different parts of this Agreement are

to be taken as mutually explanatory and

supplementary to each other and if there is

any inconsistency between or among the parts

of this Agreement, they shall be interpreted

in a harmonious manner so as to give effect

to each part.”

(Emphasis supplied)

(102) An argument was raised by Shri Amit Kapur that

the contract in the case calls for the application

of the principle of contra proferentem rule.

(103) We are of the view that the principle of contra

proferentem is ordinarily utilised in contracts of

insurance and standard form contracts.

(104) The principle of c ontra proferentem apparently

in substance is that in case of any doubt in its

terms, the doubt should be resolved against the

party who drafted the contract. We would not think

in the facts of this case that the first respondent

has been able to plant any serious doubt in regard

to the clauses with which we are concerned with on a

true understanding of the same.

CIVIL APPEAL NO. 11826 OF 2018 etc.

118

(105) The second complaint - The Office Memorandum

dated 17.06.2011.

As far as the question relating to the OM dated

17.06.2011 providing the premise for change in

law claim is concerned, we are of the view that

the claim may not have merit in it. It is true

that Article 13.1.1 inter alia provides that a

change can be brought about by the issuance of

a notification by an Indian Governmental

authority. Also a change in interpretation of

any law by an Indian Governmental

instrumentality inter alia provided that it is

final authority under law for such

interpretation would constitute a change in

law.

Indian Governmental Instrumentality is defined

as follow: -

“Indian Governmental Instrumentality” means

the GOI, Government of States where the

Procurers and Project are located and any

ministry or department of o r board, agency

or other regulatory or quasi -judicial

authority controlled by GOI or Government

of States where the Procurers and Project

are located and includes the Appropriate

CIVIL APPEAL NO. 11826 OF 2018 etc.

119

Commission;”

(106) Law as defined in the PPA is as follows:

“Law” means, in relation to this Agreement,

all laws including Electricity Laws in

force in India and any statute, ordinance,

regulation, notification or code, rule, or

any interpretation of any of them by any

Indian Governmental Instrumentality and

having force of law and shall further

include all applicable rules, regulations,

orders, notifications by an Indian

Govermental Instrumentatlity pursuant to or

under any of them and shall include all

rules, regulations, decisions and orders of

the Appropriate Commission;

(107) While the word ‘competent Court’ which can also

be the source of a change in interpretation of any

law is expressly defined in Article 13.1.1., when it

comes to the Indian Governmental instrumentality

which is the final authority, is concerned, there is

no definition in the PPA. The controversy is this.

(108) The first respondent allegedly imported goods

for the purpose of construction of the captive

mining plant. It is its case that the goods so

imported were being used for construction of the

mining plant which was in turn was utilised for the

CIVIL APPEAL NO. 11826 OF 2018 etc.

120

construction and operation of the ultra mega power

plant project. Such goods according to the first

respondent was expressly exempted from customs duty

by virtue of the notification holding the field.

The notifications holding the field it must be

understood were the n otifications holding the field

before the cut off date. The cut off date

admittedly is 21.07.2007. In other words, the said

date is the date which is seven days before the bid

deadline. The OM which is the premise for the

argument has been issued by th e Director no doubt

with the approval of the Joint Secretary in the

Ministry of Power. It reads as follows:

“No. 12/20/2009-UMPP

Government of India

Ministry of Power

Shram Shakti Bhawan, Rafi marg ,

New Delhi, the 17th June, 2011

OFFICE MEMORANDUM

Sub: 3960 MW Sasan Ultra Mega Power Project, Distt.

Singrauli - Exemption from Custom Duty under project

Import - reg.

The undersigned is directed to refer to Govt. of

Madhya Pradesh's letter No. 4468/13/2011/01 dated

24.05.2011 on the subject mentioned above and to say

CIVIL APPEAL NO. 11826 OF 2018 etc.

121

that under Mega Power Policy, the Custom/Excise Duty

exemption is given in respect of power equipment

only.

This issues with the approval of JS (Thermal),

Ministry of Power

(A.A. Tazir)

Director

Shri Mohd. Suleman

Secretary (Energy)

Govt. of Madhya Pradesh,

Bhopal”

(109) It is the contention of the first respondent

that when it imported the goods it had to pay

customs duty on the same and it constituted a change

in law as the OM issued by the Joint Secretary

placing the interpretation constituted a change in

interpretation.

(110) In other words, in contrast with the law as it

stood before the cut off date, by the issuance of

the OM by the Joint Secretary in the Ministry of

Power, a change in interpretation of the law is

brought about. Thi s sufficed to found a claim of

change in law within the meaning of Article 13.1.1

CIVIL APPEAL NO. 11826 OF 2018 etc.

122

(111) The argument of the procurers, on the other

hand, is as we have noticed is that the OM cannot be

found to be issued by a Governmental instrumentality

which can be treated as the final authority under

law for such interpretation. It is for the reason

that the notification granting exemption has been

issued by the authority under the Customs Act and

the Joint Secretary in the Ministry of Power is not

such an authority. Secondl y, it is the contention

of the procurers that the matter should have been

taken before the appropriate forum by the first

respondent on the basis that in law, actually, the

import of goods was exempt if it was exempt and it

was not open to the first respon dent to pass on the

burden without taking recourse to law. Thirdly, it

is contended that the fact of the matter is that the

position even before the cut off date was that goods

in question were not exempt.

(112) Since we are dealing with the notifications, we

notice that the authority on Advance Ruling has gone

into the history of the notifications and dealt with

the same though in the context of the right to

CIVIL APPEAL NO. 11826 OF 2018 etc.

123

exemption in a mega power plant but not for an ultra

mega power project. But we are of the view that as

far as the history of the notifications go, it would

continue to be relevant:

“7.1 The Entry corresponding to the present

Entry was introduced for the first time in

1999. As pointed out by the learned Sr. counsel

for the applicant, the introduction of this

Entry in the Customs notification seems to be a

follow up to the policy decision taken by the

Central Government as set out in the

communication dated 10.11.1995 addressed by the

Secretary, Ministry of Power, Government of

India and th e revised policy/guidelines

relating to Mega power projects issued in 1998.

The policy formulated in 1995 was in relation

to the “setting up of power plants of capacity

of 1000 MW or more supplying power to more than

one state”. In that policy document, it is

stated that the “project of capacity of 1000 MW

and more and catering power to more than one

state should be considered as a mega project.

Projects which cater power to a single State,

irrespective of size, would not come under this

category”. In the p olicy which has been recast

in 1998, it was decided that inter -state and

inter-regional mega power projects were to be

set up both in the public and private sectors.

The re-organization of the public sector

corporations was also envisaged by the policy.

The policy contemplates the beneficiary States

constituting Regulatory Commissions with powers

to fix tariff. Paragraph 5 of the guidelines is

important. It says “the import of capital

equipment would be free of custom duty for

these projects”. In order to e nsure that

domestic bidders were not adversely affected,

certain safeguards were spelt out. ”

CIVIL APPEAL NO. 11826 OF 2018 etc.

124

7.2 Entry/ Sl.No. 288A of Ch. 98.01 inserted by

Notification No. 63/1999 substantially gives

effect to the 1995 policy read with revised

policy of 1998. The same concept of mega power

project is to be found in that Entry. The Entry

reads:

SL.

No.

Chapter/

heading/su

b-head no.

Descripti

on of

goods

Standa

rd

Rate

Addition

al Duty

rate

Conditi

on No.

288

A

9801 Goods

required

for

setting

up of any

Mega

Power

Project

specified

in

List33,

if such

Mega

Power

Project

is-

a. an

inter-

state

thermal

power

plant of

a

capacity

of 1500MW

or more;

or

b. an

inter-

State

hydel

power

plant of

a

capacity

of 500MW

or

more………

Nil Nil 82

CIVIL APPEAL NO. 11826 OF 2018 etc.

125

Condition No. 82 is as follows: -

82. (a) If an officer not below the rank of a

Joint Secretary to the Government of India in

the Ministry of Power certifies that -

(i) the power purchasing state undertakes, in

principle, to privatize distribution in all

cities, in that State, each of which having a

population of more than one million within a

period to be fixed by the Ministry of Power;

and

(ii) In the case of imports by a Central Public

Sector Undertaking, the quantity, total value,

description and specifi cations of the imported

goods are certified by the Chairman and

Managing Director of the said Central Public

Sector Undertaking; and

(c) In the case of imports by a Private Sector

Project, the quantity, total value, description

and specifications of the im ported goods are

certified by the Chief Executive Officer of

such project”.

“7.3 List 33 specifies by name the thermal

projects and hydel projects in respect of which

exemption is made applicable. Then, under

Customs Notification No. 100 of 99 dated

28/7/99, the capacity of thermal power project

specified in the earlier notification was

altered from 1500 to 1000 MW. As a result of

this notification, 7 more thermal projects were

added to the list.”

“7.4 Then, the next notifications in succession

are Customs Notification No. 16 of 2000 and 17

of 2001 which are substantially the same

excepting that the number of thermal and hydel

projects specified in List 33 has gone down. ”

“7.5 Then comes the Customs Notification No. 21

of 2002 dated 01.03.2002 whic h is material for

CIVIL APPEAL NO. 11826 OF 2018 etc.

126

our purpose. It reads as follows: -

SL

.

No

.

Chapter/

heading/su

b-head no.

Descripti

on of

goods

Standar

d Rate

Addition

al Duty

rate

Conditio

n No.

40

0

9801 Goods

required

for

setting

up of any

Mega

Power

Project

specified

in

List42,

if such

Mega

Power

Project

is-

a. an

inter-

state

thermal

power

plant of

a

capacity

of 1000MW

or more;

or

b. an

inter-

State

hydel

power

plant of

a

capacity

of 500MW

or

more………

as

certified

by an

officer

not below

Nil Nil 86

CIVIL APPEAL NO. 11826 OF 2018 etc.

127

the rank

of a

Joint

Secretary

to the

Governmen

t of

India in

the

Ministry

of Power

“7.6 Entry 400 was amended by the Notification

No. 26/2003. The said amendment was

necessitated by reason of the policy decision

taken by the Government as reflected in the

Union budget speech of 203 -04. The following

extract from the budged speech is relevant:

“Simultaneous to the emphasis on improvement in

power distribution, our attention on capacity

addition remains. The Government had earlier,

in 1999, notified 18 power projected as mega

projects, conferring upon them various duty and

licensing benefits. The Government now proposes

to liberalise the mega power project policy

further by extending all these benefits to any

power project that fulfills the conditions

already prescribed for mega power projects”.

Pursuant to the above policy, Notification No.

26/2003-Cus. Was issued amending the

notification no. 21/2002 -Cus. Entry 400 as

amended reads:

400 9801 Goods required for

setting up of any

Mega Power Project

that is to say -

a. an inter-state

thermal power

plant of a

capacity of 1000MW

Nil Nil 86

CIVIL APPEAL NO. 11826 OF 2018 etc.

128

or more; or

b. an inter-State

hydel power plant

of a capacity of

500MW or more………

as certified by an

officer not below

the rank of a

Joint Secretary to

the Government of

India in the

Ministry of Power”

“7.7 The amended notification no. 21 of 2002

is almost in the same language as it stands

now (vide para 3 supra). Thus, w.e.f.

1/4/2003, the list of specified power projects

has been deleted in tune with the liberalized

policy of the Government. Further, it is to be

mentioned that Entry 400 of notification no.21

of 2002 was further amended keeping in view

the revised policy guidelines issued in order

to cater to the special requirements of power

projects in Jammu and Kashmir and NE States.

Entry 399 substantially remained the same from

1999 onwards excepting that there was change

in the Sl. No. and the rate. ”

(113) The order of the Advance Ruling Authority is

dated 19.12.2008. No doubt, it is after the cut off

date. The case of the first respondent is not based

on the order of the Advance Ruling Authority. The

case of the first respondent is specifically based

only on the OM issued by the Joint Secretary in the

Ministry of Power. We may notice that Joint

CIVIL APPEAL NO. 11826 OF 2018 etc.

129

Secretary in the Ministry of Power has a role in

terms of the notification. The role assigned to him

is contained in condition 82 to the notification

63/1999 and this condition has continued thereafter

also. The condition as we have noticed is that it

is stated that an officer not below the rank of a

Joint Secretary is to certify the aspects which are

mentioned in condition 82.

(114) It is difficult, in fact, to descri be the Joint

Secretary in the Ministry of Power as the

Governmental authority which is the final authority

under the law. The final authority under the law

would be the authority under the Customs Act which

issues the exemption notification. But we would not

wish to rest our findings on the said basis as we

feel that the objection of the procurers can rest on

surer foundations. The first respondent also relies

upon no doubt, the notification dated 26.05.2006

wherein it is indicated as follows:

“Notification No.49/2006 -Customs

In exercise of the poowers conferred by sub -

section (1) of Section 25 of the Customs Act,

CIVIL APPEAL NO. 11826 OF 2018 etc.

130

1962 (52 of 1962), the Central Government, on

being satisfied that it is necessary in the

public interest to do so, hereby makes the

following further amendments in the

notification of the Government of India in the

Ministry of finance (Department of Revenue)

No.21/2002- Customs, dated the 1st March, 2002,

which was published in the Gazette of India,

Extraordinary vide number G.S.R. 118 (E), dated

the 1st March, 2002, namely: -

(I) in the Table, against S.No.400, for

the entry in column (3), the following

entry shall be substituted,namely: -

“Goods required for setting up of any

Mega Power Project, so certified by an

officer not below the r ank of Joint

Secretary to the Government of India in

the Ministry of Power, that is to say -

(a) an inter-state thermal power plant of

a capacit of 700MW or more, located in

the States of Jammu and Kashmir, Sikkim,

Arunachal Pradesh, Assam, Meghalaya,

Manipur, Mizoram, Nagaland and Tripura,or

(b) an inter-state thermal power plant of

a capacity of 1000MW or more, located in

States other than those specified in

clause(a) above; or

(c) an inter-state hydel power plant of a

capacity of 350MW or more, located in the

States of Jammu and Kashmir, Sikkim,

Arunachal Pradesh, Assam, Meghalaya,

Manipur, Mizoram, Nagaland and Tripura,or

(d) an inter-state hydel power plant of a

capacity of 500MW or more, located in

States other than those specified in

Clause(C) above”,

(II) in the Annexure, in Condition No.86,

for sub-clauses (ii) and (iii) of

clause(A), the following shall be

substituted, namely:-

“(ii) the power purchasing State

CIVIL APPEAL NO. 11826 OF 2018 etc.

131

undertakes, in principle, privatize

distribution in all cities, in that

State, each of whic h has a population of

more than one million, within a period to

be fixed by the Ministry of Power.”

(115) The Tribunal has, in fact, proceeded on the

basis that the goods in question would fall under

Entry 400 relating to power projects and therefore,

they were exempted. The Tribunal proceeded further

on the basis that the notification dated 17.06.2011

issued by the Joint Secretary amounted to an

interpretation which constitutes a change in law.

(116) We are of the view that the approach of the

Tribunal cannot be up held. There is no material,

whatsoever, apart from the notifications to indicate

that the goods in question were being treated as

exempt before the cut off date. In other words, it

was incumbent upon the first respondent to produce

incontestable material establishing that the goods

were exempt and were being treated so before the cut

off date. The best material would have been

examples of similar cases where goods were being

treated as exempt. Even though, it is pointed out

CIVIL APPEAL NO. 11826 OF 2018 etc.

132

that the first respondent was the only ultra mega

power plant, even then power plants including mega

power plants were operational. It is difficult to

conceive that there would not be a single case where

similar inputs by way of examples of other power

projects even if it is not ultr a mega power projects

would not have operated for the first respondent to

draw from.

(117) The word law has been defined as we have

noticed. While the expression ‘Indian Governmental

Instrumentality’ is used in the definition of the

word law in Article 13.1.1 , the change in

interpretation of any law by an Indian governmental

authority must be the final authority under the law

for such interpretation. It may be difficult to

attribute to the Joint Secretary in the Ministry of

Power the position of an Indian Gov ernmental

Authority who has the final authority under the law.

But as we have indicated this must not be treated as

the basis on which we disagree with the Tribunal.

(118) The perusal of the OM does not advance the case

of the first respondent for yet another good reason.

CIVIL APPEAL NO. 11826 OF 2018 etc.

133

He does not in the OM indicate that the goods in

question had been exempted before the cut off date

and that the goods becoming exigible to duty on the

date after the cut off date. The Authority for

Advance Ruling has categorically affirmed that the

goods of the type with which we are concerned may

not qualify for exemption. The appellants have a

case that, in fact, the Joint Secretary was

essentially following the Advance Ruling. While it

is true that the Advance Ruling may not bind the

first respondent as it is not a party, and the

respondent could not have sought a ruling under the

law, it is undoubtedly an aspect which otherwise

adds strength to the case of the appellants. There

may be cases where placing the notification holding

the field before the cut off date side by side to

the subsequent notification or an interpretation

issued after the said cut off date, the Commission

or a Tribunal could find that there is change in

law, which added to the cost to the seller. On the

other hand, when the case of the first respondent

involves interpretation of the terms of the

CIVIL APPEAL NO. 11826 OF 2018 etc.

134

notification then particularly when two view s are

fairly competing for acceptance before the body, at

best, we would think that the Tribunal has hazarded

taking a perilous route in venturing to find that

the OM issued by the Joint Secretary constituted the

change in law. Though reliance has been placed on

the judgment of this Court reported in Manohar Lal

Sharma v. Principal Secretary & Ors. (2014) 9 SCC

516 and Manohar Lal Sharma v. Principal Secretary &

Ors. (2014) 9 SCC 614 which decisions purported to

exempt the mining leases which were captive leases

operating for the purpose of the power projects

including the power projects specifically in

question from the purview of its decision, we do not

think that that by itself can determine the question

as to whether the goods which were imported for the

purpose of the captive mining plant was ever exempt.

What was exempt has been goods imported for the

purpose of the Power project. In other words, as to

whether the goods in question were goods which fell

within one entry or the other is in this case a

matter which is highly disputed and the premise of

CIVIL APPEAL NO. 11826 OF 2018 etc.

135

the first respondent viz., the OM of the Joi nt

Secretary cannot be treated as being a sound

foundation for making such a claim.

(119) The parties indeed contemplated a project to be

constructed and operated. The word ‘project’ we

find has been used in many clauses in the contract.

The word ‘project’ has been defined as follows:

““Project” means the Power Station and the

Captive Coal Mine (s) undertaken for design,

financing, engineering, procurement,

construction, operation, maintenance, repair,

refurbishment, development and insurance by

the Seller in accordance with the terms and

conditions of this Agreement;”

(120) Since the word ‘power station’ has been used

in word ‘project’, it is apposite that we advert to

the definition of the words ‘power station’:

“Power Station” means the:

(a) coal fired power generation facility

comprising of any or all the Units;

(b) any associated fuel handling, treatment or

storage facilities of the power generation

facility referred to above;

(c) any water supply, treatment or storage

facilities required for the oper ation of the

power generation facility referred to above;

(d) the ash disposal system including ash

dyke;

CIVIL APPEAL NO. 11826 OF 2018 etc.

136

(e) township area for the staff colony; and

(f) bay/s for transmission system in the

switchyard of the power station,

(g) all the other assets,

buildings/structures, equipments, plant and

machinery, facilities and related assets

require for the efficient and economic

operation of the power generation facility;

whether completed or at any stage of

development and construction or intended to be

developed and constructed as per the

provisions of this Agreement.”

(121) Since the word ‘captive coal mine’ has also

been referred to as part of the definition of the

word ‘project’, it is only right that we advert to

the definition:

“Captive Coal Mine(s) means the captive coal

mines as described in Schedule 1A and

associated fuel transport system up to the

Power Station;”

(122) ‘Project Documents” again has been defined. We

may also notice the definition of the words ‘Prudent

Utility Practices’:

“Project documents Mean

a) Construction Contracts;

b) Fuel mining agreements, including the Fuel

Transportation Agreement, if any;

c) O&M contracts;

CIVIL APPEAL NO. 11826 OF 2018 etc.

137

d) RFP and RFP Project Documents; and

e) any other agreements designated in writing

as such, from time to time, jointly by the

Procurers and the Seller;

“Prudent Utility Practices means the

practices, methods and standards that are

generally accepted internationally from time

to time by electric utilities or coal mining

entities for the purpose of ensuring the safe,

efficient and economic design, construction,

commissioning, operation and maintenance of

coal mines and power generation equipment and

mine of the type specified in this Agreement

and which practices, methods and standards

shall be adjusted as necessary, to take

account of:

a) operation and maintenance guidelines

recommended by the manufacturers of the plant

and equipment to be incorporated in the

Project;

b) the requirements of Indian Law; and

c) the physical conditions at the Site;”

(123) We have set out the history of the

notifications relating to grant of exemption for

power projects. All of it began with the policy

issued in the year 1995. The exemptions had their

origin with the notification issued in the year

1999. Thereafter there is Notification 21/2002 which

was issued on 01.03.2002. Entry 400 in the said

notification reads as follows:

CIVIL APPEAL NO. 11826 OF 2018 etc.

138

S.N

o.

Chapte

r or

Headin

g or

Sub-

Headin

g

Description

of Goods

Stand

ard

rate

Additi

onal

Duty

Rate

Condi

tion

no.

400 98.01 “Goods

required for

setting up of

any Mega

Power

Project, so

certified by

an officer

not below the

rank of a

Joint

Secretary to

the

Government of

India in the

Ministry of

Power, that

is to say-

a) an inter-

state thermal

power plant

of a capacity

of 700 MW or

more, located

in the States

of Jammu and

Kashmir,

Sikkim,

Arunachal

Pradesh,

Assam,

Meghalaya,

Manipur,

Mizoram,

Nagaland and

Tripura; or

b an inter -

state thermal

power plant

of a capacity

of 1000 MW or

more, located

Nil Nil 86

CIVIL APPEAL NO. 11826 OF 2018 etc.

139

in States

other t han

those

specified in

clause (a)

above; or

c an inter -

state hydel

power plant

of a capacity

of 350 MW or

more, located

in the States

of Jammu and

Kashmir,

Sikkim,

Arunachal

Pradesh,

Assam,

Meghalaya,

Manipur,

Mizoram,

Nagaland and

Tripura; or

d an inter -

state hydel

power plant

of a capacity

of 500 MW or

more, located

in States

other than

those

specified in

clause (c)

above”;

(124) Thereafter another notification namely

Notification No. 26/03 which has given a final shape

to it came to be issued which has been noticed also

by the Authority of Advance Ruling . It reads as

follows:

CIVIL APPEAL NO. 11826 OF 2018 etc.

140

400 9801 Goods required for

setting up of any

Mega Power Project

that is to say -

a. an inter-state

thermal power

plant of a

capacity of 1000MW

or more; or

b. an inter-State

hydel power plant

of a capacity of

500MW or more………

as certified by an

officer not below

the rank of a

Joint Secretary to

the Government of

India in the

Ministry of Power

Nil Nil 86

(Emphasis supplied)

(125) We may notice that with the issuance of the

said notification what stands out is the following:

(126) While in the opening words of the Entry, there

is reference to power project, it is conditioned by

the words ‘that is to say’. We can quite safely

proceed on the basis that Entry 400 in the

Notification No. 21/2002 which came into effect on

01.03.2002 as amended by Notification No. 46/2008 is

the Entry which must be treated as holding the field

as on the cut off date. It is thereafter, no doubt,

that the first respondent has invoked the change in

CIVIL APPEAL NO. 11826 OF 2018 etc.

141

law clause by seeking to draw inspiration from the

OM issued on 17.06.2011.

(127) Change in law clause is sought to be invoked

apparently contending that there has been a change

in interpretation by Indian Governmental Authority

which has the final say in terms of the law. The

question which looms large before the C ourt is

whether there has been a change in law in terms of

‘change in interpretation’ placed by the

Governmental authority with reference to the

position obtaining under the notifications issued

under the Customs Act. Even the clauses in the PPA

which we have referred to maintain a distinction

between a power plant and a captive mine. A power

plant cannot be treated as the same as captive mine.

In fact, Schedule 1A which defines the site refers

to the captive mines in terms of the coal blocks

which are allotted. The definition of captive mine

also indicates that it is the coal mines as

described in Schedule 1A and the associated fuel

transport system up to the power station. No doubt,

the word ‘site’ has also been defined as the land

CIVIL APPEAL NO. 11826 OF 2018 etc.

142

over which the Project will be developed as provided

in Annexure 1A.

(128) Undoubtedly, in view of the very purpose of

having a coal mine which is to supply the requisite

fuel for the operation of the power plant, there

would be a certain measure of geographical

contiguity. But the question for the consideration

before this Court is whether that would decide the

fate of the contents of a notification issued under

the Customs Act.

(129) We must notice that it is not as if the first

respondent is the only person which had a right to

claim the benefit of exemption on the basis that the

goods which have been imported for the purpose of

their captive mine must be treated as goods used in

the power project. As the history of the

notifications as captured in order of the Advance

Ruling Authority would show over a period of time,

there have been a number of power plants which have

sprung up. All of them would also be using captive

mines for the purpose of generating power. It is not

as if there would be a dearth of examples of

CIVIL APPEAL NO. 11826 OF 2018 etc.

143

exemption being extended to imports made by them and

claiming the benefit of exemption under the

notification. Not a single instance of an exemption

granted to any other project where goods imported

for use in the captive mine has been produced before

the Commission, th e Tribunal or even this Court.

This goes a long way to negate the claim of the

first respondent that what was once exempt has

ceased to be exempt only by virtue of the issuance

of the OM dated 17.06.2011.

(130) There is another very important circumstance

which strikes us. The material which appeals to us

is to be found undoubtedly in the order of the

Advance Ruling Authority relied upon by the

appellant. The application, no doubt, is filed in

the year 2008. What impresses the Court the most is

the stand of the customs authorities before the

Advance Ruling Authority. We cannot proceed on the

basis that the controversy which led to the seeking

of the ruling and far more importantly the

persistent stand of the customs authority before the

Advance Ruling Author ity would not shed light on how

CIVIL APPEAL NO. 11826 OF 2018 etc.

144

the Department viewed the matter. This is important

as it is the customs department which has issued the

exemption notification. Being the authors of the

notification, they would be best placed to

understand the width and purport of a notification

granting exemption. They have stoutly opposed the

application and laid out various grounds which, no

doubt, has appealed also to the Advance Ruling

Authority. This is an aspect which goes a long way

to show that the view of the customs authority which

in a manner of speaking can also be viewed as

forming contemporanea expositio should not be

ignored by this Court.

(131) The first respondent also sought considerable

reliance in this regard from the Mega Power

Projects: Revised Policy G uidelines. The relevant

portions reads as follows:

“MEGA POWER PROJECTS: REVISED POLICY

GUIDELINES

The following conditions are required to be

fulfilled by the developer for grant of mega

project status:-

a) an inter-state thermal power plant of a

capacity of 700 MW or more, located in the

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145

States of Jammu and Kashmir, Sikkim, Arunachal

Pradesh, Assam, Meghalaya, Manipur, Mizoram,

Nagaland and Tripura; or

b) an inter-state thermal power plant of a

capacity of 1000 MW or more, located in States

other than those specified in clause (a)

above; or

c) an inter -state hydel power plant of a

capacity of 350 MW or more. located in the

States of Jammu and Kashmir. Sikkim, Arunachal

Pradesh, Assam, Meghalaya. Manipur, Mizoram,

Nagaland and Tripura: or

d) an inter -state hydel power plant of a

capacity of 500 MW or more, located in States

other than those specified in clause (c)

above'

Fiscal concessions/benefits available to the

Mega Power Projects

Zero Customs Duty: In terms of the

notification of the Government of India in the

Ministry of Finance(Department of Revenue) No.

21/2002-Customs dated 18 March, 2002 r ead

together with No. 49/2006 -Customs dated 26

May, 2006. the import of capital equipment

would be free of customs duty for these

projects.”

(132) The understanding of the Authority for Advance

Ruling appears to be that as far as the entitlement

to exemption under the notification is concerned a

mega power project has to be understood as confined

to what follows after the words ‘that is to say’. In

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146

other words, though the use of the words power

project in entry 400 would appear to suggest that it

is capable of embracing within its scope a captive

mine from which the fuel is generated to run the

power plant, when it came to the actual beneficiary

of entry 400, the maker of the notification has

confined the exemption to the goods for the purpose

of the power plant. In other words, the word power

project has been conflated with the power plant.

This appears to be the soul of the reasoning of the

Advance Ruling Authority. While we are aware that

the first respondent is not bound by the said Ruling

as it is not a party, we do not find it erroneous on

our part in finding merit in the logic of the same

or adopting the same for the purpose of deciding the

question which squarely arises before this Court

viz., whether there is a change in law.

(133) There is also merit in t he contention of the

appellant that for article 13.1.1 to be successfully

invoked by the seller, it must demonstrate that

there was an interpretation earlier to or as on the

date of the cut off date which was advantageous to

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147

the seller and there has been a change in the said

interpretation after the cut off date.

(134) In other words, the OM issued with the

approval of the Joint Secretary in the Ministry of

Power does not indicate that it is a case of a

change in interpretation. He does not say that the

position adumbrated in the OM represents a shift or

a change from what the position was prior to the cut

off date. This is apart from any material being

available to show that there was an interpretation

in favour of the first respondent prior to the cut

off date.

(135) We reiterate that no instance of exemption to

goods of similar nature being imported by any person

for the captive mine as part of a power project be

it mega or ultra mega plant is placed before the

Commission. It is one thing to say that in a

popular sense and it could be urged and it may be

true that the word project has been defined in the

PPA as power plant and the captive coal mine, but as

we have noticed this is a matter to be determined on

what was intended by the author of the notification

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148

under Section 25 of the Customs Act and the matter

is to be further determined with reference to the

express terms of the Notification. Even more

importantly, the question must fall to be decided

with reference to the interpretation available prior

to the cut off date and after cut off date. The

communication, which is the OM dated 17.06.2011

relied upon by the first respondent appears to have

been issued on the basis of the request made by the

first respondent to the State of Madhya Pradesh.

(136) Shri Amit Kapur, learned counsel on behalf of

the first respondent drew our attention to Entry 78

of notification No. 21/02 dated 1.3.2002. Entry 78

reads as follows:

Sr.

No.

Chapter

or

Heading

or sub-

heading

Descriptio

n of goods

Standard

rate

Additional

rate

Condition

No.

78.

2714.90

All goods,

for the

purpose of

power

generation

-

Nil

-

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149

(137) Shri Ramchandran, learned senior counsel,

would point out that the said Entry relates to

inputs for power generation. The case of the first

respondent is also that Entry 399 actually

specifically deals with the goods required for coal

mining project unde r which the first respondent has

been visited with customs duty.

(138) The argument of Shri Amit Kapur is that first

of all, Entry 78 if contrasted with Entry 400 would

show that all goods needed for a power project

understood in a larger sense as including a c aptive

coal mine would also come within four walls of Entry

400.

(139) Shri Amit Kapur, learned counsel, would point

out that captive coal mine envisaged as such is one

where the entire production of coal is to be

utilised for the power plant in question which a lso

would indicate that it is part of the power project.

It is not in dispute that whatever may be the

distinction which may exist between a mega power

project, an ultra mega power project (we are

concerned with latter), there is no separate

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150

notification under the Customs Act which deals with

ultra mega power project.

(140) The upshot of the above discussion is that we

are of the view that the first respondent has not

been able to demonstrate that there was a change in

law as contemplated in Article 13.1.1 by issuance of

the OM dated 17.06.2011.

RELIEF

(141) The three procurers who were respondents before

the Tribunal have not chosen to file appearance

before this Court. The lead procurer has filed an

appeal before this Court. Further, there is only

one PPA. Ironically, decisions relating to Order

XLI Rule 21 and Rule 33 have been placed before this

Court by the first respondent reminding this Court

of the power available to it. No doubt, they placed

this position in an attempt at salvaging the

situation arising from no appeal have been filed by

it challenging the finding relating to there being

no change in law in regard to the water intake

system.

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(142) In the facts of this case, we also notice that

the three non-filing parties are respondents in the

appeals filed by the appellants. We also cannot be

unmindful of the argument of Shri P. Chidambaram and

others that if the first respondent had a case that

they were entitled to an exemption under the

situation extant prior to the cut off date then

proper remedy would be to seek refund on the basis

that they have be en illegally visited with customs

duty.

(143) In the facts of this case, we feel that the

interest of justice do require that the impugned

order be set aside not only as against the

appellants but also as against the three non -

appellants. In the nature of the litigation, we

would think that the benefit of this order should be

vouchsafed to the three respondents also, viz., (1)

respondent No. 12(BSES Rajdhani Power Limited); (2)

respondent No. 13 (BSES Yamuna Power Limited); and

(3) respondent No. 15(Uttarakhan d Power Corporation

Limited). Apparently, these respondents have not

contested the appeals.

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(144) As we have noticed in the beginning as a sequel

to the impugned order, the Commission has passed

orders allowing the claim relating to the water

intake system wher eas it has rejected the prayer

relating to change in law flowing from OM dated

17.06.2011. The affected parties have carried the

matter to the Tribunal in appeals. It is brought to

our notice that this Court passed an order of stay

dated 25.11.2019. Sinc e the appellants have

challenged the order of the Tribunal, the subsequent

order by the Commission can only be treated as a

consequential order and therefore, it may not have

any independent legs to stand on. The appellants

must be given the fruits of the decision which

ultimately is rendered in their favour, as we are

rendering this judgment.

(145) Accordingly, the appeals are allowed. The

impugned order is set aside. The order will enure

to the benefit also of the three respondents also,

viz., (1) respondent No. 12(BSES Rajdhani Power

Limited); (2) respondent No. 13 (BSES Yamuna Power

Limited); and (3) respondent No. 15(Uttrakhand Power

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Corporation Limited). Equally, the order passed by

the Commission consequent upon the remand under the

impugned order canno t survive. The appeals filed

will also lose their force and it is for the

appellants to do the needful to bring it to an end

in the light of this judgment.

The parties will suffer their own costs.

………………………………………………………., J.

[ K.M. JOSEPH ]

………………………………………………………., J.

[ B.V. NAGARATHNA ]

New Delhi;

April 06, 2023.