A) ABSTRACT / HEADNOTE

The decision in Jaipur Vidyut Vitran Nigam Ltd. & Ors. v. Adani Power Rajasthan Limited & Anr. constitutes an authoritative exposition on the interpretation of “Change in Law” clauses in tariff-based competitive bidding power purchase agreements executed under Section 63 of the Electricity Act, 2003. The Supreme Court examined whether the shortfall and restructuring of domestic coal supply under the New Coal Distribution Policy, 2013 amounted to a compensable change in law when the bid and tariff were premised on domestic coal.

The Court undertook a close reading of bid documents, correspondence, the Power Purchase Agreement, and regulatory orders to ascertain the foundational assumptions of the contractual bargain. Emphasis was placed on the principle that tariff adoption under Section 63 is binding once finalized and cannot be reopened by unilateral reinterpretation of fuel assumptions. The judgment reinforces that where parties have agreed ad idem on domestic coal as the primary fuel, a subsequent policy shift reducing assured coal supply alters the economic substratum of the contract.

The Court further clarified the limited scope of appellate interference under Section 125 of the Electricity Act, equating it with second appeals under Section 100 CPC. Importantly, the ruling situates change in law compensation within the principle of restitution, ensuring that the affected party is restored to the same economic position as if the change had not occurred. The judgment harmonizes contractual certainty, regulatory oversight, and public interest in long-term power procurement.

Keywords: Change in Law; Electricity Act, 2003; Section 63 Tariff; Domestic Coal; Restitution; Power Purchase Agreement.

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The dispute arose from long-term power procurement undertaken by Rajasthan distribution licensees through tariff-based competitive bidding under Section 63 of the Electricity Act, 2003. The procurement framework emphasized certainty of tariff and allocation of fuel risk based on bid assumptions. The successful bidder, Adani Power Rajasthan Limited, structured its bid for the Kawai Thermal Power Project on the premise of domestic coal as the primary fuel, consistent with the prevailing New Coal Distribution Policy, 2007. Regulatory approval of tariff by the State Commission crystallized this assumption into a binding commercial arrangement.

Subsequent developments in national coal policy fundamentally altered the assured quantity of domestic coal available to power producers. The NCDP, 2013 curtailed the commitment of Coal India Limited to supply 100% of normative coal requirements and substituted it with a graded supply mechanism, compelling generators to rely partly on costlier imported coal. This policy shift triggered claims under Article 10 of the PPA, which provided for compensation in the event of a change in law affecting project economics.

The controversy travelled through the Rajasthan Electricity Regulatory Commission and the Appellate Tribunal for Electricity, both of which upheld the generator’s entitlement. The appeals before the Supreme Court raised issues of contractual interpretation, regulatory finality, and the scope of appellate review. The background thus involved a confluence of energy policy reform, competitive procurement discipline, and contractual risk allocation within India’s electricity sector.

D) FACTS OF THE CASE

Adani Power Rajasthan Limited participated in a competitive bidding process initiated in 2009 for long-term supply of 1200 MW power to Rajasthan distribution companies. The bid documents permitted multiple fuel scenarios, but required bidders to specify the basis for tariff evaluation. APRL indicated domestic coal as the primary fuel, supported by assurances from the State of Rajasthan to facilitate coal linkage, while maintaining imported coal arrangements as a fallback. Clarifications sought by the procurers resulted in APRL expressly confirming that its bid be evaluated on domestic coal, with escalation indices linked accordingly.

A Letter of Intent issued in December 2009 accepted this position, and the PPA executed on 28 January 2010 defined domestic coal as the primary fuel, with imported coal as a backup arrangement. The Rajasthan Electricity Regulatory Commission adopted the tariff under Section 63, noting that domestic coal offered lower escalation and was in the procurers’ best interest.

Despite persistent efforts, APRL did not receive full domestic coal linkage due to systemic shortages and policy changes. In July 2013, the Central Government notified the NCDP, 2013, reducing assured coal supply. APRL approached the State Commission seeking compensation under the change in law clause. The Commission and APTEL upheld the claim, limiting relief to the extent of domestic coal shortfall. The distribution companies challenged these findings before the Supreme Court, disputing the fuel basis of the bid and the applicability of change in law.

E) LEGAL ISSUES RAISED

i. Whether the bid and PPA were premised on domestic coal as the primary fuel?
ii. Whether the NCDP, 2013 constitutes a change in law under Article 10 of the PPA?
iii. Whether compensation is payable on the principle of restitution?
iv. Whether concurrent findings of RERC and APTEL can be interfered with under Section 125 of the Electricity Act?

F) PETITIONER / APPELLANT’S ARGUMENTS

The counsels for the appellants submitted that APRL had relied on imported coal arrangements to qualify for the bid and could not subsequently claim compensation. It was contended that no vested right to domestic coal existed absent a finalized fuel supply agreement. The appellants argued that policy changes did not amount to a change in law affecting the PPA, and any compensation would burden consumers. Reliance was placed on the limited nature of fuel assurances under the NCDP, 2007 and the alleged absence of firm linkage at bid stage.

G) RESPONDENT’S ARGUMENTS

The counsels for the respondent submitted that the bid evaluation, tariff adoption, and PPA unequivocally treated domestic coal as the foundational assumption. Admissions by the procurers before the State Commission acknowledged that non-availability of domestic coal constituted a change in law. Reliance was placed on Energy Watchdog v. CERC to assert that modification of domestic coal policy triggers compensation. The respondent emphasized that restitution required restoration of economic equilibrium disrupted by policy change.

H) RELATED LEGAL PROVISIONS

i. Section 63, Electricity Act, 2003
ii. Section 125, Electricity Act, 2003
iii. Article 10, Power Purchase Agreement
iv. New Coal Distribution Policy, 2007 and 2013

I) JUDGEMENT 

The Supreme Court affirmed that the bid was evaluated on domestic coal, supported by contemporaneous correspondence, regulatory orders, and contractual terms. The Court rejected attempts to recharacterize imported coal as the bid basis, holding that fallback arrangements do not alter the primary fuel assumption. The NCDP, 2013 was held to materially change the assurance of coal supply underlying the PPA, thereby qualifying as a change in law.

The Court endorsed the reasoning of RERC and APTEL, emphasizing that appellate interference under Section 125 is confined to substantial questions of law. Concurrent factual findings, absent perversity, were binding. The Court further moderated the levy of late payment surcharge, balancing restitution with equity.

a. RATIO DECIDENDI

The ratio rests on the determination that when a tariff-based bid is evaluated and adopted on the premise of domestic coal, a subsequent governmental policy reducing assured domestic coal supply constitutes a change in law. Compensation under the PPA flows from the principle of restitution, restoring the generator to the same economic position.

b. OBITER DICTA

The Court observed that regulatory certainty is critical to investor confidence and that public utilities cannot approbate and reprobate contractual assumptions after deriving benefit from lower tariffs.

c. GUIDELINES

i. Change in law clauses must be construed to preserve economic equilibrium.
ii. Concurrent regulatory findings merit deference under limited appellate jurisdiction.
iii. Restitution governs computation of compensation, subject to regulatory verification.

J) CONCLUSION & COMMENTS

The judgment strengthens contractual sanctity in competitive power procurement and clarifies the contours of change in law compensation. It aligns energy policy transitions with commercial fairness and reinforces judicial restraint in technical regulatory matters.

K) REFERENCES

a. Energy Watchdog v. CERC, (2017) 14 SCC 80.

b. DSR Steel (P) Ltd. v. State of Rajasthan, (2012) 6 SCC 782.

c. Wardha Power Co. Ltd. v. MSEDCL, (2016) 16 SCC 541.

b. Electricity Act, 2003; New Coal Distribution Policy, 2007 & 2013.