Supreme Court finally settles issues related to Change in Law provisions

Partner: Vishrov Mukerjee, Senior Associate: Yashaswi Kant

The Supreme Court in a judgement dated 20 April 2023 in GMR Warora Energy Limited v CERC & Ors. (GMR Warora Judgement) has settled the position regarding critical issues under ‘Change in Law’ provisions that were at the core of various disputes in the power sector.

The Supreme Court has held that notifications or circulars issued by Coal India Limited or Indian Railways qualify as ‘Change in Law’. It has reiterated restitutive compensation and criticised the conduct of parties challenging concurrent findings by expert bodies such as Electricity Regulatory Commissions (ERCs) and Appellate Tribunal for Electricity (APTEL).

Also, noting the delay and associated costs involved due to unwarranted litigation and consequent impact on endconsumers, the Supreme Court requested the Ministry of Power to devise a mechanism to reduce such unwarranted litigation and ensure timely payment of dues to power generators by distribution companies (Discoms).

Background

The GMR Warora Judgement decided a batch of 11 civil appeals challenging judgements of the APTEL wherein:

• levies/surcharges imposed by Coal India Limited and Indian Railways,
• increase in taxes/duties,
• notification on coal quality etc.

were allowed as ‘Change in Law’ under power purchase agreements and Discoms were directed to also pay carrying cost as part of the compensation payable to generators.

Notably, these claims pertained to disputes raised by generators as far back as 2013. Pursuant to the judgements by APTEL (which had reaffirmed the view taken by the ERCs), generators had sought payments which were delayed on account of pending civil appeals before the Supreme Court. As is common knowledge, delayed payments are a major pain point in the power sector, resulting in certain generators being categorised as stressed assets.

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