Deal: Supreme Court finally settles coal shortfall issue and upholds complete restitution

The Supreme Court has upheld Appellate Tribunal judgments awarding full restitution to coal-based generating companies for procurement of alternate coal due to short-supply by Coal India. The Supreme Court has held that the 2007 coal allocation policy of the Government gave assurance of supply of 100% coal. Consequently, shortfall in coal supply is a change in law event and the generating companies are entitled to be compensated for the entire shortfall.

The Court has also held that operating paramaters such as GCV and SHR are to be determined on actual or normative basis, whichever is better while accounting for change in law. The Supreme Court has deprecated the conduct of Discoms in taking contrary positions and reiterated that continuing with litigation all the way to the Supreme Court even after expert bodies such as CERC and the Appellate Tribunal have returned concurrent findings defeats the objective of expeditious disposal of cases. The Supreme Court has also held that Discoms cannot take a position contrary to that of the Government, since the Discoms are in effect State instrumentalities.

Even though the Supreme Court had held changes in the Government’s coal distribution policy and reduction in assured quantum of coal to be a change in law event in the Energy Watchdog Judgment in April 2017, various Discoms had withheld payment of these amounts challenging the entitlement of generating companies. While this judgment will (finally) give quietus to the issue of fuel shortfall, the observations of the Supreme Court on role of expert bodies and effect of long drawn litigation on the power sector should hopefully translate to a more pragmatic approach to litigation by State entities.

Trilegal represented GMR and RATTANINDIA in these proceedings. The Trilegal team comprised of Partner,Vishrov Mukerjee; Senior Associates, Yashaswi Kant and Girik Bhalla; Associates, Damodar Solanki, Priyanka Vyas and Juhi Senguttuvan. The matter was argued by Vishrov Mukerjee.

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