Supreme Court: In a dispute arising from a ‘Change in Law’ event due to a coal shortage at GMR Kamalanga Energy Ltd. (GKEL)’s 1050 MW power plant in Odisha, which necessitated the use of costlier imported coal, the Division Bench of B.R. Gavai*, CJ., and K. Vinod Chandran, J., dismissed a batch of appeals filed by various DISCOMs. The Court upheld the decision of the Appellate Tribunal for Electricity (‘APTEL’), which had held that coal shortages and the resulting additional costs must be equitably shared among all electricity procurers from the plant. The Bench further clarified that no DISCOM can claim priority in power supply during periods of coal shortage, reaffirming the principle of proportional cost and fuel allocation based on the energy actually drawn by each DISCOM.
Background
These civil appeals arise from a common judgment and final order dated 20-12-2019 passed by the APTEL, whereby APTEL upheld the order of the Central Electricity Regulatory Commission (‘CERC’) dated 20-03-2018.
The appeals challenged the CERC’s decision directing the Haryana Utilities (Dakshin Haryana Bijli Vitran Nigam Ltd. and Uttar Haryana Bijli Vitran Nigam Ltd., through the nodal agency Haryana Power Purchase Centre) to pay supplementary bills raised by GKEL for the period July 2016 to March 2017, towards compensation for “Change in Law” events under the Power Purchase Agreement (‘PPA’) dated 7 -08-2008.
GKEL had been supplying power to various distribution licensees, including Haryana Utilities, GRIDCO (Odisha), and Bihar Utilities, under separate PPAs. The project was originally conceptualized under a 1,000 MW configuration and later altered to 3 x 350 MW. GKEL secured coal linkage from Mahanadi Coalfields Ltd. (‘MCL’) and entered FSAs to fuel the power plant.
Due to a shortfall in domestic coal linkage, GKEL sourced imported and open market coal, thereby incurring additional costs. It filed Petition before the CERC seeking compensation for various post-bid statutory changes including coal royalty, clean energy cess, excise duty, and cost of alternate coal sourcing. CERC allowed some claims and disallowed others.
Following this, GKEL issued supplementary bills to Haryana Utilities based on the CERC’s ruling. When the bills were disputed, GKEL filed Petition seeking enforcement of the approved compensation mechanism. CERC ruled in GKEL’s favour, directing pro rata apportionment of coal and costs among all beneficiaries.
Haryana Utilities and GRIDCO appealed to APTEL, which dismissed both appeals. Aggrieved, the appellants filed the present civil appeals under Section 125 of the Electricity Act, 2003.
Analysis and Decision
At the outset, the Court noted that all three DISCOMs acknowledged GKEL’s entitlement to compensation arising from a Change in Law event. However, the Haryana Utilities and GRIDCO contended that the resulting liability ought not to be imposed upon them but should instead be borne by the other parties. In contrast, only Bihar Utilities accepted that the liability must be shared equally among all three DISCOMs in proportion to the energy supplied to each. The Court found it appropriate to address the two appeals separately.
Upon examining Section 125 of the Electricity Act, 2003., the Court observed that an appeal under Section 125 is maintainable only on grounds available under Section 100 of the Code of Civil Procedure, 1908 (‘CPC’) and therefore must involve a substantial question of law.
The Court reiterated that when expert bodies such as the CERC, the APTEL, and the Central Electricity Authority have arrived at a particular conclusion after considering the relevant material on record, the Court ought to exercise restraint in interfering with such decisions. It highlighted that unless it is demonstrated that these expert bodies failed to consider mandatory statutory provisions, relied upon extraneous considerations, or rendered decisions that are ex facie arbitrary or illegal, it would not be appropriate for the Court to substitute its own views in place of the conclusions drawn by such specialized authorities.
After taking note of GMR Warora Energy Limited v. Central Electricity Regulatory Commission (CERC), (2023) 10 SCC 401, the Court observed that that an appeal under Section 125 of the Electricity Act, 2003 is maintainable only on the grounds specified in Section 100 of the CPC, and thus lies solely on substantial questions of law. It further observed that, despite the presence of well-reasoned and concurrent findings by the Electricity Regulatory Commissions and the APTEL, such decisions continue to be challenged by both DISCOMs and generating companies. The Court expressed concern that the prolonged pendency of such litigation, some lasting over five years, leads to non-payment of dues, resulting in heavy carrying costs being borne by the generators. These additional costs, the Court noted, are ultimately passed on to end-consumers, who become the real sufferers. The Court unequivocally stated that such unnecessary and unwarranted litigation must be curtailed. However, despite these observations, the Court continued to be inundated with similar cases.
The Court observed that, in the present case, there were concurrent findings of fact not only in the impugned judgment passed by the APTEL and the order of the CERC, but also in the earlier CERC order dated 3-02-2016 passed during the first round of litigation. In light of these concurrent findings, the Court held that it must exercise great restraint in interfering with such determinations. It clarified that unless the findings were shown to be perverse, arbitrary, or in violation of statutory provisions, interference by this Court would not be warranted.
The Court further noted that although the appellants attempted to argue that the matter involved a question of interpretation of documents, which could be construed as a substantial question of law, it did not find that any such substantial question of law actually arose in the present appeal.
The Court noted that, since the present appeal had been pending since 2020, it was appropriate to proceed to examine the merits of the matter.
The Court further observed that the issue concerning the firm coal linkage, tapering linkage granted in favour of GKEL, and the allocation of captive coal mines to a consortium of six companies, including GKEL, also arose for consideration in the said petition.
The Court noted that, in the said petition, the Haryana Utilities had raised a preliminary objection, contending that the impact of a Change in Law could only be ascertained during the operation period, that is, after the power project had been declared commercially operational.
After perusing the order passed by the CERC dated 3-02-2016, the Court noted that the Commission had devised a formula for computing the Energy Charge Rate (‘ECR’), which required pro rata allocation of coal among all three DISCOMS. It was pertinent to note that the Haryana Utilities had not challenged the said order and had duly paid the amounts due in terms thereof until June 2016. The Haryana Utilities had accepted the bills submitted pursuant to the order passed in Petition and had made payments totaling approximately Rs. 140 crores up to that date.
However, in September 2016, the Haryana Utilities raised an objection regarding the pro rata allocation of coal. Following deliberations, the Haryana Utilities and GKEL mutually agreed that the latter would approach the CERC for clarification on the issue. Consequently, GKEL filed Petition before the CERC. In the said petition, the Haryana Utilities contended that the coal received under the Fuel Supply Agreement (‘FSA’) dated 26-03-2013 should be considered solely for supply to the Haryana Utilities and that any shortfall in coal supply should be met through imported coal, open market coal, or tapering linkage coal. Conversely, it was submitted on behalf of GKEL that the coal allocation had been made for the entire plant, and therefore, it ought to be used proportionately for power generation and supply to all beneficiaries, namely GRIDCO, Haryana Utilities, and Bihar Utilities.
The Court noted that the order passed by the CERC came to be challenged by the Haryana Utilities before the APTEL. During the pendency of the said appeal, and at the instance of the APTEL, GRIDCO was impleaded as a party respondent in the appeal filed by Haryana Utilities. Subsequently, GRIDCO also filed a separate appeal before APTEL challenging the same order. It was contended on behalf of the Haryana Utilities that the order passed by the CERC in Petition went beyond the scope of the earlier order dated 3-02-2016, which had been passed in Petition.
The Court observed that the present appeal sought to challenge the concurrent findings recorded by the CERC on two separate occasions, as well as by the APTEL in the impugned judgment. Upon perusal of the said judgments and orders, the Court found that the conclusions therein were primarily based on the interpretation of various documents and on factual considerations relating to the fuel arrangements for the project. These included:
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That the original Standing Linkage Committee — Long Term (SLC-LT) allocation dated 2-08-2007 for firm coal linkage was made prior to the execution of the Power Purchase Agreement (PPA) with Haryana;
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The letter dated 6-11-2007 issued by the Ministry of Coal, which intimated its decision to allocate the Rampia and Dip Side Rampia coal blocks in Odisha to a consortium comprising GKEL and five other allottees;
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The allocation letter dated 17-01-2008 for the captive coal mine, which indicated that the allocated 4.6 million tonnes (MT) was sufficient to meet the requirements of the installed capacity of 1050 MW for the project;
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The minutes of the SLC-LT meeting dated 14-02-2012, which recorded that the firm linkage capacity was intended to cater to the requirements of the States of Odisha, Bihar, and Haryana
The Court referred to its earlier decision in Uttar Haryana Bijli Vitran Nigam Ltd. v. Adani Power (Mundra) Limited, (2023) 14 SCC 736, wherein it had observed that the Haryana Utilities were indulging in approbation and reprobation. It was held that the Utilities could not be permitted to blow hot and cold simultaneously. Specifically, the Court noted that after having accepted before the CERC that they would adopt the methodology laid down in the GMR-Kamalanga Energy Ltd. v. Dakshin Haryana Bijli Vitran Nigam Ltd., 2016 SCC OnLine CERC 43, it was not open for the Haryana Utilities to resile from that position after the CERC had passed final orders.
Accordingly, this Court had dismissed the appeal of the Haryana Utilities, reiterating that judicial interference would be justified only where concurrent findings had failed to consider mandatory statutory provisions, were based on extraneous considerations, or were ex facie arbitrary or illegal. The Court, in that case, had expressly approved the methodology adopted by the CERC, which had been affirmed by the APTEL and was in line with the decision of the CERC in GMR Kamalanga (supra).
In light of the above, and having regard to the concurrent findings of fact recorded by the CERC on two separate occasions as well as by the APTEL in the impugned judgment, and also taking into account the communication dated 2-02-2022 issued by MCL, the Court held that no merit was found in the appeal filed by the Haryana Utilities, and consequently, the appeal was liable to be dismissed.
In regard to the appeal filed by GRIDCO, the Court noted that the principal contention raised was that the orders dated 3-02-2016 and 20-03-2018 were passed without impleading GRIDCO as a party. However, the Court found that the PPA with GRIDCO was governed under Section 62 of the Electricity Act, 2003, while the PPAs with Haryana Utilities and Bihar Utilities were governed under Section 63 of the said Act.
Since the petitions before the CERC filed by GKEL were for compensation arising out of Change in Law events affecting only the Haryana and Bihar PPAs (under Section 63), there was no requirement to implead GRIDCO as a party. The Court emphasised that the legal and procedural frameworks under Sections 62 and 63 are fundamentally distinct, with the former based on cost-plus tariff and the latter on tariff discovered through competitive bidding.
The Court further noted that GKEL had independently filed a Petition seeking approval of tariff for supply to GRIDCO. The CERC, by its order dated 12-11-2015, had determined the tariff for the period 1-04-2013 to 1-03-2014, which was later challenged by GRIDCO in Appeal of 2016. However, the APTEL, by its judgment dated 1-08-2017, upheld the CERC’s methodology of tariff determination based on the CERC Tariff Regulations, 2009. Therefore, the Court concluded that GRIDCO was neither a necessary nor a proper party to Petitions.
The Court noted that on the merits of the case, GRIDCO had argued that its PPA, dated 28-09-2006, was the earliest and operationalized in April 2013, and therefore, it had the first right over the firm coal linkage granted under the FSA dated 22-03-2013. GRIDCO contended that since the firm linkage was made against long-term PPAs, and it was the only PPA in force at that time, the linkage should exclusively benefit it. However, APTEL, while rejecting this contention, had held that the supply of coal from all modes (including linkage, imported, open market, and tapering) must be considered for the power plant as a whole, and not segregated among PPAs. This view was in consonance with earlier findings of the CERC and was upheld by the Court.
The Court reaffirmed that none of the DISCOMs, including GRIDCO could claim priority for power supply based on the date of their agreements or based on any specific coal allocation reference. The principle to be followed was that coal supply must be proportionately allocated among the DISCOMs based on the quantum of energy supplied to them.
Upon consideration of both appeals, the Court held that the appeals filed by Haryana Utilities and GRIDCO were both devoid of merit and thus dismissed. Furthermore, the impugned judgment and order dated 20-12-2019 passed by APTEL was upheld.
[Haryana Power Purchase Centre v. GMR Kamalanga Energy Limited, Civil Appeal No. 1929 of 2020, decided on 08-09-2025]
*Judgment Authored by: Chief Justice of India BR Gavai
