With respect to any commercial contract entered between the parties, a clause titled 'Change in Law' has become prevalent to specify the rights and obligations of the parties in case any of the events specified as 'Change in Law' event, gets attracted.
The idea behind stipulating the 'Change in Law' events is to maintain the commercial viability of the project and not to overburden the parties with such costs and expenditures, which generally remains unforeseeable while submitting the bid or during the execution of such a commercial contract.
Therefore, any standard commercial contract, and particularly, the contracts like Public Private Partnership, always stipulate a 'Change in Law' clause as an in-built restitutionary principle to compensate the party affected by any 'Change in Law' event, thereby restoring the party to the same economic position as if such 'Change in Law' has not occurred1.
However, in actual execution, any claim under the 'Change in Law' clause meets with varied opposing grounds, including but not limited to, (a) the event alleged as 'Change in Law' dates prior to the execution of the contract, (b) the event not qualifying within the ambit of 'law' to be considered as 'Change in Law', (c) the authority of entity under the law to introduce a 'Change in Law' event, etc.
With this backdrop, this article discusses the recent judgment of the Appellate Tribunal for Electricity ("APTEL" or "tribunal") to understand whether:
- A notification/circular issued by a government instrumentality holds 'Force of Law' to be declared as a 'Change in Law' event?
- A notification/circular would hold any ground as a 'Change in Law' event if not published in the Official Gazette?
APTEL's decision on the 'Change in Law' event in Adani Power Maharashtra Limited vs. Maharashtra Electricity Regulatory Commission and another
Recently, the tribunal while hearing the case in Adani Power Maharashtra Limited vs. Maharashtra Electricity Regulatory Commission and another2 was faced with a question of law for consideration, as to:
Whether a circular imposing a certain charge, issued by Coal India Limited constitutes a 'Change in Law' event to give rise to a valid claim of compensation in favour of the generator of electricity, i.e., Adani Power Maharashtra Limited ("Adani Power") under the relevant clauses of Power Purchase Agreement?
The APTEL while reaching its conclusion vide its judgment on 22.03.2022, first discussed the authority in 'law' which any Government Instrumentality possesses, to determine its decisions as having the 'Force of Law'. In this regard, the tribunal observed that Coal India Limited manages the coal mines in India in terms of the Coal Mines (Nationalization) Act, 1973 and has the statutory power to determine the price of coal3.
APTEL further noted that Coal India Limited is a Government Instrumentality and the notifications, circulars, etc. issued by it would have a 'Force of Law' under Article 77(3) of the Constitution of India. In that regard, the APTEL referred to its decision in GMR Kamalanga Energy Limited and another vs. Central Electricity Regulatory Commission and others4. The relevant extract from the same is as follows5:
After referring to Articles 298 and 77 of the Constitution, this Tribunal rightly opined that Articles 298 and 77 of the Constitution are complementary to each other as far as the scheme of carrying out the business/commercial activity by Government of India/State Government is concerned. The Corporations/companies which carry out business falling under various Ministries and Department of both Government of India and State Government are the creations of Government of India or creations of Parliament and State Assembly by making enactments. Their formations have a force of law. The PPA in this case also defines the Indian Government Instrumentalities which includes all departments, corporations/companies like Coal India Limited or Indian Railways formed under different Statutes.
Pursuant to deliberations, the tribunal rejected the argument that to be covered as a 'Change in Law' event under the contractual clauses which stipulate a 'Change in Law' event, the instrument whereby the law is claimed to have changed must have been published in the official gazette to have the 'Force of Law'.
The tribunal held that the publication of notification or circular in the official gazette cannot be a pre-requisite for an instrument to have a 'Force of Law'. In support of this finding, APTEL referred to the precedents of the Hon'ble Supreme Court wherein even a letter6 of the Ministry of Power in the Government of India and also the executive instructions7 without any statutory backing were accepted as instruments having 'Force of Law'.
In the given circumstances, APTEL held that the Coal India Limited circular imposing Evacuation Facility Charges fulfils all characteristics of 'law', thereby having the 'Force of Law' and being accepted as a 'Change in Law' event, giving rise to a legitimate claim for compensation in favour of Adani Power.
Conclusion and Authors' Analysis
The findings of APTEL, though appear to have settled the issue of recognition of an event as a 'Change in Law' event, however, it appears that while holding that the publication of circular in the official gazette is not a pre-requisite for it to have 'Force in Law', there are certain loopholes left unaddressed by APTEL. To elaborate, the Hon'ble Supreme Court in a catena of cases8, and even in cases referred to by APTEL9, have considered and held that:
Natural justice requires that before a law becomes operative it must be promulgated or published. It must be broadcast in some recognisable way so that all men may know what it is; or at the very least there must be some special rule or regulation or customary channel by or through which such knowledge can be acquired with the exercise of due and reasonable diligence. In the absence therefore of any law, rule, regulation or custom, a law cannot come into being in this way. Promulgation or publication of some reasonable sort is essential10.
Further, while relying on the very same decision of the Hon'ble Supreme Court in Harla vs. State of Rajasthan11 APTEL observed that:
The trappings of law do not come by virtue of publication which facilitates only dissemination of knowledge of law, statutes, etc. [Harla vs. The State of Rajasthan (AIR 1951 SC 467)].
Pertinently, it appears that APTEL was persuaded to favourably consider the argument that publication of an instrument is not required, for construing a 'Change in Law' event, for the following reasonings:
- Any standard 'Change in Law' clause always encapsulates
even such events that are termed as 'law' but are never
published in the official gazette. Since the 'law' that is
published in the official gazette is only those that are passed
directly by the Central Government or State Governments. However,
'law' would also encapsulate notifications, circulars, etc.
issued by any Government Instrumentality, for example, Master
Circulars issued by the Reserve Bank of India, which are never
published in the official gazette.
- The tribunal in the present case, while holding that the
publication of notification or circular in an official gazette is
not a pre-requisite to have 'Force of Law' was dealing with
a circular issued by a Government Instrumentality, and not any
legislation passed by Central Government or State Governments which
requires to be published in the official gazette. To support its
reasoning the tribunal also highlighted the examples of a letter
issued by a Government Instrumentality12 and executive
instructions without any statutory backing13 as held by
the Hon'ble Supreme Court as instruments having 'Force of
Law', even though these instruments are not published in the
- Further, as regards the publication or promulgation of the instrument is concerned, the same is a mode of dissemination of information so that with the exercise of reasonable diligence, common people could acquire the knowledge of the existence of such instrument. Nowhere is it necessary to get all such instruments published specifically in the official gazette. Every Government Instrumentality has some or other mode through which it publishes the instrument through which it becomes reachable to the concerned affected entities. For example, the majority of Government Instrumentalities publish the circulars or notifications issued by them on their official website.
Therefore, in the present case as well, when the APTEL refuted the argument of the requirement of publication of the Coal India Limited circular on the official gazette, it could have meant that such an action is not required when the same is already available online being published by Coal India Limited on its official website.
However, while declaring that publication of instrument declaring law is not required to construe a 'Change in Law' event, the APTEL has not made any differentiation between a law declared by Government Instrumentality and a law declared by the Legislature. Pertinently, the views of APTEL on that count do not coincide with those of the Hon'ble Supreme Court. It appears that such difference may invite a challenge to the judgment of APTEL.
1. Uttar Haryana Bijli Vitran Nigam Limited and another vs. Adani Power Limited and others – (2019) 5 SCC 325; Jaipur Vidyut Vitaran Nigam Limited and others vs. Adani Power Rajasthan Limited and another – 2020 SCC OnLine SC 697.
2. Adani Power Maharashtra Limited vs. Maharashtra Electricity Regulatory Commission and another, dated 22.03.2022, Appeal No. 40 of 2022 before APTEL.
3. Ashoka Smokeless Coal India Private Limited and others vs. Union of India and others, (2007) 2 SCC 640.
4. GMR Kamalanga Energy Limited and another vs. Central Electricity Regulatory Commission and others, 2018 SCC OnLine APTEL 151.
5. M/s. Adani Power Rajasthan Limited vs. Rajasthan Electricity Regulatory Commission, 2018 SCC OnLine APTEL 101.
6. Energy Watchdog vs. Central Electricity Regulatory Commission and others, (2017) 14 SCC 80.
7. Kusum Ingots and Alloys Limited vs. Union of India and another, (2004) 6 SCC 254.
8. Municipal Corporation of Greater Mumbai vs. Anil Shantaram Khoje and others, (2016) 15 SCC 726; Union of India vs. Param Industries Limited, (2016) 16 SCC 692; Union of India vs. G.S. Chatha Rice Mills and another, (2021) 2 SCC 209.
9. Harla vs. The State of Rajasthan, AIR 1951 SC 467; Gulf Goans Hotels Company Limited and another vs. Union of India and others, (2014) 10 SCC 673.
10. Harla vs. The State of Rajasthan, AIR 1951 SC 467.
11. Harla vs. The State of Rajasthan, AIR 1951 SC 467.
12. Energy Watchdog vs. Central Electricity Regulatory Commission and others, (2017) 14 SCC 80.
13. Kusum Ingots and Alloys Limited vs. Union of India and another, (2004) 6 SCC 254.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.