Supreme Court Affirms Adani Power's Entitlement For Compensation Due To Change In Law; Dismisses JVVNL Appeal

The Supreme Court has recently affirmed that power generators are entitled to claim compensation and Late Payment Surcharge (LPS)-based carrying costs under Power Purchase Agreements (PPAs) for cost escalations resulting from regulatory changes.

Holding thus, the bench of Justices M.M. Sundresh and Rajesh Bindal heard the case where the dispute centred around a Power Purchase Agreement (“PPA”) between the appellants (JVVNL) and Adani Power Rajasthan Ltd. (APRL) for the supply of 1200 MW of power at a fixed tariff. APRL sought compensation under the PPA's “Change in Law” clause following Coal India Limited's (CIL) Evacuation Facility Charges (EFC) notification dated 19 December 2017, which imposed an additional ₹50/tonne levy on coal, thereby increasing APRL's operational costs.

Following the Appellate Tribunal for Electricity's decision to allow the APRL claim for compensation for a change in law, the JVVNL appealed to the Supreme Court.

Affirming the APTEL's order, the Court dismissed the JVVNL's appeal, stating that the affected parties be restored to the same economic position as part of the principle of restitution as if the change had not occurred. The Court noted that the CIL's notification of introducing EFC @50 Rs per tonne on coal amounted to a change in law, which increased the operation costs of APRL; therefore, under the principle of restitution, APRL was entitled to be restored to its original position as if no EFC was introduced.

In support, reference was drawn from the case of GMR Warora Energy Ltd. v. CERC, 2023 LiveLaw (SC) 329, where the Court upheld the payment of compensation to the power generators because of hike in their operation cost due to additional charges imposed on them pursuant to notification issued by the instrumentality of state signifying “change in law”.

“It would thus be clear that all such additional charges which are payable on account of orders, directions, notifications, regulations, etc., issued by the instrumentalities of the State, after the cut-off date, will have to be considered to be “change in law” events. The generators would be entitled to compensation on the restitutionary principle on such changes occurring after the cut-off date.”, the court held in GMR Warora Energy Ltd.

The judgment authored by Justice Sundresh held that APRL was entitled to Late Payment Surcharge (LPS) at the contracted rate (2% above SBAR) from the date of the EFC notification (19.12.2017). LPS, being compound interest with monthly rests, compensates for the financing cost of delayed recovery as per Article 10 of the Power Purchase Agreement (PPA).

“As held by this Court in the decisions referred to supra, Article 10.2.1 in the instant PPA was incorporated based on the principle of restitution. The idea of this principle is to compensate the affected party in order to restore it to the same economic position, but for the change in law. This particular provision is a substantive one, which in a normal circumstance, has to be given effect to in letter and spirit.”, the court said.

In terms of the aforesaid, the Court dismissed the appeal, affirming the APTEL's decision to allow compensation and LPS to the APRL from the date of notification dated 19.12.2017, recognizing the principle that the introduction of EFC amounted to a change in law entitling the power generator to claim compensation.

Case Title: JAIPUR VIDYUT VITRAN NIGAM LTD. & ORS. VERSUS ADANI POWER RAJASTHAN LTD. & ANR.

Citation : 2025 LiveLaw (SC) 631

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Appearance:

For Petitioner(s) Mr. Shyam Divan, Sr. Adv. Mr. Kartik Seth, Adv. Ms. Shriya Gilhotra, Adv. Mr. Raghav Sharma, Adv. Mr. Saurabh Chaturvedi, Adv. Mr. Chiranjeev Sharma, Adv. M/S. Chambers Of Kartik Seth, AOR

For Respondent(s) Dr. A.M. Singhvi, Sr. Adv. Mr. Mahesh Agarwal, Adv. Mr. Amit Kapur, Adv. Ms. Poonam Sengupta, Adv. Mr. Arshit Anand, Adv. Mr. Shashwat Singh, Adv. Mr. Saunak Rajguru, Adv. Mr. Subham Bhut, Adv. Mr. Siddharth Seem, Adv. Mr. E. C. Agrawala, AOR