Skip to main content

Change in Indonesian Law is not a force majeure event

In Energy Watchdog v. Central Electricity Regulatory Commission, the issue involving the Power Purchase Agreement (PPA) entered into by the Government and the Adani Enterprises, where the Power Generating Company had pleaded that the rise in price of coal consequent to change in Indonesian law would be a force majeure event which would entitle the respondents to claim compensatory tariff, the bench of P.C. Ghose and R.F. Nariman, JJ held that the change in the Indonesian Law was neither the fundamental basis of the contract dislodged nor was any frustrating event and that alternative modes of performance were available, albeit at a higher price.
The respondents had pleaded before the Appellate Tribunal for Electricity to either discharge them from the performance of the PPA on account of frustration, or to evolve a mechanism to restore the petitioners to the same economic condition prior to occurrence of the change in law as the rise in the price of Indonesian coal, according to them, was unforeseen inasmuch as the PPAs have been entered into sometime in 2006 to 2008, and the rise in price took place only in 2010 and 2011 and that such rise in price was not within their control at all. The Tribunal had granted the relief of compensatory tariff to the respondents.
Setting aside the order of the Tribunal, the Court held that changes in the cost of fuel, or the agreement becoming onerous to perform, are not treated as force majeure events under the PPA itself. Taking note of the clauses of the PPA, the Court said that nowhere do the PPAs state that coal is to be procured only from Indonesia at a particular price. In fact, it is clear on a reading of the PPA as a whole that the price payable for the supply of coal is entirely for the person who sets up the power plant to bear. The fact that the fuel supply agreement has to be appended to the PPA is only to indicate that the raw material for the working of the plant is there and is in order. It was, hence, held that an unexpected rise in the price of coal will not absolve the generating companies from performing their part of the contract for the very good reason that when they submitted their bids, this was a risk they knowingly took.
Regarding the question as to whether the change in Indonesian Law would amount to change in law, the Court said that the change Indonesian law would not qualify as a change in law under the guidelines read with the PPA, change in Indian law certainly would. Rejecting the contention that a commercial contract is to be interpreted in a manner which gives business efficacy to such contract, that the subject matter of the PPA being “imported coal”, the expression “any law” would refer to laws governing coal that is imported from other countries, the Court said that there are many PPAs entered into with different generators. Some generators may source fuel only from India. Others, as is the case in the Adani Haryana matter, would source fuel to the extent of 70% from India and 30% from abroad, whereas other generators, as in the case of Gujarat Adani and the Coastal case, would source coal wholly from abroad. The meaning of the expression “change in law” under clause 13 of the PPA cannot depend upon whether coal is sourced in a particular PPA from outside India or within India. The meaning will have to remain the same whether coal is sourced wholly in India, partly in India and partly from outside, or wholly from outside.
The Court, hence, directed the Central Electricity Regulatory Commission to go into the matter afresh and determine what relief should be granted to those power generators who fall within clause 13 of the PPA, based on the decision of the Court. [Energy Watchdog v. Central Electricity Regulatory Commission, Civil Appeal Nos.5399-5400 of 2016, decided on 11.04.2017]

Comments

Popular posts from this blog

MACT - Permanent disability - calculate - compensation - Supreme Court - Part 2

1) C. K. Subramonia Iyer vs. T. Kunhikuttan Nair - AIR 1970 SC 376 2) R. D. Hattangadi vs. Pest Control (India) Ltd. - 1995 (1) SCC 551 3) Baker vs. Willoughby - 1970 AC 467 4) Arvind Kumar Mishra v. New India Assurance Co.Ltd. - 2010(10) SCALE 298 5) Yadava Kumar v. D.M., National Insurance Co. Ltd. - 2010 (8) SCALE 567) 5. The heads under which compensation is awarded in personal injury cases are the following : Pecuniary damages (Special Damages) (i) Expenses relating to treatment, hospitalization, medicines, transportation, nourishing food, and miscellaneous expenditure. (ii) Loss of earnings (and other gains) which the injured would have made had he not been injured, comprising : (a) Loss of earning during the period of treatment; (b) Loss of future earnings on account of permanent disability. (iii) Future medical expenses. Non-pecuniary damages (General Damages) (iv) Damages for pain, suffering and trauma as a consequence of the injuries. (v) Loss of amen

Distinction between “Loss to the Estate” and “Loss of Estate”

A subtle but fundamental distinction between “Loss of Estate” and “Loss to the Estate” was discussed in Omana P.K. and others v. Francis Edwin and others (2011 (4) KLT 952). This Judgment was challenged before the Apex Court, which has now dismissed the Appeal. The question raised in this case, was whether a certain sum which the dependants received as compensation for untimely death of Judgment debtor in a motor accident is attachable in Execution Proceedings. In this case, Justice Thomas P. Joseph speaking for the Kerala High Court had held the following (relying on The Chairman, A.P.S.R.T.C, Hyderabad vs. Smt. Shafiya Khatoon and Others) Capitalized value of the income spent on the dependents, subject to relevant deductions, is the pecuniary loss sustained by the members of his family through his death. The capitalized value of his income, subject to relevant deductions, would be the loss caused to the estate by his death. In other words, what amount the dependents would have got le

Full & Final payment - No dues certificate - end of contract

Whether after the contract comes to an end by completion of the contract work and acceptance of the final bill in full and final satisfaction and after issuance a `No Due Certificate' by the contractor Supreme Court of India Supreme Court of India R.L. Kalathia & Co. vs State Of Gujarat on 14 January, 2011 Author: P Sathasivam Bench: P. Sathasivam, B.S. Chauhan IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 3245 OF 2003 R.L. Kalathia & Co Appellant(s) Versus State of Gujarat .... Respondent(s) JUDGMENT P. Sathasivam, J. 1) This appeal is directed against the judgment and final order dated 07.10.2002 passed by the Division Bench of the High Court of Gujarat whereby the High Court set aside the judgment and decree dated 14.12.1982 passed by the Civil Judge, (S.D.), Jamnagar directing the State Government to pay a sum of Rs.2,27,758/- with costs and interest and dismissed the Civil Suit as well as cross objections filed by the a