Supreme Court Upholds Compensation for Change in Law Events in PPA Dispute, APTEL's decision reversed partially, compensation granted for post-cancellation coal procurement costs.
In a significant ruling, the Supreme Court of India has upheld the decision of the Appellate Tribunal for Electricity (APTEL) regarding compensation for Change in Law events under a Power Purchase Agreement (PPA) between West Bengal State Electricity Distribution Company Limited (WBSEDCL) and Adhunik Power and Natural Resources Limited (APNRL). The apex court partially reversed APTEL's decision, granting compensation to APNRL for costs incurred due to Change in Law events following the cancellation of its coal block.
The bench, comprising Chief Justice Surya Kant, and Justices B.V. Nagarathna and Joymalya Bagchi, delivered the judgment on February 27, 2026, in the civil appeals filed by WBSEDCL against APTEL's order dated September 4, 2025. The core issue revolved around the interpretation of Change in Law provisions in the PPA and the entitlement of APNRL to compensation for additional coal costs incurred after the cancellation of its Ganeshpur captive coal block.
The legal battle began with APNRL's claim for compensation following the Supreme Court's 2014 judgment in Manohar Lal Sharma v. Principal Secy., which cancelled the allocation of several coal blocks, including Ganeshpur, citing irregularities. Subsequently, the enactment of the Coal Mines (Special Provision) Act, 2015, further altered the landscape of coal block allocations, impacting APNRL's operations.
APNRL approached the Central Electricity Regulatory Commission (CERC) seeking compensation for the increased cost of procuring coal through e-auctions and imports, attributing it to Change in Law events. While CERC partially granted compensation, it did not recognize the cancellation of the coal block and the subsequent legislative changes as Change in Law events.
APTEL, however, sided with APNRL, recognizing the cancellation and legislative changes as Change in Law events under Articles 10.1.1(b) and 10.1.1(f) of the PPA, and ordered compensation with carrying costs. WBSEDCL challenged this decision in the Supreme Court.
In its judgment, the Supreme Court concurred with APTEL on the Change in Law interpretation, affirming APNRL's entitlement to compensation for costs incurred post-cancellation. The court emphasized the need to interpret the PPA's terms in light of contextual evidence and surrounding circumstances, such as the minutes of meetings and correspondences highlighting the Ganeshpur coal block as a captive source.
The court, however, disagreed with APTEL's decision to grant compensation for coal costs incurred before the cancellation, citing Article 2.5 of the PPA, which indemnifies WBSEDCL against cost escalations unless triggered by a Change in Law event. The apex court underscored that the delay in operationalizing the coal block was not due to any Change in Law event but other factors, thus precluding compensation for pre-cancellation costs.
In conclusion, the Supreme Court directed the CERC to modify its order to align with these findings within four weeks, ensuring compensation for APNRL's additional coal costs incurred due to the Change in Law events post-cancellation of the coal block.
Bottom Line:
Power Purchase Agreement (PPA) and Change in Law - Compensation for coal cost due to Change in Law events - Cancellation of coal blocks and enactment of Coal Mines (Special Provision) Act, 2015 constituted Change in Law events, entitling the affected party to compensation.
Statutory provision(s): Coal Mines (Special Provision) Act, 2015, Articles 10.1.1(b), 10.1.1(f), and 2.5 of the Power Purchase Agreement (PPA)
