Citation Codes

Equivalent Citations

citation codes

Case Number

Petition No. 293/MP/2018, 294/MP/2018 and 150/MP/2019

Disposition

Advocates

Mr. Vishal Binod, Advocate, APIPL;
Mr. Rajiv Yadav, Advocate, NTPC;
Ms. Poorva Saigal, Advocate, SECI;
Ms. Tanya Sareen, Advocate, SECI;
Ms. Neha Singh, SECI;
Mr. Sidhant Kumar, Advocate, AP Discoms &APSLDC;
Ms. Manyaa Chandok, Advocate, AP Discoms & APSLDC;
Ms. Mugdha Rohan Chandurkar, Advocate, O.F. Bhandara Mr. Shabbir Sheikh, O.F. Bhandara.

Judges

P.K. Pujari
Chairperson
I.S. Jha, Member
Arun Goyal, Member
P.K. Singh, Member

Acts

FINANCE ACT 2016
15.11.2015), Finance Act, 2016
Rule 3(8) of the said Rules.
sub-rule (2),
sub-rule (7).(9)
sub-rule (8),
sub-rule (1),

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Smart Summary

Structured Summary of the Provided Opinion

Factual and Procedural Background

The Petitioner is Azure Power India Private Limited (APIPL), a generating company that instituted three petitions before the Commission concerning alleged “Change in Law” events arising from the introduction of Goods and Services Tax (GST) and changes in Service Tax. The Petitioner’s projects and associated PPAs are described as follows (as stated in the opinion):

Two 50 MW Solar Power Generating Systems (SPGS) located in Kurnool Ultra Mega Solar Park, Gani Sakunala, Andhra Pradesh — two identical PPAs dated 19.04.2016 (Petition No. 293/MP/2018).
One 2 MW SPGS at Indraprastha Thermal Power Station, New Delhi — PPA dated 14.10.2015 with SECI (Petition No. 294/MP/2018).
Two SPGS projects of 2 MW and 5 MW at Ordnance factories in Bhandara and Ambajhari, Maharashtra — PPAs dated 03.05.2016 and 08.05.2016 respectively (Petition No. 150/MP/2019).

The Petitioner sought relief in each petition declaring that particular enactments/notifications (including Finance Act, 2016 and Central Goods and Services Tax, 2017, and certain Service Tax notifications) constitute “Change in Law” under the respective PPAs and directing payment of additional tariff or consolidated monthly/ supplementary invoices to compensate for the additional tax burden, along with carrying costs and reimbursement of legal and administrative costs. The petitions were listed for virtual hearing on 21.12.2021.

During hearing, the Petitioner’s counsel informed the Commission that the Ministry of Power had notified the Electricity (Timely Recovery of Costs due to Change in Law) Rules, 2021 (“Change in Law Rules”), that the Petitioner intended to first approach the Respondents/procurers to settle Change in Law claims in terms of those Rules and thereafter to approach the Commission under Rule 3(8). The counsel also sought that filing fees already deposited in respect of the present petitions be adjusted against the petition to be filed under Rule 3(8).

Legal Issues Presented

Whether the promulgation of the Finance Act, 2016 and the Central Goods and Services Tax, 2017 (and, in some petitions, certain Service Tax notifications) constitute “Change in Law” under Article 12 of the respective Power Purchase Agreements executed between the Petitioner and the Respondents.
Whether the Petitioner is entitled to additional tariff or consolidated supplementary payments (with carrying costs and reimbursement of legal/administrative costs) to compensate for the additional tax burden arising from the said enactments/notifications.
Procedural question: In view of the Ministry of Power’s Change in Law Rules, 2021, what is the proper procedural route for the Petitioner to seek recovery of Change in Law impact — i.e., settlement among parties first and then approach to the Commission under Rule 3(8)?

Arguments of the Parties

Petitioner's Arguments

The Petitioner asserted that the introduction of GST (Central Goods and Services Tax, 2017), the Finance Act, 2016 (and in some petitions specified Service Tax notifications) are Change in Law events under the relevant PPA Article and entitle the Petitioner to compensation for the additional recurring tax burden.
At the virtual hearing, the Petitioner’s counsel stated that the Ministry of Power has notified the Electricity (Timely Recovery of Costs due to Change in Law) Rules, 2021, and that the Petitioner would first approach Respondents/procurers to settle Change in Law claims among themselves in terms of those Rules and then approach the Commission under Rule 3(8).
The Petitioner requested that the filing fees already deposited in respect of the present petitions be adjusted against the petition to be filed under Rule 3(8) of the Change in Law Rules.

The opinion does not record detailed adversarial submissions from the Respondents/procurers.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The Commission's analysis proceeds from the Ministry of Power’s notification of the Change in Law Rules, 2021. The Commission quoted relevant provisions of those Rules (definition of “change in law” and Rule 3 governing adjustment in tariff on change in law) and highlighted the procedural framework established by the Rules. Key points extracted from the Rules and relied upon by the Commission (as recorded in the opinion) include:

The definition of “change in law” for tariff purposes (Rule 2(c)), i.e., any enactment or amendment or repeal of any law made after tariff determination leading to corresponding changes in cost requiring change in tariff.
Rule 3(1) — on occurrence of a change in law, the monthly tariff or charges shall be adjusted and recovered in accordance with the Rules to compensate the affected party so as to restore that party to the same economic position as if the change had not occurred.
Rule 3(2)–(4) set out notice, computation and billing timelines between affected party and other party; Rule 3(7) requires the affected party to furnish relevant documents and details of calculation to the Appropriate Commission within 30 days of commencement of recovery; and Rule 3(8) requires the Appropriate Commission to verify the calculation and adjust the amount within 60 days.

Based on the foregoing, the Commission observed that the Change in Law Rules contemplate bilateral settlement of Change in Law claims between the affected party (here, the Petitioner) and the other party/ procurers, with recourse to the Commission if parties are not in agreement or for verification under Rule 3(8). The Commission therefore concluded that the Petitioner must first seek settlement of Change in Law claims with the Respondents/procurers under the procedure envisaged in the Rules and may thereafter approach the Commission under Rule 3(8).

The Commission also addressed the Petitioner's request regarding filing fees: it ordered that the filing fees deposited for the present petitions would be adjusted against the petition to be filed under Rule 3(8) of the Change in Law Rules.

Holding and Implications

DISPOSED OF

Holding (direct outcome):

The Commission held that the Petitioner should approach the Respondents/procurers to settle Change in Law claims amongst themselves in terms of the Electricity (Timely Recovery of Costs due to Change in Law) Rules, 2021, and thereafter may approach the Commission under Rule 3(8) of those Rules.
The Commission directed that the filing fees deposited by the Petitioner in respect of the present petitions shall be adjusted against the petition to be filed by the Petitioner under Rule 3(8) of the Change in Law Rules.
Accordingly, Petition No. 293/MP/2018, Petition No. 294/MP/2018 and Petition No. 150/MP/2019 are disposed of in terms of the above directions.

Implications:

Immediate procedural consequence: The Petitioner must initiate and attempt settlement of Change in Law claims directly with the procurers/respondents following the timelines and procedures set out in the Change in Law Rules. Only thereafter may the Petitioner invoke the Commission’s role under Rule 3(8) for verification/adjustment.
Financial consequence recorded in the order: the filing fees already deposited for these petitions will be credited/adjusted against the subsequent petition(s) filed under Rule 3(8).
No broader legal precedent was articulated in the opinion beyond directing adherence to the statutory Change in Law Rules; the decision effects the procedural pathway for these petitions rather than resolving the substantive Change in Law claims on their merits.

This summary is confined to the content expressly contained in the provided opinion and does not add or infer facts or legal conclusions that are not stated therein.

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Azure Power India Private Limited v. Ntpc Limited, Thorough Its General Manager (Commercial) And Others

1. The Petitioner, Azure Power India Private Limited (APIPL) is a generating company and has the following projects:

a) Two Solar Power Generating Systems (SPGS) of capacity of 50 MW each located in the Kurnool Ultra Mega Solar Park, at Gani Sakunala, Andhra Pradesh pursuant to which two identical Power Purchase Agreements (PPAs) dated 19.04.2016, for a capacity of 50 MW each were executed with NTPC Limited (NTPC), in Petition No. 293/MP/2018.

b) 2 MW SPGS based on Photo Voltaic technology located at Indraprastha Thermal Power Station, New Delhi pursuant to a PPA dated 14.10.2015 executed with the Solar Energy Corporation of India Limited (SECI), in Petition No. 294/MP/2018.

c) Two projects comprising 2 MW and 5 MW SPGS based on Photo Voltaic technology in the Ordnance factories of Bhandara and Ambajhari in the State of Maharashtra. The SPGS have been developed pursuant to two power purchase agreements dated 03.05.2016 executed with the Ordnance Factory Bhandara and dated 08.05.2016 executed with the Ordnance Factory Ambajhari in Petition No. 150/MP/2019.

2. The Petitioner is seeking relief on account of a ‘Change in Law’ viz. the introduction of Goods and Services Tax laws at the Central level and change in the rate of Service Tax, resulting in additional recurring expenditure in the form of an additional tax burden to be borne by the Petitioner in all the three petitions. The Petitioner has made the following prayers:

In Petition No. 293/MP/2018

a) Declare that the promulgation of the Finance Act, 2016 (with effect from 01.06.2016) and Central Goods and Services Tax, 2017 (with effect from 01.07.2017) are each a Change in Law under Article 12 of the Power Purchase Agreements dated 19.04.2016 executed between the Petitioner and Respondent No. 1;

b) Direct the Respondents to accordingly pay the Petitioner an additional tariff of Rs. 0.016/kWh and Rs. 0.018/kWhwith effect from the Commercial Operation Date of the Petitioner's Solar Power Generating Systems located at location P-12 and P-13, respectively, in the Kurnool Solar Park, as compensation for the additional tax burden incurred by the Petitioner on operating and maintaining the said Solar Power Generating Systems, as elaborated in the instant Petition, due to the promulgation of the Finance Act, 2016 (with effect from 01.06.2016) and Central Goods and Services Tax, 2017 (with effect from 01.07.2017), along with carrying costs, subject to any adjustments based on the final additional expenditure incurred by the Petitioner as on the Commercial Operations Date of the Petitioner's Solar Power Generating Systems as duly audited and certified by the Petitioner's statutory auditor at the end of the relevant financial year;

c) Direct the Respondents to reimburse the legal and administrative costs incurred by the Petitioner in pursuing the instant Petition; and

d) Pass such other orders that this Hon'ble Commission deems fit in the interest of justice.

In Petition No. 294/MP/2018

a) Declare that the promulgation of the Notifications No. 21 and 22/2015-ST dated 06.11.2015 by the Ministry of Finance, Government of India (with effect from 15.11.2015), Finance Act, 2016 (with effect from 01.06.2016) and the Central Goods and Services Tax, 2017 are each a Change in Law under Article 12 of the Power Purchase Agreement dated 14.10.2015 executed between the Petitioner and the Respondent;

b) Direct the Respondent to accordingly pay the Petitioner an additional tariff of Rs. 0.243/kWh with effect from the Commercial Operation Date of the Petitioner's Solar Power Generating Systems as compensation for the additional tax burden incurred by the Petitioner on operating and maintaining the said Solar Power Generating Systems, as elaborated in the instant Petition, due to the issuance of the Notifications No. 21 and 22/2015-ST dated 06.11.2015 by the Ministry of Finance, Government of India (with effect from 15.11.2015), and promulgation of the Finance Act, 2016 (with effect from 01.06.2016) and the Central Goods and Services Tax, 2017, along with carrying costs, subject to any adjustments based on the final additional expenditure incurred by the Petitioner as on the Commercial Operation Date of the Petitioner's Solar Power Generating Systems as duly audited and certified by the Petitioner's statutory auditor at the end of the relevant financial year;

c) Direct the Respondent to reimburse the legal and administrative costs incurred by the Petitioner in pursuing the instant Petition; and

d) Pass such other orders that this Hon'ble Commission deems fit in the interest of justice.

In Petition No. 150/MP/2019

a) Declare that the promulgation of the Finance Act, 2016 (with effect from 01.06.2016) and the Central Goods and Services Tax, 2017 are each a Change in Law under Article 12 of the Power Purchase Agreements dated 03.05.2016 and 08.05.2016 executed between the Petitioner and the Respondents;

b) Declare that that the Petitioner is entitled to be paid against monthly supplementary invoices in the amount of the economic impact of the change in law events (namely, the enhancement in the tax liability of the Petitioner) supported by such documentary evidence as may be deemed appropriate by this Hon'ble Commission, as compensation for the additional tax burden incurred by the Petitioner on operating and maintaining the said Solar Power Generating Systems, as elaborated in the instant Petition, due to the promulgation of the Finance Act, 2016 (with effect from 01.06.2016) and the Central Goods and Services Tax, 2017;

c) Declare and direct that the Petitioner is entitled to raise a consolidated supplementary bill towards change in law impact (namely, the enhancement in the tax liability of the Petitioner), as elaborated in the instant Petition, for such prior period supported by such documentary evidence as may be deemed appropriate by this Hon'ble Commission, along with appropriate carrying costs;

d) Direct the Respondents to reimburse the legal and administrative costs incurred by the Petitioner in pursuing the instant Petition; and

e) Pass such other orders that this Hon'ble Commission deems fit in the interest of justice.

3. The cases were called out for virtual hearing on 21.12.2021. During the course of hearing, the learned counsel for the Petitioner submitted that the Ministry of Power, Government of India has notified the Electricity (Timely Recovery of Costs due to Change in Law) Rules, 2021 (hereinafter referred to as ‘Change in Law Rules’) and the Petitioner will approach Respondents/procurers for settlement of Change in Law claims amongst themselves in terms of the Change in Law Rules and will approach the Commission in terms of Rule 3(8) of the said Rules. The learned counsel for the Petitioner further submitted that the filing fees deposited by the Petitioner in respect of the present Petition may be adjusted against the Petition to be filed by the Petitioner in terms of Rule 3(8) of the Change in Law Rules.

4. The Commission observes that the Ministry of Power, Government of India has notified ‘Change in law Rules, 2021’, the relevant provisions of which are extracted as under:

“2(c) “change in law”, in relation to tariff, unless otherwise defined in the agreement, means any enactment or amendment or repeal of any law, made after the determination of tariff under section 62 or section 63 of the Act, leading to corresponding changes in the cost requiring change in tariff, and includes —

(i) -------

(ii) -------

(iii) ---------

3. Adjustment in tariff on change in law— (1) On the occurrence of a change in law, the monthly tariff or charges shall be adjusted and be recovered in accordance with these rules to compensate the affected party so as to restore such affected party to the same economic position as if such change in law had not occurred.

(2) For the purposes of sub-rule (1), the generating company or transmission licensee, being the affected party, which intends to adjust and recover the costs due to change in law, shall give a three weeks prior notice to the other party about the proposed impact in the tariff or charges, positive or negative, to be recovered from such other party.

(3) The affected party shall furnish to the other party, the computation of impact in tariff or charges to be adjusted and recovered, within thirty days of the occurrence of the change in law or on the expiry of three weeks from the date of the notice referred to in sub-rule (2), whichever is later, and the recovery of the proposed impact in tariff or charges shall start from the next billing cycle of the tariff.

(4) The impact of change in law to be adjusted and recovered may be computed as one time or monthly charges or per unit basis or a combination thereof and shall be recovered in the monthly bill as the part of tariff.

(5) The amount of the impact of change in law to be adjusted and recovered, shall be calculated —

(a) where the agreement lays down any formula, in accordance with such formula; or

(b) where the agreement does not lay down any formula, in accordance with the formula given in the Schedule to these rules;

(6) The recovery of the impacted amount, in case of the fixed amount shall be —

(a) in case of generation project, within a period of one-hundred eighty months; or

(b) in case of recurring impact, until the impact persists.

(7) The generating company or transmission licensee shall, within thirty days of the coming into effect of the recovery of impact of change in law, furnish all relevant documents along with the details of calculation to the Appropriate Commission for adjustment of the amount of the impact in the monthly tariff or charges.

(8) The Appropriate Commission shall verify the calculation and adjust the amount of the impact in the monthly tariff or charges within sixty days from the date of receipt of the relevant documents under sub-rule (7).

(9) After the adjustment of the amount of the impact in the monthly tariff or charges under sub-rule (8), the generating company or transmission licensee, as the case may be, shall adjust the monthly tariff or charges annually based on actual amount recovered, to ensure that the payment to the affected party is not more than the yearly annuity amount.”

5. The Commission further observes that as per the above quoted provisions, on occurrence of an event of Change in Law, the affected party, in the present case the Petitioner, and other parties, in the present case the Respondents/procurers, are to settle the Change in Law claims among themselves and approach the Commission only in terms of Rule 3(8) of the Change in Law Rules.

6. In view of the above, the Commission holds that the Petitioner may approach the Respondents/procurers for settlement of Change in Law claims amongst themselves in terms of the Change in Law Rules and thereafter approach the Commission in terms of Rule 3(8) of the said Rules.

7. The filing fees deposited by the Petitioner in respect of the present Petitions shall be adjusted against the Petitions to be filed by the Petitioner in terms of Rule 3(8) of the Change in Law Rules.

8. Accordingly, the Petition No. 293/MP/2018, Petition No. 294/MP/2018 & Petition No. 150/MP/2019 are disposed of in terms of the above.

Azure Power India Pr... v. Ntpc Limited, Thorou...