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2020 SCC OnLine APTEL 86

In the Appellate Tribunal for Electricity†

(BEFORE MANJULA CHELLUR, CHAIRPERSON AND S.D. DUBEY, MEMBER (TECHNICAL))

Bhopal Dhule Transmission Company Limited, (Through Vice

President - Corporate & Regulatory Affairs and Business
Development (Power & Infrastructure) … Appellant;
Versus
Central Electricity Regulatory Commission and Others …
Respondents.
Appeal No. 208 of 2019
Decided on October 20, 2020
Advocates who appeared in this case :
Mr. Sanjay Sen, Sr. Adv., Mr. Vishal Binod, Mr. Deep Rao Palepu, Mr. Divyanshu
Bhatt, Mr. Syed Jafar Alam, Mr. Abhishek Kumar, Mr. Arjun Agarwal, Mr. Tan Reddy,
Mr. Gaurav Kumar and Ms. Anisha Chopra Batra (Rep), Counsel on record for the
Appellant(s);
Mr. Satender Kumar Rai for R-9;
Mr. Hemant Sahai, Mr. Nitish Gupta, Mr. Shreshth Sharma, Mr. Aditya K. Singh, Ms.
Puja Priyadarshini, Ms. Molshree Bhatnagar, Mr. Nived Veerapaneni, Ms. Anukriti Jain,
Counsel for the Respondents;
Ms. Jyotshna Khatri for R-10;
Ms. Suparna Srivastava and Ms. Sanjana Dua for R-24.
The Judgment of the Court was delivered by
S.D. DUBEY, MEMBER (TECHNICAL):— The present Appeal has been filed by M/s.
Bhopal Dhule Transmission Company Limited under Section 111(1) of the Electricity
Act, 2003 (“the Act”) against the Central Electricity Regulatory Commission's
(“CERC”) Order dated 24.04.2019 in Petition No. 297/MP/2018 (“Impugned Order”).
The Appellant, Bhopal Dhule Transmission Company Limited (“BDTCL”/“Appellant”),
is an inter-state transmission licensee whose transmission elements interconnect with
those of Power Grid Corporation of India Limited (“PGCIL”/“Respondent No. 24”).
Facts of the case:
2. The Appellant was incorporated as a special purpose vehicle by PFC Consulting
Limited (“PFCCL”) as part of a Tariff Based Competitive Bidding process under Section
63 of the Act to develop and implement the following transmission elements on Build,
Own, Operate and Maintain basis for system strengthening of Western Region:
(a) Transmission Lines:
(i) Jabalpur-Bhopal 765 kV S/C Transmission line (“BJ Line”);
(ii) Bhopal-Indore 765 kV S/C Transmission line (“BI Line”);
(iii) Bhopal-Bhopal 400 kV D/C Transmission Line (“BB Line”);
(iv) Aurangabad-Dhule 765 kV S/C Transmission Line (“DA Line”);
(v) Dhule-Vadodara 765 kV S/C Transmission Line (“DV Line”); and
(vi) Dhule-Dhule 400 kV D/C Transmission Line (“DD Line”).
(b) Substations:
(i) 765/400 kV 2×1500 MVA substation at Bhopal (“Bhopal Substation”)
(ii) 765/400 kV 2×1500 MVA substation at Dhule (“Dhule Substation”)
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(Together, the aforesaid transmission lines and substations are referred to as

the “Project”).
3. Sterlite Grid Limited (“SGL”) participated in the competitive bidding process
conducted by PFCCL and on emerging as the successful bidder, a Letter of Intent
(“LOI”) was issued by PFCCL to SGL on 31.01.2011. In accordance with the bidding
documents, SGL acquired 100% of the shareholding in the Appellant company by
executing a Share Purchase Agreement with PFCCL on 31.03.2011. Thereafter, the
Appellant entered into the TSA with the LTTCs (being Respondent Nos. 2-23 herein)
on 07.12.2010.
4. Subsequently, the CERC, vide its Order dated 12.10.2011 in Petition No. 110 of
2011, granted an inter-state transmission license to the Appellant for inter-state
transmission of electricity and, vide its Order dated 28.10.2011 in Petition No. 108 of
2011, adopted the transmission charges for the Project.
5. In terms of Schedule 3 of the TSA, the Project was scheduled to be
commissioned by the Appellant within 36 months from the Effective date. The term
“Effective date” has been defined under Article 2.1 of the TSA to be the later of the
dates of: (i) the execution of the TSA; (ii) acquisition of the Special Purpose Vehicle by
the selected bidder; and (iii) submission of Contract Performance Guarantee on behalf
of the Transmission Services Provider (“TSP”). Accordingly, the Effective date is the
date of signing of the Share Purchase Agreement, i.e., 31.03.2011 and consequently,
the originally envisaged date of Scheduled Date of Commercial Operation (“SCOD”) for
the Project was 31.03.2014.
6. The Appellant developed the Project in right earnest to the best of its ability in
accordance of its various contractual obligations under the TSA. The Appellant
regularly reported the detailed construction progress on a monthly basis to the Central
Electricity Authority (“CEA”) in terms of Article 4.1(g) of the TSA. However, due to
various unforeseen and uncontrollable events that qualify as Force Majeure and
Change in Law, that took place subsequent to the award of the Project, the Appellant
was not able to complete the Project as per the SCOD envisaged under the TSA.
7. Meanwhile, PGCIL filed Petition No. 227/TT/2014 before the CERC seeking
determination of transmission tariff of the Transmission Assets for the 2014-2019 tariff
block in accordance with the Central Electricity Regulatory Commission (Terms and
Conditions of Tariff) Regulations, 2014 (“2014 Tariff Regulations”).
8. During the pendency of the aforementioned Petition No. 227/TT/2014, the
Appellant filed Petition No. 216/MP/2016 before the CERC on 15.10.2016 seeking
declaratory and compensatory reliefs on account of various Force Majeure and Change
in Law events which adversely impacted the Project. It is stated and submitted that as
a result of various unforeseen and uncontrollable events that took place subsequent to
the award of the Project, the Appellant was prevented from completing the Project on
time. It is submitted that the various events, which adversely affected and delayed
the commissioning of the Project, include the following:
Force Majeure and Change in Law events:
(a) Delay in grant of Forest clearance;
i. Change in the Ministry of Environment and Forests' Guidelines for Diversion
of Forest Land for non-forest purposes under the Forest Conservation Act,
1980 read with the Forest Conservation Rules, 2003;
ii. Change in the applicable Format for obtaining clearances under the
Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of
Forests Rights) Act, 2006
Force Majeure events:
(b) Delay in Grant of Authorization under Section 164 of the Electricity Act,
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2003;
(c) Delay due to finalization of coordinates of the gantry of PGCIL's substation;
(d) Delay in allotment of land for the Bhopal Substation and delay in
transportation of equipment; and
Change in Law event:
(e) Change in Taxes.
9. The actual dates of commissioning of the constituent elements of the Project are
set out in the table below:
Element Commercial Operation Date
DA Line 05.12.2014
DV Line 9.2.2015
DD Line 06.12.2014
BJ Line 09.06.2015
BI Line 19.11.2014
BB Line 30.06.2014 and 12.08.2014
Bhopal Substation 5.7.2014 and 30.09.2014
Dhule Substation 06.12.2014
10. Vide its Order dated 25.06.2018 in Petition No. 216/MP/2016, CERC found that
the Appellant's Project was indeed impacted by Force Majeure events and inter alia
extended the SCOD of all the aforesaid elements to their Actual Date of Commercial
Operation (“ACOD”).
11. The Appellant preferred a parallel appeal against CERC's Order dated
20.09.2017 in Petition No. 227/TT/2014, being Appeal No. 272 of 2018. Appeal No.
272 of 2018 is presently pending before this Tribunal. In the said Appeal, an interim
stay vide Order dated 10.10.2018 continues to operate in favour of the Appellant. It is
stated and submitted that the subject matter and cause of action under Appeal No.
272 of 2018 is distinct from and unrelated to the subject matter and cause of action
relevant to the present Appeal.
12. In its Order dated 25.06.2018 in Petition No. 216/MP/2016, the CERC under
Para 38 inter alia granted certain liberty to the Appellant to approach the Commissionn
with all the relevant documents for consideration in this regard:
13. Pursuant to the allowance of Change in Law events and the aforesaid liberty
granted by the CERC vide Order dated 25.06.2018 in Petition No. 216/MP/2016, the
Appellant filed a consequential petition before the CERC being Petition No.
297/MP/2018 providing all the documents required to establish the merit and bona
fides of its Change in Law claim.
14. Having considered the extensive documentation submitted by the Appellant,
the CERC framed the following three issues and answered them in detail:
“Issue No. 1: Whether the Petitioner has complied with the provisions of
the TSA before approaching the Commission?
Issue No. 2: Whether the claims of the Petitioner under change in law in
respect of the project are admissible?
Issue No. 3: What reliefs should be granted to the Petitioner in the light
of the answer to the above issues?
15. As is evident, while the CERC has rightly held in the Impugned Order that the
Appellant complied with all necessary pre-requisites for claiming Change in Law relief
under the TSA and that the Change in Law events actually adversely affected the
Appellant's Project, CERC went on to erroneously deny Change in Law relief to the
Appellant.
16. The aforesaid Change in Law events viz. delay in grant of Forest Clearance and
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change in formats of no-objection certificates from the concerned district collectors

under the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of
Forest Rights) Act, 2006 (“FRA Clearance”) has burdened the Appellant with inter
alia an additional IDC liability. The total IDC on original project cost is Rs.
84,01,63,867/-, which is tabulated hereunder:
Particulars From Actual Drawal to From SCOD to ACOD
SCOD
Gross Interest 97,69,89,675.00 1,42,10,83,955.00
Less: Interest Earned 2,42,56,792.00 34,41,524.00
Less: Interest Charged to - 74,64,20,055.00
Profit & Loss Account
Net Interest Capitalized 95,27,32,883.00 67,12,22,277.00
Finance Charges 21,94,51,212.00 16,89,41,491.00
Total IDC 1,17,21,84,095.00 84,01,63,867.00
17. Being aggrieved by the aforementioned findings of the CERC, the Appellant has
filed the captioned Appeal. The Appellant craves this Tribunal's leave to add, alter or
make additional submissions, if required. The Appellant also craves leave to place any
other record/document as may be required for the appropriate adjudication of the
present Appeal.
18. It is stated that the Appellant herein received a letter dated 13.12.2018 from
Mr. Naveen Gupta, the Insolvency Resolution Professional (“IRP”) of Monnet Power
Company Limited, which is arrayed as Respondent No. 6 in the captioned Appeal. By
the said letter, the Appellant was informed that vide an Order dated 23.02.2018, the
National Company Law Tribunal (“NCLT”), Mumbai Bench admitted Company Petition
No. 1696 of 2017 against Monnet Power Company Limited and appointed Mr. Naveen
Gupta as the IRP. The said letter, which annexes a copy of the said NCLT Order,
further states that in terms of Section 14 of the Insolvency and Bankruptcy Code,
2016 (“IBC”) the moratorium period had begun from the date of the said Order, i.e.,
23.02.2018. Another similar letter dated 03.01.2019 was received from the IRP of
Monnet Power Company Limited.
19. Similarly, it is stated that the Appellant herein received a letter dated
03.11.2018 from VISA Power Limited, which is arrayed as Respondent No. 17 in the
captioned Appeal. By the said letter, the Appellant was inter alia intimated that vide
an Order dated 11.10.2018 (“Liquidation Order”), the NCLT, Kolkata Bench ordered
the liquidation of VISA Power Limited. A perusal of the said Liquidation Order
evidences that vide an earlier Order dated 22.12.2017, the NCLT, Kolkata Bench had
appointed Mr. Anil Goel as the IRP of VISA Power Limited, and accordingly, the
moratorium under Section 14 of the IBC was initiated with effect from 22.12.2017.
Upon the pronouncement of the Liquidation Order, a separate moratorium under
Section 33(5) of the IBC came into force.
20. The aforesaid facts are relevant in light of Sections 14 and 33 of the IBC which
prohibit inter alia the continuation of any suit or proceedings in any court of
law/tribunal during the subsistence of the moratorium period. In view of the foregoing,
the Appellant is not pressing claims against Respondent Nos. 6 and 17. Even though
the tariff and recovery of Change in Law and Force Majeure reliefs is to be collected in
accordance with the Central Electricity Regulatory Commission (Sharing of inter-State
Transmission Charges and Losses) Regulations, 2010, this submission ought not to be
construed as a waiver or relinquishment of the Appellant's claims as against Monnet
Power Company Limited or VISA Power Limited, and the Appellant reserves all rights
and contentions to be raised at an appropriate stage.
Questions of law:
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21. The following questions of Law arise in the present Appeal:

22. Whether the CERC could have denied Change in Law relief to the Appellant after
having arrived at unequivocal findings of fact and law that Change in Law events
adversely affected the Appellant's Project in accordance with the TSA?
23. Whether the CERC arbitrarily and illegally altered the basis of allowing Change
in Law relief under the TSA thereby overriding the express provisions of the TSA?
24. Whether the CERC erroneously overlooked the unqualified nature of Article 12.2
of the TSA to read in illegal exceptions to the grant of Change in Law relief under the
TSA when in fact there exist none?
25. Whether IDC and Incidental Expenses During Construction (“IEDC”) constitute
appropriate Change in Law relief under the TSA in cases where the COD of the Project
has been delayed due to admitted Change in Law events?
26. Whether the CERC could have completely ignored its own previous Order in
Petition No. 310/MP/2015 dated 08.05.2017 and Order in Petition No. 174/MP/2016
dated 13.09.2017 where Change in Law relief, identical to that claimed by the
Appellant in Petition No. 297/MP/2018, was granted in materially similar facts to
altogether deny the Appellant the very same relief?
27. Learned Counsel for the Appellant (Bhopal Dhule Transmission Company
Ltd.) has submitted the following Written Submissions for our consideration:
28. The present Appeal has been filed against the Order dated 24.04.2019 passed
in Petition No. 297/MP/2018 by the Central Electricity Regulatory Commission whereby
the Central Commission has allowed the Change in Law event and denied the Interest
During Construction and corresponding Carrying Cost arising out of the said Change in
Law event.
29. The CERC while adjudicating consequential claims of the Appellant in Petition
No. 297/MP/2018, pursuant to liberty granted by the CERC vide Order dated
25.06.2018 in Petition No. 216/MP/2016, rightly accepted vide the Impugned Order
that the Appellant had been impacted by the Change in Law Events claimed by the
Appellant in accordance with the Transmission Services Agreement dated 07.12.2010
executed with Respondent Nos. 2-23 (“TSA”), but erroneously and surprisingly denied
the Appellant any Change in Law relief whatsoever. The Appellant's key grievance is
that Change in Law relief, i.e. the monetary relief claimed by the Appellant by way of
Interest During Construction (“IDC”) and corresponding Carrying Costs have been
denied by the CERC despite its own categorical finding that the Appellant was
impacted by the Change in Law events.
30. In terms of Schedule 3 of the TSA, the Project was scheduled to be
commissioned by the Appellant within 36 months from the Effective date. The
Effective date in the present case is 31.03.2011 and consequently, the Scheduled Date
of Commercial Operation (“SCOD”) for the Project was 31.03.2014.
31. The Appellant developed the Project in right earnest to the best of its ability in
accordance of its various contractual obligations under the TSA. The Appellant
regularly reported the detailed construction progress on a monthly basis to the Central
Electricity Authority (“CEA”) in terms of Article 4.1 (g) of the TSA. However, due to
various unforeseen and uncontrollable events that qualify as Force Majeure and
Change in Law, that took place subsequent to the award of the Project, the Appellant
was not able to complete the Project as per the SCOD envisaged under the TSA.
32. Accordingly, the Appellant filed Petition No. 216/MP/2016 before the CERC on
15.10.2016 seeking declaratory and compensatory reliefs on account of various Force
Majeure and Change in Law events which adversely impacted the Project. In the said
Petition, the Appellant stated that as a result of various unforeseen and uncontrollable
events that took place subsequent to the award of the Project, the Appellant was
prevented from completing the Project on time.
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33. The Appellant further submitted that as a result of the aforesaid Force Majeure
and Change in Law events, various elements of the Project were commissioned on a
date which is later than their Scheduled Commissioning Date. The actual dates of
commissioning of the constituent elements of the Project are set out in the table
below:
Element Actual Commercial Operation Date
DA Line 05.12.2014
DV Line 9.2.2015
DD Line 06.12.2014
BJ Line 09.06.2015
Bl Line 19.11.2014
BB Line 30.06.2014 and 12.08.2014
Bhopal Substation 5.7.2014 and 30.09.2014
Dhule Substation 06.12.2014
34. The CERC vide its Order dated 25.06.2018 in Petition No. 216/MP/2016,
acknowledged that the Appellant's Project was indeed impacted by the Force Majeure
events and inter alia extended the SCOD of all the aforesaid elements to their Actual
Date of Commercial Operation (“ACOD”). Further, the CERC was inter alia pleased to
grant the following liberty to the Appellant
(emphasis supplied):
“38. In our view, the letter dated 13.2.2012 issued by MoEF disentitling the
persons to utilize degraded forest land on the basis of certificate from the Chief
Secretary regarding non-availability of nonforest land for the purpose of
compensatory afforestation where the forest cover in the State is less than 50% is
covered under “a chanqein the terms and conditions prescribed for obtaininq any
Consents, Clearances and Permits or the inclusion of any new terms or conditions
for obtaininq such consents, clearances and Permits” and is therefore covered under
Change in Law. However, from the documents placed on record, it cannot be
conclusively proved that the Petitioner's case falls under the change in law. In
particular the following need clarification and supporting documents:
(a) Whether the Petitioner had applied for certificate from the Chief (Secretary)
and the outcome thereof;
(b) The efforts made by the Petitioner to acquire the non-forest land for
compulsory afforestation;
(c) Whether the guidelines dated 13.2.2012 of MoEF were issued during the
pendency of its application before the Chief (Secretary);
(d) Whether the Petitioner acquired the degraded forest land after the issue of
MoEF letter dated 11.7.2014;
(e) Whether the forest clearance was granted after the petitioner made available
the degraded forest land in accordance with the MoEF letter dated 11.7.2014.
Therefore, the claims of the Petitioner needs to be examined in the light of the
explanation/documents as noted above. We therefore grant liberty to the Petitioner
to approach the Commission with all the relevant documents for consideration in
this regard.”
(emphasis supplied)
35. Pursuant to the allowance of Change in Law events and the aforesaid liberty
granted by the CERC vide Order dated 25.06.2018 in Petition No. 216/MP/2016, the
Appellant filed a consequential petition before the CERC being Petition No.
297/MP/2018 providing all the documents required to establish the merit and bona
fides of its Change in Law claim.
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36. The extensive documentation submitted by the Appellant, the CERC framed the
following issues and answered them in the following manner, as excerpted hereunder
in relevant parts
(emphasis supplied):
“Issue No. 1: Whether the Petitioner has complied with the provisions of
the TSA before approaching the Commission?
…
In our view, the Petitioner has complied with the requirement of TSA regarding
prior notice to the L TTCs regarding occurrence of change in law and force majeure
before approaching the Commission.
Issue No. 2: Whether the claims of the Petitioner under change in law in
respect of the project are admissible?
…
38. We have considered the submissions of the Petitioner and examined the
documents on record. We are of the view that the Petitioner has taken all possible
steps for early resolution of issues pertaining to forest clearance. We are also of the
view that in case of forest clearance for all the transmission lines the Petitioner has
pursued the matter with relevant authorities and the time consumed was on
account of delay in grant of forest clearance owing to change in Moe-F quidelines
dated 13.2.2012.
39. The letter dated 13.2.2012 issued by MoEF disentitling the persons to utilize
degraded forest land on the basis of certificate from the Chief Secretary regarding
non-availability of non-forest land for the purpose of compensatory afforestation
where the forest cover in the State is less than 50% is covered under Change in
Law in terms of Article 12 of the TSA. In our view, the time consumed for getting
the final forest clearances from MOEF in the States of Maharashtra, Madhya Pradesh
and Gujarat was beyond the control of the petitioner and was due to a change in
law on account of MOEF Notification dated 13.2.2012.
…..
4. Thus MoEF vide its letter dated 5.7.2013 mandated that the no objection
certificates in respect of FRA Clearances should be issued by all District Collectors
as per the revised formats. As a consequence of which, the Petitioner was
constrained to re-apply for the no-objection certificates from all the relevant District
Collectors and re-submit the same for the purpose of obtaining its FRA Clearances.
The same is also covered under the clause of TSA “a change in the terms and
conditions prescribed for obtaining any Consents Clearances and Permits or the
inclusion of new terms or conditions for obtaining such ponsents, clearances and
Permits” and is, therefore, a Change in Law.
…
In view of the reasons submitted by the Petitioner, the delay is attributable to
the delay in grant of forest clearance.
…
Issue No. 3: What reliefs should be granted to the Petitioner in the light
of the answer to the above issues?
…
50. The Petitioner has submitted that Change in Law relief for the very same
issue, i.e. delay in grant of Forest Clearance on account of the said MoEF
Notification was granted to Jabalpur Transmission Company Limited (“JTCL”) by the
Commission in terms of its order dated 16.10.2015 in Petition No. 73/MP/2014 read
with its order dated 8.5.2017 in Petition No. 310/MP/2015. The Commission in its
above orders allowed JTCL's claims regarding additional expenditure towards IDC on
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loans during the extended construction period: increase in afforestation rates as

prescribed by MoEF: and increase in taxes and duties. Similar lvt in its order dated
13.9.2017 in Petition No. 174/MP/2016, the Commission held that since the delay
in getting forest clearance was beyond the control of the Petitioner. East North
Interconnection Company Limited (ENICL), and ENICL should be allowed IDC for the
extended period in order to put the ENICL in same economic position as if the
Change in Law had not occurred. The Petitioner has prayed to compensate the
Petitioner for the adverse economic impact of the aforesaid Change in Law event
and restore the Petitioner to the same economic position as if such Change in Law
event had not occurred.
51. The relevant provision of the TSA (Article 12.2) as regards relief on account
of change in law is as under:
“12.2 Relief for Change in Law
12.2.1 During Construction Period: During the Construction Period, the impact
of increase/decrease in the cost of the Project in the Transmission Charges shall
be governed by the formula given below:
For every cumulative increase/decrease of each Rupees Nine Crores (Rs.
9,00,00,000/-) in the cost of the Project up to the Scheduled COD of the Project,
the increase/decrease in non-escalable Transmission Charges shall be an amount
equal to 0.32 percent (0.32%) of the Non-Escalable Transmission Charges.
12.2.2 During the Operation Period—
During the Operation Period, the compensation for any increase/decrease in
revenues shall be determined and effective from such date, as decided by the
Appropriate Commission, whose decision shall be final and binding on both the
parties, subject to rights of appeal provided under applicable Law.
Provided that the above-mentioned compensation shall be payable only if the
increase/decrease in revenues or cost to the TSP is in excess of an amount
equivalent to one percent (1%) of Transmission Charges in aggregate for a
Contract Year.
12.2.3 For any claims made under Article 12.2.1 and 12.2.2 above, the TSP
shall provide to the Long-Term Transmission Customers and the Appropriate
Commission documentary proof of such increase/decrease in cost of the
Project/revenue for establishing the impact of such Change in Law.
12.2.4 The decision of the Appropriate Commission, with regards to the
determination of the compensation mentioned above in Articles 12.2.1 and
12.2.2, and the date from which such compensation shall become effective, shall
be final and binding on both the Parties subject to the rights of appeal provided
under applicable Law.”
From the above provision of TSA, we note that “during the construction
period, the impact of increase/decrease in the cost of the Project in the
Transmission Charges shall be govemed by the formula given”.
52. The Commission has in its order dated 29.3.2019 in Petition No.
195/MP/2017, held as under:
“95. In our view, the Petitioner was prevented from discharging its obligations
under the TSA on account of unexpected requirement and delay in grant of forest
clearance which was not there in the RFP documents and as such delay beyond
one year in grant of forest clearance is covered under Force Majeure. Accordingly,
the SCOD shall stand extended till the actual CODs of Kurukshetra-Malerkotla
and Malerkotla-Kurukshetra Transmission Lines which are 18.1.2017 and
27.3.2017 respectively. However, we would like to make it clear that the
extension of COD of the instant assets does not entail any financial benefit in the
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form of IDC and IEDC to the Petitioner.

113. The Petitioner has submitted that on account of events of Force Majeure
and unexpected requirement of forest clearance, there was delay as a result of
which there was time over-run of 128 days in case of Kurukshetra-Malerkotla
Line and 196 days in case of Malerkotla Amritsar Line. The Petitioner has
submitted that it had incurred IDC during the period beyond SCOD till the
respective dates of commercial operation of the Kurukshetra-Malerkotla and
Malerkotla Amritsar Transmission Lines. We have already extended the scheduled
COD of the Kurukshetra-Malerkotla and Malerkotla Amritsar Transmission Lines
upto the actual CODs without the benefit of consequential IDC. Accordingly, the
Petitioners prayer for grant of IDC for the period beyond the scheduled COD is
rejected. However, the Petitioner is allowed to recover the amount paid by the
Petitioner to the forest authorities for obtaining the forest clearance and other
legitimate expenditure made for obtaining the forest clearance, service tax,
excise duty, Swachh Bharat Cess and Krishi Kalyan Cess from the L TTCs. The
Petitioner is directed to submit the documentary evidence in support of the
amount paid to the forest departments for obtaining the forest clearance and
payment of taxes along with the Auditor Certificate to the LTTCs while claiming
the relief under Change in Law.”
53. Similarly, the Commission in its order dated 29.3.2019 in Petition No.
238/MP/2017, held as under:
“82. The Petitioner has submitted that on account of events of Force Majeure
and unexpected requirement of forest clearance, there was delay as a result of
which there was time over-run of 295 days in case of Darbhanga line and 366
days in case of Motihari Line. The Petitioner has submitted that it incurred IDC
during the period beyond SCOD till the respective dates of commercial operation
of the Darbhanga and Motihari Transmission Lines. We have already extended the
scheduled COD of the Darbhanga and Motihari Transmission Lines upto the actual
CODs without the benefit of consequential IDC and IEDC. Accordingly, the
Petitioners prayer for grant of IDC for the period beyond the scheduled COD and
the IEDC for the said period is rejected. However, the Petitioner is allowed to
recover the amount paid by the Petitioner to the forest authorities for obtaining
the forest clearance and other legitimate expenditure made for obtaining the
forest clearance, service tax, excise duty, Swachh Bharat Cess and Krishi Kalyan
Cess from the L TTCs. The Petitioner is directed to submit the documentary
evidence in support of the amount paid to the forest departments for obtaining
the forest clearance and payment of taxes alongwith the Auditor Certificate to
the LTTCs while claiming the relief under Change in Law.”
54. The TSAs in the above two Petitions are similarly worded as in the instant
case as regards relief from events of chanqe in law. Therefore, the above orders are
applicable in the present case also. We are not in aqreement with the prayer of the
Petitioner to allow IDC or IEDC during the construction period. In our view. Only
that impact of change in law can be qoverned by the qiven formula that is a direct
consequence of change in law. In the instant caser these events are change in
norms of forest clearance and change in formats of FRA Clearance. These change in
law events have a bearing on schedule of commissioning but the Petitioner cannot
claim IDC or IEDC due to such delay. This being a competitively bid project, these
parameters are neither disclosed nor evaluated while bids are submitted.
55. The Petitioner has requested to allow carrying cost of the Change in Law
compensation awarded under Article 12 of the TSA in Petition No. 216/MP/2016 as
well as under the instant Petition. Since the claim of the Petitioner for allowinq IDC
and IEDC has been rejected. The prayer for allowing carryinq cost no more survives.
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56. The Petition No. 297/MP/2018 is disposed of in terms of the above.”

37. As is evident, while the CERC has rightly held that the Appellant complied with
all necessary pre-requisites for claiming Change in Law relief under the TSA and that
the Change in Law events actually adversely affected the Appellant's Project, the CERC
went on to erroneously deny the Change in Law relief sought by the Appellant.
38. The aforesaid Change in Law events viz. Change in relevant guidelines that
resulted in delay in grant of Forest Clearance and change in formats of no objection
certificates from the concerned district collectors under the Scheduled Tribes and
Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 (“FRA
Clearance”) has burdened the Appellant with inter alia an additional IDC liability. The
Appellant submits that the gross interest paid by the Appellant from SCOD, i.e.,
12.08.2014 till ACOD, i.e., 09.06.2015 is Rs. 1,42,10,83,955/-, the cash interest
earned from the temporary parking of funds from SCOD to ACOD is Rs. 34,41,524/-,
the interest charged to profit and loss account is Rs. 74,64,20,055/-, the net interest
capitalized paid by the Appellant from SCOD to ACOD is Rs. 67,12,22,376/- the
finance charges from SCOD to ACOD is Rs. 16,89,41,491/-. Therefore, the total IDC on
original project cost is Rs. 84,01,63,867/-. This computation is tabulated hereunder:
Particulars From Actual Drawal to From SCOD to ACOD
SCOD
Gross Interest 97,69,89,675.00 1,42,10,83,955.00
Less: Interest Earned 2,42,56,792.00 34,41,524.00
Less: Interest Charged to - 74,64,20,055.00
Profit & Loss Account
Net Interest Capitalized 95,27,32,883.00 67,12,22,277.00
Finance Charges 21,94,51,212.00 16,89,41,491.00
Total IDC 1,17,21,84,095.00 84,01,63,867.00
39. In view of the above, the Appellant has filed the captioned Appeal before this
Tribunal seeking setting aside of the Impugned Order to the extent it denies Change
in Law relief to the Appellant by way of IDC and corresponding Carrying Costs.
40. Learned Counsel for the Respondent No. 10 (M/s. MB Power (Madhya
Pradesh) Limited) has submitted the following Reply/Submissions for our
consideration:
41. The Appellant has entered into a Transmission Service Agreement dated
07.12.2010 with 21 IPPs including the Respondent No. 10 - M/s MB Power Madhya
Pradesh Limited. The Answering Respondent being one of the Long-Term Transmission
Customers with whom the Appellant herein has executed the TSA, is an affected party
in the present proceedings and accordingly seeks the leave of this Tribunal to submit
its limited response on the present Appeal.
42. The Answering Respondent is filing the present reply to address the limited
issue of liability of payment of IDC and carrying cost, if any, that may arise in case the
present Appeal is allowed on merits. Accordingly, the Answering Respondent seeks the
leave of this Tribunal to put on record its submissions without contesting the entire
Appeal and filing para-wise reply.
43. The TSA executed between the Appellant and the 21 IPPs including the
Answering Respondent has been executed in terms of the Central Electricity
Regulatory Commission (Sharing of Inter-State Transmission Charges and Losses)
Regulations, 2010. As per agreed terms of the TSA, the Answering Respondent is
liable to pay to the Appellant the transmission charges as prescribed under Schedule 5
of the TSA. The relevant provisions are set out herein under for the ease of
convenience of this Tribunal-.
“Article 1 - Definitions
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“Transmission Charges” shall mean the charges payable to the TSP by the
Long Term Transmission Customers pursuant to the TSA, as adopted by the
Appropriate Commission;
“Monthly Transmission Charges” for any Element of the Project, after COD of
the Element till COD of the Project, and for the Project after COD of the Project,
shall mean the amount of Transmission Charges for the relevant Contract Year as
specified in Schedule 5 of this Agreement;
Article 10: Billing and Payment of Transmission Charges
10.1 Subject to the provisions of this Article 10, the Long Term Transmission
Customers shall pay to the TSP, in Indian Rupees, on monthly basis, the Monthly
Transmission Charges from the date on which an Element(s) has achieved COD
until the expiry date of this Agreement, unless terminated earlier, in line with the
provisions of Schedule 5 of this Agreement.”
44. The invoices for the monthly transmission charges are being issued by the
Central Transmission Utility Sharing Regulations. The Sharing Regulations introduce
Point of Connection based transmission pricing methodology in India. This is a
socialized system for the collection and disbursement of transmission charges with
respect to the transmission system servicing a particular region. The relevant
provisions from the TSA are set out below for the ease and convenience of this
Tribunal:
‘RECITAL F:
The Long Term Transmission Customers agree, on the terms and subject to the
conditions of this Agreement, to use the available transmission capacity of the
Project and pay TSP the Transmission Charges as determined in accordance with
the terms of this Agreement.
Schedule 2: Project Description and Scope of Project
……………. Sharing of transmission charges for the various elements of the
transmission works listed above would be as per orders of CERC from time to time
Schedule 5: Computation of Transmission Charges
(c) …………….. The Transmission Charges to be paid to the TSP shall comprise of
the Escalable Transmission Charges and Non Escalable Transmission. Charges,
payable by each Long Term Transmission Customer, in proportion to their Allocated
Project Capacity for the Contract Year, as determined by the CERC. In the event of
change by CERC in the methodology for the allocation of Transmission Charges
between the Long Term Transmission Customers, such revised methodology shall
apply.”
45. After coming into force on 01.07.2011, the Sharing Regulations govern the
manner in which the transmission charges as approved by the Ld. Central Commission
and the losses shall be shared amongst the Designated ISTS Customers who use the
Inter - State Transmission System. Therefore, by virtue of the notification of the
Sharing Regulations, the 21 IPPs with whom the Appellant has executed the TSA shall
be governed by the said Regulations. These Point of Connection charges and losses are
computed as per Allocation Factor for all DICs.
46. The Answering Respondent has been paying the appropriated Transmission
Charges for the subject Transmission Assets as per the PoC Mechanism computed in
accordance with the Sharing Regulations.
47. In case of any additional recurring or non-recurring expenditure which has
resulted due to Change in Law event during construction period, the impact of such
increase/decrease in the cost of the Transmission Assets in the Transmission Charges
shall be governed by the following formula:
“Article 12: Change in Law
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For every cumulative increase/decrease of each Rupees Nine Crores (Rs.

90,000,000/-) in the cost of the Project upto the Scheduled COD of the Project, the
increase/decrease in non-escalable Transmission Charges shall be an amount equal
to 0.32 per cent (0.32%) of the Non-Escalable Transmission Charges.33
48. Under the TSA that in case for any claim made under Article 12.2.1 and 12.2.2
of the TSA, the Appellant shall provide to the LTTCs and the Appropriate Commission
documentary proof of such increase/decrease in cost of the Project/revenue for
establishing the impact of such Change in Law.
49. Since the purported IDC and Carrying Cost payable to the Appellant (if any)
shall form part of the capex of the Transmission Assets, the same shall be recoverable
through the PoC Mechanism under the Sharing Regulations. The same cannot be levied
and recovered from the Answering Respondent neither under the contractual nor under
regulatory regime.
50. Any claim towards the Monthly Transmission Charges paid by the LTTCs in
terms of the invoices being issued by the CTU are being maintained by the CTU in the
POC pool. It may be noted at this point that even the TSA that has been entered into
between the Appellant and the LTTCs is pursuant to the Sharing Regulations.
Therefore, any additional liability (if any) arising on account of the purported IDC and
Carrying Cost is liable to be levied under the POC mechanism in terms of the Sharing
Regulations and the same in no way can be recovered from the LTTCs including the
Answering Respondent neither under the contractual nor under regulatory regime.
51. The liability to pay Transmission Charges pursuant to the TSA only commences
on actual evacuation of power i.e. when the ‘transmission service’ is actually provided
under the TSA and not otherwise. The purported IDC/Carrying Cost if allowed by this
Tribunal will be added to the capex of the Transmission Asset and therefore, has to be
necessarily recovered as per the PoC Mechanism under the Sharing Regulations.
52. The commissioning of the Appellant's Transmission Assets has been delayed for
reasons not attributable to the Answering Respondent and the other LTTCs and
therefore they cannot be burdened upon with the same but for in terms of the
applicable law. The Central Commission in the Impugned Order has also expressed
that the delay caused in the commissioning of the Appellant's transmission system is
on account of Change in Law events. Therefore, the Answering Respondent ought to
bear the brunt of any additional liability' on account of such Change in Law events. It
is reiterated that the purported IDC/Carrying Cost if allowed by this Tribunal is to be
recovered under the PoC Mechanism as per the Sharing Regulations.
53. The Learned Counsel for the Respondent No. 24 (Power Grid Corporation
of India Limited) has submitted the following reply for our consideration:
54. In the present Appeal, inter-se disputes have been agitated as between the
Appellant and Respondent Nos. 2-23 who are the beneficiaries/long-term transmission
customers (LTTCs) of the transmission system being implemented by the Appellant
under the tariff based competitive bidding (TBCB) route. The said inter-se disputes are
not related to and are of no consequence to Respondent No. 24 who is an inter-State
transmission licensee as defined under Section 2(73) of the Electricity Act, 2003 and
has implemented transmission elements upstream of the transmission system of the
Appellant. As such, the answering Respondent is filing a short Reply to the above
Appeal, seeking liberty to file such further Reply as may be directed by this Tribunal or
should an occasion so arise.
55. A perusal of the impugned Order would reveal that neither any direction was
issued by Respondent No. 1 Commission qua Respondent No. 24 nor the Appellant has
any grievance qua Respondent No. 24, as is also evident from the pleadings in the
present Appeal. As such, no response on merits is presently required from Respondent
No. 24 to the above Appeal as well. However, in the event that this Tribunal at any
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given stage of hearing in the present Appeal specifically directs Respondent No. 24 to
submit any information in connection with subject matter, then Respondent No. 24
would provide/file the same as directed by this Tribunal. As stated above, Respondent
No. 24 also craves leave of this Tribunal to file an additional Reply, if the occasion so
arises, during the course of proceedings in the present Appeal.
56. The Appellant vide its written submissions has submitted as under:
57. The CERC's finding that the Appellant is not entitled to the Change in Law relief
(i.e. IDC and the Carrying Costs) is erroneous as it contradicts its own finding in the
very same Impugned Order that Change in Law events had in fact adversely affected
the Appellant's Project. Thus, the CERC has approved the arbitrary and illegal
proposition that there can be legitimate Change in Law events for which no
compensation at all shall be recoverable by a transmission service provider. Once the
CERC had unequivocally accepted the Appellant's contentions on every count that
Change in Law events had occurred, and have adversely affected the Appellant's
Project, the CERC could not have denied the corresponding relief (in the form of IDC
and the Carrying Costs) claimed by the Appellant. It is pertinent to mention that a
declaration of events as Change in Law without allowing the concomitant relief
contemplated under the TSA renders Article 12 of the TSA, the Change in Law clause,
a nullity.
58. The CERC erred in holding that the Appellant is not entitled to Change in Law
relief during the construction period of the Project since expenditure on IDC is not a
direct consequence of such Change in Law events. Further, the CERC appears to have
grounded its reasoning in the fact that IDC and IEDC are not disclosed or evaluated in
competitively bid out transmission projects. It is submitted that the CERC has in the
same breath held that uncontrollable events in the form of Changes in Law have
impacted the Project, but that the Appellant deserves no compensation for the same.
It is settled law that the purpose of including a Change in Law clause in long term
infrastructure contracts is to protect the parties from unforeseeable legal
developments that commercially impact the cost of the project. The Appellant has no
other means of recovering the IDC and Carrying Costs it was constrained to incur for
no fault of its own and is suffering grave prejudice as a consequence of the Impugned
Order.
59. Article 12.1.1 of the TSA, which is the Change in Law clause is unqualified and
does not build in any exclusions with respect to IDC, IEDC or any other related
expenditures which are incurred by a TSP due to Change in Law events. It is
undisputed that the Change in Law events approved by the CERC in the Impugned
Order took place during the construction period of the Project, i.e., before all the
elements of the project declared commercial operation. Hence, the Appellant is
squarely covered by Article 12.2.1 of the TSA which provides for a formula in
accordance with which the Non-Escalable Transmission Charges of the Appellant is to
be increased.
60. A perusal of the above clauses clearly shows that there are no exceptions to the
grant of Change in Law relief once it has been determined that a Change in Law event
has affected the Project and resulted in additional non-recurring expenditure in the
form of IDC. The CERC has denied relief to the Appellant on an erroneous basis that
change in law relief can be claimed for only the direct consequences of Change in Law
events and the fact that IDC is not evaluated at the time of bidding. Pertinently, none
of these factors find mention in Article 12 of the TSA and run contrary to the very
purpose of the Change in Law clause, which is to put the affected party in the same
economic position as if such event had not occurred. Thus, it is submitted that the
CERC erred in mis-interpreting Article 12 of the TSA to deny the Appellant Change in
Law relief.
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61. Such a denial of the IDC by the CERC is in contravention of the provisions of
Article 12.1.1 of the TSA in the facts and circumstances of the present case. It is
stated and submitted that by adopting such an erroneous and illegal approach, the
CERC has rendered the Change in Law clause in the TSA completely nugatory and
redundant. Such an interpretation by the CERC is causing the Appellant grave financial
prejudice as it has no other means of recovering the IDC it was constrained to incur for
no fault of its own.
62. The CERC's reasoning in the Impugned Order reads in two exceptions to the
grant of Change in Law relief under Article 12.1.2 of the TSA namely: (a) that IDC is
not a direct consequence of the Change in Law events and therefore must be denied;
and (b) that no relief can be allowed for additional IDC incurred since IDC is not a
component that is disclosed or evaluated at the bidding. Neither of these find any
mention in the text of Article 12 of the TSA. Further, since the spirit of Article 12 of
the TSA is to ensure monetary restitution of a party to the extent of the consequences
of Change in Law events, such exceptions cannot be read into Article 12 of the TSA. It
is submitted that a crucial factor for the Appellant whilst bidding for the Project was
that uncontrollable Change in Law events would be duly accounted for in accordance
with Article 12 of the TSA. By the Impugned Order, it is submitted that the CERC has
illegally altered the meaning of the Change in Law clause of the TSA long after award
of the bid and commissioning of the Project. Such an interpretation of the TSA has a
catastrophic effect on the viability of the Appellant's Project since it modifies a critical
parameter of the entire bid process (the Change in Law clause), which cannot be
countenanced.
63. The import of Article 12 of the TSA is that a party affected by Change in Law
must be put in the same economic position as if such Change in Law has not occurred,
i.e., the party (being the Appellant herein) must be given the benefit of restitution as
understood in civil law. In the present case, the CERC has itself accepted that Change
in Law has adversely affected the Appellant's Project but illegally refused to give due
regard to the restitutionary mechanism envisaged under Article 12 of the TSA.
64. The erroneous denial of Change in Law relief to the Appellant has resulted in a
very real risk of the Appellant's Project becoming unviable. The Appellant's Project was
envisaged as part of comprehensive transmission system evolved for evacuation from
Independent Power Producer (“IPP”) generation projects in the States of Odisha,
Chhattisgarh, Madhya Pradesh, Jharkhand and West Bengal and as an alternative for
delivering power to Gujarat and Maharashtra.
65. The Impugned Order puts the Appellant's Project at a risk of becoming unviable
while also being a threat to the grid's stability. BJ and DV Lines traverse through
forest, thereby making the cost of maintenance high on account of vegetation
management. If the trees are not deforested and the corresponding forest clearances
not maintained, transmission lines are likely to trip, which will cause loss of availability
and revenue as well as negatively affect the grid's stability. Similarly, there are
challenging Right of Way issues (in operation phase) and if payments in this regard
are not made regularly (as Operation & Maintenance expenses), transmission lines are
more likely to trip.
66. The CERC erred in passing the Impugned Order without fairly considering its
own Orders in cases of Jabalpur Transmission Company Limited (“JTCL”) and East
North Interconnection Company Limited (“ENICL”). It is stated and submitted that
Change in Law relief has previously been granted by the CERC in analogous factual
circumstances and for the very same Change in Law event, i.e., delay in grant of
Forest Clearance on account of the Ministry of Environment and Forests, Government
of India (“MoEF”) Notification F. No. 11-423/201 1-FC dated 13.02.2012 (“MoEF
Notification”). For instance, Change in Law relief was granted to JTCL by the CERC in
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terms of its Order dated 16.10.2015 in Petition No. 73/MP/2014 read with its Order
dated 08.05.2017 in Petition No. 310/MP/2015. Vide the said Orders, the CERC
allowed JTCL's claims regarding additional expenditure towards IDC on loans taken
during the extended construction period, which is precisely the same relief that was
sought by the Appellant in Petition No. 297/MP/2018. Despite its own orders allowing
the very same Change in Law relief in the past, the CERC inexplicably denied the same
to the Appellant vide the Impugned Order.
67. Similarly, in its Order dated 13.09.2017 in Petition No. 174/MP/2016, the CERC
held that the delay in getting forest clearance was beyond the control of the Petitioner
therein, ENICL, and that ENICL should be allowed IDC for the extended period in order
to put ENICL in the same economic position as if the Change in Law had not occurred.
68. Despite the CERC's attention being specifically invited to its JTCL and ENICL
Orders, the CERC deviated from its own precedents and disallowed the Change in Law
relief sought by the Appellant. Such inconsistency in dispensation of justice is bad in
law, shows clear non-application of mind and is violative of the parity in treatment
guaranteed by Article 14 of the Constitution of India.
69. Article 12 of the TSA covers any and all additional expenditure incurred by an
affected party as a result of a Change in Law. There are no exceptions or qualifications
attached with the nature of expenditure or the purpose of such expenditure. It is
submitted that the Appellant had no option but to incur additional IDC for the periods
when the Project commissioning was delayed. Such additional IDC is an additional
‘expenditure’ as it is an outflow form the Appellant to its lenders. Such IDC has been
certified by the Appellant's Chartered Accountant, which has not been disputed by any
of the respondents or the CERC in any manner. This is a direct consequence of the
Change in Law events unequivocally approved by the CERC itself.
70. In a tariff-based competitive bidding (“TBCB”) project such as the Appellant's
Project, the only relief that a TBCB licensee is entitled to claim for delays because of
Change in Law events is the monetary compensation in the form of IDC and IEDC. It is
submitted that when the commissioning of a transmission project such as that of the
Appellant is uncontrollably delayed, it has no revenue stream for the period of such
delay. Thus, during the period of delay, the Appellant had no option but to incur
additional expenditure by paying additional interest. This additional interest is an
inevitable consequence of the delay caused by the Change in Law events. By denying
the only appropriate relief available to the Appellant in the present case, the CERC has
rendered Article 12 of the TSA completely meaningless vide its Impugned Order. As a
result, the Project is now at a risk of becoming economically unviable.
71. The CERC's own tariff regulations that govern transmission projects whose tariff
is determined under Section 62 of the Act expressly recognise that the appropriate
relief for Change in Law events is in the form of IDC and IEDC. In this regard, the
definition of “Change in Law’, “Uncontrollable Factors” under Regulations 3(9), 11 and
12 of the Central Electricity Regulatory Commission (Terms and Conditions of Tariff)
Regulations, 2014 (“2014 Tariff Regulations”) may be referred to. have been
reproduced below for convenient perusal.
72. The CERC failed to appreciate that it is a long standing settled industry practice
that recovery of additional IDC is the appropriate relief for Change in Law. The TSA
must be interpreted by applying the principle of ‘business efficacy’ to give effect to the
intention of the parties when the TSA was executed. The TSA is a pre-executed
standard form document on the basis of which the Appellant placed its bid for the
Project. A key clause therein was the Change in Law clause which assures investors of
protection for additional expenditure caused due to Change in Law events. It is
submitted that the CERC ought not to be permitted to make fundamental alterations
to settled principles on the basis of which the bid was made. Accordingly, the
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Impugned Order deserves to be set aside, and the relief as claimed by the Appellant
should be allowed.
73. We have heard learned Counsel appearing for the Appellant and the
learned Counsel appearing for the Respondents at considerable length of time
and we have gone through carefully their written submissions/arguments and
also taken note of the relevant material available on record during the
proceedings. The following issues emerge out of the Appeal for our
consideration:
Issue No. 1: Whether in the facts and circumstances of the case, the
Central Commission is justified in passing the Impugned Order, denying the
claims of the Appellant for IDC and corresponding Carrying Costs on
account of admitted Change in Law events from Scheduled Commercial
Operation Date to Actual COD?
Issue No. 2: Whether the Appellant is entitled for grant of an increase of
2.9872% in the non-escalable Transmission Charges as compensation for
the Change in Law as per the provisions of the TSA?
Our Findings and Analysis:
Issue No. 1:
74. The Appellant filed Petition No. 216/MP/2016 before the CERC on 15.10.2016
seeking declaratory and compensatory reliefs on account of various Force Majeure and
Change in Law events which adversely impacted the Project. In the said Petition, the
Appellant stated that as a result of various unforeseen and uncontrollable events that
took place subsequent to the award of the Project, the Appellant was prevented from
completing the Project on time.
75. The various events inter alia, which adversely affected and delayed the
commissioning of the Project as also elaborated in the aforesaid Petition and now in
the Appeal are set out below:
Force Majeure and Change in Law events:
(a) Delay in grant of Forest clearance;
i. Changes in the Ministry of Environment and Forests' Guidelines No. F. No.
11-423/2011-FC dated 13.2.2012 for Diversion of Forest Land for non-
forest purposes under the Forest Conservation Act, 1980 read with the
Forest Conservation Rules, 2003;
ii. Change in the applicable Format vide MoEF Letter No. F. No. 11-68/2014-
FC (pt.) dated 11.7.2014 for obtaining clearances under the Scheduled
Tribes and Other Traditional Forest Dwellers (Recognition of Forests Rights)
Act, 2006.
76. The Central Commission vide its Order dated 25.06.2018 in Petition No.
216/MP/2016, acknowledged that the Appellant's Project was indeed impacted by the
Force Majeure events and inter alia extended the SCOD of all the aforesaid elements to
their Actual Date of Commercial Operation (“ACOD”). Further, the Central Commission
inter alia granted the following liberty to the Appellant
(emphasis supplied):
“38. In our view, the letter dated 13.2.2012 issued by MoEF disentitling the
persons to utilize degraded forest land on the basis of certificate from the Chief
Secretary regarding non-availability of non-forest land for the purpose of
compensatory afforestation where the forest cover in the State is less than 50% is
covered under “a change in the terms and conditions prescribed for obtaining any
Consents, Clearances and Permits or the inclusion of any new terms or conditions
for obtaining such consents, clearances and Permits” and is therefore covered under
Change in Law. However, from the documents placed on record, it cannot be
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conclusively proved that the Petitioner's case falls under the change in law. In
particular the following need clarification and supporting documents:
(a) Whether the Petitioner had applied for certificate from the Chief (Secretary)
and the outcome thereof;
(b) The efforts made by the Petitioner to acquire the non-forest land for
compulsory afforestation;
(c) Whether the guidelines dated 13.2.2012 of MoEF were issued during the
pendency of its application before the Chief (Secretary);
(d) Whether the Petitioner acquired the degraded forest land after the issue of
MoEF letter dated 11.7.2014;
(e) Whether the forest clearance was granted after the petitioner made available
the degraded forest land in accordance with the MoEF letter dated 11.7.2014.
Therefore, the claims of the Petitioner needs to be examined in the light of the
explanation/documents as noted above. We therefore, grant liberty to the Petitioner
to approach the Commission with all the relevant documents for consideration in
this regard.”
77. Pursuant to the allowance of Change in Law events and the aforesaid liberty
granted by the Central Commission vide order dated 25.06.2018 in Petition No.
216/MP/2016, the Appellant filed a consequential petition before the Central
Commission being Petition No. 297/MP/2018 providing all the documents required to
establish the merit and bona fides of its Change in Law claim. In the said petition, the
Central Commission vide its order dated 24.04.2019 (Impugned order) has held that
the Appellant complied with all necessary pre-requisites for claiming Change in Law
relief under the TSA and that the Change in Law events actually adversely affected the
Appellant's Project. However, the Central Commission has denied Change in Law relief
to the Appellant.
78. The Appellant has filed the instant Appeal before this Tribunal seeking setting
aside of the Impugned Order to the extent it denies Change in Law relief to the
Appellant by way of IDC and corresponding Carrying Costs on the following grounds:
(a) The Impugned order contradicts itself by denying Change in Law relief while
accepting that Change in Law has in fact adversely affected the Appellant's
Project;
(b) The Central Commission ignored its own earlier Orders; &
(c) Grant of IDC is the appropriate relief in the instant case
79. It is settled law that a Change in Law clause (such as Article 12 of the TSA) has
an in-built restitutionary mechanism which is meant to compensate a party affected
by such a Change in Law and restore the affected party to the same position as if such
Change in Law has not occurred. The import of Article 12 of the TSA is that a party
affected by Change in Law must be put in the same economic position as if such
Change in Law has not occurred, i.e., the party (being the Appellant herein) must be
given the benefit of restitution as understood in civil law. In the present case, the
Central Commission has itself accepted that Change in Law has adversely affected the
Appellant's Project but erroneously refused to give due regard to the restitutionary
mechanism envisaged under Article 12 of the TSA as under:
ARTICLE: 12
12 CHANGE IN LAW
12.1 Change in Law
12.1.1 Change in Law means the occurrence of any of the following after the
date, which is seven (7) days prior to the Bid Deadlineresulting into any additional
recurring/non-recurring expenditure by the TSP or any income to the TSP:
• the enactment, coming into effect, adoption, promulgation, amendment,
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modification or repeal (without re-enactment or consolidation) in India, of any

Law, including rules and regulations framed pursuant to such Law;
• a change in the interpretation or application of any Law by any Indian
Governmental Instrumentality having the legal power to interpret or apply such
Law, or any Competent Court of Law;
• the imposition of a requirement for obtaining any Consents, Clearances and
Permits which was not required earlier;
• a change in the terms and conditions prescribed for obtaining any Consents,
Clearances and Permits or the inclusion of any new terms or conditions for
obtaining such Consents, Clearances and Permits;
• any change in the licensing regulations of the Appropriate Commission,
under which the Transmission License for the Project was granted if made
applicable by such Appropriate Commission to the TSP;
• any change in the Acquisition Price; orany change in tax or introduction of
any tax made applicable for providing Transmission Service by the TSP as per the
terms of this Agreement.
12.1.2 Notwithstanding anything contained in this Agreement, Change in Law
shall not cover any change:
a. on account of regulatory measures by the Appropriate Commission including
calculation of Availability; and
b. in any tax applied on the income or profits of the TSP.
12.2 Relief for Change in Law
12.2.1 During Construction Period:
During the Construction Period, the impact of increase/decrease in the cost of the
Project in the Transmission Charges shall be governed by the formula given below:
For every cumulative increase/decrease of each Rupees Nine Crores (Rs.
9,00,00,000/-) in the cost of the Project up to the Scheduled COD of the Project,
the increase/decrease in non-escalable Transmission Charges shall be an amount
equal to 0.32 percent (0.32%) of the Non-Escalable Transmission Charges.
12.2.2 During the Operation Period:
During the Operation Period, the compensation for any increase/decrease in
revenues shall be determined and effective from such date, as decided by the
Appropriate Commission whose decision shall be final and binding on both the
Parties, subject to rights of appeal provided under applicable Law.
Provided that the above mentioned compensation shall be payable only if the
increase/decrease in revenues or cost to the TSP is in excess of an amount
equivalent to one percent (1%) of Transmission Charges in aggregate for a Contract
Year.
12.2.3 For any claims made under Articles 12.2.1 and 12.2.2 above, the TSP
shall provide to the Long Term Transmission Customers and the Appropriate
Commission documentary proof of such increase/decrease in cost of the
Project/revenue for establishing the impact of such Change in Law.
12.2.4 The decision of the Appropriate Commission, with regards to the
determination of the compensation mentioned above in Articles 12.2.1 and 12.2.2,
and the date from which such compensation shall become effective, shall be final
and binding on both the Parties subject to rights of appeal provided under
applicable Law.”
80. A perusal of the above clauses clearly shows that there are no exceptions to the
grant of Change in Law relief once it has been determined that a Change in Law event
has affected the Project and resulted into additional nonrecurring expenditure in the
form of IDC.
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81. The Central Commission's reasoning in the Impugned Order reads in two
exceptions to the grant of Change in Law relief under Article 12.1.2 of the TSA
namely: (a) that IDC is not a direct consequence of the Change in Law events and
therefore must be denied; and (b) that no relief can be allowed for additional IDC
incurred since IDC is not a component that is disclosed or evaluated at the time of
bidding. CERC has in the same breath held that uncontrollable events in the form of
Changes in Law have impacted the Project, but that the Appellant deserves no
compensation for the same. Neither of these find any mention in the text of Article 12
of the TSA.
82. Since the spirit of Article 12 of the TSA is to ensure monetary restitution of a
party to the extent of the consequences of Change in Law events, such exceptions
cannot be read into Article 12 of the TSA. The Appellant has submitted that a crucial
factor for the Appellant whilst bidding for the Project was that uncontrollable Change
in Law events would be duly accounted for in accordance with Article 12 of the TSA. By
the Impugned Order, the Central Commission has wrongly altered the meaning of the
Change in Law clause of the TSA long after award of the bid and commissioning of the
Project.
83. Further, the Central Commission has erred in passing the Impugned Order
without fairly considering its own Orders in cases of Jabalpur Transmission Company
Limited (“JTCL”) and East North Interconnection Company Limited (“ENICL”). It is
observed that Change in Law relief has previously been granted by the Central
Commission is analogous factual circumstances and for the very same Change in Law
event, i.e., delay in grant of Forest Clearance on account of the Ministry of
Environment and Forests, Government of India (“MoEF”) Notification F. No. 11-
423/2011-FC dated 13.02.2012 (“MoEF Notification”). Change in Law relief was
granted to JTCL by the Central Commission in terms of its Order dated 16.10.2015 in
Petition No. 73/MP/2014 read with its Order dated 08.05.2017 in Petition No.
310/MP/2015. Vide the said Orders, the Central Commission allowed JTCL's claims
regarding additional expenditure towards IDC on loans taken during the extended
construction period, which is precisely the same relief that was sought by the
Appellant in Petition No. 297/MP/2018. Despite its own orders allowing the very same
Change in Law relief in the past, the Central Commission inexplicably denied the same
to the Appellant vide the Impugned Order. Similarly, in its Order dated 13.09.2017 in
Petition No. 174/MP/2016, the Central Commission held that the delay in getting
forest clearance was beyond the control of the Petitioner therein, ENICL, and that
ENICL should be allowed IDC for the extended period in order to put the ENICL in
same economic position as if the Change in Law had not occurred as per the provisions
of the TSA.
84. Despite the Central Commission's attention being specifically invited to its JTCL
and ENICL Orders, the Central Commission deviated from its own precedents and
disallowed the Change in Law relief sought by the Appellant. The Central Commission
having quoted the aforesaid applicable precedents went to incorrectly rely on its
Orders dated 29.03.2019 in Petition No. 238/MP/2017 and Petition No. 195/MP/2017,
respectively. These decisions are irrelevant to and distinguishable from the present
dispute. In its Order dated 29.03.2019 in Petition No. 238/MP/2017, the Central
Commission had specifically held as follows:
“However, we would like to make it clear that the extension of COD of the instant
assets would not entail any financial benefit in the form of IDC and IEDC to the
Petitioner.”
85. This is in sharp contrast with the Central Commission's Order dated 25.06.2018
in Petition No. 216/MP/2016 (concerning the present dispute), which did not impose
any caveat or qualification that the extension of SCOD to ACOD will not entail financial
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benefit in the form of IDC for the Appellant. On the contrary, in the said Order dated
25.06.2018 in Petition No. 216/MP/2016, the Central Commission requisitioned
information on the various aspects of the Appellant's present Change in Law claims
and granted liberty to the Appellant to approach the Commission with all relevant
documents for consideration in this regard. Further, in Petition No. 297/MP/2018, the
Central Commission examined all the documents placed on record and held that
Change in Law events impacted the project, however, denied any monetary relief for
the said events. This brings the inexplicable contradiction in the Central Commission's
approach.
86. Such a denial of the IDC by the Central Commission is in contravention of the
provisions of Article 12.1.1 of the TSA in the facts and circumstances of the present
case. By adopting such an erroneous approach, the Central Commission has rendered
the Change in Law clause in the TSA completely nugatory and redundant. Such an
interpretation by the Central Commission is causing the Appellant grave financial
prejudice as it has no other means of recovering the IDC which it was constrained to
incur for no fault of its own.
87. The Appellant has submitted that it had no option but to incur additional IDC
for the periods when the Project commissioning was delayed. Such additional IDC is
an additional ‘expenditure’ as it is an outflow from the Appellant to its lenders. Such
IDC has been certified by the Appellant's Chartered Accountant, which has not been
disputed by any of the respondents or the Central Commission in any manner. This is
a direct consequence of the Change in Law events unequivocally approved by the
Central Commission itself.
88. The Central Commission's own tariff regulations that govern transmission
projects whose tariff is determined under Section 62 of the Electricity Act, 2003
expressly recognise that the appropriate relief for Change in Law events is in the form
of IDC and IEDC. In this regard, the definition of “Change in Law”, “Uncontrollable
Factors” under Regulations 3(9), 12 and Regulation 11 of the Central Electricity
Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2014 (“2014
Tariff Regulations”) are reproduced below:
“3. Definitions and Interpretations.- In these regulations, unless the context
otherwise requires—
“(9) “Change In Law” means occurrence of any of the following events:
(a) enactment, bringing into effect or promulgation of any new Indian law; or
(b) adoption, amendment, modification, repeal or re-enactment of any
existing Indian law; or
(c) change in interpretation or application of any Indian law by a competent
court, Tribunal or Indian Governmental Instrumentality which is the final
authority under law for such interpretation or application; or
(d) change by any competent statutory authority in any condition or covenant
of any consent or clearances or approval or licence available or obtained for
the project; or
(e) coming into force or change in any bilateral or multilateral
agreement/treaty between the Government of India and any other
Sovereign Government having implication for the generating station or the
transmission system regulated under these Regulations.”
“11. Interest during construction (IDC), Incidental Expenditure during
Construction (IEDC)
(A) Interest during Construction (IDC):
(1) Interest during construction shall be computed corresponding to the loan
from the date of infusion of debt fund, and after taking into account the
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prudent phasing of funds upto SCOD.

(2) In case of additional costs on account of IDC due to delay in achieving the
SCOD, the generating company or the transmission licensee as the case
may be, shall be required to furnish detailed justifications with supporting
documents for such delay including prudent phasing of funds:
Provided that if the delay is not attributable to the generating company or
the transmission licensee as the case may be, and is due to uncontrollable
factors as specified in Regulation 12 of these regulations, IDC may be allowed
after due prudence check:
Provided further that only IDC on actual loan may be allowed beyond the
SCOD to the extent, the delay is found beyond the control of generating
company or the transmission licensee, as the case may be, after due prudence
and taking into account prudent phasing of funds.
(B) Incidental Expenditure during Construction (IEDC):
(1) Incidental expenditure during construction shall be computed from the
zero date and after taking into account pre-operative expenses upto SCOD:
Provided that any revenue earned during construction period up to SCOD
on account of interest on deposits or advances, or any other receipts may
be taken into account for reduction in incidental expenditure during
construction.
(2) In case of additional costs on account of IEDC due to delay in achieving
the SCOD, the generating company or the transmission licensee as the case
may be, shall be required to furnish detailed justification with supporting
documents for such delay including the details of incidental expenditure
during the period of delay and liquidated damages recovered or recoverable
corresponding to the delay:
Provided that if the delay is not attributable to the generating company
or the transmission licensee, as the case may be, and is due to
uncontrollable factors as specified in regulation 12, IEDC may be allowed
after due prudence check:
Provided further that where the delay is attributable to an agency or
contractor or supplier engaged by the generating company or the
transmission licensee, the liquidated damages recovered from such agency
or contractor or supplier shall be taken into account for computation of
capital cost.
(3) In case the time over-run beyond SCOD is not admissible after due
prudence, the increase of capital cost on account of cost variation
corresponding to the period of time over run may be excluded from
capitalization irrespective of price variation provisions in the contracts with
supplier or contractor of the generating company or the transmission
licensee.”
“12. Controllable and Uncontrollable factors: The following shall be considered as
controllable and uncontrollable factors leading to cost escalation impacting Contract
Prices, IDC and IEDC of the project:
…
(2) The “uncontrollable factors” shall include but shall not be limited to the
following:
i. Force Majeure events.; and
ii. Change in law.
…”
89. A perusal of the above regulations under the 2014 Tariff Regulations clearly
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shows that even under the cost-plus regime, it is IDC which is the principle relief that
is granted for the purpose of compensating a party that has been impacted by Change
in Law.
90. Further, the Hon'ble Supreme Court in the Energy Watchdog Judgement dated
11.04.2017 held that while determining the consequences of change in law, parties
shall have due regard to the principle that the purpose of compensating the party
affected by, such change in law is to restore, through the monthly tariff payments, the
affected party to the economic position if such change in law has not occurred.
91. We are of the view that the Central Commission erred in denying Change in Law
relief to the Appellant for IDC and corresponding Carrying Costs on account of
admitted Change in Law events after having arrived at unequivocal findings of fact and
law that Change in Law events adversely affected the Appellant's Project in accordance
with the TSA. Therefore, the impugned order passed by the Central Commission is
liable to be set aside as the same is in contravention of settled law laid down by the
Hon'ble Supreme Court (Supra) and also the previous orders passed by the Central
Commission in Petition Nos. 73/MP/2014 read with 310/MP/2015 and 174/MP/2016
wherein the same issue has been dealt by the Commission differently. In view of these
facts, the Appellant is entitled for the change in law relief as prayed for in the instant
Appeal. The issue is thus, decided in favour of the Appellant.
Issue No. 2:
92. The Change in Law relief as prescribed under Article 12.2.1 of the TSA is as
follows:
12.2 Relief for Change in Law
12.2.1 During Construction Period:
During the Construction Period, the impact of increase/decrease in the cost of the
Project in the Transmission Charges shall be governed by the formula given below:
For every cumulative increase/decrease of each Rupees Nine Crores (Rs.
9,00,00,000/-) in the cost of the Project up to the Scheduled COD of the Project,
the increase/decrease in non-escalable Transmission Charges shall be an amount
equal to 0.32 percent (0.32%) of the Non-Escalable Transmission Charges.
12.2.2 During the Operation Period:
During the Operation Period, the compensation for any increase/decrease in
revenues shall be determined and effective from such date, as decided by the
Appropriate Commission whose decision shall be final and binding on both the
Parties, subject to rights of appeal provided under applicable Law.
Provided that the above mentioned compensation shall be payable only if the
increase/decrease in revenues or cost to the TSP is in excess of an amount
equivalent to one percent (1%) of Transmission Charges in aggregate for a Contract
Year.
12.2.3 For any claims made under Articles 12.2.1 and 12.2.2 above, the TSP
shall provide to the Long Term Transmission Customers and the Appropriate
Commission documentary proof of such increase/decrease in cost of the
Project/revenue for establishing the impact of such Change in Law.
12.2.4 The decision of the Appropriate Commission, with regards to the
determination of the compensation mentioned above in Articles 12.2.1 and 12.2.2,
and the date from which such compensation shall become effective, shall be final
and binding on both the Parties subject to rights of appeal provided under
applicable Law.”
93. Since the Change in Law events approved by the Central Commission in the
Impugned Order took place during the construction period of the Project i.e. before all
the elements of the project were declared under commercial operation. Hence, the
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Appellant is squarely covered by Article 12.2.1 of the TSA which provides for a formula
in accordance with which the Non-Escalable Transmission Charges of the Appellant is
to be increased.
94. The Appellant has submitted the total IDC incurred on original project cost. The
Appellant has also placed on record copy of Certificate dated 04.08.2016 issued by the
Appellant's Chartered Accountant certifying that the increase in IDC incurred by the
Appellant was Rs. 84.01 Crores, as submitted to the Commission. Therefore, we are of
the opinion that in terms of Articles 12.2.1 and 12.2.3 of the TSA, the Appellant is
entitled to claim the relief regarding the Change in law (during the construction
period) as allowed in this order as per the provisions laid down under the TSA. The
issue is decided in the favour of the Appellant.
ORDER
95. For foregoing reasons as stated supra, we are of the considered view that the
issues raised in the instant Appeal No. 208 of 2019 have merits and hence, the Appeal
is allowed.
96. The Impugned Order dated 24.04.2019 passed by the Central Commission is
hereby set aside to the extent challenged in the Appeal and our findings given above.
97. There shall be no order as to costs.
———
† New Delhi Bench

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