Electricity Act, 2003 – s. 63 – Customs Act – s. 25 – Mega Power Policy of 2006 – Press release 01.10.2009 – Effect – Change in law, when – Notification dated 01.03.2002 whereby goods imported for setting up a Mega Power Project granted certain exemptions from customs duty – Issuance of Request For Proposal (RFP) by appellant no. 1 for selection of developers through tariff-based bidding process for procurement of power from the power station to be set up – Second appellant emerged as successful bidder – Meanwhile issuance of Press Release of 1.10.2009 under the heading “Modification of Mega Power Policy” – Thereafter, on 11.12.2009, an amendment to Notification dated 01.03.2002 issued – Entry 400 from the notification of 2002 was substituted wherein there was no reference to the thermal plant being an inter-State thermal plant – Thereafter, on 14.12.2009, issuance of office memorandum under the subject “revised Mega Power Policy”– Power purchase agreement between the appellants and the respondent – Series of correspondences ensued regarding the issuance of Essentiality Certificate to allow customs duty exemptions based on the amended entry in the notification dated 11.12.2009 – Disputes between the parties regarding the passing on the benefits – Appellant’s case, that with the press release on 01.10.2009, a new legal regime commences and on that basis, the appellant in its bid of 09.10.2009 factored the altered position including the fiscal benefits due to customs duty exemptions – Respondent’s case that the press release of 01.10.2009 only sets out the proposal for modification and the real modification happened on 11.12.2009 and 14.12.2009; and since the change of law having happened on 11.12.2009/14.12.2009 the benefits that have accrued to the appellant ought to be passed on:
Held: 01.10.2009 Press Release not law under Clause 1.1 of the PPA – Press release did not alter/amend/repeal the existing law as on 01.10.2009 – It was at best the announcement of a proposal approved by the Cabinet which had to be given shape after fulfilment of the conditions mentioned therein – Notifications constituting change in law happened on 11.12.2009 and 14.12.2009 and thus no basis in the contention that on 01.10.2009 the old legal regime had given way – Press release of 01.10.2009 certainly does not fulfil the meaning of the word “order” as understood in legal parlance – Press Release with all its future eventualities and conditionalities is only a proposal and it is only after the undertakings were agreed to be given by the State Government that a final shape was given in the form of a customs notification on 11.12.2009 and by the policy document of 14.12.2009 – Press release announcing the cabinet approval of certain modifications envisaged in the existing Mega Power Policy is not law as defined in Clause 1.1 – Change in law occurred only on 11.12.2009/14.12.2009, and the respondent no. 1 rightly held entitled to the benefits, which ultimately would go to the consumers – Words of clause 13.1.1 read with the definition of law in Clause 1.1 are plain and clear – For a change in law to occur, the certain events ought to have happened seven days prior to the bid deadline – Law, as it stood prior to the press release of 01.10.2009 insofar as the financial implications for the matter is concerned, was the notification issued on 01.03.2002 and entry 400 thereof – That notification, subject to the conditions mentioned thereon in entry 400 granted exemption from customs duty for import of goods required for setting up of any Mega Power project if such Mega Power project was an inter-State power plant and if it fulfilled the other conditions mentioned in the notification – For an exemption under the Customs Act to operate thereon there has to be a notification issued in the manner provided by the Customs Act and duly published in the official gazette – There was no duly constituted amendment notifications as on 01.10.2009 – Thus, interference with the concurrent judgments of courts below not called for. [Paras 43, 45, 50, 51, 55, 64, 71] Electricity laws – Mega Power Policy – Press release of 01.10.2009, under the heading “Modification of Mega Power Policy”, if ordained a new legal regime:
Held: Press release is a summary of the Cabinet decision – Press release makes it clear that it was a proposal that was envisaged and which was to come into force in future – Certainty is the hallmark of law, one of the essential attributes and an integral component of the rule of law – What was certain on 01.10.2009 was only the prevalent customs notification of 01.03.2002, duly notified and gazetted as well as the Mega Power Policy document promulgated on 07.08.2006 – Press release summarizing the Cabinet decision and beset with several conditions created no vested rights on any party to the power purchase agreement vis-a-vis the other party on 01.10.2009 – In fact, the press release itself contemplated certain contingencies – Right vests when all the facts have occurred which must by law occur in order for the person in question to have the right – It is only when the right vests will there be a co-relative duty on the other as far as nature of the right involved – Clauses in the Request For Proposal obligate the bidder to satisfy itself about the extant legal regime and those clauses cannot operate as a crutch to elevate the press release of 01.10.2009 to the status of law u/Clause 1.1. [Paras 57-59, 63-65]
Interpretation – Interpretation of contract – Golden rule of interpretation – Business efficacy test – Invocation of: Held: Words of a contract should be construed in their grammatical and ordinary sense, except to the extent that some modification is necessary in order to avoid absurdity, inconsistency or repugnancy – Similarly, any invocation of the business efficacy test would arise only if the terms of the contract are not explicit and clear – Business efficacy test cannot contradict any express term of the contract and is invoked only if by a plain and literal interpretation of the term in the agreement or the contract, it is not possible to achieve the result or the consequence intended by the parties acting as prudent businessmen. [Para 41]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Nidhi Jain. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
This page is for informational and research purposes only and does not constitute legal advice. Consult a qualified advocate for advice specific to your situation.