Press Release Of Govt Not 'Law' As Per Power Purchase Agreement : Supreme Court

The Supreme Court recently held that a press release issued by the Government of India about certain changes in the mega power policy did not constitute 'law' and 'change in law' in terms of a Power Purchase Agreement."The press release of 01.10.2009 certainly does not fulfil the meaning of the word “order” as understood in legal parlance," the Court observed."In our considered opinion, the 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...The 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," the bench comprising Justices BR Gavai, PK Mishra and KV Viswanathan held.The said case deals with the interpretation of the "change in law" clause i.e Article 13.1 as read with the definition of 'law' under the Power Purchase Agreement ('PPA') entered into between the Appellant, Nabha Power Limited ('NPL') and the Respondent, Punjab State Power Corporation Limited ('PSPCL') as well as the Bidding Documents including the Request for Proposal ('RfP'). FACTS OF THE CASENPL (a wholly owned subsidiary of L&T) and PSPCL entered into a PPA for purchase of power from the Rajpura Generating Station (2 X 700 MW) based in Punjab, pursuant to a tariff based competitive bidding initiated by PSPCL (then Punjab State Electricity Board) under Section 63 of the Electricity Act, 2003. The bid deadline was 09.10.2009. The PPA included a clause that allowed for adjustments to the tariff in the event of a "change in law". The definition of "law" in the PPA included any statutes, ordinance, regulations, notifications, or code, rule or any interpretations of any of them by an Indian governmental instrumentalities and having the force of law. The dispute arose with respect to a Press Release issued by the Press Information Bureau of the Government of India on 01.10.2009. The press release announced modifications to the existing Mega Power Policy, including the removal of the requirement for Inter-State sale of power to qualify for Mega Power status. The issue was in essence with respect to the admissibility of the Mega Power Status with duty exemption under the Customs Act, 1962 to the Power Project as on the cut-off date related to bid submission.NPL argued that the Press Release constituted a "change in law" and that it had factored in the benefits of the modified Mega Power Policy when it submitted its bid for the project on 09.10.2009.PSPCL, on the other hand, argued that the press release was merely an announcement of a proposal and that the actual "change in law" occurred later, on 11.12.2009 and 14.12.2009, when the Government issued a notification amending the Customs Act, 1962 and a revised Mega Power Policy document. PSPCL also argued that the Cabinet decision is not a law in regard to exemption for Mega Power Status. The Custom Notification under Section 25 of the Customs Act, 1962 was issued only on 11.12.2009 i.e., much after the Cut-Off Date of 02.09.2010, is law. DECISION OF THE SUPREME COURTThe Supreme Court held that the Press Release dated 01.10.2009 did not constitute a "change in law" within the meaning of the PPA and concluded as under:The Press Release was merely an announcement of a proposal and did not have the force of law. It did not enact, amend, or repeal any existing law to constitute a change of law in terms of the PPA. The press release was a summary of the cabinet decision and was a proposal that was envisaged and what was to come into force in future.The Press Release was subject to several conditions, including undertakings from the power purchasing states to carry out distribution reforms. These conditions were not fulfilled until later.The actual "change in law" occurred on 11.12.2009 and 14.12.2009, when the government issued a notification amending the Customs Act, 1962 and a revised Mega Power Policy document. These documents formally implemented the modifications to the Mega Power Policy announced in the Press Release.It is well settled that if a certain thing has to be done in a certain manner, it shall be done in that manner or not at all. Accordingly, 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.The definition of law is very clear under the PPA. The business efficacy test would arise only if the terms of the contract are not explicit and clear. Therefore, the words 'shall include all rules, regulations ,decisions and orders of the appropriate Commission' in the definition of law only refers to the rules, regulations, decisions and orders of the Appropriate CommissionThe Supreme...

Press Release Of Govt Not 'Law' As Per Power Purchase Agreement : Supreme Court

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Press Release Of Govt Not 'Law' As Per Power Purchase Agreement : Supreme Court

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