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Analyzing, Whether ‘Notification/Circular Issued By Government Instrumentality Have ‘Force Of Law’ And Amounts To ‘Change In Law’ Even Without Being Published In The Official Gazette’ – Contracts and Commercial Law


Introduction

With respect to any commercial contract entered between the
parties, a clause titled ‘Change in Law’ has become
prevalent to specify the rights and obligations of the parties in
case any of the events specified as ‘Change in Law’ event,
gets attracted.

The idea behind stipulating the ‘Change in Law’ events
is to maintain the commercial viability of the project and not to
overburden the parties with such costs and expenditures, which
generally remains unforeseeable while submitting the bid or during
the execution of such a commercial contract.

Therefore, any standard commercial contract, and particularly,
the contracts like Public Private Partnership, always stipulate a
‘Change in Law’ clause as an in-built restitutionary
principle to compensate the party affected by any ‘Change in
Law’ event, thereby restoring the party to the same economic
position as if such ‘Change in Law’ has not
occurred1.

However, in actual execution, any claim under the ‘Change in
Law’ clause meets with varied opposing grounds, including but
not limited to, (a) the event alleged as ‘Change in Law’
dates prior to the execution of the contract, (b) the event not
qualifying within the ambit of ‘law’ to be considered as
‘Change in Law’, (c) the authority of entity under the law
to introduce a ‘Change in Law’ event, etc.

With this backdrop, this article discusses the recent judgment
of the Appellate Tribunal for Electricity
(“APTEL” or
tribunal“) to understand whether:

  1. A notification/circular issued by a government instrumentality
    holds ‘Force of Law’ to be declared as a ‘Change in
    Law’ event?

  2. A notification/circular would hold any ground as a ‘Change
    in Law’ event if not published in the Official Gazette?

APTEL’s decision on the ‘Change in Law’ event in
Adani Power Maharashtra Limited vs. Maharashtra Electricity
Regulatory Commission and another

Recently, the tribunal while hearing the case in Adani
Power Maharashtra Limited vs. Maharashtra Electricity Regulatory
Commission and another2
was faced with a
question of law for consideration, as to:

Whether a circular imposing a certain charge, issued by Coal
India Limited constitutes a ‘Change in Law’ event to give
rise to a valid claim of compensation in favour of the generator of
electricity, i.e., Adani Power Maharashtra Limited

(“Adani Power“) under the relevant
clauses of Power Purchase Agreement?

The APTEL while reaching its conclusion vide its judgment on
22.03.2022, first discussed the authority in ‘law’ which
any Government Instrumentality possesses, to determine its
decisions as having the ‘Force of Law’. In this regard, the
tribunal observed that Coal India Limited manages the coal mines in
India in terms of the Coal Mines (Nationalization) Act, 1973 and
has the statutory power to determine the
price of coal3.

APTEL further noted that Coal India Limited is a Government
Instrumentality and the notifications, circulars, etc. issued by it
would have a ‘Force of Law’ under Article 77(3) of the
Constitution of India. In that regard, the APTEL referred to its
decision in GMR Kamalanga Energy Limited and another vs.
Central Electricity Regulatory Commission and
others4
. The relevant extract from the same is
as follows5:

After referring to Articles 298 and 77 of the Constitution,
this Tribunal rightly opined that Articles 298 and 77 of the
Constitution are complementary to each other as far as the scheme
of carrying out the business/commercial activity by Government of
India/State Government is concerned. The
Corporations/companies which carry out business falling under
various Ministries and Department of both Government of India and
State Government are the creations of Government of India or
creations of Parliament and State Assembly by making enactments.
Their formations have a force of law.
The PPA in this case
also defines the Indian Government Instrumentalities which includes
all departments, corporations/companies like Coal India Limited or
Indian Railways formed under different Statutes.

Pursuant to deliberations, the tribunal rejected the argument
that to be covered as a ‘Change in Law’ event under the
contractual clauses which stipulate a ‘Change in Law’
event, the instrument whereby the law is claimed to have changed
must have been published in the official gazette to have the
‘Force of Law’.

The tribunal held that the publication of notification or
circular in the official gazette cannot be a pre-requisite for an
instrument to have a ‘Force of Law’. In support of this
finding, APTEL referred to the precedents of the Hon’ble
Supreme Court wherein even a letter6 of the Ministry of
Power in the Government of India and also the executive
instructions7 without any statutory backing were
accepted as instruments having ‘Force of Law’.

In the given circumstances, APTEL held that the Coal India
Limited circular imposing Evacuation Facility Charges fulfils all
characteristics of ‘law’, thereby having the ‘Force of
Law’ and being accepted as a ‘Change in Law’ event,
giving rise to a legitimate claim for compensation in favour of
Adani Power.

Conclusion and Authors’ Analysis

The findings of APTEL, though appear to have settled the issue
of recognition of an event as a ‘Change in Law’ event,
however, it appears that while holding that the publication of
circular in the official gazette is not a pre-requisite for it to
have ‘Force in Law’, there are certain loopholes left
unaddressed by APTEL. To elaborate, the Hon’ble Supreme Court
in a catena of cases8, and even in cases referred to by
APTEL9, have considered and held that:

Natural justice requires that before a law becomes operative
it must be promulgated or published. It must be broadcast in some
recognisable way so that all men may know what it is; or at the
very least there must be some special rule or regulation or
customary channel by or through which such knowledge can be
acquired with the exercise of due and reasonable diligence. In the
absence therefore of any law, rule, regulation or custom, a law
cannot come into being in this way. Promulgation or
publication of some reasonable sort is
essential10
.

Further, while relying on the very same decision of the
Hon’ble Supreme Court in Harla vs. State of
Rajasthan11 APTEL observed that:

The trappings of law do not come by virtue of publication
which facilitates only dissemination of knowledge of law, statutes,
etc. [Harla vs. The State of Rajasthan (AIR 1951 SC 467)].

Pertinently, it appears that APTEL was persuaded to favourably
consider the argument that publication of an instrument is not
required, for construing a ‘Change in Law’ event, for the
following reasonings:

  1. Any standard ‘Change in Law’ clause always encapsulates
    even such events that are termed as ‘law’ but are never
    published in the official gazette. Since the ‘law’ that is
    published in the official gazette is only those that are passed
    directly by the Central Government or State Governments. However,
    ‘law’ would also encapsulate notifications, circulars, etc.
    issued by any Government Instrumentality, for example, Master
    Circulars issued by the Reserve Bank of India, which are never
    published in the official gazette.

  2. The tribunal in the present case, while holding that the
    publication of notification or circular in an official gazette is
    not a pre-requisite to have ‘Force of Law’ was dealing with
    a circular issued by a Government Instrumentality, and not any
    legislation passed by Central Government or State Governments which
    requires to be published in the official gazette. To support its
    reasoning the tribunal also highlighted the examples of a letter
    issued by a Government Instrumentality12 and executive
    instructions without any statutory backing13 as held by
    the Hon’ble Supreme Court as instruments having ‘Force of
    Law’, even though these instruments are not published in the
    official gazette.

  3. Further, as regards the publication or promulgation of the
    instrument is concerned, the same is a mode of dissemination of
    information so that with the exercise of reasonable diligence,
    common people could acquire the knowledge of the existence of such
    instrument. Nowhere is it necessary to get all such instruments
    published specifically in the official gazette. Every Government
    Instrumentality has some or other mode through which it publishes
    the instrument through which it becomes reachable to the concerned
    affected entities. For example, the majority of Government
    Instrumentalities publish the circulars or notifications issued by
    them on their official website.

Therefore, in the present case as well, when the APTEL refuted
the argument of the requirement of publication of the Coal India
Limited circular on the official gazette, it could have meant that
such an action is not required when the same is already available
online being published by Coal India Limited on its official
website.

However, while declaring that publication of instrument
declaring law is not required to construe a ‘Change in Law’
event, the APTEL has not made any differentiation between a law
declared by Government Instrumentality and a law declared by the
Legislature. Pertinently, the views of APTEL on that count do not
coincide with those of the Hon’ble Supreme Court. It appears
that such difference may invite a challenge to the judgment of
APTEL.

Footnotes

1. Uttar Haryana Bijli Vitran Nigam Limited and another
vs. Adani Power Limited and others – (2019) 5 SCC 325; Jaipur
Vidyut Vitaran Nigam Limited and others vs. Adani Power Rajasthan
Limited and another – 2020 SCC OnLine SC 697.

2. Adani Power Maharashtra Limited vs. Maharashtra
Electricity Regulatory Commission and another, dated 22.03.2022,
Appeal No. 40 of 2022 before APTEL.

3. Ashoka Smokeless Coal India Private Limited and others
vs. Union of India and others, (2007) 2 SCC 640.

4. GMR Kamalanga Energy Limited and another vs. Central
Electricity Regulatory Commission and others, 2018 SCC OnLine APTEL
151.

5. M/s. Adani Power Rajasthan Limited vs. Rajasthan
Electricity Regulatory Commission, 2018 SCC OnLine APTEL
101.

6. Energy Watchdog vs. Central Electricity Regulatory
Commission and others, (2017) 14 SCC 80.

7. Kusum Ingots and Alloys Limited vs. Union of India and
another, (2004) 6 SCC 254.

8. Municipal Corporation of Greater Mumbai vs. Anil
Shantaram Khoje and others, (2016) 15 SCC 726; Union of India vs.
Param Industries Limited, (2016) 16 SCC 692; Union of India vs.
G.S. Chatha Rice Mills and another, (2021) 2 SCC 209.

9. Harla vs. The State of Rajasthan, AIR 1951 SC 467;
Gulf Goans Hotels Company Limited and another vs. Union of India
and others, (2014) 10 SCC 673.

10. Harla vs. The State of Rajasthan, AIR 1951 SC
467.

11. Harla vs. The State of Rajasthan, AIR 1951 SC
467.

12. Energy Watchdog vs. Central Electricity Regulatory
Commission and others, (2017) 14 SCC 80.

13. Kusum Ingots and Alloys Limited vs. Union of India
and another, (2004) 6 SCC 254.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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