By an Order dated 21.05.2024, Hon’ble Maharashtra Electricity Regulatory Commission (“MERC”) held that T.P Kirnali Limited was impacted due to increase in rate of Goods and Services Tax and Basic Customs Duty and is accordingly entitled for a total compensation of Rs. 15.48 Crores along with Carrying Cost. MERC has further held that:
- Any Change in Law relief would be governed by provisions of the PPA and is to be decided by MERC. A developer’s undertaking to not claim increase in project cost or upward revision of tariff for period of extension of Scheduled Commercial Operation Date (“SCOD”), pursuant to MNRE Office Memorandums dated 12.05.2021 and 29.06.2021, cannot be held against the developer. MNRE in its subsequent Office Memorandums dated 15.09.2021 and 03.11.2021 has clarified that such undertaking is limited to developer not claiming termination of PPA or increase in project cost for reasons other than Change in Law for the period of extension granted. [Para 17-17.5 @ Pg. 18-20]
- Invoices towards supply of service raised post commissioning of project are also eligible for Change in Law relief, provided such invoice are raised within 30 days from the date of supply of such service. [Para 19-19.5 @ Pgs. 21-22]
- MSEDCL’s claim of Safeguard Duty cannot be allowed since the developer has not financially gained due to non-levy of Safeguard Duty. Notification No. 1 of 2018 dated 30.07.2018 clearly provided that there would be no Safeguard Duty after 29.07.2020. In the present case, commissioning of the Project would have been beyond 29.07.2020, for which no Safeguard Duty was applicable. This was factored into the bid accordingly. [Para 20.3 @ Pg. 23]
- Carrying cost is allowed at the rate of 1.25% plus SBI MCLR per annum on the compensation amount from the date of payment till date of Order. [Para 22.5 @ Pg. 26]
- MSEDCL to choose between payment of compensation on lumpsum or per unit basis. This decision is to be communicated to the developer within a month of the Order. [Para 23-24 @ Pgs. 26-27]
MERC in a progressive Order rightly followed settled jurisprudence on Change in Law compensation by granting relief for impact on account of increase in GST and BCD. It disregarded extraneous submissions of MSEDCL to restrict compensation due to the developer. T.P. Kirnali’s undertaking dated 09.09.2021 to not claim increase in project cost or upward revision of tariff for period of extension of Scheduled Commercial Operation Date, was also rightly not held against its claim of Change in Law, since such undertaking only came in context of specific MNRE Office Memorandums. The undertakings required by these Office Memorandums have later been clarified to not be in context of Change in Law. In a progressive measure, MSEDCL has been afforded the opportunity at the outset to elect between lumpsum payment or a staggered payout should MSEDCL choose to save on carrying cost.
T.P. Kirnali Limited was advised and represented by JSA team consisting of Partner – Kunal Kaul and Senior Associate Samikrith Rao. The matter was argued by Mr. Kunal Kaul.
Our Disputes Team Comprised Partner – Kunal Kaul, Senior Associate – Samikrith Rao
Kunal specializes in Regulatory & Policy practice with focus on disputes in energy sector. His practice area includes regulatory proceedings before statutory authorities, tribunals and courts, commercial litigation (except where the core dispute is sector specific) and Constitutional & Administrative law litigation with focus on energy sector.