MERC’s fresh hearing on Adani Power’s coal compensation case set aside; APTEL calls defiance of its directions “contemptuous”

Adani Power Limited, a generating company operating a 3,300 MW generating station at Tiroda, Maharashtra, had entered into four PPAs with Maharashtra State Electricity Distribution Company Limited (MSEDCL).

It sought compensation for “Change in Law” arising from alterations in the coal-supply assurance under the New Coal Distribution Policy, 2007 (NCDP 2007).

In Appeal No. 182 of 2019, the Tribunal, by judgment dated 14 September 2020, directed that compensation be computed using the SHR under the MERC MYT Regulations, 2011 or actual SHR, whichever was lower; the actual GCV of coal received; and the actual shortfall in domestic coal supply.

Pursuant thereto, Adani Power filed Miscellaneous Application No. 53 of 2020.

Adani Power challenged that order in the present appeal.

Whether MERC exceeded the scope of the Tribunal’s directions by reopening and rehearing issues that had already been finally decided in Appeal No. 182 of 2019, when it had been directed only to issue consequential orders?

Whether MERC was entitled to substitute the SHR under subsequently notified MYT Regulations for the SHR specified in the MERC MYT Regulations, 2011?

Whether MERC could impose a ceiling on the actual as-received GCV of coal for computing Change in Law compensation?

Whether Change in Law compensation could be restricted to coal required for normative generation or normative PLF, rather than being based on the actual domestic-coal shortfall?

The Tribunal applied Order XLI Rules 23 and 23A of the Code of Civil Procedure, 1908, recognising that the scope of a remand depends upon the appellate court’s directions.

Where a matter is remanded solely for consequential orders, the lower forum’s role is mechanical and restrictive: it cannot reopen the case, rehear issues, reconsider facts, or alter substantive findings already rendered by the appellate court; it may only pass orders naturally and logically flowing from the appellate decision.

Under its judgment dated 14 September 2020, Change in Law compensation had to be computed on the basis of the SHR under the MERC MYT Regulations, 2011 or actual SHR, whichever was lower; the actual GCV of coal received; and the actual shortfall in domestic coal supply.

The earlier proceedings had also been considered in light of the Supreme Court’s decision in Energy Watchdog v. CERC.

The Tribunal held that its earlier judgment had conclusively determined the three substantive matters concerning SHR, GCV, and coal shortfall.

Its direction to MERC was not a general remand for fresh consideration but a limited direction to calculate and issue consequential orders in accordance with those findings.

Accordingly, MERC could not replace the expressly directed SHR benchmark under the 2011 Regulations with later regulations, impose a subsequent ceiling on actual as-received GCV, or restrict compensation to normative generation/PLF.

These directions contradicted the operative findings of the Tribunal, which required compensation based on actual GCV and actual domestic-coal shortfall.

By conducting a fresh hearing and returning contrary findings, MERC acted beyond the permissible scope of remand and violated judicial discipline.

The Tribunal set aside MERC’s order dated 10 December 2020, holding that MERC had exceeded its jurisdiction by reopening issues already decided and by departing from the Tribunal’s binding directions.

MERC was directed to issue consequential orders in favour of Adani Power strictly in accordance with the Tribunal’s judgment dated 14 September 2020 in Appeal No. 182 of 2019, within six weeks from receipt of the judgment.

The Tribunal refrained from initiating contempt proceedings, while recording that MERC’s conduct was contemptuous in nature and directing adherence to judicial discipline in future.