Supreme Court Declines to Recognize Press Release as "Change in Law" in Mega Power Policy Case

A press release does not enact or modify existing law and lacks the necessary formalities of a notification under Section 25 of the Customs Act, held by Supreme Court. In a Landmark Judgement, Full Bench of the Supreme Court of India, led by Justices K.V. Viswanathan, B.R. Gavai, and Prashant Kumar Mishra, dismissed the appeal in Nabha Power Limited & Anr. v. Punjab State Power Corporation Limited & Anr. The Court ruled that a press release from October 1, 2009, announcing modifications to India’s Mega Power Policy, did not constitute a legally binding "Change in Law" under a Power Purchase Agreement (PPA). Instead, the Court affirmed that legally enforceable changes occurred only with the formal notifications issued on December 11 and December 14, 2009. The decision clarifies the interpretation of "Change in Law" clauses in contracts and emphasizes the necessity for formal government action to modify legal obligations.

The case centered around Nabha Power Limited (NPL), which entered into a Power Purchase Agreement (PPA) with the Punjab State Power Corporation Limited (PSPCL) in January 2010. The PPA included a "Change in Law" provision, allowing for tariff adjustments if any legal changes impacted project costs or revenue. NPL argued that an October 1, 2009 press release by the Union Cabinet, which announced revisions to the Mega Power Policy, constituted a "Change in Law" under the PPA, entitling them to fiscal benefits such as customs duty exemptions.

PSPCL, however, argued that the press release did not amount to a binding legal change. They contended that a formal change in law occurred only with subsequent notifications issued on December 11 and December 14, 2009, and insisted that any fiscal benefits arising from these notifications should be passed on to PSPCL. Both the Punjab State Electricity Regulatory Commission and the Appellate Tribunal for Electricity (APTEL) ruled against NPL, leading to the appeal before the Supreme Court.

The Supreme Court examined whether the October 1, 2009 press release could be considered a legally binding "law" or "order" under the PPA’s "Change in Law" clause. The PPA defined "Law" to include statutes, regulations, notifications, and orders by governmental authorities. However, the Court held that:

"The press release of 01.10.2009 certainly does not fulfill the meaning of the word ‘order’ as understood in legal parlance. It was only an announcement of a proposal approved by the Cabinet."

The Court emphasized that for a governmental decision to be legally binding under the PPA, it must be formalized through an official notification or directive, not merely communicated through a press release.

The Court underscored the principle of legal certainty, which is fundamental to the rule of law. It stated:

"Certainty is the hallmark of law. The law must be accessible and so far as possible intelligible, clear, and predictable."

Allowing a press release to alter legally enforceable terms without official notification would create dual, conflicting legal regimes, undermining predictability and certainty in contractual obligations. The Court highlighted that a formal notification under Section 25 of the Customs Act was required to grant customs duty exemptions.

Notification and Official Gazette Requirements under Section 25 of the Customs Act

The Supreme Court held that Section 25 of the Customs Act mandates that duty exemptions must be notified in the Official Gazette. The Court ruled:

"For an exemption under the Customs Act to operate there has to be a notification issued in the manner provided by the Customs Act and duly published in the official gazette."

The Court cited established legal principles that when a statute prescribes a specific mode of action, that mode must be strictly followed. Since the press release was not a formal notification, it could not confer any legally enforceable customs exemptions.

NPL also argued that the doctrine of promissory estoppel should apply, claiming that they had relied on the press release when submitting their bid. The Court rejected this argument, observing that PSPCL was not the promisor of any customs duty concession, and further noted that:

"The Union of India, as the entity capable of conferring such benefits, was not a party to the agreement, making promissory estoppel inapplicable in inter-party disputes under the PPA."

The Court explained that even if the press release were treated as a promise, it could not create binding rights between NPL and PSPCL without an enforceable order or notification.

NPL invoked the business efficacy test, arguing that the press release should be treated as law to prevent commercial detriment. The Supreme Court rejected this contention, clarifying that:

The business efficacy test cannot contradict the express terms of the PPA, which clearly define ‘Law’ and prescribe specific enactment requirements for changes in law."

The Court concluded that the terms of the PPA were clear and unambiguous, and there was no scope to reinterpret them based on commercial considerations or business efficacy.

The Supreme Court ultimately dismissed NPL’s appeal, affirming the concurrent findings of the State Commission and APTEL. The Court held that:

No Change in Law on October 1, 2009: The press release did not constitute a "Change in Law" as it was merely a statement of intent. Legally binding changes were effectuated only through notifications on December 11 and December 14, 2009.

PSPCL Entitled to Tariff Adjustments: PSPCL was entitled to adjustments in tariff for benefits arising from the customs duty exemptions formally granted in December 2009. These adjustments would ultimately benefit consumers by reducing the project costs borne by PSPCL.

The Court concluded by upholding the following findings of the State Commission:

"The benefits, if any, accruing under the Mega Power Policy would be applicable only from 11.12.2009 and not from any prior date, notwithstanding the decision for granting Mega Power Status taken on 01.10.2009."

The Supreme Court’s decision in Nabha Power Limited & Anr. v. Punjab State Power Corporation Limited & Anr. reinforces the need for formal governmental action to constitute a legally binding "Change in Law." By ruling that a press release lacks the requisite legal authority, the Court emphasized the importance of adhering to procedural requirements under statutes like the Customs Act. The judgment provides crucial guidance on interpreting "Change in Law" clauses in contracts and underscores the principle of legal certainty, ensuring that contractual obligations remain predictable and enforceable only through formal legal channels.

Date of Decision: November 5, 2024

Nabha Power Limited & Anr. v. Punjab State Power Corporation Limited & Anr.