I

NBMC – 04

SMT. NIRMALA DEVI BAM MEMORIAL

INTERNATIONAL MOOT COURT COMPETITION – CHAPTER IV

BEFORE THE HON’BLE SUPREME COURT OF DOWNTON

CASE NO………/2022

UNDER ARTICLE 136 OF THE INDIAN CONSITUTION

IN THE MATTER OF

PARIDHI ENTERPRISES …. APPELLANT

Vs.

SEOPLE URJA VIKAS NIGAM LIMITED (SUVNL) …. RESPONDENT

UPON SUBMISSION TO THE HON’BLE CHIEF JUSTICE AND HIS LORDSHIP’S

COMPANION JUSTICES OF THE HON’BLE SUPREME COURT OF DOWNTON
I
MEMORIAL for APPELLANT [TABLE OF CONTENTS]

TABLE OF CONTENTS

TABLE OF CONTENTS............................................................................................................I

LIST OF ABBREVIATION.......................................................................................................I

TABLE OF AUTHORITIES.....................................................................................................II

STATEMENT OF JURISDICTION........................................................................................III

STATEMENT OF FACTS......................................................................................................IV

STATEMENT OF ISSUES.......................................................................................................V

SUMMARY OF ARGUMENTS.............................................................................................VI

ARGUMENTS ADVANCED...................................................................................................1

I. WHETHER PETITION FILED UNDER CERC OF DOWNTON IS MAINTAINABLE..................1

A. Jurisdiction to Adjudicate in regard to Change in Law..............................................1

B. Jurisdiction of the Commission derived from section 79 of The Electricity Act, 2003:
………………………………………………………………………………………3

II. WHETHER CERC OF DOWNTON CAN PROVIDE FOR THE COMPENSATORY TARIFF AS

PER ITS OWN DISCRETION.......................................................................................................5

A. CERC as ultimate right to provide Tariff...................................................................5

B. Unsatisfactory provision of Compensatory Tax:.......................................................7

III. WHETHER THE IMPUGNED JUDGEMENT BY THE APLET ON FORCE MAJEURE IS VALID
AND “CHANGE IN LAW” IN THE PPA ENCOMPASSES FOREIGN LAW.....................................8

A. Impossibility in performing the contract....................................................................8

B. Change in Law encloses Foreign law in PPA..........................................................12

PRAYER FOR RELIEF.........................................................................................................VII

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MEMORIAL for APPELLANT [LIST OF ABBREVIATIONS]

LIST OF ABBREVIATION

SERC State Electricity Regulatory Commission

CERC Central Electricity Regulatory Commission

AIR All India Reporter

SCC Supreme Court Cases

Hon’ble Honourable

Ors. Others

APLET Appellate Tribunal

PPA Power Purchase Agreement

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MEMORIAL for APPELLANT [INDEX OF AUTHORITIES]

TABLE OF AUTHORITIES

Statues:
 Constitution of India, 1950
 Electricity Act,2003
 Indian Contract Act, 1872

Cases

Automobiles Transport vs Rajasthan......................................................................................XII

Bolani Iron Ores v/s State of Orissa..........................................................................................X
Energy Watchdog vs Central Electricity Regulatory, Civil Appeal Nos.5399-5400 of 2016VII
G.K Krishnan vs State of Tamil Nadu....................................................................................XII
M/S. Jaiprakash Power Ventures vs Haryana Electricity Regulatory, APPEAL NO.130 OF
2011......................................................................................................................................IV
Satyabrata Ghose vs. Mugneeram Bangur and Co, AIR 1954 SC 44....................................XV
Siddhivinayak Realties Pvt. Ltd. vs V Hotels Limited on 10 May, 2013.............................XIV

Other Authorities

CERC ORDER 2014.................................................................................................................X

Clause 13 of PPA.....................................................................................................................IV
Moot proposition , Para 5.........................................................................................................IV
Moot proposition, para 4........................................................................................................VII
Section 79 of electricity Act, 2003............................................................................................V

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MEMORIAL for APPELLANT [STATEMENT OF JURISDICTION]

STATEMENT OF JURISDICTION

The Hon’ble Supreme Court of Downton has jurisdiction in the matter under Article 136 of
the Constitution of Downton which reads as follows:

Article 136: Special leave to appeal by the Supreme Court

(1) Notwithstanding anything in this Chapter, the Supreme Court may, in its discretion, grant
special leave to appeal from any judgment, decree, determination, sentence or order in any
cause or matter passed or made by any court or tribunal in the territory of India
(2) Nothing in clause ( 1 ) shall apply to any judgment, determination, sentence or order
passed or made by any court or tribunal constituted by or under any law relating to the Armed
Forces.

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MEMORIAL for APPELLANT [STATEMENT OF FACTS]

STATEMENT OF FACTS

THE COMPETITIVE WINNER

1. In the State of Seople, SUVNL issued a public notice, inviting proposals for supply of
power on a long term basis. Paridhi Enterprises Consortium were declared as the
successful bidders by SUVNL for Quoting the non-escalable tariff charge.
2. 3 Paridhi Enterprises Consortium, who was selected by SUVNL as the successful bidder,
indicated that they already had an arrangement with Seople Mineral Development
Corporation, which had been allotted a certain coal block in the State of Samastigarh.
And a Memorandum of Understanding was entered into with German Company and with
a Japanese agent.
3. The decided tariff was accepted by the CERC and consequently the PPA was enforced to
full effect by both the parties.

THE AMENDMENT

4. A sudden change in law in Truasia occurred, which aligned the export price of coal from
Truasia to international market prices instead of the price that was prevailing for the last
40 years, which affected the PPA terms.

PROCEEDINGS

5. A sudden change in law in Truasia occurred, which aligned the export price of coal from
Truasia to international market prices instead of the price that was prevailing for the last
40 years, which affected the PPA terms.
6. Therefore, on 5th July 2019, Paridhi Power filed a petition before the Central Electricity
Regulatory Commission seeking relief either discharge them from the performance of the
PPA on account of frustration, or to evolve a mechanism to restore the petitioners to the
same economic condition prior to occurrence of the change in law in Truasia Regulation.
7. The Central Commission held that the Power Purchase Agreements entered into by
Paridhi in both the cases constituted a composite scheme for generation and sale of
electricity. So, being an appropriate Commission and not the respective State

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MEMORIAL for APPELLANT [STATEMENT OF FACTS]

8. Commissions, it does not had jurisdiction in the matter.

9. The Central Commission passed an order, whereby the claim of Paridhi Power on the
grounds of force majeure and/or change in law was held not to be admissible but it can
provide redressal of grievances under Section 79 of the Act.

CONDONATION OF DELAY

10. The Committee submitted a report, rejecting the cross-objection filed by Paridhi Power
and on 31st October, 2020, the Appellate Tribunal rejected the prayer for condonation of
delay. So, Paridhi Power filed an appeal before the Supreme Court.

THE IMPUGNED JUDGEMENT

11. Finally, the Appellant tribunal on 7th April, 2021, passed the impugned judgement in all
the aforesaid cases:
 The Tribunal agreed with the commission stated that CERC has jurisdiction to
proceed further in the matter and it stated that force majeure and change in law could
gone into it.
 It also held that changes in law provisions do not apply to foreign laws therefore
change in Truasian laws does not come under the scope of the provisions.
 Accordingly, the matter was remanded to CERC to grant compensatory tariff.
12. Paridhi enterprises aggrieved by the final order appealed against the same. Which
highlighted the unsatisfactory provision of compensatory tax

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MEMORIAL for APPELLANT [STATEMENT OF ISSUES]

STATEMENT OF ISSUES

THE APPELLANTS HAVE PLACED BEFORE THIS HONOURABLE

COMMISSION, THE FOLLOWING ISSUES FOR ITS CONSIDERATION:

I) WHETHER PETITION FILED UNDER CERC OF DOWNTON IS MAINTAINABLE

II) WHETHER CERC OF DOWNTON CAN PROVIDE FOR THE COMPENSATORY TARIFF AS
PER ITS OWN DISCRETION

III) WHETHER THE IMPUGNED JUDGEMENT BY THE APLET ON FORCE MAJEURE IS VALID
AND "CHANGE IN LAW" IN THE PPA ENCOMPASSES FOREIGN LAW

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MEMORIAL for APPELLANT [SUMMARY OF ARGUMENTS]

SUMMARY OF ARGUMENTS

I) WHETHER PETITION FILED UNDER CERC OF DOWNTON IS MAINTAINABLE

It is most humbly submitted before this hon'ble supreme court that petition filed under CERC
of Downton is maintainable. Firstly, CERC have jurisdiction to adjudicate in regard to
change in law. Secondly, Section 79 of Electricity Act gives jurisdiction to CERC . Thus the
petition filed under CERC is maintainable.

II) WHETHER CERC OF DOWNTON CAN PROVIDE FOR THE COMPENSATORY TARIFF
AS PER ITS OWN DISCRETION

The CERC intends to increase the efficiency and the economy of the power market, and this
intends to promote competition and investment the increases quality of power. The aims and
vision of CERC is totally favoring the Appellant. The Appellant of his obligations arising out
of the contracts, but only for the purpose of seeking the alternative relief of compensatory
tariff. Under Section 79(1)(b) of the Act has the jurisdiction to allow the CERC to act upon
its own discretion.

III) WHETHER THE IMPUGNED JUDGEMENT BY THE APLET ON FORCE

MAJEURE IS VALID AND "CHANGE IN LAW" IN THE PPA ENCOMPASSES FOREIGN
LAW
It is humbly submitted before the Hon’ble Supreme Court of Downton that it is impossible to
perform the contract any further and Change in Law encompasses Foreign law.

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MEMORIAL for APPELLANT [ARGUMENTS ADVANCED]

ARGUMENTS ADVANCED

A. WHETHER PETITION FILED UNDER CERC OF DOWNTON IS MAINTAINABLE

It is most humbly submitted before this hon'ble supreme court that petition filed under CERC
of Downton is maintainable. Firstly, CERC have jurisdiction to adjudicate in regard to
change in law. Secondly, Section 79 of environmental act gives jurisdiction to CERC . Thus
the petition filed under CERC is maintainable.

B. JURISDICTION TO ADJUDICATE IN REGARD TO CHANGE IN LAW

Change in law according to Article 13 of the PPA;

Definitions In this Clause 13 of PPA, the following terms shall have the following meanings:
“Change in Law” means the occurrence of any of the following events after the date, which is
seven (7) days prior to the Bid Deadline:
(i) the enactment, bringing into effect, adoption, promulgation, amendment,
modification or repeal, of any Law or
(ii) a change in interpretation of any Law by a competent Court of law, tribunal or
Indian Governmental Instrumentality provided such Court of law, tribunal or
Indian Governmental Instrumentality is final authority under law for such
interpretation or
(iii) change in any consents, approvals or licenses available or obtained for the
Project, otherwise than for default of the Seller, which results in any change in any
cost of or revenue from the business of selling electricity by the Seller to the
Procurers under the terms of this Agreement, or
(iv) Any change in the
(a) Declared value of Land for the Project or (b) the cost of implementation of
resettlement and rehabilitation package of the land for the Project mentioned in
the RFP or (c) the cost of implementing Environmental Management Plan for the
Power Station mentioned in the RFP, indicated under the RFP and the PPA; but
shall not include (i) any change in any withholding tax on income or dividends
distributed to the shareholders of the Seller, or (ii) change in respect of UI

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MEMORIAL for APPELLANT [ARGUMENTS ADVANCED]

Charges or frequency intervals by an Appropriate Commission. Provided that if

Government of India does

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MEMORIAL for APPELLANT [ARGUMENTS ADVANCED]

(v) not extend the income tax holiday for power generation projects under Section 80
IA of the Income Tax Act, upto the Scheduled Commercial Operation Date of the
Power Station, such non- extension shall be deemed to be a Change in Law.1

While determining the consequence of Change in Law under this Clause 13, the Parties shall
have due regard to the principle that the purpose of compensating the Party affected by such
Change in Law, is to restore through Monthly Tariff Payments, to the extent contemplated in
this Clause 13, the affected Party to the same economic position as if such Change in Law has
not occurred.
A combined reading of the above provisions would reveal that the Commission has the
jurisdiction to adjudicate upon the disputes between the Petitioner and Procurers with regard
to “Change in Law” which occur after the date which is seven days prior to the bid deadline .
The Petitioner submits claims under Change in Law in respect of moot proposition para 5 ,
An important part of the case is that a change in law in Truasia took place which aligned the
export price of coal from Truasia to international market prices instead of the price that was
prevalent for the last 40 years.2 As one of most important Source of Coal which in turn
affected the production of Thermal Energy in Downton, this sudden and unanticipated hike in
price drastically affected the Power Purchase Agreement terms.
Thus petition filed before the Central Electricity Regulatory Commission of Downton 5th
July, 2019 relief on the score of the impact of the Truasian Regulation to either discharge
them from the performance of the Purchase Power Agreement on account of frustration, or to
evolve a mechanism to restore the Paridhi Enterprises to the same economic condition prior
to occurrence of the change in law.

It is clear that under Section 86, the State Commissions have only to deal with generation and
sale of electricity within the State. When generation and sale takes place outside the State, as
is the case here, the State Commission would have no jurisdiction under Section 86, and
consequently Section 79(1)(b) has to be read as part of a scheme in which the moment
generation and sale of electricity is inter-State and not intra State, the Central Commission
alone would have jurisdiction.3

Hence, CERC have jurisdiction to adjudicate the case in regards to change in law.

1
Clause 13 of PPA
2
Moot proposition , Para 5
3
M/S. Jaiprakash Power Ventures vs Haryana Electricity Regulatory, APPEAL NO.130 OF 2011
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MEMORIAL for APPELLANT [ARGUMENTS ADVANCED]

B. JURISDICTION OF THE COMMISSION DERIVED FROM SECTION 79 OF THE

ELECTRICITY ACT, 2003:

Section 79 (1) (f) of the Electricity Act, 2003 empowers the Central Commission to
adjudicate upon disputes involving generating companies or transmission licensees in regard
to matters connected with Clauses (a) to (d) of this Section and refer to any dispute for
arbitration.4 It is most humbly submitted that the Petitioner has a composite scheme, thus
only central Commission has the jurisdiction to adjudicate upon the dispute involved in the
present Petition under Section 79(1)(f) of the Act.
The jurisdiction of this Commission to regulate the tariff of the generating companies is
derived from Section 79(1)(a) and (b) of the Act and to adjudicate the dispute from Section
79(1)(f) of the Act.
The said provisions are extracted as under:
“Section 79 (Functions of Central Commission): --- (1) The Central Commission shall
discharge the following functions, namely:-
(a) To regulate the tariff of generating companies owned or controlled by the Central
Government;
(b) To regulate the tariff of generating companies other than those owned or controlled by the
Central Government specified in clause (a), if such generating companies enter into or
otherwise have a composite scheme for generation and sale of electricity in more than one
State;
(f) to adjudicate upon disputes involving generating companies or transmission licensee in
regard to matters connected with clauses (a) to (d) above and to refer any dispute for
arbitration;”
Under Section 79(1)(b) of the Act, the Central Commission can have the jurisdiction to
regulate the tariff of generating companies other than those owned or controlled by the
Central Government if those generating companies have composite scheme for generation
and sale of electricity in more than one State.
The Hon’ble Supreme Court in Energy Watchdog Case has dealt with the issue of composite
scheme under Section 79(1) (b) as under:
“22. The scheme that emerges from these Sections is that whenever there is inter State
generation or supply of electricity, it is the Central Government that is involved, and

4
Section 79 of electricity Act, 2003
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MEMORIAL for APPELLANT [ARGUMENTS ADVANCED]

whenever
there is intra-State generation or supply of electricity, the State Government or the State

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MEMORIAL for APPELLANT [ARGUMENTS ADVANCED]

Commission is involved. This is the precise scheme of the entire Act, including Sections 79
and 86. It will be seen that Section 79(1) itself in subsections (c), (d) and (e) speaks of inter-
State transmission and inter-State operations. This is to be contrasted with Section 86 which
deals with functions of the State Commission which uses the expression “within the State” in
sub-clauses (a), (b), and (d), and “intra-state” in sub-clause(c). This being the case, it is clear
that the PPA, which deals with generation and supply of electricity, will either have to be
governed by the State Commission or the Central Commission. The State Commission’s
jurisdiction is only where generation and supply takes place within the State. On the other
hand, the moment generation and sale takes place in more than one State, the Central
Commission becomes the appropriate Commission under the Act. What is important to
remember is that if we were to accept the argument on behalf of the appellant, and we were to
hold in the Adani case that there is no composite scheme for generation and sale, as argued
by the appellant, it would be clear that neither Commission would have jurisdiction,
something which would lead to absurdity. Since generation and sale of electricity is in more
than one State obviously Section 86 does not get attracted. This being the case, we are con
strained to observe that the expression “composite scheme” does not mean anything more
than a scheme for generation and sale of electricity in more than one State.” 5
As per the above findings of the Hon'ble Supreme Court, the moment generation and sale of
electricity takes place in more than one State, central Commission is the appropriate
Commission under the Act.
After the Hon’ble Supreme Court’s judgment in the ‘Energy Watchdog Case’, all issues
arising out of inter-State transactions under the Act are within the sole jurisdiction of the
central Commission. Hon’ble Supreme Court has categorically held that the jurisdiction of
the State Commission would arise only for intra-State transactions, which are only within the
State. In the present case, the generating station is located in the State of Samastigarh and the
supply is on inter-State basis to the Respondents.6 In addition to it, The decided Tariff after
the competitive bid was also accepted by the Central Electricity Regulatory commission of
Downton , which was the primary regulatory body for the generation, transmission and
distribution in Downton. As a result, the power purchase agreement was entered into, and
made enforceable to full effect by both the parties. Thus it is evident from act of CERC and
acceptance by the respondent that it is a matter of inter-state, henceforth composite scheme
under section 79(1)(b) of the electricity act.

5
Energy Watchdog vs Central Electricity Regulatory, Civil Appeal Nos.5399-5400 of 2016
6
Moot proposition, para 4
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MEMORIAL for APPELLANT [ARGUMENTS ADVANCED]

C. WHETHER CERC OF DOWNTON CAN PROVIDE FOR THE COMPENSATORY TARIFF AS

PER ITS OWN DISCRETION.

It is humbly submitted before the Hon’ble Supreme Court of Downton that the CERC can
provide for the compensatory tariff as per its own discretion.

A. CERC AS ULTIMATE RIGHT TO PROVIDE TARIFF

Central Electricity Regulatory Commission (CERC) is a statutory body constituted on 24th

July 1998 under the Ministry of Power’s Electricity Regulatory Commissions Act, 1998. The
commission which was established and incorporated under Section 3 of the Electricity
Regulatory Commission Act 1998 is now guided by Section 76 of the Electricity Act 2003.
Enacted for the purpose of rationalization of electricity tariffs, formulation of transparent
policies regarding subsidies, promotion of efficient and environmentally benign policies, and
for matters connected to Electricity Tariff regulation, CERC functions with quasi-judicial
status under the Electricity Act 2003. 
As per the mission statement, the CERC intends to increase the efficiency and economy of
the power market, promote competition and investment in the power market, improve the
quality of power supply and advise the government for removing barriers to entry in the
market to a bridge the gap between demand and supply of power. Thus, in order to attain
these objectives, the CERC aims to:
1. Improve the functioning of the transmission systems through the Indian Electricity
Grid Code, Availability Based Tariff, etc.
2. Improve the efficiency of the tariff mechanism.
3. Facilitate inter-state transmission of power.
4. Enhance the availability of information to the shareholders.
5. Upgrade the technological changes in the power plants.
6. Advise the government on the removal of barriers to entry and exit of capital in the
market. 

From formulating policies for tariff regulation to handling various petitions filed against any
matter pertaining to the power market, CERC has become the regulatory body of the power

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MEMORIAL for APPELLANT [ARGUMENTS ADVANCED]

sector of India. The CERC has contributed to the process of making the power sector more
competitive, efficient, transparent, and consumer-friendly by introducing such procedures of
tariff regulations which are not only beneficial to the supplier but also to the customers. The
commission has passed certain regulations that have provided a legal framework for better
functioning of the industry. The commission has also enhanced the competition in the market
by advising the government on the operationalization of open access in the market and other
activities pertaining to the other forums of the power sector.
This being the case, there is no residuary source of power contained in the Commission either
in Section 79 or otherwise to fix compensatory tariffs once the tariff is adopted under Section
63. If at all, such tariff can be modified only in accordance with the guidelines issued by the
Central Government and not otherwise7.
The appellant of his obligations arising out of the contracts, but only for the purpose of
seeking the alternative relief of compensatory tariff. In other words, the appellant's
submission is that the facts which formed the basis of the submission of the frustration of
contracts are also relevant for supporting the conclusion of the National Commission that the
appellant is entitled for the relief of compensatory tariff.
The Court in dealing with an appeal arising out of an order in which the Appellate Tribunal
declined to condone a delay of 481 days said that, as long as the appellant is not desirous of
seeking a declaration that the appellant is relieved of the obligation to perform the contracts
in question, the appellant is entitled to argue any proposition of law, be it “force majeure” or
“change of law” in support quantifying the compensatory tariff.
Under Section 79(1)(b) of the Act, the Central Commission can have the jurisdiction to
regulate the tariff of generating companies other than those owned or controlled by the
Central Government if those generating companies have composite scheme for generation
and sale of electricity in more than one State.
In the context, that the rise in price of coal consequent to change in Indonesian law would be
a force majeure event which would entitle the respondents to claim compensatory tariff, the
Supreme Court relied on Sections 32 and Section 56 of the Indian Contract Act, 1872,
governing “force majeure”.8
Finally, the Tribunal, agreeing with the Commission, held that generation and sale of power
by Adani Power to more than one state was a composite scheme within the meaning
of Section

7
Energy watchdog vs CERC
8
Energy Watchdog vs CERC
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MEMORIAL for APPELLANT [ARGUMENTS ADVANCED]

79(1) (b) of the Act and the Central Commission have jurisdiction to proceed further in the
matter. The Commission has determined the amount for the compensatory tariff to be granted
due to force majeure event by its order dated 6th December 2016.
"In our view, the parties should confer to find out a practicable solution and agree for
compensation package to deal with the impact of subsequent event while maintaining the
sanctity of the PPA and the tariff agreed therein. In other words, the compensation package
agreed should be over and above the tariff agreed in the PPA and should be admissible for a
limited period till the event which occasioned such compensation exist and should also be
subject to periodic review by the parties to the PPA."9
In view of upholding a healthy competition, section 63 of the Electricity Act, 2003, allows
regulatory commissions to adopt a tariff for generation through a transparent and competitive
bidding process conducted as per the guidelines issued by the central government. The
guidelines emphasize a fair and transparent process for bidding and give the bidders an option
to pass on the fuel price variation and other related risks by quoting various escalable and
non-escalable charges transparently at the time of bidding.

B. UNSATISFACTORY PROVISION OF COMPENSATORY TAX:

A compensatory tax is levied to raise revenue to meet the expenditure for making roads,
maintaining them and for facilitating the movement and regulation of traffic. The Supreme
Court held that taxation under entry 57, List II, couldn’t exceed the compensatory nature,
which must have some nexus with the vehicles using the roads. The regulatory and
compensatory nature of the tax is that taxing power should be used to impose taxes on motor
vehicles, which use the roads in the state or are kept for use thereon.10
"A compensatory tax is not a restriction upon the movement part of trade and commerce."
The tax should not go beyond "a proper recompense to the State for the actual use made of
the physical facilities provided in the shape of a road." In the instant case, the tax collections
amounted to over Rs. 16 crores while the expenditure for the year amounted to Rs. 19.51
crores and this amount did not include the grants to local governments for the repair and
maintenance of roads within their jurisdiction. The tax was thus held to be compensatory and
hence valid.
The Supreme Court further liberalized the state taxing power by upholding a state tax on
9
CERC ORDER 2014
10
Bolani Iron Ores v/s State of Orissa
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MEMORIAL for APPELLANT [ARGUMENTS ADVANCED]

passengers and goods carried on national highways.11

To be more specific and to note that the validity of the taxing power under the Entry 57 List
II of the Seventh Schedule read with Article 301 of the Constitution depends upon the
regulatory and compensatory nature of taxes.
A working test to decide whether a tax is compensatory or not would be to enquire whether
the trades people are having the use of certain facilities for the better conduct of their
business and paying not patently much more than what is required for providing the
facilities? A tax does not cease to be compensatory because the precise or specific amount
collected is not actually used in providing facilities.12
Since then, the concept of regulatory and compensatory taxes has become established in India
with reference to entries 56 and 57, List II, and the concept has been applied in several cases,
and progressively the courts have liberalized the concept to permit state taxation at a higher
level.
Hence, the Counsel of the Appellant prays by placing the above contentions that the CERC is
having the entire rights and power to decide on the aspects of compensatory tariff on its own.

C. WHETHER THE IMPUGNED JUDGEMENT BY THE APLET ON FORCE MAJEURE IS

VALID AND “CHANGE IN LAW” IN THE PPA ENCOMPASSES FOREIGN LAW

It is humbly submitted before the Hon’ble Supreme Court of Downton that it is

impossible to perform the contract any further and Change in Law encompasses Foreign
law
A. IMPOSSIBILITY IN PERFORMING THE CONTRACT

The performance of the contract is Impossible as the prices of coal hiked due to change in
Truasian Laws.

Accordingly Non escalable tariff do not lead to the conclusion that if the coal becomes
unavailable which is the basis of the bid the tariffs cannot be changed. At this instance, the
aggrieved party was not able to supply power because of this escalation in the price, Hence
Force Majeure is bound to take place

11
G.K Krishnan vs State of Tamil Nadu
12
Automobiles Transport vs Rajasthan
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MEMORIAL for APPELLANT [ARGUMENTS ADVANCED]

'Force Majeure' means any event or circumstance or combination of events and circumstances
including those stated below that wholly or partly prevents or unavoidably delays an Affected
Party in the performance of its obligations under this Agreement, but only if and to the extent
that such events or circumstances are not within the reasonable control, directly or indirectly,
of the Affected Party and could not have been avoided if the Affected Party had taken
reasonable care or complied with Prudent Utility Practices:

It is governed by the Indian Contract Act, 1872. In so far as it is relatable to an express or

implied clause in a contract, such as the PPAs before us, it is governed by Chapter III dealing
with the contingent contracts, and more particularly, Section 32 thereof. In so far as a force
majeure event occurs de hors the contract, it is dealt with by a rule of positive law
under Section 56 of the Contract.

Section 32: Enforcement of contracts contingent on an event happening:- Contingent

contracts to do or not to do anything if an uncertain future event happens cannot be enforced
by law unless and until that event has happened.

If the event becomes impossible, such contracts become void.

This impossibility of performance which is the Doctrine of Frustration is dealt under the
Indian Contracts Act 1872 in section 56 which states that;

Section 56: Agreement to do impossible act:- An agreement to do an act impossible in itself

is void.
Contract to do an act afterwards becoming impossible or unlawful:- A contract to do an
act which, after the contract is made, becomes impossible, or, by reason of some event which
the promisor could not prevent, unlawful, becomes void when the act becomes impossible or
unlawful.

Compensation for loss through non-performance of act known to be impossible or

unlawful:- Where one person has promised to do something which he knew, or, with
reasonable diligence, might have known, and which the promisee did not know, to be

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MEMORIAL for APPELLANT [ARGUMENTS ADVANCED]

reasonable diligence, might have known, and which the promisee did not know, to be
impossible or unlawful, such promisor must make compensation to such promisee for any
loss which such promisee sustains through the non-performance of the promise

In Cricklewood Property and Investment Trust Ltd. v. Laighton's Investment Trust

Ltd. 1945 AC 221 at page 225(H) this doctrine has been explained as follows : 'Frustration
may be defined as the premature determination of an agreement between parties, lawfully
entered into and in course of operation at the time of its premature determination, owing to
the occurrence of an intervening event or change of circumstances so fundamental as to be
regarded by the law both as striking at the root of the agreement, and as entirely beyond
what was contemplated by the parties when they entered into the agreement'.

For the application of this doctrine it is essential to ascertain the facts assumed by the parties
as forming the fundamental basis of their contract and then to see how far the subsequent
developments have resulted in the determination of the very basis of the contract, thereby
rendering its performance impossible."

Fazl Ali J., in speaking about frustration, observed in his judgment as follows:

"It seems necessary for us to emphasise that so far as the courts in this country are concerned,
they must loot primarily to the law as embodied in sections 32 and 56 of the Indian Contract
Act, 1872."13

We hold, that the doctrine of frustration is really an aspect or part of the law of discharge of
contract by reason of supervening impossibility of the act agreed to be done and hence comes
within the purview of section 56 of the Indian Contract Act. It would render an incorrect
phrase to say that section 56 of the Contract Act applies only to cases of physical
impossibility and that where this section is not applicable, recourse can be had to the
principles of English law on the subject of frustration. It must be held also that to the extent
that the Indian Contract Act deals with a particular subject, it is exhaustive upon the same and
it is not permissible to import the principles of English law dehors these statutory provisions.
The decisions of the English courts possess only a persuasive value and may be helpful in
showing how the courts

Siddhivinayak Realties Pvt. Ltd. vs V Hotels Limited on 10 May, 2013

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in England have decided cases under circumstances similar to those which have come before
our courts.

It seems necessary however to clear up some misconception which is likely to arise because
of the complexities of the English law on the subject. The law of frustration in England
developed, as is well known, under the guise of reading implied terms into contracts. The
court implies a term or exception and treats that as part of the contract

The first instance of doctrine of frustration can be traced back to the Queen bench Judgment

in 1863 in the case of Taylor vs. Cardwell. Where, an opera house

was destroyed due to an accidental fire and consequently was not able to hold the
performance of the opera, the plaintiff (a buyer of the ticket for the opera) sued the defendant
for breach of contract. However, it was held that the defendant is not liable to pay the
damages as the very object on which the entire fulfillment of the contract was based was
destroyed by no fault of either party hence. It was held that the parties were discharged of
their contractual obligations.

The Apex Court word "impossible" in Section 56 has not been used in the sense of physical
or literal impossibility. The doctrine of frustration or impossibility, which are observed to be
interchangeable expressions, are held to be supervening impossibility or illegality. It is held
that Section 56 lays down a rule of positive law and does not leave the matter to be
determined according to the intention of the parties. The Court can grant relief only upon a
subsequent impossibility when it finds that the whole purpose of the basis of contract was
frustrated by the intrusion or occurrence of an unexpected event or change of circumstances
which was beyond what was contemplated by the parties at the time of the agreement.
Besides, such an event must be so fundamental as to go to the root of the contract as a whole.
Referring to this judgement14, in our case, the root of the contract is coal, since the price of
the coal has hiked and changed the economic condition of Paridhi enterprises drastically, The
Doctrine of Frustration can be applied in our case too.

In the case of M/S.Lakshminarayanan Mining ... vs The Chairman it was held that, even
though the contract was enforceable when it was entered into, the performance of
Satyabrata Ghose vs. Mugneeram Bangur and Co, AIR 1954 SC 44
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the contract became impossible or unlawful afterwards and so the contract became void

under Section 56 of the Indian Contract Act.

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MEMORIAL for APPELLANT [ARGUMENTS ADVANCED]

This much is clear that the word "impossible" has not been used here in the sense of physical
or literal impossibility. The performance of an act may not be literally impossible but it may
be impracticbale and useless from the point of view of the object and purpose which the
parties had in view and if an untoward event or change of circumstances totally upset the very
foundation upon which the parties rested their bargain.

Changes in the law that ends in resulting alteration in the law or in the legal situation that
affects a contract and prevents the contract’s performance is a well-known cause of
frustration under section 56. Until the contract specifies differently, “Law” may include
international law. 

To discharge the contract, the alteration in the law must hit at the contract’s foundation rather
than just suspending performance under it. A Supreme Court order could bring about such a
change in the law. Furthermore, any government prohibition decree making the performance
unconstitutional would lead to frustration of the contract.

In our case, the change in Truasian law has drastically changed the prices of coal which has
affected the PPA between Paridhi enterprises and SUVNL.

B. CHANGE IN LAW ENCLOSES FOREIGN LAW IN PPA

The Guidelines, as amended, that are issued by the Central Government under Section
63 clearly take care of the present situation in that any change in law that occurs and any
dispute which relates to tariffs can both be resolved before the Central Commission.

There can be no doubt that a sudden skyrocket rise of coal price due to the change in law
in Truasia, it has certainly hindered the performance of the PPA. Change in law clause is
very wide and since the PPA deals with imported coal, obviously change in law would
cover foreign law. 

Any change in law, either abroad or in India, would result in the consequential rise in

price of coal being given to the power generators. In moot proposition para 3 it is stated
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MEMORIAL for APPELLANT [ARGUMENTS ADVANCED]

that Paridhi Enterprises Consortium were declared the successful bidders by SUVNL for
quoting the Non-escalable tariffs do not lead to the conclusion that if a source of coal
becomes unavailable in a manner that completely undermines the basis of the bid, the
tariff cannot be adjusted. If otherwise they fall within the change in law provision and/or
force majeure provision, the mere fact that a non-escalable tariff has been quoted would
make no difference

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MEMORIAL for APPELLANT [PRAYER FOR RELIEF]

PRAYER FOR RELIEF

WHEREFORE IN THE LIGHT OF THE ISSUES RAISED, ARGUMENTS ADVANCED

AND AUTHORITIES CITED, IT IS HUMBLY REQUESTED THAT THIS HON’BLE
COURT MAY BE PLEASED TO ADJUDGE AND DECLARE THAT:

1: CERC have jurisdiction in the present matter.

2: CERC of Downton can provide for the compensatory tariff as per its own discretion
3: The Judgement by the APLET on Force Majeure is valid and The term "Change in Law"
in the PPA encompasses Foreign Law

AND PASS ANY OTHER ORDER, DIRECTION, OR RELIEF THAT IT MAY DEEM FIT
IN THE INTEREST OF JUSTICE, FAIRNESS, EQUITY AND GOOD CONSCIENCE
FOR THIS ACT OF KINDNESS, THE PETITIONER AS IN DUTY BOUND SHALL
FOREVER PRAY.
All of which is most humbly prayed

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