Drawing the curtains on the dispute between Adani Power (Mundra) and Gujarat Urja Vikas Nigam (GUVNL), the Supreme Court on Tuesday noted that the relationship between the two will be governed by their settlement deed where the former has agreed to continue supply of 2,000-MW power to the state discom and has withdrawn its demand for over Rs 10,000-crore compensatory tariff, as sought before the Central Electricity Regulatory Commission (CERC).

As per the settlement deed of January 3, Adani has agreed to relinquish compensation worth Rs 10,000 crore for electricity supplied to the state-owned discom, which in turn has undertaken not to terminate the PPA of February 2, 2007, which was upheld by the SC in 2019.

While disposing of the curative petition by GUVNL, a five-judge Constitution Bench led by Chief Justice NV Ramana closed the case after attorney-general KK Venugopal, representing GUVNL, and Adani’s counsel Mahesh Agarwal sought modification of the apex court’s decision of July 2, 2019 as they had arrived at an out-of-court settlement in a dispute over termination of the February 2007 PPA for supplying 1,000-MW electricity. The AG said that in terms of the settlement deed, the 2007 agreement between Adani Power and GUVNL shall stand revived and “the termination will not be given effect to. The company shall also not press for the compensatory tariff and they will continue to supply electricity to GUVNL. So, what hurt the state discom has been withdrawn,” he added.

The apex court was initially sceptical of closing the proceedings, saying “once we take up a curative petition, we can modify our verdict only after we look at merits of case”. The attorney-general, however, urged the SC to use its special powers vested in it by Article 142 of the Constitution that empowers it to dispose of the case.

In September 2021, the five-judge bench had issued notice to Adani Power on a curative petition filed by GUVNL after noting that the plea raises significant questions of law.

While seeking modification of the apex court’s decision of July 2, 2019, the joint application by Adani and the Gujarat discom asked the SC to declare that GUVNL “has relinquished its claim for termination of the PPA of February 2, 2007 and the compensation for the period till July 9, 2019 in perpetuity for all intent and purposes in view of the Settlement Deed reached”.

The state discom has agreed with Adani on the methodology reworked for the payment of energy charges to the latter for generation and supply of electricity under its 2007 PPAs “read with the two Supplementary PPAs of December 5, 2018. The parties have also agreed on the withdrawal of the proceedings pending before the Central Electricity Regulatory Commission”, the application stated.

In July 2019, a bench led by Justice Arun Mishra (now retired) had held that the notice of termination of a PPA by Adani Power to GUVNL in 2009 was legal and valid. It had validated Adani Power’s claim for compensatory tariff from GUVNL for additional costs incurred in supplying power from its imported coal-based Mundra plant, after the Gujarat Mineral Development Corporation (GMDC) reneged on its promise to supply local coal from Mogra-II coal block in Chhattisgarh.

Adani in 2006 had emerged as a successful bidder for supply of 1,000-MW power at the rate of Rs 2.35 per Kwh from its power project at Korba, Chhattisgarh, to GUVNL. Another agreement was entered in April 2007 for supply of 1,000 MW against bid from Mundra Power Project in Gujarat. The bid was submitted on the basis of the assurance given by GMDC to supply 4 million tonne of coal. Since the fuel supply agreement could not be executed, Adani had written to GUVNL in January 2009 reiterating its inability to supply the power to the procurer in the absence supply of coal by from GMDC. It also informed that it had no other option except to terminate the PPA.

Finally, Adani on December 28, 2009, terminated the PPA. GUVNL challenged the termination before the Commission, which directed Adani to supply the power at the rate determined in the PPA. On appeal, Aptel upheld the CERC’s order. GUVNL had argued that the procurer was not concerned with the issue as to from where Adani would arrange for its supply of coal. It submitted that it was the responsibility of Adani to make arrangement for an alternative sources.