Press Release Does Not Qualify as Law

The Hon’ble Supreme Court of India, in its judgment dated November 5, 2024, in the case of Nabha Power Limited v. Punjab State Power Corporation Limited, [2024 SCC OnLine SC 3128], clarified the interpretation of “law” and “change in law” under a Power Purchase Agreement (PPA). The Court ruled that a press release issued by the Government of India does not qualify as “law,” highlighting the importance of statutory instruments over informal announcements in resolving contractual disputes.

Nabha Power Limited (NPL), a subsidiary of Larsen & Tuobro Private Limited (“L&T”), and Punjab State Power Corporation Limited (PSPCL) entered into a PPA for power purchase from the Rajpura Generating Station (2 x 700 MW) in Punjab. The agreement included provisions for tariff adjustments in case of a “change in law,” with the term “law” explicitly defined to encompass statutes, regulations, notifications, and decisions by Indian governmental authorities. The dispute centred on a press release issued by the Government of India on October 1, 2009, which announced modifications to the Mega Power Policy. Notably, the press release suggested removing the requirement for interstate power sales in order to qualify for Mega Power Status.

While NPL claimed this press release constituted a “change in law,” PSPCL contended that the press release was merely an announcement of a proposal, lacking the binding force of law. PSPCL maintained that the actual change occurred later, in December 2009, when the government formally issued notifications under the Customs Act, 1962, and revised the Mega Power Policy document.

The Court held that the October 1, 2009, press release did not enact, amend, or repeal any existing law. It was deemed a mere announcement of a Cabinet-approved proposal, subject to further conditions and contingencies. As such, the press release could not qualify as “law” under the PPA.

The Apex Court determined that the actual “change in law” occurred on December 11, 2009, and December 14, 2009, when the government issued

• A notification under the Customs Act, 1962, granting duty exemptions; and
• A revised Mega Power Policy document.

These formal notifications marked the implementation of the policy changes outlined in the press release.

The Court concluded that the PPA explicitly defined “law” as statutes, ordinances, regulations, and other legally binding instruments. The press release did not meet this definition. Furthermore, the business efficacy test could not override the explicit terms of the PPA, which required statutory backing for any claimed change in law.

The Court rejected NPL’s argument based on promissory estoppel, stating that PSPCL was not the promisor. Even if the press release were considered a promise, it did not create enforceable rights or obligations.

It further upheld the concurrent findings of the Punjab State Electricity Regulatory Commission and the Appellate Tribunal for electricity. The ruling clarified that benefits arising from the Mega Power Policy changes post-bid deadline constituted a “change in law” event. As a result, these benefits must be passed on to PSPCL and ultimately to consumers in Punjab. The judgment provides valuable guidance on interpreting “change in law” provisions in contracts, emphasizing the need for legal formalization through statutory instruments.

By distinguishing between informal announcements and legally binding instruments, the Court reinforced the importance of clarity and formalization in contractual and statutory frameworks. This judgment serves as a caution for parties to precisely define and document their rights and obligations in agreements, leaving minimal scope for ambiguity or reliance on non-binding communications.