Summary: The Supreme Court’s ruling in Nabha Power v. PSPCL makes a clear distinction: government press releases and policy clarifications, even if they affect project economics, do not qualify as “Change in Law” under Power Purchase Agreements. Only formal legal instruments like statutes, rules, regulations, or gazette notifications carry the weight needed to trigger compensation. This brings greater certainty for regulators and distribution companies, but it also means developers must be more cautious when bidding, since informal policy signals can no longer be relied upon for relief. The decision ultimately reinforces contractual discipline while reminding the sector that policy announcements must be formally notified to have legal effect.

The Indian power sector is built on meticulously calibrated contractual arrangements, with disputes concerning Change in Law posing significant challenges to this established equilibrium. While there is no shortage of jurisprudence on Change in Law generally, Nabha Power Limited v. PSPCL[1] is best understood for a narrower, but far more disruptive clarification:

Do government press releases and policy clarifications (even if commercially significant) have the legal status necessary to qualify as “Change in Law” under a Power Purchase Agreement (PPA)?

For years, developers have often relied on policy announcements, circulars, and clarifications to seek regulatory relief and compensation, especially where such communications reshape financial assumptions that underpin tariff bids. The Supreme Court’s pronouncement operates as a decisive course correction — it draws a bright line between administrative communication and law, and in doing so, resets expectations across the sector.

Link to Factual Background Factual Background

Nabha Power Limited (NPL), incorporated as a Special Purpose Vehicle (SPV), entered into a Power Purchase Agreement (PPA) with Punjab State Power Corporation Limited (PSPCL) for the development and operation of a thermal power project. The project was awarded through a tariff-based competitive bidding process, where bidders price risk into their tariffs based on prevailing legal and fiscal assumptions. During implementation, NPL sought compensation on the ground that certain governmental measures altered the fiscal landscape underpinning the bid. NPL’s claim was anchored in the assertion that:

• Clarifications and communications relating to the Mega Power Project policy, and
• Notifications issued by the Directorate General of Foreign Trade (DGFT), including issues linked to the Foreign Trade Policy (FTP),

had modified the fiscal paradigm in a manner that should be recognised as a Change in Law under the PPA. However, the Appellate Tribunal for Electricity (APTEL) ruled against NPL. It found that benefits under the FTP and related press releases/ communications did not qualify as Change in Law, principally because they lacked legislative or statutory authority. Aggrieved, NPL appealed to the Supreme Court.

Link to Contentions of the Parties Contentions of the Parties

NPL’s argument was rooted in commercial logic and project economics. It contended that:

• Governmental press releases and clarifications effectively recalibrated the fiscal framework applicable to the project.
• These communications had material influence on project costs and revenue assumptions, which were integral to the financial projections made at the time of bidding.
• The PPA’s Change in Law definition should be interpreted expansively and purposively, such that it captures policy pronouncements that alter the economic foundation of the bid, even if communicated through instruments such as press releases. In essence, NPL pushed for a reading that privileges economic substance over formal legal form, emphasising the real-world reliance developers place on governmental communications in a sector shaped by policy signals.

PSPCL, by contrast, advocated a formal legal threshold. It argued that:

• Press releases are administrative communications, they are informational and explanatory, not norm-creating.
• Such communications lack binding legal effect and do not have the statutory character required to qualify as a Change in Law event.
• Only statutes, subordinate legislation, or notifications duly published in the Official Gazette can constitute Change in Law under the PPA framework. PSPCL’s submission therefore treated the dispute as one of legal taxonomy: a press release may reflect intent or policy direction, but unless it is embodied in a legally recognised instrument, it cannot trigger contractual compensation.

Link to Judgment Judgment

The Supreme Court decisively endorsed PSPCL’s position and closed the door on press-release-based Change in Law claims. It held that:

• A press release is purely administrative in character;

• It has no legal sanctity; and
• Therefore, it cannot constitute a “Change in Law” event.

Crucially, the Supreme Court underlined what a press release is not — it does not emanate from a statute, rule, regulation, or a notification published in the Official Gazette. Lacking this formal legal pedigree, it cannot be treated as “law” for Change in Law compensation purposes.

Analysis

This ruling is often read as another Change in Law decision, but its real weight lies elsewhere — it clarifies a long-contested boundary by stating unequivocally that press releases, however important in policy terms, do not amount to law. Historically, developers have frequently anchored compensation claims on policy circulars and informal governmental communications, especially where such communications were the only visible articulation of a shift affecting costs, duties, exemptions, or incentives. The Supreme Court has now set a hard threshold — unless the change is formally notified in the Official Gazette, it does not attain the status of “law”. This is not merely semantics, it is a structural clarification that will influence how claims are pleaded, assessed, and adjudicated, going forward.

From a sectoral standpoint, the judgment provides greater clarity for DISCOMs and regulators in an area that has historically been characterised by interpretive ambiguity. But that certainty comes at a cost. It transfers a greater quantum of risk onto developers. Developers can no longer predicate Change in Law compensation on informal communications/ press releases, even when such communications materially influence project economics and assumptions baked into competitive bids. This demands that:

• Independent power producers and renewable developers recalibrate risk allocation frameworks when bidding, and
• Bid assumptions become more circumspect, recognising that not every policy announcement will translate into a compensable legal change.

The judgment also highlights a practical and recurring governance problem. In India’s power and trade ecosystem, pivotal policy shifts are frequently disseminated via press releases. That creates a legal vulnerability. If the government intends market participants to act on policy shifts, the judgment implies that formal promulgation is imperative, i.e., the policy change should be issued through gazette notifications or other legally cognizable instruments. Otherwise:

• developers may adjust conduct and financing based on press releases, but
• they cannot claim contractual compensation if those announcements adversely affect project economics, and
• projects may also become vulnerable to protracted litigation when parties dispute whether policy “signals” should trigger contractual relief.

The Supreme Court’s approach drives a shift toward statutory discipline and contractual sanctity:

• Prospective bids will need tighter buffers for policy uncertainty that is not formally notified.
• PPAs will demand more meticulous drafting, possibly clarifying what qualifies as Change in Law and what does not, and how policy communications are to be treated (if at all).
• Developers must now vigilantly track only those legal instruments that are formally notified, i.e. statutes, rules, regulations, and gazette notifications, rather than assuming that policy press releases will translate into compensable change.

At the same time, the ruling strengthens predictability by ensuring that only bona fide statutory or regulatory modifications trigger tariff adjustment mechanisms. This reduces the scope for opportunistic claims and stabilises the tariff framework, particularly important in competitively bid PPAs where pricing is premised on tightly modelled risk assumptions.

Nabha Power v. PSPCL transcends a routine Change in Law dispute. It draws a sharp and necessary boundary — press releases are not law, and therefore cannot serve as the basis for Change in Law compensation. This clarity strengthens contractual certainty and statutory discipline, while simultaneously compelling developers to rethink how policy volatility is priced into bids and how governmental communications are evaluated for legal enforceability.

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[1] (2025) INSC 1002