In a landmark ruling, a three-judge bench of the Supreme Court, comprising Justice B.R. Gavai, Justice Prashant Kumar Mishra, and Justice K.V. Viswanathan, clarified that Cabinet decisions announced through press releases do not constitute “law” unless formalized through statutory or regulatory instruments. This decision, delivered in Civil Appeal No. 8478 of 2014, arose from a dispute between Nabha Power Limited and Punjab State Power Corporation Limited (PSPCL) regarding the enforceability of a 2009 Cabinet press release on the Mega Power Policy. Justice Viswanathan, writing for the bench, emphasized that legally binding policy changes require codification through official notifications to take effect as law.
Background of the Case
The dispute centers on a power purchase agreement (PPA) between Nabha Power Limited, a subsidiary of L&T Power Development, and PSPCL for a power plant in Punjab. On October 1, 2009, the Union Cabinet announced modifications to the Mega Power Policy via a press release, outlining customs duty exemptions for eligible projects. Nabha Power claimed it relied on this announcement when calculating its project bid, arguing that the press release constituted a “change in law” under the PPA, allowing it to retain the fiscal benefits associated with the mega power status without passing them to PSPCL.
PSPCL, represented by Senior Counsel M.G. Ramachandran, contested this view, asserting that the legal change only took effect with a December 11, 2009, customs notification and a December 14, 2009, policy amendment. PSPCL argued that these later dates marked the formal change in law, requiring Nabha Power to pass the benefits to PSPCL and ultimately to the consumers.
Key Legal Issues
The Supreme Court’s judgment addressed three core issues:
1. Definition and Applicability of “Law” Under the PPA: The PPA defined “law” to include statutes, notifications, and orders with binding force. Nabha Power argued that the Cabinet’s decision, even if issued as a press release, should be considered an enforceable change in law due to its origin from the Union Cabinet.
2. Requirement for Formal Notification: The Court evaluated whether a press release could replace the formal notification required by statutory frameworks, specifically under Section 25 of the Customs Act, which governs customs duty exemptions. PSPCL argued that a press release was only an expression of intent and did not carry binding legal status without an official notification.
3. Implications of the Press Release on Bidding Process and Tariff Adjustments: Nabha Power argued that it had already factored in the fiscal benefits from the press release in its bid calculations, while PSPCL contended that without formal enactment, Nabha Power was not entitled to retain these benefits.
Supreme Court’s Decision
Justice K.V. Viswanathan, writing on behalf of the bench, ruled in favour of PSPCL, concluding that the Cabinet’s press release did not meet the threshold of enforceable “law” under the PPA. The Court underscored that certainty and formal promulgation are essential for legal enforceability, stating:
“The press release announcing the Cabinet’s approval of certain modifications…is not law as defined in Clause 1.1 of the PPA. Further, the press release does not enact, adopt, promulgate, amend, modify or repeal any existing law or bring into effect any law.”
The Court found that the actual legal change only took effect with the customs notification on December 11, 2009, and the policy amendment on December 14, 2009. Consequently, Nabha Power was obligated to pass on the fiscal benefits derived from these notifications to PSPCL, aligning with the PPA’s provisions.
In its observations, the Court reinforced the importance of procedural formality in policy enactments. Justice Viswanathan remarked:
“Certainty is the hallmark of law. It is one of its essential attributes and an integral component of the rule of law.”
Nabha Power also argued for promissory estoppel, asserting that the Cabinet’s announcement created a legitimate expectation. However, the Court dismissed this claim, explaining that promissory estoppel requires a clear and enforceable commitment, which was absent in this case as the press release lacked binding legal force.
