Law of Interpretation of Statutes and Principles of Legislations
Law of Interpretation of Statutes and Principles of Legislations
Law of Interpretation of Statutes and Principles of Legislations
INTERPRETATION OF STATUTES
AND PRINCIPLES OF LEGISLATIONS
Factual Background :
The Appellant, NabhaPower Limited, was incorporated as a Special Purpose Vehicle by the Punjab
State Electricity Board (‘PSEB) which has now been succeeded by Punjab State Power Corporation
Limited (‘PSPCL’) for implementing a power plant in Rajpura, Punjab. The Appellant was constrained
to file an appeal before the Supreme Court as it was aggrieved by PSPCL’s stance of denying
reimbursement of expenses incurred by the Appellant which formed part of the cost of coal as sought by
the Appellant from PSPCL under various heads including, inter alia, washing of coal, road and surface
transportation for bringing coal to the project site, liaising for procurement of coal, third-party analysis
of coal, and transit and handling losses in transportation of coal.
The second and equally substantial grievance of Nabha Power Limited pertained to the measurement of
the Gross Calorific Value (‘GCV’) of coal at the project site and not at the ‘mine-end’ where the
property is supposed to pass on to the Appellant as urged by PSPCL.
Simply put, the Appellant’s case was premised on the contention that washing of coal was imperative as
only coal of a specified quality could be used in its plant due to extant MoEF notifications and that the
referenc to coal and fuel in the Power
Purchase Agreement (‘PPA’) could only mean washed coal. Therefore, the actual cost
of purchasing, transporting and unloading of coal specifically referred to in Article 1.2.3 of Schedule 7
of the PPA, must refer to such actual cost of coal. The question which arose for consideration before the
Bench was whether the assurance of reimbursement of the actual cost of purchasing coal would,
notwithstanding the express provision of the contract, include by implication the additional cost incurred
towards, inter alia, washing of the coal necessary to raise it to the grade of “Fuel” as defined under the
PPA. If the aforesaid were to be answered in the affirmative, the Appellant would automatically get
entitled to reimbursement for all the costs incurred by it for getting coal of required quality to its project
site including, inter alia, washing charges and all transportation costs, irrespective of the mode of
transport i.e. rail or road.
The second grievance of the Appellant stemmed from the fact that the GCV of coal undergoes
deterioration when transported for the purposes of washing. As the coal was being transported over a
distance of approximately 1000 kms., there was a notable disparity between the GCV of coal measured
at the mine end and the GCV of coal unloaded at the project site. It was the case of the Appellant that
the formula for calculating Energy Charge contemplates that the GCV of coal be measured at the project
site and not at the mine end.
The Appellant endured two rounds of litigation – before the State Commission and then in appeal before
the Appellate Tribunal for Electricity (‘APTEL’) before approaching the Supreme Court under Section
125 of the Electricity Act, 2003. Both the State Commission and the APTEL failed to uphold the
contractual terms of the PPA and rejected a majority of the claims made by the Appellant, inter alia, on
the grounds that –
1. It was found that there would be washing involved to the coal sourced by PSPCL from SECL, from
mines located in Chhattisgarh;
2. the Successful Bidder had to arrange for the washing of coal;
3. In view of (i) & (ii), since the bidders did not expressly seek a further clarification in respect of
specific reimbursement of washing related costs, it should be assumed that such costs were to the
account of the Successful Bidder.
Meaning of the rule applied: When the list of words has a modifying phrase at the end, the phrase refers only
to the last word e.g: firemen , policemen, and doctors in a hospital. Here, “ in a hospital” only applies to
doctors and not to firemen or policemen.
The reddendo singula singulis principle concerns the use of words distributively. Where a complex
sentence has more than one subject, and more than one object, it may be the right construction to render
each to each, by reading the provision distributively and applying to each object to its appropriate subject. A
similar principle applies to verbs and their subjects, and to other parts of speech. A typical application of this
principle is where a testator says ‘I devise and bequeath all my real and personal property to B’. The term
devise is appropriate only to real property. The term bequeath is appropriate only to personal property.
Accordingly, by the application of maxim reddendo singula singulis , the testamentary disposition is read as
if it were worded ‘ I devise all my real property , and bequeath all my personal property, to B’.
Reddendo singula singulis is a Latin term that means by referring each to each; referring each phrase or
expression to its corresponding object. It is a rule of construction used typically in distributing property. For
example, when a will says "I
devise and bequeath all my real and personal property to A", the principle of reddendo singula singulis
would apply as if it read "I devise all my real property, and bequeath all my personal property, to B", since
the word devise is appropriate only to real property and the term bequeath is appropriate only to personal
property.
Koteshwar Vittal Kamat vs K. Rangappa Baliga was concerned with the construction of the Proviso to
Article 304 of the Constitution which reads, “Provided that no bill or amendment for the purpose of clause
(b), shall be introduced or moved in the legislature of a state without the previous sanction of the
President”. It was held that the word “introduced” applies to “bill” and the word “moved” applies to
“amendment”. The Supreme Court stated that where a sentence contains several antecedents and several
consequents they are to be read distributively. That is, the words are to be applied to the subjects to which
they appear by context most properly to relate and to which they are most applicable.
Where –
FCOALn = weighted average actual cost to the Seller of purchasing, transporting and unloading the
coal most recently supplied to and at the Project before the beginning of month “m” (expressed in Rs./MT
in case of domestic coal)
PCVn = weighted average gross calorific value of the coal most recently delivered to the
Project before the beginning of month “m” expressed in kcal/kg.
PSPCL sought to create a distinction between the terms “to the project” used in relation to GCV of coal and
“to and at the project” used in relation to cost of coal in the same formula. It was argued that as the formula
uses two different expressions, the two expressions have to mean two different things and the formula does
not contemplate the measurement of GCV at the project site.
The aforesaid argument advanced by PSPCL was rejected by the Bench. The Bench conducted an in-depth
analysis of the formula for calculating Energy Charge.
It was observed that the formula broadly refers to three components i.e. (a) purchasing, (b) transporting, and
(c) unloading the coal. The three components, as identified above, are used with the term “most recently
supplied to and at the project. The Bench applied the principle of Reddendo Singula Singulis and held that
the word ‘to’ obviously would have reference to transporting while the word ‘at’ would have a relationship
with unloading, since the coal would be ‘transported to’ and ‘unloaded at’ the project. Thus, the definition of
FCOALn was constructed Reddendo Singula Singulis, to mean – the weighted average actual coal at the
project site.
Applying the aforesaid rule of construction, the Supreme Court held that a reading of the Energy Charges
formula leads to only one conclusion, that all costs of coal up to the point of the Project Site have to be paid
to the successful bidder and that the GCV of the coal ought to be necessarily measured at the project site.
Accordingly, the appeal filed by Nabha Power Limited was partially allowed, holding, inter alia,–
1. The term ‘coal’ in the formula for computation of Monthly Energy Charges has to mean ‘washed’ coal.
3. The Calorific Value of coal (GCV) has to be determined at the project site.
CRITICAL ANALYSIS :
The decision in Nabha’s appeal is a step towards ensuring that contractual rights of private individuals, as
well as the state, are based on equity. In State of Haryana vs. Mahabir Vegetable Oils Pvt. Ltd., the Apex
Court, noting the observations made by it in an earlier decision, opined that – “When the Government is able
to show that in view of the facts as have transpired since the making of the promise, public interest would be
prejudiced if the Government were required to carry out the promise, the Court would have to balance the
public interest in the Government carrying out a promise made to a citizen which has induced the citizen to
act upon it and alter his position and the public interest likely to suffer if the promise were required to be
carried out by the Government and determine which way the equity lies. It would not be enough for the
Government just to say that public interest requires that the Government should not be compelled to carry
out the promise or that the public interest would suffer if the Government were required to honour it.” The
reasoning employed by the Apex Court in Nabha’s appeal is a welcome departure from the judiciary’s
general reluctance against enforcing contractual terms against the state. The decisions of the State
Commission as well as the APTEL, with great respect, appear to be fallacious as both fora have rejected the
Appellant’s claims on the grounds that a further clarification was not sought by them. A contract represents
a business understanding between the parties. In the opinion of the author, the decision is fair as the state is a
party to commercial dealings with private persons and is equally well versed in the transaction of business as
regulated by contracts which parties opt to govern on their own volition. It is only fair that the State should
be bound by the terms of the agreement as any other private party would be under similar circumstances.