2024 INSC 631 1

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 7595 of 2021

BANGALORE ELECTRICITY SUPPLY

COMPANY LIMITED ...APPELLANT(S)

VERSUS

HIREHALLI SOLAR POWER PROJECT LLP

& OTHERS …RESPONDENT(S)

WITH

CIVIL APPEAL NO. 7608 OF 2021

WITH

CIVIL APPEAL NO. 6386 OF 2021

Table of Contents

Facts: .......................................................................................................................................... 2

KERC’s order: . ........................................................................................................................ 5

APTEL’s impugned order:. .................................................................................................... 6

Submissions:. ......................................................................................................................... 10

Scope of Supreme Court’s appellate jurisdiction under Section 125 of the Act: 13

Analysis on merits:. .............................................................................................................. 16

Clauses of the Power Purchase Agreement (PPA):. ..................................................... 17

Re: Applicability of the force majeure clause: ............................................................... 21

Conclusion: .............................................................................................................................. 26

2

J U D G M E N T

PAMIDIGHANTAM SRI NARASIMHA, J .

1. The short issue arising from t hese appeals is whether the

extension of the Scheduled Commissioning Date

1 was occasioned

under the force majeure clause of the Power Purchase Agreement

2,

and consequently, whether the reduction in tariff payable to the

respondents is justified. While upholding the decision of the

Appellate Tribunal for Electricity

3 we have examined the scope and

ambit of our appellate jurisdiction under Section 125 of the

Electricity Act, 2003

4. We have held that the restrictive scope of

appellate jurisdiction is a product not only of the statutory

preconditions, but also a necessary measure to enable freedom to

statutory regulator and Tribunal to develop sectorial laws through

a principled and consistent approach.

2. Facts: Since the facts and the PPAs are similar in all three

appeals, we will deal with the facts in the lead Civil Appeal No.

7595/2021, where the most relevant facts are as follows:

2.1 State of Karnataka introduced a policy dated 26.08.2014 to

identify and promote solar energy projects by land-owning farmers.

1

Hereinafter “SCD”.

2

Hereinafter “PPA”.

3

Hereinafter “APTEL”.

4

Hereinafter “the Act”.

3

These solar power plants of 1-3 MW capacity would generate and

sell power to the State Electricity (Distribution) Supply

Companies

5 at the tariff determined by the Karnataka Electricity

Regulatory Commission

6.

2.2 Respondent no. 2 is one of the many farmers who applied

under the policy and is recognised as a solar power developer

7

under the policy. Respondent No.1 is a special purpose vehicle to

undertake the solar power project in Chitradurga district in

Karnataka.

2.3 Pursuant to a Letter of Award dated 28.08.2015, the

appellant entered into a PPA with respondent no. 2 on 29.08.2015.

This PPA was approved by the KERC on 07.09.2015. The relevant

clauses of the PPA will be discussed later, but an important aspect

to note at this juncture is that the SPV must achieve commercial

operation within 18 months from the effective date as per Article

1.1(xxviii) read with Article 4.1(c) of the PPA. Effective date is

defined under Article 1.1(xii) as the date of signing the PPA. Hence,

the SCD for the project was 28.02.2017 as per these clauses.

5

Hereinafter “DISCOMs ”.

6

Hereinafter “KERC”.

7

Hereinafter “SPD”.

4

2.4 The SPV (respondent no. 1) was incorporated on

05.02.2016. The respondents then submitted an application for

land conversion on 16.02.2016. On 10.03.2016, they paid the

evacuation approval processing fee. On 27.12.2016, they paid the

land conversion processing fee, and the approval for conversion

was granted on 07.01.2017. The evacuation scheme was

provisionally approved on 13.05.2016, and the final approval was

on 22.08.2016.

2.5 Several farmers, including the respondent , raised concerns

regarding delay in the execution of the project on account of delay

in getting land use conversion, delay in getting evacuation

approvals, demonetisation, and other reasons. Hence, the

Government of Karnataka by a letter dated 24.11.2016 directed all

DISCOMs to set up 3-member committees to examine each request

for extension.

2.6 The present respondents requested a 6 -month extension

under Article 2.5 of the PPA on 03.12.2016. Th is was approved by

the appellant through a letter dated 02.03.2017.

2.7 However, by a letter dated 05.04.2017, KERC directed the

DISCOMs that all requests for extensions must be filed before it.

Pursuant to this letter, the respondents filed a petition before the

5

KERC seeking extension of time for the commercial operation of

the project and invoked the force majeure clause in the PPA (Article

8.3).

2.8 During the pendency of the petition, the respondents’ solar

power project was commissioned on 24.08.2017, within the

extended period of 24 months.

3. KERC’s order: In its order dated 18.09.2018, the KERC

rejected the various causes of delay put forth by the respondents

and held that the force majeure clause must be strictly interpreted.

First, delay in approval of the PPA by KERC was held to have no

bearing on the initial obligations of the SPD in applying for

approvals, loans, etc as the respondents had not proved the same.

Second, it found that the respondent had applied for conversion of

land only on 18.02.2016, over five months after signing the PPA

and paid the charges only on 27.12.2016, after which it was

allowed on 07.01.2017. Hence, the delay in conversion of land use

was attributed to the respondent. Third, the delay in disbursement

of loan also did not delay the implementation as the respondent

had commenced implementation from its own funds. Fourth, the

respondent applied for the evacuation approval only on

25.02.2016, and the regular approval was finally granted on

6

22.08.2016. Hence, the respondent delayed the application and

cannot attribute the same to the authorities. Similarly, the KERC

also rejected delay on other grounds such as time taken for

delivery of the breaker, and inspection of the project and grant of

safety approval.

3.1 It also found that the respondents had not submitted a notice

as contemplated under Article 8.3(b)(i) and hence, they are not

entitled to invoke force majeure and claim an extension of time

under Article 2.5. Since the KERC found that the delay in securing

approvals and the consequent delay in commissioning was

attributable to the respondents, it imposed liquidated damages

under Articles 2.2 and 2.5.7 of the PPA.

3.2 Lastly, the KERC reduced the tariff payable to the respondent

to Rs. 4.36 per unit for the term of the PPA by relying on Article

5.1 of the PPA.

4. APTEL’s impugned order: The respondent’s appeal against the

order of the KERC was allowed by the APTEL by the order

impugned before us. The APTEL dealt with each ground of delay

raised by the respondents. First, it took note that the respondent’s

application for land conversion was on 16.02.2016, after which it

had to procure several documents, including a PTCL certificate, as

7

provided under Rule 106A of the Karnataka Land Revenue Act.

Further, these documents must be secured from various

government departments, which is a laborious process. The PTCL

certificate was issued by the government only on 04.10.2016,

although the respondent had applied for it even before signing the

PPA. Hence, it found that the respondent could not be blamed for

the delay in getting approval for land use conversion.

4.1 Further, the APTEL also took note of the State Government’s

opinion to grant deemed conversion in such projects due to the

number of SPDs facing similar issues. However, the APTEL

observed, the guidelines to revenue authorities were unclear and

hence the SPDs could not benefit from the same. The delay in the

issuance of these guidelines and the confusion among authorities

regarding deemed conversion had also resulted in a delay in

obtaining land use conversion, which the respondents cannot be

faulted for.

4.2 Second, the APTEL found that although the application for

grid connectivity and evacuation approval were submitted on

25.02.2016, the final approval was only given on 22.08.2016, after

a lapse of 5 months. Until this approval is given, the authorities

will not prepare the bay SLD and layout drawings with estimation

8

of bay erection. The bay intimation notice was received by the

respondents only a few days before the original SCD, and it was

170 days after the grant of final evacuation approval. Hence, there

was a delay in the construction of the bay that was not caused by

the respondents.

4.3 Relying on other decisions by the APTEL, it held that the date

of signing the PPA will not be the effective date, as provided in

Article 1.1(xxviii). Rather, the PPA becomes effective only when it

is approved by the KERC, which in this case was on 07.09.2015.

Hence, 18 months must be calculated from this date.

4.4 The APTEL observed that the appellant had itself approved

the extension of time by 6 months after a Technical Committee

constituted by it had scrutinised all relevant documents. Hence,

the appellant could not take the stance that the respondents were

not diligent. Even before the KERC, the appellant had not objected

to the grounds raised by the respondents, and hence they could

not take a contrary stance at this stage.

4.5 Considering the delay in obtaining the PTCL certificate and

approval for land conversion, the approval for evacuation, and

construction of the bay, the APTEL found that the respondents had

taken all necessary care and caution and acted with due diligence.

9

Hence, it held that the respondents could not be blamed for the

delay as the time taken by government authorities to provide

approvals was not within their control and they had taken all the

measures that they could. Consequently, the APTEL found that the

respondents are entitled to the benefit of the force majeure clause

and an extension of time, as was already approved by the

appellant. The respondents were able to commission the project on

24.08.2017, which falls within the extended period of 24 months

from 07.09.2015.

4.6 With regard to the reduction in tariff by the KERC, APTEL

considered that the government scheme, under which these PPAs

were signed, was intended to create opportunity and benefit for

farmers by establishing solar power plants. The farmers had

invested huge amounts, sometimes through loans, in these

projects and a reduction in tariff from Rs. 8.40 to Rs. 4.36 per unit

would adversely affect them. Hence, it directed the appellant to pay

the difference in per unit tariff along with the late payment

surcharge as provided under Article 6.4 of the PPA.

4.7 Lastly, it also set aside the imposition of liquidated damages

under the PPA as it found that there was no delay in securing

approvals and commissioning the project.

10

5. Submissions: We have heard Mr. K.M. Nataraj, ASG and Mr.

Yasobant Das, senior advocate appearing for the appellants, and

Mr. Basava Prabhu Patil, senior advocate for the respondents. The

learned counsels have, through the course of their submissions,

emphasised on whether or not the delay in the present matter

would be covered under the force majeure clause of the PPA.

5.1 Learned ASG argued that a force majeure clause must be

strictly interpreted. There must be a specific pleading by the party

claiming force majeure and the burden is on him to prove the

same. In this regard, he made two primary submissions: first, there

was no force majeure event that warrants an extension of time

under Article 2.5 of the PPA; and second , the respondents have not

complied with the requirement of submitting a written notice

invoking force majeure as required under Article 8.3(b)(i). Further,

he has also argued that the APTEL was not justified in granting

late payment surcharge to the respondent as the same was not

pleaded before the KERC or in appeal.

5.2 In regard the argument on force majeure, Mr. Nataraj has

taken us through the various dates concerning approval for change

in land use and the evacuation approval. He has submitted that

the delay in securing these approvals is attributable to the

11

respondents, who were required to obtain these permissions

within the contractually stipulated period of 365 days under

Article 2.1 of the PPA, and to finally commission the project within

a period of 18 months. Despite being aware of these timelines, he

submits that the respondents delayed the applications and

payment of requisite fees. The government departments provided

the approvals within a few days from the time when the

respondents fulfilled all requirements. He therefore submits that

the delay is attributable to the respondents and hence, as per

Article 8.3(b)(iv), they cannot claim benefit of force majeure.

Consequently, the tariff must be reduced as per Article 5.1 as a

higher tariff increases the burden on consumers and hence, affects

public interest.

5.3 Mr. Das supplemented these submissions by arguing that in

Civil Appeal No. 6386 of 2021, the respondents therein had also

raised the ground of demonetisation as a reason for delay in

commissioning. He submits that Article 8.3 of the PPA does not

cover such a ground as a force majeure event.

6. Mr. Patil, appearing for the respondents, has submitted that

there are three primary factors, among several others, that caused

the delay – (i) time taken for converting the land; (ii) time taken for

12

the KERC to approve the PPA; and (iii) time taken for the

evacuation approval. He submits that these concerns have been

raised by not only the respondents in the present case but in

several other cases. Due to the extent to which SPDs were facing

these issues, the government directed DISCOMs to set up

committees to look into the same and consider the facts of each

case individually. It is pursuant to this direction that the

respondents’ case was considered by the appellant, who granted a

6-month extension on 02.03.2017 by exercising its power under

Article 2.5 read with Article 8.3 of the PPA. He submits that it was

incorrect for the KERC to then require the respondents to file a

separate petition to seek extension as the same is not as per the

terms of the PPA. He further submits that the KERC had perversely

appreciated the evidence regarding delay and that it should not

have rejected the petition when the appellant had already granted

the extension. Further, he submitted that the respondents were

able to complete the project within the extended time period.

6.1 Mr. Patil also took us through several orders of this Court

8

that dismiss appeals arising out of similar orders by the APTEL.

He has specifically referred to the APTEL’s decision in

8

In Civil Appeal No. 3958/2020; Civil Appeal No. 897/2022; Civil Appeal No. 5134/202 1; Civil Appeal Diary

Nos. 32980/2022, 33053/2022 and 33572/2022.

13

Chennamangathihalli Solar Power Project LLP v. BESCOM

9 and has

submitted that this decision has been relied on by the APTEL in

several subsequent decisions arising out of similar facts, including

the present impugned order. This Court has dismissed the appeal

arising out of Chennamangathi halli (supra)

10 and appeals from

other APTEL orders relying on it. Mr. Nataraj, in his written

submissions, has sought to differentiate these cases from the

present matter on facts.

7. Scope of Supreme Court’s appellate jurisdiction under Section

125 of the Act: Before we deal with the submissions of the learned

counsels, we must take note of the scope of our appellate

jurisdiction under Section 125, which reads:

“Section 125. (Appeal to Supreme Court):

Any person aggrieved by any decision or order of the Appellate

Tribunal, may, file an appeal to the Supreme Court within sixty days

from the date of communication of the decision or order of the

Appellate Tribunal, to him, on any one or more of the grounds

specified in section 100 of the Code of Civil Procedure,1908…”

7.1 Section 100 of the CPC restricts the High Court’s

jurisdiction in second appeals to cases that involve ‘substantial

questions of law’. There are two components to this requirement –

(i) there must be a ‘question of law’; and (ii) such question of law

must be ‘substantial’.

9

2020 SCC OnLine APTEL 75.

10

In Civil Appeal No. 3958/2020.

14

7.2 In SEBI v. Mega Corporation Limited

11, this Court analysed

the meaning of ‘question of law’ to determine the scope of its

appellate jurisdiction under Section 15Z of the SEBI Act, 1992

12.

It held that this phrase is open textured and must be interpreted

by looking at the words in their context

13. The relevant portions

are extracted:

“17. The jurisdiction of the Supreme Court under Section 15Z to

consider any question of law arising from the orders of the

Tribunal should therefore be seen in the ‘context’ of the powers and

jurisdiction of the Tribunal under Sections 15K, 15L, 15M, 15T, 15U

and 15Y of the Act. It is in the functioning of the Tribunal to re-examine

all questions of fact at the appellate stage while exercising jurisdiction

under Section 15T of the Act. In Clariant and National Securities

Depository, this Court had an occasion to examine the jurisdiction of

the Tribunal and explain that the Tribunal has wide powers. Being a

permanent body, apart from acting as an appellate Tribunal on fact,

the Tribunal routinely interprets the Act, Rules and Regulations made

thereunder and evolves a legal regime, systematically developed over

a period of time. The advantage and benefit of this process is

consistency and structural evolution of the sectorial laws.

18. It is in the above-referred context that the Supreme Court while

exercising appellate jurisdiction under Section 15Z of the Act would

be measured in its approach while entertaining any appeal from the

decision of the Tribunal. This freedom to evolve and interpret laws

must belong to the Tribunals to subserve the regulatory regime for

clarity and consistency and it is with this perspective that the

Supreme Court will consider appeals against judgment of the

Tribunals on questions of law arising from its orders.

19. It is in this very context that the UK Supreme Court in the case

of Jones v. First Tier Tribunal, formulated certain principles for

appellate courts to interfere against the orders of Tribunals on the

ground of existence of questions of law. The Court held as under:

“16 … It is primarily for the tribunals, not the appellate

courts, to develop a consistent approach to these issues [of

11

2022 SCC OnLine SC 361.

12

Section 15Z of the SEBI Act, 1992 reads:

“15Z. Appeal to Supreme Court.-- Any person aggrieved by any decision or order of the Securities

Appellate Tribunal may file an appeal to the Supreme Court within sixty days from the date of

communication of the decision or order of the Securities Appellate Tribunal to him on any question

of law arising out of such order…” (emphasis supplied)

13

ibid, para 16.

15

law and fact], bearing in mind that they are peculiarly well

fitted to determine them. A pragmatic approach should be

taken to the dividing line between law and fact, so that the

expertise of tribunals at the first tier and that of the Upper

Tribunal can be used to best effect. An appeal court should

not venture too readily into this area by classifying issues

as issues of law which are really best left for determination

by the specialist appellate tribunals.”

20. The scope of appeal under Section 15Z may be formulated as

under:

20.1 The Supreme Court will exercise jurisdiction only when there is

a question of law arising for consideration from the decision of the

Tribunal. A question of law may arise when there is an erroneous

construction of the legal provisions of the statute or the general

principles of law. In such cases, the Supreme Court in exercise of its

jurisdiction of Section 15Z may substitute its decision on any question

of law that it considers appropriate.

20.2 However, not every interpretation of the law would amount to a

question of law warranting exercise of jurisdiction under Section 15Z.

The Tribunal while exercising jurisdiction under Section 15T, apart

from acting as an appellate authority on fact, also interprets the Act,

Rules and Regulations made thereunder and systematically evolves

a legal regime. These very principles are applied consistently for

structural evolution of the sectorial laws. This freedom to evolve and

interpret laws must belong to the Tribunal to subserve the Regulatory

regime for clarity and consistency. These are policy and functional

considerations which the Supreme Court will keep in mind while

exercising its jurisdiction under Section 15Z.”

7.3 The above understanding of ‘question of law’ as a

precondition to this Court’s exercise of appellate jurisdiction under

regulatory statutes is extremely pertinent to the present matter.

The Act envisages the establishment of State Electricity Regulatory

Commissions and the Central Electricity Regulatory Commission

as expert and specialised bodies that discharge advisory,

regulatory, and adjudicatory functions.

14 It has established the

14

The functions of the Central Commission are enlisted in Section 79 of the Act. Similarly, Section 86 provides

the functions of the State Commissions.

16

APTEL as an appellate body to hear appeals against orders of the

adjudicating officers or the Appropriate Commission.

15 Hence,

while delineating the contours of this Court’s interference in

appeal under Section 125, we must be mindful and measured so

as to enable a systematic and coherent development of electricity

law by the Commissions and the APTEL.

7.4 Having examined the scope of this Court’s exercise of

appellate jurisdiction when there is a ‘question of law’ under

Section 15Z of the SEBI Act, the position that emerges in this case,

it is a little more restrictive as the requirement under Section 125

is not merely a ‘question of a law’ but a ‘substantial question of

law’.

16

8. Analysis on merits: The above discussion provides the context

in which we decide the present appeals. We take note of several

orders of this Court that have dismissed appeals arising out of

similar orders and similar facts

17. We find it necessary to state our

reasons for dismissing the present appeals, to finally settle this

issue. We will therefore analyse the submissions of the learned

15

Section 110 establishes the APTEL. Section 111 provides the scope of appellate jurisdiction of the APTEL and

Section 120 sets out the procedure to be followed by the APTEL and the powers of the APTEL.

16

The requirement of ‘substantial question of law’ for this Court to exercise appellate jurisdiction under Section

125 has also been recognised in BSES Rajdhani Power Limited v. Delhi Electricity Regulatory Commission , (2023)

4 SCC 788.

17

In Civil Appeal No. 3958/2020; Civil Appeal No. 897/2022; Civil Appeal No. 5134/2021; Civil Appeal Diary

Nos. 32980/2022, 33053/2022 and 33572/2022.

17

counsels in light of the scope of our jurisdiction and the reasoning

and findings of the impugned order.

8.1 At the outset, it is necessary to state that the learned ASG

and learned senior counsel for the appellant have not proposed a

substantial question of law for this Court to consider. Rather, they

have argued on facts as to whether or not the delay is attributable

to the respondents, and consequently whether force majeure is

applicable. We will analyse the impugned order, as well as the

KERC’s order, to determine whether there is any substantial

question of law that calls for our interference.

9. Clauses of the Power Purchase Ag reement (PPA): Before

discussing the orders of the KERC and the APTEL, it is necessary

to identify the relevant clauses of the PPA. A rticle 2.1 of the PPA

imposes the obligation on the SPD to secure necessary approvals,

clearances, and permits within 365 days. Liquidated damages can

be imposed on the SPD under Article 2.2 in case of delay, provided

that the delay is not attributable to the appellant or due to a force

majeure event.

9.1 Article 2.5.1 permits the extension of the SCD in case the

SPD is unable to fulfil its contractual obligations due to the

appellant’s default or there are force majeure events that affect

18

either the appellant or the SPD. The list of force majeure events is

set out in Article 8.3(a), and sub-clause (vi) is the most relevant for

us. A party can invoke the force majeure clause subject to the

conditions set out in Article 8.3(b).

9.2 Article 2.5.7 provides that subject to the other provisions of

the PPA, the SPD is liable to pay liquidated damages if it is unable

to supply power to the appellant by the SCD. Therefore, the

payment of damages under this clause is subject to an extension

of time under Article 2.5.1. Article 5.1 provides for the tariff rate

payable to the SPD as Rs. 8.40 per unit. However, in cases of delay,

subject to extension of time under Article 2.5, it provides that the

lower of Rs. 8.40 per unit and the varied tariff applicable as on the

date of commercial operation will apply. A plain reading of Article

5.1 makes it clear that the lower tariff will not apply if there is an

extension of time under Article 2.5.

9.3 The relevant clauses of the PPA are reproduced for ready

reference:

“Article 2.1: Conditions Precedent

The obligations of BESCOM and the SPD under this Agreement are

conditional upon the occurrence of the following in full within 365

days from the effective date.

2.1.1

(i)The SPD shall obtain all permits, clearances and approvals

(whether Statutory or otherwise) as required to execute and operate

the Protect hereinafter referred to as "Approvals"):

19

(ii) The Conditions Precedent required to be satisfied by the SPD shall

be deemed to have been fulfilled when the SPD shall submit:

a. The DPR to BESCOM and achieve financial closure and

provide a certificate to BESCOM from the lead banker to this

effect;

b. All Consents, Clearances and Permits required for supply of

power to BESCOM as per the terms of this Agreement; and

c. Power evacuation approval from Karnataka Power

Transmission Company Limited or BESCOM, as the case

maybe.

2.1.2 SPD shall make all reasonable endeavors to satisfy the

Conditions Precedent within the time stipulated and BESCOM shall

provide to the SPD all the reasonable cooperation as may be required

to the SPD for satisfying the Conditions Precedent.

2.1.3 The SPD shall notify BESCOM in writing at least once a month

on the progress made in satisfying the Conditions Precedent. The

date, on which the SPD fulfills any of the Conditions Precedent

pursuant to Clause 2.1.1, it shall promptly notify BESCOM of the

same.”

“Article 2.2: Damages for delay by the SPD:

“2.2.1 In the event that the SPD does not fulfill any or all of the

Conditions Precedent set forth in Clause 2.1 within the period of 365

days and the delay has not occurred for any reasons attributable to

BESCOM or due to Force Majeure, the SPD shall pay to BESCOM

damages in an amount calculated at the rate of 0.2% (zero point two

per cent) of the Performance Security for each day's delay until the

fulfillment of such Conditions Precedent, subject to a maximum period

of 60 (Sixty) days. On expiry of the said 60 (Sixty) days, BESCOM at

its discretion may terminate this Agreement.”

Article 2.5: Extension of Time

“2.5.1 In the event that the SPD is prevented from performing its

obligations under Clause 4.1 by the Scheduled Commissioning Date

due to:

a. Any BESCOM Event of Default; or

b. Force Majeure Events affecting BESCOM; or

c. Force Majeure Events affecting the SPD,

2.5.2 The Scheduled Commissioning Date and the Expiry Date shall

be deferred, subject to the reasons and limits prescribed in Clause

2.5.1 and Clause 2.5.3 for a reasonable period but not less than 'day

for day' basis, to permit the SPD or BESCOM through the use of due

diligence, to overcome the effects of the Force Majeure Events

affecting the SPD or BESCOM, or till such time such Event of Default

is rectified by BESCOM.

2.5.3. In case of extension occurring due to reasons specified in clause

2.5.1 (a), any of the dates specified therein can be extended, subject

to the condition that the Scheduled Commissioning Date would not be

extended by more than 6 (six) months.

20

…

2.5.6. As a result of such extension, the Scheduled Commissioning

Date and the Expiry Date newly determined date shall be deemed to

be the Scheduled Commissioning Date and the Expiry Date for the

purposes of this Agreement.

2.5.7. Liquidated damages for delay in commencement of supply of

power to BESCOMs.

Subject to the other provisions of this agreement, if the SPD is unable

to commence supply of power to BESCOM by the scheduled

commissioning date, the SPD shall pay to BESCOM, liquidated

damages for the delay in such commencement of supply of power as

follows:

(a) For the delay up to one month-amount equivalent to 20% of the

performance security.

(b) For the delay of more than one month up to three months-amount

equivalent to 40% of the performance security.

(c) For the delay of more than three months up to six months-amount

equivalent to 100% of the performance security.

For avoidance of doubt, in the event of failure to pay the above

mentioned damages by the SPD, the BESCOM entitled to encash the

performance Security.”

Article 5: Rates and Charges:

“5.1 Tariff payable: The SPD shall be entitled to receive the Tariff of

Rs. 8.40 per kwh based on the KERC tariff order S/03/1 dated

10.10.2013 in respect of SPD's Solar PV projects in terms of this

agreement for the period between COD and the Expiry Date.

However, subject to Clause 2.5, if there is a delay in commissioning

of the Project beyond the Scheduled Commissioning Date and during

such period such period there is a variation in the KERC Tariff, then

the applicable Tariff for the projects shall be the lower of the following:

(i) Rs.8.40 per kwh

(ii) varied tariff applicable as on the date of Commercial Operation…”

Article 8: Force Majeure

“8.3 Force Majeure Events:

a) Neither Party shall be responsible or liable for or deemed in breach

hereof because of any delay or failure in the performance of its

obligations hereunder (except for obligations to pay money due prior

to occurrence of Force Majeure events under this Agreement) or failure

to meet milestone dates due to any event or circumstance (a "Force

Majeure Event") beyond the reasonable control of the Party affected

by such delay or failure, including the occurrence of any of the

following:

i. Acts of God;

ii. Typhoons, floods, lightning, cyclone, hurricane, drought, famine,

epidemic, plague or other natural calamities;

iii. Strikes, work stoppages, work slowdowns or other labor dispute

which affects a Party's ability to perform under this Agreement;

21

iv. Acts of war (whether declared or undeclared), invasion or civil

unrest;

v. Any requirement, action or omission to act pursuant to any

judgment or order of any court or judicial authority in India (provided

such requirement, action or omission to act is not due to the breach

by the SPD or BESCOM, of any Law or any of their respective

obligations under this Agreement);

vi. Inability despite complying with all legal requirements to obtain,

renew or maintain required licenses or Legal Approvals;

vii. Fire, Earthquakes, explosions, accidents, landslides;

viii. Expropriation and/or compulsory acquisition of the Project in

whole or in part;

ix. Chemical or radioactive contamination or ionizing radiation; or

x. Damage to or breakdown of transmission facilities of either Party;

b) The availability of the above item (a) to excuse a Party's obligations

under this Agreement due to a Force Majeure Event shall be subject

to the following limitations and restrictions:

(i) The non-performing Party gives the other Party written notice

describing the particulars of the Force Majeure Event as soon as

practicable after its occurrence;

(ii) The suspension of performance is of no greater scope and of no

longer duration than is required by the Force Majeure Event.

(iii) The non-performing Party is able to resume performance of its

obligations under this Agreement, it shall give the other Party written

notice to that effect;

(iv) The Force Majeure Event was not caused by the non performing

Party's negligent or intentional acts, errors or omissions, or by its

negligence/failure to comply with any material Law, or by any

material breach or default under this Agreement;

(v) In no event shall a Force Majeure Event excuse the obligations of

a Party that are required to be completely performed prior to the

occurrence of a Force Majeure Event.”

10. Re: Applicability of the force majeure clause: The primary

issue for our consideration is whether the delay in this case is due

to a force majeure event as defined under Article 8.3, and

consequently whether the respondents were entitled to an

extension of time under Article 2.5. If the answer to these

questions is affirmative, the tariff cannot be lowered under

22

Article 5.1 and liquidated damages cannot be imposed under

Articles 2.2 and 2.5.7.

10.1 The law on force majeure, specifically in the context of PPAs,

has been comprehensively dealt with by this Court in Energy

Watchdog v. Central Electricity Regulatory Commission

18. The Court

delved into contractual jurisprudence on force majeure clauses

and frustration of contracts. It held that Sections 32 and 56 of the

Indian Contract Act, 1872

19 govern the law on force majeure. When

the contract contains an express or implied force majeure clause,

it is governed under Chapter III of the Contract Act, specifically

Section 32. In such cases, the ‘doctrine of frustration’ in Section

56 does not apply and the court must interpret the force majeure

clause contained in the contract

20. It held that a force majeure

clause must be narrowly construed

21.

18

(2017) 14 SCC 80.

19

Section 32 reads:

“32. Enforcement of contracts contingent on an event happening. —Contingent contracts to do or

not to do anything if an uncertain future event happens, cannot be enforced by law unless and until

that event has happened.

If the event becomes impossible, such contracts become void.”

Section 56 reads:

“56. Agreement to do impossible act.—An agreement to do an act impossible in itself is void.

Contract to do act afterwards becoming impossible or unlawful.—A contract to do an act which,

after the contract is made, becomes impossible, or, by reason of some event which the promisor

could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.

Compensation for loss through non-performance of act known to be impossible or unlawful.—

Where one person has promised to do something which he knew, or, with reasonable diligence,

might have known, and which the promisee did not know, to be impossible or unlawful, such

promisor must make compensation to such promisee for any loss which such promisee sustains

through the non- performance of the promise.”

20

Energy Watchdog (supra), para 47.

21

ibid, para 45.

23

10.2 The present case is clearly one where the PPA contains an

explicit force majeure clause in Article 8.3, which has already been

extracted above. The question is whether the delay in

commissioning falls within the ambit of this clause.

Article 8.3(a)(vi) is the most relevant force majeure event that

would apply to the facts here. It reads:

“vi. Inability despite complying with all legal requirements to

obtain, renew or maintain required licenses or Legal Approvals”

Article 8.3(b)(iv) disentitles a party from claiming force majeure

when the event was caused by its own negligence, intentional act,

or omission. It reads:

“b) The availability of the above item (a) to excuse a Party's

obligations under this Agreement due to a Force Majeure Event

shall be subject to the following limitations and restrictions:

…

(iv) The Force Majeure Event was not caused by the non

performing Party's negligent or intentional acts, errors or

omissions, or by its negligence/failure to comply with any

material Law, or by any material breach or default under this

Agreement…”

10.3 When these clauses are read together, it is clear that the

SPD would be entitled to the benefit of Article 8.3(a)(vi) when it is

unable to secure the necessary approvals and licenses required

under the PPA, provided that there is no negligence or intentional

act or omission on its part that caused this situation .

24

10.4 The entire dispute before the KERC and the APTEL revolves

on a question of fact – whether the respondents were negligent or

not diligent in securing approvals and hence, is the delay in

commissioning attributable to them. The KERC’s appreciation of

the evidence has led it to the conclusion that the delay in

commissioning was due to the respondents’ delay in making the

applications, despite the approval of the PPA. However, the APTEL

has taken note of certain additional factors affecting the time taken

to secure the approvals that were not considered by the KERC.

These include the time taken by the government to provide the

PTCL that is required for approval of land conversion, and the

delay caused by the authority in evacuation approval. Considering

these additional factors, the APTEL has re appreciated the evidence

to find that the delay was not attributable to the respondents but

to the government bodies and relevant authorities. We find that

there is no error in the APTEL’s approach, and it is reasonable in

its reappreciation of evidence.

10.5 Further, the APTEL also correctly took note of the fact that

a large number of SPDs have raised similar issues, and the

government has responded to the same by requiring DISCOMs to

set-up committees to look into these cases. The large number of

25

cases that raise similar grounds and the government’s response

show that the delay was not faced by the respondents alone, and

hence cannot be entirely blamed on them. The government has

itself acknowledged that the land use conversion process is a long

and arduous one, which led it to deem conversion for solar power

projects under the present scheme. However, due to lapses in the

implementation of the deemed conversion, the SPDs were unable

to avail the same. The APTEL has rightly appreciated these facts

to hold that the respondents acted diligently and with care and

caution to secure approvals, and hence their claims cannot be

rejected through recourse to Article 8.3(b)(iv).

11. Finally, we have also considered the letter by the appellant

dated 02.03.2017 that granted a 6-month extension to the

respondents after considering its individual facts and

circumstances. This grant of extension must be seen in light of the

government’s direction to DISCOMs dated 24.11.2016 to set up 3-

member committees to consider each request for extension. This

shows that the appellant, after considering the specific case of the

respondents, has itself accepted that they are entitled to the

benefit of Article 2.5 read with Article 8.3 of the PPA. Even before

the KERC, the appellant did not challenge the respondents’

26

contentions. Therefore, at the appellate stage before the APTEL

and this Court, they cannot be permitted to take a contrary stance

and raise the plea that the delay was attributable to the

respondents and not covered by the force majeure clause or that

there was non-compliance with the notice requirement under

Article 8.3(b)(i). We therefore reject the contentions of the appellant

that force majeure does not apply in this case.

12. In light of the above findings of fact by the APTEL that the

delay is not attributable to the respondents and that the force

majeure clause is applicable, it rightly held that the extension of

time under Article 2.5 is warranted and the commissioning of the

project on 24.08.2017 is within the extended period of 24 months.

Consequently, the APTEL also rightly held that there is no occasion

for the imposition of liquidated damages under Articles 2.2 and

2.5.7 or for the reduction of tariff under Article 5.1 of the PPA.

13. Conclusion: After considering the learned counsels’

submissions in light of the above findings of the APTEL, we find

that no substantial question of law arises in the present case. The

APTEL has primarily decided a question of fact as to the

attributability of the delay, and from the above, it is clear that the

27

APTEL’s findings are neither illegal nor unreasonable. Hence, we

find no reason to interfere with the same.

14. Lastly, we also reject the appellant’s contention that the

APTEL’s direction to pay late payment surcharge to the

respondents is unjustified since the same was not pleaded. As we

have already held, the APTEL rightly restored the tariff of Rs. 8.4

per unit and directed the appellant to pay the difference amount.

The direction to pay the late payment surcharge on this amount is

explicitly rooted in the PPA, and hence, is in furtherance of the

intention of the parties. There is no reason to set aside the same.

15. With the above reasons, we dismiss the present appeals.

16. No order as to costs.

………………………………....J.

[PAMIDIGHANTAM SRI NARASIMHA]

………………………………....J.

[PANKAJ MITHAL]

NEW DELHI;

August 27, 2024