1

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.__________________OF 2022

(Arising out of SLP (C) N os.4609-4610 OF 2021)

M.P. POWER MANAGEMENT COMPANY

LIMITED, JABALPUR …APPELLANT(S)

Versus

M/S. SKY POWER SOUTHEAST SOLAR

INDIA PRIVATE LIMITED & OTHERS …RESPONDENTS(S)

J U D G M E N T

K.M. JOSEPH, J.

1. Leave granted.

2. The appellant impugns the Judgment of the High

Court dated 27.02.2020 in Writ Petition No. 420 of

2019. It further challenges the Order dated 28.12.2020

in Review Petition No. 682 of 2020. By the said Judgment

in the Writ Petition, the High Court allowed t he Writ

Petition filed by the first respondent and quashed the

Order dated 07.07.2018, which was passed by the

appellant, terminating the Power Purchase Agreement

2

(hereinafter referred to as ‘the PPA’, for short),

which was entered into by the appellant an d the first

respondent. The review filed by the appellant was

dismissed. Hence the appeals.

THE FACTS

3. The appellant, which is “a wholly owned company of

the Government of Madhya Pradesh” (as described by the

appellant in the Special Leave Petition), is

responsible for the bulk purchase of electricity in the

State of Madhya Pradesh for onward sale/supply to the

distribution utilities (DISCOMS). The appellant issued

a request for proposal (RFP) dated 06.05.2015 for long -

term procurement of 300 MW of solar energy through

tariff-based competitive bidding. The bid of M/s Sky

Power Southeast Asia Holding Limited was accepted. It

was declared the successful bidder for three units of

50 MW each at different tariff rates. The bidder

subsequently incorporated the f irst respondent, viz.,

M/s Sky Power Southeast Solar India Private Limited as

a special purpose company. This was for developing one

project of 50 MW. The rate, which is applicable in

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respect of the first respondent, was Rs.5.109 per unit.

In respect of th e other two bids, the bidder

incorporated other companies, viz., M/s Sky Power Solar

India Private Limited and M/s Sky Power Southeast Asia

One Private Limited. The rates applicable in respect

of said companies for the other two projects consisting

of 50 MW each was Rs.5.298 per unit and Rs.5.051 per

unit, respectively. The PPA was entered into on

18.09.2015. The agreement, inter alia, provided for

pre-commissioning activities. They are described as

satisfaction of conditions subsequent by the seller.

The first respondent is the seller under the PPA.

4. The Agreement contemplated completion of the

conditions subsequent, within a period of 210 days. In

other words, the Agreement, admittedly, provided that

the first respondent was to achieve fulfilment of

conditions subsequent by 15.04.2016. The Agreement

further contemplates an extension of the period of

fulfilment of the condition subsequent on payment of

penalty for a further period of nine months. Thus,

calculating 210 days and an additional nine months from

18.09.2015, which is the date of the PPA, the period

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would come to an end on 15.01.2017. A communication was

addressed dated 12.01.2017 by the first respondent. The

first respondent purported to refer to Article 2.1 of

the PPA, which, inter alia, reads as follows:

“Article 2.1 Seller agrees and undertaken to

duly perform and complete all of the following

activities seller's own cost and risk within

210 days from the effective Date unless such

completion is affected by any force Majeure

event, or if any of the E ffective is

specifically waived in writing by MPPMCL:

a) The Seller shall obtain all Consents,

Clearance and Permits required for supply of

Power to MPPMCL as per the te rms of this

Agreement;”

5. The first respondent purported to present certain

documents and contend that there was compliance of its

obligations under the PPA. This led to communication

dated 22.02.2017 addressed by the appellant to the

first respondent. It referred to the status of the

documents, which the appellant noted. Furthermore,

appellant sought certain documents. It is, inter alia,

pointed out by the appellant that the first respondent

had no documents in regard to 34.12 hectare of land and

an unregistered lease deed for only 12 months was

submitted, which could not be considered as fulfilment

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of the condition subsequent. Thereafter, it was stated

that the PPA is liable to be terminated in terms of

Article 2.5.1 of the PPA. Explanation/justification if

any was called for from the first respondent . Acting

on the request of the first respondent, the appellant

granted time for response of the first respondent till

10.03.2017. The response, which was given on

10.03.2017, reads as follows:

“Firstly, we are thrilled to update you tha t

the project is under advanced construction and

all equipment order f or the project have been

placed and construction happening on site we

expect that the project will be top quality

using the best equipment in the market and

constructed by a top-tier EPC, for the benefit

of both Sky Power and the state of MP.

1. Satisfaction of Condition subsequent

regarding Construction Financing

MPPMCL Comment: "Loan sanction letter of Mis

L&T Finance vide letter No. S07201A03/16 -17

DATED 29.08.2016 Copy of facility agreement and

affecting compliance documents as stated in

above letters are required to be submitted"

SKY POWER comment: reference is made to

paragraph 2.1.1.(b) of the PPA, reproduced

below:

Sd/-

D.G.M. (Commerical-3)

R.0. MPMCL, Bhopal”

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6. Thereafter, the first respo ndent sent

communication dated 14.03.2017. It reads as follows:

“SKY POWER GLOBAL

March 14, 2017

To,

The Managing Director

MP Power Management Company Limited

Bittan Market,

Bhopal-462016

Attention: Chief General Manager Commercial,

MPPMC, Jabalpur.

Ref: Submission of Documents to MP Power

Management Company limited ("MPPMCL") for

fulfilment of Conditions subsequent by

SkyPower southeast solar India private Limited

("Sky Power")

Reference: 1. Sky Poer Letter dated 10

March 2017,

2. Sky Power Letter SKP2/MP/SOLAR MPPMCL/2015 -

16/06 dated 12 Jan 2017

3. Agreement (PPA) dated September 18, 2015

between MPPMCL and Skypower

Dear Sir,

Further to our office letter dated 10 March

2017 & skyP2/MP/SOLAR/MPPMCL/2015 -16/06 dated

12 Jan 2017 we hereby submit that we have

completed the entire acquisition for land 29,

85 Acres including balance 87.S Acres of land

parcels.

The relevant land registration documents have

been enclosed for your perus al

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We hereby submit that we have duly completed

land registration for 249,85 Acer for the

project

Thanking you in anticipation.

MIS SKYPOWER SOUTHEAST SOLAR INDIA PRIVATE

LIMITED

Sd/- Shivani Jhariya

(Authorized Signatory)

Sd/-

D.G.M. (Commerical-3)

R.O. MPMCL, Bhopal”

7. After a gap of nearly five months, the next date,

which is invoked by the appellant, is 09.08.2017. It

is the case of the appellant that as the first

respondent had failed to comply with the conditions

subsequent, by misrepresentation and manipulation, it

purported to obtain approval from the Chief Electrical

Inspector General (CEIG) under Regulation 32 of the

Central Electricity Authority (Measures relating to

safety and electricity supply) Regulation, 2010 read

with Section 162 of the Act. According to th e

appellant, the Report of the CEIG came to the knowledge

of the appellant on 20.08.2017. Prior to the said date,

the appellant purported to terminate the PPA in terms

of Article 2.5.1(d) of the PPA, considering it to be

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mandatory by communication dated 11.08.2017. In short,

according to the appellant, as the maximum period,

within which, the conditions subsequent, had to be

fulfilled, had run out on 15.01.2017, under the PPA,

the appellant had no other option but to terminate the

Agreement. This led to the first Writ Petition filed

by the first respondent. The said Writ Petition, viz.,

Writ Petition No. 12880 of 2017, came to be allowed by

the High Court by Judgment dated 20.06.2018. The

relevant portion of the Judgment reads as follows:

“2. The contract has been terminated on

account of 54 days delay in achieving the first

milestone i.e., procurement of land, financial

closure and necessary permissions from the

competent authority within 2 I 0 days from the

date of execution of agreement for comp leting

the first part of the project. The only reason

to terminate the agreement is that the

petitioner has failed to achieve first

milestone within 210 days though the condition

of - procurement of land was modified after 210

days on 20.04.2016. The delay in achieving the

first milestone is visited with penalty in terms

of Clause 2.5. of the agreement.

3. Similar communication terminating the

contract was set aside by this Court in Writ

Petition No.12432/2017 (Renew Clean Energy

Private Limited vs M.P. Po wer Management

Company Limited and another) vide order dated

18.08.2017. In the said petition, the

petitioner has admittedly commissioned the

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power project within the time prescribed except

that there was delay of 16 days in achieving

the first milestone. The said order has been

affirmed on 05.04.2018 by the Hon'ble Supreme

Court in Civil Appeal No.3600/2018 (M.P. Power

Management Company Limited vs Renew Clean

Energy Private Limited and another).

4. The parties are not ad idem about the stage

of commissioning of the power project in the

present petition.

5. Mr. Kaurav sought to justify the termination

of the Power Purchase Agreement (PPA) asserting

that the petitioner has not commissioned the

power project within the time fixed in the

agreement, but the lack of commissioning of

power project is not the reason for terminating

of the contract. Since, such is not the reason

mentioned in the order terminating the

agreement, therefore, the respondents cannot

supplement the reasons for termination of the

contract by virtue of additional assertions in

the return and/or in the arguments raised in

view of the Supreme Court decision in Mohinder

Singh Gill v. Chief Election Commissioner

(1978) 1 SCC 405.

6. In view of the fact that the similar reason

of termination of the agreement has not been

found to be justified in the matter of Renew

Clean Energy Private Limited (supra),

therefore, the impugned communication dated

11.08.2017 is hereby set aside. However,

liberty is granted to the respondents to pass

fresh orders in terms of Power · Purchase

Agreement dated 18th September, 2015 in

accordance with law.”

8. On 07.07.2018, the appellant issued the fresh

termination notice. This came to be challenged by the

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first respondent by Writ Petition No. 420 of 2019.

After exchange of pleadings, by the first impugned

judgment dated 27.02.2020, the High Court set aside t he

termination order. Thereafter the appellant in

September, 2020 filed review petition which came to be

dismissed by the second impugned order. On 15.04.2021

this court issued notice and stayed the impugned

orders.

9. We have heard Mr. K.M. Natraj, learned Additional

Solicitor General on behalf of the appellant and

Dr. A.M. Singhvi, learned Senior Counsel along with Mr.

Naman Nagrath, learned Senior Counsel on behalf of the

first respondent. We also heard Shri V. Giri, learned

Senior Counsel appearing for the fifth respondent

(Madhya Pradesh State Load Despatch Centre).

10. Shri K.M. Natraj, learned Additional Solicitor

General submits that the impugned judgments are clearly

unsustainable. He would firstly point out that the writ

petition filed by the first respondent is not

maintainable. The PPA in question is not a statutory

contract and therefore interference with the order

terminating the contract was not justifiable. In this

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regard he drew support from the judgment of this Court

in Kerala State Electricity Board and Another v. Kurien

E. Kalathil and Others

1

. He would next contend that

the PPA contemplated provisions to resolve disputes.

He further contended that first respondent should have

resorted, if at all, to a civil suit to claim redress.

He pointed out that a writ petition is a public law

remedy. The contract in question not being statutory

in nature, there was no public law element so as to

justify the approach under Article 226. He would next

contend that there is no basis for the High Court to

have interfered at all. This is a case where broadly

the contract contemplated fulfilment of conditions at

two stages. The first stage related to various

conditions that ha d to be fulfilled by the first

respondent which are described as conditions subsequent

in the PPA. They are also aptly described as the pre-

commissioning stage. The PPA clearly contemplated

fulfilment of these conditions on an indisputable basis

on or before 15.01.2017. In arriving at this date, the

maximum period of 9 months contemplated under the PPA

1

(2000) 6 SCC 293

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as the period which can be extended on payment of

penalty is also included. However, the first respondent

did not fulfil the condition s subsequent except with a

further delay of 56 days. The PPA clearly provides that

if the time limit is exceeded which in this case was

15.01.2017, the appellant shall terminate the contract.

This is not a question of power or a discretion . This

is a right which inhered with the appellant, a party

to a contract. In this regard he would emphasise that

while the State may be burdened with the obligation to

act in a fair manner, it does not take away the right s

available to the State as a party to a contract to

exercise the right with it under the contract. In other

words, the appellant as State within the meaning of

Article 12 should not be denied the very right which

could be duly exercised by a private party if it stood

in the shoes of the appellant in similar circumstances.

This is all that has been done by the appellant . Coming

to the second stage, namely, commissioning of the

project by the first respondent, our att ention was

drawn to Article 2.6 of the PPA. He contended that

agreement contemplated commissioning of plant within

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12 months from the date of the financial closure

subject to Force Majeure. He would point out that there

were no circumstances for invoking Force Majeure. The

period of 12 months from the date of financial closure

determined the maximum period within which the

commissioning had to take place. He would submit that

first respondent was in breach of even commissioning .

Therefore, on that score als o, there is no

justification for the High Court to have interfere d in

the matter. He would further submit that there is

another vital circumstance which should have dissuaded

the High Court from granting relief. The case threw up

disputed questions of fact s. On the one hand, it was

the case of the first respondent , that the first

respondent had proceeded to do everything within the

time which is a period of two years from 18. 09.2015,

the date of the PPA , and it was only if commissioning

was not done within the said period that what is

described in the agreement as Seller’s default occurs.

Here is a case where the first respondent had not

actually on the ground carried out necessary

installation. In this regard, he would contend that

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while the CEIG has given its approval , the approval was

granted without the first respondent hav ing complied

its obligations under the contract. In this regard

essentially two aspects are projected. It is firstly

pointed out that while the first writ petition was

pending consideration, the appellant ca rried out an

inspection on 19. 04.2018. A report ensued on

21.04.2018. It was revealed that the approval which is

granted by the C EIG may not advance the case of the

first respondent as certain lacunae emerged. It was

found by the inspecting team of the appellant that in

the blocks 9 and 10 (the project of 50MW consisted of

10 blocks of 5 MW each), 61 inverters were missing. It

was further revealed that in regard to 258 invertors,

there was duplication of numbers. In other words,

without there being the professed numbers of invertors

as required under the contract, the approval of the

CEIG was procured. In fact, this aspect, which when it

was discovered by the appellant , formed the foundation

for the review petition but was not favourably

considered by the High Court. A writ petition in the

facts of this case would not lie. He would submit that

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while a writ petition may be maintainable when the

State is awarding its large sse in the form of award of

contract, once it enters into a contract there would

arise no occasion for the court to do judicial review

and strike it down. Action taken by the state as

contracting party when it is within the four walls of

the contract is immune in public law proceedings. That

an action may lie for breach of contract where the

aggrieved party can seek damages should have weighed

with the court. He would further contend that there is

yet another dimension which has been overlooked by the

High Court. The overwhelming public interest in the

facts of this case did not favour the writ court

interfering in the matter. In this regard he would

expatiate by pointing out that the interference by the

High Court will produce the following results:

The PPA casts an obligation on the appellant

to purchase power at the rate of Rs.5.109 per unit

for a period of 25 years. Power is available in the

market at a far cheaper rate. The inevitable result

of implementing the order of the High court would

be that the appellan t would have to purchase power

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at a much higher rate and what is more disturbing

and should have troubled the High Court to decline

jurisdiction is the aspect that the increased rate

would have to be passed on to the end consumer. Put

it differently, when the appellant being entitled

to terminate the contract and would be in a position

to purchase power at a cheaper rate and charge the

consumers at the lower rate, by the court granting

relief to the first respondent, the appellant is

compelled to purchase p ower at the higher rate and

that too for a long period of 25 years, and what is

more, compelled to pass on the burden to the hapless

consumer. Thus, public interest in fact in the case

lay in the court declining to grant relief to the

first respondent. He would further point out that

the impugned judgment does not deal with any of the

aspects, be it the factual dimensions or the legal

requirements. The judgment is bereft of discussion

of the contentions raised by the appellant. He would

therefore contend th at the impugned judgments

should be set aside and appeals allowed.

17

11. Per contra, Dr. A.M. Singhvi, learned Senior

Counsel for the first respondent would point out that

there is absolutely no basis for maintaining the appeal

in the facts. He would point out t hat this is a case

where the first respondent turned out to be the lowest

bidder in respect of the project in question and what

is more an incredible number of 182 bidders

participated. It is trouncing its competitors that the

holding company of the first respondent turned out to

be the lowest bidder (here we must notice that during

the course of the arguments the appellant did propose

that first respondent could come up with proposal which

apparently should involve rates lower than the contract

rate so that the public interest concern is adequately

addressed whereas the first respondent pointed out

since it has planned for the project on the basis which

made it the lowest bidder, it would not be feasible for

it to reduce the rate any further). Dr. Singhvi pointed

out that there is no basis for discriminating the case

of the first respondent and M/s. Renew Energy. It is

pointed out that the High Court in the first round of

litigation had interfered with the termination order

18

following the judgment in Renew E nergy. In the case of

Renew Energy, it could achieve fulfilment of the

conditions subsequent with a delay of 16 days which was

condoned finally. In the case of the first respondent,

the delay happened to be 56 days. Otherwise, their

cases are similar. Rene w Energy was allowed to

commission whereas the first respondent was at the

receiving end of discrimination without any basis. He

would point out that the first respondent under the

contract had 24 months from 18.09.2015 to commission

the project. Well befo re the expiry of 24 months, the

project was ready. The respondent was prevented from

commissioning. A party cannot take advantage of its own

wrong. He would point out that the law has not stood

still after this Court adopted a hands off approach in

the decision in Radhakrishna Agrawal and others v.

State of Bihar and others

2

. Imbibing the grand mandate

in Article 14 that it behoves the State to steer clear

of unfairness in all its acts, this Court has weaved a

taboo against arbitrary action by the state even after

it entered into a contract. He would point out in this

2

(1977) 3 SCC 457

19

regard the judgment of this Court in ABL International

Ltd. v. Export Credit Guarantee Corpn. of India Ltd.

3

and the decisions following the same approving of the

writ court granting relief in contractual matters also.

He would point out that, present arbitrarin ess, be it

after a contract is entered into, the State has no

place to hide when action is challenged and its action

must pass the scrutiny of the constitutional court. It

must demonstrate that the action was fair. The action

of the State falls far short o f the exacting standard

of fairness that the Constitution demands in the case

at hand for the following reasons:

12. Outbidding an unusually large body of competitor s,

a bid based on competitive tariff, the first respondent

which is a global player in Renewab le Energy (solar

power) bids at a rate which was very much acceptable

to the appellant and investment was made by the first

respondent in the region of nearly Rs. 350 crores.

There was an initial hiccup. One of the conditions

subsequent was that the first respondent had to acquire

3

(2004) 3 SCC 553

20

land for the project by way of sale deed s. There were

insuperable obstacles which upon the first respondent

pointing them out to the appellant, the appellant

realized the genuine difficulty and amended the

Article. This, in fact, would necessarily mean that the

period of 210 days would commence not from the date of

the agreement but thereafter on the basis of the

amended Article. The first respondent engaged the

services of a company for the purposes of purchase and

installation of the parts of the project. It had

procured, inter alia the invertors which were to be

installed, from abroad. There are irrefutable

documents in the form of invoice s, bills of lading,

lorry receipts which fortify the first respondent in

its stand that it had installed all the invertors. The

project was ready to take off well within 24 months.

The first respondent would suffer grave avoidable

financial loss, besides fall in esteem as a global

player, if the termination dated 07.07.2018 is allowed

to stand. Under the contract, the first respondent was

obliged to sell power at an agreed rate for a period

of 25 years. The fact that in view of the play of market

21

forces, there has been a fall in the price o f solar

power and it would be open to the appellant to procure

solar power at a cheaper rate should not allow the

appellant to resile from its contractual obligation s.

In fact, it is pointed out that the appellant is

purchasing power even now at even highe r rates. Being

State under Article 12, the appellant should not be

permitted to seek shelter under the theory of alternate

remedies. This Court is reminded of the chronology of

events commencing from the date of the PPA in the year

2015. The first responde nt has succeeded before the

High court on two occasions. In this regard he would

point out that in the impugned termination order dated

07.07.2018, the appellant has purported to revive the

closed chapter relating to non -fulfilment of conditions

subsequent. The contention run s that by the judgment

in the first writ petition the impugned order therein

which was based on the first respondent not fulfilling

the conditions subsequent was quashed. This was done

being inspired by the judgment of the High court in the

case of Renew Energy which has received the seal of

approval by this Court as well. As far as the only

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other aspect about commissioning not being in time Dr.

Singhvi addressed two submissions. Firstly, he would

point out that admittedly, the appellant has not issued

the pre-termination notice contemplated in Article 9.1

of the PPA. This suffices to sustain the judgment.

Secondly, equally importantly the appellant has acted

arbitrarily in not realizing that the first respondent

had 24 months to commiss ion the project and before the

expiry of the same, the respondent was fully ready to

fulfil its obligation. The learned senior counsel would

also submit that contention of there being disputed

questions of fact is premised on red herrings. In this

regard he would point out that on 09.07.2017, a notice

was issued by the first respondent to the appellant

calling upon the appellant to inspect and it would be

ready to commission the project and that it was ready

to supply power. However, no inspection was carried by

the appellant till 19. 04.2018. The competent body

namely the CEIG had carried out inspection which spread

over a few days. The Body was fully satisfied with the

first respondent being compliant. All that happened was

after the inspection , in September, 2017 since the

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first respondent was visited with the first order of

termination dated 11.08.2017 which was challenged in

the High Court , there was a shortage of personnel

around the project site. This facilitated t hefts of the

parts which were inst alled. FIRs promptly registered

in September 2017 should rule out the possibility of

the case of theft being an afterthought. This is as the

inspection was carried by the appellant much later on

19.04.2018. It is further pointed out that as far as

the duplication is concerned in the number of certain

invertors, it has been established as inconsequential

by the first respondent. The inspection and the report

of the CEIG cannot be lightly brushed aside on such a

case. Still furthermore, it is pointed out tha t having

regard to the massive cost of the project which stood

at nearly Rs. 350 crores, what is involved is a

miniscule percentage. In this regard learned counsel

would emphasise the contravention of Article 9.1 under

which the appellant was oblige d to serve a notice in

case of the alleged seller’s default for not

commissioning the project in 24 months from the date

of PPA. If such a notice had been given, the first

24

respondent would have had an opportunity if at all even

proceeding on the basis of appellan t’s contention being

tenable to procure invertors which are portable and

available in the market and redress the problem. When

the project has progressed in the manner , it had to

deny the first respondent the fruits of its labour ,

acting under a solemn con tract awarded to it would be

clearly unfair. The mere fact that there had been a

fall in the market price of solar power should not

persuade this Court to find that there is no

overwhelming public interest. In this regard he also

sought to draw support from recent Judgment of this

Court in Vice Chairman & Managing Director, City and

Industrial Development Corporated of Maharashtra Ltd.

and Another v. Shishir Realty P. Ltd. and others . He

would further point out that solar power being

renewable energy and green energy must be encouraged

and it was on this basis that the first respondent

participated in the global tender and was selected,

upon it being the lowest bidder amongst a large number

of bidders. Dr. Singhvi would point out that for

various reasons the contract in question is a statutory

25

contract. He would submit that any rate irrespective

of being statutory contract or not, it is but a fact

in deciding whether the writ applicant should be

relegated to an alternate remedy. The jurisdiction of

the High Court under Article 226 in the overpowering

presence of Article 14 would embrace the power to

strike at arbitrary action by the State, even in the

working out of rights in a non -statutory contract.

13. Shri V. Giri, learned senior counsel for respondent

No.5 would support the appellant in its stand that the

first respondent was in clear breach of the contract.

It is the case of fifth respondent that there are

various steps to be undertaken and completed under

regulations extant before which commissioning can be

permitted. It is the case of the fifth respondent that

the first respondent could not therefore be said to

have acted in compliance with the regulations and

therefore cannot be heard to say that it had

commissioned the project.

14. Shri K.M. Natraj, Additional Solicitor General

would submit that the judgment of the High court in the

first-round litigation left it open to the appellant

26

to take fresh proceedings under the contract. It is for

the said reason that the said judgment was not

challenged by the appellant. He wou ld also point out

at any rate even proceeding on the basis that the High

Court is bound by the earlier judgment at any rate , as

far as this Court is concerned , it would be free to

consider the issue as to whether on account of there

being an admit ted delay of 53 days by the first

respondent beyond the maximum time contemplated under

the contract for fulfilling conditions subsequent,

whether the appellant was justified being duty bound

in the matter of terminating the contract ? He further

pointed out that th ere was a distinction in the case

of the first respondent and the case of Renew Energy.

In the case of Renew Energy, this Court while refusing

to interfere with the judgment of the High Court had

made it clear that it is not pronouncing on the question

as to the delay in fulfilling the conditions subsequent

and its impact. Secondly, it is pointed out that in the

case of Renew Energy , the said company had gone ahead

and commissioned the project and the only aspect was

the delay of 16 days whereas in the case of the first

27

respondent the contract was liable to be terminated

both for the reasons that the conditions subsequent was

not fulfilled within the maximu m time and also for the

reason that the first respondent had not commissioned

the project within the ti me provided under the

contract.

15. After hearing the learned counsel for the parties,

we find that the following points arise for our

consideration.

(1) Whether the PPA in question, is a statutory

contract?

(2) What is the scope of judicial review of action by

the State in a matter arising from a contract and

what is the effect of the contract not being

statutory? What is arbitrariness?

(3) What is the concept of public law in judicial

review in a contractual matter?

(4) Whether there is an arbitration clause in regard

to the subject matter?

(5) Whether the order dated 07.07.2018 terminating the

contract based on first respondent not fulfilling

the conditions subsequent is sustainable having

28

regard to the judgment rendered by the High Court

in the earlier round of litigation on 20.06.2018?

And will the said judgment bar the appellant from

terminating the contract on the ground of non -

fulfilment of conditions subsequent?

(6) Whether the writ petition must be dismissed as

the case involves disputed questions of facts?

(7) Whether the case of the first respondent is on

par with Renew Energy?

(8) What is the effect of non -compliance of Article

9.1 of the PPA, namely, the effect of appellant

not issuing notice contemplated therein before

issuing the impugned termination dated

07.07.2018?

(9) What is overwhelming public interest in the

context of judicial review in a contractual

matter? Is the concept applicable only to cases

which involve challenge to award of largess e by

the State or is it applicable across the Board

irrespective of the stage when the matter arises

in relation to a contract?

29

(10) Whether this Court should interfere with the

judgment of the High Court in the totality of

facts?

16. Before we proceed to consider the question whether

what is involved is a statutory contract or not, we may

make the following prefatory remarks:

Under Article 298 of the Constitution, the

Executive Power of the Union and each State, inter

alia, extends to making of contracts for any

purpose. Article 299 provides for manner in which

contracts made in the e xercise of the executive

power of the Union or the State is to be made.

17. In this case, we are dealing not with a case where

a contract has been made by the State in exercise of

its executive power within the meaning of Article 298.

The PPA is a contract which has been entered into by

the appellant, which is a fully owned Government

Company. It is one thing to hold t hat the appellant,

as a fully owned Government Company, would be State for

the purpose of Article 12 of the Constitution of India

and, quite another, to find that a contract is one

30

which is made in the executive power of the State within

the meaning of Art icle 162 of the Constitution. What

is contemplated, is the power of the Union or the State

read in conjunction with Article 73 and Article 162 of

the Constitution of India, respectively. In other

words, for the purpose of Article 298, the broader

concept of State, as defined in Article 12 of the

Constitution, which, no doubt, would include the

appellant, is inapposite and inapplicable. The

appellant, being a Company, would not be entitled to

exercise the executive power contemplated in Article

162 of the Constitution, which is the power with the

Union or the State Governments. In this regard we may

notice that the present avtar of Article 298 is born

by substituting in 1956 the original version and the

present version reads as follows: -

“298. Power to carry on trade, etc. The

executive power of the Union and of each State

shall extend to the carrying on of any trade

or business and to the acquisition, holding and

disposal of property and the making of

contracts for any purpose:

Provided that —

(a) the said executive power of the Union

shall, in so far as such trade or business or

31

such purpose is not one with respect to which

Parliament may make laws, be subject in each

State to legislation by the State; and

(b) the said executive power of each State

shall, in so far as such trade or business or

such purpose is not one with respect to which

the State Legislature may make laws, be subject

to legislation by Parliament.”

It is pertinent to notice the Objects and Reasons.

“Clause 19.-In this clause it is pr oposed to

revise and amplify the scope of article 298,

mainly to make it clear that Union Government,

as well as the State Governments, are competent

to carry on any commercial or industrial

undertaking, whether or not it is related to a

matter within the legislative competence of the

Union, or, as the case may be, of the State.

Similarly, the holding, acquisition and

disposal of property and the making of

contracts by the Union or a State could be for

any purpose without constitutional

impropriety. At the same time, the revised

article provides that this extended executive

power of the Union and of the States will be

subject, in the former case, to legislation by

the State, and in the latter case, to

legislation by Parliament. ”

WHETHER THE PPA IS A STATUTORY CONTRACT?

18. Moving on to the concept of the Statutory Contract,

the learned Additional Solicitor General, no doubt,

sought to draw considerable support from the Judgment

of this Court reported in Kerala SEB and another v.

32

Kurien E. Kalathil and ot hers

4

. That was a case, which

involved, a Writ Petition filed by a contractor, who

was awarded the work of construction of a dam, staking

a claim, for enhanced minimum wages, which the

contractor claimed, he had paid to his workers. There

was no dispute that the workmen were entitled to the

enhanced wages under a Notification. The appellant -

Board, however, contended that the respondent -

contractor had failed to prove the payment of the

enhanced wages to the workmen. The High Court allowed

the Writ Petition and this Court, while setting aside

the Judgment, proceeded to make the following

statement:

“10. We find that there is a merit in the first

contention of Mr Raval. Learned counsel has

rightly questioned the maintainability of the

writ petition. The interpretation and

implementation of a clause in a contract cannot

be the subject -matter of a writ petition.

Whether the contract envisages actual payment

or not is a question of construction of

contract. If a term of a contract is violated,

ordinarily the remedy is not the writ petition

under Article 226. We are also unable to agree

with the observations of the High Court that

the contractor was seeking enforcement of a

4

(2000) 6 SCC 293

33

statutory contract. A contract would not become

statutory simply because it is for construction

of a public utility and it has been awar ded by

a statutory body. We are also unable to agree

with the observation of the High Court that

since the obligations imposed by the contract

on the contracting parties come within the

purview of the Contract Act, that would not

make the contract statutor y. Clearly, the High

Court fell into an error in coming to the

conclusion that the contract in question was

statutory in nature.

11. A statute may expressly or impliedly confer

power on a statutory body to enter into

contracts in order to enable it to disc harge

its functions. Dispute arising out of the terms

of such contracts or alleged breaches have to

be settled by the ordinary principles of law

of contract. The fact that one of the parties

to the agreement is a statutory or public body

will not by itself affect the principles to be

applied. The disputes about the meaning of a

covenant in a contract or its enforceability

have to be determined according to the usual

principles of the Contract Act. Every act of a

statutory body need not necessarily involve a n

exercise of statutory power. Statutory bodies,

like private parties, have power to contract

or deal with property. Such activities may not

raise any issue of public law. In the present

case, it has not been shown how the contract

is statutory. The contra ct between the parties

is in the realm of private law. It is not a

statutory contract. The disputes relating to

interpretation of the terms and conditions of

such a contract could not have been agitated

in a petition under Article 226 of the

Constitution of India. That is a matter for

34

adjudication by a civil court or in arbitration

if provided for in the contract. Whether any

amount is due and if so, how much and refusal

of the appellant to pay it is justified or not,

are not the matters which could have be en

agitated and decided in a writ petition. The

contractor should have relegated to other

remedies.”

19. As to what is a statutory contract, fell for

consideration before this Court in the case reported

in India Thermal Power Ltd. v. State of M.P. and

others

5

. Incidentally, it dealt with generation,

distribution and supply of electricity and, what is

more, emanated from the State of Madhya Pradesh. While

negotiations were going on between the respondent -

State, Electricity Board and independent power

producers, on the basis of State inviting offers from

potential private investors, for establishing power

projects, the Central Government amended the earlier

Tariff Notification. The Electricity Board decided to

prioritize the projects, which offered the le ast

tariff. The appellant -independent power producer

challenged the said decision in a Writ Petition. It

5

(2000) 3 SCC 379

35

must be noticed that MoU and Power Purchas e Agreement

had been entered into by the appellant therein. The

Division Bench of the High Court took the vie w that

the PPAs therein were statutory contracts, entered into

under Sections 43 and 43(A) of the Electricity Supply

Act, 1948. This Court, while dealing with this aspect

and rejecting the contention that the Electricity Board

could not unilaterally alter the conditions of the

contract and invite bids, held as follows:

“11. It was contended by Mr Cooper, learned

Senior Counsel appearing for appellant GBL and

also by some counsel appearing for other

appellants that the appellant/IPPs had entered

into PPAs under Sections 43 and 43 -A of the

Electricity Supply Act and as such they are

statutory contracts and, therefore, MPEB had

no power or authority to alter their terms and

conditions. ………………

……… Merely because a contract is entered into

in exercise of an enabling power conferred by

a statute that by itself cannot render the

contract a statutory contract. If entering into

a contract containing the prescribed terms and

conditions is a must under the statute then

that contract becomes a statutory contract. If

a contract incorporates certain terms and

conditions in it which are statutory then the

said contract to that extent is statutory. A

contract may contain certain other terms and

conditions which may not be of a statutory

character and which have been incorporated

therein as a result of mutual agreement between

36

the parties. Therefore, the PPAs can be

regarded as statutory only to the extent that

they contain provisions regarding

determination of ta riff and other statutory

requirements of Section 43 -A(2). Opening and

maintaining of an escrow account or an escrow

agreement are not the statutory requirements

and, therefore, merely because PPAs

contemplate maintaining escrow accounts that

obligation cannot be regarded as statutory. ”

(Emphasis supplied)

20. The decision in India Thermal Power Ltd . (supra),

dealing with the concept of statutory contract, came

to be considered in the light of Section 6A of U.P.

Industrial Area Development Act of 1976. The said

provision reads as follows:

“6A. Power to authorize a person to provide

infrastructure or amenities and collect tax or

fee. - Notwithstanding anything to the contrary

contained in any other provisions of this Act

and subject to such terms and conditions as may

be specified in the regulations, the Authority

may, by agreement, authorize any perso n to

provide or maintain or continue to provide or

maintain any infrastructure or amenities under

this Act and to collect taxes or fees, as the

case may be, levied therefor.”

21. This Court interpreting a contract entered into

under Section 6A in Jaypee Kensington Boulevard

37

Apartments Welfare Ass ociation and others v. NBCC

(India) Ltd. and others

6

, took the view that the

agreement in question did not acquire the status of a

statutory contract merely for having been executed in

terms of the power under Section 6A.

22. The contention of the respondent is that the PPA

is a statutory contract since it incorporates essential

features such as tariff determined through bidding

(paragraph-4.7-CUF, paragraph -4.4-change in law,

paragraph-4.5-payment security, paragra ph-4.6-and

bidding process, paragraphs -5.4 and 5.5 -prescribed

under the guidelines for tariff based competitive

process for grid connected power project based on

renewable energy resources issued by the MNRE under

Section 63 of the Act).

23. The respondent relies on India Thermal Power Ltd.

(supra) to contend that if the contract incorporates

certain statutory terms and conditions, it is

statutory.

6

(2022) 1 SCC 401

38

24. Section 63 of the Electricity Act, 2003, reads as

follows:

“63 (Determination of tariff by bidding

process) Notwithstanding anything contained in

Section 62, the appropriate Commission shall

adopt the tariff, if such tariff has been

determined through transparent process of

bidding in accordance with the guidelines

issued by the Central Government.”

25. In the PPA in question, under the definition clause

(Article 1), bidding guidelines have been defined as

follows:

"Bidding Guidelines" shall mean the

"Guidelines for Tariff Based Competitive

Bidding Process for Grid Connected Power

Projects Based on Renewab le Energy Sources"

issued by Government of lndia, Ministry of New

and Renewable Energy on December, 2012 under

Section - 63 of the Electricity Act and as

amended from time to tim e;”

26. We are of the view that it may not be appropriate

to describe the PPA as a Statutory Contract. Section

63 of the Electricity Act, 2003 must be understood in

the background of immediately preceding provision,

viz., Section 62, In a paradigm shift from the e arlier

regime, the task of determining the tariff has been

39

conferred on the appropriate Commission. Section 62

indicates the procedure. Section 63, on the other hand,

compels the Commission to adopt the tariff determined

through a transparent process of bi dding. However, the

transparent process of bidding must be in accordance

with the guidelines issued by the Central Government.

Thus, it is for the purpose of applying the tariff

determined under Section 63 for the purpose of adopting

the tariff under Section 62, that the guidelines issued

by the Central Government become relevant. It is true

that there is reference to the guidelines made under

Section 63 in the PPA. However, it is for the purpose

of conducting the bidding that the guideline would

become relevant. That the tariff has been arrived at

in accordance with the transparent process of bidding,

which is in tune with the guidelines under Section 63,

may not be sufficient to make the PPA a Statutory

Contract. What is contemplated in India Thermal Power

Limited (supra), is that a contract containing

prescribed terms and conditions being mandatory under

the Statute, results in the contract becoming a

Statutory Contract. If this test is applied, we fail

40

to see how the reference to the bidding guidelines,

under which the bids were made and finally the PPA is

entered into, can be treated as tantamounting to saying

that the PPA contains prescribed statutory terms and

conditions as an indispensable part of a Statute. We

are not shown also as to how the PPA can be described

as containing terms and conditions, which are statutory

in nature. The expression ‘terms and conditions’, which

are statutory in nature, must be understood as those

statutory terms and conditions, which provide for

rights and obligations of th e contracting parties. Such

reference is conspicuous by its absence in the PPA. It

is common case that the appellant is incorporated under

the Companies Act. It is not a statutory body or a

corporation. Therefore, we would come to the conclusion

that we cannot describe the contract as a Statutory

Contract. We must also notice that the PPA is not made

either in purported compliance with the statutory

dictate, either in the form of parent enactment or a

subordinate legislation. The terms and conditions of

the PPA are not transplanted into the PPA from any

Statutory provision. The appellant being company under

41

the Companies Act, would be free as any other

contracting party, subject, no doubt, to its position

as an instrumentality of the State under Article 12 o f

the Constitution of India and the law otherwise.

Moreover, the terms, which are relevant to the lis

before us, viz, the Articles relating to the fulfilment

of the condition subsequent and the provisions relating

to commissioning, sellers’ default and pow er of

termination, are not demonstrated to be statutory in

nature.

What is the scope of judicial review of action by the

State in a matter arising from a contract and what

is the effect of the contract not being statutory?

What is the concept of public law in judicial review

in a contractual matter?

What is ‘arbitrary’ action?

27. In Radhakrishna Agarwal and Ors. v. State of Bihar

and Ors.

7

writ petitions were filed against orders of

the State Government revising the rate of royalty under

7

(1977) 3 SCC 457

42

a lease. The contention was both against the revision

of rate of royalty during the period of the lease and

the cancellation of the lease on various groun ds.

Though an attempt was sought to draw support from the

judgment of this Court in Erusian Equipment and

Chemicals Limited v. State of West Bengal

8

, the Court

took the view that the said case involved

discrimination at the threshold or at the time of

deciding as to whether the Government should enter into

the contract. The Court took the view that the only

question which normally arises in such cases is as to

whether the action complained of was in conformity with

the agreement. We may notice the earlier opinions of

this Court which came to be dealt with in the following

statement:

“We do not think that any of these cases

could assist the appellants or is at all

relevant. None of these cases lays down

that, when the State or its officers purport

to operate within the contractual field and

the only grievance of the citizen could be

that the contract between the parties is

broken by the action complained of, the

appropriate remedy is by way of a petition

under Article 226 of the Constitution and

not an ordinary suit. There is a formidable

8

(1975) 1 SCC 70

43

array of authority against any such a

proposition. In Lekhraj Satramdas Lalvani v.

N.M.Shah, Deputy Custodian -cum-Managing

Officer, Bombay (supra) this Court said:

“In our opinion any duty or obligation

falling upon a public servant out of a

contract entered into by him as such public

servant cannot be enforced by the machinery

of a writ under Article 226 of the

Constitution.”

In Banchhanidhi Rath v. The State of Orissa and

Ors.

9

, this Court declared:

“If a right is claimed in terms of a contract

such a right cannot be enforced in a writ

petition.”

In Har Shankar and Ors. vs. The Dy. Excise and

Taxation Commr. and Ors.

10

, a Constitution Bench of this

Court observed:

“The appellants have displayed ingenuity in

their search for invalidating circumstances

but a writ petition is not an appropriate

remedy for impeaching contractual

obligations.”

9

(1972) 4 SCC 781

10

(1975) 1 SCC 737

44

28. The Court also took the view “the correct view is

that it is the contract and not the executive power

regulated by the Constitution which governs the

relations of the parties on facts apparent in the case

before us”. No doubt the learned Additional Solicitor

General asserts that the des tiny of the appeals before

us must be governed by the law laid down in Radhakrishna

Agarwal (supra). However, as shall be presently noticed

the law has not stood still.

29. In Ramana Dayaram Shetty v. International Airport

Authority of India

11

this court inter alia held as

follows:

“10. Now, there can be no doubt that what para

(1) of the notice prescribed was a condition

of eligibility which was required to be

satisfied by every person submitting a tender.

The condition of eligibility was that the

person submitting a tender must be c onducting

or running a registered IInd Class hotel or

restaurant and he must have at least 5 years'

experience as such and if he did not satisfy

this condition of eligibility, his tender would

not be eligible for consideration. This was the

standard or norm of eligibility laid down by

Respondent 1 and since the Respondents 4 did

not satisfy this standard or norm, it was not

competent to Respondent 1 to entertain the

tender of Respondents 4. It is a well -settled

rule of administrative law that an executive

11

(1979) 3 SCC 489

45

authority must be rigorously held to the

standards by which it professes its actions to

be judged and it must scrupulously observe

those standards on pain of invalidation of an

act in violation of them. This rule was

enunciated by Mr Justice Frankfurter

in Viteralli v. Saton [359 US 535 : Law Ed

(Second series) 1012] where the learned Judge

said:

“An executive agency must be rigorously held

to the standards by which it professes its

action to be judged .… Accordingly, if

dismissal from employment is based on a defined

procedure, even though generous beyond the

requirements that bind such agency, th at

procedure must be scrupulously observed ....

This judicially evolved rule of administrative

law is now firmly established and, if I may

add, rightly so. He that takes the procedural

sword shall perish with the sword.”

This Court accepted the rule as va lid and

applicable in India in A.S.

Ahluwalia v. Punjab [(1975) 3 SCC 503, 504 :

1975 SCC (L&S) 27 : (1975) 3 SCR 82] and in

subsequent decision given

in Sukhdev v. Bhagatram [(1975) 1 SCC 421, 462

: 1975 SCC (L&S) 101 : (1975) 3 SCR 619] ,

Mathew, J., quo ted the above -referred

observations of Mr Justice Frankfurter with

approval. It may be noted that this rule,

though supportable also as an emanation from

Article 14, does not rest merely on that

article. It has an independent existence apart

from Article 14. It is a rule of administrative

law which has been judicially evolved as a

check against exercise of arbitrary power by

the executive authority. If we turn to the

judgment of Mr Justice Frankfurter and examine

it, we find that he has not sought to draw

support for the rule from the equality clause

46

of the United States Constitution, but evolved

it purely as a rule of administrative law. Even

in England, the recent trend in administrative

law is in that direction as is evident from

what is stated at pp. 540 -41 in Prof Wade's

“Administrative Law ”, 4th Edn. There is no

reason why we should hesitate to adopt this

rule as a part of our continually expanding

administrative law. Today with tremendous

expansion of welfare and social service

functions, increasing co ntrol of material and

economic resources and large scale assumption

of industrial and commercial activities by the

State, the power of the executive Government

to affect the lives of the people is steadily

growing. The attainment of socio -economic

justice being a conscious end of State policy,

there is a vast and inevitable increase in the

frequency with which ordinary citizens come

into relationship of direct encounter with

State power-holders. This renders it necessary

to structure and restrict the power of the

executive Government so as to prevent its

arbitrary application or exercise. Whatever be

the concept of the Rule of Law, whether it be

the meaning given by Dicey in his “ The Law of

the Constitution” or the definition given by

Hayek in his “ Road to S erfdom” and

“Constitution of Liberty” or the exposition set

forth by Harry Jones in his “ The Rule of Law

and the Welfare State”, there is as pointed out

by Mathew, J., in his article on “The Welfare

State, Rule of Law and Natural Justice” in

“Democracy, Equality and Freedom ” [ Upendra

Baxi, Ed. : Eastern Book Co., Lucknow (1978)

p. 28] “substantial agreement in juristic

thought that the great purpose of the rule of

law notion is the protection of the individual

47

against arbitrary exercise of power, wherever

it is found”. It is indeed unthinkable that in

a democracy governed by the rule of law the

executive Government or any of its officers

should possess arbitrary power over the

interests of the individual. Every action of

the executive Government must be inf ormed with

reason and should be free from arbitrariness.

That is the very essence of the rule of law

and its bare minimal requirement. And to the

application of this principle it makes no

difference whether the exercise of the power

involves affectation of some right or denial

of some privilege.”

This case while it dealt with the issue of

arbitrariness at the stage of award of largesse by the

State, it paved the way for future development in this

field of law.

30. No doubt, in Bareilly Development Authority and

another v. Ajai Pal Singh and others

12

, the appellant-

Authority constituted under the U.P. Planning and

Development Act, 1973, issued advertisement offering

to register the names of applicants desirous of

purchasing houses/flats. The terms and conditions were

sought to be revised. The Court went on to hold as

12

(1989) 2 SCC 116

48

follows:

“22. There is a line of decisions where the

contract entered into between the State and the

persons aggrieved is non -statutory and purely

contractual and the rights are governed only

by the terms of the contract, no writ or order

can be issued under Article 226 of the

Constitution of India so as to compel the

authorities to remedy a breach of contract pure

and simple — Radhakrishna Agarwal v. State of

Bihar [(1977) 3 SCC 457 : (1977) 3 SCR 249]

, Premji Bhai Parmar v. Delhi Development

Authority [(1980) 2 SCC 129 : (1980) 2 SCR 704]

and DFO v. Biswanath Tea Company Ltd. [(1981)

3 SCC 238 : (1981) 3 SCR 662]”

31. In Mahabir Auto Stores and others v. Indian Oil

Corporation and others

13

, the appellant complained that

the respondent, which was a company incorporated under

the Companies Act was denying or discontinuing to deal

with the appellant, which had been dealing with the

respondent for nearly eighteen years. We listen to the

following words spoken by this Court:

“12. It is well settled that every action of

the State or an instrumentality of the State

in exercise of its executive power, must be

informed by reason. In approp riate cases,

actions uninformed by reason may be questioned

as arbitrary in proceedings under Article 226

or Article 32 of the Constitution. Reliance in

13

(1990) 3 SCC 752

49

this connection may be placed on the

observations of this Court in Radha Krishna

Agarwal v. State of Bi har [(1977) 3 SCC 457].

It appears to us, at the outset, that in the

facts and circumstances of the case, the

respondent company IOC is an organ of the State

or an instrumentality of the State as

contemplated under Article 12 of the

Constitution. The State acts in its executive

power under Article 298 of the Constitution in

entering or not entering in contracts with

individual parties. Article 14 of the

Constitution would be applicable to those

exercises of power. Therefore, the action of

State organ under Article 14 can be checked.

See Radha Krishna Agarwal v. State of Bihar

[(1977) 3 SCC 457] at p. 462, but Article 14

of the Constitution cannot and has not been

construed as a charter for judicial review of

State action after the contract has been

entered into, to call upon the State to account

for its actions in its manifold activities by

stating reasons for such actions. In a

situation of this nature certain activities of

the respondent company which constituted State

under Article 12 of the Constitution m ay be in

certain circumstances subject to Article 14 of

the Constitution in entering or not entering

into contracts and must be reasonable and taken

only upon lawful and relevant consideration;

it depends upon facts and circumstances of a

particular transa ction whether hearing is

necessary and reasons have to be stated. In

case any right conferred on the citizens which

is sought to be interfered, such action is

subject to Article 14 of the Constitution, and

must be reasonable and can be taken only upon

lawful and relevant grounds of public interest.

50

Where there is arbitrariness in State action

of this type of entering or not entering into

contracts, Article 14 springs up and judicial

review strikes such an action down. Every

action of the State executive aut hority must

be subject to rule of law and must be informed

by reason. So, whatever be the activity of the

public authority, in such monopoly or semi -

monopoly dealings, it should meet the test of

Article 14 of the Constitution. If a

governmental action even in the matters of

entering or not entering into contracts, fails

to satisfy the test of reasonableness, the same

would be unreasonable. In this connection

reference may be made to E.P. Royappa v. State

of Tamil Nadu [(1974) 4 SCC 3 : 1974 SCC (L&S)

165] , Maneka Gandhi v. Union of India [(1978)

1 SCC 248] , Ajay Hasia v. Khalid Mujib

Sehravardi [(1981) 1 SCC 722 : 1981 SCC (L&S)

258] , R.D. Shetty v. International Airport

Authority of India [(1979) 3 SCC 489] and also

Dwarkadas Marfatia and Sons v. Board o f

Trustees of the Port of Bombay [(1989) 3 SCC

293] . It appears to us that rule of reason

and rule against arbitrariness and

discrimination, rules of fair play and natural

justice are part of the rule of law applicable

in situation or action by State inst rumentality

in dealing with citizens in a situation like

the present one. Even though the rights of the

citizens are in the nature of contractual

rights, the manner, the method and motive of a

decision of entering or not entering into a

contract, are subject to judicial review on the

touchstone of relevance and reasonableness,

fair play, natural justice, equality and non -

discrimination in the type of the transactions

51

and nature of the dealing as in the present

case.

17. We are of the opinion that in all su ch

cases whether public law or private law rights

are involved, depends upon the facts and

circumstances of the case. The dichotomy

between rights and remedies cannot be

obliterated by any strait -jacket formula. It

has to be examined in each particular cas e. Mr

Salve sought to urge that there are certain

cases under Article 14 of arbitrary exercise

of such “power” and not cases of exercise of a

“right” arising either under a contract or

under a statute. We are of the opinion that

that would depend upon the factual matrix.

18. Having considered the facts and

circumstances of the case and the nature of the

contentions and the dealing between the parties

and in view of the present state of law, we

are of the opinion that decision of the

State/public authority under Article 298 of the

Constitution, is an administrative decision

and can be impeached on the ground that the

decision is arbitrary or violative of Article

14 of the Constitution of India on any of the

grounds available in public law field. It is

true that there is discrimination between power

and right but whether the State or the

instrumentality of a State has the right to

function in public field or private field is a

matter which, in our opinion, depends upon the

facts and circumstances of the situation, but

such exercise of power cannot be dealt with by

the State or the instrumentality of the State

without informing and taking into confidence,

the party whose rights and powers are affected

52

or sought to be affected, into confidence. In

such situations most often peopl e feel

aggrieved by exclusion of knowledge if not

taken into confidence. ”

(Emphasis supplied]

32. In the judgment of this Court rendered by a Bench

of two learned Judges decided in Shrilekha Vidyarthi

(Kumari) v. State of U.P

14

, the court was concerned with

a challenge to a general order by which the appointment

of all government counsel in all the dis tricts of the

state of U.P. came to be terminated. The writ petition

was filed under Article 32 of the Constitution of

India. Important and apposite are the following

observations:

“22. There is an obvious difference in the

contracts between private parties and

contracts to which the State is a party.

Private parties are concerned only with their

personal interest whereas the State while

exercising its powers and discharging its

functions, acts indubitably, as is expected of

it, for public good and in public interest. The

impact of every State action is also on public

interest. This factor alone is sufficient to

import at least the minimal requirements of

public law obligations and imp ress with this

character the contracts made by the State or

its instrumentality. It is a different matter

14

(1991) 1 SCC 212

53

that the scope of judicial review in respect

of disputes falling within the domain of

contractual obligations may be more limited and

in doubtful cases the parties may be relegated

to adjudication of their rights by resort to

remedies provided for adjudication of purely

contractual disputes. However, to the extent,

challenge is made on the ground of violation

of Article 14 by alleging that the impugned act

is arbitrary, unfair or unreasonable, the fact

that the dispute also falls within the domain

of contractual obligations would not relieve

the State of its obligation to comply with the

basic requirements of Article 14. To this

extent, the obligation is of a public character

invariably in every case irrespective of there

being any other right or obligation in addition

thereto. An additional contractual obligation

cannot divest the claimant of the guarantee

under Article 14 of non -arbitrariness at the

hands of the State in any of its actions.

24. The State cannot be attributed the split

personality of Dr Jekyll and Mr Hyde in the

contractual field so as to impress on it all

the characteristics of the State at the

threshold while making a contract requirin g it

to fulfil the obligation of Article 14 of the

Constitution and thereafter permitting it to

cast off its garb of State to adorn the new

robe of a private body during the subsistence

of the contract enabling it to act arbitrarily

subject only to the contractual obligations and

remedies flowing from it. It is really the

nature of its personality as State which is

significant and must characterize all its

actions, in whatever field, and not the nature

of function, contractual or otherwise, which

54

is decisive of the nature of scrutiny permitted

for examining the validity of its act. The

requirement of Article 14 being the duty to act

fairly, justly and reasonably, there is nothing

which militates against the concept of

requiring the State always to so act, ev en in

contractual matters. There is a basic

difference between the acts of the State which

must invariably be in pubic interest and those

of a private individual, engaged in similar

activities, being primarily for personal gain,

which may or may not promot e public interest.

Viewed in this manner, in which we find no

conceptual difficulty or anachronism, we find

no reason why the requirement of Article 14

should not extend even in the sphere of

contractual matters for regulating the conduct

of the State activity.

27. Unlike a private party whose acts

uninformed by reason and influenced by personal

predilections in contractual matters may

result in adverse consequences to it alone

without affecting the public interest, any such

act of the State or a public bo dy even in this

field would adversely affect the public

interest.

28. Even assuming that it is necessary to

import the concept of presence of some public

element in a State action to attract Article

14 and permit judicial review, we have no

hesitation in saying that the ultimate impact

of all actions of the State or a public body

being undoubtedly on public interest, the

requisite public element for this purpose is

present also in contractual matters. We,

therefore, find it difficult and unrealistic

55

to exclude the State actions in contractual

matters, after the contract has been made, from

the purview of judicial review to test its

validity on the anvil of Article 14. ”

(Emphasis supplied)

33. As to what constitute s arbitrariness is captured

in paragraph 36 and it reads as follows:

“36. The meaning and true import of

arbitrariness is more easily visualized than

precisely stated or defined. The question,

whether an impugned act is arbitrary or not,

is ultimately to be answered on the facts and

in the circumstances of a given case. An

obvious test to apply is to see whether there

is any discernible principle emerging from the

impugned act and if so, does it satisfy the

test of reasonableness. Where a mod e is

prescribed for doing an act and there is no

impediment in following that procedure,

performance of the act otherwise and in a

manner which does not disclose any discernible

principle which is reasonable, may itself

attract the vice of arbitrariness. E very State

action must be informed by reason and it

follows that an act uninformed by reason, is

arbitrary. Rule of law contemplates governance

by laws and not by humour, whims or caprices

of the men to whom the governance is entrusted

for the time being. It is trite that ‘be you

ever so high, the laws are above you’. This is

what men in power must remember, always. ”

34. The pronouncement made by this Court would later

become the springboard or the charter for the further

evolution of the concept of public law element as also

56

premise for the superior courts invoking Article 14 in

various contractual matters.

35. In State of U.P and others v. Bridge and Roof

Company (India) Ltd.

15

, the Court was dealing with a

case of a writ petition filed by the respondent therein

which was a public sector corporation and seeking

payment allegedly due from the appellant state. The

Court noted that the contract in question contained

Articles providing inter alia for settlement of

disputes by reference to arbitration. The very resort

to Article 226 was found to be misconceived in the

circumstances.

The Court also laid down as follows: -

“Firstly, the contract between the parties is a

contract in the realm of private law. It is not

a statutory contract. It is governed by the

provisions of the Contract Act or maybe, also by

certain provisions of the Sale of Goods Act. Any

dispute relating to interpretation of the terms

and conditions of such a contract cannot be

agitated, and could not have been agitated, in

a writ petition. That is a matter either for

arbitration as provided by the contract or for

15

(1996) 6 SCC 22

57

the civil court, as the case may be. Whether any

amount is due to the respondent from the

appellant-Government under the contract and, if

so, how much and the further question whether

retention or refusal to pay any amount by the

Government is justified, or not, are all matter

which cannot be agitated in or adjudicated upon

in a writ petition. The prayer in the writ

petition, viz., to restrain the Government from

deducting a particular amount from the writ

petitioner’s bill(s) was not a prayer which

could be granted by the High Court under Article

226. Indeed, the High Court has not granted the

said prayer.”

36. In Verigamto Naveen v. Govt. of A.P. and others

16

,

the case involved, mining leases granted to a

corporation and a sub-lease, which was permitted by the

Government. Thereafter, the permission was sought to

be withdrawn. The withdrawal of the permission, was the

subject matter of challenge in writ proceedings, inter

alia. Against, the Order of the Full Bench of the High

Court, (which is reported in AIR 1995 A.P. 1), appeals

were carried to this Court. On the issue relating to

16

(2001) 8 SCC 344

58

the jurisdiction of the Court in ca ses arising out of

contract, this Court held as follows:

“21. … Though there is one set of cases

rendered by this Court of the type arising

in Radhakrishna Agarwal case [(1977) 3 SCC 457

: AIR 1977 SC 1496] much water has flown in

the stream of judicial review in contractual

field. In cases where the decision -making

authority exceeded its statutory power or

committed breach of rules or principles of

natural justice in exercise of such power or

its decision is perverse or passed an

irrational order, this Court has interceded

even after the contract was entered into

between the parties and the Government and its

agencies. We may advert to three decisions of

this Court in Dwarkadas Marfatia &

Sons v. Board of Trustees of the Port of

Bombay [(1989) 3 SCC 293] , Mahabir Auto

Stores v. Indian Oil Corpn. [(1990) 3 SCC 752]

and Shrilekha Vidyarthi (Kumari) v. State of

U.P. [(1991) 1 SCC 212 : 1991 SCC (L&S) 742 :

AIR 1991 SC 537] Where the breach of contract

involves breach of statutory obligation when

the order complained of was made in exercise

of statutory power by a statutory authority,

though cause of action arises out of or

pertains to contract, brings it within the

sphere of public law because the power

exercised is apart from contract. The freedom

of the Government to enter into business with

anybody it likes is subject to the condition

of reasonableness and fair play as well as

public interest. After entering into a

contract, in cancelling the contract which is

subject to terms of the statutory provisions,

as in the present case, it cannot be said that

the matter falls purely in a contractual field.

Therefore, we do not think it would be

59

appropriate to suggest that the case on hand

is a matter arising purely out of a contract

and, therefore, interference under Article 226

of the Constitution is not called for. This

contention also stands rejected.”

(Emphasis supplied)

The basis for interference was located in a statu te

which made its presence felt.

37. In Binny Ltd. and Another v. V. Sadasivan and

Others

17

, this Court was dealing with termination of

services of respondents who were working as Members of

the Management, staff of the appellant company. The

appellant company purported to terminate their

services. The respondents thereupon filed a writ

petition under Article 226 of the constitution of

India. The appellant company contended that it was

neither a public authority nor did its action involve

a public law element, and a writ of Mandamus would not

lie. The High Court granted only the declaratory relie f

to the effect that the termination was illegal. We

notice the following: -

“30. A contract would not become statutory

simply because it is for construction of a

public utility and it has been awarded by a

17

(2005) 6 SCC 657

60

statutory body. But nevertheless, it may be

noticed that the Government or government

authorities at all levels are increasingly

employing contractual techniques to achieve

their regulatory aims. It cannot be said that

the exercise of those powers are free from the

zone of judicial review and that there would

be no limits to the exercise of such powers,

but in normal circumstances, judicial review

principles cannot be used to enforce

contractual obligations. When that contractual

power is being used for public purpose, it is

certainly amenable to judicia l review. The

power must be used for lawful purposes and not

unreasonably.”

(Emphasis supplied)

38. The Court went to hold that the decision of the

employer to terminate the services of the employees

could not be said to have any element of public policy.

The Court did not find any public element in the

termination of the employees. We may at once notice

that the appellant in the said case was not a public

sector unit as the appellant in the present case.

39. In G. Bassi Reddy v. International Crops Research

Institute and another

18

, the services of the appellant

came to be terminated by the respondent -ICRISAT. The

18

(2003) 4 SCC 225

61

Court went on to hold that the respondent could not be

treated as State under Article 12. The Court further

proceeded to hold that the Writ Petition was not

maintainable against the respondent, noticing that

neither was the respondent set up by a Statute nor were

its activities statutorily controlled.

40. ABL (supra) marks a milestone, as it were, in the

matter of the superior court interfering in contractual

matters where the State is a player even after the

contract is entered into. A petition was filed under

Article 226 wherein the respondent which was

incorporated under the Companies Act repudiated an

insurance claim made by the appellant -writ petitioner.

This Court undertoo k an elaborate discussion of the

earlier case law. We find that this Court dealt with

several obstacles which were sought to be posed by the

respondent. They included disputed questions of facts

being involved, availability of alternate remedy, and

the case involving entertaining a money claim. This

court went on to hold as follows:

“27. From the above discussion of ours, the

following legal principles emerge as to the

maintainability of a writ petition:

62

(a) In an appropriate case, a writ petition as

against a State or an instrumentality of a

State arising out of a contractual obligation

is maintainable.

(b) Merely because some disputed questions of

fact arise for consideration, same cannot be a

ground to refuse to entertain a writ petition

in all cases as a matter of rule.

(c) A writ petition involving a consequential

relief of monetary claim is also maintainable. ”

41. No doubt, we must also notice para 28 which serves

as an admonition against considering the availability

of the remedy under Article 226 as an absolute charter

to invoke jurisdiction in all cases.

“28. However, while entertaining an objection

as to the maintainability of a writ petition

under Article 226 of the Constitution of India,

the court should bear in mind the fact that

the power to issue prerogative writs under

Article 226 of the Constitution is plenary in

nature and is not limited by any other

provisions of the Constitution. The High Court

having regard to the facts of the case, has a

discretion to entertain or not to enter tain a

writ petition. The Court has imposed upon

itself certain restrictions in the exercise of

this power. (See Whirlpool Corpn. v. Registrar

of Trade Marks [(1998) 8 SCC 1].) And this

plenary right of the High Court to issue a

prerogative writ will not n ormally be exercised

by the Court to the exclusion of other

available remedies unless such action of the

State or its instrumentality is arbitrary and

unreasonable so as to violate the

constitutional mandate of Article 14 or for

other valid and legitimate reasons, for which

63

the Court thinks it necessary to exercise the

said jurisdiction.”

(Emphasis supplied)

42. We may also notice how this Court steered clear

of the criticism that it was not following the

principle laid down by this Court in State of U.P. v.

Bridge & Roof Co. (India) Ltd.

19

. The Court noted that

the said case did involve a contract which contained

an arbitration clause. It is found that in the case

before it there was no arbitration clause. In regard

to the question as to whether the first respondent in

the said case was disch arging a public duty or public

function was involved while repudiating the claim of

the appellants arising out of the contract, the Court

drew support from the judgment in Kumari Shrilekha

Vidyarthi (supra).

43. In Noble Resources Ltd. v. State of Orissa

20

, this

court followed ABL (supra). However, in the facts of

the said case again the matter involving refusal by a

public authority to honour the contract in the matter

19

(1996) 6 SCC 22

20

(2006) 10 SCC 236

64

of purchase of Iron ore, the Court held as follows:

“15. It is trite that if an action on the part

of the State is violative of the equality

clause contained in Article 14 of the

Constitution of India, a writ petition would

be maintainable even in the contractual field.

A distinction indisputably must be made between

a matter which is at th e threshold of a

contract and a breach of contract; whereas in

the former the court's scrutiny would be more

intrusive, in the latter the court may not

ordinarily exercise its discretionary

jurisdiction of judicial review, unless it is

found to be violativ e of Article 14 of the

Constitution. While exercising contractual

powers also, the government bodies may be

subjected to judicial review in order to

prevent arbitrariness or favouritism on their

part. Indisputably, inherent limitations

exist, but it would not be correct to opine

that under no circumstances a writ will lie

only because it involves a contractual matter. ”

44. The court went on to approve of ABL (supra) and

observed that this Court had declared that no decision

lays down as an absolute rule that in all cases of

disputed questions of fact, the parties should be

relegated to a civil Court. We may also notice

paragraph 29:

“29. Although the scope of judicial review or

the development of law in this field has been

noticed hereinbefore particularly in the light

of the decision of this Court in ABL

International Ltd. [(2004) 3 SCC 553] each

case, however, must be decided on its own

65

facts. Public interest as noticed

hereinbefore, may be one of the factors to

exercise the power of judicial review. In a

case where a public law element is involved,

judicial review may be permissible. (See Binny

Ltd. v. V. Sadasivan [(2005) 6 SCC 657 : 2005

SCC (L&S) 8 81] and G.B. Mahajan v. Jalgaon

Municipal Council [(1991) 3 SCC 91]”

45. Of further relevance to notice is the case of the

respondent therein that only because the price of iron

ore increased in the international market, the

appellant had filed the writ peti tion only in February

2004. It was found that the said contention was not

wholly misconceived. Thereafter the court went on to

following observations:

“41. The submission of Mr Desai that rise in

international price would not by itself be a

relevant consideration to rescind the contract

may be correct, but then the same was not the

sole ground for Respondent 2 to refuse to

supply iron ore fines to the appellant.

42. Moreover, certain serious disputed

questions of fact have arisen for

determination. Such disputed questions of fact

ordinarily could not have been entertained by

the High Court in exercise of its power of

judicial review.”

46. In the context of upgradation of aided schools and

a complaint of discrimination , we notice the following

66

observations of this court in State Of Kerala and

others v. K. Prasad and another

21

.

” Para 11. This Court in Shrilekha Vidyarthi v.

State of U.P. [(1991) 1 SCC 212: 1991 SCC (L&S)

742] held that every State action, in order to

survive, must not be susceptible to the vice of

arbitrariness which is the crux of Article 14

and basic to the rule of law, the system which

governs us, arbitrariness being the negation of

the rule of law. Non -arbitrariness, being a

necessary concomitant of the rule of law, it is

imperative that all actions of every public

functionary in whatever sphere must be guided by

reason and not humour, whim, caprice or personal

predilections of the persons entrusted with the

task on behalf of the State and exercise of all

powers must be for public good instead of being

an abuse of power.”

47. We may notice that as to what constitutes

arbitrariness fell for consideration by this court in

a case which involve d cancellation of the examination

held as part of a recruitment process, in East Coast

Railway and another v. Mahadev Appa Roa and others

22

.

We notice the following passages which are apposite for

this case.

“19. Black's Law Dictionary describes the term

“arbitrary” in the following words:

21

(2007) 7 SCC 140

22

(2010) 7 SCC 678

67

“Arbitrary. —1. Depending on individual

discretion; specif., determined by a judge

rather than by fixed rules, procedures, or law.

2. (Of a judicial decision) founded on prejudice

or preference rather than on reason or fact. This

type of decision is often termed arbitrary and

capricious.”

20. To the same effect is the meaning given to

the expression “arbitrary” by Corpus Juris

Secundum which explains the term in the

following words:

“Arbitrary.—Based alone upon one's will, and not

upon any course of reasoning and exercise of

judgment; bound by no law; capricious; exercised

according to one's own will or caprice and

therefore conveying a notion of a tendency to

abuse possession of power; fixed or done

capriciously or at pleasure, without adequate

determining principle, non -rational, or not done

or acting according to reason or judgment; not

based upon actuality but beyond a reasonable

extent; not founded in the nature of things; not

governed by any fixed rules or standard; also,

in a somewhat different sense, absolute in

power, despotic, or tyrannical; harsh and

unforbearing. When applied to acts, ‘arbitrary’

has been held to connote a disregard of evidence

or of the proper weight thereof; to express an

idea opposed to administrative, executive,

judicial, or legislative discretion; and to

imply at least an element of bad faith, and has

been compared with ‘willful’.”

xxx xxx xxx

23. Arbitrariness in the making of an or der by

an authority can manifest itself in different

forms. Non-application of mind by the authority

making the order is only one of them. Every order

68

passed by a public authority must disclose due

and proper application of mind by the person

making the order. This may be evident from the

order itself or the record contemporaneously

maintained. Application of mind is best

demonstrated by disclosure of mind by the

authority making the order. And disclosure is

best done by recording the reasons that led the

authority to pass the order in question. Absence

of reasons either in the order passed by the

authority or in the record contemporaneously

maintained is clearly suggestive of the order

being arbitrary hence legally unsustainable. ”

48. We would, therefore, sum up as to when an act is

to be treated as arbitrary. The court must carefully

attend to the facts and the circumstances of the case.

It should find out whether the impugned decision is

based on any principle. If not, it may unerringly point

to arbitrariness. If the act betrays caprice or the

mere exhibition of the whim of the authority it would

sufficiently bear the insignia of arbitrariness. In

this regard supporting an order with a rational e which

in the circumstances is found to be reasonable will go

a long way to repel a challenge to state action. No

doubt the reasons need not in every case be part of the

order as such. If there is absence of good faith and

the action is actuated with an oblique motive, it could

69

be characterised as being a rbitrary. A total non-

application of mind without due regard to the rights

of the parties and public interest may be a c lear

indicator of arbitrary action. A wholly unreasonable

decision which is little different from a perverse

decision under the Wednesbu ry doctrine would qualify

as an arbitrary decision under Article 14. Ordinarily

visiting a party with the consequences of its breach

under a contract may not be an arbitrary decision.

49. We may now notice the judgment of this court in

Joshi Technologies International Inc. v. Union of India

and others

23

, which is also relied upon by the learned

Additional Solicitor General. The said case actually

involved the complaint of the writ petitioner therein

that it was entitled to the benefit of Section 42 of

the Income Tax Act, 1961 which provided for certain

deductions. The petitioner ha d entered into an

agreement with the respondent, the Government of India.

The case of the respondent , inter alia, was one denying

the case of the petitioner that the omission of Section

23

(2015) 7 SCC 728

70

42 was by oversight. The prayer in the writ petition

itself inter alia was essentially to declare

entitlement to the deduction under Section 42, inter

alia. It is while dealing with the said case that this

court no doubt proceeds to , inter alia, lay down as

following after adverting to ABL limited (supra) also:-

“69. The position thus summarised in the

aforesaid principles has to be understood in the

context of discussion that preceded which we

have pointed out above. As per this, no doubt,

there is no absolute bar to the maintainability

of the writ petition even in contractual matters

or where there are disputed questions of fact or

even when monetary claim is raised. At the same

time, discretion lies with the High Court which

under certain circu mstances, it can refuse to

exercise. It also follows that under the

following circumstances, “normally”, the Court

would not exercise such a discretion:

69.1. The Court may not examine the issue unless

the action has some public law character

attached to it.

69.2. Whenever a particular mode of settlement

of dispute is provided in the contract, the High

Court would refuse to exercise its discretion

under Article 226 of the Constitution and

relegate the party to the said mode of

settlement, part icularly when settlement of

disputes is to be resorted to through the means

of arbitration.

69.3. If there are very serious disputed

questions of fact which are of complex nature

71

and require oral evidence for their

determination.

69.4. Money claims per se particularly arising

out of contractual obligations are normally not

to be entertained except in exceptional

circumstances.”

“70. Further, the legal position which emerges

from various judgments of this Court dealing

with different situations/aspects re lating to

contracts entered into by the State/public

authority with private parties, can be

summarised as under:

70.1. At the stage of entering into a contract,

the State acts purely in its executive capacity

and is bound by the obligations of fairness.

70.2. State in its executive capacity, even in

the contractual field, is under obligation to

act fairly and cannot practise some

discriminations.

70.3. Even in cases where question is of choice

or consideration of competing claims before

entering into the field of contract, facts have

to be investigated and found before the question

of a violation of Article 14 of the Constitution

could arise. If those facts are disputed and

require assessment of evidence the correctness

of which can only be tested satisfa ctorily by

taking detailed evidence, involving examination

and cross-examination of witnesses, the case

could not be conveniently or satisfactorily

decided in proceedings under Article 226 of the

Constitution. In such cases the Court can direct

the aggrieved party to resort to alternate

remedy of civil suit, etc.

70.4. Writ jurisdiction of the High Court under

Article 226 of the Constitution was not intended

72

to facilitate avoidance of obligation

voluntarily incurred.

70.5. Writ petition was not maintainable to

avoid contractual obligation. Occurrence of

commercial difficulty, inconvenience or hardship

in performance of the conditions agreed to in

the contract can provide no justification in not

complying with the terms of contract which the

parties had accepted with open eyes. It cannot

ever be that a licensee can work out the licence

if he finds it profitable to do so: and he can

challenge the conditions under which he agreed

to take the licence, if he finds it commercially

inexpedient to conduct his business.

70.6. Ordinarily, where a breach of contract is

complained of, the party complaining of such

breach may sue for specific performance of the

contract, if contract is capable of being

specifically performed. Otherwise, the party may

sue for damages.

70.7. Writ can be issued where there is executive

action unsupported by law or even in respect of

a corporation there is denial of equality before

law or equal protection of law or if it can be

shown that action of the public authorities was

without giving any hearing and violation of

principles of natural justice after holding that

action could not have been taken without

observing principles of natural justice.

70.8. If the contract between private party and

the State/instrumentality and/or agen cy of the

State is under the realm of a private law and

there is no element of public law, the normal

course for the aggrieved party, is to invoke the

remedies provided under ordinary civil law

rather than approaching the High Court under

Article 226 of th e Constitution of India and

invoking its extraordinary jurisdiction.

73

70.9. The distinction between public law and

private law element in the contract with the

State is getting blurred. However, it has not

been totally obliterated and where the matter

falls purely in private field of contract, this

Court has maintained the position that writ

petition is not maintainable. The dichotomy

between public law and private law rights and

remedies would depend on the factual matrix of

each case and the distinction b etween the public

law remedies and private law field, cannot be

demarcated with precision. In fact, each case

has to be examined, on its facts whether the

contractual relations between the parties bear

insignia of public element. Once on the facts of

a particular case it is found that nature of the

activity or controversy involves public law

element, then the matter can be examined by the

High Court in writ petitions under Article 226

of the Constitution of India to see whether

action of the State and/or in strumentality or

agency of the State is fair, just and equitable

or that relevant factors are taken into

consideration and irrelevant factors have not

gone into the decision -making process or that

the decision is not arbitrary.

70.10. Mere reasonable or l egitimate expectation

of a citizen, in such a situation, may not by

itself be a distinct enforceable right, but

failure to consider and give due weight to it

may render the decision arbitrary, and this is

how the requirements of due consideration of a

legitimate expectation forms part of the

principle of non-arbitrariness.

70.11. The scope of judicial review in respect

of disputes falling within the domain of

contractual obligations may be more limited and

in doubtful cases the parties may be relegated

to adjudication of their rights by resort to

74

remedies provided for adjudication of purely

contractual disputes. ”

50. In State of Kerala v. M.K. Jose

24

, the specific

question with which we are concerned with, namely,

entertaining a writ petition in a contractual matter

and where the specific question was the validity of the

termination of the contract, fell for consideration.

We may notice the following:

“13. A writ court should ordinarily not

entertain a writ petition, if there is a breach

of contract involving disputed questions of

fact. The present case clearly indicates that

the factual disputes are involved. ”

51. Thereafter, the court went on to consider in detail

the judgment of this Court in ABL (supra) and found

that it was a case where the court granted relief as

the facts were absolutely clear from the documentary

evidence and it pertained to interpretation of such

clauses of the contract of insurance. We need notice

only paragraph 20 in M.K. Jose (supra). It reads as

under:

“20. We have referred to the aforesaid

authorities to highlight under what

24

(2015) 9 SCC 433

75

circumstances in respect of contractual claim

or challenge to violation of contract can be

entertained by a writ court. It depends upon

facts of each case. The issue that had arisen

in ABL International [(2004) 3 SCC 553] was

that an instrumentality of a State was placing

a different construction on the clauses of the

contract of insurance and the insured was

interpreting the contract differently. The

Court thought it apt merely because something

is disputed by the insurer, it should not enter

into the realm of disputed questions of fact.

In fact, there w as no disputed question of

fact, but it required interpretation of the

terms of the contract of insurance. Similarly,

if the materials that come on record from which

it is clearly evincible, the writ court may

exercise the power of judicial review but, a

pregnant one, in the case at hand, the High

Court has appointed a Commission to collect the

evidence, accepted the same without calling for

objections from the respondent and quashed the

order of termination of contract. ”

(Emphasis supplied)

52. In State of U.P. v. Sudhir Kumar Singh and Others

25

,

the first respondent the successful tenderer had worked

the contract for a year when he was visited with

cancellation. This Court exhaustively referred to the

earlier case law including ABL (supra) and Joshi

Technology (supra) and held, inter alia, as follows: -

“23. It may be added that every case in which

a citizen/person knocks at the doors of the

writ court for breach of his or its fundamental

25

2020 SCC Online 847

76

rights is a matter which contains a “public law

element”, as opposed to a case which is

concerned only with breach of c ontract and

damages flowing therefrom. Whenever a plea of

breach of natural justice is made against the

State, the said plea, if found sustainable,

sounds in constitutional law as arbitrary State

action, which attracts the provisions of

Article 14 of the C onstitution of India - see

Nawabkhan Abbaskhan v. State of Gujarat (1974)

2 SCC 121 at paragraph 7. The present case is,

therefore, a case which involves a “public law

element” in that the petitioner (Respondent No.

1 before us) who knocked at the doors of the

writ court alleged breach of the audi alteram

partem rule, as the entire proceedings leading

to cancellation of the tender, together with

the cancellation itself, were done on an ex

parte appraisal of the facts behind his back. ”

53. We have already concluded that PPA is not a

Statutory Contract. However, that would not be the end

of enquiry. Dr. A.M. Singhvi, learned Senior Counsel,

would point out that the contract, not being a

statutory contract, assumes relevance only for the

purpose of deciding as to whether the Court should

relegate the writ applicant, to alternate remedies. In

other words, while the Court would retain its

discretion to entertain the petition or decline to do

so, in the facts of each case, there is no absolute

taboo against the Court granting relief, even if the

challenge to the termination of a contract is made in

77

the case of a contract, which is not statutory in

nature, when the offending party is the State. In other

words, the contention is that the law in this field

has witnessed an evolution and, what is more, a

revolution of sorts and a transformatory change with a

growing realisation of the true ambit of Article 14 of

the Constitution of India. The State, he points out,

cannot play the Dr. Jekyll and Hyde gam e anymore. Its

nature is cast in stone. Its character is inflexible.

This is irrespective of the activity it indulges in.

It will continue to be haunted by the mandate of Article

14 to act fairly. There has been a stunning expansion

of the frontiers of the Court’s jurisdiction to strike

at State action in matters arising out of contract,

based, undoubtedly, on the facts of each case. It

remains open to the Court to refuse to reject a case,

involving State action, on the basis that the action

is, per se, arbitrary.

54. We may cull out our conclusions in regard to the

points, which we have framed:

i. It is, undoubtedly, true that the writ

jurisdiction is a public law remedy. A matter,

78

which lies entirely within a private realm of

affairs of public body, may not len d itself for

being dealt with under the writ jurisdiction of

the Court.

ii. The principle laid down in Bareilly Development

Authority (supra) that in the case of a non -

statutory contract the rights are governed only

by the terms of the contract and the decisi ons,

which are purported to be followed, including

Radhakrishna Agarwal (supra), may not continue

to hold good, in the light of what has been laid

down in ABL (supra) and as followed in the recent

judgment in Sudhir Kumar Singh (supra).

iii. The mere fact that relief is sought under a

contract which is not statutory, will not

entitle the respondent -State in a case by itself

to ward-off scrutiny of its action or inaction

under the contract, if the complaining party is

able to establish that the action/ inaction is,

per se, arbitrary.

iv. An action will lie, undoubtedly, when the State

purports to award any largesse and, undoubtedly,

79

this relates to the stage prior to the contract

being entered into [See R.D. Shetty (supra)].

This scrutiny, no doub t, would be undertaken

within the nature of the judicial review, which

has been declared in the decision in Tata

Cellular vs. Union of India

26

.

v. After the contract is entered into, there can be

a variety of circumstances, which may provide a

cause of action to a party to the contract with

the State, to seek relief by filing a Writ

Petition.

vi. Without intending to be exhaustive, it may

include the relief of seeking payment of amounts

due to the aggrieved party from the State. The

State can, indeed, be called upon to honour its

obligations of making payment, unless it be that

there is a serious and genuine dispute raised

relating to the liability of t he State to make

the payment. Such dispute, ordinarily, would

include the contention that the aggrieved party

26

(1994) 6 SCC 651

80

has not fulfilled its obligations and the Court

finds that such a contention by the State is not

a mere ruse or a pretence.

vii. The existence of an a lternate remedy, is,

undoubtedly, a matter to be borne in mind in

declining relief in a Writ Petition in a

contractual matter. Again, the question as to

whether the Writ Petitioner must be told off the

gates, would depend upon the nature of the claim

and relief sought by the petitioner, the

questions, which would have to be decided, and,

most importantly, whether there are disputed

questions of fact, resolution of which is

necessary, as an indispensable prelude to the

grant of the relief sought. Undoubtedly , while

there is no prohibition, in the Writ Court even

deciding disputed questions of fact,

particularly when the dispute surrounds

demystifying of documents only, the Court may

relegate the party to the remedy by way of a

civil suit.

viii. The existence of a provision for arbitration,

81

which is a forum intended to quicken the pace of

dispute resolution, is viewed as a near bar to

the entertainment of a Writ Petition (See in

this regard, the view of this Court even in ABL

(supra) explaining how it distinguished the

decision of this Court in State of U.P. and

others v. Bridge & Roof Co.

27

, by its

observations in paragraph -14 in ABL (supra)].

ix. The need to deal with disputed questions of fact,

cannot be made a smokescreen to guillotine a

genuine claim raised in a Wr it Petition, when

actually the resolution of a disputed question

of fact is unnecessary to grant relief to a writ

applicant.

x. The reach of Article 14 enables a Writ Court to

deal with arbitrary State action even after a

contract is entered into by the State. A wide

variety of circumstances can generate causes of

action for invoking Article 14. The Court’s

approach in dealing with the same, would be

27

(1996) 6 SCC 22

82

guided by, undoubtedly, the overwhelming need to

obviate arbitrary State action, in cases where

the Writ remedy provides an effective and fair

means of preventing miscarriage of justice

arising from palpably unreasonable action by the

State.

xi. Termination of contract can again arise in a

wide variety of situations. If for instance, a

contract is terminated, by a person, who is

demonstrated, without any need for any argument,

to be the person, who is completely unauthorised

to cancel the co ntract, there may not be any

necessity to drive the party to the unnecessary

ordeal of a prolix and avoidable round of

litigation. The intervention by the High Court,

in such a case, where there is no dispute to be

resolved, would also be conducive in publ ic

interest, apart from ensuring the Fundamental

Right of the petitioner under Article 14 of the

Constitution of India. When it comes to a

challenge to the termination of a contract by

the State, which is a non -statutory body, which

83

is acting in purported exercise of the

powers/rights under such a contract, it would be

over simplifying a complex issue to lay down any

inflexible Rule in favour of the Court turning

away the petitioner to alternate Fora.

Ordinarily, the cases of termination of contract

by the State, acting within its contractual

domain, may not lend itself for appropriate

redress by the Writ Court. This is, undoubtedly,

so if the Court is duty -bound to arrive at

findings, which involve untying knots, which are

presented by disputed questions of facts.

Undoubtedly, in view of ABL Limited (supra), if

resolving the dispute, in a case of repudiation

of a contract, involves only appreciating the

true scope of documentary material in the light

of pleadings, the Court may still grant relief

to an applicant. We must enter a caveat. The

Courts are today reeling under the weight of a

docket explosion, which is truly alarming. If a

case involves a large body of documents and the

Court is called upon to enter upon findings of

84

facts and involves merely the c onstruction of

the document, it may not be an unsound discretion

to relegate the party to the alternate remedy.

This is not to deprive the Court of its

constitutional power as laid down in ABL

(supra). It all depends upon the facts of each

case as to whether, having regard to the scope

of the dispute to be resolved, whether the Court

will still entertain the petition.

xii. In a case the State is a party to the contract

and a breach of a contract is alleged against

the State, a civil action in the appropriate

Forum is, undoubtedly, maintainable. But this is

not the end of the matter. Having regard to the

position of the State and its duty to act fairly

and to eschew arbitrariness in all its actions,

resort to the constitutional remedy on the cause

of action, that the action is arbitrary, is

permissible (See in this regard Kumari Shrilekha

Vidyarthi and others v. State of U.P. and

85

others

28

). However, it must be made clear that

every case involving breach of contract by the

State, cannot be dressed up and disguised as a

case of arbitrary State action. While the

concept of an arbitrary action or inaction

cannot be cribbed or confined to any im mutable

mantra, and must be laid bare, with reference to

the facts of each case, it cannot be a mere

allegation of breach of contract that would

suffice. What must be involved in the case must

be action/inaction, which must be palpably

unreasonable or absolutely irrational and bereft

of any principle. An action, which is completely

malafide, can hardly be described as a fair

action and may, depending on the facts, amount

to arbitrary action. The question must be posed

and answered by the Court and all we in tend to

lay down is that there is a discretion available

to the Court to grant relief in appropriate

cases.

28

(1991) 1 SCC 212)

86

xiii. A lodestar, which may illumine the path of the

Court, would be the dimension of public interest

subserved by the Court interfering in the

matter, rather than relegating the matter to the

alternate Forum.

xiv. Another relevant criteria is, if the Court has

entertained the matter, then, while it is not

tabooed that the Court should not relegate the

party at a later stage, ordinarily, it would be

a germane consideration, which may persuade the

Court to complete what it had started, provided

it is otherwise a sound exercise of jurisdiction

to decide the matter on merits in the Writ

Petition itself.

xv. Violation of natural justice has been recognised

as a ground signifying the presence of a public

law element and can found a cause of action

premised on breach of Article 14. [See Sudhir

Kumar Singh and Others (supra)].

WHETHER THERE IS AN ARBITRATION CLAUSE?

55. Before we proceed to deal further with the matter,

87

we would have to first find whether there is any

arbitration clause. We have already referred to the

dispute resolution clause, namely, Article 13.2.1 and

Article 13.2.3. They would appear to indicate that the

clauses may not constitute an arbitration clause. As

far as Article 13.3.1. is concerned, to which resort

is to be made when the dispute remains unresolved under

13.2.3, it deals with disputes arising from a claim for

any matter relating to the tariff. Therefore, we would

take the view that it may not be a case where the PPA

provides for an arbitration clause capable of

determining the lis in question. The situation

therefore contemplated in U.P. Roof (supra) as laid

down in ABL (supra) does not exist.

THE IMPACT OF THE JUDGMENT IN THE FIRST

WRIT PETITION

56. Taking up point no. 5., viz., the effect of the

judgment of the High Court in the earlier round, w e

must notice indeed that this is a case which represents

the second round of the litigation. In the earlier

round the respondents had successfully invoked the

88

jurisdiction under Article 226 when it was served with

the order of termination of the contract dated

11.08.2017. We have already noticed the fate of the

said case. The first battle which commenced in the year

2017 resumed as it were with the present writ petition.

We are not oblivious to the fact that the appellant

did not think it fit to challenge the verdict in the

first round of litigation. No doubt , the case of the

appellant is that the appellant was of the view that

the court has left it free to the appellant to take

steps under the contract for termination of the

contract. It is the case of the appellant in fact , that

the judgment of the High Court in the earlier round

would not be an obstacle for the appellant to revisit

and terminate the contract for the reason that the PPA

made it incumbent on the appellant to terminate the

contract under Article 2.1(d) if the contractor did not

fulfil the conditions sub sequent even after the expiry

of 210 days and a further period of nine months after

the commencement of PPA. We must examine whether the

earlier judgment, in fact, in law permits the appellant

to re-open the said issue. A perusal of the judgment

89

dated 20.6.2017 would reveal that the court was dealing

with the challenge to the order dated 11.08.201 7. The

order dated 11.08.2017 would reveal that the appellant

has found that there is a delay of 54 days in achieving

the condition subsequent deadlin e. After considering

the representation by the respondent, the appellant

found that there is no merit in the case of force

majeure and there was no justification for the delay

in achieving condition s subsequent. Thereafter, the

appellant, in terms of Article 2.5.1(d), terminated the

PPA. Still further, a sum of Rs.1180.50 lakhs was found

recoverable as penalty in terms of Article 2.5. It is

this order which was challenged. Thereafter we find

that the High court went on to notice that in a similar

case, viz., relating to New Clean Energy Pvt. Ltd., the

petitioner therein admittedly commissioned the project

within the time prescribed except that there was a

delay of 16 days in achieving the first milestone.

57. Here we must understand the word ‘first milestone’

as fulfilment of the conditions subsequent. In regard

to fulfilment of said milestone for which there was a

delay of 16 days in the case of Renew clean Energy,

90

there was a delay of 54 days in the case of the first

respondent. It is further noticed by the High Court

that there was an order passed in favour of the Renew

clean energy setting aside the termination of the

contract in the said petitioner’s case as confirmed by

this Court. Next the High Court went on to record that

there is a dispute as to whether the respondent had

commissioned the power project in the present case. We

notice that an attempt was made by the appellant to

justify the termination on the basis that t he

respondent had not commissioned the power project

within the time fixed. The High Court proceeds to

notice that the aspect of commissioning the project was

not the basis for terminating the contract. Relying

on Mohinder Singh Gill

29

, the appellants we re not

permitted to supplement the reasons for termination.

Finally, the High court has proceeded to find that

since the similar reason for termination of the

agreement in the communication dated 11.8.2017 was not

found justified in the case of Renew Clea n Energy, the

impugned communication dated 11.08.2017 was set aside.

29

(1978) 1 SCC 405

91

It is thereafter that the liberty was given to the

appellants to pass fresh orders in terms of the PPA in

accordance with law.

58. The appellants would persuade us to hold that the

High Court intended, by the liberty granted to leave

it open to the appellant to pass orders invoking its

power under the PPA which would not only include

termination of the PPA based on respondent not

commissioning the project within the time but also

revisit the aspect relating to non -fulfilment of the

conditions subsequent. The respondent would join issue

with the appellant on the score that judgment of the

High Court must be understood as meaning that on the

issue relating to non -fulfilment of the conditions

subsequent the court made its pronouncement on merits

with reference to the decision in Renew Clean Energy.

All that was left open was the question related to the

delay in commissioning the project.

59. Learned Additional Solicitor General apart from

reiterating his contention would point out that the

earlier judgment should not be treated as res judicata

and the only reason appellant did not challenge the

92

High court judgment, dated 20.06.2018, was the li berty

granted. He would further submit that at any rate even

proceeding on the basis that the High court could not

revisit the issue of the non -fulfilment of the

conditions subsequent, the decision of the High Court

would not stand in the way of this Court considering

whether the order which is impugned in this case which

includes the issue relating to non -fulfilment of the

conditions subsequent is sustainable. This is apart

from pointing out that even in the case of Renew Clean

Energy, this Court in its or der refusing to interfere

in the judgment of the High Court has made it clear

that it was not going into the merits of the said

contention having regard to observations which had been

made, namely, that the contractor therein being faced

with unavoidable c ircumstances as also the factum of

huge investment made in the project.

60. Having noticed the contents of the decision of the

High court dated 20.06.2018 and also bearing in mind

the terms of the notice of termination dated 11.08.2017

we are of the view that the High Court must be treated

as having interfered with the order based no doubt on

93

the order of the said court as affirmed by this Court

in the case of Renew Clean Energy. Noticing, however,

the contentions based on the aspect relating to project

not being commissioned by the respondent within time

and further clearly finding that the impugned order was

not premised on project not being commissioned the

impugned order was set aside finding that the

termination was not justified as regards to non -

fulfilment of conditions subsequent. It is thereafter

that the liberty was granted and it had to pass fresh

order in terms of the PPA. We have to take the order

as it is and we are of the firm view that the analysis

of the order leads us to only one conclusion w hich is

that the High Court intended to only leave open the

right of the appellant to invoke its power under the

contract in regard to the issue relating to

commissioning of the project or rather in the matter

of default in commissioning the project. It wo uld

neither be legal nor equitable to permit the appellant

to contend that the issue relating to not having

fulfilled the conditions subsequent can be canvassed

all over again.

94

AN ASIDE?

THE STATE LOAD DISPATCH CENTRE (RESPONDENT

NO.5): ITS STAND AND T HE IMPACT OF THE SAME

61. Respondent No.5 filed a counter affidavit in this

Court. It claims to be the ‘Authority charged to

perform functions under Section 32 (2) of the

Electricity Act, 2003. Its responsibility is limited

to monitoring and controlling of existing Grid elements

and generating stations keeping the account of energy

transmitted through the Grid. It specifically states

that its role emerges after commissioning of the

generating plant. It further states all activities

prior to readiness of generator to inject power into

the Grid are beyond its purview. The further stand is

that none of the regulatory provisions allows it to

interfere in pre-requisite regulatory compliance by the

generator before injecting of power into the Grid .

There is reference to short-term open access for which

there are regulations. In respect of Renewable Energy

generators intending to connect with the Grid, certain

regulatory requirements, before injecting of power

95

therein, are to be complied with. T hey are

registration, data and speech communication facility,

interface metering and communication of meter data

through automatic meter reading.

Single line diagram indicating connectivity with

the grid duly certified by MPPTCL (fourth respondent),

when connected to 132KV and above, inter alia, copy of

connection agreement with the fourth respondent, inter

alia, information regarding sale of power under long -

term access, medium-term open access or short-term open

access, approval of CEIG for construction, operation

and maintenance of electrical plans and electrical

lines under Section 73C of the Electricity Act, 2003

and approval of Power, Telecommunication and

Coordination Committee (PTCC). It is further stated

that on compliance with procedu res it first issues a

unique code for charging power evacuation line . When

the line holds for a reasonable time , unique code for

injection is issued. Real time generation is monitored.

If it is satisfied with the data recorded by the

interface meters (Mai n and check) then a generating

station is deemed to be commissioned. It is pointed

96

out by letters dated 2.12.2015 and 3.11.2016 respondent

No.5 requested Respondent No.1 for compliance of the

procedure/ response. Mandatory documents were not

submitted for injecting of Grid except registration .

CEIG approval is only for renewable energy generation

units and equipments installed in the Switchyard.

Respondent No.1 has not obtained CEIG approval of

transmission line. The details of the interface

meters, metering equipments are not mentioned in the

report of CGIG. It is pointed out that other units

including M/s. New Clean Energy was ready for

evacuation of power with all regulatory requirements.

62. In the reply affidavit filed by the first

respondent to the said counter affidavit, it is

complained that respondent No.5 though a party in the

earlier writ petition as also in the present writ

petition it never responded, objecting to the readiness

of first respondent in August 20 17. The belated reply

in the High Court is stated to seem as ill motivated

and done at the instance of the appellant.

Furthermore, the first respondent point s out that it

is not the case of the first respondent that its project

97

was commissioned. Its case was that it was complete in

all respects and would have commissioned before the

expiry of 24 months but for the illegal termination on

two occasions as noted. In regard to non -compliance

with certain regulatory requirement s, various steps

taken by it are referred to.

63. As far as registration is concerned, it was

completed on 15.12.2016. In regard to data and speech

communication facility, it is stated by Respondent No.1

that it is completed on 23.03.2017. In the said

communication, on a letterhead showing the name of the

fourth respondent and also showing the name of the

fifth respondent, it is stated that the telemetry

scheme for the 100MW solar power plant was generally

in order and accepted for implementation, subject to

four conditions stipulated therein. Thereafter, it is

stated that “ it is, therefore, required that the

telemetry and voice communication from the control

centre of the proposed power plant upto Back Up SLDC

Bhopal/Sub-LDC Indore/SLDC Jabalpur be arranged before

synchronization of your power plant. It may please be

noted that synchronization of plant with grid shall not

98

be allowed without commissioning of telemetry and voice

communication.” It is seen signed by the Superintending

Engineer (LD:E&T), SLDC, MPPTCL, Jabalpur. As far as

the requirement of connection agreement, it has been

stated in the reply affidavit of the first respondent

that such connection agreement was, indeed, executed

between Respondent No.1 and Respondent No.4. The

agreement is dated 18.05.2017. At this juncture, we may

notice that a Sur -Rejoinder has been filed by

Respondent No.5. Having regard to the connection

agreement, all that is stated is, till date, Respondent

No.5 was not provided with a copy by the first

respondent. It is also stated that Respondent Nos. 4

and 5 are two distinct entities and, therefore, it was

required for compliance that the same should have been

submitted to Respondent No. 5. We have already noticed

that letter dated 23.07.2017 is on the same letterhead,

showing the names of Respondent Nos. 4 and 5 and signed

by the Superintending Engineer, wherein also, the names

of Respondent Nos. 4 and 5 appear. It is a little

intriguing and strange, that the fift h respondent did

not know about the agreement and referred to it as a

99

requirement and as though it had not been complied with

by the first respondent. The first respondent has

stated that, with regard to the single -line diagram

indicating connectivity with the grid, that it was

completed on 19.10.2016. An extension was sought for

by Respondent No.1, in which required diagrams were

furnished to Respondent No. 4. Respondent No.4, it is

stated, has granted permission for charging the

transmission line connecte d from the project to the

STU. Diagrams were also, it is stated, approved by the

CEIG. The answer of Respondent No.5 in the Sur -

Rejoinder that the letter dated 29.08.2017 was not

issued by Respondent No.5 but by Respondent No.4. It

is admitted that it is s tated therein that the line is

ready for charging but further necessary action, like

issuing of charging code, has to be taken from

Respondent No.5 by Respondent No.1. It is again stated

that Respondent No.1 has never approached Respondent

No.5 with copy o f letter dated 29.08.2017 and CEIG

approval for readiness of evacuating line. It is again

stated that Respondent No.5 is not an arm or even unit

of Respondent No.4. In regard to the contention that

100

information regarding sale of power for access,

including long-term access, was not made available by

the first respondent. It is pointed out that the first

respondent set up the project to supply power to the

appellant only as per the PPA and the said requirement

was not applicable.

64. The fifth respondent in the S ur-Rejoinder

responded by pointing out that Respondent No.5 is the

Nodal Body for managing the grid operations and within

the State and it is generally seen that if the plant

is commissioned the same cannot be left idle and be

allowed to inject power into the grid, and it was in

this regard, it was mentioned that if a third -party

sale was to be undertaken by Respondent No.1 so that

its plant was not left idle, then, it was incumbent on

Respondent No.1 to have obtained open access. We find

that as per Article 9.8 of the PPA, the first respondent

was obliged to sell the contracted capacity for a

period of twenty -five years from COD. Elaborate

provisions have been made, which would visit the first

respondent with monetary compensation to be paid to the

appellant, in case of breach. Article 9.7 also provides

101

for the obligation of the appellant to buy power for

twenty-five years. It is only if there was refusal or

inability to buy by the appellant, fully or partially,

or in the event of default, as per Article 9. 5, leading

to termination, the first respondent was left free to

sell power to a third party, which sale was to be

regulated by certain terms.

65. As regards another requirement, viz., approval of

the CEIG for construction, operation and maintenance

of the electrical plants and electrical lines, it is

the case of the first respondent that such approval was

obtained by letter dated 10.08.2017. It was also marked

to Respondent No.4. CEIG approval for the electrical

plant was received on 09.08.2017. Respondent No. 4, it

is pointed out, had also, on 24.08.2017, issued a Joint

Inspection Report certifying that the project may be

charged. In fact, we find, in the Joint Inspection

Report issued by the fourth respondent that:

“Newly constructed 132KV D.C.D.S. line from

400KV PS Chhegaon to 50MW Pooling Station

of M/S Sky Power Solar India Pvt. Ltd. And

50MW Pooling Station of M/S Sky Power

Southeast Solar India Pvt. Ltd. At village

Chhirbel has been jointly inspected with EE

(EHT-M) MPPTCL, Indore on dt.24/08/2017.

102

During Joint Inspection No. any major

defects has been found and line. May be

charged.”

(Emphasis supplied)

66. In regard to the same, Respondent No.5 in the Sur -

Rejoinder would state that it is misleading and

incorrect on the basis that it has been averred by

Respondent No.1 that the approval of the CEIG for

readiness of 132KV double circuit line for connection

with the grid was submitted by the sister concern of

Respondent No.1, while requesting code for charging the

132KV line for the sister concern. It is stated that

in the approval issued on 10.08.2017, there is no

mention that the second line will be utilised by

Respondent No.1. The letter of the CEIG dated

10.08.2017 is said to b e addressed to the sister

concern. There was to be a specific approval of CEIG

in favour of Respondent No.1. Copy was not marked to

Respondent No.5 but only marked to Respondent No.4. It

again reiterated that they are two different entities.

67. It appears to us that though letter dated

10.08.2017 is addressed to the sister concern of

Respondent No.1, viz., Sky Power Solar India Pvt. Ltd.,

103

what was the subject matter of the communication was

for 100MW solar power project, and what is more, and

it was for the establishment of 132KV ‘dual’ circuit

transmission. This understanding of this CEIG Report

is clear from the Joint Inspection Report of Respondent

No.4 as Respondent No.1 has entered into a PPA for

50MW, and the sister concern, apparently, had a PPA for

50MW. Lastly, even given an opportunity, this is a

matter which could have been clarified by the CEIG, for

which no opportunity appears to have been given. We

bear in mind Article 9.1 of the PPA. From the Joint

Inspection Report, bearing in mind that 132KV line had

a dual circuit, the same line was to be used by the

first respondent and its sister concern. This appears

to be the only possible meaning on a joint reading of

the CEIG Report dated 10.08.2017 and Joint Inspection

Report dated 24.08.201 7. We stand fortified in this

regard by the report dated 21.04.2018 also where it is

inter alia stated as follows: -

“1. Present Status of Transmission Line for

power evacuation from Power Plant to Grid

Substation

132 kV DCDS line is found erected between

Pooling Substation to 400 kV Chhegaon

(Torni)Substation. One circuit is used for

104

already existing 50 MW plant of M/s Sky Power

and 2

nd

circuit is proposed to be used for

M/s Sky Power South East Solar India Pvt.

Ltd. at village Chirbel, Distt. Khandwa, for

which site verification visit is conducted.”

68. The next requirement, according to the fifth

respondent was that approval of the PTCC was required.

The first respondent has, in the reply, stated the said

requirement was completed on 05.09.2017. We find that

Chief Engineer (Procurement) of the fourth respondent

has recorded in the communication dated 05.09.2017 that

PTCC had accorded PTCC route approval:

“With reference to the subject cited above,

DET (PTCC), Mumbai has accorded PTCC route

approval for charging 132KV DCDS line from

400kV S/s Chhegaon to 100MW Solar Power

Project of M/s SkyPower Solar India & M/s

SkyPower Southeast Solar India Pvt. Ltd.

Chhirbel, Dist. Khandwa.”

69. The fifth respondent, in the Sur -Rejoinder, in

response to the same, would respond by stating that the

Respondent No.4 granting approval, did not mean that

the same was issued with the knowledge or concurrence

of Respondent No.5. We only remind ourselves that in

the Counter Affidavit filed by Respondent No.5,

Respondent No.5 had only stated against Requirement

105

No.VIII that there was the requirement of approval of

PTCC. What is reflected in letter dated 05.09.2017 is

that DET [PTCC] has accorded PTCC route approval. The

approval is not granted by the fourth respondent. We

are a little mystified by the statement that the PTCC

approval should be one issued with the knowledge and

concurrence of the fifth respondent.

70. It is, no doubt, true that as regards the

contention of the fifth respondent that there must be

interface metering and communication of the meter data

through automatic meter reading (AMR), which details

are to be provided to the SLDC before the commissioning

of the plant, the re is no specific averment by the

first respondent. Here we must notice that it is for

the first time such a plea is being raised by the fifth

respondent. Even proceeding on the basis that it was a

requirement; it is required to be provided before

commissioning. This is not a matter, which could not

be set right at any rate, if an opportunity to remove

a defect was provided, as we shall see, may be

contemplated under Article 9.1. It is also true that

as far as the data and speech communication facility,

106

the first respondent has claimed that it was completed

on 23.03.2017. We have already referred to it also. The

stand of the fifth respondent is that there is approval

but it is only in principle. It is complained that till

date, the telemetry and voice communication was not

working, in spite of the fact that by letter dated

03.04.2017, relevant IP address for real time data

communication was furnished. It is no t functional till

date, in the case of the first respondent, whereas, in

regard to its sister concern, it is operational. A

letter dated 14.10.2021 is produced to indicate that

the telemetry of the first respondent was not

integrated and no real time data was received from the

IP address provided to it. Even, in regard to this

matter, if an opportunity was to be given in law, to

the first respondent under Article 9.1, it is not

something which may be not achievable.

71. We are also dealing with these aspects on the basis

of an affidavit filed raising such issues for the first

time by the fifth respondent. The fifth respondent ha d

all the opportunity in the writ petition to raise such

contentions. Even in the Review Petition, there is only

107

adoption of the content ions of the appellant.

72. Emphasis is placed on the statement of Respondent

no.5 by respondent no.1 wherein it is stated “whereas

though the generating station is ready for generation

of power but the power cannot be evacuated into the

grid in the absence of transmission line”. This is

taken as an admission of the readiness of the first

respondent for generation of power. It is pointed out

further that necessary approval w as taken before

December 2016 to August 2017 for operating the

transmission line. Respondent No.1 was not allowed to

commission. Reliance is also placed on the inspection

report of the appellant to show that the transmission

line was ready. The example s about other operators are

brushed aside as irrelevant. It is the generator ’s

prerogative to sell power in the open market.

73. A Sur-Rejoinder is filed by respondent No.5.

Therein, it has interestingly produced its return in

the review petition filed by the appellant before the

High court. Therein we may notice that it referred to

Section 32(2) of the Electricity Act and its functions.

Thereafter it has stated as follows:

108

“3. That, in accordance with

Electricity act, 2003, role of SLDC comes

after commissioning of the generating

plant and its evacuating transmission

lines. On receipt of commissioning

certificate of a generator, connectivity

with the Grid, metering arrangement and

other regulatory compliances, SLDC

accords permission of injection of power

into the Grid. Further, SLDC schedules

power of generator to the beneficiary/

consumer if the valid Power Purchase

Agreement exists between buyer and

seller.

4. That, writ proceeding in the

instant petition is regarding completion

of commissioning of solar Generating

Plant of M/s. Sky Power Southeast Solar

India Pvt. Ltd., whereas the

responsibility of SLDC begins after

commissioning of the Solar Generating

Plant and other regulatory compliances.

As per provisions of Electricity Act,

2003 and MPEGC, commissioning

certification is beyond the jurisdiction

of SLDC.

6. That, the answering respondent is more

of a formal respondent as the agreement

was entered into between MPPMCL and the

Original Petitioner in Writ Proceedings

which is M/s. Sky Power.”

74. No doubt, it has also stated in paragraph -7 that

it adopts all the facts and grounds raised by the review

petitioner, namely, the appellant.

75. It will be noticed that though respondent no.5 was

a party to the earlier writ petition as much as it is

109

a party in the present writ petition, respondent no.5

has not filed any counter affidavit in either of the

writ petitions. It is only in the review petition that

the respondent no.5 has filed a reply and we have

noticed its stand. The stand appears to be that it is

more of a formal respondent. Its role comes in only

after commissioning. It is in this Court that there

has been blossoming of its case for the first time. It

is also admitted by respondent No.5 that it is not

concerned with the pre -commissioning. It is its

specific stand that all the activities prior to

readiness of the generator to inject power are beyond

its purview. It has specifically stated that its role

comes only after commissioning the project. First

respondent states that it has not commissioned the

project. Its only case is that it was ready to

commission the project within 24 months as provided in

the PPA but it was illegally prevented from doing it .

76. We may only observe that the fifth respondent has,

in the Sur-Rejoinder, owned up letter dated 23.03.2017

as the letter it has sent. The said letter is in the

letterhead of the fourth respondent and therein the

110

name of the fifth respondent is also sho wn. It would

appear that the fifth respondent is created under

Section 31 of the Electricity Act, 2003. Section 31

reads as follows:

“Constitution of State Load Despatch

Centres.—(1) The State Government shall

establish a Centre to be known as the State

Load Despatch Centre for the purpose of

exercising the powers and discharging the

functions under this Part.

(2) The State Load Despatch Centre shall be

operated by a Government company or any

authority or corporation established or

constituted by or under any State Act, as

may be notified by the State Government:

Provided that until a Government

company or any authority or corporation is

notified by the State Government, the State

Transmission Utility shall operate the State

Load Despatch Centre:

Provided further that no State Load

Despatch Centre shall engage in the business

of trading in electricity.”

77. Therefore, it would appear to us that actually the

fifth respondent is to be operated by the State

Transmission Utility, which is defined in Sect ion 2(67)

as the Board (defined as the State Electricity Board)

or the Government company specified by the State

Government under Section 39(1), unless it is operated

by a Government company or any authority or corporation

111

established or constituted by or under and State Act.

It would, therefore, appear to us that if the fourth

respondent is the State Transmission Utility, it would

be the Body to operate the fifth respondent. The

attempted disassociating of the fifth respondent from

the fourth respondent, appears to us to be without

justification. However, we leave the matter there. We

may conclude nearly that all the requirements were met.

There remained the metering requests and the aspects

about furnishing data. They clearly appea r to be

matters which could have been remedied at any rate if

a default notice was given .

THE NARRATIVE RESUMES

78. At this juncture, we must make certain

observations. While the law has evolved from the

hands-off approach to one of contracts lending ground

for writ courts making a foray into decisions by State

and its instrumentalities even in contractual matter,

there are certain principles which we have already in

fact generally noticed. We have already found that the

contract in question, i.e., the PPA, is not a sta tutory

112

contract. We have also noticed that even if it is a

non-statutory contract, there is no absolute bar in

dealing with a cause of action based on acts or omission

by the State or its instrumentalities even during the

course of the working of a contra ct. We again reiterate

that a monetary claim arising from a contract may be

successfully urged by a writ applicant but the premise

would not be a mere breach of contract. Being part of

public law the case must proceed on the basis of there

being arbitrariness vitiating the decision. The matter

should not fall within a genuinely disputed question

of facts scenario. The dispute which must be capable

of being resolved on a proper understanding of

documents which are not in dispute may furnish a cause

of action in a writ court. Such was the case in ABL

(supra). What is this litigation all about? This

litigation is not about enforcing a monetary claim.

The writ petition lays a challenge to the ter mination

of the contract. A termination of the contract , no

doubt, again may not be immune if it is found to be

afflicted with the vice of arbitrariness. Interference

again may be refused if the court finds that the case

113

really belongs to the small area with unclear contours

where it can be appropriated as a private law dispute.

The distinction between public law and private law has

concededly been reduced to nearly imperceptible terms

but the distinction in law remains. As far as the

public law aspect is concerned, we are inclined to take

the view that in view of what has been laid down in

Shri Vidhyarthi Lekha (supra), the impact of the action

in a contractual matter in the facts by public

authority is felt in public domain. We are dealing

with the action of the appellant in terminating the

contract dealing with the right to generate renewable

energy and for supply ing it to the consumers . Supply

of power and its consumption are imperative and

indispensable needs for not only the common man but

also for the efficient functioning of trade and

industry. Decisions in this domain do impinge on public

interest. Therefore, we would not be inclined to shut

the doors on the first respondent in this matter . We

also bear in mind that this is the second round of

litigation. As noticed already, in the first round, the

first respondent did succeed.

114

79. Having found that though a non -statutory contract

and that there is no absolute prohibition against

judicial review on the score that action is shown to

be arbitrary, the questions which would fall for

further consideration are: (1) whether action is

arbitrary (2) the projected disputes of facts and their

impact; (3) what is the impact of the principle that

there must be overwhelming public interest in favour

of the writ applicant for the writ court to interfere.

THE ARGUMENT OF ‘OVERWHELMING PUBLIC

INTEREST’

80. The case based on ‘overwhelming public interest

not being present in this case is based on the following

submissions by the learned Additional Solicitor

General. It is pointed out that under the PPA, if the

appellants are compelled to comply with the impug ned

Judgment and that too for a period of twenty -five

years, it would be liable to purchase power at the rate

of Rs. 5.109/- unit. On the other hand, if the Writ

Petition filed by the first respondent is dismissed,

there would be no obligation and consequent burden. It

115

is important to notice that the appellant would be

compelled to pass on the burden to t he ultimate

consumers. All of this is to be viewed in the scenario,

when power is available at a cheaper rate in the market.

In other words, public interest lies not in favour of

exercise of jurisdiction under Article 226 of the

Constitution of India. The High Court erred in not

bearing in mind this fundamental principle the argument

runs. The appellant relied on the decision in All India

Power Engineer Federation and others v. Sasan Power

Limited and others

30

, for the proposition that the Court

must be mindful of public interest, which consists of

interest of the consumers ultimately.

81. Per contra, the submission of the first respondent

is that the Court must not be oblivious to certain

facts. The rate per unit, in the case of the first

respondent, is Rs.5.109 per unit. In respect of another

project, where the PPA was entered into with a sister

concern of the first respondent, the project price was

Rs.5.298 per unit. The project stands commissioned. The

30

(2017) 1 SCC 487

116

tariff was arrived at on the basis of highly

competitive bids. There were, in fact, 183 bids. It is

further contended that the bid of the first respondent

was found to be the lowest in the competitive bidding.

The appellant is, in fact, buying power at higher

tariff from at least 5 generators, who commissioned

their projects in the year 2017 -2018. It was further

contended that the daily demand of the appellant is

approximately 15000 megawatts. The quantum of the

project of the first respondent is only 50 megawatts,

which constitutes 0.33 per cent of the total de mand.

Purchasing such a small capacity, in terms of the rate

under the PPA, would make no difference to the consumer

tariff. This is apart from countenancing the appellant

reneging on a binding contract, which involves reaching

a reward for arbitrary State action, besides,

destroying an investment of Rs.331 crores. In this

regard, reliance is placed on the Judgment of this

Court in Vice Chairman & Managing Director, City and

Industrial Development Corporation of Maharashtra Ltd.

and another v. Shishir Realt y Private Limited and

117

others

31

. Public interest cannot be determined with

reference to monetary considerations alone , it is

pointed out.

82. As far as All India Power Engineer

Federation (supra) is concerned, in fact, the Court was

dealing with Civil Appeals, which were filed under the

Electricity Act, 2003. The question about public

interest arose in the context of the provision in the

contract, which provided for waiver, which would be a

unilateral act under Article 18.3 of the PPA therein.

The Court also discussed the effect of Section 63 of

the Indian Contract Act, 1872. The Court, while dealing

with waiver and public interest, held as follows:

“21. Regard being had to the aforesaid

decisions, it is clear that when waiver is

spoken of in the realm of contract, Section

63 of the Contract Act, 1872 governs. But

it is important to note that waiver is an

intentional relinquishment of a known right,

and that, therefore, unless there is a clear

intention to relinquish a right that is

fully known to a party, a party cannot be

said to waive it. But the matter does not

end here. It is also clear that if any

element of public interest is involved and

a waiver takes place by one of the parties

31

(2021) SCC Online SC 1141

118

to an agreement, such waiver will not be

given effect to if it is contrary to such

public interest. This is clear from a

reading of the following authorities.

xxx xxx xxx

25. It is thus clear that if there is any

element of public interest involved, the

court steps in to thwart any waiver which

may be contrary to such public interest.”

83. In the said case, the Court further held that the

moment the electricity tariff gets affected, the

consumer interest comes in and public interest gets

affected and further that there is a statutory

recognition for the same in Sections 61 to 63 of the

Electricity Act, 2003. Therefore, this Judgment, though

in the context of a Statutory Appeal, has laid down

that consumer interest in tariff is intertwined w ith

public interest.

84. On the other hand, in Vice Chairman & Managing

Director, City and Industrial Development Corporation

of Maharashtra Ltd. (supra), this Court, while dealing

with a case involving the question of award of

contract, held as follows:

119

“58. When a contract is being evaluated, the

mere possibility of more money in the public

coffers, does not in itself serve public

interest. A blanket claim by the State

claiming loss of public money cannot be used

to forgo contractual obligations,

especially when it is not based on any

evidence or examination. The larger public

interest of upholding contracts and the

fairness of public authorities is also in

play. Courts need to have a broader

understanding of public interest, while

reviewing such contract s.”

85. In fact, the principle of public interest has found

expression in cases which involved challenge to the

legality of the award of contract.[See in this regard

Tata Cellular v. Union of India (1994) 6 SCC 651

32

(supra) and Raunaq International Ltd. v. I.V.R.

Construction Ltd. and Others, (1999) 1 SCC 492.

86. In Michigan Rubber (India) Limited v. State of

Karnataka and Others

33

after referring to Tata Cellular

and Raunaq International Limited (supra), the Court

inter alia held as follows: -

“35. As observed earli er, the Court would not

normally interfere with the policy decision and

in matters challenging the award of contract

32

(2017) 1 SCC 487

33

(2012) 8 SCC 216

120

by the State or public authorities. In view of

the above, the appellant has failed to

establish that the same was contrary to public

interest and beyond the pale of discrimination

or unreasonable.”

87. In Raunaq International Ltd. v. I.V.R. Construction

Ltd. and Others

34

the case involved award of contract

for the purpose of Thermal Power Station. In fact, the

Appeals in this court were maintained against the grant

of an interim order against the appellant to whom the

contracts stood awarded. The case also involved

relaxation of the criteria which was based on valid

principles it was found. It was further found that the

construction of two Thermal Power Units was being held

up due to the dispute. The Court, inter alia, held as

follows: -

“9. However, because the State or a public body

or an agency of the State enters into such a

contract, there could be, in a given case, an

element of public law or public interest

involved even in such a commercial transaction.

10. The elements of public interest are: (1)

Public money would be expended for the purposes

of the contract. (2) The goods or services

which are being commissioned could be for a

public purpose, such as, construction of roads,

public buildings, power plants or other public

utilities. (3) The pu blic would be directly

34

(1999) 1 SCC 492

121

interested in the timely fulfilment of the

contract so that the services become available

to the public expeditiously. (4) The public

would also be interested in the quality of the

work undertaken or goods supplied by the

tenderer. Poor quality of work or goods can

lead to tremendous public hardship and

substantial financial outlay either in

correcting mistakes or in rectifying defects

or even at times in redoing the entire work —

thus involving larger outlays of public money

and delaying the availability of services,

facilities or goods, e.g., a delay in

commissioning a power project, as in the

present case, could lead to power shortages,

retardation of industrial development,

hardship to the general public and substantial

cost escalation.

11. When a writ petition is filed in the High

Court challenging the award of a contract by a

public authority or the State, the court must

be satisfied that there is some element of

public interest involved in entertaining such

a petition. If, for ex ample, the dispute is

purely between two tenderers, the court must

be very careful to see if there is any element

of public interest involved in the litigation.

A mere difference in the prices offered by the

two tenderers may or may not be decisive in

deciding whether any public interest is

involved in intervening in such a commercial

transaction. Price may not always be the sole

criterion for awarding a contract .”

88. Therefore, on a conspectus of the case law, we find

that the concept of overwhelming public i nterest has

essentially evolved in the context of cases relating to

the award of contract by the State. It becomes an

important consideration in the question as to whether

122

then the State with whatever free play it has in its

joints decides to award a contr act, to hold up the

matter or to interfere with the same should be

accompanied by a careful consideration of the harm to

public interest. We do not go on to say that

consideration of public interest should not at all

enter the mind of the court when it deals with a case

involving repudiation of a claim under a contract or

for that matter in the termination of the contract.

However, there is a qualitative differen ce in the

latter categories of cases. Once the State enters into

the contract, rights are created. If the case is brought

to the constitutional court and it is invited to

interfere with State action on the score that its action

is palpably arbitrary , if the action is so found then

an appeal to public interest must be viewed depending

on the facts of each case. If the aspect of public

interest flows entirely on the basis that the rates

embodied in the contract which is arbitrarily

terminated has with the passage of time become less

appealing to the State or that because of the free play

of market forces or other developments , there is a fall

123

in the rate of price of the services or goods then this

cannot become determinative of the question as to

whether court should decline jurisdiction. In this

case, it is noteworthy that the rates were in fact

settled on the basis of international competitive

bidding and in which as many as 182 bidders participated

and the rate offered by the first respondent was

undoubtedly the lowest. The fact that power has become

cheaper in the market subsequently by itself should not

result in non-suiting of the complaint of the first

respondent, if it is found that a case of clear

arbitrariness has been established by the first

respondent.

89. In other words, public interest cannot also be

conflated with an ev aluation of the monetary gain or

loss alone.

POINTS NO. 6 - 8 AND 10

90. The time is now ripe to take a closer look at the

relevant clauses of the PPA. Article 2 deals with the

pre commissioning activities. Article 2.1 deals with

satisfaction of the conditions subsequent by the

124

respondent. Clause 2.1.1 contemplates that the

respondent must complete all the conditions which ar e

set out at his own cost and risk within 210 days from

the effective date. The only two exceptions were ‘force

maejure’ or if any of the conditions subsequent was

specifically waived by the appellant in writing. The

consequences of non-fulfilling the condition subsequent

is dealt with in Article 2.2 which related to force

majeure obstructing the fulfilment of the conditions

subsequent. Article 2.2.2 in fact provided that any

increase in the time period for completion of the

conditions subsequent mentioned under Article 2.1 would

also lead to an equal extension in the scheduled

commissioning date. Article 2.5 provided for delay in

achieving the conditions subsequent. Article 2.5.1

reads as follows:

“2.5.1. In case of delay in achieving any

of the Conditions Subsequent under clause

2.1 (a to h), as may be applicable, MPPMCL

shall encash CPG (submitted by Seller @

Rs. 30 Lakhs/MW) as under, subject to

Force Majeure: -

a) Delay from 0-3 months - 1 % per

week.

125

b) Delay from 3-6 months - 2% per

week for the period exceeding 3

months, apart from (a) above.

c) Delay from 6-9 months - 3% per

week for the period exceeding 6

months, apart from (a) and (b)

above.

d) In case of delay of more than 9

months, MPPMCL shall terminate PPA

and release balance amo unt of CPG."

91. Thereafter, PPA deals with the aspect of

commissioning. Article 2.6 deals with commissioning

and it reads as follows:

“2.6. COMMISSIONING

In case of Solar Project of capacity up

to 50 MW, commissioning of plant shall be

within 12 months from the date of

financial closure subject to Force

Majeure. In case of Solar Project of

capacity beyond 50 MW and up to 100 MW,

commissioning of plant shall be within 15

months from the date of financial closure

subject to Force Majeure For capaci ty

beyond 100 MW, commissioning period shall

be within 18 months from the date of

financial closure subject to Force

Majeure..1

In case of failure to achieve this

milestone, provision of PPA as mentioned

below shall apply: -

MPPMCL shall en cash the CPG in the

following manner for the capacity not

commissioned, subject to Force Majeure: -

126

a) Delay from 0-3 months - 1% per week.

b) Delay from 3-6 months - 2% per week for

the period exceeding 3 months, apart

from (a) above..

c) Delay of more than 6 months – 3% per

week for the period exceeding 6 months,

apart from (a) and (b) above.

Part Commissioning: In case of Solar PV

Projects, Part commissioning of the

Project shall be accepted by MPPMCL

subject to the condition that the minimum

capacity for acceptance of part

commissioning shall be 5 MW. Or in

multiple of 5 MW

COD means the commissioning date of just

units (s) of the power project where upon

the seller starts injecting power from

full contracted capacity of the power

project to the delivery point; as

approved by competent authority of the

Transco/Discom. The PPA will remain in

force for a period of25 month from the

COD.”

92. There are other Articles which need not detain us.

Article 3 deals with Supply Arrangements under Open

Access. Article 3.1.1 reads as under:

“3.1.1. The power generated through 50 MW

Solar Power Project (PY/Thermal

Technology) installed by the Seller

Located at Village bedhsya, Tai: Khandwa,

Dist: Khandwa, State: Madhya Pradesh

shall be injected into the

Transmission/Distribution system of

127

Transco/Discom on 33kV or above side of

33kV /EHV Substation situated at Deshgaon

at injection point for sale to MPPMCL,

subject to fulfilling the terms and

conditions and protection schemes by the

Seller as approved by the concerned

Transco/Discom's.

3.1.2. The Seller shall ensure to

interconnect and operate the solar power

plant in parallel with the grid of

Transco/Discom (in the area of the

location of the generating unit) system

subject to the terms and provisions of

this agreement. The Seller shall be fully

responsible for obtaining and maintaining

any or all licenses and permissions

required by law. The Seller shall abide

by any law, rules, regulations or any

notification or order issued there under

by the Central Govt. or State Govt. or

Commission or Local Authority or any

other Authority prescribed under the law

connected with the project of the Seller.

The Seller shall be fully responsible for

the design, construction, testing,

operation and maintenance of the solar

power plant in accordance with Standard

Utility Practices, relevant technical

standards and specifications.

b) For the power plant situated in MP

State, the power evacuation

infrastructure laid by the Seller shall

be the property of the concerned licensee

(Transco/Discom) in whose territorial

area the above lines are located -

notwithstanding the fact that the cost of

the said infrastructure has been paid by

the Seller and the same . shall then be

maintained by the concerned licen see at

its cost. A separate transfer agreement

128

shall be subsequently signed in this

regard with the concerned licensee, if

required.

3.1.3. The Seller shall obtain all

statutory and non -statutory permissions

as required. The seller supplying power

from outside of MP State shall require to

obtain long term open access permission

as per relevant regulations of central

and state regulators, as the case may be,

from the state or regional load dispatch

center and/or the state/central

transmission utilities. ”

93. Article 4 deals with System Operations. Article

4.2 deals with system operation and scheduling. We may

notice Articles 4.2.1 and 4.2.4.

“4.2.1. The State Load Despatch Center

shall be the Nodal Agency if the project

is located in MP, for system operation,

power accounting, scheduling, etc. The

foes and charges of SLDC as approved by

the MPERC shall be payable by the Seller

to the SLDC. In case of the system is

located in any other state, the Seller

has to follow the regulations of the

particular SLDCIRLDC and the fees and

charges shall be payable by the seller

accordingly.”

“4.2.4. SLDCs/Control Centers of the

States/UTs/DVC, in which the solar power

plant is located, shall provide the 15 -

minute block-wise data of schedule and

actual generation from Solar Grid

Connected Power Plant as recorded in the

Energy Meters to the concerned RLDC and

NLDC on a weekly basis as per the

requirement of SLDCIRLDC/NLDC. All the

129

data shall be submitted in the form

prescribed by the NLDC. ”

94. Article 4.3 deals with open access. Article 5.1

deals with commercial operations date (COD). COD has

been defined in the agreement as meaning the

commissioning date of the last unit(s) of the power

project whereupon the seller starts injecting power

from full contracted capacity of the power project to

the delivery point as approved by competent authority

of the TRANSCO/DISCOM. DISCOM has been defined as a

licensee authorise d to operate and maintain a

distribution system for supplying electricity to the

consumers in the State of Madhya Pradesh. Article 5.1

reads as under:

“5.1. COMMERCIAL OPERATIONS DATE

The Commercial Operation Date of the

plant shall mean the commissioning date

of last unit (s) of the power project

where upon the seller starts injecting

power from contracted capacity of the

power project to the delivery point as

approved by competent authority of the

Transco/discom.

After Each part commissioning and/por CoD

of the contracted capacity, the

commissioning certificate (s) ce rtified

by Transco/Discom shall be attached as

130

Annezure- XII to the Power Purchase

Agreement

However part commissioning of the plant

shall be accepted as laid out in clause

2.6 and the energy supplied from the same

shall be considered for billing and

payment of the energy supplied from such

commissioned units.”

95. Article 5.2. deals with Pre -Commercial Operations

and it inter alia provides that the discom shall take

all power produced thro ugh the STU/CTU during the

testing of the plant without any charges. Thereafter

5.3 deals with Notice of Commercial Operations. It

reads as follows:-

“5.3 NOTICE OF COMMERCIAL OPERATIONS: -

The Seller will specify in a written notice to

the MPPMCL that:

a) The Plant is constructed in accordance

with this Agreement and is ready to

deliver Solar Power in accordance with

the terms hereof;

b) All permissions and approvals required

for the Plant to sell Solar Power at the

rates and terms specified under this

Agreement have been obtained and

c) All interconnection facilities are

available to receive Solar Power from

the Plant.

Such notice shall take effect and the

Commercial Operations Date will be achie ved

following the Transco/Discom’s declaration

that all of the conditions set forth in this

Article have been satisfied or waived by the

STU/CTU/MPPMCL/Transco/Discom i.e.:

a) The Seller has successfully completed

131

the testing of the Plant in accordance

with the manufacturer’s recommendations

and the Seller has obtained and

provided to the STU/CTU/Transco/Discom

Certificates from the Electrical

Inspectorate of GoMP or any other state

government authorised agency, and the

STU/Transco/Discom’s officer as may be

designated; in case project is located

in MP. In case project is located

outside MP, similar certificates be

obtained from the concern authority of

respective state.

b) The Seller has delivered to the

Transco/Discom a list of the Plant’s

equipment, showing the make, model,

serial number and certified the

installed capacity of the Plant;

c) The Plant has achived initial

synchronization with the

Transco/Discom’s/STU/CTU Grid System

and has demonstrated the reliability

of its communications systems and

communications with the

STU/CTU/Transco/Discom;

d) The Seller has operated the Plant

without experiencing any abnormal or

unsafe operating conditions on any

interconnected system;

e) The Seller shall also have notified the

MPPMCL/Trancso/Discom/STU/CTU no later

than 30 days prior to the Commercial

Operations Date that all the Conditions

Subsequent as laid out in clause 1.01

have been met and MPPMCL shall verify

the same and shall provide the Seller a

written endorsement in this behalf

acknowledging the documents,

certificates, approvals etc provided by

the Seller in this regard. ”

The respondent was duty bound to notify to the

appellant that the plant is constructed as per PPA and

132

it was ready to produce solar power and that all

permissions and approvals to sell power at the rates

and terms under the agreement had been obtained and all

inter connection facilities were available to receive

solar power from the plant. The PPA further

contemplates that the said notice would take effect and

the COD be achieved upon the TRANSCO/DISCOM declaring

that all conditions in this Article were either

fulfilled or waived. The PPA further deals with Sale

and Purchase of Solar Power in Article 6 commencing at

COD date. The seller, that is, the respondent was to

sell and the appellant was to purchase and accept 50 MW

solar power at the point of delivery . The respondent

undertook not to sell any solar power (all of which is

committed to the appellant) to any other person.

Article 7 deals with Metering and Measuring. Article 8

deals with Billing and Power Accounting. Article 9

deals with Events of Default and Remedies. Article 9.1

is relevant and it deals as follows:

“9.1. DEFAULTS AND TERMINATION.

In case of default, the non -defaulting

party shall issue a default notice to the

defaulting party. If the default is not

133

fully set right within three months from

the date of issue of the default notice,

then in case of default by the Seller,

the MPPMC.L by giving seven days

termination notice in writing, may

terminate the agreement. In case of

default by MPPMCL, the Seller may in the

same way terminate the ag reement.”

96. Article 9.4 deals with various events which are

described as seller event of default. The relevant

provision reads, inter alia:

“9.4. SELLER EVENT OF DEFAULT

The occurrence and continuation of any of

the following events, unless any such

event occurs as a result ofa Force Majeure

Event, shall constitute Seller Event of

Default:

a) The failure to commence supply of power

to MPPMCL up to the Contracted, ·

Capacity, relevant to the Scheduled

Commissioning Date, by the end of 24

months; or”

97. Article 9.5 provides for appellant’s events of

default. Article 9.7 falling under 9.6 which generally

deals with ‘Remedy’. It reads as follows:

“9.7. MPPMCL commits to buy power, as

indicated in Article Error! Reference

source not found. of PPA, from Seller at

Rs. 5.051 per kWh for a period of 25 years

from COD. In case MPPMCL refuses or is

unable to buy the said power, fully or

partially, or there is an event of default

134

as per Clause 9 .5 of PPA leading to

termination of the PPA, the seller would

be free to sell the said power to a Third

Party at any rate which will be decided

between the Seller and the said Third

Party and such sale would be gover ned by

the following principles :”

(Emphasis supplied)

The principles are set out providing for two cases.

98. Article 11.6.3 deals with Change in Law. Article

13 deals with Jurisdiction and Dispute Resolution.

Article 13.2.1 reads as follows:

“13.2.1. Either Party is entitled to

raise any claim, dispute or difference of

whatever nature arising under, out of or

in connection with this Agreement

("Dispute") by giving a written notice

(Dispute Notice) to the other Party,

which shall contain:

• a description of the Dispute;

• the grounds for such Dispute; and

• all written material in support of its

claim

13.2.2. The other Party shall, within

thirty (30) days of issue of Dispute

Notice issued under 13.2.1, furnish:

• counter-claim and defences, if any,

regarding the Dispute; and

• all written material m support of its

defences and counter-claim.

13.2.3. Within thirty (30) days of issue

of Dispute Notice by any Party pursuant

to Article 13 .2.1 if the other Party does

135

- not furnish any counter claim or defence

under Article 13.2.2 or thirty (30) days

from the date of furnishing counter

claims or defence by the other Party, both

the Parties to the Dispute shall meet to

settle such Dispute amicably. If the

Parties fail to resolve the Dispute

amicably within thirty (30) days from the

later of the dates mentioned in this

Article, the Dispute shall be referred

for dispute resolution in accordance with

Article 13.3.”

99. Article 12.2 reads as follows:

“12.2 GRID CODE DISCIPLINE

The concerned Transco/Discom and the

Seller shall observe the State/Indian

Electricity Grid Code or its amendment if

any, and operate their systems to the best

of their capacity and resources.”

100. Article 13.3.1 reads as follows:

“13.3.1. Where any Dispute arising from a

claim made by any Party for any matter

related to Tariff or claims made by any

Party which partly or wholly relate to

any change in the Tariff or determination

of any of such claims could result in

change in the Tariff, shall be submitted

to adjudication by the MPERC. Appeal

against the decisions of MPERC shall be

made only as per the provisions of the

Electricity Act, 2003, as amended from

time to time.”

101. Article 15.1.4. deals with Compliance with Law and

in substance it provides that the provisions of the

Electricity Act, 2003 will prevail in case of

136

repugnancy or deviation from the terms of the agreement

from the Act.

102. In the impugned judgment the High Court has

proceeded to hold inter alia that the respondent has

invested Rs. 350 crores in establishing the unit and

after replacing the stolen parts, the unit is ready for

commissioning on any date. The High court has further

proceeded on the basis that the project involved two

milestones and the High court has set aside the earlier

order which dealt with delay in achievi ng the first

milestone. Thereafter, the finding is that the project

was certified to be completed much prior to 24 months

which period ended on 19.9.2017 and the notice of

commissioning was given on 4.7.2017. The CEIG approval

was also granted on 9.8.2017. It is further found that

another inspection was done on 19.04.2018 after nine

months of the notice of commissioning and the CEIG

approval. It is despite the same that the impugned

order has been passed. Still further the High court

proceeds to find that i t is undisputedly established

that both the milestones of the project were completed

whereas only some of the invertors were stolen for

137

which an FIR was also lodged. It is again found that

it is not in dispute that the aforesaid parts have been

replaced by the respondent. Support was drawn from the

case of Renew Energy and the courts discretion to

interfere in the matter was reiterated. The decision

was found to be arbitrary. The court directed the

respondent to file necessary application for statutory

sanction for operation of the unit and the appellant

was to decide on the application. To complete the

narrative a review petition , was filed by the

appellant. The appellant sought to project the aspect

of fraud. The fraud consisted of the act of the

respondent relying on unique/distinctive serial

numbers of the invertors in regard to a number of

invertors which were found to be common/duplicate. In

other words, the case of the appellant was that the

project for 50 MV was divided into 10 blocks of 5

megawatt. Each block had 116/117 invertors. A fraud was

committed on the CEIG. In other words, it was the

appellants case that the respondent had not complied

with the PPA in regard to the installing of the required

number of invertors. The first respondent took the

138

stand that the all the serial number of the invertors

were quite legible though the contrary was contended.

The CEIG reported the physical readiness of the project

for commissioning. The respondent also drew upon the

inspection report of the appellant its elf. The High

Court bearing in mind the limited jurisdiction

dismissed the review.

103. In the impugned Termination Notice dated

07.07.2018, after referring to the delay of 54 days in

fulfilling condition subsequent, it is mentioned that

the commercial operation date, as per

Article 2.6, was 14.04.2017. It was indicated that

there was no indication regarding commissioning against

the column ‘readiness of plant’ as on 11.08.2017. The

last date for commencement of supply was shown as

18.09.2017. The expiry date of three months period for

commencement of supply from the last due date was

18.12.2017. It is further provided that the expiry date

of seven days of PPA Termination Notice period was

25.12.2017. The status of the project as on 19.04.2018

was indicated as ‘not ready for commissioning’.

Thereafter, it is pointed out th at there is no

139

justification for delay in achieving condition

subsequent. Still further, reference is made to the

Order passed by the High Court in the earlier Writ

Petition. Physical verification was carried out on

19.04.2018, whereupon, it was found that installation

work of plant and equipment was incomplete in Blocks 9

and 10. It was further pointed out that the copy of

the Inspection Report was enclosed, where installation

of invertors, installation of solar EV panels,

cabelling and earthing work, was yet to be completed.

It was further pointed out that even after more than

six months, after deadline of commissioning of project,

the plant is not ready for commissioning. Thus, there

was not only failure to achieve condition subsequent

but also failure to commission the project within time.

In comparison with the case of Renew Clean Energy, it

is pointed out that apart from failure to comply with

condition subsequent, even the outer timeline has not

been observed, whereas, in the case of Renew Clean

Energy, they were ready to commission by the scheduled

commissioning date. The timeline under Article 9.1 was

not conformed to. After referring to the Order of the

140

High Court, it was found that, with reference to

Article 2.5.1(d) and Article 9.1 of the PPA, the PPA

was terminated.

104. Let us demystify the case for termination. Apart

from non-fulfilment of the condition subsequent,

apparently, in tune with the liberty granted by the

High Court, the appellant has set out a case that the

last date of commencement of supply was 18.09.2017 , and

even as on 19.04.2018, the respondent was not ready for

commissioning of the project. With reference to

Articles 5.1, 5.2 and 5.3 of the PPA, which consisted

of the commercial operation date, pre -commercial

operation and notice of commercial operation, it is

stated that the respondent has not intimated regarding

the schedule of commissioning, till the date of the

Termination Notice. A distinction is sought to be drawn

between Renew Clean Energy and the respondent, in that

the case of the first respondent, even the first

respondent was not ready to commission the project

within the stipulated time.

105. The case that the first respondent has projected

in the Writ Petition, on the other hand, is, inter

141

alia, as follows:

On 04.07.2017, while issuing letter to

respondent no.4, it issued notice for

commissioning by 31.07.2017, in terms of Article

5.1(c) of the PPA. Site inspection by the appellant

was solicited through its EPC. The respondent

obtained approval from the CEIG for commissioning

on 09.08.2017. The CEIG certified that all

infrastructure and installation pertaining to the

project were ready and the respondent may proceed

with the commissioning activities. CEIG approval

is requirement under Article 5.3(a). However, the

appellant proceeded to terminate the PPA by Order

dated 07.07.2018. Thus, it is stated that the

appellant, for reasons best known to it, chose to

ignore the first respondent’s request for

proceeding with the commissioning of the proje ct.

The respondent also obtained in principle

connectivity for the project from the appellant.

It is the specific case of the respondent that

prior to 11.08.2017, first respondent had received

intimation from its EPC Contractor that the project

142

was ready for commissioning barring minor works

pending completion such as construction of

shed/cubical for the Guard which would have no

bearing on the project commissioning. The

respondent pointed out that the appellant was

obliged to issue default notice under Art icle 9.1

of the PPA. The respondent was entitled for a

period of three months. No such notice was issued.

As far as the Report of the Inquiry Committee dated

19.04.2018, relied on by the appellant, it is

pointed out that the challenge to the earlier

termination notice was pending and the respondent

was constrained to demobilise its staff/security

guards. Thefts took place. It is pointed out that

these thefts took place after the certification by

the CEIG. In other words, the respondent would

blame the appellant for not conducting an inquiry

immediately after the certification by the CEIG.

It is also the case of the first respondent that,

through its EPC Contractor, it had procured, inter

alia, 1163 string invertors. Some of the string

invertors were stolen, as stated earlier. That the

143

case of the respondent is not that the project had

been commissioned but that the appellant prevented

it from commissioning the project before the last

date. It is also seen stated that the project was

complete in all respects from the side of the

respondent but on account of theft of a very small

number of equipment, highlighted by the appellant

in its Inspection Report, the first respondent had,

in the meanwhile ensured to get these miscellaneous

equipments and parts reinstall ed and the project

was complete in all respects as on that date. As

far as the theft is concerned, the first respondent

had lodged two FIRs through its EPC Contractor well

before the inspection carried out on 19.04.2018.

THE ASPECT OF DISPUTED QUESTIONS OF FACTS

106. What are the disputed questions of facts? The most

important disputed question of fact is as to whether

the first respondent was, in fact, ready to commission

the project by the end of the peremptory date, which

was fixed as a period of twenty-four months from the

date of the agreement. On the one hand, the appellant

144

would contend that first respondent was not ready to

commission the project. This is for the reason that in

the 9

th

and the 10

th

Blocks, certain string invertors

were found missing. On the other hand, the case of the

respondent is based on the Report of the CEIG, which

would show that the respondent was ready to commission

the project. As far as the CEIG Report is concerned,

the case of the appellant appears to be that the

respondent had played a fraud in obtaining the CEIG

Report. This was unsuccessfully canvassed before the

High Court in the Review Petition. In other words, the

case sought to be set up by the appellant is that as

many as 272 string invertors were bearing duplicate

numbers and, therefore, it was being held out by the

first respondent that it had performed its contractual

obligation, when it was not the case. As far as the

delay of 53 days in fulfilling the condition s

subsequent is concerned, there is no dispute that there

was such a delay. Though, an attempt was made by the

first respondent to contend that in view of the

amendment substituting one of the conditions

subsequent, viz., the condition relating to land and ,

145

therefore, there would be further extension of time.

We do not think that we can allow the first respondent

to set up such a plea. However, we have already

concluded that the issue as to the right or power of

the appellant to terminate the PPA on account of the

delay of 53 days, may not be open to the appellant, in

view of the Judgment of the High Court.

107. The learned Senior Counsel for the first

respondent, Dr. A.M. Singhvi, would, in fact, contend

that this Court may proceed on the basis that actually

there is a disputed question of fact. This is on the

reasoning that even if this Court proceeds on the basis

of the Inspection Report dated 19.04.2018, a miniscule

percentage of Rs. 350 crores would be the subject

matter of the lacunae that was pointed out by the

Inspecting Team in its Report dated 19.04.2018. It is

pointed out that the first respondent should not be

visited with the highly arbitrary decision to terminate

the PPA when nearly Rs. 350 crores have been sunk into

the project. The project itself is an environment

friendly project. An unusually large number of

competitors had bid in the bidding process and the

146

first respondent had emerged as a lowest bidder, which,

at that time was hailed.

THE CASE UNDER ARTICLE 9.1 READ WITH ARTICLE 9.4(a)

108. One of the grounds taken by the first respondent

against the termination notice s is that it is issued

without complying with Article 9.1 of the PPA. We have

already adverted to the said Article. We have also

referred to Article 9.4.(a). Let us divine what is

contemplated under the PPA. The PPA contemplates

Article 9 with its sub -divisions to provide for events

of default and remedies. Under Article 9, the sub -

Articles provide for seller ’s event of default and the

appellant’s Event of default. Reading Article 9. 1 with

Article 9.4 and, more particularly, Article 9.4.(a),

which alone is relevant, we understand the following

to be what is contemplated by the parties. Article 9.1

begins with the words ‘in case of default’. The default

in the case of seller ’s event of default would be the

default, which is the subject matter of the

termination. Here, we can safely conclude that the

seller’s event of default, which is apposite, is the

147

failure to commence the supply of power to the

appellant at the contracted capacity, r elevant to the

scheduled commissioning date by the end of twenty -four

months. The words ‘scheduled commissioning date’, ha ve

been defined in the PPA itself, to mean, for solar

project of capacity 50MW as per the quantum indicated

in LOI, the commissioning period allowed shall be

nineteen months from the date of signing of the PPA.

The period of twenty-four months must be reckoned from

the date of the PPA and, so understood, since the date

of the PPA is 18.09.2015, twenty -four months therefrom

would expire on 18.09.2017. We, therefore, proceed on

the basis that such an event, constituting default on

the part of the first respondent, had taken place.

Continuing with the analysis of Article 9.1, what was

expected of the appellant was , as the non-defaulting

party, to issue a default notice to the defaulting

party, viz., the seller, which in this case is the

first respondent. Article 9.1 further clearly

contemplates that if the default is not fully set right

within three months from the date of issue of the

default notice, then, in the case of default by the

148

seller, the appellant was to serve a seven days’ notice

of termination. The notic e was, undoubtedly, to be in

writing. It is by the second notice, which is to be of

the duration of seven days that the appellant could

validly terminate the agreement. Thus, PPA clearly

indicates the issuance of a default notice when seller

commits an act of default. Without issuing the first

default notice, giving three months’ time from the date

of issue of the notice, the second notice, which would

be a notice of termination, cannot be issue d.

109. Now, let us find whether the appellant has followed

this procedure. In the impugned termination notice

dated 07.07.2018, what is indicated in a Table in

paragraph-9 is that there was a delay of 54 days in

the matter of fulfilment of conditions subsequent and

the scheduled commercial operation date, as per Article

2.6 was 14.04.2017. 11.08.2017 is noted as the date of

notice of termination. 18.09.2017, being the end of

twenty-four months from the date of signing of the PPA

is shown as the last date of commencement of supply of

the contracted capacity and Article 9.4 is referred to.

18.12.2017 is shown as the expiry date of three months,

149

apparently, from 18.09.2017, for commencement of supply

from the last due date. Thereafter, 25.12.2017 is shown

as the expiry date of seven days of the PPA termination

notice period. In paragraphs-21, 22 and 23 of the

impugned notices, the appellant takes the following

stand:

“21. As per table -I, time line for

commissioning of project has been indicated.

You were required to adhere to st1pulated

provisions of the PPA. Whereas this has not

been achieved by you, within the time line

even considering provisions of Article 9.1

of the PPA i.e., 24 months (supply to power

to. contracted capacity from date of PPA) +

3 months (default notice period) + 7 days

(termination notice period) , from the

signing of the PPA have already being

exhausted.

22. Whereas, in light of showcause notice

issued vide this office letter no. 108 dated

22.02.2017 and liberty granted " by Hon'ble

Court to MPPMCL, in its order dated

20.06.2018 for issuing fresh order in terms

of PPA dated 18.09.2015 to you, in

accordance with law, it is evident that you

have failed to fulfil your contractual

obligation as per PPA executed with you on

18.09.2015. Thus, the PPA qualifies for

termination.

23. Therefore, in line an d in compliance to

the Hon'ble High Court judgment dated

20.06.2018 and pursuant to the provision

under Article-2.5.1 (d) along with the

consideration of the timeline stipulated in

Article 9 .1 of the PPA and showcause notice

150

dated 22.02.2017, the PPA sign ed on 18 Sept.

2015, between Mis Sky Power Southeast Solar

India Pvt. Ltd. New -Delhi, (SPV of Parent

Company Sky power Southeast Asia Holding 2

Ltd.) and MPPMCL, for supply of Power from

the proposed, 50MW. Solar PY plant located

at Village-Bedhaya District - Khandwa and

subsequently location changed to Village

Chhibel, Teb-Khalliiwa, Distt- Khandwa at a

rate of Rs. 5.091 per unit, is hereby

terminated.”

110. Thus, we find the twenty -four months period from

the date of the PPA, plus three months default noti ce

period, plus seven days termination notice period, had

been already exhausted. In paragraph -22, support is

sought to be drawn from the show -cause notice dated

‘22.02.2017’ and the liberty granted by the High Court

in the first Writ Petition, for issuing a fresh Order.

The PPA, it was found by the appellant, qualified for

termination. In paragraph -23, it is explicitly stated

that based on Article 2.1.1(d) along with the timeline

stipulated in Article 9.1 and the show -cause notice

dated 22.02.2017, the PPA was terminated.

111. Therefore, the show-cause notice dated 22.02.2017

is what the appellant lay s store by to conclude that

it was acting in compliance with the requirement of

151

issuance of the default notice under Article 9.1. It,

therefore, becomes necessary to advert to the notice

dated 22.02.2017. We may extract the following:

“MP POWER MANAGEMENT COMPANY LIMITED

CIN: U4010MP2006SGC018637

(A Govt. of M.P. UNDERTAKING)

Regd. Office: Shakti Bhawan, Rampur, Jabalpur,

Madhya Pradesh, india -482008, Tel: 0761-2661111;-

2660500, Fax: 0761- 261696, website:-

www.mppmcl.com, email: md@mppmcl.com,

No. 05-01/Solar Bidding-III/PP A/108

'Jabalpur Date 22.02.2017

To,

M/s Sky Power Southeast Solar Pvt. Ltd.

16A/20 W.E.A. Main Ajmal Khan Road,

Karol Bagh,

New Delhi-110005.

Subject: submission of documents for fulfilment of

condition subsequent in respect of your 50MW Solar

Power project proposed at Village Chhirbel,

Tallika Dist Khandwa under Phase -III solar

competitive bidding.

Ref: 1. Power purchase Agreeme nt executed on

18.09.2015.

2. Your letter No. SKP/MP/SOLAR/MPPMCL/2015 -

116/06, dated 12.01.2017

Dear Sir,

With reference to your latter cited above, this is

to intimate that on scrutiny of the documents

submitted by you for fulfilment of condition

subsequent after 210 days from signing of PPA. In

respect of your 50 MW solar power project proposed

at village Chhirbel, Taluka & dist Khandwa, status

of the documents found as under:

152

Sr.

No.

Location

Proposed

in

PPA/Final

Location

Status of

grid

connectivity

Status of

financial

closure

Details of land acquisition

Acqu-

ired

land

in

hectar

e

Mode of

acquisition

Remarks

BEDHSYA,

Khandwa/

chhibel

Khandwa

In principal

connectivity

issued by

Transco vide

letter No.04-

02/PSP-147-LI

& 1.2/95

7, Jabalpur,

dated

19.10.16,

which is

generally

found in

order

Loan

sanction

letter of

M/s L&T

finance

vide

letter

No.LTF/89

2567/16-

17 dated

29.08.16,

L&T INFRA

vide

letter

No.

S07201A0/

16-17,

dated

29.08.16,

copy of

facility

Agreement

and

affecting

complian-

ces

documents

as stated

in above

letters

are

require

to be

submitted

.

99.06 64.94 HEET,

UNDER

REGISTERED

SALE DEED 34.12

HEET under

unregistered

sale deed for

12 months only

from Sterling

Wilson to sky

power

Out of

34.12

Heet…

only

7.28 is

undue

Regi-

stered

sale

deed to

Sterling

,

balance

is undue

Sauda

Raseed

to

Sterling

Wilson

on

Rs.500/-

Stamp

Paper.

D.G.M. (Commercial-3)

R.0., MPPMCL, Bhopal

Chief General Manager (Commercial): Block No.

11, Shakti Bhawan, Rampur, Jabalpur (MP) 482008

Tel: 0761-2661245, 2702404, Fax: 0761 -2661245,

email: makarand.chincholkar@mppmcl.com

153

It needs to be mentioned here that as per provisions

of amended clause 2.1 (f) of the PPA pertaining to

acquisition of land for the project, Seller shall be

required to furnish the following ~ documentary

evidence:-

• Ownership or lease hold right (for at least 30 years)

or right to use permission (for revenue land in Madhya

Pradesh) in the name of seller and possession of 100%

of the area of the land required for the allotted

project.

• Requisite documents from the concerned and competent

revenue registered authority for the acquisition

ownership vesting of the land in the nam e of the seller

and in case of private land clear title for ownership

and/ or registered lease deed for land taken on lease.

As can be seen from the above table you have submitted

clear title for ownership for only 64.94 hectare land.

whereas for 34.12 he ctare land you have submitted

unregistered lease deed for only 12 months, which

cannot be considered for fulfilment of condition

subsequent as per provisions of the PPA as mentioned

above.

Further, as per provision of clause 2.5.l (dO of the

PPA, referred PPA is liable for termination. Therefore,

you are requested to submit your explanation/

justifications, if any, within 10 days from the issue

of this letter, for further - necessary action in the

matter.

Chief General Manager Commercial

MPPMCL, Jabalpur”

112. A perusal of this notice, would reveal the

following:

The subject matter of the said notice appears to

be the fulfilment of condition subsequent. It is

clearly mentioned that as per Article 2.5.1, the

154

PPA was liable for termination. The first

respondent was asked for the explanation within

ten days from the d ate of the letter for further

necessary action in the matter.

We are of the view that the said notice cannot

qualify as one which was issued as a default notice

under Article 9.1. We have already found that

Article 9.1, dealing with default, which in this

case, is the default by the seller, and,

furthermore, the defa ult being non-observance of

the time limit of twenty -four months from the date

of agreement dated 18.09.2015, the notice dated

22.02.2017, could not have been issued, even before

the expiry of the period of twenty -four months from

18.09.2015. In other word s, the seller’s event of

default under Article 9.4(a) could have become the

subject matter of a notice under Article 9.1 only

if there was failure on the part of the first

respondent to supply power, as provided in Article

9.4(a), within twenty -four months. That point of

time, viz., the expiry of twenty -four months from

155

18.09.2015, would arrive, at the earliest, only on

18.09.2017. Therefore, it is only after 18.09.2017

that the first notice or, what is described as the

default notice, could have been issue d by the

respondent under Article 9.1. Apparently, what has

happened is the appellant has combined the default

alleged with reference to Article 2.5.1(d), to

which, undoubtedly, notice dated 22.02.2017, could

be said to be related and has projected the sai d

show-cause notice as the default notice within the

meaning of Article 9.1 read with Article 9.4.

Article 9.1 contemplates a default, the issuance

of default notice and, most importantly, giving a

period of three months for the seller (first

respondent) to set right things. It is if the

seller does not remedy the matter within three

months, that the second notice, which is

essentially an Order of termination of the PPA,

can be issued. A perusal of the notice dated

22.02.2017 does not make any reference to the

seller’s event of default contemplated in Article

9.4.(a). The reasons are not far to seek . For the

156

reasons, which we have indicated hereinbefore , the

notice could not have been issued based on there

being a seller’s default within the meaning of

Article 9.4.(a) on 22.02.2017. We reiterate that

as on 22.02.2017, the seller’s event of default

under Article 9.4.(a), could not exist in law or

in facts. Still further, we notice from the tenor

of the notice dated 22.02.2017 that the first

respondent was, in fact, asked to give its

justification within ten days from the date of

issue of the notice for necessary action in the

matter. This is totally incompatible with the

notice contemplated as a default notice within the

meaning of Article 9.1. Article 9.1 cont emplates

the existence of a default by the seller and the

giving of a period of three months to the seller

to remove the defect. We are unable to understand

how notice dated 22.02.2017 could be understood as

affording any such opportunity as is contemplate d

under Article 9.1. Therefore, we have no hesitation

in holding that the appellant cannot seek shelter

under notice dated 22.02.2017 to justify the notice

157

of termination dated 07.07.2018, if reliance is to

be placed on Article 9.1 read with Article 9.4.(a ).

We have already found that the appellant cannot be

permitted to reopen the issue relating to the non -

fulfilment of the conditions subsequent, as the

issue has attained finality by virtue of the

Judgment of the High Court dated 20.06.2018.

113. Appellant has attempted to justify the notice dated

22.02.2017 as the show -cause notice within the meaning

of Article 9.1 based on the Judgment of the High Court

in the first round of litigation. We are of the view

that appellant would not be justified in drawing

support from the said Judgment to contend that the

issuance of notice dated 22.02.2017, would suffice and

it absolves the appellant from complying with Article

9.1. From a perusal of the said Judgment in Writ

Petition No. 12880 of 2017, we find that the High Court

found that an attempt was made by the appellant to

justify the earlier termination dated 11.08.2017 on the

ground that respondent had not commissioned the power

project within the time fixed in the agreement. The

High Court was not impressed as it f ound that the lack

158

of commissioning of the power project was not the

reason for terminating the contract and the appellant

could not supplement the reason in view of Judgment of

this Court in Mohinder Singh Gill and another v. Chief

Election Commissioner, New Delhi and others

35

. It is

thereafter, after setting aside the Order dated

11.08.2017, that liberty was granted to the appellants

to pass fresh Order in terms of the PPA, in accordance

with law. High Court, therefore, only permitted the

appellants to invoke the PPA with respect to the lack

of commissioning, and moreover, in accordance with law.

It becomes clear as day light that since by the date

of the Judgment, i.e., 20.06.2018, the period of

twenty-four months from the date of the agreement, had

expired, and if, in terms of the liberty granted by the

High Court, the appellant was to lawfully terminate the

contract, it could not have acted in breach of the

mandate of the PPA, which, in fact, the High Court had

specifically directed appellant to comply with. In

other words, though nearly nine months had gone by from

18.09.2017, when the High Court pronounced Judgment on

35

(1978) 1 SCC 405

159

20.06.2018, if the appellant wanted to terminate the

agreement, at least under the contract, the appellant

was obliged to issue the defau lt notice. As we have

noticed, the appellant was perhaps persuaded to issue

the impugned termination notice on the basis of the

earlier notice dated 22.02.2017 as it felt that it was

entitled to ask the Court to revisit the issue relating

to the non-fulfilment of the condition subsequent as

well. The appellant has, in fact, proceeded in the

notice of termination that the three months period,

contemplated in Article 9.1, came to an end

automatically, on 18.12.2017 and things had not changed

on the ground, entitling it to issue the notice dated

07.07.2018, after the further expiry of seven days on

25.12.2017. The appellant, in this regard, appears to

have laboured under the apprehension that the mere

expiry of the period of three months, after the

occurring of the event of seller default, within the

meaning of Article 9.4.(a) and the further expiry of

another seven days, entitled it to issue the notice of

termination. What, on the other hand, Article 9.1 read

with Article 9.4.(a) contemplated was not the mere

160

running of time for a period of three months, after the

occurrence of the seller’s event of default but an

opportunity to the seller by the giving of a notice of

default and waiting for three months. It is only after

the seller was put on notice of the def ault, which it

had committed and an opportunity was granted to remove

fully the default and it persevered in breach, that a

valid Order of termination could be passed. On this

reasoning, there can be no dispute that the appellant

has clearly failed to act in terms of the clear mandate

of Article 9.1 read with Article 9.4.(a).

114. There is another vital aspect to be borne in mind.

The impugned notice dated 11.08.2017 , brought about the

termination of the contract. This is while notice dated

04.07.2017 was issued by the first respondent, as

noticed. Therein, the appellant was specifically asked

to inspect the premises. The CEIG also issued the

certificate on 09.08.2017 . Now the really significant

fact is that after the appellant terminated the

contract on 11.08.2017, it is wholly inconceivable and

arbitrary to predicate that the first respondent should

have commenced the project and complied with Article

161

9.4(a) by 18.09.2017. Even more unfair it would be to

find that the first respondent had three months period

from 18.09.2017 to cure the defect which period came

to an end on 18.12.2017. Yet, this very premise is

reflected in the impugned notice dated 07.07.2018.

There is no case at all for the appellant that

immediately on the expiry of 24 months contemplated in

Article 9.4(a), a notice was given under Article 9.1.

This could not be , also for the reason that the

appellant had well before 18.09.2017, on 11.08.2017,

terminated the contract. This is indisputable . Equally

significantly, termination of the contract dated

11.08.2017 clearly was illegal though it was found

later and set aside by judgment dated 20.06.2018.

Thus, we cannot also brush aside the complaint of the

first respondent that this is a case where it stood

prevented from commencing supply within the meaning of

Article 9.4(a). The fact of termination by order dated

11.08.2017 and its invalidation by the High court on

20.06.2018 are again not matters of disp ute.

115. There is another aspect to the matter. The

termination of a contract, undoubtedly, results in the

162

intrusion into and deprivation of valuable rights,

which are vouchsafed to the awardee of the contract.

It could be argued that dehors a contractual provision,

unless it be that the contract peremptorily provides

for the termination of the contract express ly without

service of the notice on the occurrence of certain

stipulated events, principles of natural justice may

not be out of place and under the Theory of Fair State

Action, in consonance with Article 14, an opportunity

to the awardee as to why the con tract should not be

terminated, may be just. In this regard, we may

recapitulate what this Court in State of U.P. v. Sudhir

Kumar Singh and Others

36

has, inter alia, held:

“23. It may be added that every case in

which a citizen/person knocks at the doors

of the writ court for breach of his or its

fundamental rights is a matter which

contains a “public law element”, as opposed

to a case which is concerned only with

breach of contract and damages flowing

therefrom. Whenever a plea of breach of

natural justice is made against the State,

the said plea, if found sustainable, sounds

in constitutional law as arbitrary State

action, which attracts the provisions of

Article 14 of the Constitution of India -

see Nawabkhan Abbaskhan v. State of

Gujarat (1974) 2 SCC 121 at paragraph 7. The

36

(2020) SCConline SC 847

163

present case is, therefore, a case which

involves a “public law element” in that the

petitioner (Respondent No. 1 before us) who

knocked at the doors of the writ court

alleged breach of the audi alteram

partem rule, as the entir e proceedings

leading to cancellation of the tender,

together with the cancellation itself, were

done on an ex parte appraisal of the facts

behind his back.”

No doubt, it related to a case of cancellation of

the tender after the tenderer had worked thereunder for

over a year and based on two ex parte enquiries. We may

bear in mind that Article 9.1 captures not really the

principles of natural justice as such but an

opportunity to set right a default by the seller.

116. Having found that the impugned t ermination Order

dated 07.07.2018 ill square s with the requirement of

Article 9.1, the question may arise, whether this is a

matter which should be the basis for interference in

powers of judicial review under Article 226. This is

not the basis on which th e impugned Judgment is based.

Could it be said that this is a matter, which should

have formed the subject matter of a proceeding in a

civil court. In this regard, we may notice the

following aspects:

164

The object behind giving the default notice

under Article 9.1 is to provide an opportunity to

the seller under the PPA to comply with the PPA

and remove the default within the period of three

months. If it is a case where it is demonstrated

that removal of the default was an impossibility,

then, it would, indeed, be a futile exercise and

perhaps, at least, in a writ proceeding based on

infraction of Article 14 or that the action is

arbitrary, the Court may have refused to exercise

the extraordinary jurisdic tion and relegate the

party to other forum to seek whatever relief it

may be entitled to. If on the other hand, complying

with Article 9.1 was, indeed, meaningful and the

default (Article 9.4.(a) could have been removed

as contemplated under Article 9.1, t hen,

undoubtedly, it may constitute arbitrariness to

deprive the first respondent of the benefit of a

default notice.

We cannot be totally unmindful of the fact

that such a Clause like Article 9.1 was inserted

with the understanding, that, in such large complex

165

projects, involving large sums of money being

invested, and furthermore, the successful

completion of the project being intended to augment

the production of energy, in this case solar

energy, there was an element of public interest

also involved in not allowing the curtains to be

rung down by an abrupt termination without

affording an opportunity to the seller to r emove

the default. Therefore, we would also examine

whether there is a case where, it could be said

that the case of the first respondent is totally

bereft of bonafides or merit.

117. In this case, on 04.07.2017, the first respondent

addressed what it purports to be the notice of

commercial operations within the meaning of Article

5.3. It reads as follows:

“Ref No. SKP-2/MP/SOLAR/COMM/2017-18/026

Date: 04-07-2017

To

The Chief Engineer (Planning & Design)

M P Power Transmission Company Limited,

Shakti Bhawan, Rampur,

Jabalpur – 482008, Madhya Pradesh.

166

Subject: Notice to Commission on the 50 MW

Solar Power Project of SkyPower Southeast

Solar India Private Limited located at

Village Ch irbel, District Khandwa

(“Project”), and Evacuation of Power from

the Project to the 400 KV Chhagaon

Sostation.

Reference: Power Purchase Agreement dated

September 18, 2015 between Southeast Solar

India Private Limited and MP Power

Management Company Limi ted (“PPA”).

Dear Sir,

As per above cited subject matter and

reference, we hereby intimate you of our

intention to commission the project by 31

st

July, 2017 (“Proposed Commissioning Date”).

By the Proposed Commissioning Date, we are

likely to procure and obtain all permissions

and approvals required for the Plant and

fulfil and obligations specified in Article

5.3 read with Annexure XII of the PPA.

In relating to the commissioning of the

Project by the Proposed Commissioning Date,

we would like to apprise you of the progress

made by use in relation to completion of

some of the critical path items for the

Project-

• Transmission Line – 95% work has been

completed as on 28

th

June, 2017 for the

132KV DCDS (double circuit double

string) transmission line from location

of the Project to the 400KV substation

Chhegaon. Balance 5% is expected to be

completed by 15

th

July, 2017 in all

respect.

• Bay construction- 90% work on the 132

KV bay is completed (post receipt of

connectivity approval from MP Power

Transmission Company Limited (“MPPTCL”)

167

for the Project along with installation

of specified equipment as required by

MPPTCL. Balance 10% of the work,

including testing, meter and CRP panel,

is expected to be completed by 20

th

July,

2017.

• Connecting Agreement - Connection

agreements have already been signed on

18

th

May, 2017 between Madhya Pradesh

Power Transmission Company Limited,

Jabalpur and M/s SkyPower Solar India

Private Limited.

• SLDC connectivity - Connectivity from

plant to the SLDC -Indore is already

established through dedicated 2nox2mbps

point to point lease lines from BSNL (as

per approved scheme of SLDC on 23

rd

March, 2017 through letter no. SE./LD.

E&T/880, data can be transferred

immediately on charging of plant).

Specified equipment as per approved

scheme of SLDC has been installed at

SLDC-Indore and at the Project. Even,

IP scheme for both the routers has been

allocated by the SLDC, Jabalpur

(through letter no. SE/LD.E&T/06, dated

3

rd

April, 2017).

• CEIG Certification -We have initiated

the process to obtain the CEIG

certification, and the CEIG

certification is expected by 20

th

July,

2017. The CEIG certificate shall be

produced to MPPTCL as an annexure to

obtain the commissioning certificate,

as required under the PPA.

Considering above facts on project

progress we hereby request your kind

needful and depute necessary officials

and personnels to our site to undertake

necessary inspection and testing and help

us in the target commissioning dated of

31

st

July, 2017.

168

In the event, you require any further

information from us, we will be happy to

provide the same upon your request.”

(Emphasis supplied)

118. No doubt, Article 5.3 contemplates a notice

whereunder the seller specifies that the plant was

constructed as per the agreement and it was ready to

deliver the solar power in accordance with its terms.

Secondly, it must be indicated that all permissions and

approvals required for the plant to sell solar power

at the rates and terms had been obtained. Still

further, all interconnection facilities were available

to receive solar power. Notice is to take effect,

however, only when the TRANSCO/DISCOM declares that all

the conditions in Article 5.3 stood satisfied (or

waived by it), inter alia, i.e., that the seller had

successfully completed the testing of the plant in

accordance with the manufacturer ’s recommendations and

the seller had obtained and provided from the

Electrical Inspectorate of the Government of Madhya

Pradesh or other authorised agency, a certificate and

the seller had delivered a list of the equipments with

details. The further conditio n is that the plant had

169

achieved initial synchronisation with the appellant and

had demonstrated reliability of its communication

system, inter alia, that the seller had operated the

plant without experiencing any abnormal or any unsafe

operating condition on any interconnected system. The

seller was also to notify the appellant within no later

than 30 days prior to the commercial operations date ,

that the conditions, as laid down in Article 1.01 ha ve

been met.

119. However, the first respondent in the letter dated

04.07.2017 has intimated about the intention to

commission the project by 31.07.2017, which is on the

27

th

day after the notice. As far as transmission line

was concerned, 95 per cent of the work was claimed to

have been completed as on the 28 .06.2017. Balance 5 per

cent, it is stated, would be completed by the

15.07.2017 in all respects. In regard to bay

construction, 90 per cent of work was stated to be

completed along with installation of certified

equipment. Here also, it is stated that the balance 10

per cent of the work including, testing, meter and CRP

panel would be completed by 20.07.2017. Connection

170

agreement is stated to have been signed on 18.05.2017.

As far as SLDC connectivity is concerned, it is stated

that connectivity to SLDC in door was already

established through dedicated 2nox2mbps point to point

lease lines from BSNL . As far as the certification by

the CEIG, it is stated that the process to obtain the

CEIG certification would be initiated and it is

expected by 20.07.2017. Insp ection was prayed for so

as to achieve the target commissioning date by

31.07.2017. No doubt, the appellant has proceeded on

the basis that the notice dated 04.07.2017 cannot be

treated under Article 5.3 of the PPA. As far as the

CEIG Report is concerned, it appears to be dated

09.08.2017. It could no doubt be found that what

Article 5.3 notice contemplates is a state of

accomplishment of conditions when the notice is sent.

However, the notice dated 04.07.2017 promised

completion by 31.07.2017. Article 5.3 provides for

waiver. If a default notice under Article 9.1, was

given on 07.07.2018, in place of the termination

notice, then, with the state of completion attained

and, if anything further remained , doing that also, and

171

issuing the notice, if insisted, the defect could have

been removed.

120. In this regard, we may notice a significant

distinction between Article 2.5.1 (d) which was used

as the sheet anchor by the appellant to contend that

in the event of non-achievement of condition subsequent

termination was mandatory. Article 2.5.1(d) is as

follows:

“d) In case of delay of more than 9

months, MPPMCL shall terminate PPA and

release balance amount of CPG.”

(Emphasis supplied)

121. When it comes to Article 9.1, we have noticed that

it contemplates the giving of default notice when an

event of default takes place. The seller is given three

months’ time to set right things fully. Thereafter,

Article 9.1 provides that in case of the default by the

seller not being removed fully, apparently, the

appellant by giving seven days termination notice ‘may’

terminate the agreement. The choice of the word ‘may’

importing discretion in Article 9.1 is in stark

contrast with Article 2.5.1 (d).

172

122. Apparently, it was so drafted so that in an event

like in a seller event of default under Article

9.4.(a), i.e., failure by the seller to supply power

within 24 months, bearing in mind the nature of project

and the stakes involved for both the appellant and the

seller, there may be cases where the seller may wish

to grant more time so that a project which has

progressed to a st ate of near completion may not be

aborted by the termination and grant of time would, on

the other hand, witness the full blossoming of the

project.

123. It would appear that the appellant did not carry

out any inspection. The inspection carried out by the

CEIG in first week of August, 2017 was an inspection

conducted by the five -member team and it is further

claimed that this inspection lasted for 3 -4 days

beginning from 01.08.2017. The CEIG has certified that

the project was ready and that the first respondent can

proceed with the commissioning a ctivity. We bear in

mind that the period of twenty -four months contemplated

in Article 9.4(a), would expire only on 18.09.2017. The

CEIG has given its Report on 09.08.2017 that the

173

project was ready for commissioning. The factum of the

Report cannot be treated as a disputed question of fact

as it is covered by a document. In fact, we find that,

the appellant proceeded on the basis admittedly that

it was reliable, but, however, on 11.08.2017 issued the

termination notice solely based on non -fulfilment of

conditions subsequent. This notice stood set aside on

20.06.2018. Maybe the manner in which the inspection

was carried out and the pitfalls in the same may be

characterised as the disputed questions of facts. Also,

though the appellant was invited to carry o ut the

inspection on 04.07.2017, the appellant carried out the

inspection only on 19.04.2018 and the Report was dated

21.04.2018.

124. If we go by the Report of the CEIG, the project of

the respondent would appear to have been completed for

the purposes of effecting commissioning. It may be

another matter that other formalities had to be

completed. When the team of the appellant carried o ut

the physical inspection, (it was done on 19.04.2018 ),

the appellant’s team also substantially endorsed the

Report of the CEIG. However, it was found that a certain

174

number of string inverters inter alia, were not found

at many locations in Block Nos. 9 a nd 10. It was found

as follows:

“4. Any other specified observation in

respect of installation of solar P.V plant

In block 9 and 10, string inverters were not

found at many location but those location

had solar panels installed interconnections

of PV panel (cabling) string work at there

location are not found connected with each

other Further, at some location the cable

and earthing work is observed incomplieto &

suspended.”

125. It is here that we must notice the case of the

first respondent to be that though the equipment was

installed as certified in the Report of the CEIG and

what remained was formal connectivity to the grid upon

which commissioning certificate would be issued, the

final event remained on account of non -issuance of

connectivity code for connection to the grid. It is

while so, when the challenge against the first

termination notice was under consideration and there

was demobilisation of manpower, certain string

inverters were stolen, the cost of which is stated to

be Rs.172000 per string inverter. Based on safety

175

concerns, the equipment was , according to the first

respondent, removed and kept in safe custody. The first

respondent has la id store by two first information

reports lodged. The first FIR was lodged on 12.09.2017

and another FIR was lodged on 04.03.2018 relating to

the theft of certain equipments. This is a case where

the first respondent has alleged that it has already

invested Rs.331 crores.

126. We will proceed on the basis that there was a CEIG

Report dated 09.08.2017 certifying that the project of

the first respondent was complete. This is well before

18.09.2017, which was the date by which the

commissioning had to be done. It is also clear that the

commissioning, as such, was not completed. Still

further, if we go by the CEIG Report, the case of the

first respondent of it being on the verge of

commissioning could not be brushed aside as wanting in

bonafides or merit. Still further, there is a ca se of

the appellant that the inspection carried out on

19.04.2018, resulting in Report dated 21.04.2018,

revealed certain deficiencies in the form of missing

inverters inter alia from Block Nos. 9 and 10 inter

176

alia. First respondent has a case of theft s occurring.

In fact, the first respondent has a definite case that

about 39 inverters involved were also replaced in June,

2018 based on Purchase Order of May 2018 [See Annexure

R12 produced before the High Court in Review Petition

No.682 of 2020]. This is even before 07.07.2018. No

doubt, the appellant has a case that the FIRs relied

on by the first respondent did not refer to inverters.

As to whether, it was a result of thefts that the

inverters etc. which were already there as on the date

of the CEIG inspection went subsequently missing or as

to whether it was as a result of the Report of the CEIG

being flawed and, therefore, the inverters etc. were

not there in the firs t place, even as on the date of

the CEIG Report, appears to us to be a disputed question

of fact. We proceed on the basis that the inverters in

question were not there. But as noticed, about 39

stolen invertors were already replaced in June 2018.

At any rate, if a default notice had been given pointing

out this aspect, the matter could possibly be put right

within three months of such a notice. We recall here

the few complaints (essentially two in number) which

177

remained of Respondent No.5. It could have been

pointed out as part of aspect of default if it was so

understood. We have also found that the joint

inspection of the respondent No.4 had found on

24.08.2017 that the line may be charged. What we can

find is only that this is not a case where the first

respondent could be said to be in a position where it

could be said that it would be unable to comply with

the terms of the default notice if it was warranted .

In other words, if as on 07.07.2018, instead of issuing

a termination notice, if notice had been given within

the meaning of Article 9.1, it is quite possible that

the first respondent would have remedied the defect as

alleged. We have also noted that even in 2017, no

notice was given under Article 9.1 and even the

contract was terminated illegally as found by the High

Court by notice dated 11.08.2017. The whole idea behind

the default notice under Article 9.1 was lost sight of

by the appellant. We have unravelled also, the impact

of the use of the word ‘may’ in Article 9.1. The action

of the appellant in departing from unambiguous regime

178

of the PPA without any justification would make its

actions arbitrary.

127. The other aspect projected by the appellant is what

was projected in the Review Petition filed before the

High Court. It was contended essentially as follows:

The first respondent had committed a fraud on

the Office of the Chief Electrical Inspector, the

appellant and on the Court. It was alleged that

the project was divided into 10 blocks of 5MW each

and each Block of 5MW would have 116/117 Inverters

approximately. Each of the Inverter was to have a

unique distinctive serial number. Each inverter

was to have 43KV rating, as indicated in the CEIG

Report. The fraud consisted of a discovery by the

appellant on an alleged ‘detailed’ analysis of the

serial numbers of the inverters, that in each

Block, there were several Inverters having numbers

which were common/duplicate and interchangeably

used in the same or other blocks. It was alleged

that for about 186 Invertors serial numbers w ere

commonly, duplicably and interchangeabl y used.

Some of the inverter numbers were not legible.

179

Therefore, it was alleged that there was lack of

due diligence by the authorised personnel of the

CEIG.

128. In this regard, the first respondent has countered

the case of the appellant not only by producing

invoices supplied by the overseas supplier and the bill

of entry issued by the Customs Department but the Lorry

Receipts, to establish the procurement of 1175

Inverters required for the first respondent Unit in

2017. It is also their case that the inverter serial

numbers themselves carry no significance. They were

mere identifiers for the purpose of record keeping,

warranty claims, etc. All the 1163 Inverters installed

by the first respondent had identical mecha nical

specification and the mere mention of incorrect serial

numbers in the Report of the CEIG did not establish

that the first respondent was not ready to commission

the project. The first respondent also has pointed out

that on learning of the duplicatio n of the few

inverters serial numbers in the Report of the CEIG, it

promptly approached the CEIG on 16.09.2020 with details

of the correct unique serial numbers and the

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corresponding location of the inverters. It requested

the CEIG to inspect and verify th e inverters and to

issue a corrigendum to the first Report dated

09.08.2017. In fact, there is reference to first

respondent in compliance with the first impugned

Judgment writing to the CEIG earlier on 15.04.2020, to

visit the project site for reissuing/r evalidating the

approval for commissioning the project, since the

validity of the first report dated 09.08.2017 had

lapsed. It is specifically contended in the reply to

the Review Petition that due to non -cooperation of the

appellant on the excuse of Covid -19, the CEIG

inspection could not be undertaken. This stand is

reiterated, in fact, in the counter affidavit in this

Court also. It would appear that the first respondent

had deposited the inspection fee of Rs.66,14,000/ -

which is said to be equipment bas ed meaning thereby

that it was paid reckoning all the inverters . It would

appear that no inspection has been carried by the CEIG

based on the request for revisit. As far as this aspect

is concerned, apart from the fact that the CEIG has

conducted an inspe ction and given a Report on

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09.08.2017, certifying the readiness of the Unit of the

first respondent, the first respondent has produced

documents like invoices from overseas sellers, bill of

entry with the Customs Department and certain lorry

receipts. The alleged fraud is the common number found

in 186 inverters in the Report of the CEIG. A physical

inspection by the CEIG, which was necessitated in terms

of the original Judgement, at any rate, for

revalidation of the Report was and is necessary and

inevitable even if the appeal s fail. The first

respondent had alerted the CEIG for the need for a

reinspection for ascertaining the aspect relating to

duplication in numbers. It would appear that such

inspection has not been carried out. In this regard,

it is important to notice that the appellant carried

out an inspection on 19.04.2018 and it had not found

out any such discrepancy as it has not projected in

regard to the aspect of common numbers or illegibility

of numbers, in the inverters , in its Report dated

21.04.2018. At any rate, the PPA clearly provided for

the issuance of a default notice, providing an

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opportunity to remove the defect. This obligation has

been observed in its breach.

129. Therefore, we would find that an inspection by the

CEIG would necessarily have to be carried out in which

the appellant would have to be involved to facilitate

the exercise. In the facts of this case, on being

satisfied, the CEIG would necessarily have to grant the

re-validation of the earlier Report. It would also

involve an opportunity to the CEIG to look into the

aspects which have been projected by the fist

respondent itself in its letter dated 16.09.2020. The

report would indeed indicate the state of affairs about

all the facets. As already noticed, e ven under the

impugned Judgement dated 27.02.2020, the first

respondent would have to submit necessary applications.

We only clarify that it may involve removing any

remaining deficiencies with the fifth respondent.

130. It may not be wholly irrelevant to notice the

following aspect which is reflected in the counter

affidavit filed by the respondent No.1 before this

Court.

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“It is of utmost importance to mention here

that while the challenge to the 2018

Termination Notice was pending, the

Petitioner had proposed a so-called amicable

resolution of the dispute with the Respondent

No.1 and convened a meeting for this purpose

on February 6, 2020. Occurrence of this

meeting and the discussions held are recorded

at paragraphs 7 and 8 of the Impugned Order

1. During this meeting, the Petitioner had

attempted to impress upon the Respondent No.1

to explore ‘Third Party Sale’ from the

project or, agree to a reduction in tariff

in line with the recent auctions conducted

by SECI for other solar power projects.

Respondent No.1 had rejected both the option

of ‘third Party Sale’ or, the attempts to

reduce tariff specified in Article 9.7 of the

PPA, which was discovered through a

transparent competitive bidding process. The

very fact that the Petitioner had proposed

to the respondent No.1 to explore sale of

power from the Project to third parties is

proof enough that the Project was complete

and ready for commissioning. ”

In this regard, we may notice paragraph 4 of the

minutes of the meeting dated 06.02.2020 which reads a s

follows: -

“4. MPPMCL further stated that, as the

commissioning of the project has been

substantially delayed and, in the meantime

solar binding tariffs have been considerable

reduced up to Rs. 2.61/ Unit for which MPPMCL

has already entered into PPAs, therefore

MPPMCL offered M/s Sky Power to supply power

at reduced tariff of the project was the

lowest in the bid and their investment was

made during the FY 2016 -2017 therefore,

supplying power to MPPMCL at reduced tariff

will not be viable hence no t possible.”

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We would think that essentially the appellant’s

attempt was to secure a reduction in the rate. The rate

of the first respondent was found to be the lowest after

a clearly keenly competitive interna tional bidding,

involving a large number of bi dders.

131. In the totality of facts, we would, therefore,

think that though for reasons, which may not be the

same as in the impugned judgment, we need not interfere

with the view taken by the High Court. The appeal s fail

and are dismissed. Parties to bear their own costs.

………………………………………………………J.

[ K.M. JOSEPH ]

………………………………………………………J.

[ HRISHIKESH ROY ]

NEW DELHI;

DATED; NOVEMBER 16, 2022.