LexBANGALORE ELECTRICITY SUPPLY COMPANY LIMITED versus HIREHALLI SOLAR POWER PROJECT LLP & OTHERS
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[2024] 8 S.C.R. 1024 : 2024 INSC 631 Bangalore Electricity Supply Company Limited v. Hirehalli Solar Power Project LLP & Others (Civil Appeal No. 7595 of 2021) 27 August 2024 [Pamidighantam Sri Narasimha* and Pankaj Mithal, JJ.] Issue for Consideration Whether the extension of the Scheduled Commissioning Date (SCD) was occasioned under the force majeure clause of the Power Purchase Agreement (PPA), and consequently, whether the reduction in tariff payable to the respondents is justified. Headnotes† Electricity Act, 2003 – State of Karnataka introduced a policy dated 26.08.2014 to identify and promote solar energy projects by land-owning farmers – These solar power plants of 1-3 MW capacity would generate and sell power to the State Electricity (Distribution) Supply Companies at the tariff determined by the Karnataka Electricity Regulatory Commission (KERC) – Respondent no. 2-farmer applied under the policy – Respondent No.1 is a special purpose vehicle (SPV) to undertake the solar power project – In the year 2015, the appellant entered into a PPA with respondent no. 2 and the same was approved by KERC – The SPV had to achieve commercial operation within 18 months from the effective date – Several farmers, including the respondent, raised concerns regarding delay in the execution of the project on account of delay in getting land use conversion, delay in getting evacuation approvals, demonetisation, and other reasons – KERC rejected the various causes of delay put forth by the respondents and held that the force majeure clause must be strictly interpreted – KERC reduced the tariff payable to the respondent to Rs. 4.36 per unit for the term of the PPA by relying on Article 5.1 of the PPA – However, the APTEL found that the respondents had taken all necessary care and caution and acted with due diligence and held that respondents are entitled to the benefit of the force majeure clause and an extension of time – Also held that reduction in * Author [2024] 8 S.C.R. 1025 Bangalore Electricity Supply Company Limited v. Hirehalli Solar Power Project LLP & Others tariff from Rs. 8.40 to Rs. 4.36 per unit would adversely affect them – Hence, it directed the appellant to pay the difference in per unit tariff along with the late payment surcharge as provided under Article 6.4 of the PPA – Correctness: Held: The KERC’s appreciation of the evidence has led it to the conclusion that the delay in commissioning was due to the respondents’ delay in making the applications, despite the approval of the PPA – However, the APTEL has taken note of certain additional factors affecting the time taken to secure the approvals that were not considered by the KERC – These include the time taken by the government to provide the PTCL that is required for approval of land conversion, and the delay caused by the authority in evacuation approval – Considering these additional factors, the APTEL has re-appreciated the evidence to find that the delay was not attributable to the respondents but to the government bodies and relevant authorities – There is no error in the APTEL’s approach, and it is reasonable in its re-appreciation of evidence – In light of the above findings of fact by the APTEL that the delay is not attributable to the respondents and that the force majeure clause is applicable, it rightly held that the extension of time under Article 2.5 is warranted and the commissioning of the project on 24.08.2017 is within the extended period of 24 months – Consequently, the APTEL also rightly held that there is no occasion for the imposition of liquidated damages under Articles 2.2 and 2.5.7 or for the reduction of tariff under Article 5.1 of the PPA. [Paras 10.4, 12] Electricity Act, 2003 – s.125 – Scope and ambit of appellate jurisdiction: Held: The position that emerges in this case, it is a little more restrictive as the requirement under Section 125 is not merely a ‘question of a law’ but a ‘substantial question of law’ – The restrictive scope of appellate jurisdiction is a product not only of the statutory preconditions, but also a necessary measure to enable freedom to statutory regulator and Tribunal to develop sectorial laws through a principled and consistent approach. [Paras 1, 7.4] Contract Act, 1872 – Chapter III – ss.32 and 56 – Power Purchase Agreement – Force Majeure: Held: The law on force majeure, specifically in the context of PPAs, has been comprehensively dealt
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