CHAMUNDESHWARI ELECTRICITY SUPPLY COMPANY LTD. (CESC) versus SAISUDHIR ENERGY (CHITRADURGA) PVT. LTD. & ANR.

Citation: [2025] 8 S.C.R. 1493 · Decided: 25-08-2025 · Supreme Court of India · Bench: SANJAY KUMAR · Disposal: Appeal(s) allowed

Judgment (excerpt)

[2025] 8 S.C.R. 1493 : 2025 INSC 1034
Chamundeshwari Electricity Supply Company Ltd. (CESC) 
v. 
Saisudhir Energy (Chitradurga) Pvt. Ltd. & Anr.
(Civil Appeal No. 6888 of 2018)
25 August 2025
[Sanjay Kumar and Satish Chandra Sharma,* JJ.]
Issue for Consideration
The following questions arise for determination: (i) the effect of 
respondent no.2/KPTCL’s delay in commissioning the 220 kV 
evacuation system upon the timelines stipulated for fulfilment of the 
CPs and achievement of COD under the PPA; (ii) the entitlement of 
appellant to invoke and encash the performance bank guarantee in 
the facts of the present case; (iii) the sustainability of the finding of 
Force Majeure recorded by the State Commission in the absence 
of the contractual notice contemplated under Article 14.5 of the 
PPA; (iv) the character of the PPA as a contingent contract; and 
(v) the competence of the State Commission and the APTEL to 
direct restoration of the bank guarantee, extension of timelines, 
and renegotiation of tariff.
Headnotes†
Electricity Act, 2003 – APTEL affirmed the order dated 
28.01.2015 of the Karnataka Electricity Regulatory Commission 
(State Commission/KERC), whereby the State Commission 
directed Chamundeshwari Electricity Supply Corporation 
Limited, the appellant herein, to restore to the Developer 
i.e. respondent no.1 herein, the amount realised from the 
encashment of the performance bank guarantee; extend the 
timelines for fulfilment of contractual obligations; and to 
undertake renegotiation of the tariff under the Power Purchase 
Agreement (PPA) for a solar power project:
Held: 1. Appellant’s invocation and encashment of the performance 
security was in full conformity with the contractual framework under 
the PPA – The non-fulfilment of the respondent no.1/Developer’s 
obligations within the stipulated time, non-seeking of extension 
under Article 5.7 or valid Force Majeure claim under Article 14, 
necessarily attracted Article 4.4 of the PPA – The impugned 
* Author
1494
[2025] 8 S.C.R.
Supreme Court Reports
judgment dated 21.03.2018 of the APTEL passed in Appeal No.176 
of 2015, and the order dated 28.01.2015 of the State Commission 
in O.P. No.24 of 2014 are set aside. [Paras 44-45]
2. The record discloses beyond dispute that the evacuation system, 
integral for delivery of power, was to be executed by respondent 
no.2/KPTCL through the construction of two 220 kV double-circuit 
lines – By its communication dated 19.08.2014, respondent no.2/
KPTCL itself acknowledged that the lines would be commissioned 
only in August 2015, well beyond the contractual timelines – 
The respondent no.1/Developer submission that such delay, 
being beyond its control, automatically extended the contractual 
schedule, cannot be accepted – The contractual framework does 
not operate on automaticity – Contractual rights and remedies 
must be asserted within the framework of the agreement, not 
dehors it. [Paras 37-38]
3. Turning then to the invocation of the performance bank guarantee, 
in the present case, supply did not commence within the agreed 
period; no formal extension was obtained under Article 5.7 of the 
PPA; and no notice of Force Majeure was issued under Article 
14.5 of the PPA – The preconditions for invocation of Article 4.4 of 
the PPA thus stood satisfied – Appellant’s invocation of the bank 
guarantee was, therefore, an exercise of a remedy specifically 
conferred by the contract, and to deny it would be to disregard 
the allocation of risk embodied in the PPA. [Para 39]
4. The finding of Force Majeure by the State Commission cannot 
be sustained for the reason that Article 14.5 of the PPA stipulates 
that the affected party “shall” issue notice within seven days of 
knowledge of the event – This requirement is not merely directory; 
it is a condition precedent for invoking the clause – Even if the 
delay in completion of the evacuation system was beyond the 
respondent no.1/Developer’s control, the appropriate provision 
for relief was Article 5.7, not Article 14 of the PPA – Significantly, 
Article 14.3.1 of the PPA details the events and circumstances 
which constitute Force Majeure and delay in the readiness of the 
evacuation system, even if attributable to Respondent No.2/KPTCL, 
does not constitute a Force Majeure. [Para 40]
5. The completion of the evacuation system by respondent no.2/
KPTCL was indeed an uncertain event outside the respondent 
no.1/Developer’s control, and in a practical sense, supp

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