M. P. POWER MANAGEMENT COMPANY LTD. versus RENEW CLEAN ENERGY PVT. LTD. & ANR.

Citation: [2018] 3 S.C.R. 829 · Decided: 05-04-2018 · Supreme Court of India · Bench: RANJAN GOGOI · Disposal: Dismissed

Judgment (excerpt)

A
B
C
D
E
F
G
H
829
829
[2018] 3 S.C.R. 829
M. P. POWER MANAGEMENT COMPANY LTD.
v.
RENEW CLEAN ENERGY PVT. LTD. & ANR.
(Civil Appeal No. 3600 of 2018)
APRIL 05, 2018
[RANJAN GOGOI AND R. BANUMATHI, JJ.]
Contract – Termination of Contract – Appellant issued a
Request for Proposal (RFP) for long term procurement of 300 MV
power from Grid connected Solar Energy Sources through tariff
based competitive bidding – Respondent no.1 was selected –
Pursuant thereto, Power Purchase Agreement (PPA) was executed
between the appellant and respondent no.1 for sale and procurement
of solar power, for which, respondent no.1 submitted bank
guarantee – Respondent no.1 was unable to fulfill prescribed
conditions within stipulated period – Consequently, PPA terminated
by the appellant and further, imposed penalty on respondent no.1 –
Penalty amount was to be encashed from bank guarantee – High
Court set aside the order of termination of the contract, however,
maintained the invocation of bank guarantee – On appeal, held: –
The termination of contract was not fair – Respondent no.1 was
unable to obtain the requisite land for establishing the power plant
and on its request, the State allotted land to the respondent on lease
– However, land was found to be heavily encroached and there was
stiff resistance every time respondent no.1 tried to approach the
land – Respondent no.1 sought for change of location of the project,
which was granted – Thereafter respondent no.1 purchased another
land and undertook the construction activities and the project in
an advance stage of synchronization – The same was notified to the
appellant by communication dated 10.07.2017 stating that the
commissioning of the project was in final stage – However, still
appellant terminated the contract by its order dated 11.08.2017 –
Respondent No.1 had spent substantial amount in development of
the project in the changed location – The delay in commissioning
the project was due to unavoidable circumstances like resistance
faced at the allotted site and subsequent change of location of the
project – These circumstances, though not a Force Majeure event,
A
B
C
D
E
F
G
H
830
SUPREME COURT REPORTS
[2018] 3 S.C.R.
time taken by respondent No.1 in change of location and
construction of the plant have to be kept in view for counting the
delay – Further, since the contract permits imposition of penalty,
respondent no.1 liable to pay penalty in terms of clause 2.5.1 of the
PPA for delay – But the action of the appellant in terminating the
contract arbitrary and rightly set aside by the High Court – Insofar
as bank guarantee is concerned, Supreme Court stayed the order
of the High Court subject to restitution by the appellant of the
amount covered by the bank guarantee which has been invoked
which is said to have been complied with by the appellant.
Dismissing the appeal, the Court
HELD: 1. Respondent No.1 was unable to obtain the
requisite land, for establishing the power plant and on its request,
the State Government had allotted 96.73 acres of land at district
Rajgarh to the appellant on lease.  According to respondent No.1,
upon initiation of measurement and demarcation exercise by the
revenue officials, the land was found to be heavily encroached
and there was stiff resistance which continued every time
respondent No.1 tried to approach the said land and therefore,
respondent No.1 could not access the project site and commence
any construction activities.  On request by respondent No.1 by
its letter dated 29.09.2016, respondent No.1 sought for change
of location of the project.  The Board of Directors considered the
request of respondent No.1 and by Resolution dated 29.12.2016
allowed change of location of the project.  Thereafter, respondent
No.1 purchased the land to an extent of 253 acres in village
Bansara and Pipriya Rai in Ashok Nagar district within a period
of about eighty three days from the date of the appellant’s
approval.  After acquiring the land, respondent No.1 undertook
the construction activities and the project in an advanced stage
of synchronization as early as on 10.07.2017. The same was
notified to the appellant by communication dated 10.07.2017
stating that the commissioning of the project is in final stage and
that the expected date of commissioning of the project is
31.08.2017 which according to respondent No.1 is ahead of the
scheduled commissioning date i.e. 07.09.2017 in terms of the
PPA.[Para 10][834-H; 835-A-D]
2. Even when respondent No.1 has un

Excerpt shown. Read the full judgment & AI analysis in Lexace.