IMPORTANT POINT
Imposition of penalty for delay in commissioning of plant as per PPA is justified, termination of PPA not.

JUDGMENT

R. BANUMATHI, J.

Leave granted.

2. This appeal arises out of the judgment passed by the High Court of Madhya Pradesh, Principal Seat at Jabalpur in and by which the High Court allowed the Writ Petition No.12432 of 2017 setting aside the order of termination of contract dated 11.08.2017 while maintaining the appellant's action on invocation of bank guarantee in terms of clause 2.5.1 of the contract.

3. Brief facts which led to filing of this appeal are as follows:

The appellant-M.P. Power Management Company Ltd. initiated the process of procurement of power from Grid Connected Solar Energy through tariff based competitive bidding for meeting its Renewable Purchase obligations in the State of Madhya Pradesh. Accordingly, a Request for Proposal (RFP) dated 06.05.2015 was issued by the appellant for long term procurement of 300 MW power from Grid connected Solar Energy Sources through tariff based competitive bidding. Out of 100 bidders who participated in the bidding process, respondent No.1-ReNew Clean Energy Private Ltd. was selected on the basis of cheaper merit order rates. The appellant issued a Letter of Intent dated 23.10.2015 in favour of respondent No.1 allotting 51 MW capacity at quoted tariff of Rs.5.457/kwh for twenty five years which was accepted by respondent No.1 by its consent letter dated 26.10.2015. A Power Purchase Agreement (PPA) dated 10.11.2015 was executed between the appellant and respondent No.1 for sale and procurement of 51 MW solar power, for which, respondent No.1 submitted a bank guarantee from respondent No.2-Bank for an amount of Rs.15,30,00,000/- valid till January, 2018.

4. Since respondent No.1 was unable to obtain the requisite land for establishing the power plant, respondent No.1 requested assistance from the State Government. Accordingly, the Collector, District-Rajgarh by order dated 21.04.2016 allotted 96.73 acres of revenue land to MP New and Renewable Energy Department for further allotment on lease to respondent No.1. This was done by the appellant even though the land procurement was the obligation of the bidder.

5. According to respondent No.1, there were difficulties in accessing the land, because when measurement of land was taken on 29.06.2016, it was found encroached and the project team faced heavy resistance, physical attacks etc. and therefore, respondent No.1 vide its letter dated 29.09.2016 requested the appellant to allow to change of location of the project. The said permission sought for by respondent No.1 was granted by the appellant by its Resolution dated 29.12.2016. The relevant portion of the Resolution reads as under:-

"Resolved that condition for not allowing change of location after 210 days from signing of PPA be relaxed and following Solar Power developers be allowed to change the location of their respective project, subject to provision of clause 2.5 and 2.6 of the PPA."

6. After permission was granted to change the location of the project, respondent No.1 purchased lands to an extent of about 253 acres in villages Bansara and Pipriya Rai in Ashok Nagar district and undertook the development/construction activities. On 10.07.2017, respondent No.1 wrote to appellant that "commissioning process was in final stages and we expect to commission the plant on 31.08.2017 (tentative date), which is ahead of scheduled commissioning date of 07.09.2017."

7. As per clause 2.5.1 of the PPA, a maximum period of nine months beyond 07.06.2016 for achieving Conditions Subsequent enables the appellant to terminate the agreement if respondent No.1 failed to satisfy the Conditions Subsequent by this date along with penalty which was to be calculated as per clause 2.5.1 of the PPA. In the light of the abovesaid provisions of the PPA, the appellant by order dated 11.08.2017 terminated the PPA and imposed a penalty of Rs.11,95,54,200/-on respondent No.1. Being aggrieved, respondent No.1 filed Writ Petition No.12432 of 2017 before the High Court praying that the appellant be directe