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2024 Supreme(SC) 703
SUPREME COURT OF INDIA
PAMIDIGHANTAM SRI NARASIMHA, PANKAJ MITHAL, JJ.
Bangalore Electricity Supply Company Limited – Appellant
VERSUS
Hirehalli Solar Power Project LLP & Others – Respondents
Civil Appeal No. 7595 of 2021 With Civil Appeal No. 7608 of 2021 With Civil Appeal No. 6386 of 2021
Decided On : 27-08-2024
For the Appellant(s) : Mr. K.M. Nataraj, ASG Mr. Vinayak Sharma, Adv. Mr. Sharath Nambiar, Adv. Mr. Vatsal Joshi, Adv. Mr. Chitransh Sharma, Adv. Mr. Anuj Udupa, Adv. Ms. Indira Bhakar, Adv. Mr. Aaysh Suklani, Adv. Mr. Shubham Mishra, Adv. Ms. Garima Jain , AOR Mr. Yasobant Das, Sr. Adv. Mr. Arunav Patnaik, Adv. Ms. Bhabna Das, AOR
For the Respondent(s): Mr. Basava Prabhu Patil, Sr. Adv. Ms. Prerna Priyadarshini, AOR Mr. Syed Faraz Alam, Adv. Mr. Atharva Gaur, Adv. Mr. Aayushman Aggarwal, Adv. Mr. Prateek K. Chadha, A.A.G. Mr. Ujjal Banerjee, AOR Mr. V. N. Raghupathy, AOR Mr. Sreekar Aechuri, Adv.
IMPORTANT POINTS
(1) Appeal to Supreme Court – Requirement under Section 125 of Electricity Act, 2003 is not merely a ‘question of a law’ but a ‘substantial question of law’ – APTEL as an appellate body is to hear appeals against orders of adjudicating officers or Appropriate Commission.
(2) Force majeure clause must be narrowly construed.
Headnote:
(A) Electricity Act, 2003 – Section 125 – Civil Procedure Code, 1908 – Section 100 – Appeal to Supreme Court – Requirement under Section 125 is not merely a ‘question of a law’ but a ‘substantial question of law’ – APTEL as an appellate body is to hear appeals against orders of adjudicating officers or Appropriate Commission – Restrictive scope of appellate jurisdiction is a product not only of 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 – There was delay in execution of solar energy projects on account of delay in getting land use conversion, delay in getting evacuation approvals, demonetisation and other reasons – In light of findings of fact by APTEL that delay is not attributable to respondents and that force
majeure clause is applicable, it rightly held that extension of time under Article 2.5 of PPA is warranted and commissioning of project is within extended period of 24 months – APTEL has primarily decided a question of fact as to attributability of delay – APTEL rightly restored tariff of Rs. 8.4 per unit and directed appellant to pay difference amount – Direction to pay late payment surcharge on this amount is explicitly rooted in PPA and is in furtherance of intention of parties – APTEL’s findings are neither illegal nor unreasonable. (Paras 1, 7.3, 7.4, 12, 13 and 14)
(B) Contract Act, 1872 – Sections 32 and 56 – Force Majeure clause – Applicability of – When contract contains an express or implied force majeure clause, it is governed under Chapter III of Contract Act, specifically Section 32 – In such cases, ‘doctrine of frustration’ in Section 56 does not apply and court must interpret force majeure clause contained in the contract – Force majeure clause must be narrowly construed. (Para 10.1)
Facts of the case:
Short issue arising from these appeals is whether extension of the Scheduled Commissioning Date1 was occasioned under force majeure clause of Power Purchase Agreement and consequently, whether reduction in tariff payable to respondents is justified.
Findings of Court:
Direction to pay late payment surcharge on this amount is explicitly rooted in PPA, and hence, is in furtherance of intention of the parties. There is no reason to set aside the same.
Result : Appeals dismissed.
JUDGMENT
PAMIDIGHANTAM SRI NARASIMHA, J.
Facts
KERC’s order
APTEL’s impugned order
Submissions
Scope of Supreme Court’s appellate jurisdiction under Section 125 of the Act
Analysis on merits
Clauses of the Power Purchase Agreement (PPA)
Re: Applicability of the force majeure clause:
Conclusion
1. The short issue arising from these appeals is whether the extension of the Scheduled Commissioning Date [Hereinafter “SCD”] was occasioned under the force majeure clause of the Power Purchase Agreement [Hereinafter “PPA”], and consequently, whether the reduction in tariff payable to the respondents is justified. While upholding the decision of the Appellate Tribunal for Electricity [Hereinafter “APTEL”] we have examined the scope and ambit of our appellate jurisdiction under Section 125 of the Electricity Act, 2003 [Hereinafter “the Act”]. We have held that 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.
2. Facts: Since the facts and the PPAs are similar in all three appeals, we will deal with the facts in the lead Civil Appeal No. 7595/2021, where the most relevant facts are as follows:
2.1 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 [Hereinafter “DISCOMs”] at the tariff determined by the Karnataka Electricity Regulatory Commission [Hereinafter “KERC”].
2.2 Respondent no. 2 is one of the many farmers who applied under the policy and is recognised as a solar power developer [Hereinafter “SPD”] under the policy. Respondent No.1 is a special purpose vehicle to undertake the solar power project in Chitradurga district in Karnataka.
2.3 Pursuant to a Letter of Award dated 28.08.2015, the appellant entered into a PPA with respondent no. 2 on 29.08.2015. This PPA was approved by the KERC on 07.09.2015. The relevant clauses of the PPA will be discussed later, but an important aspect to note at this juncture is that the SPV must achieve commercial operation within 18 months from the effective date as per Article 1.1(xxviii) read with Article 4.1(c) of the PPA. Effective date is defined under Article 1.1(xii) as the date of signing the PPA. Hence, the SCD for the project was 28.02.2017 as per these clauses.
2.4 The SPV (respondent no. 1) was incorporated on 05.02.2016. The respondents then submitted an application for land conversion on 16.02.2016. On 10.03.2016, they paid the evacuation approval processing fee. On 27.12.2016, they paid the land conversion processing fee, and the approval for conversion was granted on 07.01.2017. The evacuation scheme was provisionally approved on 13.05.2016, and the final approval was on 22.08.2016.
2.5 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. Hence, the Government of Karnataka by a letter dated 24.11.2016 directed all DISCOMs to set up 3-member committees to examine each request for extension.
2.6 The present respondents requested a 6-month extension under Article 2.5 of the PPA on 03.12.2016. This was approved by the appellant through a letter dated 02.03.2017.
2.7 However, by a letter dated 05.04.2017, KERC directed the DISCOMs that all requests for extensions must be filed before it. Pursuant to this letter, the respondents filed a petition before the KERC seeking extension of time for the commercial operation of the project and invoked the force majeure clause in the PPA (Article 8.3).
2.8 During the pendency of the petition, the respondents’ solar power project was commissioned on 24.08.2017, within the extended period of
