Court Upholds CERC Ruling on Power Supply Agreement Termination

Background

In a significant ruling, the court addressed the appeal filed by the Haryana Power Purchase Centre (HPPC) against the Central Electricity Regulatory Commission (CERC) order dated November 22, 2022. The case revolves around the legality of HPPC's termination of a Power Supply Agreement (PSA) with PTC India Limited concerning the procurement of 200 MW of power from the Teesta Generating Station. The CERC had previously ruled that HPPC's termination was illegal and mandated the scheduling of the contracted power along with tariff payments.

Arguments

The HPPC argued that the termination of the PSA was justified due to significant delays in the commissioning of the Teesta project and substantial cost overruns. They contended that the conditions precedent for the PSA were not fulfilled, which warranted the termination. Conversely, PTC India Limited and Teesta Urja Limited maintained that the termination was invalid, asserting that the project had commenced operations and that HPPC was obligated to fulfill its contractual commitments.

Court's Analysis and Reasoning

The court analyzed the arguments presented by both parties, focusing on the conditions under which the PSA could be terminated. It emphasized that the HPPC's claims regarding force majeure events and the non-fulfillment of conditions were not substantiated, particularly since the termination notice was issued after the project had commenced operations. The court highlighted that the CERC had correctly determined that the termination was illegal and that HPPC was liable for the payment of tariffs as per the CERC's order.

Decision

Ultimately, the court upheld the CERC's ruling, stating that the HPPC must comply with its obligations under the PSA. The decision reinforces the importance of adhering to contractual agreements in the energy sector and clarifies the implications of force majeure events in such agreements. The court also mandated that any payments due to PTC India Limited would be contingent upon the submission of a bank guarantee, ensuring that HPPC's interests are protected while the appeal is pending.