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Supreme Court Upholds Force Majeure Clause in Solar Power Project Dispute

Background

In a significant ruling, the Supreme Court addressed the appeals concerning the extension of the Scheduled Commissioning Date (SCD) under the force majeure clause of a Power Purchase Agreement (PPA). The case involved a solar power project in Karnataka, where the respondents, a special purpose vehicle and a solar power developer, faced delays attributed to various factors including government approvals and land conversion processes.

Arguments

The appellants argued that the delays were due to the respondents' negligence in securing necessary approvals within the stipulated time frame. They contended that the force majeure clause should not apply as the respondents failed to provide timely notice of the claimed force majeure events. Conversely, the respondents maintained that the delays were beyond their control, citing bureaucratic inefficiencies and the government's acknowledgment of widespread issues faced by solar power developers.

Court's Analysis and Reasoning

The Supreme Court examined the findings of the Appellate Tribunal for Electricity (APTEL), which had previously ruled in favor of the respondents. The Court noted that the APTEL had considered the delays in obtaining land use conversion and evacuation approvals, which were not solely attributable to the respondents. The Court emphasized that the force majeure clause in the PPA was applicable, as the delays were due to factors beyond the respondents' control, including the time taken by government authorities to process necessary approvals.

The Court also highlighted that the appellant had previously granted a six-month extension, indicating recognition of the challenges faced by the respondents. This acknowledgment played a crucial role in the Court's decision to uphold the APTEL's findings.

Decision

Ultimately, the Supreme Court dismissed the appeals, affirming that the respondents were entitled to the benefits of the force majeure clause. The Court ruled that the commissioning of the project within the extended period negated the imposition of liquidated damages and the reduction of the tariff. This decision reinforces the importance of recognizing external factors affecting project timelines in the renewable energy sector.