Appellate Tribunal For Electricity
Kurugunda Solar Power Project Ll.P & Anr vs Hubli Electricity Supply Company ... on 12 August, 2021
Judgment of APL No.12 of 2019
IN THE APPELLATE TRIBUNAL FOR ELECTRICITY
(Appellate Jurisdiction)
APPEAL NO. 12 of 2019
&
IA No. 1829 of 2018 & IA No. 242 of 2019
Dated: 12th August, 2021
Coram: Hon'ble Mrs. Justice Manjula Chellur, Chairperson
Hon'ble Mr. Ravindra Kumar Verma, Technical Member
In the matter of:
1. Kurugunda Solar Power Project LL.P,
Through its Designated Partner
Sri. Sidram Kaluti
BC 109, Davidson Road,
Camp: Belagavi. 590 001
Karnataka
2. Smt. Iravva R. Patil
Kurugunda, Tal : Bailhongal,
District Belagavi
Karnataka .........Appellants
Versus
1. Hubli Electricity Supply Company Limited
Through its Managing Director,
P.B. Road, Navanagar,
Hubballii- 580 025
2. Karnataka Electricity Regulatory Commission
Through its Secretary
No.16, C-1, Millers Tank Bed Area,
Vasant Nagar,
Page No. 1
Judgment of APL No.12 of 2019
Bengaluru- 560 052 .........Respondents
Counsel for the Appellant(s) : Mr. Basava Prabhu Patil, Sr.Adv.
Mr. Shubhranshu Padhi
Mr. Ashish Yadav for App.1 & 2
Counsel for the Respondent(s) : Mr. Shahbaaz Husain
Mr. Fahad Khan for R-1
JUDGMENT
PER HON'BLE MRS. JUSTICE MANJULA CHELLUR, CHAIRPERSON
1. The Appeal No. 12of 2019 has been filed by the Appellants under Section 111 of the Electricity Act questioning the legality, validity and correctness of the Impugned Order dated 11.09.2018 in Original Petition No.97/2017 passed by the Karnataka Electricity Regulatory Commission .
2. The said original petition was filed by the Appellants herein challenging the direction and communication issued by the Respondent Commission vide order dated 13/04/2017 and seeking extension of time for the commercial operation of the Solar Power project. The Commission under the impugned order has held that the Appellants are not entitled to extension of time for commissioning of the solar power project in terms of Page No. 2 Judgment of APL No.12 of 2019 Article 2.5 (Extension of Time) read with Article 8 (Force Majeure) of the Power Purchase Agreement dated 30.06.2015 read with Supplementary PPA dated 21.09.2016.
3. The Appellants are aggrieved by the aforesaid Impugned Order and have preferred the present appeal.
Brief Facts of the Case:-
4. The Appellant No.1, Kurugunda Solar Power Project LL.P (hereinafter referred to as 'Appellant No.1') is a Limited Liability Partnership incorporated under Limited Liability Partnership Act, 2008 having its registered office at BC 109, Davidson Road, Camp, Belgaum, Karnataka - 590001, India. The Appellant No.1 was formed as a Special Purpose Vehicle (SPV) to undertake the Solar Power project, a Non- Conventional Power project at Kurugunda Village, Belgaum District, State of Karnataka.
5. The Appellant No.2 is the Solar Power Developer (SPD) in the present matter.
6. The Respondent No.1, Hubli Electricity Supply Company Limited (BESCOM), is a distribution company within the meaning of 2(17) of the Electricity Act, 2003 and a Government of Karnataka Company incorporated Page No. 3 Judgment of APL No.12 of 2019 under the provisions of the Companies Act, 1956 with its registered office at K R Circle Bangalore, Karnataka - 560001.
7. Karnataka Electricity Regulatory Commission (Respondent Commission/ State Commission) is the is the Electricity Regulatory Commission for the State of Karnataka exercising jurisdiction and discharging functions in terms of the Electricity Act, 2003.
8. On 01.07.2011, the Government of Karnataka introduced the first solar policy for the state of Karnataka for the period 2011-2016 in order to harness the potential of solar resources in the state.
9. On 10.10.2013, the State Commission passed the generic tariff order determining the tariff at Rs. 8.40 for the solar power generators entering into PPA on or after 01.04.2013 and up to 31.03.2018, other than those where the tariff is discovered through the competitive bidding process.
10. On 22.05.2014, the Government of Karnataka introduced the second Solar Policy for the period 2014-2021. Under the said solar policy, the State Government envisaged the Scheme relating to Utility Scale Grid Connected Solar photo voltaic (PV) and concentrated solar power projects. In this Scheme, the State Government endeavoured to promote solar energy projects preferably by land owning farmers with a minimum capacity of 1 Page No. 4 Judgment of APL No.12 of 2019 MWp and maximum capacity of 3 MWp per land owning farmer in the state for sale of power to State Electricity (Distribution) Supply companies (hereinafter referred to as the 'ESCOMs') at the tariff determined by the State Commission from time to time.
11. On 26.08.2014, the Government of Karnataka issued Government Order providing for the guidelines to be adopted by the ESCOMs and Karnataka Renewable Energy Development Limited (hereinafter referred to as 'KREDL') for implementation of Clause 8, Segment 1, Category 1 of the Solar Policy 2014-21. The guidelines were issued to promote distributed generation by land owning farmers (small solar power projects under land owners/farmers scheme 1-3 MW) throughout the State of Karnataka.
12. In pursuance of the above policy of the State Government, on 09.10.2014, the KREDL issued Notification inviting application from the interested parties for facilitating the development of renewable energy in the State of Karnataka. In terms of the above, the Appellant No.2 submitted an application for participation in the Solar Power development. The application of the Appellant No.2 was evaluated and the proposal to set up a Solar Power Project was approved and the Letter of Award (LOA) was issued in favour of the Appellant No.2.
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13. In terms of the above, on 30.06.2015, the Appellant No.2 entered into a PPA with HESCOM, the distribution licensee in the area. The PPA executed between the parties was in terms of the standard form of the PPA for execution by the Solar Power Developer in the State, according to Policy of the Government of Karnataka and the Guidelines issued for the said purpose.
14. The PPA dated 30.06.2015, provides for various issues.
15. The appellant submitted an application dated 29/12/2015 seeking permission to shift the project from the allotted land in Kurugunda village to Bukkamboodi in Challakere taluka of Chitradurga district, since the former land was not suitable for the project. That, in spite of repeated requests and representations for the concurrence to the permission, the same was not forth coming leading to delay and multiplicity of issues related to the former land. The KREDL finally after a lapse of 13 months vide its letter dated 04/02/2017 conveyed its approval, but however directed the appellant No.1 to set up the project in any land other than Challakere taluka since the target for 200MW for the said taluka had completed. As the Appellant did not have any other land anywhere else, the application for land change was withdrawn vide letter dated 22/03/2017. Subsequently, KREDL withdrew the Page No. 6 Judgment of APL No.12 of 2019 condition for setting limit of 200 MW for each taluka vide its letter dated 21/04/2017.
16. On 20.07.2015, the State Commission approved the PPA dated 30.06.2015 executed between the Appellant No.2 and HESCOM.
17. On 20.05.2016 the Appellant No.2 filed Applications for PT sheet sketch (Land area map) i.e. a pre-condition for filing of the application for conversion of land into non-agriculture.
18. The Appellants state that the implementation of the 3 MW Solar Power Project, in terms of the PPA dated 30.06.2015 and also the Guidelines issued by the Government of Karnataka, required various approvals, permissions, sanctions etc. from the Government of Karnataka, the other Government Agencies and also the HESCOM for connectivity of the Solar Power Project with the Grid for evacuation of power generated at the project. The Appellants were required to fund and finance the project by substantial debt being borrowed from the Banks and Financial Institutions. The financial closure of the project with the Banks and Financial Institutions was dependent upon the Appellants duly securing the approval from various agencies for implementation of the project. These include principally, the following:
Page No. 7 Judgment of APL No.12 of 2019
(a) Approval for conversion of the land from agricultural purpose to be used for setting up a Solar Power Project;
(b) Connectivity of the Solar Power Project with the Grid and power evacuation approval on the 11 KV Power System up to 33 KV Neginhal Substation;
(c) Providing the Bay estimation for the connectivity at the Bay of the substation of the transmission/distribution system and to provide approval for the break-up and other equipment to be obtained by the Appellants;
(d) Grant of approval by the Chief Electrical Inspector for charging of the line and for safety and security issues connected with the generating station and line connectivity, installation of metering arrangement, synchronization etc.
19. In regard to the approval for conversion of the use of the land applied to the Deputy Commissioner, Belagavi vide application on 27.08.2016 duly acknowledged. The Order of Conversion of Land into Non-Agriculture was given by the Deputy Commissioner only on 29.08.2017. Thus, the approval for conversion of land was received after a lapse of about 12 months. Page No. 8 Judgment of APL No.12 of 2019
20. On 12.09.2016, the Appellant submitted the application for Grid connectivity and power evacuation approval through 11 KV Power System with connectivity to 33KV/11 KV Neginhal Substation. The final approval for evacuation scheme was issued on 02.02.2017 by HESCOM (more than 8 months after submission of the application for grid connectivity).
21. On 24.04.2017, the Appellant applied to the Chief Electrical Inspector with drawings pertaining to the electrical installation of the 3 MW Solar Power Project. This approval was given by the Chief Electrical Inspector only on 19.06.2017. After the payments of the inspection fees and thereafter the submission of the completion report on 20.06.2017, the plant safety approval for commissioning of the project was on 24.06.2017.
22. In the circumstances mentioned herein above, there were delays in the implementation of the project for reasons not attributable to the Appellants but attributable to the time taken by the Government Agencies for granting necessary approvals as mentioned herein above.
23. Hence, Appellants approached HESCOM for extension of time by writing the letter dated 03.12.2016 whereby the appellants had requested for execution of the project beyond the Scheduled Commissioning Date, namely, 18 months from the Effective Date which was expiring on Page No. 9 Judgment of APL No.12 of 2019 31.12.2016. The Appellants, sought for extension of six months from the Scheduled Commissioning Date.
24. The Respondent No. 1, HESCOM after considering the above stated aspects, vide letter dated 04.02.2017 granted extension of time for completing the 3 MW Solar Power Project for a period of six (6) months.
25. The Appellants submit that the above letter dated 04.02.2017 was issued by HESCOM in terms of Article 2.5 of the PPA. Upon the issue of the letter dated 04.02.2017, the Scheduled Commissioning Date of the Solar Power Project became 24 months from the Effective Date in place of 18 months and thus, expiring on 30.06.2017.
26. On 16.03.2017, the State Commission for the first time issued a communication informing HESCOM that the extension of time should not be considered as a routine exercise except under extraordinary conditions.
27. On 05.04.2017, the State Commission directed all ESCOMs to advise the Solar Power Developers to file a Petition before t.
28. Thereafter, on 13.04.2017, HESCOM issued a communication to the Appellant advising the Appellants to file a petition before the State Page No. 10 Judgment of APL No.12 of 2019 Commission for seeking approval for extension of the Scheduled Commissioning Date.
29. On 12.06.2017, the Appellant No. 1 filed a Petition being OP No. 97 of 2017 before the State Commission, inter-alia, challenging the communication dated 13.04.2017, issued by HESCOM.
30. Thereafter, on 23.06.2017, the State Government informed the State Commission that the State Government has accepted the plea of HESCOM in the matter of extension of time to achieve the Commercial Operation Date of the Solar Power Project under the farmer scheme invoking the Force Majeure conditions of the PPA and hence called upon the State Commission to approve such extension of time.
31. On 07.07.2017 the State Commission directed HESCOM to permit the Solar Power Developer to commission the project beyond the original Scheduled Commercial Operation Date subject to the State Commission examining the merits of each case with regard to Force Majeure conditions and the applicable tariff. The State Commission directed the HESCOM to advise the Developer to file a petition before the State Commission justifying their claim for extension of time under the Force Majeure conditions as provided in the PPA.
Page No. 11 Judgment of APL No.12 of 2019
32. On 26.10.2017, the Appellant No.2 was impleaded as the Petitioner No.2 in the Petition being OP No.97 of 2017 filed by the Appellant before the State Commission.
33. In the meanwhile, the Appellants had completed and commissioned the project on 28.06.2017 as certified by HESCOM as per the requirements of the PPA and the electricity generated from the project started flowing into the Grid in terms of the provisions of the PPA dated 30.06.2015 in the month of June 2017.
34. On 11.09.2018 the State Commission passed the Impugned order and dismissed the Petition No. 97 of 2017 filed by the Appellant.
35. Aggrieved by the Order dated 11.09.2018, the Appellants are before this Tribunal.
36. The Appellant No.1's Bankers have now issued him letter on 26.10.2018 demanding regular payments in the backdrop of the Appellant not having been able to service his loan account due to reduced tariff of Rs.4.36/unit. The Bank had sanctioned loan to the Appellants based on the tariff stipulated in the PPA signed between the parties viz., Rs.8.40/unit. If the reduced tariff of Rs.4.36/per unit fixed under impugned order were to be Page No. 12 Judgment of APL No.12 of 2019 continued to operate for the entire term of the PPA, the Appellants would not be in a position to even repay the loan, and the loan account would be declared Non Performing Asset and the proceedings for auctioning the mortgaged property (farmer's land) will be initiated. The same would cause irreparable loss and injury to the farmer.
37. The Appellants have raised several questions of law in the Appeal.
38. Shri Basava P. Patil, learned senior counsel appearing for the Appellants in Appeal No. 12 of 2019 has filed the written submissions for our consideration as under:-
39. The Appellant and HESCOM had entered into a Power Purchase Agreement (PPA) on 30.06.2015 for development of 3 MW solar power plant at Kurdund village in Bailhonga Taluk, Belgaum.
NOTE 1: The PPA between the Appellant and HESCOM was based on the standard format PPA in respect of Solar Power Plants of 1 - 3 MW projects for Land Owners and institutions, that had been approved by the KERC by an order dated 16.06.2015. It may be noted that in terms of clause 2.5.3 of the standard format PPA, HESCOM has the authority to approve extension.
Page No. 13 Judgment of APL No.12 of 2019 NOTE 2: KERC approved the PPA executed between the Appellant and HESCOM on 20.07.2015, 30 days after the signing of the PPA NOTE 3: KPTCL by its order dated 21.12.2015 issued a guideline for grant of evacuation approval to smaller wind and solar generators. It is submitted that para 5 (g) of the said guidelines allows applicants to ask for land on lease for terminal bay instead of acquiring land on their own, provided payment of lease charges are made. Pertinently, the Appellant had raised a request for setting up of grid connectivity and power evacuation approval on 11 KV Terminal on 12.092016, after which KPTCL had issued Bay Estimation intimation on 01.03.2017 , but the demand for land lease charges for Bay was raised only on 21.06.2017, which was immediately paid by the Appellant on 23.06.2017
40. The Appellant No. 2 wrote a letter dated 03.12.2016 to HESCOM requesting for extension of time up to 6 months to commission its project in terms of Article 2.5 and 8 of the PPA. Further, GOK in view of various representations made by similarly placed SPPs, issued a direction to all ESCOMs to constitute a committee and to examine each cases on its own Page No. 14 Judgment of APL No.12 of 2019 merits. In view of GOK's direction, the Appellant's case for extension of SCOD was considered by a three member Technical Committee by HESCOM. HESCOM by its letter dated 04.02.2017 allowed the Appellant's request for extension and granted 6 months time to commission its plant in terms of Articles 2.5 and 8 of the PPA, categorically stating that the said extension was without altering any other terms and conditions of the PPA.
41. HESCOM under Article 4.2 (d)(iii) had acted in a reasonable manner while granting extension of time to the Appellants after scrutiny by members of the technical committee is the stand of the Appellant.
42. The KERC issued a general communication dated 16.03.2017 to all the ESCOMS, stating that ESCOMS could not allow extension of time beyond the SCOD without obtaining prior approval of the Commission,
43. GOK requested the commission to consider approval of the extension of SCOD. In reply to the aforementioned communication, the KERC by its letter dated 07.07.2017 informed GOK that the commission has approved ESCOMs grant of extensions to developers to commission projects beyond original SCODs as per PPA but the tariff applicable in each case shall be examined according to its own merits.
Page No. 15 Judgment of APL No.12 of 2019
44. It was in this backdrop, the Original Petition No. 72 of 2017 was filed before the KERC by the Appellant.
45. It is submitted that the Impugned Order is based on assumptions relating to the Appellant not being diligent in implementing the Project. In this regard, it is emphasized that the Appellant had been diligent in implementing the project and had placed all orders for solar modules, power conditioning units, mounting structures, cable and accessories etc. prior to the original scheduled commissioning date (SCOD) of the project as per the PPA. Therefore, it is submitted that but for the force majeure events, the Appellant's project would have been commissioned within the SCOD. Thus, considering the fact that entire investment cumulating into the capital cost of the project was made by the Appellant prior to SCOD, it may be noted that the Appellant does not stand to get any financial benefits of reduced expenditure in any manner by delaying the COD of the project, as has been indicated by KERC in the impugned order.
46. It may be pertinent to note that the Appellant had started the process of obtaining the required documents in prescribed Form (Annexure - 1) as per Rule 106A under Section 95 of the Karnataka Land Revenue Act, 1964, (KLRA) for the PTCL certificate and the same was received on 23.08.2016. Page No. 16 Judgment of APL No.12 of 2019 Land Conversion Order dated 29.08.2017 issued after 366 days from the date of Application and after the Commissioning of the Project on 28.06.2017.
47. It is further submitted that though the final evacuation approval was granted by HESCOM on 02.02.2017, the bay estimate intimation was issued by KPTCL on 01.03.2017, 2 months after the original SCOD. It may be pertinent to note that it is only after issuing Evacuation Approval the major works division of ESCOM/KPTCL prepares Bay SLD & Layout drawings with estimation for Bay erection after joint site visit by ESCOM and KPTCL.
48. In this case, though the Appellant No. 2 had applied for change of project site with KERDL on 29.12.2015, as no reply was received from KERDL, substantial delay was caused in the process for application of statutory approvals. However, Appellant No. 2 in order to avoid further delay started obtaining statutory approvals/permissions from April 2016 onwards. It was only on 04.02.2017, after a span of 15 months from the dated of request for change of project site, that the Appellants received a reply from KERDL that the request has been approved provided the project was set up at any other place than Challakere. As the Appellant No. 2 did not have any other land in any other location apart from the originally allotted land at Page No. 17 Judgment of APL No.12 of 2019 Kurugunda Village and the one at Challakere, the Appellant No. 2 withdrew the application for change of project site on 22.03.2017.
49. It is submitted that HESCOM having approved the extension of time, by 6 months for commissioning of the Appellant's solar power project by its letter dated 04.02.2017, after scrutiny of relevant documents by members of the technical committee constituted by HESCOM itself, are estopped from taking a contrary stand, more so, since there has been no justifiable reason put forth by HESCOM at any point of time for the change in its stand.
50. In Shyam Telelink Ltd. v. Union of India, reported in (2010) 10 SCC 165, the Hon'ble Supreme Court observed as under:
"23. The maxim qui approbat non reprobate (one who approbates cannot reprobate) is firmly embodied in English common law and often applied by courts in this country. It is akin to the doctrine of benefits and burdens which at its most basic level provides that a person taking advantage under an instrument which both grants a benefit and imposes a burden cannot take the former without complying with the latter. A person cannot approbate and reprobate or accept and reject the same instrument."
51. Also relevant to note is the Hon'ble Supreme Court's observation in Suzuki Parasrampuria Suitings Private Limited v Official Liquidator of Mahendra Petrochemicals Limited (in Liquidation) and Ors, reported in (2018) 10 SCC 707:
Page No. 18 Judgment of APL No.12 of 2019
"12. A litigant can take different stands at different times but cannot take contradictory stands in the same case. A party cannot be permitted to approbate and reprobate on the same facts and take inconsistent shifting stands. The untenability of an inconsistent stand in the same case was considered in Amar Singh v. Union of India, observing as follows:
"50. This Court wants to make it clear that an action at law is not a game of chess. A litigant who comes to court and invokes its writ jurisdiction must come with clean hands. He cannot prevaricate and take inconsistent positions."
13. A similar view was taken in Joint Action Committee of Air Line Pilots' Assn. of India v DGCA, observing:
"12. The doctrine of election is based on the rule of estoppel ---- the principle that one cannot approbate and reprobate inheres in it. The doctrine of estoppel by election is one of the species of estopples in pais (or equitable estoppel) which is a rule in equity. ... Taking inconsistent pleas by a party makes its conduct far from satisfactory. Further, the parties should not blow hot and cold by taking inconsistent stands and prolong proceedings unnecessarily."
52. In the instant case, the impugned order dated 11.09.2018 passed by the KERC in OP No. 97 of 2017 also records as under:
"5) Upon Notice, the Respondent (HESCOM) appeared through its counsel and despite granting sufficient time, did not file the Statement of Objections.
6) The Petitioners submitted their arguments. The learned counsel for the Respondent (HESCOM) submitted that, it would not specifically object to the pleas raised by the Petitioners and that Respondent HESCOM would abide by the Orders of this Commission. Therefore, the arguments of the Respondent were taken as 'concluded'. ..."
53. In view of the above, it is submitted that the Respondent HESCOM cannot on the one hand approve the extension of time on the grounds of force majeure events, and not object to the Appellant's pleas before the Ld. Page No. 19 Judgment of APL No.12 of 2019 Commission, but on the other hand, in the appellate proceedings before this Tribunal resile from their own act of granting extension by taking a diametrically opposite view. The Respondents ought not to be permitted to approbate and reprobate in this manner.
54. That the Appellant submits that the Article 6 of the PPA dated 30.06.2015 deals with the issue of billing and payment. Article 6.4 of the PPA categorically provides for Late Payment Surcharge, which is being extracted below for ready reference:
"6.4 Late Payment Surcharge: In the event of delay in payment of a monthly bill being made by HESCOM after the due date, a late payment surcharge shall be payable to the SPD at the rate of 1.0% per month on the bill amount (being 'Late Payment Surcharge'), computed on a pro rata basis on the number of days of the delay in payment. The Late Payment Surcharge shall be claimed by the SPD through the Supplementary Bill."
55. It is further submitted that this Tribunal's Judgment in Lanco Amrkantak Power Limited v Haryana Electricity Regulatory Commission dated 22.05.2019 in Appeal No. 308 of 2017on payment of interest and the time value of money wherein this Tribunal had held as under:
"93. . . .
iv) Therefore, for equity and restitution payments made at a later stage, of the amount, due in the past, must be compensated by way of appropriate rate of interest so as to compensate for the loss of money value. This is a proven concept of time value of money to safeguard the interest of the receiving party.Page No. 20 Judgment of APL No.12 of 2019
v) The Appellant has placed reliance on several judgments passed by this Tribunal in several similar matters wherein it has been clearly brought out that the developers are entitled to interest on the differential amount due to them as a consequence of redetermination of tariff. It has been clarified in various judgments that the interest is not a penal charge if it is fixed according to commercial principles. It is only compensation for the money denied at the appropriate time.
...
vii) The Respondent No. 3 have submitted that interest cannot be paid until the amount is crystallized. It is pertinent to note here that though the amount was crystallized by the State Commission vide their Impugned Order but the most important fact to be kept in mind is that the State Commission redetermined the tariff from the date of commencement of supply which clearly shows that the due date is the date of commencement of supply. In such matters the crucial point for consideration is that interest is not a penalty or punishment at all. But, it is the normal accretion on capital. Equity demands that the paying party should not only pay back the principal amount but also the interest thereon to the recipient and therefore the argument of the Respondent does not hold ground and needs to be rejected. . . ."
56. Therefore, in terms of Article 6.4 of the PPA read with the abovementioned Judgment of this Tribunal, the interest amount is intended to compensate the developer, who was paid a lower tariff than what it was entitled to, the Appellant is entitled to Late Payment Surcharge from the date of commissioning of the project, i.e. 28.06.2017 onwards as HESCOM has been paying the Appellant at the reduced tariff rate of Rs. 4.36/ kwh as against the PPA tariff rate of Rs. 8.40/kwh.
57. It is submitted that, this Tribunal by its judgment dated 27.02.2020 in Appeal No. 368 of 2019 entitled "Ayana Ananthapurama Solar Power Page No. 21 Judgment of APL No.12 of 2019 Private Limited v. Andhra Pradesh Electricity Regulatory Commission &Ors." categorically held as under:
"61. Over and above this, it is seen that there were Supplementary PSAs to the original PSAs with intermediary procurer extending the existing timelines up to 31.07.2019. The time is further extended by intermediary procurer. To commission the project within the timeframe when approval of procurement of power and adoption of tariff reach finality, that would be the starting time to reach the completion of project in terms of agreements i.e. PPA between the solar developer and intermediary procurer - NTPC/ SECI, would come into play. Therefore, the contention of the Respondent - AP Discoms that there is delay or going to be delay to achieve SCOD is rejected."
58. Therefore, it is submitted that the date of approval of the PPA by the KERC would be the starting time to reach the completion of project in terms of the agreements between the SPD and ESCOM.
59. It is also submitted that, this Tribunal in "Chamundeshwari Electricity Supply Company Ltd. v. Saisudhir Energy (Chitradurga) Pvt. Ltd." reported in 2018 SCC On Line APTEL 65 had held that no formal issuance of Notice is required in cases of force majeure events.
60. Further, the issues involved in the present Appeal are covered by this Tribunal's judgment dated 28.02.2020 in Appeal No. 340 of 2016 entitled "Azure Sunrise Private Limited v. Chamundeshwari Electricity Supply Corporation Limited" wherein this Tribunal has held that once extension of Page No. 22 Judgment of APL No.12 of 2019 Scheduled Commissioning Date is approved by the concerned DISCOM, question of reduced tariff does not arise.
61. Furthermore, the present Appeal is similar on facts and is squarely covered by this Tribunal's Order dated 14.09.2020 in Appeal No. 351 of 2018 entitled "Chennamangathihallli Solar Power Project LLP v. Bangalore Electricity Supply Company Limited", wherein this Tribunal had held as under:
"9.1. Having regard to the deliberations and our analysis, as stated supra, we are of the opinion that there was nothing wrong on the part of KERC to suo motto interfere in the matter. As being a State Regulator, it has jurisdiction to look into affairs of ESCOMS in purchase and supply of powers in the larger interest of consumers. However, as the COD extension was granted under the signed PPA between the parties and after applying, due diligence in the matter considering all prevailing facts and matrix of events, the State Commission ought to have considered the same and approved so as to meet the ends of the justice. Needless to mention that the PPA' s Terms & Conditions were duly approved by the State Commission which crystallised the rights of the parties."
62. In light of the above facts and arguments is therefore requested that this Tribunal may allow the Appeal relating to a small solar power project developed under land owners farmers category under the Solar Power Policy of the State of Karnataka, given that the delay in commissioning the project has been on account of procedural delay by government authority/ intuitional level which were beyond the control of the Appellants. Further, it is prayed that this Tribunal may restore the agreed PPA tariff of Page No. 23 Judgment of APL No.12 of 2019 Rs.8.40/kwh, and also, grant the consequential relief of interest/ late payment surcharge provided in the PPA on the differential tariff that would be payable to the Appellants for the period commencing from the date of commissioning of the project till date.
63. Shri Shahbaaz Husain, learned counsel appearing for the Respondent No.1 in Appeal No. 12 of 2019 has filed the written arguments for our consideration as under:-
A. Jurisdiction of Karnataka Electricity Regulatory Commission (KERC) to pass the Impugned Order
64. The contention of the Appellant that the KERC is not a party to the Power Purchase Agreement (PPA) and thus, its approval for extension of time is not mandated under law is wholly erroneous and bad in law.
65. It is a settled principle of law that every contract is subject to the applicable statutes and any provision of the contract in so far as it contradicts any law is void to that extent. In the instant case, the Electricity Act, 2003 under Section 86 (1) (b) requires the KERC to regulate electricity purchase and procurement process of the distribution licenses including the price at which electricity shall be procured from the generation companies or licenses or from other sources through agreements for Page No. 24 Judgment of APL No.12 of 2019 purchase of power for distribution and supply within the state.
66. The Commission has the exclusive jurisdiction to determine the tariff payable for purchase of energy by distribution license. The validity of any terms of the contract affecting the tariff rate is always subject to the scrutiny by the commission.
67. The Hon'ble Supreme Court has held that the State Commission has powers to revisit the tariff of a concluded PPA, should the same be in furtherance of public interest. In Gujrat Urja Vikas Nigam Limited Vs. Tarini Infrastructure Ltd. And Ors., reported in AIR 2016 SC 5580, the Hon'ble Supreme Court has settled this issue by ruling that:
"10.....In the Present case, admittedly, the tariff incorporated in the PPA between the generating company and the distribution licensee is the tariff fixed by the State Regulatory Commission in exercise of its statutory powers. In such a situation it is not possible to hold that the tariff agreed by and between the parties, though finds mention in a contractual context, is the result of an act of volition of the parties, which can, in no case, be alternate except by mutual consent. Rather, it is a determination made in the exercise of statutory powers which got incorporated in a mutual agreement between the two parties involved.
15. As already noticed, Section 86(1)(b) of the Act empowers the State Commission to regulate the price of sale and purchase of electricity between the generating companies and distribution licensees through agreements for power produced for distribution and supply. As held by this Court in Sri Venkata Setaramanjaneya Rice & Oil Mills and Ors.Vs. State of A.P. (supra), K. Ramanathan Vs. State of T.N. & Anr. (supra) and D.K. Trivedi & Sons Vs. State of Gujarat & Ors. (supra) the power of regulation is indeed of wide import.Page No. 25 Judgment of APL No.12 of 2019
The following extracts from the reports in the above cases would illuminate the issue.
Sri Venkata Setaraman janeya Rice & Oil Mills and Ors. Vs. State of A.P. (supra) "20.Then it was faintly argued by Mr. Setalvad that the power to regulate conferred on the respondent by Section3(1) cannot include the power to increase the tariff rate; it would include the power to reduce the rates. This argument is entirely misconceived. The word "regulate" is wide enough to confer power on the respondent to regulate either by increasing the rate, or decreasing the rate, the test being what is it that is necessary or expedient to be done to maintain, increase, or secure supply of the essential articles in question and to arrange for its equitable distribution and its availability at fair prices.
..........................................................."
K. Ramanathan Vs. State of T.N. & Anr.(supra) "18. The word "regulation" cannot have any rigid or inflexible meaning as to exclude "prohibition". The word "regulate" is difficult to define as having any precise meaning. It is a word of broad import, having a broad meaning, and is very comprehensive in scope. There is a diversity of opinion as to its meaning and its application to a particular state off acts, some courts giving to the term a somewhat restricted, and others giving to it a liberal, construction. The different shades of meaning are brought out in Corpus Juris Secundum,Vol. 76at p.611:
"„Regulate‟isvariouslydefinedasmeaningtoadjust;toadjust,order ,orgovern by rule, method, or established mode; to adjust or control by rule, method, or established mode, or governing principles or laws; to govern; to govern by rule; to govern by, or subject to, certain rules or restrictions; to govern or direct according to rule; to control, govern, or direct by rule or regulations.
„Regulate‟ is also defined as meaning to direct; to direct by rule or restriction; to direct or manage according to certain standards, laws, or rules; to rule; to conduct; to fix or establish; to restrain; to restrict."
See also: Webster‟s Third New International Dictionary, Vol. II, p. 1913 and Shorter Oxford Dictionary, Vol. II, 3rd Edn., p. 1784
16. All the above would suggest that in view of Section 86 (1) (b) the Court must lean in favour of flexibility and no tread inviolability in terms of the PPA insofar as the tariff stipulated Page No. 26 Judgment of APL No.12 of 2019 therein as approved by the Commission is concerned. It would be a sound principle of interpretation to confer such a power if public interest dictated by the surrounding events and circumstances require are view of the tariff."
68. The Hon'ble Supreme Court in the above judgment has laid out the ratio that the State Commission under Section 86 (1) (b) of the Electricity Act, 2003 is empowered to regulate the tariff of a concluded PPA if the same is in warrant in public interest even in the absence of any such powers being vested in the State Commission in the PPA. In the instant case, the PPA (Article 5.1) itself provides for a varied KERC (if it's lower than Rs. 8.40/unit) in the event of delay in commissioning of the project. Admittedly, there is a delay of over five months in the commissioning of the project and the varied KERC tariff as on the date of commissioning of the project was Rs. 4.36/unit, which is lower than 8.40/unit; thus, becoming applicable tariff.
69. A lower tariff is always in the best interest of public as the tariff being paid by the Respondent gets passed on to the consumers. Wherefore, in conformity with the provisions of PPA, the KERC had the lawful right to regulate the tariff in the instant case.
70. The Appellant has erroneously relied on the judgments of Hon'ble Supreme Court in Gujrath Urja Vikas Nigam Limited v EMCO Ltd and Anr Page No. 27 Judgment of APL No.12 of 2019 (2016 (2) SCALE 75) And Bangalore Electricity Supply Company v. Konark Power Projects Ltd. 2015 (5) SCALE711 to state that a tariff arrived at in a concluded PPA cannot be revisited. The Hon'ble Supreme Court in above quoted judgement - Gujrat Urja Vikas Nigam Limited Vs. Tarini Infrastructure Ltd. And Ors., reported in AIR 2016 SC 5580, has distinguished the said judgments relied upon by the Appellant.
71. The next issue is whether the KERC can suo moto issue directions to the Respondent no.1to not allow the extension of time under PPA, when it is not a party to the PPA. This issue has been positively settled by the Hon'ble Supreme Court in the following judgement.
72. The Hon'ble Supreme Court in All India Power Engineer Federation & Ors. Vs. Sasan Power Ltd. &Ors. Etc., Civil Appeal No. 5881-82/2016, dated 08.12.2016 held that to uphold public interest; the KERC is the only body that can adjudicate on tariff matters. The following was held:
"All this would make it clear that even if a waiver is claimed of some of the provisions of the PPA, such waiver, if it affects tariffs that are ultimately payable by the consumer, would necessarily affect public interest and would have to pass muster of the Commission under Sections 61 to 63 of the Electricity Act. This is for the reason that what is adopted by the Commission under Section 63 is only a tariff obtained by competitive bidding in conformity with guidelines issued. If at any subsequent point of time such tariff is increased, which Page No. 28 Judgment of APL No.12 of 2019 increase is outside the four corners of the PPA, even in cases covered by Section 63, the legislative intent and the language of Sections 61 and 62 make it clear that the Commission alone can accept such amended tariff as it would impact consumer interest and therefore public interest."
73. Delay in commissioning of the project has an impact on the tariff applicable on the supply of power from the power plant and the Hon'ble Commission has the exclusive jurisdiction to determine the tariff for supply of electricity to a distribution Licensee. The extension of time for commission of the project if allowed would entitle the Appellant to higher tariff, which would not be justified or fair. The payment of higher tariff would result in higher tariff to the consumer, thereby adversely affecting public interest.
B. No dispute between the Appellant and Respondent no.1
74. The Respondent no.1 being a licensee is duty bound to follow the directions of KERC. Also, under Section 86(1)(b), the KERC being the regulator of the terms of PPA, is empowered to issue directions to Respondent no.1 in best interest of public.
C. Delay in Commissioning of the Project is directly attributable actions and omissions of the Appellant
75. The delay is primarily the result of negligence on the part of Appellant Page No. 29 Judgment of APL No.12 of 2019 in implementation of the solar project.
76. The PPA was executed on 30.06.2015, which also is the effective date of PPA. The Appellant was duty bound to complete the project and commission the same within 18 months of the effective date, i.e., 31.12.2016. However, the project came to be commissioned on 28.06.2017, with a delay of more than five months. The following table will explain the main reasons on account of which the delay occurred.
Sl. Event PPA edate Date of Delay Reference
No. (effective Application
date)
1 Application for 30.06.2015 12.09.2016 14 months Para 7 (P) of
evacuation of Appeal
Power
2 Application for 30.06.2015 27.08.2016 14 months Para 7 (O) of
Conversion of Appeal
land
3 Application for 30.06.2015 29.12.2015 11 and Para 7 (K) of
change of half Appeal
Location months
4. Application for 30.06.2015 20.05.2018 11 Para 7 (M) of
PT sheet months Appeal
77. Had the Appellant been diligent in not causing the above tabled delays, the project would have commission well within the Schedule Commercial Operation Date (SCOD), which fact also proves that the Government authorities or the Respondent has not caused undue delay in performing their duties or obligations.
Page No. 30 Judgment of APL No.12 of 2019
78. Furthermore, the Appellant has not produced any document or detail to show that efforts were made on its part to follow up with the concerned authorities and expedite the process.
79. The Appellant has admitted to the above stated delays on its part by stating that "In the circumstances mentioned herein above, there were delays in the implementation for the reason not attributable to the Appellants but attributable to the time taken by the Government Agencies for granting necessary approvals as mentioned herein above" Wherefore, it is not disputed that the delay has been caused.
80. The Appellant did not provide any such monthly intimation and only wrote about the same on30.06.2016 and 13.10.2016, which is after the 12 months and 15 months provided for achieving conditions precedent.
D. Force Majeure does not attract
81. The Appellant falsely contends that the delay in achieving SCOD is on account of force majeure events and hence the same shall be condoned by extending the SCOD. As explained supra, the delay in achieving SCOD is directly attributable to the delays of the Appellant in applying for various permission and the same stands admitted by the Appellant in para 9(s) of Page No. 31 Judgment of APL No.12 of 2019 the Appeal.
82. Article 8 of the PPA provides for the force majeure events and also the conditions for their applicability.
83. The Force Majeure clause in no way excuses the obligations of a party that are prior to the occurrence of Force Majeure Events. In the instant case, the Appellant admittedly has horribly failed in reasoning the delays in filing various applications before the Government Authorities, which delay, as provided in the above clause, cannot be excused. Therefore, the Appellant's delay in execution of the project cannot be condoned.
E. State Government Recommendation
84. The Appellant's submission that a three-member committee of the Government of Karnataka (GOK) has ruled that the Appellant is entitled to extension of time to commission the project and hence, the SCOD shall stand extended, is against the principles and basic structure of the Electricity Act, 2003.
85. Under the said Act, the government has no jurisdiction to decide on the tariff issues and the same falls within the exclusive jurisdiction of KERC Page No. 32 Judgment of APL No.12 of 2019 (Section 62 r/w 86 (1) (b) of the Act).
86. Admittedly the State Government Policies have been subjected to the tariff determined by the State Commission from time to time. As established supra, the Commission being the custodian of public interest and the authority to determine tariff has a right to decide on the quantum of tariff inconformity with the provisions of PPA. Moreover, the tariff determination is the exclusive domain of State Commission and the State Policies cannot have a bearing on the tariff determined by the State Commission.
87. The GOK has no role in the tariff matters and has not evaluated the situation from the Electricity Act's point of view, which provides for a low and just tariff to consumers.
88. In light of the above submissions and facts, it is most humbly prayed that this Tribunal be pleased to dismiss the above appeal in its entirety by imposing costs on the Appellant.
ANALYSIS & DECISION
89. We have heard learned senior counsel appearing for the Appellants and learned counsel for the Respondents at considerable length of time Page No. 33 Judgment of APL No.12 of 2019 and have gone through carefully their written submissions/arguments and also taken note of the relevant material available on records during the proceedings.
90. Based on the calculations of both the parties, the points that would arise for our consideration are:
(A) "Whether the State Commission had jurisdiction to entertain the Petition?"
(B) "Whether the Respondent Commission was justified in passing the impugned order reducing the agreed tariff between the parties?"
91. So far as point no. 1 is concerned, in all Appeals filed by various Developers pertaining to Farmers' Scheme, the Appellants have raised this issue. We have already opined that the Respondent Commission being the authority to determine the tariff, if it adversely affects the public interest, it can interfere. Therefore, we opine that the Respondent Commission being the only adjudicatory body to determine the tariff has jurisdiction to entertain the petition.
Page No. 34 Judgment of APL No.12 of 2019
92. The following relevant Articles are necessary for consideration of Appeal on merits.
(viii) "Commercial Operation Date" with respect to the Project shall mean the date on which the Project is available for commercial operation as certified by HESCOM/KPTCL as the case may be:
(xxxi) "Scheduled Commissioning Date" shall mean 18 (Eighteen) months from the Effective Date.
CONDITIONS PRECEDENT 2.1 Conditions Precedent:
The obligations of HESCOM and the SPD under this Agreement are conditional upon the occurrence of the following in full within 365 days from the effective date. 2.1.1
(i) The SPD shall obtain all permits, clearances and approvals (whether statutory or otherwise) as required to execute and operate the Project (hereinafter referred to as "Approvals"):
(ii) The Conditions Precedent required to be satisfied by the SPD shall be deemed to have been fulfilled when the SPD shall submit:
(a) The DPR to HESCOM and achieve financial closure and provide a certificate to HESCOM from the lead banker to this effect;
(b) All Consents, Clearances and Permits required for supply of power to HESCOM as per the terms of this Agreement; and
(c) Power evacuation approval from Karnataka Power Transmission Company Limited or HESCOM, as the case may be.
2.1.2 SPD shall make all reasonable endeavors to satisfy the Conditions Precedent within the time stipulated and HESCOM shall provide to the SPD all the reasonable cooperation as may be required to the SPD for satisfying the Conditions Precedent. 2.1.3 The SPD shall notify HESCOM in writing at least once a month on the progress made in satisfying the Conditions Precedent. The date, on which the SPD fulfills any of the Conditions Precedent pursuant to Clause 2.1.1, it shall promptly notify HESCOM of the same.
Page No. 35 Judgment of APL No.12 of 2019 2.2 Damages for delay by the SPD 2.2.1 In the event that the SPD does not fulfill any or all of the Conditions Precedent set forth in Clause 2.1 within the period of 365 days and the delay has not occurred for any reasons attributable to HESCOM or due to Force Majeure, the SPD shall pay to HESCOM damages in an amount calculated at the rate of 0.2% (zero point two per cent) of the Performance Security for each day's delay until the fulfillment of such Conditions Precedent, subject to a maximum period of 60 (Sixty) days. On expiry of the said 60 (Sixty) days, HESCOM at its discretion may terminate this Agreement.
2.3 Performance Security 2.3.1 For due and punctual performance of its obligations relating to the Project Under this Agreement, the SPD has delivered to HESCOM, simultaneously with the execution of this Agreement, on irrevocable and revolving bank guarantee from a scheduled bank acceptance to HESCOM for an amount of Rs. 10,00,000/- per MW (Rupees Ten Lakhs per Mega Watt only)("Performance Security"). The Performance Security is furnished to HESCOM in the form of bank guarantees in favour Managing Director of the HESCOM as per the format provided in Schedule 2 and having validity up to 24 months from the date of signing of this agreement. The details of the bank guarantee furnished towards the Performance Security is given below:
Bank Guarantee No. PBG 2015/4dated 19.06.2015 for an amount of Rs. 30,00,000/- (Rupees Thirty Lakhs only). 2.3.2 Appropriation of Performance Security Upon occurrence of delay in commencement of supply of power to HESCOM as provided in clause 2.5.7, or failure to meet the Conditions Precedent by the SPD, HESCOM shall, without prejudice to its other rights and remedies hereunder or in law, be entitled to encash and appropriate the relevant amounts from the Performance Security as Damages. Upon such encashment and appropriation from the Performance Security, the SPD shall, within 30 (thirty) days thereof, replenish, in case of partial appropriation, to its original level the Performance Security, and in case of appropriation of the entire Performance Security provide a fresh Performance Security, as the case may be, and Page No. 36 Judgment of APL No.12 of 2019 the SPD shall, within the time so granted, replenish or furnish fresh Performance Security as aforesaid failing which HESCOM shall be entitled to terminate this Agreement in accordance with Article 9."
2.4 Release of Performance Security 2.4.1 Subject to other provisions of this Agreement, HESCOM shall release the Performance Security, if any after scheduled commissioning of the project;
2.4.2 The release of the Performance Security shall be without prejudice to other rights of HESCOM under this Agreement.
"2.5 Extensions of Time 2.5.1 In the event that the SPD is prevented from performing its obligations under Clause 4.1 by the Scheduled Commissioning Date due to:
(a) Any HESCOM Event of Default; or
(b) Force Majeure Events affecting HESOM; or
(c) Force Majeure Events affecting the SPD.
2.5.2 The Scheduled Commissioning Date and the Expiry Date shall be deferred, subject to the reasons and limits prescribed in Clause 2.5.1 and Clause 2.5.3 for a reasonable period but not less than 'day for day' basis, to permit the SPD or HESCOM through the use of due diligence, to overcome the effects of the Force Majeure Events affecting the SPD or HESCOM, or till such time such Event of Default is rectified by HESCOM.
2.5.3 In case of extension occurring due to reasons specified in clause 2.5.1(a), any of the dates specified therein can be extended, subject to the condition that the Scheduled Commissioning Date would not be extended by more than 6 (six) months. 2.5.4 In case of extension due to reasons specified in Article 2.5 (b) and
(c), and if such Force Majeure Event continues even after a maximum period of 3 (three) months, any of the Parties may choose to terminate the Agreement as per the provisions of Article 9.
2.5.5 If the Parties have not agreed. Within 30 (thirty) days after the affected Party's performance has ceased to be affected by the relevant circumstance, on the time period by which the Page No. 37 Judgment of APL No.12 of 2019 Scheduled Commissioning Date or the Expiry Date should be deferred by, any Party may raise the Dispute to be resolved in accordance with Article 10.
2.5.6 As a result of such extension, the Scheduled Commissioning Date and the Expiry Date newly determined date shall be deemed to be the Scheduled Commissioning Date and the Expiry Date for the purposes of this Agreement."
2.5.7 Liquidated damages for delay in commencement of supply of power to HESCOMs.
Subject to the other provisions of this agreement, if the SPD is unable to commence supply of power to HESCOM by the scheduled commissioning date, the SPD shall pay to HESCOM, liquidated damages for the delay in such commencement of supply of power as follows:
(a) For the delay up to one month- amount equivalent to 20 % of the performance security.
(b) For the delay of more than one month up to three months -
amount equivalent to 40 % of the performance security.
(c) For the delay of more than three months up to six months -
amount equivalent to 100 % of the performance security. For avoidance of doubt, in the event of failure to pay the above mentioned damages by the SPD, the HESCOM entitled to encash the performance security."
"4.1 Obligations of the SPD:
(a) The SPD shall construct the Project including the pooling station, the interconnection facilities and metering arrangements at the point of delivery of power as approved by STU /HESCOM.
(b) The SPD shall undertake by itself or by any other person acting on its behalf, at its own cost, construction/up-gradation of (a) the interconnection Facilities, (b) the transmission lines; and (c) metering arrangements with protective gear as per the specifications and requirements of STU/HESCOM, as notified to the SPD.
(c) The SPD shall achieve scheduled date of completion and the commercial operation within 18 months from the effective date.Page No. 38 Judgment of APL No.12 of 2019
(d) The SPD shall by itself or by any other person acting on its behalf undertake at its own cost maintenance of the interconnection facilities and the metering arrangements, including the dedicated transmission line up to the delivery point as per the specifications and requirements of STU/HESCOM, as notified to the SPD, in accordance with Prudent Utility Practices. The transmission / distribution line so constructed shall remain as dedicated transmission / distribution line without provision for any tapping.
(e) The SPD shall operate and maintain the Project in accordance with Prudent Utility Practices, for the entire term of this agreement.
(f) The SPD shall be responsible for all payments on account of any taxes, cesses, duties or levies imposed by the GoK or its competent statutory authority on the land, equipment, material or works of the Project or on the Electricity generated or consumed by the Project or by itself or on the income or assets owned by it.
(g) The benefits accruing on account of carbon credit shall be shared between the SPD and the HESCOM as per Clause 5.2.
4.2 Obligations of HESCOM:
HESCOM agrees:
(a) To allow SPD to the extent possible to operate the Project as a must run generating station subject to system constraints.
(b) Subject to system constraints to off-take and purchase the Electricity generated by the SPD at the Delivery Point as per Clause 3.4 and Clause 3.5 of this agreement.
(c) To make tariff payments to the SPD as set out in Clause 5.1.
(d) HESCOM agrees to provide support to the SPD and undertakes to observe, comply with and perform, subject to and in accordance with the provisions of this Agreement and the Applicable Laws, the following:
(i) support, cooperate with and facilitate the SPD in the implementation and operation of the Project in accordance with the provisions of this Agreement;Page No. 39 Judgment of APL No.12 of 2019
(ii) not do or omit to do any act, deed or thing which may in any manner be volatile of any of the provisions of this Agreement;
(iii) act reasonably, while exercising its discretionary power under this Agreement;
......."
6.4 Late Payment surcharge:
"In the event of payment of the monthly bill being made by HESCOM after the due date, a late payment surcharge shall be payable to the SPD at the rate of 1.0% per month on the bill amount (being "Late Payment Surcharge"), computed on a pro rata basis on the number of days of the delay in payment. The Late Payment Surcharge shall be claimed by the SPD through the Supplementary Bill."
8.1 Definitions:
In this Article, the following terms shall have the following meanings:
8.2 Affected Party:
An Affected Party means HESCOM or the SPD whose performance has been affected by an event of Force Majeure.
8.3 Force Majeure Events:
(a) Neither Party shall be responsible or liable for or deemed in breach hereof because of any delay or failure in the performance of its obligations hereunder (except for obligations to pay money due prior to occurrence of Force Majeure events under this Agreement) or failure to meet milestone dates due to any event or circumstance (a "Force Majeure Event") beyond the reasonable control of the Party affected by such delay or failure, including the occurrence of any of the following:
(i) Acts of God;
(ii) Typhoons, floods, lightning, cyclone, hurricane, drought,
famine, epidemic, plague or other natural calamities;
(iii) Strikes, work stoppages, work slowdowns or other labour dispute which affects a Party's ability to perform under this Agreement;Page No. 40 Judgment of APL No.12 of 2019
(iv) Acts of war (whether declared or undeclared), invasion or civil unrest;
(v) Any requirement, action or omission to act pursuant to any judgment or order of any court or judicial authority in India (provided such requirement, action or omission to act is not due to the breach by the SPD or HESCOM of any Law or any of their respective obligations under this Agreement);
(vi) Inability despite complying with all legal requirements to obtain, renew or maintain required licenses or Legal Approvals;
(vii) Fire, Earthquakes, explosions, accidents, landslides;
(viii) Expropriation and/or compulsory acquisition of the Project in whole or in part;
(ix) Chemical or radioactive contamination or ionizing radiation; or
(x) Damage to or breakdown of transmission facilities of either Party;
(b) The availability of the above item (a) to excuse a Party's obligations under this Agreement due to a Force Majeure Event shall be subject to the following limitations and restrictions:
(i) The non-performing Party gives the other Party written notice describing the particulars of the Force Majeure Event as soon as practicable after its occurrence;
(ii) The suspension of performance is of no greater scope and of no longer duration than is required by the Force Majeure Event.
(iii) The non-performing Party is able to resume performance of its obligations under this Agreement, it shall give the other Party written notice to that effect;
(iv) The Force Majeure Event was not caused by the non-
performing Party's negligent or intentional acts, errors or omissions, or by its negligence/failure to comply with any material Law, or by any material breach or default under this Agreement;
Page No. 41 Judgment of APL No.12 of 2019
(v) In no event shall a Force Majeure Event excuse the obligations of a Party that are required to be completely performed prior to the occurrence of a Force Majeure Event."
"10.3 Dispute Resolution 10.3.1 : If any dispute is not settled amicably under clause 10.2 the same shall be referred by any of the parties to the KERC for dispute resolution in accordance with the provisions of the Electricity Act, 2003."
93. Then coming to point no. 2, the following list of dates are relevant for analyzing the contentions raised by both the parties in order to opine whether there was force majeure event which prevented the Appellants to commission the project within the prescribed timeline:
(a) 16.03.2015 - Pursuant to the notification the Solar Power Developer (SPD)/Farmer submitted application and after evaluation of the application the committee concerned accepted the proposal of SPD for allotment of solar project and KREDL issued letter of award in favour of SPD.
(b) 16.06.2015 - Pursuant to submission of format PPA by KREDL, KERC approved the standard format of PPA of the solar power plants.
(c) 30.06.2015 - The SPD and HESCOM entered into a Power Purchase Agreement (PPA) for supply of power from 3 MW Page No. 42 Judgment of APL No.12 of 2019 solar power plants at Kurugunda village, Bailhongal Taluk, Belagavi.
(d) 20.07.2015 - KERC approval of the PPA dated 30.06.2015 executed between HESCOM and SPD.
(e) 12.09.2016 - Submission of application for grid connectivity and power evacuation approval on 11 kv systems.
(f) 27.08.2016 - Submission of land conversion application in respect of lands in Sy. No. 157/1, 78/7 Kurugunda village, Bailhongal Taluka, Belagavi District.
(g) 08.12.2016 - Issue of tentative power evacuation approval Evacuation approval on payment of processing fee and the same being paid on 20.10.2016.
(h) 04.02.2016 - Incorporation of SPV as per the terms & conditions of the PPA. Issue of NA conversion processing fees by DC Belagavi and same being paid on 07.08.2017
(i) 04.05.2016 - SPD executed Assignment deed with Petitioner for execution of 3 MW solar power project and assigning all the rights and liabilities of the PPA.Page No. 43 Judgment of APL No.12 of 2019
(j) 29.08.2017 - DC Belagavi orders the conversion of project land into NA.
(k) 02.02.2017 - Issue of approval for the regular evacuation scheme of 3 MW power on 11 kv reference to 33/11kv Neginhal Sub-station from the proposed solar power project. Petitioner submitted communication regarding condition precedent of 3 MW solar power projects under agriculture land owners scheme to the HESCOM.
(l) 21.09.2016 - Petitioner executed supplemental PPA with HESCOM.
(m) 02.02.2017 - Issue of final approval for the evacuation scheme of 3 MW power on 11 kv reference to 33/11kv Neginhal Sub-
station from the proposed solar power project.
(n) 21.11.2016 - KERC approval of the Supplemental PPA dated 21/09/2016 executed between HESCOM and Petitioner.
(o) 30.06.2016 & 13.10.2016 - Furnishing the progress achieved report of 3 MW solar power project.
Page No. 44 Judgment of APL No.12 of 2019
(p) 03.12.2016 - Request for extension of time for commissioning the solar power project by 6 months as per article 2.5 of PPA.
(q) 19.06.2017 - CEIG (Chief Electrical Inspector to Govt) approval of drawings pertaining to the electrical installations of 3 MW solar power project.
(r) 04.02.2017 - Approval for time extension for completing 3 MW solar power project from HESCOM.
(s) 13.04.2017 - Directions issued by HESCOM and advising the petitioner to file a petition before the Commission for seeking approval for the extension of the commissioning date.
94. According to Appellants, the delay caused to commission the project within the timelines was attributable to the delay in securing approvals/sanctions from various Governmental Instrumentalities which was necessary for setting up the solar project. They further contend that though they were extremely diligent and careful in approaching various authorities to secure these approvals, but for no fault of them the Appellants had to face the consequence of reduction of agreed tariff apart from the liability of Liquidated Damages.
Page No. 45 Judgment of APL No.12 of 2019
95. As against this, the Respondents contend that the delay in commissioning the project is directly attributable to the actions and omissions of the Appellant. Therefore, if at all the impugned order reduced tariff, the Appellants have to blame themselves. Respondents submits, subsequent to approval of PPA, if the Appellant had exercised due diligence in pursuing the matter, the delay would not have occurred in obtaining various approvals. If only the Appellant had followed up with the concerned authority to expedite the matter, the delay would not have been occurred at all. Therefore, the Respondents contend that the delay in achieving SCOD is not of force majeure event, hence the impugned order is just and proper.
96. Appellants contend that the Respondent HESCOM is blowing hot and cold by taking different stance at different stages. In fact when the Appellant approached the Respondent HESCOM explaining the reasons for delay, it did not raise even its little finger by pointing out fault of the Appellants. On the other hand, in response to the request for extension of time by letter dated 03.12.2016, on 04.02.2017 HESCOM approved for extension of time to complete 3 MW solar power project by six months.
97. That apart, the Appellant contends that HESCOM itself recommended approval of extension of time to the State Commission, therefore the Respondent HESCOM is estopped from taking a different stand now. On Page No. 46 Judgment of APL No.12 of 2019 the representation of the Association of farmers pertaining to the Farmers' Scheme, a three member Committee of the Government of Karnataka was constituted and upon consideration of all facts and circumstances, the Committee recommended that time has to be extended to commission the project on account of force majeure event. However, the HESCOM opposed this contending that Government had no jurisdiction to decide the tariff issue and it was within the exclusive jurisdiction of KERC under Section 62 read with Section 86 (1) (b) of the Electricity Act.
98. We have gone through the pleadings, written submissions so also the stance submitted by the parties. We note that the project in question was a laudable exercise undertaken by Government of Karnataka to harness the solar sources in the State of Karnataka by creating opportunities to farmers who could develop solar plant between 1 MW to 3MW. Having regard to the difficulties that could be faced by the farmers to obtain various approvals/sanctions, the guidelines envisaged creation of SPV by the Solar Plant Developer. It is seen that the 1st Appellant has come in to existence in accordance with the guidelines of the State Government.
99. We take judicial note that the procedure/process to secure various documents for obtaining land conversion itself was issued much later date than the execution of PPA between the parties. From the list of dates we Page No. 47 Judgment of APL No.12 of 2019 note that the PPA between SPD and HESCOM came in to existence on 30.06.2015, but it was approved on 20.07.2015. In terms of PPA, the effective date would be signing of the PPA between the parties. This PPA envisages that within 18 months from the effective date, the solar plant has to commission. In terms of Articles of PPA, SCOD would be 31.12.2016.
100. This Tribunal in various matters has opined that the date of PPA cannot be the effective date, since the PPA cannot be implemented with signatures of the parties to the PPA, because it can be implemented only on approval of the same by the Respondent Commission. Therefore, the effective date has to be the date of approval of PPA i.e., 20.07.2015. If timelines of 18 months calculated from this date, by or before 20.01.2017 the solar plant of the Appellants had to commission.
101. The financial closure of the project with the banks and other financial institutions mainly depend upon the Appellant in securing the approvals from various agencies for implementation of the project. The following are must to have financial closure:
(a) Approval for conversion of the land from agricultural purpose to be used for setting up a Solar Power Project;Page No. 48 Judgment of APL No.12 of 2019
(b) Connectivity of the Solar Power Project with the Grid and power evacuation approval on the 11 KV Power System up to 33 KV Neginhal Substation;
(c) Providing the Bay estimation for the connectivity at the Bay of the substation of the transmission/distribution system and to provide approval for the break-up and other equipment to be obtained by the Appellants;
(d) Grant of approval by the Chief Electrical Inspector for charging of the line and for safety and security issues connected with the generating station and line connectivity, installation of metering arrangement, synchronization etc.
102. According to Appellant, the land for the project was approved, but on 29.12.2015, the Appellant SPD sought for shifting the project from allotted land to a different village in Challakere Taluka of Chitradurga District, since the previous land approved was not suitable for the project. After a lapse of 13 months, the nodal agency KREDL conveyed its approval for shifting the project from approved village to another village. The Appellant did not have any other land anywhere else, therefore this delay has occurred. Page No. 49 Judgment of APL No.12 of 2019
103. After approval of the PPA, the Appellant seems to have applied for PT sheet sketch which is a pre-condition for filing application of land conversion. Land conversion application was submitted on 27.08.2016 after obtaining the sketch from the concerned department on 20.05.2016. Therefore, there is justification why the Appellant approached for land conversion on 30.06.2015, because they could not approach earlier for want of land area sketch.
104. After submitting for land conversion, the Appellant secured orders on conversion of the land on 20.08.2016. The demand notice to pay conversion charges has to be issued that was issued on 04.08.20167, nearly 11 months after conversion order. After payment of conversion charges on 10.08.2017, the Commissioner passed non-agriculture status order of the land on 29.08.2017, therefore, the final approval for conversion of land was received only after a lapse of 12 months.
105. Appellant sought for Grid connectivity on 12.09.2016 by application in order to evacuate power through 11 KV power system. But the letter for processing fee was received only on 18.10.2016 which was paid on 20.10.2016. The provisional evacuation approval was issued only on 08.12.2016. Application for final evacuation approval was submitted on Page No. 50 Judgment of APL No.12 of 2019 20.10.2016. The final approval for evacuation scheme was issued on 02.02.2017 by HESCOM, more than 8 months after submission of application for Grid connectivity.
106. The Appellant applied to the Chief Electrical Inspector with drawings pertaining to the electrical installation on 24.04.2017. The approval came after about two months i.e., 19.06.2017. The inspection fee and completion report was submitted on 26.06.2017. The plant safety approval was also issued only on 24.06.2017.
107. Since the approvals from various Governmental Instrumentalities were taking time, on 03.12.2016 itself, the Appellants sought for extension of time from HESCOM for commissioning the project. This was very much in terms of Article 2.5 of the PPA on account of force majeure event. After considering the explanation, HESCOM did grant extension of time only on 04.02.2017.
108. The SCOD was 20.01.2017. What we notice is Grid connectivity final approval, land conversion, CEIG reports all came much later than 20.01.2017. In the previous paras, the details of dates on which applications came to be submitted and when the approvals were secured are brought on record.
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109. We also note that it is not a simple application for land conversion. This requires several other documents to be collected before applying for land conversion. The set of documents that are required had to be obtained from different departments. All this would take some times, therefore, one cannot expect the SPD straight away to apply for conversion of land the moment the PPA was approved by the Commission. Similarly, to get CEIG safety approval, several safety steps have to be completed like submission of drawings, approval of the drawings, intimation for payment of processing fee and final approval followed by safety certificate has to be issued. This safety certificate could be granted only if there is permission for Grid connectivity and final approval for evacuation obtained. In most of the cases, the Developers have sought lease of the land for setting up bay terminal. The land on lease basis also consumer time to secure the final approval of evacuation with so many formalities that have to be complied with by the Solar Developers. It is not just one single window agency where they could secure all these approvals. They had to approach office to office to secure different certificates, documents to secure the approvals that are required.
110. Therefore, the Association of farmers meant for Farmers' Scheme made representation to the HESCOM who in turn brought to the notice of Page No. 52 Judgment of APL No.12 of 2019 the Energy Department of the State explaining the difficulties faced by the Solar Plant Developers in getting the approvals/sanctions to set up the solar plants. A special Committee was formed to look in to the reasons for the delay being caused. On appraisal of the difficulties faced by the farmers, the three member Committee recommended for acceptance of the reasons explained as force majeure event. Based on that the State Government through the Secretary requested KERC to consider the same and grant PPA tariff to the Solar Developers. In this regard, even MNRE also addressed a letter to encourage the Solar Developers.
111. It is not in dispute that the Respondent Commission is the sole adjudicatory authority empowered to determine the tariff. The power to determine the tariff, no doubt vests with the State Commission, but while determining the tariff various facts and circumstances have to be taken into consideration. Same set of facts which were considered by HESCOM to grant extension of time and the three member Commission constituted by the State Government to recommend extension of time, so also MNRE to approve the reasons for the delay being force majeure event was put forth by the Appellant before the State Commission. State Commission has to consider the case of the Petitioners having regard to the facts put forth by them for the delay caused in a judicious manner; but what we note from the Page No. 53 Judgment of APL No.12 of 2019 impugned order, it has totally ignored the difficulties faced by the Solar Developers in getting the approvals from various Governmental Instrumentalities. It has totally ignored the explanation and reasons for delay in extended time for commissioning the project by six months. Plant was commissioned on 28.06.2017.
112. According to us, the considerable lapse of time to secure these certificates necessary was not on account of negligence on the part of the Appellants, but on account of the concerned officers who took time to issue these certificates. Therefore, we are of the opinion that none of the delay in securing the approvals was on account of Appellants and in fact they approached and started the process with utmost care and diligence.
113. We are aware that number of appeals are filed pertaining to solar projects in Karnataka under Farmers Scheme. We also note that in some cases, the Application for conversion of agriculture land was submitted two or three months or may be six months after approval of PPA. We take judicial notice as discussed in Appeal No 160 of 2020 (Clearsky matter) that having regard to the nature of the solar plants to be developed by the farmers between 1 MW to 3 MWs, which required land conversion orders from revenue authorities, which has elaborate process consuming lot of Page No. 54 Judgment of APL No.12 of 2019 time, the State Government in fact opined that there would be deemed conversion for such solar projects. However, in spite of such expression, the guidelines to be followed by the revenue authorities for granting deemed conversion orders in favour of the solar plant developers were not clear and though the farmers approached revenue department, the concerned officers seem to have replied that they have not received guidelines in that regard. We also notice that even the guidelines came to be issued much later. Though this fact was not pleaded in all the appeals, but the guidelines in this regard issued by the State Government is common which was delayed and not intimated to the concerned authorities, we are of the opinion that such confusion pertaining to deemed conversion procedure has also led to delay in either approaching the concerned revenue authority for conversion of agriculture land or even if they had approached, the conversion order was granted with much delay.
114. Apparently, the scheme was meant to benefit small land holding farmers, who could establish solar plants between 1 MW to 3 MWs. This also definitely requires business prudence apart from minimum knowledge in the field concerned. As per the policy, the establishment of solar plant was to be in the agricultural land. On account of restrictions to use agricultural land for non-agricultural purpose, conversion of agricultural land Page No. 55 Judgment of APL No.12 of 2019 use is a must. In terms of Karnataka Revenue Act, it has laborious process to get conversion of agricultural land into non-agricultural one. To establish solar power plant, it is not just conversion of agricultural land permission, but several other approvals/consent/permissions were required.
115. Till SPV was established, it was the individual Appellant i.e., SPD who had to run from office to office to secure required approvals/consents. Having regard to laborious process to secure these permissions from various Government instrumentalities, it would have been a wise decision to have infrastructure under one roof (like single window agency) to get all these clearances which would have saved lot of time for the establishment of these small solar power plants in question. Since either the SPD or SPV had to run from office to office situated at different places to secure approval and permission which would not have been possible to secure on any one particular day also seems to have caused hardship and delay in procuring the approvals, be it land conversion or power evacuation and grid connectivity or safety certificate from CEIG etc. To apply for conversion of land to non-agriculture purpose itself, more than 13 documents are required, which have to be secured not from single place but various departments of Government. The scheme which was expected to be a boon to the farmers seems to have become a bane.
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116. In terms of the Articles and various Clauses especially Clause 6.4 of the PPA, if the amounts are due, not paid in time, the Solar Developer is entitled for late payment surcharge. Since the delay was not on account of the Appellants and they did commission the solar plant within the extended SCOD, we are of the opinion that they are entitled for late payment surcharge. Similarly, since there was no deficit on the part of the Appellants in any manner, they are not liable to pay Liquidated Damages or any other damages.
117. In light of the above discussion and reasoning, we are of the opinion that the impugned order cannot be sustained. Accordingly we pass the following order:
ORDER
(a) The Appeal is allowed and the impugned order is set aside.
(b) The Appellant is entitled for Rs.8.40 per unit in terms of PPA from the date of commissioning the solar power plant.
(c) The 1st Respondent - HESCOM to pay the difference of the tariff paid per unit from the date of commissioning of the Page No. 57 Judgment of APL No.12 of 2019 plant along with late payment surcharge in terms of PPA within one month from today.
(d) The Appellants are not liable to pay any damages and so also liquidated damages.
118. Pending IAs if any, shall stand disposed of.
119. No order as to costs.
Pronounced in the Virtual Court through video conferencing on this the 12th day of August, 2021.
(Ravindra Kumar Verma) (Justice Manjula Chellur)
Technical Member Chairperson
REPORTABLE / NON-REPORTABLE
pr/tpd
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