Appellate Tribunal For Electricity
Krishna Windfarms Developers Private ... vs Sh. B. Shreekumar, Deputy Chief (Legal) ... on 3 February, 2026
IN THE APPELLATE TRIBUNAL FOR ELECTRICITY
(Appellate Jurisdiction)
APPEAL NO.04 OF 2020
Dated : 03.02.2026
Present: Hon'ble Ms. Seema Gupta, Technical Member (Electricity)
Hon'ble Mr. Virender Bhat, Judicial Member
In the matter of:
Krishna Windfarms Developers Private Limited
Authorized signatory
Having Registered Office at
B-1402, 14th Floor, Plot No.211
Dalanal Tower, Free Press Journal Marg
Nariman Point
Mumbai 400021 ... Appellant(s)
Versus
1. Sh. B. Shreekumar,
Deputy Chief (Legal)
Central Electricity Regulatory Commission
Through the Secretary
3rd & 4th Floor, Chanderlok Building
36, Janpath, New Delhi - 110 001
2. Sh. Preveen Kumar
Chairman
Solar Energy Corporation of India Ltd.
1st Floor, D-3, Wing-A, Prius Platinum Building,
District Centre, Saket,
New Delhi - 110017
3. Chief Engineer
Maharashtra State Electricity Transmission Co. Ltd.
Prakashganga, Plot No.C-19
E - Block Bandra Kurla Complex
Bandra (E) Mumbai - 400 051 ... Respondent (s)
_________________________________________________________________________________
Appeal No.04/2020 Page 1 of 64
Counsel for the Appellant(s) : Matrugupta Mishra
Puneet Singh Bindra
Counsel for the Respondent(s) : M G Ramachandran, Sr. Adv.
Ranjitha Ramachandran
Poorva Saigal
Anushree Bardhan
Shubham Arya
Arvind Kumar Dubey
Tanya Sareen for Res.2
Shashwat Kumar
Rahul Chouhan
Harshit Gupta
Mukut Choudhary for Res. 3
JUDGMENT
PER HON'BLE MR. VIRENDER BHAT, JUDICIAL MEMBER
1. The appellant, a solar power developer in the State of Maharashtra, has in this appeal, assailed the order dated 08.11.2019 passed by 1st respondent Central Electricity Regulatory Commission (hereinafter referred to as the Commission) in Petition No.27/MP/2018 filed by the appellant whereby the Commission has rejected the following prayers made by the appellant: -
"a) Declare that the Project has been commissioned on 11.08.2017, which is prior to the Scheduled Commercial Operation Date (being within 13 months from the date of _________________________________________________________________________________ Appeal No.04/2020 Page 2 of 64 signing of the PPA 03.08.2016) as per Article 5.1.5 of the PPA & MNRE approval letter dated 04.08.2015;
b) Declare that the delay in completion of the Conditions Subsequent under Article 3.1 of PPA was on account of force majeure events and delay attributable to Government, its agencies and instrumentalities;
c) Declare that letter of invocation of Bank Guarantee dated 29.09.2017 issued by the Respondent as illegal and non-est in terms of the PPA;
d) Direct the Respondent to return Rs. 3 Crores along with interest (1.25% per month as per PPA clause 10.3.3) as retained by it from deducting the equivalent amount from the invoices raised by the Petitioner from supply month of September, 2017 to January, 2018;
e) Declare that the downward revision of tariff by 1.5 paise by the Respondent is violative of the terms and conditions of the PPA, hence unenforceable;
f) Declare that the Petitioner is not liable to make any payment towards extension of timeline as approved by the Respondent from time to time;
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g) Direct the Respondent to refund Rs. 56,00,000/- paid by the Petitioner to the Respondent towards extension of timeline from 31.01.2017 to 27.03.2017, along with interest;
h) Restrain the Respondent from terminating the PPA or removing the project from the list of selected projects or further downward revision in tariff; and
i) Pass such other and further order or orders as the Commission deems appropriate under the facts and circumstances of the present case."
2. The appellant is a company incorporated under the Companies Act, 1956 and is also a generating company within the meaning of the term in Section2(28) of the Electricity Act, 2003. It has undertaken to set up a solar photovoltaic project of 10MW in the State of Maharashtra.
3. The 2nd respondent M/s Solar Energy Corporation of India Limited (in short SECI) is a nodal agency designated by the Government of India for implementation of MNRE Scheme for developing grid connected solar power capacity under Jawaharlal Nehru National Solar Mission (in short JNNSM). It also acts as intermediary between the solar power producer and the 3rd _________________________________________________________________________________ Appeal No.04/2020 Page 4 of 64 respondent Maharashtra State Electricity Distribution Company Limited (in short "MSEDCL") which operates as an electricity distribution company in the State of Maharashtra.
4. We may note here that the respondent No.2 before the Commission was MSEDCL but it appears that due to inadvertence MSEDCL has not been arrayed as a respondent in this appeal and in its place Maharashtra State Electricity Transmission Company Limited (MSETCL) has been shown as 3rd respondent. Accordingly, we proceed further with the judgment with impression that the actual 3rd respondent is MSEDCL and not MSETCL.
Factual Matrix of the case:
5. The 2nd respondent SECI had invited proposals from the solar power developers in the State of Maharashtra by way of a RfS document for development of cumulative capacity of 500MW of solar power in the State of Maharashtra on the basis of Build, Own, Operate (BOO) basis through e-reverse auction process under the JNNSM Scheme. Appellant was declared a successful bidder for development of 10MW solar power plant and accordingly Letter of Intent (LoI) dated 10.03.2016 was issued by SECI to it. In terms of the relevant provisions of the RfS and the LoI, appellant was required to execute a Power Purchase Agreement (PPA) with SECI within one month from the date of _________________________________________________________________________________ Appeal No.04/2020 Page 5 of 64 issue of LoI after fulfilment of prescribed preconditions which included furnishing of two Bank Guarantees in the total amount of Rs.3crores.
6. The Bank Guarantees were submitted by the appellant on 08.07.2016 and thereafter PPA dated 03.08.2016 was executed by it with SECI, even though the same had to be executed on or before 10.04.2016.
7. Even though, the PPA has been executed on 03.08.2016, Article 2.1.1 provides that the same shall come into effect on 10.04.2016 and said date shall be referred to as effective date. Article 5.1.5 provides that the power developer i.e. the appellant shall commission the project within 13 months of the date of signing of PPA.
8. The power project has been commissioned on 11.08.2017.
9. According to the appellant, the commissioning of the power project is much prior to the SCOD i.e. 03.09.2017 as the SCOD is 13 months from the date of signing of the PPA i.e. 03.08.2016. However, according to SECI, since the effective date as per the PPA is 10.04.2016, the SCOD is 10.05.2017, and therefore, there was a delay of 93 days in commissioning the project.
10. SECI invoked the two Performance Bank Guarantees of the appellant on 29.09.2017 and subsequently also reduced the tariff to be paid to the appellant _________________________________________________________________________________ Appeal No.04/2020 Page 6 of 64 for the energy generated and supplied from the appellant's power project by 1.5 paise per unit.
11. The appellant approached the Delhi High Court under Section 9 of the Arbitration and Conciliation Act, 1996, for restraining the 2nd respondent SECI from invoking the Bank Guarantees. Vide order dated 04.10.2017, the High Court directed status quo to be maintained and further restrained the banks to make payments to SECI with respect to encashment of the Bank Guarantees. However, on 11.10.2017, Bank of India liquidated the fixed deposit of appellant to an amount equivalent to that of Bank Guarantees and remitted the same to SECI. Thereafter, a consent order was passed by the High Court on 21.02.2018 whereby the Bank Guarantees involved were released back in favor of the appellant.
12. Subsequently, the appellant had sought leave of the Commission to amend the petition in order to include the specific prayer for refund of amount of Rs.3crores along with interest by SECI.
13. The Commission had formulated following issues for its consideration: -
"Issue No. 1: Whether the Scheduled Date of Commissioning of the Project is to be considered within thirteen months from the date of signing (03.08.2016) of _________________________________________________________________________________ Appeal No.04/2020 Page 7 of 64 the PPA as per Article 5.1.5 of the PPA or the Scheduled Date of Commissioning of the Project is to be considered within thirteen months from the effective date (10.04.2016) of the PPA as defined in Article 1 of the PPA read with Article 2.1 of the PPA?
Issue No. 2: Whether the delay in completion of the Conditions Subsequent under Article 3.1 of PPA was on account of force majeure events and delay attributable to Government, its agencies and instrumentalities and whether the delay in achieving Conditions Subsequent needs to be condoned?
Issue No. 3: Whether the Petitioner is not liable to make any payment towards extension of timeline as approved by the Respondent from time to time and whether the Respondent may be directed to refund Rs. 56,00,000/- paid by the Petitioner to the Respondent towards extension of timeline from 31.01.2017 to 27.03.2017, along with interest?
Issue No.4: Whether the letter of invocation of Bank Guarantee dated 29.09.2017 issued by the Respondent is illegal and non-est in terms of the PPA and the Respondent _________________________________________________________________________________ Appeal No.04/2020 Page 8 of 64 No.1 may be directed to return Rs. 3 Crores along with interest (1.25% per month as per PPA clause 10.3.3) as retained by it from deducting the equivalent amount from the invoices raised by the Petitioner from supply month of September, 2017 to January, 2018?
Issue No. 5: Whether the downward revision of tariff by 1.5 paise by the Respondent is violative of the terms and conditions of the PPA, hence unenforceable?"
14. On issue no.1, the Commission held that "effective date" as per the PPA is to be considered as 10.04.2016 and accordingly, the SCOD of the power project would be 10.05.2017 i.e. 13 months from the effective date.
15. On issue no.2 and 3, the Commission has held that there was delay of 138 days in achieving financial closure and the said delay was not on account of any force majeure event attributable to the governmental instrumentalities. It further held that delay of 82 days is allowed on the basis of MNRE letter dated 02.12.2016 and for remaining 56 days, extension was granted on payment of Rs.56 lakhs. It also held that demonetization was not a force majeure event in terms of the PPA. The Commission also found that the appellant has failed to _________________________________________________________________________________ Appeal No.04/2020 Page 9 of 64 prove that the delay in completion of the conditions subsequent was on account of any force majeure event.
16. On issue no.4, the Commission held that the 2nd respondent SECI was within its right to encash the Performance Bank Guarantee furnished by the appellant in view of Article 3.3.3 and 4.6.1 of the PPA.
17. On issue no.5, the Commission directed the 2nd respondent SECI to downwardly revise the tariff as there was delay of one day beyond period of three months from the SCOD of the project during which the appellant could have had the benefit of pre-fixed tariff as per article 9.1 of the PPA.
18. The petition was, accordingly, disposed off by the Commission in these terms vide impugned order dated 08.11.2019.
19. We have heard Mr. Matrugupta Mishra, learned counsel for the appellant, and Mr. M.G. Ramachandran, learned senior counsel appearing for the 2nd respondent SECI. We have also perused the impugned order and the written submissions filed by the learned counsels.
20. The appellant has raised following issues in this appeal: -
(a) The "effective date" must be held to be the date of signing of the PPA between appellant and SECI i.e. 03.08.2016;
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(b) delay in commissioning of the power project, if any, is attributable to the government authorities and was beyond the control of the appellant, thereby constituting force majeure event which also includes demonetization and delay in registration of land documents;
(c) extension of financial closure granted to the appellant without penalty must result in extension of SCOD of the power project also as a equitable relief;
(d) SECI has not suffered any loss on account of delay in commissioning of the power project of the appellant, and therefore, its claim for liquidated damages and invocation of Bank Guarantee is unwarranted and not permissible in law; and
(e) delay in commissioning of the power project is also attributable to SECI on account of its delay in execution of PSA with the 3rd respondent MSEDCL.
Our Analysis: -
Issue (a): The "effective date" must be held to be the date of signing of the PPA between appellant and SECI i.e. 03.08.2016.
21. Learned counsel for the appellant vehemently argued that the "effective date" mentioned as 10.04.2016 in Article 2.1.1 of the PPA is a clear deviation from the RfS document and the draft PPA which provided that the "effective _________________________________________________________________________________ Appeal No.04/2020 Page 11 of 64 date" shall mean the date of execution of the PPA. He also submitted that Ministry of New and Renewable Energy, Government of India, while issuing approval dated 04.08.2015 for implementation of 2000MW grid connected Solar PV Power Project has noted that such projects shall be installed and commissioned within 13 months from the date of signing of Power Purchase Agreement. He also referred to the letter dated 21.10.2017 written by SECI to the appellant wherein SECI is stated to have acknowledged that period of 13 month for commissioning of the power project was to be reckoned from the date of signing of PPA.
22. The learned counsel has cited the judgment of this Tribunal in Kerala State Electricity Board Limited v. Kerala State Electricity Regulatory Commission and Ors. Appeal No.518/2023 decided on 13.12.2025 to canvas that what has not been expressly permitted in terms of model RfQ, model RFP and model PSA must be held to be a deviation from the standard bidding guidelines and falling foul of the guidelines issued by the Government of India. He cited the judgment of the Supreme Court in Maharashtra State Electricity Distribution Company Limited v. Ratnagiri Gas and Power (P) Ltd. 2024 1 SCC 333 to canvas that a commercial document cannot be interpreted in a manner that is at odds with the original purpose and intent of the parties to the document. The learned counsel also cited another judgment of the Apex Court in Nabha Power Limited v. Punjab _________________________________________________________________________________ Appeal No.04/2020 Page 12 of 64 State Power Corporation Limited and Anr. (2018) 11 SCC 508 wherein it is observed as under: -
"49. ... Needless to say that the application of these principles would not be to substitute this Court's own view of the presumed understanding of commercial terms by the parties if the terms are explicit in their expression. The explicit terms of a contract are always the final would with regard to the intention of the parties. The multi-clause contract inter se the parties has, thus, to be understood and interpreted in a manner that any view, on a particular clause of the contract, should not do violence to another part of the contract."
23. Thus, according to the appellant's counsel, the correct "effective date"
must be read as 03.08.2016 which is the date of execution of the PPA as the same is in consonance with the Article 5.1.5 of the PPA itself. It is argued that in doing so, the SCOD of the project would be 03.09.2017 and the project having been commissioned on 11.08.2017 is well within the stipulated timelines.
24. Per contra, it is argued on behalf of the 2nd respondent SECI that the appellant was required to execute PPA with SECI after fulfilling the prescribed _________________________________________________________________________________ Appeal No.04/2020 Page 13 of 64 pre-conditions as set out in the bidding documents, within one month from the issuance of Letter of Intent dated 10.03.2016 i.e. by 10.04.2016 but the PPA has actually been executed on 03.08.2016. It is submitted that delay in signing of the PPA is clearly attributable to the appellant and the appellant had agreed to execute the PPA with specific stipulation that the timeline shall commence from 10.04.2016 notwithstanding that the PPA is signed at a later date. It is argued that this was the accommodation sought for and given to the appellant on the specific condition that the timelines would begin from 10.04.2016.
25. The learned counsel for the SECI would further argue that the appellant cannot be permitted to take advantage of its own wrong in having delayed the signing of PPA and thereafter claim the timelines to be computed from the date of signing of the PPA as this would destroy the sanctity of the Letter of Intent issued to the appellant. It is submitted that by signing the PPA on 03.08.2016 with specific provision that the "effective date" would be 10.04.2016, the appellant has waived off its right to seek the timelines of 7 months and 13 months to be computed from the date of signing of the Power Purchase Agreement. It is also submitted that the Article 5.1.5 of the PPA stating that the SCOD is to be calculated from 13 months from signing of the PPA, is an obvious inadvertence and cannot override the dominant intention of the parties reflected _________________________________________________________________________________ Appeal No.04/2020 Page 14 of 64 from Article 2.1 of the PPA which provides that the "effective date" would be 10.04.2016.
26. We have considered the submissions of the learned counsels on this aspect and have perused the relevant clauses of the PPA.
27. In the definition section i.e. Section 2 of the RfS document, "effective date"
is stated to mean the date of execution of the PPA between the parties. At the same time, it is provided in Article 3.14 of the RfS that the PPA would be would within one month from the date of issue of Letter of Intent. Undisputedly, the Letter of Intent was issued to the appellant in this case on 10.03.2016, and therefore, the appellant was required to execute PPA with SECI on or before 10.04.2016. However, the PPA came to be executed on 03.08.2016.
28. In Article 1 of the PPA dated 03.08.2016 executed between the parties, which is definition clause, "effective date" is stated to have meaning ascribed thereto in Article 2.1 of the Agreement. Article 2.1 of the Agreement reads as under: -
"2.1 Effective Date 2.1.1 This Agreement shall come into effect from 10.04.2016 and such date shall be referred to as the Effective Date."
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29. Thus, these two provisions contained in the PPA envisaged that the "effective date" would be 10.04.2016. However, Article 5.1.5 of the PPA provides that the solar power developer i.e. the appellant shall commence the project within 13 months from the date of signing of the PPA.
30. In our considered opinion, the claim of the appellant that the "effective date" i.e. the date from which the timelines have to be computed has to be treated as 03.08.2016 (date of execution of the PPA) is misconceived and does not appear to have a sound basis. It is true that the RfS document provides that the "effective date" shall mean the date of execution of the PPA. However, the said provision in the RfS is to be read along with and in reference to the other provisions of the RfS namely Article 3.14 which categorically provides that PPA is to be executed within one month from the issue of LoI to the appellant. It is pointed out by the learned counsel for SECI that vide e-mail dated 08.04.2016, which is before the expiry of one month after the issuance of LoI to the appellant by SECI, SECI reminded the appellant about signing of the PPA and the requirement of submission of all requisite documents for signing the PPA. But the appellant did not come forward to either fulfil the conditions precedent or to execute the PPA.
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31. In this regard, we also find it pertinent to refer to the letter dated 05.07.2016 addressed by SECI to appellant, the contents of which read as under: -
"To KRISHNA WINDFARMS DEVELOPERS PVT. LTD.
229, Arun Chambers, Tardeo Road, Mumbai - 400 034 Kind Attn: Sh. Ajay Dhumal, Director Sub: Your Letter dated 08.04.2016 Sub: Reminder regarding signing of PPA for 10 MW in Maharashtra under JNNSM Ph-Il, Batch-III, Tranche-I महोदय, This has reference to the Letter of Intent (LOI) issued by SECI vide LOI number SECI/JNNSM/LOI/P2B3T1- KWFDPL-B-1MH-1V dated 10.03.2016 for setting up of 10 MW Solar PV Project in Maharashtra. As per the LOI, you were required to furnish all the required documents latest by 31.03.2016 and sign the PPA and VGFSA on or before 10.04.2016. In this regard, reminder mall was sent on 08.04.2016 seeking clarifications regarding not meeting the criteria for signing of PPA and it was asked to submit all the supporting documents by 14:00 Hrs., 11.04.2016 (10.04.2016 being a holiday at SECI). In reply you had submitted a letter dated 08.04.2016 seeking time till 15.04.2016 to submit all the required documents. In this regard, it is to be mentioned that no further communication has been received from you and hence you are requested to submit all the necessary documents complying all the requirements (including submission of _________________________________________________________________________________ Appeal No.04/2020 Page 17 of 64 PBG, demonstration/infusion of equity) as mentioned in the LOI latest by 11.07.2016 (14:00 Hrs.) and sign the PPA and VGFSA on or before 11.07.2016 falling which the provisions as per clause 3.11 of the RfS shall be applicable.
It may be noted that the effective date of PPA and VGFSA shall remain 10.04.2016 and the due date of Financial Closure and scheduled date of Commissioning shall remain firm as 07 months and 13 months from the effective date of PPA respectively.
This is issued without prejudice to the terms and conditions of the MNRE guidelines and RfS issued by SECI.
धन्यवाद सहहत, भवदीय, Ramesh Kumar K. GM (Solar)"
32. It appears that this communication has been sent by SECI to appellant in response to appellant's letter dated 08.04.2016, which has not been produced on record by any of the parties. Vide said letter dated 08.04.2016, the appellant had sought time for fulfilment of conditions precedent for execution of the PPA till 15.04.2016, as mentioned by SECI in the said communication. SECI, vide this communication, called upon the appellant to submit all the necessary documents required for execution of the PPA on or before 11.07.2016 with clear stipulation that the "effective date" of the PPA shall remain 10.04.2016. There _________________________________________________________________________________ Appeal No.04/2020 Page 18 of 64 has been no communication between the parties subsequent to said communication of SECI. Ultimately, the appellant furnished Bank Guarantees in the sum of Rs.2.40 crores and Rs.60 lakh each on 08.07.2016 and the PPA was executed on 03.08.2016. There is no explanation at all from the side of the appellant about the reasons for such inordinate delay in submitting the Bank Guarantees and execution of the PPA. Therefore, it is evident that the delay in fulfilment of conditions and execution of the PPA was attributable to the appellant alone. Despite the same, the SECI demonstrated magnanimity in signing the PPA at a later date, much beyond the expiry of stipulated one month from the date of issue of LoI. However, contents of the above referred communication dated 05.07.2016 of SECI make it clear that the "effective date"
was to remain as 10.04.2016 and the timelines for financial closure and SCOD would remain 7 months and 13 months respectively from the said date. It is for this reason that scheduled commissioning date is mentioned in the PPA as 10.05.2017.
33. We are in agreement with the arguments on behalf of SECI that the appellant cannot be allowed to take advantage of its own wrong in delaying the signing of the PPA by committing delay in fulfilment of conditions for signing of PPA. Therefore, the appellant cannot be permitted to contend that the timelines shall have to be reckoned from the date of signing of the PPA. We may also _________________________________________________________________________________ Appeal No.04/2020 Page 19 of 64 note that Article 5.1.5 of the PPA which provides that the appellant shall commission the power project within 13 months from the date of the PPA, appears to have been retained in the PPA due to inadvertence and it cannot override the dominant intention of the parties which can be gathered from perusal of the Article 1 (definition section) and Article 2.1 of the PPA which provide that "effective date" would be 10.04.2016 and the scheduled commissioning date would be 10.05.2017. The appellant had signed the PPA with its open eyes and without any force or coercion and did not object to these two provisions in the PPA specifying the "effective date" as 10.04.2016 and SCOD as 10.05.2016.
34. We agree with the observations of the Commission that Article 5.1.5 of the PPA is generic in nature whereas Articles 1.1 and 2.1 of the PPA are specific in nature and in consonance with the provisions of the LoI as well as RfS document. Therefore, we do not find any fault in the impugned order of the Commission in holding that the "effective date", as per the PPA, is 10.04.2016. Thus, the appellant was required to achieve financial closure by 10.11.2016 i.e. within 7 months from the "effective date" and to commission the project by 10.05.2017 i.e. within 13 months from the "effective date".
35. The issue stands answered accordingly.
_________________________________________________________________________________ Appeal No.04/2020 Page 20 of 64 Issue (b)&(c): (b) Delay in commissioning of the power project, if any, is attributable to the government authorities and was beyond the control of the appellant, thereby constituting force majeure event which also includes demonetization and delay in registration of land documents; and
(c) Extension of financial closure granted to the appellant without penalty must result in extension of SCOD of the power project also as a equitable relief.
36. Learned counsel for the appellant would argue that the appellant had been consistently notifying SECI about the events beyond its control which delayed the achieving of financial closure as well as SCOD. In this regard, the learned counsel has drawn our attention to letters dated 23.11.2016 and 01.02.2017 issued by appellant to SECI. It is his submission that delay in registration of land documents occurred due to requirement of certain permissions from the Industries Department for purchase of agricultural land in companies' name and subsequent procedural steps in registration of the sale deed. He submitted that the sale deeds in respect of the plot of land in question on which the power project was to be installed, were ultimately executed and registered in the name of the appellant company on 27.02.2017 and 03.03.2017 respectively. _________________________________________________________________________________ Appeal No.04/2020 Page 21 of 64
37. The learned counsel also argued that demonetization of certain currency notes by the Government of India with effect from 08.11.2016 also caused acute disruption in financing and procurement activities of appellant. He argued that the Government of India, through its Office Memorandum dated 02.12.2016 recognized demonetization as a force majeure event and accordingly the date of financial closure of the power projects was extended till 31.01.2017 without penalty. He referred to the judgments of this Tribunal in Chennamangathihalli Solar Power Project LLP v. Bangalore Electricity Supply Company Limited, Appeal No.351/2018 decided on 14.09.2020 and Gujarat Urja Vikas Nigam Limited v. Gujarat Electricity Regulatory Commission, Appeal No.123/2012 decided on 04.02.2014 to canvas that the approvals/clearances from various Governmental Instrumentalities are beyond the control of the project developers and shall be considered as force majeure events.
38. It is also the submission of the appellant's counsel that extension of time for achieving financial closure automatically leads to an equal extension of time in SCOD as per Article 3.2.4 and 3.2.5 of the PPA.
39. On behalf of SECI, it is argued that the delay in achieving timelines for getting approvals under the PPA cannot be considered as force majeure events under Article 11 of the PPA. The learned counsel for SECI argued that the appellant was required to act as a prudent utility and factor in the time taken by _________________________________________________________________________________ Appeal No.04/2020 Page 22 of 64 Governmental Instrumentalities for according approvals/sanctions and it cannot plead ipso facto that the time taken for such approvals is a force majeure event. It is also argued that the plea of force majeure agitated on behalf of the appellant is otherwise also not tenable for lack of mandatory notice as provided under Article 11.5 of the PPA.
40. We have considered the submissions of the learned counsels and have perused their written submissions.
41. In order to analyze the rival submissions of the learned counsels, we find it pertinent to extract hereunder the relevant provisions of the PPA dated 03.08.2016 executed between the appellant and SECI: -
"3. Article 3: Conditions Subsequent 3.1 Satisfaction of Conditions subsequent by the SPD The SPD agrees and undertakes to duly perform and complete all of the following activities at SPD's own risk and cost within seven (7) months from the effective Date unless such completion is affected by any Force Majeure event, or if any of the activities is specifically waived in writing by SECI;
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(a) The SPD shall obtain or apply (as applicable) for all Consents, Clearances and Permits required for construction of the Project as per the terms of this Agreement, The SPD shall also obtain all consents, Clearances and Permits required for operation and supply of Power to SECI before Commissioning of the Project.
(b) The SPD shall execute VGF Securitization
Agreement (if applicable) with SECI as per
format provided in Schedule-4 of this
Agreement;
(c) The SPD shall make Project Financing
arrangements and provide necessary
certificates to SECI in this regard;
(d) The SPD shall make adequate arrangements to
connect the Power Project switchyard with the
Interconnection Facilities at the Delivery Point;
(e) The SPD shall sign a Transmission Agreement with CTU/STU/Transmission Utilities confirming the evacuation and connectivity of the CTU/STU/ Transmission Utilities system up to the delivery point of SPD by the Scheduled Commissioning Date;
(f) The SPD shall produce the documentary evidence of the clear title and possession of the acquired land @ minimum 1.5 hectare/MW in the name of SPD;
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(g) The SPD shall be required to demonstrate/ infuse cumulative capital in the form of Equity for an amount of at least Rs. 0.84 Cr./ MW. The SPD shall be required to demonstrate/infuse cumulative capital in the form of Equity for an amount of at least Rs. 1.20 Cr/MW before the disbursement of first tranche of VGF. For avoidance of any doubt, the SPD not availing any VGF shall be required to demonstrate/infuse cumulative capital in form of Equity for an amount of at least Rs 1.20 Cr./MW before the COD;
(h) The SPD shall fulfil the technical requirements according to criteria mentioned under Clause 3.8(B) of JNNSM guidelines for selection of new projects and produce the documentary evidence of the same. The SPD shall also specify their plan for meeting the requirement for domestic content (if applicable).
The SPD shall submit to SECI the relevant documents as stated above, complying with the Conditions Subsequent within seven (7) months from the Effective Date.
3.2 Consequences of non-fulfilment of conditions subsequent _________________________________________________________________________________ Appeal No.04/2020 Page 25 of 64 3.2.1 in case of a failure to submit the documents as above, SECI shall encash the performance Bank Guarantee submitted by the SPD, terminate this Agreement and remove the Project from the list of the selected Projects by giving a notice to the SPD in writing of at least seven (7) days unless the delay is on account of delay by Government or Force Majeure. The termination of the Agreement shall take effect upon the expiry of the 7th day of the above notice.
3.2.2 An extension without any impact on the Schedule Commissioning Date, can however be considered on the sole request of SPD on payment of Rs. 10,000/- per day per MW to SECI.
3.2.3 For the avoidance of doubt, it is clarified that this Article shall survive the termination of this Agreement.
3.2.4 In case of inability of the SPD to fulfil any one or more of the conditions specified in Article 3.1 due to any Force Majeure event, the time period for fulfilment of the Conditions Subsequent as mentioned in Article 3.1, shall be extended for the period of such Force Majeure event.
3.2.5 Provided that due to the provisions of this Article 3.2.4, any increase in the time period for _________________________________________________________________________________ Appeal No.04/2020 Page 26 of 64 completion of conditions subsequent mentioned under Article 3.1, shall also lead to an equal extension in the Scheduled Commissioning Data.
3.3 Performance Bank Guarantee 3.3.1 The Performance Bank Guarantee having validity of twenty one (21) months from the date of signing this Agreement and of Rs. 30 Lakh/MW to be furnished under this Agreement shall be for guaranteeing the commencement of the supply of power up to the Contracted Capacity within the time specified in this Agreement as per format provided in Schedule).
3.3.2 The failure on the part of the SPD to furnish and maintain the Performance Bank Guarantee shall be a material breach of the term of this Agreement on the part of the SPD.
3.3.3 If the SPD fails to commence supply of power from the Scheduled Commissioning Date specified in this Agreement or any further extension thereof granted by SECI, subject to conditions mentioned in Article 4.5, SECI shall encash the Performance Bank Guarantee without prejudice to the other rights of SECI under this Agreement.
......"
_________________________________________________________________________________ Appeal No.04/2020 Page 27 of 64 "4. ARTICLE 4 : CONSTRUCTION & DEVELOPMENT OF THE PROJECT 4.1 SPD's Obligations 4.1.1 The SPD undertakes to be responsible, at SPD's own cost and risk for.
a) obtaining all Consents, Clearances and Permits other than those obtained under Article 3.1 and maintaining all Consent, Clearances and permits in full force and effect during the Term of this Agreement; and
b) designing, constructing, erecting, commissioning, completing and testing the Power Project in accordance with the applicable Law, the Grid Code, the terms and conditions of this Agreement and Prudent Utility Practices; and
c) the commencement of supply of power up to the Contracted Capacity to SECI no later than the Scheduled Commissioning Date and continuance of the supply of power throughout the term of the Agreement;
d) connecting the Power Project switchyard with the interconnection facilities at the Delivery Point; and _________________________________________________________________________________ Appeal No.04/2020 Page 28 of 64
e) owning the Power Project throughout the Term of Agreement free and clear of encumbrances, except those expressly permitted under Article 15;
f) maintaining its controlling shareholding (controlling shareholding shall mean not less than 51% of the voting rights and paid up share capital) prevalent at the time of signing of PPA in the Company/Consortium developing the project up to a period of one (1) year after Commercial Operation Date. However transfer of controlling shareholding within the same Group Companies will be allowed with the permission of SECI even before one year period from COD subject to the condition that the management control remains within the same Group Companies; and
g) fulfilling all obligations undertaken by the SPD under this Agreement."
"4.5 Extension of Time 4.5.1 In the event that the SPD is prevented from performing its obligations under Article 4.1 by the Scheduled Commissioning Date due to:
a) any Buyer Event of Default; or
b) Force Majeure Events affecting SECI, or
c) Force Majeure Events affecting the SPD,
_________________________________________________________________________________ Appeal No.04/2020 Page 29 of 64 the Scheduled Commissioning Date and the Expiry Date shall be deferred for a reasonable period but not less than 'day for day' basis, to permit the SPD or SECI through the use of due diligence to overcome the effects of the Force Majeure Events affecting the SPD or SECI, or till such time such Event of Default is rectified by SECI.
......"
"4.6. Liquidated Damages for delay in commencement of supply of power to SECI 4.6.1 If the SPD is unable to commence supply of power to SECI by the Scheduled Commissioning Date other than for the reasons specified in Article 4.5.1, the SPD shall pay to SECI, damages for the delay in such commencement of supply of power and making the Contracted Capacity available for dispatch by the Scheduled Commissioning Date as per the following:
a) Delay up to one (1) month- SECI will encash 20% of the total Performance HG on per day basis and proportionate to the Capacity not commissioned.
b) Delay of more than one (1) month and up to three months-SECI will encash remaining Performance BG on per day basis and proportionate to the Capacity not commissioned.
_________________________________________________________________________________ Appeal No.04/2020 Page 30 of 64 In case the commissioning of the Power Project is delayed beyond three (3) months from the Scheduled Commissioning Date, the pre-fixed tariff given in the Article 9.1 shall be reduced at the rate of half paisa (0.50 paisa) per kWh per day of delay for the delay in such remaining capacity which is not commissioned. ......"
"11 ARTICLE 11: FORCE MAJEURE 11.1 Definitions 11.1.1 In this Article, the following terms shall have the following meanings:
11.2 Affected Party 11.2.1 An affected Party means SECI or the SPD whose performance has been affected by an event of Force Majeure.
11.3 Force Majeure 11.3.1A 'Force Majeure' means any event or circumstance or combination of events those stated below that wholly or partly prevents or unavoidably delays an Affected Party in the performance of its obligations under this Agreement, but only if and to the extent that such events or circumstances are not within the reasonable control, directly or indirectly, of the Affected Party and could not have been avoided if the Affected Party had taken _________________________________________________________________________________ Appeal No.04/2020 Page 31 of 64 reasonable care or complied with Prudent Utility Practices:
a) Act of God, including, but not limited to lightning, drought, fire and explosion (to the extent originating from a source external to the site), earthquake, volcanic eruption, landslide, flood, cyclone, typhoon or tornado if and only if it is declared /notified by the competent state/central authority / agency (as applicable);
b) any act of war (whether declared or undeclared), invasion, armed conflict or act of foreign enemy, blockade, embargo, revolution, riot, insurrection, terrorist or military action if and only if it is declared/notified by the competent state/central authority/agency (as applicable); or
c) radioactive contamination or ionising radiation originating from a source in India or resulting from another Force Majeure Event mentioned above excluding circumstances where the source or cause of contamination or radiation is brought or has been brought into or near the Power Project by the Affected Party or those employed or engaged by the Affected Party.
d) An event of Force Majeure identified under SECI-
Buying Utility PSA, thereby affecting delivery of power from SPD to Buying Utility.
_________________________________________________________________________________ Appeal No.04/2020 Page 32 of 64 11.4 Force Majeure Exclusions 11.4.1 Force Majeure shall not include (i) any event on circumstance which is within the reasonable control of the Parties and (ii) the following conditions, except to the extent that they are consequences of an event of Force Majeure:
a) Unavailability, late delivery, or changes in cost of the plant, machinery, equipment, materials, spare parts or consumables for the Power Project;
b) Delay in the performance of any contractor, sub-contractor or their agents;
c) Non-performance resulting from normal wear and tear typically experienced in power generation materials and equipment;
d) Strikes at the facilities of the Affected Party;
e) Insufficiency of finances or funds or the agreement becoming onerous to perform; and
f) Non-performance caused by, or, connected with the Affected Party's:
i) Negligent or intentional acts, errors or
omissions;
ii) Failure to comply with an Indian Law; or
iii) Breach of, or default under this
Agreement.
11.5 Notification of Force Majeure Event
_________________________________________________________________________________ Appeal No.04/2020 Page 33 of 64 11.5.1 The Affected Party shall give notice to the other Party of any event of Force Majeure as soon as reasonably practicable, but not later than seven (7) days after the date on which such Party knew or should reasonably have known of the commencement of the event of Force Majeure. If an event of Force Majeure results in a breakdown of communications rendering it unreasonable to give notice within the applicable time limit specified herein, then the Party claiming Force Majeure shall give such notice as soon as reasonably practicable after reinstatement of communications, but not later than one (1) day after such reinstatement.
11.5.2 Provided that such notice shall be a pre-condition to the Affected Party's entitlement to claim relief under this Agreement. Such notice shall include full particulars of the event of Force Majeure, its effects on the Party claiming relief and the remedial measures proposed. The Affected Party shall give the other Party regular (and not less than monthly) reports on the progress of those remedial measures and such other information as the other Party may reasonably request about the Force Majeure Event.
11.5.3The Affected Party shall give notice to the other Party of (i) the cessation of the relevant event of Force Majeure; and (ii) the cessation of the effects of such event of Force Majeure on the performance _________________________________________________________________________________ Appeal No.04/2020 Page 34 of 64 of its rights or obligations under this Agreement, as soon as practicable after becoming aware of each of these cessations."
42. We have held hereinabove that the "effective date" as per the PPA was 10.04.2016 and therefore, SCOD of the appellant's solar power project was 10.05.2017 but the project has been commission on 11.08.2017.
43. The case of the appellant is that delay in execution of the sale deeds in respect of the land in question upon which the power project was to be installed due to additional requirement of permission from Industries Department to purchase agricultural land in company's name as well as the demonetization of certain currency notes ordered by the Government of India on 08.11.2016 led to the delay in commissioning of the project for no fault of the appellant thereby holding up the commissioning of the project till 11.08.2017.
44. As per Article 3 of the PPA, the appellant had agreed and undertaken to perform and complete all the activities mentioned as "conditions subsequent"
therein at its own risk and cost within seven months from the effective date. These "conditions subsequent" are stated in Article 3.1, the first of which is to apply and obtain all consents, clearances and permits required for construction of the project as per the terms of the agreement. It was envisaged under Article _________________________________________________________________________________ Appeal No.04/2020 Page 35 of 64 3 that the appellant shall complete all the activities related to construction of the power project within seven months from the effective date of the PPA i.e. 10.04.2016 unless such completion is affected by any force majeure event or is specifically waived in writing by SECI. Thus, the appellant was obligated to complete all such activities before 10.11.2016 at its own risk and cost.
45. We have already quoted Article 11 of the PPA which specifies force majeure event and the impact upon the rival obligation of the parties. Article 11.3.1 provides specific events which would constitute force majeure event under the PPA regarding which relief can be claimed by the aggrieved party. These are, act of God, any act of war, and radioactive contamination. This clause of the PPA is exhaustive and not inclusive implying thereby that only those events as stated therein are to be considered as force majeure events. This clause does not speak of the delay by Governmental Instrumentalities as a force majeure event.
46. Further, We have already noted that as per Article 3.1 of the PPA that the appellant was duty bound to apply for and obtain all consents, clearances and permits required for construction of the project and for operation as well as supply of power to SECI before commissioning of the project. Thus, it was the responsibility of the appellant to take necessary steps in this regard and to _________________________________________________________________________________ Appeal No.04/2020 Page 36 of 64 persuade the concerned authorities to grant the necessary consents/clearances/approvals/permits/connectivity as early as possible. The appellant appears to be taking refuge under the force measure clause of the PPA in contending that the delay was not attributable to it but occasioned on account of delay on the part of the Govt. Instrumentalities in granting approvals or taking actions for which the appellant cannot be held responsible. Therefore, the appellant was required to follow the procedures/conditions laid down in Article 11 of the PPA before invoking the said force measure clause. Clause 11.5.1 specifically provides that the party affected by any force measure event shall give notice of such event to the other party as soon as reasonably practicable but not later than seven days after the date on which such party gained knowledge about the commencement of the force measure event. Article 11.5.2 provides that such notice shall be precondition to the entitlement of the affected party to claim relief under the PPA and the notice shall include complete particulars of the event of force measure, its effects on the party claiming relief thereunder and the remedial measures proposed by the party.
47. No such notice has been served by the appellant upon the 2nd respondent SECI and therefore, the appellant is precluded from claiming any relief under the force majeure events upon which it is relying. We may note that in this regard, the appellant is relying upon letters dated 23.11.2016 and 01.02.2017 to _________________________________________________________________________________ Appeal No.04/2020 Page 37 of 64 contend that these are the notices vide which the appellant has notified SECI about events beyond its control which affected financial closure as well as the SCOD and therefore, these constitute force majeure notices as per clause 11.5.1 of the PPA. We have perused both of these letters. The letter dated 23.11.2016 has been sent by the appellant to SECI in response to SECI's communication of even date i.e. 23.11.2016. The relevant portion of the letter is material and is extracted hereinbelow: -
"1. We had been informed by the Registration office our documents of land cannot be register on account of BTIL act and that we should get permission from the Commissioner of Industries to purchase agriculture land in company's name. Accordingly we had submitted our application for the said permission to the Industries Department. The Industries Department informed us that a GR has been issued by which this permission will no longer be required, so no permission are being issued. However certain procedural steps need to be taken after which they will be in a position to issue a letter confirming this to us. The said letter was issued on the 9th of November 2016. A copy of this letter has been forwarded to you.
2. On account of demonetization of 500/1000 notes;
after 8th of November our bankers have refused to _________________________________________________________________________________ Appeal No.04/2020 Page 38 of 64 either permit us to withdraw money from our banks or transfer our money or issued RTGS for to our State bank account in Ahmednagar district as they are busy demonetization work. Cash payment for paying Stamp duty and other payments for land and out of pocket of expenses for completing to sale deed is not possible until our bankers are willing to process banking transfers or issue drafts or RTGS. There was a fight in our branch and bank officers have refused to entertain any work in branch because of it was not possible to complete the land transaction even though we received permission from the commissioner of industries to purchase the agricultural land.
3. We have already rectified the discrepancies that were pointed out to us, in our financial statements submitted. The discrepancies have been rectified and submitted to you yesterday.
In view of the above, since all the above circumstances are a consequence of certain Government decision these may be treated as force majeure conditions and SECI should consider these circumstances beyond control before aggressively revoking the before invoking the clauses contained in the tender document. _________________________________________________________________________________ Appeal No.04/2020 Page 39 of 64 We humbly submit that SECI should not levy these penalties as are going through abnormal difficulties on account of Government decision.
In the present situation we are hopeful to complete the land document before 30th November 2016. We would like to request you to kindly accommodate and bare with us."
48. In Paragraph No.1 of the said letter, the appellant writes that the Industries Department has, vide letter dated 09.11.2016, informed that a GR has been issued by which permission from the Commissioner of Industries to purchase agricultural land in company's name will no longer be required and so no permission is being issued as on date. This clearly indicates that the appellant was aware much before 09.11.2016 about the requirement of permission from Commissioner of Industries for purchase of agricultural land in company's name and the fact that it may cause delay in completion of the project. But the appellant chose to remain silent and did not communicate the same to SECI. The appellant appears to have awoken from slumber upon receipt of letter dated 23.11.2016 from SECI and sent the above referred communication dated 23.11.2016 to it. Clause 11.5.1 of the PPA clearly provides that the affected party shall notify the other party about a force majeure event as soon as reasonably practicable but not later than seven days after the date on which _________________________________________________________________________________ Appeal No.04/2020 Page 40 of 64 such party knew or should reasonably have known the commencement of the event of force majeure. In the instant case, even if the appellant is taken to have become aware about the above projected force majeure event on 09.11.2016, still the force majeure notice should have been sent by it to SECI on or before 16.11.2016. Concededly, this has not been done. Therefore, the communication dated 23.11.2016 sent by appellant to SECI cannot be treated as valid force majeure notice as per clause 11.5.1 of the PPA.
49. Same can be said about the demonetization also which too is projected by the appellant as a force majeure event. The demonetization of certain currency notes was ordered by the Government of India on 08.11.2016, and therefore, the force majeure notice regarding the same ought to have been issued on or before 15.11.2016. Admittedly, no such notice was issued by the appellant, and therefore, the communication dated 23.11.2016 cannot be treated as a valid force majeure notice in this regard also.
50. The Apex Court has in a recent judgment in case of Chamundeshwari Electric Supply Company Ltd. v. Saisudhir Energy (Chitradurga) Pvt. Ltd and Anr. 2025 SCC OnLine SC 1816 held that requirement of Force Majeure notice is not mere directory but a condition precedent for invoking the Force Majeure clause. The relevant portion of the judgment is extracted hereinbelow: -
_________________________________________________________________________________ Appeal No.04/2020 Page 41 of 64 "40. The finding of Force Majeure by the State Commission cannot be sustained for the reason that Article 14.5 of the PPA stipulates that the affected party "shall" issue notice within seven days of knowledge of the event. This requirement is not merely directory; it is a condition precedent for invoking the clause. ..."
51. Therefore, in the absence of the requisite notice, force majeure event agitated by the appellant cannot be considered.
52. Even otherwise also, the appellant has failed to show that the delay in achieving the SCOD of the power project was neither avoidable nor attributable to it. It is an established principle of law that force majeure clauses in an agreement have to be construed narrowly. As held in NTPC Vidyut Vyapar Nigam Limited v. Precision Technik Pvt. Ltd. 2018 SCC OnLine DEL 13102 the events or circumstances, in order to constitute force majeure events, must not only cause unavoidable delay in the performance of the obligations under the agreement but also must be such that could not have been avoided if the affected party had taken reasonable care or complied with the prudent utility practices. The force majeure event must be one which is beyond the control of the party concerned and not forceable by it. Before invoking the doctrine of force _________________________________________________________________________________ Appeal No.04/2020 Page 42 of 64 majeure, it must be shown that the event which has caused delay was one which the party to the agreement did not foresee and could not, with reasonable diligence, have foreseen.
53. In the instant case, the appellant had taken upon itself the obligation to apply for and to obtain all consents, clearances and permits required for construction of the power project. The appellant could have reasonably foreseen that some of the permissions/approvals may get delayed or rejected by the concerned Governmental Instrumentalities, and therefore, it is precluded from pleading force majeure to justify its failure to commission the power project within the stipulated time period.
54. Further, clause 11.4.1 provides that the events and circumstances which were within the reasonable control of the parties shall not constitute force majeure event. The appellant has nowhere sated as to when had he submitted the documents for registration of sale deed in its name to the office of Registrar and when he was informed about the requirement of the permission from the Commissioner of Industries. Also, there is no averment on behalf of the appellant to the effect that he could not have got knowledge about the requirement of such permission even after exercise of due diligence. Nothing on record shows that the appellant was vigilant and showed due diligence in getting the sale deed registered in its name without any undue delay. _________________________________________________________________________________ Appeal No.04/2020 Page 43 of 64
55. We may also note that with regards to demonetization, the appellant has failed to explain as to how did it affect the achievement of financial closure as well as the SCOD of the power project. It is true that vide Office Memorandum dated 02.12.2016, Ministry of Power, Government of India had directed that considering the practical problems in short run due to demonetization, time till 31.01.2017 may be allowed for complying with requirements of financial closure without penalty. However, a rider has been attached to such extension of time in the said memo to the effect that the same shall not impact the "effective date"
of financial closure or scheduled commissioning date as per the PPAs. Therefore, the extension of time for financial closure granted vide said memo without penalty does not entitle the appellant ipso facto to claim extension of time for SCOD. The said contention of the appellant is absolutely frivolous and baseless.
56. Hence, we are unable to countenance the contention of the appellant that the delay in commissioning of the power project was beyond its control and occurred due to force majeure events agitated by it. No error can be found on this aspect in the impugned order of the Commission. Issue (d): SECI has not suffered any loss on account of delay in commissioning of the power project of the appellant, and therefore, its _________________________________________________________________________________ Appeal No.04/2020 Page 44 of 64 claim for liquidated damages and invocation of Bank Guarantee is unwarranted and not permissible in law.
57. Article 4.6 of the PPA assumes relevance on tis aspect. The same has also been extracted in Paragraph No.41 hereinabove.
58. Relying upon the judgments of the Supreme Court in Fateh Chand v. Balkishan Dass 1963 AIR 1405, UOI v. Raman Iron Foundry (1974) 2 SCC 231, H.M. Kamaluddin Ansari v. UOI AIR 1984 SC 29, ONGC v. Saw Pipes Ltd (2003) 5 SCC 740, Maula Bux v. UOI AIR 1970 SC 1955, and Kailash Nath Associates v. DDA and Anr. (2015) 4 SCC 136, it was argued by learned counsel for the appellant that the Commission has erred in awarding liquidated damages to SECI without there being any proof of loss or injury suffered by SECI which is a sine qua non for awarding liquidated damages. She argued that award of liquidated damages without proof regarding the legal injury suffered by SECI is contrary to the settled law that even where liquidated damages are specified in the agreement, the court shall award reasonable compensation to the aggrieved party as a measure of restitution for the loss suffered by it and the aggrieved party has to demonstrate the legal injury suffered by it on account of breach of contract as well as the actual loss suffered where the same can be quantified.
_________________________________________________________________________________ Appeal No.04/2020 Page 45 of 64
59. The learned counsel would further argue that SECI has neither pleaded that it has actually suffered any loss on account of delay on the part of the appellant in commissioning the power project nor produced any evidence to establish the actual loss. She pointed out that SECI merely contended that it is entitled to damages under the PPA without producing any further evidence.
60. Per contra, learned counsel for SECI would argue that as per settled law, if a sum named as liquidated damage in an agreement is not by way of penalty but is a genuine pre-estimate of loss that would be suffered, then there is no necessity to prove actual loss, and the agreement reached between the parties stipulating the sum is binding and is payable. He submitted that what is required to be established is the legal injury which is distinct from the quantum of loss to be proved. He further argued that SECI has suffered legal injury/loss on account of non-availability of power from the appellant's power project with effect from the scheduled commissioning date, and therefore, is entitled to award of liquidated damages in terms of Article 4.6.2 of the PPA.
61. The primary argument advanced on behalf of the appellant is that since the 1st respondent SECI has failed to prove that it suffered any loss on account of non-supply of power by the appellant with effect from 10.05.2017, the Commission has erred in granting compensation to the SECI. The argument is _________________________________________________________________________________ Appeal No.04/2020 Page 46 of 64 based upon Sections 73 and 74 of the Indian Contract Act, 1872 which are quoted hereinbelow: -
"73. Compensation for loss or damage caused by breach of contract.--When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it. Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.
Compensation for failure to discharge obligation resembling those created by contract.--When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person _________________________________________________________________________________ Appeal No.04/2020 Page 47 of 64 had contracted to discharge it and had broken his contract.
Explanation.--In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non- performance of the contract must be taken into account.
74. Compensation for breach of contract where penalty stipulated for.-- When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for.
_________________________________________________________________________________ Appeal No.04/2020 Page 48 of 64 Explanation.--A stipulation for increased interest from the date of default may be a stipulation by way of penalty. Exception.--When any person enters into any bail-bond, recognizance or other instrument of the same nature, or, under the provisions of any law, or under the orders of the Central Government or of any State Government, gives any bond for the performance of any public duty or act in which the public are interested, he shall be liable, upon breach of the condition of any such instrument, to pay the whole sum mentioned therein.
Explanation.--A person who enters into a contract with Government does not necessarily thereby undertake any public duty, or promise to do an act in which the public are interested."
62. Section 73 of the Contract Act embodies the general principle with regards to assessment of damages caused by the breach of contract and provides that the compensation would be payable by the party committing the breach for the damages caused to the other party, which damage was anticipated by parties to be likely to occur in case of the breach of the agreement or which arose _________________________________________________________________________________ Appeal No.04/2020 Page 49 of 64 naturally in the usual course of things from such breach. Section 74 speaks of the measure of damages to be awarded in case of breach of contract where the contract itself specifies any amount to be paid in case of such breach or contains any other stipulation by way of penalty. In both the cases the measure of damages is reasonable compensation, not exceeding the amounts so specified in the contract or the penalty stipulated for, whether or not actual damage or loss is proved to have been caused by the breach.
63. Bare perusal of Section 74 would reveal that parties are free to stipulate any amount in the agreement that will be paid by the party who commits breach of the terms of the agreement i.e. defaulting party to the other party in the agreement. It further provides that the amount of liquidated damages so fixed in the agreement would be the maximum amount payable by the defaulting party and the court will not allow more than that amount fixed in the contract but may award a smaller amount depending upon the facts and circumstance of the case. In other words, the court would award only a reasonable amount of liquidated damages even though the same are pre-estimated and spelt out in advance in the contract.
64. The Hon'ble Supreme Court has interpreted Section 74 of the Contract Act in a catena of judgements and the latest one being Kailash Nath Associates _________________________________________________________________________________ Appeal No.04/2020 Page 50 of 64 v. DDA & Anr. (2015) 4 SCC 136, the relevant paragraphs of which are reproduced hereunder: -
"33. Section 74 occurs in Chapter 6 of the Indian Contract Act, 1872 which reads "Of the consequences of breach of contract". It is in fact sandwiched between Sections 73 and 75 which deal with compensation for loss or damage caused by breach of contract and compensation for damage which a party may sustain through non-fulfillment of a contract after such party rightfully rescinds such contract. It is important to note that like Sections 73 and 75, compensation is payable for breach of contract under Section 74 only where damage or loss is caused by such breach."
"43. On a conspectus of the above authorities, the law on compensation for breach of contract under Section 74 can be stated to be as follows:-
43.1 Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable _________________________________________________________________________________ Appeal No.04/2020 Page 51 of 64 compensation such liquidated amount only if it is a genuine preestimate of damages fixed by both parties and found to be such by the Court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the Court cannot grant reasonable compensation.
43.2 Reasonable compensation will be fixed on well known principles that are applicable to the law of contract, which are to be found inter alia in Section 73 of the Contract Act.
43.3 Since Section 74 awards reasonable compensation for damage or loss caused by a breach of contract, _________________________________________________________________________________ Appeal No.04/2020 Page 52 of 64 damage or loss caused is a sine qua non for the applicability of the Section.
43.4 The Section applies whether a person is a plaintiff or a defendant in a suit.
43.5 The sum spoken of may already be paid or be payable in future.
43.6 The expression "whether or not actual damage or loss is proved to have been caused thereby" means that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-
estimate of damage or loss, can be awarded.
43.7 Section 74 will apply to cases of forfeiture of earnest money under a contract. Where, however, forfeiture takes place under the terms and conditions of a public auction _________________________________________________________________________________ Appeal No.04/2020 Page 53 of 64 before agreement is reached, Section 74 would have no application."
65. Thus, any damage or loss suffered by a party due to breach of contract on the part of another party to the contract is a sine qua non for applicability of this section i.e. for award of liquidated damages. Even if a sum of money is stipulated in the contract as liquidated amount payable by the defaulting party by way of damages, only reasonable compensation commensurate with the loss/damages suffered by the other party, can be awarded not exceeding the amount so specified in the contract. Further, in cases where damage or loss is difficult or impossible to prove, the liquidated amount named in the contract, if a genuine pre-estimate of damages or loss, can be awarded.
66. In Maula Bux v. Union of India (1969) 2 SCC 544,the Apex court has held as under:-
6. ... ... ... Reliance in support of this contention was placed upon the expression (used in Section 74 of the Contract Act), "the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused there by, to receive from the party _________________________________________________________________________________ Appeal No.04/2020 Page 54 of 64 who has broken the contract reasonable compensation".
It is true that in every case of breach of contract the person aggrieved by the breach is not required to prove actual loss or damage suffered by him before he can claim a decree, and the Court is competent to award reasonable compensation in case of breach even if no actual damage is proved to have been suffered in consequence of the breach of contract. But the expression "whether or not actual damage or loss is proved to have been caused thereby" is intended to cover different classes of contracts which come before the Courts. In case of breach of some contracts it may be impossible for the Court to assess compensation arising from breach, while in other cases compensation can be calculated in accordance with established rules. Where the Court is unable to assess the compensation, the sum named by the parties if it be regarded as a genuine preestimate may be taken into consideration as the measure of reasonable compensation, but not if the sum named is in the nature of a penalty. Where loss in terms _________________________________________________________________________________ Appeal No.04/2020 Page 55 of 64 of money can be determined, the party claiming compensation must prove the loss suffered by him."
67. In the case of Fateh Chand v. Balkishan Dass, 1963 SCC OnLine SC 49, it has been held by the Apex court as under: -
"10. Section 74 of the Indian Contract Act deals with the measure of damages in two classes of cases(i) where the contract names a sum to be paid in case of breach and `ii) where the contract contains any other stipulation by way of penalty. We are in the present case not concerned to decide whether a contract containing a covenant of forfeiture of deposit for due performance of a contract falls within the first class. The measure of damages in the case of breach of a stipulation by way of penalty is by Section 74 reasonable compensation not exceeding the penalty stipulated for. In assessing damages the Court has, subject to the limit of the penalty stipulated, jurisdiction to award such compensation as it deems reasonable having regard to all the circumstances of tile case. Jurisdiction of the Court to award compensation in case of breach of _________________________________________________________________________________ Appeal No.04/2020 Page 56 of 64 contract is unqualified except as to the maximum stipulated; but compensation has to be reasonable, and that imposes upon the Court duty to award compensation according to settled principles. The section undoubtedly says that the aggrieved party is entitled to receive compensation from the party who has broken the contract, whether or not actual damage or loss is proved to have been caused by the breach. Thereby it merely dispenses with proof of "actual loss or damages"; it does not justify the award of compensation when in consequence of the breach no legal injury at all has resulted, because compensation for breach of contract can be awarded to make good loss or damage which naturally arose in the usual course of things, or which the parties knew when they made the contract, to be likely to result from the breach.
...
15. Section 74 declares the law as to liability upon breach of contract where compensation is by agreement of the parties predetermined, or where there is a stipulation by way of penalty. But the application of the enactment is not _________________________________________________________________________________ Appeal No.04/2020 Page 57 of 64 restricted to cases where the aggrieved party claims relief' as a plaintiff. The section does not confer a special benefit upon any party; it merely declares the law that notwithstanding any term in the contract predetermining damages or providing for forfeiture of any property by way of penalty, the court will award to the party aggrieved only reasonable compensation not exceeding the amount named or penalty stipulated. The jurisdiction of the court is not determined by the accidental circumstance of the party in default being a plaintiff or a defendant in a suit. Use of the expression "to receive from the party who has broken the contract" does not predicate that the jurisdiction of the court to adjust amounts which have been paid by the party in default cannot be exercised in dealing with the claim of the party complaining of breach of contract. The court has to adjudge in every case reasonable compensation to which the plaintiff is entitled from the defendant on breach of the contract. Such compensation has to be ascertained having regard to the conditions existing on the date of the breach."
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68. It is thus well settled that the essential ingredients required to be pleaded and established by a party claiming damages on account of breach of contract are: -
(a) There has been breach of contract by the other party;
(b) the party complaining of such breach has suffered in injury or damage as a result of the breach of contract by the other party; and
(c) the injury suffered is proximate and direct result of the breach committed by the other party.
69. The expression "whether or not actual damage or loss is proved to have been caused thereby" occurring in Section 74 have been interpreted to mean that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount indicted in the contract, if a genuine pre- estimate of damage or loss, can be awarded.
70. In the instant case, it was the specific case of SECI before the Commission that it has suffered loss by reason of non-supply of power by the appellant from its solar power project with effect from its SCOD i.e. 10.05.2017. We may note that the 1st respondent SECI, besides being a nodal agency to implement the Jawahar Lal Nehru National Solar Mission, is also a Trading Licensee and was _________________________________________________________________________________ Appeal No.04/2020 Page 59 of 64 acting as a trader in electricity. Concededly, it had executed PSA dated 04.11.2016 with MSEDCL for supply of power, to be procured by it from the appellant's power project under the PPA dated 03.08.2016, to MSEDCL with effect from the SCOD of the appellant's power project i.e. 10.05.2017. Manifestly, since the appellant did not commission the power project on 10.05.2017 and did not commence electricity supply to SECI from that date, SECI was not in a position to fulfill its obligation for sale of power to MSEDCL under the PSA dated 04.11.2016. Thus, breach of terms of the PSA on the part of SECI occurred on account of breach of terms of the PPA by appellant in not commissioning the project and not starting supply of power from the SCOD. However, the exact quantum of loss/damages suffered by SECI on account of breach of terms of PPA by the appellant have nowhere been stated or explained by SECI either before the Commission or before this Tribunal. At the same time, we feel that the liquidated damages specified in clause 4.6.1 of the PPA to be a genuine pre-estimate of the loss that would be suffered by SECI, in case, of non- supply of electricity by appellant from the SCOD of the power project. As per this provision of the PPA, delay in commissioning of the power project up to one month will result in encashment of 20% of the Performance Bank Guarantee (PBG) on per-day basis and proportionate to the capacity not commissioned. In case, the delay extends beyond one month and up to three months, it will result in encashment of remaining PBG on per-day basis and proportionate to the _________________________________________________________________________________ Appeal No.04/2020 Page 60 of 64 capacity not commissioned. Thus, the levy of liquidated damages from the appellant, in case of non-commissioning of the power project on or before its SCOD, will depend upon the days of delay occasioning in commissioning of the power project. It cannot be said that such damages specified in the PPA for non-commissioning of the power project by its SCOD are exorbitant or unconscionable. These cannot be treated as penalty. The parties had agreed that the power project would be commissioned by 10.05.2017 with further agreement that in case, such timelines are not adhered to, the PBGs furnished by the appellant would be encashed step-by-step depending upon the extent of delay in commissioning the power project. Therefore, the 1st respondent SECI was not required to prove actual loss or damage suffered by it on account of non-commissioning of the power project by the appellant during the stipulated time period.
Issue (e): Delay in commissioning of the power project is also attributable to SECI on account of its delay in execution of PSA with the 3rd respondent MSEDCL.
71. It is submitted by learned counsel for the appellant that under Article 3.14.4 of the RfS, SECI was required to execute PSA with MSEDCL back-to- back with the PPA to be executed with appellant. It is pointed out even though _________________________________________________________________________________ Appeal No.04/2020 Page 61 of 64 PPA was signed on 03.08.2016, SECI executed PSA with MSEDCL on 04.11.2016 after an unexplained delay of nearly 3 months. It is submitted that timely execution of PSA was a pre-condition for a smooth coordination between SECI, MSEDCL and appellant and therefore failure on the part of the SECI to execute PSA in time constituted a material default thereby frustrating performance of the contract by the appellant. This argued that delay in commissioning of the project is therefore directly attributable to SECI's own lapses for which the appellant cannot be penalized.
72. According to the learned counsel, PPA and PSA form composite transactions, and therefore, execution of PPA on 03.08.2016 without the execution of consequent PSA by SECI with MSEDCL, was in itself incomplete.
73. On this aspect, we may note that no timeline has been provided either in the PPA or in the RfS for execution of PSA between the SECI and ultimate buyer of the electricity. Further, there is nothing in Article 3.1 of the PPA to suggest that execution of PSA between SECI and the ultimate buyer was a condition precedent for fulfilment of obligations by the appellant under the said clause. There is nothing either in the PPA or in the RfS to show that absence of PSA was an impediment for the appellant to apply and obtain all the consents, clearances and permits etc. required for the construction of the power project as _________________________________________________________________________________ Appeal No.04/2020 Page 62 of 64 noted in Article 3.1 of the PPA. It is also to be noted that concededly, the appellant had never approached or called upon SECI to identify buyer of electricity and to execute PSA forthwith after the execution of the PPA. It is, therefore, evident that non-signing of PSA between SECI and MSEDCL was nowhere responsible for delay on the part of the appellant in fulfilling its obligation under Article 3.1 of the PPA.
74. Further, the appellant has nowhere stated in any of the letters dated 23.11.2016 and 01.02.2017 addressed by it to SECI that non-signing of PSA is holding up the construction of the power project and its commissioning. Therefore, it is evident that the appellant had at no point of time projected non- signing of PSA by SECI as a ground for delay in fulfilment of its obligations under Article 3.1.
75. In view of our observations in Paragraph Nos.50 & 51 hereinabove also, the appellant is precluded from projecting the non-signing of PSA by SECI as a force majeure event to seek extension of SCOD of the power project. Thus, it cannot be said that delay in execution of PSA by SECI has led to delays in obtaining approvals and consents from the concerned Govt. Instrumentalities as well as regulatory authorities by the appellant. No fault can be found in the findings of the Commission on this score as well.
_________________________________________________________________________________ Appeal No.04/2020 Page 63 of 64 Conclusion: -
76. In view of the above discussion, we do not see any ground to interfere in the findings and conclusion rendered by the Commission in the impugned order. The appeal is found to be devoid of any merit and is hereby dismissed.
Pronounced in the open court on this the 3rd day of February, 2026.
(Virender Bhat) (Seema Gupta)
Judicial Member Technical Member (Electricity)
✓
REPORTABLE / NON REPORTABLE
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