Madhya Pradesh High Court
Renew Clean Energy Private Limited vs M.P Power Management Company Ltd. ... on 18 August, 2017
Equivalent citations: AIR 2018 (NOC) 587 (M.P.)
Author: Vijay Kumar Shukla
Bench: Vijay Kumar Shukla
HIGH COURT OF MADHYA PRADESH : AT JABALPUR
Writ Petition No : 12432 of 2017
ReNew Clean Energy Private Limited
- V/s -
M.P. Power Management Company Limited
and another
Present : Hon'ble Shri Justice Hemant Gupta,
Chief Justice;
Hon'ble Shri Justice Vijay Kumar Shukla.
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Mr. Naman Nagrath, Senior Advocate with
Mr. Jubin Prasad, Mr. Mazag Andrabi and
Mr. Varun Kumar, Advocates for the petitioner.
Mr. P.K. Kaurav, Advocate General with Shri
Aditya Khandekar, Advocate for the respondent
No.1.
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Whether approved for reporting: Yes
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Law laid down:- In writ jurisdiction, the High Court can
interfere in contractual matters in view of the judgment of
Supreme Court in ABL International Ltd. Vs. Export Credit
Guarantee Corpn. of India Ltd., (2004) 3 SCC 553 and later
in State of Kerala and others vs. M.K. Jose, (2015) 9 SCC
433. However, the jurisdiction to interfere is a matter of
discretion which depends upon facts of each case. In the case in
hand, on account of undisputed question of facts, the High
Court intervened in the writ jurisdiction of the Court and set
2
Writ Petition No. 12432 of 2017
aside the order of termination of the contract, but, while
upholding the claim of penalty.
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Significant paragraphs:- Paragraphs 10 & 12.
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O R D E R (ORAL)
18/08/2017 Per: Hemant Gupta, Chief Justice.
The challenge in the present petition is to an order dated 11.08.2017 (Annexure P/18), whereby the respondent No.1 has decided to terminate the Power Purchase Agreement executed on 10.11.2015 for the reason that petitioner has failed to complete the milestone of procuring land within the extended period of nine months after 210 days from the date of execution of the agreement.
2. The brief facts leading to the present petition are that New and Renewable Energy Department, Government of Madhya Pradesh introduced the Solar Policy for encouraging generation of power through solar power projects in Madhya Pradesh on 20.07.2012. The respondent No.1, the M.P. Power Management Company (for short "the Company") issued a 3 Writ Petition No. 12432 of 2017 request for proposal for long term procurement of 300 MW power from Grid connected Solar Energy Sources through tariff based competitive bidding for meeting Renewable Purchase Obligation. The petitioner participated in such tender process.
3. The petitioner was issued a Letter of Intent on 23.10.2015 informing it that it is successful bidder and was allotted 51 MW capacity at quoted tariff of INR 5.457 per kilowatt. Subsequently the power purchase agreement was executed on 10.11.2015. Some of the conditions of the agreement, which are relevant for the purposes of present petition, read as under:-
"2.1 SATISFACTON OF CONDITIONS SUBSEQUENT BY THE SELLER 2.1.1. The Seller agrees and undertakes to duly perform and complete all of the following activities at the Seller's own cost and risk within 210 days 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 MPPMCL:
xx xx xx xx
xx xx xx xx
e) The Seller shall produce the documentary evidence
of the clear title and possession of the
acquired/allotted land for Solar Project in the name of Seller;4
Writ Petition No. 12432 of 2017
f) The Seller shall fulfill the technical requirements according to criteria mentioned in RFP and produce the documentary evidence of the same. The Seller would also provide evidence that the requisite technical criteria have been fulfilled and required land for project development @ 2 Hectares/MW for Solar PV and 3 Hectares/MW for Solar Thermal is under clear possession of the Seller. In this regard the Seller shall be required to furnish the following documentary evidences:-
Ownership or lease hold rights (for at least 30 years) or right to use permission (for revenue land in Madhya Pradesh) in the name of the Seller and possession of 100% of the area of land required for the allotted project.
Requisite documents from the concerned and competent revenue/registration authority for the acquisition/ ownership/ vesting of the land in the name of the Seller and in case private land clear title for ownership.
(Note: (i) Change in the location of land from one place to other location is not permitted after 210 days of signing of PPA or at financial closure, whichever is earlier. (ii) The land should be free from all encumbrances. (iii) The land should neither have been proposed for other purposes & nor should have been mortgaged).
(g) ............."
2.5 DELAY IN ACHIEVING CONDITIONS
SUBSEQUENT
2.5.1. In case of delay in achieving any of the Conditions Subsequent under clause 2.1 (a to h), 5 Writ Petition No. 12432 of 2017 as may be applicable, MPPMCL shall encash CPG (submitted by Seller @ Rs.30 Lakhs/MW) as under, subject to Force Majeure:
a) Delay from 0-3 months - 1% per week.
b) Delay from 3-6 months - 2% per week for
the period exceeding 3 months, apart from
(a) above.
c) Delay from 6-9 months - 3% per week for the period exceeding 6 months, apart from
(a) and (b) above.
d) In case of delay of more than 9 months,
MPPMCL shall terminate PPA and release
balance amount of CPG.
2.6 COMMISSIONING
In case of Solar Project of capacity up to 50 MW, commissioning of plant shall be within 12 months from the date of financial closure subject to Force Majeure. In case of Solar Project of capacity beyond 50 MW and up to 100 MW, commissioning of plant shall be within 15 months from the date of financial closure subject to Force Majeure. For capacity beyond 100 MW, commissioning period shall be within 18 months from the date of financial closure subject to Force Majeure. In case of failure to achieve this milestone, provision of PPA as mentioned below shall apply:-
MMPMCL shall encash the CPG in the following manner for the capacity not commissioned, subject to Force Majeure:-
a) Delay from 0-3 months - 1% per week.
b) Delay from 3-6 months - 2% per week for the
period exceeding 3 months, apart from (a) above.6
Writ Petition No. 12432 of 2017
c) Delay of more than 6 months - 3% per week for the period exceeding 6 months, apart from (a) and (b) above.
Part Commissioning: In case of Solar PV Projects, Part commissioning of the Project shall be accepted by MPPMCL subject to the condition that the minimum capacity for acceptance of part commissioning shall be 5 MW or in multiples of 5 MW.
COD means the commissioning date of last Unit(s) of the Power Project where upon the Seller starts injecting power from full contracted capacity of the Power Project to the Delivery Point; as approved by Competent Authority of the Transco/Discom. The PPA will remain in force for a period of 25 years from the COD."
4. Though the land was to be provided by the petitioner, but, the State Government allotted 41.811 hectares of land to the petitioner for installation of the solar power energy system. However, such land was found to be under encroachment and consequently a letter was issued by the Company to the Petitioner on 29.12.2016 substituting Note (I) of Clause 2.1.1 to read as under:-
"Change in the location of land may be permitted after 210 days of signing of PPA, by MPPMCL" however subject to provision 2.5 and 2.6 of said PPA."
5. Subsequently, the petitioner procured the land from its resources and informed the Company on 22.03.2017 that it has 7 Writ Petition No. 12432 of 2017 acquired 253 acres of land at Ashok Nagar. The relevant sale deeds were attached with the said communication. It is thereafter, on 11.08.2017, the Company communicated the termination of the contract and ordered encashment of contract performance guarantee in the sum of Rs.1195.542 Lakhs. The letter dated 11 th August 2017 reads as under:-
"A Power Purchase Agreement (PPA) was executed between you and MPPMCL, on 10-11-2015 for supply of Power from your proposed, 51 MW. Solar PV plant located at Village- Jaitpur, District Rajgarh and subsequently location was changed to Village-Bhensarwas, District Ashoknagar at a rate of Rs.5.457 per unit, under Phase-III solar bidding.
Whereas, for guarantee to fulfilment of contractual obligations within timeline as per PPA, you had submitted a Bank Guarantee amounting Rs.15,30,00,000/- (Rs. Fifteen Crore thirty lakhs only), bearing Sr.No.002GM01153090001, dated 05-11-2015, Drawn on Yes Bank Ltd., Fortune Global Arcade, Sikanderpur Mehrauali Gurgaon Road, Gurgaon, Valid upto 31.12.2017, as contract performance guarantee (CPG) to MPPMCL.
Whereas, as stipulated in the PPA (ARTICLE 2:
PRECOMMISSIONING ACTIVITIES), time line for scheduled commencement of supply is, mentioned hereunder-
Effective Date* (Date of PPA) 10/11/15
Last date of fulfilling Conditions Subsequent 07/06/16
(210 days from PPA)
Completion of 9 months of penalty period for 07/03/17
CS (Clause 2.5 of PPA)
Actual date of fulfillment of Conditions 23/03/2017
subsequent
Delay in achieving condition subsequent 16 days
form the dead line
Whereas, clause 2.5 of PPA - DELAY IN ACHIEVING CONDITION SUBSEQUENT, states that, 8 Writ Petition No. 12432 of 2017 '2.5.1 In case of delay in achieving any of the Conditions Subsequent under clause 2.1 (a to h), as may be applicable, MPPMCL shall encash CPG (submitted by seller @ Rs.30 Lakhs/MW) as under, subject to Force Majeure.
a) Delay from 0-3 months - 1% per week.
b) Delay from 3-6 months - 2% per week for the period exceeding 3 months, apart from (a) above.
c) Delay from 6-9 months - 3% per week for the period exceeding 6 months, apart from (a) and (b) above.
d) In case of delay of more than 9 months, MPPMCL shall terminate PPA and release balance amount of CPG.' Whereas, your representations and submissions vide letters dated 23.03.2017 and 28.03.2017, were examined and considered in light of the PPA, by the competent authority of the Company. It is observed that you have failed to achieve fulfillment of conditions subsequent, even during the permissible delay period with penalty (9 months after 210 days from signing of the PPA) i.e. upto 07.03.2017.
Whereas, contentions mentioned in your representation/submissions pertaining to delay in land acquisition because of ROW problems at original site and demonetization during the land acquisition at new site, for considering as Force majeure, does not come under Force Majeure as provided in Article I of the PPA. The Condition Subsequent requirement of the clause 2.1.1 of the PPA pertains to (i) Obtaining all consents, clearances and permits required for supply of power to MPPMCL, (ii) Financial closure, (iii) Transmission Agreement with CTU/STU, and (iv) Documentary evidence of the clear title and possession of the acquired/allotted land. The PPA provides for a period of 210 days and a maximum delay of 9 months after the completion of 210 days (thus a total of 210 days - 9 months) to complete the condition subsequent. As it is evident from the RFP, Bid documents and PPA that the Seller (M/s ReNew Clean Energy Pvt. Ltd.) was free to arrange suitable land for the project and the PPA provides options of acquiring private land or getting Govt land allotted.
Further, change in the location of land is not permitted after 210 days of signing of PPA or at financial closure, whichever is earlier (please refer note (i) under clause 2.1.1 of the PPA). However, on your 9 Writ Petition No. 12432 of 2017 request, the Board of Directors of MPPMCL permitted the change in location after 210 days of signing of PPA, in the interest of implementation of the project, subject to clauses 2.5 and 2.6 of the PPA. In light of the above facts and the provisions of the PPA, it is concluded that your justification for delay in achieving condition subsequent is not tenable, and therefore not accepted.
Therefore, as per sub-clause (d) of clause 2.5.1 of PPA, the PPA signed on 10-Nov. 2015, between M/s ReNew Clean Energy Pvt. Ltd., Haryana, (SPV of Bidding Company ReNew Solar Power Pvt. Ltd.) and MPPMCL, for Supply of Power from the proposed, 51 MW, Solar PV plant located at Village-Jaitpur, District Rajgarh and subsequently location was changed to Village-Bhensarwas, District Ashoknagar, at a rate of Rs.5.457 per unit, to MPPMCL, is hereby terminated.
Further to above, as per clause 2.5.1, Penalty due to delay in achieving condition subsequent, stands recoverable from you, same is tabulated as under-
Sr. Delay slab Applicable Penalty amount Rs.
rate of In Lac penalty 1 Up to 210 days from Nil Nil execution of PPA) (From 10.11.2015 to 07.06.2016) 2 Delay from 0-3 months 1% per 201.042 Lakh (from 00:00 Hrs of week (13.14 x 51 x 30x0.01) 08.06.2016 to 24:00 Hrs. of 07.09.2016 = 23+31+31+07 = (92/7) = 13.14 weeks Delay from 3-6 months 2% per 397.80 lakh 3 (from 00:00 Hrs. of week (13X51x30x0.02) 08.09.2016 to 24:00 Hrs. of 07.12.2016 = 23+31+30+07=91 days = 91/7 = 13 weeks.
Delay 4 from 6-9 months 3% per 596.70 Lakh 4 (from 00:00 Hrs. of week (13X51x30x0.03) 08.12.2016 to 24:00 Hrs.
of 07.03.2017 =
24+31+29+07=91 days =
91/7=13 weeks
Total Penalty 1195.542 Lakh
10
Writ Petition No. 12432 of 2017
As mentioned above, an amount of Rs.1195.542 lakh (Rupees eleven crore ninety five lakh fifty four thousand and two hundred only) is being recovered through encashment of Bank Guarantee held with MPPMCL as CPG."
6. Learned Advocate General raised preliminary objection against the entertainment of the present writ petition inter alia on the ground that petitioner has alternative statutory remedy under Section 86(1)(f) of the Electricity Act, 2003, therefore, disputed questions of fact should not be examined in the writ petition. It is also contended that the time limit contemplated in Clause 2.5.1 is mandatory and sacrosanct, therefore, any violation of the time limit entitles the Company to terminate the contract and to take action as is permissible in law. It is also argued that as against tariff quoted by the petitioner at Rs.5.457 per kilowatt, the subsequent tariff offered by other tenderers in other contracts is as low as Rs.3.30 per kilowatt and, therefore, the payment of higher tariff to the petitioner will cost the State exchequer, may be to the tune of Rs.450 Crores for the entire duration of 25 years of the contract period. After raising arguments on the maintainability of the petition, learned Advocate General seeks time to file return on the merits of the petition as well.
7. On the other hand, Mr. Nagrath, learned counsel for the petitioner, submits that petitioner has incurred a capital expenditure 11 Writ Petition No. 12432 of 2017 of Rs.350 Crores for generation and sale of power to the Company. Therefore, it is a legitimate expectation of the Petitioner that the Company shall deal with the petitioner in a fair and reasonable manner. It is contended that though there was delay of 16 days in terms of Clause 2.5.1, but, the petitioner has maintained the ultimate time line of handing over the project on 07.09.2017 when petitioner submitted notice of commissioning of 51 MW solar plant on 10.07.2017 (Annexure P/17), whereas, the petitioner is expected to commission the plant on or before 31.08.2017. Therefore, the delay of 16 days in terms of Clause 2.5.1 is not a good and reasonable cause with the Company to terminate the contract and put the petitioner to financial loss.
8. Before coming to the discussion on the preliminary objections, we may state that we heard the arguments of the learned counsel for the parties at length and when we tentatively conveyed that the order passed by the Company on 11.08.2017 is not sustainable and we intend to allow the writ petition, it was at that stage, the learned Advocate General stated that the Company would like to file the return. But we find that there is no dispute on the question of fact, therefore, we decline the request of the learned Advocate General to file return and proceed to decide the writ 12 Writ Petition No. 12432 of 2017 petition including preliminary objections raised by the learned Advocate General.
9. The contract is in two parts. One is procurement of land within 210 days and with a condition that the location of the land will not be permitted to be changed after 210 days. The other part is the installation of the power project in another 15 months. Clause 2.1.1 of the agreement is clear that the seller i.e. the present petitioner has to perform and complete all of the following activities on its cost and risk within 210 days 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 the Company. The condition 2.1.1(e) is in respect of the production of the documentary evidence of the clear title and possession of the acquired land. However, such condition has been changed on 29.12.2016, when change in location of land was permitted even after 210 days of signing of the agreement, however, subject to provisions of clause 2.5 and 2.6 of the agreement. Clause 2.5.1 empowers the Company to encash the contract performance guarantee if there is a delay in achieving any of the conditions under Clause 2.1( a to h), as the Company is competent to encash Bank Guarantee for the delay of first three months at the rate of 1% per week; for a delay of 3-6 months at the rate of 2% per week; for 13 Writ Petition No. 12432 of 2017 a delay of 6-9 months at the rate of 3% per week, but, in case of delay of more than 9 months, the Company has been given right to terminate the agreement and release the balance amount of contract performance guarantee.
10. Though, the timeline given in Clause 2.5.1 is expected to be maintained, but, the delay in procuring land ipso facto will not entitle the Company to terminate the agreement. The Company permitted the petitioner to proceed ahead with the execution of the power plant project after expiry of nine months after 210 days. The Company allowed the petitioner to invest substantial cost in erection of the power plant project after 07.03.2017; therefore, the delay of 16 days, in these circumstances, disentitles the Company to terminate the agreement. The condition of termination of the agreement after the Company has allowed the petitioner to proceed with the installation of the solar power plant project cannot be treated to be a mandatory condition. The Company could very well be justified in terminating the agreement soon after the period of default even on payment of penalty expired. But, having allowed the petitioner to proceed with the installation of solar power project, then the termination of the contract is unreasonable and arbitrary action. However, since the contract permits imposition of penalty, therefore, in terms of the said condition, the petitioner shall be 14 Writ Petition No. 12432 of 2017 liable to pay penalty in terms of clause 2.5.1 of the agreement. However, the action of the Company in terminating the Contract in these circumstances is unreasonable, arbitrary and not sustainable in law.
11. The preliminary objection raised by the learned Advocate General is that since there is statutory alternate remedy available to the petitioner, therefore, such remedy is required to be availed. We do not find any merit in the objection raised by the learned Advocate General since there is no dispute of question of fact raised in the present petition.
12. As per the Company itself, there is a delay of 16 days in completion of the first condition of the agreement. We find that such preliminary objection does not merit any consideration. The availability of alternate remedy is a rule of discretion. It does not bar the exercise of the writ jurisdiction of this Court in appropriate cases. More so, when there is no dispute about the question of fact, this Court can interfere in exercise of writ jurisdiction even in contractual matters. Reference be made to judgment reported as State of Kerala and others v. M.K. Jose, (2015) 9 SCC 433, where the Court held as under:-
"13. A writ court should ordinarily not entertain a writ petition, if there is a breach of contract involving 15 Writ Petition No. 12432 of 2017 disputed questions of fact. The present case clearly indicates that the factual disputes are involved.
xxxx xxxx
17. In ABL International Ltd. v. Export Credit Guarantee Corpn. of India Ltd., (2004) 3 SCC 553, a two-Judge Bench after referring to various judgments as well as the pronouncement in Smt. Gunwant Kaur And Ors. vs Municipal Committee, Bhatinda, (1969) 3 SCC 769 and Century Spg. and Mfg. Co. Ltd. v. Ulhasnagar Municipal Council, (1971) 1 SCC 582, has held thus: (ABL International case, SCC pp. 568-69 & 572, paras 19 & 27) "19. Therefore, it is clear from the above enunciation of law that merely because one of the parties to the litigation raises a dispute in regard to the facts of the case, the court entertaining such petition under Article 226 of the Constitution is not always bound to relegate the parties to a suit. In the above case of Gunwant Kaur this Court even went to the extent of holding that in a writ petition, if the facts require, even oral evidence can be taken. This clearly shows that in an appropriate case, the writ court has the jurisdiction to entertain a writ petition involving disputed questions of fact and there is no absolute bar for entertaining a writ petition even if the same arises out of a contractual obligation and/or involves some disputed questions of fact.
* * *
27. From the above discussion of ours, the following legal principles emerge as to the maintainability of a writ petition:
16
Writ Petition No. 12432 of 2017
(a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable.
(b) Merely because some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule.
(c) A writ petition involving a consequential relief of monetary claim is also maintainable."
While laying down the principle, the Court sounded a word of caution as under: (ABL International case, SCC p. 572, para 28) "28. However, while entertaining an objection as to the maintainability of a writ petition under Article 226 of the Constitution of India, the court should bear in mind the fact that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the Constitution. The High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. The Court has imposed upon itself certain restrictions in the exercise of this power. (See Whirlpool Corpn. v. Registrar of Trade Marks, (1998) 8 SCC 1.) And this plenary right of the High Court to issue a prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality 17 Writ Petition No. 12432 of 2017 is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the Court thinks it necessary to exercise the said jurisdiction."
20. We have referred to the aforesaid authorities to highlight under what circumstances in respect of contractual claim or challenge to violation of contract can be entertained by a writ court. It depends upon facts of each case. The issue that had arisen in ABL International was that an instrumentality of a State was placing a different construction on the clauses of the contract of insurance and the insured was interpreting the contract differently. The Court thought it apt merely because something is disputed by the insurer, it should not enter into the realm of disputed questions of fact. In fact, there was no disputed question of fact, but it required interpretation of the terms of the contract of insurance. Similarly, if the materials that come on record from which it is clearly evincible, the writ court may exercise the power of judicial review but, a pregnant one, in the case at hand, the High Court has appointed a Commission to collect the evidence, accepted the same without calling for objections from the respondent and quashed the order of termination of contract."
13. In view of the above, we do not find any merit in the arguments raised by the learned Advocate General that the petitioner has alternative remedy, therefore, be directed to avail such remedy. Since there is no dispute on the question of fact and that the delay is of 16 days only in completing first part of the 18 Writ Petition No. 12432 of 2017 agreement, therefore, we find that the action of termination of contract is not sustainable.
14. Consequently, we allow the writ petition partly and set aside the order of termination of the contract dated 11.08.2017 (Annexure P/18) while maintaining the action of invocation of bank guarantee in terms of clause 2.5.1 of the agreement.
15. The writ petition is disposed of.
( HEMANT GUPTA ) ( VIJAY KUMAR SHUKLA )
CHIEF JUSTICE JUDGE
psm/-