2024 (8) TMI 1323 - SC - Indian Laws

Restrictive scope of appellate jurisdiction under Section 125 of the Electricity Act, 2003 - Applicability of the force majeure clause - Whether the extension of the Scheduled Commissioning Date was occasioned under the force majeure clause of the Power Purchase Agreement? - whether the reduction in tariff payable to the respondents is justified. HELD THAT - The law on force majeure, specifically in the context of PPAs, has been comprehensively dealt with by this Court in Energy Watchdog v. Central Electricity Regulatory Commission 2017 (4) TMI 1385 - SUPREME COURT . The Court delved into contractual jurisprudence on force majeure clauses and frustration of contracts. It held that Sections 32 and 56 of the Indian Contract Act, 1872 govern the law on force majeure. When the contract contains an express or implied force majeure clause, it is governed under Chapter III of the Contract Act, specifically Section 32. In such cases, the doctrine of frustration in Section 56 does not apply and the court must interpret the force majeure clause contained in the contract. It held that a force majeure clause must be narrowly construed. The entire dispute before the KERC and the APTEL revolves on a question of fact whether the respondents were negligent or not diligent in securing approvals and hence, is the delay in commissioning attributable to them. The KERC s appreciation of the evidence has led it to the conclusion that the delay in commissioning was due to the respondents delay in making the applications, despite the approval of the PPA. However, the APTEL has taken note of certain additional factors affecting the time taken to secure the approvals that were not considered by the KERC. These include the time taken by the government to provide the PTCL that is required for approval of land conversion, and the delay caused by the authority in evacuation approval - there is no error in the APTEL s approach, and it is reasonable in its reappreciation of evidence. The delay is not attributable to the respondents and that the force majeure clause is applicable, it rightly held that the extension of time under Article 2.5 is warranted and the commissioning of the project on 24.08.2017 is within the extended period of 24 months. Consequently, the APTEL also rightly held that there is no occasion for the imposition of liquidated damages under Articles 2.2 and 2.5.7 or for the reduction of tariff under Article 5.1 of the PPA - The APTEL has primarily decided a question of fact as to the attributability of the delay, and from the above, it is clear that the APTEL s findings are neither illegal nor unreasonable. There are no reason to interfere with the same. Appeal dismissed.

Summary

Issues Involved:
1. Applicability of the force majeure clause under the Power Purchase Agreement (PPA).
2. Extension of the Scheduled Commissioning Date (SCD).
3. Reduction in tariff payable to the respondents.
4. Imposition of liquidated damages.
5. Scope of Supreme Court's appellate jurisdiction under Section 125 of the Electricity Act, 2003.

Issue-wise Detailed Analysis:

1. Applicability of the Force Majeure Clause:
The primary issue is whether the delay in project commissioning falls under the force majeure clause of the PPA. Article 8.3(a)(vi) of the PPA covers the inability to obtain necessary approvals despite complying with all legal requirements. The KERC held that the respondents were negligent in securing approvals, attributing the delay to them. However, the APTEL reappreciated the evidence, considering additional factors such as delays in government-issued PTCL certificates and evacuation approvals, concluding that the respondents were not at fault. The Supreme Court upheld APTEL's findings, noting that the delay was not due to respondents' negligence and thus, the force majeure clause was applicable.

2. Extension of the Scheduled Commissioning Date (SCD):
Article 2.5 of the PPA allows for an extension of the SCD due to force majeure events. The APTEL found that the respondents acted diligently and the delays were beyond their control, thus warranting an extension. The Supreme Court agreed, noting that the appellant had already granted a 6-month extension and did not challenge the respondents' contentions before the KERC. Hence, the commissioning of the project on 24.08.2017 was within the extended period of 24 months from 07.09.2015.

3. Reduction in Tariff Payable to the Respondents:
KERC reduced the tariff from Rs. 8.40 to Rs. 4.36 per unit due to the delay in commissioning. However, APTEL restored the original tariff, considering the government scheme aimed at benefiting farmers and the substantial investments made. The Supreme Court upheld this decision, noting that the respondents were entitled to the original tariff as the delay was covered under the force majeure clause.

4. Imposition of Liquidated Damages:
KERC imposed liquidated damages under Articles 2.2 and 2.5.7 of the PPA, attributing the delay to the respondents. APTEL set aside this imposition, finding no delay attributable to the respondents. The Supreme Court agreed, stating that with the extension of time being justified under the force majeure clause, there was no basis for liquidated damages.

5. Scope of Supreme Court's Appellate Jurisdiction under Section 125:
The Supreme Court emphasized that its jurisdiction under Section 125 of the Electricity Act is limited to substantial questions of law. The Court found that the appellants did not propose any substantial question of law but rather argued on facts. The APTEL's findings were based on a reappreciation of evidence and were neither illegal nor unreasonable, thus not warranting interference by the Supreme Court.

Conclusion:
The Supreme Court dismissed the appeals, upholding APTEL's findings that the delay in commissioning was due to factors beyond the respondents' control and covered under the force majeure clause. Consequently, the extension of time was justified, the original tariff was restored, and the imposition of liquidated damages was set aside. The Court also upheld the direction to pay the late payment surcharge as per the PPA terms. No substantial question of law was found to warrant interference.