A) Abstract / Headnote

This case addresses the issue of whether the delay in commissioning the solar power project under a Power Purchase Agreement (PPA) falls under the scope of the force majeure clause. The Karnataka Electricity Regulatory Commission (KERC) held that the delays were attributable to the respondents, rejecting their claims of force majeure. However, the Appellate Tribunal for Electricity (APTEL) reappreciated the facts, identifying government and authority-induced delays as primary causes. Consequently, APTEL ruled in favor of the respondents, reinstating the original tariff under the PPA and invalidating KERC’s reduced tariff decision and imposition of liquidated damages. The Supreme Court upheld APTEL’s decision, emphasizing the necessity of enabling specialized bodies to develop consistent sectoral jurisprudence under the Electricity Act, 2003.

Keywords:
Force Majeure, Power Purchase Agreement, Tariff Reduction, Solar Power Projects, Appellate Jurisdiction.

B) Case Details

i) Judgment Cause Title:
Bangalore Electricity Supply Company Limited v. Hirehalli Solar Power Project LLP & Others

ii) Case Number:
Civil Appeal No. 7595 of 2021

iii) Judgment Date:
27 August 2024

iv) Court:
Supreme Court of India

v) Quorum:
Justice Pamidighantam Sri Narasimha and Justice Pankaj Mithal

vi) Author:
Justice Pamidighantam Sri Narasimha

vii) Citation:
[2024] 8 S.C.R. 1024; 2024 INSC 631

viii) Legal Provisions Involved:

• Section 125 of the Electricity Act, 2003
• Sections 32 and 56 of the Indian Contract Act, 1872
• Relevant clauses of the Power Purchase Agreement

ix) Judgments Overruled:
None

x) Law Subject:
Electricity Law, Contract Law, Regulatory Law.

C) Introduction and Background of Judgment

The dispute concerns delays in commissioning solar power projects under the Karnataka government’s solar energy policy. The respondents, operating under a PPA with Bangalore Electricity Supply Company Limited (BESCOM), faced delays in securing necessary approvals. KERC attributed these delays to the respondents and reduced the tariff under the PPA. APTEL reversed KERC’s decision, restoring the original tariff and invalidating liquidated damages. The Supreme Court was tasked with reviewing APTEL’s findings, particularly concerning force majeure applicability.

D) Facts of the Case

1. Karnataka’s 2014 policy aimed to promote solar energy by permitting farmers to generate and sell power to state electricity companies.
2. Respondent No. 1, a Special Purpose Vehicle (SPV), signed a PPA with BESCOM in 2015, which KERC approved later that year.
3. The SPV faced delays due to:
   • Land conversion approvals
   • Evacuation scheme clearances
   • Financial constraints during demonetization
4. The respondents commissioned the project in August 2017, six months beyond the original SCD but within an extension granted by BESCOM.
5. KERC reduced the tariff, attributing delays to the respondents, and imposed liquidated damages.

E) Legal Issues Raised

1. Does the force majeure clause apply to delays caused by government-induced administrative processes?
2. Can the tariff be reduced under the PPA for delays not attributable to the respondents?
3. Did KERC exceed its jurisdiction in rejecting valid grounds for force majeure and imposing liquidated damages?

F) Petitioner/Appellant’s Arguments

1. Force majeure clauses must be strictly construed, and respondents failed to notify events as required under the PPA.
2. The delays were due to respondents’ negligence in securing necessary approvals.
3. KERC was correct in reducing the tariff under the PPA to protect public interest.
4. Late payment surcharge awarded by APTEL lacked a valid basis in the pleadings before KERC.

G) Respondent’s Arguments

1. Delays arose from systemic issues, such as prolonged administrative procedures, for which respondents cannot be held responsible.
2. The government recognized similar delays across multiple projects and provided guidelines for extensions.
3. APTEL’s decision to reinstate the tariff aligned with the original terms of the PPA and upheld the integrity of the agreement.
4. BESCOM’s approval of the extension invalidated KERC’s contrary findings.

H) Related Legal Provisions

1. Electricity Act, 2003: Governs regulatory frameworks and appellate mechanisms.
2. Contract Act, 1872: Sections 32 and 56 address force majeure and frustration of contracts.

I) Judgment

a. Ratio Decidendi:

1. Delays attributed to systemic issues, such as administrative bottlenecks, qualify as force majeure events under Article 8.3(a) of the PPA.
2. APTEL correctly reappraised evidence and determined that respondents acted diligently.
3. Imposing liquidated damages and reducing tariffs were unwarranted in light of valid force majeure claims.

b. Obiter Dicta:

1. The restrictive interpretation of appellate jurisdiction under Section 125 ensures autonomy for regulatory bodies.
2. Judicial restraint in interfering with factual findings by specialized tribunals fosters sectoral jurisprudence.

c. Guidelines:

1. Regulatory commissions must evaluate delays within the broader context of administrative and procedural inefficiencies.
2. Statutory mechanisms like committees must address industry-wide systemic issues proactively.

J) Conclusion & Comments

The judgment underscores the nuanced application of force majeure clauses in PPAs. It emphasizes the need for specialized tribunals to balance regulatory objectives with contractual fairness. APTEL’s fact-centric approach reflects the importance of considering externalities in complex contractual disputes.

K) References

1. Energy Watchdog v. Central Electricity Regulatory Commission: 2017 3 SCR 153
2. Chennamangathihalli Solar Power Project LLP v. BESCOM: 2020 SCC OnLine APTEL 75
3. SEBI v. Mega Corporation Limited: [2022] 2 SCR 546