03 May 2121

An agreement should be interpreted as to establish the fundamentals in construction of the contracts - Supreme Court of India

Case : Bangalore Electricity Supply Company limited v. E.S Solar Power limited Civil Appeal No. 9273 and 9274 of 2019

Court : Supreme Court of India

Bench : Justice L. Nageswara and Justice Vineet Saran

Decided on : 03 May 2121

Relevant Statutes

Article 1.2.1 (k), 12.2, 12, 5.8.1 and 21.1 of Power Purchase Agreements 

Brief Facts and Procedural History

Karnataka Renewable Energy Development Limited made a proposal for the undertaking the development of Solar PV ground mount power Plants in Karnataka based on a decision of the State Government. The Second respondents incorporated two special purpose vehicles and submitted the request for acceptance by the Appellant. Respondent No.1 is a special purpose vehicle for solar PV ground mount project with a capacity of 10 MWA (AC) in Bidar and second with a capacity of 20 MWA (AC) capacity in Bagepalli. Further this was awarded to Respondent on 31.03.2016. Later the Power purchase Agreement was made on 23.05 .2016 which was approved by the KERC on 17.12.2016 with some modifications. For Both Projects, Commission Certificates were Issued on 25.10.2107 and 23.11.2017.

2. An Original Petition No 18 of 2018 was filed by the respondent who was aggrieved due to the reduction of tariff from Rs. 6.10/kWh to Rs. 4.36 /kWh and also on the imposition of the damages of Rs. 20, 00, 000 due to delay in commissioning the plant. But the Karnataka Electricity Regulatory Commission dismissed the petition. Later, the respondent approached the Appellate Tribunal. The tribunal dismissed the order passed by the Commission and The Appellant challenged the order passed by the Tribunal.

The Issues of the Case

Whether the Respondent did not commission the solar projects before the expiry of the 12 months from the date of approval of PPC or the Scheduled Commission date is 16.10.2017 or 17.10.2017?

Whether the injection of power is a precondition for decoding the dates of commission of Projects?

The Observations of the Court:

 1. The Honourable Supreme Court overviewed the provisions of PPA (Power Purchase Agreements) like Article 12 (The developer is entitled to receive the tariff of Rs. 6.10/kWh of the energy which is supplied to the appellant as per the agreement. Article 5.8.1 (If the developer is unable to commence the supply of power on the Scheduled Commissioning date. then liquidated damages can be imposed). Article 12.2(If there is a delay in the commissioning of the project beyond the Scheduled commissioning date then the tariff shall be lower. One of the Judgment was referred i.e. Bihar State Electricity Board, Patna and Ors. Vs. M/S Green Rubber Industries and Ors. (1990 (1) SCC 731), it was stated that the whole terms of the contract should be considered to know the intention of the parties. The Honourable Supreme Court observed there is no dispute that the Scheduled Commissioning date shall be 12 months from the effective date i.e. 17.10.2016. The Honourable Supreme Court did not agree with the Commission definition of months and observed that Article 1.2.1(k) and Article 21.1 should be applied for determination of the Month. There is no dispute the power was injected from the solar plants on 17.10.2017. The Honourable Supreme Court held that there is no requirement of the actual injection of the grid to decide the date of commissioning.

The Decision Held by the Court

1. The Honourable Supreme court upheld the Judgment of the Appellate Tribunal and dismissed the Appeals.

2. The Honourable Supreme court also granted four weeks to implement the judgment of the Appellate Tribunal.

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