Read Time: 13 minutes

Synopsis

The Supreme Court has said that it must be mindful and measured to enable a systematic and coherent development of electricity law by the regulatory commissions and the tribunal. It emphasised at the restrictive scope of exercise its appellate jurisdiction only in cases which involved not just a 'question of law' but a 'substantial question of law'.

The court has upheld the Appellate Tribunal of the Electricity's direction to Bangalore Electricity Supply Company Ltd to pay surcharge to Hirehalli Solar Power Project LLP and tarrif at the rate of Rs 8.4 per unit as stipulated in the Power Purchase Agreement.

Having examined the scope and ambit of appellate jurisdiction under Section 125 of the Electricity Act, 2003, a bench of Justices P S Narasimha and Pankaj Mithal held that the restrictive scope of appellate jurisdiction is a product not only of statutory preconditions, but also a necessary measure to enable freedom to statutory regulator and tribunal to develop sectorial laws through a principled and consistent approach.

The court here dealt with appeals involving a question whether the extension of the Scheduled Commissioning Date was occasioned under the force majeure clause of the Power Purchase Agreement and consequently, whether the reduction in tariff payable to the respondents is justified.

Karnataka government introduced a policy in 2014 to identify and promote solar energy projects by land-owning farmers.

The respondent was a special purpose vehicle. Several farmers, including the respondent, raised concerns regarding delay in the execution of the project on account of delay in getting land use conversion, delay in getting evacuation approvals, demonetisation, and other reasons. Hence, the Karnataka government in 2016 directed all DISCOMs to set up 3-member committees to examine each request for extension. 

The present respondents requested a 6-month extension under Article 2.5 of the Power Purchase Agreement on December 03, 2016. This was approved by the appellant through a letter on March 02, 2017.

However, KERC rejected the various causes of delay put forth by the respondents and held that the force majeure clause must be strictly interpreted. The KERC also reduced the tariff payable to the respondent to Rs. 4.36 per unit for the term of the PPA by relying on Article 5.1 of the PPA.

The respondent’s appeal against the order of the KERC was allowed by the APTEL, which was challenged before the apex court.

APTEL considered that the government scheme, under which these PPAs were signed, was intended to create opportunity and benefit for farmers by establishing solar power plants. The farmers had invested huge amounts, sometimes through loans, in these projects and a reduction in tariff from Rs. 8.40 to Rs. 4.36 per unit would adversely affect them. Hence, it directed the appellant to pay the difference in per unit tariff along with the late payment surcharge as provided under Article 6.4 of the PPA.

It also set aside the imposition of liquidated damages under the PPA as it found that there was no delay in securing approvals and commissioning the project.

After hearing submissions of the parties and having examined the scope of this court’s exercise of appellate jurisdiction when there is a ‘question of law’ under Section 15Z of the SEBI Act, the bench said, the position that emerges in this case, it is a little more restrictive as the requirement under Section 125 is not merely a ‘question of a law’ but a ‘substantial question of law’.

"While delineating the contours of this court’s interference in appeal under Section 125, we must be mindful and measured so as to enable a systematic and coherent development of electricitylaw by the Commissions and the APTEL," the bench said.

In the case, the bench said the appellant has not proposed a substantial question of law for this court to consider. Rather, they have argued on facts as to whether or not the delay is attributable to the respondents, and consequently whether force majeure is applicable. 

Dealing with the law on force majeure, the bench said, "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".

The court noted the present case is clearly one where the PPA contained an explicit force majeure clause in Article 8.3. Article 8.3(a)(vi) is the most relevant force majeure event that would apply to the facts here. 

The bench said 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, APTEL has reappreciated the evidence to find that the delay was not attributable to the respondents but to the government bodies and relevant authorities. 

"We find that there is no error in the APTEL’s approach, and it is reasonable in its reappreciation of evidence," the bench said.

The court also noted the government has itself acknowledged that the land use conversion process is a long and arduous one, which led it to deem conversion for solar power projects under the present scheme. 

It also found even before the KERC, the appellant did not challenge the respondents’ contentions.

"Therefore, at the appellate stage before the APTEL and this court, they cannot be permitted to take a contrary stance and raise the plea that the delay was attributable to the respondents and not covered by the force majeure clause or that there was non-compliance with the notice requirement under Article 8.3(b)(i). We therefore reject the contentions of the appellant that force majeure does not apply in this case," the bench said.

The court opined the APTEL rightly held that there is no occasion for the imposition of liquidated damages or for the reduction of tariff under the PPA.

"APTEL’s findings are neither illegal nor unreasonable," the bench said, finding no reason to interfere with the order.

The court finally held no substantial question of law arose in the present case and the APTEL has primarily decided a question of fact as to the attributability of the delay.

Dismissing the appeal, the bench also rejected the appellant’s contention that the APTEL’s direction to pay late payment surcharge to the respondents is unjustified since it was not pleaded.