27 February 2024 Administrative Law >> Constitution & Law Procedure   |   Contract Law >> Corporate Law   |   Environment Protection >> Environmental Law  

Facts:

The Solar Energy Corporation of India Limited (SECI) entered into a Power Purchase Agreement (PPA) with Wind Four Renergy Private Limited (WFRPL) for the development of a 50 MW wind power project. The Scheduled Commercial Operation Date (SCOD) stipulated in the PPA was October 4, 2018. WFRPL, however, sought extensions due to delays in operationalizing the Long Term Access (LTA) by the interstate transmission licensee.

Extension Timeline and Dispute:

WFRPL was granted a baseline extension of nine months with liquidated damages and tariff reduction, pushing the deadline to July 5, 2019. The Ministry of New & Renewable Energy further extended the deadline by 60 days upon LTA operationalization in April 2019. Additionally, the Central Electricity Regulatory Commission (CERC) awarded a disputed 132-day extension, considering WFRPL's claim of not being informed about the LTA's operational date. SECI challenged this 132-day extension before the court.

Court's Reasoning and Decision:

The court ruled in favor of SECI, quashing the APTEL order upholding the 132-day extension granted by CERC. The court's rationale centered on the following legal principles:

• Contractual Obligations: Both parties are bound by the terms and conditions outlined in the PPA, including the initial SCOD and the nine-month extension with its associated consequences.
• Reasonableness of Extensions: Subsequent extensions granted by the Ministry and CERC must be reasonable and demonstrably linked to unforeseen circumstances beyond WFRPL's control.
• Public Interest in Green Energy Development: Time-bound project completion is crucial for ensuring a timely supply of green energy and achieving carbon footprint reduction goals.

The court deemed the 132-day extension by CERC to be irrational, lacking justification beyond WFRPL's self-reported lack of awareness regarding the LTA operational date. The court upheld the Ministry's 60-day extension based on the demonstrable delay caused by the LTA's operational status.

Financial Implications:

SECI had previously refunded a performance bank guarantee of Rs. 10 crore to WFRPL. The court ruled that SECI is entitled to recover this amount with interest if WFRPL fails to repay it within six months. The court further empowered SECI to recover the outstanding amount as electricity dues under the provisions of the Electricity Act, 2003, in case of non-compliance.

Conclusion:

This case underscores the importance of adhering to contractual timelines in renewable energy projects. Developers must demonstrate legitimate reasons for seeking extensions, and regulatory bodies must ensure the reasonableness of such extensions while balancing them with the public interest in timely green energy production. It also highlights the potential financial consequences for developers who fail to meet their contractual obligations.

  ELECTRICITY ACT, 2003