1. Introduction

In the case of SEI Aditi Power Private Limited & Ors. v. Karnataka Electricity Regulatory Commission (KERC) & Ors., adjudicated by the Appellate Tribunal for Electricity on July 14, 2021, the core issue revolved around the interpretation and applicability of force majeure clauses within Power Purchase Agreements (PPAs). The appellants, SEI Aditi Power Pvt. Ltd., SEI Bheem Pvt. Ltd., and SEI Suryashakti Pvt. Ltd., challenged KERC’s decision to reduce the tariff from ₹6.86 to ₹6.51 per unit, attributing the delay in commissioning their solar projects to force majeure events.

2. Summary of the Judgment

The appellants, solar power developers with a combined capacity of 90 MW, entered into PPAs with BESCOM for the development and supply of solar energy. Delays in the establishment of the required evacuation infrastructure by KPTCL, a state transmission licensee, prevented the appellants from commissioning their projects by the Scheduled Commissioning Date (SCOD) of June 18, 2016. The appellants argued that such delays constituted force majeure, entitling them to an extension of the SCOD without penalties.

KERC, however, ruled that the non-availability of the evacuation system did not qualify as a force majeure event, leading to a reduction in the agreed tariff. The appellants appealed this decision, seeking to uphold the extension granted by BESCOM and reclaim the reduced tariff.

The Appellate Tribunal examined the contractual obligations, the definition of force majeure within the PPA, and the conduct of the involved parties. It concluded that the delays were indeed beyond the control of the appellants and constituted force majeure, thereby setting aside KERC’s impugned order and restoring the original tariff rates.

3. Analysis

3.1 Precedents Cited

The judgment extensively referenced various judicial precedents to substantiate the interpretation of force majeure and contractual obligations:

• Satyabrata Ghose Vs. Mugneeram Bangur & Co. - Established that force majeure covers events that totally upset the foundation of a contract, making performance impossible.
• Energy Watchdog v. CERC - Highlighted the necessity of reasonable hindrance beyond mere price escalation to invoke force majeure.
• Gujarat Urja Vikas Nigam Limited v. GERC & Ors. - Emphasized the state’s duty to promote renewable energy and the importance of adhering to PPAs in achieving this mandate.
• Chamundeshwari Electricity Supply Company Ltd. vs. Saisudhir Energy Pvt. Ltd. - Affirmed that delays in state-mandated infrastructure projects could qualify as force majeure.
• Arizona Sunrise Private Limited v. CESCOM & Ors. - Clarified that regulatory approvals and contractual extensions should be honored unless legally contested.

3.2 Legal Reasoning

The Tribunal meticulously analyzed the PPA clauses, particularly focusing on Article 14 which defines force majeure. It acknowledged that the delay in establishing the KPTCL evacuation system was beyond the appellants' control and directly impaired their ability to fulfill contractual obligations by the SCOD. The Tribunal also highlighted the contradictory stance of BESCOM, which initially recognized the delay as force majeure but later contested it, attributing the delay to the appellants' lack of prudence. This inconsistency strengthened the appellants' position.

Furthermore, the Tribunal underscored that the Respondent Commission's reduction of tariffs undermined the contractual and statutory mandates to promote renewable energy. By not honoring the extension based on force majeure, KERC disregarded the Electricity Act, 2003, and the defined PPAs, which outline clear protocols for such scenarios.

3.3 Impact

This judgment sets a significant precedent in the renewable energy sector, reinforcing the sanctity of contractual agreements and the proper interpretation of force majeure clauses. It ensures that project developers are protected against infrastructural delays outside their control, fostering a more stable and predictable investment environment in the renewable energy domain.

Additionally, it reinforces the role of regulatory bodies like KERC to act within the bounds of the law and uphold policies that encourage renewable energy growth. Future cases will likely reference this judgment when disputes arise over force majeure and tariff determinations in power purchase agreements.

4. Complex Concepts Simplified

4.1 Force Majeure

Definition: Force majeure refers to unforeseen events beyond the control of the parties that prevent or delay the fulfillment of contractual obligations.

In Context: In this case, the delay in the completion of the evacuation infrastructure by KPTCL was deemed a force majeure event as it was beyond the appellants' control and directly impacted their ability to commission their projects on time.

4.2 Scheduled Commissioning Date (SCOD)

Definition: SCOD is the agreed-upon date by which a power project must be commissioned and begin operations as per the Power Purchase Agreement.

In Context: The original SCOD was June 18, 2016. Delays in infrastructure led appellants to seek extensions based on force majeure.

4.3 Liquidated Damages (LDs)

Definition: LDs are predetermined amounts set in a contract to be paid as compensation for delays or breaches.

In Context: BESCOM attempted to withhold LDs due to the delays in commissioning, which the Tribunal later ruled as unjust, requiring BESCOM to refund the withheld amounts.

5. Conclusion

The judgment in SEI Aditi Power Private Limited & Ors. v. KERC & Ors. underscores the critical importance of adhering to contractual terms and accurately interpreting force majeure clauses within Power Purchase Agreements. By recognizing infrastructural delays as legitimate force majeure events, the Tribunal ensures that renewable energy projects are safeguarded against external disruptions. This decision not only reinforces the legal protections afforded to power developers but also aligns regulatory practices with national policies promoting sustainable and renewable energy sources.