BANGALORE ELECTRICITY SUPPLY COMPANY Ltd. (BESCOM). Vs. E.S. SOLAR POWER Pvt. Ltd.

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INTRODUCTION

The Supreme Court of India in the case of Bangalore Electricity Supply Company Limited v. E.S Solar Power Private Limited and Others [C.A. 9273 of 2019] by judgement dated May 03, 2021, upheld the decision of the Appellate Tribunal for Electricity (“APTEL”). The Karnataka Electricity Regulatory Commission was of the view that the Scheduled Commissioning date for the Solar Power Projects of the Developer is 16.10.2017 and not 17.10.2017. It was of the opinion that the injection of power into the Grid from a Solar Power Project is a sine qua non for declaring that the Project is commissioned and the injection of power from the Solar Power Project into the Grid was only on 17.10.2017. The Respondents approached the Appellate Tribunal for Electricity. The APTEL had passed an order reversing the findings of the Karnataka Electricity Regulatory Commission (“KERC”). BESCOM is the appellant before the apex court. The major issue in this case is to determine what is the actual scheduled commissioning date of the solar power projects in question? Various terms of the contract between the parties are examined and finally, the decision of APTEL is upheld.

FACTS OF THE CASE

1. Karnataka Renewable Energy Development Limited (KREDL) had issued a Request for proposal on 20.11.2015 from bidders for undertaking development of Solar PV ground mount Power Plants in Karnataka pursuant to a decision taken by the State Government for development of 1200 MWA of Solar power to be implemented in 60 Taluks through private sector participation. Emmvee Photovoltaic Power Private Limited, the second Respondent herein, incorporated two Special Purpose Vehicles (SPV) in accordance with the terms of the Request for Proposal and submitted its bid for acceptance by the first Appellant, Bangalore Electricity Supply Company Limited.
2. Respondent No. 1 in Civil Appeal 9273 of 2019 is a special purpose vehicle constituted by Respondent No. 2 for setting up a Solar PV ground mount Project with a capacity of 10 MWA (AC) in Bidar Rural Taluk, Bidar District, Respondent No. 1 in Civil Appeal 9274 of 2019 is a special purpose vehicle for setting up a 20 MWA (AC) capacity Solar PV ground mount Project in Bagepalli Taluk, Chikkaballapura.
3. The Projects were awarded to the Respondents on 31.03.2016. Thereafter, Power Purchase Agreements (PPAs) were entered into between the parties on 23.05.2016. The Power Purchase Agreements were approved by Karnataka Electricity Regulatory Commission (KERC) on 17.10.2016. Supplementary Power Purchase Agreements were entered into between the parties on 17.12.2016 incorporating the modifications suggested by the Karnataka Electricity Regulatory Commission on 07.12.2016.
4. In respect of the Bidar Project, a Commissioning Certificate was issued on 25.10.2017 by KPTCL on the basis of minutes of meeting that was held on 16.10.2017. The Commissioning Certificate for Bagpalli Project was also issued on 23.11.2017.

ISSUES RAISED

1. Whether the Scheduled Commissioning date’ of the Solar Power Projects in question would fall in 16.10.2017 or 17.10.2017?
2. On what date the Solar Power Projects in OP No. 18 of 2018 and OP 19 of 2018 have started injection of power into the Grid?
3. Whether injection of power into the State Grid from a Solar Power Project is essential in order to declare that a Project is commissioned?
4. ‘Whether Commissioning of the Project’ and ‘Commercial Operation of the Project’ are one and the same or different concepts in a Solar Power Project?
5. Whether the Project of the Appellants was delayed by one day in terms of Power Purchase Agreement and whether the Commission was justified in imposing liquidated damages on the Appellant for such delay in commissioning the Project?

CONTENTIONS OF APPELLANT

The appellants were critical of the judgment of the Appellate Tribunal for its interference with a well-considered order of the Commission. The conclusion of the Appellate Tribunal that the SCOD is 17.10.2017 and not 16.10.2017 is contrary to the terms of the PPA (Power Purchase Agreement). Injection of power to the Grid is a pre requisite for determining the date of commissioning of a Solar Plant. The Tribunal committed an error in relying upon judgments relating to the General Clauses Act when PPA excluded the applicability of the General Clauses Act. Regulatory commission correctly interpreted the agreement to include the first date and last date i.e. the date on which PPA was approved by the KERC for determining the Scheduled Commissioning Date. There was minimum generation of power on 16.10.2017 which was utilized for auxiliary purposes which does not satisfy the condition of injection of power into the Grid. There was no injection of power into the Grid till 17.10.2017 and the Respondents are not entitled to tariff at the rate of 6.10/kWh.

CONTENTIONS OF RESPONDENT

The twelve months period for deciding the Scheduled Commissioning Date starts from 17.10.2016 which was the date of approval of PPA by KERC. The covenants of the PPA assert that the date of the event i.e. the date of approval of PPA has to be excluded for the purpose of computation of twelve months for deciding the Scheduled Commissioning Date (SCOD). There is no dispute regarding injection of power to the Grid on 17.10.2017. Therefore, there is no default on the part of the Respondents and they were unnecessarily penalized. The alternative submission of the Respondents is that even if 17.10.2016 is not excluded, twelve months end on 16.10.2017 on which day the Plants were commissioned. Computation of twelve months from 16.10.2017, in that case, cannot be detrimental to the Respondents. The commissioning of the Plant is different from Commercial Operation date. Respondents have entered into an agreement on the basis of the offer made by the Appellant to pay tariff at Rs. 6.10/kWh. Reduction of tariff would sound a death knell to the Solar Plants which are going through difficult times.

JUDGEMENT

The judgement of the Appellate Tribunal is upheld and the Appeals are dismissed. At the request of the Appellants, four weeks time is granted to implement the judgment of the Appellate Tribunal. The court took various provisions of the agreement into consideration for reaching a conclusion. The court also took into account the well-settled canons of the construction of contracts. The court noted that the duty of the Court is not to delve deep into the intricies of human mind to explore the undisclosed intention, but only to take the meaning of words used i.e. to say expressed intentions. The intention of the parties must be understood from the language they have used, considered in the light of the surrounding circumstances and object of the contract. Article 12 deals with the applicable tariff. The developer shall be entitled to receive the tariff of Rs. 6.10/kWh of energy supplied the Appellant in accordance with the terms of the agreement. The Tribunal held that the date of the event which is the date on which the PPA was approved i.e. 17.10.2016 shall be excluded in calculating the period of 12 months. There is no dispute that the Scheduled Commissioning date shall be 12 months from the effective date. There is no quarrel between the parties that the effective date is 17.10.2016. There is no dispute that 12 Calendar months have to be taken into account for determining the Scheduled Commissioning Date. The crucial expression in the definition of ‘Month’ is “excluding the date of the event”. If the date of the event i.e. 17.10.2016 is excluded, the Scheduled Commissioning Date would be 17.10.2017. The court held that the Commission has committed an error in applying 1.2.1 (m) when the provision that is applicable is 1.2.1 (k) read with the definition of month in Article 21.1. There is a specific mention of ‘twelve months’ in the definition of ‘SCOD’ and Article 1.2.1 (k) categorically provides that any reference to a ‘Month’ shall be a calendar month. Applicability of Article 1.2.1 (k) excludes the operation of Article 1.2.1 (m) to the facts of this case. There is no dispute that the power was injected from the solar plants on 17.10.2017. In view of the conclusion reached on the issue relating to the Scheduled Commissioning Date being 17.10.2017, it is not necessary to adjudicate the point relating to the requirement of actual injection of power into the Grid to decide the date of commissioning.    

ANALYSIS

The Supreme Court’s decision in this case hinges on the interpretation of the contractual terms outlined in the Power Purchase Agreement (PPA). The Court emphasized the importance of adhering to the expressed intentions of the parties as reflected in the contract’s language, rather than delving into subjective intentions. The Court affirmed the Appellate Tribunal for Electricity’s (APTEL) interpretation that the date of the event (17.10.2016) should be excluded when calculating the twelve-month period for determining the Scheduled Commissioning Date (SCOD). The decision underscores the necessity of consistency with the contractual definitions. By excluding the date of the event, the SCOD was accurately determined to be 17.10.2017. This aligns with the clear language of the contract, ensuring that contractual terms are applied as written without unwarranted deviations. The Court also addressed the significance of power injection into the Grid for the determination of project commissioning. The Court did not find it necessary to elaborate on the distinction between the commissioning of the project and its commercial operation since the correct SCOD determination resolved the core issue. However, this implicitly acknowledges that while power injection is important, adherence to the contractual timeline is paramount. This case exemplifies the judiciary’s approach to maintaining contractual clarity and upholding the explicit terms agreed upon by the parties. It reinforces the principle that contracts should be interpreted based on the language used, considering the surrounding circumstances and the contract’s objective. The Supreme Court’s decision to uphold APTEL’s judgment highlights the judiciary’s tendency to respect well-reasoned decisions of specialized tribunals unless there is a clear error in interpretation or application of the law.

CONCLUSION

The Supreme Court’s decision in Bangalore Electricity Supply Company Limited v. E.S Solar Power Private Limited and Others reaffirms the fundamental principles of contract law, emphasizing the importance of interpreting contracts based on their explicit language and terms. By upholding the decision of the Appellate Tribunal for Electricity, the Court has clarified that the Scheduled Commissioning Date (SCOD) should be determined by excluding the date of the event, thereby setting the SCOD as 17.10.2017. This ruling underscores the necessity for clear contractual definitions and the need to adhere strictly to agreed timelines and terms. Moreover, the decision highlights the judiciary’s role in ensuring that specialized tribunals’ well-reasoned judgments are respected and upheld, provided there is no evident error in their interpretation or application of the law. This case serves as a crucial reference for future contractual disputes, reinforcing the principle that the express language of the contract governs the parties’ obligations and rights.

REFERENCES

1. https://indiankanoon.org/doc/156428730/
2. https://main.sci.gov.in/supremecourt/2019/23573/23573_2019_36_1501_27907_Judgement_03-May-2021.pdf                                                                                                                       

This article is written by Riya Singla, student of Himachal Pradesh National Law University, Shimla (HPNLU); Intern at Legal Vidhiya.

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