M. P. POWER MANAGEMENT COMPANY LIMITED, JABALPUR v. M/S. SKY POWER SOUTHEAST SOLAR INDIA PRIVATE
Case at a glance
Provisions considered
- Electricity Act, 2003 s. 63
- Constitution of India arts. 12, 14, 32, 73, 162, 226, 298
- Indian Contract Act, 1872
- Electricity Supply Act, 1948 ss. 43, 43(A)
- Electricity Supply Act
- U.P. Industrial Area Development Act s. 6A
- Companies Act, 2013
- U.P. Planning and Development Act, 1973
Key paragraphs
- Para 1010. Shri K.M. Natraj, learned Additional Solicitor General submits that the impugned judgments are clearly unsustainable. He would firstly point out that the writ petition filed by the first respondent is not maintainable. The PPA in question is not a statutory contract and therefore interference…
Judgment
From the Judgment and Order dated 27.02.2020 of the High Court of Madhya Pradesh, Principal Seat at Jabalpur in W.P. No. 4205 of 2019 and final Judgment and Order dated 28.12.2020 in Review Petition No. 682 of 2020. K. M. Nataraj, ASG, Anish Kumar Gupta, Archana Preeti Gupta, Puneet Sheoran, Venugopal Abhay, Ms. Deepshikha Bharati, Vaibhav Verma, Advs. for the Appellant. Dr. Abhishek M. Singhvi, Naman Nagrath, Sr. Advs., Manpreet Lamba, Ramanuj Kumar, Miss. Priyal Modi for M/s. Cyril Amarchand Mangaldas, Aashish Anand Barnard, Paramhans Sahani, Sunil Kumar Pandey, R. K. Srivastava, Rajesh Kumar, Advs. for the Respondents. B C D E F G H M. P. POWER MANAGEMENT COMPANY LTD., JABALPUR v. M/S. SKY POWER SOUTHEAST SOLAR INDIA PVT. LTD. The Judgment of the Court was delivered by K. M. JOSEPH, J.
Leave granted.
The appellant impugns the Judgment of the High Court dated 27.02.2020 in Writ Petition No. 420 of 2019. It further challenges the Order dated 28.12.2020 in Review Petition No. 682 of 2020. By the said Judgment in the Writ Petition, the High Court allowed the Writ Petition filed by the first respondent and quashed the Order dated 07.07.2018, which was passed by the appellant, terminating the Power Purchase Agreement (hereinafter referred to as ‘the PPA’, for short), which was entered into by the appellant and the first respondent. The review filed by the appellant was dismissed. Hence the appeals. THE FACTS
The appellant, which is “a wholly owned company of the Government of Madhya Pradesh” (as described by the appellant in the Special Leave Petition), is responsible for the bulk purchase of electricity in the State of Madhya Pradesh for onward sale/supply to the distribution utilities (DISCOMS). The appellant issued a request for proposal (RFP) dated 06.05.2015 for long-term procurement of 300 MW of solar energy through tariff-based competitive bidding. The bid of M/s Sky Power Southeast Asia Holding Limited was accepted. It was declared the successful bidder for three units of 50 MW each at different tariff rates. The bidder subsequently incorporated the first respondent, viz., M/s Sky Power Southeast Solar India Private Limited as a special purpose company. This was for developing one project of 50 MW. The rate, which is applicable in respect of the first respondent, was Rs.5.109 per unit. In respect of the other two bids, the bidder incorporated other companies, viz., M/s Sky Power Solar India Private Limited and M/s Sky Power Southeast Asia One Private Limited. The rates applicable in respect of said companies for the other two projects consisting of 50 MW each was Rs.5.298 per unit and Rs.5.051 per unit, respectively. The PPA was entered into on 18.09.2015. The agreement, inter alia, provided for pre-commissioning activities. They are described as satisfaction of conditions subsequent by the seller. The first respondent is the seller under the PPA.
The Agreement contemplated completion of the conditions subsequent, within a period of 210 days. In other words, the Agreement, 9 A B C D E F G H SUPREME COURT REPORTS [2022] 5 S.C.R. admittedly, provided that the first respondent was to achieve fulfilment of conditions subsequent by 15.04.2016. The Agreement further contemplates an extension of the period of fulfilment of the condition subsequent on payment of penalty for a further period of nine months. Thus, calculating 210 days and an additional nine months from 18.09.2015, which is the date of the PPA, the period would come to an end on 15.01.2017. A communication was addressed dated 12.01.2017 by the first respondent. The first respondent purported to refer to Article 2.1 of the PPA, which, inter alia, reads as follows:
Article 2.1 Seller agrees and undertaken to duly perform and complete all of the following activities seller’s own cost and risk within 210 days from the effective Date unless such completion is affected by any force Majeure event, or if any of the Effective is specifically waived in writing by MPPMCL: a) The Seller shall obtain all Consents, Clearance and Permits required for supply of Power to MPPMCL as per the terms of this Agreement;
The first respondent purported to present certain documents and contend that there was compliance of its obligations under the PPA. This led to communication dated 22.02.2017 addressed by the appellant to the first respondent. It referred to the status of the documents, which the appellant noted. Furthermore, appellant sought certain documents. It is, inter alia, pointed out by the appellant that the first respondent had no documents in regard to 34.12 hectare of land and an unregistered lease deed for only 12 months was submitted, which could not be considered as fulfilment of the condition subsequent. Thereafter, it was stated that the PPA is liable to be terminated in terms of Article 2.5.1 of the PPA. Explanation/justification if any was called for from the first respondent. Acting on the request of the first respondent, the appellant granted time for response of the first respondent till 10.03.2017. The response, which was given on 10.03.2017, reads as follows: “Firstly, we are thrilled to update you that the project is under advanced construction and all equipment order for the project have been placed and construction happening on site we expect that the project will be top quality using the best equipment in the market and constructed by a top-tier EPC, for the benefit of both Sky Power and the state of MP. 10 A B C D E F G H M. P. POWER MANAGEMENT COMPANY LTD., JABALPUR v. M/S. SKY POWER SOUTHEAST SOLAR INDIA PVT. LTD. [K. M. JOSEPH, J.] 11
1. Satisfaction of Condition subsequent regarding Construction Financing A MPPMCL Comment: “Loan sanction letter of Mis L&T Finance vide letter No. S07201A03/16-17 DATED 29.08.2016 Copy of facility agreement and affecting compliance documents as stated in above letters are required to be submitted” SKY POWER comment: reference is made to paragraph 2.1.1.(b) of the PPA, reproduced below: Sd/- D.G.M. (Commerical-3) R.0. MPMCL, Bhopal” B C
Thereafter, the first respondent sent communication dated
14.03.2017. It reads as follows: “SKY POWER GLOBAL March 14, 2017 D To, The Managing Director MP Power Management Company Limited Bittan Market, Bhopal-462016 Attention: Chief General Manager Commercial, MPPMC, Jabalpur. Ref: Submission of Documents to MP Power Management Company limited (“MPPMCL”) for fulfilment of Conditions subsequent by SkyPower southeast solar India private Limited (“Sky Power”) Reference: 1. Sky Poer Letter dated 10 March 2017,
2. Sky Power Letter SKP2/MP/SOLAR MPPMCL/2015-16/06 dated 12 Jan 2017
3. Agreement (PPA) dated September 18, 2015 between MPPMCL and Skypower E F G Dear Sir, Further to our office letter dated 10 March 2017 & skyP2/MP/ SOLAR/MPPMCL/2015-16/06 dated 12 Jan 2017 we hereby H SUPREME COURT REPORTS [2022] 5 S.C.R. submit that we have completed the entire acquisition for land 29, 85 Acres including balance 87.S Acres of land parcels. The relevant land registration documents have been enclosed for your perusal We hereby submit that we have duly completed land registration for 249,85 Acer for the project Thanking you in anticipation. MIS SKYPOWER SOUTHEAST SOLAR INDIA PRIVATE LIMITED Sd/- Shivani Jhariya (Authorized Signatory) Sd/- D.G.M. (Commerical-3) R.O. MPMCL, Bhopal”
After a gap of nearly five months, the next date, which is invoked by the appellant, is 09.08.2017. It is the case of the appellant that as the first respondent had failed to comply with the conditions subsequent, by misrepresentation and manipulation, it purported to obtain approval from the Chief Electrical Inspector General (CEIG) under Regulation 32 of the Central Electricity Authority (Measures relating to safety and electricity supply) Regulation, 2010 read with Section 162 of the Act. According to the appellant, the Report of the CEIG came to the knowledge of the appellant on 20.08.2017. Prior to the said date, the appellant purported to terminate the PPA in terms of Article 2.5.1(d) of the PPA, considering it to be mandatory by communication dated 11.08.2017. In short, according to the appellant, as the maximum period, within which, the conditions subsequent, had to be fulfilled, had run out on 15.01.2017, under the PPA, the appellant had no other option but to terminate the Agreement. This led to the first Writ Petition filed by the first respondent. The said Writ Petition, viz., Writ Petition No. 12880 of 2017, came to be allowed by the High Court by Judgment dated 20.06.2018. The relevant portion of the Judgment reads as follows: “2. The contract has been terminated on account of 54 days delay in achieving the first milestone i.e., procurement of land, financial closure and necessary permissions from the competent authority 12 A B C D E F G H M. P. POWER MANAGEMENT COMPANY LTD., JABALPUR v. M/S. SKY POWER SOUTHEAST SOLAR INDIA PVT. LTD. [K. M. JOSEPH, J.] within 210 days from the date of execution of agreement for completing the first part of the project. The only reason to terminate the agreement is that the petitioner has failed to achieve first milestone within 210 days though the condition of - procurement of land was modified after 210 days on 20.04.2016. The delay in achieving the first milestone is visited with penalty in terms of Clause 2.5. of the agreement.
3. Similar communication terminating the contract was set aside by this Court in Writ Petition No.12432/2017 (Renew Clean Energy Private Limited vs M.P. Power Management Company Limited and another) vide order dated 18.08.2017. In the said petition, the petitioner has admittedly commissioned the power project within the time prescribed except that there was delay of 16 days in achieving the first milestone. The said order has been affirmed on 05.04.2018 by the Hon’ble Supreme Court in Civil Appeal No.3600/ 2018 (M.P. Power Management Company Limited vs Renew Clean Energy Private Limited and another).
4. The parties are not ad idem about the stage of commissioning of the power project in the present petition.
5. Mr. Kaurav sought to justify the termination of the Power Purchase Agreement (PPA) asserting that the petitioner has not commissioned the power project within the time fixed in the agreement, but the lack of commissioning of power project is not the reason for terminating of the contract. Since, such is not the reason mentioned in the order terminating the agreement, therefore, the respondents cannot supplement the reasons for termination of the contract by virtue of additional assertions in the return and/or in the arguments raised in view of the Supreme Court decision in Mohinder Singh Gill v. Chief Election Commissioner (1978) 1 SCC 405.
6. In view of the fact that the similar reason of termination of the agreement has not been found to be justified in the matter of Renew Clean Energy Private Limited (supra), therefore, the impugned communication dated 11.08.2017 is hereby set aside. However, liberty is granted to the respondents to pass fresh orders in terms of Power Purchase Agreement dated 18th September, 2015 in accordance with law.” 13 A B C D E F G H 14 A B C D E F G SUPREME COURT REPORTS [2022] 5 S.C.R.
On 07.07.2018, the appellant issued the fresh termination notice. This came to be challenged by the first respondent by Writ Petition No. 420 of 2019. After exchange of pleadings, by the first impugned judgment dated 27.02.2020, the High Court set aside the termination order. Thereafter the appellant in September, 2020 filed review petition which came to be dismissed by the second impugned order. On 15.04.2021 this court issued notice and stayed the impugned orders.
We have heard Mr. K.M. Natraj, learned Additional Solicitor General on behalf of the appellant and Dr. A.M. Singhvi, learned Senior Counsel along with Mr. Naman Nagrath, learned Senior Counsel on behalf of the first respondent. We also heard Shri V. Giri, learned Senior Counsel appearing for the fifth respondent (Madhya Pradesh State Load Despatch Centre).
Shri K.M. Natraj, learned Additional Solicitor General submits that the impugned judgments are clearly unsustainable. He would firstly point out that the writ petition filed by the first respondent is not maintainable. The PPA in question is not a statutory contract and therefore interference with the order terminating the contract was not justifiable. In this regard he drew support from the judgment of this Court in Kerala State Electricity Board and Another v. Kurien E. Kalathil and Others1. He would next contend that the PPA contemplated provisions to resolve disputes. He further contended that first respondent should have resorted, if at all, to a civil suit to claim redress. He pointed out that a writ petition is a public law remedy. The contract in question not being statutory in nature, there was no public law element so as to justify the approach under Article 226. He would next contend that there is no basis for the High Court to have interfered at all.
This is a case where broadly the contract contemplated fulfilment of conditions at two stages. The first stage related to various conditions that had to be fulfilled by the first respondent which are described as conditions subsequent in the PPA. They are also aptly described as the pre-commissioning stage. The PPA clearly contemplated fulfilment of these conditions on an indisputable basis on or before 15.01.2017. In arriving at this date, the maximum period of 9 months contemplated under the PPA as the period which can be extended on payment of penalty is also included. However, the first respondent did not fulfil the conditions subsequent except with a further delay of 56 days. The PPA clearly provides that if the time limit is H 1 (2000) 6 SCC 293 M. P. POWER MANAGEMENT COMPANY LTD., JABALPUR v. M/S. SKY POWER SOUTHEAST SOLAR INDIA PVT. LTD. [K. M. JOSEPH, J.] exceeded which in this case was 15.01.2017, the appellant shall terminate the contract.
This is not a question of power or a discretion. This is a right which inhered with the appellant, a party to a contract. In this regard he would emphasise that while the State may be burdened with the obligation to act in a fair manner, it does not take away the rights available to the State as a party to a contract to exercise the right with it under the contract. In other words, the appellant as State within the meaning of Article 12 should not be denied the very right which could be duly exercised by a private party if it stood in the shoes of the appellant in similar circumstances. This is all that has been done by the appellant. Coming to the second stage, namely, commissioning of the project by the first respondent, our attention was drawn to Article 2.6 of the PPA. He contended that agreement contemplated commissioning of plant within 12 months from the date of the financial closure subject to Force Majeure.
He would point out that there were no circumstances for invoking Force Majeure. The period of 12 months from the date of financial closure determined the maximum period within which the commissioning had to take place. He would submit that first respondent was in breach of even commissioning. Therefore, on that score also, there is no justification for the High Court to have interfered in the matter. He would further submit that there is another vital circumstance which should have dissuaded the High Court from granting relief. The case threw up disputed questions of facts. On the one hand, it was the case of the first respondent, that the first respondent had proceeded to do everything within the time which is a period of two years from 18.09.2015, the date of the PPA, and it was only if commissioning was not done within the said period that what is described in the agreement as Seller’s default occurs.
Here is a case where the first respondent had not actually on the ground carried out necessary installation. In this regard, he would contend that while the CEIG has given its approval, the approval was granted without the first respondent having complied its obligations under the contract. In this regard essentially two aspects are projected. It is firstly pointed out that while the first writ petition was pending consideration, the appellant carried out an inspection on 19.04.2018. A report ensued on 21.04.2018. It was revealed that the approval which is granted by the CEIG may not advance the case of the first respondent as certain lacunae emerged. It was found by the inspecting team of the appellant that in the blocks 9 and 10 (the project of 50MW consisted of 10 blocks of 5 MW each), 61 inverters were missing. It was further 15 A B C D E F G H SUPREME COURT REPORTS [2022] 5 S.C.R. revealed that in regard to 258 invertors, there was duplication of numbers.
In other words, without there being the professed numbers of invertors as required under the contract, the approval of the CEIG was procured. In fact, this aspect, which when it was discovered by the appellant, formed the foundation for the review petition but was not favourably considered by the High Court. A writ petition in the facts of this case would not lie. He would submit that while a writ petition may be maintainable when the State is awarding its largesse in the form of award of contract, once it enters into a contract there would arise no occasion for the court to do judicial review and strike it down. Action taken by the state as contracting party when it is within the four walls of the contract is immune in public law proceedings. That an action may lie for breach of contract where the aggrieved party can seek damages should have weighed with the court. He would further contend that there is yet another dimension which has been overlooked by the High Court.
The overwhelming public interest in the facts of this case did not favour the writ court interfering in the matter. In this regard he would expatiate by pointing out that the interference by the High Court will produce the following results: The PPA casts an obligation on the appellant to purchase power at the rate of Rs.5.109 per unit for a period of 25 years. Power is available in the market at a far cheaper rate. The inevitable result of implementing the order of the High court would be that the appellant would have to purchase power at a much higher rate and what is more disturbing and should have troubled the High Court to decline jurisdiction is the aspect that the increased rate would have to be passed on to the end consumer. Put it differently, when the appellant being entitled to terminate the contract and would be in a position to purchase power at a cheaper rate and charge the consumers at the lower rate, by the court granting relief to the first respondent, the appellant is compelled to purchase power at the higher rate and that too for a long period of 25 years, and what is more, compelled to pass on the burden to the hapless consumer.
Thus, public interest in fact in the case lay in the court declining to grant relief to the first respondent. He would further point out that the impugned judgment does not deal with any of the aspects, be it the factual dimensions or the legal requirements. The judgment is bereft of discussion of the contentions raised by the appellant. He would therefore contend that the impugned judgments should be set aside and appeals allowed. 16 A B C D E F G H M. P. POWER MANAGEMENT COMPANY LTD., JABALPUR v. M/S. SKY POWER SOUTHEAST SOLAR INDIA PVT. LTD.
[K. M. JOSEPH, J.]
Per contra, Dr. A.M. Singhvi, learned Senior Counsel for the first respondent would point out that there is absolutely no basis for maintaining the appeal in the facts. He would point out that this is a case where the first respondent turned out to be the lowest bidder in respect of the project in question and what is more an incredible number of 182 bidders participated. It is trouncing its competitors that the holding company of the first respondent turned out to be the lowest bidder (here we must notice that during the course of the arguments the appellant did propose that first respondent could come up with proposal which apparently should involve rates lower than the contract rate so that the public interest concern is adequately addressed whereas the first respondent pointed out since it has planned for the project on the basis which made it the lowest bidder, it would not be feasible for it to reduce the rate any further).
Dr. Singhvi pointed out that there is no basis for discriminating the case of the first respondent and M/s. Renew Energy. It is pointed out that the High Court in the first round of litigation had interfered with the termination order following the judgment in Renew Energy. In the case of Renew Energy, it could achieve fulfilment of the conditions subsequent with a delay of 16 days which was condoned finally. In the case of the first respondent, the delay happened to be 56 days. Otherwise, their cases are similar. Renew Energy was allowed to commission whereas the first respondent was at the receiving end of discrimination without any basis. He would point out that the first respondent under the contract had 24 months from 18.09.2015 to commission the project. Well before the expiry of 24 months, the project was ready. The respondent was prevented from commissioning. A party cannot take advantage of its own wrong.
He would point out that the law has not stood still after this Court adopted a hands off approach in the decision in Radhakrishna Agrawal and others v. State of Bihar and others2. Imbibing the grand mandate in Article 14 that it behoves the State to steer clear of unfairness in all its acts, this Court has weaved a taboo against arbitrary action by the state even after it entered into a contract. He would point out in this regard the judgment of this Court in ABL International Ltd. v. Export Credit Guarantee Corpn. of India Ltd.3 and the decisions following the same approving of the writ court granting relief in contractual matters also. He would point out that, present arbitrariness, be it after a contract is entered into, the State has no place
Precedent status how later indexed judgments have treated this case
No known negative treatment found in the Courts & Cases corpus.
Another 2 relationships are under human verification and not counted above.
This is a result about the indexed corpus, not a finding that the judgment remains good law. Coverage may be incomplete.
Later judgments that treat this case
- Relied onodhc010401212023_1_2025-01-16
- Relied onodhc010403792023_1_2025-01-16