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 2 (hereinafter referred to as ‘the PPA’, for short), which was entered into by the appellant and the first respondent. The bidder subsequently incorporated the first respondent, viz., M/s Sky Power Southeast Solar India Private Limited as a special purpose company., M/s Sky Power Solar India Private Limited and M/s Sky Power Southeast Asia One Private Limited. 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) 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. Agreement (PPA) dated September 18, 2015 between MPPMCL and Skypower Dear Sir, Further to our office letter dated 10 March 2017 & skyP2/MP/SOLAR/MPPMCL/2015-16/06 dated 12 Jan 2017 we hereby submit that we have completed the entire acquisition for land 29, 85 Acres including balance 87.S Acres of land parcels. 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 8 mandatory by communication dated 11.08.2017. 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 within 2 I 0 days from the date of execution of agreement for completing the first part of the project.
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. After exchange of pleadings, by the first impugned judgment dated 27.02.2020, the High Court set aside the termination order. 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. 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. 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. 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.
It is firstly pointed out that while the first writ petition was pending consideration, the appellant carried out an inspection on 19.04.2018. He would submit that 15 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. 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. 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). It is pointed out that the High Court in the first round of litigation had interfered with the termination order 18 following the judgment in Renew Energy. He would point out that the first respondent under the contract had 24 months from 18.09.2015 to commission the project. He would point out that, present arbitrariness, be it after a contract is entered into, the State has no place to hide when action is challenged and its action must pass the scrutiny of the constitutional court. There are irrefutable documents in the form of invoices, bills of lading, lorry receipts which fortify the first respondent in its stand that it had installed all the invertors. The fact that in view of the play of market 21 forces, there has been a fall in the price of solar power and it would be open to the appellant to procure solar power at a cheaper rate should not allow the appellant to resile from its contractual obligations. The contention runs that by the judgment in the first writ petition the impugned order therein which was based on the first respondent not fulfilling the conditions subsequent was quashed. All that happened was after the inspection, in September, 2017 since the 23 first respondent was visited with the first order of termination dated 11.08.2017 which was challenged in the High Court, there was a shortage of personnel around the project site.
If such a notice had been given, the first 24 respondent would have had an opportunity if at all even proceeding on the basis of appellant’s contention being tenable to procure invertors which are portable and available in the market and redress the problem. The jurisdiction of the High Court under Article 226 in the overpowering presence of Article 14 would embrace the power to strike at arbitrary action by the State, even in the working out of rights in a non-statutory contract. He would also point out at any rate even proceeding on the basis that the High Court is bound by the earlier judgment at any rate, as far as this Court is concerned, it would be free to consider the issue as to whether on account of there being an admitted delay of 53 days by the first respondent beyond the maximum time contemplated under the contract for fulfilling conditions subsequent, whether the appellant was justified being duty bound in the matter of terminating the contract? Secondly, it is pointed out that in the case of Renew Energy, the said company had gone ahead and commissioned the project and the only aspect was the delay of 16 days whereas in the case of the first 27 respondent the contract was liable to be terminated both for the reasons that the conditions subsequent was not fulfilled within the maximum time and also for the reason that the first respondent had not commissioned the project within the time provided under the contract. (5) Whether the order dated 07.07.2018 terminating the contract based on first respondent not fulfilling the conditions subsequent is sustainable having 28 regard to the judgment rendered by the High Court in the earlier round of litigation on 20.06.2018? Article 299 provides for manner in which contracts made in the exercise of the executive power of the Union or the State is to be made. It is one thing to hold that the appellant, as a fully owned Government Company, would be State for the purpose of Article 12 of the Constitution of India and, quite another, to find that a contract is one 30 which is made in the executive power of the State within the meaning of Article 162 of the Constitution. The executive power of the Union and of each State shall extend to the carrying on of any trade or business and to the acquisition, holding and disposal of property and the making of contracts for any purpose: Provided that — (a) the said executive power of the Union shall, in so far as such trade or business or 31 such purpose is not one with respect to which Parliament may make laws, be subject in each State to legislation by the State; and (b) the said executive power of each State shall, in so far as such trade or business or such purpose is not one with respect to which the State Legislature may make laws, be subject to legislation by Parliament.” It is pertinent to notice the Objects and Reasons. At the same time, the revised article provides that this extended executive power of the Union and of the States will be subject, in the former case, to legislation by the State, and in the latter case, to legislation by Parliament.” WHETHER THE PPA IS A STATUTORY CONTRACT? We are also unable to agree with the observations of the High Court that the contractor was seeking enforcement of a (2000) 6 SCC 293 33 statutory contract. We are also unable to agree with the observation of the High Court that since the obligations imposed by the contract on the contracting parties come within the purview of the Contract Act, that would not make the contract statutory. The disputes relating to interpretation of the terms and conditions of such a contract could not have been agitated in a petition under Article 226 of the Constitution of India. The contractor should have relegated to other remedies.” As to what is a statutory contract, fell for consideration before this Court in the case reported in India Thermal Power Ltd. While negotiations were going on between the respondent- State, Electricity Board and independent power producers, on the basis of State inviting offers from potential private investors, for establishing power projects, the Central Government amended the earlier Tariff Notification. If entering into a contract containing the prescribed terms and conditions is a must under the statute then that contract becomes a statutory contract.
– Notwithstanding anything to the contrary contained in any other provisions of this Act and subject to such terms and conditions as may be specified in the regulations, the Authority may, by agreement, authorize any person to provide or maintain or continue to provide or maintain any infrastructure or amenities under this Act and to collect taxes or fees, as the case may be, levied therefor.” and others, took the view that the agreement in question did not acquire the status of a statutory contract merely for having been executed in terms of the power under Section 6A. Section 63 of the Electricity Act, 2003, reads as follows: “63 (Determination of tariff by bidding process) Notwithstanding anything contained in Section 62, the appropriate Commission shall adopt the tariff, if such tariff has been determined through transparent process of bidding in accordance with the guidelines issued by the Central Government.” In the Statutory PPA in question, under the definition clause (Article 1), bidding guidelines have been defined as follows: “Bidding Guidelines” shall mean the “Guidelines for Tariff Based Competitive Bidding Process for Grid Connected Power Projects Based on Renewable Energy Sources” issued by Government of lndia, Ministry of New and Renewable Energy on December, 2012 under Section – 63 of the Electricity Act and as amended from time to time;” 26. Thus, it is for the purpose of applying the tariff determined under Section 63 for the purpose of adopting the tariff under Section 62, that the guidelines issued by the Central Government become relevant. The expression ‘terms and conditions’, which are statutory in nature, must be understood as those statutory terms and conditions, which provide for rights and obligations of the contracting parties. What is the scope of judicial review of action by the State in a matter arising from a contract and what is the effect of the contract not being statutory? The Court took the view that the only question which normally arises in such cases is as to whether the action complained of was in conformity with the agreement. , a Constitution Bench of this Court observed: “The appellants have displayed ingenuity in their search for invalidating circumstances but a writ petition is not an appropriate remedy for impeaching contractual obligations.” (1972) 4 SCC 781 (1975) 1 SCC 737 44 28. The condition of eligibility was that the person submitting a tender must be conducting or running a registered IInd Class hotel or restaurant and he must have at least 5 years’ experience as such and if he did not satisfy this condition of eligibility, his tender would not be eligible for consideration.
It is a well-settled rule of administrative law that an executive (1979) 3 SCC 489 45 authority must be rigorously held to the standards by which it professes its actions to be judged and it must scrupulously observe those standards on pain of invalidation of an act in violation of them. Bhagatram [(1975) 1 SCC 421, 462 : 1975 SCC (L&S) 101 : (1975) 3 SCR 619], Mathew, J., quoted the above-referred observations of Mr Justice Frankfurter with approval. Whatever be the concept of the Rule of Law, whether it be the meaning given by Dicey in his “ The Law of the Constitution ” or the definition given by Hayek in his “ Road to Serfdom ” and “ Constitution of Liberty ” or the exposition set forth by Harry Jones in his “ The Rule of Law and the Welfare State ”, there is as pointed out by Mathew, J., in his article on “The Welfare State, Rule of Law and Natural Justice” in “ Democracy, Equality and Freedom ” [ Upendra Baxi, Ed.
28] “substantial agreement in juristic thought that the great purpose of the rule of law notion is the protection of the individual 47 against arbitrary exercise of power, wherever it is found”. It is indeed unthinkable that in a democracy governed by the rule of law the executive Government or any of its officers should possess arbitrary power over the interests of the individual. Delhi Development Authority [(1980) 2 SCC 129 : (1980) 2 SCR 704] and
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DFO v. It appears to us, at the outset, that in the facts and circumstances of the case, the respondent company IOC is an organ of the State or an instrumentality of the State as contemplated under Article 12 of the Constitution. In a situation of this nature certain activities of the respondent company which constituted Radha State under Article 12 of the Constitution may be in certain circumstances subject to Article 14 of the Constitution in entering or not entering into contracts and must be reasonable and taken only upon lawful and relevant consideration; it depends upon facts and circumstances of a particular transaction whether hearing is necessary and reasons have to be stated. 50 Where there is arbitrariness in State action of this type of entering or not entering into contracts, Article 14 springs up and judicial review strikes such an action down. Even though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and non- discrimination in the type of the transactions 51 and nature of the dealing as in the present case. It is true that there is discrimination between power and right but whether the State or the instrumentality of a State has the right to function in public field or private field is a matter which, in our opinion, depends upon the facts and circumstances of the situation, but such exercise of power cannot be dealt with by the State or the instrumentality of the State without informing and taking into confidence, the party whose rights and powers are affected 52 or sought to be affected, into confidence. Private parties are concerned only with their personal interest whereas the State while exercising its powers and discharging its functions, acts indubitably, as is expected of it, for public good and in public interest. However, to the extent, challenge is made on the ground of violation of Article 14 by alleging that the impugned act is arbitrary, unfair or unreasonable, the fact that the dispute also falls within the domain of contractual obligations would not relieve the State of its obligation to comply with the basic requirements of Article 14.
The State cannot be attributed the split personality of Dr Jekyll and Mr Hyde in the contractual field so as to impress on it all the characteristics of the State at the threshold while making a contract requiring it to fulfil the obligation of Article 14 of the Constitution and thereafter permitting it to cast off its garb of State to adorn the new robe of a private body during the subsistence of the contract enabling it to act arbitrarily subject only to the contractual obligations and remedies flowing from it. Unlike a private party whose acts uninformed by reason and influenced by personal predilections in contractual matters may result in adverse consequences to it alone without affecting the public interest, any such act of the State or a public body even in this field would adversely affect the public interest. We, therefore, find it difficult and unrealistic 55 to exclude the State actions in contractual matters, after the contract has been made, from the purview of judicial review to test its validity on the anvil of Article 14.” (Emphasis supplied) As to what constitutes arbitrariness is captured in paragraph 36 and it reads as follows: “36. Rule of law contemplates governance by laws and not by humour, whims or caprices of the men to whom the governance is entrusted for the time being. , the Court was dealing with a case of a writ petition filed by the respondent therein which was a public sector corporation and seeking payment allegedly due from the appellant state. The prayer in the writ petition, viz., to restrain the Government from deducting a particular amount from the writ petitioner’s bill(s) was not a prayer which could be granted by the High Court under Article 226.
… Though there is one set of cases rendered by this Court of the type arising in Radhakrishna Agarwal case [(1977) 3 SCC 457 : AIR 1977 SC 1496] much water has flown in the stream of judicial review in contractual field. After entering into a contract, in cancelling the contract which is subject to terms of the statutory provisions, as in the present case, it cannot be said that the matter falls purely in a contractual field. Sadasivan and Others, this Court was dealing with termination of services of respondents who were working as Members of the Management, staff of the appellant company. The power must be used for lawful purposes and not unreasonably.” (Emphasis supplied) The Court went to hold that the decision of the employer to terminate the services of the employees could not be said to have any element of public policy. The Court further proceeded to hold that the Writ Petition was not maintainable against the respondent, noticing that neither was the respondent set up by a Statute nor were its activities statutorily controlled. However, while entertaining an objection as to the maintainability of a writ petition under Article 226 of the Constitution of India, the court should bear in mind the fact that the power to issue writ prerogatives under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the Constitution.
We may also notice how this Court steered clear of the criticism that it was not following the principle laid down by this Court in State of U.P. The Court noted that the said case did involve a contract which contained an arbitration clause. It is found that in the case before it there was no arbitration clause. A distinction indisputably must be made between a matter which is at the threshold of a contract and a breach of contract; whereas in the former the court’s scrutiny would be more intrusive, in the latter the court may not ordinarily exercise its discretionary jurisdiction of judicial review, unless it is found to be violative of Article 14 of the Constitution. Although the scope of judicial review or the development of law in this field has been noticed hereinbefore particularly in the light of the decision of this Court in ABL International Ltd.
The submission of Mr Desai that rise in international price would not by itself be a relevant consideration to rescind the contract may be correct, but then the same was not the sole ground for Respondent 2 to refuse to supply iron ore fines to the appellant. [(1991) 1 SCC 212: 1991 SCC (L&S) 742] held that every State action, in order to survive, must not be susceptible to the vice of arbitrariness which is the crux of Article 14 and basic to the rule of law, the system which governs us, arbitrariness being the negation of the rule of law. This type of decision is often termed arbitrary and capricious.” To the same effect is the meaning given to the expression “arbitrary” by Corpus Juris Secundum which explains the term in the following words: “Arbitrary.—Based alone upon one’s will, and not upon any course of reasoning and exercise of judgment; bound by no law; capricious; exercised according to one’s own will or caprice and therefore conveying a notion of a tendency to abuse possession of power; fixed or done capriciously or at pleasure, without adequate determining principle, non-rational, or not done or acting according to reason or judgment; not based upon actuality but beyond a reasonable extent; not founded in the nature of things; not governed by any fixed rules or standard; also, in a somewhat different sense, absolute in power, despotic, or tyrannical; harsh and unforbearing. Absence of reasons either in the order passed by the authority or in the record contemporaneously maintained is clearly suggestive of the order being arbitrary hence legally unsustainable.”
In this regard supporting an order with a rationale which in the circumstances is found to be reasonable will go a long way to repel a challenge to state action. The case of the respondent, inter alia, was one denying the case of the petitioner that the omission of Section (2015) 7 SCC 728 70 42 was by oversight. At the same time, discretion lies with the High Court which under certain circumstances, it can refuse to exercise.
State in its executive capacity, even in the contractual field, is under obligation to act fairly and cannot practise some discriminations. Writ jurisdiction of the High Court under Article 226 of the Constitution was not intended 72 to facilitate avoidance of obligation voluntarily incurred. If the contract between private party and the State/instrumentality and/or agency of the State is under the realm of a private law and there is no element of public law, the normal course for the aggrieved party, is to invoke the remedies provided under ordinary civil law rather than approaching the High Court under Article 226 of the Constitution of India and invoking its extraordinary jurisdiction. Once on the facts of a particular case it is found that nature of the activity or controversy involves public law element, then the matter can be examined by the High Court in writ petitions under Article 226 of the Constitution of India to see whether action of the State and/or instrumentality or agency of the State is fair, just and equitable or that relevant factors are taken into consideration and irrelevant factors have not gone into the decision-making process or that the decision is not arbitrary. Jose, the specific question with which we are concerned with, namely, entertaining a writ petition in a contractual matter and where the specific question was the validity of the termination of the contract, fell for consideration. The present case clearly indicates that the factual disputes are involved.” Thereafter, the court went on to consider in detail the judgment of this Court in ABL (supra) and found that it was a case where the court granted relief as the facts were absolutely clear from the documentary evidence and it pertained to interpretation of such clauses of the contract of insurance. It may be added that every case in which a citizen/person knocks at the doors of the writ court for breach of his or its fundamental 2020 SCC
Online 847 76 rights is a matter which contains a “public law element”, as opposed to a case which is concerned only with breach of contract and damages flowing therefrom. The present case is, therefore, a case which involves a “public law element” in that the petitioner (Respondent No 1 before us) who knocked at the doors of the writ court alleged breach of the audi alteram partem rule, as the entire proceedings leading to cancellation of the tender, together with the cancellation itself, were done on an ex parte appraisal of the facts behind his back.” We have already concluded that PPA is not a Statutory Contract. In other words, while the Court would retain its discretion to entertain the petition or decline to do so, in the facts of each case, there is no absolute taboo against the Court granting relief, even if the challenge to the termination of a contract is made in 77 the case of a contract, which is not statutory in nature, when the offending party is the State. The mere fact that relief is sought under a contract which is not statutory, will not entitle the respondent-State in a case by itself to ward-off scrutiny of its action or inaction under the contract, if the complaining party is able to establish that the action/ inaction is, per se, arbitrary. After the contract is entered into, there can be a variety of circumstances, which may provide a cause of action to a party to the contract with the State, to seek relief by filing a Writ Petition.
The existence of a provision for arbitration, 81 which is a forum intended to quicken the pace of dispute resolution, is viewed as a near bar to the entertainment of a Writ Petition (See in this regard, the view of this Court even in ABL (supra) explaining how it distinguished the decision of this Court in State of U.P. The reach of Article 14 enables a Writ Court to deal with arbitrary State action even after a contract is entered into by the State. When it comes to a challenge to the termination of a contract by the State, which is a non-statutory body, which 83 is acting in purported exercise of the powers/rights under such a contract, it would be over simplifying a complex issue to lay down any inflexible Rule in favour of the Court turning away the petitioner to alternate Fora. If a case involves a large body of documents and the Court is called upon to enter upon findings of 84 facts and involves merely the construction of the document, it may not be an unsound discretion to relegate the party to the alternate remedy. While the concept of an arbitrary action or inaction cannot be cribbed or confined to any immutable mantra, and must be laid bare, with reference to the facts of each case, it cannot be a mere allegation of breach of contract that would suffice. Before we proceed to deal further with the matter, 87 we would have to first find whether there is any arbitration clause. In the earlier round the respondents had successfully invoked the 88 jurisdiction under Article 226 when it was served with the order of termination of the contract dated 11.08.2017. It is the case of the appellant in fact, that the judgment of the High Court in the earlier round would not be an obstacle for the appellant to revisit and terminate the contract for the reason that the PPA made it incumbent on the appellant to terminate the contract under Article 2.1(d) if the contractor did not fulfil the conditions subsequent even after the expiry of 210 days and a further period of nine months after the commencement of PPA.
In regard to fulfilment of said milestone for which there was a delay of 16 days in the case of Renew clean Energy, 90 there was a delay of 54 days in the case of the first respondent. It is further noticed by the High Court that there was an order passed in favour of the Renew clean energy setting aside the termination of the contract in the said petitioner’s case as confirmed by this Court. The appellants would persuade us to hold that the High Court intended, by the liberty granted to leave it open to the appellant to pass orders invoking its power under the PPA which would not only include termination of the PPA based on respondent not commissioning the project within the time but also revisit the aspect relating to non-fulfilment of the conditions subsequent. Having noticed the contents of the decision of the High court dated 20.06.2018 and also bearing in mind the terms of the notice of termination dated 11.08.2017 we are of the view that the High Court must be treated as having interfered with the order based no doubt on 93 the order of the said court as affirmed by this Court in the case of Renew Clean Energy. Noticing, however, the contentions based on the aspect relating to project not being commissioned by the respondent within time and further clearly finding that the impugned order was not premised on project not being commissioned the impugned order was set aside finding that the termination was not justified as regards to non- fulfilment of conditions subsequent. The further stand is that none of the regulatory provisions allows it to interfere in pre-requisite regulatory compliance by the generator before injecting of power into the Grid. When the line holds for a reasonable time, unique code for injection is issued. CEIG approval is only for renewable energy generation units and equipments installed in the Switchyard. In the said communication, on a letterhead showing the name of the fourth respondent and also showing the name of the fifth respondent, it is stated that the telemetry scheme for the 100MW solar power plant was generally in order and accepted for implementation, subject to four conditions stipulated therein. 4 and 5 and signed by the Superintending Engineer, wherein also, the names of Respondent Nos. It is admitted that it is stated therein that the line is ready for charging but further necessary action, like issuing of charging code, has to be taken from Respondent No.5 by Respondent No.1.
The fifth respondent in the Sur-Rejoinder responded by pointing out that Respondent No.5 is the Nodal Body for managing the grid operations and within the State and it is generally seen that if the plant is commissioned the same cannot be left idle and be allowed to inject power into the grid, and it was in this regard, it was mentioned that if a third-party sale was to be undertaken by Respondent No.1 so that its plant was not left idle, then, it was incumbent on Respondent No.1 to have obtained open access. Article 9.7 also provides 101 for the obligation of the appellant to buy power for twenty-five years. line from 400KV PS Chhegaon to 50MW Pooling Station of M/S Sky Power Solar India Pvt. It appears to us that though letter dated 10.08.2017 is addressed to the sister concern of Respondent No.1, viz., Sky Power Solar India Pvt. From the Joint Inspection Report, bearing in mind that 132KV line had a dual circuit, the same line was to be used by the first respondent and its sister concern. We find that Chief Engineer (Procurement) of the fourth respondent has recorded in the communication dated 05.09.2017 that PTCC had accorded PTCC route approval: “With reference to the subject cited above, DET (PTCC), Mumbai has accorded PTCC route approval for charging 132KV DCDS line from 400kV S/s Chhegaon to 100MW Solar Power Project of M/s SkyPower Solar India & M/s SkyPower Southeast Solar India Pvt. It is, no doubt, true that as regards the contention of the fifth respondent that there must be interface metering and communication of the meter data through automatic meter reading (AMR), which details are to be provided to the SLDC before the commissioning of the plant, there is no specific averment by the first respondent. It is complained that till date, the telemetry and voice communication was not working, in spite of the fact that by letter dated 03.04.2017, relevant IP address for real time data communication was furnished. Emphasis is placed on the statement of Respondent no.5 by respondent no.1 wherein it is stated “whereas though the generating station is ready for generation of power but the power cannot be evacuated into the grid in the absence of transmission line”. That, in accordance with Electricity act, 2003, role of SLDC comes after commissioning of the generating plant and its evacuating transmission lines. It will be noticed that though respondent no.5 was a party to the earlier writ petition as much as it is 109 a party in the present writ petition, respondent no.5 has not filed any counter affidavit in either of the writ petitions. Section 31 reads as follows: “Constitution of State Load Despatch Centres.—(1) The State Government shall establish a Centre to be known as the State Load Despatch Centre for the purpose of exercising the powers and discharging the functions under this Part. It would, therefore, appear to us that if the fourth respondent is the State Transmission Utility, it would be the Body to operate the fifth respondent. While the law has evolved from the hands-off approach to one of contracts lending ground for writ courts making a foray into decisions by State and its instrumentalities even in contractual matter, there are certain principles which we have already in fact generally noticed.
The dispute which must be capable of being resolved on a proper understanding of documents which are not in dispute may furnish a cause of action in a writ court. As far as the public law aspect is concerned, we are inclined to take the view that in view of what has been laid down in Shri Vidhyarthi Lekha (supra), the impact of the action in a contractual matter in the facts by public authority is felt in public domain. Having found that though a non-statutory contract and that there is no absolute prohibition against judicial review on the score that action is shown to be arbitrary, the questions which would fall for further consideration are: (1) whether action is arbitrary (2) the projected disputes of facts and their impact; (3) what is the impact of the principle that there must be overwhelming public interest in favour of writ applicant for the writ court to interfere.
Sasan Power Limited and others, for the proposition that the Court must be mindful of public interest, which consists of interest of the consumers ultimately. The rate per unit, in the case of the first respondent, is Rs.5.109 per unit. The quantum of the project of the first respondent is only 50 megawatts, which constitutes 0.33 per cent of the total demand. Regard being had to the aforesaid decisions, it is clear that when waiver is spoken of in the realm of contract, Section 63 of the Contract Act, 1872 governs. It is thus clear that if there is any element of public interest involved, the court steps in to thwart any waiver which may be contrary to such public interest.” 83. Courts need to have a broader understanding of public interest, while reviewing such contracts.” In fact, the principle of public interest has found expression in cases which involved challenge to the legality of the award of contract.[See in this regard Tata Cellular v.
State of Karnataka and Others after referring to Tata Cellular and Raunaq International Limited (supra), the Court inter alia held as follows: – “35. and Others the case involved award of contract for the purpose of Thermal Power Station. Poor quality of work or goods can lead to tremendous public hardship and substantial financial outlay either in correcting mistakes or in rectifying defects or even at times in redoing the entire work — thus involving larger outlays of public money and delaying the availability of services, facilities or goods, e.g., a delay in commissioning a power project, as in the present case, could lead to power shortages, retardation of industrial development, hardship to the general public and substantial When a writ petition is filed in the High Court challenging the award of a contract by a public authority or the State, the court must be satisfied that there is some element of public interest involved in entertaining such a petition.
If the aspect of public interest flows entirely on the basis that the rates embodied in the contract which is arbitrarily terminated has with the passage of time become less appealing to the State or that because of the free play of market forces or other developments, there is a fall 123 in the rate of price of the services or goods then this cannot become determinative of the question as to whether court should decline jurisdiction. Article 2.1 deals with satisfaction of the conditions subsequent by the 124 respondent. Clause 2.1.1 contemplates that the respondent must complete all the conditions which are set out at his own cost and risk within 210 days from the effective date. Article 2.5 provided for delay in achieving the conditions subsequent. 125 b) Delay from 3-6 months – 2% per week for the period exceeding 3 months, apart from (a) above. In case of Solar Project of capacity beyond 50 MW and up to 100 MW, commissioning of plant shall be within 15 months from the date of financial closure subject to Force Majeure For capacity beyond 100 MW, commissioning period shall be within 18 months from the date of financial closure subject to Force Majeure..1 In case of failure to achieve this milestone, provision of PPA as mentioned below shall apply: – MPPMCL shall en cash the CPG in the following manner for the capacity not commissioned, subject to Force Majeure:- 126 a) Delay from 0-3 months – 1% per week. Or in multiple of 5 MW COD means the commissioning date of just units (s) of the power project where upon the seller starts injecting power from full contracted capacity of the power project to the delivery point; as approved by competent authority of the Transco/Discom. The Seller shall ensure to interconnect and operate the solar power plant in parallel with the grid of Transco/Discom (in the area of the location of the generating unit) system subject to the terms and provisions of this agreement. b)
For the power plant situated in MP State, the power evacuation infrastructure laid by the Seller shall be the property of the concerned licensee (Transco/Discom) in whose territorial area the above lines are located – notwithstanding the fact that the cost of the said infrastructure has been paid by the Seller and the same. In case of the system is located in any other state, the Seller has to follow the regulations of the particular SLDCIRLDC and the fees and charges shall be payable by the seller accordingly.” “4.2.4.
COMMERCIAL OPERATIONS DATE The Commercial Operation Date of the plant shall mean the commissioning date of last unit (s) of the power project where upon the seller starts injecting power from contracted capacity of the power project to the delivery point as approved by competent authority of the Transco/discom. It reads as follows:- “5.3 NOTICE OF COMMERCIAL OPERATIONS:- The Seller will specify in a written notice to the MPPMCL that: a) The Plant is constructed in accordance with this Agreement and is ready to deliver Solar Power in accordance with the terms hereof; b) All permissions and approvals required for the Plant to sell Solar Power at the rates and terms specified under this Agreement have been obtained and c) All interconnection facilities are available to receive Solar Power from the Plant. The Seller has successfully completed 131 the testing of the Plant in accordance with the manufacturer’s recommendations and the Seller has obtained and provided to the STU/CTU/Transco/Discom Certificates from the Electrical Inspectorate of GoMP or any other state government authorised agency, and the STU/Transco/Discom’s officer as may be designated; in case project is located in MP.
The PPA further deals with Sale and Purchase of Solar Power in Article 6 commencing at COD date. If the default is not 133 fully set right within three months from the date of issue of the default notice, then in case of default by the Seller, the MPPMC.L by giving seven days termination notice in writing, may terminate the agreement. SELLER EVENT OF DEFAULT The occurrence and continuation of any of the following events, unless any such event occurs as a result ofa Force Majeure Event, shall constitute Seller Event of Default: a) The failure to commence supply of power to MPPMCL up to the Contracted, Capacity, relevant to the Scheduled Commissioning Date, by the end of 24 months; or” 97. In case MPPMCL refuses or is unable to buy the said power, fully or partially, or there is an event of default 134 as per Clause 9.5 of PPA leading to termination of the PPA, the seller would be free to sell the said power to a Third Party at any rate which will be decided between the Seller and the said Third Party and such sale would be governed by the following principles : ” (Emphasis supplied) Within thirty (30) days of issue of Dispute Notice by any Party pursuant to Article 13.2.1 if the other Party does 135 – not furnish any counter claim or defence under Article 13.2.2 or thirty (30) days from the date of furnishing counter claims or defence by the other Party, both the Parties to the Dispute shall meet to settle such Dispute amicably. If the Parties fail to resolve the Dispute amicably within thirty (30) days from the later of the dates mentioned in this Article, the Dispute shall be referred for dispute resolution in accordance with Article 13.3.” Article 12.2 reads as follows: “12.2 GRID CODE DISCIPLINE The concerned Transco/Discom and the Seller shall observe the State/Indian Electricity Grid Code if any, and operate their systems to the best of their capacity and resources.” 100. Thereafter, the finding is that the project was certified to be completed much prior to 24 months which period ended on 19.9.2017 and the notice of commissioning was given on 4.7.2017.
The fraud consisted of the act of the respondent relying on unique/distinctive serial numbers of the invertors in regard to a number of invertors which were found to be common/duplicate. In other words, it was the appellants case that the respondent had not complied with the PPA in regard to the installing of the required number of invertors. The expiry date of three months period for commencement of supply from the last due date was 18.12.2017.
Apart from non-fulfilment of the condition subsequent, apparently, in tune with the liberty granted by the High Court, the appellant has set out a case that the last date of commencement of supply was 18.09.2017, and even as on 19.04.2018, the respondent was not ready for commissioning of the project.
Also Read: https://newslaw.in/supreme-court/c-a-no-008714-008714-2022/
The case that the first respondent has projected in the Writ Petition, on the other hand, is, inter 141 alia, as follows: On 04.07.2017, while issuing letter to respondent no.4, it issued notice for commissioning by 31.07.2017, in terms of Article 5.1(c) of the PPA. It is the specific case of the respondent that prior to 11.08.2017, first respondent had received intimation from its EPC Contractor that the project 142 was ready for commissioning barring minor works pending completion such as construction of shed/cubical for the Guard which would have no bearing on the project commissioning. It is also seen stated that the project was complete in all respects from the side of the respondent but on account of theft of a very small number of equipment, highlighted by the appellant in its Inspection Report, the first respondent had, in the meanwhile ensured to get these miscellaneous equipments and parts reinstalled and the project was complete in all respects as on that date. On the other hand, the case of the respondent is based on the Report of the CEIG, which would show that the respondent was ready to commission the project.
However, we have already concluded that the issue as to the right or power of the appellant to terminate the PPA on account of the delay of 53 days, may not be open to the appellant, in view of the Judgment of the High Court. 350 crores would be the subject matter of the lacunae that was pointed out by the Inspecting Team in its Report dated 19.04.2018. Reading Article 9.1 with Article 9.4 and, more particularly, Article 9.4.(a), which alone is relevant, we understand the following to be what is contemplated by the parties. Article 9.1 further clearly contemplates that if the default is not fully set right within three months from the date of issue of the default notice, then, in the case of default by the 148 seller, the appellant was to serve a seven days’ notice of termination.
Without issuing the first default notice, giving three months’ time from the date of issue of the notice, the second notice, which would be a notice of termination, cannot be issued. contracted capacity from date of PPA) + 3 months (default notice period) +
7 days (termination notice period), from the signing of the PPA have already being exhausted. Therefore, in line and in compliance to the Hon’ble High Court judgment dated 20.06.2018 and pursuant to the provision under Article-2.5.1 (d) along with the consideration of the timeline stipulated in Article 9.1 of the PPA and showcause notice 150 dated 22.02.2017, the PPA signed on 18 Sept.
Therefore, the show-cause notice dated 22.02.2017 is what the appellant lays store by to conclude that it was acting in compliance with the requirement of 151 issuance of the default notice under Article 9.1. Subject: submission of documents for fulfilment of condition subsequent in respect of your 50MW Solar Power project proposed at Village Chhirbel, Tallika Tal Khandwa under Phase-III solar competitive bidding. whereas for 34.12 hectare land you have submitted unregistered lease deed for only 12 months, which cannot be considered for fulfilment of condition subsequent as per provisions of the PPA as mentioned above. In other words, the seller’s event of default under Article 9.4(a) could have become the subject matter of a notice under Article 9.1 only if there was failure on the part of the first respondent to supply power, as provided in Article 9.4(a), within twenty-four months. Apparently, what has happened is the appellant has combined the default alleged with reference to Article 2.5.1(d), to which, undoubtedly, notice dated 22.02.2017, could be said to be related and has projected the said show-cause notice as the default notice within the meaning of Article 9.1 read with Article 9.4. For the 156 reasons, which we have indicated hereinbefore, the notice could not have been issued based on there being a seller’s default within the meaning of Article 9.4.(a) on 22.02.2017.
Appellant has attempted to justify the notice dated 22.02.2017 as the show-cause notice within the meaning of Article 9.1 based on the Judgment of the High Court in the first round of litigation. It becomes clear as day light that since by the date of the Judgment, i.e., 20.06.2018, the period of twenty-four months from the date of the agreement, had expired, and if, in terms of the liberty granted by the High Court, the appellant was to lawfully terminate the contract, it could not have acted in breach of the mandate of the PPA, which, in fact, the High Court had specifically directed appellant to comply with. The appellant has, in fact, proceeded in the notice of termination that the three months period, contemplated in Article 9.1, came to an end automatically, on 18.12.2017 and things had not changed on the ground, entitling it to issue the notice dated 07.07.2018, after the further expiry of seven days on 25.12.2017. On this reasoning, there can be no dispute that the appellant has clearly failed to act in terms of the clear mandate of Article 9.1 read with Article 9.4.(a). The impugned notice dated 11.08.2017, brought about the termination of the contract. No the really significant fact is that after the appellant terminated the contract on 11.08.2017, it is wholly inconceivable and arbitrary to predicate that the first respondent should have commenced the project and complied with Article 161 9.4(a) by 18.09.2017. It could be argued that dehors a contractual provision, unless it be that the contract peremptorily provides for the termination of the contract expressly without service of the notice on the occurrence of certain stipulated events, principles of natural justice may not be out of place and under the Theory of Fair State Action, in consonance with Article 14, an opportunity to the awardee as to why the contract should not be terminated, may be just. Whenever a plea of breach of natural justice is made against the State, the said plea, if found sustainable, sounds in constitutional law as arbitrary State action, which attracts the provisions of Article 14 of the Constitution of India – see Nawabkhan Abbaskhan v. Having found that the impugned termination Order dated 07.07.2018 ill squares with the requirement of Article 9.1, the question may arise, whether this is a matter which should be the basis for interference in powers of judicial review under Article 226. If on the other hand, complying with Article 9.1 was, indeed, meaningful and the default (Article 9.4.(a) could have been removed as contemplated under Article 9.1, then, undoubtedly, it may constitute arbitrariness to deprive the first respondent of the benefit of a default notice. 166 Subject: Notice to Commission on the 50 MW Solar Power Project of SkyPower Southeast Solar India Private Limited located at Village Chirbel, District Khandwa (“Project”), and Evacuation of Power from the Project to the 400 KV Chhagaon Sostation.
In relating to the commissioning of the Project by the Proposed Commissioning Date, we would like to apprise you of the progress made by use in relation to completion of some of the critical path items for the Project- • Transmission Line – 95% work has been completed as on 28 June, 2017 for the 132KV DCDS (double circuit double string) transmission line from location of the Project to the 400KV substation Chhegaon. • SLDC connectivity- Connectivity from plant to the SLDC-Indore is already established through dedicated 2nox2mbps point to point lease lines from BSNL (as per approved scheme of SLDC on 23 March, 2017 through letter no. Notice is to take effect, however, only when the TRANSCO/DISCOM declares that all the conditions in Article 5.3 stood satisfied (or waived by it), inter alia, i.e., that the seller had successfully completed the testing of the plant in accordance with the manufacturer’s recommendations and the seller had obtained and provided from the Electrical Inspectorate of the Government of Madhya Pradesh or other authorised agency, a certificate and the seller had delivered a list of the equipments with details.
Balance 5 per cent, it is stated, would be completed by the 15.07.2017 in all respects. No doubt, the appellant has proceeded on the basis that the notice dated 04.07.2017 cannot be treated under Article 5.3 of the PPA. Thereafter, Article 9.1 provides that in case of the default by the seller not being removed fully, apparently, the appellant by giving seven days termination notice ‘may’ terminate the agreement.
Apparently, it was so drafted so that in an event like in a seller event of default under Article 9.4.(a), i.e., failure by the seller to supply power within 24 months, bearing in mind the nature of project and the stakes involved for both the appellant and the seller, there may be cases where the seller may wish to grant more time so that a project which has progressed to a state of near completion may not be aborted by the termination and grant of time would, on the other hand, witness the full blossoming of the project.
Also, though the appellant was invited to carry out the inspection on 04.07.2017, the appellant carried out the inspection only on 19.04.2018 and the Report was dated 21.04.2018. Any other specified observation in respect of installation of solar P.V plant In block 9 and 10, string inverters were not found at many location but those location had solar panels installed interconnections of PV panel (cabling) string work at there location are not found connected with each other Further, at some location the cable and earthing work is observed incomplieto & suspended.” 125.
Case Title: M.P. POWER MANAGEMENT COMPANY LIMITED Vs. M/S SKY POWER SOUTHEAST SOLAR INDIA PRIVATE LTD. (2022 INSC 1208)
Case Number: C.A. No.-008515-008516 / 2022
