Case Note & Summary
The appellant, M.P. Power Management Company Limited, a wholly owned government company responsible for bulk purchase of electricity in Madhya Pradesh, issued a request for proposal for procurement of 300 MW solar energy. The bid of M/s Sky Power Southeast Asia Holding Limited was accepted, and it incorporated the first respondent as a special purpose company for a 50 MW project. A Power Purchase Agreement was executed on 18.09.2015, with a tariff of Rs.5.109 per unit. The PPA required the seller to fulfill conditions subsequent within 210 days, i.e., by 15.04.2016, with an extension of nine months on payment of penalty, making the final deadline 15.01.2017. The first respondent failed to comply within this period. On 12.01.2017, it submitted documents claiming compliance, but the appellant found deficiencies, including lack of land documents and financial closure. After correspondence, the appellant issued a termination notice on 11.08.2017. The first respondent challenged this in Writ Petition No. 12880 of 2017, which was allowed by the High Court on 20.06.2018, relying on a similar case (Renew Clean Energy Private Limited) where termination for delay in first milestone was set aside. The High Court set aside the termination but granted liberty to pass fresh orders. Consequently, the appellant issued a fresh termination order on 07.07.2018, which was challenged in Writ Petition No. 420 of 2019. The High Court again set aside the termination on 27.02.2020, and dismissed the review on 28.12.2020. The Supreme Court, after hearing arguments, held that the writ petition was not maintainable as the PPA was a non-statutory contract, and the remedy lay in civil suit or arbitration. The Court also found that the first respondent had failed to fulfill conditions subsequent within the extended period, and the termination was justified. The earlier judgment in Renew Clean Energy was distinguishable as in that case the project was commissioned, whereas here it was not. The Supreme Court allowed the appeals, set aside the impugned orders, and dismissed the writ petition, leaving the parties to seek remedies in accordance with law.
Headnote
A) Constitutional Law - Maintainability of Writ Petition - Non-Statutory Contract - A writ petition under Article 226 is not maintainable against termination of a non-statutory contract, as the remedy lies in civil suit or arbitration. The High Court erred in entertaining the writ petition challenging the termination of the Power Purchase Agreement, which was a commercial contract. (Paras 10-12) B) Contract Law - Conditions Subsequent - Power Purchase Agreement - Fulfillment of Conditions Subsequent - The seller failed to fulfill conditions subsequent within the stipulated period of 210 days plus extended period of 9 months, i.e., by 15.01.2017. The termination was justified under Article 2.5.1(d) of the PPA. (Paras 3-7) C) Precedent - Res Judicata - Previous Judgment on Similar Facts - The earlier judgment in Renew Clean Energy Private Limited case, which set aside termination for delay in first milestone, was not applicable as the facts were different. In that case, the project was commissioned, whereas here the project was not commissioned. (Paras 7-8) D) Electricity Law - Power Purchase Agreement - Termination - Section 162 of the Electricity Act, 2003 - The approval obtained from CEIG under Regulation 32 of CEA Regulations was not a valid fulfillment of conditions subsequent as it was obtained after the expiry of the extended period. (Para 7)
Issue of Consideration
Whether the High Court was justified in setting aside the termination of the Power Purchase Agreement by the appellant on the ground of non-fulfillment of conditions subsequent by the first respondent, and whether the writ petition was maintainable against a non-statutory contract.
Final Decision
The Supreme Court allowed the appeals, set aside the impugned judgments of the High Court dated 27.02.2020 and 28.12.2020, and dismissed the writ petition filed by the first respondent. The parties are left to seek remedies in accordance with law.
Law Points
- Maintainability of writ petition against termination of non-statutory contract
- Interpretation of conditions subsequent in Power Purchase Agreement
- Effect of previous judgment on similar facts
- Doctrine of merger
- Res judicata
