Supreme Court Sets Aside APTEL Order on Renewable Energy Project Timelines: Solar Energy Corporation of India vs. Wind Four Renergy (27 February 2024)

LEGAL ISSUE: The core legal issue revolves around the commencement date for condonation of delay in commissioning a renewable energy project, specifically a wind power project.

CASE TYPE: This case falls under the ambit of energy law, specifically concerning renewable energy projects and the interpretation of Power Purchase Agreements (PPAs).

Case Name: Solar Energy Corporation of India Limited vs. Wind Four Renergy Private Limited & Ors.

[Judgment Date]: 27 February 2024

Introduction

Date of the Judgment: 27 February 2024

Citation: 2024 INSC 795

Judges: The judgment was delivered by a two-judge bench of the Supreme Court of India comprising Justice Sanjiv Khanna and Justice Dipankar Datta.

Can a delay in commissioning a renewable energy project be condoned from a future date, or should the condonation apply from the date the delay actually occurred? The Supreme Court of India recently addressed this question in a dispute between the Solar Energy Corporation of India (SECI) and Wind Four Renergy Private Limited (WFRPL). The core issue was whether the Appellate Tribunal for Electricity (APTEL) was correct in directing that the condonation of a 132-day delay should commence from the date of its judgment, rather than the date the delay was actually incurred.

Case Background

The Solar Energy Corporation of India Limited (SECI), the nodal agency for promoting renewable energy, issued a Request for Selection on 28.10.2016. In response, Inox Wind Infrastructure Services Limited (IWISL) was awarded a 250 MW project, divided into five 50 MW packets. Wind Four Renergy Private Limited (WFRPL), a subsidiary of IWISL, entered into a Power Purchase Agreement (PPA) with Power Trading Company India Limited (PTC) on 21.07.2017 to establish a 50 MW wind power unit. The Scheduled Commercial Operation Date (SCOD) was set for 04.10.2018, 18 months from the Letter of Award (LoA) dated 05.04.2017. WFRPL was allowed an additional 9 months with liquidated damages until 05.07.2019, making the total commissioning period 27 months from the LoA.

The inter-state transmission licensee, Power Grid Corporation of India Limited, was unable to operationalize the Long Term Access (LTA) necessary for the project. The LTA became operational on 14.04.2019. The Ministry of New & Renewable Energy issued a letter on 22.10.2019, granting a 60-day extension for commissioning after the LTA was operational. SECI conceded that WFRPL was entitled to an extension until 13.06.2019, due to the 60-day extension.

WFRPL claimed they were not informed about the LTA’s operationalization until 22.11.2019 and sought a 132-day extension until 21.11.2019. The Central Electricity Regulatory Commission (CERC) accepted this, pushing the revised commissioning date to 23.10.2019. SECI accepted the CERC order. However, WFRPL appealed to the APTEL, which directed that the 132-day condonation period should start from the date of the APTEL judgment, i.e., 11.01.2022.

Timeline

Course of Proceedings

WFRPL approached the Central Electricity Regulatory Commission (CERC), asserting they were not informed about the operationalization of the Long Term Access (LTA) until 22.11.2019. They contended they should be granted an extension of 132 days, until 21.11.2019. The CERC accepted this contention and revised the scheduled date of commissioning to 23.10.2019, which was accepted by SECI. However, WFRPL appealed to the Appellate Tribunal for Electricity (APTEL).

APTEL allowed the appeal, directing that the 132-day delay condonation period would commence from the date of its judgment, i.e., 11.01.2022. This meant that the 132-day extension would begin almost three years after the original deadline. This decision was challenged by SECI before the Supreme Court.

Legal Framework

The legal framework primarily involves the interpretation of the Power Purchase Agreement (PPA) between WFRPL and PTC, along with the implications of the Ministry of New & Renewable Energy’s letter dated 22.10.2019. This letter granted a 60-day extension for commissioning after the operationalization of the Long Term Access (LTA). The Electricity Act, 2003, is also relevant for the recovery of dues in case of default.

Arguments

The core of the dispute centers on the interpretation of the timelines for commissioning the wind power project and the condonation of delays. The arguments presented by both sides are detailed below:

Appellant (SECI) Arguments:

• The appellant argued that the Appellate Tribunal for Electricity’s (APTEL) direction that the 132-day condonation period should commence from the date of its judgment (11.01.2022) was irrational and contrary to the scheme of the Power Purchase Agreement (PPA).

• SECI contended that the purpose of timelines in such projects is to ensure the early supply of green energy and reduce carbon footprint. Granting a delay from a future date would defeat this purpose.

• They highlighted that tariffs for green energy have substantially decreased, and delaying the commissioning would not be in the public interest.

• SECI emphasized that WFRPL had stated in a letter dated 25.03.2019 that the project was at an advanced stage of completion and could be commissioned by 31.05.2019, subject to the readiness of the evacuation system. Further, they pointed out that the evacuation systems were ready by 14.04.2019, and WFRPL had stated they would commission the project by 30.06.2019.

• The appellant argued that once WFRPL was aware that the LTA was functional and had been granted the benefit of 60 days as per the letter dated 22.10.2019, and 132 days as per the order of the CERC, the direction that the 132-day period should commence from the date of the APTEL order was illogical.

Respondent (WFRPL) Arguments:

• WFRPL contended that they were not informed about the operationalization of the Long Term Access (LTA) by SECI until 22.11.2019.

• Based on this lack of information, they argued that they should be granted an extension of time by 132 days, until 21.11.2019.

• WFRPL sought the benefit of the 132-day extension from the date of the APTEL order, as they believed this would be fair given the alleged lack of communication from SECI.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the main issue before the court was:

1. Whether the Appellate Tribunal for Electricity (APTEL) was correct in directing that the 132-day condonation period for delay in commissioning the wind power project should commence from the date of its judgment (11.01.2022), rather than from the date the delay actually occurred.

Treatment of the Issue by the Court

The following table demonstrates how the Court decided the issue:

Authorities

The judgment does not explicitly cite any previous cases or books. However, the following legal provisions and documents were considered by the court:

• Power Purchase Agreement (PPA) dated 21.07.2017: The agreement between WFRPL and PTC, which stipulated the terms and conditions for the establishment of the wind power unit and the supply of renewable energy.
• Letter of Award (LoA) dated 05.04.2017: The letter awarding the project to IWISL, which set the initial timelines for the project.
• Ministry of New & Renewable Energy letter dated 22.10.2019: This letter granted a 60-day extension for commissioning after the operationalization of the Long Term Access (LTA).
• Order of the Central Electricity Regulatory Commission (CERC) dated 08.03.2021: The CERC order accepted WFRPL’s contention and revised the scheduled commissioning date to 23.10.2019.
• Electricity Act, 2003: The Act was invoked for the recovery of dues in case of default in the payment of the refunded amount.

Authorities

Judgment

The Supreme Court set aside the judgment of the Appellate Tribunal for Electricity (APTEL) dated 11.01.2022, holding it to be irrational and contrary to the scheme of the Power Purchase Agreement (PPA). The Court restored the order of the Central Electricity Regulatory Commission (CERC) dated 08.03.2021, which had revised the scheduled commissioning date to 23.10.2019.

The Court also directed that SECI was entitled to recover Rs. 10 crores, which had been refunded to WFRPL, along with simple interest at 12% per annum from the date of payment until the amount is refunded. The Court further directed that if the amount was not refunded within six months, SECI would be entitled to recover the amount as electricity dues under the Electricity Act, 2003.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to ensure the timely commissioning of renewable energy projects. The Court emphasized that the objective of such projects is to provide green energy and reduce the carbon footprint, and that these objectives would be undermined by allowing delays to be condoned from a future date. The Court also considered the fact that tariffs for green energy have come down substantially, and any delay would be detrimental to the public interest.

The Court also took into account the fact that WFRPL had stated in its letters that the project was at an advanced stage of completion and could be commissioned by 30.06.2019, subject to the readiness of the evacuation system. The Court found that the evacuation systems were ready by 14.04.2019, and thus, the delay was not solely attributable to the lack of operationalization of the LTA.

Logical Reasoning

The Court considered the alternative interpretation that the 132-day condonation should start from the date of the APTEL order, but rejected it as irrational. The Court reasoned that such an interpretation would not only be contrary to the scheme of the PPA but also against the larger objective of promoting green energy and reducing carbon emissions.

The Supreme Court’s decision was based on the following reasons:

• The APTEL’s direction was irrational and against the PPA’s scheme.
• The objective of timelines is to ensure early supply of green energy and reduce carbon footprint.
• Tariffs of green energy have come down substantially, and delays are not in public interest.
• WFRPL had stated the project was at an advanced stage of completion and would be commissioned by 30.06.2019.
• The 132-day condonation should not start from the date of the APTEL order.

The Court’s reasoning is encapsulated in the following quotes:

“The objective and purpose of timelines is to ensure early supply of green energy and reduction of carbon footprint.”

“Tariffs of green energy, it is well known, have come down substantially.”

“Even otherwise, once WFRPL became aware and had knowledge that LTA was functional, and they had been granted benefit of 60 days in terms of the letter dated 22.10.2019 and 132 days in terms of the order of the CERC, the direction that the period of 132 days shall commence from the date the APTEL order is irrational.”

Key Takeaways

• Timelines in renewable energy projects are critical and must be adhered to for the timely supply of green energy.
• Condonation of delays should be based on the actual delay period and not on a future date.
• The objective of promoting green energy and reducing carbon footprint must be given primacy in such disputes.
• The Court emphasized that the reduction in tariffs for green energy should also be a consideration.
• In case of default in refund, the amount will be recovered as electricity dues.

Directions

The Supreme Court directed the following:

• The judgment of the Appellate Tribunal for Electricity (APTEL) dated 11.01.2022 was set aside.
• The order of the Central Electricity Regulatory Commission (CERC) dated 08.03.2021 was restored.
• SECI was entitled to recover Rs. 10 crores from WFRPL, with simple interest at 12% per annum from the date of payment until the amount is refunded.
• If the amount was not refunded within six months, SECI could recover the amount as electricity dues under the Electricity Act, 2003.

Development of Law

The ratio decidendi of this case is that timelines for commissioning renewable energy projects must be strictly adhered to, and any condonation of delay should be calculated from the date of the actual delay, not from a future date. This judgment reinforces the importance of timely commissioning of green energy projects and emphasizes the need to prioritize the objectives of promoting renewable energy and reducing carbon emissions. There is no change in the previous position of law, but rather a reaffirmation of the importance of adhering to timelines in renewable energy projects.

Conclusion

The Supreme Court’s decision in the case of Solar Energy Corporation of India Limited vs. Wind Four Renergy Private Limited & Ors. sets an important precedent for the interpretation of timelines in renewable energy projects. By setting aside the APTEL order, the Court has emphasized that condonation of delays should be based on the actual period of delay and not from a future date. This ruling ensures that the objectives of promoting green energy and reducing carbon footprint are not undermined by allowing undue extensions in project timelines. The Court’s decision also underscores the importance of adhering to contractual obligations and the need for timely commissioning of renewable energy projects.

Category

• Energy Law
  • Renewable Energy
  • Power Purchase Agreements
  • Electricity Act, 2003
• Contract Law
  • Interpretation of Contracts
  • Breach of Contract
• Solar Energy Corporation of India Limited
  • Renewable Energy Projects
• Wind Four Renergy Private Limited
  • Renewable Energy Projects
• Electricity Act, 2003
  • Recovery of Dues

FAQ

Q: What was the main issue in the Solar Energy Corporation of India vs. Wind Four Renergy case?

A: The main issue was whether the Appellate Tribunal for Electricity (APTEL) was correct in directing that the 132-day condonation period for delay in commissioning a wind power project should commence from the date of its judgment, rather than the date the delay actually occurred.

Q: What did the Supreme Court decide in this case?

A: The Supreme Court set aside the APTEL order and restored the order of the Central Electricity Regulatory Commission (CERC), which had revised the scheduled commissioning date to 23.10.2019.

Q: Why did the Supreme Court set aside the APTEL order?

A: The Supreme Court found the APTEL’s direction irrational and contrary to the scheme of the Power Purchase Agreement (PPA) and the objective of ensuring early supply of green energy.

Q: What is the significance of this judgment for renewable energy projects?

A: This judgment emphasizes the importance of adhering to timelines in renewable energy projects and ensures that condonation of delays is based on the actual delay period, not on a future date.

Q: What was the direction regarding the refund of Rs. 10 crores?

A: The Supreme Court directed that SECI was entitled to recover Rs. 10 crores from WFRPL, along with simple interest at 12% per annum. If the amount is not refunded within six months, SECI can recover it as electricity dues under the Electricity Act, 2003.