Supreme Court of India
CHAMUNDESHWARI ELECTRICITY SUPPLY COMPANY LTD. (CESC)versusSAISUDHIR ENERGY (CHITRADURGA) PVT. LTD. & ANR.
- Citation
- 2025 INSC 1034
- Decided
- 25 August 2025
- Disposal
- Appeal(s) allowed
- Bench
- SANJAY KUMAR
Holding
The Court held that, in the absence of a valid Force Majeure notice and without seeking an extension under Article 5.7, the appellant was entitled to invoke and encash the performance bank guarantee under Article 4.4 of the PPA.
Summary
The case concerned a 10 MW solar power project where Chamundeshwari Electricity Supply Company Ltd. (CESC) entered into a Power Purchase Agreement (PPA) with Saisudhir Energy (Chitradurga) Pvt. Ltd. (the Developer) and relied on Karnataka Power Transmission Corporation Ltd. (KPTCL) to commission two 220 kV evacuation lines. KPTCL admitted that the lines would be commissioned only in August 2015, well beyond the contractual timelines for conditions precedent and commercial operation date. The Developer failed to meet the conditions precedent and did not obtain an extension under Article 5.7 of the PPA nor issue a Force Majeure notice under Article 14.5, prompting CESC to invoke and encash the performance bank guarantee under Article 4.4. The State Commission and APTEL held the delay to be a Force Majeure event and ordered restoration of the guarantee, extension of timelines and tariff renegotiation, which CESC challenged. The Supreme Court held that the contractual provisions, not an automatic extension, governed the parties’ rights; the lack of a valid Force Majeure notice and failure to seek extension meant CESC was entitled to encash the guarantee. Consequently, the Court set aside the orders of the State Commission and APTEL and allowed the appeal.
Issues considered
- The effect of Respondent No.2/KPTCL’s delay in commissioning the 220 kV evacuation system on the timelines for fulfilment of the conditions precedent and achievement of COD under the PPA
- The entitlement of the appellant to invoke and encash the performance bank guarantee
- The sustainability of the State Commission’s finding of Force Majeure in the absence of a notice under Article 14.5 of the PPA
- The character of the PPA as a contingent contract
- The competence of the State Commission and APTEL to direct restoration of the bank guarantee, extension of timelines and renegotiation of tariff
Legislation cited
Headnote
Issue for Consideration The following questions arise for determination: (i) the effect of respondent no.2/KPTCL’s delay in commissioning the 220 kV evacuation system upon the timelines stipulated for fulfilment of the CPs and achievement of (ii) the entitlement of appellant to invoke and encash the performance bank guarantee in the facts of the present case; (iii) the sustainability of the finding of Force Majeure recorded by the State Commission in the absence of the contractual notice contemplated under Article 14.5 of the PPA;
Subjects
Delay in commissioning the 220 kV evacuation systemEncashing the performance bank guaranteeForce MajeureContingent contractRestoration of the bank guaranteePower Purchase AgreementLaw of ContractExplicit terms of contractIntention of partiesJurisdiction of the regulatory bodies
Judgment
[2025] 8 S.C.R. 1493 : 2025 INSC 1034
Chamundeshwari Electricity Supply Company Ltd. (CESC)
v.
Saisudhir Energy (Chitradurga) Pvt. Ltd. & Anr.
(Civil Appeal No. 6888 of 2018)
25 August 2025
[Sanjay Kumar and Satish Chandra Sharma,* JJ.]
Issue for Consideration
The following questions arise for determination: (i) the effect of
respondent no.2/KPTCL’s delay in commissioning the 220 kV
evacuation system upon the timelines stipulated for fulfilment of the
CPs and achievement of COD under the PPA; (ii) the entitlement of
appellant to invoke and encash the performance bank guarantee in
the facts of the present case; (iii) the sustainability of the finding of
Force Majeure recorded by the State Commission in the absence
of the contractual notice contemplated under Article 14.5 of the
PPA; (iv) the character of the PPA as a contingent contract; and
(v) the competence of the State Commission and the APTEL to
direct restoration of the bank guarantee, extension of timelines,
and renegotiation of tariff.
Headnotes†
Electricity Act, 2003 – APTEL affirmed the order dated
28.01.2015 of the Karnataka Electricity Regulatory Commission
(State Commission/KERC), whereby the State Commission
directed Chamundeshwari Electricity Supply Corporation
Limited, the appellant herein, to restore to the Developer
i.e. respondent no.1 herein, the amount realised from the
encashment of the performance bank guarantee; extend the
timelines for fulfilment of contractual obligations; and to
undertake renegotiation of the tariff under the Power Purchase
Agreement (PPA) for a solar power project:
Held: 1. Appellant’s invocation and encashment of the performance
security was in full conformity with the contractual framework under
the PPA – The non-fulfilment of the respondent no.1/Developer’s
obligations within the stipulated time, non-seeking of extension
under Article 5.7 or valid Force Majeure claim under Article 14,
necessarily attracted Article 4.4 of the PPA – The impugned
* Author
1494 [2025] 8 S.C.R.
Supreme Court Reports
judgment dated 21.03.2018 of the APTEL passed in Appeal No.176
of 2015, and the order dated 28.01.2015 of the State Commission
in O.P. No.24 of 2014 are set aside. [Paras 44-45]
2. The record discloses beyond dispute that the evacuation system,
integral for delivery of power, was to be executed by respondent
no.2/KPTCL through the construction of two 220 kV double-circuit
lines – By its communication dated 19.08.2014, respondent no.2/
KPTCL itself acknowledged that the lines would be commissioned
only in August 2015, well beyond the contractual timelines –
The respondent no.1/Developer submission that such delay,
being beyond its control, automatically extended the contractual
schedule, cannot be accepted – The contractual framework does
not operate on automaticity – Contractual rights and remedies
must be asserted within the framework of the agreement, not
dehors it. [Paras 37-38]
3. Turning then to the invocation of the performance bank guarantee,
in the present case, supply did not commence within the agreed
period; no formal extension was obtained under Article 5.7 of the
PPA; and no notice of Force Majeure was issued under Article
14.5 of the PPA – The preconditions for invocation of Article 4.4 of
the PPA thus stood satisfied – Appellant’s invocation of the bank
guarantee was, therefore, an exercise of a remedy specifically
conferred by the contract, and to deny it would be to disregard
the allocation of risk embodied in the PPA. [Para 39]
4. The finding of Force Majeure by the State Commission cannot
be sustained for the reason that Article 14.5 of the PPA stipulates
that the affected party “shall” issue notice within seven days of
knowledge of the event – This requirement is not merely directory;
it is a condition precedent for invoking the clause – Even if the
delay in completion of the evacuation system was beyond the
respondent no.1/Developer’s control, the appropriate provision
for relief was Article 5.7, not Article 14 of the PPA – Significantly,
Article 14.3.1 of the PPA details the events and circumstances
which constitute Force Majeure and delay in the readiness of the
evacuation system, even if attributable to Respondent No.2/KPTCL,
does not constitute a Force Majeure. [Para 40]
5. The completion of the evacuation system by respondent no.2/
KPTCL was indeed an uncertain event outside the respondent
no.1/Developer’s control, and in a practical sense, supply of
power was dependent upon it – Yet, the PPA does not treat such
[2025] 8 S.C.R. 1495
Chamundeshwari Electricity Supply Company Ltd. (CESC) v.
Saisudhir Energy (Chitradurga) Pvt. Ltd. & Anr.
completion as a condition precedent in law to the Respondent No.1/
Developer’s obligations – It instead provides specific contractual
mechanism(s)-Article 5.7 for delays attributable to the appellant
and Article 14 for events of Force Majeure – Unless relief is sought
and secured under those provisions, the time-bound obligations
under the PPA remain enforceable and the Appellant’s remedies
for default intact. [Para 41]
6. Finally, as to the competence of the regulatory fora, appellant
and respondent no. 2/KPTCL, though both State instrumentalities,
are parties to a commercial contract concluded through competitive
bidding – Their relationship is governed not by overarching notions
of equity but by the terms of the PPA – The jurisdiction of the
regulatory bodies is to ensure compliance with law and to adjudicate
disputes within the four corners of the contract. [Para 43]
Law of Contract – Explicit terms of contract – Intention of
parties:
Held: It is settled that the explicit terms of a contract are always
the final word with regard to the intention of the parties – This Court
has, in a consistent line of judgements, reiterated that regulatory
or adjudicatory fora cannot, under the guise of equity or fairness,
rewrite the contractual framework or superimpose obligations alien
to the agreement – The PPA, being the product of a competitive
bidding process and having received regulatory approval, must
be construed and enforced strictly in accordance with its express
stipulations – To permit otherwise would be to allow the State
Commission or the APTEL to override the parties own allocation
of risk under the contract. [Para 42]
Case Law Cited
Venkataraman Krishnamurthy & Anr. v. Lodha Crown Buildmart
Pvt. Ltd. (2024) 4 SCC 230 – referred to.
List of Acts
Electricity Act, 2003.
List of Keywords
Delay in commissioning the 220 kV evacuation system; Encashing
the performance bank guarantee; Force Majeure; Contingent
1496 [2025] 8 S.C.R.
Supreme Court Reports
contract; Restoration of the bank guarantee; Power Purchase
Agreement; Law of Contract; Explicit terms of contract; Intention
of parties; Jurisdiction of the regulatory bodies.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6888
of 2018
From the Judgment and Order dated 21.03.2018 of the Appellate
Tribunal for Electricity at New Delhi in A No. 176 of 2015
Appearances for Parties
Advs. for the Appellant:
Dhruv Mehta, Sr. Adv., Ms. Garima Jain, Tushar Kanti Mahindroo,
Arnav Khanna.
Advs. for the Respondents:
C. Mohan Rao, Sr. Adv., Gowtham Polanki, Snehasish Mukherjee.
Judgment / Order of the Supreme Court
Judgment
Satish Chandra Sharma, J.
STATEMENT OF FACTS
1. This appeal is arising from the judgment dated 21.03.2018 of the
Appellate Tribunal for Electricity, New Delhi (the “APTEL”), whereby
the APTEL has affirmed the order dated 28.01.2015 of the Karnataka
Electricity Regulatory Commission (the “State Commission”/“KERC”),
whereby the State Commission directed Chamundeshwari Electricity
Supply Corporation Limited, the Appellant herein, to restore to the
Developer i.e. Respondent No. 1 herein, the amount realised from
the encashment of the performance bank guarantee; extend the
timelines for fulfilment of contractual obligations; and to undertake
renegotiation of the tariff under the Power Purchase Agreement (the
“PPA”) for a solar power project.
2. The Appellant, Chamundeshwari Electricity Supply Company Limited
(“Chamundeshwari”/“CESC”), is a distribution licensee wholly owned
by the State of Karnataka. The Respondent No. 2, Karnataka
[2025] 8 S.C.R. 1497
Chamundeshwari Electricity Supply Company Ltd. (CESC) v.
Saisudhir Energy (Chitradurga) Pvt. Ltd. & Anr.
Power Transmission Corporation Limited (“KPTCL”), is the State
transmission utility and a statutory corporation. Both entities are State
instrumentalities engaged in discharging public functions under the
Electricity Act, 2003. The Respondent No. 1, M/s Saisudhir Energy
(Chitradurga) Pvt. Ltd. (the “Developer”) a special purpose vehicle
promoted and incorporated by M/s Saisudhir Energy Limited, a private
generating company selected pursuant to a competitive bidding
process for the establishment of a 10 MW solar power project in
Chitradurga District.
3. The lis traces its origin to a request for proposal issued by the
Karnataka Renewable Energy Development Limited (the “KREDL”)
inviting bids for selection of Solar Power Developers (the “SPDs”) to
establish grid-connected solar power plants in the State of Karnataka.
The bidding process was conducted under the aegis of the State’s
solar policy to promote renewable energy capacity. Pursuant to
the competitive bidding process, the Respondent No. 1/Developer
was selected for development of a 10 MW solar photovoltaic power
project at Thallaku Village, Challakere Taluk, Chitradurga District,
Karnataka.
4. On 30.08.2012, Appellant and the Respondent No. 1/Developer
executed a PPA for procurement of 10 MW solar power at a tariff of
Rs. 8.49/kWh, approved by KERC. The PPA envisaged achievement
of Commercial Operation Date (the “COD”) within 12 months from the
Effective Date, preceded by satisfaction of “Conditions Precedent”
(the “CPs”) under Article 4 of the PPA, within 240 days.
5. On 28.05.2013, the parties executed a supplementary PPA, inter alia,
aligning the commissioning schedule and other contractual timelines
with the State Commission’s tariff order and clarifying the delivery
point and interconnection facilities. It reaffirmed that CPs were to
be fulfilled within 240 days and COD achieved within 12 months
thereafter. The CPs obliged the Respondent No. 1/Developer to
acquire land, secure statutory approvals, achieve financial closure,
enter into connectivity agreements, and ensure readiness of the
evacuation system in coordination with Respondent No. 2/KPTCL.
6. The project site was finalised at Village Thallaku, Challakere Taluk,
Chitradurga. The Respondent No. 1/Developer obtained permission
under Section 109 of the Karnataka Land Reforms Act for acquisition
1498 [2025] 8 S.C.R.
Supreme Court Reports
of 49.36 acres by the order of the Deputy Commissioner dated
19.02.2014.
7. The evacuation scheme prepared by Respondent No. 2/KPTCL
envisaged connection of the project to the State grid through the
commissioning of two specific 220 kV double-circuit transmission
lines: one between Birenhalli and Thallak; and another between
Hiriyur and Gowribidnur. The readiness of these lines was, in effect, a
technical and operational precondition for the grant of synchronisation
approval as outlined in letter dated 06.02.2014.
8. On 05.04.2014, the Respondent No. 1/Developer sought Appellant’s
assistance for securing approvals and requested extension of the
COD, citing delay in Respondent No. 2/KPTCL’s commissioning of
the 220 kV lines. Vide letter dated 17.05.2014, Appellant stated that
extension could be considered only on condition of a reduced tariff
from Rs. 8.49/kWh to Rs. 2.39/kWh. The Respondent No. 1/Developer
contested this reduction and approached the State Commission
by way of O.P. No. 24 of 2014, seeking inter-alia; i) restoration of
the performance bank guarantee; ii) extension of timelines; and
iii) consequential direction for tariff renegotiation, thereby retaining
the original tariff. Pertinently, vide an interim order dated 14.11.2014,
the State Commission directed Appellant herein not to encash the
performance security/bank guarantee.
9. During pendency, the Respondent No. 1/Developer addressed further
letters seeking extension of time for CPs fulfilment, pointing to the
dependency on Respondent No. 2/KPTCL’s works. In response to a
Right to Information application, Respondent No. 2/KPTCL confirmed
that the 220 kV lines were likely to be commissioned only in August
2015, well beyond the original CP and COD timelines.
10. Due to the inability to evacuate the contracted power, Appellant
claims to have procured power from alternate sources at higher rates,
incurring losses to the tune of Rs. 48.65 crores. The Respondent
No. 1/Developer, on the other hand, faced encashment of the
performance bank guarantee to the tune of Rs. 24.9 crores despite
COD being rendered impossible due to Respondent No. 2/KPTCL’s
admitted delay.
11. Vide final order dated 28.01.2015, the State Commission held
that the delay in completion of the evacuation system constituted
[2025] 8 S.C.R. 1499
Chamundeshwari Electricity Supply Company Ltd. (CESC) v.
Saisudhir Energy (Chitradurga) Pvt. Ltd. & Anr.
a Force Majeure event under the PPA and accordingly ordered:
(i) restoration of the encashed performance security to the Respondent
No. 1/Developer; (ii) extension of the contractual timelines and
(iii) renegotiation of the project tariff in the light of the revised
commissioning schedule.
12. Aggrieved by the orders passed by the State Commission, Appellant
filed Appeal No. 176 of 2015 before the APTEL and APTEL vide the
impugned order dismissed the appeal filed by the Appellant thereby
affirming the findings and directions of the State Commission. It is
against this concurrent view of the fora below that Appellant has
approached this Court in the present appeal.
SUBMISSIONS BY THE APPELLANT
13. Learned Senior Counsel appearing for Appellant submits at the outset
that the dispute cannot be adjudicated without first appreciating
the essential character of the agreement between the parties. It is
urged that the PPA, executed on 30.08.2012 and supplementary
PPA on 28.05.2013, is in its essence a contingent contract within
the meaning of the Indian Contract Act, 1872 (the “Contract Act”).
The PPA is a self-contained commercial arrangement concluded
through competitive bidding. Its terms allocate risk and provide
specific remedies.
14. Obligation to achieve the COD within the stipulated period is, by the
very structure of the PPA, inextricably linked to the readiness of the
evacuation system - a responsibility that rests squarely on Respondent
No. 2/KPTCL, the State transmission utility. In the absence of such
readiness, Respondent No. 1 was aware that synchronisation and
injection of power into the grid is technically impossible.
15. Inviting our attention to Article(s) 4 and 5 of the PPA, learned Senior
Counsel submits that while Article 4 sets out the CPs to be duly
complied with by the Respondent No. 1/Developer within the stipulated
timelines, Article 5 enumerates the substantive obligations to be
discharged in furtherance of the contractual scheme. It is urged that
the framework of these provisions does not contemplate any dilution
of responsibility on the premise that certain elements may require
coordination with other agencies, or may otherwise lie beyond the
control of the Respondent No. 1/Developer. The said Article(s), in
material part, provide as follows:
1500 [2025] 8 S.C.R.
Supreme Court Reports
“ARTICLE 4: CONDITION PRECEDENT
4.1 Condition Precedent
Save and except as expressly provided in Articles 4,
14, 18, 20 or unless the context otherwise requires, the
respective rights and obligations of the Parties under this
Agreement shall be subject to the satisfaction in full of
the conditions precedent specified in this Clause 4 (the
“Conditions Precedent”) by the Developer within 240 (two
hundred and forty) days from the Effective Date, unless
such completion is affected by any Force Majeure event,
or if any of the activities is specifically waived in writing
by CESC Mysore.
4.2 Conditions Precedent for the Developer
The Conditions Precedent are required to be satisfied
by the Developer shall be deemed to have been fulfilled
when the Developer shall have:
a) obtained all Consents, Clearances and
Permits required for supply of power to CESC
Mysore as per the terms of this Agreement;
b) not Applicable
c) achieved Financial Closure and provided a
certificate to CESC Mysore from the lead banker
to this effect;
d) made adequate arrangements to connect the
Power Project switchyard with the Interconnection
Facilities at the Delivery Point;
e) obtained power evacuation approval from
[Karnataka Power Transmission Company
Limited (“KPTCL”)/CESC Mysore, as the case
may be];
f) produced as per the requirements set out in
Schedule 1, the documentary evidence of having
the clear title and possession of the land required
for the Project in the name of Developer;
[2025] 8 S.C.R. 1501
Chamundeshwari Electricity Supply Company Ltd. (CESC) v.
Saisudhir Energy (Chitradurga) Pvt. Ltd. & Anr.
g) fulfilled Technical Requirements for Solar PV
Project as per the format provided in Schedule
2 and also provides the documentary evidence
for the same;
h) delivered to CESC Mysore from confirmation,
in original, of compliance with the equity lock-in
condition as set out in 5.2; and
i) delivered to CESC Mysore a legal opinion from
the legal counsel of the Developer with respect
to the authority of the Developer to enter into
this Agreement and the enforceability of the
provisions thereof.
4.2.1 Developer shall make all reasonable endeavours
to satisfy the Conditions Precedent within the time
stipulated and CESC Mysore shall provide to the
Developer all the reasonable cooperation as may be
required to the Developer for satisfying the Conditions
Precedent.
4.2.2 The Developer shall notify CESC Mysore in writing
at least once a month on the progress made in satisfying
the Conditions Precedent. Developer shall promptly inform
the CESC Mysore when any Conditions Precedent is
satisfied by it.
4.3 Damages for delay by the Developer
In the event that the Developer does not procure
fulfillment of any or all of the Conditions Precedent set
forth in Clause 4.2 within the period of 240 days and the
delay has not occurred for any reasons attributable to
CESC Mysore or due to Force Majeure, the Developer
shall pay to CESC Mysore Damages in an amount
calculated at the rate of 0.2% (zero point two per cent)
of the Performance Security for each day’s delay until
the fulfillment of such Conditions Precedent, subject to
a maximum period of 30 (thirty) days. On expiry of the
said 30 (thirty) days, CESC Mysore at its discretion may
terminate this Agreement.
1502 [2025] 8 S.C.R.
Supreme Court Reports
4.4 Performance Security
a) For due and punctual performance of its obligations
under this Agreement, relating to the Project, the Developer
has delivered to CESC Mysore, simultaneously with the
execution of this Agreement, an irrevocable and revolving
bank guarantees from a scheduled bank acceptable to
CESC Mysore for an amount of Rs. 24,90,00,000/- (Rupees
Twenty Four Crores Ninety Lakhs only) (“Performance
Security”). The Performance Security is furnished to CESC
Mysore in the form of three bank guarantees in favour
of Managing Director of the CESC Mysore as per the
format provided in Schedule 3 and having validity up to 1
year from the Commercial Operation Date. The details of
the bank guarantees furnished towards the Performance
Security are given below;
(i) Bank Guarantee No. 2657BG3652012 dated 24 August,
2012 for an amount of Rs. 4,98,00,000/- (Rupees Four
Crores Ninety Eight Lakhs only);
(ii) Bank Guarantee No. 2657BG3662012 dated 24 August,
2012 for an amount of Rs. 9,96,00,000/- (Rupees Nine
Crores Ninety Six Lakhs only); and
(iii) Bank Guarantee No. 2657BG3672012 dated 24 August
2012 for an amount of Rs. 9,96,00,000/- (Rupees Nine
Crores Ninety Six Lakhs only).
b) Appropriation of Performance Security
Upon occurrence of a Developer Default or failure
to meet the Conditions Precedent by the Developer,
CESC Mysore shall, without prejudice to its other
rights and remedies hereunder or in law, be entitled to
encash and appropriate the relevant amounts from the
Performance Security as Damages for such Developer
Default or Conditions Precedent. Upon such encashment
and appropriation from the Performance Security, the
Developer shall, within 30 (thirty) days thereof, replenish,
in case of partial appropriation, to its original level the
Performance Security, and in case of appropriation of the
entire Performance Security provide a fresh Performance
[2025] 8 S.C.R. 1503
Chamundeshwari Electricity Supply Company Ltd. (CESC) v.
Saisudhir Energy (Chitradurga) Pvt. Ltd. & Anr.
Security, as the case may be, and the Developer shall,
within the time so granted, replenish or furnish fresh
Performance Security as aforesaid failing which CESC
Mysore shall be entitled to terminate this Agreement in
accordance with Article 16.
c) Release of Performance Security
Subject to other provisions of this Agreement, CESC
Mysore shall release the Performance Security, if any
within 1 year from the Commercial Operation Date.
The release of the Performance Security shall be without
prejudice to other rights of CESC Mysore under this
Agreement.”
“ARTICLE 5: OBLIGATION OF THE DEVELOPER
5.1 Obligations of the Developer
5.1.1 Subject to and on the terms and conditions of
this Agreement, the Developer shall at its own cost and
expense;
a) procure finance for and undertake the designing,
constructing, erecting, testing, commissioning and
completing of the Power Project in accordance with the
Applicable Law and Grid Code observe, fulfill, comply with
and perform all its obligations set out in this Agreement
or arising hereunder;
b) comply with all Applicable Laws and obtain applicable
Consents, Clearances and Permits (including renewals
as required) in the performance of its obligations under
this Agreement and maintaining all Applicable Permits in
full force and effect during the Term of this Agreement;
c) commence supply of power up to the Contracted
Capacity to CESC Mysore no later than the Scheduled
Commissioning Date and continue the supply of power
throughout the term of the Agreement;
d) connect the Power Project switchyard with the
Interconnection Facilities at the Delivery Point;
1504 [2025] 8 S.C.R.
Supreme Court Reports
e) own the Power Project throughout the Term of Agreement
and keep it free and clear of encumbrances, except those
expressly permitted under Article 19; and
f) comply with the equity lock-in conditions set out in
Clause 5.2; and
g) be responsible for all payments related to any taxes,
cesses, duties or levies imposed by the Government
Instrumentalities or competent statutory authority on land,
equipment, material or works of the project to or on the
electricity consumed by the Project or by itself or on the
income or assets owned by it;
h) be responsible for the construction of additional bays
in case required;
i) construct and carry out the maintenance of the
transmission line up to the Delivery Point, during the
Agreement Period and pay applicable supervision charges
to the concerned Government Instrumentality;
j) make arrangements for auxiliary consumption and bear
all the related costs for the same.
5.1.2 The Developer shall discharge its obligations
in accordance with Good Industry Practice and as a
reasonable and prudent person.
5.1.3 The Developer shall, at its own cost and expense, in
addition to and not in derogation of its obligations elsewhere
set out in this Agreement:
a) make, or cause to be made, necessary applications to
the relevant government agencies with such particulars
and details, as may be required for obtaining Applicable
Permits and obtain and keep in force and effect such
Applicable Permits in conformity with the Applicable Laws;
b) procure, as required, the appropriate proprietary rights,
licenses, agreements and permissions for materials,
methods, processes and systems used or incorporated
into the Power Project;
c) make reasonable efforts to maintain harmony and good
industrial relations among the personnel employed by it
[2025] 8 S.C.R. 1505
Chamundeshwari Electricity Supply Company Ltd. (CESC) v.
Saisudhir Energy (Chitradurga) Pvt. Ltd. & Anr.
or its Contractors in connection with the performance of
its obligations under this Agreement;
d) ensure and procure that its Contractors comply with all
Applicable Permits and Applicable Laws in the performance
by them of any of the Developer’s obligations under this
Agreement; and
e) not do or omit to do any act, deed or thing which may
in any manner be violative of any of the provisions of this
Agreement.
5.7 Extensions of Time
5.7.1 In the event that the Developer is prevented from
performing its obligations under Clause 5.1 by the
Scheduled Commissioning Date due to:
a) any CESC Mysore Event of Default; or
b) force Majeure Events affecting CESC Mysore;
or
c) force Majeure Events affecting the Developer;
the Scheduled Commissioning Date and the Expiry Date
shall be deferred, subject to the limit prescribed in Clause
5.7.2 and Clause 5.7.3 for a reasonable period but not less
than ‘day for day’ basis, to permit the Developer or CESC
Mysore through the use of due diligence, to overcome the
effects of the Force Majeure Events affecting the Developer
or CESC Mysore, or till such time such Event of Default
is rectified by CESC Mysore.
5.7.2 In case of extension occurring due to reasons
specified in Clause 5.7.1(a), any of the dates specified
therein can be extended, subject to the condition that the
Scheduled Commissioning Date would not be extended
by more than 6 (six) months.
5.7.3 In case of extension due to reasons specified in
Article 5.7.1(b) and (c), and if such Force Majeure Event
continues even after a maximum period of 3 (three) months,
any of the Parties may choose to terminate the Agreement
as per the provisions of Article 16.
1506 [2025] 8 S.C.R.
Supreme Court Reports
If the Parties have not agreed, within 30 (thirty) days after
the affected Party’s performance has ceased to be affected
by the relevant circumstance, on the time period by which
the Scheduled Commissioning Date or the Expiry Date
should be deferred by, any Party may raise the Dispute
to be resolved in accordance with Article 18.
5.7.4 As a result of such extension, the Scheduled
Commissioning Date and the Expiry Date newly determined
shall be deemed to be the Scheduled Commissioning Date
and the Expiry Date for the purposes of this Agreement.”
16. Learned Senior Counsel relies on Article 4.4, which expressly entitles
the Appellant to encash the performance bank guarantee if supply
does not commence by the Scheduled COD, subject only to relief
expressly available under the PPA.
17. On the State Commission’s finding of Force Majeure, learned Senior
Counsel submits that it is both procedurally and substantively
untenable. Procedurally, Article 14.5 of the PPA makes notice a
condition precedent. It requires the affected party to notify the other
within 7 days, with particulars of the event, its effect, and mitigating
measures. The said Article, in material part, provide as follows:
“14.5 Notification of Force Majeure Event
14.5.1 The Affected Party shall give notice to the
other Party of any event of Force Majeure as soon
as reasonably practicable, but not later than seven
(7) days after the date on which such Party knew or
should reasonably have known of the commencement
of the event of Force Majeure. If an event of Force
Majeure results in a breakdown of communications
rendering it unreasonable to give notice within the
applicable time limit specified herein, then the Party
claiming Force Majeure shall give such notice as
soon as reasonably practicable after reinstatement
of communications, but not later than one (1) day
after such reinstatement.
Provided that such notice shall be a pre-condition
to the Affected Party’s entitlement to claim relief
under this Agreement. Such notice shall include full
[2025] 8 S.C.R. 1507
Chamundeshwari Electricity Supply Company Ltd. (CESC) v.
Saisudhir Energy (Chitradurga) Pvt. Ltd. & Anr.
particulars of the event of Force Majeure, its effects
on the Party claiming relief and the remedial measures
proposed. The Affected Party shall give the other
Party regular (and not less than monthly) reports on
the progress of those remedial measures and such
other information as the other Party may reasonably
request about the Force Majeure Event.
14.5.2 The Affected Party shall give notice to the
other Party of (i) the cessation of the relevant event
of Force Majeure; and (ii) the cessation of the effects
of such event of Force Majeure on the performance
of its rights or obligations under this Agreement, as
soon as practicable after becoming aware of each
of these cessations.”
17.1 No such notice is ever issued by the Respondent No. 1/
Developer; Force Majeure is not even a pleaded defence
before the State Commission. Substantively, the delay is
caused by another arm of the State, which falls within the
contractual provision for extension under Article 5.7, not within
the exculpatory scope of Force Majeure.
18. It is therefore contended that the Respondent No. 1/Developer
neither obtained an extension under Article 5.7 nor issued a Force
Majeure notice under Article 14.5 of the PPA. In such circumstances,
Article 4.4 of the PPA squarely applies. The State Commission erred
in treating the delay as Force Majeure in the absence of notice
and specific plea. The PPA is not rendered inoperative merely
because both the Appellant and Respondent No. 2/KPTCL are
State instrumentalities; each has distinct contractual and statutory
obligations.
19. Learned Senior Counsel further contends that the jurisdiction of
the regulatory bodies does not extend to modifying the terms of a
concluded commercial contract or to conferring remedies outside
the framework of the agreement. The invocation of the performance
bank guarantee was effected strictly in accordance with Article 4.4
of the PPA, and the amount realised thereunder cannot be undone
by directions that alter the contractual allocation of risk. The PPA
contemplates no automatic extension of timelines; any relief was
required to be sought and obtained under Article 5.7 or by invoking
1508 [2025] 8 S.C.R.
Supreme Court Reports
Article 14.5 of the PPA. The Respondent No. 1/Developer’s omission
to pursue such contractual recourse forecloses its claim in law.
20. Learned Counsel lastly addresses the events surrounding the interim
application filed by the Respondent No. 1/Developer before the State
Commission, wherein the State Commission, by an interim order,
expressly restrained Appellant from encashing the performance bank
guarantee pending adjudication. It is urged that such invocation
was carried out under a bona fide belief that the Respondent
No. 1/Developer’s persistent failure to satisfy the CPs, coupled with
the absence of demonstrable progress on site, had already crystallised
the Appellant’s contractual right under Article 4.4 of the PPA.
SUBMISSIONS BY THE RESPONDENT(S)
21. In reply, learned Counsel appearing for the Respondents submit
that the PPA was consciously entered into with full awareness of the
prevailing transmission network status and the potential timelines
for completion of evacuation facilities. The CPs under Article 4 and
obligations under Article 5 of the PPA are casted in absolute terms,
to be fulfilled within 240 days from the Effective Date, and the
Respondent No. 1/Developer assumes the commercial risk of timely
completion. It must be appreciated that the performance of the PPA is
inextricably contingent upon the timely completion of the evacuation
system by Respondent No. 2/KPTCL, without which synchronisation
and supply of power to the grid is technically impossible.
22. He contends that such delay, being beyond the Respondent No. 1/
Developer’s control, ought to operate as an automatic ground for
extension of the timelines for fulfilment of the CPs and achievement
of COD, thereby precluding invocation of Article 4.4 of the PPA. At
the same time, counsel stresses that the “reasonable cooperation”
contemplated under Article 4.2.1 is facilitative and cannot be
construed as shifting upon the Respondent No. 1/Developer the risk
of delay in transmission works which the contract itself allocates to
the Appellant’s sphere of responsibility. To construe otherwise would
distort the contractual allocation of risk and undermine the very
structure of the PPA.
23. Learned Counsel stresses that developers such as the present
Respondent routinely account for external dependencies in
formulating their bids, and the tariff of Rs. 8.49/kWh reflects this
[2025] 8 S.C.R. 1509
Chamundeshwari Electricity Supply Company Ltd. (CESC) v.
Saisudhir Energy (Chitradurga) Pvt. Ltd. & Anr.
risk assessment. The State Commission, in granting extension and
ordering restoration of the performance bank guarantee, correctly
applied the agreement in a manner that avoided unjust enrichment
of the Appellant.
24. Addressing Force Majeure, learned Counsel submits that the delay
in commissioning the 220 kV evacuation lines is clearly beyond the
Respondent No. 1/Developer’s control, arising from delays in large-
scale transmission works executed by Respondent No. 2/KPTCL.
While a formal notice under Article 14.5 may not have been issued,
the factual circumstances, including the correspondence placed on
record, and the admitted position of Respondent No. 2/KPTCL are
sufficient for the commission to characterise the event as Force
Majeure. It is argued that absence of such notice, cannot negate the
substantive defence where the facts are undisputed, and the delay
is objectively established.
25. Learned Counsel further relies on the conduct of Appellant itself,
which, according to him, reflects an implicit acknowledgment of the
dependency upon Respondent No. 2/KPTCL’s transmission works.
He submits that Appellant not only entertained successive requests
for extension of time but also engaged in correspondence suggesting
revision of tariff from Rs. 8.49/kWh to Rs. 2.39/kWh, and actively
participated in proceedings before the State Commission without
ever contesting the position that commissioning of the project was
contingent upon completion of Respondent No. 2/KPTCL’s evacuation
infrastructure. He contends that it constitutes tacit admission that the
delay cannot be attributed solely upon Respondent No. 1/Developer.
26. Learned Counsel further submits that the framework of Article 4
makes it clear that invocation of the performance bank guarantee is
envisaged as a remedy for performance failures during the operational
phase of the project, and not for pre-COD breaches of conditions
precedent, particularly where such breaches are directly caused by
the Appellant’s own default or that of another State agency. As to the
performance bank guarantee, the Respondent(s) maintain that its
encashment in the face of an express interim restraint order dated
14.11.2014 of the State Commission is per se unlawful.
27. Learned Counsel concludes by submitting that the remedial directions
contained in the final order of the State Commission: i) requiring
restoration of the performance bank guarantee; ii) granting extension
1510 [2025] 8 S.C.R.
Supreme Court Reports
of timelines for fulfillment of conditions precedent; and iii) permitting
renegotiation of tariff are well within its regulatory powers to balance
contractual obligations keeping in mind the larger public interest of
securing timely commissioning of renewable energy capacity for
integration into the grid. The APTEL, in affirming these directions on
21.03.2018 has committed no error of law warranting interference
by this Hon’ble Court.
FINDINGS OF THE STATE COMMISSION AND APTEL
28. The State Commission, vide its final order dated 28.01.2015 in O.P.
No. 24 of 2014, records that the Respondent No. 1/Developer’s
inability to achieve the CPs and COD within the contractual timelines
is directly linked to the non-completion of the 220 kV evacuation
lines by Respondent No. 2/KPTCL. The commission notes that
interconnection of the project to the grid was technically impossible
until such lines were commissioned.
29. Reliance is placed on the RTI reply dated 19.08.2014 from
Respondent No. 2/KPTCL, which admits that the evacuation lines
are likely to be commissioned only in August 2015. This, in the State
Commission’s view, establishes that the delay is not attributable to
any act or omission of the Respondent No. 1/Developer. Therefore,
as per the State Commission, the delay in completion of the
evacuation system was beyond the control of the Respondent
No. 1/Developer amounting to Force Majeure, thereby justifying
extension of timelines.
30. In examining the terms of the PPA, the State Commission places
emphasis on Article 5.7, which contemplates extension of CPs
timelines where the delay is for reasons solely attributable to the
Appellant. It holds that the expression Appellant must, in the present
context, be construed to encompass the acts or omissions of the State
transmission utility, given its integrated role in enabling evacuation
of contracted power.
31. On the invocation of the performance bank guarantee, the State
Commission finds that Appellant proceeded to encash the security
notwithstanding the subsistence of its interim restraint order. Such
invocation, it holds, was contrary both to the contractual scheme
and to the authority of the State Commission. Article 4, in its view,
must be harmoniously read with the extension mechanism under
[2025] 8 S.C.R. 1511
Chamundeshwari Electricity Supply Company Ltd. (CESC) v.
Saisudhir Energy (Chitradurga) Pvt. Ltd. & Anr.
Article 5.7 of the PPA and the Force Majeure provisions, such that
invocation is impermissible where the non-performance flows from
the default of the Appellant or its instrumentalities.
32. Notedly, the State Commission takes the view that the delay in
readiness of evacuation facilities falls within the definition of Force
Majeure under the PPA, being an event beyond the reasonable
control of the Respondent No. 1/Developer. On these findings, the
commission directed: i) Restoration of the encashed security to the
Respondent No. 1/Developer; ii) consideration of an extension of
time for fulfilment of the CPs; and iii) renegotiation of the project
tariff considering the revised commissioning schedule.
33. Likewise, the APTEL vide its judgement dated 21.03.2018 in Appeal
No. 176 of 2015, affirmed the decision of the State Commission in
its entirety. The APTEL records that there is no dispute about the
fact that the 220 kV evacuation lines are not commissioned within
the original CP and COD timelines, and that the delay is attributable
to Respondent No. 2/KPTCL.
34. The APTEL further observed that where the Appellant’s contractual
performance is inherently dependent on the completion of transmission
works by Respondent No. 2/KPTCL, a State instrumentality, delay
by such entity must, for the purposes of Article 5.7 of the PPA, be
treated as delays attributable to the Appellant.
35. Qua the performance security, the APTEL concurs with the State
Commission that the right to invocation of the performance security
under the PPA is not absolute. It must be exercised in accordance
with the contract as a whole, including provisions that provide relief
where non-performance is caused by the Appellant’s own default.
Although a Force Majeure notice under Article 14.5 was not issued,
the APTEL held that the State Commission was entitled to take judicial
notice of the facts on record which show that the delay is beyond the
Respondent No. 1/Developer’s control. In view thereof, the APTEL
dismissed Appellant’s appeal, thereby upholding the directions for
restoring the performance bank guarantee; extension of contractual
timelines; and renegotiations of the tariff.
ISSUES FOR DETERMINATION AND ANALYSIS
36. Having heard learned Counsel(s) for the parties and upon close
consideration of the record, the following questions fall for our
1512 [2025] 8 S.C.R.
Supreme Court Reports
determination: (i) the effect of Respondent No. 2/KPTCL’s delay in
commissioning the 220 kV evacuation system upon the timelines
stipulated for fulfilment of the CPs and achievement of COD under
the PPA; (ii) the entitlement of Appellant to invoke and encash the
performance bank guarantee in the facts of the present case; (iii) the
sustainability of the finding of Force Majeure recorded by the State
Commission in the absence of the contractual notice contemplated
under Article 14.5 of the PPA; (iv) the character of the PPA as a
contingent contract; and (v) the competence of the State Commission
and the APTEL to direct restoration of the bank guarantee, extension
of timelines, and renegotiation of tariff.
37. Article 5.1 of the PPA casts upon the Respondent No. 1/Developer
the obligation to complete, at its own risk and cost, all activities
necessary to enable the supply of power to the Appellant. Article 5.7
provides for extension where delay is “for reasons solely attributable
to the Appellant”. The record discloses beyond dispute that the
evacuation system, integral for delivery of power, was to be executed
by Respondent No. 2/KPTCL through the construction of two 220
kV double-circuit lines. By its communication dated 19.08.2014,
Respondent No. 2/KPTCL itself acknowledged that the lines would
be commissioned only in August 2015, well beyond the contractual
timelines.
38. The Respondent No. 1/Developer contends that such delay, being
beyond its control, automatically extended the contractual schedule.
That submission cannot be accepted. The contractual framework does
not operate on automaticity. Relief is conditional upon the Respondent
No. 1/Developer seeking and obtaining an extension under Article 5.7
of the PPA, which was never done. In the absence of such recourse,
the timelines under the PPA remained binding. Respondent No. 2/
KPTCL and Appellant, being both State instrumentalities does not
alter the position in law. Contractual rights and remedies must be
asserted within the framework of the agreement, not dehors it.
39. Turning then to the invocation of the performance bank guarantee,
Article 4.4 of the PPA confers upon the Appellant the right to encash
the performance security where the Respondent No. 1/Developer
fails to commence supply by the Scheduled COD, subject to the
relief(s) expressly available under the PPA, including those relating
to Force Majeure. In the present case, supply did not commence
[2025] 8 S.C.R. 1513
Chamundeshwari Electricity Supply Company Ltd. (CESC) v.
Saisudhir Energy (Chitradurga) Pvt. Ltd. & Anr.
within the agreed period; no formal extension was obtained under
Article 5.7 of the PPA; and no notice of Force Majeure was issued
under Article 14.5 of the PPA. The preconditions for invocation of
Article 4.4 of the PPA thus stood satisfied. Appellant’s invocation
of the bank guarantee was, therefore, an exercise of a remedy
specifically conferred by the contract, and to deny it would be to
disregard the allocation of risk embodied in the PPA. Pertinently,
invocation of the bank guarantee by the Appellant was on 12.11.2014
and the restraining order was passed by the State Commission only
on 14.11.2014. As the invocation was before the State Commission’s
order, the performance security of Rs. 23,40,60,000/- was transferred
to the account of the Appellant on 06.12.2014, which thereafter
came to be refunded by the Appellant, pursuant to the order of
the APTEL.
40. The finding of Force Majeure by the State Commission cannot
be sustained for the reason that Article 14.5 of the PPA stipulates
that the affected party “shall” issue notice within seven days of
knowledge of the event. This requirement is not merely directory; it
is a condition precedent for invoking the clause. Even if the delay in
completion of the evacuation system was beyond the Respondent
No. 1/Developer’s control, the appropriate provision for relief was
Article 5.7, not Article 14 of the PPA. Significantly, Article 14.3.1 of
the PPA details the events and circumstances which constitute Force
Majeure and delay in the readiness of the evacuation system, even if
attributable to Respondent No. 2/KPTCL, does not constitute a Force
Majeure event, as defined. The omission to pursue contractual relief
under the correct clause is fatal; it cannot be remedied by recourse
to a provision inapplicable on its terms.
41. As regards the submission that the PPA is in the nature of a contingent
contract under the Contract Act, the contention requires careful
scrutiny. The completion of the evacuation system by Respondent
No. 2/KPTCL was indeed an uncertain event outside the Respondent
No. 1/Developer’s control, and in a practical sense, supply of power
was dependent upon it. Yet, the PPA does not treat such completion
as a condition precedent in law to the Respondent No. 1/Developer’s
obligations. It instead provides specific contractual mechanism(s) -
Article 5.7 for delays attributable to the Appellant and Article 14 for
events of Force Majeure. Unless relief is sought and secured under
1514 [2025] 8 S.C.R.
Supreme Court Reports
those provisions, the time-bound obligations under the PPA remain
enforceable and the Appellant’s remedies for default intact.
42. Reliance was also placed before us on the decision of this Court in
Venkataraman Krishnamurthy & Anr. v. Lodha Crown Buildmart
Pvt. Ltd., (2024) 4 SCC 230, wherein it was observed that the
explicit terms of a contract are always the final word with regard to
the intention of the parties. We find the principle enunciated therein
to be apposite to the case at hand. This Court has, in a consistent
line of judgements, reiterated that regulatory or adjudicatory fora
cannot, under the guise of equity or fairness, rewrite the contractual
framework or superimpose obligations alien to the agreement. The
PPA, being the product of a competitive bidding process and having
received regulatory approval, must be construed and enforced strictly
in accordance with its express stipulations. To permit otherwise
would be to allow the State Commission or the APTEL to override
the parties own allocation of risk under the contract.
43. Finally, as to the competence of the regulatory fora, Appellant and
Respondent No. 2/KPTCL, though both State instrumentalities, are
parties to a commercial contract concluded through competitive
bidding. Their relationship is governed not by overarching notions
of equity but by the terms of the PPA. The jurisdiction of the
regulatory bodies is to ensure compliance with law and to adjudicate
disputes within the four corners of the contract. It does not extend
to recasting the contractual framework by directing restitution of
amount lawfully realised under the PPA, or by mandating alterations
to tariff and timelines in a manner inconsistent with the agreement.
The directions of the State Commission, affirmed by the APTEL,
requiring restoration of the performance security, extension of
contractual timelines, and renegotiation of tariff, transgress the
limits of that jurisdiction.
CONCLUSION AND DIRECTIONS
44. In light of the foregoing analysis, this Court is of the view that
Appellant’s invocation and encashment of the performance security
was in full conformity with the contractual framework under the PPA.
The non-fulfilment of the Respondent No. 1/Developer’s obligations
within the stipulated time, non-seeking of extension under Article 5.7
or valid Force Majeure claim under Article 14, necessarily attracted
Article 4.4 of the PPA.
[2025] 8 S.C.R. 1515
Chamundeshwari Electricity Supply Company Ltd. (CESC) v.
Saisudhir Energy (Chitradurga) Pvt. Ltd. & Anr.
45. Resultantly, the appeal is allowed and the impugned judgment dated
21.03.2018 of the APTEL passed in Appeal No. 176 of 2015, and
the order dated 28.01.2015 of the State Commission in O.P. No. 24
of 2014 are set aside.
46. Pending application(s), if any, shall also stand disposed of. No order
as to costs.
Result of the case: Appeal allowed.
†
Headnotes prepared by: Ankit Gyan
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "Delay in commissioning the 220 kV evacuation system"Sign in to search