M/s Simbhaoli Power Private Limited vs Uttar Pradesh Electricity Regulatory Commission & Ors

Court: Appellate Tribunal For Electricity
Case type: APPEAL
Decided on: 16-03-2026

<div> IN THE APPELLATE TRIBUNAL FOR ELECTRICITY (Appellate Jurisdiction) APPEAL No. 128 of 2021 th Dated: 16 March, 2026 Present: Hon’ble Ms. Seema Gupta, Officiating Chairperson Hon’ble Mr. Virender Bhat, Judicial Member In the matter of: M/s Simbhaoli Power Private Limited Through its Managing Director Unit – Chilwariya, Dist – Bahraich Email: [email protected] … Appellant Versus 1. Uttar Pradesh Electricity Regulatory Commission Through its Secretary, Vidyut Niyamak Bhawan, Vibhuti Khand-II, Near Mantri Awas, Gomti Nagar, Lucknow – 226010, U.P. Email: [email protected] 2. Uttar Pradesh Power Corporation Limited Through its Managing Director Shakti Bhawan, 14, Ashok Marg, Lucknow – 226001 Email: [email protected] 3. Madhyanchal Vidyut Vitran Nigam Ltd. Through its Managing Director 4A, Gokhale Marg, Lucknow – 226001 Email: [email protected] ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 1 of 33 4. The Chief Engineer Power Purchase Directorate Shakti Bhawan, 14, Ashok Marg, Lucknow Email: [email protected] … Respondent (s) Counsel for the Appellant(s) : D D Chopra, Sr. Adv. Shailesh Verma Swati Updhayay for App. 1 Counsel for the Respondent(s) : Hemant Sahai Nitish Gupta Puja Priyadarshini Allan Massey Nipun Sharma Sagnik Maitra for Res. 2 J U D G M E N T PER HON’BLE MR. VIRENDER BHAT, JUDICIAL MEMBER 1. The Appellant M/s. Simbhaoli Power Pvt. Ltd., a power producer from renewable sources in the State of UP, is aggrieved by th st the order dated 25 January, 2021 passed by 1 Respondent – Uttar Pradesh Electricity Regulatory Commission (hereinafter referred to as “the Commission”) in Petition No. 1557 of 2020. ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 2 of 33 Factual Matrix : 2. The Appellant is engaged in the business of generation of renewable power as well as other incidental business and has its place of work at Chilwariya, District- Baharaich, Uttar Pradesh. nd 3. The 2 Respondent – Uttar Pradesh Power Corporation Ltd. (UPPCL) is the holding company of five Distribution Companies rd (DISCOMS) operating in the State of UP. The 3 Respondent – Madhyanchal Vidyut Vitran Nigam Ltd. is one of those Discoms under whose area of operation fall the generating units of the Appellant. 4. The Appellant owns and operates more than one power generating units which were commissioned in different years. 5. The Appellant has entered into a Power Purchase Agreement th (PPA) dated 26 April, 2007 with Respondent No. 2 for export of contracted capacity of 19 MW from its two generating units of capacity 12 MW and 19 MW after meeting its in-house requirement of 12 MW for its sugar mill. These two generating units were commissioned in the year 2007. The Appellant has another generating unit of 18 MW capacity from which it exports 16 MW of ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 3 of 33 nd th surplus power to the 2 Respondent under PPA dated 27 August, 2013. 6. The 12 MW generating unit was the first to be commissioned by the Appellant. Since, according to the Appellant, this generating unit had outlived its life for the purpose of optimum performance and had lost its efficacy on account of becoming very old, its technology also becoming obsolete as a result of which it require frequent repairing thus leading to shutdown and higher consumption of fuel, the Appellant isolated and dismantled the same in order to avoid further breakdowns and requiring heavy cost of repair. 7. Upon dismantling of the said 12 MW generating unit, the in- house consumption of 12 MW was met from the other 19 MW unit which had been commissioned along with the said 12 MW unit, thus bringing down the surplus capacity from 19 MW to 7MW for export nd th of power to the 2 Respondent under PPA dated 26 April, 2007. 8. Accordingly, the Appellant informed the Chief Manager, Power Purchase Directorate (Respondent No. 4) about the said reduction th in its export capacity from 19 MW to 7 MW vide letter dated 16 September, 2019 with the request to carry out necessary amendments in the PPA in this regard. ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 4 of 33 9. When the Appellant did not receive any response in this regard from Respondent No. 4, it approached the Commission by way of Petition No. 1557 of 2020 under Section 86(1)(e) and (f) of the Electricity Act, 2003 with the following prayers :- (i) the Hon’ble Commission may be pleased to allow the Petitioner to reduce its export capacity from 19MW after isolation of 12MW generating capacity and reduction of export capacity from its 19MW generating Plant to 7MW with effect from 16/09/2019, and (ii) the Hon’ble Commission may be pleased to direct Respondent No. 3 to suitably amend principle PPA dated 26/04/2007 and SPPA dated 27/08/2013 by taking export capacity of the Petitioner at 23MW (7MW + 16MW), and (iii) the Hon’ble Commission may be pleased to direct Respondent No.3 to suitably revise weighted average of contracted capacities of the units commissioned in different years as detailed above, and, or (iv) the Hon’ble Commission may be pleased to issue any other further order or directions in favour of the ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 5 of 33 Petitioner as it may be deem fit and proper under the facts and circumstances of the case.” 10. This petition has been dismissed by the Commission vide th impugned order dated 25 January, 2021 holding that dismantling as well as isolation of 12 MW generating unit from the plant was a purely commercial decision of the Appellant which is not covered under Force Majeure Clause in the PPA as the same was not exclusively beyond Appellant’s control. The Commission also held th that there is no provision in the PPA dated 26 April, 2007 and th Supplementary PPA dated 27 August, 2013 permitting reduction of contracted capacity. Accordingly, the Commission held the Appellant not entitled to reduction of contracted capacity under the said PPA and SPPA. 11. Hence, the Appellant is in the appeal before us. Submissions of the Learned Counsels : 12. We have heard the Learned Senior Counsel for the Appellant nd and learned Counsel for the 2 Respondent. We have also perused ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 6 of 33 the impugned order as well as the written submissions filed by the Learned Counsels. 13. Learned Senior Counsel appearing on behalf of the Appellant vehemently argued that isolation of 12 MW generating unit followed by its dismantling is an event of unforeseen circumstances that were beyond the control of the Appellant and as per Article 26 of the PPA which is co-terminus with the Section 56 of the Indian Contract Act, 1872. He would argue that even though there is no express clause in the PPA with regard to the change in the contacted capacity by any party, the Appellant was prevented from performing its obligations under the PPAs on account of the reasons beyond its control and the circumstances in which it was not possible for the Appellant to operate the said 12 MW generating unit. He submitted that the Commission has failed to appreciate that the generator cannot be compelled to continue to export power irrespective of the problems it may face resulting in a situation where the very object of entering into a contract namely supply of electricity to the consumer and the recovery of cost in a reasonable manner would be defeated. 14. It was further argued by the Learned Senior Counsel that increase in cost of operating the 12 MW generating unit and resultant ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 7 of 33 inability not been able to recover the cost of supply of electricity in a reasonable manner by the Appellant, can be easily categorized as Force Majeure event which made it impracticable for the Appellant performed its obligations under the PPAs. He would submit that the provisions of the PPA must be given a holistic interpretation and need to be read in context of the scheme of Electricity Act to balance the interest of both the generator as well as the purchaser. He placed reliance upon the judgement of the Hon’ble Supreme Court in Satyabrata Ghose vs. Mugneeram Bangur & Co., (1953) 2 SCC 437, Energy Watchdog vs. CERC, (2017) 14 SCC 80 and the judgement of Delhi High Court in Halliburton Offshore Services vs. Vedanta Limited 2020 SCC online DEL 2068. 15. Referring to the judgement in the case of Satyabrata Ghose, Learned Senior Counsel argued that Force Majeure clause is not to be interpreted literally but shall also include within its scope impracticability which hinders the performance of the contract. He submitted that the general understanding of Force Majeure envisages that the performance of the promise has become impossible which is also the purport of Sections 36 & 56 of Indian Contract Act, 1972. He submitted that the Commission has failed to consider that by running ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 8 of 33 an unviable generating unit just to comply with the terms of the PPA, the Appellant will not be able to recover the cost of electricity which is against the intent of Section 61(d) of the Electricity Act, 2003. 16. Thus, according to the Learned Senior Counsel, the impugned order of the Commission cannot be sustained and is liable to be dismissed. nd 17. Per Contra, it is argued on behalf of the 2 Respondent that there is no provision in the PPAs for reduction of the contracted capacity agreed therein and the Appellant cannot be permitted to resile from express terms of PPA read with SPPA to unilaterally reduce the contracted capacity agreed therein. It is submitted that the sanctity of the contracts must be maintained and the terms of the PPAs cannot be altered unilaterally at whims and fancies of any of the parties. 18. It is submitted that the Appellant had signed the PPAs with the nd 2 Respondent with open eyes thereby unequivocally undertaking to supply 35 MW of power for period of 20 years which was admittedly without any caveats and not premised on the procurement of bagasse at a particular rate and therefore, the dismantling of 12 MW unit is in absolute breach of the provisions of the PPAs more so ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 9 of 33 nd for the reason that prior consent of the 2 Respondent for the same was not obtained. 19. It is also argued that as per Article 7.2 of the PPA, the fuel linkage is the responsibility of the Appellant and no pass through of the cost can be permitted and as per Article 12.2 of the PPA the DISCOM cannot be held responsible for any damage caused to the electrical system/generating set of the generating plant on account of errors or defects in the design, procurement, installation, testing, maintenance and operation of the system. It is argued that inefficient running of 12 MW unit and its dismantling much before the expiry of PPA is indicative of the poor design and improper planning of the project by the Appellant and, therefore, the Appellant is not entitled to any protection under the Force Majeure clause in the PPAs. 20. It is further argued that none of the provisions in the PPAs provides that rise in fuel prices, operational difficulty due to technical snags, high repairing costs, technology becoming obsolete, high consumption of bagasse fuel qualifies as Force Majeure event and the reliance placed on behalf of the Appellant on the phrase,” “or any other similar or dissimilar cause reasonably beyond its exclusively ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 10 of 33 control” used in Clause 26 of the PPA is also far fetched and misconceived. 21. Relying upon the judgements of the Hon’ble Supreme Court in nd Energy Watchdog case (cited by the Learned Counsel for 2 Respondent) and Alopi Parshad and Sons Limited Vs. Union of India 1960 SCC Online SC 13, it is argued that mere hardship or contract becoming onerous to one of the parties does not automatically lead to frustration of the contract and therefore, the case set up by the Appellant has no merit at all. Our Analysis 22. At the outset we may note that a PPA is a contract executed between a power generator and a Distribution Licensee whereby the former agrees to sell the power generated in its generating stations and the later agrees to purchase the same on the terms and conditions as stated in the agreement. The tariff at which such power is to be sold/purchased is an essential term of a PPA. In our view, upon execution of the PPA it becomes a binding contract between the power generator and the Distribution Licensees and both are bound by its terms and conditions as well as the obligations cast ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 11 of 33 upon them under the agreement. A PPA is a creation of both the parties and, therefore, their rights/obligations flow from the terms and conditions contained therein. 23. The sanctity of the power purchase agreement had come up for consideration before the Hon’ble Supreme Court in Gujarat Urja Vikas Nigam Ltd. vs. Solar Semi-Conductors Power Company (Pvt.) Ltd., (2017) 16 SCC 498 in which, Hon’ble Justice Kurian Joseph, speaking for the Bench, held as under :- “37. This Court should be specially careful in dealing with matters of exercise of inherent powers when the interest of consumers is at stake. The interest of consumers, as an objective, can be clearly ascertained from the Act. The Preamble of the Act mentions “protecting interest of consumers” and Section 61 (d) requires that the interests of the consumers are to be safeguarded when the appropriate Commission specifies the terms and conditions for determination of tariff. Under Section 64 read with Section 62, determination of tariff is to be made only after considering all suggestions and objections received from the public. Hence, the generic tariff once determined under the statute with notice to the public can be amended only by following the same procedure. Therefore, the approach of this Court ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 12 of 33 ought to be cautious and guarded when the decision has its bearing on the consumers. 38. Regulation 85 provides for extension of time. It may be seen that the same is available only in two specified situations – (i) for extension of time prescribed by the Regulations, and (ii) extension of time prescribed by the Commission in its order for doing any act. The control period is not something prescribed by the Commission under the Conduct of Business Regulations. The control period is also not an order by the Commission for doing any act. Commissioning of a project is the act to be performed in terms of the obligation under the PPA and that is between the producer and the purchaser viz. Respondent 1 and appellant. Hence, the Commission cannot extend the time stipulated under the PPA for doing any act contemplated under the agreement in exercise of its exercise of its powers under Regulation 85. Therefore, there cannot be an extension of the control period under the inherent powers of the Commission . 39. The Commission being a creature of statute cannot assume to itself any powers which are not otherwise conferred on it. In other words, under the guise of exercising its inherent power, as we have already noticed above, the Commission cannot take recourse to exercise of a power, procedure for which is otherwise specifically provided under the Act. ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 13 of 33 40. Extension of control period has been specifically held to be outside the purview of the power of the Commission as per EMCO. This appeal is hence, allowed. The impugned orders are set aside. However, we make it clear that this judgment or orders of the Appellate Tribunal or Commission shall not stand in the way of Respondent 1 taking recourse to the liberty available to them for redetermining of tariff if otherwise permissible under law and in which case it will be open to the parties to take all available contentions before the Commission.” (Emphasis Supplied) 24. Hon’ble Justice R. Banumathi, in a separate but concurrent note has observed of this aspect as under :- “65. It is contended that Section 86(1)(b) of the Act empowers the State Commission to regulate the price of sale and purchase of electricity between the generating companies and distribution licensees and the terms and conditions of the PPA cannot be set to be inviolable. Merely because in PPA, tariff rate as per Tariff Order (2010) is incorporated that does not empower the Commission to vary the terms of the contract to the disadvantage of the consumers whose interest the Commission is bound to safeguard. Sanctity of PPA entered into between the parties by mutual consent cannot be allowed to be breached by a ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 14 of 33 decision of the State Commission to extend the earlier control period beyond its expiry date, to the advantage of the generating company-respondent No. 1 and disadvantage of the appellant. Terms of PPA are binding on both the parties equally. 66. In Gujarat Urja Vikas Nigam Limited v. EMCO Limited and Another (2016) 11 SCC 182, facts were similar and the question of law raised was whether by passing the terms and conditions of PPA, the respondent can assail the sanctity of PPA. This Court held that Power Producer cannot go against the terms of the PPA and that as per the terms of the PPA, in case, the first respondent is not able to commence the generation of electricity within the 'control period' the first respondent will be entitled only for lower of the tariffs. 67. The first respondent placed reliance upon Gujarat Urja Vikas Nigam Limited v. Tarini Infrastructure Limited and Others (2016) 8 SCC 743. In the said case, this Court was faced with the substantial question of law viz. whether the tariff fixed under a PPA (Power Purchase Agreement) is sacrosanct and inviolable and beyond review and correction by the State Electricity Regulatory Commission. In that case, respondent No.1 thereon-power producer had entered into a PPA with the appellant therein-distribution licensee for sale of electricity from the generating stations to the extent of the contracted quantity for a period of 35 years at Rs. 3.29 per ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 15 of 33 KWH subject to escalation of 3% per annum till date of commercial operation. However, later the power producer found that the place from where the power was to be evacuated was at a distance of 23 kms. as opposed to a distance of 4 kms, envisaged in the concession agreement entered into between the Respondent-power producer and Narmada Water Resources Department (Respondent No.2 therein). On this ground the respondent had sought revision of tariff by the State Electricity Commission. This Court held that Section 86(1)(b) of the Act empowers State Commission to regulate price of sale and purchase of electricity between generating companies and distribution licensees through agreements for power, produced for distribution and supply and that the state commission has power to re-determine the tariff rate when the tariff rate mentioned in the PPA between generating company and distribution licensee was fixed by State Regulatory Commission in exercise of its statutory powers. Relevant portion of the paras (17) and (18) of the judgment, read as under: (SCC pp.756 & 758) “17. As already noticed, Section 86(1)(b) of the Act empowers the State Commission to regulate the price of sale and purchase of electricity between the generating companies and distribution licensees through agreements for power produced for distribution and supply. As held by this Court in V.S. Rice & Oil Mills v. State of A.P. AIR 1964 SC 1781, K. Ramanathan v. State of T.N. (1985) 2 SCC ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 16 of 33 116 and D.K. Trivedi & Sons v. State of Gujarat 1986 Supp. SCC 20 the power of regulation is indeed of wide import. ... 18. All the above would suggest that in view of Section 86(1)(b) the Court must lean in favour of flexibility and not read inviolability in terms of PPA insofar as the tariff stipulated therein as approved by the Commission is concerned. It would be a sound principle of interpretation to confer such a power if public interest dictated by the surrounding events and circumstances require a review of the tariff. The facts of the present case, as elaborately noted at the threshold of the present opinion, would suggest that the Court must lean in favour of such a view also having due regard to the provisions of Section 41 and 21 of the General Clauses Act, 1898. ... " In the facts and circumstances of that case and that the tariff rate of Rs.3.29/- per KWH was subject to escalation and subject to periodic review. Evacuation was changed from a distance of 4 kms. to 23 kms. from its switch yard. On account of the same, respondent No.1 therein had incurred an ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 17 of 33 additional cost of about Rs.10 crores which was not envisaged in the Concession Agreement. In such facts and changed circumstances, this Court thought it apposite to take a lenient view and allow the State Commission to re-determine the tariff rate. 68. In exercise of its statutory power, under Section 62 of the Electricity Act, the Commission has fixed the tariff rate. The word ‘tariff’ has not been defined in the Act. Tariff means a schedule of standard/prices or charges provided to the category or categories for procurement by licensee from generating company, wholesale or bulk or retail/various categories of consumers. After taking into consideration the factors in Section 61(1)(a) to (i), the State Commission determined the tariff rate for various categories including Solar Power PV project and the same is applied uniformly throughout the State. When the said tariff rate as determined by the Tariff Order (2010) is incorporated in the PPA between the parties, it is a matter of contract between the parties. In my view, respondent No.1 is bound by the terms and conditions of PPA entered into between respondent No.1 and the appellant by mutual consent and that the State Commission was not right in exercising its inherent jurisdiction by extending the first control period beyond its ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 18 of 33 due date and thereby substituting its view in the PPA, which is essentially a matter of contract between the parties.” (Emphasis supplied) 25. These observations of the Hon’ble Supreme Court in the above noted judgements fortify the view that the PPA between power generator and Distribution Licensees is sacrosanct document, the terms and conditions which were binding upon the parties and its sanctity cannot be permitted to be breached. 26. Clause 26 of the PPAs executed between the Appellant and the nd 2 Respondent relates to Force Majeure and is extracted hereinbelow :- 26. FORCE MAJEURE 26.1 If any party hereto is wholly or partially prevented from performing any of its obligations under this agreement by reason of or due to lightning, earthquake, riots, fire, floods, invasion, insurrection, rebellion, mutiny, tidal wave, civil unrest, epidemics, explosion, the order of any court, judge or civil authority, change in State or National law, war, any act of God or a public enemy, or any other similar or dissimilar cause reasonably beyond its exclusive control and not attributable to its neglect, then in any such event, such party shall be excused from ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 19 of 33 whatever performance is prevented by such event, to the extent so prevented, and such party shall not be liable for any damage, sanction or loss for not performing such obligations. 26.2 The party invoking this clause shall satisfy the other party of the occurrence of such an event and give written notice explaining the circumstances, within seven days to the other party and take all possible steps to revert to normal conditions at the earliest. 26.3 Any payments that become/have become due under this agreement shall not be withheld, on grounds of force majeure conditions developing. 27. The term “Force Majeure” originates from the Code Napoleon of France that translates to mean “Superior Force’ or ‘Greater Force”. This would indicate a drastic or a fundamental change in the substance of the contract that is brought about by an event which was neither anticipated by the parties nor under their control, resulting in non-performance of the contractual obligations. 28. The term “Force Majeure” has been defined in Blacks Law Dictionary as “an event or effect that can neither be anticipated nor controlled”. Force Majeure is a contractual provision to deal with uncertain situations due to which contractual obligations could not ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 20 of 33 be performed and these situations cannot be pre-saged at the time of entering into the contract. Generally, a Force Majeure clause provides a temporary reprieve to the parties from performing their obligations under the contract if the events mentioned in the clause are satisfied. 29. Although the term “Force Majeure” does not find mention in any provisions of the Contract Act, 1872, its doctrine can be found embodied in Section 32 of the Act which renders a contract void where an event upon which performance of the contract is contingent, becomes impossible. In order to invoke the doctrine of Force Majeure, the party doing so shall have to establish; (i) There is a valid and subsisting contract between the parties. (ii) Some part of the contract is yet to be performed. (iii) The contract has become impossible to perform. 30. The consequences of the Force Majeure event will have to be ascertained and determined to find out whether it renders the contract altogether impossible, unlawful or impracticable to perform and thereby frustrates its performance. Whether it is established that ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 21 of 33 the conditions have materially and substantially affected the parties as well as their obligations and where there is no way to perform the contract during the existence of such conditions, the contract is annulled and both the contracting parties are discharged of their subsequent obligations. Under these circumstances, neither party has right to sue the other party for breach of such contracts. 31. In India, the Courts follow the contracts strictly in terms of the Force Majeure clauses. In a case where the contract must be rescinded on account of Force Majeure events, the burden to prove is on the party claiming it. Unless there is compelling evidence that a contract cannot be performed under any circumstances, the Courts do not favour party resorting to frustration of contract and its termination. 32. The concept of Force Majeure had come up before the Hon’ble Supreme court in Satyabrata Ghose vs Mugneeram Bangur & Co., 1954 SCR 310 in which it was held that the word “impossible” has not been used in the sense of physical or literal impossibilities. The determination of whether Force Majeure event has actually occurred does not centre around its impossibilities alone. A mere “impracticality of performance” with regards to such matter of the ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 22 of 33 contract will also suffice. It was held that when an untoward event or unprecedented change of circumstances impacts the very foundation of the contract between the parties, this event will be considered as Force Majeure and the contract, therefore, would become impossible to perform. 33. Generally, Force Majeure Clauses are applicable without any restrictions, but at the same time, a party cannot hide its own negligence and malafide intention behind this clause. So where the non-performance is caused by usual and natural consequences and not by uncertain consequences which are beyond the control of the parties, the Force Majeure clause cannot be enforced in those causes. Further, the Force Majeure clause can also not be invoked simply because the contract has become financially and commercially more difficult to perform. The party taking shelter under the Force Majeure clause needs to convince the Court that the Force Majeure event was beyond its control and the event could not be stopped even after ensuring due diligence and taking all possible steps. Broadly speaking, in order to qualify as a Force Majeure event, it must pass following triple test :- ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 23 of 33 (i) the event projected as Force Majeure should be unpractical and unforceable (i.e. unpracticality); (ii) the event must make the execution of the contractual obligations impossible (i.e. impossibility); and (iii) the event must not be created on account of default or negligence of the party claiming it (i.e. externality). 34. Hon’ble Supreme Court has recently settled the law relating to Force Majeure in Energy Watchdog Vs. CERC (2017) 14 SCC 80 and has laid down following principles for its application :- a. “Force Majeure would operate as part of a contract as a contingency under Section 32 of the Indian Contract Act 1872 (‘ICA’) b. Independent of the contract sometimes, the doctrine of frustration could be invoked by a party as per Section 56, ICA. c. The impossibility of performance under Section 56, ICA would include impracticability or uselessness keeping in mind the object of the contract. d. If an untoward event or change of circumstance totally upsets the very foundation upon which the parties entered their agreement it can be said that the promisor finds it impossible to do the act which he had promised to do. ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 24 of 33 e. Express terms of a contract cannot be ignored on a vague plea of equity. f. Risks associated with a contract would have to be borne by the parties. g. Performance is not discharged simply if it becomes onerous between the parties. h. Alteration of circumstances does not lead to frustration of a contract. i. Courts cannot generally absolve performance of a contract either because it has become onerous or due to an unforeseen turn of events. Doctrine of frustration has to be applied narrowly. j. A mere rise in cost or expense does not lead to frustration. k. If there is an alternative mode of performance, the Force Majeure clause will not apply. l. The terms of the contract, its matrix or context, the knowledge, expectation, assumptions and the nature of the supervening events have to be considered. m. If the Contract inherently has risk associated with it, the doctrine of frustration is not to be likely invoked. n. Unless there was a break in identity between the contract as envisioned originally and its performance in the altered circumstances, doctrine of frustration would not apply.” ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 25 of 33 35. The settled position, thus, is that the Force Majeure Clause is to be interpreted strictly and the parties to a contract cannot be excused from its performance on flimsy and unjustified grounds. We find it profitable to quote following paragraph from another recent judgement of Supreme Court in Halliburton Offshore Services Vs. Vedanta Limited and Anr. 2020 SCC Online Del 2068 :- “It is the settled position in law that a Force Majeure clause is to be interpreted narrowly and not broadly. Parties ought to be compelled to adhere to contractual terms and conditions and excusing non-performance would be only in exceptional situations. As observed in Energy Watchdog (supra) it is not in the domain of Courts to absolve parties from performing their part of the contract. It is also not the duty of Courts to provide a shelter for justifying non-performance. There has to be a ‘real reason’ and a ‘real justification’ which the Court would consider in order to invoke a Force Majeure clause.” 36. Now, let us proceed to examine whether the isolation and dismantling of 12 MW generating unit by the Appellant was occasioned by any Force Majeure event as envisaged under Clause 26 of the PPA and whether the circumstances were such which made ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 26 of 33 it impossible for the Appellant to continue performing its obligation under the PPA thereby frustrating the contracts. th 37. Concededly, letter dated 16 September, 2019 addressed by st the Appellant to Respondent No. 4 is the 1 communication sent in this regard by the Appellant. Therefore its contents are very material and are extracted hereinbelow:- “Our company has power purchase agreements with Madhyanchal Vidyut Vitran Nigam Ltd, for 19MW dated 26/04/2007 and further PPA of 16MW dated 27/08/2013. Therefore total PPA of 35MW with the generation capacity of (1x15MW + 1x22MW + 1x18MW) total 55MW. Since Availability of fuel is one of the constraints as bagasse generation as % of cane has reduced over the year, and also price of bagasse in the market is very high making it non viable to operate. We are using almost 80% biomass in our 18MW Generating plant, even then we are unable to fulfil the fuel requirement of our 15MW generating plant and compelled to stop its operation. Therefore, SPPL is unable to export 19MW Power from its combined generating plant 15MW & 22MW. We will be able to export only 7MW power from 22MW generating plant. ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 27 of 33 Therefore you are requested to reduce the export capacity from 19MW to 7MW, ie reduction by 12MW in our PPA dated 26/04/2007, and allow to tariff on weighted average of 7MW in place of 19MW and PPA of 16MW will continue as it is. We request you to kindly issue the amendment in PPA dated 26/04/2007 and accordingly in supplementary PPA.” (Emphasis supplied) 38. It is evident that the reason given for reduction of export quantity of power from 19 MW to 7 MW in this communication is reduction in availability of fuel and increase in price of Bagasse in the market which made it non-viable for the Appellant to operate the generating unit. rd 39. Vide letter dated 23 December, 2019, the Appellant has intimated the Respondent No. 4 about discarding the 12 MW TG Set due to process steam requirement of sugar mill and non economical performance of the same. It is also informed that the Appellant has installed a new 18 MW TG Set for the said purpose. ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 28 of 33 40. In the petition filed by the Appellant before the Commission the reasons for isolating and dismantling of the 12 MW generating unit have been set out in paragraph 9 which is reproduced hereinbelow:- “That on account of increase in the cost of bagasse and its non availability the Petitioner is finding it difficult to run its old 12MW bagasse based generating plant on account of its higher consumption of bagasse as compared to newer plants based on modern technology. The Petitioner therefore decided to isolate the above 12MW plant by dismantling the same.” 41. Manifestly, the case of the Appellant throughout has been that on account of increase in cost of Bagasse and its non-availability, Appellant found it difficult to run its old 12MW Bagasse based generating plant on account of its higher consumption of Bagasse as compared to new generating units based on modern technology. 42. Therefore, we feel in agreement with the observations of the Commission in the impugned order that the Appellant has taken the decision of dismantling the 12 MW generating unit for its inefficient operational performance viz. higher consumption of bagasse and had ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 29 of 33 become economically viable. In these circumstances, it is limpid that such decision was taken by the Appellant on the basis of purely commercial consideration and cannot be said to have occasioned due to any situation beyond the control of the Appellant. It has already been noted hereinabove on the basis of the legal principles enunciated by the Hon’ble Supreme Court and Delhi High Court with regards to the scope and application of “Force Majeure” and “Doctrine of Frustration” that these two concepts have to be applied narrowly and the courts cannot generally absolve performance of the contract either because it had become onerous or due to an unforeseen turn of events. The parties ought to be compelled to adhere to the terms and conditions contained in the contract and it does not lie in the domain of the Courts to absolve parties from performing their part of the contract and justify the non-performance. 43. The increase in the price of bagasse and its non-availability are not the factors which could not have been anticipated by the Appellant nd at the time of execution of the PPA with 2 Respondent. These were usual and natural events which could have been easily foreseen and taken into consideration at the time of entering into the PPAs with the nd 2 Respondent. Further, there is nothing on record from the side of ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 30 of 33 the Appellant to show that actually the price of bagasse in the market had increased astronomically and it was not easily available in the market. It also does not appear that the Appellant had taken any serious steps to mitigate the difficulties on account of purported increase in prices of bagasse and its unavailability in the market. 44. It is also evident from the record that the isolation and dismantling of the 12 MW generating unit was unilateral decision of the Appellant without seeking any concurrence or approval from the th respondents. In the letter dated 16 September, 2019, contents of which have already been extracted hereinabove, the Appellant has nowhere stated that the isolation and dismantling 12 MW generating unit is being contemplated and the same would be done shortly. The Appellant, all of a sudden informed Respondent No. 4 vide letter rd dated 23 December, 2019 that the 12 MW generating unit has had been discarded due to its non-economic performance. The contents of this letter also indicate that the decision of discarding 12 MW generating unit by the Appellant was taken only for the reason that the Appellant found it onerous to continue performing its obligations under the PPAs. ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 31 of 33 rd 45. Notably in the said letter dated 23 December, 2019, Appellant has also informed Respondent No. 4 that a new 18 MW generating unit has been installed in place of the old discarded 12 MW generating unit. Therefore, the appellant cannot claim inability or impossibility of performing its obligations under the PPAs for the reason that the nd entire contracted capacity could have been supplied to the 2 Respondent upon installation of new 18 MW generating unit in place of the old dismantled 12 MW generating unit. 46. We are unable to find any “real reason” and “real justification” for the Appellant to invoke the Force Majeure clause in the PPA and the doctrine of frustration because, as per the case set up by the Appellant itself before the Commission and before this Tribunal in this nd appeal, the contract executed by it with 2 Respondent has become financially as well as commercially difficult to perform and the plea of non-performance is based upon usual as well as natural consequences which were not beyond the anticipation and the control of the Appellant. Thus, the Appellant cannot be excused from performing its obligation under the PPAs on such unjustified grounds. Moreover, it is also manifest that the Appellant had an alternate mode of performance of the PPAs on account of the fact that a new 18 MW ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 32 of 33 generating unit had been installed in place of old dismantled 12 MW generating unit. 47. Hence, we are of the considered opinion that no case has been made out by the Appellant for seeking reduction in contracted th capacity by way of amendments in the PPAs dated 26 April, 2007 th and 27 August, 2013. The Appellant continues to remain bound by the terms and conditions agreed upon by the parties in these PPAs and shall be liable for the consequences in case of its inability to nd supply contracted capacity of power to the 2 Respondent. Conclusion 48. In the light of the above discussion, we do not find any error or infirmity in the impugned order of the Commission. The appeal is devoid of any merit and is hereby dismissed. th Pronounced in the open court on this 16 day of March, 2026. (Virender Bhat) (Seema Gupta) Judicial Member Officiating Chairperson ✓ REPORTABLE / NON REPORTABLE js ------------------------------------------------------------------------------------------------------------------ Appeal No. 128 of 2021 Page 33 of 33 </div>