Raasi Green Earth Energy Pvt. Ltd. vs Tamil Nadu Electricity Regulatory Commission & Ors
- Court
- Appellate Tribunal For Electricity
IN THE APPELLATE TRIBUNAL FOR ELECTRICITY
(Appellate Jurisdiction)
Court-1
APPEAL No. 151 of 2021
th
Dated : 29 July, 2026
Present: Hon’ble Ms. Seema Gupta, Officiating Chairperson
Hon’ble Mr. Virender Bhat, Judicial Member
In the matter of:
Raasi Green Earth Energy Pvt. Ltd.
nd
No. 817, 2 Floor, 80 feet Road,
th
8 block, Kormangala,
Bangalore – 560095
Email: [email protected] …
Appellant
Versus
1. Tamil Nadu Electricity Regulatory Commission
Through its Secretary
th
4 Floor, SIDCO Corporate Office Building,
Thiru Vi Ka Industrial Estate,
Guindy, Chennai – 600032
Email: [email protected]
2. Tamil Nadu Generation and Distribution Corporation Limited
Through its Chairman
No. 144, Anna Salai, Chennai – 600002
Email: [email protected]
3. The Chief Engineer
NCES – TANGEDCO
No. 144, Anna Salai, Chennai – 600002
Email: [email protected] … Respondent (s)
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Appeal No. 151 of 2021 Page 1 of 33
Counsel for the Appellant(s) : Anand K. Ganesan
Swapna Seshadri
Ashwin Ramanathan
Damodar Solanki
for App. 1
Counsel for the Respondent(s) : Anusha Nagarajan
For Res. 2 & 3
J U D G M E N T
PER HON’BLE MR. VIRENDER BHAT, JUDICIAL MEMBER
nd
1. In this appeal, the Appellant has assailed the order dated 2
st
February, 2021 passed by the 1 Respondent – Tamil Nadu Electricity
Regulatory Commission (hereinafter referred to as “the Commission”) in
DRP No. 8 of 2020 filed by the Appellant thereby refusing to grant project
specific extension of the Commercial Operation Date (COD) of the
Appellant’s solar power project. The Commission has also held that since
the Appellant’s power project was not commissioned within 34 months
th
from 26 September, 2017 (date of signing of the PPA between it and
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the 2 Respondent), the PPA stood automatically terminated and the 2
Respondent is entitled to relief provided under Article use 14 of the PPA
to the extent of non-commissioning of the power project by the Appellant.
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2. The Appellant is a company registered under Companies Act, 2013
and is engaged in the business of solar power generation as well as other
allied activities.
3. Respondent No. 2 – Tamil Nadu Generation and Distribution
Corporation Limited (TANGEDCO) is the sole distribution licensee in the
State of Tamil Nadu.
4. Brief facts of the case, relevant for the disposal of the instant
nd
appeal, are that 2 Respondent – TANGEDCO issued a tender in the
year 2017 for procurement of total capacity of 1500 MW of solar power
from the developers on long-term basis. The tender was prepared and
issued in line with the “Guidelines for tariff based competitive bidding
process for procurement of power from grid connected solar PV power
rd
projects, 2017” dated 3 August, 2017 issued by the Ministry of Power,
Government of India as a guiding principle.
5. The Appellant also participated in the tender and was declared L-1
bidder having quoted Rs.3.47 per unit. Accordingly, Letter of Intent (LOI)
th nd
dated 28 August, 2017 was issued by 2 Respondent to the Appellant.
As required under clause 5.0 of the LOI, the Appellant furnished two
Performance Bank Guarantees for a total amount of Rs.20 crores and
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Appeal No. 151 of 2021 Page 3 of 33
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also entered into Power Purchase Agreement dated 26 September,
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2017 with the 2 Respondent – TANGEDCO for a period of 25 years.
6. As per clause 14 of the PPA, the Appellant had to commission its
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power project by 25 September, 2019 i.e. within 24 months from the
date of the signing of the PPA.
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7. Vide notification dated 30 July, 2018, the Ministry of Finance
imposed a “Safeguard Duty” (in short “SGD”) on the modules and solar
panels to be imported from all developed countries such as China,
Taiwan and Malaysia. The notification imposed safeguard duty beyond
25% on the advolerum value of the modules thereby increasing the price
of modules by 25%.
nd
8. The 2 Respondent – TANGEDCO was duly informed about the
th
imposition of safeguard duty by the Appellant vide letter dated 8 March,
2019 with the request to revise the tariff payable for the Appellant’s power
nd th
project, which was rejected by the 2 Respondent vide reply dated 15
May, 2019.
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9. Subsequently, vide letter dated 28 June, 2019 addressed to the
nd
2 Respondent, the Appellant requested for confirmation of part
commissioning of the solar power projects as it had arrangement to
ensure 50% of the total PPA capacity to be ready for commissioning. Vide
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Appeal No. 151 of 2021 Page 4 of 33
another letter sent on the same date, the Appellant sought permission to
evacuate power through 33/110kv level instead of 230kv level in order
nd
to expedite and complete the project. The 2 Respondent vide reply
rd
dated 23 July, 2019 informed the Appellant that request for part
commissioning would be considered but refused to allow the petitioner to
evacuate power through 33/110kv level instead of 230kv level.
nd
10. Thereafter, the Appellant sent two letters to the 2 Respondent
seeking extension of COD of the power project on the ground of sudden
imposition of safeguard duty modules imported by the Appellant, but did
not receive any response to the same.
nd
11. Feeling aggrieved by the refusal of 2 Respondent TANGEDCO
to extend COD of the solar power project by 6 months, the Appellant
approached the Commission with the petition being DRP No. 8 of 2020
seeking following prayers :-
“In view of the above, it is humbly prayed that this Hon'ble
Court may be pleased to:
a. Grant the Petitioner a project specific extension of the
COD by fifteen (15) months in respect of the Petitioner's
SPG under PPA dated 26.09.2019 and thereby quash the
letters dated 15.05.2019; 22.05.2019 and 23.07.2019;
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Appeal No. 151 of 2021 Page 5 of 33
b. Direct the 1 and 2nd Respondents to not encash the
bank guarantees furnished by the Petitioner pursuant to
the PPA dated 26.09.2017;
c. Pass such further or other orders that this Hon'ble
Commission may deem fit in the facts and circumstances
of the case.”
12. The petition has been disposed of by the Commission vide order
nd
dated 2 February, 2021 which has been impugned in this appeal. The
Commission has concluded as under :-
“7.17.12. In this case, it is clear that the petitioner's project
was not commissioned within 34 months from the date of
signing PPA. Therefore, the PPA shall stand automatically
terminated as per the terms of the PPA and respondent is
entitled to the relief provided in clause 14 of the PPA to the
extent of non-commissioning of the project.
7.17.13. Accordingly, the plea for extension of date of
commissioning is rejected for the reasons stated supra.
In the result, the petition is dismissed. No costs.”
13. It appears that during the pendency of the petition before the
nd
Commission, the 2 Respondent – TANGEDCO had encashed the
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Performance Bank Guarantees amounting to Rs.15 crores submitted by
the Appellant. Accordingly, as per the submissions of the Learned
Counsel for the Appellant, the scope of the instant appeal is limited to the
nd
question whether the 2 Respondent – TANGEDCO is entitled to the
amounts corresponding to the Bank Guarantees submitted by the
Appellant.
14. We have heard Mr. Anand K. Ganesan, Learned Counsel for the
Appellant and Ms. Anusha Nagarajan appearing for Respondent Nos. 2
& 3. We have also perused the written submission filed by the Learned
Counsels.
15. Having regard to the submissions made by the Appellant’s Counsel
that the scope of the appeal now stands limited to the issue as to whether
nd
the 2 Respondent was entitled to appropriate amounts corresponding
to the Bank Guarantees submitted by the Appellant, we find that articles
14 & 15 of the PPA are relevant for discussion on this issue which are
extracted hereinbelow :-
“14 (a) Part Commissioning :
As per terms and conditions of the tender specification,
Part Commissioning will be applicable to your project.
However, Part Commissioning will be accepted by the
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Appeal No. 151 of 2021 Page 7 of 33
Distribution Licensee for minimum of 50% of the plant
capacity (location wise).
b) Commissioning Schedule and Liquidated Damages for
Delay in Commissioning: The solar power plant shall be
commissioned on or before 24 months i.e. 25.09.2019
from the date of signing of this Power Purchase
Agreement. In case of failure to achieve this milestone,
Distribution Licensee shall encash the Performance
Guarantee in the following manner:
Delay up to five months. The Distribution Licensee will
encash the Performance Guarantee on per day basis
proportionate to the capacity not commissioned within (5
months after the expiry of commissioning schedule of 24
months. In case of non-commissioning within the said 29
months, the distribution licensee will encash the entire
(100%) performance bank guarantee.
Delay beyond 29 months: In case the commissioning of
project is further delayed beyond 29 months and up to 34
months, the SPG shall in addition to 100% encashment
of performance bank guarantee shall pay a liquidated
damages to the distribution licensee a sum of Rs.
10,000/-per MWac on a per day basis in the form of BG
to the extent of capacity not commissioned.
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Prior to expiry of 29 months from the date of signing of
PPA the SPG shall furnish an additional performance
bank guarantee calculated at Rs. 10,000/- per MWac for
5 months to the distribution licensee to the extent of
capacity not commissioned. In case of non-furnishing of
additional performance bank guarantee the PPA shall
stand terminated automatically without any notice or
order.
The Maximum time period allowed for commissioning of
the full project capacity with encashment of performance
bank guarantee and payment of liquidated damages shall
be 34 months from the date of signing of the PPA. The
amount of liquidated damages shall be recovered by
TANGEDCO from the payments due of project developer
on account of sale of solar power to TANGEDCO. In case
the commissioning of the project is delayed beyond 34
months from the date of signing of PPA the PPA capacity
shall stand reduced or amended to the extent of project
capacity commissioned when the PPA for the balance
capacity not commissioned will stand terminated and
shall be reduced from the selected project capacity. In
case the project is not commissioned within the said 34
months the PPA will stand terminated automatically
without any notice or order and the distribution licensee
will encash the performance guarantee furnished towards
liquidated damages.
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15. Commercial Operation Date:
The projects commissioned during the month shall be
considered for payment of energy at 50% of the PPA tariff
as infirm power till commercial operation date CODs. The
COD shall be considered 30 days from the actual date if
commissioning of the first part capacity.”
16. It is admitted case by both the parties that the PPA was executed
nd th
between the Appellant and 2 Respondent on 26 September, 2017 and,
therefore, the Appellant ought to have commissioned the solar power
th
project by 25 September, 2019 i.e. within 24 months from the date of
the signing of the PPA. As per the said provision in the PPA, if the
commissioning of the project is delayed beyond 24 months from the
signing of the PPA and up to 29 months, the Distribution Licensees is
entitled to encash the performance Bank Guarantee on per day basis
proportionate to the capacity not commissioned during those five
months. In case of non-commissioning of the power project within 29
months from the date of signing of the PPA the Distribution Licensees
would be entitled to encash entire 100% of the Bank Guarantees and the
solar power generator shall also be liable to pay liquidated damages to
the DISCOM in the sum of Rs.10,000/- per MW ac on a per day basis to
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Appeal No. 151 of 2021 Page 10 of 33
the extent of capacity not commissioned. Further, in case the project is
not commissioned within 34 months from the signing of the PPA, the
PPA shall stand automatically terminated without any notice or order.
17. In this case, concededly the Appellant did not commission the
power project within 34 months from the date of the signing of the PPA
nd
and, therefore, the 2 Respondent became entitled to encash the entire
Performance Bank Guarantee submitted by the Appellant and the
Appellant also become liable to pay liquidated damages as per Article 14
of the PPA.
nd
18. It has been argued on behalf of the Appellant that the 2
Respondent did not suffer any loss due to non-commissioning of the
power project by the Appellant and hence the respondent is liable to
refund the amounts of Bank Guarantee to the Appellant. It is submitted
that the contentions in this regard were raised before the Commission
also during the hearing of the petition which the Commission had rejected
on the grounds that these were new contentions which did not form part
of the petition. It is pointed out that the Appellant had raised these
contentions in its rejoinder filed before the Commission which fact has
been overlooked by the Commission while passing the impugned order.
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19. We have already extracted hereinabove the prayers made by the
Appellant in this petition before the Commission. Since the Performance
Bank Guarantee had not been encashed till the date of the filing of the
petition, no prayer was made for refund of the Bank Guarantee amount.
nd
As already indicated hereinabove, the 2 Respondent had encashed the
Bank Guarantees amounting to Rs.15 crores during the pendency of the
petition before the Commission. In these circumstances, the Appellant
ought to have amended the petition in order to incorporate these
subsequent events in the petition and to make additional prayer in the
petition with regards to the refund of the Bank Guarantee amount from
nd
the 2 Respondent. Merely, mentioning about the subsequent events in
the rejoinder, without seeking amendment of petition including the prayer
clause, did not suffice the requirement of law and, therefore, the
Commission was right in rejecting such prayer of the Appellant as it was
manifestly beyond the pleadings.
20. As discussed hereinabove, Article 14 of the PPA provides for
extension of the COD of the solar power project beyond the scheduled
24 months from the date of signing of the PPA upto 34 months albeit with
certain conditions which have been elaborated in paragraph No. 16
hereinabove and are not repeated here for the sake of brevity. Therefore,
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Appeal No. 151 of 2021 Page 12 of 33
nd
no fault can be found with the action of 2 Respondent – TANGEDCO in
encashing the Performance Bank Guarantee submitted by the Appellant
for the reason that the Appellant, concededly did not commission its
power project, within the timelines as specified under Article 14 of the
PPA. For the encashment of the Performance bank guarantees
submitted by the Appellant, TANGEDCO was not required to show any
loss suffered by it on account of non-commissioning of the power project
by the Appellant. The moment, the delay in commissioning the power
project reached beyond 24 months from the date of signing of the PPA,
the encashment of performance bank guarantee triggered in as per
Article 14 of the PPA.
21. It is only when the delay in commissioning of the power project is
condoned and the SCOD of the project is extended on the request of the
project developer on account of some force majeure event as envisaged
under clause 22 of the PPA that the TANGEDCO may not be entitled to
encash the Performance Bank Guarantee furnished by the Developer. In
the instant case, the TANGEDCO encashed the Bank Guarantee of
Appellant before the plea of Force Majeure set up by Appellant in the
petition, was decided. Such encashment of Bank Guarantee appears to
have been accepted by the Appellant as it neither sought amendment of
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petition including the prayer clause nor filed a fresh petition in this context
challenging the encashment of Bank Guarantee by TANGEDCO.
Therefore, the encashment of Bank Guarantees cannot be assailed in
this appeal when there were no such pleadings raised before the
Commission. Appeal, being the extension of the proceedings before the
Court/Forum below, has to be decided on the basis of
pleadings/contentions raised therein.
22. Hence, we do not find any fault or lacunae in the impugned order
of the Commission on the aspect of encashment of Bank Guarantees of
the Appellant.
23. In so far as the liquidated damages are concerned, whether the
nd
Appellant is liable to pay the same to the 2 Respondent - TANGEDCO
as per Article 14 of the PPA, as held by the Commission in the impugned
order, it is argued on behalf of the Appellant that Appellant cannot be
asked to pay liquidated damages in the absence of any pleadings or proof
nd
on behalf of the 2 Respondent that it suffered any loss on account of
non-commissioning of the power project. It is argued that as per well-
settled legal position, a stipulation of liquidated damages in the contract
is a genuine pre-estimate of damages suffered in cases of breach and even
if it is a genuine pre-estimate, there is requirement to prove that actual loss
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has been suffered by the party seeking liquidated damages. It is argued
that when there is no loss, liquidated damages cannot be granted.
24. Reliance is placed on the judgements of the Hon’ble Supreme
Court in Fateh Chand v. Balkishan Das (AIR 1963 SC 1405) and
Murlidhar Chiranjilal vs. Harishchandra Dwarkadas, (1962) 1 SCR 653.
25. It is argued that TANGEDCO neither claimed nor attempted to
prove that any loss has been suffered by it on account of non-
commissioning of the power project by the Appellant and hence, the
Commission erred in proceeding to award damages to it in the absence
of such proof merely on speculative basis.
26. On this aspect, it is argued on behalf of the TANGEDCO that failure
on the part of the Appellant to meet its obligations to commission the
power project and supply power to TANGEDCO resulted in TANGEDCO
having to meet the energy shortfall from other sources which included
thermal power generators. It is argued that it is extremely difficult to
identify and quantify the exact loss suffered by a Distribution Licensees
on account of delay or interruption in power supply under a PPA. It is
pointed out that procurers like TANGEDCO have agreements with a
number of generating stations for procurement of electricity and
additionally, they also have to purchase power from exchanges to meet
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Appeal No. 151 of 2021 Page 15 of 33
demand fluctuations during particular times of the day and if a seller or
a generating company fails to supply power or delays in supplying power
from the agreed date, it is extremely difficult to ascertain the exact
replacing source and to compute the cost difference in a linear fashion
unlike other transactions involving movable goods. In this regard,
th
reliance is placed upon the previous judgement of this Tribunal dated 12
January, 2015 in Lanco Kondopalli Power Ltd. vs. APERC in Appeal No.
154 of 2013.
27. The primary argument advanced on behalf of the appellant is that
nd
since the 2 respondent has failed to prove that it suffered any loss on
account of non-commissioning of the power project by the Appellant
within the stipulated timeline, the Commission has erred in granting
nd
compensation to the 2 respondent as liquidated damages. The
argument is based upon Sections 73 and 74 of the Indian Contract Act,
1872 which are quoted hereinbelow: -
“ 73. Compensation for loss or damage
caused by breach of contract .—When a
contract has been broken, the party who suffers
by such breach is entitled to receive, from the
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Appeal No. 151 of 2021 Page 16 of 33
party who has broken the contract,
compensation for any loss or damage caused to
him thereby, which naturally arose in the usual
course of things from such breach, or which the
parties knew, when they made the contract, to
be likely to result from the breach of it. Such
compensation is not to be given for any remote
and indirect loss or damage sustained by reason
of the breach.
Compensation for failure to discharge
obligation resembling those created by
contract. —When an obligation resembling
those created by contract has been incurred and
has not been discharged, any person injured by
the failure to discharge it is entitled to receive the
same compensation from the party in default, as
if such person had contracted to discharge it and
had broken his contract.
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Explanation.—In estimating the loss or damage
arising from a breach of contract, the means
which existed of remedying the inconvenience
caused by the non-performance of the contract
must be taken into account.
74. Compensation for breach of contract
where penalty stipulated for .— When a
contract has been broken, if a sum is named in
the contract as the amount to be paid in case of
such breach, or if the contract contains any other
stipulation by way of penalty, the party
complaining of the breach is entitled, whether or
not actual damage or loss is proved to have
been caused thereby, to receive from the party
who has broken the contract reasonable
compensation not exceeding the amount so
named or, as the case may be, the penalty
stipulated for.
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Explanation.—A stipulation for increased
interest from the date of default may be a
stipulation by way of penalty.
Exception.—When any person enters into any
bail-bond, recognizance or other instrument of
the same nature, or, under the provisions of any
law, or under the orders of the Central
Government or of any State Government, gives
any bond for the performance of any public duty
or act in which the public are interested, he shall
be liable, upon breach of the condition of any
such instrument, to pay the whole sum
mentioned therein.
Explanation.—A person who enters into a
contract with Government does not necessarily
thereby undertake any public duty, or promise to
do an act in which the public are interested.”
28. Section 73 of the Contract Act embodies the general principle with
regards to assessment of damages caused by the breach of contract and
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provides that the compensation would be payable by the party
committing the breach for the damages caused to the other party, which
damage was anticipated by parties to be likely to occur in case of the
breach of the agreement or which arose naturally in the usual course of
things from such breach. Section 74 speaks of the measure of damages
to be awarded in case of breach of contract where the contract itself
specifies any amount to be paid in case of such breach or contains any
other stipulation by way of penalty. In both the cases the measure of
damages is reasonable compensation, not exceeding the amounts so
specified in the contract or the penalty stipulated for, whether or not actual
damage or loss is proved to have been caused by the breach.
29. Bare perusal of Section 74 would reveal that parties are free to
stipulate any amount in the agreement that will be paid by the party who
commits breach of the terms of the agreement i.e. defaulting party to the
other party in the agreement. It further provides that the amount of
liquidated damages so fixed in the agreement would be the maximum
amount payable by the defaulting party and the court will not allow more
than that amount fixed in the contract but may award a smaller amount
depending upon the facts and circumstance of the case. In other words,
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the court would award only a reasonable amount of liquidated damages
even though the same are pre-estimated and spelt out in advance in the
contract.
30. The Hon’ble Supreme Court has interpreted Section 74 of the
Contract Act in a catena of judgements and the latest one being Kailash
Nath Associates v. DDA & Anr. (2015) 4 SCC 136, the relevant
paragraphs of which are reproduced hereunder: -
“33. Section 74 occurs in Chapter 6 of the Indian
Contract Act, 1872 which reads "Of the
consequences of breach of contract". It is in fact
sandwiched between Sections 73 and 75 which
deal with compensation for loss or damage
caused by breach of contract and compensation
for damage which a party may sustain through
non-fulfillment of a contract after such party
rightfully rescinds such contract. It is important
to note that like Sections 73 and 75,
compensation is payable for breach of contract
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under Section 74 only where damage or loss is
caused by such breach.”
“43. On a conspectus of the above authorities,
the law on compensation for breach of contract
under Section 74 can be stated to be as follows:-
43.1 Where a sum is named in a contract as a
liquidated amount payable by way of damages,
the party complaining of a breach can receive as
reasonable compensation such liquidated
amount only if it is a genuine preestimate of
damages fixed by both parties and found to be
such by the Court. In other cases, where a sum
is named in a contract as a liquidated amount
payable by way of damages, only reasonable
compensation can be awarded not exceeding
the amount so stated. Similarly, in cases where
the amount fixed is in the nature of penalty, only
reasonable compensation can be awarded not
exceeding the penalty so stated. In both cases,
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the liquidated amount or penalty is the upper
limit beyond which the Court cannot grant
reasonable compensation.
43.2 Reasonable compensation will be fixed on
well known principles that are applicable to the
law of contract, which are to be found inter alia
in Section 73 of the Contract Act.
43.3 Since Section 74 awards reasonable
compensation for damage or loss caused by a
breach of contract, damage or loss caused is a
sine qua non for the applicability of the Section.
43.4 The Section applies whether a person is a
plaintiff or a defendant in a suit.
43.5 The sum spoken of may already be paid or
be payable in future.
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43.6 The expression "whether or not actual
damage or loss is proved to have been caused
thereby" means that where it is possible to prove
actual damage or loss, such proof is not
dispensed with. It is only in cases where
damage or loss is difficult or impossible to prove
that the liquidated amount named in the
contract, if a genuine pre-estimate of damage or
loss, can be awarded.
43.7 Section 74 will apply to cases of forfeiture
of earnest money under a contract. Where,
however, forfeiture takes place under the terms
and conditions of a public auction before
agreement is reached, Section 74 would have
no application.”
31. Thus, any damage or loss suffered by a party due to breach of
contract on the part of another party to the contract is a sine qua non for
applicability of this section i.e. for award of liquidated damages. Even if a
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sum of money is stipulated in the contract as liquidated amount payable
by the defaulting party by way of damages, only reasonable
compensation commensurate with the loss/damages suffered by the
other party, can be awarded not exceeding the amount so specified in
the contract.
32. In Maula Bux v. Union of India (1969) 2 SCC 544, the Apex court
has held as under:-
6. … … … Reliance in support of this contention
was placed upon the expression (used in
Section 74 of the Contract Act), "the party
complaining of the breach is entitled, whether or
not actual damage or loss is proved to have
been caused there by, to receive from the party
who has broken the contract reasonable
compensation". It is true that in every case of
breach of contract the person aggrieved by the
breach is not required to prove actual loss or
damage suffered by him before he can claim a
decree, and the Court is competent to award
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reasonable compensation in case of breach
even if no actual damage is proved to have been
suffered in consequence of the breach of
contract. But the expression "whether or not
actual damage or loss is proved to have been
caused thereby" is intended to cover different
classes of contracts which come before the
Courts. In case of breach of some contracts it
may be impossible for the Court to assess
compensation arising from breach, while in
other cases compensation can be calculated in
accordance with established rules. Where the
Court is unable to assess the compensation, the
sum named by the parties if it be regarded as a
genuine preestimate may be taken into
consideration as the measure of reasonable
compensation, but not if the sum named is in the
nature of a penalty. Where loss in terms of
money can be determined, the party claiming
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Appeal No. 151 of 2021 Page 26 of 33
compensation must prove the loss suffered by
him.”
33. In the case of Fateh Chand v. Balkishan Dass, 1963 SCC OnLine
SC 49, it has been held by the Apex court as under: -
“10. Section 74 of the Indian Contract Act deals
with the measure of damages in two classes of
cases (i) where the contract names a sum to be
paid in case of breach and `ii) where the contract
contains any other stipulation by way of penalty.
We are in the present case not concerned to
decide whether a contract containing a covenant
of forfeiture of deposit for due performance of a
contract falls within the first class. The measure
of damages in the case of breach of a stipulation
by way of penalty is by Section 74 reasonable
compensation not exceeding the penalty
stipulated for. In assessing damages the Court
has, subject to the limit of the penalty stipulated,
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jurisdiction to award such compensation as it
deems reasonable having regard to all the
circumstances of tile case. Jurisdiction of the
Court to award compensation in case of breach
of contract is unqualified except as to the
maximum stipulated; but compensation has to
be reasonable, and that imposes upon the Court
duty to award compensation according to settled
principles. The section undoubtedly says that
the aggrieved party is entitled to receive
compensation from the party who has broken
the contract, whether or not actual damage or
loss is proved to have been caused by the
breach. Thereby it merely dispenses with proof
of "actual loss or damages"; it does not justify
the award of compensation when in
consequence of the breach no legal injury at all
has resulted, because compensation for breach
of contract can be awarded to make good loss
or damage which naturally arose in the usual
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course of things, or which the parties knew when
they made the contract, to be likely to result from
the breach.
…
15. Section 74 declares the law as to liability
upon breach of contract where compensation is
by agreement of the parties predetermined, or
where there is a stipulation by way of penalty.
But the application of the enactment is not
restricted to cases where the aggrieved party
claims relief' as a plaintiff. The section does not
confer a special benefit upon any party; it merely
declares the law that notwithstanding any term
in the contract predetermining damages or
providing for forfeiture of any property by way of
penalty, the court will award to the party
aggrieved only reasonable compensation not
exceeding the amount named or penalty
stipulated. The jurisdiction of the court is not
determined by the accidental circumstance of
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the party in default being a plaintiff or a
defendant in a suit. Use of the expression "to
receive from the party who has broken the
contract" does not predicate that the jurisdiction
of the court to adjust amounts which have been
paid by the party in default cannot be exercised
in dealing with the claim of the party complaining
of breach of contract. The court has to adjudge
in every case reasonable compensation to
which the plaintiff is entitled from the defendant
on breach of the contract. Such compensation
has to be ascertained having regard to the
conditions existing on the date of the breach.”
34. It is thus well settled that the essential ingredients required to be
pleaded and established by a party claiming damages on account of
breach of contract are: -
(a) There has been breach of contract by the other party;
(b) the party complaining of such breach has suffered in injury or
damage as a result of the breach of contract by the other
party; and
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(c) the injury suffered is proximate and direct result of the breach
committed by the other party.
35. The expression “whether or not actual damage or loss is proved to
have been caused thereby” occurring in Section 74 have been
interpreted to mean that where it is possible to prove actual damage or
loss, such proof is not dispensed with. It is only in cases where damage
or loss is difficult or impossible to prove that the liquidated amount
indicated in the contract, if a genuine pre-estimate of damage or loss, can
be awarded.
36. In the instant case, we find from the perusal of the impugned order
of the Commission that the Commission did not venture to ascertain
whether or not was any loss suffered by TANGEDCO on account of non-
commissioning of the power project by the Appellant within the timeline
as specified in the PPA or on account of non-supply of power by the
Appellant. The Commission ought to have called upon TANGEDCO to
demonstrate that any loss was suffered by it on account of default on the
part of the Appellant in commissioning of the power project within the
specified timeline. There is no assertion of finding in the impugned order
that the case was of such nature where it was impossible on the part of
the TANGEDCO to prove any damage or loss suffered by it and the
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extent of liquidated amount to which it was entitled from the Appellant. In
the absence of any such exercise, the Commission appears to have held
in an arbitrary and cavalier manner that the Respondent No. 2 –
TANGEDCO is entitled to relief provided in clause 14 of the PPA i.e.
liquidated damages from the Appellant to the extent of non-
commissioning of the power project. Therefore, we are of the opinion that
the case deserves to be remanded back to the Commission for fresh
consideration on this aspect.
Conclusion
37. In view of the above discussion, the prayer of the Appellant for
refund of the Bank Guarantee amount is hereby rejected. However, we
set aside the impugned order of the Commission in so far as it holds the
nd
2 Respondent – TANGEDCO entitled to liquidated damages from the
Appellant in terms of Article 14 of the PPA to the extent of non-
commissioning of the power project by the Appellant. We hereby remand
the case back to the Commission for fresh consideration on the aspect
and to decide, upon hearing both the parties, whether or not had the
TANGEDCO suffered any loss on account of non-commissioning of the
power project by the Appellant within the timelines specified in the PPA
and if so, to what extent. Thereafter, the liability of the Appellant to pay
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liquidated damages to TANGEDCO in terms of Article 14 of the PPA shall
be ascertained.
38. The appeal stands partly allowed to the extent indicated
hereinabove.
th
Pronounced in the open court on this 29 day of July, 2026.
(Virender Bhat) (Seema Gupta)
Judicial Member Officiating Chairperson
✓
REPORTABLE / NON REPORTABLE
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