Non-availability of transmission evacuation facilities beyond the developer’s control constitutes force majeure, barring contractual penalties.

The appellant, a solar power developer, established a 20 MW solar project at Kudligi, Karnataka, pursuant to a Letter of Award issued by Karnataka Renewable Energy Development Limited and a Power Purchase Agreement (“PPA”) with Bangalore Electricity Supply Company Limited (“BESCOM”).

The PPA was approved by the Karnataka Electricity Regulatory Commission (“KERC”) on 04.05.2018, making 03.11.2019 the Scheduled Commercial Operation Date (“SCOD”).

Although the appellant completed the project and obtained CEIG and PTCC approvals by 23.10.2019, the 220/66 kV Kudligi sub-station and associated upstream transmission facilities of Karnataka Power Transmission Corporation Limited (“KPTCL”) were not ready by the SCOD.

The appellant issued force majeure notices to BESCOM, including on 23.10.2019, and repeatedly sought information and action from KPTCL regarding the evacuation facilities.

The sub-station was ultimately test-charged on 30.05.2020, and the project achieved commercial operation on that date.

The appellant sought extension of the SCOD to 30.05.2020 and exemption from liquidated damages, reduced tariff and other contractual penalties.

KERC rejected the petition, holding that the delay was not covered by the PPA’s force majeure clause and that the appellant was liable for the contractual consequences of delayed commissioning.

The Tribunal applied Articles 5.7, 5.8 and 14 of the PPA.

Article 5.7.1 permitted the developer, after commissioning, to approach KERC for condonation of delay caused by a BESCOM default or a force majeure event affecting BESCOM or the developer; Article 5.7.3 provided that, if condoned, the SCOD would be extended for the period of delay.

Article 5.8 imposed liquidated damages for delayed commencement of supply only where the delay was not attributable to the circumstances specified in Article 5.7.1.

Article 14.3.1 defined force majeure as an event beyond the affected party’s reasonable control that prevented or unavoidably delayed performance, including the unlawful, unauthorized or unjustified refusal or delay in granting a required permit, authorization, consent or approval.

Article 14.4 excluded events within the parties’ reasonable control and specified contractual or negligent defaults.

Article 14.5.1 required timely notice of the force majeure event, ordinarily within seven days of knowledge of its commencement.

The Tribunal also applied the contractual interpretation principles in Nabha Power Ltd. v. Punjab State Power Corporation Ltd., (2018) 11 SCC 508, including the “business efficacy” test for implying a term where necessary, obvious, reasonable, capable of clear expression and consistent with the express contract.

Chamundeshwari Electricity Supply Co. Ltd. v. Saisudhir Energy (Chitradurga) Pvt. Ltd., (2026) 1 SCC 799, was distinguished on the ground that it concerned the absence of a properly obtained contractual extension, whereas the appellant here had invoked the relevant contractual procedure.

The Tribunal accepted KERC’s finding that the project itself was ready for commissioning before the SCOD, relying on the CEIG and PTCC approvals dated 23.10.2019; the respondents had not effectively challenged that finding.

The appellant had initially been informed by KPTCL that the sub-station and incoming transmission line would be commissioned by 30.04.2019 and 30.06.2019, both dates preceding the SCOD.

The appellant nevertheless followed up with KPTCL in July and August 2019 and approached the Commission when no confirmation was received.

Accordingly, its acceptance of the evacuation scheme could not be treated as negligence or an intentional assumption of the risk of delay.

Since the project could not be commissioned or supply power without KPTCL’s evacuation authorization and facilities, the delayed commissioning of the sub-station and associated lines fell within Article 14.3.1(e), and none of the exclusions in Article 14.4 applied.

The Tribunal further held that treating a KPTCL-caused delay as outside the PPA’s extension mechanism would unfairly penalize the appellant for an event beyond its control; reading the PPA to include such a transmission-licensee default was necessary to give the contract business efficacy and avoid an inequitable result.

The appellant also substantially complied with the notice requirement by issuing an initial force majeure notice in February 2019 and a fresh notice immediately after learning in October 2019 that the evacuation facilities would not be available by the SCOD.

Consequently, the delay was attributable to the non-availability of the evacuation system, not to any default by the appellant.

The SCOD was extended from 03.11.2019 to the actual commissioning and synchronization date of 30.05.2020.

The appellant was consequently held not liable for liquidated damages, reduction in tariff or any other contractual penalty arising from failure to commission by the original SCOD.

The appeal was allowed and pending applications, if any, were disposed of.