Facts
The Appellant, NTPC, operates the Farakka Super Thermal Power Station, which draws cooling water from the Ganga Feeder Canal
Source reference: p. 5In February and March 2016, NTPC was forced to shut down six units due to a drastic fall in water levels, which it attributed to deficient monsoon rains in 2015 and the mandatory diversion of water to Bangladesh under the Indo-Bangladesh Water Sharing Treaty, 1996
Source reference: p. 13Consequently, the plant's availability decreased, affecting the recovery of Annual Fixed Charges
Source reference: p. 13NTPC filed a petition before the Central Electricity Regulatory Commission (CERC) seeking a declaration that this water shortage constituted a "Force Majeure" event under Article 8.0 of the Power Purchase Agreements (PPAs)
Source reference: p. 14CERC dismissed the petition on 17.11.2017, holding that the treaty and hydrological factors did not fall within the scope of Force Majeure as NTPC failed to take mitigating steps (installing lift pumps) despite earlier approvals
Source reference: p. 16Issues
1. Whether the unavailability of water in the Ganga Feeder Canal due to hydrological factors and treaty obligations constitutes a "Force Majeure" event under Article 8.0 of the PPA
Source reference: p. 16/para. 20Law Applied
The court applied the definition of "Force Majeure" as per Article 8.0 of the PPA, which includes "forces of nature," "act of God," or reasons "beyond the control of the concerned party"
Source reference: p. 17-18, para. 23It relied on the Supreme Court's definition in KSRTC v. Mahadev Shetty, stating an "Act of God" must be an occurrence that no human foresight can provide against and is free from human intervention
Source reference: p. 19-20, para. 26Furthermore, it applied the principle from Energy Watchdog v. CERC and Halliburton Offshore Services Inc v. Vedanta Limited, establishing that Force Majeure clauses must be interpreted narrowly, and a party cannot claim relief if the non-performance was attributable to its own conduct or lack of mitigating steps
Source reference: p. 22-23, para. 30-31Reasoning
The Tribunal found that the 1996 Treaty was not a new or unforeseen event, as it had existed for decades, and its impact was well within NTPC’s knowledge
Source reference: p. 20, para. 27Regarding the hydrological factors, the court noted that NTPC had identified the need for "lift pumps" as early as 2009 to mitigate water shortages and had even received regulatory approval for additional capitalization for this project
Source reference: p. 21, para. 28The Tribunal reasoned that the shutdown in 2016 was "solely attributable to the delay on the part of the appellant in constructing the lift pumps" or seeking other remedies
Source reference: p. 22, para. 30It observed that the rainfall deficiency (12-14%) was marginal and not "extraordinary" or "unprecedented" enough to be classified as an Act of God
Source reference: p. 25, para. 32Consequently, because the situation was foreseeable and NTPC failed to implement the approved solution, the event was not "beyond the control" of the party
Source reference: p. 22Holding
The Tribunal answered the issue in the negative, holding that the water shortage did not constitute a Force Majeure event under Article 8.0 of the PPA
The court concurred with CERC that NTPC’s failure to finalize the lift pump scheme precluded it from claiming relief for a foreseeable contingency. The appeal was dismissed, and the CERC’s order dated 17.11.2017 was upheld
Source reference: p. 26, para. 34Original Court PDF
NTPC LimitedvsWest Bengal State Electricity Distribution Company Limited & Ors
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