Requirement of Regulatory Approval for Enforceability of Power Purchase Agreements and Application of Quantum Meruit

Vibrant Greentech India Private Limited (VGIPL) established a 4.25 MW wind power project in Andhra Pradesh and in March 2017, the project was commissioned and a Power Purchase Agreement (PPA) was executed between VGIPL and the distribution licensee, APSPDCL.

Although the PPA followed a Commission-approved "Model PPA" format, it was never submitted to the Andhra Pradesh Electricity Regulatory Commission (APERC) for formal approval.

From March 2017 to March 2020, VGIPL injected power into the grid, which APSPDCL utilized and recorded through joint meter readings.

In 2020, APSPDCL unilaterally disconnected the project, claiming the PPA was unenforceable without statutory approval.

VGIPL sought enforcement of the PPA, while APSPDCL challenged APERC's subsequent order directing payment for power already supplied.

1. Whether the PPA between VGIPL and APSPDCL was valid and enforceable in the absence of specific Commission approval.

2. Whether APSPDCL acted beyond its authority in disconnecting the project during the pendency of proceedings.

3. Whether the State Commission was correct in awarding compensation under Section 70 of the Indian Contract Act, 1872, and whether the rate of Rs. 2.93 per unit was fair.

Section 21 of the Andhra Pradesh Electricity Reforms Act, 1998, and Section 86(1)(b) of the Electricity Act, 2003, which mandate the State Commission's written consent for any PPA to be enforceable.

The court relied on Tata Power Company Ltd. v. MERC, establishing that rights under a PPA arise only after regulatory approval.

Section 70 of the Indian Contract Act, 1872, regarding the obligation of a person enjoying the benefit of a non-gratuitous act, interpreted through State of West Bengal v. B.K. Mondal & Sons, which requires the act to be done "lawfully" with an expectation of payment.

The Tribunal held that while APERC had approved a "Model PPA," Regulation 27(ii) of the 2015 Wind Tariff Regulations did not create a "deemed approval" mechanism; rather, it required individual PPAs to be submitted for record and certification of conformity, which was not done here.

The Tribunal found APSPDCL acted arbitrarily because it had knowingly accepted power for three years and disconnected the project while the dispute was sub-judice before the Commission.

The Tribunal reasoned that "lawfully" under Section 70 does not require an enforceable contract but merely that the act was not prohibited by law or fraudulent; since the power was generated with statutory clearances and consumed by the DISCOM, Section 70 applied.

The Tribunal found the rate of Rs. 2.93/unit flawed as it relied on future-dated competitive bids rather than the appropriate tariff for 2017 commissions.

It held that APSPDCL was not justified in disconnecting the project during the pendency of proceedings.

The award of compensation under Section 70 was upheld in principle, but the rate of Rs. 2.93 per unit was set aside as inadequate.

The matter was remanded to APERC to re-determine the compensation rate for energy supplied and to calculate additional compensation for the lost opportunity of energy injection during the illegal disconnection period.