IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 27TH DAY OF AUGUST, 2019 BEFORE THE HON' BLE MR. JUSTICE B. VEERAPPA WRIT PETITION Nos.51518-51519/2016(GM-RES) BETWEEN:
1. RAGHU INFRA PRIVATE LIMITED., NO. 24, 29TH MAIN, 1ST CROSS, 1ST STAGE, BTM LAYOUT, BENGALURU - 560 068. REPRESENTED BY ITS AUTHORISED SIGNATORY MR. K.H.PUTTASWAMY GOWDA 2. ASIAN FAB TEC LIMITED, PLOT NO. 15, 2ND PHASE, PEENYA INDUSTRIAL AREA, BENGALURU - 560 058. REPRESENTED BY ITS MANAGING DIRECTOR MR. K.H.PUTTASWAMY GOWDA.
... PETITIONERS (BY SRI REUBEN JACOB, ADVOCATE) AND:
1. CHAMUNDESHWARI ELECTRICITY SUPPLY CORPORATION LIMITED., # 29, VIJAYANAGARA 2ND STAGE, HINKAL, MYSORE - 570 017.
REPRESENTED BY ITS MANAGING DIRECTOR.
2. KARNATAKA ELECTRICITY REGULATORY COMMISSION (KERC) 6TH AND 7TH FLOOR, MAHALAXMI CHAMBERS NO. 9/2, M.G.ROAD, BENGALURU - 560 001. REPRESENTED BY ITS SECRETARY.
... RESPONDENTS (BY SMT. RITHIKA RAVIKUMAR, ADVOCATE FOR SRI NIKHILESH M RAO, ADVOCATE FOR R1;
SRI B.N. PRAKASH, ADVOCATE FOR R2) …… THESE WRIT PETITIONS ARE FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE COMMUNICATION DATED 06.09.2016 ISSUED BY R-1 VIDE ANNEX-N AND CONSEQUENTLY DIRECT RESPONDENTS TO GRANT EXTENSION OF TIME OF THREE MONTHS TO THE PETITIONER FOR ACHIEVING COMMERCIAL OPERATION DATE (COD) IN RESPECT OF THE PETITIONER'S 3 MW SOLAR PROJECT AT SIRA TALUK, TUMKUR DISTRICT.
THESE WRIT PETITIONS COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER The petitioners filed the present writ petitions seeking to quash the communication dated 06.09.2016 issued by the first respondent vide Annexure-N and consequently to direct the respondents to grant extension of three months time to the petitioners for achieving Commercial Operation Date (COD) in respect of petitioners’ 3 MW Solar Project at Sira Taluk, Tumakuru District.
2. It is the case of the petitioners that, by way of Request for Proposal (RFP) dated 05.03.2013, the Karnataka Renewable Energy Development Limited (KREDL) invited applications for setting up and development of Solar Thermal and Solar PV Power Plants in the State of Karnataka. In response to the same, petitioner No.1 submitted its bid for establishment of a 3 MW Solar PV Power Plant with a tentative location of Koppal taluk and District. In response to the said bid, a letter of award dated 23.08.2013 was issued to the petitioner No.1 by KREDL stating that the tariff submitted by the petitioner No.1 for the project has been accepted. After completion of formalities, Power Purchase Agreement (PPA) dated 23.05.2014 was entered into between petitioner No.1 and the respondent No.1. The same was approved by the respondent No.2 on 04.06.2014. On account of certain technical and financial difficulties, the petitioner No.1 requested the petitioner No.2 to execute, operate and to generate the power in terms of the PPA and the petitioner No.2 agreed to the said proposal and accordingly, a sale agreement came to be executed on 24.12.2014 between petitioner Nos.1 and 2. In furtherance thereof, an Assignment-cum-Investment Agreement dated 12.09.2015 was entered into between petitioner Nos.1 and 2 after obtaining the consent of the respondents to the said arrangement.
3. It is further case of the petitioners that in the meantime, the first petitioner requested the first respondent for extension of six months time for achieving conditions precedent and six months for achieving COD which request was acceded to by first respondent and approved by the second respondent and in that regard a supplementary agreement dated 31.03.2015 was entered into, whereby the time limit for achieving conditions precedent was extended till 17.05.2015 and time for achieving COD was extended till 18.11.2015. Thereafter, petitioners sought for change of location of the project site from Koppal Taluk, Koppal District to Bevianahalli and Sankarpur village, Gowdgere Hobli, Sira Taluk, Tumakuru District, which change of location was permitted by first respondent and approved by the second respondent.
4. It is further case of the petitioners that in view of the change of location, petitioners sought for further extension of time for achieving conditions precedent as well as COD. The second respondent, by way of its letter dated 13.10.2015 approved extension of time subject to the assignee agreeing to supply the energy at `6.51 per unit instead of `7.85 per unit. The second petitioner conveyed consent for the said reduction of tariff to `6.51 per unit and requested for extension of time till 31.07.2016, which request was approved by first respondent and accordingly, a supplemental agreement dated 06.05.2016 was entered into between first petitioner and first respondent extending the time limit for fulfilling conditions precedent till 31.07.2016 and for commissioning of the project (COD) also till 31.07.2016.
5. It is further case of the petitioners that the second petitioner sought for extension of COD by three months by communication dated 23.07.2016. There was no reply from the first respondent in that regard and in the meantime, the petitioners completed the power project for commissioning and intimated the same to the first respondent. However on 17.09.2016 an e-mail was received from first respondent with the subject ‘Invoking BGs’ without any text containing an attachment. The said attachment is a scanned copy of communication dated 06.09.2016 issued by the first respondent stating that as per direction of KERC the request for extension of commissioning date has been rejected and it was stated that as per clauses 5.8.1 liquidated damages of `2,32,50,000/- is levied on the petitioners and the petitioners are required to pay the same within seven days. Therefore, petitioners are before this Court for the relief sought for.
6. The first respondent filed objections and contended that any dispute between the parties, the petitioners ought to have approached the second respondent for consideration of the dispute under clause 18 of PPA entered into between the parties. Inspite of extension of time on earlier two occasions, petitioners have not completed the project and therefore, on the directions issued by the second respondent, the impugned Order came to be passed and therefore, sought to dismiss the writ petitions.
7. I have heard the learned counsel for the parties to the lis.
8. Sri Reuben Jacob, learned counsel for the petitioners contended that the impugned communication of the first respondent on the basis of the directions issued by the second respondent is erroneous and contrary to the material on record. Since PPA has been entered into between the petitioners and first respondent, the first respondent ought to have considered the representation made by the petitioners for extension of time independently without being influenced by the directions of the second respondent and therefore, same cannot be sustained. He further contended that when an application is filed for extension of time, it is the duty of the first respondent to consider the same in terms of clause 5.7.1 which clearly depicts that in the event of developer being prevented from performing its obligations under clause 5.1 by the scheduled commissioning date due to:
(a) any CESC Mysore Event of Defulat; or (b) Force Majeure Events affecting CESC Mysore; or (c) Force Majeure Events affecting the Developer.
the Scheduled Commissioning Date and the Expiry Date shall be deferred, subject to the limit prescribed in Clause 5.7.2 and Clause 5.7.3 for a reasonable period but not less than ‘day for day’ basis, to permit the Developer or CESC Mysore through the use of due diligence, to overcome the effects of the Force Majeure Events affecting the Developer or CESC Mysore, or till such time such Event of Default is rectified by CESC Mysore. Therefore, the first respondent has to independently decide on the representation for extension of time and cannot proceed to reject the application on the basis of the directions issued by the second respondent which is impermissible as per PPA.
9. Per contra, Smt. Rithika Ravikumar for Sri Nikhilesh M. Rao, learned counsel for the first respondent sought to justify the impugned Order and contended that first of all, writ petitions filed without approaching the second respondent for amicable settlement and for dispute resolution, is not maintainable. Earlier, on two occasions, petitioners’ request was considered by the first respondent and time was extended and the same was approved by the second respondent. Inspite of granting time, the petitioners have not completed the project within the stipulated time and therefore, sought to dismiss the writ petitions.
10. Sri B.N.Prakash, learned counsel for the second respondent sought to justify the impugned order passed by the first respondent and contended that to resolve any dispute between the petitioners and first respondent, in all fairness, the petitioners ought to have approached the second respondent for amicable settlement and for dispute resolution, in view of clause 18.2 of the PPA entered into between the petitioners and respondent No.1. Inspite of granting sufficient time, petitioners have not completed the project, Therefore, sought to dismiss the writ petitions.
11. Having heard the learned counsel for the parties, it is undisputed fact that on the basis of the RFP made by KREDL inviting applications for setting up and development of Solar Thermal and Solar PV Power Plants in the State of Karnataka, petitioners filed application and were successful in the bid and accordingly, PPA came to be entered into between the first petitioner and the first respondent on 23.05.2014. The PPA was approved by the second respondent on 04.06.2014. It is also not in dispute that on earlier two occasions, application filed by the petitioners for extension was considered by the first respondent and the same was approved by the second respondent.
12. The petitioners made third representation on 23.07.2016 requesting for extension of COD for three months, for development of 3 MW solar PV Power Project in Karnataka giving detailed reasons for delay in meeting the scheduled commissioning date and it was contended that they have successfully completed 90% of the project and are in the advanced and final stage of commissioning. Therefore, sought three months extension from the scheduled commissioning date. The letter at Annexure-N dated 06.09.2016 written by the first respondent clearly depicts that first respondent has not independently passed the Order in terms of clause 5.7.1 of the PPA dated 23.05.2014 which reads as under:
“5.7.1 In the event of developer being prevented from performing its obligations under clause 5.1 by the scheduled commissioning date due to:
(a) any CESC Mysore Event of Defulat; or (b) Force Majeure Events affecting CESC Mysore; or (c) Force Majeure Events affecting the Developer the Scheduled Commissioning Date and the Expiry Date shall be deferred, subject to the limit prescribed in Clause 5.7.2 and Clause 5.7.3 for a reasonable period but not less than ‘day for day’ basis, to permit the Developer or CESC Mysore through the use of due diligence, to overcome the effects of the Force Majeure Events affecting the Developer or CESC Mysore, or till such time such Event of Default is rectified by CESC Mysore.”
13. A careful perusal of the impugned Order depicts that the said Order passed by the first respondent on the basis of the directions issued by the second respondent which reads as under:
“The request of M/s Asian Fab tech Ltd. (Assignee of your project along with their 05MW project in the same location) for extension of 03 months of time for achieving COD was forwarded to KERC for directions.
The direction of KERC relevant to the request for extension by M/s Asian Fab Tec Ltd. Is reproduced as below:
As regards, the request of the developer for extension of time by three months for achieving COD, I am directed to inform that, none of the provisions of the PPA envisage any such extension for the reasons stated by the developer. Hence, there is no case for the Commission issuing any direction for extension of time. Further, depending up on the actual Commercial Operation Date (COD), the CESC has to enforce the terms of PPA regarding the applicable tariff, recovery of liquidated damages due to delay in achieving the COD and other related aspects”.
14. It is also stated in the Order that the letter shall be treated as final notice and amount of `2,32,50,000/- shall be paid to CESC, Mysuru, as liquidated damages within seven days.
15. A careful perusal of the contents of PPA between the petitioners and first respondent provides for extension of time. It is for the first respondent to consider independently without seeking any direction or opinion from the second respondent who is the approving authority. After considering the material, it is for the first respondent to pass appropriate Orders and it is for the second respondent to approve the decision taken by the first respondent. Admittedly, the first respondent has not applied its mind independently in terms of the clauses mentioned in the PPA and proceeded to pass the impugned Order based on the directions issued by the second respondent, which is impermissible.
16. It is also brought to the notice of this Court that after passing of the impugned Order by the first respondent, petitioners have completed the project on 19.01.2017 and Commissioning Survey is also issued on 19.01.2017. The submission is placed on record.
17. In view of the aforesaid reasons, the impugned Order passed by the first respondent rejecting the extension of time based on the directions issued by the second respondent cannot be sustained. Accordingly writ petitions are allowed. The impugned Order passed by the first respondent rejecting the extension of time is hereby quashed. The matter is remanded to the first respondent to consider the petitioners’ representation for extension of time and pass appropriate orders, independently, in terms of clauses of the PPA entered into between the parties, strictly in accordance with law.
Ordered accordingly.
Sd/-
JUDGE kcm