LEGAL DISPUTES IN SOLAR PPAs: WELSPUN VS SECI

Welspun Energy Pvt. Ltd. (WREPL) signed a PPA of a 100 MW solar project with Solar Energy Corporation of India (SECI) that was to be implemented in the Sattara district of Maharashtra in 2016. The PPA was signed at a tariff of Rs. 4.43 per kwh. During the implementation phase of the project, WREPL could not complete the financial closure of the project because of land acquisition and change in shareholding pattern issues which led to a dispute between WREPL and SECI. SECI wanted to terminate this PPA because of the delay caused in the Scheduled date of commissioning (SCOD). After this, WREPL approached Central Energy Regulatory Commission (CERC) for relief.

Background of the case

The Ministry of New and Renewable Energy (MNRE) launched a scheme for setting up 2000 MW grid connected solar power project under the Jawaharlal Nehru National solar Mission (JNNSM). SECI (Respondent) issued the RfS for the implementation of the solar power project. WREPL (Petitioner) was acquired the tender for the implementation of 100 MW solar power project and the PPA was signed between both parties.

During the implementation of the project, issues arose between both parties. First issue was the non-compliance of Article 3.13.1 of JNNSM and Article 3.16 of RfS, that talk about the clear possession of the land acquired for the completion of the financial closure of the project which is the most fundamental and crucial condition. The second issue was of the authority to remove from the list of selected projects on account of delay unless there is a force majeure event which is responsible for the delay as per the Article 3.13.3 of JNNSM. The third issue was the non-compliance of the clause 3.2 of the scheme that obliged the petitioner to not make changes in the shareholding pattern of the company for a duration of a year since the start of the commissioned date of operations.

Although the petitioner had first said that it was not in a position to complete the project, it later requested for the assignment of the PPA to Giriraj Renewables Pvt. Ltd. (GRPL). However, the respondent replied by saying that the PPA stood terminated due to the efflux of time. Subsequently, WREPL reached out to CERC for the dispute resolution.

The petitioners claimed that although the land was acquired, the digitization/e-mutation process for the land was left as the revenue authorities had suspended the registration process till the survey are digitized.  The petitioner claimed that this resulted delay of 249 days in the completion of the CS activities was an event similar to force majeure event and thus should be provided an extension. The petitioner further stated that the termination of the PPA should be set aside based on the amount of investment already gone into the making of the project. For this the petitioner cited the case of M.P. Power Management Company Ltd. vs. Renew Clean Energy Pvt. Ltd. [(2018) 6 SCC 157] which set aside the termination of the PPA on account of the huge investments that had been made in the Project apart from it being at an advance stage of commissioning. The Supreme Court in this case observed that even though the delay was not caused because of a force majeure event but because of unavoidable circumstances. Thus, the developer could continue to implement the project but would be subjected to penalty charges. The present case is squarely covered by this judgment.

The Petitioner had also relied upon the judgment of Bombay High Court in the case of Mumbai Metropolitan Region Development Authority vs. Unity Infraproject Ltd. to support its contention.

The respondents in their rebuttal stated that firstly they did not consider problems in acquisition of land as a force majeure event and the petitioner’s claim regarding the same was an afterthought as no notice regarding the force majeure event was sent as per the Article 11.5 of the PPA. Thus, no extension in SCOD could have been sought. Secondly, the respondent that the petitioner had failed to comply with the most crucial and basic requirements and the respondent while acting on the terms of the contracts signed could terminate the PPA while encashing the bank guarantee. The respondent further stated that the petitioner had breached another obligation of not changing the shareholding pattern for a year since the commissioned date of operation as per the clauses in the PPA, RfS and the JNNSM.

Held

For the first issue related to CS activities, the commission recognized that that the delay caused was unavoidable and not in control of the petitioner. It was similar to force majeure event and thus, the extension was granted to the petitioner. The petitioner was asked to pay the penalty for the delay on their part. Regarding the part commissioning the CERC held that the petitioner had already completed the commissioning of 28 MW into the grid and they were satisfied that the petitioner intended to deliver remaining 72 MW of commissioning as well. About the change in shareholding pattern, CERC took the judgment of NCLT into account and noted that SECI was re-agitating the issues and there was no error in the NCLT judgment.

Conclusion

This is a case wherein the offtaker which is SECI wanted to terminate the PPA and get rid of the solar developer even though the developer wanted to complete the implementation of the project. In recent cases, not more than 50% of the solar projects are commissioned and rest are in legal disputes to get some relief from the regulators as most of the solar projects in India are suffering delays due to problems like land acquisition, transmission line, financial closure, etc. and this is yet another example of delay in the project commissioning.