Summary
MP Power Management Company terminated a 25-year PPA for a 50 MW solar project, won as the lowest of about 182 bids at Rs 5.109 per unit. It cited delay in conditions subsequent and failure to commission within 24 months. The High Court had already quashed an earlier termination on the first ground, and it set this one aside too. The Supreme Court dismissed the appeals. The PPA is not a statutory contract just because its tariff was bid under Section 63 guidelines. Even so, a writ court may review palpably arbitrary State action under a non-statutory contract where no serious factual dispute arises. Terminating without Article 9.1's default notice and three-month cure period was arbitrary, especially as the CEIG had certified the plant ready. Cheaper later tariffs alone do not make termination serve public interest. A fresh CEIG inspection was directed.
Issues
- Whether a PPA awarded through tariff-based competitive bidding is a statutory contract, and when a writ court may review termination of a non-statutory contract by a State instrumentality.
- Whether termination of the PPA without the default notice and cure period under Article 9.1 was arbitrary, and whether a fall in market tariffs supplied overwhelming public interest against interference.
Provisions considered
- Articles 12, 14 and 226, Constitution of IndiaThe State's duty to act fairly attaches even after a contract is made (Shrilekha Vidyarthi, ABL International); writ relief against termination is discretionary and depends on palpable arbitrariness, absence of complex factual disputes, alternative remedies and public interest. (¶¶ 32, 40, 53, 54)
- Sections 62 and 63, Electricity Act, 2003That the tariff was discovered by bidding under Section 63 guidelines does not make the PPA statutory; its terms on conditions subsequent, commissioning and termination are not statutory terms (India Thermal Power, Kurien E. Kalathil). (¶¶ 18, 19, 26)
Held
- The PPA is not a statutory contract, but the State cannot escape scrutiny merely because the contract is non-statutory; termination may be reviewed under Article 14 where it is palpably unreasonable or bereft of principle, though a mere breach of contract dressed up as arbitrariness will not suffice. (¶¶ 26, 53, 54)
- The dispute clause was not an arbitration clause covering the lis; the earlier High Court judgment had concluded the issue of non-fulfilment of conditions subsequent, leaving open only the commissioning default, so the appellant could not reopen it. (¶¶ 55, 60)
- Article 9.1 required a default notice and three months to cure before a discretionary seven-day termination; the show-cause notice of 22.02.2017 could not serve as one, the earlier illegal termination had prevented supply, and the CEIG had certified readiness; terminating without notice was arbitrary. (¶¶ 108, 112, 113, 114, 121, 126)
- Overwhelming public interest evolved mainly in award-of-contract cases; once rights arise, a later fall in market tariffs cannot alone justify declining relief against an arbitrary termination, and public interest cannot be reduced to monetary gain or loss. (¶¶ 88, 89, 130)
Result
Civil Appeal Nos. 8515-8516 of 2022 dismissed, though on reasons not wholly those of the Madhya Pradesh High Court, upholding the judgment dated 27.02.2020 in W.P. No. 420 of 2019 and the order dated 28.12.2020 in Review Petition No. 682 of 2020; a fresh CEIG inspection with the appellant's participation was directed; parties to bear their own costs.