O.P.No.

22/2022 Page 1 of 29

No.N/140/2022

___________________________________________________________________________

BEFORE THE KARNATAKA ELECTRICITY REGULATORY COMMISSION,

No. 16 C-1, Miller Tank Bed Area, Vasanth Nagar, Bengaluru- 560 052.

Dated:19.10.2022

Present

Shri P. Ravi Kumar .. Chairman

Shri H.M. Manjunatha .. Member
Shri M.D. Ravi .. Member

OP No.22/2022

BETWEEN:

Messrs Alpur Solar Private Limited,

Registered office at
1st Floor, Southern Park, D-2,
District Centre, Saket,
South Delhi-110 017.

Regional Office at Level 11,

Prestige Tower, 46, Palace Road,
Bengaluru-560 001. … PETITIONER
(Represented by its Authorised Signatory
by Sri Abhishek Kumar Verma)

(Represented by Sri G.S. Kannur, Senior Counsel for

Ms. Poonam Patil, Advocate)

AND
1. Gulbarga Electricity Supply Company Limited
(GESCOM),
Station Main Road
Kalaburagi–585 102.
(Represented by its Managing Director)
2. The Karnataka Renewable Energy Development Limited,
No. 39, “Shanthi Gruha”,
Bharath Scouts & Guides Building,
Opp. The Chief Post Master General Office, Palace Road,
Bengaluru-560 001.
(Represented by its Managing Director)
O.P.No.22/2022 Page 2 of 29

3. The State of Karnataka

Department of Energy
2nd Floor, Vikasa Soudha,
B.R. Ambedkar Veedi,
Bengaluru–560 001. … RESPONDENTS

(Respondent No.1 represented by

Sri Dhyan Chinnappa, Senior Counsel &
Additional Advocate General, GoK.
for Sri Shahbaaz Husain, Advocate for
M/s Precinct Law,
Respondent No.2 represented by
Sri Samarth Kashyap, Advocate and
Respondent No.3 remained absent,
Notice was served by muddam)

ORDERS

1. The petitioner has filed this petition under Section 86(1)(f) of the Electricity

Act, 2003, praying for the following reliefs to:

a) Hold and declare that the Power Purchase Agreement (PPA)

dated 28.03.2018 vide Annexure-C stands terminated.
b) Set aside the communication dated 23.03.2022 issued by the
Respondent No.1 vide Annexure-S.
c) Issue such order or direction or other relief(s) that this
Commission deems fit under the fact and circumstances of
the case to secure the ends of justice.

2. From the documents produced and the averments made in the petition, the

case of the petitioner may be stated in two parts, as follows.

3. The 1st part of the case is as follows:

a) The petitioner is the Special Purpose Vehicles (SPV) of M/s Ekialde Solar

Private Limited.

b) The Karnataka Renewable Energy Development Limited (KREDL) is the

nodal agency for facilitation and implementation of the Solar Policy of the
O.P.No.22/2022 Page 3 of 29

State of Karnataka. The KREDL invited proposals for development of solar

power projects by Request for Proposal (RfP) dated 07.12.2017, prescribing

the technical, commercial terms and conditions for selection of bidders

for undertaking development of solar PV ground mounted power plants

of 860 MW (AC) in Karnataka to be implemented in 43 Talukas.

c) Messrs Ekilalde Solar Private Limited, submitted its technical and financial

bids for the development and implementation of the solar power projects

in some of the taluks of the State of Karnataka. The bid submitted for 20

MW (AC) capacity of solar PV ground mount project (Solar Photovoltaic

Technology) in respect of Afzalpur taluk of Gulbarga district was

accepted and Letter of Allotment (LoA) dated 08.02.2018 (Annexure-B)

was issued. The tariff discovered was Rs.3.14 per unit.

d) That M/s Ekialde Solar Private Limited, incorporated the petitioner as SPV,

for development and implementation of the project and to undertake

and perform the obligations and exercise the rights of single business entity

including the obligation to enter into the PPA pursuant to issuance of LoA.

The 1st respondent (GESCOM) also accepted the petitioner as SPV of the

single business entity for development and implementation of the project.

e) That the petitioner and 1st respondent (GESCOM) entered into Power

Purchase Agreement (PPA) dated 28.03.2018 (Annexure-C) with the terms

and conditions stated therein. The petitioner submitted the Bank

Guarantee totally amounting to Rs.2,00,00,000 (Two Crores only) valid till

10.03.2021 in favour of the 1st respondent (GESCOM).

O.P.No.22/2022 Page 4 of 29

f) As per Article 3.1 of the PPA the agreement come into effect from the

date of getting concurrence from KERC on the PPA and such date shall

be referred to as the Effective Date. Article 3.2 of PPA provided that the

Agreement shall remain in force for a period of 25 years. Further, as per

Article 21.1 of PPA, the Scheduled Commissioning Date (SCD) of the

project was fixed as 18 months from the Effective Date. The KERC adopted

the bid discovered tariff and approved the PPA vide letter dated

04.05.2018 (Annexure - D). The Effective Date is defined as the date of

approval of PPA by KERC. Therefore, the SCD would fall on or before

03.11.2019. (This date is stated 05.11.2019 in the petition).

g) Article 5.8.1 of the PPA, provides that the Developer, shall commence the

supply of power to the 1st respondent before the SCD, otherwise

developer is liable to pay liquidated damages to the 1st respondent for

the delay in commencement of supply of power and maximum time

period allowed for achievement of Commercial Operation Date(COD)

with payment of Liquidated damages is limited to twenty two (22) months

from the effective date and delay beyond 22 months from SCD is one of

the grounds for ‘Default by Developer’ (Article 5.8.3 of the PPA). As per

Article 16.1 (a), of the PPA, if the developer fails to achieve the

commercial operation beyond twenty two (22) months from the date of

getting concurrence from KERC on the PPA for power project for any

reason whatsoever, the developer/petitioner shall be deemed to be in

default of the PPA.

O.P.No.22/2022 Page 5 of 29

h) The petitioner stated that it was not able to commission the project

within 22 months stipulated under PPA for reasons beyond its control

and that the petitioner faced severe delays in getting approvals

related to land acquisitions which led to finance of the petitioner

dwindle to the point of making the project unviable. Thereby the

petitioner sent the communication dated 30.01.2020 (Annexure-E) to

the 1st respondent (GESCOM) seeking acceptance of the request to

“abandon the project” and sought for termination of PPA on remitting

the penalty stipulated under the PPA. The petitioner followed up the

request to accept the penalty and terminate the PPA through

representations dated 28.02.2020 & 19.03.2020 (Annexures F & G

respectively).

i) In response to the request for termination of PPA as per

communications dated 30.01.2020 (Annexure-E) & dated 19.03.2020

(Annexure-G), the 1st respondent (GESCOM) intimated the petitioner

through letter dated 14.05.2020 (Annexure-K) to pay liquidated

damages for delay in commencement of supply of power as per

Article 5.8 and also damages towards non-compliance of Conditions

Precedent as per Article 4.3 of the PPA along with GST at 18% on

damages/liquidated damages, totally claiming Rs.2,50,16,000.

j) The petitioner has not complied with the intimation to pay the

damages of Rs.2,50,16,000 including GST, the 1st respondent

(GESCOM) wrote letter dated 27.10.2020 (Annexure-L) to the

O.P.No.22/2022 Page 6 of 29

concerned ICICI Bank for encashment of Bank Guarantee of

Rs.2 crores. The copy of letter dated 27.10.2020 (Annexure-L) was

marked to the petitioner. Thereafter, the 1st respondent (GESCOM)

wrote letter dated 08.04.2021 (Annexure-M) to the petitioner to pay

the balance of Rs.36 lakhs towards 18% GST payable on liquidated

damages of Rs.2 crores. The 1st respondent (GESCOM) again wrote

letter dated 08.10.2021 (Annexure-N) to the petitioner for payment of

the balance Rs.36 lakhs towards 18% GST on Rs.2 crores, for processing

the termination of the PPA dated 28.03.2018.

k) Thereafter, the petitioner wrote letter dated 26.10.2021 (Annexure-H)

to the 1st respondent (GESCOM) stating that the balance of Rs.36 lakhs

(18% GST) has been paid on 22.10.2021 through RTGS to it and

requesting to issue the certificate terminating the PPA dated

28.03.2018. In this letter, the petitioner has again asserted the

difficulties in commissioning the Project in the following words:

“We would like to intimate you that we are unable and not
willing to commission 20 MW project that was allocated to
under vide reference No.2 due to certain inevitable
circumstances that have been an obstacle for the process
of the project resulting to the situation wherein we would
not be able to submit commission certificate, or any further
progress related to completion of the project by SCOD or
under period liquidated damages also.”

l) Again the petitioner wrote letter dated 16.12.2021 (Annexure-J) to the

1st respondent (GESCOM) requesting to issue No Objection Certificate

O.P.No.22/2022 Page 7 of 29

accepting the petitioner’s request of abandoning the project. The

petitioner in the last sentence of para 10 of the petition has stated that

it has also paid a sum of Rs.14,16,000 towards damages for non-

fulfilment of Conditions Precedent and the GST payable on it.

m) The petitioner has averred that under the communication dated

08.04.2021 and subsequent reminder letter dated 08.10.2021, the 1st

respondent (GESCOM) categorically demanded payment of balance

amount of Rs.36 lakhs for ‘processing the termination of PPA executed

on 28.03.2018.’ This clearly goes to show that even the 1st respondent

(GESCOM) was aware and admitted that consequences of non-

commissioning the plant as per the terms of the PPA within 22 months

would amount to termination of the PPA and accordingly they insisted

for payment of penalty to process the termination of the PPA. Having

so admitted and acted upon it by collecting the penalty, the 1st

respondent (GESCOM) is estopped from refusing to terminate the PPA.

n) The petitioner has also stated that in similar circumstances as that of

the petitioner, the 1st respondent (GESCOM) has terminated the PPA

of the project developer M/s Max Plancks Solar Farms Private Limited,

vide termination order dated 21.05.2020 (Annexure-P).

o) When things stood thus, the 1st respondent (GESCOM) issued an

endorsement dated 23.03.2022 (Annexure-S) rejecting the application

of the petitioner dated 16.12.2021 (Annexure-J) for issuance of No

Objection. It is the case of the 1st respondent (GESCOM) that on a

joint inspection conducted by them on 04.03.2022, it was observed

O.P.No.22/2022 Page 8 of 29

that all the equipments are available at site and ready for

commissioning the project. The above reasons quoted by the 1st

respondent (GESCOM) were, apart from being arbitrary and

unreasonable, factually incorrect.

4. The 2nd part of the petitioner’s case may be stated as follows:

a) The petitioner filed an application dated 07.02.2022 (Annexure-Q)

before the 2nd respondent (KREDL), for allotment of solar power plant

of 20 MW (AC) under Group Captive Category in Mashal village,

Afzhalpur taluk, Kalaburgi district. The 2nd respondent (KREDL), issued

a letter dated 24.02.2022 (Annexure-R) to the petitioner informing them

to submit the NOC from the 1st respondent (GESCOM), in order to

consider petitioner’s request for allotment of the proposed project

under Group Captive Category.

b) That an independent company viz., Sunsource Energy Private Limited

has acquired all the shares of the parent company of the petitioner,

i.e., M/s Ekialde Solar Private Limited as per Board Resolution dated

21.01.2022 (Annexure-V). The major investments on the plant for group

captive supply of power including expenses towards all the equipment

and modules has been made by M/s Sunsource Energy Private Limited

by borrowing huge sum.

c) M/s Sunsource Energy Private Limited has also entered into Power

Supply Agreement (PSA) for supply of power under Group Captaive

mechanism which had to start its operations with effect from

28.02.2022. Any delay in commissioning the said plant also attracts

O.P.No.22/2022 Page 9 of 29

huge penalty under the PSA. Copies of the Power Supply and Off take

Agreement dated 24.09.2021 (Annexure-T), Novation Agreement

dated 15.02.2022 (Annexure-U), Board Resolution of the petitioner

Company authorising transfer of shares from parent company Ekialde

Solar Private Limited to Sunsource Energy Private Limited (Annexure-V),

List of Shareholders of the petitioner company (Annexure-W), List of

equipment purchased for new project under Group Captive

(Annexure-X) and Statement evidencing losses incurred per day due

to delay in supply of power (Annexure-Y) are produced by the

petitioner.

d) It could be seen that the entity that has now invested and applied for

Group Captive approval is totally a different one and that the capital

investment towards this project was made by this new entity.

Therefore, without ascertaining the actual facts from the petitioner,

and even after accepting huge sum of money towards damages on

account of on-commissioning of the plant, the refusal of the 1st

respondent (GESCOM) to effect the termination of the PPA is illegal

and arbitrary.

e) The petitioner has approached the Hon’ble High Court of Karnataka

at Kalaburagi Bench, in WP No.200935/2022 (Annexure-Z). The 1st

respondent (GESCOM) filed its objection as per Annexure (AA). The

petitioner obtained Interim Order dated 29.06.2022 (Annexure-AB) in

the said WP. The 1st respondent (GESCOM) challenged the said interim
O.P.No.22/2022 Page 10 of 29

order in WA No.200118/2022 and on 20.07.2022, obtained stay of the

operation of the interim order. Thereafter, the petitioner withdrew the

WP on 25.07.2022.

5. 1st respondent (GESCOM) & 2nd respondent (KREDL) appeared through

counsel. The 3rd respondent (GoK) remained absent. The 2nd respondent

(KREDL) has not filed any written statement of objections. The 1st

respondent (GESCOM) has filed the statement of objections. The gist of

which may be stated as follows:

a) The execution of the PPA and the exchange of several letters between

the parties are not disputed.

b) That the petitioner had fulfilled the Conditions Precedent as per Article

4.2 of the PPA affirming the same vide its letters dated 02.05.2019

(Annexure-R1) & dated 14.06.2019 (Annexure-R2) and thereafter, the

1st respondent (GESCOM) on verification of documents found that as

required in Article 4.2 of the PPA the Conditions Precedent were fulfilled

within 12 months from Effective Date and addressed letter dated

08.08.2019 (Annexure-R3) to the petitioner affirming the same.

c) That the petitioner intimated vide letter dated 16.09.2019

(Annexure-R4) stating that it was in a position to commission the 20 MW

Solar Power Project in question on or before 25.10.2019 well within the

SCD falling on 03.11.2019. Further, the petitioner made a request in this

letter to this respondent to constitute appropriate commissioning

committee in this regard.

O.P.No.22/2022 Page 11 of 29

d) The petitioner had filed OP. No 70/2019 before this Commission seeking

reimbursement of additional capital cost for the amount spent towards

the imposition of Safeguard Duty, under the head of change in law

provision contained in the PPA. That this would establish that the

petitioner already procured solar modules. The petitioner withdrew OP

No.70/2019 on 05.03.2020.

e) The 1st respondent requesting the petitioner to pay the balance of

Rs.36 lakhs (18% GST) for processing the termination of PPA dated

28.03.2018, could not be construed as amounting to acceptance of

respondent, to terminate the PPA upon receipt of GST of Rs.36 lakhs, as

interpreted by the petitioner. The word ‘processing’ would only refer to

‘consideration’ by 1st respondent of petitioner’s request to terminate

the PPA. That staying true to its content of letter dated 08.04.2021

(Annexure-M), this respondent processed the request for termination

by making a site visit on 04.03.2022 and refusing the request upon

discovering the readiness of the petitioner to commission the project.

During the site inspection it was found that the equipment which

included PV Modules, Switch Gears, Transformers, required for the

purpose of commissioning the 20 MW project were either already

installed or were available at the project site. Accordingly, this

respondent denied the request for termination of the PPA vide its letter

dated 23.03.2022 (Annexure-S).

f) That in the event of the Developer failing to achieve COD beyond 22

months from the date of getting concurrence from the KERC on the
O.P.No.22/2022 Page 12 of 29

PPA for Power Project, for any reason whatsoever, would constitute the

‘Developer default’. This would give a discretion to this respondent to

terminate the PPA. The PPA does not contain any term or situation

leading to ‘deemed termination of the PPA’. A defaulting party is not

entitled to terminate the PPA by taking advantage of his own default.

Similarly, the defaulting party cannot as a matter of right compel the

affected party to terminate the PPA.

g) The effect of the statement of objections filed by this respondent would

show that the petitioner is not entitled to plead the principle of estoppel

merely on the ground that this respondent insisted for payment of

liquidated damages.

h) The filing of WP No.200935/2022 by the petitioner and the subsequent

developments in the said proceedings, are not denied by this

respondent.

i) The measures adopted by the petitioner are against the sanctity of the

contract entered between the parties. The petitioner could not have

made an application for allotment of the Solar Power Project in

question, under Group Captive Category, during the subsistence of the

PPA.

j) The shareholders namely; Ekialde Solar Private Limited having 99.99%

shares and Solar Pack India LLP having 0.01% share in the petitioner’s

company, selling their shares to Sunsource Energy Private Limited &

Kushagra Nandan, respectively, will not alter the legal personality of

the petitioner. In other words, a Company is a separate legal entity

O.P.No.22/2022 Page 13 of 29

than its shareholders and the transfer of shares from one to another

does not affect the existence of the Company. Therefore, the

purchase of shares by Sunsource Energy Private Limited & Kushagra

Nandan, will not alter the existence of the petitioner-company.

k) The contention of the petitioner that the material and equipment

found on the project site at the time of spot inspection by this

respondent, were in fact purchased by Sunshores Energy Private

Limited by its own fund with a view to establish Group Captive Project,

is untenable and in no way relieve the petitioner from its liability under

PPA.

l) In light of the aforementioned facts and submissions, the respondent

prayed that this Commission to dismiss the instant frivolous petition in its

entirety by imposing costs on the petitioner.

6. The petitioner filed rejoinder reiterating the earlier grounds stated in the

petition with some more additional facts in support of it. In the rejoinder

the petitioner has admitted that the damages payable for non-fulfilment

of Conditions Precedent was not paid by it, as it had fulfilled the

Conditions Precedent and the same was accepted by the 1st respondent

(GESCOM) and that the petitioner’s earlier assertion in the petition that it

had also paid damages towards non-fulfilment of Conditions Precedent

was paid, is incorrect.

7. Sri G.S. Kannur, Senior Counsel, argued on behalf of the petitioner and

submitted that:
O.P.No.22/2022 Page 14 of 29

a) The petitioner had unequivocally made it clear that it was not in a

position to establish the Solar Power Project for the reasons stated by it

and requested the 1st respondent (GESCOM) to put an end to the PPA.

It is pointed out that in the letter dated 30.01.2020 (Annexure-E), the

petitioner had stated as follows:

“We would like to intimate you that we are unable and not willing to
commission 20 MW project that was allotted to under vide reference
No.1, due to certain inevitable circumstances that have been an
obstacle for the progress of the project resulting to the situation
wherein we would not be able to submit Commissioning Certificate,
or any further progress related to completion of the project by SCOD
or under period liquidated damages also.”

b) It is also pointed out that in subsequent letters dated 28.02.2020

(Annexure-F) & dated 19.03.2020 (Annexure-G), the petitioner has

made the same request for accepting the request for abandoning the

project and agreeing to pay the damages/liquidated damages

payable under the PPA towards non-fulfilment of the commissioning of

the Project. Further, he pointed out that in response to the above

requests the 1st respondent (GESCOM) by its letter dated 14.05.2020

(Annexure-K) demanded to pay the liquidated damages as per Article

5.8 of the PPA with applicable GST. He has also pointed out that after

realising the Bank guarantee to the extent of Rs.2 crores, the 1st

respondent (GESCOM) demanded to pay Rs.36 lakhs towards the GST

payable “for processing the termination of PPA executed on

28.03.2018”. Further that the 1st respondent (GESCOM) again vide

letter dated 08.10,2021 (Annexure-N) made the same representation

O.P.No.22/2022 Page 15 of 29

to the petitioner. It is contended that relying on such representation of

the 1st respondent (GESCOM), the petitioner paid Rs.36 lakhs on

22.10.2021 through RTGS and made a request to accept the

abandoning of the Project and to issue No Objection Certificate

through its letter dated 26.10.2021 (Annexure-H). Further the petitioner

wrote another letter dated 16.12.2021 (Annexure-J) reminding to

accept the request for termination of PPA.

c) In similar facts and circumstances where the project developer was

unable to proceed with the establishment of the project the 1st

respondent (GESCOM) had accepted the request of the project

developer to terminated the PPA. In support of it the petitioner relied

on the OM dated 21.05.2020 (Annexure-P) in respect of a solar project

of M/s Max Plancks Solar Farms Private Limited, issued by 1st

respondent (GESCOM) and also relied upon similar instance of

termination of PPA by HESCOM vide its OM dated 28.02.2020

(Annexure–AJ), in respect of a solar project of 15 MW at Holenarasipur

Taluk for which the parent company of the petitioner was declared

as selected bidder.

d) By reason of the representations and past practice or past conduct

of distribution licensees, the 1st respondent (GESCOM) was bound to

accept the request of the petitioner for abandoning the project by

terminating the PPA.

O.P.No.22/2022 Page 16 of 29

e) In view of the letters by the 1st respondent (GESCOM) dated

08.04.2021 (Annexure-M) and 28.10.2021 (Annexure-N) demanded to

pay Rs.36 lakhs towards the GST payable “for processing the

termination of PPA executed on 28.03.2018” there was a legitimate

expectation by the petitioner that the request for termination will be

accepted on payment of the amount demanded. The petitioner had

paid the total amount demanded by the respondent on 22.10.2021.

Therefore, the 1st respondent (GESCOM) was duty bound to accept

the request for termination of PPA, in view of the expectation raised.

8. Sri Dhyan Chinnappa, Senior Counsel, Additional Advocate General,

argued on behalf of the 1st respondent (GESCOM) and submitted that:

a) The payment of liquidated damages and penalties for non-fulfilment

of the PPA conditions and termination of PPA are different issues.

Penalties and liquidated damages are for delay in commissioning

under the contract. PPA does not provide for automatic termination

on any developer’s default, it is for the 1st respondent (GESCOM) to

consider and terminate. Article 16.3.1 provides that in the case of

Developer Event of Default, 1st respondent (GESCOM) shall be entitled

to terminate this agreement and the developer does not have the

right to terminate the agreement. It is only in the case of 1st respondent

(GESCOM) event of default that the developer can terminate the PPA.

It is not the case of the developer that the 1st respondent (GESCOM)

has defaulted;
O.P.No.22/2022 Page 17 of 29

b) The case of the petitioner cannot be compared with the case of M/s

Max Plancks Solar Farms Private Limited (Annexure-P) and case of solar

power project of Holenarsipur Taluk (Annexure-AJ) relating to the

HESCOM. It is pointed out that the above two projects have been

abandoned by the concerned developers and in the present case

the spot inspection conducted on 04.03.2022 disclosed that the entire

quantity of material/equipment including PV Modules, Switchgears,

Transformers were procured and available at site and 33 kV Bay

Connectivity at project site and injection point at Sub-Station Site,

were fully installed. Therefore, he submitted that those cases cannot

be relied upon by the petitioner to claim termination of PPA. Further,

he submitted that in view of the readiness of the project for

commissioning, the 1st respondent (GESCOM) refused termination of

the PPA executed by the petitioner.

c) The conditions precedent as per Clause 4.0 of the PPA has been

fulfilled by the petitioner and the 1st respondent (GESCOM) has also

accepted the same (Annexure R-3). Further, the petitioner vide

Annexure R-4 has intimated that they are in a position to commission

the project on or before 25.10.2019.

d) It is not the case of the petitioner that they are abandoning the project

and not able to do the construction of the project, but the intention of

the petitioner is to commission the project but not supply to the 1st

respondent (GESCOM) as per the contract. Therefore, the request of

O.P.No.22/2022 Page 18 of 29

the petitioner for termination is to come out of the PPA and supply the

power to the third party. This request cannot be considered.

e) The legitimate expectation does not arise when there is contract, and

terms of the contract will prevail.

9. In response to the fact that the Project being ready for commissioning as on

the date of spot inspection on 04.03.2022, the petitioner has stated in para

17 of the petition that one Sunsource Energy Private Limited, which had

acquired all the shares of the petitioner-company had invested for

establishment of the Solar Power Project on the Project Site by investing its

own fund by borrowing the same from others. It is also stated that the said

Sunsource Energy Private Limited had entered into power supply agreement

dated 24.09.2021 with one OA consumer namely; A-One Steel and Alloys

Private Limited, by establishing a Group Captive Solar Power Plant.

10. From the pleadings and documents of the parties and the rival submissions

made during the arguments, the following issues arise for our consideration:

Issue No.1: Whether the 1st respondent (GESCOM) was bound to terminate
the PPA dated 28.03.2018 (Annexure-C) on the principles of
legitimate expectation, as contended by the petitioner?

Issue No.2: Whether the petitioner proves that the 1st respondent (GESCOM)
is estopped from refusing to terminate the PPA dated
28.03.2018 (Annexure-C)?
Issue No.3: Whether the communication dated 23.03.2022 (Annexure-S)
issued by the 1st respondent (GESCOM) requires to be set
aside?
Issue No.4: To which reliefs, the petitioner is entitled to?

Issue No.5: What Order?

O.P.No.22/2022 Page 19 of 29

11. After considering the submissions and the records our findings on the above

issues are as follows:

12. Issue No.1: Whether the 1st respondent (GESCOM) was bound to terminate
the PPA dated 28.03.2018 (Annexure-C) on the principles of
legitimate expectation, as contended by the petitioner?

a) Before dealing this issue on facts, it is necessary to deal with the question

of law raised by the learned counsel for the respondents, that while

deciding the rights of the parties to a contract, the principle of

legitimate expectation does not arise. The learned counsel for the

petitioner negated such contention. The parties had not placed any

precedents in respect of their rival contentions.

b) The Hon’ble Supreme Court of India, in Assistant Excise Commissioner

Vs. Isaac Peter (1994) 4 SCC 104, in somewhat similar facts as in the

present case, has dealt with the plea of legitimate expectation while

dealing with a contract entered into between an arrack licensee who

was a Selected Bidder in a public auction and State Excise Department.

The contract had been entered into subject to The Kerala Abkari Act,

(1 of 1077 corresponding to 1902 AD) and the Rules & Regulations

framed thereunder. Rejecting the plea of the legitimate expectation

the Hon’ble Supreme Court of India, in para 26 of the judgment dated

22.02.1994 has observed as follows:

“ 26. ……………………………… We are, therefore, of the opinion that

in case of contracts freely entered into with the State, like the present
ones, there is no room for invoking the doctrine of fairness and
reasonableness against one party to the contract (State), for the
purpose of altering or adding to the terms and conditions of the
contract, merely because it happens to be the State. In such cases,
O.P.No.22/2022 Page 20 of 29

the mutual rights and liabilities of the parties are governed by the
terms of the contracts (which may be statutory in some cases) and
the laws relating to contracts. It must be remembered that these
contracts are entered into pursuant to public auction, floating of
tenders or by negotiation. There is no compulsion on anyone to enter
into these contracts. It is voluntary on both sides. There can be no
question of the State power being involved in such contracts. It bears
repetition to say that the State does not guarantee profit to the
licensees in such contracts. There is no warranty against incurring
losses. It is a business for the licensees. Whether they make profit or
incur loss is no concern of the State. In law, it is entitled to its money
under the contract. It is not as if the licensees are going to pay more
to the State in case they make substantial profits. We reiterate that
what we have said hereinabove is in the context of contracts entered
into between the State and its citizens pursuant to public auction,
floating of tenders or by negotiation. It is not necessary to say more
than this for the purpose of these cases. What would be the position
in the case of contracts entered into otherwise than by public
auction, floating of tender or negotiation, we need not express any
opinion herein.”

c) The PPA in question has been entered into between parties in respect

of the sale and purchase of electricity as per the tariff discovered in a

bidding process conducted under Section 63 of the Electricity Act,

2003. Therefore, the Commission is of the considered opinion that the

principles stated in the above decision would squarely apply. Hence,

the legal contention of the learned counsel for the respondents is to be

accepted.

d) Now, we would deal with the disputed questions of fact, to ascertain

as to whether plea of legitimate expectations is made out as

contended by the petitioner, assuming that the plea of legitimate

expectations is applicable in the present nature of contract between

the parties.

e) The facts are already narrated and the close scrutiny of facts would

reveal that the previous instances or cases where PPAs were terminated
O.P.No.22/2022 Page 21 of 29

on abandoning the construction of Projects, relied upon by the

petitioner are not similar or comparable with the facts of the present

case. In those cases, the Developers had abandoned the projects as

they could not do the construction. But on the other hand in the present

case, on the date of joint spot inspection, the 1st respondent (GESCOM)

found that the Solar Power Project was ready for commissioning at

Project Site. The entire quantity of material/ equipment including PV

Modules, Switchgears, Transformers were procured and available at

site and 33 kV Bay Connectivity at project site and injection point at

Sub-Station Site, were fully installed. This one fact made the 1st

respondent to refuse the termination of the PPA.

f) The petitioner contended that there was delay of more than two years

from taking any action by the 1st respondent (GESCOM) on the request

for termination of the PPA. Therefore, it is contended that the

petitioner allowed a 3rd party to invest for construction of the Solar

Power Project at the Project Site and that 3rd party viz., Sunsource

Energy Private Limited, borrowed huge amount and purchased the

Solar panels and other equipment and material for installation of the

Solar Power Project.

g) The above submission of the petitioner is not well founded. Though the

petitioner has made a request on 30.01.2020 for termination of the PPA

as per Annexure-E, it had not paid the liquidated damages payable

by it and ultimately the Bank Guarantee was encashed by the 1st

respondent (GESCOM) on 27.10.2020 and the balance of Rs.36 lakhs

O.P.No.22/2022 Page 22 of 29

payable was paid by the petitioner on 22.10.2021 through RTGS after

two reminders and the payment was intimated to the 1st respondent

(GESCOM) through letter dated 26.10.2021 (Annexure-H). After

receipt of the entire amount the 1st respondent (GESCOM) conducted

spot inspection on 04.03.2022. Therefore, at best there is a delay of a

few months but not a delay of more than two years as contended by

the petitioner.

h) The contention of the petitioner that a third party namely; Sunsource

Energy Private Limited had invested its own fund to purchase Solar

panels and other equipment and material, is also not legally

acceptable. The transfer of shares of the petitioner-company from

Ekialde Solar Private Limited to Sunsource Energy Private Limited,

would only amount to transfer of shares from one shareholder to

another shareholder but the petitioner as a SPV continues to exist even

after such transfer of shares.

i) M/s Sunsource Energy Private Limited entered into power supply

agreement dated 24.09.2021 (Annexure-T) with OA consumer, prior to

the transfer of shares in its favour which had taken place on 21.01.2022

(Annexure-V). Further it can be seen that the execution of Novation

Agreement dated 15.02.2022 (Annexure-U) between the parties

including the OA consumer, casts responsibility on the petitioner itself

as a captive plant owner to supply energy to the OA consumer. In

that event Sunsource Energy Private Limited is to be treated as a

creditor of the petitioner in supplying the solar panels and other

O.P.No.22/2022 Page 23 of 29

material for establishment of the Solar Power Project. One cannot say

that the solar panels and other material installed at Project site belong

to that third party. The conduct of the petitioner to become a captive

plant owner, disentitles it to contend that the solar plant belongs to the

third party. The 1st respondent (GESCOM) has nothing to do with the

transactions with the third party investor as the terms of PPA are

binding on the parties.

j) Being a successful bidder in the bid proceedings and obtaining the

several permits and approvals for construction of a solar power plant

with an undertaking to supply energy to the State distribution licensee,

the petitioner cannot resile from its assurance in supplying the energy

as assured, when it was capable of discharging that obligation. In such

event, the 1st respondent (GESCOM) is not expected to

terminate the PPA in the circumstances explained as above.

k) The petitioner by its letters dated 02.05.2019 (Annexure-R1), 14.06.2019

(Annexure-R2) and 16.0.9.2019 (Annexure-R3) has intimated that all the

conditions precedents have been fulfilled and it is in a position to

commission the plant before 25.10.2019. The subsequent actions in

intimating by letters dated 30.01.2020 (Annexure-E) and 26.10.2021

(Annexure-H) asserting that “that we are unable and not willing to

commission 20 MW project that was allotted” but actually taking action

to commission the project, as evidenced in the joint inspection, clearly

shows that the petitioner wants to commission the project but not supply
O.P.No.22/2022 Page 24 of 29

power to the 1st respondent (GESCOM) as per the contract but supply

to a third party.

l) The petitioner has fulfilled the conditions precedent based on the PPA

signed with the 1st respondent (GESCOM). Specifically, the petitioner

could achieve Financial Closure, get evacuation approval from KPTCL,

obtained all permission for procuring the land, based on the PPA. Having

obtained all clearances based on the PPA, now the petitioner cannot

be allowed to cancel the PPA and continue with the construction and

supply power to a third party.

m) Demand and payment of Liquidated damages and penalty is different

from termination of the PPA. Article 4.3 provides that in the event, the

developer fails to fulfil the conditions precedent within the time allowed,

he shall pay to the 1st respondent (GESCOM) damages stated therein.

Similarly, Article 5.8 provides that the developer shall pay liquidated

damages for delay in supply of power by the SCD to the 1st respondent

(GESCOM). The moment such events happen, the 1st respondent

(GESCOM) is entitled to make the demand for the same and the

petitioner is liable to comply with such demands. There is no discretion

for the petitioner to avoid such payments. On the other hand, the

termination of the PPA by the petitioner for GESCOM Event of Default or

the termination of PPA by the 1st respondent (GESCOM) for Petitioner

Event of Default as the case may be, is only a discretion allowed to the

parties. There is no mandate that on the happening of Event of Default

of either of the parties, there should be termination of the PPA. This is

 O.P.No.22/2022 Page 25 of 29

clear from the phrase “GESCOM/Developer shall be entitled to terminate

this Agreement” used in Articles 16.3.1 & 16.4.1 relating to termination of

the PPA. Therefore, the happening of Event of Default need not

necessarily lead to the termination of PPA by either of the parties and it

is within their discretion either to terminate the PPA or not.

n) For the above reasons, we hold Issue No.1 in negative.

13. Issue No.2: Whether the petitioner proves that the 1st respondent (GESCOM)
is estopped from refusing to terminate the PPA dated
28.03.2018 (Annexure-C)?

a) There is no dispute that the Principles of Estoppel/Promissory Estoppel is

applicable while deciding private law right based on contract.

b) Section 115 of The Indian Evidence Act, dealing with Estoppel reads as

follows:

“S. 115 Estoppel - When one person has, by his declaration, act or
omission, intentionally caused or permitted another
person to believe a thing to be true and to act upon
such belief, neither he nor his representative shall be
allowed, in any suit or proceeding between himself
and such person or his representatives, to deny the
truth of that thing.”

c) In the commentary on Evidence Act by Sarkar in 15th Edition at page

1747, the requirements to bring a case within the scope of Estoppel as

defined in Section 115 are stated as follows:

“(1) There must be a representation by a person or his authorized agent

to another in any form-a declaration, act or omission.

(2) The representation must have been of the existence of a fact and
not of promises de futuro or intention which might or might not be
enforceable in contract.
O.P.No.22/2022 Page 26 of 29

(3) The representation must have meant to be relied upon, i.e., it must
have been made under circumstances which amounted to an
intentioned causing or permitting belief in another. The proof of the
intent may be direct or circumstantial, e.g., by conduct. It is not
necessary that there should be a design to mislead, or any
fraudulent intention or that the representation should be false to the
knowledge of the maker. Representation even when made
innocently or mistakenly may operate as an estoppel.

(4) There must have been belief on the part of the other party in its truth.

(5) There must have been action on the faith of that declaration, act
or omission, that is to say, the declaration, act or omission must have
actually caused another to act on the faith of it, and to alter his
former position to his prejudice or detriment.

(6) The misrepresentation or conduct or negligence must have been

the proximate cause of leading the other party to act to his
prejudice.

(7) The person claiming the benefit of an estoppel must show that he
was not aware of the true state of things. If he was aware of the real
state of affairs or had means of knowledge, there can be no
estoppel.”

d) The petitioner based its case on the Principle of Estoppel, on the

following facts:

(i) That the petitioner made written request that it was not in

a position to go with the implementation of the Solar

Power Project and thereby requested the 1st respondent

(GESCOM) to terminate the PPA for the delay caused in

the implementation of the Project as per the terms of PPA

and the petitioner would pay the damages payable in

terms of the PPA.

(ii) The 1st respondent (GESCOM) through its letters dated

08.04.2021 (Annexure-M) and dated 08.10.2021

(Annexure-N) intimated the petitioner to pay the balance

O.P.No.22/2022 Page 27 of 29

of Rs.36 lakhs immediately for processing the termination

of the PPA dated 28.03.2018.

(iii) Pursuant to it, the petitioner has paid Rs.36 lakhs through

RTGS to the account of the 1st respondent (GESCOM) on

22.10.2021, believing that the PPA in question would be

terminated immediately by the 1st respondent (GESCOM).

(iv) Contrary to the assurance, the 1st respondent (GESCOM)

refused to terminate the PPA, even after receiving the

balance of Rs.36 lakhs.

e) Keeping in mind the above ingredients of the Principles of Estoppel

and the facts of the present case noted above, we have to examine

whether the petitioner has proved the estoppel pleaded. On

consideration of the above principles required to establish the plea of

Estoppel and the facts of the present case, the Commission is of the

considered view that the petitioner has failed to make out a case that

the principle of estoppel would apply in its favour for the following

reasons:

i) The petitioner was bound to pay the liquidated

damages and the GST payable on it under the terms of

the contract. Therefore, one can say that the payment

of GST payable on liquidated damages by the petitioner

for the delay in achieving the SCD cannot amount to

alter the petitioner’s position to its prejudice or detriment.

O.P.No.22/2022 Page 28 of 29

ii) It can also be seen that the above said letters of the 1st

respondent (GESCOM) do not amount to giving an

assurance of termination of PPA on payment of the

balance amount. The said letters merely state that for

processing the termination of PPA in question, the

balance payment may be paid. Such assertion by the 1st

respondent (GESCOM) does not amount to making a

representation that in the event of payment of balance

amount, the termination of PPA was guaranteed.

f) In the case on hand, the petitioner had represented that it had

abandoned the project and requested for termination of PPA.

However, the factual position was contrary as the petitioner had not

abandoned the project but had established the project and intended

to convert it into a group captive category unit, solely for the purpose

of higher gains.

g) The PPA executed between the parties provides for termination of PPA

on the happening of certain specified events of default or breach by

following a particular procedure as provided in PPA. There is no term

in PPA for its termination at will of any one of the parties. The PPA can

be terminated before the expiry of its term, only with the consent of

both the parties.

h) For the above reasons, we hold Issue No.2 in negative.

O.P.No.22/2022 Page 29 of 29

14. Issue No.3: Whether the communication dated 23.03.2022 (Annexure-S)

issued by the 1st respondent (GESCOM) requires to be set
aside?

a) In view of the findings on Issue No.1 & Issue No.2, the question of setting

aside the communication dated 23.03.2022 (Annexure-S) does not

arise.

b) Accordingly, Issue No.3 is held in negative.

15. Issue No.4: To which reliefs, the petitioner is entitled to?

For the foregoing reasons, the petitioner is not entitled to any of the

reliefs as claimed in the petition.

16. Issue No.5: What Order?

In view of the above, we pass the following:

ORDER

The petition is dismissed holding that the petitioner is not

entitled to any of the reliefs as prayed for in the petition.

sd/- sd/- sd/-

(P. RAVI KUMAR) (H.M. MANJUNATHA) (M.D. RAVI)

Chairman Member Member