High Court of Punjab and HaryanaLPA/767/2022dismissed

Punjab State Power Corporation Ltd v. Talwandi Sabo Power Ltd And ORS

2023-01-30Mr. Justice Augustine George Masih,Mr. Justice Alok Jain64 pages

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(E) As envisaged in the Rfp, the parties have agreed to sign this Power Purchase Agreement setting out the terms and conditions for the construction, operation and maintenance of the Project, sale of Contracted Capacity and supply of electricity by the Seller to the Procurer.

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# "xx xx xx xx [81]. For the reasons recorded hereinabove, I am of the considered opinion that Punjab State Load Dispatch Centre has not performed its legal obligation as per mandate of the Electricity Act, 2003, Power Purchase Agreements and Punjab State Electricity Regulatory Commission (Punjab State Grid Code) Regulations, 2013. The inaction on behalf of Punjab State Load Dispatch Centre is liable to be deprecated. The impugned actions/notices are hereby quashed. However, Punjab State Load Dispatch Centre shall proceed to act in accordance with defined duties/obligations under the Electricity Act, 2003, Power Purchase Agreements and

Punjab State Electricity Regulatory Commission (Punjab State Grid Code) Regulations, 2013 in the context of scheduling the energy. In case of any objection in terms of Regulation 14.1.6 of the Punjab State Electricity Regulatory Commission (Punjab State Grid Code) Regulations, 2013, consequent action would follow. [82]. With these observations, both the writ petitions are allowed. The issue is relegated to Punjab State Load Dispatch Centre for doing the needful in accordance with law."

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i. The method of determination of Tariff Payments for any Contract Year during the Term of Agreement shall be in accordance with this Schedule.

ii. The Tariff shall be paid in two parts comprising of Capacity and Energy Charge.

iii. For the purpose of payments, the Tariff will be Quoted Tariff, escalated as provided in this Schedule 7 for the applicable Contract Year as per Schedule 11.

iv. The Full Capacity Charges shall be payable based on the Contracted Capacity at Normative Availability

and Incentive shall be provided for Availability beyond 85% as provided in this Schedule shall be given. In case of Availability being lower than the Normative Availability, the Capacity Charges shall be payable on proportionate basis in addition to the penalty to be paid by Seller as provided in this Schedule.

The Monthly Bill for any Month in a Contract Year shall consist of the following:

i. Monthly Capacity Charge Payment in accordance with Article 1.2.2 below;

ii. Monthly Energy Charge for Scheduled Energy in accordance with Article 1.2.3 below;

iii. Incentive Payment determined in accordance with Article 1.2.4 below (applicable on annual basis and included only in the Monthly Tariff Payment for the first month of the next Contract Year); iv. Penalty Payment determined in accordance with Article 1.2.5 below (applicable on annual basis and included only in the Monthly Tariff Payment for the first month of the next Contract Year); v. Penalty Payment determined in accordance with Article 1.2.8 below (applicable on annual basis and included only in the Monthly Tariff Payment for the first month of the next Contract Year); vi. Early Commissioning Incentive payment in accordance with Article 1.2.10.

The Monthly Capacity Charge Payment for any Month m in a Contract Year n shall be calculated as below:

....Methodology of Calculation....

CAA is the cumulative Availability, as per state energy account, from the first day of the Contract Year "n" in which month "m" occurs upto and including Month "m";

AA is the Availability, as per state energy account, in the relevant Settlement Period (expressed as a percentage of Contracted Capacity in such Settlement Period);

CC is the Contracted Capacity in the relevant Settlement Period (expressed in kW);

L is the number of minutes in relevant Settlement Period, as divided by total number of minutes in one hour, (expressed as hour);

NA Normative Availability ∑C(mD1) is the cumulative Capacity Charges payable from the first day of the Contract Year "n" in which month "m" occurs upto and including Month "mD1" but not including month "m", (in Rupees); Provided, no Capacity Charges shall be paid for the Settlement Period during which the SLDC has not allowed the operation of the Power Station due to Sellers failure to operate it as per the provisions of Grid Code.

The Monthly Energy Charges for Month "m" shall be calculated as under:

....Methodology of Calculation....

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#$ If and to the extend the Availability in a Contract Year exceeds eighty five percent (85%), an incentive at the rate of forty (40%) of the Quoted Non Escalable Capacity Charges (in Rs./kWh) for such Contract Year mentioned in Schedule 11 subject to a maximum of

twenty five (25) paise /kWh, shall be allowed on the energy corresponding to the Availability in excess of eighty five percent (85%).

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In case the Availability for a Contact Year is less than 75%, the Seller shall pay a penalty at the rate of twenty percent (20%) of the simple average Capacity Charge (in kWh) for all months in the Contract Year applied on the energy (in kwh) corresponding to the difference between 75% and Availability during such Contract Year.

* +$ Variation between Scheduled Energy and actual energy at the Delivery Point shall be accounted for through Unscheduled Interchange (UI) Charges as detailed in the Grid Code and ABT.

The payment of Transmission/Wheeling charges shall be settled between the CTU/STU and the Procurer. The payment of scheduling charges to the respective nodal agency (RLDC or SLDC) shall be the responsibility of the Procurer.

/ 0 In case Seller has to pay penalty to the Fuel supplier for not purchasing the minimum guaranteed quantity of Fuel mentioned in the Fuel Supply Agreement and if during that Contract Year Availability of the Commissioned Units is greater than the Minimum OffDtake Guarantee but the Procure does not has Scheduled Energy corresponding to such Minimum OffD take Guarantee during that Contract Year, then Seller

will raise an invoice for the lower of the following amount, on the Procurer:

(a) penalty paid to the Fuel supplier under the Fuel Supply Agreement in that Contract Year, along with documentary proof for payment of such penalty, or (b) an amount corresponding to twenty percent (20%) of cumulative Monthly Capacity Charge Payment (in Rs.) for the Procurer made for all the months in that Contract Year multiplied by (1D x/y) where:

X is the Scheduled Energy during the Contract Year for the Procurer {in kwh); and Y is the Scheduled Energy corresponding to Minimum OffDtake Guarantee for the Procurer during the Contract Year (in kwh).

Provided, within ten (10) days of the end of each Month after the COD of the first Unit, the Seller shall provide a statement to the Procurer, providing a comparison of the cumulative dispatch for all previous Months during the Contract Year with the Minimum OffDtake Guarantee of the Procurer. Further, such statement shall also list out the deficit, if any, in the Fuel offDtake under the Fuel Supply Agreement, due to cumulative dispatch being less than the Minimum OffDtake Guarantee. In case of a Fuel offDtake deficit, within a period of fifteen (15) days from the date of receipt of the above statement from the Seller and after giving a prior written notice of at least seven (7) days to the Seller, the Procurer shall have the right to avail such deficit at the same price at which such deficit fuel was available to the Seller under the Fuel Supply Agreement and to sell such deficit to third parties.

The Tariff for the period prior to Scheduled COD of the first unit shall be the quoted tariff of the first year with escalation for relevant period only for energy charge. The Tariff for the Contract Years beyond the 25 years from the Scheduled COD of the first Unit shall be the Quoted Tariff of the 25th year from the Scheduled COD of the first Unit with applicable escalation. 4 If the Commercial Operation Date (COD) of a unit is achieved before its Scheduled Commercial Operation Date, the procurer shall pay incentive ("Early Commissioning Incentive") to seller, as follows:

....Methodology of Calculation....

A) The Early Commissioning Incentive will be on the units dispatched on Station bus bar for the Procurer. B) The Early Commissioning Incentive will be paid only on the units dispatched by seller on Station bus bar after achieving COD of unit.

C) The Scheduled Commercial Operation Date mentioned in PPA will not change with declaring early COD of unit Only Early Commissioning Incentive will be paid extra on units dispatched on Station bus bar for the Procurer as per above mentioned incentive formula. D) The ProcurerDPSEB will procure entire power generated earlier with added Early Commissioning Incentive.

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The penalty of actual Availability shortfall during the Contract Year, Deviation from the schedule, Transmission .& Scheduling Charges, and Penalty to be paid to fuel supplier will be settled as detailed in Article 1.2.2, Article 1.2.5, Article 1.2.6, Article 1.2.7 and Article 1.2.8 of this Schedule.

Notwithstanding anything contained in this agreement, no separate reimbursement shall be allowed

for the cost of the secondary fuel.

It is relevant to reproduce the Articles 12.2, 12.3, 12.4, 12.5 and 12.7 at this stage:

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An affected party means the Procurer of the Seller whose performance has been affected by an event of Force Majeure. An event of Force Majeure affecting the CTU/STU or any other agent of Procurer, which has affected the Interconnection Facilities, shall be deemed to be an event of Force Majeure affecting the Procurer.

Any event of Force Majeure affecting the performance of Seller's contractors, shall be deemed to be an event of Force Majeure affecting Seller only if the Force Majeure event is affecting and resulting in:

(a) late delivery of plant, machinery, equipment, materials, spare parts, Fuel, water or consumables for the Project: or (b) a delay in the performance of nay of the Seller's contractors.

Similarly, any event of Force Majeure affecting the performance of the Procurers' contractor for the setting up or operating Interconnection Facilities shall be deemed to be an event of Force Majeure affecting Procurer only if the Force Majeure event is resulting in a delay in the Performance of Procurer's contractors.

0 : A 'Force Majeure' means any event or circumstance or combination of events and circumstances including those stated below that wholly or partly prevents or unavoidably delays an Affected Party in the performance of its obligations under this Agreement, but only if and to the extent that such events or circumstances are not within the reasonable control, directly or indirectly, of the Affected Party and could not have been avoided if the Affected Party had taken reasonable care

or complied with Prudent Utility Practices:

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Act of God, including, but not limited to lightning, drought, fire and explosion (to the extent originating from a source external to the Site), earthquake, volcanic eruption, landslide, flood, cyclone, typhoon, tornado or exceptionally adverse weather conditions which are in excess of the statistical measures for the last hundred (100) years. 6;6

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Direct NonDNatural Force Majeure Events (a) Nationalization or compulsory acquisition by any Indian Governmental Instrumentality of any material assets or rights of the Seller or the Seller's contractors; or (b) the unlawful, unreasonable or discriminatory revocation of, or refusal to renew any consent required by the Seller or any of the Seller's contractors to perform their obligations under the Project Documents or any unlawful, unreasonable or discriminatory refusal to grant any other consent required for the development/operation of the Project. Provided that an appropriate court of law declares the revocation or refusal to be unlawful, unreasonable and discriminatory and strikes the same down.

(c) any other unlawful, unreasonable or discriminatory action on the part of an Indian Government Instrumentality which is directed against the Project. Provided that an appropriate court of law declares the revocation or refusal to be unlawful, unreasonable and discriminatory and strikes the same down. 2.

Indirect NonDNatural Force Majeure Events (a) any act of war (whether declared or undeclared), invasion, armed conflict or act of foreign enemy, blockade, embargo, revolution, riot, insurrection, terrorist or military action; or (b) Radio active contamination or ionising radiation originating from a source in India or resulting from another

Indirect Non Natural Force Majeure Event excluding circumstances where the source or cause of contamination or radiation is brought or has been brought into or near the site by the Affected Party or those employed or engaged by the Affected Party.

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Force Majeure shall not include (i) any event or circumstance which is within the reasonable control of the parties and (ii) the following conditions, except to the extent that they are consequences of an event of Force Majeure: (a) Unavailability, late delivery, or changes in cost of the plant, machinery, equipment, materials, spare parts, Fuel or consumables for the Project:

(b) Delay in the performance of any contractor, subD contractors or their agents excluding the conditions as mentioned in Article 12.2;

(c) NonDperformance resulting from normal wear and tear typically experienced in power generation material and equipment:

(d) Strikes or labour disturbance at the facilities of the Affected Party:

(e) Insufficiency of finances or funds or the agreement becoming onerous to perform: and (f) NonDperformance caused by, or connected with, the Affected Party's:

Negligent or intentional acts, errors or omissions; Failure to comply with an Indian Law; or Breach of, or default under this Agreement or any Project Documents.

%6 0 : $ The Affected Party shall give notice to the other Party of any event of Force Majeure as soon as reasonably practicable,

) but not later than seven (7) days after the date on which such Party knew or should reasonably have known of the commencement of the event of Force Majeure. If an event of Force Majeure results in a breakdown of communications rendering it unreasonable to give notice within the applicable time limit specified herein then the Party claiming Force Majeure shall give such notice as soon as reasonably practicable after reinstatement of communications, but not later than one (1) day after such reinstatement. Provided that such notice shall be a preDcondition to the Seller's entitlement to claim relief under this Agreement. Such notice shall included full particulars of the event of Force Majeure, its effects on the Party claiming relief and the remedial measures proposed.

The Affected Party shall give the other party regular (and not less than monthly) reports on the progress of those remedial measures and such other information as the other Party may reasonably request about the situation. The Affected Party shall give notice to the other Party of (i) the cessation of the relevant event of Force Majeure; and (ii) the cessation of the effects of such event of Force Majeure on the performance of its rights or obligations under this Agreement as soon as practicable after becoming aware of each of these cessations.

&$ '= 0 : $ Subject to this Article 12:

(a) no Party shall be in breach of its obligations pursuant to this Agreement to the extent that the performance of its obligations was prevented, hindered or delayed due to a Force Majeure Event;

(b) every Party shall be entitled to claim relief in relation to a Force Majeure Even in regard to its obligations, including but not limited to those specified under Article 4.5. (c) For the avoidance of doubt, it is clarified that no Tariff shall be paid by the Procurer for the part of Contracted

5 Capacity affected by a Natural Force Majeure Event affecting the Seller, for the duration of such Natural Force Majeure Event. For the balance part of the Contracted Capacity, the Procurer shall pay the Tariff to the Seller, provided during such period of Natural Force Majeure Event, the balance part of the Power Station is declared to be Available for scheduling and dispatch as per ABT for supply of power by the Seller to the Procurer.

(d) If the average Availability of the Power Station is reduced below sixty (60) per cent for over two (2) consecutive months or for any non consecutive period of four (4) months both within any continuous period of sixty (60) months, as a result of an Indirect Non Natural Force Majeure, then, with effect from the end of that period and for so long as the daily average Availability of the Power Station continues to be reduced below sixty (60) percent as result of an Indirect Non Natural Force Majeure of any kind, the procurer shall make payments for Debt Service, subject to a maximum of Capacity Charges based on Normative Availability, relatable to such Unit, which are due under the Financing Agreements and these amounts shall be paid from the date, being the later of (a) the date of cessation of such Indirect Non Natural Force Majeure Event and (b) the completion of sixty (60) days from the receipt of the Financing Agreements by the Procurer from the Seller, in the form of an increase in Capacity Charge.

Provided such capacity charge increase shall be determined by Appropriate Commission on the basis of putting the Seller in the same economic position as the Seller would have been in case the Seller had been paid Debt Service in a situation where the Indirect Non Natural Force Majeure had not occurred.

6 absence of such Indirect Non Natural Force Majeure Event, the Availability of such Commissioned Unit(s) would have resulted in Capacity Charges equal to Debt Service.

(e) If the average Availability of the Power Station is reduced below eighty (80) percent for over two (2) consecutive months or for any non consecutive period of four (4) months both within any continuous period of sixty (60) months, as a result of a Direct Non Natural Force Majeure, then, with effect from the end of that period and for so long as the daily average Availability of the Power Station continues to be reduced below eighty (80) percent as a result of a Direct Non Natural Force Majeure of any kind, the Seller may elect in a written notice to the Procurer, to deem the Availability of the Power Station to be eighty (80) percent from the end of such period, regardless of its actual Available Capacity.

In such a case, the Procurer shall be liable to make payment to the Seller of Capacity Charges calculated on such deemed Normative Availability, after the cessation of the effects of Direct Non Natural Force Majeure in the form of an increase in Capacity Charge. Provided such Capacity Charge increase shall be determined by Appropriate Commission on the basis of putting the Seller in the same economic position as the Seller would have been in case the Seller had been paid Capacity Charges in a situation where the Direct Non Natural Force Majeure had not occurred.

(f) For so long as the Seller is claiming relief due to any Non Natural Force Majeure Event ( or Natural Force Majeure Event affecting the Procurer) under this Agreement, the Procurer may from time to time on one (1) days notice inspect the Project and the Seller shall provide Procurer's personnel with access to the Project to carry out such inspections, subject to the Procurer's personnel complying with all reasonable safety precautions and standards. Provided further the Procurer shall be entitled at all time to request Repeat

Performance Test, as per Article 8.1 of the Unit(s) Commissioned earlier and now affected by Direct or Indirect Non Natural Force Majeure Event (or Natural Force Majeure Event affecting the Procurer), where such Testing is possible to be undertaken in spite of the Direct or Indirect Non Natural Force Majeure Event (or Natural Force Majeure Event affecting the Procurer), and the Independent Engineer accepts and issues a Final Test Certificate certifying such Unit(s) being capable of delivering the Contracted Capacity and being Available, had there been no such Direct or Indirect Non Natural Force Majeure Event (or Natural Force Majeure Event affecting the Procurer). In case, the Available Capacity as established by the said Repeat Performance Test(provided that for such Repeat Performance Test, the limitation imposed by Article 8.1.

1 shall not apply) and Final Test Certificate issued by the Independent Engineer is less than the Available Capacity corresponding to which the Seller would have been paid Capacity Charges equal to Debt Service in case of Indirect Non Natural Force Majeure Event (or Natural Force Majeure Event affecting the Procurer), then the Procurer shall make pro rata payment of Debt Service but only with respect to such reduced Availability. For the avoidance of doubt, if Debt Service would have been payable at an Availability of 60% and pursuant to a Repeat Performance Test it is established that the Availability would have been 40% then Procurer shall make payment equal to Debt Service multiplied by 40% and divided by 60%.

Similarly, the payments in case of Direct Non Natural Force Majeure Event (and Natural Force Majeure Event affecting the Procurer) shall also be adjusted pro rata for reduction in Available Capacity.

(g) In case of a Natural Force Majeure Event affecting the Procurer which adversely affects the performance obligations of the Seller under this Agreement, the provisions of subD proviso (d) and (f) shall apply.

(h) For the avoidance of doubt, it is specified that the charges payable under this Article 12 shall be paid by the Procurer.

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( ; 5%# % ++ It is the case on behalf of the appellant that for a substantial period there was a total closure due to lockdown and for the remaining period the appellant was allowed with 50% capacity and therefore, the force majeure principle contained in Clause 29 shall be applicable. When the same was submitted before the Arbitral Tribunal, no opinion, even a prima facie opinion on the aforesaid aspect was given by the Arbitral Tribunal. In para 39, it is observed that "it

would not be fair at this stage of the proceedings, where evidence is yet to be adduced by the parties in support of their rival contentions on the issues that arise, to record any definitive opinion on the import and effect of the force majeure clause (Clause 29) contained in the lease deed". Therefore, applicability of the force majeure principle contained in Clause 29 is yet to be considered by the Arbitral Tribunal at the time of final adjudication.

+/ Hence, the liability to pay the rentals for the period during lockdown is yet to be adjudicated upon and considered by the Tribunal. Therefore, no order could have been passed by the Tribunal by way of interim measure on the applications filed under Section 17 of the Arbitration Act in a case where there is a serious dispute with respect to the liability of the rental amounts to be paid, which is yet to be adjudicated upon and/or considered by the Arbitral Tribunal. Thus, no such order for deposit by way of an interim measure on applications under Section 17 of the Arbitration Act could have been passed by the Tribunal.

+9 However, at the same time, the aforesaid can be considered only for the period of complete closure due to lockdown. As per the available record, there was complete closure for the period between 22D3D2020 to 9D9D2020; for the period between 19D4D2021 to 28D6D 2021 and for the period between 11D1D2022 to 27D1D 2022 and for the remaining period the appellant was allowed to run the Restro/Bar with 50% capacity. The appellant will therefore have to deposit the entire rental amount except the period for which there was complete closure due to lockdown. As the applicability of force majeure principle (Clause 29) is yet to be considered at least, for the period during the complete

closure, it would not be justified to direct the appellant to deposit the rental amount for the said period of complete closure by way of an interim measure, pending final adjudication.

+6 In view of the above and for the reasons stated above, the present appeal succeeds in part. The order passed by the Arbitral Tribunal passed in applications under Section 17 of the Arbitration Act, directing the appellant to deposit the entire rental amount for the period between March 2020 to December 2021, confirmed by the High Court by the impugned judgment and order [Evergreen Land Mark (P) Ltd. v. John Tinson & Co. (P) Ltd., 2022 SCC OnLine Del 442], is modified and it is directed that the appellant to deposit the entire rental amount for the period other than the period during which there was complete lockdown i.e. 22D3D2020 to 9D9D2020 and for the period between 19D4D2021 to 28D6D2021.

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5BA /00/ ? !! /09 % " " ; 5%# % 4 Before we deal with the constitutional aspects, let us first state what electricity is, as understood in law, and what are its relevant characteristics. It is settled with the pronouncement of this Court in CST v. M.P. Electricity Board, Jabalpur [(1969) 1 SCC 200 : (1969) 2 SCR 939] that electricity is goods. The definition of goods as given in Article 366(12) of the Constitution was considered by this Court and it was held that the definition in terms is very wide according to which "goods" means all kinds of movable property. The term "movable property" when considered with reference to "goods" as defined for the

purpose of sales tax cannot be taken in a narrow sense and merely because electrical energy is not tangible or cannot be moved or touched like, for instance, a piece of wood or a book, it cannot cease to be movable property when it has all the attributes of such property. It is capable of abstraction, consumption and use which if done dishonestly, is punishable under Section 39 of the Indian Electricity Act, 1910. If there can be sale and purchase of electrical energy like any other movable object, this Court held that there was no difficulty in holding that electric energy was intended to be covered by the definition of "goods". However, A.N. Grover, J. speaking for the threeD Judge Bench of this Court went on to observe (at SCC p. 205, para 9) that electric energy "can be transmitted, transferred, delivered, stored, possessed etc.

in the same way as any other movable property". In this observation we agree with Grover, J. on all other characteristics of electric energy except that it can be "stored" and to the extent that electric energy can be "stored", the observation must be held to be erroneous or by oversight. Science and technology till this day have not been able to evolve any methodology by which electric energy can be preserved or stored.

Another significant characteristic of electric energy is that its generation or production coincides almost instantaneously with its consumption. To quote from Aiyar's Law Lexicon (2nd Edn., 2000)- "Electricity in physics is 'the name given to the cause of a series of phenomena exhibited by various substances, and also to the phenomena themselves'. Its true nature is not understood. Imperial Dictionary (quoted in Spensley v. Lancashire Ins. Co. [54 Wis 433, 442, 11 NW 894] where the court, quoting from the same authority, said, 'we are totally ignorant of the nature of this cause

) whether it be a material agent or merely a property of matter. But as some hypothesis is necessary for explaining the phenomena observed, it has been assumed to be a highly subtle, imponderable fluid, identical with lightning, which pervades the pores of all bodies, and is capable of motion from one body to another'."

This characteristic quality of electric energy was judicially noticed in Indian Aluminium Co. v. State of Kerala [(1996) 7 SCC 637] . Vide para 25 this Court has noted : (SCC p. 650) "Continuity of supply and consumption starts from the moment the electrical energy passes through the meters and sale simultaneously takes place as soon as meter reading is recorded. All the three steps or phases (i.e. sale, supply and consumption) take place without any hiatus. It is true that from the place of generating electricity, the electricity is supplied to the substation installed at the units of the consumers through electrical highDtension transformers and from there electricity is supplied to the meter. But the moment electricity is supplied through the meter, consumption and sale simultaneously take place ... as soon as the electrical energy is supplied to the consumers and is transmitted through the meter, consumption takes place simultaneously with the supply. There is no hiatus in its operation. Simultaneously sale also takes place."

These properties of electricity as goods are of immense relevance as we would state hereafter. With these two things in mind, namely, that electricity is goods, and that sale of electricity has to be construed and read as sale for consumption within the meaning of Entry 53, the conflict, if any, between Entry 53 and Entry 54 ceases to exist and the two can be harmonized and read together. Because electricity is

5 goods, it is covered in Entry 54 also. It is not disputed that duty on electricity is tax. Tax on the sale or purchase of goods including electricity but excluding newspapers shall fall within Entry 54 and shall be subject to provisions of Entry 92DA of List I. Taxes on the consumption or sale for consumption of electricity within the meaning of Entry 53 must be consumption within the State and not beyond the territory of the State. Any other sale of electricity shall continue to be subject to the limits provided by Entry 54. Even purchase of electricity would be available for taxation which it would not be if electricity was not includible in the meaning of the term "goods".

A piece of legislation need not necessarily fall within the scope of one entry alone; more than one entry may overlap to cover the subjectDmatter of a single piece of legislation. A bare consumption of electric energy even by one who generates the same may be liable to be taxed by reference to Entry 53 and if the State Legislature may choose to impose tax on consumption of electricity by the one who generates it, such tax would not be deemed to be a tax necessarily on manufacture or production or a duty of excise, as held by the Constitution Bench in Jiyajeerao Cotton Mills Ltd. v. State of M.P.

[AIR 1963 SC 414 : 1962 Supp (1) SCR 282] A mere consumption of goods (other than electricity), not accompanied by purchase or sale would not be taxable under Entry 54 because it does not provide for taxes on the consumption and Entry 53 does not speak of goods other than electricity. Thus in substance, Entries 53 and 54 can be and must be read together and to the extent of sale of electricity for consumption outside the State, electricity being goods, shall also be subject to provisions of Entry 92DA of List I. This, in our opinion, is the best way of reading the two entries. In C.P.

6 Taxation Act, 1938, Re, AIR 1939 FC 1] it was held that two entries in the lists may overlap and sometimes may also appear to be in direct conflict with each other. It is then the duty of this Court to reconcile the entries and bring about harmony between them. The court should strive at searching for reasonable and practical construction to seek reconciliation and give effect to all of them. If reconciliation proves impossible, the overriding power of the Union Legislature operates and prevails. Gwyer, C.J. observed : (AIR p. 7) "A grant of the power in general terms, standing by itself, would no doubt be construed in the wider sense; but it may be qualified by other express provisions in the same enactment, by the implications of the context, and even by considerations arising out of what appears to be the general scheme of the Act."

And again he said : (AIR p. 8) "[A]n endeavour must be made to solve it, as the Judicial Committee have said, by having recourse to the context and scheme of the Act, and a reconciliation attempted between two apparently conflicting jurisdictions by reading the two entries together and by interpreting, and, where necessary, modifying, the language of the one by that of the other. If indeed such a reconciliation should prove impossible, then, and only then, will the non obstante clause operate and the federal power prevail:" In Calcutta Gas Co. (Proprietary) Ltd. v. State of W.B. [AIR 1962 SC 1044 : 1962 Supp (3) SCR 1] the Constitution Bench has held that the same rules of construction apply for the purpose of harmonizing an apparent conflict between two entries in the same list.

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"Force majeure" is governed by the Contract Act, 1872. Insofar as it is relatable to an express or implied clause in a contract, such as the PPAs before us, it is governed by Chapter III dealing with the contingent contracts, and more particularly, Section 32 thereof. Insofar as a force majeure event occurs dehors the contract, it is dealt with by a rule of positive law under Section 56 of the Contract Act. Sections 32 and 56 are set out herein:

"32.

-Contingent contracts to do or not to do anything if an uncertain future event happens, cannot be enforced by law unless and until that event has happened. If the event becomes impossible, such contracts become void. ***

56. &

' -An agreement to do an act impossible in itself is void.

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' (-A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.

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' (-Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the nonDperformance of the promise."

% Prior to the decision in Taylor v. Caldwell [Taylor v. Caldwell, (1863) 3 B&S 826 : 122 ER 309 : (1861D73) All ER Rep 24], the law in England was extremely rigid. A contract had to be performed, notwithstanding the fact that it had become impossible of performance, owing to some unforeseen event, after it was made, which was not the fault of either of the parties to the contract. This rigidity of the Common law in which the absolute sanctity of contract was upheld was loosened somewhat by the decision in Taylor v. Caldwell [Taylor v. Caldwell, (1863) 3 B&S 826 : 122 ER 309 : (1861D

73) All ER Rep 24] in which it was held that if some unforeseen event occurs during the performance of a contract which makes it impossible of performance, in the sense that the fundamental basis of the contract goes, it need not be further performed, as insisting upon such performance would be unjust.

* The law in India has been laid down in the seminal decision of Satyabrata Ghose v. Mugneeram Bangur & Co. [Satyabrata Ghose v. Mugneeram Bangur & Co., 1954 SCR 310 : AIR 1954 SC 44] The second paragraph of Section 56 has been adverted to, and it was stated that this is exhaustive of the law as it stands in India. What was held was that the word "impossible" has not been used in the section in the sense of physical or literal impossibility. The performance of an act may not be literally impossible but it may be impracticable and useless from the point of view of the object and purpose of the parties. If an untoward event or change of circumstance totally upsets the very foundation upon which the parties entered their agreement, it can be said that the promisor finds it impossible to do the act which he had promised to do. It was further held that where the Court finds that the contract itself either impliedly or expressly contains a term, according to which performance would stand discharged under certain circumstances, the dissolution of the contract

7 would take place under the terms of the contract itself and such cases would be dealt with under Section 32 of the Act. If, however, frustration is to take place dehors the contract, it will be governed by Section 56.

In Alopi Parshad & Sons Ltd. v. Union of India [Alopi Parshad & Sons Ltd. v. Union of India, (1960) 2 SCR 793 : AIR 1960 SC 588], this Court, after setting out Section 56 of the Contract Act, held that the Act does not enable a party to a contract to ignore the express covenants thereof and to claim payment of consideration, for performance of the contract at rates different from the stipulated rates, on a vague plea of equity. Parties to an executable contract are often faced, in the course of carrying it out, with a turn of events which they did not at all anticipate, for example, a wholly abnormal rise or fall in prices which is an unexpected obstacle to execution. This does not in itself get rid of the bargain they have made.

It is only when a consideration of the terms of the contract, in the light of the circumstances existing when it was made, showed that they never agreed to be bound in a fundamentally different situation which had unexpectedly emerged, that the contract ceases to bind. It was further held that the performance of a contract is never discharged merely because it may become onerous to one of the parties.

. Similarly, in Naihati Jute Mills Ltd. v. Khyaliram Jagannath [Naihati Jute Mills Ltd. v. Khyaliram Jagannath, (1968) 1 SCR 821 : AIR 1968 SC 522] , this Court went into the English law on frustration in some detail, and then cited the celebrated judgment of Satyabrata Ghose v. Mugneeram Bangur & Co. [Satyabrata Ghose v. Mugneeram Bangur & Co., 1954 SCR 310 : AIR 1954 SC 44] Ultimately, this Court concluded that a contract is not frustrated merely because the circumstances in which it was made are altered. The courts have no general power to absolve a party from the performance of its part of the contract merely because its

8 performance has become onerous on account of an unforeseen turn of events.

1 It has also been held that applying the doctrine of frustration must always be within narrow limits. In an instructive English judgment, namely, Tsakiroglou & Co. Ltd. v. Noblee Thorl GmbH [Tsakiroglou & Co. Ltd. v. Noblee Thorl GmbH, 1962 AC 93 : (1961) 2 WLR 633 : (1961) 2 All ER 179 (HL)], despite the closure of the Suez Canal, and despite the fact that the customary route for shipping the goods was only through the Suez Canal, it was held that the contract of sale of groundnuts in that case was not frustrated, even though it would have to be performed by an alternative mode of performance which was much more expensive, namely, that the ship would now have to go around the Cape of Good Hope, which is three times the distance from Hamburg to Port Sudan. The freight for such journey was also double.

Despite this, the House of Lords held that even though the contract had become more onerous to perform, it was not fundamentally altered. Where performance is otherwise possible, it is clear that a mere rise in freight price would not allow one of the parties to say that the contract was discharged by impossibility of performance.

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(1) The State Load Despatch Centre shall be the apex body to ensure integrated operation of the power system in a State.

(2) The State Load Despatch Centre shall D (a) be responsible for optimum scheduling and despatch of electricity within a State, in accordance with the contracts entered into with the licensees or the generating companies operating in that State;

(b) monitor grid operations;

(d) exercise supervision and control over the intraDState transmission system; and (e) be responsible for carrying out real time operations for grid control and despatch of electricity within the State through secure and economic operation of the State grid in accordance with the Grid Standards and the State Grid Code.

(3) The State Load Despatch Centre may levy and collect such fee and charges from the generating companies and licensees engaged in intraDState transmission of electricity as may be specified by the State Commission.

(1) The State Load Despatch Centre in a State may give such

) directions and exercise such supervision and control as may be required for ensuring the integrated grid operations and for achieving the maximum economy and efficiency in the operation of power system in that State.

(2) Every licensee, generating company, generating station, subDstation and any other person connected with the operation of the power system shall comply with the directions issued by the State Load Despatch Centre under subDsection (1).

(3) The State Load Despatch Centre shall comply with the directions of the Regional Load Despatch Centre.

(4) If any dispute arises with reference to the quality of electricity or safe, secure and integrated operation of the State grid or in relation to any direction given under subD section (1), it shall be referred to the State Commission for decision:

Provided that pending the decision of the State Commission, the directions of the State Load Despatch Centre shall be complied with by the licensee or generating company.

(5) If any licensee, generating company or any other person fails to comply with the directions issued under subD section(1), he shall be liable to a penalty not exceeding rupees five lacs."

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Subject to the terms and conditions of this Agreement, the Procurer:

(a) shall be responsible for procuring the Interconnection and Transmission Facilities to enable the Power Station to be connected to the Grid System not later than the Scheduled Connection Date;

(b) shall ensure that the Seller is provided an electrical connection for reasonable construction, commissioning and start up power at the Project as reasonably requisitioned by the Seller by written intimation to the Procurer, on the then prevalent terms and conditions as applicable to such consumers;

(c)shall be responsible for payment of the Transmission Charges and RLDC and SLDC Charges.

(d) shall make all reasonable arrangements for the evacuation of the Infirm power from the Power Station: subject to the availability of transmission lines and (e)fulfilling obligations undertaken by them under this Agreement."

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4 % "(a) The obligation to pay for power within 45 days of the presentation of the bill or as provided in the PPA remains unchanged.

(b) Late payment surcharge shall apply at reduced rate only for the period between 24.03.2020 to 30.06.2020 (on those payments that become overdue during the period 24.03.2020 to 30.06.2020 and not on those payments which were already overdue before 24.03.2020) and after 30.06.2020 the delayed payment surcharge shall be payable at rates given in the PPA/regulations.

(c) Obligation to pay for capacity charges as per the PPA shall continue, as does the obligation to pay for transmission charges."

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" # ( ; % >%. In view of the above discussions, the submission of the Respondent that Covid19 pandemic led lockdown and consequent reduction in demand constitute force majeure event absolving the Respondent from making payment of capacity charges under the PPA deserves to be rejected and accordingly, the Respondent is directed to make payment of the capacity charges to the Petitioner for the period from April 2020 to June 2020 within 60 days from the date of this order. * In order dated 03.04.2020, the Commission has decided in Petition No.

6/SM/2020 (quoted in earlier part of this order) that "the generating companies whose tariff has been determined under Section 63 of the Act by this Commission, relief on the Late Payment Surcharge for payment which become delayed beyond 45 days (from the date of presentation of the bill) during the period from 24.03.2020 to 30.06.2020 may be claimed in terms of the force majeure provisions of the respective power purchase agreements (PPAs)".

)7 affected the liquidity position of all stakeholders of power sector, including the Respondent. Therefore, we feel it appropriate that in the given facts and circumstances, it is a fit case for exercise of our regulatory power, and accordingly, we direct that delayed payment of the bills which falls between 24.03.2020 to 30.06.2020, shall be payable at the reduced rate of 12% per annum that translates into 1% per month. The same shall be paid within 60 days of this order.

* The summary of our decision is as under:

a) The outbreak of the COVIDD19 pandemic did not dislodge the obligation of the Respondent. Since the Petitioner has declared its capacity on day ahead basis, the Respondent is under obligation to pay the capacity charges, along with late payment surcharge.

b) The delayed payment of the bills which falls between 24.03.2020 to 30.06.2020, shall be payable at the reduced rate of 12% per annum that translates into 1% per month.

c) Payment of the capacity charges to the Petitioner for the period from April 2020 to June 2020 along with late payment surcharge shall be payable within 60 days from the date of this order."

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)8 % "! "Force Majeure" is governed by the Contract Act, 1872. Insofar as it is relatable to an express or implied clause in a contract, such as the PPAs before us, it is governed by Chapter III dealing with the contingent contracts, and more particularly, Section 32 thereof. Insofar as a force majeure event occurs de hors the contract, it is dealt with by a rule of positive law under Section 56 of the Contract Act. Sections 32 and 56 are set out herein:

.-Contingent contracts to do or not to do anything if an uncertain future event happens, cannot be enforced by law unless and until that event has happened. If the event becomes impossible, such contracts become void.

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' .-An agreement to do an act impossible in itself is void.

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' (.-A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.

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% Prior to the decision in

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* The law in India has been laid down in the seminal decision of '

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7 EB1%!= 4 &#=1%!!!F The second paragraph of Section 56 has been adverted to, and it was stated that this is exhaustive of the law as it stands in India. What was held was that the word "impossible" has not been used in the section in the sense of physical or literal impossibility. The performance of an act may not be literally impossible but it may be impracticable and useless from the point of view of the object and purpose of the parties. If an untoward event or change of circumstance totally upsets the very foundation upon which the parties entered their agreement, it can be said that the promisor finds it impossible to do the act which he had promised to do. It was further held that where the Court finds that the contract itself either impliedly or expressly contains a term, according to which performance would stand discharged under certain circumstances, the dissolution of the contract would take place under the terms of the contract itself and such cases would be dealt with under Section 32 of the Act. If, however, frustration

5 is to take place dehors the contract, it will be governed by Section 56.

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&#=1*4%..F, this Court, after setting out Section 56 of the Contract Act, held that the Act does not enable a party to a contract to ignore the express covenants thereof and to claim payment of consideration, for performance of the contract at rates different from the stipulated rates, on a vague plea of equity. Parties to an executable contract are often faced, in the course of carrying it out, with a turn of events which they did not at all anticipate, for example, a wholly abnormal rise or fall in prices which is an unexpected obstacle to execution. This does not in itself get rid of the bargain they have made. It is only when a consideration of the terms of the contract, in the light of the circumstances existing when it was made, showed that they never agreed to be bound in a fundamentally different situation which had unexpectedly emerged, that the contract ceases to bind. It was further held that the performance of a contract is never discharged merely because it may become onerous to one of the parties.

. Similarly, in 6 @ 5 $ G

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7 E B1%!=4 &#=1%!!!F Ultimately, this Court concluded that a contract is not frustrated merely because the circumstances in which it was made are altered. The courts have no general power to absolve a party from the performance of its part of the contract merely because its performance has become onerous on account of an unforeseen turn of events.

5 1 It has also been held that applying the doctrine of frustration must always be within narrow limits. In an instructive English judgment, namely,

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'HB1*&1 81*9-5=* 81*9& = 18H59F, despite the closure of the Suez Canal, and despite the fact that the customary route for shipping the goods was only through the Suez Canal, it was held that the contract of sale of groundnuts in that case was not frustrated, even though it would have to be performed by an alternative mode of performance which was much more expensive, namely, that the ship would now have to go around the Cape of Good Hope, which is three times the distance from Hamburg to Port Sudan. The freight for such journey was also double. Despite this, the House of Lords held that even though the contract had become more onerous to perform, it was not fundamentally altered. Where performance is otherwise possible, it is clear that a mere rise in freight price would not allow one of the parties to say that the contract was discharged by impossibility of performance.

! Coming to the PPAs themselves, we find that the force majeure clause contained in all of them is in a standard form and is as follows:

"0 : "Force Majeure" means any event or circumstance or combination of events and circumstances including those stated below that wholly or partly prevents or unavoidably delays an affected party in the performance of its obligations under this agreement, but only if and to the extent that such events or circumstances are not within the reasonable control, directly or indirectly, of the affected party and could not have been avoided if the affected party had taken reasonable care or complied with

5) prudent utility practices:

(i) Natural force majeure events:

Act of God, including, but not limited to lightning, drought, fire and explosion (to the extent originating from a source external to the site), earthquake, volcanic eruption, landslide, flood, cyclone, typhoon, tornado, or exceptionally adverse weather conditions which are in excess of the statistical measures for the last hundred (100) years.

(ii) NonDnatural force majeure events:

Direct nonDnatural force majeure events (a) Nationalisation or compulsory acquisition by any Indian government instrumentality or any material assets or rights of the seller or the seller's contractors; or (b) The unlawful, unreasonable or discriminatory revocation of, or refusal to renew, any consent required by the seller or any of the seller's contractors to perform their obligations under the project documents or any unlawful, unreasonable or discriminatory refusal to grant any other consent required for the development/ operation of the project, provided that an appropriate court of law declares the revocation or refusal to be unlawful, unreasonable and discriminatory and strikes the same down; or (c) Any other unlawful, unreasonable or discriminatory action on the part of an Indian government instrumentality which is directed against the project, provided that an

appropriate court of law declares the revocation or refusal to be unlawful, unreasonable and discriminatory and strikes the same down.

Indirect nonDnatural force majeure events (a) Any act of war (whether declared or undeclared), invasion, armed conflict or act of foreign enemy, blockade, embargo, revolution, riot, insurrection, terrorist or military action; or (b) Radioactive contamination or ionising radiation originating from a source in India or resulting from another indirect nonD natural force majeure event excluding circumstances where the source or cause of contamination or radiation is brought or has been brought into or near the site by the affected party or those employed or engaged by the affected party; or (c) IndustryDwide strikes and labour disturbances having a nationwide impact in India.

&$ ' : $ Subject to this Article 12:

(a) No party shall be in breach of its obligations pursuant to this agreement to the extent that the performance of its obligations was prevented, hindered or delayed due to a force majeure event;

(b) Every party shall be entitled to claim relief in relation to a force majeure event in regard to its obligations, including but not limited to those specified under Article 4.5.

contracted capacity affected by a natural force majeure event affecting the seller, for the duration of such natural force majeure event. For the balance part of the contracted capacity, the procurer shall pay the tariff to the seller, provided during such period of natural force majeure event, the balance part of the power station is declared to be available for scheduling and dispatch as per ABT for supply of power by the seller to the procurers.

(d) If the average availability of the power station is reduced below sixty (60) per cent for over two (2) consecutive months or for any nonDconsecutive period of four (4) months both within any continuous period of sixty

(60) months, as a result of an indirect nonDnatural force majeure, then, with effect from the end of that period and for so long as the daily average availability of the power station continues to be reduced below sixty (60) per cent as a result of an indirect nonDnatural force majeure of any kind, the procurers shall make payments for debt service, relatable to such unit, which are due under the financing agreements, subject to a maximum of capacity charges based on normative availability, and these amounts shall be paid from the date, being the later of (a) the date of cessation of such indirect nonD natural force majeure event, and (b) the completion of sixty (60) days from the receipt of the financing agreements by the procurer(s) from the seller, in the form of an increase in capacity charge.

Provided such capacity charge increase shall be determined by CERC on the basis of putting the seller in the same economic position as the seller would have been in case the seller had been paid debt service in a situation when the indirect nonDnatural force majeure event had not

5 occurred:

Provided that the procurers will have the above obligation to make payment for the debt service only (a) after the unit(s) affected by such indirect nonD natural force majeure event has been commissioned, and (b) only if in the absence of such indirect nonD natural force majeure event, the availability of such commissioned unit(s) would have resulted in capacity charges equal to debt services.

(e) If the average availability of the power station is reduced below eighty (80) per cent for over two (2) consecutive months or for any nonDconsecutive period of four (4) months both within any continuous period of sixty

(60) months, as a result of a direct nonDnatural force majeure, then, with effect from the end of that period and for so long as the daily average availability of the power station continues to be reduced below eighty (80) per cent as a result of a direct nonDnatural force majeure of any kind, the seller may elect in a written notice to the procurers, to deem the availability of the power station to be eighty (80) per cent from the end of such period, regardless of its actual available capacity. In such a case, the procurers shall be liable to make payment to the seller of capacity charges calculated on such deemed normative availability, after the cessation of the effects of nonD natural direct force majeure in the form of an increase in capacity charge:

Provided such capacity charge increase shall be determined by CERC on the basis of putting the seller in the same economic position as the seller would have been in case the seller had been paid capacity charges in a situation where the direct nonDnatural force majeure had not occurred.

(f) For so long as the seller is claiming relief due to

5 any nonDnatural force majeure event [or natural force majeure event affecting the procurer(s)] under this agreement, the procurers may from time to time on one

(1) day's notice inspect the Project and the seller shall provide procurer's personnel with access to the Project to carry out such inspections, subject to the procurer's personnel complying with all reasonable safety precautions and standards. Provided further the procurers shall be entitled at all times to request repeat performance test, as per Article 8.

1, of the unit(s) commissioned earlier and now affected by direct or indirect nonDnatural force majeure event [or natural force majeure event affecting the procurer(s)], where such testing is possible to be undertaken in spite of the direct or indirect nonDnatural force majeure event [or natural force majeure event affecting the procurer(s)], and the independent engineer accepts and issues a final test certificate certifying such unit(s) being capable of delivering the contracted capacity and being available, had there been no such direct or indirect nonDnatural force majeure event [or natural force majeure event affecting the procurer(s)]. In case, the available capacity as established by the said repeat performance test (provided that such repeat performance Test, the limitation imposed by Article 8.1.

1 shall not apply) and final test certificate issued by the independent engineer is less than the available capacity corresponding to which the seller would have been paid capacity charges equal to debt service in case of indirect nonDnatural force majeure event [or natural force majeure event affecting the procurer(s)], then the procurers shall make pro rata payment of debt service but only with respect to such reduced availability.

and pursuant to a repeat performance test it is established that the availability would have been 40%, then procurers shall make payment equal to debt service multiplied by 40% and divided by 60%. Similarly, the payments in case of direct nonDnatural force majeure event [and natural force majeure event affecting the procurer(s)] shall also be adjusted pro rata for reduction in available capacity. (g) In case of a natural force majeure event affecting the procurer(s) which adversely affects the performance obligations of the seller under this agreement, the provisions of subDprovisos (d) and (f) shall apply. (h) For the avoidance of doubt, it is specified that the charges payable under this Article 12 shall be paid by the procurers in proportion to their then existing allocated contracted capacity.

It has strongly been contended by the counsel for the respondents that, first and foremost, the force majeure clause is not exhaustive, but is only inclusive. Further, it may wholly or partly prevent an affected party from performance of obligations under the agreement. Rise in the price of Indonesian coal, according to them, was unforeseen inasmuch as the PPAs have been entered into sometime in 2006 to 2008, and the rise in price took place only in 2010 and 2011. Such rise in price is also not within their control at all and, therefore, Clause 12.3 read with Clause 12.7 would apply. They further argued that the force majeure clause in the present case went further and stated that so long as performance of their obligation was "hindered" due to a force majeure event, they can claim compensatory tariff.

% First and foremost, the respondents are correct in stating that the force majeure clause does not exhaust the possibility of unforeseen events occurring outside natural and/or nonD natural events.

event, the clause applies. Chitty on Contracts, 31st Edn. at Para 14D151 cites a number of judgments for the proposition that the expression "hindered" must be construed with regard to words which precede and follow it, and also with regard to the nature and general terms of the contract. Given the fact that the PPA must be read as a whole, and that Clauses 12.3 and 12.7(a) are a part of the same scheme of force majeure under the contract, it is clear that the expression "hindered" in Clause 12.7(a) really goes with the expression "partly prevents" in Clause 12.3. Force majeure clauses are to be narrowly construed, and obviously the expression "prevents" in Clause 12.3 is spoken of also in Clause 12.7(a).

When "prevent" is preceded by the expression "wholly or partly", it is reasonable to assume that the expression "prevented" in Clause 12.7(a) goes with the expression "wholly" in Clause 12.3 and the expression "hindered" in Clause 12.7(a) goes with the expression "partly". This being so, it is clear that there must be something which partly prevents the performance of the obligation under the agreement. Also, Treitel on Frustration and Force Majeure, 3rd Edn.

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9 5 $ - E5B1 &!1%8H59F for the proposition that a mere rise in price rendering the contract more expensive to perform will not constitute "hindrance". This is echoed in the celebrated judgment of +< E 5 $ H

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E5B8119G7 .8&9F in which it was held that the expression "hinders the delivery" in a contract would only be attracted if there was not merely a question of rise in price, but a serious hindrance in performance of the contract as a whole. At the beginning of the First World War, British ships were no longer available, and although foreign shipping could be obtained at an increased

6 freight, such foreign ships were liable to be captured by the enemy and destroyed through mines or submarines, and could be detained by British or allied warships. In the circumstances, the 85

95D 85

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E5B 8119G7 .8&9FBG7 .!9 "... Under the circumstances, can it be said that the sellers were not "hindered or prevented" within the meaning of the contract? It is not a question of price, merely an increase of freight. Tonnage had to be obtained to bring the pulp in Scandinavian ships, and although the difficulty in obtaining tonnage may be reflected in the increase of freight, it was not a mere matter of increase of freight; if so, there were standing contracts that ought to have been fulfilled. Counsel for the respondents urged that certain shipowners, for reasons of their own, chose not to fulfil standing contracts. It was not only shipowners but pulp buyers and sellers. The whole trade was dislocated, by reason of the difficulty that had arisen in tonnage. It seems to me that the language of Lord Dunedin in

95$- E5D

95$- E5B1 & !1%8H59Fis applicable to the present case: (AC p. 516) '... Where I think, with deference to the learned Judges, the majority of the court below have gone wrong is that they have seemingly assumed that price was the only drawback. I do not think that price as price has anything to do with it. Price may be evidence, but it is only one of many kinds of evidence as to shortage. If the appellants had alleged nothing but advanced price they would have failed. But they have shown much more.'

6 That is exactly so here. Price, as price only, would not have affected it. They were all standing contracts, but the position has so changed by reason of the war that buyers and sellers and the whole trade were hindered or prevented from carrying out those contracts."

!* As a matter of fact, Clause 12.4 of the PPA, which deals with force majeure exclusions, reads as follows: "!0 : <

Force Majeure shall not include (i) any event or circumstance which is within the reasonable control of the parties, and (ii) the following conditions, except to the extent that they are consequences of an event of force majeure:

(a) Unavailability, late delivery, or changes in cost of the plant, machinery, equipment, materials, spare parts, fuel or consumables for the Project;

(b) Delay in the performance of any contractor, subDcontractors or their agents excluding the conditions as mentioned in Article 12.2;

(c) NonDperformance resulting from normal wear and tear typically experienced in power generation materials and equipment;

(d) Strikes or labour disturbance at the facilities of the affected party;

(e) Insufficiency of finances or funds or the Agreement becoming onerous to perform; and (f) NonDperformance caused by, or connected with, the affected party's:

(i) Negligent or intentional acts, errors or omissions;

(ii) Failure to comply with an Indian

6 law; or (iii) Breach of, or default under this Agreement or any project documents."

This clause makes it clear that changes in the cost of fuel, or the agreement becoming onerous to perform, are not treated as force majeure events under the PPA itself. We are, therefore, of the view that neither was the fundamental basis of the contract dislodged nor was any frustrating event, except for a rise in the price of coal, excluded by Clause 12.4, pointed out. Alternative modes of performance were available, albeit at a higher price. This does not lead to the contract, as a whole, being frustrated. Consequently, we are of the view that neither Clause 12.3 nor 12.7, referable to Section 32 of the Contract Act, will apply so as to enable the grant of compensatory tariff to the respondents.

Dr Singhvi, however, argued that even if Clause 12 is held inapplicable, the law laid down on frustration under Section 56 will apply so as to give the respondents the necessary relief on the ground of force majeure. Having once held that Clause 12.4 applies as a result of which rise in the price of fuel cannot be regarded as a force majeure event contractually, it is difficult to appreciate a submission that in the alternative Section 56 will apply.

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7 EB1%!=4 &#= 1%!!!F, when a contract contains a force majeure clause which on construction by the Court is held attracted to the facts of the case, Section 56 can have no application. On this short ground, this alternative submission stands disposed of." 4

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means the Contracted Capacity allocated to the Procurer as provided in Schedule 13 hereof, subject to adjustment as per the terms of this Agreement.

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&7 shall mean all the regulations contained in the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2004, as amended or revised from time to time, to the extent applied as per the terms of this Agreement."

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4.3.1 Subject to the terms and conditions of this Agreement, the Seller undertakes to sell to the Procurer, and the Procurer undertake to pay the Tariff for all of the Available Capacity up to the Contracted Capacity and Scheduled Energy of the Power Station, according to its

6 then existing Contract Capacity, throughout the terms of this Agreement.

4.3.2 Unless otherwise instructed by the Procurer, the Sell shall sell all the Available Capacity up to the Contracted Capacity of the Power Station to the Procurer pursuant to Dispatch Instructions.

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4.4.1 Subject to other provisions of this Agreement, the entire Contracted Capacity of the Power Station and all the Units of the Power Station shall at all times be for the exclusive benefit of the Procurer and the Procurer shall have the exclusive right to purchase the entire Contracted Capacity from the Seller. The Seller shall not grant to any third party or allow any third party to obtain any entitlement to the Available Capacity and/or Scheduled Energy.

4.4.2 Notwithstanding Article 4.4.1, the Seller shall be permitted to sell power, being a part of the Available Capacity of the Power Station to third parties if: (a) there is a part of Available Capacity which has not been Dispatched by the Procurer.

(b) Not Applicable.

4.4.3 If the Procurer does not avail of power upto the Available Capacity provided by the Seller and the provisions of Article 4.4.2 have been complied with, the Seller shall be entitled to sell such Available Capacity not procured, to any person without losing the right to receive the Capacity Charges from the Procurer for such unDavailed Available Capacity. In such a case, the sale realization in excess of Energy Charges, shall be equally shared by the Seller with the Procurer. In the event, the Seller sells such Available Capacity to the shareholders of the Seller or any direct or indirect affiliate of the Seller/Shareholders of the Seller without obtaining the

6 prior written consent of the Procurer, the Seller shall be liable to sell such Available Capacity to such entity at tariffs being not less than the Tariff payable by the Procurer. During this period; the Seller will also continue to receive the Capacity Charges from the Procurer. Upon the Procurer not availed of the Available Capacity, as envisaged under this Article, intimating to the Seller of its intention and willingness to avail of the part of the Available Capacity not availed of and therefore sold to the third party, the Seller shall, notwithstanding anything contained in the arrangement between the Seller and said third party, commence supply of such capacity to the Procurer from the later of two (2) hours from receipt of notice in this regard from the Procurer or the time for commencement of supply specified in such notice.

4.4.4 The Seller shall not itself use any of the electricity generated by the Power Station during the term of this Agreement, except for the purpose of meeting the Power Station's auxiliary load requirements, as per the norms laid down by the Appropriate Commission and housing colony for the staff.

4.4.5 The sale under Unscheduled Interchange shall not be considered as sale to third party for the purposes of this Agreement."

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# 4 " "(a) The obligation to pay for power within 45 days of the presentation of the bill or as provided in the PPA remains unchanged.

(b) Late payment surcharge shall apply at reduced rate only for the period between 24.03.2020 to 30.06.2020 (on those payments that become overdue during the period 24.03.2020 to 30.06.2020 and not on those payments which were already overdue before 24.03.2020 and after 30.06.2020 the delayed payment surcharge shall be payable at rates given in the PPA/regulations.

(c) Obligation to pay for capacity charges as per the PPA shall continue, as does the obligation to pay for transmission charges."

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