GERC Denies Plea For Interim Relief In Dispute With GUVNL Over 400 MW Solar Project Delays

In a recent proceeding before the Gujarat Electricity Regulatory Commission (GERC), a significant dispute unfolded involving Enren Energy Pvt. Limited and Gujarat Urja Vikas Nigam Limited (GUVNL). Enren Energy, represented by a team of legal advocates, petitioned for an extension of their project timeline due to what they described as unavoidable delays beyond their control. These delays, according to Enren Energy, have hindered their ability to meet the scheduled commercial operation date (SCOD) for a 400 MW solar power project in Gujarat.

The background of this case revolves around a Power Purchase Agreement (PPA) signed on December 15, 2022, between Enren Energy and GUVNL. Under the terms of this agreement, Enren Energy was expected to supply 400 MW of solar power with an SCOD set for June 15, 2024. However, due to various setbacks including delays in obtaining necessary approvals and permissions from state authorities, Enren Energy has been unable to progress as planned.

In response to these delays, Enren Energy sought an extension of the SCOD, citing several force majeure events that were beyond their control. The company argued that these unforeseen events should warrant a reconsideration of the timeline agreed upon in the PPA. Their legal representatives emphasized the potential financial repercussions, including the risk of GUVNL encashing a performance bank guarantee of approximately ₹37.76 crores if the SCOD was not achieved by the stipulated date.

GUVNL, represented by their legal counsel, contested this request. They maintained that the terms of the bank guarantee are clear, stating it is unconditional and irrevocable. According to GUVNL, any delays in the project are extraneous and do not qualify as force majeure events under the agreement. They argued that their right to encash the bank guarantee is legitimate if the project milestones are not met, regardless of the circumstances cited by Enren Energy.

The legal team for GUVNL further argued that the encashment of the bank guarantee is a separate contract between the bank and GUVNL, independent of the underlying project agreement. They cited several legal precedents asserting that unless there is clear evidence of fraud or special equities, which were not proven by Enren Energy, the bank guarantee should be honored.

The Commission, after hearing extensive arguments from both sides, decided not to grant the interim relief sought by Enren Energy. They acknowledged that the company would likely miss the SCOD and understood GUVNL’s entitlement to enforce the bank guarantee as per the terms of the PPA. However, the Commission noted that the invocation of the bank guarantee does not depend on the termination of the underlying contract and must be seen as a separate entity.

The GERC emphasized that a bank guarantee is an independent contract and the dispute regarding the project’s delay should not interfere with the bank’s obligation to honor it. They highlighted that restraining the encashment of the bank guarantee is only permissible in exceptional circumstances, such as proven fraud or special equities, which were not demonstrated in this case.

As a result, the Commission rejected Enren Energy’s application for interim relief, allowing GUVNL to proceed with the encashment of the performance bank guarantee if the project milestones are not met by the specified SCOD. However, the Commission granted both parties time to file additional submissions and rejoinders, indicating that further hearings will be scheduled to resolve the main petition in detail.

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