Supreme Court Favors Chamundeshwari Electricity Supply Company In Solar Power Contract Dispute

The Supreme Court of India has recently delivered a significant judgment in a long-running dispute between Chamundeshwari Electricity Supply Company Ltd. (CESC) and Saisudhir Energy (Chitradurga) Pvt. Ltd. over the terms of a Power Purchase Agreement for a solar power project. The case has gone through several stages, beginning with the Karnataka Electricity Regulatory Commission (KERC), moving to the Appellate Tribunal for Electricity (APTEL), and finally reaching the Supreme Court. The latest ruling has overturned the decisions of the lower forums and clarified the limits of regulatory authority in contractual matters.

The dispute started when Saisudhir Energy, a solar project developer, failed to meet the project deadlines outlined in its PPA with CESC. The delay occurred because the Karnataka Power Transmission Corporation Limited (KPTCL) had not completed the necessary transmission infrastructure on time. Saisudhir Energy argued that this delay was beyond its control and should be treated as a case of Force Majeure, which refers to unforeseen events that prevent a party from fulfilling contractual obligations. The KERC agreed with this argument and ruled in favor of the developer. It ordered CESC to return the performance security amount of around ₹24.9 crores, extend the project completion timeline, and allow a renegotiation of the power tariff. The APTEL later upheld this decision, further strengthening the developer’s case.

However, when the matter was brought before the Supreme Court, the higher bench took a different view. In its judgment authored by Justice Satish Chandra Sharma, the Court analyzed the provisions of the PPA in detail. The Court emphasized that the agreement was a commercial contract entered into through competitive bidding and had to be interpreted strictly according to its terms. It highlighted two possible routes available to the developer in case of delays. Under Article 5.7, the developer could have applied for an extension of time, and under Article 14, it could have formally invoked Force Majeure. But Saisudhir Energy did neither. The Court concluded that by not exercising these options, the company had failed to comply with its contractual obligations.

The judgment further clarified that regulatory bodies like the KERC do not have the jurisdiction to alter the terms of a competitively bid commercial contract. By directing CESC to return the performance security and allow changes to the PPA, both KERC and APTEL had acted beyond their powers. The Supreme Court found that CESC was fully within its rights under the PPA to encash the performance security when the project deadlines were not met. It stated clearly that courts and regulatory commissions cannot rewrite contracts that parties have agreed upon.

As a result of this ruling, the appeal filed by CESC was allowed, and the earlier judgments by KERC and APTEL were set aside. This judgment serves as an important reminder that in commercial contracts, parties must strictly adhere to the terms and conditions agreed upon, and regulatory bodies cannot interfere by altering or renegotiating these terms. It also reinforces the principle that contractual obligations cannot be bypassed unless the remedies provided in the agreement are duly invoked. The Supreme Court’s decision strengthens the sanctity of contracts and underscores the importance of compliance in the renewable energy sector and beyond.