APTEL Partly Allows Appeal In 1,500 MW Solar Power Project Dispute In Tamil Nadu

The Appellate Tribunal for Electricity (APTEL) has partly allowed an appeal filed by Raasi Green Earth Energy Pvt. Ltd. against the Tamil Nadu Electricity Regulatory Commission (TNERC) and Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO). In its judgment delivered on July 29, 2026, the Tribunal provided important clarity on issues related to the termination of a Power Purchase Agreement (PPA), the encashment of performance bank guarantees, and the recovery of liquidated damages in renewable energy projects.

The dispute originated from TANGEDCO’s 2017 tender to procure 1,500 MW of solar power. Raasi Green Earth Energy emerged as one of the successful bidders with a discovered tariff of ₹3.47 per unit. The company signed a Power Purchase Agreement with TANGEDCO on September 26, 2017. Under the agreement, the developer was required to commission the solar project within 24 months. The contract also allowed an extension of up to 34 months, subject to specified penalties and the encashment of performance bank guarantees in case of delays.

During the execution of the project, the Ministry of Finance imposed a safeguard duty of more than 25 percent on imported solar modules in July 2018. According to Raasi, the new duty significantly increased project costs and affected project implementation. The company requested a revision in tariff, sought an extension of the commercial operation date (COD), and asked for alternative power evacuation arrangements. However, these requests were rejected by TANGEDCO.

Raasi subsequently approached TNERC seeking a 15-month extension for project commissioning and protection against the encashment of its performance bank guarantees. On February 2, 2021, TNERC dismissed the petition, stating that the project had not been commissioned within the maximum permissible period of 34 months. As a result, the Commission held that the PPA stood automatically terminated under Clause 14 of the agreement.

While the proceedings before TNERC were underway, TANGEDCO encashed performance bank guarantees worth ₹15 crore. Raasi challenged both the encashment of the guarantees and the decision to impose liquidated damages before APTEL.

After examining the matter, APTEL upheld TANGEDCO’s decision to encash the ₹15 crore performance bank guarantees. The Tribunal observed that Raasi had not formally amended its pleadings before TNERC to specifically seek a refund after the guarantees had been encashed. It further held that Article 14 of the PPA clearly allowed TANGEDCO to invoke the performance bank guarantees once the project exceeded the contractual delay period of 24 months, without the need to prove any actual financial loss.

However, APTEL ruled in Raasi’s favor on the issue of liquidated damages. Referring to Supreme Court judgments, including *Kailash Nath Associates v. DDA*, and the provisions of Sections 73 and 74 of the Indian Contract Act, 1872, the Tribunal stated that liquidated damages cannot be awarded automatically unless the affected party has suffered legal injury or actual financial loss, except in situations where such loss cannot reasonably be quantified.

The Tribunal found that TNERC had granted TANGEDCO the right to recover liquidated damages without examining whether the utility had actually suffered any measurable financial loss because of the project delay. APTEL held that this approach was not legally sustainable.

Accordingly, the Tribunal set aside the portion of TNERC’s order relating to liquidated damages and remanded the matter back to the Commission. TNERC has been directed to conduct a fresh hearing, provide both parties an opportunity to present their arguments, determine whether TANGEDCO incurred any actual financial loss due to the delayed commissioning of the project, and then reassess Raasi Green Earth Energy’s liability for liquidated damages in accordance with law.