APTEL Remands 50 MW Tamil Nadu Solar Project Case Over Unresolved Force Majeure Issues

The Appellate Tribunal for Electricity (APTEL) has set aside an order of the Tamil Nadu Electricity Regulatory Commission (TNERC) in a case involving a 50 MW solar power project, directing the state regulator to reconsider the matter after finding serious procedural lapses and failure to examine key issues. The tribunal remanded the case back to TNERC and instructed it to issue a fresh decision within three months after providing both parties an opportunity to be heard.

The dispute arose from a competitive bidding process launched by Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) in 2017 to procure 1,500 MW of solar power. VSR Solar Power Private Limited emerged as one of the successful bidders and signed a 25-year Power Purchase Agreement (PPA) with TANGEDCO in March 2018. Under the agreement, the company was required to commission its 50 MW solar power plant within 12 months, making March 2019 the scheduled commissioning deadline. To meet contractual obligations, the developer also submitted performance bank guarantees amounting to ₹10 crore.

After acquiring land in Vilathikulam in Tamil Nadu’s Thoothukudi district, the company faced major setbacks due to Cyclone Gaja, which struck the region in late 2018. According to the developer, heavy rainfall and extensive waterlogging on the black cotton soil at the project site delayed construction activities and increased overall project costs by around 17 percent. The company claimed that these conditions qualified as a force majeure event under the PPA and sought a four-month extension to complete the project.

However, TANGEDCO rejected the extension request and later refused to grant any additional time beyond early 2020. The utility also encashed performance bank guarantees worth ₹5.10 crore, citing the developer’s failure to commission the project within the prescribed timeline.

The developer subsequently approached TNERC, requesting a project-specific extension, restoration of the contract, and refund of the encashed bank guarantees. In February 2021, the commission dismissed the petition, holding that the PPA had automatically terminated because the project was not commissioned within 22 months. It also upheld TANGEDCO’s decision to recover liquidated damages through the bank guarantees.

The developer challenged the order before APTEL. The appellate tribunal, comprising Officiating Chairperson Seema Gupta and Judicial Member Virender Bhat, observed that TNERC had failed to examine one of the central issues in the dispute—whether Cyclone Gaja and its impact constituted a valid force majeure event under the agreement. The tribunal noted that although detailed submissions had been made on this issue, the commission’s order did not contain any findings or analysis on the claim.

Instead, the tribunal found that TNERC had focused only on issues related to safeguard duty, leaving the force majeure arguments completely unaddressed. APTEL also pointed out significant administrative errors in the commission’s judgment, stating that portions of the order referred to facts, timelines, and clauses from power purchase agreements involving unrelated developers instead of the agreement under dispute.

Describing the approach as lacking proper judicial scrutiny, the tribunal ruled that such errors could not be sustained. It therefore set aside the commission’s order and directed TNERC to reconsider the case afresh, specifically examining the force majeure claim and the issue of encashed bank guarantees, while ensuring a fair hearing for all parties before delivering its decision within three months.