The Maharashtra Electricity Regulatory Commission (MERC) has rejected an interlocutory application filed by Parmeshi Urja Limited (PUL) seeking to restrain the Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL) from encashing its ₹6.65 crore Performance Bank Guarantee (PBG). The order was issued on August 12, 2026, allowing MSEDCL to proceed with the encashment while the main dispute remains under consideration.
PUL is developing a 133 MW solar photovoltaic project under the Mukhyamantri Saur Krushi Vahini Yojana 2.0 (MSKVY 2.0), linked to Component-C of the PM-KUSUM scheme. Under its Power Purchase Agreement (PPA) with MSEDCL, signed in February 2025, the company was required to achieve key milestones, including Financial Closure and the Scheduled Commercial Operation Date (SCOD).
PUL failed to achieve Financial Closure within the prescribed timeline. The company attributed the delay to circumstances beyond its control, including delays in execution and handover of the signed PPA by MSEDCL and a shortage of Domestic Content Requirement (DCR)-compliant solar modules. PUL argued that these circumstances qualified as Force Majeure under Article 10 of the PPA.
The developer also relied on an Office Memorandum issued by the Ministry of New and Renewable Energy (MNRE) on March 28, 2026, which extended timelines for projects under PM-KUSUM schemes. Based on these grounds, PUL sought protection against MSEDCL’s decision to invoke the bank guarantee.
MSEDCL issued the invocation letter on April 1, 2026. PUL subsequently approached the Bombay High Court, which initially granted temporary protection before directing the developer to seek appropriate relief from MERC.
Before the Commission, MSEDCL argued that a performance bank guarantee is an independent and unconditional financial instrument. According to the distribution company, such guarantees cannot ordinarily be restrained merely because of contractual disputes, except in cases involving established fraud or irretrievable injustice.
MSEDCL also maintained that the Financial Closure deadline was linked to the Letter of Award rather than the PPA signing date. It further argued that equipment shortages were excluded from the Force Majeure provisions of the PPA and that MNRE’s timeline extensions did not automatically modify contractual obligations without approval at the state level.
The MERC bench comprising Chairperson Valsa Nair Singh and Members Anand M. Limaye and Surendra J. Biyani declined to grant an injunction against encashment. The Commission observed that unconditional bank guarantees can be restrained only in exceptional circumstances, particularly where fraud or irreparable injustice is demonstrated.
MERC found that PUL had not established either condition. It also held that any financial loss suffered by PUL could potentially be compensated through monetary adjustments if the developer ultimately succeeds in the main proceedings.
The Commission clarified that its decision is limited to the interlocutory application and does not determine the merits of the wider dispute. PUL’s Force Majeure claims, requests for extension of timelines, and reliance on the MNRE memorandum will be examined in the ongoing main case.
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