VSR Solar Power Private Limited vs Tamil Nadu Electricity Regulatory Commission & Ors on 31 July 2026

J U D G M E N T

PER HON’BLE MR. VIRENDER BHAT, JUDICIAL MEMBER

1. In this appeal, the Appellant has assailed the order dated 2nd February, 2021 passed by the 1st Respondent – Tamil Nadu Electricity Regulatory Commission (hereinafter referred to as “the Commission”) in DRP No. 7 of 2020 filed by the Appellant thereby refusing to grant project specific extension of the Commercial Operation Date (COD) of the Appellant’s solar power project. The Commission has also held that since the Appellant’s power project was not commissioned within 22 months

from 22nd March, 2018 (date of signing of the PPA between it and the 2nd Respondent), the PPA stood automatically terminated and the 2nd Respondent is entitled to relief provided under Article use 14 of the PPA to the extent of non-commissioning of the power project by the Appellant.

2. The Appellant is a company registered under Companies Act, 2013 and is engaged in the business of solar power generation as well as other allied activities.

3. Respondent No. 2 – Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) is the sole distribution licensee in the State of Tamil Nadu.

4. Brief facts of the case, relevant for the disposal of the instant appeal, are that 2nd Respondent – TANGEDCO issued a tender in the year 2017 for procurement of total capacity of 1500 MW of solar power from the developers on long-term basis. The tender was prepared and issued in line with the “Guidelines for tariff based competitive bidding process for procurement of power from grid connected solar PV power projects, 2017” dated 3rd August, 2017 issued by the Ministry of Power, Government of India as a guiding principle.

5. The Appellant also participated in the tender and was declared L-1 bidder. Accordingly, Letter of Intent (LOI) dated 2nd January, 2018 was

issued by 2nd Respondent to the Appellant. As required under clause 5.0 of the LOI, the Appellant furnished two Performance Bank Guarantees for a total amount of Rs.10 crores and also entered into Power Purchase Agreement dated 22nd March, 2018 with the 2nd Respondent – TANGEDCO for a period of 25 years.

6. As per clause 14 of the PPA, the Appellant had to commission its power project by 21st March, 2019 i.e. within 12 months from the date of the signing of the PPA.

7. Subsequent to signing of the PPA, the Appellant finalized its location for its solar power project at Vilathikulam Tuticorim District, Tamil Nadu and purchased the site land and also registered the same in its name on 26th April, 2018. Immediately, thereafter, the Appellant commenced the ground work for establishing the power project i.e. cleaning of land, bush removal etc.

8. The Appellant communicated its acceptance of LOI on 25th July, 2018 and at the same time requested for change of location of the power project from Virudhunagar District (as identified earlier by the Appellant) to Vilathikulum Taluk, which request was accepted by 2nd Respondent – TANGEDCO. Accordingly, a certificate in this regard was issued to the Appellant certifying that the solar plant can be interfaced to Vilathikulum

110/33-11 KV SS at 110 KV level through a dedicated 110 KV power evacuation line.

9. Vide notification dated 30th July, 2018, the Ministry of Finance imposed a “Safeguard Duty” (in short “SGD”) on the modules and solar panels to be imported from all developed countries such as China, Taiwan and Malaysia. The notification imposed safeguard duty beyond 25% on the advolerum value of the modules thereby increasing the price of modules by 25%.

10. The Ministry of Power, Government of India took note of the impact of the levy of SGD upon the upcoming solar power projects and accordingly issued under Section 107 of the Electricity Act to the Central Commission on 21st August, 2018 stating that the solar power generators can be duly compensated as a pass through for sudden levy of SGD as the same amounts to a change in law situation.

11. The Cyclone Gaja accompanied by heavy rains are stated to have hit the coast of Tamil Nadu in December, 2018 due to which Appellant’s project was severely affected. There was severe water logging at the site and the Appellant has to restart the preliminary work that had already been completed. This severely impacted the viability of the entire project of the Appellant and resulted in an increased overall project cost by 17%.

12. Accordingly, Appellant wrote a letter dated 18th December, 2018 to 2nd Respondent – TANGEDCO stating these reasons and seeking an extension of the Scheduled Commercial Operation Date (SCOD) of the power project by four months i.e. from 21st March, 2019 to 21st July, 2019. However, the TANGEDCO rejected the said request of the Appellant vide letter dated 7th January, 2019 stating that as per the commercial schedule in the tender specification, the Appellant could commission the project on or before 21st January, 2020 subject to the conditions mentioned therein.

13. A memorandum of understanding is stated to have been executed between the Appellant and the Government of Tamil Nadu represented by TANGEDCO on 24th January, 2019 during Global Investor Meet whereby TANGEDCO agreed to provide infrastructural and regulatory support to facilitate the project in view of substantial investment being made by the Appellant. In view of the assurances, the Appellant placed two purchase orders dated 6th February, 2019 and 10th February, 2019 upon M/s DK Solar Projects & Ventures Pvt. Ltd. for a complete EPC package for 53 MWp solar power project and for sub-station components.

14. At the same time, TANGEDCO addressed the communication dated 3rd September, 2019 to the Appellant as well as to the bankers of

the Appellant seeking to invoke the Performance Bank Guarantee furnished by the Appellant to the tune of Rs.10 crores citing the delay in commissioning of the project. Thereafter, the Performance Bank Guarantee for a sum of Rs.5.10 crores was encashed by TANGEDCO on 7th September, 2019 to which the Appellant strongly objected.

15. Vide letter dated 27th October, 2019, the Appellant requested TANGEDCO to refrain from forfeiting the Performance Bank Guarantee furnished by it with further request to allow the Appellant to complete the project by 26th June, 2020. However, no response was received by the Appellant to the said communication.

16. Vide letter dated 5th December, 2019, the Respondent No. 3 denied Appellant’s request for extension of COD and stating that the Appellant was required to furnish the commissioning of the power plant by 21st January, 2020. Vide another letter dated 20th December, 2019, Respondent No. 3 directed the Appellant to furnish a fresh Performance Bank Guarantee to a tune of Rs.7.60 crores for the delay of five months in commissioning of the project.

17. Feeling aggrieved by the refusal of the 2nd Respondent – TANGEDCO in granting the extension of SCOD of the power project or approving the part commissioning of the project despite Appellant having

taken active steps to complete the project and having expressed willingness to perform its obligations under the PPA, the Appellant approached the Commission by way of the petition being DRP No. 7 of 2020 seeking following prayers :- “a) Grant the Petitioner a project specific extension of the COD by eighteen months i.e. 21.3.2019 to 21.9.2020 in respect of the Petitioner's SPG under PPA dated 22.03.2018 and consequently quash the letters dated 05.12.2019.

b) Direct the 1st and 2nd Respondents not to enforce any security including bank guarantees and allow for its continuance pending disposal of this petition upon such terms as the Commission may deem fit in the facts and circumstances of the case; and

c) Direct the 1st and 2nd Respondent to repay a sum of Rs.5,10,00,000/ collected under Bank Guarantee dated 21.03.2018 in order that the Petitioner cam reinstate such bank guarantee and keep it alive in terms of the PPA dates 22.03.2018 and upon such terms as the Commission deems fit.”

18. The petition has been disposed of by the Commission vide the order dated 2nd February, 2021 which has been impugned in this appeal. The Commission vide the impugned order, has not only refused to grant extension of COD to the power project of the Appellant but has also held that the PPA stood terminated automatically as the Appellant did not commission the power project within the stipulated 22 months from the date of signing of the PPA and also held the Respondent – TANGEDCO entitled to invocation of the Performance Bank Guarantee submitted by the Appellant as well as the liquidated damages as provided under clause 14 of the PPA.

19. We have heard Shri Aditya Singh, Learned Counsel for the Appellant and Ms. Anusha Nagarajan, Learned Counsel for Respondent Nos. 2 to 5. We have also perused the written submissions filed by the Learned Counsel.

20. From the submission of the Learned Counsel for the Appellant, it appears that the primary grievance of the Appellant is that the Commission, in the impugned order, has over-looked the impact of the cyclone and heavy rain on the development of the power project as contended by the Appellant in its pleadings. It is argued that neither is

there discussion on this aspect in the entire impugned order nor have any findings been returned by the Commission on the same.

21. We note that the Appellant had specifically pleaded in paragraph No. 23 of the petition filed before the Commission that its project was severely affected by unforeseen natural disaster i.e. cyclone that hit the cost of Tamil Nadu during the month of November, 2018. In paragraph No. 29 of the petition, the Appellant had stated that it wrote two letters to the Respondents seeking extension of COD of the power project on the ground of natural disaster and low bank credit rating of TANGEDCO. These paragraphs of this petition are extracted hereinbelow :- "23. The Petitioner submits that vide letter dated 18.12.2018, the Petitioner intimated to the 2nd Respondent that due to the unforeseen natural disaster that hit the coast Of Tamil Nadu during November, 2018, the Petitioner's project was severely affected and the Petitioner was set back in project development by four months. In light of the same, the Petitioner sought COD extension by 4 months, i.e. from 21.03.2019 to 21.07.2019. TO this letter, the 2nd Respondent TANGEDCO replied stating that the Petitioner had time

till 21-01.2020 to commission its power plant, as per the PPA dated 22.03.2018, during Which time the TANGEDCO will be entitled to invoke the bank guarantee for every day's delay.

29. The petitioner wrote two letters to the Respondent Seeking extension COD on the ground of natural disaster and low bank credit rating of TANGEDCO by the Petitioner dated 18.12.2018 and 22.10.2019. However, the Petitioner has received response from the Respondent dated 07.01.2019 and 05.12.2019, in which, the Respondent denied the extension of COD stating not feasible."

22. The 2nd Respondent – TANGEDCO had in paragraph No. 29 of its reply to the petition referred to and responded to these assertions of the Appellant. The said paragraph of the reply of TANGEDCO filed before the Commission is extracted hereinbelow :- "29. It is respectfully submitted that the petitioner in para 23 of its petition has stated that they have been prevented from developing and commissioning the solar power plant at Tuticorin district because of natural disaster that hit the

coast of Tamil Nadu in November 2018. Further 5 developers have commissioned solar power plants of combined capacity of 500 MW within scheduled date of commissioning at Tuticorin district under this scheme and they have not claimed any time extension due to the reasons stated above by the petitioner company. Hence the reason stated by the petitioner is not acceptable and justifiable and such a reason is stated to cover up his commissions and omissions in pursuing the contract conditions."

23. In paragraph No. 7 of the rejoinder filed by the Appellant, it reiterated its assertions with regards to the complete inundation of the project site due to heavy rains that had hit the coast of Tuticorim in November, 2018. The said paragraph of the rejoinder is extracted hereinbelow:- "7. Further, the Respondent has failed to consider that in November 2018, when heavy rains hit the coast of Tuticorin, the Petitioner's project site was completely inundated owing to which the Petitioner's personnel were unable to access the project site. The Respondent has

not taken cognizance of the fact that the Petitioner's project site consists of black cotton soil which is more susceptible to rain water stagnation, consequently, due to the stagnation, the Petitioner was unable to carry out any work. The contention of the Respondent that the other developers have not cited the heavy rains to seek extension of time is misplaced in as much as the Respondent has failed to take cognizance of the nature and location of the project site, which are facts peculiar and unique to the Petitioner's project. Pertinently, in response to the Petitioner's letter dated 18.12.2018, seeking an extension of time for delay owing to the above mentioned unforeseen rain and cyclone, the Respondent has categorically stated in its letter dated 7.01.2019 that the Petitioner had time until 21.01.2020 to commission the power plant. Further, the 2nd Respondent had also reiterated that the Petitioner had time till 21.01.2020, to commission the project, in its letter dated 05.12.2020. That being so, the Respondent cannot at this juncture

retract its stand and claim that the PPA had terminated on 21.08.2019."

24. In paragraph No. 3.10 of the impugned order, the Commission has taken note of these averments of the Appellant contained in the petition. The said paragraph of the impugned order is reproduced hereinbelow:- “3.10. Vide letter dated 18.12.2018, the Petitioner intimated to the 2nd Respondent that due to the unforeseen natural disaster that hit the coast of Tamil Nadu during December, 2018, the Petitioner's project was severely affected and the Petitioner suffered set back in project development by four months and sought COD extension by 4 months, i.e. from 21.03.2019 to 21.7.2019. To the same, the 2nd Respondent TANGEDCO replied stating that the Petitioner had time till 21.01.2020 to Commission its power plant, as per the PPA dated 22.03.2018, during which time the TANGEDCO would be entitled to invoke the bank guarantee for every day's delay.”

25. The response of the TANGEDCO to these averments of the Appellant have been noted in paragraph No. 4.26 of the impugned order which is reproduced hereinbelow:-

“4.26. The petitioner in para 23 of its petition has stated that it has been prevented from developing and commissioning the solar power plant at Tuticorin district because of natural disaster that hit the coast of Tamil Nadu in December 2018. Further 5 developers have commissioned solar power plants of combined capacity of 500 MW within scheduled date of commissioning at Tuticorin district under this scheme and they have not claimed any time extension due to the reasons stated above by petitioner company. Hence the reason stated by the petitioner is not acceptable and justifiable and such a reason is stated to cover up its commissions and omissions in pursuing the contract conditions.”

26. We have minutely perused the entire impugned order of the Commission. At no place in the order has the Commission discussed the impact of cyclone and heavy rains on the development of the power project of the Appellant. As such no findings have been returned by the Commission on this aspect in the order. In fact, we may, record that the findings of the Commission contained in paragraph No. 6 of the impugned order begin with paragraph No. 6.1, contents of which indicate that the

Commission has proceeded to discuss and examine the assertions of the Appellant only with regards to the imposition of safeguard duty by the Ministry of Finance, Government of India. The said paragraph of the impugned order is extracted hereinbelow :- “6.1. The instant petition is being filed seeking an extension of the date of Commissioning (COD) by 18 months from 21-03-2019 to 21-09-2020 in respect of the Petitioner's 50 MW power plant in respect of which the Petitioner entered into a power purchase agreement (PPA) dated 22.03.2018 with the 1st Respondent herein due to a substantial change in law in respect of levy of Safeguard Duty (SGD) by the Ministry of Finance, Government of India and also to direct the 1st and 2nd respondent to repay a sum of Rs.5,10,00,000/- collected under Bank Guarantee dated 21-03-2018 in order that the petitioner can reinstate such bank guarantee and keep it alive in terms of the PPA dated 22-03-2018.”

27. We are unable to understand as to how the Commission chose not to discuss the impact of the cyclone and the consequently heavy rains upon the progress of the power project of the Appellant despite their

being ample pleadings before it in this regard. Therefore, the impugned order is not only erroneous but also atrocious as it fails to dwell upon and address one of the primary grievance with which the Appellant has approached the Commission.

28. The Commission had even framed four issues for its consideration, one of which related to the scope of Force Majeure and is extracted hereinbelow:- “Whether there has been a substantial change in law which falls within the scope of Force Majeure as contemplated under clause 16 of the PPA?”

29. In the discussion under the said issue, the Commission has referred to and discussed only the impact of the levy of the safeguard duty by the Central Government and has held that such levy does not fall within the Force Majeure clause of the PPA. There is no reference to the cyclone and the consequential heavy rains in the entire discussion under this issue which also had been projected by the Appellant as Force Majeure event affecting the progress of the power project.

30. Once, a statement of facts is made in the petition by the petitioner upon which the relief claimed in the petition is founded, the same having been denied in the reply of the respondent and re-affirmed by the

petitioner in the rejoinder, the Commission was bound to take note of the same, discuss the same and return its findings on the same in the final order by which the petition is disposed of. In the instant case, the Commission has completely over-looked issue of cyclone and consequential rainfall as agitated by the Appellant as a ground for claiming extension of SCOD of the power project. Such non- consideration of one of the material issue in the impugned order is merely reflects failure on the part of the Commission to properly adjudicate the disputes between the parties, which has rendered the impugned order unsustainable and liable to set aside.

31. The fact that Commission has passed the impugned order in a cavalier fashion without application of mind to the contractual provisions, is evident from bare reading of paragraphs 6.17.11 and 6.17.12 of the order in which the Commission has extracted and discussed clause 14 of PPA of some other project developers and not of the PPA executed between the Appellant and TANGEDCO in this case. In fact, concluding paragraph No. 6.17.13 of the impugned order also refers to the timelines of some other PPA and not the timelines specified in the PPA executed in this case being a party. This factual mis-match also renders the impugned order unsustainable and liable to set aside.

32. We refrain from returning any findings on the issue of entitlement of TANGEDCO to encash the Bank Guarantee submitted by the Appellant and the liability of the Appellant to pay liquidated damages to TANGEDCO, as directed by the Commission in the impugned order, as any decision of these two issues would depend upon the findings to be returned by the Commission with regards to the impact of Force Majeure event i.e. cyclone along with consequential heavy rains upon the construction of the power project of the Appellant.

33. Having regard to above discussion, we are unable to sustain the impugned order of the Commission and the same is hereby set aside. The case is remanded back to the Commission for fresh consideration with regards to the impact of cyclone and the consequential heavy rains that are stated to have hit the coast of Tamil Nadu in November, 2018, upon the progress of the power project by the Appellant as a Force Majeure event as contemplated under clause 16 of the PPA executed between the parties as also upon the consequential issues related to entitlement of TANGEDCO for encashing the Bank Guarantees submitted by the Appellant and liability of the Appellant to pay liquidated damages to TANGEDCO. The Commission shall render its fresh decision after affording reasonable opportunity of hearing to all the parties and

while keeping in mind the observations of this Tribunal in the judgement dated 29th July, 2026 in Appeal No. 151 of 2021 which also had arisen in almost similar factual context and identical order passed by the Commission. Needless to say that the Commission shall endure to pass fresh order within three months from the date of receipt of this judgement. Pronounced in the open court on this 31st day of July, 2026.

(Virender Bhat)

(Seema Gupta)

Judicial Member

Officiating Chairperson

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REPORTABLE / NON REPORTABLE

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