# M. P. POWER MANAGEMENT COMPANY LIMITED, JABALPUR v. M/S. SKY POWER SOUTHEAST SOLAR INDIA PRIVATE LIMITED & OTHERS

- **Citation:** [2022] 5 S.C.R. 1
- **Court:** Supreme Court of India
- **Decided:** 2022-11-16
- **Case number:** Civil Appeal Nos. 85158516 of 2022
- **Bench:** K. M. Jospeh, Hrishikesh Roy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-p-power-management-company-limited-jabalpur-v-m-s-sky-power-southeast-solar-36403
- **Pages:** 103

## Headnote

Electricity Laws - Electricity Act, 2003 - ss.63 and 62 -
Contract - Non-statutory contract - Power Purchase Agreement
(PPA) entered into by the appellant and the first respondent, if a
statutory contract - Held: The PPA was not made either in purported
compliance with the statutory dictate, either in the form of parent
enactment or a subordinate legislation - The terms and conditions
of the PPA were not transplanted into the PPA from any statutory
provision - That tariff was arrived at in accordance with the
transparent process of bidding, which was in tune with the guidelines
u/s.63, may not be sufficient to make the PPA a Statutory Contract -
A contract containing prescribed terms and conditions being
mandatory under the Statute, results in the contract becoming a
Statutory Contract - If this test is applied, one fails to see how
reference to the bidding guidelines, under which the bids were made
and finally the PPA was entered into, can be treated as tantamounting
to saying that the PPA contains prescribed statutory terms and
conditions as an indispensable part of a Statute - The expression
'terms and conditions', which are statutory in nature, must be
understood as those statutory terms and conditions, which provide
for rights and obligations of the contracting parties - Such reference
is conspicuous by its absence in the PPA - It may not be appropriate
to describe the PPA as a Statutory Contract.
Contract - Administrative action - Judicial Review - Scope
of judicial review of action by the State in a matter arising from a
non-statutory contract - Held: The mere fact that relief is sought
under a contract which is not statutory, will not entitle the
respondent-State in a case by itself to ward-off scrutiny of its action
or inaction under the contract if the complaining party is able to
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establish that the action/inaction is per se arbitrary - Even if it is a
non-statutory contract, there is no absolute bar in dealing with a
cause of action based on acts or omission by the State or its
instrumentalities even during the course of the working of a contract.
Administrative Law - Arbitrariness in State action - When an
act is to be treated as arbitrary - Held: The court must carefully
attend to the facts and the circumstances of the case - It should
find out whether the impugned decision is based on any principle -
If not, it may unerringly point to arbitrariness - If there is absence
of good faith and the action is actuated with an oblique motive, it
could be characterised as being arbitrary - A total non-application
of mind without due regard to the rights of the parties and public
interest may be a clear indicator of arbitrary action - A wholly
unreasonable decision which is little different from a perverse
decision under the Wednesbury doctrine would qualify as an
arbitrary decision under Art.14 - Ordinarily visiting a party with
the consequences of its breach under a contract may not be an
arbitrary decision - Constitution of India - Art. 14.
Dismissing the appeals, the Court
HELD:1. The writ jurisdiction is a public law remedy. A
matter, which lies entirely within a private realm of affairs of public
body, may not lend itself for being dealt with under the writ
jurisdiction of the Court. [Para 54][50-G]
2. The principle laid down in Bareilly Development Authority
that in the case of a non-statutory contract the rights are governed
only by the terms of the contract and the decisions, which are
purported to be followed, including Radhakrishna Agarwal, may
not continue to hold good, in the light of what has been laid down
in ABL and as followed in the recent judgment in Sudhir Kumar
Singh. [Para 54][50-G; 51-A]
3. The mere fact that relief is sought under a contract which
is not statutory, will not entitle the respondent-State in a case by
itself to ward-off scrutiny of its action or inaction under the
contract, if the complaining party is able to establish that the
ac

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[2022] 5 S.C.R. 1
1
M. P. POWER MANAGEMENT COMPANY LIMITED,
JABALPUR
v.
M/S. SKY POWER SOUTHEAST SOLAR INDIA PRIVATE
LIMITED & OTHERS
(C.A. No. 8515-8516 of 2022)
NOVEMBER 16, 2022
[K. M. JOSPEH AND HRISHIKESH ROY, JJ.]
Electricity Laws - Electricity Act, 2003 - ss.63 and 62 -
Contract - Non-statutory contract - Power Purchase Agreement
(PPA) entered into by the appellant and the first respondent, if a
statutory contract - Held: The PPA was not made either in purported
compliance with the statutory dictate, either in the form of parent
enactment or a subordinate legislation - The terms and conditions
of the PPA were not transplanted into the PPA from any statutory
provision - That tariff was arrived at in accordance with the
transparent process of bidding, which was in tune with the guidelines
u/s.63, may not be sufficient to make the PPA a Statutory Contract -
A contract containing prescribed terms and conditions being
mandatory under the Statute, results in the contract becoming a
Statutory Contract - If this test is applied, one fails to see how
reference to the bidding guidelines, under which the bids were made
and finally the PPA was entered into, can be treated as tantamounting
to saying that the PPA contains prescribed statutory terms and
conditions as an indispensable part of a Statute - The expression
'terms and conditions', which are statutory in nature, must be
understood as those statutory terms and conditions, which provide
for rights and obligations of the contracting parties - Such reference
is conspicuous by its absence in the PPA - It may not be appropriate
to describe the PPA as a Statutory Contract.
Contract - Administrative action - Judicial Review - Scope
of judicial review of action by the State in a matter arising from a
non-statutory contract - Held: The mere fact that relief is sought
under a contract which is not statutory, will not entitle the
respondent-State in a case by itself to ward-off scrutiny of its action
or inaction under the contract if the complaining party is able to
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[2022] 5 S.C.R.
establish that the action/inaction is per se arbitrary - Even if it is a
non-statutory contract, there is no absolute bar in dealing with a
cause of action based on acts or omission by the State or its
instrumentalities even during the course of the working of a contract.
Administrative Law - Arbitrariness in State action - When an
act is to be treated as arbitrary - Held: The court must carefully
attend to the facts and the circumstances of the case - It should
find out whether the impugned decision is based on any principle -
If not, it may unerringly point to arbitrariness - If there is absence
of good faith and the action is actuated with an oblique motive, it
could be characterised as being arbitrary - A total non-application
of mind without due regard to the rights of the parties and public
interest may be a clear indicator of arbitrary action - A wholly
unreasonable decision which is little different from a perverse
decision under the Wednesbury doctrine would qualify as an
arbitrary decision under Art.14 - Ordinarily visiting a party with
the consequences of its breach under a contract may not be an
arbitrary decision - Constitution of India - Art. 14.
Dismissing the appeals, the Court
HELD:1. The writ jurisdiction is a public law remedy. A
matter, which lies entirely within a private realm of affairs of public
body, may not lend itself for being dealt with under the writ
jurisdiction of the Court. [Para 54][50-G]
2. The principle laid down in Bareilly Development Authority
that in the case of a non-statutory contract the rights are governed
only by the terms of the contract and the decisions, which are
purported to be followed, including Radhakrishna Agarwal, may
not continue to hold good, in the light of what has been laid down
in ABL and as followed in the recent judgment in Sudhir Kumar
Singh. [Para 54][50-G; 51-A]
3. The mere fact that relief is sought under a contract which
is not statutory, will not entitle the respondent-State in a case by
itself to ward-off scrutiny of its action or inaction under the
contract, if the complaining party is able to establish that the
action/ inaction is, per se, arbitrary. [Para 54][51-B]
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4. An action will lie, undoubtedly, when the State purports
to award any largesse and, undoubtedly, this relates to the stage
prior to the contract being entered into. This scrutiny, no doubt,
would be undertaken within the nature of the judicial review, which
has been declared in the decision in Tata Cellular vs. Union of
India. [Para 54][51-C]
5. After the contract is entered into, there can be a variety
of circumstances, which may provide a cause of action to a party
to the contract with the State, to seek relief by filing a Writ Petition.
[Para 54][51-D]
6. It may include the relief of seeking payment of amounts
due to the aggrieved party from the State. The State can, indeed,
be called upon to honour its obligations of making payment, unless
it be that there is a serious and genuine dispute raised relating
to the liability of the State to make the payment. Such dispute,
ordinarily, would include the contention that the aggrieved party
has not fulfilled its obligations and the Court finds that such a
contention by the State is not a mere ruse or a pretence. [Para
54][51-E-F]
7. The existence of an alternate remedy, is, undoubtedly, a
matter to be borne in mind in declining relief in a Writ Petition in
a contractual matter. Again, the question as to whether the Writ
Petitioner must be told off the gates, would depend upon the
nature of the claim and relief sought by the petitioner, the
questions, which would have to be decided, and, most importantly,
whether there are disputed questions of fact, resolution of which
is necessary, as an indispensable prelude to the grant of the relief
sought. While there is no prohibition, in the Writ Court even
deciding disputed questions of fact, particularly when the dispute
surrounds demystifying of documents only, the Court may relegate
the party to the remedy by way of a civil suit. [Para 54][51-G; 52A-B]
8. The existence of a provision for arbitration, which is a
forum intended to quicken the pace of dispute resolution, is
viewed as a near bar to the entertainment of a Writ Petition. [Para
54][52-C]
M. P. POWER MANAGEMENT COMPANY LTD., JABALPUR v. M/S. SKY
POWER SOUTHEAST SOLAR INDIA PVT. LTD.
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9. The need to deal with disputed questions of fact, cannot
be made a smokescreen to guillotine a genuine claim raised in a
Writ Petition, when actually the resolution of a disputed question
of fact is unnecessary to grant relief to a writ applicant. [Para
54][52-D]
10. The reach of Article 14 enables a Writ Court to deal
with arbitrary State action even after a contract is entered into by
the State. A wide variety of circumstances can generate causes of
action for invoking Article 14. The Court's approach in dealing
with the same, would be guided by, undoubtedly, the overwhelming
need to obviate arbitrary State action, in cases where the Writ
remedy provides an effective and fair means of preventing
miscarriage of justice arising from palpably unreasonable action
by the State. [Para 54][52-E-F]
11. Termination of contract can again arise in a wide variety
of situations. If for instance, a contract is terminated, by a person,
who is demonstrated, without any need for any argument, to be
the person, who is completely unauthorised to cancel the contract,
there may not be any necessity to drive the party to the
unnecessary ordeal of a prolix and avoidable round of litigation.
The intervention by the High Court, in such a case, where there
is no dispute to be resolved, would also be conducive in public
interest, apart from ensuring the Fundamental Right of the
petitioner under Article 14 of the Constitution of India. When it
comes to a challenge to the termination of a contract by the State,
which is a non-statutory body, which is acting in purported exercise
of the powers/rights under such a contract, it would be over
simplifying a complex issue to lay down any inflexible Rule in
favour of the Court turning away the petitioner to alternate Fora.
Ordinarily, the cases of termination of contract by the State, acting
within its contractual domain, may not lend itself for appropriate
redress by the Writ Court. This is, undoubtedly, so if the Court
is duty-bound to arrive at findings, which involve untying knots,
which are presented by disputed questions of facts. Undoubtedly,
in view of ABL Limited, if resolving the dispute, in a case of
repudiation of a contract, involves only appreciating the true scope
of documentary material in the light of pleadings, the Court may
still grant relief to an applicant. The Court must enter a caveat.
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The Courts are today reeling under the weight of a docket
explosion, which is truly alarming. If a case involves a large body
of documents and the Court is called upon to enter upon findings
of facts and involves merely the construction of the document, it
may not be an unsound discretion to relegate the party to the
alternate remedy. This is not to deprive the Court of its
constitutional power as laid down in ABL. It all depends upon the
facts of each case as to whether, having regard to the scope of
the dispute to be resolved, whether the Court will still entertain
the petition. [Para 54][52-G; 53-A-F]
12. In a case the State is a party to the contract and a breach
of a contract is alleged against the State, a civil action in the
appropriate Forum is, undoubtedly, maintainable. But this is not
the end of the matter. Having regard to the position of the State
and its duty to act fairly and to eschew arbitrariness in all its
actions, resort to the constitutional remedy on the cause of action,
that the action is arbitrary, is permissible. However, every case
involving breach of contract by the State, cannot be dressed up
and disguised as a case of arbitrary State action. While the concept
of an arbitrary action or inaction cannot be cribbed or confined to
any immutable mantra, and must be laid bare, with reference to
the facts of each case, it cannot be a mere allegation of breach of
contract that would suffice. What must be involved in the case
must be action/inaction, which must be palpably unreasonable or
absolutely irrational and bereft of any principle. An action, which
is completely malafide, can hardly be described as a fair action
and may, depending on the facts, amount to arbitrary action. The
question must be posed and answered by the Court and discretion
is available to the Court to grant relief in appropriate cases. [Para
54][53-G-H; 54-A-C]
13. A lodestar, which may illumine the path of the Court,
would be the dimension of public interest subserved by the Court
interfering in the matter, rather than relegating the matter to the
alternate Forum. [Para 54][54-D]
14. Another relevant criteria is, if the Court has entertained
the matter, then, while it is not tabooed that the Court should not
relegate the party at a later stage, ordinarily, it would be a germane
consideration, which may persuade the Court to complete what
M. P. POWER MANAGEMENT COMPANY LTD., JABALPUR v. M/S. SKY
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it had started, provided it is otherwise a sound exercise of
jurisdiction to decide the matter on merits in the Writ Petition
itself. [Para 54][54-E-F]
15. Violation of natural justice has been recognised as a
ground signifying the presence of a public law element and can
found a cause of action premised on breach of Article 14. [Para
54][54-F-G]
ABL International Ltd. v. Export Credit Guarantee
Corpn. of India Ltd. (2004) 3 SCC 553; India Thermal
Power Ltd. v. State of M.P. and others (2000) 3 SCC
379 : [2000] 1 SCR 925; Ramana Dayaram Shetty v.
International Airport Authority of India (1979) 3 SCC
489 : [1979] 3 SCR 1014; Shrilekha Vidyarthi (Kumari)
v. State of U.P. (1991) 1 SCC 212 : [1990] 1 Suppl.
SCR 625; East Coast Railway and Another v. Mahadev
Appa Roa and Others (2010) 7 SCC 678 : [2010]
7 SCR 908; State of U.P. v. Sudhir Kumar Singh and
Others 2020 SCC Online 847 and Tata Cellular v. Union
of India (1994) 6 SCC 651 : [1994] 2 Suppl. SCR 122
- relied on.
Radhakrishna Agrawal and Others v. State of Bihar and
Others (1977) 3 SCC 457 : [1977] 3 SCR 249; Bareilly
Development Authority and Another v. Ajai Pal Singh
and Others (1989) 2 SCC 116 : [1989] 1 SCR 743;
Kerala State Electricity Board and Another v. Kurien E.
Kalathil and Others (2000) 6 SCC 293 : [2000] 1 Suppl.
SCR 581; Jaypee Kensington Boulevard Apartments
Welfare Association and others v. NBCC (India) Ltd.
and Others (2022) 1 SCC 401; Erusian Equipment and
Chemicals Limited v. State of West Bengal (1975) 1 SCC
70 : [1975] 2 SCR 674; Banchhanidhi Rath v. The State
of Orissa and Ors. (1972) 4 SCC 781; Har Shankar
and Ors. v. The Dy. Excise and Taxation Commr. and
Ors. (1975) 1 SCC 737 : [1975] 3 SCR 254; Mahabir
Auto Stores and Others v. Indian Oil Corporation and
Others (1990) 3 SCC 752 : [1990] 1 SCR 818; State of
U.P and others v. Bridge and Roof Company (India)
Ltd. (1996) 6 SCC 22 : [1996] 4 Suppl. SCR
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762; Verigamto Naveen v. Govt. of A.P. and others
(2001) 8 SCC 344 : [2001] 3 Suppl. SCR 112; Binny
Ltd. and Another v. V. Sadasivan and Others (2005) 6
SCC 657 : [2005] 2 Suppl. SCR 421; G. Bassi Reddy
v. International Crops Research Institute and Another
(2003) 4 SCC 225 : [2003] 1 SCR 1174; State of Kerala
and Others v. K. Prasad and Another (2007) 7 SCC
140 : [2007] 8 SCR 115; Joshi Technologies
International Inc. v. Union of India and Others (2015)
7 SCC 728 : [2015] 6 SCR 1042; State of Kerala v. M.
K. Jose (2015) 9 SCC 433 : [2015] 9 SCR 17; State of
U.P. and Others v. Bridge & Roof Co. (1996) 6 SCC 22
: [1996] 4 Suppl. SCR 762; All India Power Engineer
Federation and Others v. Sasan Power Limited and
Others (2017) 1 SCC 487 : [2016] 9 SCR 901; Raunaq
International Ltd. v. I.V.R. Construction Ltd. and Others,
(1999) 1 SCC 492 : [1998] 3 Suppl. SCR 421; Michigan
Rubber (India) Limited v. State of Karnataka and Others
(2012) 8 SCC 216 : [2012] 8 SCR 128; Mohinder Singh
Gill and another v. Chief Election Commissioner, New
Delhi and Others (1978) 1 SCC 405 : [1978] 2 SCR
272 - referred to.
Case Law Reference
[2000] 1 Suppl. SCR 581
referred to
Para 10
[1977] 3 SCR 249
referred to
Para 11
(2004) 3 SCC 553
relied on
Para 11
[2000] 1 SCR 925
relied on
Para 18
(2022) 1 SCC 401
referred to
Para 21
[1975] 2 SCR 674
referred to
Para 27
(1972) 4 SCC 781
referred to
Para 27
[1975] 3 SCR 254
referred to
Para 27
[1979] 3 SCR 1014
relied on
Para 29
[1989] 1 SCR 743
referred to
Para 30
[1990] 1 SCR 818
referred to
Para 31
M. P. POWER MANAGEMENT COMPANY LTD., JABALPUR v. M/S. SKY
POWER SOUTHEAST SOLAR INDIA PVT. LTD.
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[2022] 5 S.C.R.
[1990] 1 Suppl. SCR 625
relied on
Para 32
[1996] 4 Suppl. SCR 762
referred to
Para 35
[2001] 3 Suppl. SCR 112
referred to
Para 36
[2005] 2 Suppl. SCR 421
referred to
Para 37
[2003] 1 SCR 1174
referred to
Para 39
[2007] 8 SCR 115
referred to
Para 43
[2010] 7 SCR 908
relied on
Para 47
[2015] 6 SCR 1042
referred to
Para 49
[2015] 9 SCR 17
referred to
Para 50
[1994] 2 Suppl. SCR 122
relied on
Para 54(iv)
[1996] 4 Suppl. SCR 762
referred to
Para 54(viii)
[1990] 1 Suppl. SCR 625
referred to
Para 54(xii)
[2016] 9 SCR 901
referred to
Para 80
[1998] 3 Suppl. SCR 421
referred to
Para 85
[2012] 8 SCR 128
referred to
Para 86
[1978] 2 SCR 272
referred to
Para 113
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 85158516 of 2022.
From the Judgment and Order dated 27.02.2020 of the High Court
of Madhya Pradesh, Principal Seat at Jabalpur in W.P. No. 4205 of 2019
and final Judgment and Order dated 28.12.2020 in Review Petition No.
682 of 2020.
K. M. Nataraj, ASG, Anish Kumar Gupta, Archana Preeti Gupta,
Puneet Sheoran, Venugopal Abhay, Ms. Deepshikha Bharati, Vaibhav
Verma, Advs. for the Appellant.
Dr. Abhishek M. Singhvi, Naman Nagrath, Sr. Advs., Manpreet
Lamba, Ramanuj Kumar, Miss. Priyal Modi for M/s. Cyril Amarchand
Mangaldas, Aashish Anand Barnard, Paramhans Sahani, Sunil Kumar
Pandey, R. K. Srivastava, Rajesh Kumar, Advs. for the Respondents.
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The Judgment of the Court was delivered by
K. M. JOSEPH, J.
1. Leave granted.
2. The appellant impugns the Judgment of the High Court dated
27.02.2020 in Writ Petition No. 420 of 2019. It further challenges the
Order dated 28.12.2020 in Review Petition No. 682 of 2020. By the said
Judgment in the Writ Petition, the High Court allowed the Writ Petition
filed by the first respondent and quashed the Order dated 07.07.2018,
which was passed by the appellant, terminating the Power Purchase
Agreement (hereinafter referred to as 'the PPA', for short), which was
entered into by the appellant and the first respondent. The review filed
by the appellant was dismissed. Hence the appeals.
THE FACTS
3. The appellant, which is "a wholly owned company of the
Government of Madhya Pradesh" (as described by the appellant in the
Special Leave Petition), is responsible for the bulk purchase of electricity
in the State of Madhya Pradesh for onward sale/supply to the distribution
utilities (DISCOMS). The appellant issued a request for proposal (RFP)
dated 06.05.2015 for long-term procurement of 300 MW of solar energy
through tariff-based competitive bidding. The bid of M/s Sky Power
Southeast Asia Holding Limited was accepted. It was declared the
successful bidder for three units of 50 MW each at different tariff rates.
The bidder subsequently incorporated the first respondent, viz., M/s Sky
Power Southeast Solar India Private Limited as a special purpose
company. This was for developing one project of 50 MW. The rate,
which is applicable in respect of the first respondent, was Rs.5.109 per
unit. In respect of the other two bids, the bidder incorporated other
companies, viz., M/s Sky Power Solar India Private Limited and M/s
Sky Power Southeast Asia One Private Limited. The rates applicable in
respect of said companies for the other two projects consisting of 50
MW each was Rs.5.298 per unit and Rs.5.051 per unit, respectively.
The PPA was entered into on 18.09.2015. The agreement, inter alia,
provided for pre-commissioning activities. They are described as
satisfaction of conditions subsequent by the seller. The first respondent
is the seller under the PPA.
4. The Agreement contemplated completion of the conditions
subsequent, within a period of 210 days. In other words, the Agreement,
M. P. POWER MANAGEMENT COMPANY LTD., JABALPUR v. M/S. SKY
POWER SOUTHEAST SOLAR INDIA PVT. LTD.
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admittedly, provided that the first respondent was to achieve fulfilment
of conditions subsequent by 15.04.2016. The Agreement further
contemplates an extension of the period of fulfilment of the condition
subsequent on payment of penalty for a further period of nine months.
Thus, calculating 210 days and an additional nine months from 18.09.2015,
which is the date of the PPA, the period would come to an end on
15.01.2017. A communication was addressed dated 12.01.2017 by the
first respondent. The first respondent purported to refer to Article 2.1 of
the PPA, which, inter alia, reads as follows:
"Article 2.1 Seller agrees and undertaken to duly perform and
complete all of the following activities seller's own cost and risk
within 210 days from the effective Date unless such completion
is affected by any force Majeure event, or if any of the Effective
is specifically waived in writing by MPPMCL:
a) The Seller shall obtain all Consents, Clearance and Permits
required for supply of Power to MPPMCL as per the terms of
this Agreement;"
5. The first respondent purported to present certain documents
and contend that there was compliance of its obligations under the PPA.
This led to communication dated 22.02.2017 addressed by the appellant
to the first respondent. It referred to the status of the documents, which
the appellant noted. Furthermore, appellant sought certain documents. It
is, inter alia, pointed out by the appellant that the first respondent had
no documents in regard to 34.12 hectare of land and an unregistered
lease deed for only 12 months was submitted, which could not be
considered as fulfilment of the condition subsequent. Thereafter, it was
stated that the PPA is liable to be terminated in terms of Article 2.5.1 of
the PPA. Explanation/justification if any was called for from the first
respondent. Acting on the request of the first respondent, the appellant
granted time for response of the first respondent till 10.03.2017. The
response, which was given on 10.03.2017, reads as follows:
"Firstly, we are thrilled to update you that the project is under
advanced construction and all equipment order for the project
have been placed and construction happening on site we expect
that the project will be top quality using the best equipment in the
market and constructed by a top-tier EPC, for the benefit of both
Sky Power and the state of MP.
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1. Satisfaction of Condition subsequent regarding Construction
Financing
MPPMCL Comment: "Loan sanction letter of Mis L&T Finance
vide letter No. S07201A03/16-17 DATED 29.08.2016 Copy of
facility agreement and affecting compliance documents as stated
in above letters are required to be submitted"
SKY POWER comment: reference is made to paragraph 2.1.1.(b)
of the PPA, reproduced below:
Sd/-
D.G.M. (Commerical-3)
R.0. MPMCL, Bhopal"
6. Thereafter, the first respondent sent communication dated
14.03.2017. It reads as follows:
"SKY POWER GLOBAL
March 14, 2017
To,
The Managing Director
MP Power Management Company Limited
Bittan Market,
Bhopal-462016
Attention:Chief General Manager Commercial, MPPMC, Jabalpur.
Ref: Submission of Documents to MP Power Management
Company limited ("MPPMCL") for fulfilment of Conditions
subsequent by SkyPower southeast solar India private Limited
("Sky Power")
Reference: 1. Sky Poer Letter dated 10 March 2017,
2. Sky Power Letter SKP2/MP/SOLAR MPPMCL/2015-16/06
dated 12 Jan 2017
3. Agreement (PPA) dated September 18, 2015 between
MPPMCL and Skypower
Dear Sir,
Further to our office letter dated 10 March 2017 & skyP2/MP/
SOLAR/MPPMCL/2015-16/06 dated 12 Jan 2017 we hereby
M. P. POWER MANAGEMENT COMPANY LTD., JABALPUR v. M/S. SKY
POWER SOUTHEAST SOLAR INDIA PVT. LTD. [K. M. JOSEPH, J.]
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submit that we have completed the entire acquisition for land 29,
85 Acres including balance 87.S Acres of land parcels.
The relevant land registration documents have been enclosed for
your perusal
We hereby submit that we have duly completed land registration
for 249,85 Acer for the project
Thanking you in anticipation.
MIS SKYPOWER SOUTHEAST SOLAR INDIA PRIVATE
LIMITED
Sd/- Shivani Jhariya
(Authorized Signatory)
Sd/-
D.G.M. (Commerical-3)
R.O. MPMCL, Bhopal"
7. After a gap of nearly five months, the next date, which is invoked
by the appellant, is 09.08.2017. It is the case of the appellant that as the
first respondent had failed to comply with the conditions subsequent, by
misrepresentation and manipulation, it purported to obtain approval from
the Chief Electrical Inspector General (CEIG) under Regulation 32 of
the Central Electricity Authority (Measures relating to safety and
electricity supply) Regulation, 2010 read with Section 162 of the Act.
According to the appellant, the Report of the CEIG came to the
knowledge of the appellant on 20.08.2017. Prior to the said date, the
appellant purported to terminate the PPA in terms of Article 2.5.1(d) of
the PPA, considering it to be mandatory by communication dated
11.08.2017. In short, according to the appellant, as the maximum period,
within which, the conditions subsequent, had to be fulfilled, had run out
on 15.01.2017, under the PPA, the appellant had no other option but to
terminate the Agreement. This led to the first Writ Petition filed by the
first respondent. The said Writ Petition, viz., Writ Petition No. 12880 of
2017, came to be allowed by the High Court by Judgment dated
20.06.2018. The relevant portion of the Judgment reads as follows:
"2. The contract has been terminated on account of 54 days delay
in achieving the first milestone i.e., procurement of land, financial
closure and necessary permissions from the competent authority
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within 210 days from the date of execution of agreement for
completing the first part of the project. The only reason to terminate
the agreement is that the petitioner has failed to achieve first
milestone within 210 days though the condition of - procurement
of land was modified after 210 days on 20.04.2016. The delay in
achieving the first milestone is visited with penalty in terms of
Clause 2.5. of the agreement.
3. Similar communication terminating the contract was set aside
by this Court in Writ Petition No.12432/2017 (Renew Clean Energy
Private Limited vs M.P. Power Management Company Limited
and another) vide order dated 18.08.2017. In the said petition, the
petitioner has admittedly commissioned the power project within
the time prescribed except that there was delay of 16 days in
achieving the first milestone. The said order has been affirmed on
05.04.2018 by the Hon'ble Supreme Court in Civil Appeal No.3600/
2018 (M.P. Power Management Company Limited vs Renew
Clean Energy Private Limited and another).
4. The parties are not ad idem about the stage of commissioning
of the power project in the present petition.
5. Mr. Kaurav sought to justify the termination of the Power
Purchase Agreement (PPA) asserting that the petitioner has not
commissioned the power project within the time fixed in the
agreement, but the lack of commissioning of power project is not
the reason for terminating of the contract. Since, such is not the
reason mentioned in the order terminating the agreement, therefore,
the respondents cannot supplement the reasons for termination of
the contract by virtue of additional assertions in the return and/or
in the arguments raised in view of the Supreme Court decision in
Mohinder Singh Gill v. Chief Election Commissioner (1978) 1 SCC
405.
6. In view of the fact that the similar reason of termination of the
agreement has not been found to be justified in the matter of
Renew Clean Energy Private Limited (supra), therefore, the
impugned communication dated 11.08.2017 is hereby set aside.
However, liberty is granted to the respondents to pass fresh orders
in terms of Power Purchase Agreement dated 18th September,
2015 in accordance with law."
M. P. POWER MANAGEMENT COMPANY LTD., JABALPUR v. M/S. SKY
POWER SOUTHEAST SOLAR INDIA PVT. LTD. [K. M. JOSEPH, J.]
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8. On 07.07.2018, the appellant issued the fresh termination notice.
This came to be challenged by the first respondent by Writ Petition No.
420 of 2019. After exchange of pleadings, by the first impugned judgment
dated 27.02.2020, the High Court set aside the termination order.
Thereafter the appellant in September, 2020 filed review petition which
came to be dismissed by the second impugned order. On 15.04.2021 this
court issued notice and stayed the impugned orders.
9. We have heard Mr. K.M. Natraj, learned Additional Solicitor
General on behalf of the appellant and Dr. A.M. Singhvi, learned Senior
Counsel along with Mr. Naman Nagrath, learned Senior Counsel on
behalf of the first respondent. We also heard Shri V. Giri, learned Senior
Counsel appearing for the fifth respondent (Madhya Pradesh State Load
Despatch Centre).
10. Shri K.M. Natraj, learned Additional Solicitor General submits
that the impugned judgments are clearly unsustainable. He would firstly
point out that the writ petition filed by the first respondent is not
maintainable. The PPA in question is not a statutory contract and therefore
interference with the order terminating the contract was not justifiable.
In this regard he drew support from the judgment of this Court in Kerala
State Electricity Board and Another v. Kurien E. Kalathil and Others1.
He would next contend that the PPA contemplated provisions to resolve
disputes. He further contended that first respondent should have resorted,
if at all, to a civil suit to claim redress. He pointed out that a writ petition
is a public law remedy. The contract in question not being statutory in
nature, there was no public law element so as to justify the approach
under Article 226. He would next contend that there is no basis for the
High Court to have interfered at all. This is a case where broadly the
contract contemplated fulfilment of conditions at two stages. The first
stage related to various conditions that had to be fulfilled by the first
respondent which are described as conditions subsequent in the PPA.
They are also aptly described as the pre-commissioning stage. The PPA
clearly contemplated fulfilment of these conditions on an indisputable
basis on or before 15.01.2017. In arriving at this date, the maximum
period of 9 months contemplated under the PPA as the period which can
be extended on payment of penalty is also included. However, the first
respondent did not fulfil the conditions subsequent except with a further
delay of 56 days. The PPA clearly provides that if the time limit is
1 (2000) 6 SCC 293
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exceeded which in this case was 15.01.2017, the appellant shall terminate
the contract. This is not a question of power or a discretion. This is a
right which inhered with the appellant, a party to a contract. In this
regard he would emphasise that while the State may be burdened with
the obligation to act in a fair manner, it does not take away the rights
available to the State as a party to a contract to exercise the right with it
under the contract. In other words, the appellant as State within the
meaning of Article 12 should not be denied the very right which could be
duly exercised by a private party if it stood in the shoes of the appellant
in similar circumstances. This is all that has been done by the appellant.
Coming to the second stage, namely, commissioning of the project by
the first respondent, our attention was drawn to Article 2.6 of the PPA.
He contended that agreement contemplated commissioning of plant
within 12 months from the date of the financial closure subject to Force
Majeure. He would point out that there were no circumstances for
invoking Force Majeure. The period of 12 months from the date of
financial closure determined the maximum period within which the
commissioning had to take place. He would submit that first respondent
was in breach of even commissioning. Therefore, on that score also,
there is no justification for the High Court to have interfered in the matter.
He would further submit that there is another vital circumstance which
should have dissuaded the High Court from granting relief. The case
threw up disputed questions of facts. On the one hand, it was the case
of the first respondent, that the first respondent had proceeded to do
everything within the time which is a period of two years from
18.09.2015, the date of the PPA, and it was only if commissioning was
not done within the said period that what is described in the agreement
as Seller's default occurs. Here is a case where the first respondent had
not actually on the ground carried out necessary installation. In this regard,
he would contend that while the CEIG has given its approval, the approval
was granted without the first respondent having complied its obligations
under the contract. In this regard essentially two aspects are projected.
It is firstly pointed out that while the first writ petition was pending
consideration, the appellant carried out an inspection on 19.04.2018. A
report ensued on 21.04.2018. It was revealed that the approval which is
granted by the CEIG may not advance the case of the first respondent
as certain lacunae emerged. It was found by the inspecting team of the
appellant that in the blocks 9 and 10 (the project of 50MW consisted of
10 blocks of 5 MW each), 61 inverters were missing. It was further
M. P. POWER MANAGEMENT COMPANY LTD., JABALPUR v. M/S. SKY
POWER SOUTHEAST SOLAR INDIA PVT. LTD. [K. M. JOSEPH, J.]
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revealed that in regard to 258 invertors, there was duplication of numbers.
In other words, without there being the professed numbers of invertors
as required under the contract, the approval of the CEIG was procured.
In fact, this aspect, which when it was discovered by the appellant,
formed the foundation for the review petition but was not favourably
considered by the High Court. A writ petition in the facts of this case
would not lie. He would submit that while a writ petition may be
maintainable when the State is awarding its largesse in the form of award
of contract, once it enters into a contract there would arise no occasion
for the court to do judicial review and strike it down. Action taken by the
state as contracting party when it is within the four walls of the contract
is immune in public law proceedings. That an action may lie for breach
of contract where the aggrieved party can seek damages should have
weighed with the court. He would further contend that there is yet another
dimension which has been overlooked by the High Court. The
overwhelming public interest in the facts of this case did not favour the
writ court interfering in the matter. In this regard he would expatiate by
pointing out that the interference by the High Court will produce the
following results:
The PPA casts an obligation on the appellant to purchase power
at the rate of Rs.5.109 per unit for a period of 25 years. Power is available
in the market at a far cheaper rate. The inevitable result of implementing
the order of the High court would be that the appellant would have to
purchase power at a much higher rate and what is more disturbing and
should have troubled the High Court to decline jurisdiction is the aspect
that the increased rate would have to be passed on to the end consumer.
Put it differently, when the appellant being entitled to terminate the contract
and would be in a position to purchase power at a cheaper rate and
charge the consumers at the lower rate, by the court granting relief to
the first respondent, the appellant is compelled to purchase power at the
higher rate and that too for a long period of 25 years, and what is more,
compelled to pass on the burden to the hapless consumer. Thus, public
interest in fact in the case lay in the court declining to grant relief to the
first respondent. He would further point out that the impugned judgment
does not deal with any of the aspects, be it the factual dimensions or the
legal requirements. The judgment is bereft of discussion of the contentions
raised by the appellant. He would therefore contend that the impugned
judgments should be set aside and appeals allowed.
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11. Per contra, Dr. A.M. Singhvi, learned Senior Counsel for the
first respondent would point out that there is absolutely no basis for
maintaining the appeal in the facts. He would point out that this is a case
where the first respondent turned out to be the lowest bidder in respect
of the project in question and what is more an incredible number of 182
bidders participated. It is trouncing its competitors that the holding
company of the first respondent turned out to be the lowest bidder (here
we must notice that during the course of the arguments the appellant did
propose that first respondent could come up with proposal which
apparently should involve rates lower than the contract rate so that the
public interest concern is adequately addressed whereas the first
respondent pointed out since it has planned for the project on the basis
which made it the lowest bidder, it would not be feasible for it to reduce
the rate any further). Dr. Singhvi pointed out that there is no basis for
discriminating the case of the first respondent and M/s. Renew Energy.
It is pointed out that the High Court in the first round of litigation had
interfered with the termination order following the judgment in Renew
Energy. In the case of Renew Energy, it could achieve fulfilment of the
conditions subsequent with a delay of 16 days which was condoned
finally. In the case of the first respondent, the delay happened to be 56
days. Otherwise, their cases are similar. Renew Energy was allowed to
commission whereas the first respondent was at the receiving end of
discrimination without any basis. He would point out that the first
respondent under the contract had 24 months from 18.09.2015 to
commission the project. Well before the expiry of 24 months, the project
was ready. The respondent was prevented from commissioning. A party
cannot take advantage of its own wrong. He would point out that the
law has not stood still after this Court adopted a hands off approach in
the decision in Radhakrishna Agrawal and others v. State of Bihar
and others2. Imbibing the grand mandate in Article 14 that it behoves
the State to steer clear of unfairness in all its acts, this Court has weaved
a taboo against arbitrary action by the state even after it entered into a
contract. He would point out in this regard the judgment of this Court in
ABL International Ltd. v. Export Credit Guarantee Corpn. of India
Ltd.3 and the decisions following the same approving of the writ court
granting relief in contractual matters also. He would point out that, present
arbitrariness, be it after a contract is entered into, the State has no place
2 (1977) 3 SCC 457
3 (2004) 3 SCC 553
M. P. POWER MANAGEMENT COMPANY LTD., JABALPUR v. M/S. SKY
POWER SOUTHEAST SOLAR INDIA PVT. LTD. [K. M. JOSEPH, J.]
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to hide when action is challenged and its action must pass the scrutiny of
the constitutional court. It must demonstrate that the action was fair.
The action of the State falls far short of the exacting standard of fairness
that the Constitution demands in the case at hand for the following
reasons:
12. Outbidding an unusually large body of competitors, a bid based
on competitive tariff, the first respondent which is a global player in
Renewable Energy (solar power) bids at a rate which was very much
acceptable to the appellant and investment was made by the first
respondent in the region of nearly Rs. 350 crores. There was an initial
hiccup. One of the conditions subsequent was that the first respondent
had to acquire land for the project by way of sale deeds. There were
insuperable obstacles which upon the first respondent pointing them out
to the appellant, the appellant realized the genuine difficulty and amended
the Article. This, in fact, would necessarily mean that the period of 210
days would commence not from the date of the agreement but thereafter
on the basis of the amended Article. The first respondent engaged the
services of a company for the purposes of purchase and installation of
the parts of the project. It had procured, inter alia the invertors which
were to be installed, from abroad. There are irrefutable documents in
the form of invoices, bills of lading, lorry receipts which fortify the first
respondent in its stand that it had installed all the invertors. The project
was ready to take off well within 24 months. The first respondent would
suffer grave avoidable financial loss, besides fall in esteem as a global
player, if the termination dated 07.07.2018 is allowed to stand. Under
the contract, the first respondent was obliged to sell power at an agreed
rate for a period of 25 years.