Supreme Court settles the issue of PPAs being binding.

A Power Purchase Agreement being sacrosanct and binding on the parties has now been finally settled by the Supreme Court by its judgment delivered on 13.04.2023 in the case of Civil Appeal No. 3480-3481 of 2020 (Gujarat Urja Vikas Nigam Limited and Ors. v. Renew Energy Private Limited and Ors.)

The issue whether a Regulatory Commission can re-open or vary the terms of the PPA has led to multiple litigations since 2003. The Regulatory Commission and the Appellate Tribunal for Electricity had, over the years, largely leaned in favour of the power to re-open the PPAs. While previously, the Supreme Court had in some cases held that PPAs are binding and cannot be reopened, a few divergent views were also taken on particular facts of cases. This decision should finally settle the issue, more particularly since it is by a 3-judge bench.

The Supreme Court has also explained the scope of Regulations interfering with contractual rights. With reference to the Constitutional bench decision in PTC India Limited, it has been held that the Trading Margin Regulations then considered was in the context of introducing a Regulation for the first time to deal with trading in energy and was therefore applicable across the board. This however cannot apply to amendments to existing Regulations, wherein the parties had agreed on their commercial relationship based on the then existing Regulations. It has been held that unless the Regulations are made to expressly over-ride existing agreements, the agreements bind the parties.

The Supreme Court has also come down heavily on Regulatory Commissions and the Appellate Tribunal in dealing with allegations of fraud, coercion, duress etc. in a casual manner, without there being specific pleadings and proof of such allegations.

This should settle numerous cases pending at various levels of adjudication under the Electricity Act.

Mr. Anand K

The entire judgment can be read: https://main.sci.gov.in/supremecourt/2020/16810/16810_2020_13_1501_43497_Judgement_13-Apr-2023.pdf