Case: Bangalore Electricity Supply Company Limited (BESCOM) Vs. E.S. Solar Power Pvt. Ltd. &amp; Ors

2. The facts that are necessary for adjudication of the dispute in these appeals are as follows:(a) Karnataka Renewable Energy Development Limited (KREDL) issued a Request for proposal on 20.11.2015 from bidders for undertaking development of Solar PV ground mount Power Plants in Karnataka pursuant to a decision taken by the State Government for development of 1200 MWA of Solar power to be implemented in 60 Taluks through private sector participation. Emmvee Photovoltaic Power Private Limited, the second Respondent herein, incorporated two Special Purpose Vehicles (SPV) in accordance with the terms of the Request for Proposal and submitted its bid for acceptance by the first Appellant, Bangalore Electricity Supply Company Limited.(b) Respondent No. 1 in Civil Appeal 9273 of 2019 is a special purpose vehicle constituted by Respondent No. 2 for setting up a Solar PV ground mount Project with a capacity of 10 MWA (AC) in Bidar Rural Taluk, Bidar District, Respondent No. 1 in Civil Appeal 9274 of 2019 is a special purpose vehicle for setting up a 20 MWA (AC) capacity Solar PV ground mount Project in Bagepalli Taluk, Chikkaballapura.(c) The Projects were awarded to the Respondents on 31.03.2016. Power Purchase Agreements (PPAs) were entered into between the parties on 23.05.2016. The Power Purchase Agreements were approved by Karnataka Electricity Regulatory Commission (KERC) on 17.10.2016. Supplementary Power Purchase Agreements were entered into between the parties on 17.12.2016 incorporating the modifications suggested by the Karnataka Electricity Regulatory Commission on 07.12.2016.(d) In respect of the Bidar Project, a Commissioning Certificate was issued on 25.10.2017 by KPTCL on the basis of minutes of meeting that was held on 16.10.2017. The Commissioning Certificate for Bagpalli Project was also issued on 23.11.2017.3. Original Petition (OP) No. 18 of 2018 was filed by the Respondents in Civil Appeal 9274 of 2019 aggrieved by the reduction of the tariff payable by Appellant No. 1 from Rs. 6.10/kWh to Rs. 4.36/kWh and imposition of damages of Rs. 20,00,000/- (Rupees Twenty Lakhs only) for delay in commissioning the plant.4. Apart from others, the main ground taken in the Original Petition by the Respondents is that Commissioning of the Project took place on 16.10.2017 which is clear from the Minutes of meeting drawn by the Officials of KPTCL. The meeting was attended by officers of KPTCL, officers of GSCOM and representatives of the Respondents. It was contended by the Respondents that the Project commenced its operations within 12 months from the date of approval of the PPA by the Karnataka Electricity Regulatory Commission and the imposition of damages and reduction of tariff payable by the Appellant was contrary to the provisions of the agreement.5. Original Petition No. 19 of 2018 was filed by the Respondents in Civil Appeal 9273 of 2019 in respect of the Solar PV ground mount Power Project in Bidar for reliefs similar to those claimed in OP 18 of 2018.6. The Karnataka Electricity Regulatory Commission by its Order dated 23.10.2018 dismissed OP No. 18 of 2018 and OP No. 19 of 2018. The Karnataka Electricity Regulatory Commission framed four issues for consideration which are as follows:(i) Whether the Scheduled Commissioning date of the Solar Power Projects in question would fall in 16.10.2017 or 17.10.2017.(ii) On what date the Solar Power Projects in OP No. 18 of 2018 and OP 19 of 2018 have started injection of power into the Grid.(iii) Whether injection of power into the State Grid from a Solar Power Project is essential in order to declare that a Project is commissioned.(iv) Whether Commissioning of the Project and Commercial Operation of the Project are one and the same or different concepts in a Solar Power Project.7. Insofar as issue No. 1 is concerned the Commission was of the view that the Scheduled Commissioning date for the Solar Power Projects of the Developer is 16.10.2017 and not 17.10.2017 as contended by the Respondents. Considering issues 2, 3, and 4 together, the Commission was of the opinion that the injection of power into the Grid from a Solar Power Project is a sine qua non for declaring that the Project is commissioned. The Commission was of the view that the injection of power from the Solar Power Project into the Grid was only on 17.10.2017. In view of the above findings recorded by the Commission, the OPs were dismissed.8. The Respondents approached the Appellate Tribunal for Electricity by filing Appeal Nos.332 and 333 of 2018. The Appellate Tribunal framed the following point for consideration:Whether the Project of the Appellants was delayed by one day in terms of Power Purchase Agreement and whether the Commission was justified in imposing liquidated damages on the Appellant for such delay in commissioning the Project.9. The Appellate Tribunal held that the Commissioning Date of both the Solar Plants according to KPTCL is 16.10.2017. According to the Tribunal, synchronization took place prior to the commissioning of the Plant. The Tribunal was also of the view that the Scheduled date of Commissioning was done within the time limit prescribed under the agreements even if the commencement of the Solar Plants is taken as 17.10.2017. The Appellate Tribunal for electricity allowed the Appeals filed by the Respondents and set aside the orders passed by the Karnataka Electricity Regulatory Commission. The Appellant has challenged the said judgment of the Appellate Tribunal for Electricity in these Appeals.

Reasoning: 16. The duty of the Court is not to delve deep into the intricies of human mind to explore the undisclosed intention, but only to take the meaning of words used i.e. to say expressed intentions (Smt. Kamala Devi vs. Seth Takhatmal & Anr 1964 (2) SCR 152 ). In seeking to construe a clause in a Contract, there is no scope for adopting either a liberal or a narrow approach, whatever that may mean. The exercise which has to be undertaken is to determine what the words used mean. It can happen that in doing so one is driven to the conclusion that clause is ambiguous, and that it has two possible meanings. In those circumstances, the Court has to prefer one above the other in accordance with the settled principles. If one meaning is more in accord with what the Court considers to the underlined purpose and intent of the contract, or part of it, than the other, then the court will choose former or rather than the later. Ashville Investment v. Elmer Contractors. 1988 (2) All ER 577 The intention of the parties must be understood from the language they have used, considered in the light of the surrounding circumstances and object of the contract. Bank of India and Anr. v. K. MohanDas and Ors 2009 5 SCC 313.  Every contract is to be considered with reference to its object and the whole of its terms and accordingly the whole context must be considered in endeavoring to collect the intention of the parties, even though the immediate object of inquiry is the meaning of an isolated clause. Bihar State Electricity Board, Patna and Ors. v. M/s. Green Rubber Industries and Ors 1990 (1) SCC 731. 17. Liquidated damages can be imposed on the Developer under Article 5.8.1 if he is unable to commence supply of power to the Appellant by the Scheduled Commissioning Date. Article 12 deals with the applicable tariff. The developer shall be entitled to receive the tariff of Rs. 6.10/kWh of energy supplied the Appellant in accordance with the terms of the agreement. If there is delay in commissioning of the project beyond the Scheduled Commissioning Date and if there is change in KERC applicable tariff, Article 12.2 provides that the changed applicable tariff for the project shall be the lower of the Tariff as in Clause 12.1 and KERC applicable tariff as on the commercial operation day.KERC approved the PPAs on 17.10.2016. Scheduled Commissioning Date according to the agreement should be 12 months from 17.10.2016. There is also no dispute between the parties that 12 months means 365 days.According to the Appellants if 17.10.2016 is included in computation of 365 days, the Scheduled Commissioning Date is 16.10.2017.On the other hand, the Respondents contended that 17.10.2016 should be excluded in the calculation of 365 days, in which case, 17.10.2017 would be the Scheduled Commissioning Date.19. The Commission relied upon 1.2.1(m) of the PPA to conclude that 17.10.2016 has to be included for ciphering the period of 365 days to determine the Scheduled Commissioning Date. Whereas, the Appellate Tribunal was of the view that Article 1.2.1 (k) of the PPA is relevant. The Tribunal held that the date of the event which is the date on which the PPA was approved i.e. 17.10.2016 shall be excluded in calculating the period of 12 months.20. Reduction of applicable tariff is permissible under Article 12.2 of the PPA only when there is delay in commissioning of the Project beyond the Scheduled Commissioning Date. As discussed above, there is no dispute that the Scheduled Commissioning date shall be 12 months from the effective date. There is no quarrel between the parties that the effective date is 17.10.2016. The interpretation clause contains three provisions which are 1.2.1 (k), 1.2.1 (l) and 1.2.1 (m). According to 1.2.1 (k), any reference to a month shall mean a reference to a Calendar month as per the Gregorian Calendar. 1.2.1 (l) provides that references to any date or period shall mean and include such date, period as may be extended pursuant to the agreement. As per Article 1.2.1 (m), any reference to any period commencing from a specified date and until the specified day shall include both such day or dates. The other crucial provision which has to be taken note of is the definition of the expression Month in Article 21.1 of the agreement. Month has been defined to mean a period of 30 days and excluding (the date of the evet) where applicable, else a Calendar month. We are not concerned with 1.2.1 (l), in this case as there is no question of any extension of any period pursuant to the agreement. 1.2.1 (k) indicates that any reference to a month shall mean reference to a Calendar month. Reverting to the definition of Month, it is clear that a month shall mean either 30 days where applicable or a Calendar month. In this case, there is no dispute that 12 Calendar months have to be taken into account for determining the Scheduled Commissioning Date. The crucial expression in the definition of Month is excluding the date of the event. If the date of the event i.e. 17.10.2016 is excluded, the Scheduled Commissioning Date would be 17.10.2017. We do not agree with the conclusion of the Commission that the definition of month is with reference only to one month and not more which is wrong a reading of the provision. The Commission applied 1.2.1 (m) which refers to a period commencing from a specified date to a specified day for the purpose of including the date of the event. In our view, the Commission has committed an error in applying 1.2.1 (m) when the provision that is applicable is 1.2.1 (k) read with the definition of month in Article 21.1. There is a specific mention of twelve months in the definition of SCOD and Article 1.2.1 (k) categorically provides that any reference to a Month shall be a calendar month. Applicability of Article 1.2.1 (k) excludes the operation of Article 1.2.1 (m) to the facts of this case.The Commission answered the point in favour of the Appellants by holding that actual injection of power is necessary to determine the date of commissioning of the Plant. The Appellate Tribunal reversed the findings recorded by the Commission on this aspect by relying upon the Commissioning certificate issued by the KPTCL which is to the effect that the Solar Plants were commissioned on 16.10.2017 itself. There is no dispute that the power was injected from the solar plants on 17.10.2017.