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In a recent judgment, the Appellate Tribunal for Electricity (APTEL) ruled in favour of substance over form when determining the start and end dates for force majeure events. The issue reached the APTEL after the Maharashtra Electricity Regulatory Commission (MERC), by its order of 7 July 2022, had rejected the arguments of the solar power developer (SPD).

There was little need for argument about whether supply chain disruptions caused by covid-19 were force majeure. This had been pre-empted because of the memorandum dated 3 November 2021 issued by the Ministry of New and Renewable Energy acknowledging that the disruption in supply of imported solar photovoltaic modules could have an adverse effect on projects that were due to commission before 1 April 2022.

Although factors that constituted force majeure were not at issue, the contractual reliefs consequent on a force majeure event became the matter of dispute. The force majeure clause in the agreement clearly provided that a force majeure notice was a precondition to the affected party’s entitlement to relief. Further, the agreement set out in detail the contents that the notice had to include.

Regarding when the force majeure began, the MERC had decided that this could run only from the time a proper notice, as required by the power purchase agreement (PPA), was served on the Maharashtra State Electricity Distribution Company Limited (MSEDCL). Such a notice was served on 26 November 2021.

The appellant argued that the force majeure clauses should be interpreted liberally and that the absence of a formal notice should not invalidate the force majeure claim. The respondents contended that it was necessary to adhere to the notice requirements in the PPA and that failure to do so defeated the force majeure claim. The APTEL accepted the appellant’s earlier communications as sufficient notice, rejecting the strict interpretation of the notice requirements argument advanced by the respondents.

The APTEL found that the appellant had communicated the force majeure event earlier than 26 November 2021, as evidenced by correspondence with the MSEDCL. Thus, the APTEL decided that the start should not be limited to that date. The APTEL’s decision emphasised that substance was more important than form. Such an interpretation was also in line with the Mannai principle, laid down by the UK House of. This, in brief, states that a minor defect in a contractual notice will not render the notice defective.

Although in this case, the APTEL did interpret the notice requirements liberally, parties should adhere to notice requirements as strictly as possible to avoid a situation where contractual remedies or benefits are lost.

So far as the cessation date for the force majeure event was concerned, the appellant claimed that the force majeure event continued beyond 26 November 2021, because deliveries were delayed until February and March 2022. It was also argued that the cessation date should align with the actual delivery dates. The respondents replied that the appellant did not issue a cessation notice as required under the PPA. The MERC order declared that the cessation date cannot go beyond the date set out by the SPD in its pleadings.

The APTEL determined that the force majeure event continued until the actual delivery of the modules in February and March 2022. The MERC order on this aspect shows that State Electricity Regulatory Commissions (SERCs) are adopting a pedantic and myopic interpretation, while ignoring other material before them. In overturning the decision of the MERC, the APTEL relied on a holistic reading of the pleadings in which it was repeatedly accepted that the supply chain disruption was an ongoing event. It also relied on the actual dates of delivery in the bills lading annexed by the SPD and the relief granted to other players.

This case and others highlight the need for a data-backed study to understand how many state commission decisions are appealed to the APTEL and how many succeed. Anecdotal evidence suggests an overwhelming number of these decisions are being reversed by APTEL in whole or part. There is a need for urgent capacity building and training to ensure that the parties do not become involved in unnecessary and protracted litigation.

Mani Gupta is a partner at Sarthak Advocates & Solicitors