Supreme Court upholds voluntary renewable energy PPAs, rules State Commission cannot alter agreed tariff terms

The SC upheld PPAs entered into voluntarily by parties for renewable energy sources, ruling that State Commission lacked jurisdiction to alter tariff terms contrary to agreements. The court held that amendments to REC Regulations could not be applied retrospectively to pre-existing contracts, rejecting claims of coercion in PPA formation. The SC found no provision requiring prior State Commission approval for renewable energy PPAs and determined that established companies with legal advisers could not be deemed coerced into agreements. The concurrent findings of State Commission and APTEL were set aside, with the appeal allowed.

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Issues Involved:

1. Jurisdiction of the State Commission in altering Power Purchase Agreements (PPAs).
2. Applicability of amendments to the Renewable Energy Certificate (REC) Regulations on existing PPAs.
3. Allegations of coercion or duress in the execution of PPAs.
4. The enforceability of PPAs without prior approval from the State Commission.

Issue-wise Detailed Analysis:

1. Jurisdiction of the State Commission in altering Power Purchase Agreements (PPAs):

The appellants argued that the State Commission had no jurisdiction to alter the tariff agreed in the PPAs, which were governed by the Central Electricity Regulatory Commission (CERC) Regulations 2010. They contended that the Central Commission had clarified that tariffs agreed upon in PPAs prior to the amendment of REC Regulations in 2013 would remain valid for the entire duration of the PPA. The court held that the State Commission's role was to regulate the purchase and procurement process of distribution licensees, including the price, but it could not unilaterally alter the terms of a PPA that was lawfully entered into by the parties.

2. Applicability of amendments to the Renewable Energy Certificate (REC) Regulations on existing PPAs:

The Second Amendment to the REC Regulations changed the pricing mechanism, but it was clarified that this amendment would apply prospectively and would not affect PPAs executed at a tariff lower than the Average Pooled Power Purchase Cost (APPC) prior to the amendment. The court held that amendments to laws or regulations are generally prospective unless expressly stated otherwise, and the Second Amendment did not retroactively affect existing contracts. Therefore, the terms of the existing PPAs, which were entered into before the amendment, remained binding on the parties.

3. Allegations of coercion or duress in the execution of PPAs:

The respondents claimed that the PPAs were entered into under coercion or duress due to unequal bargaining power. However, the court found no substantial evidence or specific pleadings to support these allegations. It emphasized that mere allegations without detailed particulars and evidence are insufficient to establish coercion. The court referred to previous judgments, highlighting that claims of coercion must be substantiated by clear evidence, which was lacking in this case.

4. The enforceability of PPAs without prior approval from the State Commission:

The respondents argued that the PPAs were unenforceable as they were not approved by the State Commission. The court rejected this argument, stating that there was no regulatory requirement for prior approval of PPAs related to renewable energy sources. It noted that the model PPA approved by the State Commission did not require such approval, and the terms of the PPA in question did not conflict with any express regulation or the model PPA. Therefore, the absence of prior approval did not affect the enforceability of the PPAs.

Conclusion:

The Supreme Court set aside the concurrent findings and orders of the State Commission and the Appellate Tribunal for Electricity (APTEL), holding that the PPAs were enforceable as per their original terms. The appeals were allowed, with costs awarded to the appellants. The court emphasized the sanctity of contracts freely entered into by parties and the prospective nature of regulatory amendments unless expressly stated otherwise.

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