The Appellate Tribunal for Electricity (APTEL) has issued a significant judgment partly allowing the appeal of Raasi Green Earth Energy. While the Tribunal upheld the encashment of a ₹15 crore Performance Bank Guarantee (PBG) due to procedural lapses and contractual terms, it set aside the “automatic” imposition of Liquidated Damages (LD). The matter has been remanded to the state commission to determine if the utility suffered actual financial loss, reinforcing the principle that penalties cannot be recovered without proven legal injury.
1. Case Background and the 2017 Solar Tender
The dispute is rooted in a landmark 1,500 MW solar tender issued by the Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) in 2017. This tender, which featured an upper-limit tariff of ₹4.00/unit, was a cornerstone of Tamil Nadu’s renewable energy push at the time. Raasi Green Earth Energy emerged as a successful bidder, securing a project with a discovered tariff of ₹3.47/kWh.
Contractual Timeline and Milestones Following the tender, a Power Purchase Agreement (PPA) was executed on September 26, 2017, establishing a rigorous implementation schedule:
- Commercial Operation Date (COD): The project was mandated for commissioning within a 24-month window.
- Maximum Extension Threshold: The PPA provided a terminal 34-month timeline; failure to commission within this period triggered automatic termination under Article 14.
Project Bottlenecks and “Change in Law” The project was quickly beset by financial and infrastructure hurdles that Raasi argued rendered the original timelines unviable:
- Safeguard Duty Impact: In July 2018, the Ministry of Finance imposed a Safeguard Duty exceeding 25% on imported solar modules. Raasi framed this as a “Change in Law” event that fundamentally altered the project’s economics.
- Infrastructure Refusal: Raasi cited TANGEDCO’s refusal to provide alternative power evacuation arrangements as a core grievance, claiming the utility’s lack of infrastructure support directly impeded the commissioning schedule.
- Tariff Revision: Consequently, the developer sought a 15-month COD extension and a tariff revision to account for the increased capital expenditure.
The Initial TNERC Order (February 2, 2021)
The Tamil Nadu Electricity Regulatory Commission (TNERC) dismissed Raasi’s petition, adhering to a strict interpretation of the PPA. The Commission ruled that:
- Automatic Termination: Because the project failed to meet the 34-month terminal threshold, the PPA stood automatically terminated under Clause 14.
- Rejection of Extensions: TNERC ignored the “Change in Law” arguments, refusing the requested 15-month extension.
- Financial Penalties: During the pendency of the proceedings, TNERC allowed TANGEDCO to proceed with the encashment of PBGs totaling ₹15 Crore.
APTEL’s Ruling on PBG Encashment
In a nuanced decision, APTEL upheld the invocation of the ₹15 crore PBG, though the rationale was as much procedural as it was contractual.
Procedural Findings and Pleadings A critical “legal lesson” emerged from this section of the ruling: the Tribunal noted that its hands were largely tied regarding the PBG refund because Raasi failed to formally amend its prayers after the bank guarantees were encashed mid-proceedings. Without a specific prayer for a refund in the amended pleadings, the Tribunal could not grant that relief.
Contractual Entitlements Substantively, the Tribunal held that Article 14 of the PPA granted TANGEDCO the right to invoke the PBG once the 24-month delay period was exceeded. Unlike Liquidated Damages, the Tribunal found that the PPA’s PBG clauses did not require the utility to prove actual financial loss prior to invocation.
Setting Aside Liquidated Damages (LD) and Remand
While the PBG encashment stood, APTEL struck down the automatic application of Liquidated Damages, creating a clear legal distinction between the two financial instruments.
Statutory Principles and the Burden of Proof The Tribunal applied the strictures of Sections 73 and 74 of the Indian Contract Act, 1872, which govern compensation for breach of contract. By doing so, the ruling shifted the burden of proof back to TANGEDCO. APTEL emphasized that an LD clause is not a “blank check” for utilities; rather, it acts as an unenforceable penalty unless the claimant can demonstrate a “legal injury.”
Judicial Precedents The Tribunal relied heavily on the Supreme Court’s landmark judgment in Kailash Nath Associates v. DDA, asserting that damages cannot be awarded as a matter of course. Unless the loss is impossible to quantify, the party claiming damages must prove actual financial loss or measurable injury.
The Tribunal’s Core Argument on Article 14
“The Tribunal found that TNERC’s automatic grant of the right to recover liquidated damages under Article 14 of the PPA, without examining whether TANGEDCO had actually suffered any measurable financial loss due to the project delay, was not legally sustainable and must be set aside for fresh determination.”
Directives for the Fresh Determination
APTEL has remanded the issue of LDs to the State Commission with specific mandates to ensure due process:
- Evidentiary Requirement: TANGEDCO must now quantify and prove the specific, measurable financial loss it incurred due to the project’s delay.
- Fresh Hearing: TNERC is directed to conduct a new hearing where both parties can provide evidence regarding “legal injury.”
- Reassessment: Any liability for Raasi regarding LDs must be calculated based on the findings of actual loss rather than the automatic formulas found in the PPA.
Document Metadata
| Field | Details |
| Appeal Number | Appeal No. 151 of 2021 |
| Judgment Date | July 29, 2026 |
| Parties | Raasi Green Earth Energy Pvt. Ltd. vs. TANGEDCO & TNERC |
| PBG Value | ₹15 Crore |
| Statutes Cited | Sections 73 & 74, Indian Contract Act, 1872 |
This ruling serves as a stern warning to State Electricity Regulatory Commissions against the “automatic” application of financial penalties. By insisting on the quantification of loss for Liquidated Damages, APTEL has protected developers from arbitrary penalization while highlighting the necessity for precise legal pleadings—specifically the need to amend prayers as facts change during litigation. For the broader industry, this clarifies that while a PBG may be a primary security, Liquidated Damages remain subject to the compensatory principles of Indian contract law.
Official Citations and Judgments
- Appellate Tribunal for Electricity (APTEL) Judgment – Appeal No. 151 of 2021 Case Title: Raasi Green Earth Energy Pvt. Ltd. v. Tamil Nadu Electricity Regulatory Commission & Ors. Decision Date: 29th July, 2026 Official Link: Appeal No. 151 of 2021
- Appellate Tribunal for Electricity (APTEL) Judgment – Appeal No. 214 of 2021 Case Title: VSR Solar Power Private Limited v. Tamil Nadu Electricity Regulatory Commission & Ors. Decision Date: 31st July, 2026 Official Link: Appeal No. 214 of 2021
- Appellate Tribunal for Electricity (APTEL) Judgment – Appeal No. 67 of 2021 Case Title: M/s Solitaire BTN Solar Private Limited v. Tamil Nadu Electricity Regulatory Commission & Ors. Decision Date: 5th July, 2021 Official Link: Judgment Record (Referenced via APTEL Official Registry)
- Appellate Tribunal for Electricity (APTEL) Official Portal Purpose: Repository for all official judgements and orders related to electricity sector disputes in India. Official Link: APPELLATE TRIBUNAL FOR ELECTRICITY – Judgements/Orders
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