Andhra Pradesh High Court upholds the sanctity of Power Purchase Agreements

Almost three years after the State of Andhra Pradesh decided to reopen existing PPAs and reduce tariff, the Andhra Pradesh High Court today upheld the sanctity of PPAs and quashed proceedings initiated to redetermine tariff of existing PPAs. While setting aside the order of the Single Judge which had relegated the parties to the regulatory commission and imposed an interim tariff almost 50% lower the PPA tariff, the judgment underscored the importance of certainty in contracts by rejecting the plea that PPAs can be reopened on the ground of financial hardship. Quashing the proceedings pending before the regulatory commission can finally (hopefully!) give quietus to this issue.

While setting aside the Impugned Judgment dated 24.09.2019, the Hon’ble High Court upheld the sanctity of concluded contracts and held that there is no power to revise or modify tariff retrospective. Key findings of Judgment are:-

• Jurisdiction under Article 226 of the Constitution cannot be used to re-write the terms of the contract and terms of the PPAs cannot be altered either by the parties (unilaterally) or by the Court.
• Inability or financial difficulty of Government or Discoms cannot be a ground to avoid payment of dues of generating companies or to reduce tariff.
• Sanctity of PPAs entered into between the parties by mutual consent cannot be allowed to be breached by a decision of the Commission and terms of PPAs are binding on both the parties equally.
• It is not open for the Commission to amend the parameters to reduce the tariff which has already been made operative for 25 years by separate Tariff Orders, without mentioning that they are subject to periodic review.
• Discoms are directed to pay pending bills/arrears within a period of 6 weeks from the pronouncement of the present judgment.

JSA represented Green Infra Wind Solutions (“Green Infra”) in a batch of Writ Appeals before the Hon’ble High Court of Andhra Pradesh. The matter was argued by Vishrov Mukerjee.

JSA team comprised Partner – Vishrov Mukerjee and Senior Associate – Girik Bhalla.