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APTEL, by way of its judgment dated 16.03.2026 in M/s. Simbhaoli Power Private Limited v. Uttar Pradesh Electricity Regulatory Commission and Others1, upheld the order of the Uttar Pradesh Electricity Regulatory Commission ("UPERC"), rejecting the claim of M/s. Simbhaoli Power Private Limited ("SPPL") for reduction of contracted capacity under its Power Purchase Agreement ("PPA") executed with Uttar Pradesh Power Corporation Limited ("UPPCL"). APTEL held that SPPL is not entitled to such reduction and that the sanctity of the PPA cannot be permitted to be breached on account of a commercial consideration taken by SPPL.
SPPL had dismantled a 12 MW generating unit on account of increase in cost and non-availability of bagasse and sought reduction of export capacity under the Force Majeure clause of the PPA. APTEL held that such circumstances are 'usual and natural events' which could have been foreseen at the time of execution of the PPA and do not constitute a Force Majeure event. Further, Force Majeure and doctrine of frustration are to be applied narrowly and that mere rise in cost or expense or the contract becoming financially and commercially difficult to perform does not render performance impossible. APTEL also emphasised that the decision to dismantle the unit was a purely commercial decision of SPPL and not an event beyond its control and that where an alternative mode of performance exists, the Force Majeure clause cannot be invoked. Accordingly, APTEL laid down a 'triple test' for an event to qualify as Force Majeure, namely: (i) the event projected as Force Majeure should be impractical and unenforceable (i.e. impracticality); (ii) the event must make the execution of the contractual obligations impossible (i.e. impossibility); and (iii) the event must not be created on account of default or negligence of the party claiming it (i.e. externality).
In view of the above, APTEL upheld UPERC's order and dismissed the appeal filed by SPPL, reiterating that parties are bound by the terms of the PPA and cannot seek to avoid contractual obligations on the ground of commercial hardship.
Footnote
1. Appeal No. 128 of 2021.
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