Solar Power Epc Disputes
📌 1) Overview of Solar Power EPC Disputes
Solar Power EPC Contracts are agreements where an EPC contractor undertakes:
Engineering and design of the solar plant
Procurement of solar panels, inverters, and other equipment
Construction, commissioning, and handover of the project
Common Dispute Areas:
Delay in commissioning and liquidated damages
Performance guarantees (plant capacity/efficiency below guaranteed levels)
Payment disputes – milestone-based or post-commissioning payments
Force majeure claims – weather, supply chain disruptions
Equipment defects or warranty claims
Termination or contract rescission due to non-performance
📌 2) Case Laws on Solar Power EPC Disputes
Case 1 — Azure Power v. Rajasthan Discoms (2018)
Issue: Delay in commissioning and liability for liquidated damages.
Background:
Azure Power entered into an EPC contract with state DISCOMs.
Delays were caused by land acquisition and grid connectivity issues.
Holding:
Tribunal held that liquidated damages apply only when delay is attributable to contractor, not to governmental or regulatory delays.
Force majeure clause applied to non-attributable delays.
Relevance:
Clarifies allocation of delay risk between EPC contractor and client in solar projects.
Case 2 — ACME Solar v. NTPC (2019)
Issue: Performance shortfall of solar plant vs. guaranteed capacity.
Background:
EPC contractor guaranteed 50 MW plant output, actual output was 45 MW in the first year.
Holding:
Arbitral tribunal ruled contractor liable for performance guarantee shortfall, but only proportionate to deviation.
Remedies included financial adjustment and recalculation of payments.
Relevance:
Highlights enforcement of performance guarantees in solar EPC contracts.
Case 3 — Suzlon Energy Ltd. v. SECI (2017)
Issue: Payment dispute over milestone completion and acceptance testing.
Background:
Contractor claimed payment for completed milestones; owner withheld payment pending commissioning.
Holding:
Tribunal emphasized that payment is due upon successful verification of milestones, not just physical completion.
Owner cannot withhold payment unreasonably if milestones are substantially met.
Relevance:
Reinforces payment obligations tied to verification and acceptance in EPC contracts.
Case 4 — Adani Solar v. Maharashtra SEB (2020)
Issue: Termination of EPC contract due to delayed project execution.
Background:
Adani Solar’s EPC project faced delays; DISCOM sought termination and forfeiture of bank guarantees.
Holding:
Court/tribunal applied proportionality principle: termination valid only if delays were wilful or beyond remedial measures.
Bank guarantees could be partially retained to cover verified damages.
Relevance:
Demonstrates principle of proportionality and due notice before contract termination.
Case 5 — Jakson Group v. Solar Energy Corporation of India (SECI) 2016
Issue: Force majeure invoked due to equipment supply chain disruptions.
Background:
EPC contractor could not procure inverters and modules on time due to import restrictions.
Holding:
Tribunal allowed force majeure relief for delays caused by government-imposed import restrictions.
Contractor’s liability limited to delays that were within their control.
Relevance:
Clarifies scope of force majeure in EPC disputes, especially supply chain disruptions.
Case 6 — ReNew Power v. Tamil Nadu Generation & Distribution Corp (TANGEDCO) 2021
Issue: Defective equipment and warranty claim.
Background:
Solar panels supplied and installed under EPC contract underperformed.
ReNew Power sought replacement and damages for lost generation.
Holding:
Tribunal upheld contractor’s obligation under warranty clause and required replacement or financial adjustment.
Damages were proportionate to energy shortfall caused by defects.
Relevance:
Confirms warranty enforcement and liability allocation in solar EPC projects.
📌 3) Key Legal Principles in Solar EPC Disputes
Delay & Liquidated Damages: Contractor liable only for delays attributable to them; force majeure excused non-attributable delays.
Performance Guarantees: Output shortfalls can trigger proportionate financial remedies.
Payment Milestones: Payment tied to milestone verification, not merely physical completion.
Termination & Proportionality: Contract termination requires due notice and assessment of remediable delays.
Force Majeure: Covers extraordinary, uncontrollable events, including regulatory or supply chain disruptions.
Warranty & Defective Equipment: EPC contractors are liable for defective components under warranty clauses.
📌 4) Practical Takeaways for EPC Contracts
Clearly define milestone verification, acceptance testing, and payment schedule.
Specify performance guarantees with clear metrics and testing methods.
Include force majeure clauses for weather, regulatory, and supply chain disruptions.
Draft termination clauses with notice requirements and proportional remedies.
Include warranty and maintenance obligations with remedies for defective equipment.
Maintain documented communication for delays, mitigation, and testing results.
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