The Supreme Court of India recently delivered a judgment in the case of Maharashtra State Electricity Distribution Company Limited v/s Ratnagiri Gas and Power Private Limited & Ors.; Civil Appeal No. 1922 of 2023.
The case involved a dispute over the interpretation of a Power Purchase Agreement (PPA) between the parties. The Apex Court analyzed the terms of the PPA and the factual context of the case to reach its conclusion. The court held that deviation from the plain terms of the contract is warranted only when it serves business efficacy better. However, in this case, the Apex Court, taking into account the establishment’s background and the shortage of domestic gas beyond the respondent’s control, concluded that straying from the plain terms of the agreement would be unjustified. Such deviation would hinder business efficacy, negatively impacting the respondent’s viability.
The Hon’ble Court further held that a commercial document cannot be interpreted in a manner that arrives at a complete variance with what may have originally been the intention of the parties. Such a situation can only be contemplated when the implied term can be considered necessary to lend efficacy to the terms of the contract. If the contract is capable of interpretation of its plain meaning with regard to the true intention of the parties, it will not be prudent to read implied terms on the understanding of a party or by the court with regard to business efficacy.

Author of this article:
Adv. Ravish Bhatt,
Partner, R&D Law Chambers,
Dual Qualified Lawyer Solicitor | International Tax Affiliate

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