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IN THE HIGH COURT OF DELHI AT NEW DELHI
SANJIV KHANNA, NAVIN CHAWLA, JJ.
NTPC Vidyut Vyapar Nigam Limited - Appellant
Versus
M/s Saisudhir Energy Limited - Respondent
FAO (OS) Nos. 275 & 281 of 2016
Decided On : 18-01-2018
Arbitration - NTPC Vidyut Vyapar Nigam Limited - Arbitration and Conciliation Act, 1996, Delhi High Court Act, 1966 - Section 37, Section 10 - Clause 4.6 of the PPA - Liquidated Damages for delay in commencement of supply of power to NVVN
Fact of the Case:
NTPC Vidyut Vyapar Nigam Limited (NVVN) filed an appeal partly impugning the judgment of the single Judge dated 8th September, 2016 passed in OMP No. 410/2015, Saisudhir Energy Limited versus NTPC Vidyut Vyapar Nigam Limited and OMP No. 446/2015, NTPC Vidyut Vyapar Nigam Limited versus Saisudhir Energy Limited. The subject matter of challenge was the majority and minority awards, both dated 21st July, 2015 passed by the Arbitral Tribunal of three Arbitrators. SEL had also preferred an appeal against the impugned judgment of the learned single Judge in the aforestated OMPs.
Finding of the Court:
The single Judge held that delay in commencement of supply of electricity was not denied, albeit accepted by SEL and, therefore, there was a breach on their part. The single Judge also held that NVVN was entitled to encash the bank guarantees, excluding the bank guarantee of Rs.4 crores furnished as earnest money. The single Judge further held that NVVN had pleaded having suffered tangible and intangible loss as nodal agency for delay and non-performance on the part of SEL. The single Judge awarded half of the amount claimed by NVVN as reasonable compensation as against provided compensation by modifying the Award published by minority Arbitrators and by setting aside the Award published by majority Arbitrators as the finding arrived in the majority award are wholly contrary to law, facts and the Clause 4.6 of the Contract. The said findings are perverse, illogical and shake the conscious of the court when the same are applied to the facts and circumstances of the present case.
Issues: The issues revolved around the delay in commencement of supply of electricity, the entitlement of NVVN to encash the bank guarantees, and the determination of reasonable compensation for the delay.
Ratio Decidendi: The court held that NVVN was entitled to encash the bank guarantees, excluding the bank guarantee of Rs.4 crores furnished as earnest money. The court also held that NVVN had pleaded having suffered tangible and intangible loss as nodal agency for delay and non-performance on the part of SEL. The court awarded half of the amount claimed by NVVN as reasonable compensation as against provided compensation by modifying the Award published by minority Arbitrators and by setting aside the Award published by majority Arbitrators as the finding arrived in the majority award are wholly contrary to law, facts and the Clause 4.6 of the Contract.
Final Decision: The court modified the majority and minority awards and directed SEL to pay damages @ Rs. 1,00,000/- per megawatt per day for the entire period of delay, and also pay the bank guarantee charges which have been paid by NVVN during pendency of arbitration proceedings, before the single Judge and the Division Bench. The court further directed that in case there is default and payment is not received, SEL would be liable to pay interest at 18% p.a. with yearly rests from the date of Award till payment is made.
Sanjiv Khanna, J.
NTPC Vidyut Vyapar Nigam Limited has filed FAO(OS) 275/2016, under Section 37 of the Arbitration and Conciliation Act, 1996 read with Section 10 of the Delhi High Court Act, 1966 partly impugning the judgment of the single Judge dated 8th September, 2016 passed in OMP No. 410/2015, Saisudhir Energy Limited versus NTPC Vidyut Vyapar Nigam Limited and OMP No. 446/2015, NTPC Vidyut Vyapar Nigam Limited versus Saisudhir Energy Limited. Saisudhir Energy Limited has also preferred an appeal, being FAO(OS) 281/2016 against the impugned judgment of the learned single Judge in the aforestated OMPs. For the sake of convenience, NTPC Vidyut Vyapar Nigam Limited has been referred to as NVVN and Saisudhir Energy Limited has been referred to as SEL in the present judgment.
2. The subject matter of challenge in the aforestated OMPs was the majority and minority awards, both dated 21st July, 2015 passed by the Arbitral Tribunal of three Arbitrators.
3. NVVN is a Government of India undertaking. It was designated as a nodal agency under the Jawaharlal Nehru Solar Mission, with the objective to deploy 20,000 megawatt of grid connected solar power by the year 2022 at a reasonable cost. The mission was promoted to create and establish an ecologically sustainable growth model for India’s future energy requirements and to reduce India’s dependence on non-renewable resources of energy. The mission postulated bundling of solar power, with a cheaper unallocated quota of power generated at NTPC coal base stations, to offset the high cost of generating solar power. NVVN was permitted and was required to enter into Power Purchase Agreements (PPAs) with solar power developers with a commitment to purchase solar power at a fixed rate for 25 years. This bundled power was to be sold by NVVN to distribution utilities at the Central Electricity Regulatory Commission’s (CERC) determined prices.
4. SEL, pursuant to competitive bidding, had signed and executed PPA dated 24thJanuary, 2012 with NVVN, agreeing to supply electricity at the bid amount of Rs.8.22 per unit, thereby offering a discount of Rs.7.17 per unit over the CERC approved benchmark tariff of Rs.15.39. Based on the discount offered, SEL had furnished bid bond of Rs.50.154 crores in the form of bank guarantee. In addition, SEL had furnished bank guarantee of Rs.4 crores as earnest money towards the bid for 20 megawatt project and had given performance guarantee of Rs.6 crores. SEL had accordingly provided five bank guarantees totaling to Rs.60.154 crores.
5. As per the PPA, the scheduled commissioning date for supply of 20 megawatts solar power by SEL was 26th February, 2013. However, SEL could only commence production and started supplying 10 megawatts to NVVN from 26thApril, 2013 instead of 20 megawatts of solar energy as per PPA. Supply of balance 10 megawatts of solar energy commenced from 24thJuly, 2013.
6. SEL vide letter dated 30th January, 2013 had sought extension of time by two months, citing various reasons and invoking force majeure clause. NVVN, however, rejected the said request vide letter dated 31st January, 2013 relying upon clause 11.5.1 of the PPA, which as per them was a pre-condition for invoking force majeure clause.
7. Apprehending punitive action, SEL had preferred OMP No. 173/2013 before the High Court of Delhi for restraining NVVN from encashing the bank guarantees. Interim relief against encashment of bank guarantees was granted and had continued till the arbitration proceedings were invoked and had commenced. The OMP was disposed of, vide order dated 23rd May, 2013 leaving it to the Arbitral Tribunal to decide the interim relief application under Section 17 of the Act. In the meanwhile, stay granted would continue. Before the Arbitral Tribunal, the parties did not press for disposal of the application for interim relief and the case proceeded for
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