Point of Law : Arbitration - Application for setting aside of Arbitral Award - Courts would not interfere “unless Court comes to a conclusion that perversity of award goes to root of matter without there being a possibility of alternative interpretation which may sustain arbitral award”.

JUDGMENT :

1. NTPC Vidyut Vyapar Nigam Limited (hereinafter ‘NVVNL’) has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter the ‘A&C Act’) impugning an arbitral award dated 20.11.2020 (hereinafter ‘the impugned award’) rendered by an Arbitral Tribunal comprising of Justice (Retired) V.N. Khare, former Chief Justice of India, Mr Ambarish Dave and Justice (Retired) D.P. Wadhwa, former Judge of the Supreme Court of India as the Presiding Arbitrator.

2. The impugned award was rendered in the context of disputes that had arisen between NVVNL and respondent no.1 (hereafter ‘Lexicon’) in connection with the Power Purchase Agreement (hereinafter the ‘PPA’) entered into between NVVNL and Lexicon

3. Essentially, the dispute between NVVNL and Lexicon revolve around the question whether NVVNL was entitled to recover liquidated damages from Lexicon as contemplated under the PPA. NVVNL claimed that it was entitled to recover Rs.2,77,27,000/- (Rupees Two Crores Seventy-Seven Lacs and Twenty-Seven Thousand only) as liquidated damages being 10% of the Performance Guarantee furnished by Lexicon, as according to NVVNL, Lexicon had failed to commission the solar power plant for generating 10 MW capacity on or before the scheduled commissioning date

4. According to NVVNL, Lexicon had commissioned 5 MW capacity on or before 26.02.2013 (the Scheduled Commissioning Date) and had commissioned the balance 5 MW by 01.03.2013, that is, after a delay of three days. NVVNL claimed that it was thus, entitled to recover half of 20% of the Performance Bank Guarantee in terms of Clause 4.6 of the PPA. Lexicon disputed the aforesaid claim as according to Lexicon it had commissioned the solar power generating project before the Scheduled Commissioning Date. It claimed that it had completed and installed 10 MW of solar power generating capacity on 21.02.2013.

5. The Arbitral Tribunal found in favour of Lexicon and accepted its contention that it had completed and installed the solar power plant with 10 MW capacity on or before the Scheduled Commissioning Date of 26.02.2013. Accordingly, the Tribunal held that NVVNL was not entitled to recover any liquidated damages. The Arbitral Tribunal further held that not was not established that NVVL had suffered any loss on account of the three days delay in completion of a part of the project. Therefore, in any event, NVVNL could not recover the said damages without establishing that it had suffered any loss.

6. Accordingly, the Arbitral Tribunal directed that the Performance Bank Guarantee furnished by Lexicon be discharged. It also awarded costs of Rs.1,08,66,000/- (Rupees One Crore Eight Lacs and Sixty-Six Thousand only) in favour of Lexicon.

7. It is contended on behalf of NVVNL that the impugned award is perverse and is contrary to the terms of the PPA. It is contended on behalf of NVVNL that the impugned award disregards the minutes of the Commissioning Committee of 25.02.2013- 26.02.2013 – which recorded that Lexicon had electrically connected only 7.06 MW capacity as on 25.02.2013 – and therefore, the impugned award is patently illegal and is liable to be set aside.

Factual Background

8. The Government of India launched the Jawaharlal Nehru National Solar Mission (hereinafter ‘JNNSM’) with the objective to establish India as a global leader in solar energy. The Government of India through the Ministry of New and Renewable Energy (hereinafter ‘MNRE’) designated NVVNL as a Nodal Agency for Phase-I of JNNSM.

9. NVVNL was required to purchase solar power from Solar Power Developers (SPDs); bundle it with the power available from coal based plants of NTPC; and sell the bundled power to various Distribution Utilities.

10. On 24.08.2011, NVVNL invited proposals for setting up of Grid Connected Solar PV Project under Phase-I Batch-II of JNNSM for purchase of power. NVVNL issued a Request for Selection (RfS) inviting bids for 350 MW of power. The bidders were to be selected in decreas