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IN THE HIGH COURT OF DELHI
Vibhu Bakhru, Amit Mahajan, JJ.
India Power Corporation Limited - Appellant
Versus
Eastern Coalfields Limited - Respondent
FAO(OS)(COMM) 166 of 2022 & CM No. 29693 of 2022
Decided On : 13-09-2022
An entity in unauthorized possession of leased property cannot claim maintenance expenses while the rent obligation remains enforceable, affirming the Arbitral Tribunal’s ruling.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34 - Appeal against arbitral award - Challenge to the rejection of claim for additional expenses of Rs.25.81 crores as not supported by pleadings or evidence - Claimant was a 'rank trespasser' and could not justify maintenance expenses for an idle plant - Respondent entitled to rent for unauthorized occupation - Award upheld. (Paras 20, 40, 51)
(B) The lease agreement required the lessee to yield possession of the leased property without claiming compensation but entitled the lessee for written down value upon surrender. (Para 48)
Facts of the case:
Disputes arose under an agreement and lease deed regarding the possession and maintenance of a power plant; IPCL claimed additional expenses and ECL sought unpaid rents. (Paras 6, 10)
Findings of Court:
The arbitral tribunal awarded ECL rent due for unauthorized possession of the premises and dismissed IPCL's claim for additional expenses citing lack of justification. (Paras 56, 69)
Issues: Whether IPCL was entitled to additional expenses; whether ECL was entitled to claim rent for the period after the lease expired. (Paras 20, 38)
Ratio Decidendi: The Court held that the Arbitral Tribunal acted correctly in rejecting absentee claims and affirming ECL's right to compensation, qualifying IPCL's claims as untenable due to unauthorized possession. (Paras 64, 68)
Result: Appeal dismissed. (Para 69)
| Table of Content |
|---|
| 1. introduction of parties and factual background. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9) |
| 2. ipcl's claims and ecl's counterclaims in arbitration. (Para 10 , 11 , 12) |
| 3. details of section 34 petitions by both parties. (Para 13 , 14 , 15 , 16 , 17) |
| 4. court's findings on ipcl's claims for additional expenses. (Para 18 , 19 , 20 , 21 , 22 , 30) |
| 5. analysis of ibcl's legal standing and interpretations. (Para 27 , 28 , 39 , 40 , 44 , 62) |
| 6. conclusion and order dismissing the appeal. (Para 68 , 69) |
JUDGMENT
Vibhu Bakhru, J. India Power Corporation Limited (hereinafter `IPCL') has filed the present appeal under Section 37(1)(c) of the Arbitration and Conciliation Act (hereinafter `the A&C Act') impugning a judgement dated 02.03.2022 (hereinafter `the impugned judgement') passed by the learned Single Judge, whereby IPCL's application under Section 34 of the A&C Act, seeking to set aside an arbitral award dated 15.02.2021 (hereinafter `the impugned award'), was rejected
FACTUAL CONTEXT:
2. IPCL claims that it is engaged in the business of supply and distribution of electricity since the year 1990. It, inter alia, operated two generating power stations - one at Chinakuri and the other at Dishergarh. The electricity generated was supplied to various coal mines of the respondent - Eastern Coal Fields Ltd. (hereinafter `ECL'). ECL is a wholly owned subsidiary of Coal India Ltd. and is engaged in producing coal.
3. On 30.03.1987, IPCL (then known as Dishergarh Power Supply Company Ltd.) entered into an agreement (hereinafter `the Agreement') with ECL for construction, erection and successful commissioning of a 2x10 MW Thermal Power Plant at Chinakuri Mining Complex (hereinafter `the Power Plant'). Subsequently, on 31.03.1993, the parties entered into a lease deed (hereinafter `the Lease Deed') for lease of the Power Plant along with land, buildings and quarters, plant and machinery (hereinafter `the Leased Assets') for a period of twenty years commencing from 01.04.1991.
4. IPCL leased the Power Plant for carrying on of its business of generating electricity for consideration. The parties agreed that IPCL could enhance the capacity of the Power Plant by commissioning an additional plant of 1x10 MW capacity at its own cost. ECL agreed to pay the Written Down Value (hereinafter `WDV') of the Power Plant after expiry of the Lease Deed and on taking over the said plant. There is no dispute that after the execution of the Lease Deed, IPCL commissioned an additional power plant of 1x10 MW capacity.
5. ECL supplied coal to IPCL through a linkage system from 1991 to 2010. The entire electricity generated by IPCL from the two power stations - one at Chinakuri and the other at Dishergarh - was supplied to the coal mines of ECL. Prior to expiry of the Lease Deed, IPCL, by a letter dated 17.08.2010, sought extension of the same for a period of twenty years. ECL did not accede to the said request, however, by a letter dated 15.03.2011, it agreed to extend the lease for a period of one year. ECL also informed IPCL that it would invite fresh tenders in respect of the Power Plant.
6. Disputes have arisen between the parties in respect of the Agreement as well as the Lease Deed. IPCL claimed that ECL had failed to supply coal, and consequently, the Power Plant remained idle from the month of November 2011.
7. ECL issued notice dated 16.01.2012 bearing No.ECL/GM(E&M)/Chinakuri TPS/4438 for replacing the existing 3x10 MW stoker fired boilers by 3x10 MW fluidized bed combustion boilers; and, for leasing the Power Plant for a period of twenty years on `as is where is basis'. IPCL took exception to the said notice inviting tenders and claimed that no such tenders could be invited by ECL without paying the WDV of the equipment installed and commissioned by IPCL. IPCL quantified the WDV as on 31.01.2012 at Rs.24.9682 crores.
8. The pleadings indicate that there was exchange of letters between the parties in regard to IPCL's claim and E
