Vibhu Bakhru, J
1. NTPC Vidyut Vyapar Nigam Limited (hereinafter “NVVNLâ€) has filed the present petition under Section 34 of the Arbitration and
Conciliation Act, 1996 (hereinafter the “A&C Actâ€) impugning an arbitral award dated 20.11.2020 (hereinafter “the impugned awardâ€)
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 (hereinafter “Symphonyâ€)
in connection with a Power Purchase Agreement (hereinafter the “PPAâ€) entered into between NVVNL and Symphony.
3. Essentially, the dispute between NVVNL and Symphony are centered around the question whether NVVNL is entitled to recover liquidated
damages from Symphony in terms of clause 4.6 of the PPA. NVVNL claims that it is entitled to recover ₹2,87,77,000/- (Rupees Two Crores, Eighty-
Seven Lakhs, Seventy-Seven Thousand only) as liquidated damages being 10% of the Performance Bank Guarantee furnished by Symphony, as
according to NVVNL, Symphony had failed to commission the solar power plant for generating 10 MW capacity on or before the Scheduled
Commissioning Date.
4. According to NVVNL, Symphony had commissioned 5 MW capacity on or before 26.02.2013 (the Scheduled Commissioning Date) and
commissioned the balance 5 MW on 27.02.2013. 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. Symphony disputed the aforesaid claim as according to Symphony, 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 held in favour of Symphony 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, in any event, NVVNL could not recover damages under clause 4.6 of the PPA without
establishing that it had suffered any loss.
6. Accordingly, the Arbitral Tribunal directed that the Performance Bank Guarantee furnished by Symphony 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 Symphony.
7. It is contended on behalf of NVVNL that the impugned award is patently erroneous as it is contrary to the terms of the PPA. It is contended on
behalf of NVVNL that the impugned award disregards the Minutes of the Meeting of Commissioning Committee of 25.02.2013/26.02.2013 â€" which
recorded that Symphony had electrically connected only 7.04 MW capacity as on 25.02.2013 â€" 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 “JNNSMâ€) 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 “MNREâ€)
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 Ltd; 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 and supply of
power. NVVNL issued a Request for Selection (RfS) inviting bids for setting up capacity of 350 MW of solar power. The bidders were to be selected
in decreasing order of the discount offered by them over the tariff approved by the Central Electricity Regulatory Commission (CERC).
11. Symphony submitted its response to the said RfS. Thereafter, it was issued a Request for Proposal (RfP) form. Symphony submitted the same to
NVVNL quoting a discount of 691 paisa per KWh over the CERC applicable tariff.
12. Symphony was selected as one of the successful bidders and NVVNL issued a Letter of Intent (LOI) dated 28.12.2011 accepting Symphonyâ€s
bid and further, confirmed its intent to purchase the power generated by Symphony pursuant to its proposal.
13. In terms of the LOI, Symphony was required to furnish Bank Guarantee(s) in terms of Article 3.19 of the RfS before signing of the PPA. The
Bank Guarantees were required to be valid for a period of sixteen months from the effective date of the PPA. Symphony complied with the said
condition and furnished Bank Guarantees aggregating a total sum of Rs. 28,77,70,000/- (Rupees Twenty-Eight Crores, Seventy-Seven Lacs and
Seventy Thousand only) for securing due performance of its obligations.
14. Thereafter, NVVNL and Symphony entered into the PPA on 27.01.2012. Under the PPA, the location of the power project was initially at a
village in Jaisalmer. The PPA was subsequently amended to change the location of the power project to Village Manchitiya, District Jodhpur,
Rajasthan.
15. In terms of the PPA, Symphony agreed to set up, install and commission a 10 MW capacity grid connected Solar PV Power Project using photo
voltaic technology at Village Manchitiya in Jodhpur District of Rajasthan. The power project was required to be designed, constructed, erected and
commissioned within a period of thirteen months from the effective date, that is, on or before 26.02.2013 (the Scheduled Commissioning Date).
16. It is relevant to note that in terms of the PPA, the “Commercial Operation Date†of the project was defined to mean the “actual
commissioning date of respective units of power project whereupon SPD starts injecting power from the power projects to the delivery pointâ€.
17. Symphony claims that it installed, completed and initialized a solar power plant of 10 MW capacity on 21.02.2013. It also claims that its solar
power plant was connected to the grid and was successfully generating electricity from 21.02.2013, that is, prior to the Scheduled Commissioning
Date.
18. The Commissioning Committee constituted by respondent no.2 inspected Symphonyâ€s solar power plant on 25.02.2013. It verified that Symphony
had set up modules of 10.004 MW capacity. However, it also noted in the Minutes of the Meeting prepared on that date, that 30% of the
modules/strings had not been electrically connected. According to the Commissioning Committee, only 7.04 MW capacity had been electrically
connected.
19. According to Symphony, the observations made by the Commissioning Committee were erroneous and it had installed a power plant which was
completed in all respects of a capacity of 10 MW. Symphony claimed that notwithstanding the above, it connected the balance modules and on
26.02.2013, requested the Commissioning Committee to inspect the same. Symphony claimed that although the members of the Commissioning
Committee were present at site, they declined to accede to its request of re-inspecting the plant. Thereafter, Symphony sent an email as well as a
FAX to respondent no.2; and it also served a copy of the same to the members of the Commissioning Committee requesting for an immediate re-
inspection on the plant site on 26.02.2013. Symphony claims that notwithstanding that the conclusion of the Commissioning Committee was erroneous,
it had addressed the observations made by the Commissioning Committee.
20. It is stated that the Commissioning Committee did not re-inspect the plant site on 26.02.2013 but undertook the inspection on 02.03.2013, that is,
after three days and found that Symphonyâ€s Solar Plant was complete in all respects
21. There is no controversy that as on 27.02.2013, Symphony had completed its obligations of setting up a solar power plant of 10 MW capacity.
NVVNL prepared a report dated 25.04.2013 to the effect that only 5 MW capacity had been commissioned by Symphony on 26.02.2013 and the
remaining 5 MW capacity was commissioned on 27.02.2013. Thus, according to NVVNL, Symphony had defaulted in performance of its obligations
inasmuch as it had completed the establishment of 50% of the contracted capacity (50% of 10 MW) after the Scheduled Commissioning Date, that is
26.02.2013.
22. According to NVVNL, it is entitled to claim liquidated damages in terms of Article 4.6 of the PPA and it sought to recover the same by invoking
the Performance Bank Guarantees furnished by Symphony.
23. In the aforesaid backdrop, Symphony filed a petition under Section 9 of the A&C Act (OMP No. 461/2013) seeking an injunction against NVVNL
from invoking the Bank Guarantees furnished by it.
24. This Court by an order dated 07.05.2013 passed an ad interim order restraining NVVNL from invoking the Bank Guarantees and further directed
that status quo be maintained.
25. Since NVVNLâ€s limited case was that Symphony had delayed completion of the project to the extent of 5 MW, the damages payable under
Article 4.6.1 of the PPA could in any event, not exceed 10% of the total Bank Guarantee amount (being in proportion of the capacity that was
delayed, that is 50%, of the 20% of the bank guarantee amount that could be enforced for the delay). Accordingly, this Court by an order dated
24.05.2013 directed that the interim order passed earlier (order dated 07.05.2013) interdicting NVVNL from invoking the Bank Guarantee would
continue subject to NVVNL keeping alive the Bank Guarantee to the extent of 10% of the total Bank Guarantee amount.
26. In terms of the aforesaid order, Symphony amended the original Bank Guarantees furnished by it by reducing the amount to Rs. 2,87,77,000/-
(Rupees Two Crores Eight-Seven Lacs and Seventy-Seven Thousand only). The said amended Performance Bank Guarantee (Performance Bank
Guarantee No. 05731LGOO1412 dated 27.05.2013 for a sum of Rs. 2,87,77,000/- issued by Punjab National Bank, Park Street, Kolkata) was kept
alive by Symphony during the arbitral proceedings.
27. Symphonyâ€s petition under Section 9 of the A&C Act (OMP No. 461/2013) was disposed of by this Court by an order dated 16.10.2014
directing NVVNL to give at least three days clear notice if it chose to invoke the Bank Guarantee.
28. Thereafter on 20.10.2014, NVVNL issued a letter seeking to invoke the Bank Guarantee. This led Symphony to approach the Arbitral Tribunal for
seeking interim measures of protection under Section 17 of the A&C Act. The Arbitral Tribunal passed an order dated 30.10.2014 restraining
NVVNL from invoking the Bank Guarantee and the said order was extended from time to time.
29. In the aforesaid context, Symphony filed its Statement of Claims before the Arbitral Tribunal, inter alia, praying for a declaration that its solar
power plant was commissioned on 26.02.2013 and seeking a direction to respondent no.2 to issue a Commissioning Certificate certifying 26.02.2013 as
the date of commissioning of its plant (Claim Nos. 1 and 2). Symphony further prayed that a direction be issued to NVVNL for release of its Bank
Guarantee (Claim No. 3). Symphony also sought reimbursement of expenses incurred in keeping the Performance Bank Guarantee alive for the
period beyond 16.05.2014, which it quantified at Rs. 2,99,206/-(Claim No.4). In addition, Symphony also claimed Rs. 20,11,952/- as litigation expenses
incurred by it in pursuing OMP No. 461/2013 before this Court (Claim No.5) and costs of the arbitral proceedings (Claim No.6). It also sought
pendente lite and future interest at the rate of 18% per annum on the amounts claimed.
30. The Arbitral Tribunal considered the rival contentions; evaluated the material placed before it; and delivered the impugned award directing release
of the Bank Guarantee. Further, the Arbitral tribunal also awarded costs quantified at Rs. 1,08,66,000/- in favour of Symphony. The Arbitral Tribunal
directed NVVNL to pay the awarded amount to Symphony within a period of four weeks from the receipt of the impugned award failing which it
would also be liable pay interest at the rate of 9% after the four weeks period till realization of the amount by Symphony.
Submissions
31. Mr Biswas, learned counsel appearing for NVVNL has assailed the impugned award on, essentially, three fronts. First, he referred to Clause 4.1.1
of the PPA and emphasized that Symphony was obliged to commence supply of power up to the contracted capacity to NVVNL no later than the
Schedule Commissioning Date. He referred to the Minutes of the Meeting of the Commissioning Committee dated 25.02.2013 - 26.02.2013, whereby
the Commissioning Committee had observed that “Modules of only 7.04 mw capacity were electrically connected …â€. He submitted that in view
of the said report, the decision of the Arbitral Tribunal that Symphony had performed its obligation by installing and commissioning a 10 MW solar
power plant on or before the Schedule Commissioning Date of 26.02.2013, is patently illegal. He also submitted that Symphonyâ€s witness had
admitted that “few of the strings were not electronically connected on 25.02.2013†and therefore, the observations made by the Commissioning
Committee could not be faulted.
32. Second, he submitted that the Arbitral Tribunal had also grossly erred in holding that liquidated damages were not a matter of right and NVVNL
was required to prove that it had suffered a loss. He submitted that electrical power was a public utility and therefore, it was not necessary for
NVVNL to prove the quantum of damages suffered by it with any precision. He referred to the decision of the Supreme Court in Construction and
Design Services v. Delhi Development Authority: (2015) 14 SCC 263 and the decisions of this Court in NTPC Vidyut Vyapar Nigam Limited v.
Saisudhir Energy Limited: FAO (OS) 275 and 281 of 2016, decided on 18.01.2018 and NTPC Vidyut Vyapar Nigam Ltd v. Precision Technik Pvt.
Ltd.: 2018 SCC OnLine Del 13102.
33. Third, he submitted that the award of cost of Rs. 1,08,66,000/- in favour of Symphony is without any basis or any material and therefore, it is liable
to be set aside.
34. Ms Mamta Tiwari, learned counsel appearing for Symphony countered the aforesaid submissions. She also referred to an affidavit filed in this
Court affirming that on 06.12.2019, Symphony had forwarded the details of payment made to the Arbitral Tribunal. This was in context of the costs of
the arbitral proceedings claimed by Symphony. Thereafter, a hard copy of the Statement of Costs was also handed over to the Arbitral Tribunal at the
hearing on 21.12.2019. Symphony claimed that it had incurred costs of Rs. 1,08,66,600/- as on that date which included arbitration fees of Rs.
77,50,000/-; travelling expenses of Rs. 4,91,425/- and legal and consultancy fees of Rs. 26,25,175/-. She stated that on that date, the Arbitral Tribunal
passed an order directing the parties to make payments for further four hearings and Symphony had incurred further costs of Rs. 8,00,000/- as fees to
be paid to the Arbitral Tribunal. She submitted that the Arbitral Tribunal had awarded costs on the basis of the statement handed over on 21.12.2019
and had ignored the fee paid for subsequent hearings. She also pointed out that the total fees was twice the amount, but had been split between two
matters which were being pursued simultaneously.
Reasons and Conclusion
35. The Arbitral Tribunal had considered the pleadings and had framed the following issues for consideration:
“l. Whether Rajasthan Renewable Energy Corporation Limited (Respondent No.2) is party to the Arbitration?
2. Whether the Solar Power Project was fully completed in all aspects on/before 26.02.2013?
3. Whether Respondent No.1 has rightly invoked the bank guarantee or should he be directed to release the same?
4. Whether any actual loss was suffered by Respondent No.1?
5. Whether Article 4.6 of the PPA is penal or not?
6. Whether the claimant can be held liable for delay caused due to acts of a third Party?
7. Whether the Claimant is entitled to receive any amounts as mentioned in its claims?
8. Whether either Party is entitled to costs of the present Arbitration?â€
36. The disputes between the parties are centered around the question whether Symphony had completed the solar power project in all respects on or
before 26.02.2013 (the Scheduled Commissioning Date). Symphony claimed before the Arbitral Tribunal that it had, in fact, commissioned the solar
power project to its full capacity before 26.02.2013 and was not liable to pay any damages. Concededly, if the project had been completed as asserted,
NVVNL would have no ground to levy any damages. According to NVVNL, Symphony had commissioned only 5MW capacity as on 26.02.2013 and
had commissioned the balance 5MW on the next date, that is on 27.02.2013. NVVNL claimed that on account of the said delay, it was entitled to
claim damages to the extent of Rs. 2,87,77,000/- in terms of Article 4.6.1 of the PPA.
37. The Arbitral Tribunal evaluated the evidence and material on record and found in favour of Symphony that it had fully commissioned its plant
before 26.02.2013. The Arbitral Tribunal relied on the connectivity report dated 21.02.2013 and found that Symphonyâ€s solar plant had generated
electricity and was connected to the grid on 21.02.2013. The relevant extract of the impugned award reads as under:
“21. We have carefully considered submissions of both the parties and decide as follows:
It is evident from the connectivity report dated 21.02.2013 that the Solar Plant was generating electricity and was connected to the grid. Even if the
alleged incorrect observation by the Commission Committee that 30% of the modules are not connected is deemed to be correct, in order to avoid any
confusion and to remove any and all doubts, the modules were once again stringed and connected by the Claimant on 26.02.2013. The delay in
certifying on the commissioning date is not attributable to the Claimant but to the Commissioning Committee, of which the officers of Respondent No 1
were a part, which refused to re-inspect the plant on 26.02.2013 despite being present on the site, as admitted by the Respondent No. l. The decision
of the Commission Committee of not re-inspecting the Plant, even though they were still at the plant, at the requests of the Claimant was wrong and
without any valid ground.
22. Hence, we are deciding this issue in favour of the Claimant and we are, therefore, holding that the solar power plant was complete in all respects,
in terms of the PPA, on 26.02.2013 and hereby direct Respondent No. 2 to issue the Commissioning Certificate, certifying 26.02.13 as the date of
commissioning of the Solar Power Plant of the Claimant.â€
38. Mr Biswas contended that the finding of the Arbitral Tribunal is erroneous and the impugned award was liable to be set aside. The said contention
is unmerited. Without going into the question of whether the finding is erroneous, it is well settled that a challenge to the Arbitral Tribunalâ€s finding of
fact as erroneous, is not the ground for setting aside an arbitral award. The scope of challenge under Section 34 of the A&C Act is narrow and unless
it is found that the arbitral award is “vitiated by patent illegality appearing on the face of award†or that it is in “conflict with the public policy
of Indiaâ€; it cannot be interfered with. In the present case, there is no controversy that the claim made by Symphony was arbitrable; and the Arbitral
Tribunal was duly constituted; and had the jurisdiction to adjudicate the claim.
39. In Associate Builders v. Delhi Development Authority: (2015) 3 SCC 49, the Supreme Court had authoritatively held that:
“It must clearly be understood that when a court is applying the ""public policy"" test to an arbitration award, it does not act as a court of appeal and
consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the
ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or
on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once it is found that the
arbitrators approach is not arbitrary or capricious, then he is the last word on facts.â€
40. In Dyna Technologies Private Limited v. Crompton Greaves Limited: (2019) 20 SCC 1, the Supreme Court had held that the courts would not
interfere “unless the Court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of
alternative interpretation which may sustain the arbitral awardâ€.
41. In view of the above, the Arbitral Tribunalâ€s decision to enter an award for release of the Bank Guarantee, sought to be encashed by NVVNL to
recover liquidated damages in terms of Article 4.6 of the PPA, cannot be faulted.
42. The Arbitral Tribunal also held that in the present case, NVVNL had suffered no loss and therefore, was not entitled to recover any damages. In
view of the conclusion that there was no breach on the part of Symphony, the question of levying any damages does not arise. In this view, the
question whether the levy of damages as contemplated under Article 4.6 of the PPA is in the nature of penalty or a genuine pre-estimate of damages
is academic.
43. The Arbitral Tribunal also concluded that NVVNL had not suffered any actual damages or losses as the State Transmission Utility (STU) was not
ready to transmit 40 megawatts â€" which was the cumulative power contracted to be generated from the Symphonyâ€s power plant and three other
similarly placed power plants â€" as the second transformer necessary to transmit the said electricity was not set up till 13.03.2013.
44. Mr Biswas referred to the decision of the Supreme Court in M/s Construction and Design Services v. Delhi Development Authority (supra) and
on the strength of the said decision, contended that it was not necessary for NVVNL to prove actual damages since the contract was for provision of
a public utility. It is well settled that in case of contracts pertaining to public utilities, it is difficult to quantify the damages with any precision and
therefore, it may not be necessary for the same to be proved. In such cases, it is assumed that a breach on the part of a party contracted to execute
works in respect of such utilities results in a loss. However, this presumption is rebuttable and does not preclude the party against whom claim of
damages is made from establishing that no loss had been caused on account of its acts. In the present case, NVVNL does not dispute that the STU
was not in a position to transmit the electricity as contracted from the four solar power plants in the region as there was some delay in setting up the
second transformer (which was set up on 13.03.2013). And, even according to NVVNL, Symphony had established and commissioned the power
plant on 27.02.2013.
45. The contention that the award of cost is without any basis, is also unmerited. The Arbitral Tribunal had examined the claims of Symphony as well
as claims of Lexicon Vanijya Private Limited (Lexicon) which were the subject matter of separate reference. Both the arbitration proceedings (one
relating to disputes raised by Symphony and the other raised by Lexicon) were conducted simultaneously.
46. The claims on behalf of Symphony and Lexicon were pursued by the same set of counsel and it is not disputed that an affidavit was furnished to
the Arbitral Tribunal setting out the cost incurred and allocating them equally amongst the two cases. Admittedly, a sum of Rs. 1,55,00,000/- had been
paid to the Arbitral Tribunal as on 21.12.2019 by the claimants (Symphony and Lexicon). The said fees were, accordingly, split between both the
cases. Thus, the cost awarded to Symphony includes Rs. 77,50,000/- paid as fees to the Arbitral Tribunal. Similarly, the travelling expenses and legal
consultancy fees were also split and the cost awarded to Symphony includes Rs. 4,91,425/- as travelling expenses and Rs. 26,25,175/- as legal and
consultancy fees incurred by it.
47. Indisputably, the said fees are reasonable and this Court finds no ground to interfere with the award of cost.
48. The questions raised by NVVNL in this petition are identical to the questions raised by NVVNL in OMP(COMM) 163/2021; NTPC Vidyut
Vyapar Nigam Limited v. Lexicon Vanijya Private Limited, which was dismissed by this Court on 02.08.2021. The impugned award is also similarly
worded as the one impugned in that case and the decision in that case squarely covers all contentions raised in the present petition.
49. In view of the above, the petition is dismissed. The pending application is also disposed of.
