Delhi High Court
Dalmia Solar Power Ltd vs Ntpc Vidyut Vyapar Nigam Ltd on 12 July, 2017
$~30
* IN THE HIGH COURT OF DELHI AT NEW DELHI
DECIDED ON : 12th JULY , 2017
+ FAO(OS) (COMM) 138/2017 & CM APPL. 24041/2017
DALMIA SOLAR POWER LTD ..... Appellant
Through : Mr.Dinesh Goyal, Advocate with
Mr.Rupesh Goyal & Ms.Smita Mohan, Advocate.
Versus
NTPC VIDYUT VYAPAR NIGAM LTD ..... Respondent
Through : Mr.M.G.Ramachandran, Advocate
with Mr.Pulkit Agarwal & Ms.Anushree Bardhan,
Advocates.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE S.P.GARG
S. RAVINDRA BHAT, J. (OPEN COURT)
1. This appeal is directed against an order of the learned Single Judge
rejecting the petition under Section 34 of the Arbitration & Conciliation
Act, 1996 (hereinafter referred as 'The Act'). The appellant had challenged
the legality of the award of the Tribunal dated 24.11.2016.
2. The appellant entered into an agreement with the respondent
(hereinafter referred as 'NVVN') pursuant to the scheme of the Union
Ministry of New and Renewable Energy which had floated the Jawaharlal
Nehru National Solar Mission. The mission proposed to purchase solar
power and power from other non-conventional sources - the NVVN was to
enter into long term agreements at a fixed tariff to be determined by the
Central Electricity Regulatory Commission. The appellant proposed to set
up a solar power plant based on an innovative technology known as Solar
Dish Sterling Engine Based Technology to be provided to it by a foreign
collaborator - M/s. Infinia Corporation, USA. The appellant approached the
Rajasthan Renewable Energy Corporation Ltd. for a long term arrangement
for supply from their intended power plant using Infinia technology. It is
stated that the corporation empanelled the appellant for purchase of the
power. The appellant opted for the National Solar Mission under the
Jawaharlal Nehru Solar Mission with the consent of the Rajasthan
Corporation and entered into a Power Purchase Agreement with NVVN on
23.07.2010. As a part of the obligations under that Power Purchase
Agreement, the appellant furnished two Performance Bank Guarantees for
`2.5 crores each on 23.07.2010 and 13.10.2010. Under the terms of the
Power Purchase Agreement, the appellant was obliged to commence power
supply from their intended power plant by 15.02.2013; NVVN was under
an obligation to purchase the power so generated @ `15.31 per KWH for
25 years. Citing insurmountable barriers in ensuring compliance with the
terms of the agreement due to commercialization of technology, the
appellant requested for permission to establish a plant based on Photo-
Voltaic (PV) Technology. It sought - as an alternative, extension of the
date of commencing of the power supply - in July 2012 and pushing the
agreed date of 15.02.2013 to later date. This request was declined by the
Central Government on 28.08.2012. The appellant could not therefore
establish the power plant and supply the power within the time agreed. The
appellant requested for withdrawal of the Performance Bank Guarantees by
NVVN. However, on 14.03.2013 NVVN stated that there was breach and
failure by the appellant in the performance of its obligations under the
agreement and proceeded to encash the bank guarantees.
3. These developments occasioned a claim to arbitration by the
appellant. It sought for a direction / award - which in fact amounted to a
claim for the return of `5 crores encashed by NVVN with interest at 18 %
per annum from 13.03.2013 till actual date of payment. The NVVN's
defence was that `5 crores forming part of the two Performance Bank
Guarantees was a genuine pre-estimation of loss likely to be incurred in the
event of appellant's non-compliance with the supply of the power under the
agreement. It was also urged that having benefited from the Power
Purchase Agreement and the underlying benefits of the scheme, the
appellant cannot characterize the encashment of `5 crores as penal. The
NVVN in other words stated that the concerned clauses enabling to encash
the bank guarantees were not penal clauses but a reasonable pre-assessment
of loss likely to be incurred in the event of breach. The award of the
tribunal, accepted the NVVN's contentions and rejected the claim for
refund of an amount of `5 crores with interest.
4. Before the learned Single Judge under Section 34, the appellant had
advanced two fold contentions - one that without proof of actual damage or
loss, the NVVN could not have legitimately encashed the bank guarantees
and that the concerned contractual terms i.e. clause 3.2.2 was in fact penal
in nature. It was further contended that the appellant also set up the plea of
impossibility - which was rejected even though no suitable pleadings were
made nor was any evidence in that regard led.
5. It is contended by Mr.Goyal, learned counsel for the appellant -
based upon the grounds urged in the appeal, that the learned Single Judge
fell into grave error in ignoring the binding decisions of the Supreme Court
in Maula Bux vs. Union of India, AIR 1970 SC 1955 and Fateh Chand vs.
Balkishan Das, AIR 1963 SC 1405. He also relied upon Kailash Nath
Associates vs. Delhi Development Authority, 2015 (4) SCC 136. It was
submitted that so far as the issue of impossibility / frustration is concerned,
there was no denial that Infinia technology was unavailable at the time of
appellant's claim - which ought to have led the Tribunal to return such a
finding.
6. Consideration of the impugned order would show that the learned
Single Judge took note of all the decisions that are cited today i.e. Maula
Bux, Fateh Chand and Kailash Nath etc. (supra). Fateh Chand and other
decisions specially Kailash Nath (supra), differentiate between two clauses
of liquidated damages in the agreement. One is of a category where the
injured party is in position to lead evidence : in such cases, subject to the
evidence led, the monetary limit or the formula to determine it, shall be the
outer cap for the damages - i.e. 'reasonable damage' not exceeding the
amount stipulated. In the other category, the Courts acknowledge that the
injured party would not be in a position to lead evidence having regard to
inherent difficulties, which the parties recognized at the time of entering
into contract. In such cases, the requirement of proof is dispensed with.
Both the tribunal and the learned Single Judge were unanimous on this issue
that the condition i.e. clause 3.2.2 in the present case, fell into the second
category where there was no need for proof of damages or actual damages.
Thus, NVVN's determination that there was no compliance with the terms
of the agreement inasmuch as the power could not be supplied by the date
agreed, ipso facto resulted in an event that enabled it to encash the Bank
Guarantees, which denoted the agreed damages. This finding is one based
upon the interpretation of the contract and having regard to the surrounding
circumstances, the Court finds no error in the award.
7. So far as the plea of impossibility is concerned, the award would
show that actual submission in this regard was made by the appellant
through its counsel. Concededly, the plea of impossibility was not set up in
the statement of claim so as to afford the respondent NVVN a chance to
reflect or apply to it. In these circumstances, the appellant's plea that the
parties were aware of the fact that the Infinia technology was no longer
available, is of no avail. Here again, the Court is conscious of the fact that
impossibility like other circumstances, has to be proved through objective
evidence and cannot be based upon a mere plea in the contents of the
pleadings or arguments in the proceedings. There is no error of law in the
award.
8. In view of the above findings, the Court is of the opinion that there is
no merit in the appeal and it is dismissed.
S. RAVINDRA BHAT
(JUDGE)
S.P.GARG
(JUDGE)
JULY 12, 2017 / tr
