Delhi High Court
Dde Renewable Energy Pvt. Ltd. vs Ntpc Vidyut Vyapar Nigam Limited on 6 July, 2022
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 6th July, 2022
+ O.M.P.(COMM.) 317/2020
M/S NTPC VIDYUT
VYAPAR NIGAM LTD. ..... Petitioner
versus
M/S DDE RENEWABLE ENERGY PVT. LTD. ..... Respondent
Advocates who appeared in this case:
For the Petitioner : Mr. Bharat Sangal, Sr. Adv. with Mr. R R
Kumar & Ms. Babita Kushwaha, Advs.
For the Respondents : Mr. Deepak Khurana, Mr. Vineet Tayal &
Ms. Nishtha Wadhwa, Advs.
AND
+ O.M.P. (COMM). 374/2020
DDE RENEWABLE ENERGY PVT. LTD. ......Petitioner
versus
NTPC VIDYUT
VYAPAR NIGAM LTD. ......Respondent
Advocates who appeared in this case:
For the Petitioner : Mr. Deepak Khurana, Mr. Vineet Tayal &
Ms. Nishtha Wadhwa, Advs.
For the Respondents : Mr. Bharat Sangal, Sr. Adv. with Mr. R R
Kumar & Ms. Babita Kushwaha, Advs
CORAM
HON'BLE MR JUSTICE VIBHU BAKHRU
Signature Not Verified
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By:Dushyant Rawal O.M.P.(COMM.) 317/2020 & O.M.P. (COMM.) 374/2020 Page 1 of 27
Signing Date:06.07.2022
JUDGMENT
VIBHU BAKHRU, J
INTRODUCTION
1. The parties have filed the present petitions under Section 34 of
the Arbitration and Conciliation Act, 1996 (hereinafter 'the A&C
Act') impugning an arbitral award dated 21.10.2019 (hereinafter 'the
impugned award') delivered by an Arbitral Tribunal comprising of
Justice (Retd.) G.N. Ray, Justice (Retd.) Usha Mehra, and Justice
(Retd.) G.B. Patnaik as the Presiding Arbitrator (hereinafter 'the
Arbitral Tribunal').
2. The impugned award was rendered in the context of disputes
that have arisen between the parties in connection with a Power
Purchase Agreement dated 10.01.2011(hereinafter 'the Agreement').
THE CONTROVERSY
3. The controversy in the present petition relates to the question
whether there was any delay on the part of DDE Renewable Energy
Pvt.Ltd. (hereinafter 'DDE') in complying with its obligations under
the Agreement and whether it was liable to pay liquidated damages for
the said delay, if any. In addition, NTPC Vidyut Vyapar Nigam
Limited (hereinafter 'NVVNL') had also claimed compensation for
shortfall in supply of solar power, which was disputed by DDE.
4. The Arbitral Tribunal found that there was a delay of one day in
commissioning the solar project and DDE was liable to pay liquidated
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damages quantified at 20% of the aggregate amount of the
performance bank guarantees. The Arbitral Tribunal further found
that DDE was not liable to pay any compensation for any shortfall in
supply of energy.
5. Both the parties are aggrieved by the finding of the Arbitral
Tribunal regarding the delay in commissioning of the solar power
project and the consequent decision regarding levy of liquidated
damages. According to NVVNL, the delay is in excess of one month
and DDE is liable to pay an additional 40% of the aggregate amount
of the Performance Bank Guarantees as liquidated damages.
According to DDE, there is no delay in commissioning the solar
project in question and therefore, it is also aggrieved by the impugned
award. In addition, NVVNL is aggrieved by the decision of the
Arbitral Tribunal in absolving DDE of any liability on account of
shortfall in supply of solar power. Thus, both the parties have assailed
the impugned award to the extent that they are aggrieved.
FACTUAL CONTEXT
6. In the month of July 2010, the Ministry of New & Renewable
Energy, Government of India (hereinafter 'MNRE') issued certain
guidelines for the selection of new grid connected solar power
projects. NVVNL was selected as a nodal agency for arranging and
purchasing solar power from Solar Power Developers (hereinafter
'SPD' in singular and 'SPDs' in plural).
7. On 18.08.2010, NVVNL issued a request for selection
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(hereafter 'RFS'), which was followed by a request for proposal
(hereafter 'RFP') on 29.10.2010.
8. Pursuant to the said RFP, DDE (a SPD) submitted its bid for
establishing a solar power project and supplying power. DDE's bid
was accepted and NVVNL issued a Letter of Intent dated 11.12.2010
(hereinafter 'the LoI') accepting DDE's proposal to set up the power
project at Village Askandra, Tehsil Nachna in District Jaisalmer,
Rajasthan.
9. Thereafter, on 10.01.2011, the parties entered into the
Agreement. In terms of the Agreement, DDE agreed to set up a "Solar
Power Project based on Advanced Technology of 5 MW capacity"
(hereinafter 'the Power Project') and supply power for a period of
twenty-five years commencing from the Commercial Operation Date
(hereinafter 'COD') of the Power Project.
10. In terms of the Agreement, the Scheduled Commissioning Date
(hereinafter 'SCD') was stipulated as 09.01.2012.
11. The Agreement also required DDE to furnish Performance
Bank Guarantees (hereinafter also referred to as 'the PBG'). It was
further agreed that in the event there was a failure on the part of DDE
to commission the Power Project by the SCD (that is, on or before
09.01.2012), NVVNL would have the right to levy liquidated damages
in a phased manner and recover the damages by invoking the PBG. In
terms of the Agreement, DDE furnished the following Bank
Guarantees:-
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(i) Bank Guarantee No. 46151LG000411 for ₹2,42,63,000/-
representing 20% of the total PBG, dated 05.01.2011
drawn on Punjab National Bank, New Delhi;
(ii) Bank Guarantee No. 46151LG000511 for ₹4,85,26,000/-
representing 40% of the total PBG, dated 05.01.2011
drawn on Punjab National Bank, Delhi;
(iii) Bank Guarantee No. 46151LG000611 for ₹4,85,26,000/-
representing 40% of the total PBG, dated 05.01.2011
drawn on Punjab National Bank, Delhi.
12. Further, in terms of the Agreement, DDE, at its own risk and
cost, was required to supply power at the Delivery Point and enter into
a transmission agreement with the State Transmission Utility
(hereinafter 'STU') for "evacuation and connectivity of the STU
system upto the delivery point of SPD by the Scheduled
Commissioning Date".
13. On 06.07.2011, DDE entered into a Transmission Agreement
with the concerned STU - Rajasthan Rajya Vidyut Prasaran Nigam
Ltd. (hereafter 'RRVPNL') - whereby RRVPNL also agreed to
construct a 132 KV transmission line one month prior to the SCD. The
power generated was to be used by NVVNL for further sale to
Distribution Companies (DISCOMS) under a Power Sale Agreement
(hereinafter 'PSA') entered into between NVVNL and DISCOMS on
10.01.2011. DDE states that evacuation of the power was dependent
upon the transmission line being completed by RRVPNL.
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14. According to DDE, RRVPNL failed to construct the 132 KV
transmission line within the stipulated period due to unrest created by
the local public relating to the issue regarding Right of Way (RoW).
15. It is further claimed by DDE that as a measure of mitigation,
Jodhpur Vidyut Vitaran Nigam Ltd., the local DISCOM, permitted
DDE to temporarily connect the Project by a 33 KV line to an existing
33 KV Sub-station at Village Chandasar, District Jaisalmer. DDE
claims that by 10.01.2012, it had constructed and commissioned the
Power Project.
16. Thereafter, on 16.01.2012, the Office of Superintending
Engineer (RDPPC), Jodhpur DISCOM issued a certificate to DDE
certifying that it had successfully commissioned the Power Project by
10.01.2012.
17. DDE claims that the supply of power from the Power Project
commenced from 11.01.2012 till 14.02.2012 - which was the new
commissioning date ascertained by the Review Committee of the
MNRE - NVVNL purchased power from DDE and paid tariff at the
rates specified in the Agreement. The said tariff was applicable only if
the Power Project was commissioned by DDE.
18. DDE states that on 06.02.2012, in anticipation of completion of
the 132 KV transmission line, NSPPL installed and connected
equipment modules aggregating 5 MW capacity.
19. Thereafter, by letters dated 14.02.2012 and 15.02.2012, DDE
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informed the MNRE and Rajasthan Renewable Energy Corporation
Limited (RRECL) that it had commissioned the Power Project but due
to the failure on the part of RRVPNL to complete the 132 KV
transmission line, it was unable to evacuate the entire power that could
be generated form the Power Project.
20. By a letter dated 27.02.2012, RRECL informed DDE regarding
the guidelines dated 24.02.2012 issued by the MNRE concerning the
commissioning of solar power plants.
21. In view of the guidelines issued by the MNRE regarding the
commissioning of solar power plants, NVVNL invoked Clause 4.6.1
of the Agreement and invoked the PBG to the extent of 20% for not
commissioning the Power Project on or before 09.01.2012. DDE paid
the said amount.
22. Thereafter, NVVNL sought invocation of the PBG to a further
extent of 40% as, according to NVVNL, there was a delay of thirty-six
days in commissioning the Power Project. Aggrieved by this action,
on 01.05.2012, DDE filed an application (being O.M.P No. 415 of
2012) under Section 9 of the A&C Act before this Court seeking an
order restraining NVVNL from encashing the PBG. By an order dated
01.05.2012, this Court directed the parties to maintain status quo
regarding the PBG (the remaining two guarantees). By an order dated
03.09.2012, this Court modified the aforesaid order and allowed DDE
to keep one of the bank guarantees alive.
23. By a letter dated 10.09.2012, DDE invoked the Arbitration
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Clause as included in the Agreement. And, the Arbitral Tribunal was
constituted.
ARBITRAL PROCEEDINGS
24. Before the Arbitral Tribunal, DDE filed its Statement of Claims.
The claims made by DDE in its Statement of Claims are set out below:
"A. A declaration that the Report of the Committee
constituted by Ministry of New and Renewable Energy, Govt.
of India determining the date of commissioning of the project of
the Claimant Company as 14.2.2012, under the PPA is
erroneous, baseless and arbitrary;
B. An order quashing the Report of the Committee
constituted by Ministry of New and Renewable Energy, Govt.
of India determining the date of commissioning of the project of
the Claimant Company as 14.2.2012;
C. A declaration that the claimant company has
commissioned its project within the stipulated time under the
PPA and no Liquidated Damages can be levied by the
Respondent under the PPA;
D. A declaration that Clause 4.6 of the PPA, which provides
for Liquidated Damages, is invalid and is of no effect as being
contrary to the provision of Section 74 of the Contract Act,
1872;
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E. A declaration that the Respondent has illegally, and
wrongfully imposed Liquidated Damages to the tune of
Rs.2,42,63,000/- under the PPA;
F. An order directing the Respondent to refund the amount
of Rs.2,42,63,000/- along with interest @ 18% per annum from
the date of payment i.e. 16.02.2012 till the date of realization to
the Claimant Company;
G. Permanent order restraining the Respondent from
invoking the Bank Guarantee No.44371LG000511 furnished by
Claimant Company;
H. Payment of an amount of Rs.4,51,02,750/- (Rupees Four
Crores Fifty One Lacs Two Thousand and Seven Hundred
and Fifty Only) as loss suffered by the Claimant Company due
to delayed performance of obligations under the PPA as detailed
in paragraph 59 above;
I. A declaration that the demand of Rs.23,94,534/- (Rupees
Twenty Three Lacs Ninety Four Thousand Five Hundred
Thirty Four Only) made by the Respondent vide letter dated
12.08.2015 on account of compensation for the alleged short
supply of 829276 KWH of energy in the Contract Year 2011-
2012 (i.e. 10.01.2012 to 31.03.2012) is invalid, non-est and
illegal;
J. Permanently restrain the Respondent from acting in any
manner 111 furtherance of the letter dated 12.08.2015 including
but not limited to deducting/setting off/adjusting a sum of
Rs.23,94,534/- (Rupees Twenty Three Lacs Ninety Four
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Thousand Five Hundred Thirty Four Only) or any part
thereof on account of alleged compensation for the alleged short
supply of 829276 KWH of energy in the Contract Year 2011-
2012 (i.e. 10.01.2012 to 31.03.2012) from any of the future
invoices raised by the Claimant under the PPA;
K. A declaration that the demand of Rs.25,07,259/- (Rupees
Twenty Five Lacs Seven Thousand Two Hundred and Fifty
Nine Only) on account of sale of infirm power, transmission
losses admitted by RDPCC and compensation for short supply
of energy in the Contract Year 2012-2013 is invalid, non-est
and illegal;
L. Direct the Respondent to refund an amount of
Rs.25,07,260/- (Rupees Twenty Five Lacs Seven Thousand
Two Hundred Sixty Only) illegally deducted from December,
2013 bill payment on account of sale of infirm power,
transmission losses admitted by RDPCC and compensation for
short supply of energy in the Financial Year 2012-13 along with
interest @18% per annum from 04.03.2014 till the date of
realization of the same;
M. The entire cost of arbitration proceedings and other legal
cost;
N. Any other relief which this Hon'ble Tribunal deems fit
and proper."
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25. One of the principal disputes before the Arbitral Tribunal was
regarding the date of commissioning of the Power Project.
26. NVVNL stated that the date of commissioning ought to be
considered as the date on which the project capacity was installed and
not the date on which energy had flown into the grid. Before the
Arbitral Tribunal, NVVNL relied upon the report of the Committee set
up by the MNRE by its letter dated 27.02.2012. The Committee had
concluded that "a solar PV project will be considered as
commissioned if all equipment as per rated project capacity has been
installed and energy has flown into the grid". According to NVVNL,
the date of commissioning the Power Project was 14.02.2012 as
determined by the said Committee.
27. DDE disputed the same. According to DDE, it had
commissioned the Power Project on 10.01.2012. It relied upon the
report of the Committee of four officers constituted by the Office of
the Superintending Engineer (RDPPC) by an Office Order dated
06.01.2012, as well as the Commissioning Certificate dated
16.01.2012 issued by the Office of the Superintending Engineer
(RDPCC). On the strength of the said documents, DDE claimed it had
commissioned the Power Project on 10.01.2012 - the stipulated
Commissioning Date - and therefore, was not liable to pay any
liquidated damages to NVVNL in terms of Clause 4.6.1 of the
Agreement.
28. However, according to NVVNL, the delay in commissioning
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was over one month and therefore, DDE was liable to pay liquidated
damages at the rate of 20% of the total PBG for the first one month
and, further 40% of the total PBG for the delay beyond a period of one
month.
29. The second controversy before the Arbitral Tribunal related to
the short supply of power during the contract year 2011-12 and 2012-
30. NVVNL had deducted a sum of ₹25,07,260/- as compensation
towards short supply of power and transmission lost during the
Contract Year 2012-13 and, a further sum of ₹23,94,534/- for short
supply of power for the Contract Year 2011-12 (10.01.2012 to
31.03.2012).
31. The said deductions were made belatedly. The deduction for the
Contract Year 2012-13 was communicated by a letter dated
16.04.2014, and deduction for the year 2011-12 was communicated by
a letter dated 12.08.2015.
32. According to DDE, the deduction of ₹25,07,260/- was illegal as
the shortfall was not for reasons solely attributable to DDE. It claimed
that the shortfall was principally on account of non-commissioning of
the 132 KV line for transmission by the STU (RRVPNL). Inter-se
NVVNL and DISCOMS, NVVNL had also disputed that any amount
was payable to DISCOMS on account of shortfall in supply of power.
33. NVVNL claimed that DDE was responsible for the delay in
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construction of the 132 KV transmission line. Merely because DDE
had engaged RRVPNL for constructing the 132 KV transmission line
did not absolve DDE's responsibility for the same. It was contended
on behalf of NVVNL that RRVPNL was engaged as an EPC
Contractor by DDE and NVVNL was not concerned with the mode
and method in which the transmission line was constructed.
34. The Arbitral Tribunal found that the date of commissioning of
the Power Project was 11.01.2012, that is, the date on which the power
was first supplied to the grid. The Arbitral Tribunal rejected the
contention that the definition of 'commissioning' as provided by the
Committee constituted by the MNRE was required to be followed. It
held that the said Committee had been constituted after the parties had
entered into the Agreement and therefore, the said definition was not
binding. However, it did not accept DDE's contention that it had
commissioned the Power Project on 10.01.2012. The Arbitral
Tribunal held that the object of commissioning is to effect safe and
orderly handover of the unit from the contractor to the owner
guaranteeing its operability in terms of performance reliability and
safety. Thus, it would be appropriate that the date on which the power
is generated and injected into the grid be taken as the date of
commissioning of the Power Project. The Arbitral Tribunal found that
DDE had injected power into the grid on 11.01.2012 and therefore,
determined that date as the date of commissioning of the Power
Project.
35. Accordingly, the Arbitral Tribunal held that in terms of Clause
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4.6.1 of the Agreement, DDE was liable to pay compensation to the
extent of 20% of the total PBG for the delay of one day in
commissioning the Power Project. Since DDE had paid the said
amount, albeit under protest, the Arbitral Tribunal held that there was
no question of NVVNL refunding the same.
36. In view of the Arbitral Tribunal's finding that the Power Project
was commissioned on 11.01.2012, NVVNL's claim for further
liquidated damages computed at 40% of the PBG was rejected.
37. Insofar as the payment regarding shortfall for supply of power
is concerned, the Arbitral Tribunal held that DDE was not solely
responsible for the same and therefore, no such compensation was
payable. Accordingly, the Arbitral Tribunal awarded a sum of
₹25,07,260/-, which was deducted by NVVNL, in favour of DDE
along with interest at the rate of 18% per annum from the date of
deduction till the date of payment of the amount, if the same was not
refunded within a period of one month from the date of the award.
38. In view of the aforesaid findings, the Arbitral Tribunal rejected
NVVNL's claim for a further amount of ₹23,94,534/- as compensation
for short supply of power during the Contract Year 2011-12.
39. DDE's claim for compensation on account of loss suffered to
the extent of ₹4,51,02,750/- was rejected.
SUBMISSIONS
40. Mr. Sangal, learned senior counsel appearing for NVVNL, has
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assailed the impugned award on, essentially, two fronts. First, he
submitted that the Arbitral Tribunal has grossly erred in ignoring the
language of Clause 4.6.1 of the Agreement. He submitted that Clause
4.6.1 of the Agreement provided for liquidated damages for delay in
commencement of supply of power and "making the Contracted
Capacity available" but the Arbitral Tribunal had completely ignored
the said language. It had interpreted Clause 4.6.1 of the Agreement as
providing for liquidated damages for the delay in commissioning and
not in making the contracted capacity available.
41. Second, he submitted that the Arbitral Tribunal had grossly
erred in denying NVVNL's claim for shortfall of supply of power on
account of delay in commissioning the transmission lines. He
submitted that in terms of the Agreement, DDE was responsible for
supply of power to the point of delivery. It had engaged RRVPNL as
a contractor for setting up the line along with the other SPDs.
However, it continued to be responsible for delivery of the power at
the delivery point. He submitted that the Arbitral Tribunal had grossly
erred in not appreciating that the Agreement required DDE to enter
into a transmission agreement with the STU (RRVPNL in this case)
for evacuation of power to the grid; it did not contemplate the STU to
be appointed as an executing agency for construction of transmission
line till the point of delivery.
42. Mr Khurana, learned counsel appearing for DDE, countered the
aforesaid submissions. He has also assailed the impugned award to
the extent the Arbitral Tribunal held that the date of commissioning of
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the Power Project was 11.01.2012. He submitted that in fact the
Power Project was commissioned on 10.01.2012. He submitted that
the Office of Superintending Engineer (RDPCC) had issued the Solar
PV Power Generation Project - Commissioning Certificate dated
16.01.2012 certifying that DDE had "successfully commissioned 01
No.X 05 MW Solar PV Power Generation Project having
CRYSTALLINE PV TECHNOLOGY at Village Askandra, Tehsil
Nachana & District - Jaisalmer on dated 10th Jan'2012.". He stated
that this certificate was not challenged and therefore, the Power
Project was commissioned on 10.01.2012. He contended that the
Arbitral Tribunal's decision that injection of power into the grid was
necessary for commissioning of the Project is, ex facie, erroneous.
REASONS AND CONCLUSION
43. As is apparent from the above, the controversy in the present
case is twofold. The first relates to the levy of liquidated damages
under Clause 4.6.1 of the Agreement. And, the second relates to levy
of compensation under Clause 4.4.1 of the Agreement.
44. Clause 4.6.1 of the Agreement provides for liquidated damages
for delay in commencement of supply of power to NVVNL. The said
clause is relevant and set out below:
"4.6 Liquidated Damages for delay in
commencement of supply of power to NVVN
4.6.1 If the SPD is unable to commence supply of
power to NVVN by the Scheduled
Commissioning Date other than for the reasons
specified in Article 4.5.1, the SPD shall pay to
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NVVN, Liquidated Damages for the delay in such
commencement of supply of power and making
the Contracted Capacity available for dispatch by
the Scheduled Commissioning Date as per the
following:
a. Delay upto one (1) month - NVVN will
encash 20% of total Performance Bank
Guarantee.
b. Delay of more than one (1) month and upto
two months - NVVN will encash another
40% of the total Performance Bank
Guarantee.
c. Delay of more than two and upto three
months - NVVN will encash the remaining
Performance Bank Guarantee.
4.6.2 In case the commissioning of Power Project is
delayed beyond three (3) months, the SPD shall
pay to NVVN, the Liquidated Damages at rate of
Rs 1,00,000/- per MW per day of delay for the
delay in such commissioning. Provided that the
SPD shall be required to make such payments to
NVVN in advance on a week to week basis for
the period of delay."
45. It is relevant to note that the question whether the said amount
of liquidated damages is a genuine pre-estimate of damages is no
longer res integra. In NTPC Vidyut Vyapar Nigam Limited v. M/s
Saisudhir Energy Limited: FAO (OS) No. 275/2016, decided on
18.01.2018, this Court held that the liquidated damages as mentioned
in Clause 4.6 of the Power Purchase Agreement are a genuine pre-
estimate of damages. Mr. Khurana also did not seriously dispute that
the liquidated damages as provided under Clause 4.6.1 of the
Agreement would be leviable for any delay in completing the Power
Project beyond the Scheduled Commissioning Date (SCD). He,
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however, submitted that in view of the said decision, damages should
be pegged at ₹1,00,000/- per MW per day for the entire period and the
liquidated damages quantified at 20% of the aggregate bank
guarantees for a delay of one day, is excessive.
46. The said contention is unpersuasive. A plain reading of the
judgment in NTPC Vidyut Vyapar Nigam Limited v. M/s Saisudhir
Energy Limited (supra) indicates that the observations of the Court to
peg damages at ₹1,00,000/- per MW per day were in the context of
Clause 4.6.2 of the relevant Power Purchase Agreement (which is
similarly worded as the Agreement). However, the finding that the
amount provided in Clause 4.6 of the Power Purchase Agreement was
a genuine pre-estimate damage would apply to Clause 4.6.1 of the
Agreement as well.
47. The Arbitral Tribunal did not accept DDE's contention that the
Certificate of Commissioning dated 16.01.2012 was conclusive as the
Arbitral Tribunal held that the matter as to the date of commissioning
of the Power Project was a contractual matter and not a regulatory
one. Therefore, the date of commissioning of the Power Project for the
purpose of applying Clause 4.6.1 of the Agreement was required to be
considered based on the contract between the parties and not on the
basis of any certificate issued for the purpose of synchronization of the
power plant for transmitting the solar power.
48. The expression 'commissioning' is not defined under the
Agreement; therefore, the Arbitral Tribunal was of the view that the
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meaning of the expression 'commissioning' as normally understood in
common parlance was applicable. The Arbitral Tribunal found that
commissioning of the Power Plant would require injection of power to
the power grid. Since DDE had injected power into the grid for the
first time on 11.01.2012, the Arbitral Tribunal accepted the same as
the date of commissioning of the Power Project. The relevant extract
of the impugned award is set out below:
"15 So far as the question of commissioning of the
project is concerned we have in Newton Solar
arrived at the conclusion that even though
commissioning is not defined in PPA, it would
mean the date on which the power was injected
into the grid by the power developer and not the
date mentioned in the so called commissioning
certificate. In that view of the matter in the case
in hand we are of the considered opinion that the
claimant's project can be said to have been
commissioned on 11.01.2012, the date on which
the power was injected into the grid and not on
10.01.2012 as indicated in the commissioning
certificate that has been issued to the claimant...."
49. It is settled law that the decision of the Arbitral Tribunal
regarding construction or interpretation of a contract falls squarely
within its jurisdiction and the same would not warrant any interference
by this Court in a proceeding under Section 34 of the A&C Act unless
the same is found to be patently erroneous or an impossible view.
50. The Arbitral Tribunal was required to determine the controversy
having regard to the language of Clause 4.6.1 of the Agreement - "the
delay in such commencement of supply of power and making the
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Contracted Capacity available for dispatch by the Scheduled
Commissioning Date". Thus, clearly, the Arbitral Tribunal was
required to determine the date on which DDE had made available the
contracted capacity. There is no dispute that the contracted capacity is
5 MW and the same was to be supplied at the Delivery Point. The
Arbitral Tribunal has proceeded to determine the date of
commissioning of the Power Project without alluding to the
requirement of "making the Contracted Capacity available" as
stipulated in Clause 4.6.1 of the Agreement.
51. There is no dispute that although DDE had set up the Power
Project, it had not connected all modules. Even according to DDE, it
had established all the solar modules by 08.02.2012. Thus, according
to DDE, it was not in a position to generate 5 MW power prior to
08.02.2012. Mr. Sangal had relied upon the report of the Committee
constituted for ascertaining the date of commissioning. The said
report also clearly indicates the date of installation of full capacity of
PV Arrays as 08.02.2012.
52. This Court is of the view that the Arbitral Tribunal's finding in
computing the delay for the purpose of Clause 4.6.1 of the Agreement
without reference to the date on which all the PV Arrays were
installed - which implied the installation of the entire 5 MW capacity
- is erroneous. According to DDE, the contracted capacity was
installed on 08.02.2012.
53. Mr. Sangal had contended that the date of making the
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contracted capacity available should be accepted as 14.02.2012 as
determined by the said Committee. However, this Court finds it
difficult to accept the same. The concerned Committee had notionally
extended the date of installation from 08.02.2012 to 14.02.2012 on the
basis of average rate of installation of PV Arrays by DDE. The
Committee had no material to doubt DDE's assertion that it had
installed all the PV Arrays by 08.02.2012. It is expected that a person
would increase his pace of work as the deadline to complete the same
approaches. It is erroneous to assume that he would continue to
maintain an average pace of work notwithstanding the final deadline.
Thus, in the normal course, DDE would have installed a larger than
average number of PV Arrays immediately prior to 08.02.2012 as a
delay beyond the said date would expose DDE to a further levy of
liquidated damages of 40% of the PBG.
54. Having stated the same, this Court is not required to examine
this aspect in any further detail as the Arbitral Tribunal has not
considered the same. The impugned award rests solely on the premise
that the date of commissioning of the Power Project was 11.01.2012
as some power was supplied on that date. This is, ex facie, erroneous.
55. Mr. Khurana had contended that it was admitted by NVVNL
that liquidated damages under Clause 4.6 of the Agreement were for
delay in setting up the Power Project and not for supplying power.
Thus, the date when 5 MW of power was supplied is not relevant.
Indisputably, it is NVVNL's case in its pleadings that liquidated
damages were payable for delay in setting up the Power Project and
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not for supply of power. But this contention is not destructive of or in
conflict with NVVNL's stand that the Power Project would be
complete when it is able to generate and make available the contracted
capacity of 5MW. This capacity was required to be made available on
or before the Scheduled Commissioning Date (SCD).
56. Insofar as DDE's challenge to the impugned award is
concerned, this Court finds no infirmity with the decision of the
Arbitral Tribunal to examine the question of delay in the context of the
contractual provisions and not on the basis of the Certificate of
Commissioning dated 16.01.2012, which was issued from a regulatory
perspective.
57. The second question to be examined is whether the decision of
the Arbitral Tribunal to reject NVVNL's claim for compensation
under Clause 4.4.1 of the Agreement is erroneous. Clause 4.4.1 of the
Agreement is relevant and set out below:
"4.4 Right to Contracted Capacity & Energy
4.4.1 NVVN, at any time during a Contract Year, shall not
be obliged to purchase any additional energy from
the SPD beyond 10.731 Million kWh (MU) if for
any Contract Year, it is found that the SPD has not
been able to generate minimum energy of 7.665
Million kWh (MU) on account of reasons solely
attributable to the SPD, the non-compliance by SPD
shall make SPD liable to pay the compensation
provided in the PSA as payable to Discoms and shall
duly pay such compensation to NVVN to enable
NVVN to remit the amount to Discoms. This
compensation shall be applied to the amount of
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shortfall in generation during the Contract Year.
The amount of compensation shall be computed at
the rate equal to the compensation payable by the
Discoms towards non-meeting of RPOs, subject to a
minimum of 25% of the applicable tariff."
58. It is clear from the plain language of Clause 4.4.1 that an SPD
would be liable to pay compensation, as payable to DISCOMS, in
terms of the Power Sale Agreement (PSA), if there is a shortfall in
generating the stipulated minimum energy on account of reasons
"solely attributable to the SPD". Thus, the Arbitral Tribunal was
required to address the dispute whether the shortfall as claimed by
NVVNL was solely for the reasons attributable to the SPD and
whether NVVNL was liable to pay such compensation to DISCOMS.
59. DDE along with six other SPD's agreed for construction of
33/132 KV pulling station near the project site. There is no dispute
that the various SPD's including DDE had entered into the Agreement
with the STU (RRVPNL), whereby RRVPNL had agreed to
construction of the 132 KV transmission line. The power supply by
the seven SPDs was to be evacuated from the pulling station by a 132
KV line to Pokhran GSS. The power evacuation plan was provided by
the concerned STU (RRVPNL). RRVPNL had agreed to construct the
132 KV line for evacuation of power and complete the work one
month prior to the SCD. RRVPNL had also agreed to provide open
access for full supply of the power from the Power Project for the
entire duration of the Agreement.
60. It is also not seriously disputed that there was delay in
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construction of the said transmission line. Thus, sensu stricto, DDE
was not solely responsible for the said delay. The Arbitral Tribunal
has also referred to Clause 3.1 of the Agreement. Sub-clause (a), (c)
and (d) of Clause 3.1 are relevant and are set out below:-
"3. ARTICLE 3 : CONDITIONS SUBSEQUENT
3.1 Satisfaction of conditions subsequent by the
SPD
The SPD agrees and undertakes, to duly perform
and complete all of the following activities at the
SPD's own cost and risks within 180 days from
the Effective Date, unless such completion is
affected by and Force Majeure event, or if any of
the activities is specifically waived in writing by
NVVN:
a) The SPD shall obtain all Consents,
Clearances and Permits required for supply
of power to NVVN as per the terms of this
Agreement;
**** **** ****
c) The SPD shall make adequate arrangements
to connect the Power Project switchyard
with the Interconnection Facilities at the
Delivery Point;"
d) The SPD shall sign a Transmission
Agreement with STU confirming the
evacuation and connectivity of the STU
system upto the delivery point of SPD b the
Scheduled Commissioning date;"
61. It is clear from the above that DDE was required to make all
arrangements to connect the Power Project switchyard with
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interconnection facilities at the delivery point. However, DDE was
also required to sign the Transmission Agreement with the STU for
confirming the evacuation and connectivity of the STU system upto
the Delivery Point. Although NVVNL was not a party to the
agreement between DDE and the STU (RRVPNL), it cannot be
disputed that DDE was obliged to enter into an agreement with the
STU.
62. Mr. Sangal has contended that the arrangement for construction
of the 132 KV line was entirely between DDE and RRVPNL and DDE
was required to bear the entire costs. There is no cavil with this
contention. However, the same does not imply that the finding of the
Arbitral Tribunal that the shortfall in delivery is not solely attributable
to DDE, is erroneous. Clearly, the shortfall of delivery is not
attributable solely to DDE. In any view, the Arbitral Tribunal's
decision cannot be stated to be patently erroneous. The said view is
not only a possible view but a plausible one.
63. It is also relevant to note that NVVNL had not accepted its
liability to pay compensation to DISCOMS. On the contrary, the
Arbitral Tribunal found that NVVNL had disputed its liability to pay
any compensation to DISCOMS under the PSA. Therefore, the
Arbitral Tribunal held that it was not open for NVVNL to claim any
compensation from DDE under Clause 4.4.1 of the Agreement.
64. This Court finds no ground to interfere with the decision of the
Arbitral Tribunal to reject NVVNL's claim for compensation
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regarding shortfall of power. The Arbitral Tribunal's view is a
plausible one and warrants no interference in these proceedings under
Section 34 of the A&C Act.
65. In view of the above, DDE's petition under Section 34 of the
A&C Act [being OMP (COMM) No. 374/2020] is rejected as
unmerited.
66. NVVNL's challenge to the impugned award [being OMP
(COMM) No. 317/2020] succeeds to a limited extent. The impugned
award to the extent that the Arbitral Tribunal found that the delay in
commissioning the Power Project is one day without referring to the
installation of the entire contracted capacity, is set aside. It is
material to note that if DDE's contention that the contracted facility
was installed on 08.02.2012 is accepted, there would, in effect, be no
material impact on the final outcome. This is because 20% of the PBG
is leviable as liquidated damages for a delay upto one month.
Therefore, whether the delay is one day or one month would make no
material difference as far as levy of liquidated damages is concerned.
However, if it is found that NVVNL's contention is correct that the
contracted capacity was established and made available on 14.02.2012
- which prima facie appears to be unmerited - NVVNL may be
entitled to claim further liquidated damages in terms of Clause 4.6.1
(b) of the Agreement.
67. NVVNL's petition is allowed to the aforesaid extent. The
parties are at liberty to agitate the said dispute afresh in view of the
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observations made herein.
68. The petitions are, accordingly, disposed of in the aforesaid
terms. All pending applications are also disposed of.
VIBHU BAKHRU, J
JULY 06, 2022
'gsr'/RK
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