Facts: M/s Saisudhir Energy Ltd. (SEL) and M/s NTPC Vidyut Vyapar Nigam Ltd. (NVVNL) entered into a Power Purchase Agreement (PPA) under the Jawaharlal Nehru National Solar Mission (JNNSM). SEL was to supply 20 MW of solar power by 26.02.2013, but faced delays. NVVNL invoked Clause 4.6 of the PPA for liquidated damages due to the delay. SEL sought an extension citing force majeure, which was rejected. SEL commissioned 10 MW by 26.04.2013 and the remaining 10 MW by 24.07.2013.
Procedural Posture: A three-member Arbitral Tribunal issued a split award, directing SEL to pay ₹1.2 crores. The Delhi High Court's Single Judge modified this, granting ₹27.06 crores to NVVNL. The Division Bench further modified it to ₹20.70 crores. Cross appeals were filed before the Supreme Court challenging the Division Bench's judgment.
Issue: Did the Division Bench exceed its jurisdiction under Section 37 of the Arbitration and Conciliation Act, 1996, by modifying the amount of reasonable compensation determined by the Single Judge under Section 34 of the same Act? Specifically, can a Section 34 court modify an arbitral award to grant higher compensation, and what is the scope of interference under Section 37?
Holding: Yes, the Supreme Court held that the Division Bench exceeded its jurisdiction under Section 37 of the Arbitration and Conciliation Act, 1996, when it re-worked and re-calculated the amount of reasonable compensation. The Court restored the judgment of the Single Judge.
Reasoning: The Supreme Court reasoned that the Single Judge, acting under Section 34, had determined a reasonable compensation based on Clause 4.6 of the PPA. Unless this determination was arbitrary, perverse, or beyond the terms of the PPA, the Division Bench should not have interfered under Section 37. The Court relied on Gayatri Balasamy vs. ISG Novasoft Technologies Limited, emphasizing that Section 34 allows for modification of an award to a limited extent. The Court also noted that the JNNSM project was a public utility, and SEL had failed to discharge its burden of proving that the delay did not cause any loss to NVVNL. The court stated, "the modification is only with a view to apply Clause 4.6.2 of the PPA to the facts of the case which exercise has also been approved by the Section 37 Court".