Arbitration Act| Taking Different View Of Same Matter From One Taken U/S. 34 Beyond Scope Of Section 37 Appeal: Supreme Court

The cross-appeals before the Apex Court arose out of the common judgment of the Division Bench of the Delhi High Court in proceedings filed under Section 37 of the Arbitration and Conciliation Act, 1996.

The Division Bench of Justice Pamidighantam Sri Narasimha and Justice Atul S. Chandurkar held, “The modification in the amount of reasonable compensation by the Division Bench is merely a substitution of its view in place of the plausible view taken by the learned Single Judge. Such course of taking a different view of the same matter from the one taken under Section 34 of the Act of 1996 would be beyond the scope of Section 37 of the Act of 1996. As held in AC Chokshi Share Broker Private Limited vs. Jatin Pratap Desai and another to which one of us (P.S. Narasimha J) was a party, the Court under Section 37 must only determine whether the Section 34 Court had exercised its jurisdiction properly and rightly, without exceeding its scope. To that extent, we find that the Division Bench of the High Court erred in interfering with the judgment of the learned Single Judge.”

Senior Advocate Gopal Jain represented the Appellant, while Advocate Gowtham Polanki represented the Respondent.

Factual Background

In 2010, the Ministry of Power, Government of India, launched the Jawaharlal Nehru National Solar Mission (JNNSM) with the objective of deploying 20000 Mega Watt (MW) of grid-connected solar power in three phases by 2022 at a reasonable cost. The Ministry of Power designated NTPC Vidyut Vyapar Nigam Limited (NVVNL) as the nodal agency. A Power Purchase Agreement was entered into between M/s Saisudhir Energy Limited (SEL) and NVVNL. Under the said agreement, SEL agreed to set up and thereafter supply 20 MW solar power at the rate of ₹ 8.22 per unit, which was a discounted price from the tariff approved by the Regulatory Commission of ₹ 15.39 per unit.

The PPA provided for liquidated damages in case there was a delay in the commencement of the supply of solar power to NVVNL. SEL sought an extension of time by two months from NVVNL, citing various exigencies and invoked the force majeure clause. This request was, however, rejected by NVVNL. SEL failed to commission its project by February 26, 2013. It commissioned the supply of 10 MW of power after a delay of two months. SEL, thereafter, moved an application under Section 9 before the Delhi High Court seeking to restrain NVVNL from encashing the bank guarantees furnished by it. The High Court granted interim relief in favour of SEL till the consideration of its prayer for interim relief by the Arbitral Tribunal under Section 17.

A three-member Arbitral Tribunal, while holding that there was a delay in commissioning the power plant, by majority, awarded an amount of ₹1.2 crores towards the claim made by the employer. Both parties raised objections under Section 34. A Single Judge of the Delhi High Court proceeded to grant an amount of ₹ 27.06 crores to the employer on account of delay on the part of the Solar Power Developer in commissioning the power plant. Both parties further took recourse to Section 37. By the impugned judgment, the Division Bench modified the order passed under Section 34 of the Act of 1996 in the matter of grant of liquidated damages and reduced the amount to ₹ 20.70 crores.

Reasoning

On a perusal of the facts of the case, the Bench noted that the timelines agreed to by the parties to the PPA were not followed by SEL. Reference was made to Clause 4.6 of the PPA which provides for liquidated damages for delay in the commencement of supply of power. “The period of delay is material in determining the amount of liquidated damages”, it added.

Reference was also made to Section 74 of the Indian Contract Act, 1872, which stipulates that in the case of breach of contract, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused, to receive from the party who has broken the contract reasonable compensation not exceeding the amount named or the penalty stipulated.

The Bench was of the view that the modification of the award so as to enhance the amount of reasonable compensation by the Section 34 Court was a permissible exercise in light of the law laid down in Gayatri Balasamy vs. ISG Novasoft Technologies Limited (2025). The Constitution Bench in Gayatri Balasamy (supra) has recognised the power of the Section 34 Court to modify an award to a limited extent. The Bench thus held, “The modification is in exercise of jurisdiction under Section 34 of the Act of 1996 without undertaking any examination of the merits of the dispute. To put it plainly, 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. We, therefore, do not find that on this count, the judgment of the Section 34 Court suffers from any jurisdictional error”, the order read.

Considering that the commissioning of the solar plant by SEL was with a view to satisfying and taking the solar mission forward, the Bench stated that such activity was in public interest and with a view to promoting green energy. “The objective of the PPA, therefore, involves public interest and the environment at large. The timelines fixed by the parties, therefore, are relevant”, it mentioned.

According to the Bench, the Single Judge as well as the Division Bench had rightly held that NVVNL, in terms of Clause 4.6 of the PPA, was entitled to reasonable compensation. Dealing with the aspect of determination of the amount of reasonable compensation, the Apex Court held that the determination of the amount of reasonable compensation by the Single Judge having been undertaken in terms of Clause 4.6 of the PPA and further discretion having been exercised by awarding 50% of such amount as liquidated damages, the Division Bench was not justified in modifying the said decision.

Thus, dismissing the appeal preferred by SEL and allowing the appeal of NVVNL, the Bench restored the judgment of the Single Judge.

Cause Title: M/s Saisudhir Energy Ltd. v. M/s Ntpc Vidyut Vyapar Nigam Ltd. (Neutral Citation: 2026 INSC 103)

Appearance

Appellant: Senior Advocate Gopal Jain, AOR Adarsh Tripathi, Advocates Vikarm Singh Baid, Ajitesh Garg, Gowtham Polanki, AOR Sahil Raveen

Respondent: Advocates Gowtham Polanki, AOR Sahil Raveen

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