Legal provisions involved: Sections 34 & 37 of the Arbitration and Conciliation Act, 1996; Section 74 of the Indian Contract Act, 1872.

Judgement by: Supreme Court of India

Judge/Bench: Justice P.S. Narasimha and Justice Atul S. Chandurkar

Facts

Saisudhir Energy Ltd. signed an agreement with NVVNL to set up a 20 MW solar power plant under a government solar mission. The plant was not completed on time. Because of the delay, NVVNL imposed liquidated damages as mentioned in the contract. An arbitral tribunal gave a mixed decision. Later, a Single Judge increased the compensation to 50% of the contractually fixed damages. The Division Bench reduced this amount. Both sides then appealed to the Supreme Court.

Key legal provisions

Sections 34 & 37 of the Arbitration and Conciliation Act, 1996

Section 74 of the Indian Contract Act, 1872.

Issues raised

Whether actual loss had to be proved?

Whether the court could modify the award; and whether the appellate court could recalculate damages?

Arguments of the case

The company said damages were unfair without proof of loss. NVVNL argued delay in a public project itself caused loss and the damages were pre-agreed.

Judgement

The Supreme Court restored the Single Judge’s order, saying delay in public utility projects itself implies loss and higher courts cannot rework the compensation like an appeal on facts.

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