Full Judgment Text
REPORTABLE
2026 INSC 103
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS.12892-12893 OF 2024
M/S SAISUDHIR ENERGY LTD. APPELLANT(S)
VERSUS
M/S NTPC VIDYUT VYAPAR NIGAM LTD. RESPONDENT(S)
WITH
CIVIL APPEAL NOS.12894-12895 OF 2024
M/S NTPC VIDYUT VYAPAR NIGAM LTD. APPELLANT(S)
VERSUS
M/S SAISUDHIR ENERGY LTD. RESPONDENT(S)
J U D G M E N T
ATUL S. CHANDURKAR, J.
1. These cross appeals arise out of the common judgment
passed by the Division Bench of the Delhi High Court dated
18.01.2018 in proceedings filed under Section 37 of the Arbitration
and Conciliation Act, 1996 (for short, “the Act of 1996”). Broadly,
Signature Not Verified
Digitally signed by
NIDHI AHUJA
Date: 2026.01.30
18:21:31 IST
Reason:
the dispute between the parties relates to the claim for liquidated
damages raised by the employer against the Solar Power Developer
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 1 of 23
on account of delay caused in commissioning a power plant. 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 of the Act of 1996.
A learned 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 of
the Act of 1996. 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.
2. The facts relevant for considering the challenge as raised by
the parties to the aforesaid common judgment are that, in 2010
the Ministry of Power, Government of India, launched the
Jawaharlal Nehru National Solar Mission (for short, “the 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 JNNSM postulated bundling of solar power alongwith
cheaper power from and out of the unallocated quota of central
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 2 of 23
stations and thereafter selling the said bundled power to the State
distribution utilities at a regulated price.
3. The Ministry of Power designated NTPC Vidyut Vyapar Nigam
Limited (for short, “NVVNL”) as the nodal agency. NVVNL was
required to enter into Power Purchase agreements with Solar
Power Developers at a fixed rate for twenty-five years. The bundled-
up power was to be sold by NVVNL to various distribution utilities
at prices determined by the Regulatory Commission. Accordingly,
on 24.01.2012, a Power Purchase Agreement (for short, “PPA”) was
entered into between M/s Saisudhir Energy Limited (for short,
“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. Under the said
agreement, the date of commissioning supply of 20 MW solar
power was 26.02.2013. Clause 4.6 of the PPA provided for
liquidated damages in case there was a delay in commencement of
supply of solar power to NVVNL. On 30.01.2013, SEL sought
extension of time by two months from NVVNL citing various
exigencies and invoked the clause. This request was,
force majeure
however, rejected by NVVNL on 31.01.2013 as notice of seven days
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 3 of 23
as required under Clause 11.5.1 of the PPA was not given. SEL
failed to commission its project by 26.02.2013. It commissioned
supply of 10 MW power from 26.04.2013, which was after a delay
of two months. Thereafter, it commissioned supply for the balance
10 MW power from 24.07.2013, which was after a delay of about
five months. SEL, thereafter, moved an application under Section
9 of the Act of 1996 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 of the Act of 1996.
4. On invocation of the arbitration clause, a three-member
Arbitral Tribunal was constituted. SEL as claimant submitted its
claim and sought to restrain NVVNL from encashing the bank
guarantees. It also claimed charges for maintenance of the bank
guarantees. On the other hand, NVVNL claimed encashment of the
bank guarantees as per Clause 4.6 of the PPA. On 21.07.2015, the
three-member Arbitral Tribunal passed a split award. As per the
majority award, SEL was directed to pay NVVNL ₹ 1.2 crores being
20% of the original performance guarantee at the rate of ₹ 30 lakhs
per MW. The claim made by SEL for reimbursement of expenditure
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 4 of 23
was, however, rejected. The minority award on the other hand held
that it was not possible to work out the actual loss suffered by
NVVNL on account of delay in commissioning the project. The
liquidated damages as mentioned in Clause 4.6 of the PPA were
held to be a genuine pre-estimate of loss suffered and SEL was
directed to pay the same. NVVNL was held entitled to encash the
bank guarantees amounting ₹ 49.92 crores excluding the bank
guarantees furnished towards earnest money deposit.
5. Both the parties were aggrieved by the aforesaid awards and
they took recourse to the provisions of Section 34 of the Act of
1996. By the judgment dated 08.09.2016, a learned Judge of the
Delhi High Court held that there was delay on the part of SEL in
commencing the supply of power in terms of the PPA. He held that
NVVNL had not invested any amount in the said project nor did it
prove any actual damage suffered by it. The project was for a
duration of twenty-five years while the delay caused was of only a
few months. He, therefore, modified the award and granted 50% of
the amount awardable towards damages under Clause 4.6. This
amount was to be recovered by adjusting a sum of ₹ 25 lakhs per
month from 01.10.2016 that was payable to SEL. The majority
award was set aside by the learned Single Judge.
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 5 of 23
6. Both the parties were further aggrieved by the judgment
passed under Section 34 of the Act of 1996 and they preferred
appeals under Section 37 of the Act of 1996. The Division Bench
by its common judgment did not agree with the findings recorded
in the majority award on the aspect of liquidated damages as well
as on the question of public utility. It held that the PPA had been
entered into with a social object and purpose. It was difficult to
prove the quantum of damages that could be awarded and paid in
case of breach on account of delay on the part of SEL. After
considering various aspects such as total cost of the project
incurred by SEL, the monthly income received by SEL from NVVNL
and the fact that duration of the project was about twenty-five
years while the period of delay was not very long, SEL was directed
to pay damages at the rate of ₹ 1,00,000/- per MW for the entire
period of delay which amounted to ₹ 20.70 crores. SEL was also
directed to pay bank guarantee renewal charges within a period of
six weeks from the date of the judgment. It is this judgment that
is the subject matter of challenge at the instance of both the parties
in these cross appeals.
7. Mr. Nakul Dewan, learned Senior Advocate on behalf of SEL
submitted that NVVNL having failed to prove the actual loss
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 6 of 23
suffered by it, it was not entitled to receive any liquidated damages
under Clause 4.6.2 of the PPA. The PPA was a purely commercial
contract entered into for the purchase and sale of solar power.
Merely because the PPA was executed under the JNNSM, it could
not be stated that it was a project of public utility and, hence, there
was no obligation on the part of the NVVNL to prove its actual loss
for claiming liquidated damages. Relying upon the decision of this
1
Court in Kailash Nath Associates vs. D. D. A. , it was submitted
that in terms of Section 74 of the Indian Contract Act, 1872 (for
short, “the Act of 1872”) proof of damage caused or loss suffered
was a sine qua non for claiming compensation on account of such
breach. In absence of any such loss being proved by NVVNL before
the Arbitral Tribunal, it was not entitled to receive any liquidated
damages under Clause 4.6.2 of the PPA. Both the Courts erred in
relying upon the decision in M/s Construction and Design
2
Services vs. D.D.A. inasmuch as the employer therein had made
various investments in the concerned project and had suffered loss
due to delay. It was urged that in the present case, NVVNL had not
made any investment whatsoever and that all investments were in
fact made by SEL. While the contractor in the said case had
1
2015 INSC 22
2
2015 INSC 92
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 7 of 23
abandoned the project, SEL had successfully commissioned the
Solar Power Project and it was running smoothly. A delay of few
months, therefore, ought not to be the reason to impose liquidated
damages on SEL.
It was further submitted that ignoring the limited power
available under Sections 34 and 37 of the Act of 1996, the Courts
proceeded to modify the arbitral award while granting liquidated
damages. A merit based evaluation under Sections 34 and 37 of
the Act of 1996 was impermissible and a review of the arbitral
award in such a manner could not have been undertaken. Both
the Courts erred in travelling beyond the arbitral award and
modifying the same. The exercise of undertaking the calculation of
liquidated damages was also an exercise on merits of the dispute,
which was impermissible under the limited jurisdiction available.
In this regard, reliance was placed on the decision in Gayatri
3
Balasamy vs. ISG Novasoft Technologies Limited . It was, thus,
submitted that interference by both the Courts being
unwarranted, the said orders were liable to be set aside. The
appeal filed by SEL, thus, ought to be allowed.
3
2025 INSC 605
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 8 of 23
8. On the other hand, Mr. Gopal Jain, learned Senior Advocate
appearing on behalf of NVVNL submitted that in the case of a
public utility project or a work involving public interest, it was not
necessary to prove the actual loss suffered. The supply of solar
energy under the JNNSM was in fact a public utility project and it
was necessary for SEL to have complied with the time schedules
agreed. The fact that delay was caused in the initiation of the
project was itself sufficient to indicate that NVVNL had in fact
suffered loss and that there was no need of any specific evidence
in that regard. It was submitted that the ratio of the decision in
M/s Construction and Design Services (supra) was squarely
applicable to the case in hand. In fact, NVVNL was entitled to
higher amount of liquidated damages and that the Division Bench
was not justified in reducing the same. Referring to the pleadings
of the parties, it was submitted that the delay caused by NVVNL
being an admitted fact, the entire claim for liquidated damages in
accordance with Clause 4.6.2 of the PPA ought to have been
allowed. There was no question of importing the notions of equity
in such matters and that the rights of the parties were governed
by the PPA entered into by them. The reduction in the amount of
liquidated damages from ₹ 27.06 crores to ₹ 20.70 crores by the
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 9 of 23
Division Bench was uncalled for. To substantiate the aforesaid
contentions, reliance was placed on the decision in
Chamundeshwari Electricity Supply Company Limited vs.
Sai-Sudhir Energy (Chitradurga) Private Limited and
4
another . While the entitlement of NVVNL to liquidated damages
under Clause 4.6.2 of the PPA was ₹ 54.12 crores, the Division
Bench despite being satisfied with the claim made on behalf of
NVVNL was not justified in reducing that amount to ₹ 20.70 crores.
Finally, it was submitted that the dispute between the parties was
of the year 2013 and relegating the parties to any fresh proceedings
was totally unwarranted. It was prayed that the appeal preferred
by NVVNL be allowed.
9. We have heard the learned Senior Advocates for the parties
at length and we have also perused the documentary material on
record. Having given our due consideration to the entire matter,
we find that the Division Bench in exercise of jurisdiction under
Section 37 of the Act of 1996 was not justified in modifying the
amount of compensation awarded by the Court under Section 34.
10. The PPA entered into by NVVNL with SEL on 24.01.2012 was
in its capacity as the Nodal Agency for carrying out the objectives
4
2025 INSC 1034
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 10 of 23
under the JNNSM. This was to enable the sale of bundled up power
by NVVNL to various distribution utilities at prices determined by
the regulatory commission. A total of 20 MW solar power was to be
commissioned under the PPA. It is an admitted position under the
terms of the PPA that the date of commissioning was fixed as
26.02.2013. SEL, however, failed to meet this deadline. It
commissioned supply of 10 MW power from 26.04.2013, which
was after a delay of two months. The balance of 10 MW power was
commissioned from 24.07.2013, which was after a delay of about
five months. Clause 4.6 of the PPA is the subject matter of dispute
between the parties and same reads as under: -
“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 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 proportionate to the
Capacity not commissioned.
b. Delay of more than one (1) month and upto two
months - NVVN will encash 40% of the total Performance
Bank Guarantee proportionate to the Capacity not
commissioned.
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 11 of 23
c. Delay of more than two and upto three months -
NVVN will encash the remaining Performance Bank
Guarantee proportionate to the Capacity not commissioned.
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 remaining Capacity which
is not commissioned. The amount of liquidated damages
would be recovered from the SPD from the payments due on
account of sale of solar power to NVVN.
4.6.3 The maximum time period allowed for
commissioning of the full Project Capacity with encashment
of Performance Bank Guarantee and payment of Liquidated
Damages shall be limited to eighteen (18) months from the
date of signing of this Agreement. In case, the commissioning
of the Power Project is delayed beyond eighteen (18) months
from the date of signing of this Agreement, it shall be
considered as an SPD Event of Default and provisions of
Article 13 shall apply and the Contracted Capacity shall
stand reduced/amended to the Project Capacity
Commissioned within 18 months of signing of PPA and the
PPA for the balance Capacity will stand terminated.
4.6.4 However, if as a consequence of delay in
commissioning, the applicable tariff changes, that part of the
capacity of the Project for which the commissioning has been
delayed shall be paid at the tariff as per Article 9.2 of this
Agreement.”
11. As regards failure on the part of SEL to meet the deadline for
commissioning solar power is concerned, there is no dispute that
SEL failed to meet the agreed deadline as the supply of 10 MW
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 12 of 23
power was undertaken with a delay of two months and the supply
of balance 10 MW power was undertaken after a delay of about five
months. The majority award in paragraph 97 records this aspect,
including the admission on the part of SEL that such delay in fact
had been occasioned. The learned Single Judge while dealing with
the proceedings under Section 34 of the Act of 1996 has in
paragraphs 57, 76 and 77 recorded in clear terms that the breach
of contract was admitted by SEL and that there was in fact delay
on its part in supplying power. The Division Bench in the appeals
filed under Section 37 of the Act of 1996 affirmed this position.
The aforesaid would indicate that insofar as the grievance
raised by NVVNL that SEL failed to commission 20 MW power
within the time stipulated under the PPA is concerned, the said
position does not admit of any doubt. In fairness to the learned
Senior Advocate for SEL, it may be stated that this finding was not
seriously challenged in its appeal.
12. Thus, having found that the timelines agreed to by the parties
to the PPA not having been followed by SEL, it is evident that
Clause 4.6 of the PPA that provides for liquidated damages for
delay in commencement of supply of power gets attracted. Clause
4.6 provides the consequence of delay in not commissioning the
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 13 of 23
agreed capacity within the prescribed period. The period of delay
is material in determining the amount of liquidated damages. It is
in this context that the provisions of Section 74 of the Act of 1872
gets attracted. Section 74 reads as under:-
“ 74. Compensation for breach of contract where penalty
stipulated for:- [When a contract has been broken, if a sum is
named in the contract as the amount to be paid in case of such
breach, or if the contract contains any other stipulation by way of
penalty, the party complaining of the breach is entitled, whether
or not actual damage or loss is proved to have been caused
thereby, to receive from the party who has broken the contract
reasonable compensation not exceeding the amount so named or,
as the case may be, the penalty stipulated for.
Explanation .-- A stipulation for increased interest from the date of
default may be a stipulation by way of penalty.]
Exception .-- When any person enters into any bail-bond,
recognizance or other instrument of the same nature, or, under
the provisions of any law, or under the orders of the [Central
Government] or of any [State Government], gives any bond for the
performance of any public duty or act in which the public are
interested, he shall be liable, upon breach of the condition of any
such instrument, to pay the whole sum mentioned therein.
.-- A person who enters into a contract with
Explanation
Government does not necessarily thereby undertake any public
duty, or promise to do an act in which the public are
interested…………”
Section 74 of the Act of 1872 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
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 14 of 23
penalty stipulated. The provisions of Section 74 were the subject
matter of consideration by this Court in M/s Construction and
Design Services (supra) wherein it was held in the context of delay
in providing a public utility service that in such a case, the delay
in commissioning of such utility service itself can be taken to have
resulted in loss in the form of environmental degradation. In the
said case, the contract was in relation to the construction of a
sewerage pumping station. It was observed that providing for a
sewerage pumping station was of public utility to maintain and
preserve clean environment. It was held that if the parties had pre-
estimated the loss likely to be caused, it would be unjustified to
arrive at the conclusion that the party that had committed the
breach was not liable to pay compensation.
13. The learned Single Judge while exercising jurisdiction under
Section 34 of the Act of 1996 relied upon the aforesaid decision
and while exercising discretion in the matter of award of
reasonable compensation proceeded to grant 50% of the amount
of damages that NVVNL was entitled to under Clause 4.6 of the
PPA. The Division Bench in appeal recorded its agreement with the
view of the learned Single Judge that it was necessary to compute
a fair and reasonable amount of compensation while balancing the
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 15 of 23
equities. The Division Bench, however, proceeded to modify the
order passed under Section 34 of the Act of 1996 and thereafter
reduced the amount of compensation taking into consideration the
period of delay caused by SEL.
14. It has been urged on behalf of SEL that the majority award
having granted an amount of ₹ 1.20 crores to NVVNL in view of the
delay in commission the power plant, the Section 34 Court could
not have modified the award so as to grant higher compensation.
The modification was beyond the permissible limits recognized in
Gayatri Balasamy (supra) .
The Constitution Bench in Gayatri Balasamy (supra) has
recognised the power of the Section 34 Court to modify an award
to a limited extent. It has held in paragraphs 40 to 46 as under:
“IV. A Limited Power of Modification Can Be Located in Section 34
40. A core principium of arbitration, an Alternative Dispute
Resolution mechanism, is to provide a quicker and cost-effective
alternative to courtroom litigation. While this suggests minimal
judicial interference, the role of domestic courts remains crucial,
as they function in a supportive capacity to facilitate and expedite
the resolution of disputes. Therefore, it follows that judicial
intervention is legitimate and necessary when it furthers the ends
of justice, including the resolution of disputes.
41. To deny courts the authority to modify an award-particularly
when such a denial would impose significant hardships, escalate
costs, and lead to unnecessary delays-would defeat the raison
d'être of arbitration. This concern is particularly pronounced in
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 16 of 23
India, where applications under Section 34 and appeals under
Section 37 often take years to resolve.
42. Given this background, if we were to decide that courts can
only set aside and not modify awards, then the parties would be
compelled to undergo an extra round of arbitration, adding to the
previous four stages: the initial arbitration, Section 34 (setting
aside proceedings), Section 37 (appeal proceedings), and Article
136 (SLP proceedings). In effect, this interpretation would force the
parties into a new arbitration process merely to affirm a decision
that could easily be arrived at by the court. This would render the
arbitration process more cumbersome than even traditional
litigation.
43. Equally, Section 34 limits recourse to courts to an
application for setting aside the award. However, Section 34 does
not restrict the range of reliefs that the court can grant, while
remaining within the contours of the statute. A different relief can
be fashioned as long as it does not violate the guardrails of the
power provided under Section 34. In other words, the power
cannot contradict the essence or language of Section 34. The court
would not exercise appellate power, as envisaged by Order XLI of
the Code of Civil Procedure, 1908.
44. We are of the opinion that modification represents a more
limited, nuanced power in comparison to the annulment of an
award, as the latter entails a more severe consequence of the
award being voided in toto . Read in this manner, the limited and
restricted power of severing an award implies a power of the court
to vary or modify the award. It will be wrong to argue that silence
in the 1996 Act, as projected, should be read as a complete
prohibition.
45. We are thus of the opinion that the Section 34 court can apply
the doctrine of severability and modify a portion of the award while
retaining the rest. This is subject to parts of the award being
separable, legally and practically, as stipulated in Part II of our
Analysis.
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 17 of 23
46. Mustill and Boyd have observed that an order varying an award
is not equivalent to an appellate process. The authors suggest that
a modification order would only be appropriate where the
modification, including any adjustment of costs, follows inevitably
from the tribunal’s determination of a question of law. This
approach would be beneficial, as it would reduce costs and delays.
The courts need not engage in any fact-finding exercise. By
acknowledging the Court’s power to modify awards, the judiciary
is not rewriting the statute. We hold that the power of judicial
review under Section 34, and the setting aside of an award, should
be read as inherently including a limited power to modify the
award within the confines of Section 34.”
15. In our view, the modification of the award so as to enhance
the amount of reasonable compensation by the Section 34 Court
was a permissible exercise when viewed in the context of the law
laid down in Gayatri Balasamy (supra) . 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.
16. SEL has strenuously sought to distinguish the decision of
this Court in M/s Construction and Design Services (supra) and
urge that the PPA entered into by the parties was merely a
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 18 of 23
commercial agreement to supply power. We do not find this
contention acceptable. The PPA indicates that NVVNL had been
appointed as a Nodal Agency for carrying out the objectives under
the JNNSM. The commissioning of the solar plant by SEL was with
a view to satisfy and take the solar mission forward. This activity
was definitely in public interest and with a view to promote 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. We are, therefore, of the view that M/s
Construction and Design Services (supra) in fact provides sufficient
indication of the manner in which the aspect of reasonable
compensation could be considered wherein a public utility project
is involved. In such cases, the burden would be on the party
committing the breach to show that no loss was caused by the
delay or that the amount stipulated as liquidated damages was in
the nature of penalty. In the facts of the present case, this burden
has not been discharged by SEL. In fact, it has remained content
by urging that NVVNL having failed to make any investment under
the PPA, it neither suffered any loss of capital or loss of interest,
notwithstanding the delay. Having agreed to incorporate Clause
4.6 in the PPA, it is clear that the rights of the parties ought to be
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 19 of 23
determined bearing in mind the terms agreed and SEL would not
be justified in contending that NVVNL had failed to indicate the
exact loss suffered by it due to the delay in commissioning of the
project. The learned Single Judge as well as the Division Bench
have in our view rightly approached this aspect of the matter and
have held that NVVNL in terms of Clause 4.6 of the PPA is entitled
to reasonable compensation. We, therefore, do not find any reason
whatsoever to take a different view of the matter in this regard.
17. Coming to the aspect of determination of the amount of
reasonable compensation, the learned Single Judge after referring
to Clause 4.6 of the PPA determined the claim as made by NVVNL
in terms of Clause 4.6 of the PPA at an amount of ₹ 54,12,32,000/-.
He found that granting 50% of the aforesaid amount by adjusting
₹ 25,00,000/- per month from the revenue to be received by SEL
would amount to reasonable compensation in favour of NVVNL.
The Division Bench in appeal, however, proceeded to modify the
amount of reasonable compensation by reading Clause 4.6 of the
PPA on the premise that a higher rate of damages was payable in
the initial three months period of delay and that amount was
reduced after three months. On that basis damages at the rate of
₹ 1,00,000/- per MW per day came to be worked out. The amount
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 20 of 23
of compensation was, thus, reduced to ₹ 20.70 crores.
18. In our view, the Division Bench exceeded its jurisdiction
under Section 37 of the Act of 1996 when it proceeded to re-work
and re-calculate the amount of reasonable compensation to which
NVVNL was entitled. The learned Single Judge having determined
the amount of reasonable compensation by relying upon Clause
4.6 of the PPA and thereafter awarding 50% of the amount so
determined, in the absence of this determination being shown to
be beyond the terms of Clause 4.6 of the PPA or arbitrary or
perverse, no interference with such determination was called for in
exercise of jurisdiction under Section 37 of the Act of 1996. In fact,
the Division Bench has not recorded any finding that such
determination of reasonable compensation by the learned Single
Judge suffered from arbitrariness or that it travelled beyond what
was provided by Clause 4.6 of the PPA. Having held in paragraph
28 of the impugned judgment that it was in agreement with the
view of the learned Single Judge of the need to balance equities
and compute a fair and reasonable amount of compensation
coupled with the fact that the majority award granting a paltry
amount of ₹ 1.2 crores was held to be contrary to the fundamental
policy of Indian law thus requiring interference, the further
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 21 of 23
exercise undertaken by it in modifying the amount of reasonable
compensation was not justified in the facts of the case. 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
5
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.
19. For the aforesaid reasons, we are of the view that the
determination of the amount of reasonable compensation by the
learned 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
5
2025 INSC 174
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 22 of 23
Bench was not justified in modifying the said decision.
Accordingly, the judgment of the Division Bench dated 18.01.2018
to that extent stands set aside. The judgment of the learned Single
Judge in OMP No.410 of 2015 and 446 of 2015 stands restored.
Civil Appeal Nos.12894-12895 of 2024 preferred by NVVNL, thus,
stands allowed and Civil Appeal Nos.12892-12893 of 2024
preferred by SEL stands dismissed. The parties shall bear their
own costs.
……………………………………………..J.
[PAMIDIGHANTAM SRI NARASIMHA]
.…..………………………..J.
[ATUL S. CHANDURKAR]
NEW DELHI,
JANUARY 30, 2026.
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 23 of 23
2026 INSC 103
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS.12892-12893 OF 2024
M/S SAISUDHIR ENERGY LTD. APPELLANT(S)
VERSUS
M/S NTPC VIDYUT VYAPAR NIGAM LTD. RESPONDENT(S)
WITH
CIVIL APPEAL NOS.12894-12895 OF 2024
M/S NTPC VIDYUT VYAPAR NIGAM LTD. APPELLANT(S)
VERSUS
M/S SAISUDHIR ENERGY LTD. RESPONDENT(S)
J U D G M E N T
ATUL S. CHANDURKAR, J.
1. These cross appeals arise out of the common judgment
passed by the Division Bench of the Delhi High Court dated
18.01.2018 in proceedings filed under Section 37 of the Arbitration
and Conciliation Act, 1996 (for short, “the Act of 1996”). Broadly,
Signature Not Verified
Digitally signed by
NIDHI AHUJA
Date: 2026.01.30
18:21:31 IST
Reason:
the dispute between the parties relates to the claim for liquidated
damages raised by the employer against the Solar Power Developer
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 1 of 23
on account of delay caused in commissioning a power plant. 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 of the Act of 1996.
A learned 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 of
the Act of 1996. 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.
2. The facts relevant for considering the challenge as raised by
the parties to the aforesaid common judgment are that, in 2010
the Ministry of Power, Government of India, launched the
Jawaharlal Nehru National Solar Mission (for short, “the 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 JNNSM postulated bundling of solar power alongwith
cheaper power from and out of the unallocated quota of central
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 2 of 23
stations and thereafter selling the said bundled power to the State
distribution utilities at a regulated price.
3. The Ministry of Power designated NTPC Vidyut Vyapar Nigam
Limited (for short, “NVVNL”) as the nodal agency. NVVNL was
required to enter into Power Purchase agreements with Solar
Power Developers at a fixed rate for twenty-five years. The bundled-
up power was to be sold by NVVNL to various distribution utilities
at prices determined by the Regulatory Commission. Accordingly,
on 24.01.2012, a Power Purchase Agreement (for short, “PPA”) was
entered into between M/s Saisudhir Energy Limited (for short,
“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. Under the said
agreement, the date of commissioning supply of 20 MW solar
power was 26.02.2013. Clause 4.6 of the PPA provided for
liquidated damages in case there was a delay in commencement of
supply of solar power to NVVNL. On 30.01.2013, SEL sought
extension of time by two months from NVVNL citing various
exigencies and invoked the clause. This request was,
force majeure
however, rejected by NVVNL on 31.01.2013 as notice of seven days
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 3 of 23
as required under Clause 11.5.1 of the PPA was not given. SEL
failed to commission its project by 26.02.2013. It commissioned
supply of 10 MW power from 26.04.2013, which was after a delay
of two months. Thereafter, it commissioned supply for the balance
10 MW power from 24.07.2013, which was after a delay of about
five months. SEL, thereafter, moved an application under Section
9 of the Act of 1996 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 of the Act of 1996.
4. On invocation of the arbitration clause, a three-member
Arbitral Tribunal was constituted. SEL as claimant submitted its
claim and sought to restrain NVVNL from encashing the bank
guarantees. It also claimed charges for maintenance of the bank
guarantees. On the other hand, NVVNL claimed encashment of the
bank guarantees as per Clause 4.6 of the PPA. On 21.07.2015, the
three-member Arbitral Tribunal passed a split award. As per the
majority award, SEL was directed to pay NVVNL ₹ 1.2 crores being
20% of the original performance guarantee at the rate of ₹ 30 lakhs
per MW. The claim made by SEL for reimbursement of expenditure
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 4 of 23
was, however, rejected. The minority award on the other hand held
that it was not possible to work out the actual loss suffered by
NVVNL on account of delay in commissioning the project. The
liquidated damages as mentioned in Clause 4.6 of the PPA were
held to be a genuine pre-estimate of loss suffered and SEL was
directed to pay the same. NVVNL was held entitled to encash the
bank guarantees amounting ₹ 49.92 crores excluding the bank
guarantees furnished towards earnest money deposit.
5. Both the parties were aggrieved by the aforesaid awards and
they took recourse to the provisions of Section 34 of the Act of
1996. By the judgment dated 08.09.2016, a learned Judge of the
Delhi High Court held that there was delay on the part of SEL in
commencing the supply of power in terms of the PPA. He held that
NVVNL had not invested any amount in the said project nor did it
prove any actual damage suffered by it. The project was for a
duration of twenty-five years while the delay caused was of only a
few months. He, therefore, modified the award and granted 50% of
the amount awardable towards damages under Clause 4.6. This
amount was to be recovered by adjusting a sum of ₹ 25 lakhs per
month from 01.10.2016 that was payable to SEL. The majority
award was set aside by the learned Single Judge.
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 5 of 23
6. Both the parties were further aggrieved by the judgment
passed under Section 34 of the Act of 1996 and they preferred
appeals under Section 37 of the Act of 1996. The Division Bench
by its common judgment did not agree with the findings recorded
in the majority award on the aspect of liquidated damages as well
as on the question of public utility. It held that the PPA had been
entered into with a social object and purpose. It was difficult to
prove the quantum of damages that could be awarded and paid in
case of breach on account of delay on the part of SEL. After
considering various aspects such as total cost of the project
incurred by SEL, the monthly income received by SEL from NVVNL
and the fact that duration of the project was about twenty-five
years while the period of delay was not very long, SEL was directed
to pay damages at the rate of ₹ 1,00,000/- per MW for the entire
period of delay which amounted to ₹ 20.70 crores. SEL was also
directed to pay bank guarantee renewal charges within a period of
six weeks from the date of the judgment. It is this judgment that
is the subject matter of challenge at the instance of both the parties
in these cross appeals.
7. Mr. Nakul Dewan, learned Senior Advocate on behalf of SEL
submitted that NVVNL having failed to prove the actual loss
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 6 of 23
suffered by it, it was not entitled to receive any liquidated damages
under Clause 4.6.2 of the PPA. The PPA was a purely commercial
contract entered into for the purchase and sale of solar power.
Merely because the PPA was executed under the JNNSM, it could
not be stated that it was a project of public utility and, hence, there
was no obligation on the part of the NVVNL to prove its actual loss
for claiming liquidated damages. Relying upon the decision of this
1
Court in Kailash Nath Associates vs. D. D. A. , it was submitted
that in terms of Section 74 of the Indian Contract Act, 1872 (for
short, “the Act of 1872”) proof of damage caused or loss suffered
was a sine qua non for claiming compensation on account of such
breach. In absence of any such loss being proved by NVVNL before
the Arbitral Tribunal, it was not entitled to receive any liquidated
damages under Clause 4.6.2 of the PPA. Both the Courts erred in
relying upon the decision in M/s Construction and Design
2
Services vs. D.D.A. inasmuch as the employer therein had made
various investments in the concerned project and had suffered loss
due to delay. It was urged that in the present case, NVVNL had not
made any investment whatsoever and that all investments were in
fact made by SEL. While the contractor in the said case had
1
2015 INSC 22
2
2015 INSC 92
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 7 of 23
abandoned the project, SEL had successfully commissioned the
Solar Power Project and it was running smoothly. A delay of few
months, therefore, ought not to be the reason to impose liquidated
damages on SEL.
It was further submitted that ignoring the limited power
available under Sections 34 and 37 of the Act of 1996, the Courts
proceeded to modify the arbitral award while granting liquidated
damages. A merit based evaluation under Sections 34 and 37 of
the Act of 1996 was impermissible and a review of the arbitral
award in such a manner could not have been undertaken. Both
the Courts erred in travelling beyond the arbitral award and
modifying the same. The exercise of undertaking the calculation of
liquidated damages was also an exercise on merits of the dispute,
which was impermissible under the limited jurisdiction available.
In this regard, reliance was placed on the decision in Gayatri
3
Balasamy vs. ISG Novasoft Technologies Limited . It was, thus,
submitted that interference by both the Courts being
unwarranted, the said orders were liable to be set aside. The
appeal filed by SEL, thus, ought to be allowed.
3
2025 INSC 605
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 8 of 23
8. On the other hand, Mr. Gopal Jain, learned Senior Advocate
appearing on behalf of NVVNL submitted that in the case of a
public utility project or a work involving public interest, it was not
necessary to prove the actual loss suffered. The supply of solar
energy under the JNNSM was in fact a public utility project and it
was necessary for SEL to have complied with the time schedules
agreed. The fact that delay was caused in the initiation of the
project was itself sufficient to indicate that NVVNL had in fact
suffered loss and that there was no need of any specific evidence
in that regard. It was submitted that the ratio of the decision in
M/s Construction and Design Services (supra) was squarely
applicable to the case in hand. In fact, NVVNL was entitled to
higher amount of liquidated damages and that the Division Bench
was not justified in reducing the same. Referring to the pleadings
of the parties, it was submitted that the delay caused by NVVNL
being an admitted fact, the entire claim for liquidated damages in
accordance with Clause 4.6.2 of the PPA ought to have been
allowed. There was no question of importing the notions of equity
in such matters and that the rights of the parties were governed
by the PPA entered into by them. The reduction in the amount of
liquidated damages from ₹ 27.06 crores to ₹ 20.70 crores by the
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 9 of 23
Division Bench was uncalled for. To substantiate the aforesaid
contentions, reliance was placed on the decision in
Chamundeshwari Electricity Supply Company Limited vs.
Sai-Sudhir Energy (Chitradurga) Private Limited and
4
another . While the entitlement of NVVNL to liquidated damages
under Clause 4.6.2 of the PPA was ₹ 54.12 crores, the Division
Bench despite being satisfied with the claim made on behalf of
NVVNL was not justified in reducing that amount to ₹ 20.70 crores.
Finally, it was submitted that the dispute between the parties was
of the year 2013 and relegating the parties to any fresh proceedings
was totally unwarranted. It was prayed that the appeal preferred
by NVVNL be allowed.
9. We have heard the learned Senior Advocates for the parties
at length and we have also perused the documentary material on
record. Having given our due consideration to the entire matter,
we find that the Division Bench in exercise of jurisdiction under
Section 37 of the Act of 1996 was not justified in modifying the
amount of compensation awarded by the Court under Section 34.
10. The PPA entered into by NVVNL with SEL on 24.01.2012 was
in its capacity as the Nodal Agency for carrying out the objectives
4
2025 INSC 1034
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 10 of 23
under the JNNSM. This was to enable the sale of bundled up power
by NVVNL to various distribution utilities at prices determined by
the regulatory commission. A total of 20 MW solar power was to be
commissioned under the PPA. It is an admitted position under the
terms of the PPA that the date of commissioning was fixed as
26.02.2013. SEL, however, failed to meet this deadline. It
commissioned supply of 10 MW power from 26.04.2013, which
was after a delay of two months. The balance of 10 MW power was
commissioned from 24.07.2013, which was after a delay of about
five months. Clause 4.6 of the PPA is the subject matter of dispute
between the parties and same reads as under: -
“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 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 proportionate to the
Capacity not commissioned.
b. Delay of more than one (1) month and upto two
months - NVVN will encash 40% of the total Performance
Bank Guarantee proportionate to the Capacity not
commissioned.
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 11 of 23
c. Delay of more than two and upto three months -
NVVN will encash the remaining Performance Bank
Guarantee proportionate to the Capacity not commissioned.
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 remaining Capacity which
is not commissioned. The amount of liquidated damages
would be recovered from the SPD from the payments due on
account of sale of solar power to NVVN.
4.6.3 The maximum time period allowed for
commissioning of the full Project Capacity with encashment
of Performance Bank Guarantee and payment of Liquidated
Damages shall be limited to eighteen (18) months from the
date of signing of this Agreement. In case, the commissioning
of the Power Project is delayed beyond eighteen (18) months
from the date of signing of this Agreement, it shall be
considered as an SPD Event of Default and provisions of
Article 13 shall apply and the Contracted Capacity shall
stand reduced/amended to the Project Capacity
Commissioned within 18 months of signing of PPA and the
PPA for the balance Capacity will stand terminated.
4.6.4 However, if as a consequence of delay in
commissioning, the applicable tariff changes, that part of the
capacity of the Project for which the commissioning has been
delayed shall be paid at the tariff as per Article 9.2 of this
Agreement.”
11. As regards failure on the part of SEL to meet the deadline for
commissioning solar power is concerned, there is no dispute that
SEL failed to meet the agreed deadline as the supply of 10 MW
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 12 of 23
power was undertaken with a delay of two months and the supply
of balance 10 MW power was undertaken after a delay of about five
months. The majority award in paragraph 97 records this aspect,
including the admission on the part of SEL that such delay in fact
had been occasioned. The learned Single Judge while dealing with
the proceedings under Section 34 of the Act of 1996 has in
paragraphs 57, 76 and 77 recorded in clear terms that the breach
of contract was admitted by SEL and that there was in fact delay
on its part in supplying power. The Division Bench in the appeals
filed under Section 37 of the Act of 1996 affirmed this position.
The aforesaid would indicate that insofar as the grievance
raised by NVVNL that SEL failed to commission 20 MW power
within the time stipulated under the PPA is concerned, the said
position does not admit of any doubt. In fairness to the learned
Senior Advocate for SEL, it may be stated that this finding was not
seriously challenged in its appeal.
12. Thus, having found that the timelines agreed to by the parties
to the PPA not having been followed by SEL, it is evident that
Clause 4.6 of the PPA that provides for liquidated damages for
delay in commencement of supply of power gets attracted. Clause
4.6 provides the consequence of delay in not commissioning the
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 13 of 23
agreed capacity within the prescribed period. The period of delay
is material in determining the amount of liquidated damages. It is
in this context that the provisions of Section 74 of the Act of 1872
gets attracted. Section 74 reads as under:-
“ 74. Compensation for breach of contract where penalty
stipulated for:- [When a contract has been broken, if a sum is
named in the contract as the amount to be paid in case of such
breach, or if the contract contains any other stipulation by way of
penalty, the party complaining of the breach is entitled, whether
or not actual damage or loss is proved to have been caused
thereby, to receive from the party who has broken the contract
reasonable compensation not exceeding the amount so named or,
as the case may be, the penalty stipulated for.
Explanation .-- A stipulation for increased interest from the date of
default may be a stipulation by way of penalty.]
Exception .-- When any person enters into any bail-bond,
recognizance or other instrument of the same nature, or, under
the provisions of any law, or under the orders of the [Central
Government] or of any [State Government], gives any bond for the
performance of any public duty or act in which the public are
interested, he shall be liable, upon breach of the condition of any
such instrument, to pay the whole sum mentioned therein.
.-- A person who enters into a contract with
Explanation
Government does not necessarily thereby undertake any public
duty, or promise to do an act in which the public are
interested…………”
Section 74 of the Act of 1872 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
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 14 of 23
penalty stipulated. The provisions of Section 74 were the subject
matter of consideration by this Court in M/s Construction and
Design Services (supra) wherein it was held in the context of delay
in providing a public utility service that in such a case, the delay
in commissioning of such utility service itself can be taken to have
resulted in loss in the form of environmental degradation. In the
said case, the contract was in relation to the construction of a
sewerage pumping station. It was observed that providing for a
sewerage pumping station was of public utility to maintain and
preserve clean environment. It was held that if the parties had pre-
estimated the loss likely to be caused, it would be unjustified to
arrive at the conclusion that the party that had committed the
breach was not liable to pay compensation.
13. The learned Single Judge while exercising jurisdiction under
Section 34 of the Act of 1996 relied upon the aforesaid decision
and while exercising discretion in the matter of award of
reasonable compensation proceeded to grant 50% of the amount
of damages that NVVNL was entitled to under Clause 4.6 of the
PPA. The Division Bench in appeal recorded its agreement with the
view of the learned Single Judge that it was necessary to compute
a fair and reasonable amount of compensation while balancing the
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 15 of 23
equities. The Division Bench, however, proceeded to modify the
order passed under Section 34 of the Act of 1996 and thereafter
reduced the amount of compensation taking into consideration the
period of delay caused by SEL.
14. It has been urged on behalf of SEL that the majority award
having granted an amount of ₹ 1.20 crores to NVVNL in view of the
delay in commission the power plant, the Section 34 Court could
not have modified the award so as to grant higher compensation.
The modification was beyond the permissible limits recognized in
Gayatri Balasamy (supra) .
The Constitution Bench in Gayatri Balasamy (supra) has
recognised the power of the Section 34 Court to modify an award
to a limited extent. It has held in paragraphs 40 to 46 as under:
“IV. A Limited Power of Modification Can Be Located in Section 34
40. A core principium of arbitration, an Alternative Dispute
Resolution mechanism, is to provide a quicker and cost-effective
alternative to courtroom litigation. While this suggests minimal
judicial interference, the role of domestic courts remains crucial,
as they function in a supportive capacity to facilitate and expedite
the resolution of disputes. Therefore, it follows that judicial
intervention is legitimate and necessary when it furthers the ends
of justice, including the resolution of disputes.
41. To deny courts the authority to modify an award-particularly
when such a denial would impose significant hardships, escalate
costs, and lead to unnecessary delays-would defeat the raison
d'être of arbitration. This concern is particularly pronounced in
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 16 of 23
India, where applications under Section 34 and appeals under
Section 37 often take years to resolve.
42. Given this background, if we were to decide that courts can
only set aside and not modify awards, then the parties would be
compelled to undergo an extra round of arbitration, adding to the
previous four stages: the initial arbitration, Section 34 (setting
aside proceedings), Section 37 (appeal proceedings), and Article
136 (SLP proceedings). In effect, this interpretation would force the
parties into a new arbitration process merely to affirm a decision
that could easily be arrived at by the court. This would render the
arbitration process more cumbersome than even traditional
litigation.
43. Equally, Section 34 limits recourse to courts to an
application for setting aside the award. However, Section 34 does
not restrict the range of reliefs that the court can grant, while
remaining within the contours of the statute. A different relief can
be fashioned as long as it does not violate the guardrails of the
power provided under Section 34. In other words, the power
cannot contradict the essence or language of Section 34. The court
would not exercise appellate power, as envisaged by Order XLI of
the Code of Civil Procedure, 1908.
44. We are of the opinion that modification represents a more
limited, nuanced power in comparison to the annulment of an
award, as the latter entails a more severe consequence of the
award being voided in toto . Read in this manner, the limited and
restricted power of severing an award implies a power of the court
to vary or modify the award. It will be wrong to argue that silence
in the 1996 Act, as projected, should be read as a complete
prohibition.
45. We are thus of the opinion that the Section 34 court can apply
the doctrine of severability and modify a portion of the award while
retaining the rest. This is subject to parts of the award being
separable, legally and practically, as stipulated in Part II of our
Analysis.
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 17 of 23
46. Mustill and Boyd have observed that an order varying an award
is not equivalent to an appellate process. The authors suggest that
a modification order would only be appropriate where the
modification, including any adjustment of costs, follows inevitably
from the tribunal’s determination of a question of law. This
approach would be beneficial, as it would reduce costs and delays.
The courts need not engage in any fact-finding exercise. By
acknowledging the Court’s power to modify awards, the judiciary
is not rewriting the statute. We hold that the power of judicial
review under Section 34, and the setting aside of an award, should
be read as inherently including a limited power to modify the
award within the confines of Section 34.”
15. In our view, the modification of the award so as to enhance
the amount of reasonable compensation by the Section 34 Court
was a permissible exercise when viewed in the context of the law
laid down in Gayatri Balasamy (supra) . 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.
16. SEL has strenuously sought to distinguish the decision of
this Court in M/s Construction and Design Services (supra) and
urge that the PPA entered into by the parties was merely a
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 18 of 23
commercial agreement to supply power. We do not find this
contention acceptable. The PPA indicates that NVVNL had been
appointed as a Nodal Agency for carrying out the objectives under
the JNNSM. The commissioning of the solar plant by SEL was with
a view to satisfy and take the solar mission forward. This activity
was definitely in public interest and with a view to promote 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. We are, therefore, of the view that M/s
Construction and Design Services (supra) in fact provides sufficient
indication of the manner in which the aspect of reasonable
compensation could be considered wherein a public utility project
is involved. In such cases, the burden would be on the party
committing the breach to show that no loss was caused by the
delay or that the amount stipulated as liquidated damages was in
the nature of penalty. In the facts of the present case, this burden
has not been discharged by SEL. In fact, it has remained content
by urging that NVVNL having failed to make any investment under
the PPA, it neither suffered any loss of capital or loss of interest,
notwithstanding the delay. Having agreed to incorporate Clause
4.6 in the PPA, it is clear that the rights of the parties ought to be
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 19 of 23
determined bearing in mind the terms agreed and SEL would not
be justified in contending that NVVNL had failed to indicate the
exact loss suffered by it due to the delay in commissioning of the
project. The learned Single Judge as well as the Division Bench
have in our view rightly approached this aspect of the matter and
have held that NVVNL in terms of Clause 4.6 of the PPA is entitled
to reasonable compensation. We, therefore, do not find any reason
whatsoever to take a different view of the matter in this regard.
17. Coming to the aspect of determination of the amount of
reasonable compensation, the learned Single Judge after referring
to Clause 4.6 of the PPA determined the claim as made by NVVNL
in terms of Clause 4.6 of the PPA at an amount of ₹ 54,12,32,000/-.
He found that granting 50% of the aforesaid amount by adjusting
₹ 25,00,000/- per month from the revenue to be received by SEL
would amount to reasonable compensation in favour of NVVNL.
The Division Bench in appeal, however, proceeded to modify the
amount of reasonable compensation by reading Clause 4.6 of the
PPA on the premise that a higher rate of damages was payable in
the initial three months period of delay and that amount was
reduced after three months. On that basis damages at the rate of
₹ 1,00,000/- per MW per day came to be worked out. The amount
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 20 of 23
of compensation was, thus, reduced to ₹ 20.70 crores.
18. In our view, the Division Bench exceeded its jurisdiction
under Section 37 of the Act of 1996 when it proceeded to re-work
and re-calculate the amount of reasonable compensation to which
NVVNL was entitled. The learned Single Judge having determined
the amount of reasonable compensation by relying upon Clause
4.6 of the PPA and thereafter awarding 50% of the amount so
determined, in the absence of this determination being shown to
be beyond the terms of Clause 4.6 of the PPA or arbitrary or
perverse, no interference with such determination was called for in
exercise of jurisdiction under Section 37 of the Act of 1996. In fact,
the Division Bench has not recorded any finding that such
determination of reasonable compensation by the learned Single
Judge suffered from arbitrariness or that it travelled beyond what
was provided by Clause 4.6 of the PPA. Having held in paragraph
28 of the impugned judgment that it was in agreement with the
view of the learned Single Judge of the need to balance equities
and compute a fair and reasonable amount of compensation
coupled with the fact that the majority award granting a paltry
amount of ₹ 1.2 crores was held to be contrary to the fundamental
policy of Indian law thus requiring interference, the further
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 21 of 23
exercise undertaken by it in modifying the amount of reasonable
compensation was not justified in the facts of the case. 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
5
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.
19. For the aforesaid reasons, we are of the view that the
determination of the amount of reasonable compensation by the
learned 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
5
2025 INSC 174
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 22 of 23
Bench was not justified in modifying the said decision.
Accordingly, the judgment of the Division Bench dated 18.01.2018
to that extent stands set aside. The judgment of the learned Single
Judge in OMP No.410 of 2015 and 446 of 2015 stands restored.
Civil Appeal Nos.12894-12895 of 2024 preferred by NVVNL, thus,
stands allowed and Civil Appeal Nos.12892-12893 of 2024
preferred by SEL stands dismissed. The parties shall bear their
own costs.
……………………………………………..J.
[PAMIDIGHANTAM SRI NARASIMHA]
.…..………………………..J.
[ATUL S. CHANDURKAR]
NEW DELHI,
JANUARY 30, 2026.
C.A. Nos.12892-12893 & 12894-12895 of 2024 Page 23 of 23