Unilateral tariff hikes and abrupt power stoppage without contractual justification constitute a compensable breach of contract.

The parties entered into a Power Supply Agreement (PSA) on 18.04.2018 for three years, wherein the appellant (Generator) supplied electricity to the respondent (Consumer) at a fixed tariff of Rs.5.75 per unit

Monthly billing cycles ran from the 28th to the 27th, with a 7-day payment window

On 19.09.2018, the appellant unilaterally sought to increase the tariff to Rs.6.15 per unit, citing Clause 11.8 (fuel price changes), and subsequently stopped supply on 28.09.2018—prior to the expiry of the payment window for the current bill

The respondent was forced to procure power from TANGEDCO at higher rates and pay increased security deposits

The Sole Arbitrator awarded the respondent Rs.40,82,400/- for excess power charges and interest on security deposits

A Single Judge dismissed the appellant’s Section 34 challenge on 19.08.2020, leading to this Section 37 appeal

1. Whether the grant of damages on account of non-supply of electricity was justified when the appellant claimed a right to stop supply due to non-payment and fuel price escalation

2. Whether the arbitral award suffered from patent illegality or perversity under Section 34 of the Arbitration and Conciliation Act, 1996

The court applied Section 34 and Section 37 of the Arbitration and Conciliation Act, 1996, regarding the limited scope of judicial interference with arbitral awards

It relied on the principle of "Causation" for awarding damages for breach of contract

It further applied the tests for "Patent Illegality" and "Perversity" as established in *Associate Builders v. DDA* and *PSA Sical Terminals Pvt. Ltd. v. Board of Trustees, V.O.C. Port Trust*, holding that an award is perverse only if it ignores vital evidence or is so irrational that no reasonable person would arrive at such a conclusion

The court also referenced *Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd.* to emphasize respecting party autonomy and the finality of awards

The court found that the appellant committed the initial breach by unilaterally escalating the tariff without providing evidence of increased fuel costs as required by Clause 11.8 of the PSA

The Arbitrator correctly noted that the appellant stopped power supply on 28.09.2018, even before the 7-day "Due Date" for the previous invoice had expired, rendering the "non-payment" justification an afterthought

The court reasoned that the damages awarded were not remote but were a direct "proximate" result of the appellant’s breach, as the respondent provided monthly quantifications of the loss incurred by procuring more expensive power from TANGEDCO

Both the Arbitrator and the Single Judge concurrently found the appellant's actions to be a breach of contract; thus, the court held there was no ground to interfere as the interpretation of the contract was plausible and supported by evidence

The court held that the cessation of power supply was an unjustified breach of the PSA and that the award did not suffer from perversity or patent illegality

The appellant was ordered to pay costs, and the respondent was granted liberty to withdraw the amounts deposited by the appellant during the pendency of the appeal