In a significant ruling on arbitration and infrastructure contracts, the Supreme Court of India has set aside a Delhi High Court decision that reduced damages payable for delay in a solar power project. The Court restored the earlier order granting ₹27.06 crore as compensation to NTPC Vidyut Vyapar Nigam Ltd. (NVVNL), holding that appellate courts cannot re-calculate damages once a valid finding exists under arbitration law.
The verdict clarifies how far courts can go while interfering with arbitral awards, especially in public utility projects linked to national missions.
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Background of the Case
The dispute arose from a 2012 Power Purchase Agreement (PPA) signed under the Jawaharlal Nehru National Solar Mission (JNNSM).
- NVVNL, a government-owned power trader, appointed Saisudhir Energy Ltd. (SEL) to set up a 20 MW solar power plant.
- The project was to be commissioned by 26 February 2013.
- SEL failed to meet the deadline.
- Power supply began in phases - two months late for the first half and nearly five months late for the rest.
Under Clause 4.6 of the agreement, delay attracted liquidated damages.
What the Arbitration Tribunal Held
A three-member arbitral tribunal examined the dispute:
- The majority awarded only ₹1.2 crore as damages.
- A minority view held that NVVNL was entitled to full liquidated damages as per the contract.
Both sides challenged the award.
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Delhi High Court’s Intervention
A Single Judge of the Delhi High Court ruled that:
- Delay was clearly established.
- NVVNL need not prove actual financial loss.
- Since the project served a public purpose, damages were justified.
The court fixed damages at ₹27.06 crore, calculated as 50% of the contractual amount.
However, a Division Bench later reduced this figure to ₹20.70 crore, prompting both parties to approach the Supreme Court.
Supreme Court’s Observations
A bench of Justice Pamidighantam Sri Narasimha and Justice Atul S. Chandurkar examined the issue in detail.
The Court noted:
“The delay in commissioning a public utility project itself results in loss. In such cases, exact proof of damage is not required.”
The judges stressed that the solar project was not a private commercial deal but part of a national renewable energy mission, affecting public interest.
They also relied on earlier rulings which allow reasonable compensation even without strict proof of loss when a contract clearly provides for it.
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On Limits of Court Interference
The Supreme Court strongly criticised the High Court’s decision to recalculate damages under Section 37 of the Arbitration Act.
The bench observed:
“Once the Section 34 court has exercised discretion reasonably, the appellate court cannot substitute its own calculation.”
It clarified that appellate courts can correct jurisdictional errors-but cannot rewrite awards or reassess compensation figures unless they are perverse or illegal.
Final Decision
The Supreme Court ruled that:
- The Delhi High Court exceeded its powers by reducing the compensation.
- The Single Judge’s order granting ₹27.06 crore was legally sound.
- The Division Bench’s judgment was set aside.
- NVVNL’s appeal was allowed.
- Saisudhir Energy’s appeal was dismissed.
The Court also directed that both parties bear their own costs.
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Why This Judgment Matters
- Reinforces the finality of arbitral awards
- Limits excessive judicial interference
- Strengthens enforcement of contracts in infrastructure projects
- Supports timely execution of renewable energy projects
The ruling sends a clear signal: delays in public utility projects carry real financial consequences, and courts will respect contractual risk allocations.
Case Title: M/s Saisudhir Energy Ltd. vs NTPC Vidyut Vyapar Nigam Ltd.
Case No.: Civil Appeal Nos. 12892–12895 of 2024
Decision Date: 30 January 2026
