Delhi High Court Overturns 2019 Arbitral Award Against NTPC
Delhi High Court Overturns 2019 Arbitral Award against NTPC
The Delhi High Court has overturned a 2019 arbitral award that had directed NTPC Ltd to pay Rs 1,891 crores in damages to Jindal ITF Ltd (JITF), the infrastructure arm of Jindal Saw, following the alleged wrongful termination of a coal transportation agreement for the Farakka thermal power plant in West Bengal.
Justice Dinesh Sharma, in his ruling, stated that the arbitral award was "patently illegal" and violated public policy, declaring that it "shocks the conscience of the Court." He further emphasized that the award was so "perverse" that it needed to be set aside in its entirety. The court noted that the arbitrator had a duty to resolve disputes with appropriate care and skill, and the failure to do so rendered the award invalid.
The dispute originated from a memorandum of understanding (MoU) signed in 2008 betweenn NTPC and the Inland Waterways Authority of India (IWAI) to explore using inland waterways as an alternative coal transport method for the Farakka plant. In 2011, IWAI issued a request for proposals to select an operator for coal transportation via waterways. A tripartite agreement was eventually made between NTPC, JITF, and IWAI, covering the transportation of coal through National Waterways-I, along with the construction of unloading infrastructure at the Farakka plant.
Under the terms of the coal transportation agreement, NTPC was responsible for procuring and transporting coal to JITF, which, in turn, was to handle the unloading and transportation of the coal to the Farakka plant, with a minimum requirement of 12,000 tonnes per day.
However, a dispute arose regarding delays in the construction of infrastructure, and JITF sought damages, claiming that NTPC's failure to complete the necessary infrastructure led to a loss of revenue.
The matter was referred to arbitration in 2017, and in January 2019, the arbitral tribunal awarded JITF Rs 1,891 crores in damages. NTPC challenged the award before the Delhi High Court, arguing that the tribunal had violated the Contract Act, imposed a liability of Rs 417 crore despite the existence of a 'no damages' clause, and awarded damages from the incorrect date. NTPC also claimed that the tribunal had rejected its counterclaims and improperly altered the contract terms.
