**Delhi High Court Overturns Arbitral Award Against NTPC Ltd**
In a significant relief for NTPC Ltd, the Delhi High Court has annulled an arbitral award that mandated the state-run power company to pay ₹1,891 crore to Jindal Infralogistics Ltd, a subsidiary of the Jindal Group. The ruling, delivered by a single bench on January 30, deemed the award “patently illegal and perverse,” highlighting its lack of a sound basis for calculating damages. The court remarked, “The award is so perverse, it has to go in totality,” while nullifying it.
Jindal Infralogistics has announced its intention to appeal the decision before a division bench of the high court. The dispute originated from a 2011 tripartite agreement involving NTPC, Jindal Infralogistics, and the Inland Waterways Authority of India (IWAI) for coal transportation via National Waterway 1 to NTPC’s Farakka thermal power plant in West Bengal.
Under the agreement, Jindal Infralogistics was tasked with developing the necessary infrastructure for coal transport, with Phase 1 expected to be completed within 15 months and Phase 2 within 24 months. However, the project faced significant delays—400 days for Phase 1 and 674 days for Phase 2. In 2017, Jindal Infralogistics initiated arbitration proceedings, alleging that NTPC was responsible for these delays, prompting NTPC to terminate the agreement.
On January 27, 2019, the arbitral tribunal ruled in favor of Jindal Infralogistics, awarding ₹1,891 crore in damages for wrongful termination. This amount included ₹417.32 crore for pre-commercial operation date (pre-COD) shortfalls in minimum guaranteed quantity (MGQ) and ₹1,108.93 crore for the alleged wrongful termination of the tripartite agreement.
NTPC subsequently challenged the arbitral award in the Delhi High Court on several grounds. It contended that the award was flawed due to the exclusion of a necessary party, as the Inland Waterways Authority, a crucial entity in the agreement, was not part of the arbitration. NTPC also argued that the damages awarded for the pre-COD period contravened the Indian Contract Act, 1872, which governs compensation for contract breaches.
Furthermore, NTPC pointed out that the tripartite agreement contained a “no damages” clause for the pre-COD period, yet the tribunal awarded damages. The company also claimed that the tribunal’s calculation of damages was erroneous, as it used an incorrect starting date for its computations. Additionally, NTPC asserted that the ₹1,108 crore compensation for wrongful termination was unwarranted, as Jindal Infralogistics had not fulfilled its contractual obligations nor accounted for the costs it would have incurred for the remaining operational period. NTPC further argued that the tribunal mistakenly treated the tripartite agreement as a non-terminable contract, despite its explicit provisions.
