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M/s. SB Adithya Power Projects Pvt Ltd, Rep. by its Director, Sheik Bareed v/s M/s. Siemens Gamesa Renewable Pvt. Ltd, [Previously known as Gamesa Renewable Pvt.Ltd and before that known as Gamesa Wind Turbines Ltd], Rep. by its Managing Director, Chennai

    Original Petition No. 481 of 2020

    Decided On, 28 September 2021

    At, High Court of Judicature at Madras

    By, THE HONOURABLE MR. JUSTICE N. SATHISH KUMAR

    For the Petitioner: M.S. Krishnan, SC, K. Gowtham Kumar, Advocates. For the Respondent: R. Parthasarathy, Advocate.



Judgment Text

(Prayer: Petitions filed under section 34 of the Arbitration and Conciliation Act,. 1996 to set aside the impugned Award dated 19.04.2019 passed by the Arbitral Tribunal in the arbitration between the petitioner and the respondent allowing the counter-claim filed by the respondent and to allow the claims filed by the petitioner before the Arbitral Tribunal and for costs of the proceedings.)

1. Aggrieved over the three member arbitral tribunal dismissing the claim of the petitioner and allowing of the part of the counter claim, the present petition has been filed.

2. Brief facts leading to filing of this original petition is as follows:

2.1 The claimant is in the field of wind energy and its function and business is to provide land, civil foundation, power evacuation facilities, erection of wind turbines and other related infrastructure development works necessary to establish wind farm projects. The respondent approached the claimant in setting up wind farms in the state of Maharashtra at wind power project in Khanapur and there were correspondences between the parties. Thereafter, Land Procurement and development agreement dated 22.04.2013 came to be executed between the parties. Simultaneously evacuation facility and development agreement dated 22.04.2013 is also executed between them. The scope of the work mentioned in the schedule -1 and payment schedule is mentioned in the schedule 4 of the agreement. Based on the agreement, the claimant without any delay proceeded for getting statutory clearance pertaining to the land such as village NOC, mining NOC, DIC to secure and block the land parcels etc. He has also applied for sixteen locations for basic infrastructure clearance with Maharastra Energy Development Authority and obtained the final clearance for one location. Statutory charges were paid for nine locations [Rs.20,10,000/-] for each obligation with necessary required details. The claimant has also identified the entire land parcel required for 200 MW project and blocked the lands by a way of agreement of sale, lease deed, sale deed, token sale advance, consent deed etc. The claimant also identified the lands of ROW for a distance of 40 kms from the wind farm to Khadegoan sub-station to evacuate the power as per the evacuation facility and development agreement dated 22.04.2013. After repeated reminders, the respondent paid a partial advance of Rs.9.69 crores by 14.06.2018 after a delay of two months as against Rs.36 crores payable under the agreements. The claimant also taken steps requesting MSETCL to extend grid connectivity. However, the respondent has not adhered to terms and conditions of the agreements by not issuing work orders in time and not releasing the funds as agreed exposing the claimant to difficulties to speed up the work.

2.2 The claimant by an email dated 01.10.2013, updated the progress and delay in issuing work orders. MSETCL made a provisional demand note dated 11.10.2013 for paying the provisional supervision testing charges of Rs.74.56 lakhs. The claimant sent an email dated 09.01.2014 highlighting the milestone achieved and how the respondent is delaying the project requesting release of pending work orders and payments. The respondent paid Rs.74.56 lakhs on 25.01.2014. The delay in payment caused delay in the execution of all related works since they are all interlinked. The respondent failed to release the amount as agreed. When the matter stood thus, even without considering the enormous work carried out by the claimant, the respondent mooted the option to tap from some of the existing 220 KV the feeder instead of Khadegoan substation. The respondent also insisted new conditions to obtain LILO [Loop in Loop out] permission from MEDA before taking the project. Consequent to new conditions insisted, the claimant was forced to do new work and eventually the entire activities as processed with the earlier agreements came to a standstill in order to meet new conditions imposed. Review meeting was also held on 15.03.2013. Thereafter, the respondent on their own accord and unilaterally brought in a new customer M/s.Orange Maha Wind Private Limited and requested the claimant to continue the project directly with their scope limited to supply of windmills.

2.3 The claimant also entered into a term sheet on 20.05.2014 with M/s.Orange Maha Wind Private Limited for execution of 200 MW project in two phases of 100 MW each in Bhud Village, Sangli District along with the agreement title as understanding for transfer of approval agreement dated 16.08.2014 to use the approvals already obtained exclusively for the project in their favour. M/s.Orange Maha Wind Private Limited have made assurances and promises along with the respondent to make timely payment of funds as per the schedule towards completion of the project. Therefore, again the claimant commenced the project activities in full swing with its own funds expecting the payment will be released by the respondent. M/s.Orange Maha Wind Private Limited wanted to change the land parcel already identified and approved by the respondent and sought new land parcel locations. Even though it is not a condition as agreed in the undertaking for continuation of the project, the claimant intimated the same to the respondent and identified new locations and requested M/s.Orange Maha Wind Private Limited to release the funds but the funds were not released as agreed. The claimant, through emails marking copies to the respondent requested to release payments enabling the claimant to complet the project. But the respondent and M/s.Orange Maha Wind Private Limited failed to enter into an agreement with the claimant for completion of the projection. Therefore, it is the contention of the claimant that that they made their fund towards various works done for the project. Hence, the claimant has raised the following claims:

[a] Directing the respondent to pay a sum of Rs.11,51,27,136/- [Rupees Eleven corres fifty one lakhs twenty seven thousand one hundred thirty six only] towards the expenditure and cost incurred by the claimant from its own funds in the project with interest at 12% p.a. from the year 2015 till the date of payment to the claimant;

[b] Directing the respondent to pay a sum of Rs.13,07,00,000/- [Rupees thirteen crores seven lakhs only] towards the business opportunity loss with interest at 12% p.a. from the year 2015 till the date of payment to the claimant.

[c] Direct the respondent to pay the cost of the Arbitration of Rs.25,00,000/- [Rupees twenty five lakhs only] to the claimant.

3.1 It is the case of the respondent that the agreement entered between the parties is valid for two years from the date of the agreement or till the completion of the works under the agreement, whichever is earlier. The claimant has to implement the project in full by doing services mentioned in the agreement itself. Time is essence of the agreement and in the event of delay, the respondent is entitled to claim liquidated damages. Evacuation Agreement dated 22.04.2013 and 28.02.2014 was also entered between the parties. It is their contention that all the agreements were interlinked and required simultaneous performance in order to successfully complete the project. Procurement of lands was to be done while approvals and development of facilities was to be done in order to ensure timely completion of the project and to ensure that each of tasks are completed fully with proper documentation etc. The initial requirement is proper procurement of land for installation of the wind turbine generator as well as the land for setting up a pooling sub-station to consolidate the power generated from the wind turbine generators. Simultaneously, the requisite approvals and facilities for evacuation of the Power to the substation of the relevant plant/utility would also have to be procured. Only for that purpose, the parties have entered into two agreements with similar time lines, which were interlinked with each other in a manner that default under one agreement would also have a domino effect upon the performance of obligations under both agreements was necessary for full completion of both agreements.

3.2 The agreements in issue were negotiated as lump sum contracts where the respondent's obligation was limited to furnishing of timely payments against various milestones, only on completion of entire services under the agreements in full without any shortfall, as stipulated in clause 5 of the Land Procurement Agreement and Clause 5 of the 2014 Evacuation Agreement. It is only for the sake of procedural convenience, the payment schedule was split into achievement of several milestones. The claimant, however, did not even procure a single location with clear and marketable title as contemplated under the agreements, which was the threshold step for performance of its obligations. Hence, disputed the entire claim. Further, there were inordinate delay in execution of the works by the claimant which has adversely affected the respondent's prospect of getting returns. Hence, they have claimed counter claim for a sum of Rs.21,92,22,864/- together interest at 18% per annum till the date of payment towards the advance already paid to the claimant and also liquidated damages.

4. The learned arbitral tribunal has framed as many as 18 issues. On side of the claimant C.W.1 was examined and Ex.C.1 to Ex.C.87 were marked and on the side of the respondent R.W.1 was examined and Ex.R.1 to Ex.R.18 were marked.

5. The learned arbitral tribunal after considering various clauses governing parties, passed an award dismissing the entire claim and allowed the counter claim for a sum of Rs.10,63,26,864/- and passed the following award:

a] The claim petition is rejected with no order as to costs.

b] The counter claim is decreed for a total sum of Rs.10,63,26,864/- [Rupees ten crores sixty three lakhs twenty six thousand eight hundred sixty four [i.e. A] Mobilization Advance for 20% payment against 50 locations of Rs.4,84,49,632 [after deducting TDS] on 05.06.2013; b] another Mobilization Advance for 20% payment against another 50 locations of Rs.4,84,49,632 [after deducting TDS] on 14.06.2013;

c] Advance for land of Rs.94,27,600 [after deducting TDS] on 18.02.2014] together with interest at 6% per annum from the date of counter claim till the date of payment. As against which the present petition has been filed.

6. Challenge was made mainly on the ground of perversity and patent illegality. It is the main contention of the learned Senior Counsel appearing for the applicant is that the tribunal has not appreciated the evidence let in by the respondents and dismissed the claim of the petitioner without appreciating the entire evidence. It is the contention of the learned Senior Counsel that the finding of the tribunal is on the basis of no evidence and it cannot be sustained in the eye of law. It is his further contention that the arbitral tribunal recording that there is no definition of material breach in all the agreements. The aforesaid finding demonstrates total lack of application of mind by the tribunal. The tribunal having found that both sides have not terminated the contract. However, applied the termination clauses under the agreements for granting certain reliefs to the respondent. Hence, it is his contention that such a finding is also contrary to each other and refund of advance amount ought not have been granted without termination of the contract. The arbitral tribunal has failed to consider the documents running to 13 volumes filed by the claimant. The tribunal has turned blind eye to the entire evidence of the petitioner and also the admissions of the respondent is also not considered. Admittedly, there was a delay of payment of the first installment which is not at all taken not by the arbitral tribunal. Therefore, the finding of the learned arbitral tribunal that work done by the claimant and the expenses incurred by the claimant has never been considered by the tribunal, without considering clause 17 in the contract, refund has been Ordered.

7. It is further stated that the tribunal has totally ignored the fact that the respondent had abandoned the project and introduced M/s.Orange Maha Wind Private Limited and the benefits of the works undertaken by the claimant under the agreements would have enured to M/s.Orange Maha Wind Private Limited and ultimately M/s.Orange Maha Wind Private Limited also abandoned the project. This fact is also not taken note by the arbitral tribunal. The work done by the petitioner and the agreements have not been considered by the tribunal. There is violation of Section 18 of the Arbitration and Conciliation Act. It is also further contended that despite framing 17 issues, the arbitral tribunal did not go into all the issues to decide the issues. For Issue Nos.7 and 2, there were no discussion at all. The issue as to whether the failure in completion of work is attributable to the petitioner is also decided against the petitioner without considering the evidence of the respondent. Hence, submitted that the award has to be set aside on the ground of patent illegality. In support of his submissions he relied on the following judgments:

Associate Builders Vs. Delhi Development Authority reported in 2015 3 SCC 49

PSA SICAL Terminals Pvt. Ltd. Vs. Board of Trustees of V.O.Chidambaranar Port Trust Tuticorin and others reported in 2021 SCC OnLine Sc 508

Mahanagar Telephone Nigam Limited Vs. Tata Communications Limited reported in 2019 [5] Supreme Court Cases 341

8. Whereas, it is contention of the learned counsel for the respondent that the under land procurement agreement, the obligations of the parties are clearly spelt out. Schedule I provides detailed milestones to be achieved by the petitioner and schedule 4 contains the payment obligations of the respondent, which is expressly linked to milestones to be achieved by the petitioner under schedule I. The advance payment of 20% was made by the respondent which was accepted by the petitioner without any demur. Though it is alleged delay in payment for the first time, there is no case made out for any loss on account of delay in making payment. Since the petitioner was unable to discharge its burden of having performed the milestone to seek payment, there was no requirement to go into the evidence of the respondent. The agreement is a lumpsum contract and clause 4 clears spells out that the performance of entire scope of services is essential to implement the project and part performance would be of no business value to the respondent. The Arbitral Tribunal has clearly found that the petitioner has committed breach of both agreements, by not obtaining legal opinion under the Evacuation Agreement. Scope of works is set out in clause 3 read with schedule I and the payment schedule is defined in the said agreement as the schedule of price as set out in schedule 4. A perusal of Schedule 4 would reveal that the first milestone payment of 20% was upon submission of sub-station award letter. In the present case, the substation award letter has not been issued by the concerned authorities. Hence, the petitioner is not entitled to any payment under the agreement. It is his further contention that the tribunal has recorded factual findings and same cannot be challenged under section 34 of the Arbitration and Conciliation Act.

9. The tribunal has laid emphasis on the contractual terms that part of the performance of obligations under the agreements are of no business value to the respondent and interpreted the contract according to its true construction, which is solely within the domain of the arbitral tribunal. Only on an interpretation of the contract, the arbitral tribunal has come to a conclusion in awarding the claim of the respondent and rejecting the claims of the claimant. Hence, interpretation of the contract is a matter of arbitral tribunal to determine. It is his further contention that the various costs allegedly incurred by the petitioner for obtaining permits have all been obtained even before signing of the agreements between the parties and these expenses have been incurred by the petitioner in anticipation of business with prospective customers like the respondent and cannot be claimed as a damage or loss under the present agreement. Hence, it is his contention that the counter claim is only refund of monies paid as advance as per the contractual provisions and as per Section 54 of the Indian Contract Act. Hence, submitted that there are no grounds made out whatsoever to interfere the well reasoned award of the arbitral tribunal. Hence, prayed for dismissal of this petition. In support his contention, he relied upon the judgment reported in Associate Builders Vs. Delhi Development Authority reported in 2015 3 SCC 49 Ssangyong Engineering and Construction Co. Ltd. Vs. NHAI reported in [2018] 12 SCC 471

10. The Project land procurement agreement and Development Agreement, Evacuation Facilities Development Agreement have been executed on 22.04.2013 to provide wind farm projects for its customers and in the process of setting up 200 MW wind farm project at Khanpur Village, Maharashtra. Under the Land Procurement Agreement, the petitioner has to undertake the activity of procurement of land, arranging right of way and obtaining requisite licenses so that wind farm can be established. It is relevant to extract the important clause in the land procurement and Development Agreement, dated 22.04.2013. As per clause 2 of the agreement, the agreement shall be valid for a period of two years from the effective date or till the services completion date, whichever is earlier. Obligation of the Developer is as follows:

Clause 4: Developer agrees, understands and covenants that performance of the entire scope of services is essential for Gamesa to implement the project and that if it is partly performed there will be no business value to Gamesa. In performing the Scope of Services, Developer shall do all things necessary to achieve completion of the Scope of Services, including but not limited. Clause 4.1 reads as follows:

Clause 4.1 Project Land and Approvals

a] facilitate procurement of land with the dimension of 120x130 Mtrs of alnd per WTG location for all 100 Nos. of WTG and Access Roads/Common Roads, with a clear and Marketable Title, from the actual land owner to Gamesa/or its nominee on lease/sale basis, with all right is necessary to develop in the project. Clause 5 deals with price and payment terms and Clause 5 [a] and [b] reads as follows:

5 Price and Payment Terms

[a] In consideration of the performance of the Service by Developer in accordance with the Scope of Services, applicable law, obligations to be undertaken per clause 4 and the terms of this Agreement, Gamesa shall pay the Developer a total amount of Rs.22 lakhs/MW [Rupees 22 laks per Mega Watt only] ['Prince'] in he manner set out in schedule 4.

[b] The price is inclusive of all stamp duty, registration charges, other applicable statutory charges, incidental expenses, etc. on all the deeds of lease and conveyance of project Land in favour of Gamesa or its nominee, documents for securing easementary right and pathways and Row for internal transmissions lines, and on all other documents required and involved in the performance of the Scope of Service.”

11. The above clauses makes it clear that the payment has to be made as per the schedule 4 of the contract. Schedule 4 of the contract makes it very clear that the payments will be made on prorata basis [for each WTG location] as per the following schedule, upon achievement of milestones and completion of all services relative to each milestone, as detailed in schedule I, within 15 business days of submission proper invoices along with required documents. The first amount of 20% has to be paid on execution of the agreement as per the conditions for payment mentioned in schedule – 4 upon achievement of milestones and completion of all services relative to each milestone, as detailed in schedule I. The learned arbitral tribunal took note of the oral evidence of the claimant besides documents and recorded factual finding that the services was not complied as agreed and all the milestones have not been done by the claimant and recorded a finding that as per the schedule 4 and releasing of the 20% and 40% of the remaining amount will be made after execution of lease or sale deed in favour Gamesa or its nominees and found that when the claimant has failed to discharge the burden of proving any of the services specifically agreed milestones, the arbitral tribunal has finally held that there is no necessity for looking into the evidence of R.W.1.

12. The tribunal has recorded a factual finding that the services have to be completed by the claimant as per the contract and the same has not been done to insist the remaining payment as per the schedule. Merely because the oral evidence of R.W.1 has not been considered in this aspect, it cannot be said that the finding is totally perverse or illegal which goes to the root of the matter. The arbitral tribunal took note of the fact that parties have also admitted that Ex.C.3 and E.C.4 are interlinked and they have to be performed simultaneously and each contract has a life of two years and the parties are conscious of the fact that such simultaneous performance of the terms of Ex.C.3 and C4 [Ex.C.37] is so very essential so as to not to jump the contractual period and held that the claimant has not shown that the they have completed their obligations as per the contract. Therefore, the factual findings have been recorded by the learned arbitral tribunal and the contract between the parties was interpreted by the tribunal and such interpretation of the contract is always the matter for the arbitral tribunal to determine even if it gives rise to determination of a question of law as held in McDermott International inc. Vs. Burn Standard Co. Ltd. [2006 [11] SCC 181 and Associated Builders Vs. DDA [2015 [3] SCC 49].

13. The petitioner in the business of procuring land, arranging right of way, obtaining required government and non governmental licenses. The very claim statement itself clearly indicate that much prior to the entering into the contract with the respondent, they are in possession of required land in the year 2012 itself they ha

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ve got readiness to transfer and that itself clearly demonstrate the fact that various costs allegedly spent by the petitioner for obtaining such permits have been obtained even before signing of the contract between the parties and such expenses have been spent by the petitioner in anticipation of the business with prospective customers who enters into a contract with the petitioner. The petitioner themselves have claimed the amount as reimbursement on contractual basis. The arbitral tribunal has recorded a finding that the services mentioned in the claim statement do not indicate the services mentioned in schedule to Ex.C.3. When the arbitral tribunal factually recorded that such reimbursement is not maintainable, this Court is of the view that when the arbitral tribunal has concluded that there is a breach of the contract on the part of the petitioner, and ordered only refund of advance amount, other than statutory payment already made, it cannot be said that counter claim has been ordered without any default. What has been ordered is only the advance amount paid, that too after deducting statutory payments made. 14. The learned arbitral tribunal has also clearly given reasons for refunding the advance. Reasoning and conclusion of the tribunal is more plausible and merely because the evidence of R.W.1 has not been considered, it cannot be said that ordering counter claim goes to the root of the matter and fall within the ambit of perversity. What has been ordered is only admitted advance paid after deducting statutory deduction. Whereas, the entire breach is on the part of the petitioner and the tribunal has analysed in detail in para 17 of the award, the tribunal has given a reasoning that the amount is said to have been spent on services, claim made by the claimant towards various expenses has not been indicated in any of the services mentioned in the schedule I Ex.C.3 and a factual finding has been recorded by the arbitral tribunal that mere refunding of the advance after deducting the statutory payment cannot be illegal or perverse, which goes to the root of the matter. Hence, this Court is of the view that the arbitral tribunal has considered the entire evidence and documents and the entire award is a result of adequate reasoning and intelligible. Therefore, none of the grounds has been made out to interfere with the will reasoned award of the tribunal and there is no merits in the petition. 15. Accordingly, this Original Petition is dismissed.
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