By LE Desk

Chandigarh, June 16, 2021: In an arbitration award, the sole arbitrator has directed Reliance Infrastructure Limited (earlier Reliance Energy Ltd) to pay an amount of Rs 125 crore to Haryana Power Generation Corporation Limited (HPGCL).

The disputes under the adjudication of the sole arbitrator, Promilla Issar, former Chief Secretary, Government of Haryana, arose out of the contract for the construction of 2×600 MW Rajiv Gandhi Thermal Power Project at Khedar (Hisar), which had been awarded to M/s Reliance Infrastructure Ltd. The contract value was Rs 2,344.41 crore (indigenous component) and $321 million (offshore supplies).

Since the company failed to complete the project on time, a penalty was levied on it as per the contract. The company was also required to operate and maintain (O&M) the plant till the final taking over, in which it failed again and the task had to be done by the HPGCL. Consequently, various deductions were made from the amounts payable to the company, The Tribune reported.

Aggrieved by the penalty and other deductions, the company invoked arbitration. It filed claims amounting to Rs 1,752.27 crore (indigenous component) and $117.97 million (offshore supplies) and challenged the sole arbitrator’s appointment in the Punjab and Haryana High Court. The then Chief Justice SJ Vazifdar dismissed the challenge and upheld the appointment. The company then filed a special leave petition in the Supreme Court, which was subsequently withdrawn. Thereafter, the parties filed their respective claims and counter-claims before the sole arbitrator.

During the pendency of the arbitration proceedings, the company initiated fresh litigation seeking the removal of the arbitrator on various grounds. The said challenge was rejected by the Special Commercial Court in Gurugram. The revision petition filed by the company was dismissed by the HC with the observation that it had adopted dilatory tactics and had made all efforts to stall the arbitration proceedings. The special leave petition filed by the company in the SC against the HC judgment was also dismissed.

In the detailed award running into 188 pages, the arbitrator has held that the company was in the breach of contract as they delayed the completion of the project, reported The Tribune. 

Accordingly, the levy of penalty amounting to 10% of the contract value on the company was justified. The arbitrator also held that the company had failed to perform its contractual obligations regarding O&M of the plant till the final taking over. Due to the said findings, the arbitrator partly allowed the counter-claim of the HPGCL for expenses towards the O&M till the final taking over of the plant. The arbitrator further held that the amount would be worked out by the HPGCL and communicated to the company, which shall pay it within four months. As per the HPGCL calculation, the amount worked out to be Rs 125 crore.

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