![Section 37 Court Cannot Recompute Liquidated Damages Fixed Under Section 34: Supreme Court in Saisudhir Energy v. NTPC Vidyut Vyapar Nigam [2026 INSC 103]](/assets/images/article-corporate.svg)
Quick Answer: A Section 37 appellate court cannot re-work the amount of reasonable compensation fixed by the Section 34 court unless that determination is shown to be beyond the contract, arbitrary or perverse. The Supreme Court restored the Delhi High Court Single Judge's award of 50% of the contractual liquidated damages (about ₹27.06 crores) to NTPC Vidyut Vyapar Nigam for delayed commissioning of a 20 MW solar plant under the National Solar Mission, holding that the project involved public interest and the developer bore the burden of showing no loss.
In M/s Saisudhir Energy Ltd. v. M/s NTPC Vidyut Vyapar Nigam Ltd. (2026 INSC 103), the Supreme Court held that the Section 34 court's modification of the arbitral award, applying Clause 4.6.2 of the Power Purchase Agreement, was permissible under Gayatri Balasamy, but the Division Bench exceeded its Section 37 jurisdiction by substituting its own calculation and reducing the compensation to ₹20.70 crores (paras 15, 18–19). Since the PPA under the Jawaharlal Nehru National Solar Mission was in public interest, Construction and Design Services applied and the developer had to show that no loss was caused (para 16). A Bench of Justice Pamidighantam Sri Narasimha and Justice Atul S. Chandurkar allowed NVVNL's appeals and dismissed the developer's appeals (para 19).
Status: Delhi High Court Division Bench judgment dated 18.01.2018 set aside to the extent it modified the compensation; Single Judge's judgment in OMP No. 410 of 2015 and 446 of 2015 restored; NVVNL's Civil Appeal Nos. 12894–12895 of 2024 allowed and SEL's Civil Appeal Nos. 12892–12893 of 2024 dismissed; no costs (para 19).
Headnote: Liquidated Damages and the Limits of Section 37 Review
Arbitration and Conciliation Act, 1996 – Sections 34 and 37 – Indian Contract Act, 1872 – Section 74 – Power Purchase Agreement – Delay in commissioning solar power project – Liquidated damages – Reasonable compensation – Public utility project – Proof of actual loss – Modification of award by Section 34 court – Scope of appellate interference under Section 37.
Held: (i) The developer's delay of two months for 10 MW and about five months for the balance 10 MW was admitted and found at every stage, so Clause 4.6 of the PPA on liquidated damages was attracted (paras 10–12).
(ii) Under Section 74 of the Contract Act, the party complaining of breach is entitled to reasonable compensation not exceeding the named sum, whether or not actual loss is proved; where a public utility is involved, delay itself can be taken to cause loss (para 12).
(iii) The Section 34 court's modification of the award, enhancing compensation by applying Clause 4.6.2 without examining the merits, was within the limited power recognised in Gayatri Balasamy (paras 14–15).
(iv) The PPA, executed with NVVNL as nodal agency under the JNNSM, was in public interest and promoted green energy; the burden was on the developer to show that no loss was caused or that the stipulated sum was a penalty, which it did not discharge (para 16).
(v) The Division Bench, having agreed with the need to balance equities, could not re-calculate the compensation; that was a substitution of its view for the plausible view of the Single Judge and beyond Section 37 (paras 17–18).
(vi) Following AC Chokshi, the Section 37 court only checks whether the Section 34 court exercised its jurisdiction properly without exceeding its scope (para 18).
(paras 9–19)
Case Details: Saisudhir Energy v. NTPC Vidyut Vyapar Nigam (2026 INSC 103)
Final Outcome: NVVNL's appeals allowed; SEL's appeals dismissed; Division Bench judgment set aside to the extent of modifying compensation; Single Judge's award of 50% of the liquidated damages under Clause 4.6 restored; parties to bear their own costs.
Case: M/s Saisudhir Energy Ltd. v. M/s NTPC Vidyut Vyapar Nigam Ltd., with the cross appeal M/s NTPC Vidyut Vyapar Nigam Ltd. v. M/s Saisudhir Energy Ltd.
Neutral Citation: 2026 INSC 103
Case No.: Civil Appeal Nos. 12892–12893 of 2024, with Civil Appeal Nos. 12894–12895 of 2024
Court: Supreme Court of India (Civil Appellate Jurisdiction) – Reportable
Date of Decision: 30 January 2026
Bench: Justice Pamidighantam Sri Narasimha and Justice Atul S. Chandurkar (author)
Relevant Acts & Sections: Arbitration and Conciliation Act, 1996 – Sections 9, 17, 34 and 37; Indian Contract Act, 1872 – Section 74; Power Purchase Agreement dated 24.01.2012 – Clauses 4.6 and 11.5.1
Impugned Order: Common judgment dated 18.01.2018 of a Division Bench of the Delhi High Court in appeals under Section 37, modifying the Single Judge's judgment dated 08.09.2016 under Section 34 and reducing liquidated damages to ₹20.70 crores (paras 1, 5–6)
Counsel: Mr. Nakul Dewan, Senior Advocate, for SEL; Mr. Gopal Jain, Senior Advocate, for NVVNL (paras 7–8)
Source: Supreme Court of India
Key Holdings of the Supreme Court
- Delay in commissioning was admitted, attracting the liquidated damages clause of the PPA (paras 11–12).
- A solar PPA under the National Solar Mission involves public interest; Construction and Design Services applies and the defaulting party must show that no loss was caused (para 16).
- The Section 34 court could modify the award to apply Clause 4.6.2 within the limits recognised in Gayatri Balasamy (para 15).
- The Section 37 court cannot re-calculate compensation fixed by the Section 34 court absent a finding that it was beyond the contract, arbitrary or perverse (para 18).
- The Single Judge's award of 50% of the contractual liquidated damages was restored (para 19).
Brief Facts of the Case
Under the Jawaharlal Nehru National Solar Mission, NVVNL was the nodal agency for buying solar power and selling bundled power to distribution utilities. On 24.01.2012 it entered into a PPA with SEL for 20 MW of solar power at ₹8.22 per unit, with a commissioning date of 26.02.2013; Clause 4.6 provided for liquidated damages for delay (paras 2–3, 10).
SEL's request for extension citing force majeure was rejected for want of the required notice. It commissioned 10 MW on 26.04.2013 and the balance 10 MW on 24.07.2013 (para 3). A three-member Arbitral Tribunal passed a split award on 21.07.2015: the majority awarded NVVNL ₹1.2 crores, while the minority allowed encashment of bank guarantees of ₹49.92 crores (para 4).
On cross petitions under Section 34, the Single Judge on 08.09.2016 set aside the majority award and granted NVVNL 50% of the damages under Clause 4.6, recoverable at ₹25 lakhs per month (paras 5, 17). On cross appeals under Section 37, the Division Bench on 18.01.2018 re-worked the damages at ₹1,00,000 per MW and reduced them to ₹20.70 crores (paras 6, 17). Both parties appealed (para 6).
Issues Before the Supreme Court
- Whether NVVNL was entitled to liquidated damages without proving actual loss (paras 7–8, 12, 16).
- Whether the Section 34 court could modify the majority award to grant higher compensation (paras 14–15).
- Whether the Division Bench could re-calculate the compensation under Section 37 (paras 17–18).
Court's Findings and Reasoning
Breach established (paras 10–12): The majority award, the Single Judge and the Division Bench all recorded that SEL had admitted the delay, and this finding was not seriously challenged; Clause 4.6 was therefore attracted.
Section 74 and public utility (paras 12, 16): Under Section 74, reasonable compensation is payable whether or not actual loss is proved. In Construction and Design Services, delay in a public utility was itself taken to cause loss. Rejecting SEL's plea that the PPA was purely commercial, the Court held that the solar mission project served public interest and the environment, so the burden lay on SEL to show no loss or that the sum was a penalty; SEL relied only on NVVNL having made no investment.
Modification under Section 34 (paras 14–15): Quoting paras 40–46 of the Constitution Bench in Gayatri Balasamy, the Court held that the Section 34 court's enhancement of compensation, made only by applying Clause 4.6.2 to the facts and without a merits review, involved no jurisdictional error.
Re-calculation under Section 37 (paras 17–18): The Single Judge quantified the claim at ₹54,12,32,000 and awarded 50% as reasonable compensation. The Division Bench agreed on balancing equities but re-read Clause 4.6 and reduced the amount without finding the Single Judge's determination arbitrary or beyond the contract. Relying on AC Chokshi, the Court held that this was an impermissible substitution of view.
Final Outcome and Directions
- Division Bench judgment dated 18.01.2018 set aside to the extent it modified the compensation (para 19).
- Single Judge's judgment in OMP No. 410 of 2015 and 446 of 2015 restored (para 19).
- NVVNL's Civil Appeal Nos. 12894–12895 of 2024 allowed; SEL's Civil Appeal Nos. 12892–12893 of 2024 dismissed (para 19).
- Parties to bear their own costs (para 19).
Legal Principle Laid Down
Where a contract tied to a public-interest project such as a national solar mission stipulates liquidated damages for delay, the party in breach bears the burden of showing that no loss was caused or that the sum is a penalty. A Section 34 court may modify an award within the limits of Gayatri Balasamy by applying the contractual clause, but a Section 37 court cannot re-compute compensation fixed by the Section 34 court unless that determination is beyond the contract, arbitrary or perverse (paras 15–16, 18).
Precedents Relied Upon
- M/s Construction and Design Services v. D.D.A., 2015 INSC 92 – Applied – delay in a public utility project can itself be taken as loss. Discussed at paras 12, 16.
- Gayatri Balasamy v. ISG Novasoft Technologies Limited, 2025 INSC 605 – Applied – limited power of the Section 34 court to modify an award. Discussed at paras 14–15.
- AC Chokshi Share Broker Private Limited v. Jatin Pratap Desai, 2025 INSC 174 – Relied upon – scope of Section 37 review of a Section 34 decision. Discussed at para 18.
Important Paragraphs of the Judgment
Verbatim extracts from the judgment. For the full text, refer to the judgment PDF below.
Para 9: "Having given our due consideration to the entire matter, we find that the Division Bench in exercise of jurisdiction under Section 37 of the Act of 1996 was not justified in modifying the amount of compensation awarded by the Court under Section 34."
Para 15: "In our view, the modification of the award so as to enhance the amount of reasonable compensation by the Section 34 Court was a permissible exercise when viewed in the context of the law laid down in Gayatri Balasamy (supra)."
Para 16: "This activity was definitely in public interest and with a view to promote green energy."
Para 16: "In such cases, the burden would be on the party committing the breach to show that no loss was caused by the delay or that the amount stipulated as liquidated damages was in the nature of penalty."
Para 18: "In our view, the Division Bench exceeded its jurisdiction under Section 37 of the Act of 1996 when it proceeded to re-work and re-calculate the amount of reasonable compensation to which NVVNL was entitled."
Para 18: "The modification in the amount of reasonable compensation by the Division Bench is merely a substitution of its view in place of the plausible view taken by the learned Single Judge."
Practical Impact of the Ruling
- For renewable energy developers: Delay under solar mission PPAs is treated as a breach affecting public interest; developers must prove absence of loss to resist liquidated damages (para 16).
- For procurers and nodal agencies: A claim under a liquidated damages clause in a public-interest PPA does not fail merely because no investment or specific loss is shown (para 16).
- For appellate courts under Section 37: A plausible quantification by the Section 34 court should not be replaced by a fresh calculation (para 18).
- For arbitration practitioners: Modification of an award by applying a contractual formula, without a merits review, is within the Gayatri Balasamy limits (para 15).
FAQs on Liquidated Damages and Section 37 Review
1. What did the Supreme Court decide in Saisudhir Energy v. NTPC Vidyut Vyapar Nigam?
It restored the Delhi High Court Single Judge's award of 50% of the contractual liquidated damages to NVVNL and set aside the Division Bench's reduction to ₹20.70 crores (para 19).
2. Must the employer prove actual loss to claim liquidated damages here?
No. As the PPA involved public interest, the burden was on SEL to show that no loss was caused or that the sum was a penalty, and SEL did not discharge it (para 16).
3. Could the Section 34 court increase the compensation awarded by the arbitrators?
Yes. Applying Clause 4.6.2 without examining merits was a permissible modification under Gayatri Balasamy (para 15).
4. Why was the Division Bench's reduction set aside?
It re-worked the compensation without finding the Single Judge's determination arbitrary, perverse or outside Clause 4.6, which went beyond Section 37 (para 18).
5. How long was the delay in commissioning?
About two months for the first 10 MW and about five months for the balance 10 MW beyond the scheduled date of 26.02.2013 (paras 3, 10–11).
Keywords: 2026 INSC 103, Saisudhir Energy v. NTPC Vidyut Vyapar Nigam, liquidated damages, Section 74 Contract Act, Section 34 Arbitration Act, Section 37 Arbitration Act, modification of arbitral award, Gayatri Balasamy, Construction and Design Services, public utility project, solar power purchase agreement, JNNSM, reasonable compensation, Justice Atul S. Chandurkar, Justice P.S. Narasimha, Supreme Court judgment
Related on LegalTaxGuru
Download Judgment PDF – Saisudhir Energy v. NTPC Vidyut Vyapar Nigam
Source: Supreme Court of India (official website).