Delhi High Court sets aside Rs 1,891 crore arbitral award against NTPC

Terms penalty imposed in dispute with Jindal arm as 'patently illegal, perverse'

The Delhi High Court (HC) has set aside a Rs 1981 crore arbitral award against the National Thermal Power Corporation (NTPC). In its judgment of January 30, uploaded on Monday, a single-bench of the HC said that the arbitral award was “patently illegal and perverse”.

 

“The court considers that the impugned award in totality has to be set aside as having been passed on wrong premises and falls into the category of ‘perverse’ and ‘patently illegal’. The parties shall be free to avail the appropriate legal remedies,” the HC order read.

 

The arbitral award against NTPC was granted to Jindal Infralogistics Limited (Jindal ITF), a part of the OP Jindal Group. The arbitration was in relation to the delay in the construction of the infrastructure required to transport coal to the Farakka thermal power plant in West Bengal.

 

 

In 2011, NTPC, Jindal ITF, and the Inland Waterways Authority of India (IWAI) signed a seven-year tripartite agreement for the transportation of coal through National Waterway 1 to the power plant.

 

The Farakka plant is managed and controlled by NTPC and Jindal ITF was contracted by the former to build the infrastructure for the transportation of imported coal. The said infrastructure was to be completed in two phases — the first phase was to be completed within 15 months from the date of signing of the agreement, and the second phase within 24 months.

 

Following a delay of 385 days in the completion of construction of phase 1 and 674 days for the completion of phase 2, NTPC terminated the agreement with Jindal ITF. The latter then initiated arbitration proceedings against NTPC in late 2016.

 

In 2019, the arbitral tribunal awarded an amount of Rs 1,891 crore to Jindal ITF for wrongful termination of the tripartite agreement. NTPC challenged this in the Delhi HC, saying the “award is contrary to the provisions” of the tripartite agreement and “contrary to the established legal principles of law”. 

Case in a nutshell 

 

> In 2011, NTPC, Jindal ITF, and the Inland Waterways Authority of India signed a tripartite agreement for coal transportation to the Farakka power plant

> NTPC contracted Jindal ITF to build infra for coal transport, with completion in 2 phases 

> Due to delays in construction, NTPC terminated the deal

> Jindal ITF initiated arbitration in 2016

> In 2019, the tribunal awarded Rs 1,891 cr to Jindal ITF for wrongful termination

> NTPC challenged the award in the HC, citing violation of the deal and legal principles