Section 37 Court Cannot Recalculate Liquidated Damages Once Section 34 Court Awards Reasonable Compensation Under PPA

Case Name: M/s Saisudhir Energy Ltd. v. M/s NTPC Vidyut Vyapar Nigam Ltd.; with M/s NTPC Vidyut Vyapar Nigam Ltd. v. M/s Saisudhir Energy Ltd.
Citation: 2026 INSC 103

Date of Judgment/Order: 30 January 2026

Bench: Justice Pamidighantam Sri Narasimha and Justice Atul S. Chandurkar

Held: The Supreme Court held that while a Section 34 court has limited power to modify an arbitral award, a Section 37 appellate court cannot rework or recalculate liquidated damages merely by substituting its own view for a plausible determination made under Section 34. Where the Section 34 court determined reasonable compensation under Clause 4.6 of the PPA and awarded 50% of the quantified amount as liquidated damages, the Division Bench under Section 37 exceeded its jurisdiction by recalculating and reducing the compensation. The Court further held that in a public utility project such as commissioning of a solar power plant under the Jawaharlal Nehru National Solar Mission, proof of exact loss is not strictly required under Section 74 of the Contract Act when delay is admitted and the contract stipulates liquidated damages.

Summary: The dispute arose from a Power Purchase Agreement dated 24.01.2012 between Saisudhir Energy Ltd. (SEL) and NTPC Vidyut Vyapar Nigam Ltd. (NVVNL), the nodal agency under the JNNSM, for supply of 20 MW solar power. SEL failed to commission the full capacity by the agreed date of 26.02.2013, resulting in delay of two months for 10 MW and about five months for the balance capacity. Clause 4.6 of the PPA provided for liquidated damages in case of delay. The Arbitral Tribunal by majority awarded ₹1.2 crores. On challenge under Section 34, the learned Single Judge held that delay was admitted and, applying Section 74 of the Contract Act and the decision in Construction and Design Services, determined the claim under Clause 4.6 at ₹54.12 crores but awarded 50% as reasonable compensation. In appeal under Section 37, the Division Bench recalculated damages and reduced the amount to ₹20.70 crores. Before the Supreme Court, SEL argued that actual loss had not been proved and modification exceeded permissible limits, while NVVNL contended that the project involved public interest and full liquidated damages were payable. The Court examined the scope of Sections 34 and 37 in light of Gayatri Balasamy and AC Chokshi Share Broker and emphasized that appellate scrutiny under Section 37 is confined to examining whether the Section 34 court exercised jurisdiction properly.

Decision: The Supreme Court set aside the Division Bench judgment dated 18.01.2018 to the extent it modified the amount of compensation, restored the judgment of the learned Single Judge awarding 50% of the quantified liquidated damages, allowed the appeals filed by NVVNL, dismissed the appeals filed by SEL, and directed that the parties bear their own costs.