Gujarat High Court
Arvind Mills Ltd vs Bharat Heavy Electrical Ltd on 14 November, 2025
Author: Sunita Agarwal
Bench: Sunita Agarwal
NEUTRAL CITATION
C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025
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Reserved On : 03/09/2025
Pronounced On : 14/11/2025
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 1180 of 2007
With
R/CROSS OBJECTION NO. 29 of 2009
In
R/FIRST APPEAL NO. 1180 of 2007
FOR APPROVAL AND SIGNATURE:
HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA AGARWAL
and
HONOURABLE MR.JUSTICE D.N.RAY
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Approved for Reporting Yes No
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ARVIND MILLS LTD.
Versus
BHARAT HEAVY ELECTRICAL LTD.
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Appearance:
Appearance (FA No.1180/2007):
MR SAURABH SOPARKAR, SR. ADVOCATE with MR PARTH
CONTRACTOR for the Appellant
MR MIHIR THAKORE, SR. ADVOCATE with VARUN K.PATEL for
the Defendant(s)
Appearance (X-OBJ/29/2009):
MR MIHIR THAKORE, SR. ADVOCATE with VARUN K.PATEL for
the Appellant
MR SAURABH SOPARKAR, SR. ADVOCATE with MR PARTH
CONTRACTOR for the Defendant(s)
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CORAM:HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE
SUNITA AGARWAL
and
HONOURABLE MR.JUSTICE D.N.RAY
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NEUTRAL CITATION
C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025
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CAV JUDGMENT
(PER : HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA AGARWAL)
1. This is an old appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996 (in short as 'the Act, 1996') of the year 2007, challenging the judgment and order dated 02.01.2007 passed by the Court of City Civil Judge, Ahmedabad in allowing the Civil Misc. Application No. 51 of 2004 under the Act, 1996, whereby the award dated 15th October, 2003 passed by the learned sole Arbitrator has been set aside in part.
2. The facts, in brief, for effective adjudication of the present appeal are to be noted at the outset. Bharat Heavy Electrical Ltd. (BHEL), namely the respondent herein, had submitted an offer for supply, erection, commissioning and starting up operations and maintenance of 15 numbers of Wind Turbine Generators (WTGs) including the designing, supply and commissioning and associated electricals, auxiliary equipments, civil work and connected services at the proposed site. Accordingly, the order to install the wind power plants was placed by the appellant herein. The order placed on record contains the detail terms and conditions of the contract regarding payments, and in case of non- performance of contract, penalty etc. and also other substantial clauses.
3. It appears that a dispute arose between the parties pertaining to the terms of the agreement and the matter was Page 2 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined referred to the learned Arbitrator, who had passed the award dated 15.10.2003 in favour of the appellant herein awarding a sum of Rs. 3,56,62,000.00/- including interest of amount Rs. 73,22,000.00. The total awarded amount came to Rs.4,01,33,000.00 alongwith interest @ 10% p.a.. till realisation.
4. The respondent (BHEL) herein filed application under Section 34 of the Act, 1996 challenging the award on the ground that once the learned Arbitrator had held that the time was not the essence of the contract and that the original contract did not survive and there was novatio contract, the award of penalty of Rs. 64,000.00, as per the original contract was illegal. It was also contended that the erection of wind masts by the applicant/respondent herein was not with any time schedule and the wind mast could be erected after the completion of erection of Wind Turbine Generators. It was submitted that the learned Arbitrator has himself held that there was delay on the part of the appellant to provide land and hence, the respondent could not be saddled with the responsibility of not erecting the wind mast. Moreover, as per the terms of the contract, the working of the machines (WTGs) was to be calculated on the basis of the wind data at Harshad site and the learned Arbitrator has wrongly relied on the data published for Navadra site, which was otherwise for the previous year and not for the period in question. It was, thus, contended that the basis of calculation being the previous year data to assess the working capacity of the machines (WTGs) itself Page 3 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined makes the award bad, inasmuch as, the learned Arbitrator himself admitted that wind power change from month to month due to ecological change in the atmosphere. The whole comparison made by the learned Arbitrator for Navadra wind area was, thus, an absurd decision.
5. From a perusal of the order passed by the Court under Section 34 of the Act, 1996, it may be noted that the contention of the respondent therein was that it was further agreed between the parties that in absence of availability of actual wind data of the place of installation of the wind farm, published wind data of Harshad site would continue to be the basis of Performance guarantee and evaluation of performance of WTGs and wind farms. It was argued therein that the learned Arbitrator once recorded that the power generation was not as per the guaranteed standard, but was much lower than Harshad site, the basis of calculation with the Navadra data cannot sustain.
6. From the order impugned passed by the Court under Section 34 of the Act, 1996, pertinent is to record that from paragraph Nos. '3' to '35', there is only narration of the arguments made by the learned advocates appearing for the parties. The analysis of the arguments started from paragraph No. '36', wherein it was noted by the Court under Section 34 of the Act, 1996 that from the documents on record, it is evident that both the applicant and the respondent had agreed to evaluate the functioning of the WTGs on the basis of the published data of Harshad site.
Page 4 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined The applicant had also agreed to put up two wind masts with data logger chips fixed at two heights on each mast to obtain the wind data. It was also agreed that in case of any missing data for a particular period through wind mast, the data would be taken only on the basis of the corresponding missing period. It is also recorded that the applicant has failed to erect the wind masts and, therefore, there was no actual wind data of the site available to evaluate the guaranteed performance. It was also noted that there was no published wind data for Harshad site and considering the above facts, the learned Arbitrator had decided the whole case on the basis of the published data for Navadra area and further, for some period, even for the Navadra site there was no published data available.
7. The Court further noted the condition No.(a) of the Methodology to record that it was clearly stated there that the guarantee is based on published data of Harshad area and, therefore, the published data stated elsewhere means published data of Harshad area, and then proceeded to make an independent interpretation of the guaranteed performance clause noticing that it is of vital importance. Applying the golden rule of construction referring to the decision of the Apex Court in the case of Ramkishorlal vs. Kamalnarayan reported in AIR 1963 SC 890, it has proceeded to record that the document as a whole is to be taken into account to ascertain the circumstances under which the particular words were used in the contract. The Court has also referred to the rule of harmonious Page 5 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined constructions of two parts of one document, in case of conflict. However, without any further discussion on the facts of the present case, the document containing the terms and conditions of the contract and other related documents, as well as attending circumstances, the learned Judge has simply expressed his opinion in paragraph No. '41' of the judgment impugned as under :-
"41. Therefore, in my view, it can not be said that the party has not agreed to evaluate the guarnateed performance as per the data for Harshad area and the evaluation can be made on the basis of any published data as in the present case made by the arbitrator. The condition No.(a) regarding performance guaranteed clearly speaks of Harshad publish data, and as per the Apex Court's decision, the interpretation would be Harshad publish data. I find substance in the submission made by the LA for the respondent that the arbitrator has travelled beyond the scope of arbitration. Even Sec. 14 of the Arbitration and Conciliation Act, 1996, would be applicable in such case, which says as under:-
"14. Failure or impossibility to act, (1) The mandate of an arbitrator shall terminate if-
(a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and
(b) he withdraws from his office or the parties agree to the termination of his mandate.
(2) If a controversy remains concerning any of the grounds referred to in clause (a) of sub-section (1), a party may, unless otherwise agreed by the parties, apply to the court to decide on the termination of the mandate."
8. It was further observed in paragraph No. '42' that :-
Page 6 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined "42. In the present case, the party has not agreed, and therefore, it was the duty of the arbitrator to terminate the mandate. Under the circumstances, I am also of the view that the present application is maintainable u/s.34 of the Act and the judgment of Saw Pipes (Supra) would be fully applicable to the fats of the present case."
9. From the bare reading of the aforesaid two paragraphs of the judgment impugned, suffice it to note that the learned Judge presiding the Commercial Court, had passed the order of setting aside of the arbitral award in a cryptic manner and the order under Section 34 is bereft of any reasoning for the opinion expressed by him. The order of setting aside the award passed by the Court under Section 34 is unintelligible. It is also not understandable as to why the discussions with respect to Section 14 of the Arbitration Act, 1996 were made and opinion was drawn about the termination of the mandate of the Arbitrator.
10. The further observations in paragraph Nos. '43' and '44' to pass the final order of allowing the Section 34 application are also relevant to be extracted hereinunder for ready reference :-
"43. However, the award regarding the Claim No.1- B of Penalty of delaying in commissioning of the Wind Mast for Rs.64,000-00 found reasonable from the reacord speaks in volumes against the applicant. The respondent has repeatedly request the applicant to erect the wind mast, but, the applicant has not paid any heed, and ultimately, the wind mast contract was terminated. The LA for the Page 7 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined applicant Shri Ramchandran has also considered this point and stated that he has no objection if the award on the said claim is confirmed by the Court.
44. Having thus regard to the facts and circumstances of the case, the award for Rs.64,000- 00 on Claim No.1(b) is not required to be set aside and rest of the award is required to be set aside. Hence, I pass the following order :-
This CMA is hereby partly allowed.
The respondent is hereby directed to pay the amount of Rs. 64,000.00 (towards claim No. 1(b) of the Award dtd. 15.10.2003) , to the applicant alongwith interest at the rate of 10% from 15.10.2003 till the date of realisation.
Rest of the award is set aside."
11. From the above, suffice it to say that from the bare reading of the impugned judgment and order dated 02.01.2007 passed by the City Civil Judge, Ahmedabad in Civil Misc. Application No. 51 of 2004 under Section 34 of the Arbitration Act, 1996, the same is liable to be set aide being unintelligible.
12. While holding so, in view of the fact that the present appeal under Section 37 is pending since the year 2007, we have proceeded to examine the correctness of the arbitral award dated 15.10.2004, within the scope of Section 37/34 of the Arbitration Act' 1996. Both the learned senior counsels appearing for the parties have addressed us on the said issue at length.
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13. Heard the learned senior counsels for the parties and perused the record.
The case of the appellant:-
Material on record placed before us:-
14. Mr. Saurabh Soparkar, the learned senior counsel assisted by Mr. Parth Contractor, the learned advocate appearing for the appellant would submit that the admitted facts of the matter, as noted by the learned Arbitrator, are that the wind mills were installed at Navadra site and the wind masts as agreed were not put up, and that the said default was on the part of the respondent herein. The dispute about the Performance Guarantee is of the year 1995 and 1996, and for both the years, published data of Harshad site was not available. Whereas, the published data of Navadra site was made available for the year 1995 by the end of the year 1996. The appellant's claim before the learned Arbitrator was for Guaranteed Performance on the basis of the published data for Navadra site.
15. Placing the written statement of the claimant/appellant before the learned Arbitrator, it was argued that the published wind data of Navadra site, which has been placed by the claimant appellant before the learned Arbitrator, was based upon the wind data of Navadra for the years 1993, 1994 and 1995. For the year 1996, as no published wind data for Navadra site was available, the average of the wind data of three years being 1993, 1994 and 1995 was worked Page 9 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined out by the claimants for the purpose of working out assured performance of the WTGs for the year 1996. The attention of the Court is invited to the computation placed on record alongwith the written submissions filed by the claimant/appellant before the learned Arbitrator to submit that the actual v/s. guaranteed performance for WTGs for the year 1995 (from 1.1.1995 to 31.12.1995) came to 57.62% for the year 1995. The percentage shortfall in performance for the said period was computed as 42.38% and the price reduction/damages on account of short coming in performance of WTGs @ 42.38% as per the Navadra data on the actual order value of Rs. 1179 lakhs, was calculated as 499.68%. Further, for the total period of two years i.e. from January, 1995 to December, 1996, the actual v/s. guaranteed performance was calculated to 62.61% and the percentage shortfall in performance was computed as 37.39%. The price reduction/damages on account of the shortcoming in performance of WTGs @ 37.39% as per the Navadra data of actual order value of Rs. 1179 lakhs, thus, was worked out as 440.79%.
16. With the said computation sheet, it was sought to be demonstrated by the learned senior counsel for the appellant that without prejudice to the contentions of the appellant herein, if the claim of the respondent is to be accepted, then for the year 1995, for which the published wind data of Navadra site was available, the claim of the appellant for the damages would increase from Rs. 410.08 lakhs to Rs. 499.68 lakhs as worked out in the calculation Page 10 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined sheet for the year 1995 only. The respondent rather had been benefited by the composite computation made for the two years, inasmuch as, shortfall in performance in the year 1995 was on the higher side. If the theory propounded by the respondent was accepted by the learned Arbitrator and thereupon, the published wind data for Navadra site only for the year 1995 was taken into consideration for the purpose of reduction in price of WTGs on the basis of their performance on the premise that no published data of Navadra site was available for the year 1996, it would be to the advantage to the claimant/appellant herein. The submission, thus, is that the claimed amount worked out by the appellant was lesser than the actual computation because of the average taken of the two years, 1995 and 1996.
17. It was further argued that as per the terms and conditions of the contract, for working out the exact assured performance, the component of wind data which at the relevant time was considered taking into account the wind data of Harshad site, was agreed to be the actual wind data for the warranty period of two years obtainable from the wind masts to be put up by the respondents. However, in absence of the same, it was required to be replaced by the corresponding published wind data. In view of the same, Navadra site data being the only published wind data for the said warranty period, the claimant has made use of the same for evaluation of the guaranteed performance of WTGs. As there was no published data of Harshad site for the Page 11 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined corresponding years 1995-1996, there was no question of the same to have been taken into consideration by the claimant/appellant.
18. It was further argued that even if the published data of Harshad site was available, it would still be prudent to rely upon the published wind data of the Navadra area, being the closest wind data, inasmuch as, the WTGs were installed at Navadra and not at Harshad.
19. Placing the terms and conditions of the contract dated 30.04.1994 (at page No. '507' of the paper book), it is sought to be demonstrated that the appellant placed an order for 15 numbers 200 kW BHEL-Nordex WTGs, as per the terms and conditions mentioned therein. The scope of the contract in clause (1) of the agreement reads as under :-
"1. Scope of Contract:
Supply, erection, commissioning, start-up, operations and maintenance of 15 Nos. of wind turbine generators (WTGs) alongwith design, supply and commissioning of associated electricals, auxiliary equipment works, and others services, at Navadara on Saurashtra Coast or any other site allotted by GEDA for setting up the wind farm.
The scope of contract would specifically include (but will not be limited to) the following:
a) Supply of 15 Nos. 200 kW (27 m. rotor dia. with 40 .tower height) Wind Turbine Generators (WTGs), 0.415/11 kV step-up transformers, and associated electricals including (but not limited to) LT cabling, MCCB, AB switch, horn-gap fuse, DP structure, insulators, and others (upto but excluding 11 kV transmission line).Page 12 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025
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b) Micro-sitting, soil-testing, civil workds, foundations, erection, commissioning, earthing, internal electrical and communication cabling and any other works and services for the above, upto HT grid interface.
c) Fully equipped control room for centralised control, monitoring and management system, including (but not limited to) 80486 or suitable compatible personal computer with keyboard and colour monitor, printer, UPS for computer, modems and communication cabling, 2 ton AC, voltage stabilizer for AC, control-room building (minimum 20 sq.m. area) with electricals and lighting, desks and chairs, etc.
d) Two numbers wind monitoring masts, alongwith two dataloggers to be fitted on each mast, at 41 m. (hub height) and 20 m. heights above ground level, duly erected and commissioned and fully equipped with decoding, analysis and reporting system.
e) 11-kV Central metering station within the windfarm.
f) 11-kV HT transmission line from WTGs to central metering station within the wind farm, and from wind farm metering station to grid substation, Including VCB, import-export meter, etc. at Lamba or as approved by GEB/GEDA.
g) Complete operations and maintenance of the wind farm, including providing all necessary staff, security, materials, spares and all provisions for minimum period of one year from the date of completion of the order without any cost to us, and thereafter, at the rates to be mutually agreed.
h) Training of our engineers, supervisors, operators etc. in India, to our satisfaction."
20. Placing the above extracted part of the contract, it was submitted by the learned senior counsel that there was no clarity at the time of execution of the contract as to the site Page 13 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined for erection of WTGs and it was agreed to erect the WTGs alongwith design, supply, commissioning of associated electricals, auxiliary equipment, civil work and other services at Navadra site on Saurashtra Coast or any other site allotted by Gujarat Energy Development Agency (GEDA) for setting up the wind farm. The contract, thus, included not only supply and erection of the WTGs, but also for auxiliary equipments. It was specified therein that two (numbers) wind monitoring masts, alongwith 2 dataloggers to be fitted on each mast at the appropriate height mentioned therein, shall be duly erected and commissioned, fully equipped with decoding, analysis and reporting system.
21. While fixing the price, it was categorically provided therein that the prices are subject to the liquidated damages/penalties and price reductions/refunds due to delay in schedule or work completion, shortcomings in performance of the equipment, and shortcomings in performance of the contract and the work completion schedule in clause (3) of the contract also included the time line for commissioning of wind masts and reporting system as per para 1-d, by 30th September, 1994. The relevant clause-5 of Guaranteed Performance of the WTGs is to be noted, at this juncture as under:-
"5. Guaranteed Performance of WTGs:
You have guaranteed that the WTGs shall generate minimum net power of 4,04,000 kWh of electricity, annually on average per WTG, measured and/or estimated at the control panel of WTG, to be monitored Page 14 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined over a continuous period of two years, from any date after the completion of the order.
This guaranteed figure of net power generation is based on published frequency distribution of wind speed and other parameters at Harshad, 100% grid availability and 95% WTG availability.
For the purpose of ascertaining whether the WTGs have performed as per the guaranteed performance or not, the detailed procedure has been earlier communicated to you and explained to you in detail by our consultants, which has been fully agreed by you, and in case of any differences arising in this regard, decision of our consultants shall be final and binding on you."
22. Clause 8 of the contract provided for price reductions and refunds, penalties and liquidated damages, and reads as under :-
"8. Price Reductions and Refunds, Penalties and Liquidated Damages:
a) For any delay in work completion schedule, penalty will be charged @ 1% of the contract value of non-commissioned WTGs per every week or part thereof, with maximum limit of 10%.
b) For any short-comings in the guaranteed power generation as mentioned in para 5 above, pro-rata Contract price on 1:1 percentage-to-percentage basis, of the entire order will be reduced and refunded to us by BHEL. This will be accounted for annually in two instalments. This is in addition to the amounts due to us if any as per para (a) above.
c) This is without prejudice to any rights and remedies available to us under the laws for any shortcomings in your performance of contract and/or performance of equipment supplied/commissioned by you.Page 15 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025
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23. The attention of the Court is invited to Annexure-A; methodology for measurement of actual performance v/s. guaranteed performance, as agreed under the contract itself, which reads as under :-
"Annexure A- Methodology for Measurement of Actual Performance vs. Guaranteed Performance:
a) Based on your guaranteed power curve, for published wind data for Harshad area, estimated power generation in electricity units (kWh) at 95% availability factor would be worked out. This would be a reference figure of guaranteed power generation.
b) Actual annual performance of WTG would be monitored separately for each of the two (or three) warranty period, and during this period, actual wind data for the specific site would be collected using standard procedure and requisite instrumentation (two wind masts with data logger chips fixed at two heights on each mast one at hub height and the other at 20 m. height-together with related Computer hardware and software).
c) Guaranteed power generation figures as in (a) above would be adjusted for variations in published wind data and actual wind data individually for each full year, obtained as in (b) above. (In case of any missing data for a particular period, published data would be taken as a basis only for the corresponding missing period.)
d) If the actual annual power generation is less than adjusted guaranteed power generation as in
(c) above, the supplier would be liable to give price reduction or damages and refund the amount proportionately (1:1 basis) for the total (turn-key) price of the commissioned WTGs/wind farm. This would be monitored annually over two (or three) Page 16 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined years of warranty in two (or three) annual instalments (as applicable).
e) If actual performance of electricals and transmission equipment is lower the stated performance levels, appropriate price reductions damages may applicable, as per the rates to be mutually agreed.
24. Placing the above noted clauses of the contract and the Annexure-A providing methodology for measurement of actual performance v/s. guaranteed performance, it was vehemently submitted by the learned senior counsel for the appellant that reference to the published data of wind speed and other parameters at the Harshad site in the contract at the time of its execution on 30.04.1994, was for the reason that at the relevant point of time, no other published wind data was available and further that there was no clarity as to the actual site of erection of the WTGs. The submission is that though the contract contemplated erection of WTGs at the Navadra site of Saurashtra coast, but it was an open ended agreement, inasmuch as, the parties had agreed that even any other site allotted by the GEDA for setting up the wind farm would be within the scope of the contract. The contention, thus, is that mentioning of the published data of Harshad in clause-5 of the agreement was for reference purposes, inasmuch as, no published wind data for any other area of the Saurashtra coast was available at that point of time.
25. Further, placing clause(a) of Annexure A, methodology, it was submitted by the learned senior counsel for the Page 17 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined appellant that with reference to the published wind data for Harshad site therein, to work out the estimated power generation in electricity units (kWh) at 95% availability factor, based on guaranteed power curve, it was clarified as being a reference figure of guaranteed power generation. It was further clarified in clause (c) of Annexure-A that Guaranteed power generation figures as in (a) therein, would be adjusted for variation in published wind data and actual wind data individually for each full year, obtained as in clause (b) therein. It was further provided therein that in case of any missing data for a particular period, the published data would be taken as the basis only for the corresponding missing period.
26. Clause (b) of Annexure-A further provided that actual annual performance of WTG would be monitored separately for each of the two (or three) years of warranty period and during this period, actual wind data for the specific site would be collected using the standard procedure and requisite instrumentation, which mean two wind masts with data logger chips fixed at two heights on each mast-one at hub height and the other at 20 m. height together with related hardware and software.
27. It was, thus, agreed that the methodology worked out for measurement of actual performance v/s. guaranteed performance, as per the clause 5 of the contract, was based on a reference figure taking into account the published wind data for Harshad site (as mentioned in the contract), but actual annual performance of WTGs was to be monitored by Page 18 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined two wind masts, to be put up for collecting actual wind data for the specific site. Only in case where there is any missing data for a particular period, published data would be taken as the basis for the said corresponding missing period. The guaranteed power generation worked out in clause(a) of the methodology was, thus, required to be adjusted for variation in published wind data and actual wind data individually for each full year. In case the actual power generation was less than the adjusted guaranteed power generation as per clause(c) of Annexure-A, the supplier would be liable to give price reduction or damages and refund the amount proportionately (1:1 basis) for the total (turn-key) price of the commissioned WTGs/wind farm.
28. It was, then, argued vehemently that under the terms and conditions of the contract to obtain actual annual performance of the WTGs, it was incumbent upon the respondent to put up two wind masts as agreed between the parties within the time line mentioned in the contract itself. Admittedly, no such wind masts had been put up and the default was on the part of the respondent. The published wind data of Harshad site, mentioned for reference purposes in the contract, was not available for both the years of warranty period namely for the years 1995 and 1996. On account of non-availability of the actual annual performance data due to non-installation of the wind masts on the part of the respondents and the published wind data for Navadra site being available for the year 1995, the performance of wind farm consisting of 15 numbers of BHEL-Nordex WTGs Page 19 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined for the period from January, 1995 to September, 1996 was worked out by the Expert Consultant considering the published Harshad wind data and also the published Navadra wind data. The details of the computations indicated that performance of WTGs for the period from January, 1995 to September, 1995 had been lower than the Guaranteed Performance by 25.6% considering the published Harshad wind data, and by 36.6% considering the published Navadra wind data.
29. A letter dated 14.11.1996 was sent to the respondent BHEL intimating specifically to the General Manager alongwith the computations made by the Consultant annexed as Annexures 1 to 3 therein. It is submitted that prior thereto, a communication dated 09.11.1995 was made communicating the respondent BHEL that the performance evaluation of the wind farms for the period from January, 1995 to September, 1995 was made by taking into account both Navadra wind data and Harsahd wind data worked out by the Consultant as per the methodology as per Annexure-A of the contract. As per the data analysis presentation in the Consultant report shared with the letter dated 09.11.1995, Annexure-1 showed published wind data for the Navadra site and Annexure-2 showed published wind data for the Harshad site. The computation made on the basis of the said data of two sites, namely Navadra and Harshad, showed difference in the figures of overall performance actual v/s. guaranteed performance being 32.11% v/s 56.68% (on the basis of Navadra wind data) and 36.69% v/s 65.49% on the Page 20 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined basis of Harshad wind data, for the period from January, 1995 to September, 1995, placed at page No. '592' of the paper book being the performance valuation of the WTGs for the period from January to September, 1995 made by the Consultant.
30. It was submitted that, in fact, the performance ratio of overall performance actual v/s. guaranteed performance based on Navadra wind data for the period was better than the performance ratio computed based on the Harshad wind data. Guaranteed performance as per the Navadra wind data was 56.68% whereas for Harshad wind data, it was 65.49%. Moreover, the reference figure for Harshad wind data in the Consultant's report was not on the published wind data for the current year 1995. The details given by the Consultant at page No. '588' of the paper book in its performance evaluation report indicated that at the relevant point of time, Navadra wind distribution data was available for the year 1993 and, as such, the data for the wind measurement organized by the Field Research Unit of Indian Meteorological Laboratory at Bangalore was obtained from GEDA, Vadodara, whereas published Harshad wind data related to the period 1987 to 1991 collected over the long time and published by the Field Research Unit of Indian Meteorological Laboratory at Bangalore was taken into consideration.
31. A perusal of the Consultant's performance evaluation report indicated that it has been categorically mentioned Page 21 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined therein that the said valuation was made in absence of the current wind data for Navadra site. It was further stated therein that Navadra profile was considered to be better than that of Harshad. Performance evaluation based on Harshad wind distribution was likely to overestimate the performance than the actual performance. The evaluation report of the Consultant for the period from January to September 1995 was shared with the BHEL alongwith the letter dated 09.11.1995, which clearly records that despite the above limitation, in absence of reliable wind data available for Navadra site, they have taken published Harshad wind data as the basis for performance evaluation and, therefore, performance evaluation has been made considering both the reference figures.
32. Further, from a careful reading of the performance analysis report of the Consultant for the period from January to September, 1995, as noted hereinabove, it is evident that computation made therein was based on both the old published wind data for Harshad site and Navadra site,. It is clear that none of the two published wind datas, i.e. Navadra wind data or Harshad wind data, which were considered for evaluation of performance of wind farm from the period from January to September, 1995 in the said report of the Consultant related to the relevant years, i.e. year 1995 and 1996. The Consultant made computations on the basis of the data available for the year 1993 for Navadra site and for the period from 1987 to 1991 for Harshad site, Page 22 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined both published by the Field Research Unit of Indian Meteorological Laboratory at Bangalore.
33. Placing the above material from the record, it was submitted by the learned senior counsel for the appellant that due to the prevailing situation at the relevant point of time, because of non-availability of the published wind data for Navadra site, a meeting was held on 20.11.1995 between the representatives of the appellant Arvind Mill and the respondent BHEL on the issue of performance evaluation of the wind farm for the period from January to September, 1995. The minutes of the aforesaid meeting appended at page No. '600' of the paper book, has been placed before us to demonstrate that the said meeting was held in light of the report of the Consultant shared with the letter dated 09.11.1995 due to the lower performance of WTGs was noted as recorded therein. During the course of discussion, it was resolved that :-
"BHEL will ensure satisfactory installation of wind mast and other wind monitoring equipments covered under the order of ARVIND latest by 31.12.1995, failing which ARVIND may decide to cancel that portion of the order, in absence of actual wind data, Harshad published wind data will will continue to form basis for performance guarantees and evaluation of performance of WTGs and wind farm (ARVIND maintained that height of wind mast should be 40m only and not lower, as Hub Height of all WTGs is 40m)."
34. Further, placing the report of the Consultant for updating the performance of BHEL site of the wind farm for the period from January, 1995 to September, 1996, issued Page 23 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined with the subsequent letter dated 14th November, 1996 at page No. '540' of the paper book, the findings given for the total period, as presented in the Consultant's report in the table therein, has been placed before us, from page No. '548' of the paper book, which reads as under :-
"Expected and Actual Power Generations and Performance Ratios for Jan. 1995-Sept.1996
a) Basis : Navadra Wind Data Jan. Oct.95 Jan.95 Sep.95 Sept. 96 Sep.96 (Lac kWh) (Lac kWh) (Lac kWh) Expected Power Gen. 100% Availability Basis 61.86 75.18 137.04 Actual Grid/95% WTG 35.05 63.52 98.57 (Guaranteed) Actual Power Generation 19.87 42.64 62.50 Performance Ratios Overall Performance 32.1% 56.7% 45.6% Actual vs. Guantd. Performance 56.7% 67.1% 63.4%
b) Basis : Harshad Wind Data Expected Power Gen 100% Availability Basis 54.14 63.79 117.93 Actual Grid/95% WTG 30.33 53.68 84.02 (Guaranteed) Actual Power Generations 19.87 42.64 62.50 Performance Ratios Overall Performance 36.7% 66.8% 53.0% Actual vs. Guant. Performance 65.5% 79.4% 74.4% Page 24 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined It would be observed that the ratios of actual vs. guaranteed performance for the overall period Jan. 1995 to Sept. 1996 have been at 63% based on Navadra wind data and 74% based on Harshad Wind Data. This is a very low performance, as these figures should have been near about 100% only. This short-fall in performance is after giving full credit of GEB grid non-availability as well as internal line and electricals down-time, with maximum benefit of doubt in faovur of WTG suppliers, as stated before.
35. It is, thus, submitted that the published data for Navadra site for the year 1995 was made available in the year 1996. Inspite of that, the Consultant in its report had taken into consideration the previous evaluation of performance for the period from January to September, 1995 as intimated vide letter dated 09.11.1995 and further evaluated the performance of WTGs for the period from October, 1995 to September, 1995 and worked out the performance indicators, separately based on Navadra wind data as also on Harshad wind data, mentioning the latter (Harshad wind data) as alternative working for guaranteed purpose.
36. As extracted hereinabove, as per the findings of the consultant, the ratio of actual v/s. guaranteed performance for the overall period from January, 1995 to September, 1996 (warranty period) have been 63% based on Navadra wind data and 74% based on Harsahd Wind data. It was noted therein that those figures showed a very low performance, as the figures should have been near about 100% only. It was also clarified therein that the shortfall in performance was worked out after giving full credit of GEB grid non-availability as well as internal line and electricals Page 25 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined down-time with maximum benefit of doubt in favour of the WTG suppliers, namely BHEL, the respondent herein.
37. The learned senior counsel for the appellant has further invited attention of the Court to the communication dated 14.03.97 sent by the appellant to the respondent BHEL, at page No. '741' of the paper book, to submit that due to the dispute between the parties and invocation of bank guarantee on the part of the appellant in partial satisfaction of their claim, as intimated vide letters dated 14.11.1996 and 20.11.1996, a further meeting was held on 17th and 18th February, 1997 at the Consultant's office and the office of the appellant in Ahmedabad. For the sake of clarity, the letter dated 14.03.1997 was sent to the respondent BHEL in furtherance of the issues discussed in the aforesaid meetings to resolve the outstanding points and for further course of action. On the subject of performance of BHEL Nodex WTGs, it was further mentioned therein that:-
"1. Following points on the subject of Performance of BHEL-Nordex WTGs were noted:
a)Arvind had claimed price reduction/ damages on account of shortcomings and performance of WTGs @ 36.6% in their letter dated November 20, 1996. This was based on performance evaluation report for period January 1995 to September 1996 based on published wind data for Navadra site for the period January-
December 1993.
b) Now that published data for Navadra site based on IITM wind mast in close proximity of ARVIND wind farm are available for the period 1993 to 1995 performance Page 26 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined evaluation for BHEL WTG need be based on such published Navadra wind data.
Based on the above, performance of BHEL WTGs evaluated as per details sent to you vide Vijayant Consultants letter dated 13/02/1997. Accordingly, the shart-fall in performance for the period January, 1995 to December 1995 works out to 31.67 as compated to guaranteed performance (summary details placed at Exhibit-1 to this letter).
Based on this performance, price reduction recoverable from BHEL by ARVIND comes to Rs.372.56 lacs (in place of Rs.431.51 lacs stated in item No. 1 of claim amount in Annexure to the letter dated 20/11/1996) on the value of the order.
c) BHEL expressed that prima facie they did not have any disagreement on data on actual power generation or grid availability figures and such other data used in the working of performance as sent by ARVIND earlier or M/s.Vijayant Consultants to them vide their letter dated February 13, 1997.
d) Mr.Kirtivasan contended that this working based on Navadra wind data should take into consideration difference in elevation of Navadra wind farm site of Arvind Mills compared to reference wind mast ground level and also that allowance should be made for wake losses in terms of array efficiency. It was clarified by M/s. Vijayant Consultants that ordinarily in computation of guaranteed performance of BHEL WTGs, no provision is to be made for difference in site elevation, array efficiency and such other factors in terms of the contract. Therefore, no mutual agreement was reached on this issue during the discussion.
e) BHEL showed to ARVIND data recently collected by them from controllers of some WTGs while trying to analyse short performance of BHEL WTGs. This data could not be taken to provide any clues or basis for evaluation of WTGs on account of reasons as explained Page 27 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined by M/s.Vijayant Consultants to BHEL during the discussion."
38. Placing the above contents of the letter dated 14.03.1997, it was submitted that it was clarified by the appellant that the evaluation made by the Consultant, intimated vide letter dated 20.11.1996, though was based on the published wind data for Navadra site for the period January to December, 1993, but by then the published wind data for Navadra site based on IITM wind mast in the close proximity of Arvind wind farm were available for the period from 1993 to 1995 and hence, the performance evaluation for BHEL WTGs needed to be based upon such published Navadra wind data. Based on the same, the performance of BHEL WTGs were evaluated as per the details already sent to the BHEL vide Consultant's letter dated 13.02.1997 and the shortfall in performance for the period from January, 1995 to December, 1995 was worked out to 31.6% as compared to the guaranteed performance. It is mentioned therein that no mutual agreement was arrived at on the issue during the discussion because of the stand taken by the Deputy General Manager, Ranipet, BHEL about the evaluation made by the Consultant communicated vide letter dated 13.02.1997. It was argued that though as per the letter dated 20.11.1996, the appellant had claimed price reduction/damages on account of shortcoming and performance of WTGs @ 36.6% for the period from January, 1995 to September, 1996 based on the old data for Navadra site for the year 1993 but taking into consideration Page 28 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined of the published wind data for Navadra site for the relevant period of two years from 1993 to 1995, when it became available, the shortfall in performance for the period January, 1995 to December, 1995 was worked out to 31.6%, which has resulted in reduced claim amount recoverable towards price reduction from BHEL, by the appellant, which came to Rs. 372.56 lakhs, in place of Rs. 431.51 lakhs stated in the Annexure to the letter dated 20.11.199 on the value of the order.
39. It was, thus, vehemently argued by the learned senior counsel for the appellant that there cannot be any justification to raise any dispute about the computation made by the Consultant on the performance of the WTGs, communicated vide letter dated 13.02.1997 sent to the BHEL. The submission, thus, is that taking note of all the above noted documents from record, the learned Arbitrator had reached at the conclusion that the evaluation of the performance of WTGs and the shortfall in performance assessed as per the agreed procedure on the basis of the published wind data of Navadra site for the year 1993-1995, published in the year 1996, were the correct evaluation based on the method worked out in the contractual terms and should have been made the basis to decide the claim of the appellant.
40. Further, inviting attention of the Court to the page No. '600' of the paper book, which is the extract of minutes of the meeting dated 20.11.1995 held between the representatives of the BHEL and the appellant Arvind Mills, Page 29 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined it was submitted by the learned senior counsel that it was insisted in the said meeting and the respondent BHEL had agreed for installation of the wind mast and other wind measuring equipments latest by 31.12.1995. The decision in the said meeting to go by the Harshad published wind data, was, thus, in two circumstances : (i) wind mast and other wind measurements were not installed by the respondent (BHEL) in breach of the contract. (ii) the published wind data for Navadra site was not available by then. It was submitted that later on the availability of the published wind data of Navadra site, the Consultant made computations for guaranteed performance based on the published wind data for Navadra site and the said computation was communicated to the respondent BHEL vide letter dated 14.11.1996.
41. Another communication dated 20.11.1996 was sent by the appellant in continuation of the letter dated 14.11.1996 intimating BHEL that losses, price reductions, damages and other amounts recoverable on such accounts was due to shortcomings in the performance of WTGs etc., non-performance/shortcomings in performance of contractual obligations on the part of the BHEL in respect of the warranties and operation and maintenance, and also on account of breach of various contractual provisions partially or fully, and, therefore, the BHEL was liable to pay a sum of Rs. 580.64 lakhs by way of demand draft in favour of the appellant to be tendered within one week from the date of receipt of the said letter.
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42. Referring to the communication dated 14.03.1997, extract of which has been noted hereinabove, it was submitted by the learned senior counsel that another meeting was held at the Consultant office and the office of the appellant at Ahmedabad, but discussions were not fully conclusive. Vide the aforesaid communication, respondent BHEL was, thus, intimated about the analysis to be made based on the published wind data of Navadra site.
43. Referring to the page Nos. '744' and '745' of the paper book, it was submitted that alongwith the communication dated 14.03.1997, documents as Exh. 1 to 3 were shared. Exh. 1 at page No. '745' of the paper book is the analysis of performance based on Navadra wind data and also of Harshad wind data. This document also refers to wind data based on Navadra site (reference: Anna Mani Vol.IV, 1996) for the period from January, 1993 to December, 1995. A further communication dated 24.11.1997 sent by the respondent BHEL to the Consultant is appended at page No. '748' of the paper book, which has been placed before us by the learned senior counsel for the appellant to submit that a further meeting was held on 19.11.1997 on the issues regarding the wind farm and the letter dated 24.11.1997 sent by the BHEL to the consultant refers to the same. The enclosure to the letter dated 24.11.1997 at page No. '749' of the paper book has been further placed before us to demonstrate the discussions made in the high level meeting held on 19.11.1997 as per the agenda circulated on 09.10.1997. The relevant extract of the minutes of the said Page 31 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined meeting referring to the issue of short performance at page Nos. '749' and '750' of the paper book are to be extracted hereinuner :-
"BHEL explained the purpose of the visit of high level team to discuss the outstanding issues with Arvind Mills. The agenda points sent by Shri Bharat J. Mehta on 09.10.97 were discussed :
1.Reported short performance:
Regarding Arvind Mill's claim for additional amount over and above the encashed Bank Guarantee, BHEL expressed that the whole issue has to be resolved only by measurement of the actual wind regime and the corresponding generation to prove the performance. For this, BHEL proposed to install 2 wind masts as per the earlier agreement and the understanding with respect to the data is to be collected and evaluated. Minimum 1 year data to be collected and performance periodically evaluated. Alternatively, President, Arvind Mills informed that they are willing to negotiate their claim of Rs. 5.8 crores vide their letter dated 20.11.1996 across the table and arrive at a figure. However, BHEL expressed that they will revert back within a week. Arvind Mills also informed that the shortfall in performance for measurement through wind mast, if any, will be 1:1 percentage basis without any ceiling limit as per the contractual terms. BHEL has to decide to opt either for proving the performance through the power curve or for a negotiable settlement as no further discussions on this issue will be entertained later. Based on the wind mast actually measured if the performance of machines is proved Arvind is willing to return the encahsed B.G. amount in full. "Page 32 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025
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44. Placing the above, it was vehemently argued by the learned senior counsel for the appellant that even in the said meeting, respondent BHEL had expressed that the whole issue had to be resolved only by measuring actual wind regime and the corresponding generation to prove the performance and for that, BHEL proposed to install two wind masts as per the earlier agreement and the understanding with respect to the data, is to be collected and evaluated. It was resolved that minimum one year data is to be collected and performance periodically evaluated. On the said assurance of respondent BHEL, the President, Arvind Mills informed that they were willing to negotiate their claim of Rs 5.8 crores made vide letter dated 20.11.1996 across the table and arrived at a figure. However, BHEL expressed that they would revert back within a week. It was also agreed that shortfall in performance for measurement through wind mast, if any, would be 1:1 % basis without any ceiling limit as per the contract terms and based on wind data actually measured and if the performance of the machine was proved, Arvind Mills (appellant) was willing to return the encahsed bank guarantee in full. There were other discussions about the other equipment, but on those issues we need not to go into detail in view of the submissions made by the learned senior counsels for the parties, inasmuch as, the dispute before us is confined to the measurement of actual performance for evaluation of short performance and performance guarantee.Page 33 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025
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45. Another communication dated 04.03.1998 is at page No. '757' of the paper book sent by the Consultant to the BHEL for the kind attention of the Deputy General Manager, pertaining to the subject : "performance of BHEL-Nordex WTGs installed at Arvind Wind Farm at Navadra and other pending matters". Placing the same, it was submitted by the learned senior counsel for the appellant that in the meeting held on 03.03.1998, again discussions were made and intimation made in the letter was about the schedule with regard to performance evaluation, wherein again, a time-line was given for installation of the wind mast with complete instrumentation latest by the end of April, 1998 and that the wind data measurement for performance evaluation would commence latest from 01.05.1998. The Consultant had specifically invited attention of the officer of the BHEL to give priority to the issues mentioned therein.
46. A further communication dated 21st May, 1999 sent by the President, Arvind Mills to the General Manager, BHEL has been placed before us where the discussion again was about the performance evaluation of WTGs and reference was made to the draft minutes of the meeting of November, 1997 sent to BHEL on 15.12.1997. It was reminded therein that once it was agreed that whatever percentage short fall in performance was assessed as per the agreed procedure, BHEL shall pay to Arvind Mills full price reduction on 1:1 % basis of the contract value without any ceiling limit and there cannot be any negotiation or settlement for loss other than the contractual terms.Page 34 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025
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47. The attention of the Court is further invited to the communication dated 28th January, 2000 of BHEL to the General Manager, Arvind Mills (appellant) on the subject : "Performance testing of WEG at Arvind Wind Farm" and the discussions held on 11.01.2000 that the power curve performance of WEGs can be measured and provided by the installation of the wind mast. In the said letter, BHEL sought permission of M/s. Arvind Mills (appellant) for installing the wind mast and connecting the same to one of the machines. A suggestion was given to permit BHEL to collaborate with M/s. Nordex, its collaborator for measuring the power curve as recorded by the controllers. There was again a communication dated 31.01.2000 (at page No. '773' of the paper book) wherein request was made by the respondent BHEL to perform performance test by the third party.
48. But the fact remains that wind masts as required to be put up by respondent BHEL was never put up. It was agreed by the respondent BHEL since inception of the contract executed in the year 1994 and during various discussions subsequently on the issue of short performance, by giving assurances from time to time that wind masts as required under the contract would be installed. But, without putting it up, the dispute was raised again and again about the evaluation made by the Consultant and the action of the appellant in invocation of the bank guarantee.Page 35 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025
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49. The learned senior counsel for the appellant has taken us through the findings in the arbitral award.
Findings in the Arbitral Award:
50. The discussion on claim No.2 about the "reduction and refund of price for shortcomings in the guaranteed energy generation for Rs. 410.08 lakhs" starts from page No. '264' of the paper book.
51. A careful reading of the same indicates that the learned Arbitrator had discussed about the purchase order dated 30.04.1994 and the previous correspondences and also the methodology (part of the contract) for measurement of actual performance vs. guaranteed performance as agreed between the parties. It was noted by the learned Arbitrator that the purchase order was approved and agreed by the respondent and then the contract was arrived at between the parties. The claimant appellant placed the order for 15 Nos.200KW BHEL-NORDEX WTGs on the terms and conditions specified therein. The respondent BHEL guaranteed that WTGs shall generate minimum net power of 4,04,000 KWH of electricity annually on an average per WTG, measured and/or estimated at the control panel of WTG to be monitored over a continuous period of two years from any date after completion of the order. It was also specifically agreed that the guaranteed figure on net power generation was based on the published frequency distribution of wind speed and other parameters at Harshad 100% grid availability and 95% WTG availability. It was also Page 36 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined agreed that for the purpose of ascertaining whether WTGs performed as per the guaranteed performance or not, the detailed procedure, were earlier communicated to the respondent in detail by the Consultant, which had been fully agreed by the respondent BHEL, and in case of any difference arising in that regard, the decision of the claimant's consultant (Vijayant Consultant) shall be final and binding to the respondent.
52. Clause 8(b) regarding the price reduction and refund for shortcomings in the guaranteed power generation was noted by the learned Arbitrator in the award. It was also noted that alongwith the purchase order, Annexure-A methodology for the measurement of the actual performance v/s. guaranteed performance, was also attached and agreed by the respondent. The learned Arbitrator in paragraph No. '25.3' and '25.4' had extracted the rival claims of the parties which are relevant to be noted hereinunder :-
"25.3 The claimant relied on published wind data for Navadra site published in "Wind Energy Resources Survey in India-Vol IV 1996 by Anna Mani". The claimant gave due credit for non availability of grid and other non generation periods including the period of non generation because on the falling of 11 KV H transmission line and the allowance of 5% was also given for WTG non availability to arrive at 95% WTG availability and detailed calculations were made as per (Exh C/15-18 pages). Based on said figures, actual power generation was only 65.22% of the capacity power generation based on respondents power curve, Navadra wind data actual grid availability and 95% WTG availability. Relying on clause 8(b) of the Purchase Order for shortcoming in the guaranteed Page 37 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined power generation prorata contract price on 1:1 percentage-to-percentage basis of the entire order, has to be reduced and refunded to the claimant by the respondent. The claimant has therefore asserted that it is entitled to refund of 34.78% of the entire order value i.e. 34.78% of Rs 1179 lacs which works out to Rs. 410.08 lacs and accordingly, claimed that amount.
25.4 I have discussed the contention of the respondent above and therefore it is not necessary to repeat them. However, in short the contentions of the respondent regarding this claim in the defence statement are discussed, so that the contention can be properly appreciated is contended that during the pre-contract stage as per the letters dated 14-10-93, 25-9-94 and 3-3-94 (Exh.R-18. 19 &20) the respondent clearly stated that the power curve only was guaranteed and the energy calculation was an estimation based on the published wind data as per "Wind Energy Resources Survey in India Vol.III". Those letters are referred in the Purchase Order by the claimant. However, during the contract stage the claimant M/s. Arvind Mill worked out the generation as 4,04,000 units per machine per annum after considering the facts of site density and machines availability. It is contended that the method of evaluation of performance was always under discussion as could be seen from the various correspondence during pre-contract and post contract stages (Exh. R. 14 & 15) that issue was still not resolved even after 2 years from the date of commissioning and during every subsequent meeting also that issue was discussed but no agreement was reached. The respondent had during the pre-contract stage stated in the letter dated 16-3-1994 (Exh C-40/21) that the performance measurement could he as per IEA norms. The respondent did make attempt to install the wind mast on 2 different dates but due to unforeseen circumstances the mast fell down and the job could not be completed but there was no Page 38 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined intentional delay or negligence to avoid measurement of the wind data as alleged by the claimant. Subsequently the respondent did take up with the claimant for installation of the wind mast to prove the performance of WEG as per predicted power curve (Exh. R.22) for which the claimant had prima-facie agreed for evaluation but because of disagreement with respect to methodology and other factors to be considered for evaluation etc that was getting delayed and the claimant was not willing to make the commitments that once the performance was approved as per the power curve the levied penalty would be waved. The claimant insisted that the testing and proving of performance was independent of the penalty claims of the claimant. It was also contended that the wind profile during the 1995-96 was really poor and much lower than the published figures, as evidenced by the measurement taken from the sensors mounted on nacelles. It is stated that even though there could be some argument on the usage of such measurement for performance evaluation, the trend definitely showed lower wind profile and some of the supporting data for that reasoning were enclosed at Exh. R/23. The lower wind profile was the major reason apart from the unstable grid in that area. GEDA had resorted to "power shedding" especially during the peak season, and that was because of evacuating capacity at Bhatia sub-station was limited compared to the generation capability of the wind farms at Lamba and Navadra. GEDA and GEB would never account such grid non- availability time and that would have never been reflected. Such things can be checked and inquired from various developers in Lamba and Navadra. It was asserted that the respondent was still willing to prove the machines as per the certified power curve provided the claimant was interested, even though the attempts for such testing in 1998 were not received properly. On the said ground the claim is refuted by the respondent."Page 39 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025
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53. Proceeding further, the learned Arbitrator noticing that minimum net power of 4,04,000 KWH of electricity annually on an average per WTG was guaranteed as per clause-5 of the purchase order, has recorded that the minimum net power of electricity was based on three factors : (i) published frequency distribution of the wind speed and other parameters at Harshad, (ii) grid availability and (iii) 95% WTG availability. It was also recorded that there was an agreement between the parties that wind velocity of Navadra site should be considered by wind masts for the period of two years and, therefore, the contract was given for erecting wind masts, but the respondent had failed to perform that part of the contract and, thus, committed breach of the contract.
54. We may note, at this juncture, that there is no dispute about the aforesaid facts noted by the learned Arbitrator in the award, i.e. (i) about the requirement of putting up of two wind masts to assess the wind velocity of the site of the installation of WTGs, namely Navadra site for a period of two years as per the contract and that (ii) there was a breach on the part of the respondent in performance of that part of the contract by non-installation of the WTGs despite repeated assurance given by them.
55. The learned Arbitrator has further discussed about the relevant clauses of Annexure-'A' methodology agreed between the parties to refer in paragraph No. 25.10 as under:-
Page 40 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined "25.10 I have extracted above the relevant clauses of Annexure-A methodology which was agreed between the parties and formed the part of contract. The relevant clauses of methodology may he considered for ascertaining the method and the procedure for arriving at the exact figure of shortfall in power generation. As provided in clause
(a) first of all estimated power generation in electricity units (Kwh) was required to be ascertained at 95% of availability factor which would be the reference figure of guaranteed power generation. Clause (b) provided for the procedure for collecting the data for Navadra site by 2 wind masts with necessary items as specified in it for the period of 2 years. The function of wind masts is to collect the statistics regarding the wind velocity or wind regime including the wind density. It is relevant to ascertain the kinetic energy, which propels WTG. Clause (c) laid down actual method of adjusting the variation in published wind data and actual wind data individually for each full year, as stated above and comparing it with guaranteed power generation figures as stated in clause(a). It appears that the parties were conscious of the fact that the wind data for particular period may not be available and therefore the specific provision be made that in case of any missing data for the particular period published data would be taken as the basis only for the corresponding missing period. That published data refers to the published data at Navadra or any nearby place, may be at Lamba. That specific provision was made with a view that claimant may not he put to avoidable loss.
Clause (d) provided for the formula that in case the actual annual power generation is less than the adjusted power generation as specified in clause (c) the respondent would be liable to pay price reduction or damages and refund the amount proportionately (1:1) basis of the total (turn-key) price of the commissioned WTGs/wind farm. That Page 41 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined would be monitored annually over two years of the warranty in two annual installments."
56. About the Guaranteed minimum net power generation and the basis of evaluation thereof, discussions are made in paragraph Nos. '25.11', '25.12' and '25.13', as under :-
"25.11 So far as guaranteed minimum net power generation of 4,04,000 KWH of electricity is concerned, it was based on the published frequency distribution of wind speed and other parameters at Harshad, 100% grid availability and 95% WTG availability. In clause (a) the reference is regarding the Harshad published wind data taken as the basis for the guaranteed power generation but to be worked out for arriving at the reference figures of guaranteed power generation considering the availability factor. The availability factor is regarding the availability of working of the WTGs and transmission etc. 25.12 The published wind data of Navadra is material for the purpose of ascertaining the difference in generation of the power. The quantum of generation of power, reference figure, less generation than guaranteed etc. should be ascertained only by the method provided in the methodology.
25.13 For working WTGs the wind velocity and density are the main factors as the guaranteed power generation is based on the wind data at Harshad areas. The actual power generation which can be ascertained only on the published wind data at Navadra and the difference could he ascertained other factors being common, by comparing the wind data of both the places and ascertaining the difference. For this purpose, therefore, the wind data at Harshad. and the wind data at Navadra are required to be considered. The other factors regarding the grid, availability of WTGs etc. will be considered at the later stage while considering the actual power generation figure."Page 42 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025
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57. It was, thus, held by the learned Arbitrator that the quantum of generation of power, reference figure, less generation than guaranteed etc. should be ascertained only by the methods provided in the methodology.
58. It was then held that for working WTGs, the wind velocity and density ratio are the main factors, as the Guaranteed power generation is based on wind data at Harshad site. The actual power generation can be ascertained only on the basis of published wind data at the Navadra site and the difference could be ascertained, other factors being common, by comparing the wind data of both the places and ascertaining the difference. The learned Arbitrator then proceeded to consider both the wind data at Harshad and wind data at Navadra. It has further discussed in detail the basic principles of wind turbine in order to understand the process and has recorded in paragraph No. '25.6' and '25.7' as under :-
"25.26 In the instant case, it is clear that all the three places viz. Navadra Lamba and Harshad are situated on Saurashtra sea coast Lamba is & Kms away from Navadra and Harshad in 30 Kms from Navadra. I will discuss their location at later stage. The wind farms are selected at Navadra and Lamba and even the respondent during the pre-contract discussions recommended for installing the WTGs and wind masts at Navadra. When the respondent recommended for installing them at Navadra they must have taken all these factors into consideration and then fixed their machines and assured the minimum energy production and accepted the methodology for ascertaining the generation of the electric energy.Page 43 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025
NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined 25.27 About the variation of the wind pattern etc. it is observed that "you should note however, that wind pattern may vary from vear to year and the energy content may vary, (typically by some 10%) from year to year, so it is best to have observations from several years to make a credible average. Planners of the large wind parks will usually rely on one year of local measurement and then use long term meteorological observations from nearby weather stations to adjust their measurements to obtain a reliable long term average. It appears that based on this principle the Harshad wind data which was available for 1987 to 1991 is referred in the contract agreement i.e. Purchase Order as the basis of guaranteed power generation and Navadra wind data which was available from 1990 was relied and agreed to install wind masts and the methodology for ascertaining the power generation was agreed. Navadra wind data was available from 1990 though published for period 1990 to 1995 in 1996."
59. It was also noted by the learned Arbitrator that out of three places viz. Navadra, Lamba and Harshad situated at Saurashtra sea coast, Lambda is 8 kms. away from Navadra and Harshad is 30 kms. away from Navadra. The wind farms are selected at Navadra and Lamba and when the respondent recommended for installing of wind farms at Navadra even during the pre-contract discussions, they must have taken all these factors into consideration and then fixed their machines and assured the minimum energy production while accepting the methodology for ascertaining the generation of the electricity energy. It was also noted that planners of the large wind parks will usually rely on the one year of local measurement and then use long term meteorological observations from nearby weather Page 44 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined stations to adjust their measurements to obtain a reliable long term average. It was recorded that it is for this reason it appeared that the Harshad wind data which was available for 1987 to 1991 was referred in the contract agreement, i.e. the purchase order as the basis of guaranteed power generation. It was also recorded that the Navadra wind data was available from 1990, though it was published for the period from 1990 to 1995, only in the year 1996.
60. With the above discussions, the learned Arbitrator has proceeded to make a detailed discussion to compare the wind speed, density and wind energy etc. at Harshad and respectively; at Navadra to notice that such kinetic energy for both the places is relevant, as noted in the methodology adopted by the parties, and agreed between them in the subsequent meetings.
61. The learned Arbitrator after a discussion on the technical aspects about the wind speed at Navadara, Lamba and Harshad, has reached at the conclusion in the award in the following manner:-
"It is therefore clear that the wind power density which is more important for the kinetic energy on an average was better at Navadra than at Harshad. The Annual Energy content of the wind at Lamba was 1315.2 based on data for the period of 2 years i.e. 1993-1994 and was 1471.5 based on the data for 3 years 1993-1995 at Navadra while it was 1318.2 based on data January 1987 to 1991 at Harshad. The energy content of the wind at Navadra is therefore more and better than that of Harshad and Lamba."Page 45 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025
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62. The learned Arbitrator has further noted that :-
"25.32 The energy content of the wind was 1318.2 based on data January 1987 to December 1991 at Harshad (Page 504 table 207 vol. II) while it was 1491.03 in 1993: 1544.99 in 1994 and 1378.46 in 1995 at Navadra (Table 243 page 515 vol. IV). It was comparatively lapsed during the year 1993-94 at Lamba (statistics for 1995 not published). The distribution of wind power density based on data January 1987 to December 1991 at Harshad was 153 annually (table 229 page 527 vol. II) while it was 169.1 based on data January 1993 to December 1995 at Navadra (table 175 page 442 vol.IV) and 151.4 at Lamba (table 173 page 440 vol.IV). The wind power density in the month of July at Navadra was 455.7 while it was 436 at Harshad. It was 248.9 at Navadra in the month of June while 238 in the same month at Harshad. It was 301.4 in the month of August at Navadra while it was only 205 in the same month at Harshad. It is therefore clear that the distribution of wind power density at Navadra was more than that of at Harshad.
25.33 Considering the wind velocity wind density power content of the wind etc. as discussed above, the wind parameters regime was better at Navadra than at Harshad or Lamba The wind turbine power generation therefore, should have been more at Navadra than at Harshad or Lamba. The minimum power generation 4,04,000 per annum guaranteed on the basis of the wind parameter at Harshad should be comparatively more at Navadra considering the above discussed factors and the wind parameters.
25.34 The situation of Lamba. Navadra and Harshad is that all the places are situated on West- coast of Saurashtra. Harshad is more towards the South on the Saurashtra West-coast. Lamha is towards north of Harshad and Navadra is towards north of Lamba on Saurashtra West-Coast."Page 46 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025
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63. Holding the above, the learned Arbitrator has discussed various communications between the parties as extracted hereinabove and minutes of the meetings held to resolve the dispute and has further recorded the assurance given by the respondent BHEL in the meeting held on 20.11.1995 between the high ranking officers of the BHEL, the Consultant and the officers of the Arvind Mills (appellant) to note that :-
"It was agreed that in absence of actual wind data Harshad published wind data would continue to be the basis of performance guarantee and evaluation of performance of WTGs and wind farm. About wind mast, Arvind had maintained that the height should be 40 meters only and not less than that as the hub height of all the WTGs is 40 meters. The O&M problems which were faced in the past and which were being faced requiring immediate corrective measures were enlisted and they were regarding the spares O&M personnel etc.."
64. It was, thus, recorded in paragraph No. '25.37' as under:-
"25.37 The admissions in the minutes of the meeting are very important to decide the less generation of the power by 15 WTGs. As such the low generation of the power compared to the guaranteed generation per WTG was admitted considering the published data for 1993 for Navadra and published data of Harshad. This admission by itself is insufficient to hold that the power generation was not as per the guaranteed standard but was much more lower than that. The methodology, which was agreed at the initial stage Page 47 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined was adopted and from the admission it is clear that the method of evaluation should be as discussed by me above. Various reasons, which were attributable to the respondent which resulted into low power generation and much more lower than the guaranteed power generation were enlisted and agreed and remedial measures were also assured. The shut down period, grid fault and other relevant factors as agreed were also considered and the low power generation was admitted after considering all the said relevant factors. If at all the respondent would not have been factor responsible for the low power generation due to their fault that fact would not have been agreed in the minutes of the meeting virtually admitting the claim of the claimant and assuring for remedial measures. It is true that the decisions taken in the meeting were without prejudice to the terms of the contract, but the contract also provided for the same terms for evaluation of the power generation vis-à-vis guaranteed power generation and therefore the admissions were not contrary to the terms of the contract. The admissions in the minutes of the meeting are therefore much important to hold the respondents to he responsible for the less generation of the power. Subsequently, the published data for the year 1995 for Navadra are available and therefore the said data should he considered for arriving at the percentage of less performance than the guaranteed performance of WTGs."
65. A perusal of the aforesaid discussion in the award indicates that the learned Arbitrator has noted that though the discussion taken in the said meeting were very important to decide the less generation of the power by 15 WTGs, but it was was true that the decisions taken therein were without prejudice to the terms and conditions. The admissions in the meeting are important to hold the Page 48 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined respondent responsible for less generation of the power. Further, once the published data for the year 1995 for Navadra site was subsequently available, the said data should have been considered for arriving at the percentage of less performance than the guaranteed of WTGs. The finding in the award is that the less generation and the reasons attributable to respondent are practicably admitted.
66. The learned Arbitrator then proceeded to deal with the contentions of the respondents that only the Harshad data should be taken into consideration as per the contract methodology and clause no.5 of the contract, to reject the same with the following reasonings :-
"25.54 The contention of the respondent that in absence of wind data by wind masts the claimant cannot assert the claim and that the published wind data cannot be used for the missing period, deserves to be rejected. Clause (1) of methodology Annexure-A (Ex.C/2) is regarding guaranteed power curve based on published data for Harshad area which was guaranteed at 4,04,000 KWH and 100% grid availability and 95% WTG availability, the reference figure of the guaranteed power generation was required to be worked out. Clause(b) provided for the actual annual performance of WTGs monitored separately for each of the two years warranty period. It is specifically provided that during the period of two years actual wind data for specific site would be collected using the standard procedure and requisite instrumentations 2 wind masts with data logger-chips etc. That was the procedure for collecting the data. Clause (C) specifically provided that the guaranteed power generation as provided in Clause (a) shall be adjusted for variations in the Page 49 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined published wind data and actual wind data individually for each full year obtained as in clause
(b). The party knew that there may be missing data for a particular period and therefore, agreed that the published data would be taken as the basis only for the corresponding missing period. It is clear that the data was required to be collected by the mast but respondent failed to erect the mast and the data could not be collected by help of 2 masts required to be erected by the respondent. The data was therefore, missing and that missing data was required to be supplied by the published data for that corresponding period. The submission of the respondent that the missing period should be considered only for the missing data for only particular months but that cannot be accepted. The period referred by the parties here is the entire period for two years as the parties were conscious that the specific provision should be made in case the respondent did not erect the wind masts as it is the actually done by the respondent and the claimant should not be deprived of, for the reduction in the price as agreed between the parties. It may be that if the mast would have been erected during the warranty period and for some other period the mast might not have worked and published data could have been used for that particular period, but that does not necessarily mean that the provision should be construed narrowly that in case of respondent committing the default in erecting the mast the published data of Navadra cannot be used by the concerned party. As such it was the intention of the parties while entering into the contract that such published data for Navadra should be used for specifying the actual performance, which should normally by wind masts or published wind data of Navadra, in case the data by wind mast was missing. If the contention of respondent is accepted it would amount to allow the respondent to earn the premium of its own wrong. The said contention of the respondent therefore, deserve to be rejected.Page 50 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025
NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined 25.55 The contention that only the Harshad data should be taken into consideration also cannot be accepted as the wind data was admittedly required to be collected by wind masts at Navadra. The wind data of Navadra was therefore, agreed by between the parties for evaluating the actual generation by WTGs. As discussed above, the published wind data of Harshad was available only for the period of 1989 to 1993 and was not available for the subsequent period when the contract was entered into and therefore, the published wind data of Harshad could not have been in the contemplation between the parties when the contract was entered into for ascertaining the actual performance. The published data of Harshad was considered only for the purpose of guaranteed performance and the relevant time when the contract was entered into the data for Navadra was in existence hut was not published and therefore the claimant subsequently secured the data from GEDA. After it was published it was sought to be relied upon for the purpose of ascertaining the claims. The contention that Harshad data should have been relied upon therefore deserves to be rejected.
25.56 It is contended by the respondent that the respondent had at no point of time accepted that the basis would be Navadra data and on the other hand parties had agreed to refer Harshad published wind data in respect of missing period. The submission is not only incorrect but also misleading. The very fact that the two wind masts were to be erected at Navadra and wind measurements would he collected for the wind regime at Navadra that by itself is sufficient to hold that the wind regime and wind data for Navadra was to be collected for ascertaining the performance and not the wind data at Harshad which is at the distance of about 30 Kms. away from Navadra. As discussed above, the parties did contemplate only the wind data at Navadra. It cannot be also accepted that parties had agreed as per the contract to refer to the Harshad published Page 51 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined wind data in respect of the missing period. As such in the contract parties had not agreed even though some reference was subsequently made in minutes of the meeting for Harshad published wind data for which I would discuss at a later stage.
25.57 All the contentions about the reliability of the statements, the non-availability of the data by wind mast at Navadra, using the published data objecting to use Navadra wind data in absence of the wind data by mast, not permitting to use Navadra wind data for the missing period etc. are rejected for the reasons recorded above including the admissions and the conduct of the respondent right from the inception of the warranty period to 1997. Two other contentions of the respondent that the wind profile during the year 1995-96 was really poor and much lower than published figure and there was power shedding was resorted by GEDA should he rejected as the respondent has not produced any evidence to support their said contentions."
67. The learned Arbitrator has ultimately concluded that the bona fide intention of the appellant/claimant to get the analysis done by the wind masts in a fair manner, was evident from the record. Even the appellant/claimant was prepared to return the amount recovered by encashing the bank guarantee, if the performance was found as per the contract and also ascertained the claim amount of 1:1 basis for the shortfall. Inspite of giving repeated opportunities, the respondent BHEL was not prepared for settlement and wasted time in making alternative proposals and even advancing the new proposals to be measured by the third party. The learned Arbitrator has, thus, reached at the conclusion from the extracted discussion noted hereinabove Page 52 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined that the appellant/claimant had proved the statistics and the reliance placed on the published wind data and hence, the claim of the appellant/claimant to that extant, was liable to be allowed.
68. Noticing that the actual annual power generation was less than the assured power generation, the respondent was held liable to give price reduction and refund the amount proportionately (1:1 basis) of the contract price of the commissioned WTGs/Wind Farm. Referring to clause 8(b) of the contract, it was held by the learned Arbitrator that the total order price is required to be reduced by the shortfall percentage and the amount at 1:1 percentage to percentage basis should be reduced and refunded. In the claim statement, the appellant/claimant had computed the entire order value being Rs. 1179 lakhs which was not denied by the respondent BHEL in the defense statement. The appellant/claimant had already paid the price and therefore, the amount of Rs. 372.56 lakhs which is 31.6% of the entire order value of 1179 lakhs was required to be refunded to the appellant/claimant.
69. Further, rejecting the submissions made by the respondent BHEL in the written statement that the annual wind data of 1995 of Navadra site only could be taken into consideration as the wind data of 1996 was not available, it was recorded by the learned Arbitrator that the claimant in the written statement has claimed Rs. 499.68 lakhs for the price reduction on account of the shortcoming in Page 53 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined performance and that it was entitled to Rs. 440.79 lakhs for the total period from January, 1995 to December, 1996 as stated in Exh.C. However, ultimately, the learned Arbitrator has allowed the claim asserted in the letter Exh. 48 only, which is at Rs. 372.56 lakhs of claim No.2, lesser than demanded by the claimant/appellant herein.
Counter arguments of the respondent:-
70. We may record, at the outset, that none of the abovenoted findings of fact returned by the learned Arbitrator have been assailed before us by the learned senior counsel for the respondent BHEL being without any evidence on record. Only submission of the learned senior counsel for the respondent BHEL is that the learned Arbitrator has wandered outside the scope of the contract to take into consideration the published wind data of the Navadra site instead of Harshad site.
71. Mr. Mihir Thakore, the learned senior counsel for the respondent vehemently argued that the learned Arbitrator has acted completely without jurisdiction, while making interpretation of the terms and conditions of the contract, inasmuch as, he has ignored the clauses of the contract, which clearly refer to the Harshad published wind data for evaluation of the guaranteed performance. By ignoring the specific terms of the contract, the construction of the contract made by the learned Arbitrator is beyond the contemplation of the parties. By such construction of the contract, an implied inconsistent term with that of the Page 54 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined expressed terms of the contract has been imposed on the parties. The submission is that considering the contract which specifically refers to the Harshad data in clause (5) of Guaranteed performance clause and clauses (a), (b) and (c) of Annexure-A 'the methodology', as also the minutes of the meeting dated 20.11.1995, the decision of the learned arbitrator in taking into account the Navadra site data cannot be considered to be the possible view. The only possible view on the construction of the terms of the contract could be consideration of the Harshad data, as agreed for assessment of the Guaranteed performance between the parties.
72. Much emphasis has been laid on the contents of the minutes of the meeting dated 20.11.1995, to vehemently argue that once it was agreed between the parties that Harshad published wind data will continuously form the basis for performance guarantees and evaluation of performance of the WTGs and Wind Farms, any other view would be contrary to the terms and conditions of the contract.
73. In a feeble argument, issue has also been raised with regard to the limitation in initiation of the arbitration proceedings. The submission is that the claims were ex facie barred by law of limitation. It was argued that by ignoring the limitation aspect, the learned Arbitrator has committed a jurisdictional error which can even be agitated in the proceedings under Section 37.
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74. To substantiate the above arguments, the learned senior counsel Mr. Mihir Thakore, has placed reliance on the following judgments:-
(i) Associated Engineering Co. v/s. Government of Andhra Pradesh and Another [(1991) 4 SCC 93);
(ii) Rajasthan State Mines & Minerals Ltd. v/s. Eastern Engineering Enterprises and Another [(1999) 9 SCC 283];
(iii) Bharat Cocking Coal Ltd. v/s. Annapurna Construction [(2003) 8 SCC 154];
(iv) Food Corporation of India v/s. Chandu Construction and Another [(2007) 4 SCC 697];
(v) Batliboi Environmental Engineers Limited v/s.
Hindustan Petroleum Corporation Limited and Another [(2024) 2 SCC 375];
(vi) Delhi Metro Rail Corporation Limited v/s. Delhi Airport Metro Express Private Limited [(2024) 6 SCC 357];
(vii) PSA Sical Terminals Private Limited v/s. Board of Trustees of V.O.Chidambranar Port Trust Tuticorin and Others [(2023) 15 SCC 781];
(viii) Indian Oil Corporation Limited through its Senior Manager v/s. Shree Ganesh Petroleum Rajgurunagar through its Proprietor Laxman Dagdu Thite [(2022) 4 SCC 463];
(ix) Satyanarayana Construction Company v/s. Union of India and Others [(2011) 15 SCC 101];
(x) B and T AG v/s. Ministry of Defence [(2024) 5 SCC 358];
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75. Referring to paragraph Nos. '24 to 27' in Associated Engineering Co. (supra), it was vehemently argued by Mr. Mihir Thakore, the learned senior counsel that the settled law is that the Arbitrator cannot act arbitrarily, irrationally and capaciously or independent of the contract. His sole function is to arbitrate in terms of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled outside the bounds of the contract, he has acted without jurisdiction. It was submitted that the authority of the Arbitrator is derived from the contract and is governed by the Arbitration Act. A deliberate departure from the contract amounts to not only manifest disregard of his authority by the learned Arbitrator, but amounts to misconduct on his part. An Arbitrator cannot widen his jurisdiction by deciding the question not referred to him by the parties or by deciding a question otherwise than in accordance with the contract. He cannot say that he does not care what the contract says. He is bound by it. It must bear his decision. He cannot travel outside its bounds. In order to see what the jurisdiction of the Arbitrator is, it is open for the Court to see what dispute was submitted to him. The Court can look at the affidavits and pleadings of the parties and the agreement itself.
76. It was argued that if the Arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. But if he wanders outside the contract and deals with the matter not allotted to him, he commits a jurisdictional error. Such an error going to his jurisdiction Page 57 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined can be established by looking into the material outside the award. It was argued that the ambiguity in the award, if any, in such cases, can be resolved by admitting extrinsic evidence. The rationale of this rule is that the nature of the dispute is something which has to be determined outside and independent of what appears in the award.
77. Referring to the decision in Rajasthan State Mines and Minerals Ltd. (supra), it was submitted that it is well settled principle of law that the Arbitrator is a creature of the contract between the parties and hence if he ignores the specific terms of the contract, it would be a question of jurisdictional error, which can be corrected by the Court and for that limited purpose, the agreement is required to be considered. For deciding whether the Arbitrator has exceeded his jurisdiction, reference to the terms of the contract is must.
78. The decision in Bharat Coking Coal Ltd. (supra), has been placed to argue that the award could be void for want of jurisdiction, if the Arbitrator has done something which the parties never authorised him to do. If the damages are awarded ignoring the express terms of the contract, the Arbitrator would commit misconduct of the proceedings.
79. Placing the decision of the Apex Court in Food Corporation of India (supra), it was submitted that the Contract Act does not enable a party to a contract to ignore the express covenants thereof and to claim payment of consideration for performance of the contract at rates Page 58 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined different from the stipulated rates, on some vague plea of equity. In the codified law of contracts, there is nothing which justifies the view that a change of circumstances, "completely outisde the contemplation of the parties" at the time when the contract was entered into, will justify a Court, while holding the parties bound by the contract, in departing from the express terms of the contract. Where there is an express term, the Court cannot find on construction of the contract an implied terms inconsistent with such express terms. Placing paragraph No. '13' of the said decision, it was submitted that emphasis was laid therein on a previous decision of the Apex Court in Continental Construction Co. Ltd. vs. State of M.P. [(1998) 3 SCC 82] to record there that an Arbitrator, not being a Conciliator, cannot ignore the law or misapply it nor do what he thinks is just and reasonable. He is an Arbitrator selected by the parties to decide their dispute according to law and so is bound to follow and apply the law, and if he does not, he can be set right by the Court, provided his error appears on the face of the record.
80. The submission is that the issue which arises for determination in the present matter is as to whether the learned Arbitrator has disregarded the agreement between the parties and exceeded his jurisdiction and has, thus, committed legal misconduct.
81. While placing the paragraph No. '32' of the decision in Ssangyong Engineering and Construction Company Page 59 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined Limited v/s. National Highways Authority of India (NHAI) [(2019) 15 SCC 131], it was submitted that for the present matter, unamended provision of Section 28(3) of the Arbitration and Conciliation Act, 1996 are to be looked into. By reading the said provision, it was argued that the Arbitration Act mandated the Arbitral Tribunal (Arbitrator) to decide all cases "in accordance with the terms".
82. The question as to what would be the interpretation of Section 28(3) of the unamended Arbitration Act, 1983, has been answered by the Apex Court in Associate Builders v/s. Delhi Development Authority [(2015) 3 SCC 49], wherein it was held that the contravention of Section 28(3) of the Arbitration Act, 1996 amounts to patent illegality. It was submitted that only caveat to consider contravention admitted by the Apex Court is that the construction of the terms of the contract by the learned Arbitrator is such, which in a reasonable way can be said to be something that a fair minded or reasonable person could do.
83. Paragraph Nos. '42.3' of the decision in Associate Builders (supra) placed before us is noted hereinunder:-
"42.3 (c) Equally, the third subhead of patent illegality is really a contravention of Section 28(3) of the Arbitration Act, which reads as under :-
"28. Rules applicable to substance of dispute - (1)-(2) *** (3) In all cases, the Arbitral Tribunal shall decide in accordance with the terms of the contract and shall Page 60 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined take into account the usages of the trade applicable to the transaction."
This last contravention must be understood with a caveat. An Arbitral Tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be something that no fair-minded or reasonable person could do."
84. Placing Batliboi Environmental engineers Limited (supra), it was agitated that the Arbitrator cannot award damages where there is no semblance in the contract.
85. Further, referring to the decision of the Apex Court in Delhi Metro Rail Corporation Limited (supra), it was argued that a finding based on no evidence at all and an award which ignores vital evidence in arriving at its decision, would be perverse and is liable to be set aside under the head of "patent illegality", as it results in a gross miscarriage of justice.
86. The remaining decisions noted above have been referred to one by one to substantiate the above points, but we do not deem it fit to burden this judgment with all of them having noted the above principles placed before us.
Rejoinder arguments:-
87. In rejoinder, the learned senior counsel Mr. Saurabh Soparkar appearing for the appellants reiterated his Page 61 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined arguments based on the work order issued for supply and commissioning of WTGs and other associated work, which contains the conditions of supply and installation. Referring to the Annexure-A, as part of the letter dated 02.04.1994, namely 'the methodology' for measurement of actual performance v/s. Guaranteed performance, it was further argued that at the stage of negotiation, only available published wind data was for Harshad area. Clause(5) of the contract as well as clauses (a), (b) and (c) of the methodology in Annexure-A would refer to the Harsahd data, only as a reference figure so as to decide the methodology as to how measurement of actual performance v/s. Guaranteed performance would be worked out to evaluate the guaranteed performance of WTGs. The reasoning of the learned Arbitrator in arriving at a finding after detailed discussion of the relevant clauses of the contract, methodology agreed between the parties and also the subsequent communications by the parties, cannot be said to be patently illegal or even illogical.
88. In so far as the issue of limitation is concerned, it was argued that the question of limitation though was raised initially, but had been given up by the respondent before the learned Arbitrator. It was submitted that issue No. '37' was framed by the learned Arbitrator on the plea of the respondent about the statement of claim being barred by time and period of limitation. Placing the findings of the learned Arbitrator on issue No. '37', it was sought to be demonstrated that the issue of limitation was not pressed Page 62 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined before the learned Arbitrator, and hence, it cannot now be raised that too in the proceedings of appeal under Section 37, filed by the appellant challenging the order passed under Section 34. In so far as the cross objections filed by the respondent are concerned, no ground has been taken therein to challenge the award on the issue of limitation. The cross objections filed by the respondent are confined to the denial of their counter claim by the learned Arbitrator as affirmed by the Court under Section 34. Moreover, limitation being a mixed question of facts and law, in absence of any contrary material placed in the cross- objection, the said issue cannot be agitated during the course of arguments, inasmuch as, it may not be possible for the Court to enter into the merits of the issue of limitation, which is nothing but an after thought.
89. Dealing with the arguments made by the learned senior counsel for the respondent, Mr. Saurabh Soparkar, the learned senior counsel for the appellant has tried to distinguish each and every decision relied on by the learned Senior counsel for the respondents on the facts and circumstances of the case to submit that the opinions formed by the Apex Court therein for holding the Arbitral awards being patent illegal or the construction of the contract being completely outside the jurisdiction of the learned Arbitrator, were in the peculiarity of the case before them.
90. Mr. Soparkar, the learned Senior counsel for the appellant has further argued that it was well within the Page 63 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined jurisdiction of the learned Arbitrator to take into account the terms of the contract, which may be express or implied, the scope and ambit of the arbitration agreement, conduct of the parties as well as the correspondences exchanged by the parties for the purposes of construction of the contract. Once the Arbitrator has exercised its jurisdiction to make interpretation of the contract by taking into consideration of the relevant material on record, the Court will not interfere, unless it is found that there exists an apparent error on the face of the award. It was argued that it is trite in law that interpretation of the contract is a matter for the learned Arbitrator to determine, even if it gives rise to determination of question of law. Even in a case where the clause(s) of the contract is/are capable of giving two interpretations, the view taken by the Arbitrator, if a possible view, even if not a plausible one, it is not permissible to say that the Arbitrator had travelled outside his jurisdiction, or that the view taken by him was against the terms of the contract.
91. It is, thus, submitted by the learned senior counsel for the appellant that the view taken by the learned Arbitrator based on the material on record in the instance case, cannot be substituted by the High Court in the exercise of appellate powers under Section 37 of the Act, 1996 to hold otherwise by opining that any other alternative view would be 'a plausible view' or 'a better possible view'. The present is not a case where the learned Arbitrator can be said to have disregarded the material terms of the contract while making its assessment or has failed to consider the relevant clauses Page 64 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined of the contract. The Arbitrator being the best Judge, is entitled to take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the contract. The Court while considering the challenge to the arbitral award, does not sit in appeal over the findings and the decision unless the Arbitrator construes the contract in such a way that no fair minded or reasonable person could do.
92. Reliance is placed on the decision of the Apex Court in McDermott International INC v/s. Burn Standard Ltd. and Others [(2006) 11 SCC 181] to substantiate the above submissions.
93. By placing reliance on Para No. 42.3(c) of the judgment of the Apex Court in Associate Builders (supra), applicable to the present case being a decision rendered on the unamended Arbitration Act, 1996 by the Amendment Act 2015 w.e.f. 23.10.2015, it was submitted that even as per the law laid down therein under the original Section 28(3), the Arbitraal Tribunal though was mandated to decide in accordance with the terms of the contract, but in a case where the Arbitrator construed the terms of the contract in a reasonable manner, it will not mean that the award can be set aside. It was clearly held by the Apex Court that the construction of the contract is primarily with the jurisdiction of the Arbitrator. Unless, the Arbitrator constructs the contract in such a way that it can be said to be something that no fair-minded or reasonable person could do, the Court cannot interfere.
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94. Dealing with the above, we may note that the Apex Court in Associate Builders (supra), has also approved the law laid down in McDermott International INC(supra), wherein it was held that the correspondences exchanged between the parties were required to be taken into consideration for the purpose of construction of the contract and that unless it is found that the learned Arbitrator has wandered outside the contract and dealt with the matters not allotted to him, he can not be said to have committed a jurisdiction error.
95. It has further approved the view expressed in paragraph No. '45' of the decision Rashtriya Ispat Nigam Ltd. v/s. Dewan Chand Ram Saran [(2012) 5 SCC 306] therein to hold that if the clauses of the contract are capable of two interpretations and the view taken by the Arbitrator was clearly a possible if not a plausible one, the Court cannot say that the Arbitrator had travelled outside his jurisdiction or that the view taken by him was against the terms of the contract. The Court cannot substitute its view in place of the interpretation accepted by the Arbitrator.
96. In a recent decision in Ssangyong Engineering and Construction Company Limited (supra), the Apex Court had recognised that the amendments brought in Section 28(3) by the Amended Act, 2015 in fact followed, what was stated in paragraph Nos. '42.3 to 42.5' in Associate Builders (supra). It was observed therein that the grounds Page 66 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined of challenge as laid down therein in the matter of interpretation of contract in light of the Section 28(3) will now fall within the new grounds added under Section 34(2-A), which is 'patent illegality' for setting aside the arbitral award in domestic arbitration.
97. Holding the above, the Apex Court has further clarified in paragraph No. '38' in Ssangyong Engineering and Construction Company Limited (supra) that re- appreciation of evidence, which otherwise an appellate court is permitted to do, cannot be permitted under the patent illegality appearing on the face of the award even within the scheme of the Amendment Act, 2015 under Section 34(2-A).
98. It can, thus, be seen that the position of law about the Arbitrator being the best Judge in the matter of interpretation of the contract and the scope of interference under Section 34/37 of the Arbitration Act, is well settled that unless the Arbitrator construes the contract in a manner that no fair-minded or reasonable person would do, the award cannot be set aside on the ground of patent illegality by the Court. This principle stated in Associate Builders (supra) for pre-amendemnt regime has been recognised by the Legislature in the Amendment Act' 2015 and has further been reiterated by the Courts from time and again in pre and post amendment' 2015 regime. The patent illegality appearing on the face of the award, would certainly be a ground to set aside the award even for an award delivered in the pre-amendment era, but the scope of inquiry by the Court under Section 34 is confined to find an Page 67 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined illegality which has appeared on the face of the award. In all such situations where the finding is based on no evidence at all; the award ignores vital evidence in arriving at its decision; the finding is based on a document taken behind the back of the parties by the Arbitrator; if a decision is not based on evidence led by the parties, even the pre- amendment award can be categorised as perverse and is liable to be set aside on the ground of patent illegality.
99. With the above, we may note, at the outset, that the award passed by the learned Arbitrator, in the instant case, does not fall in any of the above categories.
100. At the cost of repetition, as held hereinbefore, the Court under Section 34 of the Act, 1996, has committed a grave error of law in ignoring the above settled principles in the matter of interference in an arbitiral award and rather wrongly referred to the decision of the Apex Court in the case of Ramkishorlal v/s. Kamalnarayan (AIR 1963 SC page 890) to make an independent construction of the terms of the contract clause pertaining to Guaranteed performance. Independent interpretation of the clauses of the contract by taking aid of the rules of statutory interpretation based on the aforesaid decision of the Apex Court without even referring to the findings returned by the learned Arbitrator, is a manifest error of law committed by the Court in excess of its jurisdiction under Section 34 of the Act, 1996.
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101. The views expressed by the Court under Section 34, in the instant case, that since the condition No. (a) regarding performance guaranteed clearly speaks of Harshad published data, no other interpretation would be possible and, thus, the learned Arbitrator has travelled beyond the scope of arbitration, is clearly in disregard to the findings of fact returned by the learned Arbitrator on consideration of the material on record, which could not be interfered within the scope of its jurisdiction under Section 34 of the Act' 1996. In fact, the order passed under Section 34 of the Act, 1996 is a non-speaking order and can not be sustained as such.
102. We may, however, remind ourselves that this Court under Section 37 has a narrower jurisdiction, inasmuch as, the scope of interference in an Arbitral award cannot go beyond the scope of inquiry under Section 34 of the Act, 1996.
103. Considering the above, firstly dealing with the issue of limitation raised in a feeble argument made by the learned senior counsel for the respondent, suffice it to note that the learned Arbitrator on the issue No. '37', clearly records that though the respondent in general asserted that the claim raised in the statement of claim was barred by time, but apart from making such general statement in the defense statement, the respondent did not assert the point of limitation during the course of argument. It is also noted by the learned Arbitrator that the learned advocate appearing for the respondent did not argue on the point of Page 69 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined limitation and also did not raise that contention or made any submission in the written submissions filed by the respondent. It was, thus, opined by the learned Arbitrator that the point of limitation had not been seriously pressed into service and the reasons thereof were obvious that the negotiations were going on between the parties for settlement upto 18.02.2002.
104. Even after noticing that the issue of limitation was not pressed into service seriously during the course of argument, the learned Arbitrator, on its own, had evaluated the material on record to return a finding on the issue as to when the cause of action for the claimant accrued. Considering the material on record, it was held that till 18.02.2000, the parties were negotiating for the settlement and discussing the procedure for measurement of the power generation, erection of wind masts etc.. As a result of it, the claimant could not have finally arrived at the amount of claim to be ascertained under various claims as per the warrantee clauses. As the claimant could not have ascertained the final amount of claim under various heads as negotiation for settlement failed, on that very day itself, the Arbitrator was appointed, the question of limitation, therefore, does not arise. Computing the period of limitation from the date when the claim was expressly or by implication repudiated, i.e. 18.02.2000, it was held that the cause of action arose on the date on which the respondent unequivocally denied the right to claim the amount.
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105. It was, thus, held that the claims and the counter claims are not barred by period of limitation. These findings returned by the learned Arbitrator could not be assailed before us. Moreover, the issue of limitation has not been raised either in the application under Section 34 or in the cross objection filed on behalf of the respondent. Nothing from the record could be placed before us to seriously address the issue of limitation. Rather, Mr. Mihir Thakore, the learned senior counsel appearing for the respondents, at the very inception, submitted that he was not disputing the award for penalty on the delay in commissioning the wind masts, which was awarded to the tune of Rs. 64,000/- and has been upheld by the Court under Section 34 of the Act, 1996 while setting aside the award in part. In their cross- objections, the respondent has confined the challenge to the order passed by the Court under Section 34 in upholding the award for rejection of the counter claim of the respondent.
106. In view of the above, the issue of limitation raised by the learned senior counsel for the appellant, at the fag end of his arguments, is nothing but an after thought. The limitation being the mixed question of facts and law, in view of the findings returned by the learned Arbitrator on the issue of limitation upon evaluation of the evidence on record, the award cannot be interfered with within the scope of Section 37, like a Court of first appeal on re- appreciation of the material on record. The arguments of the learned senior counsel for the respondent on the Page 71 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined question of limitation or the claims being time barred, are, accordingly rejected being devoid of merits.
107. Further, analysing the award, having carefully considered the submissions of the learned senior counsels for the parties and perused the record, the terms and conditions of the contract, we may reiterate that there is no dispute about the fact that the guaranteed power generation as per clause (5) of the guaranteed performance of the WTGs could not have been meted by the respondent. There is no dispute about the fact that the measurement of the actual performance v/s. guaranteed performance as agreed under the contract was required to be worked out as per the Methodology in Annexure A, extracted hereinbefore. Referring to the methodology adopted for performance evaluation, the learned Arbitrator has considered in detail the terms and conditions of the contract and has recorded that the minimum net power of electricity was based on three factors including published frequency distribution of the wind speed and other parameters at Harshad.
108. The record indicates that there was an agreement between the parties that the wind velocity of the site of installation of WTGs would be considered by installation of wind masts by the respondent, for the period of two years. The contract was given for erecting wind masts but the respondent had failed to perform that part of the contract. There is no dispute about the breach of this part of the contract at the ends of the respondent.
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109. It is recorded by the learned Arbitrator and is evident from the material before us that repeated assurances were given by the respondent in various meetings held with the appellant that the installation of two wind masts to assess the wind velocity of the site of the installation of the WTGs, viz. Navadra site and Harshad would be completed by them, so as to get the figure of the actual power generation by WTGs in order to assess whether there were any shortcomings in the guaranteed power generation as per clause (5) of the contract. There is also no dispute about the fact that the quantum of generation of power, reference figure, less than the guaranteed generation, etc. was required to be ascertained only by the methods provided in the methodology.
110. The Consultants engaged by the appellant and whose opinion mattered in terms of the contract, had submitted in their first report for performance evaluation on the methodology adopted by the parties that non-availability of precise wind data for the Navadra site for the current period has been a major constraint in reliable estimation of wind farm performance and same has happened due to the failure of respondent BHEL to erect the wind masts ordered on them. In absence of the current wind data for Navadra site, the evaluation of performance of the wind farm had been made alternatively, both taking into account the available published wind data for Navadra site for the year 1993 and Harshad Published Wind Data related to the periods from 1987 to 1991.
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111. It was opined in the report of the Consultant that the Navadra wind profile was considered to be better than that of Harshad, inasmuch as, the performance evaluation based on the Harshad wind distribution was likely to overestimate the performance than actual performance. It was categorically mentioned therein that in absence of reliable wind data available for Navadra site, at the relevant time, the consultant had provided for taking Harshad wind data as the basis for performance evaluation and, therefore, performance evaluation had been made considering both the cases as Case -1 and Case - 2, to be extracted from the report of the consultant shared with the respondent :-
"A. Methodology Methodology adopted for the performance evaluation is as follows:
1. Non-availability of precise wind data for the Navadra site for the current period has been a major constraint in reliable estimation of wind farm performance. This has happened due to failure of BHEL to erect the wind masts ordered on them.
In absence of current wind data for Navadra site, have evaluated performance of the wind farm in the following two cases:
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NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined Navadra wind distribution data is available for the year 1993. Wind measurements were organised by Field Research Unit of Indian Meteorological Laboratory at Bangalore. The data was obtained from GEDA, Baroda.
Case-2 Take Harshad Published Wind Data as the basis. Published Harshad data relate to the periods 1987 to 1991 and present fairly reliable average wind data collected over the long time. This data is also collected and published by Field Research Unit of Indian Mereorology Laboratory, Bangalore.
Navadra wind profile is considered to be better than that of Harshad, hence performance evaluation based on the Harshad wind distribution is likely to overestimate the performance than actual performance.
Despite this limitation, this option is also employed bacause, according to our order terms, in absence of reliable wind data available for Navadra site, we have provided for taking published Harshad wind data as basis for performance evaluation.
Therefore, performance evaluation has been made considering both these cases."
112. Clause (5) of the contract pertaining to Guaranteed Performance of WTGs though referred that the guaranteed figure of the net power generation was based on published frequency distribution and wind speed and other parameters at Harshad, but the fact remains that the WTGs were installed at Navadra site and for measurement of actual performance vs. guaranteed performance, two wind masts were required to be installed to collect the actual wind data Page 75 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined for the specific site, which is Navadra on the Saurashtra coast. If we read Clause (5) of the contract, and clauses of Annexure A-Methodology for Measurement of Actual Performance vs. Guaranteed Performance, it is evident that reference for published wind data for Harshad area, at both places, was a reference figure of Guaranteed power generation. The actual annual performance of WTGs was required to be monitored separately for each of the two (or three) warranty periods, by collection of actual wind data of the specific site using the standard procedure and requisite instrumentation as per clause (b) of Annexure A, the methodology for measurement agreed by the parties. Clause (c) of Annexure A further clarifies that the guaranteed power generation figure as in clause (a) would have to be adjusted for variations in published wind data and actual wind data individually for each full year, obtained as per clause (b) therein. It is also clarified in clause (c) that in case of any missing data for a particular period, published wind data would be taken as a basis only for the corresponding missing period.
113. It is evident that the reference to published wind data at Harshad area at both places as a reference figure of guaranteed power generation was for the reason that only available published data at the relevant time, was for Harshad area and wind data for Navadra site, though was available, but was not published by then. Even while considering the Navadra wind distribution data available in the year 1993, it was noted by the consultant that the said Page 76 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined data was obtained by them from GEDA, Baroda, which in turn got it from the concerned laboratory at Bangalore, which organised wind measurement.
114. As per the data analysis presentation in the Consultant report, extracted hereinbefore, shared with the letter of the appellant dated 09.11.1995, pertinent is to note that the details given by the Consultant therein indicated that at the relevant point of time, Navadra wind distribution data was available only for the year 1993 whereas published Harshad wind data related to the period 1987-1991. A perusal of the aforesaid material on record clearly indicates that the performance evaluation was made by the Consultant on both the available data for Navadra site as well as Harshad site and they categorically mentioned in their report that Harshad wind data was considered in absence of the current wind data for the Navadra site.
115. In view of the above, we find substance in the submission of the learned Senior counsel for the appellant that because of non-availability of published wind data for Navadra site, the published data of Harshad site, available at the relevant point of time, was mentioned in clause (5) of the contract as also clause (a) of Annexure A as a reference figure for providing methodology to assess the guaranteed performance of WTGs. As extracted hereinbefore, the learned arbitrator in paragraphs '25.3' and '25.4' of the award has noted that the claimant relied on published wind data for Navadra site published in "Wind Energy Resources Survey In India-Vol IV 1996 by Anna Mani" and further dealt Page 77 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined with the contention of the respondent BHEL to record that during the pre-contract stage, as per Exhibit R-18, 19 & 20 (letters of the respondent dated 14.10.1993, 25.09.1994 and 03.03.1994), the respondent had clearly stated that the power curve only was guaranteed and the energy calculation was an estimation based on the published wind data as per "Wind Energy Resources Survey in India Vol. III". Those letters were referred in the purchase order by the claimant. However, during the contract stage, the claimant worked out the generation as 4,04,000 units per machine per annum after considering the facts of site density and machines availability. The method of evaluation of performance was always under discussion during pre-contract and post- contract stages and the said issue was not resolved even after two years from the date of commissioning and during every subsequent meetings, discussions were held on the issue, but no agreement was reached.
116. It was noted by the learned Arbitrator that while refuting the claim of the claimant, the respondent submitted that they made an attempt to install the wind masts on two different dates but due to unforeseen circumstances the masts fell down and the job could not be completed and there was no intentional delay or negligence to avoid measurement of the wind data as alleged by the claimant.
117. As extracted hereinbefore, the learned Arbitrator in paragraph '25.10' after discussion of the claims of the rival parties and relevant clauses of Annexure A-
Page 78 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined Methodology agreed between the parties, which formed part of the contract, has opined that the parties were conscious of the fact that the wind data for the particular period may not be available and, therefore, the specific provision was made that in case of any missing data for the particular period, published data would be taken as the basis for the corresponding missing period. That specific provision was made with a view that the claimant may not be put to avoidable loss. Two years of warranty period for monitoring the actual annual power generation and assess the liability of the respondent to pay the price reduction or damages as agreed under the contract was clearly mentioned in the methodology.
118. It was, thus, opined by the learned arbitrator in paragraph '25.11', extracted hereinbefore, that reference to the published Harshad wind data though was made in clause
(a) of the methodology as the basis for guaranteed power generation, but reference figures were to be worked out for arriving at the guaranteed power generation considering the availability factors. The availability factor is regarding the availability of working of the WTGs and transmission etc. The published wind data of Navadra is material for the purpose of ascertaining the difference in generation of the power as per the method provided in the methodology. Considering that the actual power generation which can be ascertained only on the published wind data at Navadra and the difference could be ascertained other factors being common, by comparing the wind data of both the places, the Page 79 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined learned Arbitrator has proceeded to take note of the wind data at Harshad and wind data at Navadra to return the findings in paragraphs '25.26' and '25.27', as extracted hereinbefore.
119. We do not find any error in the construction of the terms and conditions of the contract made by the learned Arbitrator noticing that while selecting the sites such as Navadra and Lamba for installation of wind farms during pre-contract discussions, the methodology was worked out for ascertaining generation of electricity energy taking into consideration the published Harshad wind data which was available for 1987 to 1991 at the relevant point of time and as such, it was referred in the contract as the basis of guaranteed power generation. Navadra wind data though was available from 1990, but it was published for the period from 1990 to 1995 only in the year 1996.
120. As noted hereinbefore, the learned Arbitrator apart from considering the terms and conditions of the contract and the methodology, also discussed in detail various communications made between the parties on the subject and the minutes of the meetings held to resolve the dispute. While dealing with the contentions of the respondents that only the Harshad wind data should be taken into consideration as per the contract methodology and clause (5) thereof, it was rightly held by the learned Arbitrator that the contention that only the Harshad data should be taken into consideration cannot be accepted as the wind data was admittedly required to be collected by wind masts at Page 80 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined Navadra. The learned Arbitrator made no error in holding that the parties, thus, agreed that the wind data of Navadra shall be the basis for evaluating the actual generation by the WTGs. Moreover, the published wind data of Harshad was available only for the period of 1989-1993 and was not available for the subsequent period when the contract was entered into. For the above reasons, the published wind data of Harshad could not have been in contemplation between the parties when the contract was entered into for ascertaining the actual performance. The view of the learned Arbitrator cannot be said to be a view not possible in accordance with the terms and conditions of the contract and consideration of the material on record including the communications exchanged between the parties and the minutes of meetings held between them.
121. It was categorically recorded by the learned Arbitrator in the award that the published data of Harshad was considered only for the purpose of guaranteed performance and at the relevant point of time when the contract was entered into, the data for Navadra was in existence but was not published and, therefore, the claimant subsequently secured the data from GEDA. Further, once it was published, it was sought to be relied upon for the purpose of ascertaining the claims. The contention of the respondent that only Harshad data should have been relied upon was, therefore, rightly rejected.
122. We do not find any error apparent on the face of the award so as to find any patent illegality in the said Page 81 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined findings returned by the learned Arbitrator. The opinion drawn by the learned Arbitrator that the very fact that two wind masts were to be erected at Navadra site and the wind measurement would be collected for the wind regime at Navadra by itself is sufficient to hold that the wind regime and wind data for Navadra was to be collected for ascertaining the performance and not the wind data at Harshad which is at the distance of about 30 Kms. away from Navadra is not open to challenge. The conclusion drawn by the learned Arbitrator that the parties had contemplated only the wind data at Navadra and it cannot be accepted that the parties had agreed as per the contract to refer to the Harshad published wind data in respect of the missing period, cannot be said to be such as to hold that the learned Arbitrator had wandered outside the contract.
123. The conclusion by the learned Arbitrator that the submission of the respondent that they had at no point of time accepted that the basis would be Navadra data and the parties had agreed to refer to only Harshad published wind data in respect of the missing period, has rightly been rejected by the learned Arbitrator with the above reasoning. None of the reasoning given by the learned Arbitrator for arriving at the aforesaid findings can be said to be such, which would be a reason for us to hold that the learned Arbitrator has ignored the evidence on record; or the findings are based on no evidence at all. The findings of the learned Arbitrator in the impugned award cannot be categorised as perverse nor do we find any illegality which Page 82 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined has appeared on the face of the record, so as to upturn the award by holding that the learned Arbitrator had construed the contract in a manner that no fair minded or reasonable person would do.
124. In view of the settled position of law of the arbitrator being the best judge in the matter of interpretation of contract, it is difficult for us to accept the arguments of the learned Senior counsel for the respondent that the present is a case where while making interpretation of the terms and conditions of the contract, the learned Arbitrator has ignored the clauses of the contract and has, thus, travelled outside the bounds of the contract. We do not find any substance in the arguments of the learned Senior counsel for the respondent that the award is arbitrary, irrational and capricious or independent of the contract so as to set aside the same. It is difficult for us to accept that the learned Arbitrator has widened the scope of his jurisdiction by wandering outside the contract and dealt with the matter not allotted to him and, thus, committed a jurisdictional error.
125. Within the scope of for limited jurisdiction under Section 37 of the Act, 1996, we do not find that the impugned award would fall within the parameters of the unamended Section 28(3) as per the law laid down in the case of Associate Builders (supra) to set aside it as patently illegal being in contravention of the said Section. In our considered opinion, the present matter falls under the Page 83 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined umbrella of the caveat put forth by the Apex Court in Associate Builders (supra) that the construction of terms of a contract is primarily for an arbitrator to decide and unless the arbitrator construes the contract in such a way that it could be said to be something that no fair minded or reasonable person could do, the Court cannot interfere.
126. In view of the above discussion, we reach at an irresistible conclusion that the Court under Section 34 of the Arbitration and Conciliation Act, 1996 has committed a manifest error of law in setting aside the arbitral award in part, on an independent constructions of the terms of the contract in utter ignorance of the material on record and the reasoning given by the learned Arbitrator to arrive at its findings.
127. The judgment and order passed by the Court under Section 34 of the Arbitration and Conciliation Act, 1996 is clearly a non-speaking order and has been rendered beyond the scope of inquiry under Section 34 of the Act' 1996 and, as such, is liable to be set aside.
128. We, therefore, set aside the judgment and order dated 02.01.2007 passed by the Court of City Civil Judge, Ahmedabad in Civil Misc. Application No. 51 of 2004. For the above reasoning, while upholding the award dated 15.10.2003 passed by the learned Arbitrator, the appeal under Section 37 of the Arbitration and Conciliation Act, 1996 stands allowed. The Cross Objections of the Page 84 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025 NEUTRAL CITATION C/FA/1180/2007 CAV JUDGMENT DATED: 14/11/2025 undefined respondent on the counter claim have not been pressed and hence rejected. No order as to costs.
(SUNITA AGARWAL, CJ ) (D.N.RAY,J) C.M. Joshi/Bijoypillai Page 85 of 85 Uploaded by C.M. JOSHI(HC01073) on Tue Nov 18 2025 Downloaded on : Tue Nov 18 23:43:30 IST 2025