VAATA SMART LIMITED Vs. MYSORE SALES INTERNATIONAL LIMITED

JUDGEMENT

(1.) The claimant before the Arbitral Tribunal assailed the arbitral award dtd. 27/4/2016(the Award) in O.P.No.519 of 2016. Likewise, the respondent before the Arbitral Tribunal assailed the Award in Arb.O.P.(Comm.Div)No.242 of 2021. These cross petitions are considered and disposed of by this common order.

(2.) A Tripartite Operating Lease Agreement dtd. 23/3/2001(the Lease Agreement) was executed by and between Mysore Sales International Limited(MSIL), as the lessor, Sundram Fasteners Ltd. (SFL), as the lessee, and Wescare (India) Limited, as the operation and maintenance contractor. Wescare (India) Limited was later merged with a company called Vaata Infra Limited under a scheme of amalgamation sanctioned by this Court on 24/8/2012. The name of Vaata Infra Limited was subsequently changed to Vaata Smart Limited(VSL). VSL is the petitioner in O.P.No.519 of 2016 and MSIL is the petitioner in Arb.O.P.(Comm.Div.)No.242 of 2021. For ease of reference, the parties are referred to as VSL and MSIL throughout this order.

(3.) Under the Lease Agreement, the windmills were to be installed on lands owned by VSL. SFL agreed to take on operating lease six wind turbine generators (WTGs) or windmills owned by MSIL and operated and maintained by VSL for a term of eight years. The power generated through the windmills was to be wheeled into the TNEB grid and lease rentals were to be paid by SFL to MSIL by making payments into the designated escrow account on the basis of the TNEB tariff structure indicated in Schedule I and at the rates specified in Schedule III of the Lease Agreement. Although the lease rentals were to be appropriated from and out of remittances in the escrow account, obligations with regard to payment of lease rent were enforceable by MSIL against VSL and not SFL. An upfront deposit equivalent to 37.5% (Rs.270.00 lakhs) of the cost of the windmills was made by VSL in compliance with the requirement under the Lease Agreement. This 37.5% represents the residual value of the windmills. Upon expiry of the term of the Lease Agreement, the windmills were to be sold, subject to a right of first refusal of VSL, either to a third party or to VSL. If the windmills were sold for less than the residual value, VSL was to bear the difference between the sale price and residual value. Upon expiry of the term of lease, the parties corresponded on the sale of the windmills but the windmills were not sold. Instead, the windmills continued to be in the possession of VSL and there were unpaid lease rentals. Hence, disputes arose between VSL and MSIL.