SUZLON ENERGY LIMITED Vs. INDOWIND ENERGY LIMITED

JUDGEMENT

(1.) The respondent in the arbitration is the Petitioner herein. The Petitioner is a manufacturer of Wind Turbine Generators (WTGs), i.e. windmills. The Petitioner and the Respondent executed a Memorandum of Understanding on 24.01.2008 (the First MoU) (Ex.C1) and, pursuant thereto, the Respondent issued Purchase Orders dated 24.01.2008 (the Purchase Orders) (C2 series) along with associated work orders to the Petitioner for the purchase of 12 windmills of 1.5 MW each to execute a 18 MW project at Elkornahalli, Chitraduraga District, Karnataka. These windmills were to be purchased in two lots of six windmills each at a total price of Rs.108.60 crores. This was followed by a meeting held on 22.06.2008 wherein the Petitioner stated, as under, as per the minutes thereof (Ex.C3) (the MoM of 22 June 2008):

(2.) Thereafter, the Petitioner and the Respondent executed a Memorandum of Understanding dated 26.02.2009 (Ex.C4) (the Second MoU), wherein, in clause 4 thereof, the Petitioner provided a warranty of minimum 95% machine availability of the windmills, on an annual basis, to the Respondent through the operation and maintenance service provider. In the Second MoU, the Petitioner undertook that in case machine availability, when calculated on annual basis, falls below 95%, the Petitioner was liable to compensate for loss of power generation based on prevailing BESCOM/KERC tariff. The Petitioner, thereafter, provided a Generation Certificate dated 10.03.2009 [Ex.C5(a)](the Generation Certificate) to the Respondent in respect of the windmills that were supplied to the Respondent. In the Generation Certificate, the Petitioner confirmed that "42 lakh units per WTG, as per prognosis, will be the estimated generation for this captioned project." In addition, by letters dated 10.03.2009 [Ex.C5(b) and Ex.C6], that were addressed both to the Respondent and to the Indian Renewable Energy Development Agency Limited (IREDA), the Petitioner confirmed that "any claims/settlements/ compensation for the shortfall in the actual generation from the estimated generation/performance guarantee/any payment obligations calculated on an annual basis as per the supply agreement (purchase offer)/MOU between Indowind Energy Ltd and M/s.Suzlon Energy Ltd will be deposited in the designated Trust and Retention Account only." The Respondent and Suzlon Infrastructure Services Ltd(SISL), a group company of the Petitioner also agreed upon two Operation and Maintenance(O&M) Agreements (Ex.C8 series) (the O&M Agreement), by initialling the draft, at the meeting held on 24.08.2009. In the recitals of the O&M Agreement, it was stated that "as per the generation prognosis, the estimated generation is 42 lakh units per WTG per annum at 100% grid availability and 95% machine availability at the controller. Any shortfall in actual generation from the estimated generation of 42 lakh units per WTG per year shall be calculated/compensated at prevailing BESCOM tariff by SEL directly or indirectly through SISL as per clause No.6.1 of the Agreement." The O&M Agreement was initialled at the outset, as stated earlier, but was not executed and returned by the Petitioner to the Respondent. Nevertheless, O&M activities were admittedly carried out and payments were made in respect thereof. According to the Respondent, the Petitioner was liable to pay compensation of Rs.23,71,60,109/- (including interest at 18% per annum from 2011-12 to 2014-15) on account of shortfall in power generation when compared to the guaranteed 42 lakh units per WTG per year. Therefore, claims were made by letters dated 28.04.2011, 02.09.2011, 16.01.2013 and 25.02.2015. In response, the Petitioner refuted the demand on the basis that it is not liable for generation loss. This resulted in a dispute that was referred to Arbitration.

(3.) In the arbitration, the Respondent made a claim for the sum of Rs.23,71,60,109/- with interest thereon at 18% per annum from 01.04.2015 till the date of actual payment and also requested that the original signed O&M Agreement should be returned to the Respondent. Upon completion of pleadings, the Arbitral Tribunal framed 12 issues on 28.07.2015. Both parties adduced oral and documentary evidence: the Respondent adduced evidence through one witness and exhibited documents as Ex. C1 to C55; and the Petitioner adduced evidence through one witness and also exhibited documents as Exs.R1 to R6. By Arbitral Award dated 22.07.2017 (the Award), the Petitioner was directed to pay a sum of Rs.20,73,52,228/- as compensation for generation loss during the period April 1, 2010 to March 31, 2015 with interest thereon at 12% per annum from 01.04.2011 to 31.03.2015 and at 18% per annum from 01.04.2015 till the date of actual payment. The Award is under challenge in this Petition.