New Delhi (ABC Live): At first glance, Saisudhir Energy v. NTPC Vidyut Vyapar Nigam Ltd. looks like a routine dispute over liquidated damages in a solar power contract. However, a closer reading shows something more important. The case directly confronts a recurring tension in Indian commercial law.

On the one hand, arbitration law prioritises finality and discourages judicial interference. On the other hand, contract law insists on fairness, especially when damages appear excessive. Therefore, courts often struggle to strike a balance between these competing goals.

Instead of choosing one side, the Supreme Court attempted to reconcile both. As a result, the judgment now serves as a key reference point for future infrastructure and arbitration disputes.

Factual Background

The dispute arose under the Jawaharlal Nehru National Solar Mission (JNNSM), which aims to expand grid-connected solar power across India. To implement this policy, the Government appointed NTPC Vidyut Vyapar Nigam Ltd. (NVVNL) as the nodal agency.

Accordingly, on 24 January 2012, NVVNL entered into a Power Purchase Agreement (PPA) with Saisudhir Energy Ltd. (SEL). Under the PPA, SEL agreed to commission 20 MW of solar capacity at a fixed tariff for 25 years. Meanwhile, the parties fixed the Scheduled Commissioning Date (SCD) as 26 February 2013.

Most importantly, Clause 4.6 of the PPA created a clear and graded liquidated-damages mechanism. In particular, it allowed NVVNL to encash bank guarantees for early delay. Moreover, if the delay exceeded three months, the clause imposed damages of ₹1,00,000 per MW per day.

However, SEL failed to meet the deadline.

• First, it commissioned 10 MW in April 2013, roughly two months late.
• Then, it commissioned the remaining 10 MW in July 2013, nearly five months late.

Importantly, SEL admitted the delay. Although it invoked force majeure, NVVNL rejected the claim because SEL did not comply with the contractual notice requirement. Consequently, the dispute moved toward arbitration.

From Arbitration to the Supreme Court

The arbitral tribunal delivered a split award, which immediately deepened the conflict.

• On one side, the majority awarded only ₹1.2 crore as damages.
• On the other side, the minority upheld full contractual liquidated damages of nearly ₹49.92 crore.

As a result, both parties approached the courts.

First, the Section 34 Court intervened. It set aside the majority award. However, instead of granting full damages, it awarded 50% of the contractual amount, calling this figure reasonable.

Next, the Section 37 Court took a further step. Instead of stopping there, it recalculated damages afresh and reduced them to ₹20.70 crore.

Therefore, when the matter reached the Supreme Court, the real question was not delay, which everyone accepted. Rather, the question was how far courts could go in correcting arbitral outcomes.

Contract Law First: Enforcing Timelines

The Supreme Court began with a straightforward contractual position.

Because SEL admitted the delay, liability was no longer in dispute. Therefore, Clause 4.6 applied automatically. The Court stressed that, particularly in infrastructure and power projects, timelines form the backbone of risk allocation. Consequently, parties cannot treat them as flexible or negotiable after the fact.

Section 74 and Public Interest

Ordinarily, courts insist on proof of loss under Section 74 of the Contract Act. However, the Court adopted a different approach in this case.

Because the project formed part of a national renewable-energy mission, the Court reasoned that:

• First, solar projects advance environmental and social goals.
• Second, delay can cause public harm even when monetary loss is hard to measure.
• Therefore, strict proof of actual loss is not always required.

As a result, the burden shifted to SEL to show that Clause 4.6 operated as a penalty. Since SEL failed to do so, the Court upheld the clause in principle.

Arbitration Law Next: Protecting Finality

After settling the contract-law issue, the Court then turned to arbitration law.

Section 34: Limited Correction Is Allowed

Relying on Gayatri Balasamy, the Court clarified that Section 34 allows limited modification of arbitral awards. In particular, courts may intervene when:

• The facts are admitted,
• The contract clearly governs the outcome, and
• The court avoids re-examining evidence.

Therefore, because the Single Judge merely adjusted the quantum without reopening the merits, the Supreme Court upheld the 50% damages award.

Section 37: Clear Limits Apply

However, the Court drew a firm line at the appellate stage.

It held that the Section 37 Court crossed its limits by recalculating damages and substituting its own view of fairness. In contrast, Section 37 permits supervision, not substitution. Consequently, once a Section 34 court exercises discretion reasonably, appellate courts must stop.

As a result, the Supreme Court restored the Section 34 decision and rejected further tinkering.

A Wider Judicial Pattern

Importantly, this approach fits into a broader judicial trend.

In other infrastructure arbitrations, courts have also resisted the temptation to reopen merits in the name of fairness. For example, a similar issue arose in a major dredging dispute involving government contracts.

That trajectory is explained in detail here:
👉 Jan De Nul Dredging and the Limits of Judicial Interference in Arbitration
https://abclive.in/2026/01/15/jan-de-nul-dredging/

Taken together, these cases show a consistent message: courts will correct structural errors, but they will not become second arbitrators.

The Balance the Court Ultimately Struck

Ultimately, the Supreme Court balanced three competing concerns:

• First, contract law required the enforcement of agreed timelines.
• Second, public policy demanded sensitivity to infrastructure and climate goals.
• Third, arbitration law insisted on finality and restraint.

At the same time, the judgment leaves open questions. For instance, the Court approved a 50% figure without laying down a clear formula. Therefore, future courts must ensure that discretion does not slide into unpredictability.

Conclusion

In the end, Saisudhir Energy v. NVVNL does not favour developers or public bodies. Instead, it protects the system itself.

The Supreme Court sent a clear institutional message:

Courts may correct arbitration outcomes when necessary; however, they must never rewrite them.

Thus, while the case reinforces arbitral finality, it also ensures that contractual fairness retains a limited but meaningful role. That careful balance, rather than the damages figure alone, forms the judgment’s lasting contribution.