M/S.China Datang Technologies vs M/S.Nlc India Limited

Headnote AI-drafted · Reviewed and approved

These two petitions under Section 34 of the Arbitration and Conciliation Act, 1996 arose from a contract dated 06.03.2020 between M/s.China Datang Technologies and Engineering Company Limited (claimant) and M/s.NLC India Limited (respondent) for installation of a Flue Gas Desulphurisation (FGD) system for a lignite-based thermal power project at Neyveli, valued at Rs.556,50,00,000/-. Following delays in execution attributed partly to the COVID-19 pandemic and lockdowns, the respondent terminated the contract on 07.09.2020 and invoked the contract performance guarantee of Rs.55.65 Crores. The claimant challenged the termination and encashment before this Court under Section 9 of the Act and subsequently before the Arbitral Tribunal.

The Arbitral Tribunal passed an award dated 09.11.2022. In Arb.O.P.(Com.Div.) No.141 of 2023, the claimant challenged the award under Section 34(2)(b)(iii) seeking to set aside the award and directing restoration of the contract performance guarantee encashed on 11.11.2022. In Arb.O.P.(Com.Div.) No.333 of 2023, NLC India Limited challenged the award to the extent it granted claims IV and V in favour of the claimant for Rs.5,10,00,000/- and rejected NLC's counter claims.

The High Court heard both petitions together and disposed them by way of a common order, examining the scope of interference with arbitral awards under Section 34 of the Arbitration and Conciliation Act, 1996, particularly in the context of contract termination, force majeure, and encashment of bank guarantees.

Catchwords: arbitration · Section 34 · setting aside award · contract performance guarantee · encashment · force majeure · COVID-19 · contract termination · flue gas desulphurisation · thermal power project · NLC India · lignite · counter claim · arbitral tribunal

Arbitration and Conciliation Act