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ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMMERCIAL ARBITRATION PETITION (L) NO. 33283 OF 2024
Marine Electricals (India) Ltd. ...Petitioner
Mr. Darius Khambata, Senior Advocate a/w. Ms. Arti Raghavan, Counsel, Mr. Pratik Pawar, Mr. Siddhesh S. Pradhan and Ms. Meher Mistri i/b J. Sagar Associates, for Petitioner.
Mr. Shiraz Rustomjee, Senior Advocate a/w. Ms. Sita Kapadia, Mr. Sulabh Rewari, Ms. Smriti Singh, Ms. Mansi Binjrajka, Ms. Arunima Athavale i/b Keystone Partners, Advocates and Solicitors, for Respondent.
Context and Factual Background:
JUDGMENT
1. This Petition is filed under Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”) challenging an award dated August 1, 2024 (“Impugned Award”) passed by a Learned Arbitral Tribunal allowing claims made by the Respondent, GE Power Conversion (India) Pvt. Ltd. (“GE Power”) against the Petitioner, Marine Electricals (India) October 7, 2025 Ltd. (“Marine”) and correspondingly, rejecting the counter-claims by Marine.
2. At the heart of the controversy between the parties lies the question of whether the agreement between the parties was meant to be an agreement for supply of equipment as contracted, or if it was an agreement that involved supply of goods as well as provision of services, with a discernible break-up of the consideration between the goods and the services. The essence of the challenge in this Petition is that the Impugned Award is contrary to the contract between the parties, contrary to the evidence on the record, and contrary to the provisions of the Sale of Goods Act, 1930 (“Sale of Goods Act”).
3. A brief overview of the factual matrix would be appropriate and the same is set out below: a) Neyveli Lignite Corporation or NLC India Ltd. (“Neyveli”) commissioned Marine to set up a 50 MW (AC) Grid- Interactive Solar PV Project at Ettankulam, Tirunelveli, Tamil Nadu (“Project”); b) Marine sought supply of PV Modules and Inverters from GE Power. Towards this end, Marine and GE Power executed a Letter of Commitment dated September 14, 2017 for a full supply of all equipment necessary, which was modified and substituted by another Letter of Commitment dated September 21, 2017 (“LOC”) for a reduced quantum of supply; c) In furtherance of the LOC, the parties executed a subcontract dated December 22, 2017 (“Sub-Contract”). The LOC and Sub-Contract are collectively termed as “the Agreement”; d) GE Power had to provide, install and commission a set of
48 Inverters. GE Power also had to supply 29.796 MW of PV Modules which were compliant with Neyveli’s project. An affiliate of GE Power, namely GE Transmission and Distribution (“GE T&D”) was involved, and GE Power and GE T&D were to coordinate their activity. One of the claims made by Marine in the proceedings was that GE Power would be responsible for the obligations of GE T&D as well; e) The PV Modules were to be affixed with RFID tags to help trace their location. The PV Modules were delivered by March 2018, the RFID tags were to be affixed while commissioning on site, and payment was to be made; f) The PV Modules were installed only by June 2019 and according to GE Power, the delay was not attributable to GE Power since the supply had been made and it was the local installation issues that led to the delay; and that the RFID tagging would be effected after installation; g) By July 2018, disputes over payment broke out – GE Power would contend that it had given an undertaking to Neyveli that the RFID tags would indeed be affixed on the PV Modules at the site, and installation would be completed by August 2018. Neyveli is said to have agreed to release payments but Marine did not pay GE Power for the supply. Additionally GE Power suspended work on installing the Inverters, which had also been supplied by March 2018; h) Disputes between the parties in the arbitration proceedings, covered the scope of work to be performed and the allegedly defective Inverters that had been supplied by GE Power. Pursuant to discussions, work resumed and payments were released but disputes had persisted and GE Power stopped providing its services purporting default by Marine in paying the consideration due; i) Marine claimed that the equipment supplied by GE Power was defective and that Neyveli had complaints about their performance. Between November 2020 and December 2020, Marine is said to have replaced all of GE Power’s Inverters with those acquired from another Chinese manufacturer. Neyveli is said to have given permission for the replacement so long as Marine complied with the obligations owed to Neyveli; j) Marine is said to have completed the work on its own, accused GE Power of breach, and encashed a Contract Performance Bank Guarantee (“Bank Guarantee”) supplied by GE Power; k) The disputes referred to arbitration relate to the claim for payment of the balance of the contract price by Marine to GE Power, and for refund of the amounts encashed by invoking the Bank Guarantee; l) The Learned Arbitral Tribunal held in favour of GE Power. It was held that GE Power was entitled to receipt of the balance consideration under the Agreement. Marine was directed to pay a sum of Rs. 12.60 crores towards this end. The invocation of the Bank Guarantee by Marine has been held to be illegal. Payment of Rs. 7.87 crores towards interest on the amount for which the Bank Guarantee was invoked has been directed. Costs in the sum of Rs. 1.37 crores were also awarded; and m) The Impugned Award also allowed claims towards variation in foreign exchange rates (Claim 2); return of liquidated damages retained (Claim 5); and another claim towards stamp duty, all payable with interest (Claim 7). Marine has accepted the rulings in relation to Claim 2, Claim 5 and Claim 7 and is only impugning the other findings and the consequential award referred to above. Grounds of Challenge:
4. The multiple grounds of attack to the Impugned Award can be summarised under the following two broad heads: a) The Learned Arbitral Tribunal erred in equating the contract price with the value of the equipment supplied. This is purportedly contrary to the very definition of the term “Contract Price” which covers both the goods and the services that GE Power was obligated to provide. Therefore, the Learned Arbitral Tribunal was wrong in holding that GE Power had completed performance of its obligations by May 8, 2019. As a result, the Learned Arbitral Tribunal erred by not realising that the Bank Guarantee was validly invoked, which was necessary to recoup the losses suffered due to non-performance of the contract by GE Power; and b) The Learned Arbitral Tribunal’s reading of the Sale of Goods Act is patently illegal and contrary to GE Power’s own pleaded case, thereby rendering the Impugned Award patently illegal. Analysis and Findings:
5. I have heard at length, the submissions by Mr. Darius Khambata, Learned Senior Advocate for Marine and Mr. Shiraz Rustomjee, Learned Senior Advocate for GE Power. With their assistance, I have examined the voluminous record involved in the proceedings and the rather lengthy Impugned Award (655 paragraphs spread over 221 pages, with 53 pages containing three annexed schedules). Contract Price and break-up:
6. What lies at the heart of the consideration for purposes of adjudicating this Petition is the issue of whether the Learned Arbitral Tribunal took a plausible view in its consideration of the Agreement and its sub-components – supply of goods and provision of services, and the attribution of such consideration to the goods and to the services. If this issue is addressed squarely, the rest of the analysis involved in this challenge, would stand answered one way or the other, bearing in mind the scope of jurisdiction under Section 34 of the Act.
7. The Learned Arbitral Tribunal found that the solar plant for Neyveli had been commissioned by April 2021 and it was in July 2021 that Marine informed GE Power that all its Inverters had been replaced, calling upon GE Power to remove the equipment supplied by it. GE Power protested and took a stance that the Inverters had been used for two years and it would not pick them up.
8. As regards the Sale of Goods Act, GE Power would contend that the goods had been supplied and accepted. The PV Modules were actually deployed and are in use. The Inverters were said to have been replaced but this was indicated only in July 2021, and therefore these too had been accepted and used for two years. Marine would contend that the services to be provided by GE Power were inextricably linked to the supply of goods. Various services relating to installation, operations and maintenance had not been provided and it was not open to treat the goods as having been supplied with full consideration becoming due, when GE Power stopped work on the ground of nonpayment for the goods supplied.
9. The Learned Arbitral Tribunal found that Marine was conflating two separate and independent aspects. The Learned Arbitral Tribunal found that the Agreement indeed entailed provision of further services after supply, but it cannot be held that despite non-payment for the goods supplied, services would need to be provided. The contract price had been designated and denominated for supply of the goods and was broken up in that manner. Indeed, there was to be a provision of services, but such services would be provided only if the supply of goods were paid for, the Learned Arbitral Tribunal ruled. In other words, the contract price was held to be attributable to the goods supplied, and installation and other related services were to come in as being an incidental part of the contract. In a nutshell, it was found that the contract price had been attributed to the goods and unless the goods were paid for, non-provision of services due to default in payment for the goods, was justified.
10. Therefore, the Learned Arbitral Tribunal repelled Marine’s contention that 40% of the consideration in the Agreement was meant to be attributed to the services component. The Learned Arbitral Tribunal has also done an empirical analysis to indicate that Marine’s contentions in this regard would be commercially absurd and inflict violence on a commonsensical commercial approach to the Agreement. The Learned Arbitral Tribunal also found that the milestones indicated for payment were milestones for marking instalments and these milestones could not be conflated into expecting GE Power to wait indefinitely for events completely outside its scope of work and power to transpire, in order to get paid the contracted consideration.
11. Each and every argument and sub-argument presented by the parties has been analysed in acute detail by the Learned Arbitral Tribunal, which is what has lent significant length to the Impugned Award. Analysing Sections 42, 55 and 59 of the Sale of Goods Act, the Learned Arbitral Tribunal has returned clear and specific findings that cannot be regarded as being patently illegal. Dealing with case law in the context of services accompanying the sale of goods, the Learned Arbitral Tribunal has found that Marine could have set up a claim of diminution for breach of warranty but could not contend that the contract price had an attributable component of the consideration for services. It was fond that Marine originally claimed such attribution at 15% and later at an escalated component of 40% - in itself undermining whether the parties could be said to have been ad idem about the break-up between goods and services.
12. Moreover, seeking diminution would point to the goods having been accepted in the first place. Having held that the contract price could not have been broken up into any component for services, the Learned Arbitral Tribunal ruled that it would follow that the goods had been accepted and ought to have been paid for. Even a reading of the provisions of the Agreement would indicate that the findings and outcome are not implausible. The parties had agreed to a billing break up (“BBU”) and payment terms in the LOC, and when the parties moved to executing the Sub-Contract, the BBU is seen to have been linked specifically to the equipment alone. This is a clearly plausible finding and cannot be substituted with a view of the Section 34 Court, unless the view adopted by the Learned Arbitral Tribunal can be regarded as a view that no reasonable person could ever take.
13. I have examined the various other facets of evidence on deficiencies raised by Marine in the proceedings and the manner in which the Learned Arbitral Tribunal has dealt with them.
14. Suffice it to say that as the master of the evidence and the sole judge of the quality and quantity of evidence, the Impugned Award represents a meticulous even if a somewhat excessively laborious analysis of the evidence, with credible and plausible conclusions having been rendered, after hearing the parties in over a hundred sittings. It is not as if the length of hearings or the length of the judgement could justify the Impugned Award as being unassailable, but clearly, the Impugned Award presents a rational and logical reasoning that cannot be set aside lightly. Invocation of Bank Guarantee:
15. As regards the invocation of the Bank Guarantee by Marine, the Learned Arbitral Tribunal has considered the contention of Marine that each of the Inverters had failed for some material issue or the other, and that Marine had been constrained to replace them with Inverters by another Chinese manufacturer. Going by the evidence led, including registers such as the site log-book, the breakdown register and failure logs, and other documentary evidence such as contemporaneous written correspondence, the claim that all Inverters malfunctioned has been rejected. The Learned Arbitral Tribunal found that a majority of them performed perfectly well. No evidence was found about the precise reasons for the need to replace the Inverters. Here again, the findings do not meet the standard of being implausible for Marine to convince this Court to displace them.
16. Noticing that the Clause 8 of the Sub-Contract explicitly provided for a procedure of a 30-day notice that would enable specific clarity on the cause for an intended invocation of the Bank Guarantee, it was found that Marine had not followed the agreed due process, and on this ground too (apart from the analysis referred to above) it was held that the Bank Guarantee ought not to have been invoked. This led to the award of refund of the Bank Guarantee amount invoked with interest at the same rate as agreed to by the parties in the Agreement, at 12% per annum. This again, is an eminently plausible decision that is not susceptible to being second-guessed within the scope of intervention permissible under Section 34 of the Act. Scope of Review:
17. It is now trite law that the Supreme Court has repeatedly iterated that Courts must not lightly interfere with arbitral awards. The scope of review by the Section 34 Court is also well covered in multiple judgements of the Supreme Court including Dyna Technologies[1],, Ssyangyong[3], Konkan Railway[4] and OPG Power[5]. Even implied reasons are discernible and may be inferred to support the just and fair outcome arrived at in arbitral awards.
18. To avoid prolixity, I do not think it necessary to burden this judgement with quotations from these judgements. Suffice it to say (to Dyna Technologies Private Limited v. Crompton Greaves Ltd – (2019) 20 SCC 1 Associate Builders vs. Delhi Development Authority – (2015) 3 SCC 49 Ssangyong Engineering & Construction Co. Ltd. v. National Highways Authority of India – (2019) 15 SCC 131 Konkan Railways v. Chenab Bridge Project Undertaking – 2023 INSC 742 OPG Power vs. Enoxio – (2025) 2 SCC 417 extract from just one of the foregoing), in Dyna Technologies[6], the Supreme Court held thus:
19. Applying the aforesaid standard, I find it difficult to hold that the Impugned Award is perverse in a manner that goes to the root of the Dyna Technologies Private Limited v. Crompton Greaves Limited – (2019) 20 SCC matter, where no other view would be possible. It would not be possible to accept the submissions made by Marine in furtherance of its challenge to the Impugned Award inasmuch as they canvas an alternate view which can at best be a competing plausible view. An arbitral award is not to be reviewed through an appellate lens, but from the standpoint of whether it falls foul of any of the limited grounds of challenge under Section 34 of the Act. The findings in the Impugned Award represent an eminently plausible view and for the aforesaid reasons, I am not persuaded to set aside the Impugned Award. Conclusion:
20. Applying the aforesaid standard of review to the Impugned Award and the record examined by the Learned Arbitral Tribunal, I note that the the clearly plausible finding that while services were indeed meant to be provided along with the equipment, the parties did not intend to conflate the facet of provision of services with the supply of goods for purposes of determining the consideration amount. The Learned Arbitral Tribunal cannot be faulted for likening the services contracted being akin to servicing of electronic goods that may be purchased in the market. The parties agreed to a BBU that was linked directly to the equipment and was not linked to provision of services. The Learned Arbitral Tribunal’s view that neither 40% nor 15% of the contract price (as varyingly contended by Marine) is attributable to the services is not an unreasonable, perverse or arbitrary finding, warranting interference.
21. Once it is held that the contract price was reasonably linked to the supply of equipment, and it is seen that the equipment was indeed supplied, it would follow that there was no scope to hold that the contract price for the equipment was not payable. The PV Modules had indeed been accepted and deployed. The Inverters too were deployed and although replaced later, it cannot be said that they were not accepted. The findings of the Learned Arbitral Tribunal even in terms of applying the Sale of Goods Act, are well-reasoned and do not lend themselves to be patently illegal. No case is made out for holding them to be perverse. Therefore, it would follow that the direction to refund the amount received on invocation of the Bank Guarantee too cannot be faulted.
22. The outcome in the arbitration proceedings may not have been palatable to Marine, which could hold a view that another reading of the same evidence and contract documentation is possible. However, that conviction alone would not enable Marine to make out a case that the Impugned Award is infirm when seen from the prism of Section 34 of the Act.
23. For the aforesaid reasons, the Petition is dismissed, along with attendant interim applications, if any, making no interference with the Impugned Award. Deposits of the amount awarded, if any have been made, shall be released in four weeks of the upload of this judgement on the website of this Court.
24. All actions required to be taken pursuant to this order shall be taken upon receipt of a downloaded copy as available on this Court’s website. [SOMASEKHAR SUNDARESAN, J.]