National Hydroelectric Power Co. vs General Electric Co. Ltd. 2013 SCC Online Del 164
|29 April 2013
|High Court of Delhi
|National Hydroelectric Power Co.
|General Electric Co. Ltd. & Ors.
|Hon’ble Mr. Justice Sanjay Kishan Kaul, J. Vipin Sanghi
The ‘National Hydroelectric Power Co. vs General Electric Co. Ltd. 2013’ is a case highlighting the importance of written executed contracts, because it provides a concrete proof of what the actual terms were and no party is allowed to revert from them.
Here, the respondents claimed the price variation due to force majeure situations and that too was allowed by the arbitrator as well as by the single judge but this present forum gave a new dimension to the case which is discussed in detail further.
In front of the present bench, the major question is about the way or method of calculation of price variation and it is to be made clear that the method which was mentioned in the contract is to be strictly followed and neither of the parties can twist it in their own favor.
Further details are discussed below.
FACTS OF THE CASE-
- 03.08.1984- A contract was executed between the parties.
- National Hydro Electric Power Corp. Ltd. (NHPC)- the owner of the project.
- It was a Chamera Hydroelectric project on Ravi River (Himachal Pradesh).
- Some key works mentioned in contract:
- Construction of a dam
- Underground powerhouse complex with 3 hydro turbine generator units
- A transmission line.
- The work divided amongst respondents was as follows:
- SNC/ACRES- engaged in the business of professional engineering.
- GE- engaged in the business of designing, manufacturing and installing electrical equipment.
- MIL- engaged in the business of designing, manufacturing and installing hydroelectric equipment.
So, GE and MIL both were responsible for manufacturing and supply of turbines, generators, gates and other equipment for the Turbine Generator Unit, each providing different parts.
- Present dispute is between NHPC and GE, MIL about some price variation.
- As per the contract both respondents GE and MIL were allowed to claim price variation.
- Dispute was referred to Arbitration.
- Arbitrator accepted claims of GE, MIL and allowed their price variation along with interest.
- The Single Judge dismissed Appellants’ issues.
- So, this appeal is presented before the Hon’ble Court.
- Whether the present situation of Force Majeure justified and proved.
- Whether respondent can get the price variation claim satisfied.
CONTENTIONS OF THE APPELLANT-
- That the main dispute is not the entitlement of claiming price variation but the manner of calculating the same.
- That claim of respondents about price variation after contract delivery period has to be on force majeure conditions from 1988-1990 and it is essential for them to show and prove such conditions, only assumptions are not valid.
- That the price variation dependent on delay in delivery on any other reason than force majeure should not be allowed.
- That as per the terms of contract, no contract was given by respondents during said period about existence of force majeure conditions.
- As alleged by the respondents, the work/construction was not suspended during the said period of the project.
CONTENTIONS OF THE RESPONDENTs-
- Because of floods and washouts, a substantial portion had to be reconstructed before the delivery of equipment by the respondents.
- The project had to face setbacks of around 3 years due to earthquakes and floods.
- This led to delay in commission until 1990-91.
- That price variation should be grossed up for the whole contractual amount and not part of it as mentioned in the contract.
After the whole discussion, we set aside the order of arbitration as well as the learned single judge. However, the respondents are entitled to receive price variation on quarterly progress payments strictly according to the mentioned formula and not by grossing up, if not received till now.
The above payment should only be for the contract delivery period. The remaining amount is to be paid within 8 weeks from the date of delivery of this judgement. If not paid so, would carry interest @5% per annum.
That the cost of arbitration, single judge as well as this court should be borne equally by both the parties.
- Force Majeure– Those unforeseeable situations arising in front of humans which prevents them from fulfilling their part of contract. This French term’s literal meaning is ‘greater force’ and is related to the Act of God. For such kinds of acts nobody can be held liable as these are out of their control.
- Price variation- the clause in this contract as price variation meant that the respondents will be able to claim any changes in price as per the conditions mentioned i.e., if they have to bear more than expected rates for any good or service then they can get that from the appellant.
In the present case, the court observed that at this point where courts are allowed to give rational judgements on the basis of given facts and circumstances, they are not allowed to speculate situations or to assume them. They must have reason behind every order they provide.
A mere error of fact or law might result in grave injustice to one of the parties, that is why in our country we have the system of redressal by way of appeal or any another forum provided to safeguard the interest of people as well as to ensure justice.
This case is a legal precedent for situations when the terms of contract are interpretated as they are and are protected from misinterpretation. Here, the court asked for equal distribution of costs of litigation also in order to lessen the burden from a single party.
This Article is written by Devanshi Goyal, student of Faculty of law, JNVU, Jodhpur; Intern at Legal Vidhiya.
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