Reliance Infrastructure wins arbitration dispute against State of Goa, High Court's verdict set aside

Reliance Infrastructure has emerged victorious in an arbitration dispute against the State of Goa over the delayed payment for the construction of a power plant. The Bombay High Court had reduced the interest rate awarded to Reliance by the arbitrator, but the Supreme Court set aside the High Court's verdict and restored the award in its entirety.

Reliance Infrastructure had constructed a 48 MW power plant for the State of Goa under a power purchase agreement (PPA). The project was commissioned in 2013, and Reliance sought arbitration in 2016 after the state failed to pay for the power generated by the plant. In 2018, the arbitrator awarded Reliance a sum of Rs. 292.22 crore along with an interest of 15% per annum from 1st August 2013 till the date of payment.

However, the State of Goa challenged the award in the Bombay High Court, which reduced the interest rate to 10% per annum. Reliance then filed an appeal in the Supreme Court against the High Court's verdict.

A two-judge bench of the Supreme Court comprising Justices Dinesh Maheshwari and Sanjay Kumar observed that the High Court had misdirected itself on the major issues concerning the merits of the award. The court noted that the arbitrator had acted within his jurisdiction in awarding the interest rate of 15% per annum, as prevailing interest rates at the time were in the range of 13% to 14% per annum.

The Supreme Court also held that the scope of "patent illegality" cannot be breached by mere use of different expressions which nevertheless refer only to "error" and not to "patent illegality". The court reprimanded the High Court for relying on the analysis of a learned Single Judge instead of examining the enunciations of the Supreme Court in earlier judgments.

The court set aside the High Court's verdict and restored the award in its entirety. The appeal filed by Reliance Infrastructure was allowed accordingly, and the appeal filed by the State of Goa was dismissed. The court ordered that no costs be awarded.

D.D-10.May.2023

RELIANCE INFRASTRUCTURE LTD.   vs STATE OF GOA