There cannot be any unilateral determination or realization of penalty or damages by a party to a contract without any adjudication: Calcutta High Court.

This case was filled by Bharat Heavy Electricals Limited – Electronics Division against The West Bengal State Electricity Distribution Co. Ltd. & Anr. The Judgment in Bharat Heavy Electricals Limited vs The West Bengal State Electricity (Citation : AP/244/2021) was served by The Hon’ble Mr. Justice Ravi Krishan Kapur  


This case was filled under Section 9 of the Arbitration and Conciliation Act, 1996. The disputes between the parties arise out of a notice inviting an E- Tender for setting up a 10 MW Solar Photovoltaic Power Plant at Santaldih, District-Purulia, West Bengal. Pursuant to the aforesaid notice, the petitioner was awarded a Letter of Award dated 6 September, 2016 (LOA). The LOA contains all the terms and conditions of the contract between the parties. Clause 13 of the LOA provides that the petitioner was to submit a performance bank guarantee for an amount not less than 10% of the total value of the contract. Clause 32 of the LOA also provides for an arbitration clause.


After going through the facts and arguments of the case, the Court observed that there cannot be any unilateral determination or realization of penalty or damages by a party to a contract without any adjudication. According to the court the proposition of law enumerated in the said decisions deals with breaches of the main or underlying or matrix contract between the parties. For the reasons aforementioned, these issues have no relevance whatsoever at this stage of proceeding.

Accordingly, the court find no merit in this application. There are no grounds whatsoever to pass any order of restraint insofar as the guarantee is concerned. In view of the aforesaid, AP 244/2021 stands dismissed. Consequently, the interim order dated 21.06.2021 is automatically vacated.

(Ravi Krishan Kapur, J.) LATER The Court: After pronouncement of this judgment, Mr. Jishnu Saha, Senior Advocate prays for stay operation of this judgment. The prayer for stay is considered and rejected.


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