Delhi High Court Upholds USD 714,760 Refund to Dinowic; Holds Ratnagiri Gas Waived Naphtha Delivery Delay and Failed to Justify Liquidated Damages Deduction
Delhi High Court Rejects Ratnagiri Gas Challenge to Naphtha Arbitration Award; Says Accepted Delayed Performance Cannot Later Support Liquidated Damages Without Reserved Rights
Facts
The petitioner, Ratnagiri Gas and Power Private Limited (“RGPPL”), is a joint venture promoted by NTPC Ltd. and GAIL (India) Ltd. for revival of the erstwhile Dabhol Power Project. The respondent, Dinowic Pte. Ltd., is a company incorporated in Singapore.
On 19 March 2014, RGPPL floated an e-auction for sale of approximately 40,000 metric tonnes of Naphtha lying at its Dabhol facility on an “as is where is”, “as it is what it is” and “no complaint” basis. Dinowic emerged as the successful bidder.
RGPPL issued a Sale Order dated 2 April 2014 for approximately 40,000 MT of Naphtha for a total consideration of about ₹160.03 crore. The quantity was to be lifted in scheduled lots within specified timelines, with payment through an irrevocable confirmed Letter of Credit.
Clause 9 of the Sale Order provided for liquidated damages at 1% of the contract value corresponding to the unlifted quantity for every week of delay, subject to a maximum of 5% of the total sale consideration.
Although there were delays in opening the Letters of Credit, payment and lifting of the Naphtha, RGPPL ultimately permitted Dinowic to lift the consignments. The first lot of 20,090.848 MT was lifted on 25 April 2014, while the remaining quantities were lifted subsequently in May 2014.
RGPPL thereafter deducted approximately USD 714,960.74 from Dinowic’s security deposit as liquidated damages and released the balance. Dinowic disputed the deduction and invoked arbitration.
The Sole Arbitrator, Justice Anil Dev Singh (Retd.), ultimately directed RGPPL to refund USD 714,760.74 with simple interest at 6% per annum from 17 June 2014 and rejected RGPPL’s counterclaims for interest on delayed payment, exchange-rate loss, ground rent and related interest.
RGPPL challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996.
Issues
The principal issues before the High Court were:
- Whether RGPPL had waived strict compliance with contractual timelines by accepting Dinowic’s delayed performance without reserving its right to claim compensation.
- Whether Section 55 of the Contract Act barred RGPPL from recovering damages after accepting delayed performance without a contemporaneous reservation.
- Whether that principle also extended to liquidated damages claimed under Section 74.
- Whether RGPPL could validly deduct liquidated damages without first following the procedural sequence prescribed by Clause 9 of the Sale Order.
- Whether the liquidated damages clause represented a genuine pre-estimate of loss and whether RGPPL was required to establish that some actual loss or legal injury had occurred.
- Whether rejection of RGPPL’s counterclaims for delayed-payment interest, exchange-rate variation and ground rent was adequately reasoned.
- Whether the Arbitrator had denied RGPPL a fair opportunity by declining belated additional documentary evidence.
- Whether the 6% interest awarded to Dinowic was valid.
- What standard of judicial review applied because the dispute constituted an international commercial arbitration seated in India.
Petitioner’s Arguments
RGPPL argued that although Dinowic admittedly delayed opening the Letters of Credit, remitting payment and lifting the Naphtha, the Arbitrator wrongly treated its acceptance of the delayed performance as waiver.
It maintained that it had repeatedly insisted upon compliance with the contractual schedule and that its decision to permit late lifting was merely an attempt to mitigate further losses, particularly because the approaching monsoon could close Dabhol port operations.
RGPPL argued that Section 55 of the Contract Act dealt with compensation under Section 73 and should not prevent enforcement of a separately agreed liquidated damages clause under Section 74. According to it, the contractual amount was pre-notified and became payable automatically on delay.
It further contended that the Arbitrator incorrectly required proof of actual loss. RGPPL’s case was that delay in clearing Naphtha from its tanks impaired the availability of storage necessary for water used in power generation, making loss inherent and difficult to quantify.
RGPPL also challenged rejection of its counterclaims for:
- ₹2.64 crore towards interest for delayed remittance;
- ₹1.86 crore towards exchange-rate variation;
- ₹4.30 crore towards ground rent; and
- consequential interest.
It additionally argued that the Arbitrator had rejected some counterclaims without adequate reasoning and wrongly declined permission to place further documents on record concerning alleged financial loss.
Respondent’s Arguments
Dinowic defended the award as a plausible and commercially reasonable interpretation of the contract.
It argued that RGPPL had knowingly permitted lifting after the contractual dates, allowed the vessels to sail, accepted payment and never contemporaneously reserved a right to claim compensation for delay.
Accordingly, under Sections 55 and 63 of the Contract Act, RGPPL had waived the original timelines.
Dinowic further contended that Clause 9 required RGPPL first to raise a quantified claim for liquidated damages, grant seven days for payment and only thereafter make a deduction. RGPPL instead deducted the amount unilaterally from the security deposit.
It also argued that RGPPL had failed to plead or prove any actual loss and that its later assertion concerning use of the tanks for power-generation purposes was an afterthought.
Finally, Dinowic submitted that RGPPL’s Section 34 petition was effectively an attempt to reargue contractual interpretation and factual findings on merits, which was particularly impermissible in an international commercial arbitration.
Analysis of the Law
International Commercial Arbitration and Section 34
The High Court first held that this was an international commercial arbitration under Section 2(1)(f) because Dinowic was incorporated in Singapore.
This distinction materially narrowed the Court’s jurisdiction.
Section 34(2A), which permits domestic arbitral awards to be challenged for patent illegality appearing on the face of the award, expressly excludes international commercial arbitrations.
Consequently, an India-seated international commercial arbitration can principally be challenged only on the grounds contained in Sections 34(2)(a) and 34(2)(b).
The Court emphasised that the already restricted Section 34 jurisdiction becomes even narrower in international commercial arbitration. Contract interpretation, perversity and alleged erroneous factual appreciation cannot ordinarily be repackaged as patent illegality because that ground is statutorily unavailable.
Waiver Under Section 55
The Court accepted the Arbitrator’s finding that whether a contractual right has been waived is principally a question of fact inferred from conduct and surrounding circumstances.
RGPPL had permitted delayed lifting and remittance, allowed the transactions to be completed and accepted performance.
The Arbitrator’s inference that RGPPL thereby waived strict adherence to the original timelines was supported by the contractual documents, email correspondence and conduct of the parties. The High Court could not reassess that evidence as an appellate court.
Sections 55 and 74
The Court rejected RGPPL’s argument that the requirement of reserving a claim for delayed performance applies only to ordinary damages under Section 73 and not to liquidated damages under Section 74.
Relying upon the existing legal position, the Court held that where a promisee accepts delayed performance without reserving the right to compensation at the time of acceptance, the resulting disentitlement extends to damages under both Sections 73 and 74.
Precedent Analysis
Ssangyong Engineering & Construction Co. Ltd. v. NHAI
The Court relied upon Ssangyong Engineering & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 to explain the post-2015 limits upon review of arbitral awards.
In international commercial arbitration, patent illegality is unavailable, and “fundamental policy of Indian law” cannot be used to undertake a disguised merits review.
Bridge Marine Ltd. v. Indian Oil Corporation Ltd.
The Court relied extensively on Bridge Marine Ltd. v. Indian Oil Corporation Ltd., 2021 SCC OnLine Del 3427, which recognises that international commercial awards receive a significantly narrower form of judicial scrutiny and that contractual interpretation by an arbitral tribunal is ordinarily beyond Section 34 interference.
Kailash Nath Associates v. DDA
On liquidated damages, the Court relied on Kailash Nath Associates v. Delhi Development Authority, (2015) 4 SCC 136.
The governing principle is that Section 74 awards reasonable compensation for loss or damage caused by breach. Some loss or legal injury must therefore exist. Where loss is capable of proof, the claimant cannot simply rely upon a stipulated figure to secure a windfall.
Madgavkar Salvage
The Court also relied on the principle articulated in Madgavkar Salvage that acceptance of delayed contractual performance without reserving a claim for damages disentitles the promisee from later recovering compensation, whether claimed under Section 73 or as liquidated damages under Section 74.
Dyna Technologies v. Crompton Greaves
On RGPPL’s complaint that its counterclaims were rejected without adequate reasons, the Court relied upon Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1.
An arbitral award must be read as a whole, and reasons can be discerned or implied from the award’s overall structure and treatment of connected issues.
Court’s Reasoning
The Court found the Arbitrator’s waiver analysis entirely sustainable.
Although Dinowic had plainly delayed payment and lifting, RGPPL nevertheless permitted the consignments to be lifted and completed the transactions. The Arbitrator therefore concluded that RGPPL had accepted delayed performance without the kind of reservation necessary to preserve a subsequent damages claim.
The High Court held that this factual inference did not remotely meet the threshold for violation of the fundamental policy of Indian law.
The Court also upheld the Arbitrator’s application of Sections 55 and 74. Once delayed performance was accepted without reservation, RGPPL could not subsequently use the same delay to impose contractual damages.
Further, Section 74 does not automatically permit recovery of every amount named in a contract. The stipulated sum must represent reasonable compensation for an actual legal injury, and where loss can be established, the party seeking damages must show that some loss occurred.
The High Court therefore found no error in the Arbitrator’s conclusion that RGPPL had not adequately shown loss sufficient to sustain the deduction.
The Court also accepted the reasoning concerning RGPPL’s counterclaims. Those claims for interest, exchange-rate loss and ground rent all arose from the very delays which the Arbitrator had found RGPPL to have waived.
Once that waiver finding survived, the counterclaims necessarily failed as a logical consequence. The award therefore did not suffer from absence of reasons.
The Court likewise upheld the 6% interest awarded to Dinowic. The refund claim arose when RGPPL withheld the amount from the security deposit, and Section 31(7)(a) empowered the Arbitrator to compensate Dinowic for being deprived of that money.
Conclusion
The Delhi High Court held that the award contained a reasoned and plausible construction of the parties’ contract, supported by the evidence before the Tribunal.
It found no violation of the fundamental policy of Indian law, public policy, natural justice or any other permissible ground under Section 34 applicable to an international commercial arbitration.
The Court specifically reiterated that it could neither reappreciate evidence nor undertake a merits review of the Arbitrator’s conclusions.
Accordingly, RGPPL’s Section 34 petition was dismissed, thereby leaving intact the award directing refund of approximately USD 714,760.74 with 6% interest from 17 June 2014 and rejection of RGPPL’s counterclaims.
Case Details
Case: Ratnagiri Gas and Power Pvt. Ltd. v. Dinowic Pte. Ltd.
Court: High Court of Delhi at New Delhi
Case Number: O.M.P. (COMM) 534/2019 with I.A. 18412/2019 & I.A. 18414/2019
CNR Number: DLHC010503732019
Judge: Justice Mini Pushkarna
Date: 17 August 2026; reserved on 7 April 2026
Result: Section 34 petition dismissed; award in favour of Dinowic upheld, including refund of USD 714,760.74 with 6% interest and rejection of RGPPL’s counterclaims.
