Landmark Vestas decision

Arbitral award significant for Indian legal jurisprudence, say Ranjit Prakash and Arun Mani at HSA Advocates

The dispute arose in the backdrop of a typical EPC (engineering, procurement and construction) and supply contract in which Vestas undertook to design the project and supply turbines, which included evaluation of wind data, designing, siting and erecting the turbines, and operation and maintenance thereafter. The technology and design was dictated by Vestas and Inox relied on its representations regarding efficiency and performance of the turbines, as well as the projected generation data furnished by Vestas. Consistent with usual practice, Vestas limited its liability through contractual caveats and exceptions. This was Inox’s first wind energy project and Inox relied heavily on Vestas’ representations, including generation estimates.

Upon commissioning the project, it was found that the actual generation was significantly lower than that projected by Vestas. However, Vestas disowned any liability. The dispute culminated in an arbitration initiated by Inox claiming damages on account of the underperforming turbines. The contract and arbitration proceedings were governed by Indian law.

Inox contended that Vestas had made fraudulent misrepresentations regarding performance of the turbines and their projected generation, inducing Inox to enter into the contract. Vestas disowned liability by taking recourse to contractual caveats, including lack of any guarantees and specific exclusion clauses contained in the contract, specifically the disclaimer that their generation estimates would not constitute a guarantee or warranty.

HSA Advocates represented Inox in the arbitration proceedings with a team led by senior partner Ranjit Prakash, along with associate partner Arun Mani.