PSU Ordered To Pay Compensation To Solar Manufacturer In Arbitration Dispute

A sole arbitrator has dismissed a ₹12.08 crore claim filed by state-owned Bharat Heavy Electricals Limited (BHEL) against Surat-based solar manufacturer Goldi Solar Limited and directed BHEL to pay ₹4 crore in compensation, along with interest and arbitration costs. The award was delivered on October 14, 2026, by Justice V. Jagannathan, former Judge of the High Court of Karnataka, at the Arbitration & Conciliation Centre in Bengaluru.

The dispute originated from a purchase order issued by BHEL to Goldi Solar on September 18, 2021. BHEL initiated arbitration proceedings, alleging that Goldi Solar had breached the contractual obligations, compelling the public sector undertaking to procure supplies from alternative sources at higher costs. BHEL sought ₹12.08 crore in damages under several categories, including additional procurement expenses, delays in document submissions, litigation costs, loss of reputation and applicable interest.

Goldi Solar rejected the allegations and filed a counter-claim of ₹6.30 crore, along with 18% annual interest. The company argued that BHEL had itself failed to fulfil important contractual obligations. According to Goldi Solar, BHEL did not issue a revised purchase order following a Central Government tax notification, despite the requirement under the contract.

Goldi Solar also challenged BHEL’s demand for an additional 5% bank guarantee, stating that such a requirement was not included in the original purchase order. Furthermore, the company alleged that BHEL had placed orders with third-party suppliers, including Satvik Green, before formally terminating its existing contractual arrangement with Goldi Solar or completing the required discussions.

After examining the contractual provisions, documentary evidence and submissions from both parties, the Arbitral Tribunal found multiple contractual violations by BHEL. The Tribunal specifically held that BHEL had failed to issue the revised purchase order in accordance with Clause 10 of the General Conditions of Contract. It also found that the additional 5% bank guarantee demanded by BHEL was not contractually authorised.

Additionally, the Tribunal observed that BHEL had awarded contracts to alternative suppliers before formally terminating its agreement with Goldi Solar. These findings established that BHEL had breached its contractual obligations.

Consequently, the Tribunal dismissed BHEL’s entire claim and partly accepted Goldi Solar’s counter-claim. BHEL was directed to pay ₹3 crore to Goldi Solar, along with ₹1 crore as nominal damages for loss of reputation and goodwill, in addition to arbitration costs.

The awarded amount will carry interest at 9% per annum and must be paid within two months. If BHEL fails to comply within the stipulated period, the interest rate will increase to 12% per annum until the amount is fully recovered. The ruling marks a significant outcome in the contractual dispute between the state-owned engineering company and the solar manufacturer.