In the case between SEPC Ltd. and the State of Tamil Nadu, the dispute arose from a contract for the construction of a thermal power plant. SEPC claimed that delays in approvals and supply of materials by the state caused financial losses. The State of Tamil Nadu, on the other hand, argued that SEPC failed to meet its contractual obligations, leading to cost overruns and delays.
SEPC initiated arbitration to resolve the dispute. The key issue was whether the arbitration clause covered all disputes arising from the contract. The Supreme Court upheld the validity of the arbitration clause and confirmed the jurisdiction of the arbitral tribunal. It emphasized that public sector entities, while acting in the public interest, must respect arbitration agreements and that such disputes are arbitrable.
This case serves as a significant precedent for public infrastructure projects, reaffirming arbitration as an effective dispute resolution mechanism. It ensures that public contracts can be handled efficiently, even when government entities are involved, without compromising the public interest or fairness in the arbitration process.
