Deal Street

September 11, 2018

GBPL wins Rs 500-crore arbitration case against NHAI


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Singh & Associates, Founder Manoj K. Singh successfully represented Gwalior Bypass Project Ltd (GBPL) in an Arbitration matter against the National Highways Authority of India (NHAI). The arbitration was related to a dispute arising out of the Design, Construction, Development, Finance, Operation, and Maintenance of the work of construction of New Four-Lane Gwalior Bypass of length 42.033 Km on NH-75 in the State of Madhya Pradesh on Build, Operate, Transfer, Annuity Basis executed by GBPL.

In 2006, NHAI floated a Notice Inviting Tender (NIT) towards the Design, Construction, Development, Finance, Operation, and Maintenance of the work of construction of New Four-Lane Gwalior Bypass of length 42.033 Km on NH-75 in the State of Madhya Pradesh on Build, Operate, Transfer, Annuity Basis. GBPL was awarded the aforesaid Project on a semi-Annuity amount of INR 26.53 Crores (Rupees Twenty Six Crore and Fifty Three Lacs Only), and accordingly, the parties executed a Concession Agreement on October 9, 2006. The Commencement Date was fixed as April 7, 2007.

It was the case of GBPL that NHAI failed to adhere to its obligations as set forth in the Concession Agreement (including but not limited to providing encumbrance-free land and Right of Way) on account of which the construction work could not be completed on the Scheduled Project Completion Date, i.e., October 8, 2009. The complete stretch of land and Right of Way were handed over to GBPL only on February 6, 2012, whereas as per the Concession Agreement, NHAI was obligated to provide the same by April 6, 2008.

It was also the case of GBPL that despite GBPL achieved the Provision Completion of the Project on November 15, 2011 and also completed the construction on June 30, 2013 and NHAI started the toll operation of the project Highway with effect from July 1, 2013, NHAI delayed the payment of Annuity and further coerced GBPL to enter into two Supplementary Agreements dated 18.12.2012 and 01.07.2015, respectively, in this regard. Even after the signing of the Supplementary Agreements, NHAI delayed the payment of Annuity, as per the Concession Agreement. Additionally, although NHAI started the Toll Operations from 00.00 hours of July 1, 2013, the final Commercial Operation Date (COD) was declared by NHAI only on April 30, 2014.

As disputes arose between the parties, GBPL invoked the Arbitration Clause, and thereafter, due to failure of NHAI to appoint its Arbitrator, it also sought the Hon’ble Delhi High Court’s intervention for the appointment of an Arbitrator on behalf of NHAI.

The S&A Team led by Mr. Manoj K Singh, Founding Partner, Mr. Nilava Bandyopadhyay, Senior Partner, and Mr. Rahul Pandey, Principal Associate, advised and represented GBPL in the arbitration. On the other hand, Chiramel & Co. led by Mr. Jos Chiramal and Mr. Ramesh Kumar represented NHAI in the Arbitration.

The Final Award dated 14.08.2018 has now been pronounced by the Hon’ble Arbitral Tribunal, which was constituted of Three Hon’ble Members [Justice Anil Kumar (Retd.), Justice V. K. Shali (Retd.), and Mrs. Madhurima Mridul].

In the Final Award dated 14.08.2018, the Hon’ble Tribunal held that it is NHAI which has majorly contributed towards the delay in handing over the land and Right of Way, and therefore, it has breached the terms of the Concession Agreement. The Hon’ble Tribunal has also agreed with the contention of GBPL that the execution of the Supplementary Agreements did not bar GBPL from raising its claims in accordance with law. The Hon’ble Tribunal, as a consequence, allowed various claims of GBPL to the tune of more than Rs. 500 Crores, inclusive of applicable interest.

This Award is one of the first of its kind case. This case will also boost Contractors working in Road Infrastructure projects and who has/is suffering losses on various counts due to default of the Authority in providing Right of Way. In India, it is a common fact that the Authority conceptualize the project, without even confirming land availability and later on face problems in acquiring land for the project, which delayed the project. The Right of Way challenge has been a contentious issue for the Indian infrastructure sector impediments (especially road & highways) and delays as a result of variable and complex procedures across states, non-uniformity in levies, and obtaining approvals from the relevant authorities has greatly impacted planning and completion of projects across the country. The general reasons (as per NHAI stated in the 19th Report by Committee on Public Undertakings 2017-18) for delay in land acquisition are delay in handing over the possession of land by CALA, delay in the declaration of compensation awards by CALA, time taken in the preparation of report/draft for the declaration of acquisition notification under Section 3D, non-updation of revenue records, resistance to joint measurement survey or demand for higher compensation by land owners, filing of large number of arbitration cases by land owners, resistance to work by land owners, encroachments within project ROW, religious structures within project ROW, process of transfer of state govt. land falling within project ROW, and transfer/posting of CALA during acquisition proceedings. Moreover, it has been reported in the said Report that there is no mechanism for holding interaction with local bodies and public at large during the process of land acquisition. Due to this delay, the project cost also becomes much higher than the projected cost and the same forces the developer(s) to take extra financial burden to complete the project. However, this Award will definitely boost the infrastructure industry to raise dispute(s) against the failure of the Authority to provide Right of Way on time.

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