In a major relief to the state government, City and Industrial Development Corporation (CIDCO) and Konkan Irrigation Development Corporation (KIDC), the Bombay High Court on Tuesday quashed and set aside the majority award passed by the arbitral tribunal in April last year that directed the authorities to pay Rs 303 crore to FA Enterprises, a private firm, towards unpaid bills for construction of Balganga dam. The project is meant for supply of drinking water in expanding areas of Navi Mumbai.
The tribunal, in April last year, had directed KIDC and the state government to pay the contractor Rs 303 crore within 60 days. The authorities moved the HC against the tribunal order in June last year.
Allowing appeals made by the authorities, the HC on Tuesday directed FA Enterprises to return a sum of Rs 50 crore deposited to it by CIDCO within eight weeks with interest of 7 per cent per annum from the date of withdrawal.
A single judge bench of Justice R D Dhanuka passed the ruling on Tuesday and struck down the arbitral award of April 3 last year and said that contractual relations between the private firm and KIDC were not governed by the arbitral tribunal and could be decided only by terms and conditions of contract.
The judge said that the arbitral award was patently illegal and unsustainable and that FA Enterprises could not prove most of its claims independently. However, majority members (three out of five) of the tribunal accepted the claims on the basis of communications given by some KIDC officers, who are under the cloud of suspicion, the court noted.
Justice Dhanuka observed, “It is not in dispute that forest clearance, which was one of the mandatory conditions under the contract, has not been obtained till date. Substantial part of the balance work falls in the forest area. On this ground, the Arbitral Tribunal could not have awarded relief in favour of claimant (FA Enterprises).”
The court enumerated the facts of the case and noted that in the meeting held on January 28, 2009, the authorities including KIDC, CIDCO and Mumbai Metropolitan Region Development Authority (MMRDA) decided to construct a dam on Balganga river, near Niphad village in Pen taluka of Raigad district, for drinking water requirements of expanding areas in Navi Mumbai. CIDCO agreed to fund the project and approved funds of approximately Rs 488 crore. In February 2009, KIDC invited tenders for construction work of nearly Rs 353.89 crore.
Thereafter, in May 2009, KIDC issued a work order in favour of FA Enterprises for Rs 495.45 crore. The project cost was revised to Rs 1,220 crore in June 2011. CIDCO officials disputed it and appointed expert committees to ascertain the cost. As per senior counsel Shrihari Aney for KIDC, CIDCO did not accept reports of its three committees, which gave the last report on June 2013.
On October 28, 2013, FA Enterprises moved the High Court and invoked arbitration clause in its agreement with the authorities. The arbitral panel was formed, which comprised of representatives from KIDC, CIDCO, FA Enterprises and the state government, The High Court appointed its presiding member. In August 2015, the Anti-Corruption Bureau filed a chargesheet against the firm and others for corruption and other irregularities.
In September 2016, the firm claimed an amount of Rs 536.56 crore, including Rs 186. 89 crore towards one of the bills, and Rs 75 crore as difference in rate of interest among others before the tribunal. KIDC and CIDCO opposed the claims made by the private firm.
After examining several statements and evidences, on April 3 last year, three members of the tribunal passed a majority award directing KIDC to pay to the claimant firm a sum of Rs 303 crore. The authorities had challenged the award. The HC had reserved its judgement in January this year.
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