Dilip Buildcon Secures Favourable Arbitration Award in NHAI Dispute

Dilip Buildcon Limited (DBL) recently emerged victorious in an arbitration case against the National Highways Authority of India (NHAI). The company announced this development in a filing dated April 29, 2024.

Background

The dispute centred around a highway construction project awarded to DBL through an Engineering, Procurement, and Construction (EPC) agreement dated February 16, 2018. The project involved the fourth/sixth laining of a highway section in Maharashtra under the NHDP Phase IV program.

Key Issues in Arbitration

DBL initiated arbitration proceedings against NHAI, seeking compensation for various delays and breaches allegedly committed by the authority during project execution. These issues primarily included:

• Right of Way (ROW) Delays: DBL claimed damages arising from delays in NHAI providing the necessary right of way for construction to proceed. Smooth access to the designated land is crucial for timely project completion.
• Early Completion Bonus Dispute: DBL contended they were entitled to a bonus for completing the project ahead of schedule. However, NHAI may have disputed this claim.
• Contract Price Reduction: DBL potentially contested a reduction in the contracted price due to work allegedly withdrawn by NHAI. This could have resulted in a financial loss for DBL.

Arbitration Outcome

The Arbitral Tribunal issued its award on April 23, 2024. The key aspects of the award are favourable to DBL

• Compensation for ROW Delays: The Tribunal recognised the delays in ROW acquisition and awarded damages to DBL for the negative impact on their operations.
• Early Completion Bonus: The Tribunal upheld DBL’s claim for a bonus due to early project completion.
• Contract Price Adjustment: The Tribunal ruled in favour of DBL regarding the disputed contract price reduction, potentially restoring the original project value.

Financial Implications

The award translates into a significant financial gain for DBL. NHAI is liable to pay DBL approximately ₹53.69 crore within a short timeframe. Additionally, a penalty interest of 11% per annum accrues on the awarded amount if not paid by NHAI.

Potential Next Steps

The Arbitration and Conciliation Act 1996 allows NHAI the right to challenge the award in court. DBL has expressed their readiness to defend the award’s validity if NHAI chooses to pursue legal action.

This arbitration outcome represents a positive development for DBL. The awarded compensation acknowledges the challenges they faced during project execution and potentially restores the original project value agreed upon with NHAI.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.