HC trashes Arbitral Award passed by relying on communications alone with no independent proof of claims, Read Judgement

In a major reprieve for City & Industrial Development Corporation (CIDCO) & the Konkan Irrigation Development Corporation (KIDC), on Tuesday, the High Court of Bombay struck down a decision directing them to pay a sum of Rs 303 crore to FA Enterprises towards unpaid bills for construction of Balganga dam in Raigad district.

Justice RD Dhanuka struck down the arbitral award dated April 3, 2019, on the ground that it was patently illegal & legally unsustainable. The judge noted FA Enterprises could not prove most of its claims independently, but the majority members (3 out of 5) of the tribunal accepted the claims on the basis of communications issued by some KIDC officers, who are under the cloud of suspicion.

In Jan 2009, the Govt. decided to construct Balganga dam at Niphad in Pen tehsil of Raigad district for catering drinking water requirements of some CIDCO areas & therefore CIDCO was to fund the project, initially estimated to cost Rs 353.89 crore.

However, 5 months later the work was allotted to FA Enterprises for Rs 495.45 crore & on June 10, 2011, the cost of the project was revised to Rs 1,220 crore. The dispute began the same year after CIDCO officers began disputing the project cost & appointed the body’s own experts to ascertain the cost.

FA Enterprises had then moved HC invoking the arbitration clause in its agreement with the authorities. Accordingly, the arbitral panel was formed, comprising one representative each of the State Govt, KIDC, the CIDCO & FA Enterprises. The presiding member was appointed by the HC.

The contractor had alleged an amount of Rs 536.56 crore, including Rs 186.89 crore towards a particular bill. Both KIDC & CIDCO had strenuously opposed the claim.

On April 3, 2019, three members of the tribunal passed a majority award directing the KIDC to pay to the claimant a sum of Rs 303 crore to the contractor firm. 

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