Tamil Nadu

HC directs T.N. govt. to pay ₹340.97 crore to a private firm for losses suffered in laying Chennai Outer Ring Road

The State government has lost a case involving huge financial implication of ₹340.97 crore, apart from an annual interest of 18% on the amount from January 2020, with the Madras High Court dismissing its appeals against orders passed by a single judge as well as an arbitral tribunal in favour of GMR Chennai Outer Ring Road Private Limited.

Second Division Bench of Justices M. Duraiswamy and Sunder Mohan rejected the appeals preferred in the name of Governor of Tamil Nadu and confirmed the orders passed by Justice N. Sathish Kumar who, in turn, had found substance in the decision taken by a three-member arbitral tribunal to award ₹340.97 crore for the losses suffered by the private firm.

The Bench pointed out that the firm was a successful bidder for the Chennai Outer Ring Road, running to a length of 29.5 km. The total project cost was ₹1,166.75 crore. A concession agreement was entered between it and the government on a Design, Build, Finance, Operate and transfer (DBFOT) basis on December 5, 2009. The construction period, as per the agreement, was 913 days (30 months) and the concession period was 20 years. After the construction, the private firm would be eligible for 30 instalments of half yearly payments of ₹62.12 crore. It was also offered a bonus payment of one annuity period if the construction was completed within 24 months.

Appointed date for the commencement of construction was June 3, 2010 and hence, the private firm planned to complete the work by June 2, 2012. It entered into an Engineering, Procurement and Construction (EPC) agreement and mobilised the requisite manpower and machinery for completing the project on time.

However, the firm could not keep up with the deadline, reportedly due to the government’s failure to discharge its contractual obligation of providing full support in obtaining requisite clearances from the Railways and National Highways Authority of India, failure to hand over encumbrance-free land, change in alignment and ground conditions and so on.

The delay resulted in the firm suffering huge losses due to escalation of material costs, other overheads and payment of interests for loans taken by it. Therefore, it resorted to arbitration in 2015, demanding ₹675.06 crore and the tribunal, after elaborate consideration, awarded ₹340.97 crore along with 18% interest from the date of the award on January 30, 2020.

While the government approached the single judge in 2021 challenging the award, the private firm too approached the single judge challenging the tribunal’s refusal to pay pendente lite (pending litigation) interest. Justice Kumar dismissed the government’s petition and allowed the private firm’s petition by granting pendente lite interest at the rate of 9% per annum.

Aggrieved over these two orders, the government had come on appeal now but the Bench, led by Justice Duraiswamy, did not find any reason to interfere with the single judge’s order.


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Printable version | Aug 13, 2022 12:32:03 am | https://www.thehindu.com/news/national/tamil-nadu/hc-directs-tn-govt-to-pay-34097-crore-to-a-private-firm-for-losses-suffered-in-laying-chennai-outer-ring-road/article65761651.ece