'NHAI must not challenge arbitral awards mechanically'

The NHAI should avoid challenging arbitral awards against it "mechanically and casually" as it derails infrastructural projects and raises the amount to be paid to contractors.

Justice Prathiba M Singh of the Delhi High Court said there is an urgent need for the National Highway Authority of India (NHAI) to take a policy decision on the way to resolve its disputes with contractors.

"There is a need for the NHAI not to challenge arbitral awards mechanically and casually, especially where objections to the award are not strong or substantial," said Justice Singh, adding "challenges being raised to awards in this manner also results in the derailment of infrastructural projects".

Justice Singh said by casually challenging the arbitral awards against it, the NHAI deprives both the contractor of timely payments as well as adds to that additional amounts payable on account of interest to the contractor.

The judge also directed the court's registry to communicate the order to the NHAI chairman.

The court's order came on two separate petitions, one by the NHAI and other by contractor Gammon India Ltd, both challenging parts of the same arbitral awards passed against them.

Gammon had entered into a contract with the NHAI for widening a nearly 140-km stretch of NH-5 in Odisha from two lanes to four/six-lane and strengthening bridges and flyovers on it between Chandikhol and Baleshwar.

The stretch was part of the Golden Quadrilateral and the total value of the contract was Rs 144.56 crore. While the agreement was signed in August 2001, the project was to be completed within 33 calendar months.

Some of the claims made by the contractor were rejected by the engineer-in-charge after which the matter was taken to the Arbitral Tribunal.

Out of the six claims, two were awarded in the favour of NHAI and four were decided in favour of the contractor, prompting both to move the high court.

The court dismissed both petitions.

The court, in its 56-page judgment, said the entire mechanism of Dispute Resolution Board (DRB) and Arbitral Tribunal would be set at naught if the DRB's every recommendation and every award of the Tribunal is challenged.

The large number of NHAI disputes pending before the court is evidence of the fact that most awards are challenged, it said.

Justice Singh said a policy-level decision deserves to be taken at the NHAI's highest level to ensure that DRB's recommendations are evaluated before matters proceed to arbitration.

"In cases where the recommendations are not accepted and the matter goes to arbitration, the arbitrations are pursued with right earnest and no undue delays and adjournments are caused," the court added.

"Upon the tribunal rendering the award, challenges to an award are made only in respect of those claims where the NHAI believes that they have more than a reasonable chance of success," Justice Singh said.

The court said the policy decision should also ensure that even when awards are challenged, some mechanism should be adopted to ensure that the interest on the payable sum stops running and the public exchequer does not incur higher liability if objections are rejected.

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