Arbitration between Hindustan Construction Company Limited & Ircon International Limited

J. Sagar Associates (JSA) successfully advised and represented Hindustan Construction Company Limited in obtaining an arbitral award for about Rs 200 crores against Ircon International Limited along with a declaration that termination of contract between the parties by Ircon was not valid. The tribunal also rejected counter claims of Rs. 419 crore raised by Ircon.

The dispute between the parties arose out of termination of the contract for construction of a 10 km long railway tunnel (T-48) on Dharam-Qazigund Section of Udhampur-Srinagar-Baramulla New BG Railway Line Project. The total contract price was Rs 884 crores. Ircon had terminated the contract on the ground of slow progress of works by HCC and had encashed the bank guarantees furnished by HCC. HCC referred the dispute to an arbitral tribunal comprising of Justice (Retd.) Badar Durrez Ahmad, Mr Suresh Kumar & Mr Bhuvnesh Prakash Khare. In the arbitration proceedings, HCC had sought for a declaration that the termination by Ircon was invalid and had raised consequent claims for refund of bank guarantee amount, for loss of profit, release of retention money, release of amount withheld as liquidated damages, payment for equipment wrongfully withheld by Ircon etc. Ircon had, in turn, raised a counter claim for about Rs. 419 crores as the amount payable by HCC under risk and cost for execution of the balance works under the contract through another contractor.

On 31 March 2021, the tribunal passed a majority award [by Justice (Retd.) BD Ahmad & Mr Suresh Kumar] holding that the termination of contract by Ircon was invalid. A total amount of Rs. 198 crores (appx.) was awarded in favour of HCC along with post award interest at the rate of 15.75% per annum. The tribunal also awarded an amount of about Rs. 1.31 crores as arbitration costs. The counter claim of Rs. 419 crores (appx.) raised by Ircon was rejected.

Matter was led and argued by Dhirendra Negi, Partner. Apart from complex facts, the matter involved various legal issues concerning right to terminate, levy of interim liquidated damages and encashment of bank guarantees.

JSA team comprised Lead Partner – Dhirendra Negi, Principal Associate – Pragya Chauhan.