Maharashtra Govt To Challenge Bombay HC Order Directing ₹303 Crore Payout To Contractor In Balganga Dam Case

Mumbai: The Maharashtra government is set to challenge a recent decision of the Bombay High Court which directed state authorities to pay Rs 303 crore to FA Enterprises, a private contractor, towards unpaid bills for the construction of the Balganga dam in Raigad district.

Single-Judge Order Set Aside

A division bench of Chief Justice Alok Aradhe and Justice MS Karnik, on August 12, restored the arbitral tribunal’s April 2019 award in favour of FA Enterprises. The award had earlier been set aside in May 2020 by a single-judge bench of Justice (retired) RD Dhanuka.

The tribunal’s decision pertained to the ambitious Balganga dam project, which was initiated in 2009 to address the drinking and industrial water requirements of Navi Mumbai’s growing population.

Tribunal’s Findings Upheld

The division bench held that the arbitral tribunal’s findings were well-founded. “The findings of the Arbitral Tribunal are based on the materials on record and on a proper appreciation of evidence,” the court observed.

It further noted that the tribunal had reasonably concluded the termination of FA Enterprises’ contract was invalid, as the company had taken significant steps to secure mandatory forest clearances.

“We are satisfied that the view taken by the Arbitral Tribunal on the basis of the evidence on record is a plausible view. In such circumstances there was no scope for the Single Judge to have interfered with the award,” the bench stated in its 55-page judgment. The judgment copy was made available Wednesday late night.

Balganga Dam Project Timeline

In 2009, during a meeting chaired by the then Water Resources Development (WRD) Minister, it was decided to build a dam on the Balganga river near Niphad village in Raigad. Under the arrangement, the City and Industrial Development Corporation (CIDCO) was to finance the project and obtain water rights, while execution was entrusted to the Konkan Irrigation Development Corporation (KIDC).

Contract Termination And Dispute

FA Enterprises was awarded the contract in May 2009 for Rs 495 crore. However, by June 2011, the estimated cost escalated to Rs 1,220 crore, which CIDCO disputed, resulting in the formation of expert committees to examine the matter.

Facing financial pressure, FA Enterprises approached the High Court in 2013, which led to the constitution of an arbitral tribunal, with the presiding arbitrator appointed by the court.

In 2015, the Anti-Corruption Bureau filed a chargesheet against FA Enterprises and others for alleged irregularities. A year later, in 2016, KIDC terminated the contract, after which FA Enterprises claimed Rs 536.56 crore in dues.

Tribunal’s 2019 Award

In April 2019, three of the tribunal’s five members ruled in favour of FA Enterprises, awarding Rs 303 crore. The state and its agencies challenged the award before a single-judge bench, which held that the tribunal had erred in granting specific performance since the contractor had halted work on its own and failed to secure forest clearance. Th4e single judge termed the award as suffering from “patent illegality.”

However, the division bench disagreed, stressing that the arbitral tribunal had considered detailed evidence, including findings that the contractor had completed more than 80% of the dam construction and was compelled to stop work due to non-payment by KIDC. The bench held that the single judge “ought not to have interfered” with such findings under Section 34 of the Arbitration and Conciliation Act.

“Consequently, the Appeals are allowed. The impugned judgment and order dated 19th May 2020 of the learned Single Judge is quashed and set aside. The award of the Arbitral Tribunal stands restored,” the bench concluded.

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State To Move Supreme Court

The State government would be approaching the apex court against this judgment. “We are studying the judgment and would soon take necessary steps,” said an advocate from the State’s panel.