Karnataka High Court
The Chief Engineer vs Gvr Infra Projects Limited on 3 August, 2026
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COMAP No. 127 of 2025
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 03RD DAY OF AUGUST, 2026
PRESENT
THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE
AND
THE HON'BLE MR. JUSTICE C.M. POONACHA
COMMERCIAL APPEAL NO. 127 OF 2025
BETWEEN:
1. THE CHIEF ENGINEER
NATIONAL HIGHWAYS ZONE
PUBLIC WORKS DEPARTMENT
GOVERNMENT OF KARNATAKA
P.W.D. ANNEX BUILDING
2ND FLOOR, K.R. CIRCLE
BENGALURU - 560 001
...APPELLANT
(BY SRI GIRIDHAR S.V., ADVOCATE)
AND:
1. GVR INFRA PROJECTS LIMITED
Digitally
signed by
YASHAVANT
A COMPANY DULY REGISTERED UNDER
YASHAVANT NARAYANKAR
NARAYANKAR Date:
2026.08.04
THE PROVISIONS OF
11:03:18
+0530
THE INDIAN COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE
AT VBC SOLITAIRE
9TH AND 10TH FLOOR
NO.47 AND 49, BAZULLAH ROAD
T. NAGARA, CHENNAI - 600 017
TAMIL NADU AND ITS BRANCH AT
#40, SNEHA NAGAR, 2ND CROSS
GROUND FLOOR
NEAR RELIANCE FRESH
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COMAP No. 127 of 2025
AMRUTHAHALLI
BYTARAYANAPURA
NEW BANGALORE INTERNATIONAL
AIRPORT ROAD
BANGALORE - 560 092
REPRESENTED BY ITS
RESOLUTION PROFESSIONAL
MS. VANDANA GARG
[IBBI/IPA-001/IP-PWC
P00025/2016-2017/10058]
OFFICE, 252, VEER SAVARKAR MARG
SHIVAJI PARK, DADAR
MUMBAI CITY
MAHARASHTRA - 400 028
...RESPONDENT
(BY SRI YASHODHAR HEGDE, ADVOCATE)
THIS COMMERCIAL APPEAL IS FILED UNDER SECTION
13 (1-A) OF COMMERCIAL COURTS ACT 2015, READ WITH
SECTION 37 OF THE ARBITRATION AND CONCILIATION ACT,
1996 PRAYING TO SET ASIDE THE JUDGMENT PASSED BY
THE HON'BLE LXXXVII ADDITIONAL CITY CIVIL AND
SESSIONS JUDGE, AT BANGALORE (CCH.88) DATED
05.09.2024 IN COMMERCIAL ARBITRATION PETITION
NO.4/2020 AND CONSEQUENTLY ALLOW THIS APPEAL AS
PRAYED FOR & ETC.
THIS COMMERCIAL APPEAL HAVING BEEN HEARD AND
RESERVED FOR JUDGMENT, COMING ON FOR
PRONOUNCEMENT THIS DAY, JUDGMENT WAS
PRONOUNCED AS UNDER:
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COMAP No. 127 of 2025
CORAM: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE
and
HON'BLE MR. JUSTICE C.M. POONACHA
C.A.V. JUDGMENT
(PER: HON'BLE MR. JUSTICE C.M. POONACHA)
The present appeal is filed by the National Highways
Authority of India [NHAI] under Section 13(1A) of the Commercial
Courts Act, 2015 [CC Act] read with Section 37 of the Arbitration
and Conciliation Act, 1996 [A & C Act] impugning the judgment
dated 05.09.2024 [impugned judgment] in Commercial Arbitration
Petition No.4/2020 passed by the LXXXVII Additional City Civil and
Sessions Judge at Bangalore [Commercial Court] whereunder the
application filed by the NHAI under Section 34 of the A & C Act
seeking to set aside the Arbitral Award dated 11.10.2019
[impugned award] passed by the Arbitral Tribunal was rejected.
2. The respondent-M/s GVR Infra Projects Ltd., [GVR]
instituted arbitral proceedings for resolution of the disputes arising
out of the contract work of Job No.NH-48-KNT-2014-15-734 for the
work of strengthening from KM 216.00 (Gulagabale) to KM 237.00
(Maranahalli) and providing Rigid Pavement from KM 250.620
(Kemphole) to KM 263.00 (Addahole) (Shiradi Ghat) of NH-48
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COMAP No. 127 of 2025
Bangalore-Mangalore Section in the State of Karnataka
[contracted works].
3. GVR was the successful tenderer in respect of the
contracted works awarded by NHAI for a total sum of
₹90,27,83,520/- (Rupees Ninety Crore Twenty-seven Lakh Eighty-
Three Thousand Five Hundred and twenty only). GVR and NHAI
entered into an agreement on 06.11.2015 [agreement] and the site
was handed over by NHAI to GVR on 23.12.2015, which was the
appointed date.
4. In terms of the contract, GVR proceeded with the
construction. However, the work could not be completed for various
reasons. NHAI terminated the agreement on 04.01.2017. Being
aggrieved, GVR initially filed W.P.No.1819/2017 before this Court
which was dismissed on 12.12.2017, wherein GVR was permitted
to raise all the pleas in arbitration proceedings.
5. Each of the parties nominated their respective arbitrators.
The said arbitrators nominated the presiding arbitrator. Accordingly,
the Arbitral Tribunal was constituted. The claimant-GVR made a
total of 20 claims. NHAI also made a counterclaim. Oral and
documentary evidence were adduced before the Arbitral Tribunal.
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COMAP No. 127 of 2025
The Tribunal, vide the impugned award, partly allowed the claims
made by GVR and rejected the counterclaim made by the NHAI.
6. Being aggrieved, NHAI preferred an application under
Section 34 of the A & C Act (COMAP No.4/2020) before the
Commercial Court, the same was dismissed by the impugned
judgment. Being aggrieved, the present appeal is filed.
BACKGROUND FACTS:
7. The scope of work as contemplated under the agreement
together with the financial component of each item of work is as
under:
Flexible Rs.22.33
216.00Km to 237.00Km 21.00Km
pavement crores
Rigid 250.62Km to 263.00Km 12.38Km Rs.53.17
pavement crores
Structures in Reconstruction of 14 CD's
Rigid Widening of 36 CD's
Pavement(50 Rs.2.53
CDs) crores
Provision for Rs.12.24
road crores
safety works
Total Rs.90.27
crores
8. Both the counsels in the course of submissions,
placed on record a representative sketch which is as under:
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COMAP No. 127 of 2025
9. Schedule-J as per Clause 10.3.2 of the agreement
contains the project completion schedule which is as under:
“Schedule-J
(See Clause 10.3.2)PROJECT COMPLETION SCHEDULE
1. Project Completion Schedule
During Construction period, the Contractor shall
comply with the requirements set forth in this
Schedule I for each of the Project Milestones and
the Scheduled Completion Date. Within 15 (fifteen)
days of the date of each Project Milestone, the
Contractor shall notify the Authority of such
compliance along with necessary particulars thereof.
2. Project Milestone-I
2.1 Project Milestone-I shall occur on the date falling
on the 180th (one hundred and fiftieth) day from the
Appointed Date (the “Project Milestone-I”).
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COMAP No. 127 of 2025
2.2 Prior to the occurrence of Project Milestone-I,
the Contractor shall have commenced construction
of the Project Highway and submitted to the
Authority duly and validly prepared Stage Payment
Statements for an amount not less than 10% (ten
percent) of the Contract Price.
3. Project Milestone-II.
3.1 Project Milestone-II shall occur on the date
falling on the 365th (three hundred and thirtieth) day
from the Appointment Date (the “Project Milestone-
II”).
Prior to the occurrence of Project Milestone-II, the
Contractor shall have commenced construction of
the Project Highway and submitted to the Authority
duly and validly prepared Stage Payment
Statements completion schedule in reference to
Schedule-H Items, Stages and Sub-stages payment
statements for an amount not less than 30% (thirty
percent) of the Contract Price.
4. Project Milestone-III
4.1 Project Milestone-III shall occur on the date
falling on the 550th (four hundred eightieth) day from
the Appointed Date (the “Project Milestone-III”).
4.2 Prior to the occurrence of Project Milestone-III,
the Contractor shall have continued with
construction of the Project Highway and submitted to
the Authority duly and validly prepared Stage
Payment Statements for an amount not less than
60% (sixty percent) of the Contract Price.
5 Schedule Completion Date
5.1 The Schedule Completion Date shall occur on
the 650th (seven hundred and thirtieth) day from the
Appointed Date.
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COMAP No. 127 of 2025
5.2 On or before the Scheduled Completion Date,
the Contractor shall have completed construction in
accordance with this Agreement.
6. Extension of time
Upon extension of any or all of the aforesaid
Project Milestones or the Scheduled Completion
Date, as the case may be, under and in accordance
with the provisions of this Agreement, the Project
Completion Schedule shall be deemed to have been
amended accordingly.”
10. The work schedule that was to be carried out by GVR,
as noticed in the Arbitral Award, is as under:
a) Flexible pavement and widening of 36 numbers of CDs was
to be done during the period April-2016 to June-2016;
b) Reconstruction of 14 numbers of CDs coming under the
rigid pavement and construction of the rigid pavement was to
be done during the period October-2016 to March-2017;
11. A request was made by GVR for closing the traffic in
the rigid pavement section. However, the same was not done. GVR
had also contended that certain portions of the flexible pavement
section overlapped with the other tenders issued by NHAI.
12. Various correspondences were exchanged between
GVR and NHAI with regard to the progress of the work. NHAI
issued a memorandum on 24.09.2016 (Ex.C51), debarring GVR.
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COMAP No. 127 of 2025
Vide letters dated 24.10.2016 (Ex.C52), GVR sought for
reconsideration of the decision of NHAI to debar it. GVR also
requested to invoke Article 26.2 of the agreement to appoint a
conciliator. NHAI vide letter dated 18.11.2016 (Ex.C53), revoked
the debarrement notice with certain conditions.
13. NHAI issued a notice dated 02.12.2016 (Ex.C29) for
termination for not procuring 50% of the materials and machinery
required for carrying out rigid pavement works before closure of the
traffic at Shiradi Ghat. GVR vide reply dated 12.12.2016 (Ex.C30)
requested for withdrawal of the termination notice. However, the
contract was terminated on 04.01.2017 (Ex.C35). NHAI terminated
the contract on the ground that GVR did not achieve the first
milestone. The gist of the milestones as per the agreement
between the parties is as under:
1st milestone 180 days at 10% Not less than 10% of
(one hundred and fiftieth day) the contract price2nd milestone 360 days at 30% Not less than 30% of
(three hundred and thirtieth the contract price
day)3rd milestone 550 days at 60% Not less than 60% of
(four hundred eightieth day) the contract price4th milestone 730 days at 100% Completion of the
th
(650 days) project
(seven hundred and thirtieth
day)
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COMAP No. 127 of 2025
14. GVR, inter alia, contended that the road that was to be
made available for carrying out the rigid pavement works by closing
the traffic was not done. It was further contended that there was no
clarity with regard to the work to be done over the flexible
pavement section with regard to the overlapping extent; as also
that there was a change in the scope of work. Hence, it is
contended that the termination was illegal.
15. Both the parties submitted their draft issues
consequent to which, ten issues were framed by the Tribunal,
which are as under:
“ISSUES
The 10 Issues framed by the Claimant are as
underi. Whether the duration of the performance under the
contract is 18 months or 24 months?
ii. Whether the site of the project highway is
procured in accordance with the Contract
Agreement?
iii. Whether Claimant proves that the ‘Authority
Engineer’ appointed was required to be an external
engineer mandatorily and whether the Respondent
can appoint its own engineer as ‘Authority Engineer?
iv. Whether the road length from KM 216.00 to
237.00 of NH-48 requiring strengthening overlapped
with the work proposed to be taken up by the NHAI
and whether the Claimant was prevented by the
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COMAP No. 127 of 2025
Respondent in completing the flexible pavement
work from KM 216.00 to 237.00 of NH-48?
v. Was it possible to allow passage of traffic along
the existing carriageway between KM 250.620 to KM
263.00 of NH-48 (Shiradi Ghat) under improvement,
simultaneously carrying the work of Rigid
Pavement?
vi. Whether the termination of the Contract by the
Respondent is valid and legal?
vii.Whether the Claimant achieved the 1st Financial
Milestome in terms of the Contract Agreement?
viii. Whether the Claimant is entitled to the Claims at
Serial Nos. 1 to 20 amounting to. Rs. 115.61 Crores
claimed in the Statement of Claims?
ix. Whether the Respondent is entitled to the
Counter-Claim amount from Serial Nos. 1 to 4
amounting to Rs. 79.65 Crores.
x. What relief?”
16. The Arbitral Tribunal, consequent to the oral and
documentary evidence adduced between the parties, partly allowed
the claims made by GVR and rejected the counterclaim made by
NHAI. The abstract of the award amount as is forthcoming from the
arbitral award is as under:
ABSTRACT OF AMOUNT AWARD
SL. Category of Claim Amount Claimed as Awarded amount Remarks
NO. per SOC (in Rs.)
(in Rs.)
1. Claim No.1: Claim for Return, release and 6,82,90,215/- 6,89,90,215/-
discharge of performance Security Bank Guarantee
furnished to the Respondent BG 6,77,08,765/-+ BG
Commission Rs.5,81,450/-
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COMAP No. 127 of 2025
2. Claim No.2: Claim for loss of profit @15% on the 12,55,50,124/- 12,14,18,158/-
balance value of work, which could not be executed
due to illegal & wrongful termination of the contract:
3. Claim No.3: Claim for Loss of Business 10,00,00,000/- – Rejected
Reputation/Loss of future business due to potential
negative reputation following the termination
4. Claim No.4: Claim toward delay damages (as per 1,74,98,345/- – Rejected
Clause 8.3 of contract)
5. Claim No.5: Claim for Payment due towards Stage 6,57,82,695/- 9,33,29,134/-
Payment -1, in respect of work done
6. Claim No.6: Claim for change of Scope items 5,36,14,342/- 2,19,10,515/-
amounting to Rs.5,36,14,342/-
7. Claim No.7: Claim for Expenses incurred in carrying 5,77,11,692/- 2,92,87,972/-
out Road Maintenance Work amounting to
Rs.5,77,11,692/-
8. Claim No.8: Claim for additional area of Flexible 47,67,443/- – Rejected
Pavement works carried out than the average Km.
area of the total project length Rs.47,67,443/-.
9. Claim No.9: Claim for loss on Deployment of Plant 2,89,92,000/- 1,99,38,000/-
and Equipment owned by the Claimant amounting
to Rs.2,89,92,000/-
10. Claim No.10: Plant & Equipment deployed in the 7,15,68,484/- 1,64,62,828/-
Project which are owned by the Official Sub
Contractor of the Claimant amounting to
Rs.7,15,68,484/-
11. Claim No.11: Plant and Equipment Hired by Official 12,78,83,618/- – Rejected
Contractor of Claimant amounting to
Rs.12,78,83,618/-
12. Claim No.12: Expenses incurred in Mobilization & 89,58,596/- 13,43,118/-
Demobilization of plant and Machinery
Rs.89,58,596/-
13. Claim No.13: Recovery of Machinery utilized for 70,01,431/- - Rejected
execution of works Rs.70,01,431/- (Negative Claim)
14. Claim No.14: Claim for Loss of unused Material 5,86,41,696/- 2,93,20,848/-
Rs.5,86,41,696/-
15. Claim No.15(a): Claim for Administrative Expenses: 5,15,32,589/- 1,71,77,530/-
Site Overheads and Establishment Expenses
Incurred by the Claimant Rs.5,15,32,589/-
Claim No15(b): Offsite Overheads / Apportionment 2,70,83,506/- – Rejected
Charges of Claimant @ 3% of Contract Value
amounting to Rs.2,70,83,506/-
Claim No.15(c): Off-Site Overheads / 77,93,953/- 77,93,953/-
Apportionment Charges of official Subcontractor of
the Claimant Rs. 77,93,953/-
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COMAP No. 127 of 2025
16. Claim No. 16: Loss of Bonus for early Completion: 2,70,83,506/- – Rejected
3% of Project Cost i.e., Rs.2,70,83,506/-
7. Claim No. 17: Design Charges 3% of Project Cost 2,70,83,506/- – Rejected
Rs.2,70,83,506/-
18. Claim No.18: Loss of Maintenance Benefit @ 3% of 2,70,83,506/- – Rejected
Contract Price i.e., Rs.2,70,83,506/-
19. Claim No.19: Interest on the duo amounts at the 20,23,71,654/- – Rejected
rate of 18% p.a amounting to Rs.20,23,71,654/-
Total 1,15,22,90,038/- 46,62,72,271/-
20. Claim No.20: Cost incurred on Legal proceedings at 38,14,882/- 38,14,882/-
High Court and Civil Court, Bangalore
Rs.38,14,882/-
21. a. The expenditure incurred by the Claimant for 21 3,99,754 1,99,877/-
hearings by AT (both the parties should share the
amount equally) (Ex: C-93)
b. The expenditure incurred-by the Claimant for 88,620/- 88,620/-
arranging the internal meetings of the Arbitrator’s on
11th ,12th, 14th ,17th ,18th ,23rd ,24th and 25th
September and 6th, 9th and 10th October (including
food & other charges)
1,15,65,93,294/- 43,03,75,650/-
22. Counter claim 74,51,81,277/- Rejected 45,13,920/-
Negated by the Tribunal except for refunding of
excess BG (110%) collected
Grand total 1.15.65.93.294/- 43,48,89,570/-
Note:
a. Interest to be paid for the award amount of
Rs.42,62,72,271/- from the date: 12.03.2018 (date of
submission of SOC till the date of Award
dt:11.10.2019) @15% as per article 31 (7) (a) of
Arbitration and Conciliation Act 1996.
b. Interest to be paid for the Award amount of Rs.
42,62,72,271/- at the rate of 15% up to 90 days,c. If not paid the interest to be paid is at 18% from
the date of award till the date of payment.”
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COMAP No. 127 of 2025
17. With regard to Issue No.1 that is whether the time for
performance was 18 months or 24 months, the Arbitral Tribunal
noticing Clause 1.4.2 of the agreement, concluded that the time
was 24 months.
18. With regard to Issue No.2, the Arbitral Tribunal
concluded that the site of the project was not procured in
accordance with the contract. This is with regard to the specific
contention of GVR that the road for carrying out rigid pavement
works was required to be closed for traffic.
19. With regard to issue No.3, the Tribunal concluded that
NHAI could not have appointed its own engineer as the Authority
Engineer. It was held that, under the agreement, the appointment
of Authority Engineer was mandatorily required to be that of an
External Engineer. The Authority Engineer appointed in the present
case was the Executive Engineer, NHAI – Mangalore Division. The
same was in violation of the terms of the Agreement.
20. Issue No.4 was as to whether GVR was prevented by
NHAI in completing the flexible pavement work between 216.00
kms to 237.00 kms. The Tribunal concluded that there was an
overlap in the work that was to be carried out between 216.00 kms
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COMAP No. 127 of 2025
to 219.534 kms and 225.600 kms to 237.000 kms. The NHAI
delayed in deciding with regard to the overlap of the work and the
Arbitral Tribunal concluded that GVR was prevented from
completing the flexible pavement work from 216.00 kms to 237.00
kms.
21. With regard to Issue No.5, the Tribunal concluded that
the rigid pavement work cannot be taken up without closing the
road between 250.620 kms to 263.00 km of NH 48 (Shiradi Ghat).
22. While considering Issue No.6, the Tribunal concluded
that the termination of the contract by NHAI was not valid. With
regard to Issue No.7, as to whether GVR achieved the first financial
milestone in terms of the contract, the Tribunal concluded that GVR
was prevented by NHAI from achieving the first milestone in terms
of the contract.
23. Issue No.8 pertains to the damages claimed with
respect to the claims 1 to 20 made by the claimant. Accordingly,
the damages were assessed and the claims were awarded in terms
of the abstract of the amounts awarded as noticed at paragraph
No.16 (supra).
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COMAP No. 127 of 2025
24. Issue No.9 was with regard to the counterclaim made
by NHAI. The Tribunal concluded that NHAI was not entitled to the
counterclaim. The counterclaim made by NHAI, inter alia claimed
the amounts that it had incurred with respect to the fresh tender
that was called, with respect to unfinished works consequent to the
termination of the present tender as well as other charges.
CONTENTIONS:
25. The primary contention of the learned counsel for the
appellant/NHAI is that the finding of the Arbitral Tribunal that the
termination of the agreement with GVR was not justified and is
patently illegal; NHAI also impugns the finding of the Tribunal that
the road was required to be closed while rigid pavement work was
to be carried out. It was also contended that the finding of the
Tribunal with regard to completion of the first milestone by GVR
was also patently illegal. The quantification of the damages is also
pointed out as being patently illegal inasmuch as it is the contention
of NHAI that the Emden’s Formula is applicable only for
engineering contracts and was not required to be adopted for the
agreement in question.
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COMAP No. 127 of 2025
26. Per contra, learned counsel for GVR justifies the award
of the Tribunal and contends that the same is not to be interfered
with by this Court in exercise of its jurisdiction contained under
Section 37 of the A & C Act.
DISCUSSION AND REASONING:
27. The material on record clearly indicates that the
contract between the parties consisted primarily of two parts, i.e.,
the flexible pavement works, which were to be carried out between
216 kms to 237 kms, i.e., for a total extent of 21 kms. The other
part of the work was rigid pavement works, which were between
250.62 kms to 263 kms, i.e., for an extent of 12.38 kms. In the
entire extent of both the flexible as well as rigid pavement works,
GVR was also required to carry out reconstruction and widening of
culverts [referred to as CDs at certain places]; and also, carry out
other road safety works. As already noticed above, the break-up of
the financial outlay with regard to the contracted works is as under:
a) Flexible pavement - ₹22.33 crores b) Rigid pavement - ₹53.17 crores
c) Reconstruction and widening of 50 culverts – ₹2.53 crores
d) Provision for road safety works – ₹12.34 crores
Total ₹90.27 crores
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COMAP No. 127 of 2025
28. With regard to the flexible pavement works, it is the
contention of GVR that in respect of certain stretches of the road,
there was overlapping inasmuch as NHAI had already proposed
four- laning of the road before the agreement with GVR. The said
overlapping was between 216 kms to 219.434 kms as well as
between 225 kms to 237 kms. Hence, it was the contention of GVR
that the contracted works for the said portions, which overlapped
with the earlier proposed works, could not be carried out, and there
was no clarity given by NHAI to the queries raised by GVR in that
regard. It was contended that the overlapping stretch virtually
reduced the scope of the project.
29. With regard to the rigid pavement works, GVR had
requested NHAI to temporarily close the road and divert the vehicle
traffic to enable GVR to carry out the rigid pavement works. The
rigid pavement works were to be carried out between 250.60 km to
263.00 km.
30. The NHAI had terminated the agreement, since GVR
had not even achieved the first financial milestone. In this regard, it
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COMAP No. 127 of 2025
is to be noticed that as a first milestone, GVR was required to
complete 10% of the contract price within 180 days.
REGARDING THE VALIDITY OF TERMINATION BY NHAI:
31. As noticed above, the agreement was entered on
06.11.2015 and the appointed date was 23.12.2015. In terms of the
completion schedule (Annexure-J to the agreement), the first
milestone was that GVR was required to complete construction of
10% of the contract price within 180 days from the appointed date.
Accordingly, the first milestone was to be completed on or before
22.06.2016.
32. As already noticed above, the project contemplated
carrying out of flexible pavement works of a total extent of 21 kms
(that is from 216.00 kms to 237.00 kms) as well as rigid pavement
works of 12.38 kms (that is from 250.62 kms to 263.00 kms). The
works included NHAI to construct 50 culverts. Out of the 50
culverts, the works contemplated reconstruction of 14 culverts and
widening of 36 culverts. The culverts were required to be
constructed both in the flexible pavement stage as well as the rigid
pavement stage.
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COMAP No. 127 of 2025
33. While it is the contention of GVR that there was
overlapping in the portion of the road where flexible pavement
works was to be carried out and that NHAI did not, in any manner,
clarify the said aspect of the matter, it is clear and forthcoming that
between the stretch-219.534 kms (Sakleshpur bypass off take) to
225.600 kms (Sakleshpur bypass exit), which is a length of 6.066
kms in which stretch the flexible pavement works were required to
be undertaken, there was no overlapping of work. Hence, the
extent of 6.066 kms where flexible pavement work was required to
be undertaken is that stretch of the road where there was no
dispute between the parties as to the mode and manner of carrying
out the work.
34. The contention of GVR is that since certain portions of
the flexible pavement works were overlapping with an earlier work
and there was no clarity from NHAI, there was delay in the
completion of the works and the milestones stipulated in the
agreement could not be adhered to; and hence, the termination of
the contract by NHAI was illegal. In order to consider the said
contention, vis-Ã -vis the findings of the Arbitral Tribunal regarding
the same, it is necessary to notice certain correspondences
exchanged between the parties.
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COMAP No. 127 of 2025
35. In the meeting held on 14.03.2016 (part of Ex.R8), it
was, inter alia, agreed between the parties as under:
“The contractor has assured to executed the work
as follows:
1. 10 pipe culverts and 3 Km flexible pavement by the
end of March 2016.
2. 12 pipe culverts and 7 Km flexible pavement by the
end of April 2016.
3, 14 pipe culverts and 11 Km flexible pavement by
the end of May 2016.
Instructions were issued to the confractor to
execute 22 CD’s and 10 Kms flexible pavement
within a period of one month.
Since the working period for the above work is
only from October to April end, instructions were
given to the Superintending Engineer to monitor the
progress of work for a period of 1 month, if contractor
fails to achieve the above said progress in this period
and instructed to submit the specific proposal with
recommendations whether to take up the work with
the same agency or to rescind the contract.”
(emphasis supplied)
36. Vide letter dated 04.04.2016 (part of Ex.R10), GVR
has, inter alia, furnished the details of the materials procured as
well as the status of the culvert works. The relevant portion of the
status regarding the culvert works is as under:
“3. The modified programme will be submitted on
07.04.2016. As per modified programme the flexible
pavement of 7 Kms and 6 No’s Culverts already
completed and 16 No’s of Pipe/slab culverts will be
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COMAP No. 127 of 2025
completed in all respects by the end of April 2016.
The balance stretch will be completed after monsoon.
4. The Rigid Pavement work cannot be tackled until
closure of Road due to restricted width in ghat
section as the Slip form paver blocks the flow of
traffic and also in the interest of safety of the Road
users as traffic is prohibited during the laying of rigid
payment as per the norms.
5. xxxxx
6. Further it is reported that we have taken up
construction and widening of 26 nos. of Pipe / Slab
culverts wherever it is found that the safety road is
not affected due to widening/reconstruction work. The
remaining structures cannot be tackled until closure
of Road in the safety interest of the Road users. In
this regard we wish to submit that as there is no
change in formation levels the widening of these
culverts have been taken up based on the existing
top of culvert levels and the work is not stopped as
reported in your letter and they are in progress and
will be completed well before the onset of monsoon.
The present status of structures are as below”
Sl. Type of Units As per Completed Work Balance
No. Structures Agreement in Status
Progress
Widening
st
1 Slab Culverts No’s 12 0 10 2 Walls 1 lift
in progress
2 Pipe Culverts No’s 24 6 10 8 Head wall 1st
nd
& 2 lift in
progress
Reconstruction
3 Slab Culverts No’s 14 0 0 14 Will start
after Closure
of road.
(emphasis supplied)
– 23 –
COMAP No. 127 of 2025
37. In response to the said letter dated 04.04.2016 NHAI
vide its letter dated 05.04.2016 (part of Ex.R.9) intimated GVR
regarding the start of flexible pavement works as under:
“The proposal submitted vide your letter cited
above has been examined and as such to start the
work of flexible pavement work from Km 216.00 to
Km 237.00 may be taken up subject to the following
conditions:-
1. Quality Assurance, Monitoring and Supervision
should be as per Article 11 of the agreement.
2. Original agreement between M/s BSCPL
infrastructure Limited and M/s GVR Infra Projects
Ltd is not yet furnished till date.
3. The Batch Mix plant may be got inspected by
the Regional Officer (Mechanical) for the condition
and fitness of the plant.
4. Quality tests for the materials collected may be
got done both from your end and National
Highway Quality Control Authorities.
5. The Design Mix may be got approved from the
competent Authority.
6. As traffic flow in this stretch is around 17,000
PCU, all safety measures may be taken and
ensure that there is free flow of traffic during
execution of the work.
7. Suitable Traffic signals may be provided in this
stretch during execution of the work.”
(emphasis supplied)
38. In the meeting dated 27.04.2016 (part of Ex.R8), it was
noticed that in the previous meeting dated 14.03.2016 GVR had
– 24 –
COMAP No. 127 of 2025
assured that the culvert works would be completed (as noticed in
para 35 above). However, it was noticed by NHAI that no progress
has been achieved as per the said assurance. It was also noticed
that GVR had opened 25 culverts and not carried out the work
which was hazardous to the safety of the road users. Hence, GVR
was instructed to close the culverts and make the same safe for
road users. It was also noticed that since the rigid pavement work
was very important, if GVR proceeded with the same speed for the
execution of the work, the closing of the Shiradi Ghat highway for a
period of three to four months would be very difficult.
39. A meeting was held on 02.05.2016 (part of Ex.R8)
between the representatives of the NHAI and GVR. It is relevant to
notice the minutes of the said meeting, which are as under:
“The above work was entrusted to M/S GVR Infra
projects Ltd Chennai, on 06/11/2015. The site was handed
over on 23-12-2015 and the same has been declared as
appointed date by the Authority Engineer.
The Chief Engineer noted with displeasure regarding nil
progress of the above Project up to the end of April-2016,
even though it was assured by the agency to complete 22
nos of culverts and 10 Kms of flexible pavement during the
meeting held on 14-03-2016.
It is also reiterated by the Chief Engineer that the
monsoon rains will start from second week of May, and
observing the present methodology adopted by the agency
– 25 –
COMAP No. 127 of 2025
it would be vague to say that all the 22 culverts and 10 Km
of flexible pavement would be completed in next 10 days
and it clearly Indicates that it is not possible to complete
culverts and flexible pavement works before the onset of
monsoon. Hence it is very difficult to achieve the first mile
stone progress of 10% as on 23-06-2016 i.e, 180 days from
the appointed date at this juncture.
However once again the agency assured that the above
shortfall of progress will be made good by completing all the
25 nos of culverts which are already tackled by providing
necessary traffic safety measures alongwith 10 Kms of
flexible pavement before 12-05-2016. It is also discussed
and opined in the meeting that since there is lack of time for
bleeding for bituminous work and the pavement shall only
be made after monsoon.
The Assistant Executive Engineer, National Highway
Sub Division Sakaleshpura stated that, the approval to the
OGLs, Design and Drawings may be obtained from the
competent authority prior to commencement of any work.
The Chief Engineer instructed the agency to get the
approval to the OGLs, Design and Drawings from the
competent authority before commencement of any work.
Conclusion of the meeting:
It is instructed the field staff to closely monitor the day to
day progress of the work up to 12-05-2016 and final
decision of termination of contract will be taken on 12-05-
2016 after reviewing the progress of the work and a clear
decision would be taken with respect to termination of the
contract as discussed in the meeting held on 27th April-2016
and directed the Managing Director, M/S GVR Infra projects
Ltd Chennai asked to be present on that day.
The meeting was concluded with thanks to all the
officers present.”
(emphasis supplied)
– 26 –
COMAP No. 127 of 2025
40. It is pertinent to notice here that GVR vide its letter
dated 06.04.2016 intimated NHAI that it would be starting the
flexible pavement works between 216.00 km to 237.00 km. The
same was reiterated by GVR vide its letter dated 20.05.2016 (both
the letters are part of Ex.R.10). In response to the same, the NHAI
vide its letter dated 23.05.2016 (Ex.C.20) replied to GVR, wherein it
is stated as under:
“Please refer to your letter Dtd: 20.05.2016 cited
above wherein it is stated that the work of flexible
pavement work from Km 216.00 to 237.00 would be
stated as the material and machinery for laying crack
seal, DBM & BC is mobilized and also the batch mix
plant on lease basis from BSCPL is available at
Km.160 of NH 48.
Prior to this letter, in your letter Dtd: 04.04.2016
(ref 2), it was also stated the work of flexible
pavement would be started and this office vide letter
Dtd: 05.04.2016(ref 3) accorded permission subject
to certain conditions. Even then, no action has been
taken.
It is at this juncture, especially during the third
week of May 2016 wherein the pre-monsoon
showers have already begun, it is stated in your
letter Dtd: 20.05.2016 that the work would be started.
In this regard, in the proceeding of the meeting
held on 02.05.2015 (ref 1) under the chairmanship of
the Chief Engineer along with the officers concerned
and the representatives Shri Gangaprasad,
Managing Director, Shri Gopalkrishna and Shri
Venkateshwaralu were also present, the chief
Engineer reiterated that the monsoon rains would
– 27 –
COMAP No. 127 of 2025
start from second week of May, 2016 and observing
the present methodology adopted by the agency, it
would be vague to say that all the 22 culverts and 10
Kms of flexible pavement would be completed in next
10 days and it clearly indicated that it is not possible
to complete culverts and flexible, pavement works
before the onset of monsoon and it is very difficult to
achieve the first mile stone progress of 10% as on
23.06.2016 i.e., 180 days from the appointed date at
this juncture.
In the meeting your representatives assured that
the above shortfall of progress will be made good by
completing all the 25 nos of culverts which are
already tackled by providing necessary traffic safety
measures alongwith 10 kms of flexible pavement
before 12.5.2016 and it was also discussed and
opined in the meeting that since there is lack of time
for bleeding for bituminous work and the pavement
shall only be made after monsoon.
Also as many as 25 culverts as against 22 have
been tackled and it is required that these culverts
should be immediately tackled and completed before
the onset of monsoon. It is also should be that at one
culvert before the inspection of the Secretary, PWD
which was intended on 10.05.2016 concrete was laid
and the following day no curing was done. Also
during the inspection of the undersigned, it was
observed that the machinery were laying idle.
As regards flexible pavement it is reiterated that
as already discussed in the meeting held on
02.05.2016, and it was also discussed and opined in
the meeting that since there is lack of time for
bleeding for bituminous work and the payment shall
only be made after monsoon. Further, it is opined
that since there is already intermittent monsoon rains
and after completion of bituminous work there will not
be time for bleeding also. If there is no time for
– 28 –
COMAP No. 127 of 2025
bleeding there is every chance of damages to the
bituminous layer during monsoon.
The subject was discussed with the Chief
Engineer, National Highways and with the
Superintending Engineer, National Highways who
reiterated to adhere to the minutes of the
proceedings held on 02.05.2016.
Further, The Superintending Engineer, National
Highway circle has opined to start the work of flexible
pavment from reach 219.534(Kollahalli, starting point
of Sakaleshpura bypass) to Km 225.600 (Anemahal,
ending point of Sakleshpura bypass) at present
stage.
“Hence it is once again instructed to adhere to the
minutes of the meeting held on 02.05.2016”.
This is for information and further necessary
action.”
(emphasis supplied)
41. It is clear and forthcoming from the aforesaid
communications that NHAI had been following up with GVR
regarding construction of culverts from 14.03.2016 (as noticed in
Para 35 above) and even as on 23.05.2016 the construction of
culverts had not been completed by the agency. It is also
forthcoming from the said communications that the flexible
pavement works were required to be carried out consequent to the
completion of the culvert works. However, the said works had not
commenced till 23.05.2016, which has led NHAI to apprehend
– 29 –
COMAP No. 127 of 2025
regarding the quality of the asphalting work if the monsoon
commences. Hence, it is clear that it was not for the first time, that
NHAI had, vide the said letter dated 23.05.2016 (Ex.C20), called
upon GVR to commence the flexible pavement works.
42. NHAI vide its communication dated 24.06.2016
(Ex.C17) had in detail noticed the various works and the progress
of various work was adduced. It was noticed that “since about six
months there is no considerable progress and only meagre
progress is achieved”; that with regard to flexible pavement stretch,
the preliminary work concluded till about 2.20 kms. It was also
noticed that work on 25 culverts was started in December 2015 and
the widening had not been completed and that all the 25 culverts
had become hazardous locations. That road safety signs of 25
culverts were not provided and that work had completely stopped
due to litigation over the settlement of dues of the supervisory staff
and labourers of GVR. The mobilisation of material was also
noticed to be less than 50%. An explanation from GVR was sought
for all the deficiencies that were pointed out in the said letter.
43. NHAI vide its communication dated 30.06.2016
(Ex.R.21), notified GVR that it has not completed the first milestone
– 30 –
COMAP No. 127 of 2025
of 10% of the financial progress of the contract within 180 days
(i.e., within 22.06.2016). Hence, GVR was notified that the said
works were required to be completed within the cure period of 45
days from 23.06.2016. In the said letter-Ex.R21, the details of the
materials and equipment that had not been mobilised were set out.
Further, the progress of construction of the culverts (both pipe
culverts and slab culverts) was set out. It was specifically noted
that in respect of the said culvert works, only 15% of the physical
progress was achieved, i.e., 0.41% of the whole work. Further, with
regard to the flexible pavement works, physical progress is
achieved only up to 1.54%, i.e., 1.29% of the whole work.
Accordingly, GVR was notified that 1.70% physical progress has
been achieved as against 10% of the progress as required under
the agreement.
44. NHAI vide letter dated 16.07.2016 (Ex.C.44), which
had been issued during the cure period, notified GVR that despite
the notice- Ex.R21, action for making good the shortfall has not
been reported. It was also reported that progress has been
reviewed as on 12.07.2016, i.e., about 20 days of the cure period
having been completed and there was no significant progress in
the project site except collection of GSB material of 1900 COM.
– 31 –
COMAP No. 127 of 2025
Hence, GVR was called upon to explain as to how the shortfall
would be made good in the remaining period of 25 days of the cure
period.
45. At this juncture, it is pertinent to notice that there is no
material on record to indicate that GVR had responded to the said
cure period notice -Ex.R21. It is further pertinent to note that in all
the correspondence until the issuance of the said cure period
notice, GVR had not raised the contention that portions of the road
where the flexible pavement work was required to be carried out
overlapped with an earlier work. In fact, in the letter dated
05.04.2016 (part of Ex. R.9) (which has been noticed at para 37
hereinabove) GVR has been specifically called upon to carry out
the flexible pavement works. However, in none of the
correspondence thereafter, the issue with regard to the overlap has
been raised. In all the correspondences the only aspect that has
been repeatedly raised by NHAI with GVR is the fact that the
culvert work had not been completed and the flexible pavement
work had not commenced; as also the materials as well as
machinery had not been mobilized as required.
– 32 –
COMAP No. 127 of 2025
46. The inspection note of the inspection dated 22.09.2016
(Ex.C46) also discloses that the material at the site was 42.15%. It
is also noticed that no labourers were engaged during monsoon for
maintenance work. With regard to the extent of work, it is
necessary to extract the relevant portion of the inspection note,
which reads as under:
“On the day of inspection the patching of pot holes
at Km:232 in flexible pavement reach is in progress.
In the balance reach of flexible pavement lot of pot
holes has been observed the same shall be covered
immediately to avoid inconvenience to the road
commuters.
In the proposed Rigid Pavement reach from
Km:250.620 to 263.000, lot of pot holes are observed
causing inconvenience to the road users the same
may be covered and road shall be maintained traffic
worthy by providing Wet Mix Mecadam immediately
by engaging more maintenance batches as it is the
primary responsibility of the tender agency.
The centering/shuttering for three half done
culverts has been erected in Km:259. It is reported by
the contractor that the concrete batch of 40 members
has been arrived at the project site. The contractor
has been instructed to mobilize still more concrete
batches to complete the culvert work in time.
A meeting has been convened in the Shiradi Ghat
inspection bungalow with the officials and the
contractor.
It is briefed to the agency regarding the meeting to
be held on 26-09-2016 under the chairmanship of
Principal Secretary, PWP & IWT Dept. Government
of Karnataka with all the District Commissioners and
Superintendent of Police of the concerned districts to
discuss regarding the traffic closure from 15-10-2016.
– 33 –
COMAP No. 127 of 2025
But during the discussion the contractor is requesting
for traffic closure from 01-11-2016 due to the
following reasons:
• The work could not be started since the
monsoon rains are still continuing.
• The scope of work in respect of culvert
widening is increased.
• Mobilizing the Slip form paver with automatic
dowel bar inserter is taking time.
• The agency sought permission for starting the
bituminous work and culvert works up to 01-
11-2016, which in turn helps to cash flow for
further work.
Regarding traffic closure, it is instructed to adhere
as was committed in the meeting which held under
the chairmanship of Chief Engineer, National
Highways on 16-09-2016. It is instructed the agency
to prepare the programme on stage construction
basis. Culvert works shall be completed in the first
stage of 5 kms from where the rigid pavement work
could start shall be completed first.
It is also instructed to keep continuing the material
collection like sand and aggregates.
Regarding flexible pavement, the bituminous work
may be get started if the rain stops.”
(emphasis supplied)
47. The NHAI vide the Official Memorandum [OM] dated
24.09.2016 (Ex.C51) [debarment order] debarred the participation
of GVR in all future tenders of the NHAI-Zone of PWD, Karnataka
and as also recommended to the Ministry of Road Transport and
Highways, Government of India [MORTH], to take similar action of
– 34 –
COMAP No. 127 of 2025
debarment till 23.09.2017 or the further notice, whichever, is earlier
of GVR in other centrally sponsored works elsewhere in the
country. It is forthcoming that the OM dated 24.09.2016 (Ex.C51)
was issued having regard to the fact that GVR had delayed in the
execution of three contracted works, in which the present
contracted work was also included.
48. GVR vide letter dated 24.10.2016 (Ex.C52), requested
for withdrawal to revoke the said debarment order. In the said
reply, GVR has set out the progress of works in each of the
contracts which was the subject matter of the debarment order. It
had been represented by GVR that the contracted works were a
special type of project wherein, the methodology of execution is
totally different from other road construction projects, as the road
traverses in the ghat section and reserve forest area. It was also
stated that the said region experiences one of the highest rainfalls
starting from May to October end and that the works can be
executed only during November to April. Hence, it was stated that
“huge quantities of materials have to be procured for uninterrupted
progress of work during the available non-seasonal rainfall period
of four months”. GVR also set out the status of its collection of
material, as well as the mobilization of equipment.
– 35 –
COMAP No. 127 of 2025
49. The inspection note of the inspection held on
25.10.2016 (Ex.C45) in the presence of the representatives of
NHAI and M/s. Suryodaya Infra Pvt Ltd (stated to be the sub-
contractor of GVR) noticed that GVR had failed to achieve the
assurances that were given by them in the meeting held on
13.10.2016. Further, the sub-contractor agreed to complete 36 out
of the 71 culverts by 15.11.2016, which is a prerequisite for closing
of the road. It was decided to give a last and final chance to GVR
for making use of the working period from October, 2015 to April
2016, even though 18 months is stipulated as the working period
as per the agreement. It was also noticed that the material that was
mobilised was 42.15%. It is also pertinent to note that GVR was
required to take up the undisputed extent of 6.06 kms and there is
reference to submission of a change of scope proposal to be
submitted.
50. However, it is pertinent to note here that the change in
the scope of work as referred to in the inspection dated 25.10.2016
(Ex.C45) is occasioned due to the inability of GVR to complete the
work within the time stipulated as per its assurances. Despite
periodic reviews and setting milestones for completion of culvert
works and commencement of flexible pavement works, GVR failed
– 36 –
COMAP No. 127 of 2025
to complete the said milestones. As already noticed above, the
flexible pavement work was required to be completed prior to the
commencement of monsoon. However the culvert work itself, which
was required to be done prior to commencement of the flexible
pavement work, was also not done.
51. Vide OM dated 18.11.2016 (Ex.C53), the debarment
order was withdrawn since GVR has assured that the work
specified would be completed within the stipulated period.
52. A meeting was held on 05.11.2016 between the
representatives of the parties. The relevant extract of the minutes
of the meeting (part of Ex.R8) is as under:
“A meeting was held on 05-11-2016 and the following
points were discussed:-
The Chief Engineer has again instructed to adhere the
dates given by the Principal Secretary, Public Works,
Ports & Inland Water Transport Department, Bangalore
during the inspection of Shiradi Ghat on 04-11-2016.
During the inspection the Agency has assured as
follows:
1. Out of 74 CD’s, 46 CD’s will be completed before
15-11-2016 and balance will be completed by the end
of December 2016.
2. DLC Paver will be brought to site on: 07-11-2016.
– 37 –
COMAP No. 127 of 2025
3. Slip form paver will be brought to site on: 20-11-
2016.
It is instructed the agency to complete the all the work
as per his assurance before 20-11-2016 without fail.
Further, instructions are also issued to the
Superintending Engineer and Executive Engineer to
watch the progress of the agency and submit the report
on daily basis, if progress of the work is not satisfactory
the Superintending Engineer and Executive Engineer are
Authorized to Terminate the Contract without taking
permission from the Chief Engineer’s Office duly
observing all precautionary measures and action taken
may be reported to this office.
It is decided to convey a meeting on 20-11-2016 at
11.30 A.M to take further action.”
(emphasis supplied)
53. It is clear and forthcoming from the said minutes that
out of 74 culverts, GVR had assured, inter alia, that 46 culverts
would be completed before 15.11.2016 and the balance would be
completed by the end of December-2016. Further, the pavers were
to be brought to the site by 20.11.2016.
54. A meeting was once again held on 23.11.2016
between the representatives of the parties. The minutes of the said
meeting (part of Ex.R8) clearly noted that 42.87% of the materials
were collected to the site. The equipment brought to the site was
also noticed. Thereafter, it is also noticed that GVR had failed to
– 38 –
COMAP No. 127 of 2025
complete the progress of the work as assured by them. Hence, in
the interest of the completion of the work, GVR was also permitted
to sub-contract the work. Relevant extracts of the said minutes is
as under:
“During the last meeting held on 05-11-2016,
instructions were issued to the agency to complete the all
the work as per his assurance before 20-11-2016 without
fail. During the meeting held on 05-11-2016, the MD, M/s
GVR Infra Projects Limited, Bangalore has reported that if
agency fails to deploy the slip form paver on or before 20-
11-2016 any decision may take to rescind the contract or
to change the subcontract.
Further, instructions are also issued to the
Superintending Engineer and Executive Engineer to
watch the progress of the agency and submit the report
on daily basis, if progress of the work is not satisfactory
the Superintending Engineer and Executive Engineer are
Authorized to Terminate the Contract without taking
permission from the Chief Engineer’s Office duly
observing all precautionary measures and action taken
may be reported to this office.
In observing the above progress of the agency, till
today agency has not adhered to the dates assured by the
agency in any of the work from last one year. This is a
very important nature of Rigid Pavement work, if
contractor goes with the same speed in executing the
above work the closing of Shiradi Ghat highway for a
period of 3-4 months is not possible which will lead-to-
Chaos and resentments.
During the inspection of the Principal Secretary, Public
Works Department on 04-11-21016, instructions were
issued to the undersigned to watch the progress of the
contractor upto 21-11-2016, if contractor fails to achieve
– 39 –
COMAP No. 127 of 2025
progress as per his assurance action may be initiated to
terminate the contract.
Under the above circumstances, in observing the
progress of the subcontractor from last 3-4 months
contractor fails to achieve the progress as per his
assurance.
As discussed with the MD, M/s GVR Infra Projects
Limited, Bangalore instead of terminating the contract, he
requested to change the existing sub contract to the M/s
Ocean Constructions(India) Pvt ltd, Mangalore. The same
was consented by the SE, NH Circle, Bangalore, EE NH
Division, Mangalore and AEE NH Sub Division,
Sakaleshpura since first project was executed by the M/s
Ocean Constructions (India) Pvt ltd, Mangalore as they
have all equipments and man power required for the work
and also they have experience in the last project.
Hence, in the interest of work and public, it is decided
allow M/s GVR Infra Projects Limited to sub contract the
work to the M/s Ocean Constructions (India) Pvt ltd,
Mangalore since M/s GVR Infra Projects Limited himself
suggested the name of M/s Ocean Constructions(India)
Pvt ltd, Mangalore and directions were issued to the M/s
GVR Infra Projects Limited, Bangalore to give a proposal
of subcontract in the name of M/s Ocean
Constructions(India) Pvt ltd, Mangalore immediately and
make all contractual arrangements within 28-11-2016 and
directed to attend this office with all records on 28-11-
2016. If these things are not fulfilled within 28-11-2016 the
Executive Engineer is directed to terminate the contract
by 30-11-2016 and report to this office by 01-12-2016.
Meeting was ended with thanks to the Chair.”
(emphasis supplied)
55. It is pertinent to note that in the said meeting held on
23.11.2016, it has been specifically noticed that GVR has not
– 40 –
COMAP No. 127 of 2025
adhered to the dates assured by it for completion of the work for
one year. Hence, since GVR was unable to complete the works as
required, it suggested an appointment of a specific sub-contractor
which was permitted by NHAI.
56. Thereafter, vide communication dated 02.12.2016
(Ex.C.29), NHAI issued a notice for termination as per Clause
23.1.2 of the agreement. In the said notice, it was intimated that
180 days from the appointed date expired on 22.06.2016, and that
10% of the project milestone had not been completed. As per the
said date, payments have been made only with respect to the first
and second instalment of the mobilisation advance. GVR was also
intimated that despite the letter dated 30.06.2016 (Ex.R.21) issued
by NHAI to cure the said defect, the same had not been done. It
was further noticed that GVR in the meeting dated 05.11.2016 (part
of Ex. R.8), had represented that it would complete 46 out of 74
CDs by 15.11.2016 and the balance by 31.12.2016 and that
mobilisation would be done by 20.11.2016 at the site. However, in
the meeting dated 23.11.2016, it was noticed that GVR had failed
to adhere to the said assurance. Hence, NHAI notified GVR of its
intention to issue a termination notice and called upon GVR to
respond within 15 days.
– 41 –
COMAP No. 127 of 2025
57. The said letter dated 02.12.2016 (Ex.C29) was
responded to by GVR by its letter dated 12.12.2016 (Ex.C30). GVR
responded by stating that the roads were required to be blocked for
the entire period of the contract. That the delay in execution of the
project was not attributable to them and in the meeting held on
09.11.2016, all the issues were explained, and a request was made
for change of milestones. It was alleged that the delays were due to
the government agencies and department officials. GVR intimated
that they are awaiting the road closure to start the construction
work. Hence, they requested for withdrawal of the notice for
termination.
58. Vide Letter dated 02.01.2017 (Ex.R.22) written by the
Executive Engineer, NHAI, Mangalore Division to the
Superintendent Engineer, NHAI, it was placed on record that GVR
was able to achieve total progress of 3.78% after completion of 11
months of the 18 months of the tender period. It was further
specifically noted that in the inspection dated 04.11.2016, GVR had
assured to procure the materials and complete 46 culverts out of
74 culverts on 15.11.2016 and the remaining culverts by
30.12.2016. However, the said progress has not been achieved. It
was further noticed that on 19.12.2016, the progress of the work
– 42 –
COMAP No. 127 of 2025
was once again reviewed and even after a lapse of more than one
and a half months from the inspection dated 04.11.2016, only 23
culverts had reached road level. Further, when an explanation was
sought from GVR, they gave a commitment letter dated
21.12.2016, which they had failed to comply with. Hence, it was
reported that GVR was not able to complete the culverts as per its
commitment and there was no further collection of aggregates at
the site. It was also noticed that the requisite pavers with DBI
(Dowel Bar Inserter) had not been procured.
59. NHAI issued the termination notice dated 04.01.2017
(Ex.C35). In the said notice, a detailed reference has been made to
all the correspondence exchanged between the parties as well as
the relevant stipulations in the agreement. It was placed on record
that since the first milestone was not completed, the contract was
terminated as per Clause 23.1.1 C and 23.1.1.O.
60. The Issue No.6 is whether the termination by NHAI is
valid and legal. Issue No.7 is whether GVR achieved the first
financial milestone in terms of the contract. The Arbitral Tribunal,
while coming to the conclusion that the action of the NHAI in
terminating that contract is not valid and legal, has merely noticed
– 43 –
COMAP No. 127 of 2025
some of the communication between the parties. However, the
arbitral tribunal did not notice the communications in terms of the
sequence of events so as to appreciate and adjudicate as to
whether the GVR had completed the first milestone. Further, while
considering Issue No.7, the Arbitral Tribunal concluded that the
GVR was prevented by NHAI in completing the works in terms of
the contract. The said conclusion was arrived at having regard to
the finding recorded in Issue No.4.
REGARDING FLEXIBLE PAVEMENT WORKS:
61. Issue No.4 was with regard to whether there was
overlapping in the flexible pavement works and as to whether GVR
was prevented from completing the flexible pavement works. The
Tribunal, while considering Issue No.4, held and concluded as
under:
“Thus A.T finds that,
i) The Claimant was prevented from carrying out
flexible pavement work upto 23.05.2016. The
claimant completed the work of flexible pavement in
the Town Limit of Sakaleshpur from Km 219.534 to
Km 225.600 for a length of 6.06.Km on 09.06.2016.
ii) The Authority instructed the Claimant on
25.10.2016 (Ex C-45) to carry out the remaining
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length of 14.558 Km by providing.30 mm B.C, which
resulted in Change in Scope of work.
iii) No directions to the claimant were given by the
Authority/Authority Engineer between 23.05.2016 to
25.10.2016 regarding carrying out flexible pavement
work
iv) The respondent has also not included this flexible
pavement stretch while inviting tender.
The AT comes to the conclusion that
i) The road length from KM 216.000 to Km. 219.534
and Km.225.600 to KM 237.000 over lapse with work
proposed to be taken up by the NHẠI.
ii) The delay in taking the decision by the Authority
has prevented the Claimant in completing the flexible
pavement work from KM 216 to KM 237 before June
2016 as per programme submitted by him.”
62. The said finding was recorded by the Arbitral Tribunal
noticing the letter of NHAI dated 23.05.2016 (Ex.C-20) written to
GVR; the inspection note dated 25.10.2016 (Ex.C-45) and the letter
dated 05.01.2017 (Ex.C-87) written by the NHAI-Mangalore
Division to the NHAI, KR Circle, Bangalore.
63. At this juncture, it is pertinent to note that the entire
contents of the letter-Ex.C20 have been extracted at paragraph 40
supra. The context of the letter i.e., the previous correspondence,
has also been noticed at paragraphs 35 to 39 supra. It is clear and
forthcoming from a plain reading of the same that the GVR was
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called upon to start the flexible pavement work in Sakleshpur Town
limit between 219.432 KM to 225.50 KM (6.07 KM), which is the
undisputed portion at that point of time. This was in the context of
NHAI noticing that GVR had consistently defaulted in completing
the works as was required to be done by them.
64. With regard to the inspection note dated 25.10.2016
(Ex.C-45), which has been extracted by the Arbitral Tribunal, it is
noticed that the preamble of the said inspection note has been
extracted in the findings of the Arbitral Tribunal. In the said
inspection note, consequent to the review of the progress, it was
noticed as under:
“The Agency has agreed to complete 36 culverts out of 71
within 15-11-2016 which is a prerequisite for closing the
road. The Assistant Executive Engineer briefed the
necessity of the construction of guard wall on valley side
and drain on hillock side before laying GSB wherever the
width constraints are encountered for ensuring confinement
to the GSB as well as safe passage to the slip from paver
movement. The agency has instructed to deploy additional
concrete batches immediately for such locations.”
(emphasis supplied)
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65. Further, in the said inspection note, it was also noticed
that the mobilisation of material by GVR was of a cumulative of
42.15% and that there was no progress achieved since the
previous meeting. The GVR had given various assurances with
regard to further mobilization of material. Hence, in the inspection
note, it was concluded that the assurance of GVR about the
progress would be reviewed on 15.11.2016 and a final decision will
be taken.
66. It is clear and forthcoming from the said inspection and
all the prior communications between the parties, as well as the
Minutes of the Meetings that GVR had never completed the work in
terms of the contract. The consistent defaults of GVR had been
repeatedly noticed and placed on record by NHAI in the various
communications and meetings. The timelines were reviewed
periodically by NHAI merely to ensure compliance of the same by
GVR, which has also not yielded any result. It is pertinent to notice
here that even as on the said date of inspection i.e., 25.10.2016
i.e., after lapse of more than four months of the expiry of the first
milestone period of 180 days, the GVR was yet to complete even
the construction and modification of culverts.
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67. With regard to the contention of GVR regarding closure
of the road, the request of GVR for closure of the road for carrying
out rigid pavement work was made vide letter dated 04.04.2016
(part of Exhibit R10). In response to the said request, the Assistant
Executive Engineer, NHAI Sakleshpur in its communication dated
20.04.2016 (Ex.C.25) to the Executive Engineer, NHAI, Bangalore
Division, a copy of which was marked to GVR has inter alia stated
as under:
“Since this is an important time bound state
project, the above project site is located on the main
National Highway No-48, connecting Capital city
Bangalore and port city Mangalore. The construction
of rigid pavement work is to be taken up by totally
closing the vehicular traffic on the above project
stretch for as minimum period as possible to avoid
inconvenience to the road users. There will be lot of
pressure from the Public as well as from the elected
representatives to complete the work early in view of
traffic closure.
Keeping in view the above condition of the project
it is instructed the tender agency to collect minimum
of 50% of total requirement of the construction
materials so that the progress of the work should not
be hampered or stopped in the middle for want of
construction materials. Sometimes there may be
imposition of ban on the mining activities of sand and
metal from the district administration side time to
time, which in turn affect the progress of the project.
Keeping in view of the above consequences the
tender agency may be instructed to explore the
possibility of hiring the level ground for collection of
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construction materials, the same has been done by
the adjacent contractor while executing the work of
“Providing Rigid pavement from Km:237.000 to
Km:263.000 (Shiradi Ghat) of NH-48, B-M section”
and identified several stacking yards nearby and
collected 50% of construction material in advance.”
(emphasis supplied)
68. It is clear that the work of construction and modification
of culverts and other works were to be completed before the task of
asphalting the road could be done. This aspect has been
specifically stipulated as is forthcoming from the Minutes of the
Meeting held on 16.09.2016 (Ex.C.19). Perusal of the said minutes
indicates that NHAI has specifically stipulated that the culverts of at
least 5 km stretch of the road should be completed before the start
of the rigid pavement work. It was also noticed that the requisite
material was not available at the site. A schedule for the
procurement of machinery was also specified. Since a request was
made by GVR for closure of the road, it is noticed that NHAI has
specifically briefed GVR of the inconvenience caused due to
closure of road which is an important national highway connecting
the capital city-Bangalore and the port city-Mangalore; as also the
sensitiveness of the project. It is in the said context, the NHAI had
specifically stipulated that the closure of the road could be done
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only if the requisite material is available at the site and the culvert
work was completed. GVR was called upon to give a programme
of work in which the requisite stipulated works would be carried out.
However, the said aspect of the matter which is forthcoming from
material on record has not been noticed by the Arbitral Tribunal
while recording its findings.
69. The Tribunal has also noticed the letter dated
05.01.2016-Ex.C87, whereunder the NHAI-Mangalore Division had
reported to the NHAI-K.R.Circle, Bangalore regarding the other
works as well as the present contract in question. In this context,
NHAI, Mangalore Division had opined to the NHAI, Bangalore
Division that the work pertaining to the present contract was
required to be done in precedence over the other works. The same
clearly falsifies the contentions ought to be taken by GVR that it
had been orally asked not to carry out the works which was
overlapping with the present works.
70. It is clear from the sequence of communication
between the parties as well as the minutes of the meeting (as
noticed at paragraphs 35 to 54 herein above) that GVR had
defaulted in the timelines stipulated for completion of the various
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works. The periodic assurances given by GVR from time to time in
the various meetings and letters have not been adhered to. It is
pertinent to notice (at cost of repetition) that the first milestone of
180 days from the appointed date expired on 22.06.2016, within
which GVR was required to complete 10% of the value of the
contract. The NHAI had vide its communication dated 30.06.2016
(Ex.R.21) notified GVR that since the first milestone was not
completed within the stipulated time, the same was required to be
completed within 45 days from 23.06.2016 (cure period). A
reminder was issued vide letter-Ex.C.44 during the cure period
whereunder it was indicated that there was no significant progress
in the work. Despite the same the requisite work was not
completed even during the cure period. Subsequently, the
debarment order (Ex.C.51) was issued, which was withdrawn (vide
Ex.C53 dated 18.11.2016). Further, the notice for termination dated
02.12.2016 (Ex.C.29) was issued consequent to which the
termination notice dated 04.1.2017 (Ex.C35) has been issued.
71. As already noticed above, there were various
correspondences exchanged and meetings that were held after
issuance of the debarment order and before its withdrawal; as well
as after issuance of the notice for termination – Ex.C29 and the
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termination notice – Ex.C35. In none of the said communication
there was request by GVR for closure of the road while carrying out
the flexible pavement works.
72. The Tribunal had concluded that there was overlapping
from 216 km., to 219.435 km., and from 225.600 km., to 237.000
km., and that the delay by NHAI in taking the decision prevented
GVR from completing the flexible pavement work with regard to the
said extent of work. However, the Tribunal had also concluded that
GVR had completed the work of flexible pavement in the town limit
of Sakleshpura for the undisputed extent of 6.066 km. It was
concluded that GVR was prevented from carrying out the flexible
pavement work upto 23.05.2016.
73. It is clear from the aforementioned discussion that the
findings of the Tribunal on Issue No.4 as well as Issue No.6 and7
have been recorded without noticing all the material available on
record and the said findings are patently illegal.
REGARDING RIGID PAVEMENT WORKS:
74. Issue No.5 was with regard to the road between
250.620 km. to 263.00 km., i.e., the extent of road where the rigid
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COMAP No. 127 of 2025
pavement work was required to be carried out. The Tribunal
concluded that the said work could not be carried out without
closing the said road.
75. It is pertinent to note here that the closure of the road
to carry out the rigid pavement works is not contemplated under the
agreement. GVR had requested for closure of the road to carry out
the rigid pavement works. However, the NHAI had acceded to the
request of GVR with regard to closure of the road upon GVR
completing the culvert works. The material on record, as already
noticed above, would clearly indicate that GVR had not even
completed the work of construction/modification of the culverts in
the section of the rigid pavement works until the date of termination
of the agreement. The finding of the Tribunal that the said work
could not be carried out without closure of the road is without taking
into consideration the material which indicated that the culvert
works were required to be completed before contemplating closure
of the road.
76. As noticed at para 68 above, the request of GVR for
closure of the road was acceded to by NHAI only in the interest of
the works being completed expeditiously subject to certain
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COMAP No. 127 of 2025
conditions. Further, it is to be noticed that when the request by
GVR for closure of the road was made, NHAI considering the same
request, noticed the importance of the road vis-Ã -vis its connectivity
etc., as also noticing that GVR had delayed in the completion of the
works clearly specified that the request for closure of the road
would be considered upon completion of the
construction/modification of the road as well as upon GVR
mobilizing the requisite material. The aspect regarding mobilizing
the material was specifically stipulated by NHAI since it had
apprehended that after closure of the road, GVR would not have
been able to complete the work within the time stipulated by it. This
aspect of the matter is clear and forthcoming from the
communications, as noticed above, which has not been
appreciated by the Tribunal. Hence, the finding of the Tribunal on
Issue No.5 is ex-facie patently illegal.
77. With regard to the scope of this Court as contemplated
under Section 37 of the A & C Act, it is relevant to notice the
judgment of the Supreme Court in the case of Dyna Technologies
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Private Limited v. Compton Greaves Limited1, wherein it has
been, inter alia, held as under:
“34. The mandate under Section 31(3) of the
Arbitration Act is to have reasoning which is
intelligible and adequate and, which can in
appropriate cases be even implied by the courts from
a fair reading of the award and documents referred
to thereunder, if the need be. The aforesaid provision
does not require an elaborate judgment to be passed
by the arbitrators having regard to the speedy
resolution of dispute.
35. When we consider the requirement of a
reasoned order, three characteristics of a reasoned
order can be fathomed. They are: proper, intelligible
and adequate. If the reasonings in the order are
improper, they reveal a flaw in the decision-making
process. If the challenge to an award is based on
impropriety or perversity in the reasoning, then it can
be challenged strictly on the grounds provided under
Section 34 of the Arbitration Act. If the challenge to
an award is based on the ground that the same is
unintelligible, the same would be equivalent of
providing no reasons at all. Coming to the last aspect
concerning the challenge on adequacy of reasons,
the Court while exercising jurisdiction under Section
34 has to adjudicate the validity of such an award
based on the degree of particularity of reasoning
required having regard to the nature of issues falling
for consideration. The degree of particularity cannot
be stated in a precise manner as the same would
depend on the complexity of the issue. Even if the
Court comes to a conclusion that there were gaps in
the reasoning for the conclusions reached by the
Tribunal, the Court needs to have regard to the1
(2019) 20 SCC 1
– 55 –
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documents submitted by the parties and the
contentions raised before the Tribunal so that awards
with inadequate reasons are not set aside in casual
and cavalier manner. On the other hand, ordinarily
unintelligible awards are to be set aside, subject to
party autonomy to do away with the reasoned award.
Therefore, the courts are required to be careful while
distinguishing between inadequacy of reasons in an
award and unintelligible awards.”
REGARDING ISSUE NO.2 – WHETHER THE SITE WAS PORCURED
IN ACCORDANCE WITH AGREEMENT:
78. The Arbitral Tribunal had concluded, while considering
Issue No.2 that “the project highway site is not procured by the
parties in accordance with the agreement.” In this context, the
Tribunal noticing the letter dated 17.12.2015 (Ex.C24) wherein
GVR was instructed to inspect the site and prepare a memorandum
as per Article 8.2., held that the parties had not followed the said
instructions and the conditions of the contract; but simply enclosed
Schedule-A to the Agreement and road details.
79. It is relevant to notice that the works that were required
to be carried out under the agreement were upon an existing
highway. There was no fresh acquisition of land from any private
party. The subject matter of the contract was not laying down of a
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fresh road. Under the circumstances, the finding of the Tribunal on
Issue No.2 is ex-facie to be interfered with as patently illegal.
REGARDING THE COUNTERCLAIM OF NHAI:
80. The NHAI had made a counterclaim of ₹79,65,98,050/-. The
Tribunal had framed Issue No.9 with regard to the counterclaim of
NHAI. The said counterclaim was quantified primarily taking into
account the value of the work that was subsequently entrusted to
another agency for completion, which was in a sum of ₹74 Crore.
The other claims are with regard to performance security bank
guarantee, mobilization advance bank guarantee, legal expenses
and valuation of unpaid works. However, the said finding recorded
by the Tribunal rejecting the counterclaim is primarily premised on
the finding recorded on Issue No.6 that the termination of the
agreement by NHAI was not proper. The said finding on, inter alia,
Issue No. 6 being patently illegal, the finding of the Tribunal
rejecting the counterclaim is also to be set aside. However, the
parties are at liberty to initiate arbitration proceedings with regard to
adjudication of the said aspect.
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OTHER ISSUES:
81. Issue No.1 framed by the Tribunal is with regard to the
duration of the contract. The Tribunal had concluded that the
duration of the agreement was 24 months; the same is on the basis
of the schedule to the agreement. A perusal of various materials on
record would clearly indicate that GVR has also admitted that the
duration of the agreement is 18 months. A specific reference is to
be made to letter dated 25.11.2015 (Ex.C3) written by GVR while
furnishing the bank guarantee, whereunder they indicated that they
were planning to complete the project in 6 months instead of 18
months. The duration of the agreement as 18 months is also
mentioned by GVR in its letter dated 25.10.2016 (Ex.C28).
Accordingly, the finding of the Tribunal in Issue No. 1 is ex facie
patently illegal.
82. Issue No.3 is whether the Authority Engineer is
required to be an independent engineer. The Tribunal concluded
that NHAI cannot appoint its own engineer as Authority Engineer.
In this context, it is pertinent to note that NHAI is required to
appoint an Authority Engineer in terms of Article 18 of the
Agreement and that a ‘consulting engineering firm’ must be
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appointed. Appointment of a government entity as an authority
engineer is also permitted provided that, inter alia, the same should
not be owned or controlled by NHAI.
83. The requirement of appointing an Authority Engineer is
only with the intention of ensuring that an independent perspective
and advice is available to NHAI when it reviews the work under the
contract in question. The said appointment would not entitle GVR
to allege breach of the terms of the agreement. Hence, the findings
of the Arbitral Tribunal on Issue No.2 are also to be set aside on
the ground of patent illegality.
84. In view of the aforementioned discussion, the findings
of the Arbitral Tribunal on Issue Nos.1 to 7 are set aside.
Consequently, Issue No.8 whereunder the claims made (Claim 1 to
20) by GVR were considered and the damages have been
awarded with respect to some of the claims are also set aside.
Liberty is reserved to the parties to re-arbitrate on Issue No.9
regarding counterclaim.
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85. The appeal is partly allowed in the aforementioned
terms.
SD/-
(VIBHU BAKHRU)
CHIEF JUSTICE
SD/-
(C.M. POONACHA)
JUDGE
BS/YAN/PMP/RKM/ND
