Free Demo Request

JNPT challenges arbitration award on damages claim favouring Singapore’s PSA

Date 06-Nov-2017
Subject JNPT challenges arbitration award on damages claim favouring Singapore’s PSA

Jawaharlal Nehru Port Trust (JNPT), India’s biggest state-owned container port, has filed an appeal in the Mumbai High Court challenging the award by an arbitration panel rejecting its demand to claim liquidated damages of over ?500 crore from Singapore’s PSA International Pte Ltd – the world’s biggest container port operator.

The damages claim was filed in 2015 on a tender that collapsed in 2012 after PSA failed to sign an agreement within the stipulated time on winning the deal to build a new container terminal at JNPT.

“The arbitration award went against us,” Neeraj Bansal, Deputy Chairman of JNPT, told BusinessLine. The arbitration award said that since PSA didn’t sign the concession agreement, it is not binding on them. So, they are not liable for any consequences.

“We have challenged the award in the Mumbai High Court; the hearing is coming up soon,” Bansal said, adding that the port trust has hired senior counsel Rafique Dada to argue the case.

“PSA did not sign the agreement, but it participated in the tender process; it ran all the way to the finishing line. But, when we gave the document to sign, it put some conditions and refrained from signing,” Bansal said. “The arbitration award came as a shock to us,” he said, adding that the award was given after two hearings.

“In the last minute, PSA came up some excuse; I’ve already given the document for signing. So, they wasted this entire time. There is an audit objection saying that because of this, JNPT lost money,” he added.

The challenge of the arbitration award comes barely two months before PSA will start operating the first phase of the same project, which it won in a re-tender, quoting revenue share that was 15 per cent lower than it did in the first round of bidding.

The biggest FDI
The contract involves the biggest single foreign direct investment of as much as ?3,100 crore in an Indian port project.

This was the first instance of a Central government-controlled port seeking liquidated damages from a successful bidder of a contract for failure to sign a concession agreement within the stipulated time after the sector was opened to private investments in 1997.

PSA International is fully-owned by Temasek Holdings Pte Ltd, the sovereign wealth fund of Singapore.

In October 2012, JNPT withdrew the letter of award given to a consortium led by PSA after the group failed to sign a concession agreement – a document that sets out the terms and conditions of a port contract – even a year after it was awarded the project in September 2011 in a public auction.

JNPT subsequently encashed the bid security of ?67 crore submitted by PSA for the ?6,700-crore project that was designed to load 4.8 million TEUs a year.

The consortium of PSA and local firm ABG Ports Ltd (now re-named Star Ports Ltd) was awarded the project after it quoted a record high revenue share then of 50.828 per cent in a public tender.

Concession pact
The winning bidder has to sign the concession agreement within 30 days of accepting the letter of award for the project, according to tender conditions. Despite repeated extension of time, PSA didn’t sign the agreement.

When the project was re-tendered in June 2013, PSA applied on its own and won the auction again after emerging the highest bidder by offering a revenue share of 35.79 per cent, which was 15 per cent lower compared to the 50.828 per cent quoted in the earlier round in 2011.

The scrapping of the first tender and the consequent delay raised the project cost from ?6,700 crore to ?7,915 crore, an increase of ?1,215 crore, and pushed back the construction of the new facility by at least five years, resulting in loss of business/opportunity costs, JNPT said in its claim.

Source:- thehindubusinessline.com

High-volume of Loyal
and Trusted Customers!

We feel pride in offering our customers the wide range of products of the top leading brands of the world.

BCG
Binani
Godrej
Induslnd Bank
Indian Oil
ITC Limited
Jindal Steel Power
Milton
Paharpur
Philips
Reliance
TATA Chemicals Limited
The Times of India
Wipro
Yamaha
Dalmia Bharat Cement
JCB
Pernod Ricard