Delhi Metro Phase-III Project: Delhi High Court Upholds Arbitral Award Against DMRC Over ₹3.47 Crore ECC Claim

The Delhi High Court has recently upheld an arbitral award requiring Delhi Metro Rail Corporation Ltd (DMRC) to reimburse contractor GYT TPL Joint Venture towards ₹3.47 crore in Environmental Compensation Charges (ECC), GST-related burdens and other additional costs.

These arose during the execution of the Delhi Metro Phase III Dilshad Garden–New Bus Adda corridor project, including during the extended contract period.

Justice Subramonium Prasad held that the Environmental Compensation Charges imposed during construction pursuant to Supreme Court directions to control pollution were not ordinary “taxes”, “duties” or “levies” covered by Clause C2.6(c) of the contract. This clause barred adjustment of the contract price for changes in taxes, duties or levies, including introduction of new ones.

"Since ECC was not a tax or levy but an additional charge imposed by the Apex Court, the clause C2.6(c) could not have been applicable. The Petitioner has not demonstrated that the said clause unequivocally and unambiguously bars such a claim irrespective of the cause or timing of the imposition. The interpretation adopted is not so irrational or implausible asto warrant interference.," the Court observed.

DMRC floated the tender on August 5, 2014 for construction of elevated viaducts and eight elevated stations on the Delhi Metro Phase-III extension corridor from Dilshad Garden to New Bus Adda in Ghaziabad.

The corporation awarded the contract worth about ₹665.87 crore to GYT TPL Joint Venture on December 9, 2014. The agreement was executed on January 7, 2015.

The project was scheduled to be completed by June 14, 2017. It was completed on February 5, 2019 after a delay of about 19 months.

Disputes arose over prolongation costs, GST reimbursement, increased labour costs due to revised minimum wages, Environmental Compensation Charges and taxes payable on awarded amounts. The contractor then invoked arbitration.

A three-member arbitral tribunal, by a majority award dated April 28, 2021, partly allowed several claims by the contractor, including prolongation costs, GST reimbursement, increased labour costs and ₹3.47 crore towards ECC.

DMRC challenged the award before the Delhi High Court under Section 34 of the Arbitration and Conciliation Act. It argued that the tribunal had awarded claims based on assumptions and contrary to contractual clauses barring reimbursement for tax or statutory changes during the contract period, including the extended period.

DMRC also argued that the contractor had failed to produce sufficient documentary proof for several claims.

GYT TPL Joint Venture opposed the challenge. It argued that the tribunal's findings were based on evidence, contractual interpretation and recognised methodologies for quantifying damages, which could not be revisited in a Section 34 challenge.

The Court reiterated that its powers under Section 34 were limited. It said it could not re-appreciate evidence or substitute its own interpretation merely because another view was possible.

Accepting the tribunal's interpretation, the Court held that ECC was a special pollution-control charge imposed during execution of the works pursuant to Supreme Court directions and NCT Delhi notifications. It therefore fell outside the contractual exclusion for taxes, duties and levies.

The court also upheld GST reimbursement and labour cost compensation. It held that the tribunal's interpretation of the contractual clauses in the factual context of the case did not warrant interference.

It noted that DMRC had itself offered reimbursement towards GST, though at a lower amount than what was awarded.

Holding that the arbitral award suffered from no patent illegality or violation of fundamental policy, the Court dismissed DMRC's petition.

For Petitioner (Delhi Metro Rail Corporation Ltd.): Advocates Tarun Johri, Vishwajeet Tyagi.

For respondent (GYT TPL Joint Venture): Senior Advocates Jayant Mehta, Tushad Cooper with Advocates Dhirendra Negi, Pragya Chauhan, Shaurya Rohit, Pallav Arora.