Karnataka High Court Sets Aside ₹13.08 Crore Award To L&T In Bengaluru Metro Contract Dispute

The Karnataka High Court has recently set aside parts (around ₹13.08 Crore) of an arbitral award arising from a ₹303.29 crore Bengaluru Metro construction contract between Larsen & Toubro Limited (L&T) and Bangalore Metro Rail Corporation Limited (BMRCL).

The court found shortcomings in the tribunal's treatment of claims relating to reduced parapet quantities, revised rates for 18 delayed pier locations and unpaid reinforcement quantities. It also set aside the tribunal's finding on L&T's entitlement to time-related costs during the prolonged contract period.

The Division Bench of Chief Justice Vibhu Bakhru and Justice K.S. Hemalekha observed: “The court cannot re-appreciate or re-validate evidence and supplant its opinion in place of the Arbitral Tribunal in proceedings under Section 34 of the A&C Act. However, it is not disputed that if the Arbitral Tribunal has disregarded evidence or material which is relevant, the arbitral award would be liable to be set aside.”

The dispute arose from L&T's contract to construct about 4.80 km of elevated viaduct and three elevated stations for the Bengaluru Metro. The original contract period ended on December 16, 2011, but the work continued amid delays in handing over parts of the site.

L&T had claimed ₹4.23 crore after the quantity of parapet work was substantially reduced. The tribunal awarded ₹96.43 lakh by calculating the amount at 20% of the cost of the quantity reduced beyond the permissible 25% variation.

The High Court found that this computation was neither based on L&T's claim as made nor supported by evidence. It consequently set aside the award under this claim.

L&T had also claimed ₹9.80 crore for revised rates for 18 pier locations that were handed over beyond the original contract period. Eight locations were released in January 2013, while the remaining sites were handed over on January 4, 2014. The tribunal awarded ₹9.27 crore.

The High Court found that the tribunal had failed to consider BMRCL's defence based on contractual provisions governing delayed site handover. It therefore set aside the award under this claim.

On the ₹3.15 crore reinforcement claim, the tribunal had awarded ₹2.84 crore. However, the High Court noted that BMRCL's Engineer had stated that piling guide rings/spacers were included in the accepted rates. Since the award included these items, the court found that portion unsustainable.

L&T had separately claimed ₹103.30 crore towards time-related costs arising from the prolonged contract period. The tribunal found the delay attributable to BMRCL and held that L&T was entitled to such costs in principle, but rejected the claim for failure to establish the quantum of damages.

The High Court found that the tribunal had proceeded on the erroneous basis that the quantification rested entirely on an American Appraisal report. It held that other relevant material produced by L&T had not been properly considered.

The court accordingly set aside the finding on entitlement to time-related costs and the rejection of the claim for want of proof of quantum. It left these claims open to be “agitated afresh, if so advised.”

For BMRCL: Senior Advocate S. Sriranga, Advocates Ashwini N. Ravindra and Sumana Naganand.

For L&T: Advocates Anirudh Krishnan, Ramkishore Karanam, Garima Kirti and Nischal Dev.