BMC ordered to pay ₹30 crore to contractor who built Middle Vaitarna dam

The company, Soma Consortium, undertook the construction of the Middle Vaitarna dam on the Vaitarna river, along with an approach road and other infrastructural amenities in 2008 after the BMC’s standing committee passed the proposal at a cost of ₹505.91crore.

Mumbai: After five years of a face-off between a contractor appointed to construct the Middle Vaitarna dam in Thane (one of the key sources of water to Mumbai) and the BMC, the arbitrator has ordered the civic body to award approximately ₹30 crore for two commercial claims which were not honoured by it in the past.

The work began on October 27,2008 and was completed on March 28,2014. “During the course of the contract, disputes arose between the contractor and BMC,” said advocate Prerak Choudhary representing Soma Consortium. While the quality of construction was declared excellent by the civic body, some commercial claims of the contractors towards labour cess deductions, fly ash lead charges and royalty charges were allegedly not paid by the BMC. (HT PHOTO)

The company, Soma Consortium, undertook the construction of the Middle Vaitarna dam on the Vaitarna river, along with an approach road and other infrastructural amenities in 2008 after the BMC’s standing committee passed the proposal at a cost of ₹505.91crore. The contractor completed the work in record time, and the dam was declared the ninth fastest-built dam in the world.

The work began on October 27,2008 and was completed on March 28,2014. “During the course of the contract, disputes arose between the contractor and BMC,” said advocate Prerak Choudhary representing Soma Consortium. While the quality of construction was declared excellent by the civic body, some commercial claims of the contractors towards labour cess deductions, fly ash lead charges and royalty charges were allegedly not paid by the BMC.

The contractors invoked arbitration proceedings under the Arbitration and Conciliation Act, 1996, and Justice V C Daga, a former judge of the Bombay high court, was appointed as arbitrator to decide the matter.

An arbitral award is one passed by the arbitral tribunal. The arbitrator is a retired judge, and the award is akin to an order passed by the high court. Under the Arbitration Act, every contract has an arbitration clause, which essentially means that any dispute arising in a contract will be resolved by the appointment of an arbitrator. The parties can decide on who they want as the judge, and if they are not able to decide, they can approach the high court, which, in turn, will appoint the arbitrator. Arbitration proceedings in this case commenced in 2017. Senior counsel Dipal Merchant represented the BMC.

“The contract was for ₹812 crore, and the firm completed the work in record time,” said advocate Choudhary. “The dispute arose with respect to three claims. One, the one percent labour cess was wrongly deducted from the bill amount, something that was not done for other contractors. Two, the contractor had paid some money towards royalty charges for procurement of rubble, stone and earth, which were initially ₹100 per brass, but increased later. The third claim was for fly ash charges, which had to be procured from somewhere near Bhusawal instead of Nashik, as was originally planned. This resulted in an additional transportation cost, called lead charges, of approximately ₹13 crore.” The amount for the three claims aggregated to ₹23-odd crore along with interest.

After hearing the parties from 2017 to 2023, Justice Daga ruled in the contractor’s favour and awarded a prize of approximately ₹15.30 crore together with interest to be calculated at 12 percent per annum from 2015 till the date of award within 90 days, stated the order. The entire amount comes to approximately ₹30 crore. HT has a copy of the order passed by the arbitrator.

The order first came on February 21, 2023, but another proceeding was started under Section 33 of the Arbitration Act to rectify some errors, since interest was not added to the conclusive part. That proceeding took effect from February 23 till April 15 when a final award was passed with corrections.

Senior counsel Dipan Merchant, representing the BMC, said that the order was passed a month ago, and on Saturday there were corrections made in the main order. “I don’t know the exact amount that is awarded,” he said. “But there were three claims made out, of which the claim made on labour cess was rejected by the arbitrator.”

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The 84-metre-tall middle Vaitarna dam is the third tallest dam in the state and is made of roller-compacted concrete.

It was built on the Vaitarna river in Thane’s Kochale village in 2014. The dam stands at an elevation of 102 metres to impound the 455 million litres of water vital for Mumbai’s growing water demand. The city receives only 3,950 million litres (Mld) per day compared to the demand of 4,000 Mld. The water is transported to the Bhandup treatment plant through a 40-km pipeline and delivered to Mumbai city.