Disputes and Arbitration- How to Avoid and Manage

DISPUTES&

ARBITRATION

How to AVOID and MANAGE ?by

Rajesh PrasadExecutive Director

Rail Vikas Nigam Limited, Kolkata09.12.2016

Thought

Some men worship rank, some worship heroes, some worship power, some worship God, some worship Amma, and over these ideals they DISPUTE and most of them worship MONEY.

I have to get the work completed and

commissioned…..

I have to maximise profit and get some

claims from Arbitration

MeARBITRATOR

So it is all about Money,Dispute,Arbitration….

Boundary line cases in Contract Management can lead to either way…… SIX or OUT……….

What a dispute……

World cup 2007

https://youtu.be/saKJdNhDB_4

The biggest unresolved dispute in the world is :

‘which one has come first CHICKEN or EGG?

The dispute of Chicken or Egg is resolved in a restaurant….

what ever you order first we will give you

that first…….

Dispute can be b/w Brothers in a family for property……

Dispute on Land issue

August 24, 2008: Mamata Banerjee starts indefinite dharna at Singur outside the car plant.September 2, 2008: Tata Motors suspends work on Nano Plant at Singur.September 3, 2008: Governor Gopal Krishna Gandhi plays mediator; CPI(M)-led Left Front government and Trinamool agree to hold discussions.September 5, 2008: West Bengal government and Trinamool start negotiations.September 7, 2008: Talks break down.October 3, 2008: Tata Motors decides to move out of Singur. Read: We cannot run a plant with police protection, says TataOctober 7, 2008: Tata Motors announces new Nano Plant at Sanand in Gujarat.May 20, 2011: Mamata Banerjee sworn in as Chief Minister of West Bengal, announces first Cabinet decision to return 400 acres of land to unwilling Singur farmers.June 14, 2011: Singur Land Rehabilitation and Development Bill, 2011 passed in West Bengal Assembly.June 22, 2011: Tata Motors moves Calcutta High Court challenging the Bill.September 28, 2011: Calcutta High Court single bench upholds the Singur Land Rehabilitation and Development Act, 2011.June 22, 2012: A division bench of Calcutta High Court strikes down the Bill on an appeal by Tata Motors.August 31, 2016: Supreme Court sets aside January 18, 2008 order of Calcutta High Court, allows appeals filed by some farmers and NGOs

July 2006: Mamata Banerjee opposes the plant on fertile land.December 2006: Protests against the acquisition begins.December 2006: Mamata Banerjee holds 26-day hunger strike against the land acquisition | Also read: Singur and political posturingJanuary 21, 2007: Tata Motors starts construction of Nano car plant in West Bengal.January 18, 2008: Calcutta High Court upholds Singur land acquisition, following which farmers and NGO moved the Supreme Court challenging the HC order.

Samudra Manthan was also a DISPUTE……

Nature of Disputesi) Delay in completion of work.

ii) Delay in releasing payments.

iii) Delay in giving decisions on matters referred to.

iv) For extra items of work, quantity and rate their of.

v) Variations in scheduled quantities..

vi) Disputes regarding extension under penalty

clause or termination of contract under risk and

cost.

vii) Disputes in connection to measurements.

viii) Claims for hiring plants and equipment.

ix) Various compensations and undue interest.

x) Some times claims are even raised for excepted

matters.

xi) Work getting deleted from Pink Book (Sanctioned

list) & payments are affected due to non-

availability of fund.

xii) Disputes in connection to specifications.

xiii) Disputes in connection to drawings.

xiv) Disputes in connection to poor workmanship.

Dispute & Negotiation Can Take place any time, any where ……

I do not agree to your proposal tonight. You take these many actions and then I’ll think over ….

Arbitration: Managing Disputes• Disputes unmanaged lead to arbitration

• Parties to a Contract– Client– Contractor– Consultant (in some cases)

• Objectives are different except one common thread;– “Successful contract completion”

TimelyOrderlyDispute FreeCustomer Satisfaction

Aim of Executive :Execution of Work which is

Hon’ble PM’s Address during recent commissioning of one of the RVNL projects

https://youtu.be/rlf-DgN9KdY

Message

• Execution within Time frame.

• Execution within Estimated Cost.

• Execution with Proper Quality.• Above all Execution should be

dispute free.

Project Management Triangle

ScopeQ

ualit

y

Various ways of sorting DISPUTES

ARBITRATION

More than 300 Crores cases pending…It may take 300 years to settle….

Reasons for arbitrations Incomplete and defective tender

schedule, conditions, poor rate. Delay in site, drawings, and decision

taking.

Contractors inclination towards arbitration.

Unforeseen circumstances.

Combination of the above.

• There is a limit of changes in Drawing....

• Not sure & clear

Reasons for ArbitrationEvery executive’s Aim : ORDERLY, TIMELY and DISPUTE FREE.

i) The contractor has also motive to earn money and arbitration may be an easy mode to extract the same.

ii) Unexpected changes in underground situations and unforeseen items.

iii) Awarding the contract to L1 irrespective of poor rate.

iv) Changes or revisions in technical decisions.v) Incorporation of new concepts/ideas.

vi) Unexpected outside developments affecting the work.

vii) Non-maintaining proper and day today progress.

viii) Granting extensions without penalty to ensure completion and that also without a joint program signed by the contractor. A compromise is made to achieve the progress and sometimes this becomes the basis for arbitration.

ix) Time constraint in preparation of drawing, schedule, conditions etc. resulting variations in quantities and or in specifications.

x) Delay in finalization of drawing and construction details.

xi) Erosion of the power of the executive to take bold decision based on the merit of the case due to various checks by Accounts, Vigilance, Audit etc.

xii) Delay in deciding rates for extra items.xiii) Delay in making the railway materials

available.xiv) Due to termination of contract on account

of contractor’s failures and improper follow up action

xv) Incomplete or contradicting schedule and/or specification.

xvi) Claims for execution during over run period for which contractor is not responsible.

xvii) Deductions from bills due to Audit/Vigilance/Account’s examination or faulty measurements.

Executive should therefore, be very careful and particular in planning, framing tender documents, proper record keeping, taking timely decisions etc. In the present scenario increasing no. of disputes can not be avoided.

Prevention against Arbitrationi) Proper planning of tender schedule, drawing and

incorporating clear conditions.

ii) Granting of extensions with a joint program (may be a revised program) signed by the contractor.

iii) Finalization of the contract at the right time with realistic date of completion.

iv) Ensuring signing of all MB’s and bills with prescribed certificates.

v) Ensuring recoding of all level books in ink duly signed by the contractors and keeping in the safe custody of PD.

vi) Keeping record of actual daily progress. This includes engagement of labour, consumption of cement & steel.

vii) All vague and fabricated allegations should be properly and

timely refuted.

viii) Proper procedures should be followed in finalization and

termination of the contract.

ix) Delay on the part of the contractor must be kept in writing.

x) Senior supervisors and junior officers should be advised not

to communicate to the contractor, only PD and CPM should

do that.

xi) Non-execution of work in anticipation of sanction.

xii) A constant watch should be kept on contractor’s tendency to

create records for unjustified claims and prompt and proper

reply should be sent.

xiii) Last but not the least – as soon as the dispute arises and the

contractor’s intention is noticed, all basic records like level

books, cross-sections, MB’s, site records and various

correspondences should be sealed and kept under personal

custody of a responsible officer.

Counterclaims and defending the proceedingsi) Continuation of speed restrictions (affected directly or

indirectly) due to prolonging of execution. The total loss can be calculated.

ii) Extra traffic/power block required due to fewer engagements of skilled/semi-skilled/un-skilled labors. The amount of loss can be calculated.

iii) For safety related works, cost of speed restriction and cost of any accident occurred due to non-completion or delay in completion can be claimed by railway.

iv) Cost of railway supervisors/officers for their idling or under utilization can be claimed.

v) Various compensations and interests as claimed by the contractors can also be raised as part of counterclaims.

vi) Demurrage and wharfage dues, if any.

vii) In case the contractor does not return the railway material over a long period, the cost as per the rules along with interest should also be claimed.

The counterclaims should also be got vetted by local finance and law before submission to the arbitrator.

Site not clear- Site not clear- Encroachments, Encroachments, Infringements,Infringements,DOT, Tree, DOT, Tree, ServicesServices

Important letter/ instruction :1Letter date:12.05.2011The claim of Ms AFCONS Infrastructure Ltd. quashed by Arbitrators

i) Mr. M. Ravindraii) Mr. P . Sridhananiii) Mr S.M. Singla

Citing a lot of judgments Classical Case

Important letter/instructions:2

Risk Management with regard to contractors claims date 23.04.13

POINTS REQUIRED TO BE MONITORED TO MINIMISE CLAIMS OF THE CONTRACTOR

1.Award of contracts to be done only after (i) availability of at least 50% land and availability of first stage forestry clearance in case of forest land is involved (ii) Preparation of detailed estimate as per procedure order No.C/Policy/Estimate dated 27.6.2012.

2.Tender for important bridges should be invited only after considering Geotechnical Investigation Report and finalization of GAD's3.Schedule of quantities should be prepared as per procedure order No.C/Policy/Estimate dated 27.6.2012. 4.The time frame for completion of work in the tender documents should be realistic duly stipulating mile stones for section wise completion. 5.The time frame for completion of work in the tender documents should be realistic duly stipulating mile stones for section wise completion. 6.Request for extension of time should be processed expeditiously within 7 working days of receipt of application.

POINTS REQUIRED TO BE MONITORED TO MINIMISE CLAIMS OF THE CONTRACTOR

7.Process for sanction in variation in quantities and rates for deviated/substituted/ extra items expeditiously i.e. within 15 working days of receipt of information about the same. 8.Maintain all necessary records such as site order book, labour register, equipment register and cement consumption register properly. 9.All references received from the contractor must be invariably replied expeditiously covering all points raised with reference to the conditions of contract. 10.Periodic Review meetings should be held with the contractor and minutes should be invariably issued.11.Payment to Contractors should be made as quickly as possible, but in any case not later than the time limits specified in the contract. 12.Timely action should be taken to make available critical items such as rails, sleepers and any other items to be made available by the Employer, keeping in mind the milestones given in the contract document.

Important letter/instructions: 3Appointment of Arbitrator date: 01.08.2013 Judgment (2013/4 Supreme Court cases 35) of the Supreme Court sent by Anit Seth, Advocate dated 25.07.13 wherein the Supreme Court has held that appointment / nomination of Arbitrator by Corporation after the Contractor has filed the application for appointment of Arbitrator is not valid and the Appointing Authority under agreement right is forfeited to appoint / nominate the Arbitrator for your information and necessary action please.

Important letter/instructions: 4

Monitoring of appointment of Arbitrators and progress of Arbitration cases Date:14.08.13

Handle contractors honestly & diplomatically. Otherwise………

Contract Management and defending arbitration is not an easy task…

Pre-amendment scenario making Arbitration costly and long-drawn

Ad-hoc arbitrations were left to the whims and fancies of the arbitrators;

Large number of sittings were there and arbitrations went on for years altogether;

Charging of higher fees per sitting, with several add-ons, without any ceiling, many a time resulted in the cost of arbitration even exceeding the amount involved in the dispute;

Adjournments were granted with great ease.

No responsibilities on either side.

On 23rd October 2015, the Government of India through an executive action promulgated the Arbitration and Conciliation Ordinance, 2015 bringing about large scale changes to the Arbitration and Conciliation Act, 1996.

The Arbitration and Conciliation (Amendment) Act, 2015 was passed by both houses of parliament in the winter session.

The Act was notified in the Gazette of India on 1st January 2016

Strict Time limit for making award under Section 29A

The arbitral tribunal is statutorily obligated to deliver an award within 12 months from the date when arbitral tribunal enters into reference.

The explanation says that the arbitral tribunal is said to have entered upon the reference on the date on which the arbitrator(s) have received notice of their appointment.

Award within 12 months [29A(1)]

Maximum delay of 6 months [29A(3)] The award can be delayed by a maximum

period of 6 months only under the special circumstances where all parties give their consent to such extension.

Where the award is not made out within the statutory period the mandate of arbitrators shall automatically terminate.

Unless the Court has, either prior to or after the expiry of the period so specified, extended the period.

While extending the period, if the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceding five per cent for each month of such delay.

Mandate of arbitrators to terminate automatically [29A(4)]

Additional Fess for faster disposal [29A(2)] Where the Arbitral Tribunal delivers the award

within of 6 months the arbitral tribunal shall be entitled to additional fees. The quantum of such additional fees shall be determined by the parties.

Extension granted by the court [29A(5)]It is open for the courts to extend the time

period for making an award upon receipt of an application by any of the parties.Such extension is to granted only for sufficient cause and the court in its discretion has the power to:•Reduce the fees of arbitrators by up to 5% for each month of delay, [29A(4)]•Substitute one or all the arbitrators [29(6)]•Impose actual or exemplary costs on any of the parties [29A(8)]Again for the application field a time limit has been set and the same shall be disposed of as expeditiously as possible and endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party. [29A(9)]

Fast Track Procedure (Section 29B) The parties to an arbitration may choose to opt for

a new fast track procedure either before or after the commencement of the arbitration. (1)

The award in a fast track arbitration is to be made out within six months from the date the arbitral tribunal enters upon the reference. (4)The salient features of the fast

track arbitration are (3) Disputes are to be decided based on written

pleadings and documents only; Arbitral Tribunal shall have the power to call for

clarifications where it deems necessary. Oral hearing may be held only if all the parties

make a request or if the arbitral tribunal considers it necessary.

The arbitral tribunal may dispense with any technical formalities.

Amendment to the A&C Act 1996 via Arbitration Ordinance 2015

Section 2(2) Section 8 (Reference of parties to the

dispute to arbitration) Section 9 (Interim Measures) Section 11 (Appointment of Arbitrations) Section 12 (Declaration by the

Arbitrators) Section 14 (Termination of mandate of

arbitration) Section 17 (Interim Measures by

Arbitration tribunal) Section 23 (Respondent can file counter

claim)

Section 24 (Presentation of evidence or oral)

Section 29A and 29B (Time limit for arbitral award and Fast Track procedure)

Section 25 (Tribunal to treat Respondent’s failure to communicate statement of defence

Section 31 (Provision for levy of future internal)

Section 34 (Limiting the gamut of Public Policy of India)

Section 36 (Stay on enforcement of award)

Amendment to the A&C Act 1996 via Arbitration Ordinance 2015

Positive step towards making Arbitration – Expeditious, Efficacious, Cost

effective Curb the practices leading to wastage of

time Declaration by the Arbitrator about his

independence and impartiality Making the Arbitrator responsible for delay

in the proceeding Likely to reduce the interference of the

court in proceedings.

Amendment to the A&C Act 1996 via Arbitration Ordinance 2015

Bigger the Contractor, better and diplomatic handling is needed…….

I Have Lost Everything due to greed to earn more through Arbitration

Contractor

Ping-Pong b/w Ping-Pong b/w ContractorContractor & & Executive Executive

https://www.youtube.com/watch?v=KW_6Lzr47iU

Play Play between between

Contractor and ExecutiveContractor and Executive has to be has to be FairFair and and as per as per

the provisions of the the provisions of the Contract AgreementContract Agreement

Quality of Food is important for him. Quality of Construction is important for us.

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Dos & Don’ts by Parties

• Do not meet/try to meet arbitrator, in absence of other party

• All correspondence to Arbitrator be copied to the other party

• Send communication in writing in advance if not able to attend hearing

• On receipt of adverse award take legal advice

It was a presentation It was a presentation made by made by Rajesh PrasadRajesh Prasad, ,

Executive Director Executive Director Rail Vikas Nigam LimitedRail Vikas Nigam Limited

What is a Project?What is a Project?Means of converting Vision to Reality

A set of activities undertaken to meet specific objectives for changes

"A temporary endeavor undertaken to create a unique product, service or result "

What is a Project?What is a Project?

• Temporary - have a definite beginning and an end• Unique - no two projects are identical• Predefined goals & objectives - financial/ social /economic• Budgets & schedules - prefixed budget and timeframe• Uses Resources & Manpower - both are limited• Quality / Performance - determined at beginning• Face Risks - known and unknown risks• Have a Project Life cycle - many phases from start to end

Projects can be defined as:

Project ManagementProject ManagementWhat is Project Management (PM)?

Project Management is the processes & body of knowledge of specific skills, tools and techniques used to bring structure and planned order to deliver projects successfully

Project Management is the most efficient way for implementing unique changes

Project Status Determination

Under Budget & Behind Schedule

Under Budget& Ahead of Schedule

Over Budget& Behind Schedule

Over Budget& Ahead of Schedule

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