Sethusamudram Project – Mercator Wins Arbitrations Against DCI

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Sethusamudram Project - Mercator Wins Arbitrations Against DCI
Sethusamudram Project - Mercator Wins Arbitrations Against DCI

Sethusamudram Project – Mercator Wins Arbitrations Against DCI

The Arbitral Tribunal adjudicating the dispute between Mercator Ltd. & Dredging Corporation of India (DCI) has passed awards in favour of Mercator for breach of contracts related to 2007/2008 dredging contracts of Sethusamudram Project.

The Tribunal headed by retired Supreme Court Judge, with co-arbitrators as Retired chief justice of Delhi HC and others, awarded Mercator claim amount of Rs. 50.75 crores with an interest rate of 9 percent per annum, till realization.

Mercator received the favourable arbitration award on March 15, 2018; vide three separate orders.

With this award, the company feels strengthened in its position, for the CBI to consider quashing the investigation. as the matter is clearly not of any favours extended by any employee of DCI to Mercator.

DCI, however, filed several applications for rectifications pursuant to the award before the tribunal. To which, one correction was accepted on April 26 that reduced the claim amount by 1.87 crores. All other submissions filed by DCI were dismissed.

As per the final orders, DCI has been directed to pay Rs. 48.42 crores along with interest @9% till realization.

During the submissions, DCI had alleged continuous underperformance of the dredgers & emphasized that Mercator’s dredgers failed to dredge as per Guaranteed Production as stated in the agreement.

“The allegations of continuous underperformance of the dredger in question was premised on incorrect figures. It has, furthermore, not been shown that the performance of the vehicle was not in accordance with the requirement of the respondent”, the tribunal observed.

It added, “The respondent inspite of alleged underperformance of the dredgers had further extended the charter party agreements & thus have waived their right to terminate the Contracts.”

DCI had in 2007-08, chartered 3 dredgers namely Triloki Prem, Darshani Prem and Bhagwati Prem under separate charter party agreements from Mercator for single Sethusamudram (Sethu) Project which involved dredging work in the Ram Sethu/Adams Bridge. Experience Certificates were issued to Mercator as per the standard practice in the industry.

The project got abruptly stalled due to various religious and environmental issues, hence in May 2009, DCI illegally terminated two charter party agreements. While partial amount claimed by Mercator towards work done was paid by DCI, the balance was deducted for alleged underperformance of Mercator’s dredgers. Consequently, Mercator invoked arbitration under all the 3 Charter Party Agreements to recover unpaid sums and damages suffered due to wrongful termination of the Contracts.

Mercator has in the last 10 years successfully executed various dredging contracts for a various government as well as private ports clocking revenue in excess of Rs. 1,500 crores.

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