The responsibility for project feasibility and related claims lies with the principal contractor; exclusionary clauses do not absolve liability for unforeseen project conditions.

JUDGMENT

Vibhu Bakhru, J. The petitioner (hereafter `Konkan Railway') has filed the present petition under Section 34 of the Arbitration & Conciliation Act, 1996 (hereafter the `A&C Act') impugning the Arbitral Award dated 22.12.2021 passed by the Arbitral Tribunal comprising of Justice (Retd.) A.K. Sikri, former Judge of the Supreme Court, Mr. Shahzad Shah, former Financial Commissioner (Railway) and Justice (Retd.) D.K. Jain, former Judge of the Supreme Court as the Presiding Arbitrator (hereafter the `Arbitral Tribunal'). The Arbitral Tribunal had allowed certain claims of the respondent (hereafter `SIL') and entered an award for a sum of Rs.26,17,53,500/-, in its favour.

2. The impugned award was rendered in the context of disputes that have arisen between the parties in connection with a Contract Agreement dated 23.01.2004 (hereafter the `Agreement') for construction of "B.G. Single Line Tunnel No.2, (Kotli Tunnel) from KM 33.095 to 38.450 on the Katra - Laole Section of the Udhampur - Srinagar - Baramulla Rail Link Project" (hereafter the `Project').

3. Mr. Navare, learned senior counsel appearing for Konkan Railway, confined his challenge to the impugned award to the finding that the exclusionary clauses did not preclude SIL from raising the claims relating to the hindrances and delay resulting from geo-technical reasons. He contended that the said decision was contrary to the express terms of the Agreement.

4. The Arbitral Tribunal rejected Konkan Railway's contention that certain clauses of the Agreement requiring SIL to carry out due diligence, absolved Konkan Railway from any liability in respect of any difficulty or delay caused due to terrain conditions or geological conditions encountered during execution of the works. The Arbitral Tribunal found that Konkan Railway was not absolved from its responsibility in respect of overall feasibility of the Project, the appropriateness of the technology or the alignment chosen for the Project. The Arbitral Tribunal held that in any event, SIL could not be held responsible for the same.

5. Mr. Navare submitted that the aforesaid finding completely disregards the express terms of the Agreement and therefore, the impugned award is liable to be set aside as being contrary to the Agreement entered into between the parties.

Factual Context

6. On 19.02.2003, Konkan Railway issued a Notice Inviting Tender (hereafter the `NIT') for the Project at an estimated cost of Rs.155.46 crores.

7. SIL submitted its bid pursuant to the NIT and accepted a rate, which was 14.4% below the estimated rates mentioned under Schedule-A and Schedule-B of the NIT. Konkan Railway issued a Letter of Acceptance dated 12.12.2003 (hereafter `LOA') and the same was also agreed to be the date for commencement of the Agreement. Thereafter, on 23.01.2004, the parties signed the Agreement, whereby SIL agreed to execute the Project at a cost of Rs.1,33,07,42,870/- (being 14.4% less than the estimated cost of Rs.155.46 crores). The Project was required to be completed within a period of three years and fifteen days from commencement, that is, on or before 26.12.2006.

8. Only 7% of the total work as contemplated under the Agreement, was completed. No significant progress could be made for various reasons. SIL claims that the same was due to flawed alignment, the methodology and technology stipulated by Konkan Railway. The same were not appropriate and completion of the Project was not feasible. The Agreement was finally foreclosed on 05.10.2007.

9. SIL commenced the work and according to Konkan Railway, it completed 220 meters of tunneling from Portal-1. However, it encountered a heavy inrush of water and aggregate, therefore, the work at Portal-I was stopped on 09.04.2005. According to Konkan Railway, SIL did not execute the road upto Portal-2 but had expressed its willingness to do so at rates, which were twice the contractual rates. In view of the above, Konkan Railways had to engage a third party