NHAI pays Rs 308 cr arbitral award to IRB Infra SPV in payments dispute

Amount is 75% of total award for Pathankot-Amritsar told road project, matches union cabinet guideline.

The National Highways Authority of India (NHAI), after a Delhi High Court order, has paid Rs 308 crore to IRB Pathankot Amritsar Toll Road Ltd (IRPRL), a special purpose vehicle (SPV) of IRB Infrastructure Developers, over a dispute in payment related to the Pathankot-Amritsar project.

“We deeply appreciate the steps taken by the Cabinet Committee on Economic Affairs for providing interim cashflow access to developers in clear award scenarios till a final verdict is closed,” said Virendra Mhaiskar, chairman and managing director of IRB Infra.

The amount is 75 per cent of the Rs 419 crore arbitral award owed by the highways authority after a court victory in July 2021, said the company. It claimed before the arbitral tribunal that the amount was owed to it as the EPC contractor of Pathankot-Amritsar build-operate-transfer (BOT) project on account of time and cost overruns.

IRB had claimed that the reasons for the delays were not attributable to the company. It sought a 518-day extension in the concession period. The tribunal had ruled in favour of the company, granting an arbitral award of Rs 252 crore and interest of Rs 167 crore.

The nodal highways authority challenged the decision in the High Court, which upheld the tribunal’s decision and directed NHAI to pay up 75 per cent of the arbitral award.

As per the cabinet committee on economic affairs, government agencies must pay 75 per cent of the arbitral award to the concessionaire or contractor against a bank guarantee, if the agency chooses to challenge the award.

The Union cabinet had allowed for this provision in 2019 and codified it into the general financial rule (GFR) in November 2021. The provision was made following a proposal by NITI Aayog, keeping in view the potential of liquidity crunches arising for contractors due to delay in arbitral award payment as agencies would challenge the decisions, increasing the risk of them turning into non-performing assets (NPAs) for lenders.