JNPA Board opts conciliation method to resolve disagreement with the dredging contractor

According to several sources briefed on the Board meeting, the state-owned Jawaharlal Nehru Port Authority’s Board approved a plan on June 30 to refer the dispute with a joint venture between Boskalis Smit India LLP and Jan De Nul Dredging India Pvt Ltd over the channel widening and deepening work it carried out at the port in 2019 for conciliation. The Mumbai Centre for International Arbitration (MCIA) or any other appropriate organization or specialist will oversee the conciliation.

A three-member Arbitration Tribunal is currently hearing the dredging contract issue, and it appears that JNPA is at a “weak ground” over the final bill of ₹194.64 crore that it owes the dredging contractor. This was the primary cause of the dredging contractor’s arbitration action.

The final payment to the dredging contractor has been “withheld under instructions received from the Ministry due to ongoing investigations by the Central Bureau of Investigation,” according to JNPA’s submission to the Arbitral Tribunal. When late payment interest and other demands from the dredging contractor are taken into account, the total bill amount has increased to around ₹800 crore.

Since the Bombay High Court and the Supreme Court rejected the fraud angle put forth by the Ministry of Ports, Shipping and Waterways and the CBI in the dredging work and recommended that the commercial dispute be settled through arbitration, legal experts say that JNPA has little chance of contesting a potential arbitration award of a steep final bill to the dredging contractor.

During the hearing, the Arbitral Tribunal advised the Boskalis-Jan De Nul JV “to explore the possibility of settlement with JNPA”, following which the dredging contractor through a letter dated May 21, 2024, offered to “enter into an amicable settlement with JNPA”.

The Attorney General, R Venkataramani, has also favoured conciliation to settle the dispute. According to the Attorney General, “it is more likely that the Arbitral Tribunal may grant an award for payment of ₹448.35 crore plus interest from August 3, 2022 (claim date) in favour of the Claimant (dredging contractor) which is ₹679.10 crore (approx) as on August 13, 2024”.

The Board also authorised Unmesh Wagh, Chairman, JNPA, to finalise the name of the Conciliator and to take all such steps, actions, and decisions as may be necessary to conduct the conciliation proceedings on behalf of JNPA.

The dredging work involved widening and deepening J N Port channel to 15 metres from 14 metres (second phase) on assured depth model at an estimated cost of ₹2,029 crore (₹2,306 crore including applicable service tax), which was approved by the Cabinet Committee on Economic Affairs (CCEA) led by Prime Minister Narendra Modi on March 22, 2017.