00:00Hi everyone, today we will be looking at the Delhi High Court decision of COGRA
00:27v. HVPNL. Now in this decision, the court said that a tribunal has the discretion to
00:34use guesswork and rough and ready methods to estimate damages when losses are otherwise
00:39difficult to quantify. Anshu, would you like to give us the background of the judge?
00:43Absolutely, Rithi. So back in 2011, HVPNL, the project employer in question, had invited
00:50BITS for a work to be started on the Haryana Power Improvement Project, which was a project
00:56aimed at improving the state's power and infrastructure systems. COGRA, the relevant
01:04contractor, won the BIT for 5 different projects involved in the entire overarching project.
01:10Certain delays took place in the work to be undertaken by COGRA, some of which were solely
01:16attributable to COGRA, but the others were also attributable to other contractors involved
01:21in the project. I understand that even though there were other delays, eventually HVPNL
01:26ended up imposing the liquidated damages solely on COGRA.
01:29Correct. Because of this, COGRA initiated arbitration proceedings in 2016. The arbitrator
01:36ordered a refund of 50% of the liquidated damages which HVPNL had imposed on COGRA,
01:43holding that since it was very difficult to determine the apportionment of damages since
01:48other contractors were also liable for certain losses, it could employ the rough and ready
01:55method which was previously employed by the Supreme Court in the judgment of Paxstruction
02:00Design Services v. Delhi Development Authority, and therefore impose a refund of 50% of the
02:06total liquidated damages which HVPNL had originally imposed on COGRA.
02:10But I understand in CDS v. DDA case, they said that you can use these methods because
02:16there was insufficient evidence, fortification was difficult, and there was a public interest
02:20involved. Was it a similar situation in this case?
02:23Correct. So, this was also a very similar situation. There was lack of evidentiary material
02:28which could help the arbitrator in determining the exact apportionment of damages which each
02:33contractor could be liable for. This was also a project which implicated public interest
02:38since this was aimed at improving Haryana's power and infrastructure systems. Because
02:44of these reasons, the division bench of the Delhi High Court stated that the arbitrator
02:49also has a power equal to the Supreme Court when trying to determine damages, when there
02:57is insufficient evidence on record to determine which contractor is liable for what damage.
03:03And therefore, the arbitrator could also undertake guesswork and undertake a rough and ready
03:08method to calculate damages. Okay. And what did the single judge bench decide?
03:13They said this is wrong. Correct. So, when the arbitrator had originally
03:17ordered the refund of 50% of the liquidated damages, the matter then went to appeal and
03:24the single judge bench had reversed this fighting of the arbitrator and asked the parties to
03:29seek a fresh reference to arbitration. Following which, COBRA had then appealed to the division
03:34bench of the Delhi High Court which concerns the relevant judgment which is the topic of
03:40discussion now. The division bench then reversed the judgment of the single judge holding that
03:45the arbitrator was rightfully entitled to order a refund of 50% of liquidated damages
03:52in this case. So, the division bench said that CDS case is something the arbitrator
03:56could have invaded. Correct. The division bench stated that arbitral tribunals are also
04:02equally empowered to undertake guesswork and employ the rough and ready method which the
04:09CDS case had also employed when determining damages.
04:13This was very helpful. Now, we actually have a good understanding of what the background
04:16of the case is. Thank you so much. And now, I think we will call upon VD to tell us what
04:21are the implications of this case and how this is likely to pan out in the future.
04:27Thank you VD for being here. As we just heard from Ayesh, what was the background of this
04:31COBRA v. HGPNIC case? Now, what we want to hear from you is what are the implications
04:35of this case? Sure. So, I think some of these cases and the
04:40jurisprudence that we are seeing, particularly in the infrastructure and construction disputes,
04:48brings us to a very important stage in dispute resolution, particularly for this sector.
04:54I think in the past, we have always looked at construction infrastructure disputes as
05:02more like commercial disputes. And therefore, there is always an overhang or an overlap
05:09on how we adjudicate commercial disputes versus how we adjudicate construction disputes.
05:16I think the most important learning from this judgment is there is now a need where we look
05:24at the construction and infrastructure industry as an independent industry, even from a dispute
05:33resolution perspective. And why I say this is that it is not almost the same, while it
05:42looks similar, but these kinds of disputes are not the same as the commercial disputes.
05:48I think we need to change our practices at both the levels. First, this judgment makes
05:55it very clear that even at the time when the projects are running, what kind of documentation
06:02you need to give. You cannot be informal about the extensions that you are seeking.
06:09You need to document if there are multiple contractors as to what kind of processes that
06:17you will follow in terms of concurrent delays, not only between employers and the contractors,
06:24but also inter-city contractors and how it affects the overall project. And on the other
06:30hand, when a dispute arises, or let me put it this way, a claim arises, because not every
06:35claim in a construction project is a dispute. I think what requires is a proper documentation
06:41behind it. And therefore, when a claim arises for the cost associated to the delays or the
06:48extensions short, what methods that you would implement to run the concurrent delays, to
06:58look at the cost associated to those delays, who was responsible to it, whether we need
07:03experts to do the window analysis on the delays and the associated costs, or we would continue
07:12to run our disputes on guesstimates as this judgment does. Yes, one can always find solutions
07:22in guesstimates, and that may not be entirely bad in certain situations. As we always see
07:31in generally, that not everything which is uncertain is impossible. And therefore, even
07:39if it is uncertain to look at the cost, it is not impossible to compute what the loss
07:47is. But there are enough methods, there are enough guidance available worldwide, in many
07:54different for us, and many different institutions have come up with those guidelines. Now it's
08:01time for India to adopt some of those measures to avoid ultimate challenges, to avoid ultimate
08:12setting aside of the awards and bring finality to some of these claims, rather than a debate
08:20between actual loss versus guesstimate. So that's what I feel this judgment provides us
08:30as a tool to start thinking on those lines, where we need possibly a different set of rules
08:39and a different set of jurisprudence when it comes to construction and infrastructuralism.
08:45Thank you, Miri, that was very insightful. And as you very rightly said, now that
08:50arbitrators have the power to guesstimate damages in that sense, now we have to
08:54see how they actually use this flexibility. Thank you so much, and we'll see you again.
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