PNC/VGHP/AE/MSV Date: 22.07.

2019

To
The Team Leader,
MSV International Inc.
in association with MSPARK Futuristics & Associates,
2nd Floor, Plot No.55, Raghuvanshi Rajendrapuri Colony,
Natinia Dai, Nawalpur, Shivpur, Varanasi – 221 003 (UP)

Sub: 4-Laning of Varanasi Gorakhpur Section of NH-29 from Km 12.000 (Design

Chainage Km. 12.010) to Km 88.000 (Design Chainage Km. 84.160)
[Package-II from Sandah to Birnon] in the State of Uttar Pradesh under
NHDP PHASE-IV on EPC mode. - Payment Schedule.

Ref: 1) GM(T) – UP, NHAI HQ, New Delhi letter no. Varanasi-Gorakhpur/NH-
29/Pkg- II/EPC/UP(Tech-Div)/2014/97694 dated 31.03.2017
2) PD, NHAI,PIU , Varanasi letter no. 11015/PD Varanasi/NH-29, Pkg-II/2019-
20/33537 dated 03.06.2019
3) Our letter no.PNC/VGHP/PD/NHAI/742 dated 18.06.2019
4) Your letter no.MSV-MSPARK/VNS-GRKH/PIU/571 dated 25.06.2019
5) PD, NHAI,PIU , Varanasi letter no. 11015/PD Varanasi/NH-29, Pkg-II/2019-
20/33801 dated 10.07.2019
6) Your letter no.MSV-MSPARK/VNS-GRKH/EPC/670 dated 16.07.2019

Dear Sir,

1.0 We are surprised to read the contents of your letter No. MSV-
MSPARK/VNS-GRKH/EPC/670 dated 16.07.2019, returning the stage
payment statement -21 in original for reanalyzing and resubmitting the
same in accordance with the provision of contract, which is unlawfully,
unwarrantedly and violating the provisions of the Contract Agreement.

2.0 Your above letter was issued based on the direction from the Project
Director, NHAI, Varanasi vide letter No. 11015/PD Varanasi/NH-29, Pkg-
II/2019-20/33801 dated 10.07.2019, stating interalia as under;
PNC/VGHP/AE/MSV Date: 22.07.2019

Quote
Consequent upon availability of 90.80% of the project length for
road construction as per the joint inspection/joint memorandum
dated 30.04.2019, this office, vide letter referred at (iii) asked you to
adjust the payment schedule suitably as per provisions of contract
and as stipulated vide para 2 of NHAI HQ letter referred at (ii)
above

You have submitted the Stage Payment Statement no.21 for the
works done during the period 1st May 2019 to 31st May 2019, which
is based on the actual work done by the contractor during the
said period it has not been analysed in terms of contract provisions
as directed vide this office letter referred at (iii)

In view of above discrepancies, the said invoice is returned

herewith in original for reanalyzing and resubmitting the same in
accordance with provisions of the Contract.

Unquote

3.0 Kindly refer to our letter No. PNC/VGHP/PD/NHAI/742 dated 18.06.2019,

wherein we have attempted to dispel doubts regarding Payment
Schedule. Since you are fully appraised of the facts and the ground
realities, as well as must have carefully read the provisions of the Contract
Agreement, you cannot, but agree with us, as under

a) Obligations of the Authority according to Article 4 of EPC Agreement ,

Article 4.1.3(a) The Authority shall provide to the Contractor :

Quote

“Upon receiving the Performance Security under Clause 7.1.1, the

Right of Way in accordance with the Provisions of Clause 8.2 and
PNC/VGHP/AE/MSV Date: 22.07.2019

8.3, within a period of 15 (fifteen days) from the date of this

Agreement, on no less than 90% (ninety per cent) of total length of
the Project Highway.”
Unquote

b) The Authority declared the appointed date 31.03.2017 after 144 days
of signing the agreement without fulfilling the obligation to provide the
90% Hindrance and obstruction free land to the EPC contractor for the
project execution as protected under clause 4.1.3

c) Article 4.1.3 fulfilled only after lapse of 760 days from the appointed
date. (90.8% of land handed over to us as on 30.04.2019)

d) Article 8.2.2 of EPC Agreement regarding procurement of the site

Quote

“The Authority shall provide the Right of way to the Contractor in

respect of all land included in the Appendix by the date specified in
Schedule – A for those parts of the site referred to therein, or no later
than 90 (ninety) days of the Appointed Date for those parts of the
Site which have not been specified in Schedule A”.
Unquote

e) Agreement Clause No 8.2.2 (Annex II, Schedule A) stipulates

mandatory requirements of handing over of land and the entire
stretch would be made available to us within 90 days from the
appointed date i.e. 28.06.2017. You will kindly appreciate, at the time
of writing of this communication to you, already 843 days have lapsed
from the Appointed date and the land is not been acquired for
purposes of handing over as per clause 8.2.2. (Only 90.80% of land
handed over to us as on 22.07.2019)
PNC/VGHP/AE/MSV Date: 22.07.2019

f) As against the stipulation of handing over 90% length at the appointed

date in accordance with the agreement Clause No 8.2.2 (Annex II,
Schedule A), the status of availability of land was as under

Land Actual Handing over

Required to of land from Agreement
Event
be handed Authority as detailed Clause
over in % Exhibit C
Prior to
Annexure – II
appointed date 91.61 % 30.396 Km (42.13%)
(Schedule A)
i.e. 31/03/2017
90 Days from the
Annexure – II
appointed date 100% 30.396 Km (42.13%)
(Schedule A)
i.e. 28.06.2017

4.0 In fact the material breach committed by NHAI continued for failure to
handover 90% Hindrance and obstruction free land to the EPC contractor
for the project execution within a period of 15 (fifteen days) from the
date of singing of Contract Agreement CA and also failed to handover
total site to Contractor no later than 90 (ninety) days of the Appointed
Date.

5.0 This signified that in the event the Reciprocal obligations, as undertaken
by NHAI be not discharged, the relevant provisions of The Indian Contract
Act, 1872’ shall be attracted inter-alia the provisions of section 52 and
Section 54 thereof would be enforceable which stipulated as under:-
Quote
‘Where the order in which reciprocal promises are to be performed is
expressly fixed by the contract, they shall be performed in that order; and
where the order is not expressly fixed by the contract, they shall be
performed in that order which the nature of the transaction required.’
&
‘When a contract consists of reciprocal promises, such that one of them
cannot be performed or that its performance cannot be claimed till the
other has been performed, and the promisor of the promise last
PNC/VGHP/AE/MSV Date: 22.07.2019

mentioned fails to perform it, such promisor cannot claim the

performance of the reciprocal promise, and must make compensation to
the other party to the contract for any loss which such other party may
sustain by the non-performance of the contract.
Unquote

6.0 In short, it was the paramount obligations of NHAI to hand over complete
project of 72.15 Km. in encumbrance free utility removed condition
before 28.06.2017 and not later. Any delay on this score is to be deeded
as failure, material breach of contract by NHAI and non discharging of
Reciprocal obligations by NHAI and for which they would be liable and
must make payment of compensation of all losses and damages suffered
by the Contractor.

7.0 Failure on the part of NHAI to fulfill this prime Reciprocal obligations would
invalidate the ‘Implementation period’ as the same really affected the
Scheduled project completion date and constitute material breach of
the Agreement by NHAI

8.0 We had mobilized our resources as per requirement of the Contract

Agreement on the basis that the hindrances free land would be made
available to us within the stipulated period as per the provisions of the
Contract Agreement

9.0 We have time and again, requested the NHAI for handing over of land to
us, but we would like to point out, that even with the best efforts made by
NHAI, the land could not be made available, probably due to the
procedural delays etc.
Upon perusal, you will kindly observe that 90.8% of the land has been
acquired only after 904 days of signing of the Contract Agreement
PNC/VGHP/AE/MSV Date: 22.07.2019

10.0 You will kindly appreciate, due to such unprecedented and abnormal
delay, we are suffering huge losses by way of unutilized plants and
machinery, idle manpower, inflationary costs etc., the burden of which is
substantial in financial terms and most of it could have been avoided,
one site was handed over to us, in due time, as per Contract Agreement

11.0 90.8% of land handed over to us as on 30.04.2019 and the NHAI has failed
to hand over full site after 3 months from the date of handing over of
90.8% land, as well as have failed to indicate the date when full site shall
be handed over.

12.0 Please refer to Letter No. Varanasi-Gorakhpur/N H-29/P kg-ll/EPC/UP(Tec

h-Div)/2014/97694 dated 31.03.2017 of General Manager(T)-UP, NHAI ,
while notifying the appointed date the Competent Authority had agreed
in para (ii) which is reproduced here under

“(ii) The billing schedule will be modified in schedule-H on pro rata

basis as per available work front from appointed date.
Accordingly, AE may be asked to make pro-rata payment after
adjusting schedule - H for the work done on monthly basis.
When 90% work front is made available, then payment
schedule may be suitably adjusted as per the provision of
contract”

The similar permissions were subsequently agreed by MORTH

and modification to this effect were circulated for
incorporation vide circular No.RW/NH-39013/23/2015/NHDP-IVA
dated 16 August 2017 (copy attached as Annexure – 1 for
ready reference)
PNC/VGHP/AE/MSV Date: 22.07.2019

13.0 In reference to the broader provisions of MORTH letter No.RW/NH-

39013/23/2015/NHDP-IVA dated 16 August 2017 as already narrated here
in above, regarding clarification on Schedule ‘H’ and Schedule’J’ of
Model EPC Agreement due to non-handing over entire obstruction free
project stretches, Ministry of Road Transport and Highways mentioned
that , references have been received from various contractors wherein it
has been claimed that actual unencumbered length handed over a, the
time of 'appointed date' is much less than the total project length due to
various hindrances, while payments are being made as per the payment
milestones for the total project length as per Schedule 'H'. In cases were
such claims regarding non-handing over of the encumberance free
working fronts are correct, it is affect in the cash flows of the contractors
and subsequent project completion. The references received from the
contractors have been considered and following clarifications are issued
in terms of provision of EPC contract document.

14.0 According to the Schedule - H , Contract Price Weightages, Table 1.3.1 –

Stage payment for A – Widening and strengthening of existing road
payment procedure is unit of measurement is linear length and payment
of each stage shall be made on pro rata basis on completion of a stage
in a length of not less than 10 (ten) percent of the total length.

Clarification by the MORT & H

If existing road length (excluding bypasses, re-alignment, structure) is say
'L' km and the unencumbered length along the existing road as handed
over on the appointed date is 'L1' km and the balance length i.e. 'L2' km
(L - L1) is to be handed over on a later date as per the memorandum
signed under provision of Clause 8.2.1 of the Contract Document, then
the stage payment shall be worked out for the 'L1' km length handed
over on the appointed date. The stage payment for the remaining 'Ll km
length shall be worked out on prorata basis from the date of handing
over of such length.
PNC/VGHP/AE/MSV Date: 22.07.2019

Table 1.3.1 – Stage payment for B – New 4 lane realignment , bypass

payment procedure is unit of measurement is linear length and payment
of each stage shall be made on pro rata basis on completion of a stage
in full length or 5 (five) Km length.
Clarification by the MORT & H

Unit of measurement is linear length of each bypass/ re-alignment

(excluding structures) and payment of each stage shall be made on
prorata basis on completion of a stage in full length or 5 (five) km length
of each bypass/ re-alignment taken separately.

15.0 Mere perusal of the aforesaid provisions/ Clarifications on schedule 'H'

and Schedule 'J' of Model EPC Agreement due to non-handing over of
entire encumbrance free project stretch would lead to inevitable and
inescapable conclusions as under

Quote
In order for the above dlspensation to come into operation, it is
necessary that a suitable mechanism (like escrow account) is
evolved between the parties to the effect that the payments
released to the contractor under the above dispensation would be
used for completion of the project in the first instance and shall be
available to the Contractor only after meeting his project related
commitments
Unquote
16.0 We humbly submit, leaving aside the provisions of the Contract
Agreement, in spite of our several reminders, we have neither been
delivered the ‘Site’ free from encumbrances to the Contractor till date,
nor we have been informed, as to when the said obligation shall be
discharged by the Employer
PNC/VGHP/AE/MSV Date: 22.07.2019

The handed over stretches were having various

obstructions/encumbrances like private buildings, shops, building
compound walls/Gates, Residential Plots, Religious Structures , RCC pipe
etc. and public utilities like water lines etc. The land acquisition was not
complete at the time of handing over as the compensation to the land
owners was not distributed. It is to be appreciated that the handing over
of site without completing land acquisition is meaningless

17.0 Kindly provide us now at least, a definite date about the discharge of
your reciprocal promise,/obligations in this regard, so that we could
mobilize all our resources and complete the work expeditiously, working
at accelerated pace, even with compensatory increased costs

18.0 It is the responsibility of the employer to take good care to see that there
is no misinterpretation as to physical status of site, since the contractor is
presumed to have worked out the rate in accordance with data given in
the contract or tender document. The need to work as per program
requires undisturbed possession of site. It is there - fore imperative that the
employer should completely satisfy himself that the contractor is not put
to disadvantageous position. The consequences of such default leading
to disruption of activities of the contractor would be that of Employer,
having induced the EPC Contractor to mobilize and plan construction
activities on the presumption of having valid possession of desired land.

19.0 We kept continuing our work on extremely constrained disjointed &

scattered work fronts in order to mitigate the losses arising out of idling of
resources to the possible extent. The availability of work front remained
precarious all the time owning to non-shifting of obstructing utilities and
non-cutting of trees. This anomaly remaining unresolved resulted in loss of
production besides resulting into huge under utilization of resources
PNC/VGHP/AE/MSV Date: 22.07.2019

20.0 You will kindly appreciate, even now number of stretches have not been
handed over to us and at present, stands to be 28 months from the
Appointed date. With the present situation of 90.80% of availability also
there are 53 gaps in project length. The value of work involved in the 53
gaps are Rs.150,00,00,000/- which is 20% of Project value. It clearly shows
that financial status of handing over is only 80% of project value.
(affected length and financial value(detailed calculation) in the
affected area is attached as annexure – 2)

21.0 Finally, we submit, we are currently in dwindling financial state in the

midst of soaring targets ahead, since we find it very hard to carry on with
the execution, we therefore approach your good authority and call upon
you to kindly set out on evaluating our stage payment in this process, and
thereon compensate us duly at this stage in order that project cash flow is
somewhat strengthened and the ensuing project targets are not
defaulted

22.0 We shall appreciate, In the interest of the project and public at large, we
request you to kindly release the aforesaid payments and we undertake
to extend full cooperation and complete the project soonest possible
after handing over of the full site.

23.0 In case the matter be resolved on urgent basis, as we continue to suffer

immensely, due to such non payment of our dues. Therefore, we request
you to kindly consider the reality of the situation and kindly follow the
modified Schedule – H of Contract Agreement i.e., modified Payment
Schedule, till hand-over of 90% obstruction free project length.

Thanking you and assuring you of our best services at all times.

Yours faithfully,
For PNC Infratech Limited
PNC/VGHP/AE/MSV Date: 22.07.2019

(N. K. Singh)
Senior Project Manager

Cc: 1.The Team Leader, MSV-MSPARK, Shivpur, Varanasi.

2. The Director (Technical), PNCInfratech Ltd., PNC Tower, Civil Lines,
Agra.