CE 308

Construction Technology and Management

Lecture 5

Dr. Santu Kar

Department of Civil Engineering
Arbitration and
Settlement of
Disputes
Claim, Counter Claim, and Dispute
❑ What is a claim?

A demand or request for something considered one’s due; a contention or assertion.

❑ What is counter claims?

Counter claim is a cross claim, and it can be raised as a defense to claim but may not be so in a
number of situations and can be a substantive claim against the claimant which could have rooted
as independent action.

❑ What is dispute?

A dispute implies on assertion of a right by one party and repudiation thereof by another. Hence a
mere claim without repudiation cannot be a dispute and a claim cannot be adjudicated unless it
becomes a dispute.

Dr. Santu Kar, Assistant Professor, Department of Civil Engineering, IIT Guwahati 3
Reasons of Disputes
Incorrect ground data
Contracts containing faulty and ambiguous provisions
Deviations
Suspension of works
Hindrances due to other contractors working on site
Owners not handing over site on dates agreed
Defaults by contractor
Levy of compensation for delay
Delay in payment of bills
Dr. Santu Kar, Assistant Professor, Department of Civil Engineering, IIT Guwahati 4
Mediation and conciliation
❑ An informal process in which the parties are assisted by one or more
neutral third parties in their efforts towards settlement
❑ Mediators advise and consult impartially with the parties to assist in
bringing about a mutually agreeable solution to the problem
❑ Mediators have no power to impose an outcome on disputing parties
❑ The parties participate in their own free will
❑ The process is private, confidential and conducted without prejudice to
any legal proceedings

Dr. Santu Kar, Assistant Professor, Department of Civil Engineering, IIT Guwahati 5
Mediation and conciliation
❑ Process of mediation and conciliation

– Agree to mediate

– Identification and engagement of mediator

– Meetings with the parties

– The parties’ presentation

– Information gathering

– Facilitating negotiation

– Settlement

– Recording agreements

– Compliance with the settlement

Dr. Santu Kar, Assistant Professor, Department of Civil Engineering, IIT Guwahati 6
Benefits of Mediation
Reducing the time taken to resolve disputes

Reducing the costs of resolving disputes

Providing a more satisfactory outcome to the disputes

Opening channels of communication

Preserving or enhancing relationship

Dr. Santu Kar, Assistant Professor, Department of Civil Engineering, IIT Guwahati 7
Arbitration

Less formal and Suited for

Quick settlement
quasi-judicial disputes of
and less expensive
process technical nature

Time and place of

hearing are
Site of works can No publicity
normally fixed to
be visited involved
the convenience
of parties

Dr. Santu Kar, Assistant Professor, Department of Civil Engineering, IIT Guwahati 8
Arbitration (cont…)

Awards are final and Any party of arbitration Arbitration and

binding on parties can go to court of law for Conciliation Act, 1996
seeking relief if he feels
arbitrator has
misconducted himself

Dr. Santu Kar, Assistant Professor, Department of Civil Engineering, IIT Guwahati 9
Selection of Arbitrator
Technical person with special knowledge of subject matter under dispute

Should have sound understanding legal procedure

Man of high integrity, complete impartiality

Believes in applying principles of natural justice and practical approach

Disputes can be resolved by single arbitrator or a panel of several arbitrators

Number of arbitrators should be odd

Dr. Santu Kar, Assistant Professor, Department of Civil Engineering, IIT Guwahati 10
Duties of Arbitrator
Call for a preliminary meeting to familiarize himself of the issues and disputes or send notices to
parties asking them to forward statement of case along with supporting documents

Should not receive any evidence in the absence of the other party

Should not examine a witness in the absence of any of the parties and should not make private
enquires at the back of any party

Should not exceed beyond the scope of reference

Must adhere to time schedule laid down for making and publishing the award

Dr. Santu Kar, Assistant Professor, Department of Civil Engineering, IIT Guwahati 11
Arbitration (Case Study)
❑ Project description

Supply and commissioning of coal handling plant (CHP) by L&T at Maharashtra for
Maharashtra State Electricity Board (MSEB)

Details of contract -
LOI issued on 19/04/1988

Completion period of contract: 25 months

Total value of contract: Rs. 61,11,07,200

Contract was a lump sum contract

Dr. Santu Kar, Assistant Professor, Department of Civil Engineering, IIT Guwahati 12
Arbitration (Case Study)
❑ Background of the claims ▪ Arbitrators
▪ L&T filed its claims on October 1994 o Mr. X (Appointed by L&T)
o Mr. Y (Appointed by MSEB)
▪ L&T raised 14 claims worth Rs. 26,84,65,023
o Mr. Z (Institution of Engineer)
▪ MSEB strongly opposed the claims and raised
counterclaims

▪ Tribunal held several meetings which continued to

August 2001

▪ Award made on July 2002

Dr. Santu Kar, Assistant Professor, Department of Civil Engineering, IIT Guwahati 13
 Case Study – Claim No. 1
Description: Additional cost of hand railing on all the walkways along the conveyor
instead of providing only for the central walkway

❑ Claimant (L&T)

Claim arises out of additional hand railing

for side walkways as insisted by MSEB

❑ Respondent (MSEB)
MSEB drawing for this work shows both
side handrailing on all the walkways

Dr. Santu Kar, Assistant Professor, Department of Civil Engineering, IIT Guwahati 14
Case Study – Claim No. 1 (Cont…)
❑ Claimant (L&T)

Bill of quantity (BOQ) of L&T for this

work stated hand railing on central
walkway only

❑ Respondent (MSEB)

Drawing of L&T for this work shows

both side hand railing on all the
walkways

Dr. Santu Kar, Assistant Professor, Department of Civil Engineering, IIT Guwahati 15
Case Study – Claim No. 1 (Cont…)

Claimant (L&T): But

specification clause __ Vol II Respondent (MSEB): This
says, ‘handrails should be issue was not raised by L&T
provided for central during pre-bid meeting
walkways’

L&T MSEB

Dr. Santu Kar, Assistant Professor, Department of Civil Engineering, IIT Guwahati 16
Case Study – Claim No. 1 (Cont…)

Arbitrators

As per hierarchy of documents to be referred during dispute,

specifications override drawing.

Hence, MSEB should pay L&T Rs. 18,57,423

Dr. Santu Kar, Assistant Professor, Department of Civil Engineering, IIT Guwahati 17
Case Study – Claim No. 2
Description: Compensation for extra work carried out for repair of conveyor and
structure due to damage caused by oversized boulders of coal.

Amount claimed by L&T Rs. 2,22,553

❑ Claimant (L&T)
▪ Coal of 600 mm size and below was expected

▪ Huge quantity of oversized coal was

encountered

▪ Oversized coal caused damage to conveyor

Dr. Santu Kar, Assistant Professor, Department of Civil Engineering, IIT Guwahati 18
Case Study – Claim No. 2

❑ Respondent (MSEB)

▪ The grid through which coal was passing is designed by L&T

▪ We have specified that the grid should be adequate to pass coal of 600 mm
size and below

▪ We did not specify grid size

▪ Instead of making diagonal of grid 600 mm, L&T made 600 mm x 600 mm size
grid, which allowed bigger size of coal lumps up to 848 mm size to pass
through
Dr. Santu Kar, Assistant Professor, Department of Civil Engineering, IIT Guwahati 19
Case Study – Claim No. 2
❑ Claimant (L&T)
▪ The design was approved by MSEB

❑ Respondent (MSEB)
▪ When L&T submitted the design, our interest was only to get coal of 600mm size
and below

▪ This 600 mm size grid was considered by L&T, now the diagonal becomes 848 mm

L&T MSEB
Dr. Santu Kar, Assistant Professor, Department of Civil Engineering, IIT Guwahati 20
Case Study – Claim No. 2 (Cont…)

Arbitrators

We find both parties are equally responsible for the situation.

So, we award 50% of revised amount of Rs. 2,22,553 claimed by L&T.
Thus, we award L&T, which MSEB should pay to L&T

Dr. Santu Kar, Assistant Professor, Department of Civil Engineering, IIT Guwahati 21
Thank You