Arbitral Tribunal Awards Tata Motors Rs. 326-cr Claim In Dispute With DTC

The Arbitral Tribunal has awarded a claim of nearly Rs. 326 crore to Tata Motors Limited (TML) against the DTC towards illegally recovered liquidated damages regarding delivery of buses in 2010, ahead of the Commonwealth Games.

Justice AP Shah and Justice RC Chopra announced the majority award while Justice Rekha Sharma pronounced the minority award, in which she held that TML was not entitled to any relief.

In the majority award, the tribunal also rejected the counter claim of DTC, saying, “The two notices issued by DTC (dated January 5, 2013) imposing a penalty of Rs. 14,06,57,183 and Rs. 21, 75, 38,172 are also invalid.”

In the instant case, the DTC had floated a tender in January, 2008, for supply of 2,500 low floor CNG buses. Of the 2,500, TML got the award for 1,625 buses and was issued two Letters of Acceptance for 650 AC and 975 non-AC buses.

The AC buses were to be delivered in 11 months, while non-AC in 9 months after the approval of the prototype which itself was to be done in six months from the signing of the LoA.

TML, represented by senior advocate Gopal Jain, advocate Meera Mathur and Nandini Gore (Partner) from Karanjawala and Co., told the tribunal that it repeatedly informed the DTC about appropriate standards which should be applied as it encountered practical and technical difficulties in the standards specified by the DTC. The DTC overlooked its suggestion, which ultimately affected the entire contract.

TML said the DTC modified the prescribed specifications, approvals and testing methodology at various stages which impacted the development of prototype, procurement of materials and testing that are directly linked to delivery schedule timelines.

TML claimed it supplied the entire fleet of buses by March 31, 2010, but the DTC levied liquidated damages for delay in supply, which was disputed by TML.

The DTC, on the other hand, claimed that there was extensive delay on part of TML on finalisation of spare parts, catalogues and pricelist and that TML was taking its own time in repairing the buses.

While awarding TML claim under various heads, the tribunal, in its majority award, rejected its claim regarding wrongful deductions pertaining to accident bills.

It also rejected TML’s claim of Rs. 50 crore for business loss and Rs. 8.58 crore for loss caused as a result of maintaining inventory and idle manpower due to delay caused by DTC.

In the minority award by Justice Rekha Sharma, TML was held not entitled to any relief.

Justice Sharma held the DTC as entitled to recover Rs. 14, 21, 62, 698 from TML, while holding that the dispute actually got triggered in July, 2010, when TML declined to carry out defects and liabilities.