Bombay High Court: SRC Infra Responsible for Construction Fees, Contract Terms Prevail

Here's a breakdown of the recent court decision involving Konkan Railway Corporation Ltd. and SRC Company Infra Private Ltd. about who should pay the fees for using the earth in construction work. Let's dive into the details.

The Background: What's the Fuss About?

The National Thermal Power Corporation (NTPC) planned to set up a Super Thermal Power Plant in Madhya Pradesh. Konkan Railway was chosen to manage the project, and they hired SRC Infra to do the construction work. The main issue? Who should pay the fees for using the earth needed for the project.

The Contract Drama: Who Pays the Fees?

Konkan Railway argued that the contract clearly stated SRC Infra should pay the fees. They pointed to several parts of the contract that supported their claim. Mr. Simil Purohit, representing Konkan Railway, emphasized that the contract terms were clear and that SRC Infra agreed to them.

"The contract terms clearly confirm that the fees were to be paid by SRC Infra," said Mr. Purohit.

SRC Infra's Stand: Misunderstanding or Mistake?

SRC Infra, represented by Mr. Anil Anturkar, claimed there was an agreement that no fees were payable on ordinary earth. They argued that the real intention of both parties was misunderstood and that the contract should show this agreement.

Mr. Anturkar argued, "The majority Arbitrators chose to find out the real intention of the parties rather than sticking to a word-for-word interpretation."

The Arbitral Tribunal's Decision: A Split Verdict

The Arbitral Tribunal initially agreed with Konkan Railway's interpretation but then decided that Konkan should pay the fees, based on the "real intention" of the parties. This decision was based on notes from a meeting, which suggested no fees were expected.

The Court's Ruling: Setting Things Straight

Judge R.I. Chagla of the Bombay High Court found the Tribunal's decision flawed. The court ruled that the contract terms were clear and that SRC Infra should pay the fees. The judgment emphasized that meeting notes couldn't override the formal contract.

"The Arbitral Tribunal's reliance on internal notes is misplaced," the judgment stated.

Summary of the Verdict

The court overturned the Tribunal's decision, reinforcing that SRC Infra is responsible for the fee payments. This case highlights the importance of clear contract terms and the risks of relying on informal understandings.