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Challenging an Arbitral Award

Procedure for securing 75% award amount from Railways.

👉🏻 Pursuant to NITI Aayog’s instructions pertaining to PSU’s obligation to pay 75% of Arbitral Award at the time of challenging u/s 34, following is the Standard Operating Procedure for the Railway projects.

(i) These provisions shall be applicable to all Railway projects, where the Concessionaire / Contractor and the railways have entered into agreements in which the Arbitral Tribunal has passed the Arbitral Award in favour of the Concessionaire/ Contractor and the railway has challenged the Arbitral Award.

(ii) The Arbitral Award amount is the amount for which the Award has been announced by the Arbitral Tribunal. Payout amount is the sum of Arbitral Award together with interest amount till the date of payment, if the Tribunal has awarded payment of interest on such amount.

(iii) Railway may challenge any Arbitral Award in full or parts with the approval of competent authority duly deliberating the portion and amount of award under challenge.

(iv) Railway shall send a communication (under acknowledgement) to the eligible Contractor/Concessionaire regarding challenge of Arbitration award duly indicating the amount of award under challenge within 30 days of issue of Arbitral award.

(v) Contractor/Concessionaire may ask for payment of 75% Payout obligation in terms of the CCEA decision after opening an Escrow account with Lead Banker and furnish a Bank Guarantee in the approved format for the purpose within a period of 30 days of receipt of Railway’s communication, which can be extended based on request/merit of each case.

(vi) Railway is liable to pay 75% of such ‘Payout amount’ against the Bank Guarantee of the equivalent amount within a period of not more than 15 working days.

(vii) The custody, refund and encashment of Bank Guarantee bond shall be in accordance with Arbitral Award Escrow Account Agreement.

(viii) The Arbitral award escrow account shall be operated and closed in accordance with Arbitral Award Escrow Account Agreement.

Arbitral Award escrow Account

(a) A separate designated Escrow Account (hereinafter referred to as the Arbitral Award Escrow Account), shall be opened and established by the Concessionaire/ Contractor in accordance with Arbitral Award Escrow Account Agreement.

(b) Arbitral Award Escrow Account Agreement shall be opened with Lead Banker (Bank with highest lending in project). It will include 4 (four) parties viz.

• Lead Banker,
• the Concessionaire/Contractor
• Railway and
• Lenders’ Representative (If any).

(c) The Concessionaire / Contractor shall bear all expenses on establishment of the Arbitral Award Escrow Account with respect to opening and operation of the said Account.

Bank Guarantee

👉🏻 This Bank Guarantee shall be valid for one year and renewed on annual basis till settlement of the legal challenge to the Arbitral Award.

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