To

1. Mr. K. Venkat Pani, Director

M/s. Potin Pangin Highway Private Limited
Orion Place, Maya Appts.,
Flat No. 401, 4th Floor,
Next to Mizoram House, Tarun Nagar,
G.S. Road, Guwahati - 781 005.

2. The Chairman, ECIECCL

Plot No. A 12 &13, Panchavati Township
Manikonda Village, RR District,
Hyderabad - 500089

Sub : Submission of EPC Contractor’s Claims for the Project – Potin to Pangin
in consequences to Termination of the Contract by Authority

Ref : Authority Lr. No. NH-12011/22/2008/Ar. Pkg/SARDP-NE/Nil, 15-11-2018

Dear Sir,

Reference to the subject it was noticed that the project was terminated by the
Authority vide letter dated 15-11-2018 under reference. It is brought to your kind
notice that, you are well aware that we (TKECPL) are the EPC Contractor for the
subject Contract. The EPC Agreement was signed on 19-09-2014 between PPHPL
(Concessionaire) & TKECPL (EPC Contractor). In this context, it is brought to your
information that, prior to signing the EPC Agreement we had mobilised the Plant,
Equipment, Manpower, Camp establishment etc. which were required for executing
the works as per your request.

The Contract terminated by the Authority under Cl. 36.1 (page 000091) of the
Concession Agreement (ref.). The same was neither notified nor informed to EPC
contractor. As per the terms of the contract agreements, the Concessionaire to be
share/notify the informations/correspondences/communications received/submitted to
and fro to the Authority/Concessionaire. The EPC Contractor have been waited till for
the confirmation of termination and in opinion that the Concessionaire will
inform/notifies the same to EPC and pay/release the EPC Contractor payments as per
the Contract Agreements. There is no sign from the Concessionaire in providing the
termination conformation and releasing our payments as per the provisions of the CAs
clauses and also noticed that you had been invoked, constituted the Arbitration clause
and proceedings are going on. The Concessionaire had been invoked the Arbitration
clause and the Arbitration proceedings are in progress as per the Contract. Herewith,
the EPC Contractor submitting claims under the Cl. 34.2 & 34.3 (page 000084), 36.3
(page 000090) & 36.5 (page 000091) of the Concession Agreement and Cl. 21.5
(Page 72 of EPC Agreement) without prejudice and for your information and
immediate release the payments.

You are requesting to share the copies of the Arbitration proceedings with the Claims
statements. It is also requesting to provide the dates of the Arbitration Proceedings,
inform the Tribunal regarding our participation as EPC contractor in the proceedings.

The heads specified are enclosed for your ready reference.

Herewith you are requested to release the said amount under the Cl. 36.6 of the
Concessionaire Agreement & Cl. 17.6 of the EPC Agreement.

For your information and release the said claims.

Regards
for TKECPL

(Director)

Encl . : The Claim Statement with encl.

Cc : 1. Hon’ble Justice Shri G.N. Ray (Presiding Arbitrator).

2. Hon’ble Justice Shri G.B. Patnaik (Arbitrator).
3. Shri Ahzal Amanullah (Arbitrator).
4. The Chairman, MoRTH, New Delhi.
5. The Director General (Road Development) & Spl. Sec., MoRTH, New
Delhi.
6. The Chief Engineer (P9), MoRTH, New Delhi
7. The Chairman, ECIL, Hyderabad.
8. The Chairman, SREI, Kolkata.
 Claims Description of Individual Heads Quantification

1. THE consequences of the Authority’s defaults have caused huge additional

costs and losses to the Contractor under following heads:-
1. Overhead costs
2. Plant and equipment costs
3. Additional costs incurred on Consultancy Fees, Financing charges etc.
4. Loss of opportunity and profits
5. Payment of unbilled work

1. Overhead Costs

2. AT the time of conversations with the Concessionaire, the EPC Contractor had
envisaged to complete all works within the stipulated period of 54 months in
accordance with the express terms of the Concessionaire Contract with
Authority. Accordingly, the Contractor while structured the discussion had
foreseen that the time related overhead costs would be recovered from the
execution and completion of the project in the 54 month period. These times
related overhead costs include the following:
 Running and maintenance of site office/ establishments including
accommodation and transport charges including other enabling works
 Office stationery and consumables including power, electricity,
telephone and other enabling services
 Local taxation
 Management and supervision including salaries to staff and officers
Off-site Overheads: Head office expenses relating to the project
 Bank Guarantee and Insurance costs
 Management, monitoring and supervisions charges including salaries
and expenses
 Repairs and maintenance
 Other relevant heads
 Head office overheads
 These costs are time related and earmarked for the scheduled 54 month period.
Although the Contractor had to incur these overhead expenses, it could not
progress and complete the works as planned owing to factors beyond the
Contractor’s control as described. These factors were not attributable to the
Contractor and entitle the Contractor to compensation. The Contractor had to
stay for 54 months in the site and has been able to complete work accounting
to only a fraction of the original scope. These fixed overheads have been taken
as amounting to 10% in accordance with practices of trade. Considering the
application of the internationally accepted Hudson’s formulae, the amount
under this head comes to Rs. 133.2 crores.

2. Plant and Equipment Costs

3. THE EPC Contractor had envisaged that the various constructional plant and
equipment deployed for the execution and completion of the works would be
demobilized from site after completion of the works within the time of 54
months as originally scheduled. The equipments were intended for
demobilization to other project sites of the Contractor in aphased manner once
their respective requirement at site was completed. Accordingly, the
Contractor had distributed the equipment costs (operating and ownership
costs) in the BOQ rates and amounts. However, due to various delay factors
not attributable to the EPC Contractor, the EPC Contractor’s equipment was
forced to be kept on standby for the present work and the Contractor has
suffered significant losses on this account. These additional costs have
incurred on account of the breach of Contract by the Authority/Concessionaire
which could not be reasonably foreseen at the time of
bidding/conversations/negotiations and were hence not included in the
Contract Price. In terms of the relevant provisions of Contract and law, the
Contractor is entitled to suitable compensation for such unforeseeable costs.
The Contractor has considered the hire rates (charges) (duly reduced for the
cost of operation) as prescribed by the PWD and has considered the planned
deployment of resources. The Escalation @ 5% for the mobilised plant &
Equipments was worked out. The claim amount for this head works out to
 Rs.153.98 Crores including man-power idle charges. The details of the
machinery deployed from March 2013 to April 2018, the hire charges of Plant
and machineries as per the PWD, Arunachal Pradesh and the calculations
made in arriving to the claim of the Contractor under this head after duly
setting off the value of billed work.

3. Plant & Equipment Mobilisation Charges

4. THE Contractor had envisaged that the various constructional plant and
equipment deployed for the execution and completion of the works to the site
for the completion of the works within the time of 54 month as originally
scheduled. These equipments were mobilised based on the Agreement and
work program. Accordingly, the Contractor had mobilised the required
equipments on site, due to various delay factors not attributable to the
Contractor, the Contractor’s equipment was forced to be kept on standby for
the present work and the Contractor has suffered significant losses on this
account. These additional costs have incurred on account of the breach of
Contract by the Employer (Concessionaire) which could not be reasonably
foreseen at the time of Meetings, Conversations & EPC Agreement and were
hence not included in the Contract Price. In terms of the relevant provisions of
Contract and law, the Contractor is entitled to suitable compensation for such
unforeseeable costs. The Contractor has considered the mobilisation of Plant
& Equipment charges. The claim amount for this head works out to Rs.
2,25,67,266/-. The details of the machinery mobilised from March 2013 to
April 2018.

4. Additional Costs incurred on Consultancy Fees, Financing

Charges & Legal Expenses and the Amounts paid to ECIL
etc.

5. THE EPC Contractor had envisaged that the Time related expenditure towards
overheads, plant and machinery and profits expended along with the resources
deployed during the scheduled 54 month period would be recovered on
 account of realization of payment against running bills on a month to month
basis. However, owing to the defaults of the Concessionaire, the Contractor’s
fixed costs and profit expectation for resources deployed during the original
period were not recovered in a timely manner. In fact, due to the shortfall in
financial progress, the Contractor was forced to finance its losses at
commercial rates. On a month to month basis, the Contractor had to expend
the financing costs of the amounts not realized by making suitable
arrangements from the market. This was an additional expenditure that was
under no circumstances foreseeable at the time of entering into the Contract.
Therefore, the Contractor is claiming the compensation towards the financing
charges by way of interest towards the delayed recovery of component of
overheads and other fixed charges from the Contract including the profit
potential which works out to Rs. 55,00,64,752/-Crores. As per the request of
the ECIL the EPC Contractor paid Rs. 23,87,00,000/-.

5. Loss of Opportunity, Profits and other

6. THE Contractor had envisaged that it would complete all works within the 54
month of the contract period, subject to compliance of reciprocal obligations
in time by the Concessionaire. Accordingly after the completion of the work
the Contractor could have moved elsewhere and deployed all the resources in
some other project of similar nature and type of commercial gain. The
Contract has however been terminated by the Authority without considering
their defaults and breaches of the Contract and the same was applied to EPC
Contractor. As the Contract terminated by the Authority and the EPC
Contractor is left with a huge portion of the works which could not be
completed. The loss of opportunity to generate a turnover in a similar project
and the consequent loss of profit are calculated on the basis of the standard
profit potential as 10% in accordance with the practice of trade, the claim
amount works out to Rs. 146.52 Crores. The EPC Contractor losses its
reputation due to illegal termination and vilifying either obliquely or
obviously.
 6. Payment of Unbilled Work and Maintenance Works etc.

AT the time of termination of works and subsequent works till April 2018, the works
to the tune of Rs. 133,74,48,000/- have been completed and have not yet been billed.
The EPC Contractor taken-up the Tree cutting, maintenance & repair works for bridge
and roads tunes to an amount Rs. 94,68,97,312/-. The Contractor is entitled to these
payments.

7. THE EPC Contractor has evaluated the claimed amounts till April 2018. The
extract of the claims made under different heads by the Contractor in the
supras above reflected in the below tabular column.

STATEMENT OF CLAIMS

Sl. Heads under Which Contractor to be

Amount Rs. Remarks
No. Compensated

Covered
1 Amount Paid to ECIL towards replacement of BGs. 20,00,00,000.00 under Head
–4
Covered
2 Bank Charges for the amount paid to ECIL. 3,87,00,000.00 under Head
–4
Covered
Interest on the amount paid to ECIL @ 16.7% from
3 13,36,00,000.00 under Head
September 2014 to April 2018.
–4
Value of work done cum unbilled including Covered
4 maintenance, tree cutting and repair works for bridge 228,43,45,312.00 under Head
and roads. –6
Covered
Plant & Machinery Idle Charges after deduction the
5 130,10,29,065.00 under Head
fuel and other charges and escalation @ 5%.
–2
Covered
6 Plant & Equipment Mobilisation Charges. 2,25,67,266.00 under Head
–3
 Covered
7 Man Power Idle Charges. 23,86,74,455.00 under Head
–2
Covered
8 Legal and Consultancy Expenditure. 26,07,14,752.00 under Head
–4
Covered
9 Over Head Expenses 10% of the Project Cost. 133,20,00,000.00 under Head
–1
Covered
Loss of Opportunity/Profit potential 10% of the
10 146,52,00,000.00 under Head
Work Value as per standard norms.
–5
Interest towards the delayed recovery of component Covered
12 of overheads and other fixed charges from the 55,00,64,752.00 under Head
Contract including the profit potential –4
Covered
11 Compensation for loss of reputation/goodwill. 200,00,00,000.00 under Head
–5

Total Principal Claim Amount 982,68,95,602.00

 

8. THE Contractor has been deprived of these significant additional amounts by

the Concessionaire/Authority and is entitled to the interest on the unpaid
amounts from the date they were due till the date of receipt of payments of the
amounts. The EPC Contractor is entitled to the commercial rate of borrowing
at 16.7% per annum.

9. IT is further submitted that the Concessionaire/Authority is mandated by the

Contract to return forthwith the amounts paid towards bank guarantees against
mobilisation advance as well as the Performance Security bank guarantee.
Details of these amounts paid for bank guarantees are provided in the schedule
herein. The Concessionaire/Authority is required by Contract to ensure the
return of the amounts paid towards bank guarantees to the EPC Contractor and
any delay in doing so will constrain the EPC Contractor to claim further
amounts on account.