AN ARBITRATION UNDER THE

UNCITRAL RULES, 2013

BETWEEN

CHAMELIYA
CHINA GEZHOUBA HYDROELECTRIC
GROUP CO., LTD. AND PROJECT, GENERATION
(CGGC) CONSTRUCTION
DEPARTMENT
Claimant (NEA)

Respondent

OPENING STATEMENT OF THE RESPONDENT

 CONSTRUCTION OF CIVIL WORKS FOR
CHAMELIYA HYDROELECTRIC PROJECT

The Parties

Contractor
 China Gezhouba Group Co., Ltd. [CGGC] (hereinafter “Claimant”)
 Claimant is a Corporation specializing in providing infrastructure construction services including
construction of highways, railways, bridges, airports, and other infrastructure construction
businesses.
Employer
 Chameliya Hydroelectric Project, Generation Construction Department, Nepal Electricity
Authority (hereinafter “Respondent”)
 Respondent is a department under the Nepal Electricity Authority, established for the execution
of all works related to the construction of Civil Works for Chameliya Hydroelectric Project
 DETAILS OF THE PROJECT

Contract Title: Construction of Civil Works,

Chameliya Hydro Electric project

Contract Reference Number: Lot No. 1, 062/063,

Civil Works

Date of Agreement: 21 December 2006

 IMPORTANT DATES FOR CONSIDERATION BY
THE ARBITRAL TRIBUNAL
Date Particulars
23 November 2006 Memorandum of Understanding (“MoU”) was signed between the Parties following
Letter of Acceptance awarding the Contract to the Claimant
21 December 2006 Contract Agreement Signed Between the Parties
10 January 2007 Commencement Date of the Project
9 May 2011 Originally envisaged date of completion of the Project
1 October 2017 Final Extention of Time (“EoT”) provided to the Claimant
15 July 2018 Completion date of the Project as per the last EoT

25 August 2018 Taking Over Certificate was issued to the Claimant

2 October 2019 Defects Liability Certificate was issued to the Claimant

29 March 2021 Notice of Arbitration sent by the Claimant

19 January 2022 Forfeiture of Performance Guarantee by the Respondent

 STRUCTURE OF SUBMISSIONS OF THE
RESPONDENT

I. Reply to the claims raised by the

Claimant
II. Counter-Claim of the Respondent

III.Conclusion and Relief Sought

REPLY TO THE CLAIMS RAISED BY THE
CLAIMANT
 CLAIM NO.1: NON APPLICABILITY OF DISCOUNT ON CONTRACT
PRICE EXCEEDING “ACCEPTED CONTRACT AMOUNT”

Contention raised by the Claimant:

 The Claimant under the heading has basically sought to argue and contend that the
Discount offered by the Claimant is to the tune of NRs. 803,802,690.78 in a Fixed
Lumpsum Discount manner and the discount amount after reaching this ceiling of NRs.
803,802,690.78 cannot be crossed.

 As per the MoU, the discount stipulated is as 24.18423540% of the Bill of Quantities
attached in the Bid offer. This percentage was not to be applied beyond the fixed lump
sum discount amount of NRs. 803,802,690.78. It was not and cannot have been the
intention of the parties to have the percentage applied to all future IPCs, such that it
exceeded the fixed lump sum amount of NRs. 803,802,690.78

 Total Claim Amount under this heading: 1,288,786,113.68.

Law of Limitation bars the Claim
 At the outset, it is the submission of the Respondent that this particular Claim of the
Claimant is barred by the application of the doctrine of Limitation

 Section 89(2)(d) of the erstwhile Contract Act,

2056 (2000) categorically provides that the
limitation period for matter relating to
contracts is two years from the date of
emergence of the reason for filing a lawsuit for
such a claim

 Similarly, the limitation period under Part-5

Provisions relating to Contracts and Other Liabilities
has been provided under Sections 503, 516, 534,
544, 562, 574, 584, 590, 601, 609, 623, 639, 663,
671 wherein it has been categorically stated that the
limitation period for filing a lawsuit is within two
years after the date of accrual of the cause of action
  Specifically, to refer matters to arbitration, the
limitation period envisaged under the
Arbitration Act, 1999 (2055) should be referred

 Section 6(1) provides that the process of

appointment of arbitrators must be started
within three months from the date when the
reason to settle a dispute through arbitration
arises

 Reference should also be made to Section 3(1), which provides that in the case of any dispute to be
settled through arbitration, the dispute is to be settled according to the procedure prescribed in the
agreement between the parties. But if there is no specific agreement, then the procedure prescribed
under the Act itself shall be followed.

 Although the current arbitration proceeding is conducted under the UNCITRAL Arbitration Rules,
2013, it is the mandate of the Arbitration Act that for issues where the institutional rules under which
the arbitration proceedings is being conducted are silent regarding the time limit for appointment of
arbitrators, then for all such matters, the provisions of the AA shall be applicable by default.
  The Claimant had, through its letter dated 7 April 2013 itself
stated that they would be referring the matter pertaining to
discount to arbitration

 Post this date as well, the Respondent continued to deduct the

discount in subsequent IPCs. However, the Claimant never sought
to initiate any dispute resolution process in a timely manner.

 The date of occurrence, date of discovery or the date of knowledge

Excerpt of R-12 of all such deductions on account of the discount is pertaining to
an event that is almost a decade old.

 Now, suddenly after 10 years, the Claimant cannot be in a position

to bring this issue as a claim in arbitration proceedings.

 This is not just against the principle of laches, but also directly
barred under the principle of law of limitation as stipulated under
the Nepalese laws

 Further, there were a total of 137 IPCs issued during the entire
timeframe of the Contract, with the last date being 14 October,
2018. The Claimant has failed to initiate timely dispute resolution
process of the same for almost a decade post their abovementioned
letter.

 This conscious conduct of the Claimant clearly accounts for an

instance of agreeing to the deduction on account of discount,
during the payment of interim payments.

 If a party does not approach the competent authority within the

time period prescribed by the law, and sleeps over its right, then,
in such circumstances, it can only be construed as deemed
acceptance.
 The claims currently submitted by the Claimant is not only time barred under the
limitation period envisaged under the law of contract, but also directly barred under
Section 6(1) of the Arbitration Act
 The Claimant has failed to start the process of appointment of arbitrators within a period
of 3 months from the date when the reason for settlement of the dispute (or cause of
action) had arisen.
 The reason for settlement of dispute through arbitration arose on 7 April, 2013, which
was the date when the Claimant has categorically stated that it would initiate arbitration
proceedings, but failed to do so for nearly a decade.
 Even if the Claimant were to initiate a lawsuit, the same is also barred by limitation
because the cause of action accrued on 7 April 2013 and by application of limitation, two
years has already passed in the year 2015

 Therefore, the claim of the Claimant relating to Non-applicability of Discount on

Contract Price exceeding Accepted Contract Amount should be quashed solely on
the ground of limitation.
Defense on Merits

 As the dispute relates to the provision of the MoU, it is apposite to refer to the relevant Clause under
the MoU  The MoU signed and agreed between the
Parties categorically accounts that the
Claimant and the Respondent agreed
that 24.18% shall be deducted from
each monthly Interim Payment before
Provisional Sum and VAT

 Accordingly, as per the terms of the MoU

under the heading ‘Final Offered
Discount Price’, the Respondent has
deducted 24.18% from each Interim
Payment
 This deduction of 24.18% from each interim payments need not be refunded back to the Claimant,
as it is totally in line with the agreement with the Parties

 The contention of the Claimant is erroneous as it is mentioned absolutely nowhere that NRs.
803,802,690.78 is the cut-off ceiling, post which the discount cannot be deducted

 On the other hand, the recorded MoU between the Parties categorically accounts for the fact that
24.18% is to be deducted as discount during the payment of each interim payments
 The Claimant is now only seeking to unjustly enrich from additional payments -payments which are
well accounted as discount, in light of agreement between the parties
 There is no contractual provision or any minutes agreed between the parties regarding a cap/ceiling
on the discount wherein there is a categorical provision which provides for deduction of discount
under each IPC
 Therefore, there is no room for segregation of the payments, as all interim payments are subjected to
a discount of 24.18%, as explicitly identified and agreed in the MoU

 It is apposite to refer to definition

of the term “Contract Price” as
defined under Clause 1.1 (e) of the
GC

 When the entire payments made to the Claimant as part of the various Interim Payments are for execution and
completion of the Works, it cannot be reasonably inferred that certain interim payments would be subject to
discount and other not subject to discounts

 The amounts for Variation Works as determined by the Engineer is by taking the Original Rates, which have been
discounted by 24.18% by the Claimant themselves during the time of bid

 Therefore, since all of the interim payments form a part of the payments made for the works done to achieve
execution and completion of the works, it cannot be reasonably argued that the contractual completion has been
attained, the discounts made by the Respondent in each and every interim payment, is as per the MoU, signed by
both parties.
 A generic form of interpretation, be it the golden rule approach or the literal rule approach of the canon of
interpretation would only rationally allow us to interpret that the Contract Price is the amount on which the
execution and completion of the Works, including any defects would be remedied. This would clearly further
ascertain that the completion of the entire works have to be attained for finality of the Contract

 The ‘Contract Price’ is not simply the amount that the Claimant had quoted at the time of bid but the actual
revised Contract Price attained during the final completion of the work
 When the Contract Price of the project has massively changed, it cannot be argued that the initial contract price
entered between the parties at the inception of the project and during the time of bid, remains as the Contract
Price for the full timeframe of the entire project

 The Contract Price, after all the variations and additional works as of the latest Engineer’s determination, is
NRs. 7,22,29,80,669.72

 Therefore, application of the discount only in a limited approach would defeat the very intent and
purpose of the parties entering and agreeing into the MoU
 Further, with reference to the definition of the term
“works” as per Clause 1.1(f) of the GC, it can be
reasonably inferred that Works would entail each and
every kind of work needed to be completed during the
execution of the project
 Hence, work would not only entail that which was
 Therefore, segregation of the applicability of foreseen during the time of tender or execution of the
the discount to only the tendered amount is Contract, but also all other works that would form a part
not at all rationale and absence of any legal
basis for the same is not legally justifiable
of the Contract, as and when the project moved forward.
  The Claimant for its convenience seeks to add in new phrases
such as “Discount would not be applicable for variation works” or
“Discount would not be applicable for amounts or increase in
contract price beyond originally intended contract price”.

 Had the intention of the parties been to this extent, such phrases
would have categorically been put in.

 It is only correct to note that the issue for deductions on discount

only being till the amount mentioned in the tender is wrongful
interpretation of the agreement between the parties by the
Claimant.

 The letter of the Engineer furthers the fact that the Respondent
had in fact never agreed to such an erroneous contention of the
Claimant.

 Only after the Variation Orders being issued and the

recommendations from the Expert Committee being provided, the
Price Escalation has been calculated by appropriating the
discount as 24.18%.

 Claimant in its SoC has stated excerpt of the MoM dated 29 September 2014, wherein it was recorded that “The
Negotiation Committee (NC) and Contractor agreed that the discount deducted from IPC payments made prior to the
approval of variation for squeezing treatment would be refunded to the Contractor….”

 This statement only limits to the extent that the discount deducted from IPC payments prior to the approval of
variation, whereas the same could never materialize because the Contractor clearly disagreed to the adjustments to be
made for the foreign currency while refunding the discount deductions.

 Therefore, the Claimant’s statement that the over deduction of the discount is wrongful, is unsubstantiated.
• The Respondent fully agrees with the Claimant to the extent that the privity of contract must be adhered,
and a contract is a meeting of minds between the two parties
• Therefore, the statement recorded in the MoM dated November 16, 17, 19, 20, 22 and 23 of 2006
resulting in the MoU must be adhered to as per its literal meaning
Illustrative Inarguendo
• All the payments made to the Claimant on account of the Net Payable Amount were done in 60% Foreign
Currency
• The payments of all the IPCs till the Revised IPC on Final Statement has been made by calculating 1 US$
as NRs. 72.24 as stable exchange rate throughout the entire duration of the Contract
• This stable exchange rate as outlined in the contract has been adhered to even for payments made after
the ceiling of the Claimant’s bid amount has been surpassed, and/or the exchange rate has increased
over the rate outlined under the Contract
• The Respondent having adhered to the privity of the Contract while making the payments even post the
payments crossing NRs 2,881,343,103.00 is a clear scenario that avails the factual circumstances as
agreed between the Parties that the meeting of the mind between the Parties must be adhered at all fronts
• This very mechanism of payment has caused the Respondent a substantial and direct loss
• Further, in light to the same, the well settled principle of approbate and reprobate also bars the Claimant
from moving forward any other contention
 CLAIM NO.2: REFUND OF SUPERFLUOUS
DEDUCTION OF ADVANCE PAYMENT

Contention raised by the Claimant:

 The Claimant alleges wrongful recovery of Advance Payment by the Defendant which
resulted in superfluous deduction of Advance Payment made to the Claimant
 Claimant under this heading of the SoC primarily contends that there have been further
Advance Payments made to the Claimant on two particular occasions:

(i) Against different Variation Orders

(ii) Against the work relating to Squeezing treatment of Tunnel

 Advance has been provided only in NRs. (Nepalese currency), but deduction of Advance
Payment in further IPCs have been made in both USD (Foreign Currency) and NRs.
(Nepalese Currency), thus leading to an additional deduction
 Therefore a loss of a total of NRs. 97,846,191.41 has occurred to the Claimant, which the
Claimant seeks to be refunded along with interest at 4% per annum compounded monthly
from the date of deduction to the actual date of payment
Law of Limitation bars the Claim

 Perusal of the table of deduction on advance payment shows

that equivalent deductions against the two above referred
Advance Payments were done through each IPC after the
payment being made
Excerpt of R-18  The Claimant has full knowledge of such deductions since
the date of deduction, or accrual of the cause of action, i.e.,
from 24 March 2013 (IPC 70) itself

 Also, the last IPC through which the relevant Advance

Payment is deducted is from IPC 124 dated 1 October, 2017

 The law of limitation for contractual disputes either under

the older Contract Act, 2056 or the prevailing Chapter on
Contract under the National Civil Code, 2074 is two years
from the date of cause of action arising
 When has the cause of action arisen?

 The cause of action for any claim in relation to the deductions made in relation to the
above mentioned two Advance Payments has accrued from either:

(i) The date of occurrence, which is ipso facto the date of such deduction – that is 24 March
2013, as the same was deducted from IPC 70 for the first time
OR
(ii) The date of knowledge or the date when the Claimant first raised the issue – that is 8
September 2014, as the same was raised by the Claimant through its letter [See Exhibit R-
19]
OR
(iii) The last date when the deduction was made – that is 1 October 2017, which was the
payment date of IPC 124, where-in such deduction was made for the final time
 The Claimant had to resort to dispute settlement process as identified under the Contract
within the limitation period of 2 years from either of these dates, which are the date for
accrual of the cause of action, either under the principle of date of occurrence, date of
knowledge or the date of discovery

 However, the Claimant clearly having failed to initiate the same within the time frame
identified as the limitation period under contractual disputes in the Nepalese laws, the
current claims of the Claimant is time barred in the present arbitral proceedings

 Even considering the 1 October, 2017, which is the last date on which the payments were
deducted, the current claim is time barred by over 3 years, in the present arbitral
proceedings, as a lapse of 5 years is prima facie evident

 Therefore, the claims of the Claimant pursuant to the deductions made on the two
Advance Payments is clearly time barred.
Defense on Merits

 With reference to the concerned Advance Payments, it is pertinent to note that the
Claimant issued both the Bank Guarantees in NRs. (Nepalese Currency). The same can
be perused through the following Bank Guarantees furnished by the Claimant
(i) Advance Payment amounting to NRs. 106,349,035.1, bearing Bank Guarantee
No. 477020031407-FA dated 27 September, 2012 [See Exhibit R-15]
(ii)for the portion of Advance Payment amounting to NRs. 300,000,000, bearing Bank
Guarantee No. 477020045447 dated 3 July, 2013 [See Exhibit R-16]

 Clause 10.1 of CoPA clearly provides that the

performance security is to be denominated in
the currency in which the Contract Price is
payable

 However, the Claimant had in fact never

provided the Bank Guarantees in portion
equivalent to Foreign Currency in USD but
only in equivalent Nepalese Currency
 Excerpt of R-14
 Similarly, reference should also be made to the
MoM dated 29 September 2014
 The Claimant had raised its concern regarding
deduction of advance being made in foreign
currency and local currency
 It was discussed that , adjustments for
deductions already made for additional advance
payment against variations would be discussed
and decided between the Employer, Contractor
and Engineer within 15 working days

 However, the same could never materialize between the Parties. No agreement on the
same could be realized between the Parties, and the same is clearly substantiated vide
the letter dated 6 July 2015 of the Claimant [See Exhibit R-17]
 Therefore, the fact that the payments of the two Advance Payments, i.e. against different
Variation Orders and Against the work relating to Squeezing treatment of Tunnel could
not be released in foreign currency, was solely accountable to the own conduct of the
Claimant
 This cannot be a reason for the Respondent to not deduct the Advance Payments in
portion equivalent to foreign and local currency, as identified and mandated by the
Contract
 It was due to the conduct of the Claimant to provide Bank Guarantees in NPR that the
Respondent was not able to provide the payments pertaining to the Advance Payments in
Foreign Currency
 Now, Claimant is evasively seeking to not account its part of failure to meet the
contractual obligations of providing the Bank Guarantees in equal portion to that of the
Foreign Currency, which had actually restricted the Respondent to provide the Advance
Payment portions in equivalent Foreign Currency
 Therefore, it is categorically established that it was the failure in the conduct of the
Claimant themselves that restricted the Respondent to make the above referred Advance
Payments in equal portion to that of the foreign currency
 The failure of the Claimant to adhere to contractual provisions can neither be held
detrimental towards its contractual interests, wherein it is the right of the Respondent to
deduct the Advance Payments in proportions equal to the foreign and local currencies, as
identified under the Contract.
Case Law

 Contract is an agreement in accordance to the

law that is executed between the concerned
Arvind parties.
Majumdar vs.  If a particular party has not fulfilled its obligations
arising to the Contract, then the other party can
Government of be relieved from further performance of its
Nepal, Finance contractual obligations. The party not performing
its contractual obligations cannot force the other
Ministry party to fulfil its contractual obligations.
NKP 2073 Vol. 5  The interpretation of the Contract must be done
in accordance to the entirety of the Contract.
Decision No. Interpretation of a Contract cannot be done by
9591 giving weightage only to one particular provision
or part, as that would lead to a different
interpretation.
 Lastly, contrary to the submission made by the Claimant, there has been no additional
deduction on Advance Payment. There is no issue of any superfluous deduction at all.
 No extra deductions have been made. So, when there has never been any additional deduction
of NRs. 97,846,191.41, the Claimant’s claim as to the same being an additional deduction is
completely frivolous
 If the contention of the Claimant is to be taken into consideration, then it would tantamount to
additional payment than the bank guarantees itself. Hence, the futile claim of the Claimant is
greatly erred
 Four important issues
 A. The Contractual provisions themselves identify that payment and deductions have to be
done in equal proportions of the currencies. Refer 60.6 of COPA – Privity of Contract has to be
honored.
 B. They have themselves agreed for the initiation Advance Payment Deduction to the tune of 42
crores. No issue raised therein.
 C. Claim of the Claimant is against the principle of Promissory Estoppel (Section 34 of Evidence
Act, and Concept of Approbate and Reprobate)
 Therefore, there is no issue of any extra deduction being made and the entire claim of
the Claimant should be dismissed
CLAIM NO.3: OVER-PAID CUSTOMS DUTY FOR 15 UNITS OF
EMPLOYER’S VEHICLE OVER 1% SPECIAL CUSTOM DUTY

Contention raised by the Claimant:

 The Claimant, as per Item No. 113 of the BoQ “Supply of Vehicles”, purchased and handed
over the 15 Vehicles to the Respondent
 It contends that Pursuant to Clause 3(vi) of MoU nand Clause 73.4 (b) of the CoPA, the
Claimant was liable to pay only (1%) of CIF (Cost, Insurance and Freight), but in actuality
the Claimant had to incur and pay Customs Duty comprising of import tax and excise
duty
 Hence, such additional costs incurred as a result of imposition of the Customs Duty on
the Vehicles imported by the Claimant must be reimbursed
 Claimant also seeks to argue that Vehicles construe as Permanent Works under the
Contract as all the vehicles used by the Employer and Engineer will not be returned to the
Contractor, they will remain the property of the Employer after completion of the works.
 Therefore the imposition of 1% of CIF value must be upheld
 The Claimant’s position under this heading of the claim is extremely futile. In fact there is no
contractual or legal basis to substantiate the Claimant’s claims in relation to the reimbursement of
the applicable Customs Duty back to the Claimant
 There is absolutely no provision in the Contract or any MoM or any MoU entered between the Parties,
which account for non-imposition of the Customs Duty on the import of Vehicles.
 It should be noted that the Respondent has never agreed to provide any kind of waiver on the
imposition of the applicable taxes on the import of the Vehicles
 Claimant also seeks to mislead the Tribunal by seeking to argue that Vehicles are Permanent Works
under the Contract
 It can be seen from the perusal of the definition
of Permanent Works, as defined under Sub-
Clause 1.1 (f) (ii) of the GC that there is nothing
in the definition of ‘permanent works’ to
construe that the same includes Vehicles.
 When a certain item has not been categorically
mentioned in the contract, it cannot be
reasonably inferred that such is included in the
Contract.

 Rather, the interpretation of the contractual provision would be such that the same is sought to be
excluded from the contractual provision
 The rates mentioned in the BoQ with regard to vehicles include all the taxation costs as well. There is
absolutely no indication in the Contract that refers that such costs do not include the taxation costs
 It is an explicit mandate as per sub-clause 73.7
of the CoPA that the related taxes such as the
applicable customs tax on the import of Vehicles
has to be paid by the Claimant.
 Permanent Works are only those that need to be
executed during the timeframe of the contract.
 The supply of Vehicles are not Permanent Works,
and there is no agreement between the Parties on
the waiver of the Customs Duty on the same.
 The law of the land has to be followed and the
Claimant has to make all the payments of the
applicable taxes accordingly.

 Similarly, as per Clause 3(vi) under the heading

‘Specification’ of the MoU between the parties,
there is a clear indication that the special
customs rate is applicable only to (i) equipment,
(ii) plant, (iii) supplies, (iv) materials and (v) spare
parts used for construction equipment.
 However, there is no agreement that the special
customs rate of 1% of CIF is applicable to
Vehicles
 In the explicit absence of the same, it is only
rationale that the law of the land be followed and
the applicable taxes are borne by the Claimant
 Furthermore, the Claimant has sought provide a series of communications as Exhibits to prove its
case [See Exhibits 41.1 to 69 of the Claimant]
 However, none of such documents or communications establish that 1% of the CIF value is to be
imposed on the import of Vehicles
 All of such communications are only to the extent that the Claimant has, in a unilateral manner,
sought to interpret the contract to the extent of going beyond the contractual realm and privity
 The Claimant is only seeking to interpret and include aspects which are not actually foreseen in the
Contract.
 More importantly, the Claimant has paid the applicable taxes to the Customs Department and other
relevant authority of the Government of Nepal. Instead of claiming the same from the Respondent,
the Claimant must initiate legal proceedings as applicable under the Nepalese Laws, in accordance to
the Customs Act or other relevant statute, in the judicial authority having jurisdiction over such
issues relating to over payment of customs.
 The Respondent has categorically noted vide its letter dated 21 November, 2018 that as per the
legislation of the Government of Nepal the excess custom duty must be borne by the Contractor [See
Exhibit R-22]
 Therefore, the Claimant should rather approach the competent authority, rather than establishing
the same as a claim under the Contract, since the issue of taxation is to be devised under the
competent authority and is not an issue of claim under the Contract
 Respondent has already time and again notified the Claimant that under the Contract “Vehicles”
were not “Equipment” or “Permanent Works” and all the related payments for the supply of Vehicles
were already duly made to the Claimant.
 This is also prima facie clear through the application of Ejusdem Generis as an applicable cannon of
interpretation
 Additionally, the Claimant themselves have given Bank Guarantees for the release of the Vehicles
from the custom. Had the customs not been applicable, then the Claimant would have released the
vehicles from the Customs without submission of any bank guarantees
 The fact that the Claimant has issued Bank Guarantees for vehicles categorically show and prove by
conduct that the Claimant very well knew that customs is applicable for vehicles.
 Additionally, supply of vehicles is in BoQ Item No. 113, which includes 9 Station Wagon at the rate of
NRs. 1,19,12,866 totaling to NRs. 10,72,15,794 and 6 Pick Ups at the rate of NRs. 41,29,793.15,
with aggregate total as NRs. 2,47,78,758.90. This is the total Bid Amount of the Claimant, which has
entirely been paid by the Respondent through the First IPC
 It is only later that the Claimant is seeking the refund in the name of Custom Duty Refund through
application of provisions of the Contract that are in fact not applicable.
 The Claimant has already not only accounted its profit margin in its above quoted amount, but also
well accounts for the custom taxes in the same. These rates for the vehicles as quoted by gives clear
indication of the same
 There is absolutely no loss to the Claimant, and therefore, the claim of the Claimant must be
quashed
 CLAI M NO. 4: ADDIT IONAL COST INCURRED DUE TO EXTENSI ON
OF PERFORMANCE SECURITY BEYOND DEFECT LIABI LIT Y
PERIOD

Contention raised by the Claimant:

 The Defect Liability Certificate being issued on 23 October 2019, with effect from 15
September 2019; the time period up to 31 December 2022, till when the Claimant has had
to renew and extend the Performance Guarantee, amounts to additional cost and therefore
the same along with applicable interest must be reimbursed to the Claimant.

 The Claimant is entitled to recover the additional cost and or commission amounting to
NRs.12,769,119.08 incurred due to the extension of the validity of the Performance
Guarantee beyond the DLP
 The Respondent categorically contends that the Respondent is not liable to incur any
additional costs incurred on account of the renewal of the Performance Guarantees

 The Claimant relies on the MoU between the

parties to argue that Performance Security was
to be in the form of an Unconditional Bank
Guarantee issued by an international bank, until
the issuance of the Defects Liability Certificate
(DLC)

 Given that the performance security was

extended beyond the DLC, the Claimant is
attempting to recover the “additional amount”
paid as performance security beyond the DLC.

 However, only this part cannot be made the basis for interpretation of the release of
Performance Guarantees and equal reference should be drawn to the overall
communications and other provisions stipulated in the Contract
  Performance Guarantees are undertakings of the Contractor to
complete the contractual obligations and failure of the same results in
the forfeiture of the Performance Guarantees
Excerpt of R-24
 Reference to the Defect Liability Certificate issued by the Employer
dated 23 October 2019 shows the Claimant had not completed the
entire contractual obligations and there are remedial works to be
proceeded under clause 49.4 of the contract

 This non completion of the contractual obligations by the Claimant

was the sole reason for the need of extension of the Performance
Guarantee.

 Unlike the Claimant’s purported assertion, the Respondent did not

seek to renew or extend the Performance Guarantee due to any
misinterpretation of the Contract

 Rather, the Claimant’s own failure to complete the works necessitated

the extension of Performance Guarantees

 Further, reference to Sub-Clause 10.2 of the CoPA II clearly states

that the Performance Guarantee is to be returned subject to the Final
Completion Certificate

 In the current project, the Final Completion Certificate had not been
issued, therefore the Performance Guarantee cannot be released

 Final Completion Certificate means the Final Payment Certificate and

not the Defect Liability Certificate
 The Defect Liability Certificate being issued does not mean that the Final Completion Certificate has
been issued, particularly because although the issuance of the Defect Liability Certificate takes into
consideration the physical completion, the arithmetical and payment calculation is yet to be
completed, post completion only of which can the Final Completion Certificate can be issued.
 Instead, it is the Final Payment Certificate which takes into account the overall picture of valuation
at the date of completion of the project.
 Without the issuance of the Final Payment Certificate, it cannot be reasonably argued that the
project has been completed or the Claimant has in fact completed all of its contractual obligations.
 Therefore, until the issuance of the same, Performance Guarantee need not be released as per Sub-
Clause 10.2 of the CoPA II

 Additionally, Sub-Clause 10.4 of CoPA II states

that the entire costs relating to the Performance
Security must be borne by the Claimant.

 This is an explicit contractual obligation from

which the Claimant cannot evade
  Vide letter dated 1 October 2020, the relevant
contractual provisions were also pointed out to the
Claimant explaining why Performance Guarantee could
not be released after the issuance of Defect Liability
Certificate
Excerpt of R-25
 Therefore, the contractual provisions itself is clear that
the Performance Guarantee has to be extended for all
such period until the issuance of Final Payment
Certificate by the engineer

 Hence, the costs incurred during the extension of the

Performance Guarantee cannot be attributable towards
the Respondent
Case Law relied by the Claimant is not relevant in the Present case

 The case law of Dr Jainuddin Aansari Vs. Tribhuwan University, or the doctrine of Promissory
Estoppel, as identified by the Claimant do not hold any persuasive value in the present case and
should be distinguished

 In the present case, there is no contractual obligation of the Respondent to release the Performance
Guarantee, when in fact the Final Completion Certificate is yet to be issued, and multiple accounts for
remedial works had to be taken into consideration

 Therefore, the Respondent is not in any breach of the contractual obligations to the extent that
the renewal/extension of the Performance Guarantee is concerned
 CLAIM NO.5: WRONGFUL DEDUCTION OF COST INCURRED
DURING PREPARATION OF CONSTRUCTION DRAWINGS

Contention raised by the Claimant:

 The costs pertaining to the preparation of Construction Drawing must be attributable towards
the Respondent

 Because the MoU dated 23 November 2006 accounts the preparation of the Construction
Drawings by the Engineer, and only the Shop Drawings are to be prepared by the Claimant, the
costs involved in the preparation of the Construction Drawings cannot be imposed upon the
Claimant

 Therefore, the Claimant further contend that the deduction of the costs incurred in the
preparation of the Construction Drawings in the issuance of the Revised IPC against the Final
Statement is wrongful

 The total quantum claim of the Claimant under this heading amounts to NRs. 7,172,425,
excluding interest claims
• The Respondent shall show that it is mentioned absolutely nowhere in the contractual documents or in any
part of the MoU entered between the Parties that the costs involved with the preparation of the Construction
Drawings is to be incurred by the Respondent

 Clause 3.3 of Section F General

Specifications, Volume II specifically states
that unless mentioned otherwise in the contract,
all design and drawings for works under the
contract is to be done by the Contractor
(Claimant)

 It is the submission of the Respondent that it is

nowhere mentioned in the contractual
documents between the parties that the cost
associated with design and drawing works is to
be borne by the Respondent

 In the absence of the same, it naturally leads to

the interpretation that all costs related to
drawings are to be borne by the Claimant

 In any case, it has also been expressly

mentioned under this clause that the Claimant is
required to prepare detailed construction
drawings at its own expense
 It is true that the MoU dated 23 November 2006 indicates that the
Shop Drawings are to be prepared by the Claimant, whereas the
Construction Drawings are to be prepared by the Engineer.

 However, it should be noted that there is absolutely no indication

that the costs involved with the preparation of the Construction
Drawings are to be attributable towards the Respondent. There is yet
again a clear absence of the same.

 In absence of the same, the explicit provisions of Clause 3.3 of

Section F (General Specification, Volume II) shall apply which states
that costs of all construction drawings is to be borne by the Claimant

 No indication on the costs to be additionally imposed upon the

Respondent, clearly suggests that the Parties did not intend to
change the earlier agreed provisions of the Contract

 The requirement of the Engineer to prepare construction drawings

does not and cannot tantamount to acceptance of costs, unless a
clear agreement for the same

 unless a clear deletion or change in the provisions mentioned in the

Specifications, it cannot be reasonably inferred that the provisions of
the MoU have in fact overridden the provisions of the Specifications,
which remain in full force
 The Claimant has also sought to argue that the costs involved with the preparation of the
Construction Drawings is attributable towards the Respondent by application of the noscitur a
sociis, a canon of interpretation

 This rule of construction would be applicable only to the extent that the meaning of an unclear or
unambiguous word needs to be determined through consideration of the context to which the word
is associated with

 In the present case, there is a clear and explicit provision which stipulates that the costs involved in
the preparation of the construction drawings must be borne by the Claimant, and in the absence of
any deletion of the same, the Claimant’s case to substantiate its current claim is yet again only a
futile attempt

 Therefore, the claims of the Claimant in pursuant to the recovery of costs involved in the
preparation of the Construction Drawings from the Respondent is contractually unsubstantiated.

 The Claimant is not entitled to any costs in relation to the preparation of the Construction
Drawings
 CLAIM NO.6: REVIST OF SWELLING FACTORS
FOR THE SPOIL MATERIAL

Contention raised by the Claimant:

 There was a prior agreement between the Parties as basing the Swelling Factor as 1.6.

 However, later during the issuance of the IPC against the Final Statement by the Engineer, the
swelling factor has been unilaterally revisited and against the earlier agreed position of keeping
the same as 1.6.

 Further variations were adjusted and NRs. 285,831,390.28 was deducted against the principles
of promissory estoppel and legitimate expectation. Thereby, the Claimant has sought recovery
of the same, along with applicable interests.
 Contrary to the submission of the Claimant, it should be noted that there has been no agreement
between the Parties to maintain the swelling factor as 1.6.
 Rather, this issue was always under discussion, which could never materialize during the entire
timeframe of the Contract
 Based on the letter of the Engineer dated 20 January
2009, the Claimant is attempting to construe that there
was an agreement between the parties to maintain the
swelling factor as 1.6

Excerpt of R-33  The same is entirely misconceived as this statement does

not contour that the swelling factor is agreed as 1.6 for the
entire project and for all calculations, but simply states
that in that particular IPS, the swelling factor is taken as
1.6.

 It should be noted that the Contract never explicitly

provides for any provision for quantifying the exact swell
volume.

 Also, a general number as 1.6 as the swelling factor is not

contractual or practically justified. The swelling factor
must be taken as per the ground conditions. And, that is
exactly what the Engineer has done through its
adjustments in the IPC against the Final Statement.
 Exhibit R-30

 The letter of the Engineer dated 3 August 2021

clarifies that while it was initially recommended to
keep weighted swelling factor as 1.6, the same had
to be revised given the large variations witnessed
in the excavation

 Thus, the revised swelling factors were 1.1 for

collapsed materials to 1.67 for hard rocks and was
considered more practical given the ground
conditions

 This shows that one single amount of 1.6 as the swelling factor is not contractually feasible, and it is only
more reasonable, rationale and logical to actually consider the ground reality, and carrying out the
adjustments accordingly.

 Therefore, the claim of the Claimant pertaining to the swelling factor for the spoil material is not
contractually valid and therefore, must be quashed in totality. The Respondent not being in any
breach of its contractual obligations, no payment on account of the same is to be paid to the
Claimant
Case Laws Relied by the Claimant are irrelevant

 The Claimant has tried to contend that 1.6 is the swelling factor and the Parties have
already agreed to the same. However, as stated above, there was never any agreement in
place regarding the same.
 The doctrine of promissory estoppel or legitimate expectation is not applicable in the
present case, primarily because there has never been any explicit agreement on keeping
the swelling factor as 1.6.
 The case laws cited by the Claimant, i.e. Krishna Manandhar vs. Constituent
Assembly et. al, Division of Road Vs. Appellate Court Patan et.al. and Dr. Jainuddin
Aansari vs. Tribhuwan University have laid down the principles of promissory estoppel
and doctrine of legitimate expectation.
 However, these judgments of the Supreme Court relied by the Claimant do not hold
persuasive value to prove the Claimant’s contention, as the Claimant has failed to prima
facie show as to how the 1.6 swelling factor is unconditionally agreed between the
Parties.
 CLAIM NO.7: WRONGFUL DEDUCTION FOR
TREATMENT OF SPILLWAY

Contention raised by the Claimant:

 The deduction made in pursuant to the costs to be incurred for the Treatment of the Spillway.
The Claimant has argued that the damage to the Spillway was caused by the operation of the
forces of nature and in particular on account of rolling of boulders during flood, and therefore,
the Claimant is not obligated to remedy the same.

 Therefore, the Claimant has sought NRs. 17,517,656.83 to be reimbursed to the Claimant,
along with the applicable interest
Law of Limitation bars the Claim
 The Respondent Submits that the entire claim in relation to the deduction for treatment
of spillway is clearly barred under the law of limitation, as envisaged under Section 6(1)
of the Arbitration Act, 2055 or Section 89(2)(d) of the CA or Section 544 of CC

Excerpt of E-143
 It can be clearly seen from the assertions made by the
Claimant themselves that through the letters dated 15
September, 2019 or 22 September, 2019, the Claimant
had full knowledge of the deductions being made.
 This is further substantiated by the Claimant’s letter
dated 26 September, 2019, wherein they have
categorically stated that hey intent to refer the
disputes to Arbitration
 It is important to note that this letter was served to the
Respondent almost 3 years earlier
 As already discussed, Section 6(1) of the Arbitration Act mandates that the process of
appointment of arbitrator be started within a period of 3 months from the date of cause of
action
 The Claimant having served its letter to initiate arbitration on 26 September 2019, and
not having initiated the same within the timeframe as stipulated under the AA, the claims
in relation to the same are clearly time barred
 Similarly, the law of limitation under the Nepalese law for initiating dispute resolution
process for contractual remedies is 2 years from the date of cause of action. The Claimant
has clearly failed to do so within the time limit stipulated under the relevant laws of
Nepal
 Therefore, the Claimant having failed to initiate arbitration in light to the above claim
within the limitation period as stipulated under the laws of Nepal, this claim is clearly
time barred under the law of limitation
Defense on Merits

 A conjoint reading of Clause 20.2, 49.2 and

49.3 of the GC shows that the Contractor
(Claimant) is responsible for the care of
damaged works and has to rectify such
damage at its own cost

 Further it is stated that the obligation of

Completion of the Outstanding Work and
Remedying Defects shall be for the
timeframe of the entire Defect Liability
Period and the costs of Remedying Defects
shall be borne by the Claimant

 In the present case, it should be noted that the damages caused on the Spillway occurred
due to the defective works of the Claimant prior to the issuance of the Defect Liability
Certificate. Thus, remedying the damage solely falls under the Claimant’s obligation at its
own cost

 Despite clear contractual provisions, the Claimant is now maliciously seeking

reimbursement for rectification of works that it was required to do at its own cost
  The letter of the Engineer dated 13 January 2019 to the Claimant clearly
shows that the Claimant had expressed its unwillingness to repair the
damaged spillway surface

 In response, the Engineer has clearly stated that the damage to the
spillway was due to the Claimant’s poor workmanship and given that the
Defect Liability Period was not over, the Engineer instructed that Claimant
to rectify the damage at its own costs
Excerpt of R-35
 Similar letters were sent time and again to the Claimant i.e,. 4 February
2019 [See Exhibit R-36], 3 April 2019 [See Exhibit R-37] reminding the
Claimant to remedy the damages of spillway surfaces

 However, the Claimant did not proceed to rectify the defective works due to
which the damages to the spillway was caused

 The damages is caused due to defective works. Defective works result in

damages to the works. Occurrence of damages is a result of defective
works. The Claimant has sought to distinguish between damages and
defective works. It seems to agree in its SoC that defective works account
for rectification by the Claimant, but not for damages

 Therefore, the Claimant in fact willfully sought to evade from fulfilment of

its contractual obligations and thereby raise the issue of unforeseen
grounds, which are nowhere substantiated or corroborated through
submission of any legitimate and adequate evidence.
 CLAIM NO.8: BREACH OF CONTRACT BY THE EMPLOYER-
FAILURE TO IMPLEMENT THE DRB’S DECISION

Contention raised by the Claimant:

 The Dispute Review Board (“DRB”) had, through their recommendation dated 10 May 2011,
recommended an amount of NRs. 132,284,117.82 without VAT on the Disputes submitted by
the Claimant through Referral No. 4 and 6.

 The Respondent had, through Interim Payment Certificate No. 88, paid a provisional amount of
60% of the total recommendation of the DRB, amounting to NRs. 79,370,470.52.

 However, the same was recovered by the Respondent by deducting the amount in the Revised
IPC against Statement of Completion dated 22 September, 2019. Therefore, the Claimant has
sought NRs. 132,284,117.82 without VAT as recommended by the Dispute Review Board
Law of Limitation bars the Claim

 The claim submitted by the Claimant in pursuant to the enforcement of DRB’s decision in the present
arbitral proceedings is clearly time barred under the law of limitation
 It is an undisputed fact that the recommendation of the DRB was on 10 May 2011
 Both the parties had issued Notice of Dissatisfaction on the DRB recommendation and served its
intention to commence arbitration. The Claimant issued its Notice of Dissatisfaction on 15 May
2011[See Exhibit R-39]. The Respondent also served its Notice of Dissatisfaction on the DRB
recommendation on 25 May 2011[See Exhibit R-40]
 It is pertinent to note that these Notices of Dissatisfactions were issued on the year 2011 by both the
Parties, wherein they had clearly expressed their intention to commence arbitration. However, as it is
evident that both the Parties have failed to commence any arbitration proceedings for nearly a decade.
 The Claimant themselves having expressly cited various sections of the Civil Code relating to
contractual obligations to argue its case, notably Sections 499, 521, 535, 537, 500 of the Civil Code
categorically shows that the provisions of the Civil Code relating to the contractual obligations is
equally applicable. Therefore, the Claimant having failed to adhere to the basic limitation period as
prescribed in the relevant statutes of Nepal, the adjudication of the same by the Arbitral Tribunal is
time barred.
 Therefore, the claim submitted by the Claimant in relation to the enforcement of the DRB
recommendation in the current arbitral proceedings is prima facie time barred under Section
6(1) of the AA and Section 544 of the CC
Defense on Merits

 The Respondent had made a payment equivalent to 60% of the amount recommended by the DRB to
the tune of NRs. 79,370,470.52 without VAT, only with the purpose and sole intention of easing the
Claimant’s cash flow
 It is neither an acceptance of the DRB recommendation as being valid, nor an acceptance that the
Claimant is to be paid the abovementioned amount on account of the DRB decision. This is implicitly
implied through the Notice of Dissatisfaction served by the Respondent.
 The Respondent not taking any bank guarantee against the same is only on good faith and nothing
else
 Additionally, the deduction by the Engineer in the Revised IPC against the Statement at Completion
dated 22 September 2019 is only an adjustment carried out against the provisional payment made to
the Claimant to ease its cash flow. This is not a breach of the contractual provisions, as the said
amount in the first place was provided by the Claimant only on a provisional basis, so as to ease the
cash flow of the Claimant
 Therefore, there is no breach of the contractual obligations and the claim raised by the
Claimant pertaining to the enforcement of the DRB decision is time barred under the principle
of limitation
 CLAIM NO 9: WRONGFUL DEDUCTION OF
OVERHEAD IN VARIATION ITEMS WITH NEW RATE

Contention raised by the Claimant:

 There has been a wrongful deduction or recovery of the overhead from new item of works in
excess of 15% of the Contract Price.

 The Overhead and Profit as per the tender was 40% of the Direct Cost, however, the Engineer
through its IPC against the Final Statement of Works revised the Claimant’s overhead on “New
Items” from 40% to 15% citing provisions of the Public Procurement Regulations.

 Therefore, the Claimant seeks recovery of NRs. 204,344,273.18 deducted from the Respondent.
  It is not disputed that the Contract had witnessed Variations and
New Work Items were issued. However, application of 15% on the
direct cost, instead of 40% as claimed by the Claimant is a matter
of dispute.

 The Engineer has vide its letter dated 3 August, 2021 , has
revised the IPC against the Final Statement. Under Sub-Clause
52.3 of the GC, for Variations exceeding 15 percent, the Engineer
is contractually empowered to do so

 Since the contract is to be in accordance with the laws of Nepal,

Excerpt of R-30 the provision of the Public Procurement Rules 2064 become
applicable

 When the law of the land itself provides for a clear 15%
application, as mandated by the Public Procurement laws of
Nepal, it cannot be reasonably argued that the same should not
be followed.

 As contractual provisions should supersede the sections of the

national legislations reference to Rule 10(7) of the Public
Procurement Regulations, 2064 with conjoint reading of Annexure
1 categorically accounts the clear ceiling of 15% on Overhead
Costs

 The provisions of the Contract are valid only to such an extent

that they do not overlap with the various provisions of the
national legislations. Otherwise, the provisions of the contract will
be held void ab initio. The same is provided under Section 517
and 518 of the Civil Code
 The issue of non-certification of the prolongation cost cannot be made a basis by the Claimant for
their recovery of the Overhead at the rate of 40%.
 These are independent events, and non-certification of the prolongation cost by the Engineer has no
linkage with the application of 15% on the Overhead costs, as mandated by the provision of the
Public Procurement laws.
 There is absolutely no mandate of the contract that non certification of the prolongation cost by the
Engineer restricts the deduction of the overhead recoveries
 The Engineer while issuing the IPC against the Final Statement has full rights to revise the earlier
calculations and draft IPCs, to the extent that the same are in due course of the legal provisions

 The Engineer while issuing the IPC against the Final Statement
has full rights to revise the earlier calculations and draft IPCs, to
the extent that the same are in due course of the legal provisions

 Clause 52.3 of the GC has not placed any restriction upon the
Engineer to revise the Overhead Costs application

 When the Respondent has clearly identified the applicable legal

provision which accounts for only 15% adjustment on the
Overhead Costs and Profit, the Engineer is fully obligated to
make the required adjustments. Such an action by the Engineer
cannot be deemed to be as illegitimate actions.

 Adhering to the law of the land cannot be argued as being

impartial
 The Claimant has also sought to contend that the 15% set in the Public Procurement
Regulation is only for the purpose of the estimation of the Project done by the Engineer or the
Employer
 Such an understanding of law is completely misled. The Public Procurement law has clearly
stipulated a ceiling of 15% on the Overhead and Profit calculations, which must be adhered as
the Engineer has rightly adhered to the same
 Sub-Clause 52.3 of the GC cannot be interpreted to such an extent that it would supersede
the law of the land. Such is only a futile attempt of the Claimant to seek to apply rates that
are against the clearly manifested rates in the provisions of the Public Procurement
Regulations
 Moreover, this Contract has been awarded and the entire tender process has itself been done
in accordance to the provisions of the Public Procurement laws of Nepal. It cannot be argued
that the provisions of the Public Procurement laws are inapplicable in the present Contract,
when in fact the Contract itself was conceived in light to it
 Therefore, the claim of the Claimant in pursuant to the issue of Wrongful Deduction of
Overhead in Variation Items with New Rate is based on a complete deviation from the
explicit law of the land, wherein the provisions of the Public Procurement laws mandate
a 15% adjustment to the Overhead Costs and Profit for New Items, and is therefore,
legally non standing
 CLAIM NO.10.1: UNILATERAL DETERMINATION
OF VARIATION FOR RIVER CLEARANCE WORK

Contention raised by the Claimant:

 The payment in pursuant to the works carried out in relation to the clearance of the debris and
river clearance works in 2009 should be paid as per the provisional rate fixed by the Engineer,
and paid in the subsequent IPCs

 However, vide the letter dated 5 April, 2018 , the Engineer issued the Variation Order for the
River Bed Clearance work, and unilaterally revised the rates for the Variation, and also through
IPC No. 131 deducted the earlier amounts paid to the Claimant

 Thus, the Claimant has submitted its claim to the extent NRs. 43,721,603.30, along with
interest for the river clearance works, as per the application of the provisional rates determined
by the Engineer
Law of Limitation bars the Claim
 The rates fixed by the Engineer pertaining to the river
bed clearance works is well identified through the
letter dated 5 April 2018, the knowledge of which is
Excerpt of R-42
well in light of the Claimant, as categorically
established through its letter dated 10 April 2018

 In this letter, the Claimant has categorically

mentioned that “We shall forward the issue to DRB or
arbitration and we will claim for the loss incurred”

 The Claimant has clearly failed to do so within the

limitation period as ascribed under Section 6(1) of the
Arbitration Act, 2055, or Section 89(2)(d) of the
Contract Act, 2056, or Section 544 of the Civil Code

 The date of occurrence of the deduction was 5 April 2018, the conduct through which the
Claimant was aggrieved (if any), and the date of knowledge was 10 April 2018

 The Claimant having slept over its rights to bring the issue for adjudication before an
Arbitral Tribunal for a period of nearly over 4 years, the claims in relation to the same as
submitted before the current Arbitral Tribunal, is clearly time barred under the doctrine of
limitation
Defense on Merits
 Primarily, the Claimant has failed to understand the rates through which the subsequent payments
were made, was only a “provisional rate”. This rate was not “Final Rate”. The Claimant seems to
however well accept the fact that the payments made in the subsequent IPCs post 2010 were only on
account of the provisional rate
 There is no substantiation from the Claimant as to why the rates mentioned by the Claimant has to
be agreed upon and not the rates determined by the Engineer
 The Contract under Sub-Clause 52.1 and 52.2 of the GC well identify that the Engineer shall
determine the costs in case of non-agreement between the Parties.
 As there is a substantive amount of difference in the rates determined by the Engineer and the rates
mentioned by the Claimant, It would be contractually impediment to award the Claimant on the
rates that were provisional or the rates that the Claimant has submitted without any basis for doing
so
 This is not the intention of the clauses of the Contract. The Engineer has every right and is rather
obligated to revise the rates and award the costs only to the extent as deemed fit under the
provisions of the Contract, particularly so when there is no explicit agreement between the Parties
 The Claimant’s reliance on Sections 499, 521, 535, 537 of the Civil Code and Section 34 of the
Evidence Act, together with case laws relating to legitimate expectation and principle of quantum
meirut. However, none of these hold any relevance or has persuasive value in the present context
because primarily, the entire claim of the Claimant under this heading is clearly time barred under
the law of limitation
 CLAIM NO.10.2: DISSATISFACTION ON DETERMINATION
FOR THE VARIATION OF POLICE AND ARMY CAMP

Contention raised by the Claimant:

 The Claimant had constructed Police and Army Camp as per the instruction of the Respondent dated 15 March,
2008.

 Although the Claimant submitted its Variation cost for the same, the Respondent not agreeing to it as Variation, the
dispute arising between the Parties was submitted to the DRB for its recommendation

 The DRB vide its recommendation dated 5 May 2011 instructed the Engineer to make an analysis of the unit rates
and certify the payment if possible as variation under Sub Clause 52.1 of the GC. Thereafter, the Parties reached an
agreement through MoM on 29 September, 2014 to evaluate the related costs for the construction of the Police and
Army Camp as Variation and certify the same in the IPC.

 The payment for the construction of the Police and Army Camp to the tune of NRs. 4,388,014.7 was certified in the
IPC No. 88 dated 23 November, 2014.

 The Claimant has sought to claim NRs.14,580,664.38 as the costs for the construction of the Police an Army Camp
as per the Cost Proposal submitted by the Claimant dated 12 December, 2008.
Law of Limitation bars the Claim

 This claim relating to the costs incurred by the Claimant for the construction of the Army
and Police Camps as per the instruction dated 15 March, 2008 is prima facie time barred
under the principle of limitation
 The DRB had through its recommendation dated 5 May, 2011 advised the Engineer to
consider making the payment as a variation. The parties had submitted their Notice of
Dissatisfaction, but had, however, never initiated any arbitration
 Thereafter, an agreement was reached between the Parties on 29 September, 2014 to
categorize the works as Variation and certify the same in the IPC. The Engineer has rightly
done so by certifying the same in the IPC No. 88 dated 23 November, 2014. The Claimant
fully acknowledges the same
 However, the Claimant has failed to initiate any arbitration proceedings against the DRB
recommendation dated 5 May, 2011, and has also failed to raise any dispute and initiate
the dispute resolution process as conceived under the Contract, if it is aggrieved by the
determination of the Engineer, certified in the IPC No. 88 dated 23 November, 2014
 Now, almost a decade later from the date when the DRB recommendation was issued, the
Claimant is clearly time barred under Section 6(1) of the Arbitration Act, 2055, or Section
89(2)(d) of the Contract Act, 2056, or Section 544 of the Civil Code
 The Claimant had to initiate arbitration proceedings within a period of 3 months as per the
mandate of the Arbitration Act or within a period of 2 years if the statute of limitation of the
contract laws is to be considered.
 The Claimant has clearly lapsed on both fronts, by an extensive delay. This massive delay is
directly attributable towards the Claimant.
 The claims submitted by the Claimant on account of works carried out in the year 2008, and
DRB’s recommendation of the year 2011, in light to which payments have already been
determined and certified in the year 2014.
 Hence this issue cannot be submitted as a new claim in the arbitral proceedings initiated
in the year 2022, as it is barred by the law of limitation
 Arguendo, the Claimant has simply claimed the entire costs submitted by itself as peer its Cost
Proposal dated 12 December, 2008, without any substantiation at all. This is simply a cost
proposal submitted by the Claimant 14 years ago.
 There is no reason for the Respondent to be obligated to pay the same.
 The principle of quantum meirut does not allow the Claimant to impose unilateral costs, as the
same would tantamount to unjust enrichment.
 Reference to the cost proposal as claimed by the Claimant to substantiate its costs is only merely
a unilateral action of the Claimant, which does not have any contractual basis, and there cannot
be taken as an evidence to calculate that the same costs have been in fact incurred by the
Claimant to construct the Police and Army camps.
 CLAIM NO.10.3: UNILATERAL DETERMINATION OF
RATE IN VARIATION ORDER NO.2 (MAIN WORKS)

Contention raised by the Claimant:

 The rates determined by the Engineer on account of the works execution by the Claimant on
account of Variation Order II relating to Headrace tunnel, Dam, Spillway, Connecting Tunnel,
Access Tunnel to Desander, Desander, Flushing Tunnel for Adit, Vertical Penstock, Horizontal
Penstock, tailrace tunnel, access road to headwork, Bridge at Headworks, Road to Powerhouse,
Adit Tunnel No.2 and Aeration tunnel is low and does not cover the expenses incurred by the
Claimant

 Therefore, the Claimant seeks a payment of NRs. 52,506,301.65 and interest, which is line to
the Engineer’s determined rate for the part that the Claimant agrees and the rate that the
Claimant has proposed as the final rate for the items that the Claimant has not agreed upon
the rates determined by the Engineer
Law of Limitation bars the Claim
 The Claimant has time and again, through several letters issued by it, stated that they
shall be referring the issue regarding the rates for Variation II to DRB under Clause 67 of
the CoPA:
I. Claimant’s letter dated 10 June 2012 serving its notice of dissatisfaction regarding the rates for
Variation II for Dam and Spillway, along with the intention to refer the dispute to DRB [See
Exhibit R-50]
II. Claimant’s letter dated 17 January 2013 serving its notice of dissatisfaction for the rates for
Variation II for Headrace Tunnel along with the intention to refer the dispute to DRB [See Exhibit
R-51]
III. Claimant’s letter dated 6 February 2013 serving its dissatisfaction for the new items of headrace
tunnel and informed the referral to DRB [See Exhibit R-52]
IV. Claimant’s letter dated 4 June 2013 serving its dissatisfaction on Variation II for Connecting
Tunnel, Access Tunnel to Desander, Desander, Flushing Tunnel for Adit, Vertical Penstock,
Horizontal Penstock, and tailrace tunnel along with intention to refer the dispute to DRB [See
Exhibit R-53]
V. Claimant’s letter dated 3 January 2014 serving the notice of dissatisfaction on Variation II for
access road to headwork, Bridge at Headworks, Road to Powerhouse, Adit Tunnel no.2 and
Aeration tunnel and intended to refer the dispute to DRB [See Exhibit R-54]
 Despite serving numerous letters of dissasitfaction on the same issue and specifically stating
their intention to refer the issue to the DRB as per the contract, the Claimant has never
initiated any dispute resolution process at all
 The Claimant never initiated any dispute resolution process as per the Contract and now, after
almost a period of 8 years having been lapsed seeks to purportedly submit the same and bring
the issue as a claim in the current arbitral proceedings
 This conduct of the Claimant is barred by the concept of limitation due to the application of
Section 6(1) of the Arbitration Act, 2055, or Section 89(2)(d) of the Contract Act, 2056, or
Section 544 of the Civil Code
 At the time of dispute, as referenced by the Claimant, it was supposed to be submitted before
the DRB. But, having failed to submit the same before the DRB, the Claimant is now
purportedly bring the same as a claim under the current arbitral proceedings, which is clearly
time barred
 Therefore, the claim as submitted by the Claimant is time barred under the doctrine of
limitation
Defense on Merits

 The Claimant contends that the rates provided by the Claimant has to be approved at all cost. To the extent
that the determination of the Engineer and the Engineer’s role under Sub-Clause 52.1 of the GC is also
sought to be taken away by the Claimant by bringing in unwarranted averment and questioning the
Engineer’s impartiality
 The Claimant takes into account that the Respondent had informed the Engineer of the approval of the
Variation Order II dated 9 January, 2012, 9 May, 2012, 7 May, 2013 and 13 December, 2013. These
included the Variation Amount and the revised Bill of Quantities. The Engineer thereafter had informed the
Claimant of the approval vide letters dated 6 June, 2012, 4 February, 2013, 27 May, 2013 and 30
December, 2013
 The basic premise of the claim of the Claimant to this extent is such that the determinations of the
Engineer on account of these Variations were not as per the Contract. However, the Claimant failed to show
and substantiate as to how the rates mentioned and paid to the Claimant are not justified. The Engineer
has full power to fix the rates, which are based either on the basis of the Rate Analysis or the BoQ rates.
The Respondent has paid the price adjustment as per the variation order as well.
 There has to be a true account of the actual expenses and costs involved in light to the claimed amount.
The rates prescribed under the Variation Order II for the works done in relation to the same are fully
justified and are not low, but actually in accordance to the then prevailing market rates
 The Claimant, having already taken the payments for the same at this point of time years later,
cannot make the same basis of its claim. The rates for the Variation Orders, if not agreed between
the Parties, is to be determined by the Engineer pending any agreement between the Parties
CLAIM NO.11.1: UNSETTLED COMPLETED WORK
DISPUTE (EXTRA WORKS)

Contention raised by the Claimant:

 The Claimant had performed various extra additional works, and the same was not certified by
the Engineer and paid to the Claimant
 The Claimant thus seeks a payment of NRs. 54,437,274.47 and interest on account of the same
Law of Limitation bars the Claim
 The Claimant has failed to understand that under the doctrine of limitation identified in Section 6(1) of the
Arbitration Act, 2055, the process of appointment of arbitrator must be initiated within a period of 3 months from
the date when the reason for settlement of dispute through arbitration arises

 It can be seen that the Claimant had expressed its dissatisfaction and
notified that it would proceed with arbitration vide its letter dated 18
August, 2020

 However, the Claimant largely failed to initiate any arbitration process

within the period of 3 months as stipulated under Section 6(1) of the
AA.

 Rather, the Claimant has slept over his legal right to initiate the
Exhibit R-55 arbitration proceeding in relation to this particular issue (if any) by
almost a period of 2 years.

 The issues relating to payment sought for works performed, but not
certified by the Engineer, should have been sought to be adjudicated
through arbitral proceedings initiated within a period of three months
from the date 18 August, 2020¸where-in the Claimant have themselves
expressed their intention to proceed to arbitration.

 But, since, there is a massive time lapse of almost 2 years, the claims
of the Claimant are time barred under the principle of limitation
as envisaged under Section 6(1) of the AA
Defense on Merits
 The Claimant has sought to claim costs for the completion of the following “extra works”:
(i) Diversion tunnel outlet clearance in river way
(ii) Protection works for dam instrumentation and water stop
(iii) Construction of plugging work at connecting tunnel No. 1 and 2
(iv) Clearance of mudflow near Adit no. 1 portal
(v) treatment of geological defects at Headrace tunnel, penstock shaft tunnel
(vi) construction of road to upstream cofferdam
(vii) construction of road from Balanch to Ganna
(viii) Other miscellaneous extra works
 It is extremely important to note that these are works that are already a part of the Contract and such works cannot be
taken as Variation Orders.
 These works identified by the Claimant as additional works, are in fact a part of the Contract and form the basis of the
Contractor’s obligations under the Contract.
 These works are intrinsic to the works to be performed by the Claimant. Therefore, under no condition can these be
attributable to be Variation Order or Variation Works
 There is also no submission of the Claimant which evidences that these works are to be taken as Variation Orders.
There is absolutely no agreement or written compliance between the Parties towards the same
 These works were foreseen in the Contract because none of these are new item works, but works that form the basis of
the completion of the project and is very intrinsic in nature to the works required to be completed, so as to attain the
completion of the entire project
 The Quantity Certificate cannot be made the sole basis for payment of these works and the Engineer
has not carried out any determination of the rates as provided under Sub-Clause 52.1 and 52.2 of
the GC because evidently the Engineer has never considered these as Variation Works
 When the Engineer has never accounted these works as Variation Works, there is no duty or onus
upon the Engineer to determine the rates under the clauses of the Contract.
 The Claimant has again argued its case on the basis of the theory of Quantum Meirut and Unjust
Enrichment. However, the same is not applicable to the case at hand particularly because the works
mentioned by the Claimant as included in the Annex 11.1.1 are not variation works and no Variation
Orders have been issued to that effect.
 These are works that the Claimant had to complete, and works which were very intrinsic to the
completion of the Project, for which it cannot be reasonably ascertained that the same tantamount to
variation works.
 Therefore, the completion of the same being intrinsic to the identified contractual obligations
of the Claimant, the Engineer has never gone to the extent of issuing any Variation Order or
certifying the same for payment.
 CLAIM NO.11.2: UNSETTLED COMPLETED WORK
DISPUTE (MAIN WORKS)

Contention raised by the Claimant:

 The Claimant has performed various Additional Works at the Site in relation to dam,
descending basin, head race tunnel, penstock tunnel, powerhouse and switchyard and tailrace
canal and outlet.

 The Claimant by way of this arbitration proceedings has sought NRs.110,365,232.51 and
interest as claim for the Additional Works performed under the Contract, but not certified by
the Engineer or paid to the Claimant
Law of Limitation bars the Claim
 The claim of the Claimant in relation to the current claim, is yet again time barred under the doctrine of limitation
stipulated in Section 6(1) of the AA
 Reference should again be made to the letter of the Claimant dated 18 August 2020 [See Exhibit R-55] wherein the
Claimant had categorically expressed its intention to refer the dispute to Arbitration in light of the non-certification
of the items by the Engineer
 However, the Claimant has not sought to initiate any arbitration proceedings within the time frame of 3 months as
mandated under Section 6(1) of the AA.
 The Claimant currently after almost a period of 2 years has initiated the current arbitration proceedings, on
account of which the claims have been lodged. Therefore, the AT cannot admit these time barred claims of the
Claimant.
 The Claimant also seems to seek enforcement of the DRB decision dated 9 February 2012 through this arbitration
proceeding. The same is clearly time barred, as there is a lapse of a period of more than a decade, i.e. 10 years
 As the Claimant has failed to seek any remedy within the time period mandated by the law of Nepal, the
claim sought under this heading is barred by the application of the law of limitation

Defense on Merits
 Since much of the arguments of the Claimant in relation to this claim is similar to that of the arguments put
forward in relation to the Claimant’s claim no. 11.1, particularly relating to similar provisions of law, concepts of
law and case laws identified, the Respondent submits its similar line of defense to that extent
 CLAIM NO.12: UNSETTLED DAYWORKS
(EXCLUDING EXTRA DEWATERING)

Contention raised by the Claimant:

 The Claimant seeks the payment for the additional works done by the Claimant to the tune of
NRs. 26,694,241.40, which have never been certified by the Engineer
Law of Limitation bars the Claim
 The Claimant has sought certification of the currently claimed additional day works vide their letter dated 30 July,
2014. As already accepted by the Claimant, the Engineer certified some, while did not certify all.
 Thereafter, instead of seeking timely resolution of the claim (if any), the Claimant again brought the issue to light
after a substantive time had passed through its Final Statement, wherein vide the letter dated 18 August 2020 the
Claimant has particularly stated that “Thus, considering the above we hereby serve our notice of dissatisfaction on
your assessment of the Draft Final Statement submitted by us and intend to refer the same to Arbitration as the DRB
is not in place”.
 This was the explicit statement of the Claimant on account of the above claims, made through their own letter on
18 August, 2020.
 Now, Section 6(1) of the AA mandates that arbitral proceedings be initiated within a period of three months from
the date of reason for settlement of dispute arising.
 By the mandate of the law, the Claimant should have initiated arbitral proceedings (if any) within a period of three
months from their explicit letter dated 18 August, 2020.
 However, the Claimant has clearly failed to initiate any arbitration proceedings within the period as mandated by
the law and is currently evasively seeking to bring in the time barred claim, after a lapse of two years
 However, if further scrutinized, the cause of action is actually accrued on 30 July 2014 itself. This is because the
Engineer has not certified the works relating to dayworks, the knowledge of which is well to the Claimant in the
year 2014, itself.
 The Claimant should have resorted to dispute settlement process through that date itself. However, the Claimant
clearly having failed to do so, not only under the limitation period prescribed in the AA, but also under the
limitation period stipulated under the Section 89(2)(d) of Contract Act or Section 544 of the Civil Code, the claims
of the Claimant are clearly time barred
Defense on Merits
 The contentions raised by the Claimant under this part of its claim, like above, is very similar to the averments
raised under Claim No. 11.1
 It is reiterated that the alleged works were already foreseen in the Contract and formed part of the contract.
Further, none of these are new item works, but works that form the basis of the completion of the project and is
very intrinsic in nature to the works required to be completed to attain the completion of the entire project
 CLAIM NO.13: ADDITIONAL COST INCURRED DUE
TO EXTRA DEWATERING WORKS (DAYWORKS)

Contention raised by the Claimant:

 The Claimant seeks the payment for the additional works done by the Claimant to the tune of
NRs. 26,694,241.40, which have never been certified by the Engineer

 The works pertaining to dewatering, as provisioned under Item No. 109 of the BoQ, has had a
substantial increase in the quantity of actual work needed to be performed by the Claimant.
This has led the increase in the work relating to dewatering works to be a Variation under Sub-
Clause 51 and 52 of the Contract.

 Not only was the Claimant not appropriately paid for the works done in relation to the
dewatering works, but rather the provisional amount of NRs. 4,000,000 paid to the Claimant
post the MoM dated 29 September 2014 was unjustly deducted

 Therefore, the Claimant, by way of the current arbitral proceedings, have claimed NRs.
813,468,019.84 and interest for the dewatering works
Law of Limitation bars the Claim
 It is the vehement contention of the Claimant, that the entire claims of the Claimant in relation to the
works carried out for dewatering, is barred under the doctrine of limitation
 Section 6(1) of the AA mandates for a 3 month period to initiate any arbitration proceeding from the date of
cause of action. Likewise, Section 89(2)(d) of the Contract Act and Section 544 of the Civil Code stipulates a
2 year period for filing of lawsuit for contractual matters from the date of cause of action

 Vide the letters dated 15 September, 2019 and 22 September

2019 , the provisional sum paid to the Claimant against
dewatering works was deducted

 The has been well acknowledged by the Claimant in its letter

dated 26 September 2029 wherein the Claimant has
categorically stated that they will seek remedy through
arbitration for the unreasonable deduction

 The trigger factor for any claim relating to the additional

payments of dewatering works (if any) was the letters dated 15
September 2019 or 22 September 2019, which are the dates
of occurrence

 The cause of action directly accrued through the letter dated

26 September 2019 wherein the Claimant has not only shown
Excerpt of R-60 his full knowledge of the same, but also has expressly stated
that it would be seeking arbitration for the dispute
 The Claimant has clearly failed to initiate any arbitral proceedings for a period of almost 3
years from the date of the cause of action arising.
 The Claimant is therefore clearly barred from bringing in the issue of additional payment
relating to dewatering works by virtue of the limitation period stipulated under the Arbitration
Act, or the Contract Act or the Civil Code
 Given that the claim of the Claimant is time barred under the doctrine of limitation the
Claimant is not entitled to the payment of NRs. 813,468,019.84 for dewatering works and any
interest thereof
Defense on Merits
Excerpt of R-27
 During the MoM dated 29 September 2014, the issue related to
dewatering was discussed at great length between the Parties

 The crux of the submission of the Claimant is that the lump sum
monthly amount for dewatering quoted in the Contract was
inadequate to cover the actual dewatering, due to which the Claimant
is entitled to compensation

 Further, the Claimant under this heading of the claim seeks to

construe the works relating to dewatering as a Variation Work in
pursuant to Sub-Clause 51 and 52 of the GC and therefore, claim
additional amount, not underlined under the Contract

 Such contention is erroneous as Not only has the Claimant already

during the very initiation of the project quoted monthly amount to be
covered for the entire dewatering works, but there has also never been
any Variation Orders issued by the Engineer, neither has any
determination on the rates been fixed by the Engineer with regard to
the dewatering works

 It is only reasonable that the works relating to dewatering does not

and cannot be construed as a Variation Work
 During the MoM dated 29 September 2014, the parties had also come to an agreement that in the interim, the
following steps would be taken:
I. Additional dewatering for powerhouse, dam site, tunnels and other locations beyond the Claimant’s
contractual requirements would be established based on contractual provisions and paid on case to case
basis through proper verification
II. Till such time, a payment of Rs. 4,000,000 against additional dewatering will be made to the Claimant
III. The Claimant will submit their substantiations to the Engineer within 15 days of signing the MoM and the
Engineer would certify the payment within 60 days of signing the MoM
 It is extremely pertinent to note here that the additional payment for dewatering would be made only upon
establishing the same through proper verification. However, no substantiation of its claim was provided by the
Claimant

 The relevant portion of the Engineer’s letter dated 15 September

2019 clearly establishes that during the MoM, the amount of NRs
4,00,000 was issued to the Contractor on the contition that the
amount would be settled through assessment of substantiationg
Excerpt of R-58 documents in support of the claim

 However, as the Claimant failed to submit any such documents, the

Engineer recommended that itcould not be established that
additional costs were incurred by the Claimant for dewatering
works

 As a consequence, the Engineer also recommended that the

payment made be deducted from the Contractor’s subsequent
payments
 Thus, it is clearly seen that the Claimant’s sole reluctance and inability to provide substantive basis for the
dewatering works led the Engineer to rightly deduct the provisional amount paid on account of the same
 Now it is trying to resort to an letter of 8 September 2014, which was issued prior to the MoM between the
parties to contend that the Claimant had notified the Respondent that the actual cost for dewatering is up
to NRs. 600 million, which is nearly 46.4 time of the contract price and gave explanation for the increase in
price
 The letter dated 8 September 2014 , cannot have any evidentiary value because the Parties have post that
letter agreed in a written form through the execution of a MoM, that the Claimant would substantiate its
case relating to additional payment on dewatering, which would be decided on a case to case basis
 The Claimant having failed to provide any substantiation on the same for a period of almost 5 years, the
Engineer has rightfully deducted the provisional amount as well
 Further, item no. 109 of the BoQ that categorically mentions 48 months for dewatering, which was
submitted by the Claimant at the time of bid.
 During the entire tenure of the project, the Claimant has already been substantially paid for 134 months
for the dewatering related work.
 Additional amount for the same cannot be made a basis of the claim, as clearly the scope of work
pertaining to dewatering works is submitted by the Claimant as a monthly rate BoQ item, for which
additional payments have already been adjusted for during the entire tenure of the Contract, where
although the Claimant had quoted 48 months, payment for 134 months have been made.
 Therefore, there can be no relevance of quantity and other rates for the payment related to dewatering
works and hence the Claimant’s claim should be dismissed entirely
 CLAIM NO.14: CLAIM FOR PROJECT
PROLONGATION COST

Contention raised by the Claimant:

 The Claimant has sought to claim the prolongation costs for the EOT period, i.e. from 10 May,
2011 to 15 August, 2018.

 The total extended period being for a period of 2655 days, the Claimant has claimed
prolongation costs to the tune of NRs. 656,676,065.46 and interest for this entire period when
the project was extended
Law of Limitation bars the Claim
 The Engineer vide its letter dated 2 August 2020 issued
the IPC against the Final Statement provided by the
Claimant
Excerpt of R-34
 It can be seen that the Engineer not only mentioned that
the Claimant was unable to substantiate its prolongation
claims properly, but has also gone to the extent of
deducting the provisional payments made to the Claimant

 The Claimant, having full knowledge of the same, should

have opted for the dispute resolution process and
commenced arbitral proceedings within a period of 3
months from this date, i.e. 2 August, 2020.

 However, the Claimant having completely failed to initiate

the arbitration proceedings within the mandate of the
Arbitration Act; the claims of the Claimant in relation to
the prolongation costs is dismissible on the principle of
limitation

 The Respondent cannot bring the claim in a an arbitral proceeding initiated almost after a period
of 2 years from the cause of action arising. Hence, the claim as submitted by the Claimant is time
barred under the doctrine of limitation
 CLAIM NO.15: WRONGFUL INVOCATION OF PERFORMANCE
SECURITY AND FORFEITURE OF RETENTION MONEY

Contention raised by the Claimant:

 It is the submission of the Claimant that the Respondent, even after issuing the Defect Liability
Certificate, instructed the Claimant to extend the Performance Security and eventually
encashed the Retaining Money amounting to NRs. 171,246,755.89 and NRs. 233,040,920.24
from the Performance Guarantee on 3 February 2022.

 The Claimant thus seeks payment of the abovementioned amounts, together with the release
of the remaining amount of the bank guarantee, along with payment of interests
 The Respondent has not defected from its contractual obligations by forfeiting the Performance
Guarantee or encashing the Retention Money
 Rather, this is in clear line with the Revised IPC against Final Statement as detailed out by the Engineer
vide its letter dated 3 August 2021

 Direct reference must be made to the fact that there

was a detailed calculation by the Engineer vide is
Excerpt of R-10
Revised IPC against Final Statement

 The Respondent has simply adhered to the

recommendation of the Engineer, the details of which
categorically establish the fact that there has been
an excessive over payment to the Claimant, and such
overpayments have to be refunded back to the
Respondent.
 There was no malafide intention on the part of the Respondent to forfeit and encash the Performance
Security of the Claimant.
 This is clearly evidenced vide the Claimant’s letter dated 20 August 2021, wherein the Respondent
had sought from the Claimant to pay back the overpaid amount of NRs. 355,132,210.54

 The Respondent had, vide letter dated 20 August 2021, written

to the Claimant regarding payback of amounts overpaid as
Excerpt of R-66 indicated by the Engineer

 Even after a considerable amount of time had lapsed, the

Claimant did not oblige towards repayment of the additional
amount.

 Thereafter, the Respondent, vide its letter dated 19 January,

2022 clearly mentioned to the Standard Chartered Bank that it
would be forfeiting the Bank Guarantee to the tune of NRs.
233,040,920.24, which was the remaining amount from NRs.
355,132,210.54 after a sum of NRs. 171,246,755.89 would be
deducted from the Retention Money [See Exhibit R-67]

 The Claimant’s Performance Guarantee was encashed on 3

February, 2022 by the bank but the ex-parte stay order of the
High Court, Patan was also vacated on 13 February 2022
 The court’s reluctance to give any stay order also substantiates that the encashment of the
performance security was a lawful and contractually valid act.
 Therefore, it can be seen from the above set of facts that the Respondent had on numerous
occasions provided adequate remedy and opportunities to the Claimant to repay the overpaid
amount. The Claimant not showing any likeliness of paying back the overpaid amount, the
Respondent being left with no alternate remedy sought the invocation of the Performance Security
 It should also be noted that the Respondent has gone to the extent of encashing the Performance
Security only to the extent of the amount which is not fulfilled by the Retention Money, and further
dues is to be recovered from the Claimant, on account of the Revised IPC against the Final Statement
 Therefore, this conscious decision of the Respondent towards recovering the overpaid amounts
from the encashment of the Retention Money and the Performance Security cannot be held as
unlawful
 The sole contention of the Claimant throughout its this heading of the claim is that the Respondent
has materially breached by asking the Claimant to extend the Performance Guarantee even post the
Defect Liability was issued
 Reference to Sub-Clause 10.2 of the COPA
provides that ot is a contractual duty and
contractual obligation of the Claimant to
extend the Performance Security toll such
time that the Engineer’s Final Completion
Certificate has not been provided, explicitly
mentioning that there is no liability
attachment remaining in the contract
 Claimant’s unilateral contention that the Respondent had to release the Performance Security after
the issuance of the Defect Liability is completely irrational, unreasonable and contractually invalid
averment
 The original Sub-Clause 10.2 under the GC has been completely deleted and new Sub-Clause 10.2
under CoPA has been inserted
 This conscious decision of the Parties to delete the provision of the GC stating that the Performance
Security within 14 days of the issue of the Defects Liability Certificate with until the Engineer’s Final
Completion Certificate saying no liability remains in the Contract must be fully adhered.
 There is absolutely no justification to bypass this mandatory clear provision of law
 Therefore, the allegations of the Claimant that the Respondent had unlawfully sought multiple
extensions of the Performance Guarantee even after issuance of the DLC, is completely futile,
because the Claimant has not adequately referred to the basic premise of Sub-Clause 10.2 of
the CoPA
Case Laws relied by the Claimant are irrelevant

 Krishna Manandhar vs. Constituent Assembly et.al., Division of Road Vs. Appellate Court
Patan et.al:
 This case law has no persuasive bearing to the current issue at hand because the Respondent has
not deviated from any of its contractual obligations.
 But, in fact the Respondent has provided ample opportunity to the Claimant to repay the overpaid
amount as determined by the Engineer through its Revised IPC against Final Statement.
 The failure of the Claimant to repay the same, has caused the Respondent to encash the bank
guarantee and retention money, to the extent that the recovery of the overpaid amount is
concerned.

 Swarnim Services Pvt. Ltd. vs. Agricultural Ingredients Ltd

 The Respondent has nowhere breached any of its contractual obligations by encashing the
retention money and the performance guarantee, as the Engineer’s Revised IPC against Final
Statement categorically shows that there is a negative payments due to be recovered from the
Claimant, and additional payment has been made to the Claimant
 CLAIM NO.16.1: DELAY AND DISRUPTION DURING
EXECUTION OF WORKS AT HEADRACE TUNNEL

Contention raised by the Claimant:

 The Claimant, while executing the works at the Headrace Tunnel, has incurred losses
amounting to NRs. 222,061,977.20 for the loss of efficiency, NRs. 41,143,262.27 for standby of
Manpower and Equipment cost and recover the cost of loss of explosive for Headrace Tunnel
amounting to NRs. 1,661,750, together with interest and VAT
Law of Limitation bars the Claim
 As per the Claimant’s own submissions, the works related to Headrace Tunnel were commenced on and
completed in the following manner:

Start Date End Date

Work Face Adit 1 of Headrace 15 March 2009 31 December 2011
Tunnel
Work Face Adit 2 of Headrace 30 May 2008 31 December 2011
Tunnel
Work Face Adit 3 of Headrace 1 August 2008 31 December 2011
Tunnel

 It is clear from the table above that all the works relating to Headrace Tunnel of all the Adits were completed on 31
December 2011
 When the works have been completed on 31 December 2011, the claim for loss of efficiency or mobilization of
additional resources or loss of explosives relating to the delay of works, cannot be claimed through arbitral
proceedings in 2022
 These claims of the Claimant are massively time lapsed under the limitation period envisaged in Section 6(1) of the
Arbitration Act, Section 89(2)(d) of the Contract Act or Section 544 of the National Civil Code
 The current arbitral proceedings being initiated after almost a period of 11 years from the date when all the works
relating to the same has already been over, there can be no valid justification towards entertaining the time barred
claims of the Claimant, and the same must hence be quashed
Defense on Merits
Claimant’s Loss of  Through this table, the Claimant has
claimed Efficiency as outlined instances of delay on three separate
productivity claimed by locations
Ground Planned rate due to the Claimant  It has contended that due to factors such as
Location Condition Rate/day delay flood, dewatering, lack of construction
Work face Adit 1 ： 2.11m/day 1.49m/day materials, instruction to use weep wipes,
Dolomite 3.6m
0+000 - 1+753. occurrence of various collapses, excessive
Work face Adit 2 ： 1m/day 2.3m/day water ingress, revision in the support works,
Slate/Dolomite 3.3m more resources (equipment and manpower)
1+753 - 3+347.
Tailcosic 0.42m/day 1.83m/day
had to be mobilized which resulted in
dolomite/
additional costs
Work Face Adit 3 ：
dolomite
2.25m  The same time also substantially reduced the
3+347- 4+067
planned productivity rate of the Claimant
phyllity

 It is a generally accepted theory of contract law that consequential or indirect claims cannot be made as a
basis of the claim
 The entire claim of the Claimant is based on the superfluous contention that had they been able to achieve
the targeted efficiency, they would have saved costs.
 It should be noted that this is a question of probability and there is no substantial basis presented by the
Claimant to ensure that the loss in efficiency is on the one hand accrued due to the reasons outlined by the
Claimant and on the other hand such account would be true
 It is the duty of the Claimant to plan an optimum quantity of explosives to be used in each face. Failure of the
Claimant to account a correct estimate of the quantity cannot be made detrimental towards the Respondent
 Additionally, the Claimant must have already reused the unused explosives or must have returned it
back, and the non-use of the explosives cannot be a justifiable loss to the Claimant as there are
alternatives like reusing them in other projects or returning to the vendor or the costs accrued upon
the Respondent, as the Respondent has no role in the same

 The Claim Assessment Report of the Engineer also

substantially concludes that the costs related to
the construction of the tunnel have already been
paid in the respective BoQ items as per the
Contract and therefore, do not warrant any
additional payment, and further cost
compensation for idling of the resources is not
justified
 This also further infers that the Claimant’s
Excerpt of R-72
conduct of assessment is irrational

 It should also be noted that on one hand, the Claimant has claimed that they had to incur
additional cost on account of additional resources like equipment and manpower, but on the other
hand it has also claimed loss of idle resources like equipment and manpower as well.
 This further shows the vagueness of the Claimant’s claims in relation to delay and disruption claim
 Moreover, all the faces of the HRT cannot be completed on the same day, i.e. 31.12.2011. This shows
that the actual vs. planned rate is only a theoretical analysis, without considering the practicality of
the issue.
  Despite the clear contractual mandate
provided under Sub-Clause 60.13 of the
CoPA, the has failed to adhere to the clear
mandate of the contractual provisions, by
virtue of the express agreement between the
Parties itself

 Thus, it is clear that the Employer’s Liability (if any) on such frivolous claims of the Claimant is liable to
be dismissed by virtue of direct application of Sub-Clause 60.13 of the CoPA
 CLAIM NO.16.2: CLAIM FOR DELAY AND DISRUPTION
DURING EXECUTION OF PENSTOCK WORKS

Contention raised by the Claimant:

 The Claimant has suffered a substantial delay in the execution of the works relating to
Penstock and has claimed loss of efficiency costs and idle manpower and equipment costs
through this arbitration proceedings.

 The total quantum of claim for the same amounts to NRs. 36,131,259.36.
Law of Limitation bars the Claim

 It has been discussed in several instances that Section 6(1) of the Arbitration Act, Section
89(2)(d) of the Contract Act or Section 544 of the National Civil Code stipulates certain
timeframe within which a claim must be brought for adjudication before the arbitral
proceedings
 The worlds for the Penstock tunnel excavation and support were completed on 30 April
2012. However, the Claimant has gone to the extent of calculating the delay till 31
March, 2014, by taking account of the installation works
 Even then, taking any of these dates as the date of cause of action arising, the claims of
the Claimant as submitted for adjudication before the current AT is seriously time barred
 There is no legal right of the Claimant to submit such erroneous claims for adjudication
after the lapse of the limitation period
 Therefore, given that the claims of the Claimant is time barred under the doctrine of
limitation, the Claimant is not entitled to NRs. 36,131,259.36 for idle labor and
equipment and efficiency loss
Defense on Merits
 Claimant’s claim under this heading of its SoC relates to projected indirect losses for the Claimant, which
are clearly barred by the basic contractual principles
 In order to calculate the efficiency claim, the Claimant has basically summed up that “At 31st December
2011 the Claimant had executed 310.889m of tunnel in 482 days. The average rate of advance in therefore
0.65m/day compared with the planned advance rate of 2.57m/day (=310.889m/121days).”
 This cannot be the sole basis for the calculation, as it nowhere takes into account the fact that the
Claimant had actually incurred a loss amounting to the same.
 The claims under this heading should be quashed by the arbitral tribunal because this calculation of the
efficiency claim, is projected or consequential losses.

 The Claim assessment report of this heading by the

Engineer also clearly states that “no additional cost is
recommended due to lack of acceptable supporting
Excerpt of R-73 documents”

 In light of this observation by the Engineer, it is

already established that there is no additional payment
to be made by the Respondent to the Claimant in this
regard

 Further, as per sub-clause 60.13 of the CoPA, the

liability of the Employer (Respondent) for any matter or
thing arising out of or in connection with the Contract
or execution of the Works
 CLAIM NO.16.3: CLAIM FOR DELAY AND DISRUPTION
EXECUTION OF WORKS AT DAM AND SPILLWAY

Contention raised by the Claimant:

 The Claimant encountered delays in the execution of the Dam and Spillway due to various
unforeseen events and thus claimed additional increase in manpower and equipment costs
through the current arbitral proceedings.

 The total quantum of the claim for the same sought by the Claimant is NRs. 4,432,604.99
Law of Limitation bars the Claim

 It has been discussed in several instances that Section 6(1) of the Arbitration Act, Section
89(2)(d) of the Contract Act or Section 544 of the National Civil Code stipulates certain
timeframe within which a claim must be brought for adjudication before the arbitral
proceedings
 The dates for which the delay events are shown by the Claimant pertains to the period
year 2013, with the last date being 8 January 2014.
 The Claimant has clearly failed to initiate arbitral proceedings within the timeframe
stipulated and mandated by the law
 The Claimant is now barred from raising its claims accrued in the year 2014 through
arbitral proceedings initiated in the year 2022.
 The claims in relation to the same are clearly time barred in the present arbitral
proceedings as it has been raised after a lapse of 8 years
 Therefore, the claims of the Claimant is time barred under the doctrine of
limitation and the Claimant is not entitled to payment of NRs. 4,432,604.99
Defense on Merits

 Firstly, as per Sub-Clause 60.13 of the CoPA, the liability of the Employer (Respondent)
for any matter or thing arising out of or in connection with the Contract or execution of
the Works
 The Claimant having clearly failed to adhere to the clear mandate of the contractual
provisions, by virtue of the express agreement between the Parties itself, it is explicit that
the Employer’s Liability (if any) on such frivolous claims of the Claimant is seized
 Another argument raised by the Claimant is that the Engineer’s non-timely inspections
and instructions regarding the cable alignment prevented the Claimant’s performance
under the Contract and thus attracts the Principle of Prevention
 However, the Claimant is not only completely silent as to how the same is applicable, but
as a general principle as well the law of Prevention is not applicable to force majeure or
unforeseen events.
 The Claimant themselves had accepted that the delay events arising to their claim are
unforeseen events. Hence, the Claimant’s use of the principle of prevention does not have
material relevance as the same is inapplicable
Exhibit of R-74  The Claim Assessment Report of the Engineer
relating to this particular claim for the period up to
June 2009 also substantially concludes that the
claim report of the Claimant is not clear on the issue
of cost compensation for equipment idling and the
Contractor’s daily records on which any assessment
for additional cost can be based is inconsistent and
unreliable and cannot be a basis of such assessment

 Based on this, the Engineer reached the conclusion

that no cost payment for plant idling could be
awarded to the Claimant

 Hence, the Claimant’s conduct of assessment is

irrational as has been clearly pointed out by the
Engineer
 CLAIM NO.16.4: CLAIM FOR DELAY AND DISRUPTION
COST RELATED TO THE DE-SANDING BASIN

Contention raised by the Claimant:

 The Claimant had to incur costs on account of idle manpower and equipment due to various
delay events while executing the works related to Desanding Basin

 The quantum of the claim for the same as submitted by the Claimant is NRs. 38,561,195.69
Law of Limitation bars the Claim

 It is clear that Section 6(1) of the Arbitration Act, Section 89(2)(d) of the Contract Act or Section 544 of
the National Civil Code stipulates certain timeframe within which a claim must be brought for
adjudication before the arbitral proceedings
 The Claimant has l pointed out issues relating to delay in commencement due to lack of right bank
access road, suspension due to changed ground condition/ingress of water, suspension due to washing
away of access road, public obstructions and national strikes, delay due to lack of right bank
construction access road due to mudslide, delay due to unforeseen ground conditions, delay due to
suspension due to non-payment, delay due to lack of material, delay due to electromechanical
contractor, delay due to engineer’s verbal instruction, delay due to additional backfilling works and
serious seepage in the tunnel as the delay events.
 These delay events are taken into account for the year 2010 to 2013.The Claimant having sought idle
manpower and equipment charges for the delay events occurred in the year 2010 to 2013 through an
arbitral proceedings initiated in the year 2022, is clearly time barred.
 The cause of action attributable to these delays (if any) has started in the year 2013 itself. Now, almost
after 9 years after the reason for settlement of dispute arising, the Claimant is clearly barred under the
principle of limitation to claim any costs accruing as a reason of delay through such events.
 Therefore, the claims of the Claimant is time barred under the doctrine of limitation and the
Claimant is not entitled to payment of NRs. 38,561,195
Defense on Merits

 As per Sub-Clause 60.13 of the CoPA, the liability of the Employer (Respondent) for any
matter or thing arising out of or in connection with the Contract or execution of the
Works
 The Claimant having failed to adhere to the explicit provision of the Contract, the claims
of the Claimant are seized, as Employer’s liability cannot be generated
 Moreover, reference should be made to the Engineer’s assessment of Claim on this
heading wherein only a small portion of the Claimant’s excessive claim was granted by
the Engineer for the works relating to Desanding Basin [See Exhibit R-75]
 CLAIM NO.16.5: CLAIM FOR DELAY AND DISRUPTION COST
INCURRED DURING EXECUTION OF WORKS AT POWERHOUSE

Contention raised by the Claimant:

 The Claimant had incurred delays during execution of the works relating to Powerhouse, the
claims for idle manpower and equipment of which the Claimant has sought to claim by way of
the current arbitral proceedings.

 The quantum of the claim for the same is NRs. 39,746,482.19

Law of Limitation bars the Claim

 Section 6(1) of the Arbitration Act, Section 89(2)(d) of the Contract Act or Section 544 of
the National Civil Code stipulates certain timeframe within which a claim must be
brought for adjudication before the arbitral proceedings
 The claims raised by the Claimant occurred during the timeframe 2008-2014
 The Claimant has failed to initiate the dispute adjudication measures within the
limitation period envisaged under the laws of Nepal, and has massively slept over its
right to initiate arbitration proceedings by a period of more than 8 years.
 The claims relating to the additional idle costs of manpower and equipment arisen due to
the delay for the execution of the Powerhouse, is massively time barred. Therefore, the
claims of the Claimant must be quashed on the ground of limitation
Defense on Merits  The table shows the details of delays alleged by the
S.No Delay Events Applicable Clause Clause Claimant under this heading
Suspension of works upon completion of 6.3 Disruption of Progress
1
excavation 6.4 Delays and cost of Delays of Drawings

2 Delay in commencement of concrete structure

6.3 Disruption of Progress  The delays identified by the Claimant are for the period
6.4 Delays and cost of Delays of Drawings
3 Delay due to lack of cast in items 12.2 Not Forseeable Physical Obstruction or condition of 2008 to 2014. has claimed costs on account of idle
4
Delay to due suspension due to Employers failure
to pay a accordance with the Contract
69.4 Contractor's Entitlement to Suspend Work manpower and equipment
20.3 Loss or Damage due to Employer's Risks
5 Damage due to mud flow
20.4 Employer's Risks
6 Interference by another contractor 12.2 Not Forseeable Physical Obstruction or condition  However, it must be particularly noted that Sub-Clause
7 Suspension due to the electromechanical contractor 12.2
20.3
Not Forseeable Physical Obstruction or condition
Loss or Damage due to Employer's Risks
60.13 of CoPA limits the liability of the Employer
8 Suspension due to National Strike
20.4 Employer's Risks (Respondent) for any matter or thing arising out of or in
6.3 Disruption of Progress
9 Delay due to Lack of Cash Flow 6.4 Delays and cost of Delays of Drawings connection with the Contract or execution of the Works
69.4 Contractor's Entitlement to Suspend Work
6.3 Disruption of Progress
Delay due to the Engineer’s late issuance of
10
construction information 6.4 Delays and cost of Delays of Drawings  A clear application of the explicit mandate of the
17
Delay due to late confirmation of the treatment for
12.2 Not Forseeable Physical Obstruction or condition contractual provision categorically protects the
the structural steel bars
18 Suspension due to the electromechanical contractor 12.2 Not Forseeable Physical Obstruction or condition Employer from any further erroneous claims of the
19 Obstruction due to the electromechanical contractor 12.2 Not Forseeable Physical Obstruction or condition
Change of cable trench from powerhouse to 6.3 Disruption of Progress Claimant, such as the ones that the Claimant is seeking
20
switchyard 6.4 Delays and cost of Delays of Drawings
on account of delay during the execution of the works
relating to Powerhouse
  The Claim Assessment Report of the Engineer
relating to this particular claim for the period
Excerpt of R-76 up to June 2009 also substantially concludes
that the claim report of the Claimant is not
substantiated and the scheduled dates in the
approved construction program and the claim
report do not match, with further inference
that the daily records of the data is doubtful
as the daily reports do not add up, and
assessment on such incomplete and futile
evidences is not possible.

 So, this also further infers that the

Claimant’s conduct of assessment is
erroneous.
 CLAIM NO.16.6: CLAIM FOR DELAY AND DISRUPTION COST
INCURRED DURING EXECUTION OF WORKS AT POWERHOUSE

Contention raised by the Claimant:

 The Claimant had to incur additional transportation cost due to poor road condition from
Gokuleshower to the project site, which by way of the current arbitral proceedings is sought as
a claim by the Claimant.

 The total quantum of the claim as submitted by the Claimant in its SoC for the same is NRs.
335,520,910.60.
Law of Limitation bars the Claim

 Section 6(1) of the Arbitration Act, Section 89(2)(d) of the Contract Act or Section 544 of
the National Civil Code stipulates certain timeframe within which a claim must be
brought for adjudication before the arbitral proceedings
 The last date of the event giving rise to the Claimant’s current claim is June 2017. The
cause of action (if any) accrues from this date.
 The Claimant was clearly mandated by the law to initiate dispute resolution process for
its claims (if any) within the period as mandated under the law.
 However, the Claimant having failed to do the same within the clear mandate of the
limitation period under law, the claims of the Claimant in relation to additional cost due
to bad condition of offsite access road must be quashed.
 The claims of the Claimant is time barred under the doctrine of limitation and the
Claimant is not entitled to payment of NRs. 335,520,910.60
Defense on Merits
 The Claimant’s account that the road condition was in such a deplorable status that transportation
of equipment and other materials was greatly hampered is incorrect and grossly overstated
 With regard to access to site from Gokuleshwar, Clause 5 of
General Specification clearly provides that the project site is
connected by road from Gokuleshwar and can be reached
within 1 hour

 The MoM dated 17 March 2007 entered between the Parties is of

evidentiary value to take into account the fact that the road
condition was well in knowledge to the Claimant

 The Claimant noted that works for making the road condition better
were carried out by the Respondent is evident from the Claimant’s
Excerpt of R-77 letter dated 29 March 2007

 Therefore, the Claimant cannot deviate from the fact that the
Claimant had full knowledge of the road condition during the time of
bid and also during the time of entering into the Contract

Excerpt of R-78
 It is also not true that the road condition was not motorable
 Transportation of equipment and manpower was always possible. The Claimant entered into the Contract
knowing fully about the condition of the road leading to the site

 Similarly, sub-clause 57.3 of the CoPA also expressly makes it

clear that the cost of transportation to the site and other costs
related to the transportation of machines and equipment is to
be borne by the Contractor or the Claimant

 Sub-Clause 78.2 of the CoPA explicitly restricts the Claimant

from bringing the claims in relation to stocking of the
materials as it is sufficiently clear that the Claimant was
responsible to arrange sufficient stock of materials at the Site

 Unlike the Claimant’s submission, it is also not true that the road condition was not motorable. Transportation
of equipment and manpower was always possible.
 The transportation of equipment and materials to the is to be done through lorries or trucks. These vehicles do
not have any problem in the motorable condition that existed to reach the site
 It must be noted that the Claimant’s work at site had in fact never been hampered, which is directly proven by
the IPCs which were consistently raised during all times of the Contract
 The Claimant currently seems to seek additional costs for transportation of the equipment and
materials, which was actually an explicit contractual obligation of the Claimant
 The huge amount of the claim as submitted by the Claimant does not substantiate many portions of
assessment, as to what were the prevailing rates for transportation, what were the cross verified
rates between different transportation companies, what were the negotiation achieved, what is the
basis for the rates quoted by the Claimant, amongst others
 While it is one thing to pay the Claimant for the additional costs, as per the contractual provisions
under Section 53.1 to 53.5, it is a completely different aspect to seek to claim costs not foreseen by
the Contract
 The Claimant further seeks to argue that as per Sub Clause 1.1 (f) (vii) of GC, the phrase “site” also
means road. However, the definition clause nowhere indicates the same. Such an erroneous
interpretation cannot be provided any credibility
 Additionally, there is absolutely no substantiation to show that the Claimant had in fact paid these
amounts claimed from the Respondent. If so, there is a complete silence as to which transporters or
transporting agency the same was paid to.
 There is absolutely no negotiation or agreement between the Parties, wherein the Respondent has
agreed to incur the costs for transportation, and neither can such an agreement be reached, when in
fact, it is the Claimant’s sole responsibility to bear all costs relating to transportation
 There is absolutely no evidence on the actual payment made, to which vendors it were made, on
which dates such payments were made, the mechanism of such payments, amongst all
 Even if the Claimant may have had to pay a higher amount of transportation cost for the sector from
Dhangadhi to the site, there is absolutely no contractual reason for these costs of transportation to
be imposed upon the Respondent
 Reference should be made to Sub-Clause 60.13 of the CoPA which categorically provides that the
Respondent shall not be liable to the Contractor for any matter or thing arising out of or in
connection with the Contract or execution of the Works

 Lastly, it is also apposite to refer to the Claim

Excerpt of R-79 Assessment Report of the Engineer on costs due to the
condition of the Off-site access road

 It is absolutely clearly mentioned by the Engineer that

given the lack of documentary evidences related to
such costs, the compensation cannot be granted to
the Claimant

 Accordingly, the claim was dismissed by the engineer

 In light to the explicit contractual provisions, as

consciously entered into by the Parties, the futile
claims of the Claimant must be nullified
 CLAIM N O. 16. 7: CLAI M FOR D ELAY AND DISRU PTION D UE TO
LACK OF CO NSTR U CTI ON OF ACCESS RO AD BETWEEN ADIT 1-2

Contention raised by the Claimant:

 The Claimant had to incur additional costs due to strikes at Dhangadhi and Farwest region of
Nepal from 27 April, 2012 to 29 May, 2012, which the Claimant seeks by way of the current
arbitral proceedings.

 The total quantum claim of the Claimant on account of the same is NRs. 19,333,827.60
Law of Limitation bars the Claim

 Section 6(1) of the Arbitration Act, Section 89(2)(d) of the Contract Act or Section 544 of
the National Civil Code stipulates certain timeframe within which a claim must be
brought for adjudication before the arbitral proceedings
 The road route used by the Claimant was used since the very inception of the project.
 Particularly, it must be noted that the Taking Over Certificate and the Defect Liability
Certificate has already been issued. The DLC was issued in the year 2019 itself.
 The Claimant now cannot raise this issue before an arbitration proceedings initiated in
the year 2022, as the last date of cause of action for the same cannot be stretched
beyond the period when the construction of the headworks (adit 1) is already over.
 Therefore, the claim of the Claimant pursuant to the same is time barred and must
be quashed.
Defense on Merits

 Since the inception of the project, the Claimant has been transporting the necessary
materials through the use of the Bailey bridge.
 The route used by the Claimant was the only route that the Claimant used during the
entire duration of the project.
 The Claimant by using the same route has clearly shown its implied acceptance towards
the road route being used for the entire project to reach Adit 1 (headworks)
 Now, years later, and having agreed to the usage of the said route during the entire
duration of the project, the Claimant cannot seek additional payment by making its basis
that the Claimant had to use a longer route
 In any case, reference should be made again to sub-clause 60.13 of the CoPA which
explicitly states that the Respondent shall not be liable to the Contractor for any matter
or thing arising out of or in connection with the Contract or execution of the Works
  Furthermore, in the Claim Assessment Report by
Excerpt of R-80 the Engineer concerning the claim relating to delays
to Adits, the Engineer has categorically noted that
that the Claimant’s claim for cost cannot be
provided because all costs related to the
construction of the adits have already been paid
through the respective BoQ items

 Therefore, there is no need for any additional

payment as compensation to the Claimant.
 CLAIM NO.16.8 : CLAIM FOR DELAY AND DI SRUPTION DUE TO
NATIONWIDE STRI KE RELATED TO THE NEW CONS TITUTION

Contention raised by the Claimant:

 The Claimant had incurred delays during execution of the works relating to Powerhouse, the
claims for idle manpower and equipment of which the Claimant has sought to claim by way of
the current arbitral proceedings.

 The quantum of the claim for the same is NRs. 39,746,482.19

Law of Limitation bars the Claim

 Section 6(1) of the Arbitration Act, Section 89(2)(d) of the Contract Act or Section 544 of
the National Civil Code stipulates certain timeframe within which a claim must be
brought for adjudication before the arbitral proceeding.
 The Claimant has raised its claims for the period of 27 April 2012 to 29 May 2012.
However, the same is brought for adjudication before an arbitral proceeding that is
commenced in the year 2022, by conduct of which the claims of the Claimant in relation
to the same is clearly time barred and hence, must be quashed.
 Therefore, the claim of the Claimant pursuant to the same is time barred and must
be quashed.
Defense on Merits

 Firstly, it should be noted that the Claimant has not produced any substantive evidences to
substantiate its claims under this heading as there is absolutely no material to evidence that the
Claimant had in fact incurred the claimed amount of additional costs.
 The payment made for the construction materials or the additional transportation costs have not
been substantiated or even corroborated at the very least through the issuance of any evidences.
There is absolutely no proof to show that the Claimant had incurred the said amount of additional
costs. Hence, the entire claims of the Claimant on account of the same must be nullified.
 Likewise, the application of Sub-Clause 60.13 of the CoPA ceases the liability of the Respondent
(the Employer) for any matter arising out of or in connection with the contract or for the execution
of works. Hence, direct reference to this sub-clause restricts the Claimant from seeking such
frivolous claims against the Respondent.
 Lastly, the Claimant has asserted its claim through the Principle of Implied Covenant of Good
Faith and Fair Dealing. But, it is not a question of good faith or fair dealing.
 It is the claimant that has failed to substantiate its claims. Failure to substantiate its claims by
the Claimant cannot result in award of the claims to the Claimant.
 As there is no proper documentation corroborating that the said amounts have been
actually incurred by the Claimant, all such futile claims of the Claimant must be quashed.
 CL AIM NO. 16.9: CLAIM FOR DELAY AND DISRUPT ION DUE TO
SUSPENSI ON OF WORKS DUE T O NON-PAYMENT BY TH E
EMPL OYER

Contention raised by the Claimant:

 The Claimant has had to incur additional costs at the time of suspension of works from May to
September 2014, which the Claimant has sought to claim from this arbitral proceedings.

 The quantum of the claim for the same is NRs. 51,226,609.69.

Law of Limitation bars the Claim

 Section 6(1) of the Arbitration Act, Section 89(2)(d) of the Contract Act or Section 544 of
the National Civil Code stipulates certain timeframe within which a claim must be
brought for adjudication before the arbitral proceeding.
 The Claimant has sought to bring claims for the period of May to September 2014
through an arbitration proceedings initiated in the year 2022. There is a massive time
lapse of almost 8 years, and therefore, the claims of the Claimant in relation to the same
must be quashed on the ground of limitation as well.
 Therefore, the claim of the Claimant pursuant to the same is time barred and must
be quashed.
Defense on Merits

 The Suspension Notice sent by the Claimant was a unilateral step taken by the Claimant which was against the
provisions of the Contract.. The Suspension Notice of the Claimant was never justified and therefore, is completely
only a unilateral approach of the Claimant.
 The Engineer had never certified such an approach of the Claimant, which was against the reckless approach of
the Claimant and therefore, not a valid act as per the contractual provisions.
 It has been categorically been time and again reminded to the Claimant that the obligation and liabilities arising (if
any) from such an action of the Claimant must be solely borne by the Claimant. The Claimant is responsible for
its own conduct. The unilateral notice for suspension of works being sent by the Claimant, which was never
justified, the additional obligations (if any) accrued through such a conduct, must solely be borne by the Claimant.
The delay cannot be attributable to the Respondent.
 The Respondent cannot be claimed for any idle costs for the Suspension Notice sent by the Claimant in a
unilateral manner, the contents of which have never been established. This is against the privity of the Contract.
 Furthermore, the Engineer through their letter vide 17 July, 2014 has categorically given extensive grounds and
reasoning as to why the notice for suspension of works as activated by the Claimant under Sub-Clause 69.4 is
inappropriate has not been anywhere contended by the Claimant in its SoC. Therefore, on account of the same as
well, the notice for suspension of works as submitted by the Claimant is wrong and against the basic premise of
the contractual provisions.
 Direct reference should be drawn to the letter dated 22 May, 2014 of the Respondent, where-in the Respondent
has clearly on issue wise basis provided its reasoning as to why the Claimant is not entitled to issuing the
suspension notice, and any liabilities or consequences must be solely be borne by the Claimant. The Claimant has
clearly nowhere in its SoC sought to rebut the same.
 There is absolutely no substantiation of the claims by the Claimant through any evidences.
There is no documentation or corroboration of evidences that such was the real costs incurred
by the Claimant during this time. There is no evidences attached to that extent by the Claimant.
 The Claimant had been continuing with their works during this timeframe, despite of having
served the Suspension Notice.
 The IPCs issued during this timeframe categorically accounts that the work had in fact never
stopped.
 Breach of any contractual obligation by the Claimant can only be associated if the notice for
suspension of works served by the Claimant is justified. When the unilateral action of the
Claimant is itself not justifiable, then the Respondent cannot be held liable to bear the
consequences arising from such contractually devoid action of the Claimant, which is yet again
largely unsubstantiated.
 Furthermore, Sub-Clause 60.13 of CoPA limits the liability of the Employer (Respondent) for any
matter or thing arising out of or in connection with the Contract or execution of the Works.
Reference to the above clause of the Contract also mandates that the claim must be quashed.
 C L AIM N O . 16. 10: C LAI M F O R D ELAY AN D D I SR U PT I O N D U E T O
SU SPE N SIO N O F W O R K S D U E TO N O N - PAYM EN T BY T H E
EM PLO Y ER F R O M 10. 0 2. 201 5 T O 14. 03. 2015

Contention raised by the Claimant:

 The Claimant has had to incur additional costs at the time of suspension of works from 10
February to 14 March 2015, which the Claimant has sought to claim from this arbitral
proceedings.

 The total quantum of the Claimant under this heading is NRs. 15,609,351.62
Law of Limitation bars the Claim

 Section 6(1) of the Arbitration Act, Section 89(2)(d) of the Contract Act or Section 544 of
the National Civil Code stipulates certain timeframe within which a claim must be
brought for adjudication before the arbitral proceeding.
 The Claimant has sought to bring claims for the period of February to March 2015
through an arbitration proceedings initiated in the year 2022. There is a massive time
lapse of almost 7 years, and therefore, the claims of the Claimant
 Therefore, the claim of the Claimant pursuant to the same is time barred and must
be quashed.
Defense on Merits

 The Suspension Notice sent by the Claimant was a unilateral step taken by the Claimant which was against the provisions
of the Contract. The Suspension Notice of the Claimant was never justified and therefore, is completely only a unilateral
approach of the Claimant.
 The Engineer had never certified such an approach of the Claimant, which was against the reckless approach of the
Claimant and therefore, not a valid act as per the contractual provisions.
 It has been categorically expressed that the obligation and liabilities arising (if any) from such an action of the Claimant
must be solely borne by the Claimant. The Claimant is responsible for its own conduct. The unilateral notice for
suspension of works being sent by the Claimant, which was never justified, the additional obligations (if any) accrued
through such a conduct, must solely be borne by the Claimant.
 The Respondent cannot be claimed for any idle costs for the Suspension Notice sent by the Claimant in a unilateral
manner, the contents of which have never been established. This is against the privity of the Contract.
 There is absolutely no substantiation of the claims by the Claimant through any evidences. There is no documentation or
corroboration of evidences that such was the real costs incurred by the Claimant during this time. There is no evidences
attached to that extent by the Claimant.
 The Claimant had been continuing with their works during this timeframe, despite of having served the Suspension Notice.
 The IPCs issued during this timeframe categorically accounts that the work had in fact never stopped.
 Breach of any contractual obligation by the Claimant can only be associated if the notice for suspension of works served by
the Claimant is justified. When the unilateral action of the Claimant is itself not justifiable, then the Respondent cannot be
held liable to bear the consequences arising from such contractually devoid action of the Claimant, which is yet again
largely unsubstantiated.
 Furthermore, Clause 69.4 of the GC read with Clause 69.4 of the CoPA states the following:

Clause 69.4: “Without prejudice to the Contractor’s entitlement to interest under Sub-Clause 60.7 and to terminate
under Sub-Clause 69.1, the Contractor may, if the Employer fails to pay the Contractor the amount due under any
certificate of the Engineer within 56 days after the expiry of the time stated in Sub-Clause 60.7 within which payment
is to be made, subject to any deduction that the Employer is entitled to make under the Contract, after giving 56 days
prior notice to the Employer, with a copy to the Engineer, suspend work or reduce the rate of work. If the Contractor
suspends work or reduces the rate of work in accordance with the provisions of this Sub-Clause and thereby suffers
delay or incurs costs the Engineers shall, after due consultation with the Employer and the Contractor, determine: (a)
any extension of time to which the Contractor is entitled under Clause 44, and (b) the amount of such costs, which shall
be added to the Contract Price, and shall notify the Contractor accordingly, with a copy to the Employer.”

 Thus, it can be seen that it is a mandatory requirement under the contractual provision that 56 days
prior notice is to be given by the Claimant, prior to suspending the works. However, the Claimant has
never intimidated that the Claimant is going to the suspend the works
 Clear failure on the part of the Claimant to meet the very essence of the Contract and seeking to
unilaterally suspend the works, without meeting the basic criteria of issuance of the prior notice to the
Respondent, the conduct of the Claimant is itself a clear breach of the contractual obligations
 Therefore, no liability can be attributable towards the Respondent, when the Claimant themselves have
been unable to fulfil the minimal conduct mandated by the Contract.
 It must be noted that the Claimant themselves resumed the works post the discussion between the
Parties on 24 February 2015. If such is the case, then the suspension is lifted and the works is already
resumed, so the suspension is only for a mere period of 14 days
 Since the suspension itself is lifted within a period of 14 days, against the clear
contractual mandate of 56 days prior notice, it can ipso facto be deduced that the notice
for suspension of the works was never actually effective per se
 In any case, sub-clause 60.13 of the CoPA ceases the Respondent from any liability
arising from the execution of works under the Contract making the claim of the Claimant
liable to be quashed
C O N C LU SI O N ( C LAI M N O . 16)
1. The Claimant has not submitted any substantive evidences or material proof of payments corroborating
its each claim.
2. The Claimant has not accounted any overlapping or concurrent delay aspects in its entire claim, and has
evasively sought to raise similar events duration as separate claims, thus, multiplying its claim amount.
3. The Claimant has sought to claim each claim under separate heading, but however, while doing so, there
are multiple timeframes which have been overlapped, and hence, the claims of the Claimant are largely
futile.
4. The works of the Claimant has in fact never been stopped at any point of time, and there was
continuation of the works at all times.
5. There is no account of idle manpower and resources of the Claimant during the entire duration of the
Contract, as substantial amount of variation works had been issued, and the Claimant had at all times
been involved in construction activity throughout the project duration.
6. The overheads of the Variation Amount as largely already equated the Claimant for all of its other
overhead costs. So, basing the claim again by only restricted to the Initial Contract Price without taking
into consideration the Variation Amounts, is a totally erroneous calculation devised by the Claimant.
7. All of the Claimant’s individually raised claims pursuant to the delay event as shown by the Claimant is
largely time barred under the principle of limitation as envisaged in the Nepalese laws.
 Therefore, the erroneous and futile claims of the Claimant pursuant to the delay events as
contended by the Claimant must be quashed in totality
 REL EVAN T C A SE L AW S R EG A R D I N G TH E APPL I C ABI LI TY O F
S EC TI O N 6( 1) O F TH E AA

The issue regarding the applicability of Section 6(1) of the AA in arbitration proceedings
conducted under the ICC Rules is no longer res integra as the same has not only been settled
by a prior arbitral tribunal but the same has also been discussed and upheld by the high
courts of Nepal, which have the power to review the award of an arbitral tribunal.

ICC Partial Award on
Jurisdiction
Case No. 20375/CYK/PTA
• It is the tribunal’s interpretation of Section 6(1) of the AA that “if the parties’ agreement or their
chosen arbitration rules does not provide for this period (time limit for starting the process of
appointment of arbitrators), then the three-month period in Section 6(1) of the AA applies by default”
• A clear reading of Section 3(1) also further substantiates the same.
• There is a conspicuous absence of a prescribed time limit for starting the process the appointment of
arbitrators under the ICC Rules and the contract agreement. Hence, the three-month period prescribed
in Section 6(1) (of the AA) is applicable.

Pitambar Badu v.
Melamchi Drinking Water
Supply Development Board
Case No. 074-DP-0291
• This decision upheld the partial award on jurisdiction rendered by the
Arbitral Tribunal in Case No. 20375/CYK/PTA
• In the case that the parties have not mentioned the time limit within
their agreement, and the arbitration rules are silent on that matter, the
prevailing laws, which is Section 6(1) of the AA is applicable.
 The Supreme Court of Nepal has laid down the law that procedural rules of
arbitration institutions cannot override the mandatory provisions of the
Arbitration Act.

Bakhbar Singh v. Kankai The rules applicable on the procedural matters to be followed
Irrigation Project, while settling the international commercial dispute arising out of
Department of Irrigation the contract through the process of arbitration cannot replace the
Nepal law or make it ineffective. These rules cannot override nor
NKP 2067, Decision No. can it make ineffective the mandatory provisions of the Arbitration
8397, Issue 6 Act
 APPOINTMENT OF ARBITRATOR DOES NOT IMPLY OR MEAN THAT THE
ARBITRATION PROCEEDINGS HAS JURISDICTION TO ENTERTAIN ON MERITS

 The agreement between the parties stipulates that any

Nepal Industrial and Commercial Bank v.
Arbitral Tribunal of three members
Writ No. 062-WO-2886
dispute should be settled through arbitration. Thus, the
date the dispute arose between the parties is on 10 July
2001. This is because of the letter of the Petitioner
withdrawing its obligation to underwrite the shares
hampered the performance of the terms of the contract.
The date for appointment of the tribunal was started only
on 23 February 2002, (after a lapse of six months) which
is not within the limitation period prescribed under Section
6(1)

 If the preliminary task of appointment of an arbitrator

itself is not within the limitation period prescribed by
Section 6(1) of the AA, the decision of the arbitral tribunal
to assume jurisdiction was incorrect.

 Simply because appointment of arbitrator has taken place

in a dispute in which the Arbitral Tribunal does not have
jurisdiction, does not ipse facto mean that the Arbitral
Tribunal will have jurisdiction.
  When another party to the contract had stopped
carrying out the works as per the contract and the
terms of the contract was not extended, the
Raghubarlaal Shrestha v. Syako termination of the contract should be considered as
Construction Pvt. Ltd the reason for filing the lawsuit.

 The issue of limitation is fully a legal question and

NKP 2065 (2008), Issue 8, Decision
hence before proceeding to the facts of the case, it
No.8004
is important to determine whether the suit has
been filed within the period prescribed by the law.
Therefore, it is important to bring the suit within the
period prescribed by law. Only if the suit is filed
within this period can the court examine the claims
 STRICT APPLICATION OF THE LAW OF LIMITATION BY THE SUPREME COURT

 The provision of time limitation is a legal question. There is a certain

Rajendra Man Sherchan v. timeframe prescribed by the law to adopt the legal process. Whether
Appellate Court Patan any work has been done within the timeframe prescribe by the law or
NKP 2064 (2007), Issue 3, not has to be linked into especially.
Decision No. 7823  When dispute arises regarding whether the process of appointment of
the arbitrator has started within the time limitation prescribed by the
law or not, the court cannot set aside the legal question

 If the prevailing law provides for a time limitation to file a lawsuit in any disputed
Rajendra Man Sherchan v. matter, the party seeking the legal remedy should do so as per the time limitation
Appellate Court Patan period prescribed by the respective law.
 Therefore, the limitation period is not a subject that may be shortened or extended as
NKP 2064 (2007), Issue 3, per the will of any party but it is a legal right as prescribed in the law of the
Decision No. 7823 legislature. This right cannot be interpreted for and against any party. In which form
or manner, the matter of time limitation has been kept in the law, the court also has to
interpret the legal provision relating thereto only as per the meaning and objective of
the legal term