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CAG detects inept arbitration by GMC

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  30 March 2017 12:00 AM GMT

*GMC suffered Rs 4.86-crore loss due to inefficient arbitration.

*Government panel detected lapses, omissions and commissions on the part of the GMC in dealing with the court case.

*To pay arbitration award, GMC had to divert Rs 7.80 crore from the Fourth ASFC fund.


By our Staff Reporter

GUWAHATI, March 29: In the eyes of the CAG, the Guwahati Municipal Corporation (GMC) is a dead loss as a user charge collector. Now it has come to light that the civic body has not been efficient in dealing arbitration cases as well.

Lack of timely action on the part of the GMC in setting disputes with construction firms, not challenging the arbitration awards and delayed implementation of arbitration awards led to the loss of a whopping Rs 4.86 crore, besides diversion of Rs 7.80 crore from the Fourth Assam State Fince Commission (ASFC) fund, the CAG said in its report on local bodies for the year ended March 31, 2016.

Test check of records of GMC Commissioner revealed that an amount of 7.80 crore, as arbitration award including interest, was paid by the civic body in September 2015 to three construction firms from the Fourth ASFC grant. Detailed scrutiny of that from October 1989 to October 1990 found that the GMC engaged three construction firms for carrying out three different works under the scheme ‘improvement of the existing water supply in Guwahati city’ at a total contract price of Rs 10.10 crore. According to the CAG report, due to disputes with the GMC, the construction firms moved the GMC Commissioner in 2001 seeking his intervention for resolution, by way of arbitration, as per the terms of the contract. “The disputes, however, couldn’t be amicably settled. The firms subsequently approached the Gauhati High Court, for appointment of an Arbitrator under Section 11 (6) © of the Arbitration Act, 1966. The Arbitrator appointed by the High Court, after hearing both the sides, awarded the payment of Rs 2.55 crore, along with 12 per cent pre-suit and pendentelite interest of Rs 0.87 crore and 18 per cent future interest to the firms,” the CAG report said, and added: “The Arbitration Award was not challenged in time and part payments of Rs 31.06 lakh in October 2004 and Rs 16.99 lakh against pendentelite interest amount of Rs 15.59 lakh and post award interest of Rs 3.94 lakh were made to one of the three firms.”

Dispur, on the matter being taken up by the GMC in February 2011, formed an award negotiation committee in June 2011. It also failed to resolve the issue, the CAG said, and added that in April 2012, the GMC had filed a petition before the High Court to dismiss the money execution cases, on the plea that the arbitral award was obtained by the decree holders fraudulently, in collusion with GMC officials, the lawyer and the arbitrator. The petition was dismissed in May 2014 on the ground that the GMC had never challenged the Arbitration Award, though there was a provision for it under Section 34 of the Act, the CAG report said, and added that the GMC had filed a review petition before the High Court in May 2015. “It was also dismissed by the High Court, stating that it cannot appreciate filing of review petition by the petitioner, when the judgment of the writ court had not been questioned by filing any appeal,” the report said, and added: “Filly, an agreement was reached in September 2015 between the GMC and the three firms for payment of Rs 7.80 crore. The GMC requested the State Fince Department to provide some relief by making available to GMC at least a part of the huge funds.”

The committee formed by the government to examine the matter observed that there had been certain official lapses, omissions and commissions, on the part of the GMC, in dealing with the court case and it rejected GMC’s request in that regard. “Subsequently, the GMC in September 2015 made payment to the firms out of Rs 26 crore received under Fourth ASFC fund for 2012-13 which was meant for (i) construction of four zol offices, (ii) solid waste magement, (iii) construction of roads and drains, (iv) construction of four GMC markets and (v) improvement of the existing water supply schemes.

The CAG report said that due to lack of timely action on the part of the GMC in settling the disputes with the firms, not challenging the arbitration award before the Appellate Authority and not taking timely action on implementation of the Arbitration Award, the GMC suffered a loss of Rs 4.86 crore by way of extra payment to construction firms.

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