GVK faces NHAI axe over road project

Notice asks why company should not be barred from bidding for any project for 2 years

 

The National Highways Authority of India (NHAI) has served showcause notices for termination and debarment on GVK Transportation for failure to mobilise the needed money for the Rs 2,815-crore Shivpuri-Dewas project in Madhya Pradesh.

The company was awarded the project in January 2012, under the fourth phase of the National Highways Development Programme.

In the notice, issued last month, NHAI told the infrastructure major there was “no merit or cogent ground” in the company’s explanation for non-achievement of financial closure and other conditions required to be done before work begins on the project. Holding the company responsible for breach of the concession agreement, NHAI’s notice says GVK even failed to attend a personal hearing opportunity on April 11.

ROUGH RIDE

•  A notice was served to GVK for failure to mobilise the required money for the project
• The company was awarded the project in January 2012, under the fourth phase of the National Highways Development Programme
• GVK Shivpuri-Dewas Expressway, and the parent company, GVK Transportation, would have to explain why they should not be barred for two years from any other project of theirs, said NHAI

Asked for its response, a GVK spokesperson said, "We have not received any communication; hence, cannot comment."

In a separate notice on debarment, NHAI said both the special purpose vehicle created by the company for the project, GVK Shivpuri-Dewas Expressway, and the parent company, GVK Transportation, would have to explain why they should not be barred for two years from any other project of theirs.

A senior official in NHAI said the authority was forced to issue the two notices since it could not proceed with development of the expressway project, part of the plan for National Highway-3 in Madhya Pradesh.

Under Article 24.1.1 of the 30-year concession agreement between the SPV and NHAI, the company had to achieve financial closure within 180 days from the date of the signing. A further grace period not exceeding 120 days is provided, subject to payment of damages to NHAI which equals 0.1 per cent of the performance security for each day of delay but the further period should not exceed 200 days. No damages are, however, payable if such delay in financial close has occurred solely as a result of any default or delay by NHAI in meeting specified conditions.

NHAI clarification

In response to a Business Standard report (GVK may get to exit ~3,000-cr road project, published on May 16), NHAI said it had kept the order on encashing of the bid security in the form of a bank guarantee in abeyance, subject to the disposal of an arbitration case, as directed by the Delhi High Court. NHAI had earlier sought from the court a direction to GVK to renew or furnish the performance security bank guarantee for ~1.4 crore till final disposal of the petition. The highways authority, therefore, said it would not be correct to say the company had been allowed a “harmonious” (without encashment of guarantee) exit.