Vizhinjam Port delay: Adani Group hopes to play ‘Force Majeure’ card to escape ‘damages’ claim

 

THIRUVANANTHAPURAM: Even as the December 03, 2019 deadline for the commissioning of the much-trumpeted Vizhinjam Port is already behind us; the two grace periods are set to expire within days and with the D-day being anybody’s guess, the management of Adani Vizhinjam Port Pvt Ltd (AVPPL) nurses hopes that it will not be penalised by the Government of Kerala by claiming ‘damages’ against the delay in achieving the Commercial Operation Date (COD) deadline.

The ‘damages’, if invoked, would be 0.1 per cent of the Performance Security at Rs120 crore, which works out at Rs12 lakh for each day’s delay until the fulfilment of such Conditions Precedent, subject to a maximum amount equal to the Bid Security.

The Adani Group management is said to have invoked Force Majeure, which is a common clause in contracts that essentially frees both parties from liabilities or obligation when extraordinary events or circumstances beyond the control of parties affect the contract itself

Adani Ports and Special Economic Zone Ltd (APSEZ), the owner of AVPPL, has explained in the notes to its latest financials that through various representation made by AVPPL explaining the reasons for the delay in achieving the COD, it could convince the management’s stand to the Kerala Government and the regulatory authorities.

The management is confident that the authorities will accept its stand that the delay was due to various Force Majeure events during the course of construction of the project as well as due to a revision in the project completion schedule.

“And, accordingly the management doesn’t expect any probable outflow pertains to damages payable, which otherwise as per the agreement is a sum calculated at the rate of 0.1 per cent of the amount of performance security,” the note added.

The management also stated that as per the terms of the Concession Agreement (CA), AVPPL doesn’t expect termination of the Concession Agreement.

As per the terms of the concession agreement (CA) signed on August 17, 2015 with the Government of Kerala for the development and operation of Vizhinjam International Deepwater Multipurpose Seaport, the scheduled milestone date for AVPPL to complete the project including Commercial Operation Date (COD) was set as December 3, 2019.

The CA also allowed an extended grace period of further 90 days to 270 days from the Scheduled COD to complete the project with certain ‘damages’ to be paid to the Government authorities till August 30, 2020, and after which, the authorities will have the rights to terminate the Concession Agreement (CA)itself.

“The COD date and further grace period as above are the stipulated contractual obligations as per the CA unless the delays are due to reasons attributable to the Authorities or due to Force Majeure as agreed between the parties,” the notes explained.

AVPPL said that though it had started the development of the project from December 5, 2015 itself, it could complete three milestones of the project despite certain project work having got delayed due to events like Cyclone Ockhi in November 2017.

Due to extreme adverse weather conditions at sea in July 2018, the project work got standstill as is done during such events. The work also got delayed waiting for the Environment Clearance required for the development of mines and sourcing rocks for construction of Breakwater as per the National Green Tribunal (NGT) vide the order dated September 13, 2018.

And the latest is the long-drawn nationwide lockdown due to Covid 19 pandemic from March 2020 onwards.

“Due to all these events AVPPL could not achieve scheduled COD date of December 3, 2019 and all these events are in the nature of Force Majeure events in terms of Clause 35.51 of the CA,” the company added.

AVPPL did communicate to Vizhinjam International Sea Port Ltd (VISL, a government coordinating entity) and Department of Ports, Government of Kerala, and also represented in the regular Project Review meeting convened by the Principal Secretary to the Government of Kerala, Port Department, about the events that led to the delays in completing the project.

Stating that the work is still on with the project, AVPPL added that it is in discussions with Government of Kerala and VISL for seeking clarification on certain Force Majeure events raised by it and also regarding revision in Project completion schedule.

 

Leave a Reply

Your email address will not be published. Required fields are marked *