India and China are squabbling over a massive Rs. 471 crore Railways contract that India discontinued in the wake of the crisis that started in the summer of 2020, even as they steadily attempt to mend their strained political relations caused by the ongoing border impasse in Ladakh.
In June of that same year, India revoked the contract it had with the Chinese government-controlled company CRSC Research & Design Institute Group for the installation of signalling and telecom systems along a 417-kilometer section of the future Eastern Dedicated Freight Corridor between Kanpur and Deen Dayal Upadhyay junction.
Under the auspices of the International Chamber of Commerce in Singapore, China has now submitted the dispute for international arbitration. Among other things, it has alleged that the Dedicated Freight Corridor Corporation of India (DFCCIL) failed to reimburse it for the work that was completed. It has claimed a number of problems that it encountered while working in India that were out of its control, according to officials.
The first damage claim from CRSC was for Rs 279 crore, however it was later increased to Rs 443 crore. It demands several things from the DFCCIL, including the return of its bank guarantee. A contractor must deposit a bank guarantee as a requirement for obtaining a contract.
The claimed sum includes claims for various types of overhead costs, interest on various forfeited amounts, contractual deployment, etc.
The Indian side has responded by filing an amended counterclaim for Rs 234 crore as opposed to the initial Rs 71 crore it had requested. In addition to regularising the forfeiture of the bank guarantee, the DFCCIL has asserted its claim based on the recovery of its mobilisation advance, retention money, and balance under the termination.
The Chinese side argues that the contract’s termination was unlawful since DFCCIL did not follow the terms of the contract’s termination clause.
According to the provisions of the treaty, a tribunal has been established under the norms of the ICC. The parties are currently preparing the numerous submissions that the Tribunal has requested.
This contract was important for China on a number of levels.
First of all, this was China’s largest contract in India’s important and security-sensitive rail sector for signalling and telecommunications work, which it secured in 2016.
Second, it provided a foothold in the Dedicated Freight Corridor project, whose Western arm is supported by financial and technical support from Japan. The Chinese side would have benefited from this work if they were to bid for future similar projects in India, where they are trying to develop their dedicated freight lanes.
An indirect body blow to the Chinese was dealt by India’s decision to terminate the contract as the two forces clashed on the Line of Actual Control.
Officials from India denied that the contract’s termination was due to political difficulties between the two nations. They cited the slow progress of the job as one of the main causes. Despite the fact that the project started in 2016, just 20% of the work had been completed by 2020, in addition to missing deadlines.
Due to a lack of local connections, the Chinese giant was unable to mobilise sufficient resources on the ground. As a result, when DFCCIL representatives visited project sites, they were frequently taken off guard, and engineers and authorised employees were frequently found to be missing. Their ability to purchase materials was also determined to be lacking.
The Chinese group was “reluctant” to share technical information with them, such as logic design and interlocking, according to Indian authorities as well. Since we required a system that could be effortlessly synchronised with our other systems, this was a requirement of the contract. Therefore, we required the technical documents and proactive collaboration, neither of which were occurring, according to a top official.
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