LCC Projects pursues Rs 41.977 crore claims against MPJNM

LCC Projects has two pending arbitration petitions seeking Rs 41.977 crore plus 18% interest from Madhya Pradesh Jal Nigam Maryadit (MPJNM). Filed on August 29, 2024, the claims challenge MPJNM’s replacement of a bitumen index with a resin index for high-density polyethylene (HDPE) and resin price adjustments.

Why is LCC Projects pursuing Rs 41.977 crore claims against MPJNM?

LCC Projects is pursuing the Rs 41.977 crore claims against MPJNM because it alleges that MPJNM changed the method for calculating HDPE and resin price adjustments in two water-scheme contracts. Both petitions were filed under Section 7 of the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983, for reference to the Madhya Pradesh Madhyastham Adhikaran Tribunal.

The contracts followed MPJNM tenders dated September 23, 2020. LCC Projects’ bids were accepted on December 23, 2020, and it entered the Madia Contract Agreement for the Madhya Village Scheme in Sagar district and the Rajond Contract Agreement for the Rajond Multi Village Scheme in Dhar district on January 11, 2021. Each turnkey contract covered engineering, procurement, construction, testing, commissioning, trial run and 10 years of operation and maintenance.

The Rs 41.977 crore aggregate consists of two material civil proceedings initiated by LCC Projects, not claims against it. Petition 1 seeks Rs 26.165 crore plus 18% interest and Petition 2 seeks Rs 15.812 crore plus 18% interest. The litigation summary’s Rs 41.977 crore aggregate is the stated claim amount and does not include any interest that may become payable.

What changed in the HDPE and resin price-adjustment calculation?

The dispute concerns a shift from the bitumen index selected at MPJNM’s February 25, 2022 technical committee meeting to a resin index required in later directions. Price adjustment is the contractual mechanism that changes amounts payable in response to specified input-price indices. Both contracts separately used price indices for mild-steel flat products to calculate the steel-component adjustment.

For the Madia contract, LCC Projects asked on August 24, 2022 for the February 2022 decision to be implemented for the project term. MPJNM’s Project Director later stated in a March 1, 2023 letter, communicated through a March 31, 2023 order, and an August 24, 2023 letter that HDPE and resin adjustments in agreements with such clauses would be calculated using the resin index. MPJNM also directed that the difference arising from use of the bitumen index be deducted in four instalments from consecutive future bills.

The Rajond contract had a similar sequence, with a specific approval before the later change. LCC Projects requested implementation on July 21, 2022, and MPJNM approved that request on August 30, 2022. However, the March 1, 2023 communication and an August 28, 2023 direction required resin-index calculation and recovery of the difference in four future bills.

How did LCC Projects contest MPJNM’s directions?

LCC Projects pursued internal representations during 2023 before filing arbitration petitions in August 2024. In both matters, it argued that the use of a resin index conflicted with the February 25, 2022 technical committee decision and resulted in an improper recovery of price-adjustment amounts calculated using the bitumen index.

In Petition 1, LCC Projects wrote to MPJNM’s Managing Director on May 1, 2023 after the Project Director’s direction. The Project Director rejected the claim on June 7, 2023, stating that the February 2022 permission to use the bitumen index had been made without expert opinion and was modified by the March 2023 communication. LCC Projects appealed on July 4, 2023, and the Managing Director rejected the appeal on August 18, 2023.

In Petition 2, LCC Projects made its representation on May 1, 2023, and the Project Director rejected it on June 9, 2023 on the stated basis that the initial permission had been granted without expert opinion. LCC Projects appealed on July 3, 2023, seeking to stop recovery and calculate past and future bills using bitumen. MPJNM’s Managing Director rejected that appeal on August 18, 2023.

What must LCC Projects establish before the Tribunal?

LCC Projects seeks declarations that the February 25, 2022 decision is final and binding and that the March 31, 2023 order should be revised. Its stated case in both petitions is that the technical committee decision was well considered and that expert opinion was sought only after a written understanding to use the bitumen index had been reached.

The Tribunal will need to assess the contract price-adjustment clauses, the status of the February 2022 technical committee decision and MPJNM’s stated reason for changing the index. MPJNM told LCC Projects in June 2023 that expert opinion had not supported the earlier bitumen-index permission. The disclosure gives no hearing date, interim order, provision recorded by LCC Projects or expected resolution date.

The two petitions are material under the policy adopted by LCC Projects’ board on August 20, 2026. The applicable threshold was Rs 10.534 crore, equal to 5% of the average absolute profit or loss after tax for the preceding three financial years. That threshold was lower than 2% of Fiscal 2026 turnover of Rs 72.005 crore and 2% of March 31, 2026 net worth of Rs 17.768 crore, so each petition exceeded it.

How do the arbitration claims compare with other disclosed proceedings?

The two petitions are LCC Projects’ only disclosed material civil proceedings by the company, while the litigation summary records no material civil proceedings against the company. The summary separately records 12 tax proceedings against LCC Projects, comprising five direct-tax cases involving Rs 7.922 crore and seven indirect-tax cases involving Rs 4.296 crore, or Rs 12.218 crore in total.

The Rs 41.977 crore arbitration claim total is more than three times the Rs 12.218 crore tax amount in dispute or demand against LCC Projects. The categories have different directions: the arbitration matters are claims sought by LCC Projects from MPJNM, while the tax matters are proceedings against LCC Projects. The disclosure also records no criminal, statutory or regulatory proceedings against LCC Projects and no material litigation involving its subsidiaries or group companies that may affect it.

Conclusion

LCC Projects’ disclosed material civil litigation is concentrated in two pending claims against MPJNM arising from the change from a bitumen to a resin index for HDPE and resin price adjustments. The Rs 41.977 crore principal sought exceeds the Rs 10.534 crore materiality threshold and is separate from Rs 12.218 crore of tax matters disclosed against LCC Projects.

What to watch next is the Tribunal’s treatment of the February 25, 2022 technical committee decision, the March 2023 directions and MPJNM’s explanation regarding expert opinion. The disclosure identifies no award, hearing timetable or settlement plan, so the claims remain pending and the requested 18% interest is not a confirmed recovery.