Fabtech gets court support against Oil India

Vol 19, PW 10 (28 Jan 16) People & Policy

Fabtech Projects & Engineers has launched legal proceedings against Oil India in the Guwahati High Court, worried it is about to lose a tender to set up a tank farm at Madhuban in Assam despite bidding lowest.

Judge Hrishikesh Roy on January 6 ordered Oil India to respond within four weeks. Fabtech acted after receiving a letter from Oil India on December 9, 2015 instead of the LoA it was expecting.

Oil India wanted to know how Fabtech calculated Service Tax at Rs9.1cr ($1.3m) using the 'composite' ST rate of 5.6%? According to Oil India the actual ST amount works out to Rs23.73cr ($3.5m), which if added to Fabtech's bid makes it the second-ranked bidder, not first. In its reply on December 12, 2015 Fabtech assured Oil India it would bear any additional tax liability if it has wrongly interpreted tax rates.

Fabtech stressed that its price includes all applicable taxes and 'duties', as demanded by the tender document. Despite this, Oil India sent caveats (notices) to all the Guwahati courts to protect itself from any Fabtech legal challenge.

Fabtech then complained on December 21, 2015 to Oil India's Independent External Monitor Rajiv Mathur and to acting chairman UP Singh. But no one took any notice, forcing Fabtech to approach the Guwahati High Court.

Judge Roy also said if Oil India finalises the contract before it gives its response no additional amount should be added to Fabtech's Rs432.99cr ($64m) bid.