IndianOil and Foster Wheeler fight in court

Vol 17, PW 25 (31 Jul 14) People & Policy

Even some at IndianOil believe it has a weak case against Foster Wheeler in an arbitration appeal over unpaid fees for work at its upcoming 15m t/y Paradip refinery in Orissa.

The Delhi Court will hear the case on August 21, almost two years after IOC lost an arbitration case against Foster Wheeler in September 2012. IOC is appealing under section 34 of The Arbitration and Conciliation Act, 1996.

"Foster Wheeler has a good chance of winning this as well," admits an IOC source. Cut to 2009 and IndianOil appoints Foster Wheeler Managing Project Management Consultant (MPMC) and Engineering, Procurement and Construction Management consultant (EPCM) for fifteen key refinery process units, plus offsites, utilities and infrastructure for Paradip.

Chronic delays followed and IOC has been blaming Foster Wheeler ever since for its failure to commission the Paradip refinery by March 2012. IOC has rejected Foster Wheeler's demand for Rs350cr ($58m) payment for 'additional work' related to refinery design changes.

Yet the 2012 arbitration ruled that Foster Wheeler should receive at least partial payment, which led to IOC’s appeal in the Delhi High Court. IOC officers are mainly worried about an investigation by its vigilance department into inflated costs in the original 2009 contract.

"About 50 junior officers have been questioned about this,” adds our IOC source. “Nobody wants to approve any additional costs.

Contractors can inflate bills."