Mumbai: Hindustan Construction Company (HCC) has won a challenge in the Supreme Court for setting aside Section 87 of the Arbitration and Conciliation Act.
The company on Friday described it as a significant victory for the arbitration process in the country and for the construction sector in particular.
Section 87 was a recent amendment to the Arbitration and Conciliation Act passed by Parliament in the last monsoon session and was notified on August 9.
In HCC's case, the company will now be in a position to execute awards amounting to about Rs 1,584 crore which were impacted by Section 87.
The EPC sector has been plagued by non-payment of arbitration awards which mainly comprise delay damages on account of overstays at the site. HCC has 56 arbitration awards outstanding totalling Rs 6,419 crore.
Of this amount, Rs 2,532 crore has been withdrawn against bank guarantees. The remaining Rs 3,887 crore is yet to be received as the matters are currently at various stages of challenge by government agencies in court.
On November 20, the Cabinet Committee on Economic Affairs also recognised the crisis faced by the construction sector on timely receipt of arbitration award monies.
Government entities will take the decision to initiate proceedings for setting aside of the award and any appeals with the opinion of a law officer (Attorney General for India) in consultation with the Department of Legal Affairs.
Where a challenge to an award is made, 75 per cent of the money will be paid out against a bank guarantee pending final adjudication.
"We anticipate that both the Supreme Court order and the Cabinet order will provide much-needed relief to the industry," said HCC in a statement.
With an engineering heritage of nearly 100 years, HCC has executed a majority of India's landmark infrastructure projects, having constructed 27 per cent of India's hydro power generation and 60 per cent of nuclear power generation capacities, over 3,900 lane km of expressways and highways, more than 350 km of complex tunnelling and 382 bridges.
The HCC Group with a turnover of Rs 10,322 crore comprises of HCC Ltd., HCC Infrastructure and Steiner AG in Switzerland.