Mumbai: Reliance Infrastructure Ltd said on Monday it has won a major arbitration award of Rs 1,250 crore against government-owned Damodar Valley Corporation (DVC).
A three-member arbitration tribunal unanimously gave the award in favour of Reliance Infrastructure on December 21.
The tribunal directed DVC to pay Rs 896 crore and return the bank guarantees of Rs 354 crore within four weeks or pay additional interest at the rate of 15 per cent per annum for any delay in payment beyond four weeks.
Pursuant to the recent Niti Aayog circular, Reliance Infrastructure will request DVC to pay 75 per cent of the arbitral award against bank guarantee immediately. The proceeds will be used to pay lenders and reduce the company's debt.
"It is critical for Indian engineering, procurement and construction (EPC) companies to be paid their dues on time so that they can participate in mega-infrastructure projects without the risk of getting bogged down by working capital issues," said an official spokesperson.
"This award by the arbitration tribunal is a validation of the rightful position of the company," he said in a statement.
Anil Ambani-lead Reliance Infrastructure was the E&C contractor of DVC's 2 x 600 MW Raghunathpur thermal power project in West Bengal with a contract value of Rs 3,750 crore.
After emerging the lowest bidder, the company was issued a letter of acceptance on December 11, 2007. Units one and two were to be commissioned in 35 and 38 months respectively.
During execution, Reliance Infrastructure faced various impediments like non-availability of land, hindrances at the project site on account of local agitations, unavailability of inputs from DVC like water and coal.
Despite such handicaps, the company commissioned the project. Unit one was commissioned on May 15, 2015 and unit 2 was commissioned on February 23, 2016.
The company also raised several claims on DVC in respect of delays and hindrances faced by it in the execution of the project. However, DVC sought to levy liquidated damages upon the company for failure to adhere to the contractual schedule.
Reliance Infrastructure invoked arbitration and a three-member arbitral tribunal comprising of Presiding Arbitrator Justice Ganendra Naryan Ray, a former judge of Supreme Court of India, and co-arbitrators Justices Ronojit Kumar Mitra, former Judge of Calcutta High Court, and Indrajit Chatterjee, also a former judge of Calcutta High Court, was formed.
The arbitral tribunal was constituted on August 1, 2017 and the first hearing was held on August 11, 2017. Reliance Infrastructure claimed for grant of extension of time, release of retention amount and performance bank guarantees withheld by DVC, compensation for increase in price, extended stay and other related claims.
DVC also filed a counter-claim and sought to levy liquidated damages, claims towards loss of generation, additional interest on loans and other claims.
The arbitral tribunal over 107 sittings dwelt on the rival claims of the parties.