Reliance Infrastructure Limited is going to get windfall profits of approx. In a five-year-old arbitration case with power producer Damodar Valley Corporation, the Supreme Court ruled in favor of the company for Rs 900 crore.
As per the Supreme Court’s May 31 decision, Damodar Valley Corporation (DVC) will pay Reliance Infra 595 crore cash and 303 crore as bank guarantee till 31st July.
Kolkata-based DVC chairman Ram Naresh Singh has given an undertaking in writing to the Supreme Court on June 6, stating that the DVC will abide by the court’s direction in the matter of arbitration award.
Mint reviewed the undertaking in the matter and a copy of the SC order.
The matter dates back to April 2017, when Reliance Infra had called for arbitration following a dispute with DVC due to delay in fulfillment of engineering contract awarded by DVC for the construction of a 2x600MW coal-fired power plant at Purulia, West Bengal.
The arbitral tribunal ruled in favor of Reliance Infra and directed DVC to pay 898 crores and issued six bank guarantees to the company 353 crore within a month.
There was an interest liability of 12% p.a. on the arbitral award amount, which was to be paid by DVC. The total interest burden accumulated by DVC till 31st May 2022 is approx. 260 crores.
DVC challenged this arbitral decision in the Calcutta High Court, which also ruled in favor of Reliance Infra.
Following this, the matter was challenged by DVC in the Supreme Court, which has now directed DVC to pay Reliance Infra within eight weeks.
On 25 April, the Supreme Court was the first to pass an order requiring the DVC to submit 595 crore cash and 303 crore as bank guarantee in favor of Reliance Infra within four weeks.
But DVC failed to comply with the order and hence Reliance Infra was contemplating to file a contempt petition against the officials of DVC.
However, the Supreme Court granted more time to DVC to pay the money to Reliance Infra on the condition that the chairman of DVC submits an undertaking with the apex court regarding the payment.
Certain bank guarantees were issued by the DVC in December 2021, following the direction of the Supreme Court in the first round of litigation between the two parties.
Non-issuance of bank guarantee by DVC till December 2021 resulted in additional interest burden of approx. 107 crore, as per the documents reviewed by the mint.