According to the 31 May Supreme Court ruling, Damodar Valley Corp. (DVC) will pay Reliance Infra ₹595 crore in cash and ₹303 crore by way of bank guarantees by 31 July.
Ram Naresh Singh, chairman of Kolkata-based DVC, has given an undertaking in writing to the Supreme Court on 6 June, stating that DVC will comply with the court’s directive in terms of the arbitration award.
Mint reviewed a copy of the undertaking and the SC order in the matter.
The case dates back to April 2017, when Reliance Infra had invoked arbitration following a dispute with DVC on account of delays in the completion of an engineering contract awarded by DVC for the construction of a 2x600MW coal-based power plant in Purulia, West Bengal.
The arbitral tribunal ruled in favour of Reliance Infra and had directed DVC to pay ₹898 crore to the company and release six bank guarantees worth ₹353 crore within a month.
The arbitral award amount carried an interest obligation of 12% per annum, which was to be paid by DVC. The aggregate interest burden accumulated by DVC as of 31 May 2022 is about ₹260 crore.
DVC challenged this arbitral judgement in the Calcutta high court, which too ruled in favour of Reliance Infra.
Subsequently, the case was challenged by DVC before the Supreme Court, which has now directed DVC to make the payment to Reliance Infra within eight weeks.
On 25 April, the Supreme Court had first passed an order requiring DVC to deposit ₹595 crore in cash and ₹303 crore by way of bank guarantees in favour of Reliance Infra within four weeks.
But DVC failed to comply with this order, and hence Reliance Infra was mulling filing a contempt petition against officials of DVC.
However, the Supreme Court granted DVC more time to pay the money to Reliance Infra on the condition that the chairman of DVC furnishes an undertaking with the apex court regarding the payment.
Following a Supreme Court directive in an earlier round of litigation between the two parties, some bank guarantees were released by DVC in December 2021.
The non-release of the bank guarantees by DVC till December 2021 entailed an additional interest burden of approximately ₹107 crore, according to the documents reviewed by Mint.
