Reliance Infrastructure Ltd’s shares surged by over 2% after the Calcutta High Court upheld an arbitration award worth approximately ₹780 crore in favor of the company, resolving a longstanding dispute with Damodar Valley Corporation (DVC). The court ruling supports a decision made by an arbitration tribunal in 2019, directing DVC to pay compensation to Reliance Infrastructure, with some adjustments.
Background of the Dispute
The conflict dates back over a decade when Reliance Infrastructure was awarded a contract worth ₹3,750 crore to set up a 1,200 MW thermal power plant in Purulia, West Bengal. The project faced delays due to disputes and other reasons, prompting DVC to seek damages. However, the arbitration tribunal ruled in favor of Reliance Infrastructure in 2019, directing DVC to pay ₹896 crore, including interest, to the company. DVC subsequently challenged this award in the Calcutta High Court.
On September 27, 2024, the Calcutta High Court dismissed DVC’s challenge, effectively upholding a significant portion of the arbitration award. The judgment included ₹780 crore in compensation and accrued interest, though it excluded ₹181 crore related to pre-award interest and reduced the interest rate on a bank guarantee.
Key Details of the Court Ruling
- The upheld arbitration award totals around ₹780 crore, inclusive of accrued interest.
- A bank guarantee worth ₹600 crore is also to be released to Reliance Infrastructure as part of the judgment.
- The exception made by the court pertains to a ₹181 crore reduction, covering pre-award interest and a decrease in the interest rate on the bank guarantee.
Reliance Infrastructure has stated that it is reviewing the judgment in detail and will decide, based on legal advice, whether to enforce the award as upheld or to challenge portions of the ruling that interfere with the original award.
Market Reaction
As of 9:24 AM, Reliance Infra shares were trading 0.51% higher at ₹324.60 on the NSE. The positive market reaction reflects investor confidence in the company’s favorable outcome from the arbitration dispute.
This ruling is expected to bolster Reliance Infrastructure’s financial position, providing it with a significant cash inflow and potentially resolving a long-standing legal issue.
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