GMR Infrastructure (GIL) announced that an arbitration award has been passed in a matter of claims between GMR Kamalanga Energy (GKEL), a step down subsidiary of the company and its project EPC contractor, SEPCO Electric Power Construction Corporation (SEPCO). While SEPCO had claims on GKEL for project payments, prolongation costs etc., GKEL had made claims on SEPCO towards delays in project execution and towards defect liabilities. In this regard, GKEL had in the year 2014 encashed Bank Guarantees of about Rs 580 crore furnished by SEPCO which amount was utilised towards repayment of GKEL terms loans and consequential reduction of interest burden on the project.
Considering and accepting mutual claims of both GKEL and SEPCO, the arbitration tribunal has confirmed a net claim of Rs1005 crores payable by GKEL to SEPCO. It may be noted that there is an existing provision of Rs 1092 crore appx. in GKEL books towards any such liability, which covers the entire amount of this award and such liability, if any, is non-recourse to GIL and will have no impact on GILs profitability.
GKEL is studying the detailed arbitration award and is assessing the legal options as it can challenge the award within 90 days in courts in India.
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