Reliance Infrastructure has won an arbitration award of ₹1,250 crore against Damodar Valley Corporation (DVC), a Government of India undertaking.

The three member tribunal directed DVC to pay ₹896 crore and return the bank guarantees of ₹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.

DVC is an Indian government organization established in 1948 and is India’s first multipurpose river valley project, operating in West Bengal and Jharkhand.

Reliance Infrastructure was the Engineering & Construction contractor for Damodar Valley Corporation's 2 x 600 MW Raghunathpur thermal power project in West Bengal commissioned in 2012.

After emerging as the lowest bidder, Reliance Infrastructure was issued Letter of Acceptance on December 11, 2007 and unit 1 and unit 2 were to be commissioned in 35 and 38 months respectively. During execution, Reliance Infrastructure faced various impediments such as non-availability of land, hindrances at project site on account of local agitations, non-availability of inputs from DVC such as water and coal. Unit 1 was commissioned on May 15, 2015 and Unit 2 was commissioned on February, 23, 2016.

Reliance Infra raised several claims on DVC in respect of delay and hindrances faced by it in execution of the project. However, DVC sought to levy liquidated damages upon the company for failure to adhere to the contractual schedule. This resulted in an arbitration.

Pursuant to the recent Niti Aayog circular, Reliance Infrastructure will ask 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 debt of the company, Reliance Infrastructure said in the filing.

This award by the Arbitration Tribunal is validation of the rightful position of the company. It is critical for Indian 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,” a spokesperson said.