"NTPC has eliminated its previous contract with Ansaldo, a group company of Finmeccanica," sources said.
Finmeccanica is also the parent company of AgustaWestland, which is facing probe after bribery charges were levelled against it in the Rs 3,600-crore helicopter deal with India.
According to sources, the company wants to play safe and does not want to get into any controversy and therefore has decided to annul the contract.
The tender, which was floated under the company's R&M (renovation and modernisation) programme, was terminated after seeking legal opinion.
The bids were invited last year and Ansaldo emerged as the lowest bidder for the contract.
NTPC's Dadri plant is a Rs 960.35-crore gas-based power project that supplies electricity to Uttar Pradesh, Uttrakhand, Rajasthan, Delhi, Punjab, Haryana, Himachal Pradesh, Jammu & Kashmir and Chandigarh. The plant also supplies power to railways.
The company is also operating a 1,820 MW coal-based plant at the same location.
However, whether the company will issue a fresh tender for the same contract could not be ascertained.
Shares of NTPC were trading at Rs 155.35, up 1.77 per cent on the BSE.