Afcons Infrastructure has encountered a major setback in its ongoing dispute related to a Rs 1,200 crore work order. The company has informed the stock exchanges that, following the invocation of the bonds, the client has now issued a notice of termination for the order.
This contract termination puts the Shapoorji Pallonji group company in a tight spot, as it claims that about 93 per cent of the project’s work has been completed.
What is the conflict?
In September 2020, Afcons Infra bagged a 113.03 million euros (about Rs 1,210 crore) work order from the French company SOCIÉTÉ AUTOROUTIERE DU GABON (SAG) for the construction of a 117 km road in the Central African country Republic of Gabon.
On January 31, Afcons Infra disclosed in an exchange filing that SAG had invoked bonds. Simply put, SAG demanded the guarantee money of 17.8 million euros (about Rs 191 crore) from Lombard, the guarantor on behalf of Afcons. The French company demanded the guarantee money on claims of incompletion of the work order.
“Differences have arisen between the Company and SAG with respect to certification of certain balance works and release of corresponding payments,” Afcons said in a January 31 filing.
Afcons Infra claims 93% project completion
Afcons Infra claims to have completed about 93 per cent of the work on the 117 km-long national road, which was opened to traffic about two years ago. Further, the company said that a certain portion of the remaining ~7 per cent of the work is incomplete as it is awaiting land handover.
In today’s latest development, SAG has issued a notice of termination for the project. It is still not clear how much of the contract amount has been paid to Afcons to date.
What next for Afcons?
Afcons Infra stated that bond invocation and contract termination by SAG are inconsistent with the contractual terms spirit of the contract, and applicable law.
In January, upon SAG’s invocation of bonds, Afcons initiated arbitration proceedings under the rules of the International Chamber of Commerce (ICC) for delays and additional costs incurred during execution.
Afocns said in the exchange filing that it is pursuing contractual and legal remedies in the matter.