India?s largest diversified engineering and construction company Larsen & Toubro (L&T) has filed for arbitration proceedings against cement maker Zuari Cement, a fully-owned subsidiary of Italian cement major Italcementi Group, to claim R188.53 crore in unpaid bills and payment delays, two people with direct knowledge of the development said.
?They haven?t paid us for the R269.74 crore civil construction work to build a cement plant in Yeraguntala, Andhra Pradesh, and we have started arbitration proceedings against them,? K Jagannathan, legal head at L&T?s engineering and construction division, said. ?They encashed our R15.80 crore performance guarantees in spite of their dues to us.?
?I cannot comment,? Zuari Cement managing director Maurizio Caneppele said.
A three-member arbitration panel will hear the case, presided by BP Singh, a former Supreme Court judge, with Arvind V Savant, retired chief justice of Kerala High Court appearing for L&T and JK Mehra, a retired high court judge representing Zuari. L&T ECC is represented by Mumbai-based Hiroo Advani & Co and Italicementi by Amarchand & Mangaldas & Suresh A Shroff & Co.
?The arbitration may continue for a year for the final verdict,? a second person with direct knowledge of the development said.
L&T?s engineering and construction division, which contributes more than three fourth of the revenues of parent L&T, took Zuari Cement to court after the cement maker failed to repay R31.53 crore outstanding dues to build a 5,500 tonne a day cement plant. The rest of the claim is for penalty payment for delays and encashing the performance guarantee.
L&T gave an advance guarantee after they received the initial payment to build the cement plant and was later converted into performance guarantee to assure work completion on time. ?The R15.89 crore advance guarantee was later converted into performance guarantee for completing the civil works, steel and mechanical fabrication of the plant,? Jagannathan said.
?Companies choose arbitration when there is a dispute and there is an arbitration clause in the contract executed,? said Vikram Nankani, senior partner, Economic Law Practice, a legal firm.
Italcementi, the world?s fifth largest cement maker, made their entry into the 323 million tonne Indian cement market in 2001 by purchasing a 50% stake in Zuari Cement owned by Zuari Industries. Later, it purchased the remaining 50% to make it a fully owned subsidiary of the group with a 6 million tonne capacity primarily focused on southern India.