The company said it has to receive money from government bodies under arbitration awards, which are deemed to be dues under the Arbitration Act.
The Supreme Court has asked the Centre and NHAI as to why they should not be asked to pay arbitration award dues of Rs 6,070 crore to Ajit Gulabchand-led Hindustan Construction Company (HCC), which is facing insolvency proceedings before the National Company Law Tribunal.
A bench led by Justice RF Nariman last week issued notice to ministries of finance, road transport and highways and law & justice and company affairs and also NHAI, NHPC, Ircon International, NTPC and National Institution for Transforming India in this matter.
The construction company stated in the court that it has 63 unpaid arbitration awards aggregating to Rs 6,070 crore against various PSUs and government bodies as on March 31 which are under challenge but not stayed by any court/tribunal so far. “In turn, the total loans taken by HCC from banks and FIs apart from bank guarantees (BGs) issues by various banks is around Rs 3,948 crore,” its appeal seeking stay of the insolvency proceeding said.
The company added that it owes operational creditors only around Rs 1,808 crore towards supply of manpower, machinery and materials for its projects. In its order, the apex court noted that senior counsel AM Singhvi, appearing for HCC, stated that his client will pay operational creditors around Rs 35 crore within eight weeks.
“…to get stay, you pay these people… your networth is more than what you have to pay. Since you are a solvent company, you pay them. We will help you in getting some money from the government,” Justice Nariman said, refusing to stay the proceedings before NCLT, Mumbai. However, it allowed the company to apprise the NCLT of the SC order.
Challenging the Insolvency and Bankruptcy Code as being violative of fundamental rights, HCC alleged that the 2016 law creates a non-level playing field and an artificial financial stress due to non-payment of determined legitimate and genuine dues against the government bodies and PSUs, which cannot be proceeded against under the Code in respect of arbitration awards.
According to HCC, the “regime of incongruent rights has resulted in an extraordinary situation necessitating remedial measures to be ordered by the SC as to equalise the rights of parties”.
The company said it has to receive money from government bodies under arbitration awards, which are deemed to be dues under the Arbitration Act. However, the actual receipts of such amounts are locked in litigation for years together due to mechanical and casual challenged in one or the other court by way of abusing the process of law, it added.
While HCC is facing the “daily threat” of initiation of insolvency proceedings as already few operational creditors like Haripa Industries, AGL Infra and others are seeking recovery of their dues, the government, instead of paying the award money, has moved the high court seeking refund of money and for recall of the release orders, the appeal stated.
HCC said it not only faces the threat of encashment of its performance guarantees, levy of liquidated damages, termination of its contracts, but also apprehends blacklisting by the government agencies, who themselves have been responsible for its financial mess, the appeal added.