SC asks Damodar Valley to return Rs 354-cr bank guarantees to RInfra

In a relief to Reliance Infrastructure, the Supreme Court on Thursday asked Damodar Valley Corp (DVC) to return bank guarantees (BGs) worth Rs 354 crore to the firm, which is seeking enforcement of the Rs1,500-crore arbitration award (including interest) that it won against the government undertaking in December 2019.

supreme court
Posting the matter for further hearing in the third week of January, the apex court refused to restrain the HC from hearing the case.

In a relief to Reliance Infrastructure, the Supreme Court on Thursday asked Damodar Valley Corp (DVC) to return bank guarantees (BGs) worth Rs 354 crore to the firm, which is seeking enforcement of the Rs1,500-crore arbitration award (including interest) that it won against the government undertaking in December 2019.

Both Reliance Infrastructure and DVC have filed cross-appeals against the Calcutta High Court order. While DVC has challenged the single judge’s (SJ) November 18 order directing that RInfra is under no obligation to furnish any fresh BGs to the PSU or to keep any of the BGs alive or renewed, RInfra has challenged the division bench’s November 22 order that “illegally and wrongfully entertained the DVC’s appeal and granted a stay” of the SJ’s order.

A bench headed by Justice L Nageswara Rao said that the inconvenient situation that DVC finds itself is of its own doing as the PSU first challenged the arbitration award, and then challenged the enforceability of the award when the challenge against the validity of the award was still pending before the HC. Posting the matter for further hearing in the third week of January, the apex court refused to restrain the HC from hearing the case.

Solicitor-general Tushar Mehta, appearing for DVC, said that the single judge had exceeded his jurisdiction by passing an order that in effect amounted to execution of the award. The SJ “did not deal with the issue of securing the awarded amount and went ahead and gave orders for return of BGs, thereby executing the award without having jurisdiction”.

According to DVC, the SJ had failed to appreciate that RInfra had left the site without completing the work under the contract and even some work carried out were defective. The SJ failed to appreciate that BGs are its securities and the defect liability period had also not yet been commenced to run, and, in any event, was not over, DVC stated in its appeal.

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