The process to restart the 2184-MW Dabhol power plant has received a jolt with promoters, GE and Bechtel, slapping an arbitration notice on Maharashtra State Electricity Board for recovery of Rs 26,000 crore (Rs 260 billion) towards investments and lost profits in the venture.

Sources in the promoter companies said in Mumbai on Thursday that the notice was served in May 2004. Under the Indian law, the Dabhol promoters have to go for arbitration within three years of the dispute, they said.

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"As per legal provisions, MSEB has 90 days to respond to our notice sent in May and after getting the response, we would be required to file proceedings with the London Court for arbitration," they added.

Earlier, GE and Bechtel, who currently hold about 85 per cent stake in DPC, had served arbitration notices on the Maharashtra government and the Centre as they had provided guarantees and counter-guarantees respectively for the $3 billion power project, situated in the Konkan region of Maharashtra.

MSEB sources said the arbitration notice amounted to contempt of court.

"We have sent a reply to GE and Bechtel stating that their demand for arbitration proceedings amounts to contempt of court since the Delhi and Bombay high courts had stayed arbitration proceedings," Maharashtra Power Minister Dilip Walse-Patil said.

The latest notice is similar to the one, which was served on the Centre and the Maharashtra government about 18 months ago and both the governments had got a stay on operation of these notices for arbitration proceedings.

Earlier in May 2004, the Delhi high court had confirmed its interim order of June 18, 2003, restraining DPC from going ahead with the arbitration proceedings initiated at London to invoke the Centre's counter-guarantee in the power purchase agreement signed by the multinational with the Maharashtra government.

The $3 billion project, initially promoted by the now bankrupt Enron group, has been lying defunct since mid-2001 following financial disputes with MSEB.