Institutional sources said foreign lenders were not willing to compromise on the pricing of part of their exposure which was covered by the government guarantee.

"They do not want any discounted sale of the government guaranteed loan. If the arbitration panel takes a firm stand on the government guarantee, it will give a handle to the foreign lenders," said sources.

At the meeting between domestic and foreign lenders last week in Mumbai, domestic lenders raised the offer to about 60 cent per dollar of foreign lenders' exposure. However, foreign lenders did not accept the offer.

Besides, they wanted full payment for the government-guaranteed portion of their loan of about $110 million and interest on their total exposure. Indian lenders are willing to settle only around 60 per cent of the principal amount.

Sources said if the London arbitration tribunal order does not go in favour of the foreign lenders, then the issue can be settled in July.

As part of the settlement, foreign lenders will drop all legal proceedings running in various courts across the globe against the Indian lenders. This will pave the path for the asset sale by the lenders under the Securitisation Act.

Once the assets are sold to the highest bidder, secured creditors (the lenders) will get the first preference to settle their dues and only after that the equity holders will get their dues.

The list of foreign banks which have exposure to DPC includes ABN Amro, Citi, Bank of Novascotia, Toranto-Dominion, Credit Lyonnaise, Bayerjshe Landes, Erste bank, CSFB, Sakura, Sumitomo, Development Bank of Singapore for the first phase of the project.

The lenders to the second phase are ANZ, Bank Am, Citi, CSFB, Credit Lyonnaise, StanChart, BNP, Deutsche, Erst Bank, KBC Bank and Development Bank of Singapore.