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Stung by Bechtel Corporation's move to attach its 14.6 per cent stake in Dabhol Power Company, Maharashtra Power Development Corporation has secured a stay order from the Bombay High Court.
MPDL, a subsidiary of the Maharashtra State Electricity Board, secured the stay on Monday, two days after a US court ordered the attachment of its stake after the company failed to meet a deadline set by an international arbitration panel last month to pay Bechtel $123 million for violation of its shareholder rights in the Dabhol power project.
MPDL will also file a fresh affidavit before the court in an ongoing contempt petition against Bechtel for repeatedly violating an earlier stay on international arbitration.
Though MSEB Chairman Jayant Kawle declined to comment, a state government official said: "The order of attachment is illegal and null and void. We have never accepted the jurisdiction of the international arbitration proceedings launched by Bechtel as a Division Bench of the Bombay High Court had already issued an injunction against any such move."
The official said for any such award to be given effect in India, an execution petition would have to be moved before an Indian judicial body. "No Indian judicial body will allow the execution of such an award in the wake of the stay by the Bombay High Court," the official added.
Bechtel Executive Vice-President and Director Tim Statton, however, said the company was ready to support the restarting of the 2,184 Mw Dabhol power project, now defunct for five years.
This is provided India upholds Bechtel's legal rights and abides by its international obligations. Together with General Electric, Bechtel has an 85 per cent stake in Dabhol Power Company.
Sources in the central government also said since MPDL was an Indian company, the Companies Act would be applicable here. "US courts do not have the jurisdiction to pass orders on an Indian company," said a government official.
However, the sources admitted that MPDL was on weak legal ground, as under the agreement with Enron, the erstwhile owner of Dabhol Power Company, MPDL was liable in case of default.
US District Judge Lewis Kaplan's order followed a decision handed down on April 27 by the International Court of Arbitration in Paris, which ruled that MPDL and the state government conspired to block Dabhol Power Company from exercising its contractual rights to arbitrate its claims against the state and central governments for the expropriation of its investment.
The arbitration panel gave Maharashtra until May 27 to pay the awarded damages.
The latest development of Bechtel attaching MPDL's stake comes just days after GE Chairman and CEO Jeffrey Immelt's statement that the US giant would give full support to restarting Dabhol.
A team comprising GE, National Thermal Power Corporation and Bharat Heavy Electricals Ltd executives will determine the course of action for restarting and completing the project.
Indian lenders unfazed
Indian lenders to Dabhol Power Company today said Bechtel's action against the Maharashtra government would not have any impact on ongoing efforts to restart the project.
A bank executive said lenders had nothing to do with Bechtel's action.
"The issue is between the two sponsors of Dabhol Power Company," the executive said.
Attempts to buy out the exposure of all the 19 lenders to Dabhol Power Company for $230 million hit a roadblock with ABN Amro and ANZ refusing to sign the deal. They have demanded an additional $25 million.