In a major setback, Anil Ambani’s Reliance Infrastructure Ltd has been asked to pay Rs 1,215 crore by a Singapore arbitration court in relation to its dispute with the Shanghai Electric Group Co. Ltd.
The Singapore International Arbitration Centre was hearing the case relating to the construction of the Sasan Ultra-Mega Power Project in Madhya Pradesh.
On 26 June 2008, an 'Equipment Supply and Service Contract' was signed by Shanghai Electric Group Co. Ltd. (SEGCL) and Reliance Infra Projects (UK) Ltd. (Reliance UK), a subsidiary of Reliance Infra Projects Ltd.
According to the contract, SEGCL was supposed to supply equipment, develop the main body of the turbines and generators, and supervise the services to Reliance UK and supply other equipment for the construction of the Sasan Ultra-Mega Power Project.
Reliance UK, according to the terms of the contract, was supposed to pay Rs 9,641 crore to the SEGCL. As per the record, in order to secure performance of obligations on part of Reliance UK, Reliance had issued a guarantee letter in 2008. That letter guaranteed that Reliance UK would comply with its obligations.
By 2019, SEGCL was owed Rs 995 crore under the contract. A notice of dispute in 2019 was issued to Reliance Infra that sought compliance of its obligations as per the guarantee letter.
The notice further called for curing Reliance UK’s breach of obligations by making payments within 60 days of the notice. The notice was not complied with, which compelled SEGCL to invoke arbitration proceedings at the Singapore International Arbitration Centre.
