Sepco Electric Power Construction Corporation moves Odisha HC to restrain GMR's unit

MUMBAI: Chinese firm Sepco Electric Power Construction Corporation has moved the Orissa High Court to restrain a subsidiary of Bengaluru-based GMR Group from invoking a bank guarantee of about Rs 640 crore.

Sepco has said that the Indian infrastructure company has arbitrarily invoked the bank guarantee under "liquidated damages" for the delay in construction of a power plant in Odisha, claiming that GMR is not entitled to do so under the contract.

The Chinese firm has also blamed GMR for delay in the project, for which GMR engaged Sepco to construct a 1,050-Mw coal-based power plant in Kamalanagar in Dhenkanal district at a cost of Rs 3,000 crore.

According to Sepco's petition, GMR Kamalangar Energy had contracted it to construct three power plants of 350 Mw each. The company has claimed that due to delay on the part of GMR, the project that was supposed to start in 2008 got delayed by a year. When Sepco raised the invoice after completing the construction and required testing of the power plants, and asked GMR to pay the dues according to the agreements, GMR issued an invoice for liquidated damages for alleged delay in achieving milestones for all three units, the petition says.

The clause pertaining to liquidated damages in a contract between two parties empowers the affected party to collect compensation upon a specific breach that includes late performance of a deed.

A GMR spokesperson said in response to an email query from ET, "Since the matter is sub judice, we do not wish to comment on this issue." Kapil Arora, partner at Bharucha & Partners, confirmed the filing of an appeal in the Orissa High Court on behalf of Sepco, but he too refused to comment on the issue since the matter is sub judice.