The domestic lenders to Dabhol Power Company are unfazed at the prospect of the dispute with the offshore lenders ending up in arbitration in London.

According to the inter-creditors' agreement, a dispute between the domestic and foreign lenders has to be sorted out through arbitration in London.

Last year, the domestic lenders obtained a stay from the Bombay High Court restraining Dabhol Power as well as the offshore lenders from serving the final termination notice because they apprehended that the  firm would become a part of the bankruptcy proceedings of Enron Corp in the United States.

"The offshore lenders cannot proceed with arbitration unless the stay is vacated by the Bombay High Court," P P Vora, chairman of the Industrial Development Bank of India, said. Senior institutional officials said they would not move the high court to vacate the stay order.

The latest round of sparring between the domestic and foreign lenders comes after the latter authorised Dabhol Power to serve the final termination notice to the Maharashtra State Electricity Board, which will force the state-owned utility to take over the power project and cough up the dues to the lenders.

Foreign lenders benefit in such a move as their exposure of $90 million in the first phase is covered by a counter-guarantee by the Union government.

The domestic lenders enjoy no such cover and are keen on restarting the plant and eventually find a buyer.