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US Court says Bechtel can attach
Dabhol shares of Maharashtra Power Corp
Suman Guha Mozumder in New York | June 01, 2005 05:48 IST
Last Updated: June 01, 2005 06:48 IST
Bechtel Corporation said Tuesday one of its affiliates has attached all shares in Dabhol Power Corporation owned by a State government-controlled company following a federal court order by a judge here
Bechtel Corp helped construct the Dabhol power facilities in India.
The San Francisco-based company, which has completed more than 22,000 projects in 140 countries, said following the order by US District Judge Lewis Kaplan in the Southern District of New York, Energy Enterprises (Mauritius), a Bechtel affiliate, attached all shares in DPC owned by the Maharashtra Power Development Corporation Limited, controlled by the Maharashtra government.
Bechtel took the action following failure by MPDC Ltd to meet a May 27 deadline, set by an international arbitration panel last month, to pay Bechtel $123 million for violations of its shareholder rights in the Dabhol power project.
Judge Kaplan signed the order directing the attachment of assets held by MPDC Ltd that holds a 14.6 percent share in DPC.
General Electric, through its affiliate Capital India Power Mauritius, and Bechtel, through its affiliate Energy Enterprises, hold a majority interest in DPC that was forced to shut down in 2001 when the western Indian state of Maharashtra reneged on its legal commitments to purchase power and support completion of the second of two generating units.
The judge's order followed a decision by the International Court of Arbitration in Paris, which ruled that the MPDC and the Government of Maharashtra conspired to block DPC from exercising its contractual rights to arbitrate its claims against the state of Maharashtra and the Indian Government for the exproportion of DPC's investment.
The panel gave Maharashtra until May 27 to pay the awarded damages.
"This non-payment of the award of $123 million is very serious thing given the fact foreign investors depend on contractual rights and their protection under arbitration," Jonathan Marshall of Bechtel, told rediff.com. "If these rights and obligations are ignored they send a very bad signal to the outside world," he said.
In a statement Bechtel executive vice president Tim Statton said that the company was "disappointed that Indian authorities have given us no choice" but to begin proceedings to seize their assets.
"Their refusal to acknowledge valid legal orders also sends a very troubling message to foreign investors whose capital and technology expertise could help modernize India's infrastructure," he said.
"Nonetheless," Statton said, "we stand ready to help start the much-needed Dabhol facility once India upholds our legal rights and abides by its international obligations."
Marshall explained that while Bechtel and GE, between them they, own about 52 percent of the shares in DPC, they do not have any controlling interests. "This is because they do not have control of all the voting shares. Enron still has controlling interest in the voting but in terms of equity GE and Bechtel have over half," he said.