The filing of bankruptcy by Enron Corporation in the US has raised questions on who will fund the ongoing legal battles of its Indian subsidiary Dabhol Power Company (DPC).
At present, the company is involved in about 8 to 10 court cases and, so far, they had all been bankrolled by Enron, which holds a 65 per cent stake in the company.
Sources said with Enron officially declaring bankruptcy, it will no more be in a position to fund the legal battles.
More From This Section
Power industry sources, however, suggested that the global lenders to DPC may step in and fund the ongoing cases. "This will be opposed, tooth and nail, by the domestic financial institutions as they would be happy to see the collapse of these cases, especially as some of the battles involve them," sources added.
A DPC spokesman declined to comment on the issue. The company is, at present, locked in a legal tangle with the Maharashtra government for not honouring its guarantee. It is involved in yet another battle with the Union government for the latter not honouring the counter guarantee.
The Maharashtra State Electricity Board (MSEB) and DPC too have locked horns on the jurisdiction for resolving various payments disputes between them.
MSEB is keen on the state power regulator Maharashtra Electricity Regulatory Commission adjudicating on the issue. DPC, on the other hand, is pressing for the case being adjudicated at the London Court of Arbitration. The jurisdiction issue is now before the Mumbai High Court.
Apart from this, there is ongoing fight with the Indian financial institutions over serving of the final termination notice. While DPC is keen on serving it, the financial institutions are totally opposed to this. The company is also involved in a wrangle with the customs department.
Even Maharashtra government officials conceded that if the issue goes into arbitration at London, Enron is on a strong wicket and could end up collecting damages to the tune of about $3 billion at least. In such an eventuality, the foreign lenders will gain as their liabilities are covered by the counter guarantee, while the domestic lenders will not. This is the reason that the domestic lenders will be quite happy to see the collapse of these cases, while the foreign lenders will not be.