An arbitral tribunal has awarded Rs 54 crore to Punj Lloyd in a dispute with state-run Oil & Natural Gas Corp. The award will likely help increase the attractiveness of the construction firm for financiers looking to fund litigations over its claims, in the hope of getting a slice of the recoveries.
Two out of three arbitrators consented to Punj Lloyd’s plea, seeking compensation for various expenses incurred in carrying out a pipeline contract at Hazira for ONGC. The panel, on a majority ruling, also accepted ONGC’s counter claims and asked Punj Lloyd to pay Rs 6 crore to the oil and gas company for an unutilised advance payment.
The Atul Punj-led engineering procurement and construction (EPC) company owes more than Rs 12,000 crore to lenders. It had been admitted for insolvency in March, but lenders and the resolution professional have been finding it difficult to attract serious investors as the company has no real assets.
Some investors like Eight Capital that make investments in stressed companies had told ET that it would evaluate the claims of the company against various government enterprises in India and abroad in making an offer for the company. “This award in favour of Punj Lloyd will definitely enhance the prospects of a successful insolvency resolution of the company,” said Waseem Pangarkar, a senior partner at MZM Legal who was the counsel representing Punj Lloyd before the tribunal. Pangarkar said the company had claimed another Rs 1,500 crore from ONGC itself as well as Rs 1,300 crore from Libya’s government-owned Sirte Oil Company.
“In IBC (Insolvency and Bankruptcy Code), litigation funding could be a welcome idea since unlike stressed steel or cement plants and other such industries, EPC companies only have contract value to their advantage. However, this value is lost when the company enters bankruptcy process and there is considerable shortage of funds to pursue the claims. If claims assessment provides a good return, then this may attract investors willing to fund the litigation in return for a share of the recovery which can be folded into the total bid value for the asset based on negotiations held with lenders,” said Pangarkar.