Chinese power equipment manufacturer Shanghai Shandong Nuclear Power Construction (SSNP) has filed a case against multi-national mining giant Vedanta Aluminium for allegedly causing losses due to work stoppage at the latter's controversial alumina refinery in Lanjigarh in India's eastern state of Odisha, sources said Friday.
SSNP has pleaded for arbitration to recover its dues against Vedanta saying the firm has incurred "tremendous losses".
The dispute can be traced back to Vedanta's controversial plan to expand its alumina capacities in Lanjigarh with bauxite mined from the nearby Niyamgiri hills. The Indian environment ministry put a stop to the plans by denying clearance, thus depriving the alumina plant of a crucial raw material and forcing it to shut down.
According to the petition, the order for a power plant by Vedanta Aluminium was placed in 2008 for setting up co-generation units on a turn-key basis for the Lanjigarh project.
Shandong was contracted for five jobs to build a 210 MW co- generation power plant project that included offshore engineering and technical services, an offshore supply contract and onshore supply contract and onshore services and construction contract.
"As per the EPC (Engineering, Procurement and Construction) contracts, it was the obligation of Vedanta Aluminium to obtain clearance from the Ministry of Environment & Forests (MoEF)," Mahesh Londhe of Sanjay Udeshi & Company, the law firm representing SSNP said.
Vedanta directed Shandong to suspend all "construction activities" at the site after the ministry order. The long duration of suspension, the petition said, has caused "tremendous loss" to Shandong.
The Chinese company has cited a clause in the contract which empowers it to terminate the contract if the suspension of the agreement continues for over 180 days and at the end of it, after a thirty-day prior notice, Vedanta will pay 105 percent of the cost incurred by the contractor till the date of termination as compensation.
"As per the obligations under EPC contracts, Shandong was promised that at no point, the Chinese equipment maker would suffer any loss," said Londhe.
Accordingly, the project was "79.4 percent complete" with the" design procurement being nearly 100 percent complete" and the " construction activities being 65.2 percent complete," says Londhe.
The fallout between the two is surprising as the two companies had shared a warm and cordial relationship. The Chinese company had helped Vedanta build one of the most cost-efficient business operations in India and enabled it to emerge as one of the top low- cost producers of aluminium and copper in the world.