New arbitration norms to bring relief for construction cos, bks

The Cabinet on Wednesday tweaked arbitration norms for construction companies to get stalled projects moving and to inject liquidity into the sector. Under the new norms, the government will release 75 percent of amount against margin free guarantee in cases where arbitral awards have been given, but have been contested.The new norms will push stalled projects for companies as well as reduce stressed assets for banks, says RS Ramasubramaniam, Co-Chairman of Feedback Infra. Companies are likely to use 75 percent amount to pare existing debts. “This money will help us pay back the banks,” says Ajit Gulabchand, CMD of HCC. The company is expected to get Rs 2,400 crore for an arbitration amount of Rs 3,000 crore.HCC will also get another Rs 3,200 crore for Rs 4,500 crore stuck under arbitration in next 12-15 months. However, Ramasubramaniam says the real issue is whether the current projects under arbitration will be included in the new law. If that happens, then relief for companies and banks will be immense. Watch video for more..