In a significant legal development, the Supreme Court of India has ruled that a foreign arbitral award against SEPC Limited (formerly known as Shriram EPC Limited) is enforceable in India. However, the company has stated that this ruling will not have any financial impact due to existing indemnification arrangements.

Supreme Court's Decision

The Supreme Court's order disposed of a Special Leave Petition (SLP) arising from a judgment by the Madras High Court. The High Court had previously held that the foreign arbitral award in favor of the petitioners was enforceable in India, subject to obtaining Reserve Bank of India (RBI) approval if required by law.

RBI's Stance on Foreign Award Payments

Importantly, the RBI clarified its position on the matter. According to the apex bank, the payment of compensatory damages as awarded by the Arbitral Tribunal is considered a current account transaction. As such, it is enabled under Section 5 of the Foreign Exchange Management Act (FEMA) read with Foreign Exchange Management (Current Account Transaction) Rules, 2000. The RBI stated that such payments from resident respondents to non-resident petitioners do not require any specific approval or permission from the central bank under FEMA.

No Financial Impact on SEPC

SEPC Limited, in its disclosure to the stock exchanges, has assured investors that the Supreme Court's ruling will not have any financial implications for the company. This is due to an indemnification agreement dated September 29, 2015, with Twarit Consultancy Services Private Limited and Shri Housing Private Limited, which fully indemnifies SEPC against any matters arising from the Arbitral Award.

Background of the Case

The case stems from a dispute under three share purchase agreements and a letter agreement dated September 28, 2015. The respondents (including SEPC) were to purchase securities held by the petitioners in Haldia Coke and Chemicals Private Limited. The dispute arose when the respondents failed to furnish the purchase consideration as per the agreements.

Arbitral Award Details

The international commercial arbitration, held at the Singapore International Arbitration Centre, resulted in an award. The Arbitral Tribunal awarded aggregate damages of ₹195.00 crore with interest to the petitioners for breach of the share purchase agreements by the respondents.

Implications and Next Steps

With the Supreme Court's ruling, the execution proceedings for the foreign arbitral award are now set to proceed expeditiously. This development brings clarity to the enforceability of foreign arbitral awards in India, particularly in cases involving complex financial transactions and indemnification agreements.

For SEPC Limited, while the legal battle has concluded, the company's financial position remains unaffected due to its foresight in securing indemnification. This case underscores the importance of robust legal and financial planning for companies engaged in international business transactions.

Investors and market watchers will likely keep a close eye on how this ruling might influence future international arbitration cases and their enforcement in India, especially in the context of cross-border financial dealings.

SEPC Limited (NSE: SEPC | BSE: 532945), a leading Engineering, Procurement, and Construction (EPC) company, has reported a remarkable financial performance for the first quarter, along with several significant contract wins that underscore its strong market position.

Financial Highlights

SEPC Limited announced a substantial increase in its Q1 financial results:

The company's net profit surged by 104.80% to ₹16.50 crore, compared to ₹8.10 crore in the same quarter of the previous fiscal year. Total income grew by 14.40% to ₹203.80 crore, while EBITDA increased by 11.90% to ₹29.80 crore.

Strategic Fundraising

SEPC Limited successfully raised ₹350 crore through a rights issue, offering 3.5 crore partly paid-up shares at ₹10 each. This strategic move is expected to enhance the company's financial flexibility and support its growth initiatives.

Major Contract Wins

The company has secured several significant contracts across various sectors:

1. Power Plant Operations & Maintenance: A ₹18 crore contract for operation and maintenance services of 2 x 45 MW power plants in Uttar Pradesh, awarded by Bajaj Energy Private Limited.

2. International Infrastructure Project: Through its UAE subsidiary SEPC FZE, the company won a USD 8.9 million (approximately ₹75.60 crore) contract for the construction, supply, and installation of four 45,000-litre steel tanks in Fujairah, UAE.

3. Solar EPC Project: A substantial ₹650 crore contract for the EPC of a 133 MW AC solar power project across 26 locations in four districts of Maharashtra, awarded by Parmeshi Urja Limited.

Management Commentary

Mr. Abdulla Mohammad Ibrahim Hassan Abdulla, Chairman and Non-Executive Director of SEPC Limited, commented on the company's performance: "The quarter marked a period of steady progress with meaningful steps taken to strengthen our position in core and emerging sectors. The successful rights issue has enhanced our financial flexibility, enabling us to pursue growth opportunities with greater confidence."

He further added, "Recent contract wins in power plant operations, international infrastructure, and large-scale solar EPC highlight the breadth of our capabilities and our ability to deliver diverse, high-value projects. These developments reinforce client trust in our execution strength across geographies."

Future Outlook

Looking ahead, SEPC Limited's priorities remain focused on disciplined project execution, expansion into high-potential sectors, and leveraging technical expertise to capture new opportunities. With a healthy order pipeline and supportive industry trends, the company is well-positioned to drive sustainable business growth in the coming quarters.

SEPC Limited continues to play a key role in India's infrastructure development, offering turnkey solutions across Water & Wastewater, Roads, Industrial Infrastructure, and Mining sectors. The company's diverse project portfolio and strong financial performance underscore its significant contribution to the nation's infrastructure landscape.