Bharat Heavy Electricals Limited (BHEL) has officially invoked arbitration proceedings against M/s. Fitwell Constructions for the recovery of contractual dues amounting to ₹283.73 crore. The company disclosed this information to the BSE and NSE in compliance with Regulation 30(4) of SEBI (LODR) Regulations, 2015, as the case meets the criteria of materiality.

The arbitration notice was detailed in a communication issued by Sayed Salahuddin, Deputy Manager, Corporate Communication, BHEL, under reference number CC/MISC/2024-25/66, dated March 7, 2025. The official filing included an Annexure I, outlining the specifics of the arbitration case.

Details of the Arbitration Case

According to the disclosure:

• Claimant: BHEL
• Respondent: M/s. Fitwell Constructions
• Nature of the Dispute: Recovery of contractual dues
• BHEL's Claim Amount: ₹283,73,37,515 (₹283.73 crore)
• Fitwell Constructions Counterclaim: Not yet filed (if any)

BHEL has initiated arbitration to recover outstanding payments from Fitwell Constructions. The details regarding the specific contract and nature of the dues have not been disclosed at this stage. However, as per standard arbitration processes, Fitwell Constructions may file a counterclaim, which is currently pending or yet to be submitted.

Regulatory Compliance and Market Disclosure

This arbitration case qualifies as material litigation under SEBI’s Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015. Regulation 30(4) mandates listed companies to disclose significant disputes, legal proceedings, or events that may impact the company's financial position.

By formally notifying the BSE (Bombay Stock Exchange) and NSE (National Stock Exchange), BHEL has ensured compliance with corporate governance norms, offering transparency to investors and stakeholders. The disclosure also provides insights into the company’s legal risks and potential financial implications.

Potential Financial and Legal Implications

BHEL’s claim of ₹283.73 crore is a substantial amount, and its resolution could impact the company’s financials depending on the outcome of the arbitration. If the tribunal rules in favor of BHEL, the company could recover the dues, positively impacting cash flows. However, if Fitwell Constructions files a counterclaim, it could lead to a prolonged legal battle, potentially affecting both parties.

In past arbitration cases involving large infrastructure and construction contracts, delays in resolution have been common, often requiring intervention from higher judicial authorities like the High Court or Supreme Court of India. Given the scale of the dispute, this case might take several months or years to reach a conclusive judgment.

Industry Context and Similar Cases

The infrastructure and construction industry often witnesses disputes over contractual payments, particularly in large-scale government and PSU contracts. Arbitration has become a preferred mechanism to resolve these issues outside traditional litigation due to its speed and efficiency.

Other PSUs like NTPC, ONGC, and Indian Railways have previously engaged in high-value arbitration against contractors over disputes related to delays, cost escalations, and non-compliance with contractual obligations. The Arbitration and Conciliation Act, 1996, governs such disputes in India, promoting an alternative dispute resolution framework.

What’s Next?

• Fitwell Constructions' Counterclaim: The company may submit its response or counterclaim, if any, outlining its defense.
• Arbitration Proceedings: The case will now proceed through arbitration as per contractual agreements, and a tribunal will hear both sides before issuing a ruling.
• Financial Disclosure Impact: BHEL might have to provision for expected recoveries in future financial statements depending on how the case progresses.

Conclusion

BHEL’s arbitration case against Fitwell Constructions for the recovery of ₹283.73 crore highlights the ongoing challenges in contractual settlements in the infrastructure and manufacturing sector. The case's outcome will be closely monitored by investors, as it could influence BHEL’s financials and operational cash flows. Meanwhile, Fitwell Constructions' next move—whether to contest the claim or seek an amicable resolution—remains to be seen.