Lanco Infratech will pay AUD 7.5 million to settle the protracted AUD 3.5 billion-legal battle with Australia's Perdaman Chemicals over coal supply issues.
The company has agreed to pay the amount without admission of any allegations raised by Perdaman related to fuel supply from Griffin Coal, which was acquired by the group for about AUD 730 million in March 2011.
Perdaman had filed the lawsuit against Lanco in Australia, alleging non-compliance with fuel supply pact by Griffin Coal for its upcoming urea plant in Western Australia.
"The protracted litigation for a claim of AUD 3.5 billion initiated by Perdaman Chemicals against Griffin Coal, Lanco group and its officers, in the Supreme Court of Western Australia is now at an end," Lanco said in a statement.
The company has agreed to "pay Perdaman a nominal amount of AUD 7.5 million (about Rs 42 crore at current exchange rate) plus legal costs to be taxed by the Court, without admission of any of the allegations of Perdaman".
"The (settlement) is a big relief. It is a fantastic outcome for Lanco and will have a positive impact on the entire group... Perdaman had no choice but to accept nominal offer in the settlement proposed by Lanco, which is in fact a small fraction of the original claim," Lanco's CEO (Business Development) Nagaprasad Kandimalla said.
The settlement was reached on April 26 pursuant to the rules of Supreme Court of Western Australia, which allows for early and cost effective resolution of such claims. In a separate statement, Perdaman said settlement of the case is scheduled to be completed by May 24.
Kandimalla said the legal costs related to the settlement would be AUD 3-3.5 million to be paid over a period of 9 to 12 months.
According to Lanco, if allowed to continue, this case would have taken another 12 to 14 months for the trial and judgement, resulting in significant legal costs and loss of management time.
Lanco would reinforce its focus on its business and mining operations in Western Australia, including the proposed expansion of the Collie mine and the enhancement of the export facilities at the Bunbury port, the statement said.
Law firm Clifford Chance acted as lawyers for Lanco.
Currently, Griffin Coal has a production capacity of about four million tonnes per annum. Meanwhile, Perdaman said it was continuing with its urea project and was in advanced discussions with an alternative coal supplier.