Kargil township in the Himalayas. Turner and Sahara were to have built $25bn similar developments over 20 years. (Wikimedia Commons)

Companies

Turner fights legal battle over collapse of $25bn Indian development plan

26 August 2014 | By David Rogers | 0 Comments

Turner Construction, the US contractor owned by Germany's Hochtief, has begun legal action to sever its joint venture partnership with Indian conglomerate the Sahara Group and the New Delhi-based investment firm Acropolis Capital. 

The three companies formed their partnership, Sahara Turner Construction, in 2012 with the intention of developing townships in India over a period of 20 years.

Now Turner has begun an arbitration in the International Chamber of Commerce’s court of arbitration in Paris to dissolve the venture on the grounds of non-performance.

Sahara now has to raise $1.7bn to bail its founder, Subrata Roy, from judicial custody

Turner's legal representative, Robert Peckar, said: “We started the arbitration to terminate the relationship with Sahara and Acropolis on the grounds of the inability of Sahara to execute various township projects, which was the main reason for forming a joint company.”

Meanwhile, Sahara Turner Construction has begun an action in the Mumbai branch of the Company Law Board (CLB) against the Indian subsidiary of Turner Construction, alleging oppression and mismanagement.

In its plea, Sahara Turner Construction alleged mismanagement of funds, fraud and misconduct. 

In an email to Indian business website Live Mint, Peckar said: “We believe Sahara group has moved the CLB to divert our attention from the arbitration.” He denied the allegations made by the Sahara group in its plea at CLB. “The allegations of mismanagement on the part of Turner are all without merit and are untrue,” said Peckar, adding that none of the new townships contemplated by the joint venture had been executed. 

In February 2012, when the venture was announced, a press release from the Sahara group said: “The construction volume of Sahara Prime City will reach $25bn over the next 20 years of which $2.5bn will be completed over the next five years. Sahara Turner Construction Ltd will be the preferred contractor for the execution of this entire volume of work.” 

The Sahara Group is also embroiled in a legal battle with the Securities and Exchange Board of India in the Supreme Court over capital raised in a share issue, which the regulator claims was done illegally.

Sahara now has to raise $1.7bn to bail its founder, Subrata Roy, from judicial custody. Roy was jailed along with two directors for contempt of court, after he failed to attend a court hearing.

Sahara's property development subsidiary, Sahara Prime City, holds a 63% stake in the joint venture.