May 12, 2014 / 4:11 AM / 3 years ago

UPDATE 2-Australia's Leighton says CEO of Indian mining unit arrested

3 Min Read

(Adds NTPC comment, updates shares)

SYDNEY, May 12 (Reuters) - Leighton Holdings, Australia's biggest builder, said the head of its Indian mining subsidiary had been arrested and warned it may lose a contract to develop and operate a coal mine.

Leighton, controlled by Spain's ACS, said Thiess Minecs Chief Executive Raman Srikanth had been arrested in Hyderabad in the southern Indian state of Andhra Pradesh, in relation to an ongoing civil proceeding filed by an Indian company in Singapore.

Leighton said it was filing an application to courts in India to dismiss the case.

The company's statement did not provide further details of any charges against Srikanth. A Leighton official in Sydney contacted by telephone declined to comment further on the arrest. Srikanth was not available to comment.

The problems in India come as Leighton has been emerging from a rough patch due to hefty losses on two big projects, a downturn in new mine construction and an investigation into potential corruption relating to Iraq contracts, after the company voluntarily reported a possible ethics breach in 2011.

Leighton said in a separate statement that the biggest client at the Pakri Barwadih coal mine operated by Thiess Minecs is attempting to scrap a five-year contract worth $267 million.

India's largest power generator NTPC Ltd, said it had decided to terminate the contract on May 7 after Thiess Minecs failed to make any progress in developing the mine, despite the development period being extended twice.

"NTPC had no option but to terminate the contract," NTPC said in an emailed statement on Monday, adding that it had given the company 45 days notice.

Leighton said NTPC is in breach of its contract by seeking to terminate it, adding that the case will not have any "material impact" on Leighton's financial results.

Indian newspaper Mint reported in January that NTPC said coal was being illegally extracted from its Pakri Barwadih block and sold by outsiders, adding that NTPC had requested the district commissioner of the area where the block is located to take action to stop it.

Leighton said NTPC has already called A$18.5 million ($17.3 million) worth of bank guarantees issued by Thiess Minecs and added that it will initiate legal proceedings to recover the bank guarantees, as well as against the termination notice.

Shares in Leighton closed down 1.25 percent on Monday in a weak Australian market.

Separately on Monday, German builder Hochtief, majority-owned by ACS, said it had raised its stake in Leighton to nearly 70 percent, tightening its grip on the company and paving the way for its restructuring.

$1 = 1.0697 Australian Dollars Reporting by Swati Pandey; additional reporting by Tommy Wilkes in New Delhi; Editing by Paul Tait and Louise Heavens

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