Australia-based Leighton Holdings has lost its $5.5bn mine development and coal mining contract with India's electricity producer NTPC.
A mining subsidiary of Leighton, Thiess Minecs, had secured the contract in December 2010 to develop the Pakri Barwadih coal project, which was expected to produce 300 million tonnes of coal over a 22 year period.
According to Leighton, the contract is currently worth about A$267m ($250m) to Thiess over the next five years.
NTPC has attempted to develop its own mines and increase imports to meet demands; however, protests in the eastern state of Jharkhand delayed the opening of the Pakri Barwadih site.
The electricity producer has also called in A$18.5m ($17.3m) of bank guarantees relating to the project.
Leighton said in a statement that it is Thiess Minecs' position that the action taken by NTPC is in breach of the contract and without foundation.
"Thiess will initiate legal proceedings to recover the monies called and in respect of the notice of termination issued by NTPC," the company said.
Separately, the company announced that Thiess Minecs CEO Raman Srikanth was arrested after Hyderabad-based Roshni Developers filed a complaint that was the subject of ongoing civil arbitration proceedings in Singapore.
"Thiess Minecs has advised the complaint is unfounded and urgent applications are being made to the courts in Hyderabad to dismiss it," Leighton said.