Jarvis, the heavily indebted support services company, received more bad news this week after it was ordered by the Technology and Construction Court to pay £800,000 to an Indian rail engineer

According to Jarvis, the dispute centred on tax payments related to Indian workers at a site in Doncaster, who had been subcontracted from Rites, one of India’s largest rail engineering companies.

Jarvis confirmed that it had been instructed to pay the money in regard to “contractual disputes to do with payment of their tax”.

Both companies argued that the other was responsible for tax-related payments on a year-long contract signed in 2003.

The dispute went to adjudication earlier this year and Jarvis was ordered to pay £785,000 by 13 June, but failed to do so. The Jarvis spokesperson said that it failed to pay the amount initially “because we were still in negotiation with RITES at that stage”.

In the TCC last Thursday, Judge Wilcox enforced the adjudicator’s decision and ordered Jarvis to pay £800,000 to RITES, including interest, as well as RITES’ legal costs. Jarvis has been given a deadline of next Thursday, 21 July, to pay the money owed.

In the absence of emergency funding the group would enter into insolvency proceedings

Jarvis statement to the stock exchange

Jarvis is still in financial difficulties because of its high level of debt, worsened last month when it was forced to borrow a further £31.4m from Deutsche Bank. At that time Jarvis said it had agreed a £297m debt-for-equity swap with its lenders.

However, in better news for the company this week, Jarvis revealed that it was to swap 95% of its equity for £350m. It said that if shareholders agreed to the restructuring, the company would have less than £20m net debt on its balance sheet.

In a statement to the stock exchange on Tuesday, Jarvis warned: “If the restructuring cannot be implemented, the directors believe that, in the absence of emergency funding, the group would be unable to trade and would enter into insolvency proceedings.”