The DMRC cannot shy away from paying 80 per cent of the debt owed by Reliance Infrastructure subsidiary DAMEPL to banks, which had loaned the money to run the Airport Express line, the Delhi High Court said today.
The DMRC cannot shy away from paying 80 per cent of the debt owed by Reliance Infrastructure subsidiary DAMEPL to banks, which had loaned the money to run the Airport Express line, the Delhi High Court said today. A bench of Justices Sanjiv Khanna and Chander Shekhar noted that under the agreement between the two, if the contract was terminated due to DAMEPL’s fault, then DMRC would have to pay 80 per cent of the debt, while if it was the metro’s fault, then the PSU would have to pay 100 per cent of the debt and 130 per cent of the equity.
“You cannot shy away from the 80 per cent, even if they are at fault,” the court told the DMRC which has challenged a March 6 single judge order upholding a Rs 5,164 crore arbitral award, including interest of nearly Rs 2,000 crore, in favour of DAMEPL in connection with the Airport Express project. The court also said that asking for a stay of the single judge order would not be fair on the part of DMRC (Delhi Metro Rail Corporation).
The DMRC has also challenged the single judge’s direction to deposit within four weeks 75 per cent of the award amount in an escrow account maintained with the banks which had loaned money to Delhi Airport Metro Express Private Ltd (DAMEPL). The bench observed that had DMRC paid 80 per cent of the debt, the interest component would not have been so high. It asked the DMRC whether it was willing to pay or take over the Rs 1,617 crore owed by DAMEPL to the 11 banks which had loaned the money to run the Airport Express line.
The query by the bench came after Additional Solicitor General (ASG) P S Narasimha, appearing for DMRC, said his client will service the debt of Rs 1,617 crore, while DAMEPL said the Delhi metro could take over the entire debt as it was running the express line. DAMEPL, represented by senior advocates P Chidambaram and Kapil Sibal, said that apart from the Rs 1,617 crore owed to 11 banks, their client had also borrowed and infused in the project an additional Rs 2,501 crore which too the DMRC should take over.
The bench listed the matter for hearing tomorrow to await DMRC’s stand depending on which the court said it will pass an interim order. It also told DAMEPL that it may pass some order protecting the company with regard to the Rs 2,501 crore it had borrowed from others. In its plea, DMRC has contended that there was a “patent illegality” in the arbitral decision as it did not consider that the Commissioner for Metro Rail Safety (CMRS) had certified the line as viable for operations. It said it has been running the airport line since June 2013 when DAMEPL had “abandoned” the project despite repairs of structural defects in November 2012.
The arbitral tribunal in its award had accepted DAMEPL’s claim that the running of operations on the line was not viable due to structural defects in the viaduct through which the train would run. DAMEPL claimed before the court today that the CMRS certificate was conditional as the trains have to be run at reduced speeds and frequency, which would make the operations commercially unviable for it.
The Rinfra subsidiary has already moved a plea for execution of the award and also seeking attachment of DMRC’s bank accounts for not depositing 75 per cent of the amount within the given time. On March 23, the high court had directed DMRC to settle the immediate amounts that DAMEPL owes the banks for the airport metro project, so that its accounts are not termed non-performing assets (NPAs).
It had directed DMRC to ascertain the immediate amount that DAMEPL has to pay to the 11 lending banks — Axis Bank, UCO Bank, Punjab and Sind Bank, Andhra Bank, Central Bank of India, Dena Bank, Allahabad Bank, Canara Bank, Bank of India, IIFC UK and Canara Bank London — and to make the payment before March 28.
Pursuant to the court’s direction, DMRC had deposited Rs 306 crore. On March 6, while dismissing DMRC’s plea against the Arbitral Tribunal’s May, 2017 order asking it to make payments to DAMEPL, the court had allowed a separate plea of the Rinfra subsidiary for an early payment of 75 per cent of the arbitral award in its favour.
The concession agreement between the two was signed on August 25, 2008. Under the agreement, DMRC was to carry out the civil works, excluding at the depot, and the balance, including the project system works, were to be executed by DAMEPL. The Airport Express line was commissioned on February 23, 2011 after an investment of over Rs 2,885 crore, funded by the DAMEPL’s promoters’ fund, banks and financial institutions.
DAMEPL had told the single judge that it had terminated the concession agreement as DMRC had not cured certain defects in the Airport Express line within 90 days of a notice issued by it. It had also said the agreement had come to effect from January 1, 2013 and the project was handed over to DMRC on June 30, 2013. Till the handing over of the project, DAMEPL had operated the line as a deemed agent of DMRC, it had said.
The arbitration was entered into in August, 2013 after efforts to amicably resolve the issue did not yield any result. DAMEPL is a joint venture of Rinfra and a Spanish construction company — Construcciones Y Auxiliar De Ferrocarriles — with a shareholding of 95 and five per cent respectively.