2017 Airport Metro Arbitral Award: Delhi High Court Issues Directions To Centre, Delhi Govt For Payment Of Unpaid Dues To Reliance Infra By DMRC

The Delhi High Court on Friday directed the Union of India and Delhi government to forthwith attend to Delhi Metro Rail Corporation (DMRC)'s request for extension of sovereign guarantee or subordinate debt to enable it make payment of dues to Reliance Infra-owned Delhi Airport Metro Express Private Limited (DAMEPL) under the 2017 arbitral award.

Justice Yashwant Varma said the decision shall be taken within a period of two weeks from today and if permission is accorded to the DMRC in respect of either of the suggestions, it shall proceed to deposit the entire amount payable under the award along with up-to-date interest in terms thereof within a period of one month therefrom.

However, the court said if the union government or GNCTD decline the DMRC's request, the union ministry shall forthwith and at the end of two weeks, revert and repatriate all money received by it from DMRC post March 10, 2022, pursuant to its directives, so as to ensure that "the credit balance in the "Total DMRC Funds, Total Project Funds and Total Other Funds" reflects the balance as it existed on March 10, 2022.

"Upon receipt of the aforesaid moneys, DMRC shall forthwith transfer to the escrow account, an amount equivalent to the total amount payable in terms of the Award along with interest," said the court, adding otherwise the entire amount under 'Total DMRC Funds, Total Project Funds and Total Other Funds' heads as of today shall stand attached forthwith.

Justice Varma also said if the DMRC fails to clear all the outstanding amount in terms of the award despite the directions, the court reserves the right to frame appropriate directions against the union ministry and the GNCTD "consequent to corporate veil having been duly lifted as per the findings recorded as per the findings recorded herein above".

"Parties are granted liberty to approach the Court for such further directions/clarifications as may be warranted," said the court.

The court passed the directions in the execution petition filed by DAMEPL seeking enforcement of the arbitration award dated May 11, 2017 which attained finality in 2021. 

DMRC, which is owned by both the union government and Delhi government, has failed to pay the award money to DAMEPL despite multiple orders in the execution petition pending before the high court. It currently owes over 6000 crores to Reliance Infra-owned company. 

About the Case

In 2008, the DMRC and DAMPEL entered into an agreement for design, installation, commissioning, operation and maintenance of Airport Metro Express Line from New Delhi Railway Station To Dwarka Sector 21 via the Indira Gandhi International Airport. Some of the obligations of the contract were to fulfilled by the DMRC.

In 2012, issues arose in relation to the project and DAMEPL issued a notice terminating the contract as it alleged that defects pointed out by it were not cured in the civil structure. DMRC invoked the arbitration clause under the Concession Agreement. Meanwhile, the Metro Line continued to face issues and was being run on a reduced speed. DAMEPL in June 2013 stopped the operations and handed over the line to DMRC.

The Arbitral Tribunal in 2017 ruled in favour of DAMEPL and awarded a total amount of Rs 2782.33 crore along with further interest. DMRC’s petition against the award was dismissed by a single bench of Delhi High Court in March 2018. DMRC succeeded in appeal and the award was partly set aside. The matter then reached the Supreme Court. In 2021, the Supreme Court set aside the division bench ruling and upheld the award passed by the tribunal.

Execution Proceedings 

In September, 2021, DAMEPL approached the High Court for enforcement of the 2017 award. The DMRC was required to pay Rs 7045.41 crores upto September 10, 2021, as per DAMEPL. Around Rs 1000 crore was deposited by DMRC in an ESCROW account in September 2021.

With regard to the rest of the payment, the DMRC in December 2022 told the court that it has only an amount of Rs 1642.69 crores in the bank account. It said the other funds available with it are earmarked for projects or for salary, medical and post retiral benefits of the employees.

It initially offered to take over the Reliance Infra’s liabilities of the bank and other financial institutions to the extent of amount due under the Award. However, DAMEPL told the court that it does not wish to settle the matter in this fashion. Meanwhile, the Supreme Court asked the high court to take up the matter at the earliest and dispose of the Execution Application without any further delay.

On February 21, 2022, the DMRC told the court that an amount of Rs 600 crore shall be deposited by it within two days. On March 10, 2022, the high court said the 2017 award cannot be allowed to remain a paper award and the DMRC is duty bound to either divert its funds after seeking permission of the central government or should raise loans to satisfy the award.

However, the DMRC only paid a total of Rs 166.64 crores to DAMEPL after the decision. It led to another round of litigation. DAMEPL claimed a payment of Rs 4427.41 crores as on May 10, 2022, by attachment of bank accounts and fixed deposit of the DMRC. In October 2022, Attorney General for India R. Venkatramani himself started appearing in the matter.

In November 2022, the court was told that DMRC’s two shareholders - Union Ministry of Housing and Urban Affairs and the Delhi government, have decided to examine the proposal of bearing 50 percent of the total arbitration award.

On November 18, 2022, the High Court adjourned the hearing to December 12 at the request of Attorney General for India. It was indicated that the two equity partners might be able to do a "next round of meeting" till then.

Aggrieved by the order, DAMEPL moved an SLP before Supreme Court which was disposed with a direction to the the single judge to proceed further with the execution of arbitral award expeditiously.

Subsequently, an affidavit was filed by DMRC before the High Court on January 4 stating that the Delhi Government was not inclined to pay towards the unpaid dues of DMRC.

DMRC then requested both its stakeholders to provide “interest free subordinate debt” for payment of its unpaid dues. The corporation also showed its inability to raise money from open market because of its “adverse financial position”.

On February 14, 2022, the unpaid amount stood at Rs 8009.38 crores - Rs 1678.42 crores were paid by the DMRC. DAMPEL last month told the court that the unpaid amount along with interest now stands at Rs 6330.96 Crores. Earlier this month, the DMRC told the court that a total of Rs 2600 crore has been paid to the DAMEPL till date.

After hearing the parties in detail, Justice Varma had reserved the order on March 10.

Also Read: Explained: Why Is There No End In Sight For DMRC-Reliance Infra Dispute Despite Court Orders?

Title: DELHI AIRPORT METRO EXPRESS PRIVATE LIMITED vs DELHI METRO RAIL CORPORATION LTD

Citation: 2023 LiveLaw (Del) 248

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