Take A Decision On Granting Sanction To Attach DMRC's Assets For Payment Of Unpaid Dues To Reliance Infra: Delhi High Court Directs Centre

Delhi High Court on Monday directed the union government to take a decision whether it proposes to accord sanction under Section 89 of Delhi Metro Railway (Operation And Maintenance) Act, 2002, for attachment of the movable and immovable assets of DMRC for satisfaction of the amounts payable under a 2017 arbitral award to Reliance Infrastructure-promoted Delhi Airport Metro Express Private Ltd (DAMEPL).

Justice Yashwant Varma on February 17 had impleaded the Union of India through the Ministry of Housing and Urban Affairs and Delhi Government through its Chief Secretary in DAMEPL’s petition seeking enforcement of the arbitration award.

While a sum of Rs. 1678.42 crores of the arbitral award has been paid, DMRC is yet to pay Rs. 6330.96 crores to DAMEPL. Senior Advocate Kapil Sibal appearing for DAMEPL had earlier argued that the court can lift the corporate veil in the matter and proceed against the shareholders - Government of India and Delhi government.

During the resumed hearing on Monday, Additional Solicitor General Chetan Sharma, representing the Centre, at the outset said that the union government was not a party to the arbitration and is not liable to pay under law.

Sharma said lifting of the corporate veil is not warranted by law in such a case. "We are 50 percent shareholders. I have no liability to pay the decretal amount in law," said the ASG.

As the ASG started arguments on the jurisprudence regarding lifting of corporate view, Justice Varma said:

"When you throw an impasse at a court, it compels it to become inventive and innovative. So before we go down that route, you have something to say? ... Before we get inventive!"

ASG said the Union has a shareholding in almost all the public sector undertakings. "This may set a new precedent even if it is by way of an invention or innovativeness. This will create havoc," said Sharma.

Section 89

The provision provides that "no rolling stock, metro railway tracks, machinery, plant, tools, fittings, materials or effects used or provided by a metro railway administration for the purpose of traffic on its railway, or its stations or workshops, or offices shall be liable to be taken in execution of any decree or order of any court or of any local authority or person having by law the power to attach or distrain property or otherwise to cause the property to be take in execution, without the previous sanction of the Central Government."

The court on Monday said Section 89 is not an absolute bar and it empowers the union government to give consent. "So what is the stand of the Union?", asked Justice Varma.

When Sharma said the stand of Union is "not in this case", the court said: "Why not? It can't be your ipse dixit. Why would the Union not want to give consent?"

ASG said the decision has been taken on cogent grounds. "So place on record the material. Let's see your decision is based on what to refuse consent," said the court in response.

However, ASG Sharma said the decision has not been taken under Section 89 yet.

"Take the decision. Let's go step by step," said the court, adding it has to complete proceedings before March 15 in the matter due to the Supreme Court order.

Observing that before it proceeds to deal with the objections pertaining to limited liability principal and on the issue of whether circumstances warrant lifting of the corporate veil, the court said:

"It would appear expedient to call upon the government to take a decision whether it proposes to accord sanction for the attachment of movable and immovable assets of the corporation for the purposes of satisfaction of the amounts payable under the award."

In order to enable the competent authorities in the union government to take that decision and place the same on the record of the proceedings, the court adjourned the matter to March 02.

Earlier, the Delhi Government, while refusing to provide money to DMRC, in its communication had said that the shareholders cannot be held liable for payments arising out of contractual defaults. DMRC had then told court that it may raise money from Open Market or through externally aided Funds or loan from Government of India to meet this liability. The DMRC had sought Rs 3500 Crore each from both Centre and Delhi government.

The court on Monday said if corporate veil is lifted in the case, it would be against Delhi government as well.

In 2008, DMRC had signed a contract with DAMEPL, related to "the design, installation, commissioning, operation and maintenance of the line".

Due to certain disputes, the matter went into arbitration in 2012 - the DMRC invoked the arbitration after DAMEPL terminated the agreement on certain grounds. The award in favour of DAMEPL was upheld by the Supreme Court.

Case Title: Delhi Airport Metro Express Private Limited v. Delhi Metro Rail Corporation Ltd.