Delhi HC directs DMRC to pay Rs 4800 crore arbitral award to R Infra
As per the Delhi HC order, the Union and Delhi Governments will have to decide on DMRC's request for a sovereign guarantee to pay the arbitral dues within two weeks. If permission for a sovereign guarantee is granted, DMRC shall pay the entire amount to R.Infra within one month.
In a big win for Reliance Infrastructure, the Delhi High Court has directed Delhi Metro Rail Corporation (DMRC) to pay Rs 4,800 crore ($645 million) as per the arbitral award. The court has warned that failure to pay as per the orders may lead to action against the Centre and Delhi Government, and the HC has also warned of attachment of DMRC funds.
As per the Delhi HC order, the Union and Delhi Governments will have to decide on DMRC's request for a sovereign guarantee to pay the arbitral dues within two weeks. If permission for a sovereign guarantee is granted, DMRC shall pay the entire amount to R.Infra within one month. However, if permission for a sovereign guarantee is refused, the Centre shall repatriate all funds received by it from DMRC post March 10, 2022.
Upon receipt of the money from the Centre, DMRC shall deposit the arbitral award dues with interest in escrow. In case of failure, the entire amount payable to DMRC shall stand attached without reference to courts. If DMRC fails to pay, the Delhi HC will take further action against the Centre and Delhi Government.
The legal dispute pertains to the enforcement of an arbitration award of Rs 7,200 crore in favour of Delhi Airport Metro Express Private Limited (DAMEPL), a subsidiary of Reliance Infrastructure. Out of these Rs 7,200 crore, dues worth Rs 2,600 crore were paid by DMRC, and it was left with an outstanding amount of Rs 4,500 crore to DAMEPL.
The Supreme Court in May 2022 upheld a Delhi High Court order directing DMRC to pay over Rs 4,600 crore of the arbitral award along with interest to the DAMEPL in two equal instalments in two months.
The high court on March 10, 2022, had directed the DMRC to pay over Rs 4,600 crore of the arbitral award along with interest to DAMEPL. The court had said the first and second instalments shall be paid on or before April 30 and May 31, 2022.
In March 2022, the Supreme Court maintained the DAMEPL's 2017 arbitration award, which totaled almost Rs 4,500 crore and was enforceable against the DMRC. Despite the SC affirming the arbitral judgement, Reliance Infra alleged that the DMRC had not made the required payments.
The SC reprimanded the Centre, saying that while on one hand it promotes India as a centre for arbitration with grandiose speeches, on the other side it refuses to uphold arbitral awards upheld by the SC.
Last December, the court had sent a notice to the DMRC regarding this, asking for a response by December 12. The Delhi High Court had also given the DMRC till December 12 to come up with a strategy to refund the unpaid sum of an arbitral award in Delhi Airport Metro Express Pvt Ltd's (DAMEPL) favour. But on failure to do so, the court gave Centre a deadline till December 14 to provide clarification on the Rs 4,500 crore payment.
DAMEPL is a joint venture of Reliance Infrastructure (R-Infra) and a Spanish construction company — Construcciones Y Auxiliar De Ferrocarriles — with a shareholding of 95 and 5 percent, respectively.
An arbitral tribunal in its May 2017 award had ruled in favour of DAMEPL, which had pulled out from running the Airport Express metro line over safety issues, and accepted its 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. The arbitral award pertained to a concession agreement between the two entities, which was signed on August 25, 2008.
Under the agreement, the DMRC was to carry out civil works, excluding at the depot. The balance, including the project system works, were to be executed by DAMEPL.
DAMEPL had borrowed from 11 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 — to carry out operations on the line.
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.
(Edited by : Anushka Sharma)
First Published: Mar 17, 2023 3:17 PM IST
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