Delhi Metro shows financial inability to pay pending dues of Reliance's DAMEPL

New Delhi, India (Urban Transport News): The Delhi Metro Rail Corporation Limited (DMRC) is facing financial crisis these days due to mismanagement, corruption and irregularities in implementation of high value projects. Recently, Comptroller & Auditor General of India (CAG) cited in its observation report on the detailed project reports (DPR) of Phase 1, 2 & 3 projects.

During the hearing of an arbitral award case, Delhi High Court has asked DMRC to submit details of money lying in their bank accounts in India as well as abroad even as DMRC cited financial inability to pay pending dues of over Rs 6,000 crore to Reliance Infrastructure's subsidiary Delhi Airport Metro Express Private Limited (DAMEPL) as per obligations of arbitral award. The court clarified that DAMEPL can't be compelled to accept DMRC's plan for payment, and deferred hearing for 11th January.

Claiming that a public utility can't be treated like any other judgement debtor, DMRC submitted that it wasn't asking for a haircut and sought to take over DAMEPL's debt, claiming that it was already in talks with banks. DMRC said that it had already deposited Rs 1,000 crores in an escrow account. However, DAMEPL submitted that it was free to decide how to resurrect the company and can't be forced to agree on the terms laid down by DMRC. 

The single-judge bench of Justice Suresh Kumar Kait observed that if DAMEPL has money lying in the escrow account, it may bargain with banks whereas if the money is given to DMRC, it will get the bargaining power despite being the judgement debtor.

On December 6, the High Court had questioned why DMRC needed more time to compute the entire amount of liability as well as provision for the payment when it had exhausted all legal remedies, with even its review petition dismissed by the Supreme Court last month.

DMRC claims that it has to pay Rs. 5,000 crores as per the arbitral award, while DAMEPL claims that the total liability is over Rs 7,000 crores and increasing each passing day. The single-judge bench of Justice Suresh Kumar Kait had asked why DMRC can't pay half the amount of the arbitral award till both the parties are able to compute the exact amount, while refusing to consider the DMRC's argument on paucity of funds. While noting that money will come to an escrow account as per the arbitral award, the High Court asked DMRC why it was terming the enforcement of the arbitral award as "arm-twisting" ?

Appearing for DMRC, Solicitor General Tushar Mehta had cited issues on computation of the total amount and sought time since the DMRC was working on various solutions to tide over a financial crunch. Contending that public functions will be affected if the entire amount is paid in one go, he had sought time to arrange money from banks to pay the arbitral award. Clarifying that DMRC wasn't contesting the award and was only trying to find a way out, DMRC offered to take over Reliance Infrastructure's debt instead of paying the entire arbitral liability.

However, DAMEPL objected to DMRC's offer, and refused to substitute the award in lieu of a debt transfer. Appearing for DAMEPL, senior lawyer Rajiv Nayyar had argued that despite the award in the company's favour the proceeds will anyway go to banks to reduce outstanding dues. Pointing out that the total liability of the bankrupt company is far more than the award amount, he had submitted that money which will come from the government will go to public sector-owned banks to reduce the company's debt, and any delay will worsen the situation.

On November 23, the Supreme court had upheld its 9th September verdict which directed Delhi Metro Rail Corporation (DMRC) to pay Rs 4,600 crores (Rs 2,800 crores + interest) as part of a 2017 arbitration award to Delhi Airport Metro Express Pvt Ltd (DAMEPL), an arm of Reliance Infrastructure. The 2-judge bench of Justice L Nageswara Rao and Justice S Ravindra Bhat dismissed a review petition by DMRC while ruling: "We have gone through the review petitions and the connected papers filed therewith. In our opinion, no case for review of order is made out. The review petitions are dismissed."

On 9th September, the Supreme court had termed the arbitration award as enforceable against DMRC, while noting a disturbing trend of courts quashing arbitral awards. It had set aside the Delhi High Court order which undid the liability imposed on DMRC after DAMEPL has exited from the operations of running the Airport Express metro line owing to safety concerns.