Centre, GNCTD shall attend requests of DMRC for extension of sovereign guarantees enabling it to liquidate its liabilities: Delhi HC

New Delhi [India], March 17 : The Delhi High Court on Friday in its judgement stated that Union Ministry as well as the GNCTD shall forthwith attend to the requests of the Delhi Metro Rail Corporation (DMRC) for extension of sovereign guarantees/subordinate debt enabling it to liquidate its liabilities under the Award.
The Bench of Justice Yashwant Varma on Friday has passed the judgement in the ongoing case of unpaid dues in the arbitral award won by the Delhi Airport Metro Express Private Limited (DAMEPL) run by Reliance Infrastructure against DMRC.
The bench said, "The decision be taken within a period of two weeks from today. If permission is accorded to the DMRC in respect of either of the two modes as suggested by it, 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."
"If the Union Ministry or the GNCTD decline the request for providing sovereign guarantees or subordinate debt, 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," said the Court.
"Upon receipt of the aforesaid money, DMRC shall forthwith transfer to the escrow account, an amount equivalent to the total amount payable in terms of the Award along with interest. In case of a failure on the part of parties to proceed in terms of the above directions, the entire amount standing to the credit of Total DMRC Funds, Total Project Funds and Total Other Funds as of today shall stand attached forthwith without reference to Court," said the Court Judgement.
"In case DMRC fails to clear all outstanding amounts payable in terms of the Award despite the directions set forth above, the Court reserves the right to frame further appropriate directions against the Union Ministry and the GNCTD consequent to the corporate veil having been duly lifted as per the findings recorded hereinabove," added the court in order.
The Delhi High Court recently impleaded Centre Government and Delhi Government as parties in the ongoing case of unpaid dues in the arbitral award won by the Delhi Airport Metro Express Private Limited (DAMEPL) run by Reliance Infrastructure against DMRC.
Delhi Govt's counsel in the matter earlier submitted that a shareholder cannot be held liable for a company's liabilities except in case of fraud etc. It is not the case of DAMEPL that there is any element of fraud for which Govt of Delhi can be held liable in the execution proceedings.
Central Govt had earlier stated that there may be certain cases like force majeure etc when a decree may become un-executable either in law or on facts of the case. The Judge asked whether he should record this submission, to which the Addl. Solicitor General ( Chetan Sharma) said that it may not be recorded.
Recently, the Delhi Metro Rail Corporation (DMRC) told the Delhi High Court that a request has been made to its shareholders, Ministry of Housing and Urban Affairs (MOHUA) and Delhi Government a sum of Rs 3565.64 Crore may please be provided as interest-free subordinate debt at an early date.
The affidavit filed by DMRC stated that "the decision of its Board of Directors, has approached its shareholders, i.e., GOI and GNCTD and had written letters dated 18.01.2023 to MOHUA and GNCTD, in which DMRC requested to MOHUA and GNCTD that a sum of Rs 3565.64 Crore
may please be provided as interest-free subordinate debt at an early date so that the Supreme Court directions may be complied with.
In December 2022, the Supreme Court directed the Delhi High Court to execute within three months the arbitral award of Rs 7,200 crore won by the Delhi Airport Metro Express Private Limited (DAMEPL) run by Reliance Infrastructure against DMRC.
The affidavit stated that this matter was discussed in the 148th Board Meeting
of DMRC, held on January 16, 2023, and in view of GNCTD's disinclination and also in view of the inability of DMRC to raise money from the open market because of its adverse financial position, it was decided to approach both the shareholders i.e. GOI and GNCTD to share the total awarded amount of Rs. 7,131.28 Crore in equal proportion as interest-free subordinate debt.
"Though this step of interest-free subordinate debt brings more financial burden on DMRC, however, the less financially burdensome option of issue of Equity Shares, which was explored earlier, failed to materialise," stated DMRC
The matter was listed in Delhi High Court on Thursday, but later got adjourned for January 31, 2023, because of the non-availability of the Attorney General in the matter.
Earlier, the government of NCT Delhi (GNCTD) informed DMRC that, "It is not inclined to provide money for payments arising out of disputes or contractual defaults to the Reliance Infrastructure subsidiary's Delhi Airport Metro Express Private Limited (DAMEPL)."
GNCTD said, "Shareholders cannot be held liable for payments arising out of disputes or contractual defaults. It is further submitted that DMRC may raise money from Open Market or through externally aided Funds or loans from the Government of India to meet this liability."
The Court earlier made clear that if the amount is not paid within time, the Court shall be constrained to call the appearance of the Managing Director of the DMRC before this Court.
The Delhi High Court earlier had directed DMRC to provide details of funds in its bank account in connection with a Reliance Infrastructure subsidiary's (DAMEPL) plea for the execution of an arbitral award against it.
The Reliance Infrastructure subsidiary Delhi Airport Metro Express Pvt Ltd (DAMEPL) had filed an application requesting Delhi High Court to direct Delhi Metro Rail Corporation Limited (DMRC) to deposit Rs 6,208 crores available in its various bank accounts into the project escrow account without any delay.
DAMEPL, in its application, had rejected any out-of-court negotiations/ settlement or assignment of debt to the DMRC. DAMEPL plea states, "The Decree Holder is not agreeable to settling the matter out of the Court. Accordingly, no alternate proposal by DMRC is acceptable to Decree Holder and it presses for the execution on merits at the earliest."
The plea further stated, "The delay in payment by DMRC is causing immense prejudice to DAMEPL and its Promoter, Reliance Infrastructure Limited. In case the reliefs as sought for are not granted, the Decree Holder shall suffer irreparable loss and injury."
The Supreme Court (SC), on 7 September 2021, upheld the arbitration award of Rs 7,200 crores in favour of DAMEPL.
In 2008, DAMEPL entered into a contract with DMRC for running the airport metro line till 2038. As disputes arose between the parties, DAMEPL stopped operating the metro on the airport line and invoked the arbitration clause against DMRC alleging violation of contract, and sought a termination fee.