Back
IN THE HIGH COURT OF DELHI
Sanjiv Khanna, Chander Shekhar, JJ.
Delhi Metro Rail Corporation Ltd. - Appellant
Versus
Delhi Airport Metro Express Private Limited - Respondent
FAO(OS) (COMM) 58 of 2018 & CM Nos. 13434, 17581 & 31531 of 2018
Decided On : 15-01-2019
Based on the provided legal document, here are the key points extracted with their respective references:
Case Details and Parties * The case is an intra-Court appeal filed by Delhi Metro Rail Corporation Ltd. (DMRC) against Delhi Airport Metro Express Private Limited (DAMEPL). (!) * DMRC is a state-owned company with equal participation from the Government of India and the Government of National Capital Territory of Delhi. (!) * DAMEPL is a special purpose vehicle incorporated by a consortium of M/s Reliance Infrastructure Limited and M/s Construcciones Y Auxiliar de Ferrocarriles SA. (!) * The dispute relates to the Concession Agreement (CA) signed on 25th August, 2008, for the construction, operation, and maintenance of the Delhi Airport Metro Express Line (AMEL). (!)
Background and Timeline of Events * DMRC undertook land acquisition and civil structures, while DAMEPL was responsible for railway systems, rolling stock, and signaling. (!) * DAMEPL was entitled to collect fares and non-fare revenue, and was required to pay an annual concessionaire fee of Rs.51 crores. (!) * DAMEPL paid the concessionaire fee for the first year but stopped subsequent payments, requesting deferment due to financial constraints and lack of retail revenue. (!) * On 8th July, 2012, DAMEPL stopped operations citing unsafe conditions regarding viaduct bearings and girders. (!) * DAMEPL issued a cure notice on 9th July, 2012, and subsequently a termination notice on 8th October, 2012, under Article 29.5.1 of the CA. (!) * Repairs were undertaken, and on 18th January, 2013, the Commissioner of Metro Road Safety (CMRS) granted sanction to restart operations with speed restrictions. (!) * DAMEPL resumed operations on 22nd January, 2013, and handed over the project to DMRC on 30th June, 2013. (!) * An Arbitral Tribunal was constituted on 8th August, 2013, and pronounced its award on 11th May, 2017. (!)
Arbitral Award Findings * The Arbitral Tribunal held that there were defects in the civil structure (cracks, twists, gaps) which were not cured within the 90-day period specified in the cure notice. (!) * The Tribunal found that these defects had a "Material Adverse Effect" on DAMEPL's ability to perform obligations, validating the termination notice under Article 29.5.1. (!) * The Tribunal held that DAMEPL's participation in meetings and operations after the termination notice was "without prejudice" to their rights and did not amount to a waiver. (!) * The Award directed DMRC to pay DAMEPL a termination payment of Rs.2782.33 crores, comprising debt due and 130% of adjusted equity. (!) * The Tribunal included Rs.611.95 crores as part of the "adjusted equity" despite DAMEPL's balance sheets categorizing it as subordinate debt. (!)
High Court Judgment (Appeal) * The High Court set aside the findings regarding the validity of the termination notice due to confusion and contradiction in the Award regarding the date of termination (8th October, 2012 vs. 7th January, 2013). (!) * The Court held that the Award suffered from perversity and patent illegality for ignoring the statutory sanction granted by CMRS on 18th January, 2013, which certified the safety of the line. (!) * The Court set aside the finding that Rs.611.95 crores should be treated as equity, ruling it perverse to ignore the Board resolution converting share application money into subordinate debt. (!) * Consequently, the direction to pay interest under Article 29.8 on the termination payment was held infructuous. (!) * The Court set aside the Award in its entirety regarding the termination payment and consequential reliefs, leaving the matter for fresh adjudication via arbitration. (!) * The Court upheld the finding that DAMEPL did not waive the termination notice by election or conduct. (!)
JUDGMENT
Sanjiv Khanna, J. Delhi Metro Rail Corporation Ltd. ('DMRC', for short) in this intra-Court appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (`A & C' Act, for short) read with Section 13 of the Commercial Courts, Commercial Division and Commercial Appellate Division of the High Courts Act, 2015 has impugned judgment and order dated 6th March, 2018, whereby the learned single Judge has dismissed objections under Section 34 of the A & C Act upholding the award dated 11th May, 2017 passed by the Arbitral Tribunal.
2. DMRC is a state-owned company with equal participation from the Government of India and the Government of National Capital Territory of Delhi.
3. The respondent, Delhi Airport Metro Express Private Limited ('DAMEPL', for short), is a company incorporated as a special purpose vehicle by the consortium of M/s Reliance Infrastructure Limited and M/s Construcciones Y Auxiliar de Ferrocarriles SA, Spain (`consortium', for short).
4. The consortium were successful bidders in the international competitive bidding process for construction, operation and maintenance of the Delhi Airport Metro Express Line (`AMEL', for short) based on Public-Private Partnership model for providing high speed metro connectivity with maximum speed of 120 Kms per hour between New Delhi Railway Station and Indira Gandhi International Airport, T-3 Terminal with further line till Section-21 at Dwarka with underground section of 15.7 Kms and elevated viaduct section of 7 Kms.
5. On 25th August, 2008 Concessionaire Agreement ('CA', for short) was signed and executed between DMRC and DAMEPL.
6. DMRC had undertaken clearances and borne costs relating to acquisition of land and in construction of all civil structures like tunnels, viaducts, station buildings except depot buildings.
7. Design, supply, installation, testing and commissioning of various railway systems like rolling stock, power supply, overhead equipment, signaling, track systems, platform, screen doors, ventilation, architectural finishing etc. were to be provided by DAMEPL, as a private partner in the project.
8. As per the CA, DAMEPL was allowed two years period for completion of obligations and scope of work after they were granted access to the civil segment by DMRC. DAMEPL was to operate and maintain AMEL for next 28 years i.e. till August, 2038.
9. The scheduled commissioning and operation date of AMEL as stipulated in the CA was 31st July, 2010 which was extended from time to time to 30th September, 2010. As per Article 16.5 of the CA, the Commercial Operation Date (`COD', for short) was to be within two months from the date of scheduled project completion date, i.e., by 31st November, 2010. On 11th January,2011 safety clearance/sanction for operation of the line was granted by the Commissioner of Metro Road Safety (CMRS) under the Delhi Metro Rail (Operation and Maintenance) Act, 2002, which is now known as Metro Railways (Operation and Maintenance) Act, 2002 [hereinafter would be referred to as `the Metro Act']. Clearance was given with conditions and reduced speed limit of 105 kilometers per hour. On 23rd February, 2011, COD was achieved when Airport Line Consultancy as per Article 17.6 of the CA had issued provisional completion certificate.
10. DMRC had incurred expenditure of Rs.2,700 crores towards costs for executing their part of obligations.
11. Exact figure of the costs incurred on fixed assets by the DAMEPL is unclear. Paragraph 118 of the Award refers to the report of IRCON who were appointed by DMRC as consultants to evaluate the works executed by DAMEPL. As per the IRCON's report cost of assets including overheads and other charges created by DAMEPL was Rs.2273.67 crores. (This figure has been referred to indicate that DAMEPL had incurred substantial expenditure/costs. We express no opinion on correctness or otherwise of the report).
12. DAMEPL was entitled to collect fare from the passengers and from non-fare revenu
