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New Delhi: Supreme Court on Thursday. retained Arbitration Award of Rs 4,660 crore That includes interest in favor of Anil Ambani-led Reliance Infrastructure Ltd, which has ended its protracted legal battle with the Delhi Metro Rail Corporation (DMRC).
The judgment was delivered by a bench of Justice L Nageswara Rao and Justice S Ravindra Bhat on appeals challenging a judgment passed by the Delhi High Court on 15 January 2019, which had partially set aside the arbitral award.
The apex court’s decision came after a nine-year-long legal battle initiated by the DMRC, which invoked the arbitration clause against Delhi Airport Metro Express Pvt Ltd (DAMEPL) in 2012. DAMEPL is a company incorporated as a Specialized Company. Purpose Vehicle by a consortium of M/s Reliance Infrastructure Limited and M/s Construción y Auxilier de Ferrocarillas SA, Spain. DMRC is a state-owned company which is a joint venture between the Central and Delhi Governments.
The arbitral tribunal had ruled in favor of DAMEPL, in which it was awarded a total amount of Rs 2,782.33 crore including interest. According to reports, this increased the award to Rs 4,660 crore ($632 million).
The verdict is seen as a significant victory for Ambani, whose telecom companies are in bankruptcy. ThePrint explains what the matter is.
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First PPP in Metro Construction and Operation
DMRC entered into an agreement with DAMEPL promoted by Reliance Infrastructure in 2008 for the design, installation, commissioning, operation and maintenance of the Airport Metro Express Line project in New Delhi.
The project was envisioned as the first public-private partnership (PPP) in metro construction and operation. As per the agreement, DMRC was responsible for all civil works, appointment of consultants and obtaining approvals, while DAMEPL was responsible for the design, supply, installation, testing and commissioning of various systems such as power supply, overhead equipment, signalling, track systems . stage, screen doors, ventilation and architectural finishing.
The project received security clearance from the Commissioner of Metro Railway Safety in January 2011 and the commercial operation of the metro line started on 23 February 2011.
DAMEPL was to operate and maintain the metro line till August 2038. However, about 18 months after the commissioning of the Metro line, DAMEPL ceased operation of the line on 8 July 2012, citing defects in the works of DMRC.
DAEMEPL issued notice to DMRC on 9 July 2012, giving 90 days time to rectify the defects listed by it. It terminated the agreement on 8 October 2012, alleging that the defects were not rectified within a period of 90 days.
DMRC invokes arbitration clause
DMRC invoked the arbitration clause under the agreement on 23 October 2012.
Meanwhile, the Metro line was restarted with reduced speed on 22 January 2013, after receiving a certification for resumption from the Commissioner of Metro Railway Safety. The metro line was still being operated by DAMEPL, with DAMEPL claiming that it was doing so in the public interest, as an agent.
However, DAMEPL ceased its operations on 30 June 2013 and handed over the line to DMRC the next day.
DMRC claimed in the arbitral tribunal that the termination notice issued by DAMEPL was illegal as DMRC had taken several steps while honoring its obligations under the agreement. It demanded that DAMEPL either take over the operation of the metro line or pay a compensation of Rs 3,173 crore along with an interest of 18 per cent per annum.
In response, DAMEPL filed a counter claim of Rs 3,470 crore as termination payment along with interest, on the ground that DMRC did not rectify the defects in the civic structure despite the notice.
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1,551 cracks in 367 girders
In its judgment, the arbitral tribunal made an in-depth analysis of the defects in the civil infrastructure and the steps taken to rectify them. It was noted that there were 1,551 cracks in 367 girders i.e. 72 per cent of the girders were affected by such cracks.
As per the Supreme Court judgment, the tribunal had then concluded that nearly a year of train operation had resulted in such a large number of cracks in the concrete girders as well as “non-serious inspection of repairs by an agency appointed by the DMRC”. had gone. ”, The defects adversely affected the integrity of the structure. It therefore found DMRC to be in breach of agreement and concluded that the termination notice by DAMEPL was valid.
The tribunal awarded a total amount of Rs 2,782.33 crore along with interest as termination payment to DAMEPL. DMRC challenged the tribunal’s decision in the Delhi High Court.
While a single judge-bench of the High Court dismissed the DMRC’s plea in March 2018, a division bench of the High Court partially quashed the arbitral award in January 2019. This was then challenged in the Supreme Court by both the parties.
‘Shocked the conscience of the court’
The Delhi High Court ruled that the tribunal’s decision “shocked the conscience of the court”. However, the Supreme Court is now of the opinion that this conclusion of the High Court Bench was “wrong”.
The Supreme Court held that the certificate issued by the Commissioner of Metro Railway Safety for resumption of operations by itself cannot show that DMRC has rectified the defects pointed out by DAMEPL.
“The members of the arbitral tribunal, nominated in accordance with the procedure agreed between the parties, are engineers and their award should not be scrutinized in the same way as those prepared by legally trained minds. In any event, it did not say It may be noted that the view of the Tribunal is perverted,” the apex court concluded while setting aside the judgment of the division bench.
(Edited by Mansa Mohan)
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