DMRC not required to pay Rs 8,000 crore to Reliance Infrastructure, says Supreme Court [11.4.2024]

The Supreme Court on Wednesday overturned its own order delivered three years ago and exempted the Delhi Metro Rail Corporation (DMRC) from paying an arbitration award of approximately Rs 8,000 crore to a subsidiary of Anil Ambani-controlled Reliance Infrastructure.

The DMRC had filed a curative petition against a two-judge bench order of the apex court delivered in 2021. The division bench had upheld the arbitral award in favour of Delhi Airport Metro Express Private Ltd. (DAMEPL) -- which is an arm of Reliance Infrastructure.

In 2019, the Delhi High Court had set aside the award, after which the DAMEPL had moved the apex court.

While referring to its 2021 verdict, the apex court on Wednesday observed that it was “a grave miscarriage of justice by interfering with a Division Bench decision of the Delhi High Court”.

A three-judge Bench, headed by Chief Justice of India DY Chandrachud, said the judgment was “perverse and patently illegal”. He was reading out a verdict that was reserved on February 20.

The bench, comprising CJI Chandrachud and justices BR Gavai and Surya Kant, asked the company to return the amount it had already received.

“Any amount paid by DMRC as part of coercive action has to be refunded and the execution proceedings for the award must be discontinued,” it said.

This comes as a major relief for DMRC which was seeking financial assistance from the central government to pay the arbitration award. The Airport metro line in question is currently being operated by DMRC after Reliance Infra exited the project, post the arbitration case.

Meanwhile, Reliance Infrastructure on Wednesday said that the court order didn’t impose any liability on the company. While DAMEPL is a subsidiary of Reliance Infrastructure, it is a separate entity and the liability falls on it.

DMRC and DAMEPL have been at odds ever since the latter pulled out of the Delhi Metro Airport Line operations due to safety issues arising from structural defects. An arbitral court ruled in favour of the Reliance Infra firm in 2017, asking DMRC to pay the arbitral award.

Reliance Infra had moved the Supreme Court on December 2, 2022, against DMRC, seeking payment of Rs 4,500 crore of dues from the total arbitral award to DAMEPL.

On December 14, 2022, the SC gave DMRC three months to pay dues and sent the matter back to Delhi High Court for disposal.

The earlier liability, along with the interest and other charges, exceeds Rs 8000 crores on the present date.

The case involved a dispute over a concession agreement between DAMEPL and DMRC regarding the Delhi Airport Express Line.

In September 2021, DMRC deposited Rs 1000 crore in an ESCROW account. And with DMRC having cleared Rs 1678.42 crores of the total amount, in February 2023, DAMEPL informed the Court that the pending amount then stood at a humongous sum of Rs 6330.96 crore.

In a statement, submitted to the stock exchange, Reliance Infrastructure said, “Hon’ble Supreme Court today has allowed the Curative Petition filed by Delhi Metro Rail Corporation (DMRC) against Delhi Airport Metro Express Private Limited (“DAMEPL”). Reliance Infrastructure wishes to clarify that the Order dated April 10, 2024 passed by the Hon’ble Supreme Court does not impose any liability on Reliance Infrastructure and the Company has not received any money from DMRC/DAMEPL under the arbitral award.”

Commenting on the judgment, Smita Paliwal, Partner, King Stubb & Kasiva, Advocates and Attorneys, said, “This verdict has a huge impact in all circles of arbitration with a great learning and express caution from the bench comprising of CJI DY Chandrachud, Justice BR Gavai and Justice Surya Kant that review or curative jurisdiction should not be used to open flood gates in order to create 4th or 5th stage of court’s intervention in an arbitral award.”

Aaushi Doshi, Associate Partner, IndiaLaw LLP, said, “This judgment once again reaffirms the law that there should be a valid justification for an appeal court to interfere in the findings of an order when they are borne out from the record and are not based on a misappreciation of law or fact.”

11 Apr 2024