1. Public-Private Partnership
The dispute between the DMRC and DAMEPL started a little more than a year after the line became functional.
Delhi Metro Rail Corporation Ltd., a joint venture of the Government of India and the Government of National Capital Territory of Delhi, the proposed implementation of the Airport Metro Express Line project in New Delhi, from New Delhi Railway Station to Dwarka Sector 21 via Indira Gandhi International Airport, New Delhi.DMRC had to undertake the design and construction of a basic civil structure for the project, which was in the nature of a public-private partnership.
The bid of a consortium comprising Reliance Energy Limited (renamed as Reliance Infrastructure Limited) and M/s Construcciones y Auxiliar de Ferrocarriles, S.A. was accepted by DMRC. Thereafter, a Concession Agreement was entered between DMRC and DAMEPL for design, installation, commissioning, operation and maintenance of the AMEL.
2. The Partnership Action Points
It was agreed between the parties that all civil works, as well as the appointment of consultants, land acquisition and other clearances from the Government and other authorities, have to be obtained by DMRC and the design, supply, installation, testing and commissioning of various systems like rolling stock, power supply, overhead equipment, signalling, track system, platform, screen doors, ventilation, architectural finishing etc. were to be provided by DAMEPL. As the work could not be completed in time, extensions were granted and finally, safety clearances were obtained from the Commissioner of Metro Railway Safety. The date of commercial operation was achieved on 23.02.2011.
On 22.03.2012, DAMEPL requested DMRC for a joint inspection of the viaduct and its bearings before the expiry of the defect liability period of the civil contractors. Another letter was written by DAMEPL complaining of issues relating to the design and quality in the installation of viaduct bearings. It was mentioned in the said letter that there were signs of girders having sunk at some locations as a result of deformations/cracks. DMRC responded to the said letter and informed that inspections were carried out at the locations pointed out by DAMEPL and no bearings were found damaged. However, DMRC admitted that grouting material filled above/below the bearings was damaged/loosened for which action would be taken to repair them on priority. Due to the said defects, DMRC advised DAMEPL to impose speed restrictions as deemed necessary in the interest of safety
3. The beginning of Dispute
A notice was issued by DAMEPL asking DMRC to cure the defects in DMRC’s works within a period of 90 days from the date of the notice, failing which it shall be treated as a breach having Material Adverse Effect on the Concessionaire under the Concession Agreement. In the said notice, ‘a non-exhaustive list of defects’ was set out by DAMEPL. It appears from the record that DMRC had also engaged some other agencies in carrying out the repair work.
DAMEPL issued a notice terminating the Concession Agreement as, according to it, the defects that were pointed out in the notice were not cured within a period of 90 days, resulting in an Event of Default under the Concession Agreement. DMRC invoked arbitration. On 22.01.2013, the Line was restarted with reduced speed after a certificate sanctioning resumption was issued by the Commissioner on 18.01.2013. According to DAMEPL, it agreed to operate the Line only as an agent in the public interest and on instructions of DMRC, although DAMEPL’s stance was not accepted by DMRC. DAMEPL stopped its operations on 30.06.2013 and handed over the Line to DMRC on the next day.
4. Concession Agreement and the Arbitration Clause
Article 36 of the Concession Agreement which refers to dispute resolution shall be settled through arbitration by reference to a sole arbitrator, where the total value of claims do not exceed Rs.1,500,000/-. Beyond this limit, the dispute shall be referred to three arbitrators who will be selected from a panel of engineers with requisite qualifications and professional experience relevant in the field to which the Concession Agreement relates. The panel shall be from serving or retired engineers of government departments or of the public sector.
The main issue that arose for determination before the Arbitral Tribunal constituted under the Concession Agreement is the validity of the termination notice. DMRC claimed that the termination notice issued by DAMEPL is illegal, as DMRC had taken various steps honouring its obligations under the Concession Agreement. A direction was sought from the Arbitral Tribunal to DAMEPL to take over operations of the AMEL under the Concession Agreement, and in the alternative, to grant compensation of Rs.3,173 crore with the interest of 18% per annum.
Further monetary reliefs were sought by DMRC. DAMEPL justified the termination as being in conformity with the Concession Agreement and consequently, filed a counterclaim seeking an amount of Rs.3,470 crore as termination payment along with interest and further amounts as detailed in the counterclaim, on the ground that DMRC did not cure the defects in the civil structure in terms of the cure notice dated 09.07.2012. As DMRC did not comply with its obligations under Article 29.5.1(i), DAMEPL justified the termination notice dated 08.10.2012 and the consequent claim of termination payment from DMRC under Article 29.5.2.
5. What next?
In March 2018, the Delhi government’s advisory body, which was at the time led by Ashish Khetan, submitted a report that alleged that DMRC had “wilfully distorted” the agreement with DAMEPL to extend favours to Reliance Infrastructure, thus “bleeding” the public exchequer. This wilful omission in the case of DAEML is one of the main reasons why the private concessionaire led by Anil Ambani Group has bagged such a large arbitral award, to the detriment of the exchequer.
Armed with the report, Kejriwal wrote to then Home Minister Rajnath Singh in July 2018, demanding a CBI probe into the matter.
“The entire episode would lead to an onerous burden of about Rs 4,700 crore, which will have to be shared equally by the Centre and the Delhi government. Yet, the Government of NCT of Delhi has no means of taking any preventive or corrective action as the DMRC is neither answerable to it nor does it exercise any form of control or authority over DMRC,” Kejriwal wrote.
IMAGE: THE METRORAILGUY
