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Analysis of- Rapid Metro Rail Gurgaon Limited v. Haryana Mass Rapid Transport Corporation Limited and Ors
Analysis of- Rapid Metro Rail Gurgaon Limited v. Haryana Mass Rapid Transport Corporation Limited and Ors
Civil Appeals No 925-926 of 2021
FACTS OF THE CASE
The instant matter concerns two Concession Agreements awarded to Rapid MetroRail Gurgaon Limited ("RMGL") and Rapid MetroRail Gurgaon South Limited ("RMSGL") by Haryana Shehri Vikas Pradhikaran ("HSVP") for the development of metro rail lines. Following this, both RMGL and RMGSL sought to terminate their Concession Agreements due to material violations by HSVP. As a result, they issued notices stating that the Concession Agreements would be terminated 90 days after the termination notice was delivered. Furthermore, HSVP issued their termination notices to RMGL and RMGSL, directing them to hand over the projects to Haryana Mass Road Transport Corporation Limited to breach the Concession Agreements ("HMRTC").
Notably, RMGL and RMGSL were part of the IL&FS Group's "red" businesses required to obtain approval before transferring or encumbering any assets. On September 6, 2018, this approval was granted concerning the handover of projects under the Concession Agreement. On the same day, the HSVP and HMRTC filed two Writ Petition under Section 226 of the Constitution of India in the High Court of Punjab and Haryana, challenging RMGL and RMGSL's notice of termination dated June 7, 2019.
The High Court, in its judgement dated September 20, 2019 ("Consent Order"), took note of a "consensus" established by senior executives of both parties in light of ongoing negotiations between the parties and to protect the immediate interests of the public sector lenders. The High Court ordered RMGL and RMGSL to keep the metro lines running for another 30 days. During that time, the amount of "debt due" under the Concession Agreements will be determined under the supervision of the Comptroller and Auditor General of India. However, in light of the frequent adjournments and disputes over the audit, RMGL and RMGSL filed a Special Leave Petition challenging the High Court's directives, which was granted by the Hon'ble Supreme Court.
DECISION OF HON'BLE SUPREME COURT
When a case is arbitrable, the Supreme Court has stepped into the writ jurisdiction of the High Court under Article 226 of the Indian Constitution. As a result, the Supreme Court determined that the High Court was dealing with a fundamental issue of public interest. The exercise of its writ jurisdiction under Article 226 was justified because non-interference would have resulted in metro line disruptions and the resulting negative consequences for the general public. Notwithstanding this, the Supreme Court was of the view that the High Court ought to refuse to hear disputes that are arbitrable in ordinary circumstances, primarily since the Arbitration and Conciliation Act of 1996 provides for interim orders to be granted before the courts and the Arbitral Tribunal, respectively, under Sections 9 and 17.
On the merits, the Supreme Court examined the terms of the Concession Agreements and the Escrow Agreement that were in dispute in the Instant Matter, focusing on what constitutes the term "debt due." The Court noted that clause (v) of the Consent Order could be interpreted to mean that when the debt due was determined by the audit report, HSVP would deposit 80 per cent of such amount in the Escrow account and the remaining disputes, if any, would be agitated by way of arbitration. The Supreme Court also stated that HSPV and HMRTC could not avoid compliance with the High Court's Consent Order at this time by claiming fake invoices and cost inflation because allowing HSPV and HMRTC to intercept or delay payment in the presence of an agreement would be unallowable for the following three reasons: To begin with, Article 24.4 mandates the payment of 80% of the outstanding debt. Second, as public bodies, HSPV/HMRTC have willingly agreed to pay 80% of the debt due as per the auditor's findings, and they cannot be allowed to refuse. Third, the Escrow Account Agreement was signed in conjunction with the Concession Agreement. It facilitates the funding of projects conducted by RMGL and RMGSL by allocating cash from Canara Bank and Andhra Bank, all of which have a significant stake in the project's financials.
This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts made to ensure the accuracy and correctness of the information published, White Code VIA Mediation and Arbitration Centre shall not be responsible for any errors caused due to human error or otherwise.
- Analysis of- Rapid Metro Rail Gurgaon Limited v. Haryana Mass Rapid Transport Corporation Limited and Ors
- FACTS OF THE CASE
- DECISION OF HON'BLE SUPREME COURT