DMRC has to pay from funds lying in its account, RInfra arm tells Delhi HC

The DAMEPL counsel argued that DMRC's stance that the corporate veil cannot be lifted does not hold water since it went ahead and did just that

Delhi Airport Metro Express Pvt Ltd (DAMEPL) told the Delhi High Court on Tuesday that the DMRC (Delhi Metro Rail Corporation) has to use the funds lying in its account to pay its dues to Reliance Infrastructure Ltd, under the 2017 arbitral award. DAMEPL is a subsidiary of Reliance Infra.

“If the DMRC is an entity unrelated to shareholders then it should have paid the amount due. If they say that they will honour the shareholders wishes then how can they argue that the corporate veil cannot be lifted,” the DAMEPL counsel argued.

The counsel pointed out that about Rs 682 crore held by DMRC should be kept aside, of which Rs 514 crore is for payment of salaries, etc, and Rs 114 crore is the security deposit on smart cards.

"There is (a sum of) Rs 1,400-odd crore in their account. Out of this, Rs 302 crore is project funds and other projects is Rs 699.61 crore. A total of 1,452.44 crore must be paid to Reliance Infra. They are duty bound to pay," the DAMEPL counsel said.

The counsel also argued that DMRC's stance that the corporate veil cannot be lifted does not hold water since it went ahead and did just that.

"They argued the corporate veil cannot be lifted but they themselves did that. How can the shareholders (the Union and Delhi governments are equal shareholders in DMRC) tell an independent entity how to use their funds," DAMEPL argued.

The DMRC had told the Delhi High Court on Friday that as of now it has Rs 1,452 crores in the bank after it was asked to prepare a chart showing the financial change over the past year and produce it before the court in the afternoon.

The Court asked DMRC how it had come down from Rs 5,700 crore to Rs 1,452 crore. In the afternoon, the DMRC counsel explained how DMRC was able to survive the past few years despite the impact of Covid, and managed to pay Rs 920 crore to DAMEPL last year, from its operations and maintenance (O&M) funds.

While hearing the case on Friday, Justice Yashwant Varma said he would have to see the extent to which Section 89 of the Metro Railways (Operation and Maintenance) Act, 2002 applies and, notwithstanding that section, what directions can be given for the execution of the arbitral award.

Section 89(1) says that “no rolling stock, metro railway tracks, machinery, plant, tools, fittings, materials or effects used or provided by a metro railway administration for traffic on its railway, or its stations or workshops, or offices” will be liable to be taken for the execution of any order of any court or of any local authority or person having, by law, the power to attach the property without the previous sanction of the Central Government.

Subsection 2 states that nothing in sub-section (1) can be construed to affect the authority of any court to attach the earnings of the metro railway administration in the execution of an order.

This suggests that the court may use its powers in a worst-case scenario to attach assets without central government sanction.

The next hearing is on Friday, March 10.