Rapid Metro case: HSVP transfers ₹1,925 to escrow account

A payment of ₹1,925 was received in an escrow account for the Rapid Rail project, following directions from the Supreme Court earlier this year, officials of the erstwhile concessionaire said on Sunday.

Officials of the Infrastructure Leasing and Financial Services Ltd (IL&FS), which developed and operated the Rapid Metro in Gurugram on Sunday received the payment from the Haryana Shahari Vikas Pradhikaran (HSVP), as “interim termination payment”.

A spokesperson for IL&FS spokesperson said that the money would be paid to the banks that financed the project, namely Andhra Bank, PNB, Indian Overseas Bank, Indian Bank, Punjab & Sindh Bank, UCO Bank, Bank of India and Dena Bank (presently Bank of Baroda), Corporation Bank, Central Bank of India and IIFC (UK) Ltd.

The Gurugram Rapid Metro project was developed by IL&FS through its subsidiary special purpose vehicles (SPVs), Rapid Metro Rail Gurgaon Limited (RMGL) and Rapid Metro Rail Gurgaon South Limited (RMGSL), between 2009 and 2013.

The spokesperson said that all the banks were partners in either of the subsidiaries.

Ajit Balaji Joshi, the chief administrator of HSVP, said that they had deposited the money in an escrow amount as per the directions of the Supreme Court. “This matter is in arbitration and money has been deposited in the escrow account as per the order of Supreme Court,” he said.

The case pertains to litigation between IL&FS and HSVP over the operation of the Rapid Metro rail project, which came to halt due to lack of traffic on the route. IL&FS officials said that due to multiple unmet obligations, they had terminated the concession agreement and demanded termination payments as per the agreement, in case of default by HSVP. The HSVP, however, disputed the contention and challenged the matter in the Punjab and Haryana high court.

The high court ruled in September 2019 that operation and maintenance of the metro link be handed over to HSVP and directed the Comptroller and Auditor General of India (CAG) to carry out a financial audit of total debt due. The court also ruled that the HSVP must transfer 80% of the debt due, as determined by the CAG, to an escrow account.

In September 2020, the auditors determined the debt to be ₹2,407 crore and the high court took note of the same on September 28, 2020, said IL&FS officials. The HSVP, however, raised several objections to the CAG audit report.

The concessionaire, IL&FS, then moved the Supreme Court, seeking termination payments from the HSVP, after the authority failed to pay an amount of ₹1,925 crore amounting to 80% of the debt due of ₹2,407 crore, as per the CAG audit. On March 26, 2021, the Supreme Court ruled against the HSVP and directed the authority to deposit ₹1,925 crore within three months.

The IL&FS spokesperson described the development as “unprecedented” and said it would greatly boost the morale of infrastructure and project development companies across the country.

“The Supreme Court ruling on March 26, 2021, followed by HSVP’s compliance with the order and transfer of the payable amount to the IL&FS Group entities, will go a long way in protecting the interest of stakeholders and lenders in the Indian infrastructure sector. This ruling will also set a precedence for other projects wherein infrastructure companies, including IL&FS, are seeking payment of their legitimate dues and enforceability of valid contracts and concession agreements with various state governments,” the company spokesperson said.

Appropriation of any amount from the escrow account shall be subject to further orders of the National Company Law Appellate Tribunal or other competent legal authority, as per the order, and the same would be duly complied with by IL&FS, the spokesperson said.