Reliance Infra seeks termination payment for Delhi airport metro

Reliance Infrasture Ltd, which terminated operation of the Delhi Airport Metro Express Private Limited (DAMEPL) nine months ago over the Delhi Metro Rail Corporation's (DMRC) "persistent" failure to rectify defects in the civil structure of the metro line (See:  Delhi Metro rejects Reliance Infra's pull-out from airport metro line), has now invoked the termination clause of the concession agreement to run the Delhi Airport Metro Line and demanded payment of termination charges from it.http://www.domain-b.com/companies/companies_a/ADA_Enterprises/20130629_metro_line.html

"As per the terms of the concession agreement, DMRC is now liable to pay DAMEPL a Termination Payment equal to 130 per cent of the adjusted equity and 100 per cent of the debt due for the project, as the termination has arisen owing to DMRC's event of default," Reliance Infra said in release.

DAMPEL, the special purpose vehicle (SPV), which owned Delhi Airport Metro Express Private Limited (DAMEPL), wrote a letter to DMRC on 27 June expressing its inability to continue operations of the line due to poor civil infrastruvture.

DAMEPL said it had terminated the concession agreement with the DMRC for the Delhi airport metro line nearly 9 months back, through its  notice dated 8 October 2012.

"The termination clause had to be invoked by DAMEPL, as DMRC had persistently failed to cure the substantial defects in the civil structure designed and built by DMRC, within the period prescribed under the concession agreement, and on account of material breach and event of default by DMRC arising under the agreement as a result thereof," Reliance Infrastructure said in its release.

"Despite the lapse of 9 months and repeated requests by DAMEPL, DMRC failed to make alternate arrangements for taking over the operations of the metro line, even after the termination of the concession agreement in October 2012. As a result, DAMEPL was compelled to serve a final notice on DMRC once again to take over the operations with effect from 1 July 2013, as it was not possible for DAMEPL to continue the same indefinitely in the above situation," Reliance Infrastructure said, adding, "This takeover of operations has now been completed."

Reliance Infrastructure said the matter has now been referred to arbitration, in accordance with the dispute resolution mechanism specified in the agreement.

"DAMEPL's claims for the termination payment are fully justified and enforceable, and RInfra is confident of recovering its entire investment in DAMEPL," it added.

DMRC, which has already taken over the operations of the 22.7 km-long link, however, rejected the claim of Reliance Infra and termed it as a "violation" of the concession agreement and the ongoing arbitration proceedings.

Sources said Reliance Infrastructure's claims could add up to a Rs2,800 crore burden on DMRC.

The airport metro line, which is the country's first public private partnership (PPP), suspended services  from 7 July 2012 to 22 January 2013 due to technical problems and continues to operate at low speeds and at extended journey time.