Delhi High Court directs Delhi Metro to deposit all money payable to Reliance-owned DAMEPL on receipt of funds from government

The Delhi High Court on Friday directed the Delhi Metro Rail Corporation (DMRC) to deposit all funds payable as per an arbitral award to Anil Ambani-owned Delhi Airport Metro Express Private Limited (DAMEPL), on receipt of funds from the Central and Delhi governments..Justice Yashwant Varma directed the two governments to tend to DMRC's request for extension of the sovereign guarantee subordinate debt, enabling it to liquidate its liabilities under the award. The Court further said,"If permission be accorded to the DMRC, it shall proceed to deposit the entire amount payable under the award along with interest within one month. If the Union Ministry or GNTCD declines the request, the Union shall at the end of two weeks, revert and repatriate all moneys received by it from DMRC post 10 March 2022." .On receipt of the money, the DMRC was directed to transfer the total amount payable to DAMEPL, along with interest, to the escrow account..Justice Varma added that in case of a failure of the parties to proceed in terms of these directions, the entire amount standing to the credit of DMRC as of today shall stand attached."In case DMRC fails to clear all outstanding amounts despite the directions above, the Court reserves the right to frame further appropriate directions against the Union Ministry and GNTCD consequent to the corporate veil having been duly lifted.".The Court also said that the DMRC is merely an alter ego of its two shareholders - the Central and Delhi governments.Justice Varma said that these two sovereign entities exercise control over the DMRC by virtue of the composition of its Board and it is their equity and debt contributions which enables the DMRC to carry out its functions and discharge its statutory obligations.“Both by virtue of the capital invested in the corporation as well as the control vested and exercised by them over its affairs, the Union Ministry and the GNCTD must be recognised in law as being in absolute control and the directing mind. They cannot hide behind the veil of corporate personality especially when it comes to the discharge of binding obligations owed by the DMRC. In any case public policy demands that the veil be lifted and they be commanded to take appropriate steps to enable the DMRC to meet the obligations flowing from the award.”The judge noted that the DMRC's shareholders are not mere individuals having a business interest in the corporation, but sovereign governments in their own right that cannot shirk their responsibility to abide by binding judgments, decrees and awards."If such a situation were permitted to hold, the very structure of the adjudicatory and judicial system would falter and crumble.".DAMEPL, a subsidiary of Reliance Infrastructure, had filed an execution petition seeking payment of the money owed by the DMRC as part of an arbitral award. The company claimed that the total arbitral award amount along with interest in its favour stands at over ₹8,000 crore, of which over ₹6,300 crore is yet to be paid.The Central and Delhi governments each hold 50% shares in the DMRC. However, both of them refused to pay the money..The award under consideration arose out of an agreement signed between the DMRC and DAMEPL in 2008 to develop and operate the orange line of the Delhi Metro that connects Indira Gandhi International Airport's Terminal-3 to Dwarka Sector-21.In March 2022, the High Court had directed DMRC to pay the entire balance amount to the DAMEPL along with interest in two equal instalments, by May 31. This order was upheld by the Supreme Court on May 5.In December 2022, the Supreme Court asked the High Court to proceed with the matter expeditiously and decide it in three months..In a detailed judgment, the Bench also dealt with the doctrine of lifting of corporate veil. Justice Varma said that the doctrine is no longer recognized to be applicable only in the context of the facade and sham tests, and that the courts can employ the principle even in absence of these.The said principle may also, in an appropriate case, be liable to be resorted to where equity and the ends of justice may sanction such recourse, where legal obligations are sought to be avoided, as also in a setting where public policy or public interest so demand and require, the judgment stated.“A decree or judgment of a competent court must necessarily be enforced. Courts of justice would be failing in their duty if a decree were left to be a mere dead letter. If decrees and judgments of courts were to be rendered inexecutable and courts were to simply be forced to stand on the sideline, it would clearly shake the confidence of the people in the legal system and its very efficacy.”.Justice Varma disagreed with the English courts which have been reluctant in expanding the applicability of the doctrine.He said that while legal systems around the world have evolved their own tests or grounds on the basis of which that doctrine may be applied, it is manifest that the shield of a separate legal personality is neither inviolable nor impenetrable.The Court noted that the courts in the United States and the European Union have adopted flexibility in their approach, and applied the principle on grounds of public interest or policy.“The power of the Court to peep behind the veil thus must be recognised and held to be justifiably invoked where questions of public policy, public interest or enforcement of settled legal obligations arise.”.Senior Advocate Kapil Sibal along with Advocates Mahesh Agarwal, Rishi Agarwal, Venkatesh, Megha Mehta, Niyati Kohli, Pranjit Bhattacharya, Suhael Buttan, Vineet Kumar, Manavi Agarwal and Manisha Singh appeared for DAMEPL. Advocates Tarun Johri, Vishwajeeet Tyagi and Ankur Gupta appeared for DMRC. The Central government was represented through Additional Solicitor General (ASG) Chetan Sharma, Central Government Standing Counsel Apoorv Kurup as well as Advocates Amit Gupta, Nidhi Mittal, Ojaswa Pathak, RV Prabhat, Vinay Yadav and Suresh Tripathi. Senior Advocates Parag P Tripathi and Manish Vashisht, Standing Counsel Santosh Tripathi, Additional Standing Counsel Udit Malik and Advocates Arun Panwar, Rachita Garg and Astha Gupta appeared for the Delhi government. .[Read Judgment].[Read our live-coverage of the hearing below]