Anil Ambani's Delhi Airport Metro: Courting a Curious Controversy!
The doctrine of legitimate expectation is a principle invoked when a public authority recoils from a promised performance. It falls in the lap of the courts to apply this to make the authority perform its obligation.
It may sound paradoxical to speak of this in the context of a decision rendered by the highest court in the land.
Courts often overturn decisions taken in previous instances if the latter combination of judges sitting in a numerical majority disagrees with it. A higher court, like the Supreme Court (SC), can, and does, overturn judgements of lower courts.
The SC, being the final arbiter of any issue on law, does not reverse its own past judgements in later cases if the judges hearing the matter see the need to revisit the principles and do so with the propriety of a large complement of judges deciding it. 
It is quite unheralded, at least to a layperson, that the court revisits its own decision in a case and reverses it for the reason that the earlier order suffered from some perversity and does it after a gap of almost three years!
The judicial propriety and the compulsions to do this in this instant case is for the legal experts to debate and deliberate on. The article has no intention to enter this domain!
Delhi Airport Metro Express Pvt Ltd (DAMEPL) is a company in the fold of the ADAG group and is a subsidiary of a listed company, Reliance Infrastructure Ltd (R Infra).
DAMEPL was set up as a special purpose vehicle (SPV) to carry out the Delhi Metro project for operating the airport to city line.
The contract between DAMEPL and Delhi Metro Corporation became a subject matter of dispute which landed in arbitration.
The arbitral award became the subject of a chain of litigation that finally found its quietus when, on 10 April 2024, the SC passed an order reversing its earlier judgement rendered in September 2021 by allowing a curative petition filed by Delhi Metro alleging that the arbitral award and the later verdicts approving it are perverse.
Consequent to the issue of the Court’s order, R Infra made a disclosure to the stock exchanges as per the exhibit below.
The above disclosure states that the Court’s verdict would have no implication on the company (holding company) as it had received no amount under the arbitration award from DMRC/DAMEPL.
The notification is quite strange as the holding company as a listed entity, has to report a material event affecting a subsidiary. The fact may be that R Infra may not have received any money on the arbitration matter in the past, but that has very little to do with the reporting formalities.
The contradiction in the representation to the exchanges will be better appreciated if the accounting note in R Infra is seen, which is extracted below.
According to the above note, DMRC has deposited, on various dates, amounts totalling Rs2,945 in the escrow account based on the execution order issued by the Delhi High Court.
The note also confirms that the amounts so received in the escrow account were utilised to pay the debts of DAMEPL to the banks.
Another important point to note is that the favourable arbitral order and its being upheld in the SC on 9 September 2021 was the reason to prepare the accounts of DAMEPL on a going concern basis as per the management note shown above. The extract from the audit report shown on the right echoes the same position.
The question that arises is how would the declaration filed to the exchange by R Infra be correct when the reversal of the earlier SC order on 10 April 2024 is likely to upset all the assumptions underlying the implementation of the arbitral award and the receipt of the first few payments under the award?
In this context, the media release issued to the stock exchanges on 9 September 2021, when the favourable judgement of the SC was issued, makes for an interesting contrast to the latest one!
The part payment of Rs2,945 crore already effected by DMRC will be refundable now as the latest SC order sets aside the arbitral award. However, this amount has already been pulled out by the banks towards the settlement of their outstanding loans.
How will DMRC get its money back? DAMEPL is tottering on bankruptcy and its position as a going concern was being supported based on the premise of receiving the arbitral compensation! 
R Infra itself is in default on various loan commitments and is riddled with multiple litigations in many of its subsidiaries. 
The other outfits of this group (ADAG) are already in different stages of bankruptcy proceedings, though that fact has no relevance to the present issue under discussion. The date in the picture is a little dated but the situation only worsened in the subsequent years and both Reliance Communication Ltd and Reliance Capital Ltd have gone out of the grasp of ADAG through IBC.
During the financial year ended March 2023, the promoter Anil Ambani, through his personal company, and a foreign institutional investor (FII) were cumulatively issued 25.25% shares in the company for a fund infusion of Rs461.76 crore, though Anil Ambani had, in a proceeding before a London court, said his net worth was zero!
Since the verdict of the SC in September 2021, the stock of R Infra has gone up significantly, almost four-fold!
It is difficult to disassociate the share price jump with the favourable award where a bounty of almost Rs8,000 crore was to be received. The receipt of the part amount must have added fuel to the fire. No one can be faulted for the assumption that a SC order is final!
Already in the two days after the decision, the stock has lost more than 30% of its value and investors, who bought the scrip in the days before the SC order, would be staring at a huge loss.
The rug has been pulled from under everyone’s feet! There is no intention to raise doubts on the current order and perhaps passing it was absolutely unavoidable to prevent serious injustice to the affected parties.
But where does it leave the investors who have piled on to the stock in anticipation of better days?
If all the perpetrators of the mistake at the earlier levels go completely scot-free, then the latest decision may be perceived to have done more harm than good.
If the earlier decision was palpably erroneous needing to be set aside, the judges who passed it at all levels cannot have acted in good faith.
How will DMRC get its Rs2,945 crore paid in pursuance of the execution order of the High Court? Can it claim it against the banks which got it as a settlement of loans?
In settling one issue, has the Court opened up a few more to answer? Who would do it is the question as judges don’t answer questions but only pass verdicts!
(Ranganathan V  is a CA and CS. He has over 43 years of experience in the corporate sector and in consultancy. For 17 years, he worked as Director and Partner in Ernst & Young LLP and three years as senior advisor post-retirement handling the task of building the Chennai and Hyderabad practice of E&Y in tax and regulatory space. Currently, he serves as an independent director on the board of four companies.)
1 month ago
Jobs with all perks and no accountabilty .. RBI , Sc , sebi
1 month ago
Nice analysis and thought provoking article by the author. Perhaps the courts also need to take in to account the long term implications of it's judgements before passing any orders. How are we going to deal with judicial accountability?
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