Reliance Infra-DMRC to end in a bitter legal battle - Business Standard

After the pull-out of Reliance Infra from Delhi Airport Expressline, DMRC has assured the commuters that services will remain unaffected for the passengers. The company had sent a letter to DMRC this week stating that it will not run services after 30 June. However the dispute relating to costs and compensation that Reliance Infra has claimed from DMRC could be a bitter legal spectacle to be settled through arbitration.  Under arbitration R-Infra is going to claim costs worth Rs. 600 crore. In addition, if DMRC is found to be liable under the contract it will have to pay 100% of the company debt along with 130 per cent of the equity of the company. The claim costs of Rs. 600 crore includes a claim Rs 350 crore for project related issues and a claim for loss of reputation worth 250 crore.  Since January 2012, Delhi Airport Metro Express (DAME), a Special Purpose Vehicle of R-Infra, had been running the services as an 'agent' for which it has billed DMRC at Rs.25 crore per month. This further adds the cost of Rs. 125 crore that would need to be settled. DAME legally notified DMRC in October, 2012 that it wishes to pull out of the project since then their legal status was that of an 'agent'.  This makes up the claims and bills worth Rs. 725 crore, excluding the costs of termination and breach of contract.  According to officials at R-Infra, the main point of contention between DMRC and DAME is the breach of material clause in the concession agreement. In July, 2012 when the Expressline was closed for cracks in civil structure, DMRC was supposed to mend the problems within 90 days, according to the contract. However DMRC took six months to complete the repairs which allegedly led to reputational and business loss for R-Infra. According to sources, the other major reason is 'suspension for safety'. "There was no joint inspection carried out before the handover because the commonwealth was about start. The bearings in the line that was supposed to have a life of at least fifteen years started breaking "said a senior official. Officials from DMRC remained unavailable for response.  Although DMRC has assured the passengers of the unfettered services, the Ministry of Urban Development is yet to come up with a plan to meet its cost. A senior official at Ministry commented, "Our response to their exit is clear, the services would continue but we will come up with a plan to meet costs and other details in coming 8-10 days". The challenge before DMRC is not only legal costs but to come up with a sustainable plan to cover their costs and continue to provide services to over nine thousand passengers that use the services on a daily basis.  via Business - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNGP6px4Pto0d1XUom9aHgrswX5iSQ&url=http://www.business-standard.com/article/companies/reliance-infra-dmrc-to-end-in-a-bitter-legal-battle-113062900531_1.html

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