Holding

The Supreme Court upheld the High Court’s consent order, directing HSVP to deposit 80% of the debt due in escrow within three months and directing that any residual disputes be resolved by arbitration.

Summary

The Haryana government awarded concession agreements to Rapid Metrorail Gurgaon Ltd (RMGL) and Rapid Metrorail Gurgaon South Ltd (RMGSL) for two metro projects, which were later terminated by both parties amid allegations of fraud against the IL&FS group. The State agencies HSVP and HMRTC approached the High Court under Article 226 to stay the termination notices, fearing disruption of metro services, and the Court issued a consent order directing a CAG audit of the "debt due" and the deposit of 80% of that amount into an escrow account. The parties later disputed the audit findings and the escrow deposit, with HMRTC raising objections on the basis of pending investigations and alleged incompleteness of the audit. The Supreme Court examined whether the High Court could intervene in an arbitrable dispute, the enforceability of the consent order, and the public‑interest imperative to protect lenders' funds. It held that the High Court’s order was valid, that HSVP must deposit the stipulated amount, and that any remaining disputes are to be resolved through arbitration as per the concession agreements. The Court consequently directed compliance with the escrow deposit and dismissed the appeals.

Issues considered

The propriety of the High Court exercising writ jurisdiction under Article 226 in a dispute that contains an arbitration clause.
Whether the consent order directing a CAG audit and the deposit of 80% of the debt due is binding and enforceable despite alleged fraud and pending investigations.
Whether HSVP and HMRTC can lawfully avoid or delay the escrow deposit of 80% of the debt due.
The appropriate forum for adjudicating disputes arising from the CAG audit report and the validity of termination notices.
The scope of Supreme Court intervention under Article 136 to enforce the High Court’s directions.

Legislation cited

Arbitration and Conciliation Act, 1996s. Sec. 17, s. Sec. 9
Companies Act, 2013s. Sec. 241(2), s. Sec. 242
Constitution of Indias. Art. 136, s. Art. 226
Specific Relief Act, 1963s. Sec. 14

Subjects

Article 226 writ jurisdictionArbitration clauseConcession agreementEscrow accountDebt duePublic interestCAG auditIL&FS groupTermination of contractInfrastructure financing

Judgment

[2021] 3 S.C.R. 639 639

RAPID METRORAIL GURGAON LIMITED ETC. A
v.
HARYANA MASS RAPID TRANSPORT CORPORATION
LIMITED & ORS.
(Civil Appeals Nos. 925-926 of 2021)
B
MARCH 26, 2021
[DR. DHANANJAYA Y CHANDRACHUD, M R SHAH AND
SANJIV KHANNA, JJ.]
Constitution of India: Art. 226 – Power of High Courts to
issue writ – Award of Concession Agreement to two companies- C
RMGL and RMSGL respectively by Haryana Shehri Vikas
Pradhikaran-HSVP for developing metro rail – Meanwhile direction
by State of Haryana that all metro projects would be handled by the
first respondent – Thereafter, issuance of termination notice by
RMGL and RMSGL to HSVP to bring an end to the Concession
Agreement upon expiry of 90 days from delivery of the termination D
– Thereafter, HSVP issued their termination notices to RMGL and
RMGSL, directing them to hand over the projects to HMRTC –
However, since RMGL and RMGSL were entities of a group
categorised in the Red category, they were to seek approval before
transferring or encumbering any assets – Subsequently, RMGL and E
RMGSL permitted to handover possession and control of metro
project to HSVP pursuant to termination of the Agreement – On the
same day, writ petition u/Art. 226 by HSVP and HMRTC challenging
the notice of termination on the ground that it was against public
interest – High Court granted interim direction for continuance of
the operation of metro project for 30 days, which was further F
extended and during which the debt due under the financing
documents in terms of concession agreements was to be determined
by the auditor and then HSVP was to deposit 80 % of the debt due
as determined in an Escrow Account in terms of Concession
Agreement, which would be subject to order of NCLAT or any other G
court – On appeal, held: Exercise of writ jurisdiction by the High
Court u/Art. 226 was justified since non-interference, which would
have inevitably led to the disruption of rapid metro lines for
Gurgaon, would have had disastrous consequences for the general
public – However, ordinarily the High Court in its jurisdiction u/
H
639
640 SUPREME COURT REPORTS [2021] 3 S.C.R.

A Art. 226 would decline to entertain a dispute which is arbitrable –
Directions contained in the High Court’s consent order makes it
clear that the audit team appointed by CAG was to conduct a
financial audit of the debt due and to examine the scope of the
audit, the audit being completed within 30 days and 80 % of the
debt due being deposited within 30 days after the receipt of the
B
audit report; and that the rest of the disputes between the parties
arising out of the audit report were to be agitated in arbitration –
HSPV and HMRTC could not avoid compliance with the High Court’s
Consent Order since they willingly agreed to pay 80% of the debt
due as per the auditor’s findings – HSPV to deposit 80% of the
C amount within 3 months – Amount to be maintained in the Escrow
Account subject to the orders of NCLAT or any other competent
authority – RMGL and RMGSL on the one hand and HSVP on the
other hand, at liberty to pursue their rights and remedies in
pursuance of the arbitration clause.
D Disposing of the appeals, the Court
HELD: 1.1 The expression ‘debt due’ is defined in Article
1.1 of the Concession Agreement dated 9 December 2009. The
expression indicates that the term debt due comprises of three
components: the principal amount of the debt provided by the
E senior lenders under the financing agreement; all accrued
interest, financing fees and charges payable under the financing
agreement; and any subordinated debt which is included in the
financial package. [Para 36][682-D-H; 683-A]
1.2 Article 18 provides for an Escrow Account into which
F all funds, which constitute the financing package for meeting the
capital cost of the concessionaire, are to be deposited. During
the operational period, all fare and non-fare revenues were also
to be deposited exclusively in the Escrow Account by the
concessionaire. Article 18.2.1 provided for the disbursement from
the Escrow Account, which included debt service payments due
G to the senior lenders. [Para 37][683-F-G]
1.3 Where the Concession Agreement has been terminated
by HUDA on account of a default by the concessionaire, HUDA
was required to take over the complete project and assets, and
to pay to the lenders of the Project, as per the financing documents,
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an amount equal to 80 per cent of the debt due as termination A
payment. Where on the other hand, the termination is by the
concessionaire on account of a default by HUDA, the
concessionaire was entitled to receive by way of a termination
payment, a sum equal to: the debt due; and 110 per cent of the
adjusted equity. [Para 39][686-D-E]
B
1.4 The directions contained in the High Court’s consent
order dated 20 September 2019 makes it abundantly clear that
the audit team appointed by CAG was to conduct a financial audit
of the debt due and to examine the scope of the audit, the consent
order is the time bound process which was envisaged, with the
audit being completed within 30 days and 80 per cent of the debt C
due being deposited within 30 days after the receipt of the audit
report; and that the final aspect which needs to be emphasized is
that the rest of the disputes between the parties arising out of
the audit report were to be agitated in arbitration. The parties
clearly understood that once the debt due was ascertained in D
terms of the audit report, 80 per cent would be deposited by
HSVP in the Escrow Account while the rest of the disputes in
respect of the audit report would be governed by arbitration. A
time of 30 days was envisaged for deposit the amount in Escrow
Account, upon the receipt of the audit report. Subsequently,
another order was passed by the High Court wherein clause (ii) E
of the earlier order was substituted and the substituted one
envisaged that the auditors would also have to examine the scope
of the audit of the debt due suggested by HSVP. Hence, CAG
would also examine the scope of the audit of the debt due
suggested by HSVP in terms of the Concession Agreements. F
Moreover, it was envisaged that the rest of the dispute either
arising out of the CAG report, the validity of the termination
notices issued by both the parties and any past or future claims/
liabilities inter se would be agitated in arbitration. On 15 October
2019, there was a further clarification by the Division Bench that
CAG would examine the scope of the audit of the debt due G
suggested by both the parties in terms of the Concession
Agreements. Thus, it was understood by both the parties that
the determination of the debt due would be in terms of the
Concession Agreements. CAG specifically placed before the High
Court its understanding of the role to be performed by it. In its H
642 SUPREME COURT REPORTS [2021] 3 S.C.R.

A written statement before the High Court on 19 November 2019,
CAG stated that it had decided to appoint an auditor “for the
financial audit of debt due as on the transfer date”. [Paras 45, 46]
[690-H; 691-A-G]
1.5 HMRTC and HSVP, as well as the appellants, were
B apprised at all material times of the work of audit being handed
over by CAG to a firm appointed by it. On 24 February 2020, a
draft report of the financial audit of the debt due of RMGL/
RMGSL was sent to the Principal Secretary to the Government
of Haryana in the Department of Town and Country Planning.
HMRTC was requested to communicate its response on behalf
C of the State government, so that it could be incorporated in the
report. On 27 February 2020, HSVP sought four weeks at the
least, in view of the ongoing Session of the State Legislative
Assembly. The Accountant General Audit, Haryana followed up
the earlier email by subsequent communications dated 18 March
D 2020 and 22 April 2020. By the later communication on behalf of
CAG, the response of the State government was requested to be
furnished before the deadline of 29 April 2020, failing which the
report would be finalized without including their response.
HMRTC, HSVP and the State government, however, did not
furnish their response to the draft report. Eventually, the audit
E reports were finalised in respect of the debt due under the
Concession Agreements with RMGL/RMGSL respectively, and
were placed before the High Court in sealed cover. Following
the opening of the sealed cover on an application by the appellants,
an objection was raised in the form of an affidavit by HMRTC on
F 10 October 2020. According to HMRTC, the audit report was
inconclusive and incomplete, since several aspects which will
have an impact on the debt due remain to be determined. The
auditors stated that the scope of the audit as decided by CAG
was submitted to the High Court on 19 November 2019, and it
was intimated that only those issues which are relevant and related
G to examining the debt due under the Concession Agreements
would be examined. Hence, other issues mentioned by HMRTC,
such as encumbrances and liabilities on the metro project,
shareholding/share in the valuation of the assets of the
concessionaire, change of shareholding rights, criminal acts and
H liabilities, would require forensic and technical audit. Such audits
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are ongoing independently. The audit conducted by the auditors A
appointed by the CAG herein, was limited to examining the debt
due as defined in the Concession Agreements. While arriving at
the principal and interest component of the debt due, the auditors
indicated that other matters had come to their attention, which
can have a significant impact on the debt due, and that the report
B
was subject to the outcome of such matters. [Para 47][692-E-H;
693-A-E]
1.6 Clause (ii) of the order dated 20 September 2019 makes
it abundantly clear that the basic purpose underlying the
entrustment of the reference to the CAG was the determination
of the debt due “as defined under the Concession Contract”. C
The High Court was seized of a proceeding under Article 226 of
the Constitution, and its writ jurisdiction had been invoked to
challenge the notices of termination issued by RMGL and
RMGSL, and for ensuring that the consequence which would
emanate on the expiry of the notice period of 90 days by the D
cessation of the metro operations could be prevented by the
judicial intervention in the course of the public law jurisdiction.
The issuance of a notice of termination, the consequences which
would ensue, and the resolution of disputes is specifically provided
in the arbitration agreement between the parties, which is an
intrinsic part of the Concession Agreements. Hence, there was E
an evident interface between this element of public interest on
the one hand and the contractual rights of the parties to the
Concession Agreements on the other. However, when HMRTC
and HSVP moved the High Court under Article 226, they did so
in view of the impending threat which was looming large on the F
horizon of the rapid metro operations being brought to a standstill
as a result of the proximate expiry of the notice of 90 days
preceding termination. In the instant case, the High Court was
evidently concerned over a fundamental issue of public interest,
which was the hardship that would be caused to commuters who
use the rapid metro as a vehicle for mass transport in Gurgaon. G
As such, the High Court’s exercise of its writ jurisdiction under
Article 226 in the instant case was justified since non-interference,
which would have inevitably led to the disruption of rapid metro
lines for Gurgaon, would have had disastrous consequences for
the general public. However, as a measure of abundant caution, H
644 SUPREME COURT REPORTS [2021] 3 S.C.R.

A it is clarified that ordinarily the High Court in its jurisdiction under
Article 226 would decline to entertain a dispute which is arbitrable.
Moreover, remedies are available under the Arbitration and
Conciliation Act, 1996 for seeking interim directions either under
Section 9 before the Court vested with jurisdiction or under
Section 17 before the arbitral tribunal itself. [Para 49][694-G-H;
B
695-A-C; 696-B-D]
1.7 The termination of the Concession Agreements had
consequences in terms of the provisions contained in the
Agreement requiring a deposit of 80 per cent of the debt due
under Article 24.4. The contesting parties agreed to an
C independent third-party determination of this amount by a neutral
entity, namely the CAG. The primary function of CAG was to
appoint a team of auditors for conducting a financial audit of the
debt due and in that process of also examine the scope of the
audit. The orders dated 4 October 2019 and 15 October 2019
D issued by the High Court also envisaged that CAG would examine
the scope of the audit. While the earlier order of 4 October 2019
required CAG to examine the scope of the audit of the debt due
suggested by HSVP, the subsequent order dated 15 October 2019
required the examination by CAG on the scope of the audit after
bearing in mind the suggestions by both the parties “in terms of
E the Concession Agreement”. The expression “in terms of the
Concession Agreement” indicates that the basis of the audit was
to be what was envisaged in the Concession Agreements, which
specifically defines the expression “debt due”. Pertinently, the
original order of 20 September 2019 specifies a strict time
F schedule within which, on a determination being made by the
auditor, 80 per cent of the debt due would be deposited by HSVP
in the Escrow Account. This was however subject to the safeguard
that it would be subject to any order that may be passed by
NCLAT or by a competent statutory authority. However, it was
further clarified that the rest of the disputes between the parties
G to the lis arising out of the audit report were to be agitated in
arbitration proceedings. [Para 50][696-E-H; 697-A-B]
1.8 The provision, embodied in clause (v) of the operative
directions of the High Court’s consent order dated 20 September
2019, is capable of a reasonable interpretation that once a
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determination was made in the audit report, 80 per cent would A
be deposited in the Escrow Account by HSVP and if any dispute
arising out of the audit report remained, that would be resolved
in arbitration. As a matter of fact, the subsequent order of 4
October 2019 replaced clause (v) by envisaging that the rest of
the disputes between the parties arising out of: the CAG report;
B
the validity of the termination notices issued by both the parties;
and any past or future inter se claims/liabilities; shall be agitated
and decided in arbitration proceedings. [Para 51][697-C-E]
1.9 HSVP and HMRTC on the one hand, and RMGL/
RMGSL on the other, were in discussion at arm’s length when
they invited the High Court to pass its order dated 20 September C
2019, and agreed to the modifications which have been made by
the orders dated 4 October 2019 and 15 October 2019. In the
face of the clear stipulations contained in the order of the High
Court, it would be impermissible to interdict the consequences
emanating from the working out of the directions contained in D
the above orders of the High Court upon the submission of the
CAG report. [Para 52][697-E-F; 698-B]
1.10 CAG in the course of its affidavit filed before this Court
and High Court by the Deputy Accountant General, clarified that
it was decided, after examining the scope of the financial audit of E
the debt due suggested by both the parties, that CAG would
examine only those issues which are related and relevant to
examining the debt due under the Concession Agreements. CAG
followed a process which is fair by making a statement on the
scope of the audit before the High Court in advance; examining
the scope of the audit as suggested by the parties before making F
its determination; appointing a firm of chartered accountants for
conducting an audit as was envisaged in the order of the High
Court; furnishing the contesting parities with a copy of the draft
report; allowing the parties to submit their response to the draft
report; granting an extension of time to the State of Haryana to G
submit its comments; and placing the State on notice that it would
have to file its objections finally by a prescribed deadline, failing
which the report would be finalized. [Para 53][698-C-G]

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646 SUPREME COURT REPORTS [2021] 3 S.C.R.

A 1.11 HMRTC and HSVP are themselves to blame if they
did not submit their responses. CAG has specifically rebutted
the objections to the audit report submitted by HMRTC on the
ground that as a constitutional authority, CAG decided upon the
scope of the audit of the debt in terms of the Concession
Agreements, which it submitted to the High Court. Moreover, it
B
has clarified that this was a financial audit of the debt due and the
auditors reported their findings in terms of the Concession
Agreements. The FIR lodged by the Economic Offences Wing,
the Income Tax Department notice, investigation by the SFIO
and Forensic Audit did not form a part of the financial audit
C conducted by the CAG . CAG has submitted that a financial audit
of the debt due is complete and conclusive under the scope of
audit as decided by CAG, and submitted to the High Court.
[Para 54][698-G-H; 699-A-B]
1.12 The Projects in question have been funded by a
D consortium led by banks, among which are Canara Bank and
Andhra Bank. The terms of the Concession Agreements
expressly recognized that the Projects were being publicly funded
through financial institutions. The audit report emphasized that
the proportion between debt and equity was pegged at 70:30.
The terms of the Concession Agreement dated 9 December 2009
E clearly envisaged the purpose of the Escrow Account in Article
18. HUDA, the predecessor of HSVP, entered into a Concession
Agreement dated 9 December 2009, which in Article 17 expressly
recognizes the linkage between the financing package and the
Concession Agreement. In fact, Article 17.2 emphasizes that the
F rights of the concessionaire would stand waived if financial closure
was not to occur within six months within the cure period of six
months. Further, Article 18.1 envisages that all funds constituting
the financing package for meeting the concessionaire’s capital
cost shall be credited to the Escrow Account during the period of
operations, and all fare and non-fare revenues collected by the
G concessionaire shall be exclusively deposited in it. Under Article
18.2, the concessionaire was required to give to the Escrow bank
irrevocable instructions while opening the Escrow Account that
the deposits into the Escrow Account would be appropriated in
the manner indicated in clauses (i) to (ii) of Article 18.2.1. This
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includes provision for debt service payments. These provisions A
in the Concession Agreement have a vital bearing on the subject
matter of the present dispute. Canara Bank in its affidavit filed
before the High Court has stated that on behalf of consortium of
lenders, acting as facility agent, it financed RMGSL in the
aggregate of Rs 1500 crores in terms of a common loan
B
agreement. The Escrow Account Agreement has been entered
into in pursuance of the Concession Agreement, and to effectuate
the funding of the Project No 2. As on 31 July 2019, the lenders
of RMGSL have an outstanding of Rs 1651 crores approx. Hence,
the Projects which have been executed by RMGL and RMGSL,
involved an outlay of funds from Andhra Bank and Canara Bank, C
who have a vital stake in the financials of the Projects.
[Para 55][699-C-H; 700-A]
1.13 As such, HMRTC and HSVP cannot avoid at this stage
complying with the directions which were issued by the High
Court in its orders dated 20 September 2019, as modified on 4 D
and 15 October 2019, on the plea that an FIR has been lodged on
16 December 2018 against IL&FS group in which there are
allegations against RMGL and RMGSL of producing fake invoices
and inflating the capital cost of the rapid metro Projects. The
circumstances which have been adverted to in the affidavit filed
by HMRTC in the High Court were known to it and to HSVP, E
when they both agreed to an order which emanated with the
consent of the parties on 20 September 2019. Both HMRTC and
HSVP were conscious of their obligation to deposit 80 per cent
of the debt due as a consequence of the termination by the
provisions contained in the Concession Agreements. They wished F
to lend an assurance to the determination of the debt due by
seeking the involvement of the CAG. They made a solemn
commitment before the High Court that within 30 days of the
determination, 80 per cent of the debt due would be deposited in
an Escrow Account. This amount, it must be emphasized, is not
being handed over either to RMGL or RMGSL, which have been G
classified as “red entities” of the IL&FS group. The placement
of the quantum representing 80 per cent of the debt due in Escrow
Account is to abide by such directions as may be issued by NCLAT
or any other competent statutory authority. Besides this
provision, remedies are available either before the competent H
648 SUPREME COURT REPORTS [2021] 3 S.C.R.

A Court under Section 9 or before the Arbitral tribunal under Section
17 of the Arbitration and Conciliation Act, 1996. Hence, there
being an agreement between the parties, to permit HSVP and
HMRTC to obstruct or delay compliance with their obligations
would be manifestly impermissible for three reasons: firstly, the
obligation to deposit 80 per cent debt due as a consequence of
B
the termination emanates from Article 24.4 of the Concession
Agreement dated 9 December 2009; secondly, the obligation to
deposit 80 per cent of the debt due as determined in the report
of the auditor has been assumed voluntarily before the High Court
by HSVP/HMRTC from which, as public bodies, they cannot be
C permitted to resile; and thirdly, there is a vital public interest
element in ensuring that the monies which are committed by banks
and financial institutions towards financing infrastructure projects
are secured to them in terms of the Concession Agreements.
[Para 56][700-B-H; 701-A]
D 1.14 The underlying wrongdoing which was allegedly
conducted by the promoters in the erstwhile management of
IL&FS undoubtedly needs to be investigated. The process of
pursuing the forensic audit, the investigation by the SFIO and by
the law enforcement machinery must follow to its logical
conclusion. The NCLT is supervising the resolution process with
E a government appointed Board now being in charge of the
management of IL&FS. Equally, financing arrangements entered
into by financial institutions towards fulfilling infrastructure
projects, based on the sanctity of the commercial contracts, are
to be duly observed. This facet has to be emphasized since it
F embodies a vital element of public interest as well. Deterioration
in loan recovery not only leads to higher provisions and
diminished profitability but also constrains banks’ lending capacity,
thus affecting the economy adversely”. Unless the dues which
are assured to financial institutions as part of the arrangements
which are envisaged in Concession Agreements are duly enforced,
G the structure of financing for infrastructure projects may well be
in jeopardy. Such a consequence must be avoided by declining to
accede to a request, such as that by HMRTC and HSVP, which is
to allow it to resile from its obligations. These obligations arise
not only in terms of the Concession Agreements, but have been
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solemnly assumed before the High Court. Hence, on both counts, A
HMRTC and HSVP cannot be permitted to resile. [Para 57]
[701-B-E]
1.15 The intervention of this Court under Article 136 of
the Constitution was sought having regard to the manner in which
the proceedings before the High Court were being derailed. On B
12 October 2020, after HMRTC filed its affidavit, the High Court
noted the appellant’s submission that “the matter does not brook
any delay” and yet adjourned the matter to 16 October 2020.
Thereafter, when the proceedings came up on 16 December 2020,
and the response filed by CAG was taken on the record, the
hearing of the writ petitions was again deferred to 8 April 2021. C
This course of events indicates that the whole object and purpose
behind setting down the timelines in the order dated 20 September
2019 stood the risk of being defeated. This Court has been
constrained to intervene in the process in order to ensure that
the sanctity of the understanding that was arrived at before the D
High Court on 20 September 2019 is duly maintained. There is a
vital public interest element in ensuring that monies which are
liable to be deposited in the Escrow Account with a nationalised
bank are duly deposited. HMRTC and HSVP, it must be
emphasized, are not left without remedy. The deposit into the
Escrow Account has to be maintained in that form and will abide E
by such orders that may be passed by NCLAT or by a competent
statutory authority. Besides this, the Concession Agreements
provides a clear-cut remedy for seeking reliefs under the
arbitration agreement. [Para 58][701-F-G; 702-A-C]
1.16 The invocation of the writ jurisdiction of the High Court F
under Article 226 of the Constitution by HMRTC and HSVP was
to challenge the termination notices dated 17 June 2019, and to
obviate the consequence of the cessation of the rapid metro
operations, which would have ensued on the expiry of the notice
period. The arbitration clause of the Concession Agreements
provides sufficient recourse to remedies which can be availed of. G
That apart, the order of the High Court dated 4 October 2019
has also clarified that the rest of the dispute that remains after
the deposit of 80 per cent of the debt due, either arising out of
the CAG report, the validity of the termination notices issued by
both the parties and any past or future inter se claims and liabilities H
650 SUPREME COURT REPORTS [2021] 3 S.C.R.

A shall be agitated and decided in the arbitration proceedings. In
view of the order which is passed, the dispute between the High
Court in the writ jurisdiction under Article 226 of the Constitution
shall stand worked out by granting liberty to the parties to avail
of their rights and remedies in accordance with law. It is directed
that HSVP shall within the stipulated period deposit into the
B
Escrow Account 80 per cent of the debt due as determined in the
reports of the auditors dated 23 June 2020, in the case of RMGL
and RMGSL respectively; the deposit into the Escrow Account
shall continue to be maintained in Escrow, subject to any order
that may be passed by NCLAT or any competent statutory
C authority, and shall not be appropriated by the Escrow Bank
without specific permission; RMGL and RMGSL on the one hand,
and HSVP on the other, are at liberty to pursue their rights and
remedies in pursuance of the arbitration clause contained in the
Concession Agreements on all matters falling within the ambit of
the arbitration agreement, including the validity of the notices of
D
termination, any past or future inter se claims and liabilities as
envisaged in the order of the High Court dated 20 September
2019, as modified on 4 October 2019 and 15 October 2019; in
terms of clause (v) of the order of the High Court dated 20
September 2019, in the event of any dispute arising about the
E correctness of the CAG report, in regard to the determination of
the debt due, any of the parties would be at liberty to raise a
dispute in the course of arbitral proceedings; upon compliance
with the directions contained in (i) RMGL and RMGSL shall
execute and handover to HSVP all documents which are required
for effectuating the transfer of operations, maintenance and assets
F
to HSVP or their nominees with a view to fulfill the obligation of
the concessionaires in Article 25 of the Concession Agreement
dated 9 December 2009 and clause (vi) contained in the order of
the High Court dated 20 September 2019, as modified on 4
October 2019 and 15 October 2019; and the writ petitions filed
G before the High Court by the respondents are disposed of.
[Paras 59, 60][702-D-H; 703-A-G]
Sanjana M. Wig vs Hindustan Petroleum Corporation
Limited (2005) 8 SCC 242 : [2005] 3 Suppl. SCR 190;
Bisra Lime Stone Co. Ltd. v. Orissa SEB, (1976) 2 SCC
167 : [1976] 2 SCR 307; Manish Mohan Sharma v.
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Ram Bahadur Thakur Limited (2006) 4 SCC 416 : [2006] A
3 SCR 97 – referred to.
Case Law Reference
[2005] 3 Suppl. SCR 190 referred to Para 49
[1976] 2 SCR 307 referred to Para 49
B
[2006] 3 SCR 97 referred to Para 52
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.925-
926 of 2021.
From the Judgment and Orders dated 12.10.2020 and 16.12.2020
of the High Court of Punjab and Haryana at Chandigarh in CM-7881- C
CWP-2020 in CWP-24949-2019 and CWP-24951-2019.
Tushar Mehta, SG, Alok Sangwan, Sr. AAG, B.K. Satija, AAG,
Mukul Rohatgi, Puneet Bali, Chetan Mittal, Dhruv Mehta, Sr. Advs.,
Raunak Dhillon, Abhijeet Das, Aditya Marwah, Shubhankar Jain, Arup
Gupta (for M/s Cyril Amarchand Mangaldas), Rajesh Goel, Sumit Kumar D
Sharma, Anurag Kulharia, Sandeep, Jatin Kumar, Udit Garg, Himanshu
Gupta, Devan Munjal, Akshit Jain, Dr. Monika Gusain, Sanjay Bajaj,
Ms. Kanchan Kaur Dhodi, P.B.A. Srinivasan, Amit K. Nain, Parth D.
Tandon, Avinash Mohapatra, Ms. Chandralekha, Keith Varghese, Ms.
Ichchha Kalash, Ms. Nikitha Ross, Rajive Bhalla, Yajur Bhalla, Deepak
Samota, Ashish Bajpayee, Siddharth Srivastava, Shubham Bhalla, Advs. E
for the appearing parties.
The Judgment of the Court was delivered by
DR. DHANANJAYA Y CHANDRACHUD, J.
This judgment has been divided into the following sections to F
facilitate analysis:
A Factual background
B Submissions of counsel
C Analysis of the Concession Agreements G
D Terms of the consent order dated 20 September 2019 passed
by the High Court
E Obligations of HMRTC and HSVP to pay the debt due
F Conclusion
H
652 SUPREME COURT REPORTS [2021] 3 S.C.R.

A A Factual background
1. In 2008, Haryana Shehri Vikas Pradhikaran (“HSVP”), the
second respondent, issued a Request for Qualification and Request for
Proposal (“RFQ/RFP”) for developing a metro rail link from Delhi Metro
Sikanderpur Station on MG Road to NH-8 (“Project No1”). A
B Consortium Agreement was entered into on 1 December 2008 between
IL&FS Rail Limited (“IRL”), IL&FS Transportation Networks Limited
(“ITNL”) and DLF Metro Limited in which IRL was identified as the
lead member of the consortium. HSVP accepted the bid submitted by
the consortium and issued a letter of award of 16 July 2009, subject to
the condition that a concession agreement would be executed within 60
C days. Pursuant to the letter of award, the consortium incorporated the
first appellant, Rapid MetroRail Gurgaon Limited (“RMGL”), under the
Companies Act, 1956 (the “Act of 1956”) and requested HSVP to accept
RMGL as the entity which would undertake, fulfill and exercise the
rights of the consortium under the letter of award.
D 2. On 9 December 2009, HSVP entered into a Concession
Agreement with RMGL for the execution of Project No 1 on a design,
build, finance, operate and transfer basis. HSVP granted a concession
to RMGL for a period of 99 years from the effective date, including the
exclusive right, license and authority during the subsistence of the
E Concession Agreement to implement and operate Project No 1.
3. In 2012, HSVP issued another RFQ/RFP for developing a
metro rail link from Delhi Metro Sikanderpur Station on MG Road to
Sector 56, Gurugram (“Project No 2”).
4. On 25 April 2012, IRL and ITNL entered into a consortium
F arrangement in the form of a Memorandum of Understanding, under
which IRL was identified as the lead member of the consortium. The
bid submitted by the consortium was accepted by HSVP, which issued a
letter of award on 1 October 2012. Pursuant to the letter of award, the
consortium promoted and incorporated the second appellant, Rapid
G MetroRail Gurgaon South Limited (“RMGSL”), which would fulfill the
obligations and exercise the rights of the consortium under the letter of
award. Thereafter, a Concession Agreement was entered into between
HSVP and RMGSL for the execution of Project No 2 on 3 January
2013. The term of the concession was 98 years commencing from the
effective date. RMGSL had the exclusive right, license and authority
H
RAPID METRORAIL GURGAON LTD. ETC. v. HARYANA MASS RAPID 653
TRANS. CORP. LTD [DR. DHANANJAYA Y CHANDRACHUD, J.]

during the subsistence of the Concession Agreement to implement and A
operate Project No 2.
5. RMGL completed Project No 1 on 14 November 2013.
RMGSL completed Project No 2 on 31 March 2017. In the meantime,
on 11 January 2014, the Town and Country Planning Department of the
Government of Haryana directed that all metro projects and projects for B
Haryana Mass Rapid Transport in the State would be handled by the
first respondent, Haryana Mass Road Transport Corporation Limited
(“HMRTC”).
6. On 17 July 2018, RMGL and RMGSL issued notices to HSVP
to cure material breaches they alleged had been committed under the C
Concession Agreement. Responding to the cure notice dated 17 July
2018, HSVP addressed a communication dated 11 October 2018 to both
RMGL and RMGSL.
7. On 1 October 2018, a petition1 was instituted by the Union of
India under Section 241(2) read with Section 242 of the Companies Act, D
2013 (the “Act of 2013”) before the Mumbai Bench of the National
Company Law Tribunal (“NCLT”) against Infrastructure Leasing and
Financial Services Limited (“IL&FS”) and its Board of Directors
(“Board”), on the ground that the affairs of the company and its
subsidiaries were being conducted in a manner prejudicial to public
interest. Both RMGL and RMGSL form part of the IL&FS group of E
companies. Acting on the petition, the NCLT by its order dated 1 October
2018 superseded the existing Board of IL&FS with a newly constituted
Board, which was appointed on the recommendation of the Union
government. The new Board took charge of the affairs of the IL&FS
and was authorised to conduct its business and formulate a road map for F
recovery.
8. The National Company Law Appellate Tribunal (“NCLAT”)
by an order dated 4 February 2019 appointed Mr Justice D K Jain, a
former Judge of this Court, to supervise the resolution process for the
IL&FS group of companies. The appellants, RMGL and RMGSL, G
were categorized as a “red” entity of the IL&FS group of companies in
an affidavit2 dated 11 February 2019 filed by the Union of India before
the NCLAT.
1
Company Petition No 3638 of 2018
2
Filed in Company Appeal (AT) No 346 of 2018
H
654 SUPREME COURT REPORTS [2021] 3 S.C.R.

A 9. On 7 June 2019, RMGL issued a notice of termination to HSVP
seeking to bring an end to the Concession Agreement dated 9 December
2009 in terms of Article 24.5.1, upon the expiry of 90 days from the date
of delivery of this termination notice. A similar termination notice was
issued by RMGSL to HSVP, in terms of Article 32.5.1 of the Concession
Agreement dated 3 January 2013. Further, on 7 June 2019, the appellants
B
responded to the letter of HSVP complaining of material breaches alleged
to have been committed by the appellants under their respective
Concession Agreements.
10. On 26 June 2019, RMGL wrote to HSVP intimating that the
divestment requirements contained in Article 25.4 and Article 25.2 of
C the Concession Agreement dated 9 December 2009 had already been
completed by it. However, HSVP had failed to fulfill its obligations under
Article 25.4 to verify RGML’s compliance with such divestment
requirements. A similar letter was addressed by RMGSL in the context
of the Concession Agreement dated 3 January 2013. On 1 August 2019,
D RMGL informed HSVP that it had completed the formalities for handover
of Project No 1, and that the Concession Agreement dated 9 December
2009 would stand terminated on the expiry of 90 days from the
termination notice. RMGL asserted that it would stop the operation and
maintenance of Project No 1 after the termination. A similar letter was
addressed by RMGSL to HSVP in the context of the Concession
E Agreement dated 3 January 2013 and Project No 2.
11. On 8 August 2019, NCLAT issued directions for the entities
forming a part of IL&FS group of companies which had been categorized
in the “red” category, inasmuch as that they had to seek the approval of
Justice D K Jain before alienating, encumbering, transferring or creating
F third party rights on assets. RMGL presented a memorandum on 19
August 2019 to Justice D K Jain to seek his approval for handover of
the Project No 1 to HSVP. A similar approval was sought by RMGSL
in the context of Project No 2.
12. On 26 August 2019, the respondents issued a notice of
G termination to RMGL under Articles 24.1 and 24.2 of the Concession
Agreement dated 9 December 2009. Terminating the agreement, they
directed RMGL to handover Project No 1 to HMRTC, which in turn
would hand it over to Delhi Metro Rail Corporation (“DMRC”). A similar
notice of termination was issued to RMGSL, coupled with an analogous
H direction for handing over Project No 2.
RAPID METRORAIL GURGAON LTD. ETC. v. HARYANA MASS RAPID 655
TRANS. CORP. LTD [DR. DHANANJAYA Y CHANDRACHUD, J.]

13. On 6 September 2019, Justice D K Jain permitted RMGL to A
handover possession and control of Project No 1 to HSVP pursuant to
the termination of the Concession Agreement dated 9 December 2009,
on or before 9 September 2019. By a separate order on the same date,
RMGSL was permitted to handover possession and control of Project
No 2 by the same date.
B
14. Further, also on 6 September 2019, the same day as the order
of Justice D K Jain permitting handover, the respondents instituted a
Writ Petition3 under Article 32 of the Constitution before the High Court
for the State of Punjab and Haryana challenging notice of termination
dated 7 June 2019 issued by RMGL, inter alia, on the ground that the
period of 90 days shall start from the date of permission, which had not C
been yet granted by Justice D K Jain. An interim direction was sought
for the continuance of the operation of Project No 1 by RMGL. Another
Writ Petition4 was instituted to challenge the notice of termination by
RMGSL on similar grounds, and similar interim directions were sought
in respect of Project No 2. The observations of Justice D K Jain, D
contained in his order dated 6 September 2019, in respect of the
Concession Agreement dated 9 December 2009, were produced before
the High Court, which were as follows:
“20. Nevertheless, Clause 24.6 of Article 24 stipulates that upon
termination of the Concession Contract, “for any reason E
whatsoever” HUDA shall take possession and control of Metro
link forthwith, including the material, construction plan, implements,
equipment, etc., on or about, the site. Therefore, except for the
stipulation of a prior 90 days’ notice in writing to HUDA by the
Concessionaire for termination of the Concession Contract, where
after such termination takes effect, upon termination of the F
Concession Contract by either of the Parties, HUDA is, obliged
to take possession of the Metro link forthwith. I am inclined to
agree with the Ld. Counsel appearing for RMGL that requirement
of the said prior notice is to enable HUDA to prepare itself to
take over the possession and control of the Metro link. In that G
view of the matter, the Notice of termination of the Concession
Contract having been served by RMGL on HSVP (earlier known
as HUDA), in writing on June 7, 2019, the said termination notice
3
WP (C) No 24949 of 2019
4
WP (C) No 24951 of 2019 H
656 SUPREME COURT REPORTS [2021] 3 S.C.R.

A takes effect on the expiry of the 90 days therefrom i.e. September
8, 2019 and RMGL is required to handover the possession and
control of the subject Metro link to HSVP on or before, September
9, 2019 and HSVP is obliged to take possession and control of the
Metro link forthwith. There is no explanation as why HSVP did
not take any steps to ensure smooth handing and taking over of
B
the project by RMGL to HSVP, all this while. In so far as the
question of validity of the termination notice issued by RMGL to
HSVP is concerned, the issue is to be decided at an appropriate
forum and not by the undersigned in terms of the afore-extracted
direction by the Hon’ble NCLAT.”
C The observations of Justice D K Jain in respect of the Concession
Agreement dated 3 January 2013 were as follows:
“19. It is evident that both the parties are ad-idem that both the
parties having issued notices for terminating the Agreement, the
metro link has to be taken over by HSVP/HMRTC but the dispute
D is only with regard to the time when the handing over and taking
over after the same should take place. No explanation whatsoever
is forthcoming as to why, on the receipt of Termination Notice
dated June 7, 2019, HSVP/HMRTC did not take any steps to
ensure smooth handing over of the project by RMGSL to them, all
E this while. In so far as the question of validity of the termination
notice issued RMGSL to HSVP is concerned, the issue is to be
decided at an appropriate forum and not by the undersigned in
terms of the afore-extracted direction by the Hon’ble NCLAT.
20. Accordingly, RMGSL is permitted to handover the possession
F and control of Metro link from Delhi Metro Sikanderpur Station
on MG Road to Sector 56, Gurugram to ASVP, pursuant to the
termination of the Concession Agreement dated January 3, 2013.
It goes without saying that this permission is without prejudice to
the rights and contentions of the contesting parties to take recourse
to appropriate legal proceedings’ to assail the validity and
G consequences of termination of the Concession Agreement by
both of them. It is, however, clarified that HSVP, shall still be free
to engage the services of RMGSL, albeit at the mutually discussed/
negotiated terms and charges to run the subject Metro link till,
such time, appropriate/alternative arrangements are made by
H HSPV to run the same.”
RAPID METRORAIL GURGAON LTD. ETC. v. HARYANA MASS RAPID 657
TRANS. CORP. LTD [DR. DHANANJAYA Y CHANDRACHUD, J.]

15. On 6 September 2019, the High Court, while issuing notice, A
adjourned the proceedings to 9 September 2019 and directed that until
then the operation of the Rapid Metro Rail by the appellants shall continue
on both the lines, till midnight on 9 September 2019. On 9 September
2019, the High Court deferred the hearing to 17 September 2019, with a
consequent extension to its interim order as well. The High Court
B
observed:
“Order dated 09.09.2019
“We propose to pass this order in both the cases i.e. CWP
Nos.24949 and 24951 of 2019.
Although both the contracts dated 03.01.2009 and 03.01.2013 C
executed for both the lines of the Rapid Metro Rail at Gurgaon
have been terminated by both the parties i.e. HSVP (previously
known as “HUDA”) on 26.08.2019 (forthwith) and the RMGSL
by giving 90 days notice with effect from 07.06,2019 which comes
to an end on 09.09.2019. But the operations are still continuing
D
under the orders of this Court dated 06.09.2019 till the midnight of
09.09.2019.
After lengthy arguments addressed by counsel for the parties, the
Court has found that the dispute between the parties may be
resolved by negotiation for which they both would require some
time and, therefore, the hearing of this case is deferred to E
17.09.2019 and the order of stay granted on 06.09.2019 is also
extended till 17.09.2019 till midnight.
During the course of hearing, learned senior counsel appearing
on behalf of the respondent has submitted that with the termination
of the contract with effect from 09.09.2019, the respondent would F
not act as a concessionaire rather would act as an agent.
On the other hand, learned senior counsel for the petitioners has
submitted that the respondent can act as a licensee.
Be that as it may, the question as to whether the respondent would
act for the purpose of operation and management till 17.09.2019 G
till midnight as a licensee or an agent shall be decided on the next
date of hearing.
Learned senior counsel for the respondent has also referred to
the terms and conditions for the purpose of discussion in the meeting
during this period which are also reproduced as under:- H
658 SUPREME COURT REPORTS [2021] 3 S.C.R.

A (1) Time bound handover of the Project to HSVP;
(2) Commitment to take handover the Project by HSVP;
(3) Commitment to pay at least 80% of debt due as termination
payment to RMGL/RMGSL by HSVP;
B (4) Handover to start immediately;
(5) RMGL/RMGSL to act as agent of HSVP for further work
post 09.09.2019;
(6) Cost and benefit to be on HSVP’s account;
(7) Indemnification of RMGL/RMGSL from any third party
C
claims and from HSVP’s actions;
(8) Rights and benefits of parties get frozen on the date
termination of Concession Agreement becomes effective,
be-09-09-2019— and.
D (9) Issuance of vesting certificate by HSVP.
Learned senior counsel appearing on behalf of the petitioners has
submitted that all these issues would be discussed in the joint
meeting of the parties.
Till the next date of hearing i.e. 17.09.2019, the respondent shall
E operate and manage the Rapid Metro Rail at Gurgaon on both the
lines but subject to reimbursement of the insurance and operation
and maintenance cost by the petitioners of this period.
A copy of this order be given to both the parties under signatures
of Bench Secretary of this Court.
F
To be taken up in the urgent list.
A photocopy of this order be placed on the file of other connected
case.”
On 18 September 2019, the following order was passed:
G “Order dated 18.09.2019
Learned senior counsel appearing on behalf of the Rapid Metrorail
Gurgaon Ltd. (RMGL) and the Rapid Metrorail Gurgaon South
Lid. (RMGSL) has made the following proposals:-

H
RAPID METRORAIL GURGAON LTD. ETC. v. HARYANA MASS RAPID 659
TRANS. CORP. LTD [DR. DHANANJAYA Y CHANDRACHUD, J.]

i) RMGL/RMGSL will continue to operate their Metro Link A
for a period of 30 days (i.e. until October 16, 2019) during
which (a) the ‘debt due’ as per financing documents in terms
of the concession agreement may be determined by an
auditor appointed by the Hon’ble Court; and (b) the process
for transfer of the Metro Links may be undertaken under
B
the supervision of two Hon’ble (retired) High Court Judges,
one being nominated by RMGL/RMGSL and one being
nominated by HSVP;
ii) During this extended period since 9 September 2019 RMGL/
RMGSL will act as agents of HSVP, RMGL and RMGSL
will be responsible for all liabilities arising on account of C
their gross negligence and fraud during this time;
iii) The conditions set forth in (i) and (ii) above are subject to
an undertaking from HSVP that once the debt due is
determined by the auditor appointed by the Hon’ble Court
at least 80% of the ‘debt due’ so determined shall be, D
deposited in the escrow account inter alia in terms of the
Concession Agreement Escrow Agreement and Substitution
Agreement.
iv) The above proposal is made to safeguard immediate interest
of the public sector lenders of the project and is without E
prejudice to the rights and, remedies of RMGL/RMGSL
under contract or applicable laws including inter alia the
right to claim any differential amounts that may be due and
payable to the lenders or RMGL/RMGSL as Termination
Payments or any other payments. F
He has also submitted that since the petitioners may take some
time to consider the aforesaid proposals, RMGL/RMGSL shall
continue its operation and management till 20.09.2019 (midnight).
Adjourned to 20.09.2019.
G
To be shown in the Urgent List.
A photocopy of this order be placed in the file of the connected
case.”
16. In the order of the High Court dated 18 September 2019,
there was a specific reference to the proposals which were made on H
660 SUPREME COURT REPORTS [2021] 3 S.C.R.

A behalf of the RMGL and RMGSL. The proposals essentially were
that: firstly, RMGL and RMGSL would continue to operate the rapid
metro link for 30 days, during which the ‘debt due’ as per the financing
documents in terms of their respective Concession Agreements would
be determined by an auditor; and secondly, an undertaking would have
to be furnished by HSVP that on determination of the ‘debt due’ by the
B
auditor, at least 80 per cent of the amount so determined should be
deposited in the Escrow Account in terms of the Concession Agreements.
The respondents HMRTC and HSVP submitted their response to the
proposal which was made by the appellants, which was adverted to in
the earlier order. The response was in the following terms:
C “(i) With respect to the request of the RMGL and RMGSL to
continue to operate the said Metrolines fora period of 30 days, it
is stated that HMRTC and HSVP have already entered into a
formal agreement with the Delhi Metro Rail Corporation Ltd.
“(DMRC)” on 16" September, 2019 for Operations and
D Maintenance “(O&M)” of the said Metro Lines. And it is
categorically stated that HMRTC and HSVP has signed the said
agreement on account of the fact that previously RMGL/RMGSL
were not acceding to the request of HMRTC/HSVP to run the
said Metrolines for sufficient period during which effective
resolution of the entire matter could be achieved. Now, after having
E signed the said agreement with DMRC, HMRTC/HSVP is also
of the view that the entire process of handover of O&M for the
said Metro Lines to DMRC be done under the supervision of
Hon’ble (Retd.) High Court Judge as may be appointed by the
Hon’ble Court within reasonable time.
F (ii) Secondly, the aspect of the ascertainment of “debt due” is
linked with the definition of the words “debt due “in the concession
agreement linked with the ascertainment of the Total Project Cost.
However, the HMRTC and HSVP do hereby agree with the
proposal of the RMGL and RMGSL that an auditor may be
G appointed to ascertain the actual figures in that respect. In this,
matter, the HMRTC and HSVP proposes that Comptroller and
Auditor General of India “(CAG)” may be given the assignment
of financial audits under the order of the Hon’ble Court to ascertain
financial aspects including determination of over invoicing into
the project. HMRTC/HSVP are agreeable for the appointment of
H
RAPID METRORAIL GURGAON LTD. ETC. v. HARYANA MASS RAPID 661
TRANS. CORP. LTD [DR. DHANANJAYA Y CHANDRACHUD, J.]

CAG subject to full cooperation by RMGL and RMGSL and all A
documents and other information pertaining to the ‘debt due’ may
be provided to CAG or the auditor so appointed with a copy to
HMRTC and HSVP.
(iii) Thirdly, during the transition period the period during which
O&M of the said Metro lines shall be transferred from RMGL B
and RMGSL, to DMRC, RMGL & RMGSL have proposed to act
as an agent of the HMRTC and HSVP during the said period. In
this respect it is stated that it will lead to further complications.
HMRTC and HSVP have transferred the amount of insurances
and the entire control will remain with the RMGL and RMGSL
during this period. RMGL and RMGSL shall continue their O&M C
in terms of concession agreements and the HMRTC and HSVP
have no objection that RMGL/RMGSL may receive all the
revenues arising from O&M and incur all expenses therefrom
itself and pay the same as is being done currently. In other words
the RMGL and RMGSL remain responsible and liable for all their D
acts and deeds with are generally associated with the running of
the said Metro Lines, not limited to only the Gross negligence and
fraud during this time.
(iv) Fourthly, the aspect of HMRTC and HSVP undertaking to
deposit the 80% of the debit due in Escrow Account as would be E
ascertained by the auditors depends solely on the outcome of the
report as would be submitted by the learned auditor as shall be
appointed by the Hon’ble Court and the HMRTC and HSVP do
hereby commit and confirm to adhere to the directions as would
be passed by the Hon’ble High Court or NCLAT or any other
court or any other order under any other legal proceeding(s) passed F
by any other competent authority in that respect, in terms of the
concession contract subject to the all other rights and entitlements
in favour of both the parties arising out of the same.
(v) With respect to the submission that RMGL/RMGSL is reserving
their right to claim differential payment, it is apprised that by having G
stated that, RMGL/RMGSL are trying to keep options open to
challenge whereby RMGL/RMGSL may rekindle this entire matter
again after having settled the matter in the light of aforesaid
statement i.e. after having settled the amount which becomes
due i.e. 80% of the debt due in terms of the definition contained in H
662 SUPREME COURT REPORTS [2021] 3 S.C.R.

A the concession agreement as linked with the total project cost
which shall be ascertained by an auditor as shall be appointed by
the Hon’ble Court. As such the same cannot be acceded to since
this would lead to multiplicity of litigation and could be a serious
dampener on this entire matter. This matter is being settled under
the directions of the Hon’ble Court and as such the same should
B
be acceptable to you gracefully.
(vi) That the HMRTC and HSVP hereto reserves its right to make
any further submissions in the light of any further arguments or
facts that may be brought to light in this matter during the audit
process and course of proceedings.”
C
17. The proposal submitted by RMGL and RMGSL, which had
been responded to by HSVP and HMRTC, was then deliberated in the
High Court. Accordingly, the following directions were issued by the
Division Bench on 20 September 2019, recording that “a consensus”
had been arrived at in the presence of senior officers of the contesting
D parties namely, the Managing Director of HMRTC, Chief Administrator
of HSVP, the Managing Director of RMGSL and Director of RMGL.
Thereupon, the directions which were issued by the Division Bench of
the High Court on 20 September 2019 were in the following terms:
“(i) RMGL and RMGSL have decided to continue the Operation
E and Maintenance (for short “O&M”) of both the metro lines for
the period of 30 days w.e.f. 16.09.2019. In the meantime, process
of transfer of control and management of operation and
maintenance of both the Metro links shall start w.e.f. 23.09.2019.
The operation and maintenance by RMGL and RMGSL shall be
F in terms of the order dated 09.09.2019 passed by this Court.
It is needless to mention that in case of any clarification/
modification, the parties shall be at liberty to approach this Court
by moving an appropriate application(s) in these petitions.
Both the parties have requested to appoint two retired Hon’ble
G Judges of the High Court on payment of suitable remuneration to
supervise the aforesaid transfer and in this regard petitioners have
suggested the name of Hon’ble Mr. Justice Kailash Gambhir
(Retd.) and the respondent(s) has suggested the name of Hon’ble
Mr. Justice V.K. Gupta (Retd.).
H
RAPID METRORAIL GURGAON LTD. ETC. v. HARYANA MASS RAPID 663
TRANS. CORP. LTD [DR. DHANANJAYA Y CHANDRACHUD, J.]

Keeping in view the magnitude of work involved, we direct that A
£10.00 Lakh, towards remuneration, shall be paid to Hon’ble Mr.
Justice Kailash Gambhir (Retd.) by the HSVP and remuneration
to the tune of 710.00 Lakhs shall be paid to Hon’ble Mr. Justice
V.K. Gupta (Retd.) by the — RMGL- RMGSL.
(ii) As far as “debt due” as defined under the concession contract B
is concerned, direction is issued to the Comptroller and Auditor
General of India (for short ‘CAG’) to appoint a team of auditors
for the financial audit of the “debt due” and also for examining
the scope of the audit of “debt due” audited by the HSVP with
the assistance of the auditors appointed by the parties to the lis.
C
It is needless to say that the CAG shall complete the aforesaid
audit within a period of 30 days.
(iii) It is directed that the arrangements made by this Court vide
order dated 09.09.2019 shall continue till the process of handing
over the operations is complete. D
(iv) It is further directed that amount of 80% of the debt due,
determined in terms of the audit report of the CAG, shall be
deposited by the HSVP in the Escrow account which shall be
subject to any order passed by the NCLAT or any other competent
statutory authority, within a period of 30 days after the receipt of E
the audit report.
(v) It is further directed that rest of the disputes between the
parties to the lis, arising out of the audit report, shall be agitated
and decided in the arbitration proceedings, a mode provided in the
concession contracts. F
(vi) It is also directed that whatever documents are required for
the purpose of final transfer of operation and management and
the assets, the same be given by the RMGL and RMGSL to HSVP
after the payment of “debt due”.”
This order dated 20 September 2019 was subsequently modified G
by the High Court on 4 October 2019, in the following terms:
“Notice in the applications was issued to which no reply has been
filed, however, suggestions made by the applicant(s)- respondent(s)
are accepted by the non- applicant(s)/petitioner(s) and therefore,
three Clauses i.e. Clause No. II, V and VI of the order dated H
664 SUPREME COURT REPORTS [2021] 3 S.C.R.

A 20.09.2019 are hereby clarified/modified to the following extent:-
In Clause II at pages No. 12 and 13 of the order, the words
i.e. “also for examining the scope of the audit of “debt due” audited
by the HSVP with the assistance of the auditors appointed by the
parties to the lis.” be replaced with the words “also for examining
B the scope of the audit of the debt due suggested by the HSVP
with the assistance of the auditors appointed by the parties to the
lis. The CAG will also examine the scope of the audit of debt due
suggested by the HSVP in terms of the concession agreement.”
As regards to Clause V, it is being replaced with the following:-
C
V) It is further directed that rest of the dispute between the
parties to the lis either arising out of the CAG report, the validity
of the termination notices issued by both the parties and any
past or future inter se claims/liabilities shall be agitated/decided
in the arbitration proceedings, a mode provided in the concession
D agreement. Needless to say that arbitration proceedings shall
be subject to any permission that may be required from NCLAT
or any other competent Court of law.
Insofar as Clause VI is concerned, Learned Senior Counsel
appearing on behalf of the applicant(s)-respondent(s), after taking
E instructions from Mr. Rajiv Banga, Managing Director, RMGSL
and Director RMGL, has submitted that the same be read as
under:-
VI) It is directed that whatever documents are required for
the purpose of transfer of operation and maintenance is
F concerned, the same will be handed over by the RMGL and
RMGSL to the petitioners or their agent/licensee DMRC in
terms of direction No. I and rest of the documents which are
for final transfer of the assets the same be given by the RMGL
and RMGSL to HSVP after payment of the debt due. However,
in the meanwhile the proposed documentation in terms of
G
concession agreement may also be communicated by the
RMGL and RMGSL to the petitioners.
With the aforesaid clarifications/modifications, present applications
are hereby disposed of. Further, on the joint request, of counsel
for the parties, CAG is directed to complete the audit, as ordered
H
RAPID METRORAIL GURGAON LTD. ETC. v. HARYANA MASS RAPID 665
TRANS. CORP. LTD [DR. DHANANJAYA Y CHANDRACHUD, J.]

by this Court, by counting the period of 30 days from the date of A
receipt of certified copy of this order.”
18. On 15 October 2019, the High Court allowed an extension of
seven days for implementing the directions issued in its orders dated 20
September 2019 and 4 October 2019. The High Court also corrected its
earlier order with the consent of the contesting parties, in the following B
terms:
“Accordingly, the applications are allowed.
However, Mr. Puneet Bali has pointed out that there is an error in
the order dated 04.10.2019. He has further submitted that instead
of reading the order, “The CAG will also examine the scope of C
the audit of debt due suggested by the HSVP in terms of the
concession agreement” be read as “The CAG will also examine
the scope of the audit of debt due suggested by both the parties in
terms of the concession agreement.”
19. In pursuance of the order of the High Court, the Comptroller D
and Auditor General of India (“CAG”) presented a statement dated 19
November 2019 in regard to:
(i) The scope of the audit; and
(ii) Deliverables and timelines.
E
The statement has a bearing on the controversy, and is hence
extracted in entirety:
“
1. Verify that the Debt Due has been arrived at with reference
to the terms & conditions of respective Concession F
Contracts and all Financing Agreements/Documents which
may have bearing on the computation of Debt Due.
2. Verify that all funds constituting the financial package (debt
and equity) for meeting the concessionaire’s capital cost
has been credited / received in the Escrow Account, as per G
the quantum/ratio/priority/procedure prescribed in Common
Loan Agreement and assessing the impact on the amount
of debt due.
3. Verify that the funds of financial package, deposited in the
Escrow account, were used for the project assets as defined H
666 SUPREME COURT REPORTS [2021] 3 S.C.R.

A in the Concession Contract and assess the impact on the
amount of debt due.
4. Verify receipt and check that all non-fare revenues were
duly accounted for referring to the agreements governing
such revenues. Similarly, verify receipt and deposit of all
B fare revenues in the Escrow account including reconciliation
with DMRC/other relevant document assessing the impact
on the amount of debt due.
5. Verify that all amounts standing to the credit of Escrow
Account has been appropriated and dealt with in the order
C prescribed in the Concession Contract and Escrow
Agreement assessing the impact on the amount of debt due.
6. Verify that all other receipts and payments have been routed
through Escrow Accounts. Review all other bank accounts
maintained/operated by the concessionaire during
D concession period with a view to assess the impact of the
operation of such account on the amount of Debt Due.
7. Verify that the information contained in Annual Reports (i.e.
Audited Financial Statements, Directors Reports and
Statutory Audit Reports) of the concessionaire, to the extent
E this information has a bearing on the amount of Debt Due,
has been arrived at by following the applicable Accounting
Standards and Guidelines in particular, Ind_AS 11 on
Construction Contracts, Ind_AS 23 on Borrowing Costs,
Ind_AS 38 on Intangible Assets, Ind_AS 115 on Revenue
from Customer Contracts.
F
8. Audit would cover verification of other aspects as may be
considered necessary, ring the course of audit, to verify the
amount of Debt Due.
9. Above Audit would be conducted for the concession period,
since inception, by following the applicable standards of
G
Auditing issued by CAG/CAI (inter alia 200- 299 on General
Principals and Responsibilities, 300-499 on Risk Assessment
and Response to Assessed Risks, 500-599 on Audit
Evidence with emphasis on SA 530 on Audit Sampling and
600-699 on Using Work of Others).
H
RAPID METRORAIL GURGAON LTD. ETC. v. HARYANA MASS RAPID 667
TRANS. CORP. LTD [DR. DHANANJAYA Y CHANDRACHUD, J.]

10. Nature, timing and extent of audit procedure will be impacted A
by the audit evidence obtained. A risk assessment or problem
analysis may be conducted and the scope may be revised
as necessary in response to the audit findings. Unimpeded
and quick access to relevant records/ documents may be
ensured by the auditee. Any delay in getting records would
B
be recorded so as to maintain Audit trail.
Deliverables and timelines
1. Within two weeks from date of award, the Auditor shall
submit Inception Report indicating results of risk assessment,
audit methodology for conducting audit and constraints, if C
any.
2. Draft Audit Report to be submitted by Auditor within three
months from date of award of audit.
3. Monthly appraisal meetings to be held to review the audit
progress and modify the scope of audit, if necessary.” D
20. CAG then filed a Civil Miscellaneous Application, together
with the compliance affidavit, before the High Court on 25 June 2020,
stating that it had appointed a firm of chartered accountants, SARC &
Associates, to undertake a financial audit of the debt due between
HMRTC/HSVP and the concessionaires, RMGL/RMGSL. It was E
noted that in terms of the audit process followed by CAG, the draft audit
report was furnished to both sets of contesting parties by emails dated
19 February 2020 and 24 February 2020. Though the appellants had
responded to the emails, HMRTC had addressed a communication on
27 February 2020 stating that since the budget session of the Haryana
F
Vidhan Sabha was in progress, it was difficult at this stage to have
consultations and to respond to the draft audit report. As such, a period
of four weeks was sought to respond to the draft. In view of this, CAG
had sought an extension of eight weeks before the High Court by filing
an application, on which notice was issued on 18 March 2020, returnable
on 3 April 2020. Thereafter, the lockdown occasioned by Covid-19 G
ensued. CAG by its further communications dated 18 March 2020 and
22 April 2020 sought the response of the HMRTC and the State
government by 29 April 2020, a deadline beyond which it was stated that
the final audit report would be prepared. CAG stated before the High
Court that the financial audit of the ‘debt due’ had been performed by
H
668 SUPREME COURT REPORTS [2021] 3 S.C.R.

A the auditors to whom the work had been assigned in accordance with
the “limited scope of audit which has been submitted in the Court earlier”.
CAG stated that the financial audit had then been finalized, since no
response had been received from HMRTC or the State government.
21. On 18 August 2020, a Civil Miscellaneous Application5 was
B filed before the High Court by RMGL and RMGSL, pursuant to the
order of the High Court dated 20 September 2019 in accordance with
which the CAG had submitted its report in a sealed cover to the High
Court, wherein the appellants sought a direction for:
(a) Opening the sealed cover submitted by CAG containing its
C report of the financial audit of the debt due in terms of the
Concession Agreements; and
(b) Directing the deposit of 80 per cent of the debt due in terms
of the order of the High Court dated 20 September 2019.
22. On 2 September 2020, the High Court issued notice on the
D application filed by the appellants and listed it on 10 September 2020. On
28 September 2020, the sealed cover was opened and the report of the
CAG was taken on the record. The CAG report adverts to the scope of
the audit which was undertaken in respect of the debt due under the
Concession Agreement dated 9 December 2009 with RMGL in the
following extract:
E
“The scope of audit was suggested by RMGL and HMRTC through
communications and presentations. The scope of audit as suggested
by both the parties were examined and the scope of audit of “debt
due” was accordingly firmed up. The suggestions made through
presentations and the scope of audit, as decided by were submitted
F to the Court vide CMA no. 15397 dated 20 November 2019 by
CAG.
It was also informed to the Court that only those Issues that are
related and relevant to examination of the “debt due” as per
concession agreement would be examined. The scope of audit
G decided by CAG and as intimated to the Court has been placed at
Annexure 1B. The issues mentioned in the scope provided by
HMRTC like encumbrances and liabilities on the said metro
project, shareholding / share in valuation of the assets of the
concessionaire company, change of shareholding fights, criminal
5
H CM-7881-CWP-2020
RAPID METRORAIL GURGAON LTD. ETC. v. HARYANA MASS RAPID 669
TRANS. CORP. LTD [DR. DHANANJAYA Y CHANDRACHUD, J.]

acts and liabilities etc. which are said to have been inflicted on the A
Company require detailed forensic and technical audits. It is
understood that such audits are ongoing. This audit is limited to
the examination of “debt due”, as defined in the Concession
Agreement.”
23. In computing the debt due, the audit report notes that the B
actual cost of the project was Rs 1,199 crores as against the budgeted
cost of Rs 1,088 crores. Since the cost overrun is to be contributed by
the sponsors under the loan agreement, this would not have any impact
on the debt due. Hence for the purpose of computing the debt due, the
project cost was taken as Rs 1,088 crores. In computing the debt due,
the audit report took into consideration: C
(i) The principal component of the term loan; and
(ii) The interest component on the term loan.
In arriving at the debt due, the conclusion which was drawn in the
audit report is extracted below: D
“6. Conclusion
The amount of debt-due as per the audit, which has been
conducted within limited scope as detailed in earlier sections
of the report, has been worked out as Rs. 797.52 crores
including interest upto 8 September 2019. E
Other matters that have come to our attention and can have
a significant impact on debt due are listed below. Our report
is subject of the outcome of such matters.
• An entity specific forensic audit of RMGL is being
conducted by the lenders. F
• NCLT as part of its resolution proceedings ordered on 01
January 2019 for the reopening and recasting of the
accounts of IL&FS and two of its subsidiaries IL&FS
Transportation Networks Limited (ITNL) and IL&FS
Financial Services Limited (IFIN) in respect of financial G
years 2013-14 to 2017- 18, under Section 130 of the
Companies Act 2013.The same is one of the basis of
disclaimer of opinion given by statutory auditors of IL&FS
for FY 2018-19. The contracts were awarded by RMGL to
related parties, i.e. IRL worth Rs.623 crore (52 per cent of
H
670 SUPREME COURT REPORTS [2021] 3 S.C.R.

A total project cost) is a subsidiary of ITNL. Further, INL
and IRL are the promoters in the RMGL.
• New board of Directors, in January 2019, has initiated a
third- party forensic examination for the period from April
2013 to September 2018, in relation to certain companies
B of the Group, which is currently ongoing. The same is
one of the basis of disclaimer of opinion given by statutory
auditors of IL&FS for FY2018-19,
• 9 packages which were awarded to IRL, were sub-
contracted to various related and unrelated parties as
C explained by the management. This includes companies with
irregularities as pointed out by Income Tax Department as
mentioned in the income Tax Show Cause Notice!!, dated:
15.11.2018, ref no. ADIT(INV]-3{4}/Show Cause Notice/
ENSO/2018-19/251. Income tax scrutiny/assessments on-
going.
D
Table 12 - Party-wise break-up of the packages sub-
contracted by IRL (Amount in crore)

E

F

Our report is submitted solely for the purpose set forth in
G the first paragraph of this report. This report relates only to
the items specified and does not extend to any financial
statements of RMGL, taken as a whole.”
The audit report for second appellant RMGSL computed the debt
due at Rs 1,609.88 crore, including interest upto to 8 September 2019.
H The conclusion in the audit report is extracted below:
RAPID METRORAIL GURGAON LTD. ETC. v. HARYANA MASS RAPID 671
TRANS. CORP. LTD [DR. DHANANJAYA Y CHANDRACHUD, J.]

“6. Conclusion A
The amount of debt-due as per the audit, which has been
conducted within limited scope as detailed in earlier sections
of the report, has been worked out as Rs.1,609.88 crore
including interest upto 8 September 2019.
B
Other matters that have come to our attention and can have
a significant impact on debt due are listed below. Our report
is subject to the outcome of such matters.
• An entity specific forensic audit of RMGSL is being
conducted by the lenders. C
• NCLT as part of its resolution proceedings ordered on 01
January 2019 for the reopening and recasting of the
accounts of IL&FS and two of its subsidiaries IL&FS
Transportation Networks Limited (ITNL) and IL&FS
Financial Services Limited (IFIN) in respect of financial D
years 2013-14 to 2017- 18, under Section 130 of the
Companies Act 2013. The same is one of the basis of
disclaimer of opinion given by statutory auditors of ILAFS
for FY 2018-198. The contract was awarded by RMGSL
of related party, i.e., TNL worth Rs. 1,803 crore (77 per
E
cent of total project cost).
• New board of Directors, in January 2019, has initiated a
third- party forensic examination for the period from April
2013 of September 2018, in relation to certain companies
of the Group, which is currently ongoing. The same is one F
of the basis of disclaimer of opinion given by statutory
auditors of IL&FS for FY 2018-19.
• 14 packages which were awarded to ITNL, as detailed
above, were subcontracted to various related and unrelated
parties. G
Table 12 – Party-wise break-up of the packages sub-
contracted by ITNL
• IRL further sub-contracted it to the related parties and other
parties which includes companies with irregularities as
H
672 SUPREME COURT REPORTS [2021] 3 S.C.R.

A

B

pointed out by Income Tax Department as mentioned in the
Income Tax Show Cause Notice’, dated: 15.11.2018,
C ref no. ADITIINV]-3(4]/Show Cause Notice/ENSO/2018-
19/251. Income tax scrutiny/assessments is on-going.
Table 13- Party-wise break-up of the packages sub-
contracted by IRL
(Amount in crore)
D
Our report is submitted solely for the purpose set forth in
the first paragraph of this report. This report relates only

E

F

for the items specified and does not extend to any financial
statements of RMGSL, taken as a whole.”

G 24. On 10 October 2020, an affidavit was filed before the High
Court by the Advisor (Planning) HMRTC on behalf of the respondents,
objecting to the audit report. The substance of the objection was that the
audit report had not considered “critical aspects…which shall have a
direct bearing” on the amount of the debt due. In the course of the
affidavit, the following circumstances were highlighted:
H
RAPID METRORAIL GURGAON LTD. ETC. v. HARYANA MASS RAPID 673
TRANS. CORP. LTD [DR. DHANANJAYA Y CHANDRACHUD, J.]

(i) In exercise of powers under Section 241(2) of the Act of A
2013 and in terms of the permission granted by the NCLT,
the Central government had reconstituted the Board of the
IL&FS, the appellants’ parent company whose affairs were
being conducted in prejudicial to the public interest. On 6
December 2018, a First Information Report (“FIR”) had
B
been lodged against RMGL, RMGSL and sister concerns
alleging that monies had been siphoned off from the group
companies. As against RMGL and RMGSL, there were
allegations that fake invoices had been raised as a result of
which the cost of the metro rail project was significantly
higher than comparable projects of DMRC, as a result of C
which the rapid metro was incurring losses year on year.
The losses were occasioned by high interest cost entailed
on “huge capital expenditure”, which in turn was due to
false and bogus invoices;
(ii) Notices have been issued by the Income Tax Department D
against IRL indicting that the group companies were shell
entities who had raised funds through bogus and unsecured
loans and invoices;
(iii) Serious Fraud and Investigation Office (“SFIO”) had
commenced a probe into the affairs of the associated E
companies including IL&FS Financial Services (“IFS”) and
ITNL; and
(iv) Investigations under the Prevention of Money Laundering
Act, 2002 have been initiated against IL&FS.
In this backdrop, it was urged that the CAG had not audited the F
accounts of the concessionaire, RMGL and RMGSL, in accordance
with the scope of audit finalised by them. The auditors, it is stated, had
indicated that the amount of the debt due is subject to the outcome of
various matters which can have a significant impact on the debt due.
Hence, it was urged that the audit is “incomplete and inconclusive”. G
25. HMRTC tabulated its objections to the audit report in the
course of the affidavit before the High Court. HMRTC has submitted
that the scope of audit finalised by CAG “still remains incomplete and
inconclusive”.
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674 SUPREME COURT REPORTS [2021] 3 S.C.R.

A 26. RMGL submitted its reply in which, firstly, it drew attention
to the fact that the High Court’s order dated 20 September 2019
unequivocally obligates the respondents herein to pay 80 per cent of the
debt due within 30 days of the CAG report, and no liberty has been
granted to challenge the report at this stage. Secondly, it was urged that
despite ample opportunities provided by CAG, HMRTC had not
B
furnished any objections to the draft report. Thirdly, it was alleged that
the objections filed before the High Court is an attempt to delay the
fulfillment of the obligation to pay 80 per cent of the debt due despite the
entirety of Project No 1 having been handed over. A similar reply was
also filed by RMGSL.
C 27. An affidavit was also filed before the High Court by CAG in
response to the objections filed by HMRTC. In its affidavit dated 28
October 2020, CAG noted:
“That the scope of financial audit of debt due suggested by both
the parties was examined by CAG being the Constitutional
D authority, and after due consideration, decided the scope of audit
of debt due to be conducted and further it was decided that CAG
will examine only those issues, that are related and relevant to
examination of the debt due as per the concession agreements. It
was also decided that the issues mentioned in the scope provided
E by the HMRTC like encumbrances and liabilities on the said metro
projects, shareholdings/share in valuation of the assets of the
concessionaire companies, change of shareholding rights, criminal
acts & liabilities etc. which have been inflicted on the company
are not related to the present audit. These issues as well as other
issues which may have impact on the viability of the project of
F relate to criminal acts etc, as stated by the HMRTC can be got
audited/examined by HMRC through other agencies or through a
separate forensic audit. These facts and scope of audit decided
by CAG was duly submitted in this Hon’ble Court vide Additional
Affidavit dated 19.11.2019 submitted along with CM No. 17584
G of 2019 in CM No. 15397 of 2019.”
CAG further noted in the course of its affidavit that it had ensured
that:
(i) The firm appointed for conducting the audit had no conflict
of interest with RMGL/RMGSL or any group company
H of the IL&FS group;
RAPID METRORAIL GURGAON LTD. ETC. v. HARYANA MASS RAPID 675
TRANS. CORP. LTD [DR. DHANANJAYA Y CHANDRACHUD, J.]

(ii) After the auditors had conducted the audit of the debt due, A
it was examined by the office of the CAG to ensure that
the financial audit had been conducted and completed in
terms of the scope of audit submitted before the High Court
on 19 November 2019;
(iii) The auditors had completed the financial audit of the debt B
due in terms of the Concession Agreements;
(iv) The draft audit report was submitted to both the parties by
emails dated 19 February and 24 February 2020, which was
followed up with reminders on 18 March and 20 April 2020;
(v) Since no response had been received from HMRTC and C
the State government, the report of the financial audit was
finalised and submitted in a sealed cover to the High Court;
(vi) The objection that the audit report was incomplete and
inconclusive did not hold any substance. In that context,
CAG stated: D
“11, That the objections/response, as submitted vide affidavit
dated 11.10.2020 has been considered and the same does not
hold any substance on account of the following facts:
1) CAG of India, being constitutional authority, decided the
E
scope of audit of debt due in terms of concession agreement
and the same was also submitted to the High Court on
20.11.2019.
2) This is a financial audit of debt due and has been performed
by the auditors M/s, SARC and Associates as per the limited
F
scope of audit. The Auditors have reported their findings as
per the limited scope to arrive at the amount of debt due in
terms of the applicable Concession Agreements. The amount
of debt due has been worked out after examination of
documents as well as verification of records, wherever
required. G
3) The draft report was shared with the HMRTC but it did not
respond despite repeated requests. So the CAG was
constrained to finalise the report without the response of
HMRTC.
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676 SUPREME COURT REPORTS [2021] 3 S.C.R.

A 4) The issues pointed out like reconstitution of Board of Parent
Company IL&FS and investigation against its officers by
Enforcement Directorate, FIR lodged by Economic offence
wing, issue of income tax notice to group company, investigation
by SFIO etc. are matter of investigation / forensic audit and
does not form part of financial audit. It was categorically
B
informed to the High Court that issues relating criminal acts
etc, can be got audited/examined by HMRTC through other
agencies or through separate forensic audit.
5) Although the debt due has been worked out as on 08
September 2019, the Report was neither required nor delve
C upon / comment upon which party’s ‘Event of default’
occurred.”
CAG has thus submitted that the report of the financial audit of
the debt due “is complete and conclusive as per the scope of audit as
decided by CAG” and stands submitted to the High Court on 19
D November 2019 on affidavit.
28. On 12 October 2020, the Division Bench of the High Court
noted the affidavit that had been filed by the Advisor (Planning) HMRTC
and took the affidavit on record, while also noting the submission of
RMGL and RMGSL that the matter “does not brook any delay”. The
E hearing was then adjourned to 16 October 2020 to facilitate filing of
replies. The proceedings then came up before the High Court on 16
December 2020, when on the request of the counsel for the petitioners
before the High Court (HMRTC and the State of Haryana), the hearing
was deferred to 8 April 2021.
F 29. At this stage, the appellants filed Special Leave Petitions
challenging orders dated 12 October 2020 and 16 December 2020 passed
by the High Court. The order of this Court dated 5 February 2021 issuing
notice is extracted below:
“1 Mr Mukul Rohatgi and Mr Puneet Bali, learned Senior Counsel
G appearing on behalf of the petitioners, submit that:
(i) The High Court, by its order dated 20 September 2019
(Annexure P-8), directed the CAG to prepare a report on
the debt which is due to the petitioners and 80% of the debt
was directed to be deposited in an Escrow account within
H thirty days of the report;
RAPID METRORAIL GURGAON LTD. ETC. v. HARYANA MASS RAPID 677
TRANS. CORP. LTD [DR. DHANANJAYA Y CHANDRACHUD, J.]

(ii) Any dispute arising out of the CAG report was to be decided A
in an arbitration proceedings;
(iii) The CAG report was submitted on 23 June 2020; and
(iv) Though 80% of the debt due, as determined by the CAG,
was required to be deposited in an Escrow account within
thirty days, this has not been carried out and the High Court B
has simply adjourned the proceedings to 23 April 2021.
2. Mr Mukul Rohatgi submitted that the dues which are to be
deposited in the escrow account will be to the benefit of the
secured creditors of the petitioners who form a part of the
Infrastructure Leasing & Financial Services Limited group of C
companies presently under the management of a Board of
Directors constituted by the Union Government.
3. Issue notice, returnable on 22 February 2021.
4. Dasti, in addition, is permitted.” D
30. On 22 February 2021, two financial institutions, Andhra Bank
and Canara Bank, were permitted to file their responses. The Special
Leave Petitions were listed thereafter, and have been taken up for final
disposal. We have heard Mr Mukul Rohatgi and Mr Puneet Bali, learned
Senior Counsel appearing on behalf of the appellants, Mr Tushar Mehta,
E
learned Solicitor General appearing on behalf of the respondents and Mr
Dhruv Mehta, learned Senior Counsel appearing on behalf of Andhra
Bank and Canara Bank.
B Submissions of counsel
31. Mr Mukul Rohatgi and Mr Puneet Bali, learned Senior Counsel F
appearing on behalf of the RMGL and RMGSL, submitted that:
(i) The directions contained in the order of the High Court
dated 20 September 2019 are by consent of parties, the
High Court having recorded that a consensus had been
arrived at in the presence of senior officials of the contesting G
parties;
(ii) The appointment of CAG has to be understood in the
backdrop of the earlier orders of the High Court dated 9
September 2019 and 18
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678 SUPREME COURT REPORTS [2021] 3 S.C.R.

A September 2019, which highlighted the concerns of RMGL
and RMGSL that in terms of the Concession Agreements
between the parties 80 per cent of the debt due was required
to be deposited as termination payment by HSVP;
(iii) Responding to these concerns, HMRTC and HSVP had
B agreed to the proposed appointment of an auditor for
determination of the debt due, and proposed the reference
to CAG. HMRTC and HSVP specifically committed to
complying with the orders that may be passed by the High
Court, NCLAT or any other legal proceedings;
C (iv) The Metro Rail Projects, Projects No 1 and Project No 2,
which were undertaken by RMGL and RMGSL were
funded by a consortium of banks and finance was made
available subject to execution of:
a. Consortium Agreement;
D b. Escrow Agreement;
c. Debt Due Agreement; and
d. Financial documents;
(v) The object and purpose hence was to secure the dues of
E the banks and financial institutions;
(vi) Article 24.4 of the Concession Agreement dated 9
December 2009 contains specific provisions in the event of
a termination by HSVP, while Article 24.5.2 contains
provisions in the event that it is terminated by the
F concessionaire, RMGL;
(vii) The requirement of depositing 80 per cent of the debt due
in an Escrow Account is to protect the interest of the banks
and financial institutions which were involved in funding
the Projects;
G (viii) In pursuance of the order passed by Justice D K Jain, the
Projects were handed over to HMRTC and the petitioner
agreed to run the Metro Rail despite the termination in view
of the necessity to avert disruption of metro services;
(ix) The order dated 20 September 2019 was passed by the
H High Court based on consent of parties, under which:
RAPID METRORAIL GURGAON LTD. ETC. v. HARYANA MASS RAPID 679
TRANS. CORP. LTD [DR. DHANANJAYA Y CHANDRACHUD, J.]

a. RMGL/RMGSL were to continue the operation and A
maintenance of the metro lines for 30 days
commencing from 16 September 2019, during which
period the process of transfer of control and
management of the operation and maintenance of
both the metro links was to commence;
B
b. The debt due was to be determined by the CAG in
terms of the Concession Agreements;
c. Upon the determination by the CAG, 80 per cent of
the debt due was to be deposited by HSVP in an
Escrow Account subject to the order of NCLT or C
any other statutory authorities within 30 days of the
receipt of the audit report; and
d. All other disputes were to be decided in arbitration
proceedings, as provided in the Concession
Agreements. D
(x) Once a report has been submitted by CAG, there was no
occasion for HMRTC to raise any objections, since 80 per
cent of the debt due was required to be deposited in an
Escrow Account within 30 days;
(xi) The High Court has no jurisdiction to reopen the terms of a E
consent order;
(xii) The CAG submitted the scope of audit to the High Court.
Right from the inception, it was evident that the audit was
to be carried out for determining the debt due in terms of
the Concession Agreements. CAG has specifically clarified F
in the affidavit filed before the High Court that the audit is
neither incomplete nor inconclusive and that the objections
which have been raised by HMRTC are without any
substance;
(xiii) On the above facts which have been submitted, RMGL/ G
RMGSL have handed over the entire assets consisting of
the rapid metro links to HSVP. The ground that there is an
FIR against the IL&FS group of companies cannot furnish
a valid basis for defeating a contractual obligation to deposit
80 percent of the debt due in Escrow Account, which has
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680 SUPREME COURT REPORTS [2021] 3 S.C.R.

A been confirmed by the consent order of the High Court.
The amount will not be paid over to either RMGL/RMGSL
but would be deposited in an Escrow Account with Andhra
bank and Canara bank, which are public financial institutions.
The amount deposited would abide by the ultimate directions
of the NCLT or any other statutory authority; and
B
(xiv) No charge sheet has been filed as against one of the
companies.
32. Mr Tushar Mehta, learned Solicitor General appearing on
behalf of the respondents, on the other hand, submitted that:
C (i) Investigations are underway in respect of the IL&FS group
of companies, and as a matter of fact both RMGL and
RMGSL have been classified as ‘red entities’:
(ii) FIR No 253 was registered on 6 December 2018, in which
RMGL and RMGSL have been named as accused nos 21
D and 22, and there are specific allegations of fake invoices
and that the cost of projects implemented by them was higher
than for DMRC projects, resulting in losses being incurred;
(iii) Subsequent to the original order of the High Court dated 20
September 2019, a modification was effected on 4 October
E 2019, in terms of which it was envisaged that CAG would
appoint a team of auditors to conduct a financial audit of
the debt due, with the assistance of the auditors appointed
by the parties to the lis. CAG was to hence examine the
scope of the audit of the debt due suggested by HSVP in
F terms of the Concession Agreements;
(iv) The reports submitted by the auditors appointed by CAG
indicate that the audit was limited in nature, confined to
ascertaining the debt due under the Concession Agreements.
On the other hand, the conclusions in the audit reports would
demonstrate that “other matters had come to the attention
G
of the auditors which could have significant impact on the
debt due”;
(v) The detailed objections filed by HMRTC would indicate
that the audit is incomplete and incomprehensive; and
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(vi) Since the proceedings are pending before the High Court, A
there is no reason for the appellants to move this Court,
and the objections raised by HMRTC to the audit reports
would have to be determined on their merit.
33. Mr Dhruv Mehta, learned Senior Counsel appearing on behalf
of the Canara Bank and Andhra Bank, submitted that on the request of B
RMGSL, the consortium led by Canara Bank provided facilities in
aggregate of Rs 1,500 crores in the form of a Rupee Term Loan Facility
under a Common Loan Agreement dated 26 March 2013. Thereafter,
RMGSL also availed the External Commercial Borrower as well as
Derivate Facility. Hence, on the basis of supplementary documents
executed on 29 September 2014, a sum of Rs 1,109 crores was availed C
of by RMGLS from the Senior Lenders, Rs 391 crores from India
Infrastructure Finance Company (UK) Limited, ECB Lenders (forming
part of Senior Debt) as well as USD 30 million from IndusInd Bank
Limited, being the Derivate Facility Lender. As such, an Escrow Account
Agreement dated 2 July 2013, read with Supplementary Agreements D
dated 15 January 2014 and 24 September 2014, was executed between
RMGSL, HSVP and Canara Bank, under which Canara Bank was
appointed as the Escrow Agent. It was stated that as on 31 July 2019,
the lenders of RMGSL had an outstanding claim of Rs 1651 crores approx.
Hence, on termination of the Concession Agreement dated 3 January
2013 by “HUDA”, now HSVP, under Article 32.4 of the Concession E
Agreement dated 3 January 2013, an amount of 80 per cent of the debt
due has to be paid to the lenders of Project No 2. The lenders had filed
a reply before Justice D K Jain stating that they had no objection of the
handing over of the assets to HMRTC, subject to the deposit of the
amount due to the lenders in an Escrow Account. Hence, the debt due F
having now been determined in terms of the audit report, it has to be
deposited in the Escrow Account maintained by Canara Bank. Similarly,
the consortium led by Andhra Bank provided credit facilities for Project
No 1 to RMGL, and maintained a similar Escrow Account. In the
affidavit submitted by Andhra Bank, it was noted that the debt due to all
the members of the consortium led by Andhra Bank was Rs 943 crores G
approx.
34. It was submitted by both the Banks that the Projects were
completed by utilizing funds from the lenders, who are biggest
stakeholders. On the other hand, HMRTC and HSVP have taken
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A possession of the Projects, and are utilizing the revenue from DMRC.
Supporting the contents of the affidavits filed by Canara Bank and Andhra
Bank, Mr Dhruv Mehta urged that 70 per cent of the Projects’ cost is
comprised within debt. Hence, the deposit of 80 per cent of the debt due
amounts only to 56 per cent of the Projects’ cost. Further, the amount
coming to the Escrow Accounts would be subject to the orders of the
B
NCLAT. It has been submitted that the amount, upon deposit in Escrow
Accounts, will be in the hands of the nationalized banks which have
financed the Projects.
35. The rival submissions will now be considered.
C C Analysis of the Concession Agreements
36. At the outset, it is necessary to advert to some of the salient
features of the Concession Agreements. For the purposes of the
discussion, we are referring to the terms of the Concession Agreement
dated 9 December 2009, but similar terms are also present within
D Concession Agreement dated 3 January 2013. The expression ‘debt due’
is defined in Article 1.1 of the Concession Agreement dated 9 December
2009 in the following terms:
“Debt Due” means the aggregate of the following sums
expressed in Indian Rupees outstanding on the Transfer Date:
E (a) the principal amount of the debt provided by the Senior
Lenders under the Financing Agreements for financing the
Total Project Cost (the “Principal”) but excluding any part
of the Principal that had fallen due for repayment two years
prior to the Termination Date;
F (b) all accrued interest, financing fees and charges payable
under the Financing Agreements on, or in respect of, the
debt referred to in Sub-clause (a) above until the Transfer
Date but excluding (i) any interest, fees or charges that
had fallen due one year prior to the Transfer Date, (ii) any
penal interest or charges payable under Financing
G
Agreements to any Senior Lender, and (iii) any pre-payment
charges in relation to accelerated repayment of debt except
where such charges have arisen due to Authority Default;
and

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(c) any Subordinated Debt and all accrued interest thereon, A
which is included in the Financial Package and disbursed
by Lenders for financing the Total Project Cost as per the
Financing Documents.”
The above expression indicates that the term debt due comprises
of three components: B
(i) The principal amount of the debt provided by the senior
lenders under the financing agreement;
(ii) All accrued interest, financing fees and charges payable
under the financing agreement; and
C
(iii) Any subordinated debt which is included in the financial
package.
37. In terms of Article 3.1, HUDA granted to the concessionaire
the exclusive right, license and authority during the subsistence of the
Concession Agreement to implement the project and the concession over D
a period of 99 years. Under Article 17.1, the concessionaire was to
provide to HUDA a copy of the financing package furnished by it to the
prospective lenders. As and when the financing package was agreed
upon by the lenders and the Concession Agreement was confirmed by
the signing of the agreed financing package by both the concessionaire
and the lenders, a copy was required to be furnished to HUDA forthwith. E
Financial closure was to be completed within six months within the signing
of the Concession Agreement, with a cure period of six months, failing
which all rights and claims under the Concession Agreement were to
stand waived. Article 18 provides for an Escrow Account into which all
funds, which constitute the financing package for meeting the capital F
cost of the concessionaire, are to be deposited. During the operational
period, all fare and non-fare revenues were also to be deposited
exclusively in the Escrow Account by the concessionaire. Article 18.2.1
provided for the disbursement from the Escrow Account, which included
debt service payments due to the senior lenders. Article 18 insofar as is
relevant is extracted below: G
“ARTICLE 18
ESCROW ACCOUNT
18.1 Opening of Escrow Account and Deposits into Escrow
Account On Financial Close, (in any case not later than 30 days H
684 SUPREME COURT REPORTS [2021] 3 S.C.R.

A of financial close) the Concessionaire shall open and establish the
Escrow Account with a Bank (the “Escrow Bank”) and ail funds
constituting the Financing Package for meeting the
Concessionaire’s capital costs shall be credited to such Escrow
Account During Operations Period all Fare and Non-Fare
Revenues collected by the Concessionaire shall be exclusively
B
deposited therein, separately.
18.2 Disbursements from Escrow Account
18.2.1 The Concessionaire shall give, at the time of the opening
of the Escrow Account, irrevocable Instructions by way of an
C Escrow Agreement substantially in form set forth in Schedule ‘F’
(the “Escrow Agreement’) to the Escrow Bank instructing, inter
alia, that the deposits Into the Escrow Account shall, be
appropriated in the following order every month and if not due in
a month then appropriated proportionately in such month and
retained in the Escrow Account and paid out there from in the
D month when due unless otherwise expressly provided in the
instruction latter:
(i) All taxes due and payable by the Concessionaire
(ii) All Lease charges payable to HUDA as per Lease
E Agreement
(iii) All expenses in connection with and relevant to the
Concessionaire’s Works by way of payment to the EPC
Contractor and such other persons as may be specified in
the Financing Documents
F (iv) O&M Expenses subject to the ceiling, if any set forth in the
Financial Documents
(v) Connectivity charges and Revenue Share due to HUDA
from the Concessionaire under this Concession Contract
(vi) Monthly proportionate provision of debt service payments
G due to Senior Lenders in an accounting year and payment
of Debt Service Payments to Senior Lenders in the month
when due
(vii) Debt service payment in respect of Subordinate Debt;

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(viii) Any reserve of requirements required to be settled in terms A
of financial document.
(ix) Balance in accordance with the instructions of the
Concessionaire.
18.2.2 The Concessionaire shall not in any manner modify the
order of payment specified in Sub-Article 18.2.1 except with the B
prior written approval of HUDA
18.3 Notwithstanding anything to the contrary contained in the
Escrow Agreement and subject to the provisions contained in Sub-
Articles 25.5 and Article 27, upon Termination of this Concession
Contract, all amounts standing to the credit of the Project Escrow C
Account shall be appropriated and dealt with in the following Order:
(a) all Taxes due and payable by the Concessionaire
(b) all Connectivity charges / non-fare revenue share due and
payable to HUDA under this Concession Contract D
(c) all accrued Debt Service Payment
(d) any payments and Damages due and payable by the
Concessionaire to HUDA pursuant to this Concession Contract,
including Termination claims
(e) all accrued O&M Expenses; E

(f) any other payments required to be made under this Concession
Contract; and
(g) balance, if any, on the instructions of the Concessionaire.
18.4 The instructions contained in the Escrow Concession Contract F
shall remain in full force and effect until the obligations set forth
In Sub-Article 18.3 have been discharged,”
38. Article 24 provides for termination. Article 24.1.1 sets down
events of default on the part of the concessionaire. According to Article
24.4: G
“24.4 Upon Termination by HUDA on account of occurrence of
Concessionaire Event of Default during the Operations Period,
the HUDA shall take over the complete system (all Project
Assets), HUDA shall pay the Lenders of the Project, as per
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A financial documents, an amount equal to 80% of debt “due, as
Termination payment. No termination payment shall be due or
payable on account of Concessionaire’s default occurring prior to
COD.”
39. Article 24.5.2 provides for the consequences of termination
B by the concessionaire, due to a default by HUDA:
“24.5.2 Upon Termination by the Concessionaire on account of
an HUDA Event of Default, HUDA shall take over the complete
system (all Project Assets) and the Concessionaire shalt be entitled
to receive from HUDA by way of Termination Payment a sum
C equal to :
(a) Debt due
(b) 110% of the Adjusted Equity”
Accordingly, where the Concession Agreement has been
D terminated by HUDA on account of a default by the concessionaire,
HUDA was required to take over the complete project and assets, and
to pay to the lenders of the Project, as per the financing documents, an
amount equal to 80 per cent of the debt due as termination payment.
Where on the other hand, the termination is by the concessionaire on
account of a default by HUDA, the concessionaire was entitled to receive
E by way of a termination payment, a sum equal to:
(a) The debt due; and
(b) 110 per cent of the adjusted equity.
Article 24.7 which provides for the termination payments reads
F as follows:
“24.7 Termination Payments: The Termination Payment
pursuant to this Concession Contract shall become due and payable
to the Concessionaire by HUDA within thirty days of a demand
being made by the Concessionaire with the necessary particulars
G duly certified by the Statutory Auditors. If HUDA fails to disburse
the full Termination Payment within 30 (thirty) days, the amount
remaining unpaid shall be disbursed along with interest an
annualised rate of SBI PLR plus two per cent for the period of
delay on such amount.”

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40. Article 30 of the Concession Agreement provides for dispute A
resolution.
Article 30.2 contains an arbitration agreement, which reads as
follows:
“30.2 Arbitration
B
30.2.1 Dispute Due For Arbitration
Disputes or differences shall be due for arbitration only if all the
conditions in Sub- Article 30.1 are fulfilled.”
D Terms of the consent order dated 20 September 2019
passed by the High Court C
41. Pursuant to the petition filed under Section 241(2) read with
Section 242 of the Act of 2013 before the NCLT, the Board of IL&FS
was superseded on 1 October 2018, with a new Board appointed on the
recommendations of the Central government. On 6 December 2018, an
FIR No 253 was registered by the Economic Offences Wing. As pointed D
out by the Solicitor General, RMGL and RMGSL were named as
accused nos 21 and 22 in the FIR, the allegation being in respect of the
procuring of fake invoices, as a result of which the cost of projects
implemented were alleged to be higher than those implemented by
DMRC, resulting in the rapid metro link projects at Gurgaon incurring
E
losses. RMGL and RMGSL, which belong to the IL&FS group of
companies, were thus classified as “red entities”. On 4 February 2019,
Justice D K Jain was appointed by the NCLT to supervise the resolution
process for the IL&FS group. On 7 June 2019, RMGL issued a notice
for the termination of the Concession Agreement dated 9 December
2009 to HSVP under Article 24.5.1, with the period of notice being 90 F
days. A similar notice of termination was issued by RMGSL in terms of
Article 32.5.1 of Concession Agreement dated 3 January 2013. RMGL
and RMGSL addressed communications on 1 August 2019 to HSVP
for completing the handover of the rapid metro link Projects. On 26
August 2019, HMRTC issued a notice of termination to RMGL in
G
terms of the Articles 24.1 and 24.2 of the Concession Agreement dated
9 December 2009. A similar notice was issued to RMGSL. In the interim,
Justice D K Jain was moved by RMGL and RMSL to grant his approval
to the handing over of possession of the rapid metro link Projects. By his
order dated 6 September 2019, Justice D K Jain permitted RMGL and
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688 SUPREME COURT REPORTS [2021] 3 S.C.R.

A RMGSL to handover possession and control of the rapid metro link
Projects to HSVP on or before 9 September 2019. HMRTC and HSVP
then moved the High Court in writ proceedings under Article 226 of the
Constitution seeking:
(i) Writ of certiorari for quashing the notices of termination
B dated 7 June 2019, on the ground that there was no
permission of the competent authority appointed by the
NCLAT, and that it was against the public interest because
the rapid metro project of Gurgaon, which was operational
since 2013, would come to a halt on 8 September 2019; and
C (ii) A writ of mandamus directing that the notice period of 90
days would commence only from the grant of the permission
by the NCLAT.
42. Taking note of the order passed by Justice D K Jain, the High
Court by its order dated 6 September 2019 directed RMGL and RMGSL
D to continue the operation of the rapid metro rail till the midnight of 9
September 2019. On 9 September 2019, the High Court observed that
the dispute between the parties would have to be resolved by negotiations,
and hence the order of stay, under which the rapid metro rail projects
were to be continued in operation by RMGL and RMGSL, was continued
till midnight of 17 September 2019. From the order of the High Court
E dated 9 September 2019, it is evident that RMGL and RMGSL, while
referring to the terms of the proposed discussion which HMRTC
HSVP, catalogued inter alia:
(a) A time bound handover of the project to HSVP and
corresponding commitment for taking it over by HSVP; and
F
(b) A commitment to pay at least 80 per cent of the debt due
as termination payment to RMGL and RMGSL by HSVP.
43. On 18 September 2019, the appellants proposed that they would
continue to operate the metro link Projects until 16 October 2019, during
which period the debt due under the financing documents, in terms of
G
the Concession Agreements, may be determined by an auditor to be
appointed by the High Court. Further, the process for transfer of the
rapid metro link Projects was to be supervised by two former judges of
the High Court. Both the appellants specifically stated that this proposal
was subject to the condition that once the debt due is determined, HSVP
H must deposit 80 per cent of the debt due as determined in an Escrow
RAPID METRORAIL GURGAON LTD. ETC. v. HARYANA MASS RAPID 689
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Account in terms of the Concession Agreement, Escrow Agreement A
and Substitution Agreement. This proposal, it was clarified, was made to
safeguard the interest of the public sector lenders of the Projects.
Responding to the above proposal of the appellants, HMRTC and HSVP
specifically stated in their written responses that:
(i) An agreement had been entered into with DMRC on 16 B
September 2019 for operation and maintenance of the rapid
metro lines;
(ii) As regards the ascertainment of the debt due, this was linked
to the definition of the expression under Concession
Agreements; C
(iii) HMRTC/HSVP agreed with the proposal of RMGL/
RMGSL that an auditor may be appointed to ascertain the
actual figures, and stated that the CAG may be entrusted
with the assignment to ascertain financial aspects and
determining the over invoicing of the Projects; and D
(iv) The deposit of 80 per cent of the debt due as determined in
an Escrow Account would depend on the outcome of the
report of the auditor, and HMRTC and HSVP “commit
and confirm to adhere to the directions as would be passed
by the Hon’ble High Court or NCLAT or any other Court E
or any other order under any other legal proceedings passed
by any other competent authority” in terms of the
Concession Agreements.
44. The above course of events indicates that the entire order
which was passed by the High Court on 20 September 2019 was the
F
outcome of sustained negotiations which took place between RMGL
and RMGSL on the one hand, and HMRTC and HSVP on the other,
commencing from the invocation of the writ jurisdiction under Article
226. Now, it is significant to note that recourse to the proceedings under
Article 226 was taken by HMRTC/HSVP, which challenged the
termination notice and sought the continuation of the operation of the G
rapid metro lines at Gurgaon, which were under imminent threat of
closure, once the notice period expired on 8 September 2019. The
narration of events would make it abundantly clear that initially as a
result of the order of stay granted by the High Court on 6 September
2019, and thereafter consequent upon mutual discussions, RMGL/
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690 SUPREME COURT REPORTS [2021] 3 S.C.R.

A RMGSL agreed to operate the rapid metro link Projects until 16 October
2019, within which period the handover to DMRC would take place.
Equally, the concerns by RMGL/RMGSL, as concessionaires, was that
in terms of the Concession Agreements, 80 per cent of the debt due had
to be deposited in the Escrow Account in terms of the provisions contained
in Article 24.4 in Concession Agreement dated 9 December 2009. All
B
the parties specifically agreed before the High Court that there would
be a reference to the CAG for conducting an audit for the purpose of
determining the debt due. The High Court by its order dated 20 September
2019, issued directions which were specifically noted to be emanating
from the “consensus...arrived at in the presence of senior officers of
C both the parties” namely Mr D Suresh, IAS, Managing Director,
HMRTC, Chief Administrator, HSVP, Mr Rajiv Banga, Managing
Director, RMGL and Director, RMGSL. The consensual order passed
by the High Court envisaged that:
(i) RMGL and RMGSL would continue to operate the rapid
D metro lines for 30 days from 16 September 2019;
(ii) The transfer of the rapid metro lines would be overseen by
two former judges of the High Court;
(iii) The debt due as defined under the Concession Agreements
would be determined under the auspices of the CAG who
E would appoint a team of auditors “for the financial audit of
the debt due and for examining the scope of the audit of the
debt due audited by the HSVP with the assistance of the
auditors appointed by the parties to the lis”;
(iv) The process of audit would be completed within 30 days,
F and 80 per cent of the debt due determined by the audit
report shall be deposited by HSVP in an Escrow account,
which would be subject to the orders of the NCLAT or any
other competent statutory authority, within a period of 30
days of the receipt of the report; and
(v) The rest of the disputes between the parties arising out the
G
audit report, would be agitated and decided in arbitration
proceedings, which was a mode already provided in the
Concession Agreements.
45. Clause (ii) of the directions contained in the High Court’s
consent order dated 20 September 2019 makes it abundantly clear that
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the audit team appointed by CAG was to conduct a financial audit of the A
debt due and to examine the scope of the audit. The next important
aspect of the consent order is the time bound process which was
envisaged, with the audit being completed within 30 days and 80 per
cent of the debt due being deposited within 30 days after the receipt of
the audit report. The final aspect which needs to be emphasized is that
B
the rest of the disputes between the parties arising out of the audit report
were to be agitated in arbitration.
46. This would leave no manner of doubt that parties clearly
understood that once the debt due was ascertained in terms of the audit
report, 80 per cent would be deposited by HSVP in the Escrow Account
while the rest of the disputes in respect of the audit report would be C
governed by arbitration. A time of 30 days was envisaged for deposit the
amount in Escrow Account, upon the receipt of the audit report.
Subsequent to the order dated 20 September 2019, another order was
passed by the High Court on 4 October 2019. Clause (ii) of the earlier
order was substituted. As substituted, it was envisaged that the auditors D
would also have to examine the scope of the audit of the debt due
suggested by HSVP. Hence, CAG would also examine the scope of the
audit of the debt due suggested by HSVP in terms of the Concession
Agreements. Moreover, it was envisaged that the rest of the dispute
either arising out of the CAG report, the validity of the termination notices
issued by both the parties and any past or future claims/liabilities inter E
se would be agitated in arbitration. On 15 October 2019, there was a
further clarification by the Division Bench that CAG would examine the
scope of the audit of the debt due suggested by both the parties in terms
of the Concession Agreements. Thus, it was understood by both the
parties that the determination of the debt due would be in terms of the F
Concession Agreements. CAG specifically placed before the High Court
its understanding of the role to be performed by it. In its written statement
before the High Court on 19 November 2019, CAG stated that it had
decided to appoint an auditor “for the financial audit of debt due as on
the transfer date”. The terms as envisaged define the scope of the work
of the auditor to be: G

(i) Verification of the debt due with reference to the terms
and conditions of the Concession Agreements and all
financing agreements/documents which have a bearing on
the computation of the debt due;
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692 SUPREME COURT REPORTS [2021] 3 S.C.R.

A (ii) Verification that all funds constituting the financial package
both debt and equity, for meeting the capital cost had been
credited and received in the Escrow Account;
(iii) Verification that the funds of the financial package were
used for the project assets as defined in the Concession
B Agreements and their impact on the debt due;
(iv) Verification that all non-fare revenues were duly accounted
and that all fare revenues were deposited in the Escrow
Account;
(v) Verification that the amounts standing to the credit in the
C Escrow Account had been appropriated in the order
prescribed in the Escrow Agreement;
(vi) Verification that all other receipts and payments were routed
through the Escrow Account, together with the review of
all other bank accounts maintained/operated by the
D appellants; and
(vii) Information in the annual reports of the appellants was
arrived at by following the applicable standards and
guidelines.
E Obligations of HMRTC and HSVP to pay the debt due
E
47. HMRTC and HSVP, as well as the appellants, were apprised
at all material times of the work of audit being handed over by CAG to
a firm appointed by it. On 24 February 2020, a draft report of the financial
audit of the debt due of RMGL/RMGSL was sent to the Principal
Secretary to the Government of Haryana in the Department of Town
F
and Country Planning. HMRTC was requested to communicate its
response on behalf of the State government, so that it could be incorporated
in the report. On 27 February 2020, HSVP sought four weeks at the
least, in view of the ongoing Session of the State Legislative Assembly.
The Accountant General Audit, Haryana followed up the earlier email
G by subsequent communications dated 18 March 2020 and 22 April 2020.
By the later communication on behalf of CAG, the response of the State
government was requested to be furnished before the deadline of 29
April 2020, failing which the report would be finalized without including
their response. HMRTC, HSVP and the State government, however,
did not furnish their response to the draft report. Eventually, the audit
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reports were finalised in respect of the debt due under the Concession A
Agreements with RMGL/RMGSL respectively, and were placed before
the High Court in sealed cover. Following the opening of the sealed
cover on an application by the appellants, an objection was raised in the
form of an affidavit by HMRTC on 10 October 2020, as noticed in the
earlier part of this judgment. According to HMRTC, the audit report
B
was inconclusive and incomplete, since several aspects which will have
an impact on the debt due remain to be determined. Now, at this stage,
it is necessary to note that the auditors stated that the scope of the audit
as decided by CAG was submitted to the High Court on 19 November
2019, and it was intimated that only those issues which are relevant and
related to examining the debt due under the Concession Agreements C
would be examined. Hence, other issues mentioned by HMRTC, such
as encumbrances and liabilities on the metro project, shareholding/share
in the valuation of the assets of the concessionaire, change of shareholding
rights, criminal acts and liabilities, would require forensic and technical
audit. It is important to note that such audits are ongoing independently.
D
The audit conducted by the auditors appointed by the CAG herein, was
limited to examining the debt due as defined in the Concession
Agreements. While arriving at the principal and interest component of
the debt due, the auditors indicated that other matters had come to their
attention, which can have a significant impact on the debt due, and that
the report was subject to the outcome of such matters. These included: E
(i) An entity specific forensic audit which is conducted by the
lenders;
(ii) The order passed by NCLT on 1 January 2019 for reopening
and recasting the accounts of IL&FS and two of its
subsidiaries (INTL and IFIM); F

(iii) The initiation by the new Board in January 2019 of third-
party forensic examination for the period between April 2013
to September 2018 in relation to certain companies of the
group; and
G
(iv) The sub-contracting by IRL of nine packages to various
related and unrelated parties including companies, with
irregularities pointed in a notice to show cause issued by
the Income Tax department on 15 November 2018.

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694 SUPREME COURT REPORTS [2021] 3 S.C.R.

A Indeed, the submission of the learned Solicitor General that the
audit under the auspices of the CAG is incomplete and inconclusive is
based on the above statements contained in the audit report noticing
other matters which may have a bearing on the debt due.
48. Now the issue before the Court in this backdrop is whether
B the consequences envisaged in the consent order of the High Court
dated 20 September 2019 can stand obviated on the above grounds. At
the very outset, it is important to note that the FIR in respect of IL&FS
group of companies was lodged on 6 December 2018. The termination
notices of June and August 2019, and the institution of the writ
proceedings, took place thereafter. Evidently the appellants on the one
C hand, as well as HSVP/HMRTC on the other, were conscious of the
developments which were taking place in respect of the IL&FS group
of companies in the proceedings before Justice D K Jain on 19 August
2019. When the consent order was passed before the High Court, HSVP
was represented by counsel as well as the Chief Administrator of HSVP
D and Managing Director of HMRTC who were also present. The financial
institutions including Andhra Bank were also in appearance. The consent
order before the High Court on 20 September 2019 was also preceded
by mutual discussions between the parties and the exchange of written
proposals. which have been referred to expressly by the High Court.
The consent order of the High Court envisages:
E
(i) The manner in which the expression ‘debt due’ would be
determined;
(ii) The manner in which the scope of the audit report would
be prescribed; and
F (iii) The consequence of the determination by the auditors to
be appointed by the CAG.
49. Clause (ii) of the order dated 20 September 2019 makes it
abundantly clear that the basic purpose underlying the entrustment of
the reference to the CAG was the determination of the debt due “as
G defined under the Concession Contract”. The High Court, it must be
emphasized, was seized of a proceeding under Article 226 of the
Constitution, and its writ jurisdiction had been invoked to challenge the
notices of termination issued by RMGL and RMGSL, and for ensuring
that the consequence which would emanate on the expiry of the notice
period of 90 days by the cessation of the metro operations could be
H
RAPID METRORAIL GURGAON LTD. ETC. v. HARYANA MASS RAPID 695
TRANS. CORP. LTD [DR. DHANANJAYA Y CHANDRACHUD, J.]

prevented by the judicial intervention in the course of the public law A
jurisdiction. The issuance of a notice of termination, the consequences
which would ensue, and the resolution of disputes is specifically provided
in the arbitration agreement between the parties, which is an intrinsic
part of the Concession Agreements. Hence, there was an evident
interface between this element of public interest on the one hand and
B
the contractual rights of the parties to the Concession Agreements on
the other. However, when HMRTC and HSVP moved the High Court
under Article 226, they did so in view of the impending threat which was
looming large on the horizon of the rapid metro operations being brought
to a standstill as a result of the proximate expiry of the notice of 90 days
preceding termination. In Sanjana M. Wig vs Hindustan Petroleum C
Corporation Limited6, a two judge Bench of this Court, speaking
through Justice S B Sinha, has observed:
“12. The principal question which arises for consideration is as to
whether a discretionary jurisdiction would be refused to be
exercised solely on the ground of existence of an alternative remedy D
which is more efficacious…
13. However, access to justice by way of public law remedy
would not be denied when a lis involves public law character
and when the forum chosen by the parties would not be in a
position to grant appropriate relief. E
[…]
18. It may be true that in a given case when an action of the party
is dehors the terms and conditions contained in an agreement as
also beyond the scope and ambit of the domestic forum created
therefor, the writ petition may be held to be maintainable; but F
indisputably therefor such a case has to be made out. It may also
be true, as has been held by this Court in Amritsar Gas Service
[(1991) 1 SCC 533] and E. Venkatakrishna [(2000) 7 SCC 764]
that the arbitrator may not have the requisite jurisdiction to direct
restoration of distributorship having regard to the provisions G
contained in Section 14 of the Specific Relief Act, 1963; but while
entertaining a writ petition even in such a case, the court may not
lose sight of the fact that if a serious disputed question of fact is
involved arising out of a contract qua contract, ordinarily a writ
6
(2005) 8 SCC 242 H
696 SUPREME COURT REPORTS [2021] 3 S.C.R.

A petition would not be entertained. A writ petition, however, will
be entertained when it involves a public law character or
involves a question arising out of public law functions on the part
of the respondent.”
(emphasis supplied)
B In the present case, the High Court was evidently concerned over
a fundamental issue of public interest, which was the hardship that would
be caused to commuters who use the rapid metro as a vehicle for mass
transport in Gurgaon. As such, the High Court’s exercise of its writ
jurisdiction under Article 226 in the present case was justified since non-
C interference, which would have inevitably led to the disruption of rapid
metro lines for Gurgaon, would have had disastrous consequences for
the general public. However, as a measure of abundant caution, we
clarify that ordinarily the High Court in its jurisdiction under Article 226
would decline to entertain adispute which is arbitrable 7. Moreover,
remedies are available under the Arbitration and Conciliation Act, 1996
D for seeking interim directions either under Section 9 before the Court
vested with jurisdiction or under Section 17 before the Arbitral Tribunal
itself.
50. It is also important to note that the termination of the
Concession Agreements had consequences in terms of the provisions
E contained in the Agreement requiring a deposit of 80 per cent of the debt
due under Article 24.4. The contesting parties agreed to an independent
third-party determination of this amount by a neutral entity, namely the
CAG. The primary function of CAG was to appoint a team of auditors
for conducting a financial audit of the debt due and in that process of
F also examine the scope of the audit. The orders dated 4 October 2019
and 15 October 2019 issued by the High Court also envisaged that CAG
would examine the scope of the audit. While the earlier order of 4 October
2019 required CAG to examine the scope of the audit of the debt due
suggested by HSVP, the subsequent order dated 15 October 2019 required
the examination by CAG on the scope of the audit after bearing in mind
G the suggestions by both the parties “in terms of the Concession
Agreement”. The expression “in terms of the Concession Agreement”
indicates that the basis of the audit was to be what was envisaged in the
Concession Agreements, which specifically defines the expression “debt
due”. Pertinently, the original order of 20 September 2019 specifies a
7
H Bisra Lime Stone Co. Ltd. vs Orissa SEB, (1976) 2 SCC 167
RAPID METRORAIL GURGAON LTD. ETC. v. HARYANA MASS RAPID 697
TRANS. CORP. LTD [DR. DHANANJAYA Y CHANDRACHUD, J.]

strict time schedule within which, on a determination being made by the A
auditor, 80 per cent of the debt due would be deposited by HSVP 7
Bisra Lime Stone Co. Ltd. vs Orissa SEB, (1976) 2 SCC 167 in the
Escrow Account. This was however subject to the safeguard that it
would be subject to any order that may be passed by NCLAT or by a
competent statutory authority. However, it was further clarified that the
B
rest of the disputes between the parties to the lis arising out of the audit
report were to be agitated in arbitration proceedings.
51. This provision, which is embodied in clause (v) of the operative
directions of the High Court’s consent order dated 20 September 2019,
is capable of a reasonable interpretation that once a determination was
made in the audit report, 80 per cent would be deposited in the Escrow C
Account by HSVP and if any dispute arising out of the audit report
remained, that would be resolved in arbitration. As a matter of fact, the
subsequent order of 4 October 2019 replaced clause (v) by envisaging
that the rest of the disputes between the parties arising out of:
(i) the CAG report; D

(ii) the validity of the termination notices issued by both the
parties; and
(iii) any past or future inter se claims/ liabilities; shall be agitated
and decided in arbitration proceedings. E
52. HSVP and HMRTC on the one hand, and RMGL/RMGSL
on the other, were in discussion at arm’s length when they invited the
High Court to pass its order dated 20 September 2019, and agreed to the
modifications which have been made by the orders dated 4 October
2019 and 15 October 2019. A two judge Bench of this Court, speaking F
through Justice Ruma Pal, in Manish Mohan Sharma vs Ram Bahadur
Thakur Limited8 has observed:
“28…A consent decree has been held to be a contract with the
imprimatur of the Court superadded. It is something more than a
mere contract and has the elements of both a command and a
G
contract. (See: Wentworth v. Bullen 141 ELR 769; C.F. Angadi v.
Y.S. Hirannayya [1972] 2 SCR 515). As was said by the Privy
Council as early as 1929, “The only difference in this respect
between an order made by consent and one not so made is that
8
(2006) 4 SCC 416 H
698 SUPREME COURT REPORTS [2021] 3 S.C.R.

A the first stands unless and until it is discharged by mutual agreement
or is set aside by another order of the Court; the second stands
until and unless it is discharged on an appeal (See: Charles Hubert
Kinch v. Edward Keith Walcott and Ors.).”
In the face of the clear stipulations contained in the order of the
B High Court, it would be impermissible to interdict the consequences
emanating from the working out of the directions contained in the above
orders of the High Court upon the submission of the CAG report.
53. CAG in the course of its affidavit filed before this Court and
High Court by the Deputy Accountant General Shri KSN Prasad, IAS
C and AS (Deputy General (Administration), has clarified that it was
decided, after examining the scope of the financial audit of the debt due
suggested by both the parties, that CAG would examine only those issues
which are related and relevant to examining the debt due under the
Concession Agreements. CAG followed a process which is fair by:

D (i) making a statement on the scope of the audit before the
High Court in advance;
(ii) examining the scope of the audit as suggested by the parties
before making its determination;
(iii) appointing a firm of chartered accountants for conducting
E an audit as was envisaged in the order of the High Court;
(iv) furnishing the contesting parities with a copy of the draft
report;
(v) allowing the parties to submit their response to the draft
report;
F
(vi) granting an extension of time to the State of Haryana to
submit its comments; and
(vii) placing the State on notice that it would have to file its
objections finally by a prescribed deadline, failing which
G the report would be finalized.
54. HMRTC and HSVP are themselves to blame if they did not
submit their responses. CAG has specifically rebutted the objections to
the audit report submitted by HMRTC on the ground that as a
constitutional authority, CAG decided upon the scope of the audit of the
H debt in terms of the Concession Agreements, which it submitted to the
RAPID METRORAIL GURGAON LTD. ETC. v. HARYANA MASS RAPID 699
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High Court. Moreover, it has clarified that this was a financial audit of A
the debt due and the auditors reported their findings in terms of the
Concession Agreements. The FIR lodged by the Economic Offences
Wing, the Income Tax Department notice, investigation by the SFIO and
Forensic Audit did not form a part of the financial audit conducted by the
CAG. CAG has submitted that a financial audit of the debt due is complete
B
and conclusive under the scope of audit as decided by CAG, and submitted
to the High Court.
55. It is pertinent to remember that the Projects in question have
been funded by a consortium led by banks, among which are Canara
Bank and Andhra Bank. The terms of the Concession Agreements
expressly recognized that the Projects were being publicly funded through C
financial institutions. The audit report emphasized that the proportion
between debt and equity was pegged at 70:30. The terms of the
Concession Agreement dated 9 December 2009 clearly envisaged the
purpose of the Escrow Account in Article 18. HUDA, the predecessor
of HSVP, entered into a Concession Agreement dated 9 December 2009, D
which in Article 17 expressly recognizes the linkage between the financing
package and the Concession Agreement. In fact, Article 17.2 emphasizes
that the rights of the concessionaire would stand waived if financial
closure was not to occur within six months within the cure period of six
months. Further, Article 18.1 envisages that all funds constituting the
financing package for meeting the concessionaire’s capital cost shall be E
credited to the Escrow Account during the period of operations, and all
fare and non-fare revenues collected by the concessionaire shall be
exclusively deposited in it. Under Article 18.2, the concessionaire was
required to give to the Escrow bank irrevocable instructions while opening
the Escrow Account that the deposits into the Escrow Account would F
be appropriated in the manner indicated in clauses (i) to (ii) of Article
18.2.1. This includes provision for debt service payments. These
provisions in the Concession Agreement have a vital bearing on the subject
matter of the present dispute. Canara Bank in its affidavit filed before
the High Court has stated that on behalf of consortium of lenders, acting
as facility agent, it financed RMGSL in the aggregate of Rs 1500 crores G
in terms of a common loan agreement. The Escrow Account Agreement
has been entered into in pursuance of the Concession Agreement, and
to effectuate the funding of the Project No 2. As on 31 July 2019, the
lenders of RMGSL have an outstanding of Rs 1651 crores approx.
Hence, the Projects which have been executed by RMGL and RMGSL, H
700 SUPREME COURT REPORTS [2021] 3 S.C.R.

A involved an outlay of funds from Andhra Bank and Canara Bank, who
have a vital stake in the financials of the Projects.
56. As such, HMRTC and HSVP cannot avoid at this stage
complying with the directions which were issued by the High Court in its
orders dated 20 September 2019, as modified on 4 and 15 October 2019,
B on the plea that an FIR has been lodged on 16 December 2018 against
IL&FS group in which there are allegations against RMGL and RMGSL
of producing fake invoices and inflating the capital cost of the rapid
metro Projects. The circumstances which have been adverted to in the
affidavit filed by HMRTC in the High Court were known to it and to
HSVP, when they both agreed to an order which emanated with the
C consent of the parties on 20 September 2019. Both HMRTC and HSVP
were conscious of their obligation to deposit 80 per cent of the debt due
as a consequence of the termination by the provisions contained in the
Concession Agreements. They wished to lend an assurance to the
determination of the debt due by seeking the involvement of the CAG.
D They made a solemn commitment before the High Court that within 30
days of the determination, 80 per cent of the debt due would be deposited
in an Escrow Account. This amount, it must be emphasized, is not being
handed over either to RMGL or RMGSL, which have been classified
as “red entities” of the IL&FS group.
E The placement of the quantum representing 80 per cent of the
debt due in Escrow Account is to abide by such directions as may be
issued by NCLAT or any other competent statutory authority. Besides
this provision, remedies are available either before the competent Court
under Section 9 or before the Arbitral tribunal under Section 17 of the
Arbitration and Conciliation Act, 1996. Hence, there being an agreement
F between the parties, to permit HSVP and HMRTC to obstruct or delay
compliance with their obligations would be manifestly impermissible for
three reasons:
(i) Firstly, the obligation to deposit 80 per cent debt due as a
consequence of the termination emanates from Article 24.4
G of the Concession Agreement dated 9 December 2009;
(ii) Secondly, the obligation to deposit 80 per cent of the debt
due as determined in the report of the auditor has been
assumed voluntarily before the High Court by HSVP/
HMRTC from which, as public bodies, they cannot be
H permitted to resile; and
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(iii) Thirdly, there is a vital public interest element in ensuring A
that the monies which are committed by banks and financial
institutions towards financing infrastructure projects are
secured to them in terms of the Concession Agreements.
57. The underlying wrongdoing which was allegedly conducted
by the promoters in the erstwhile management of IL&FS undoubtedly B
needs to be investigated. The process of pursuing the forensic audit, the
investigation by the SFIO and by the law enforcement machinery must
follow to its logical conclusion. The NCLT is supervising the resolution
process with a government appointed Board now being in charge of the
management of IL&FS. Equally, financing arrangements entered into
by financial institutions towards fulfilling infrastructure projects, based C
on the sanctity of the commercial contracts, are to be duly observed.
This facet has to be emphasized since it embodies a vital element of
public interest as well. Commentators have noted that, “[d]eterioration
in loan recovery not only leads to higher provisions and diminished
profitability but also constrains banks’ lending capacity, thus affecting D
the economy adversely” 9 . Unless the dues which are assured to financial
institutions as part of the arrangements which are envisaged in Concession
Agreements are duly enforced, the structure of financing for infrastructure
projects may well be in jeopardy. Such a consequence must be avoided
by declining to accede to a request, such as that by HMRTC and HSVP,
which is to allow it to resile from its obligations. These obligations arise E
not only in terms of the Concession Agreements, but have been solemnly
assumed before the High Court. Hence, on both counts, HMRTC and
HSVP cannot be permitted to resile.
58. The intervention of this Court under Article 136 of the
Constitution was sought having regard to the manner in which the F
proceedings before the High Court were being derailed. On 12 October
2020, after HMRTC filed its affidavit, the High Court noted the
appellant’s submission that “the matter does not brook any delay” and
yet adjourned the matter to 16 October 2020. Thereafter, when the
proceedings came up on 16 December 2020, and the response filed by G
CAG was taken on the record, the hearing of the writ petitions was
again deferred to 8 April 2021. This course of events indicates that the
9
Rekha Mishra, Rajmal and Radheshyam Verma, “Determinants of Recovery of Stressed
Assets in India: An Empirical Study”. Economics and Political Weekly, Vol. 51, Issue
No. 43, 22 Oct, 2016. H
702 SUPREME COURT REPORTS [2021] 3 S.C.R.

A whole object and purpose behind setting down the timelines in the order
dated 20 September 2019 stood the risk of being defeated. This Court
has been constrained to intervene in the process in order to ensure that
the sanctity of the understanding that was arrived at before the High
Court on 20 September 2019 is duly maintained. As we have already
observed earlier, there is a vital public interest element in ensuring that
B
monies which are liable to be deposited in the Escrow Account with a
nationalised bank are duly deposited. HMRTC and HSVP, it must be
emphasized, are not left without remedy. The deposit into the Escrow
Account has to be maintained in that form and will abide by such orders
that may be passed by NCLAT or by a competent statutory authority.
C Besides this, the Concession Agreements provides a clear-cut remedy
for seeking reliefs under the arbitration agreement.
59. As noted earlier, the invocation of the writ jurisdiction of the
High Court under Article 226 of the Constitution by HMRTC and HSVP
was to challenge the termination notices dated 17 June 2019, and to
D obviate the consequence of the cessation of the rapid metro operations,
which would have ensued on the expiry of the notice period. The
arbitration clause of the Concession Agreements provides sufficient
recourse to remedies which can be availed of. That apart, the order of
the High Court dated 4 October 2019 has also clarified that the rest of
the dispute that remains after the deposit of 80 per cent of the debt due,
E either arising out of the CAG report, the validity of the termination notices
issued by both the parties and any past or future inter se claims and
liabilities shall be agitated and decided in the arbitration proceedings. In
view of the order which we propose to pass, the dispute between the
High Court in the writ jurisdiction under Article 226 of the Constitution
F shall stand worked out by granting liberty to the parties to avail of their
rights and remedies in accordance with law.
F Conclusion
60. We accordingly dispose of the appeals in terms of the following
directions:
G
(i) HSVP shall within a period of three months from the date
of the present judgment deposit into the Escrow Account
80 per cent of the debt due as determined in the reports of
the auditors dated 23 June 2020, in the case of RMGL and
RMGSL respectively;
H
RAPID METRORAIL GURGAON LTD. ETC. v. HARYANA MASS RAPID 703
TRANS. CORP. LTD [DR. DHANANJAYA Y CHANDRACHUD, J.]

(ii) The deposit into the Escrow Account shall continue to be A
maintained in Escrow, subject to any order that may be
passed by NCLAT or any competent statutory authority,
and shall not be appropriated by the Escrow Bank without
specific permission;
(iii) RMGL and RMGSL on the one hand, and HSVP on the B
other, are at liberty to pursue their rights and remedies in
pursuance of the arbitration clause contained in the
Concession Agreements on all matters falling within the
ambit of the arbitration agreement, including the validity of
the notices of termination, any past or future inter se claims
and liabilities as envisaged in the order of the High Court C
dated 20 September 2019, as modified on 4 October 2019
and 15 October 2019;
(iv) In terms of clause (v) of the order of the High Court dated
20 September 2019, in the event of any dispute arising about
the correctness of the CAG report, in regard to the D
determination of the debt due, any of the parties would be
at liberty to raise a dispute in the course of arbitral
proceedings;
(v) Upon compliance with the directions contained in (i) above,
RMGL and RMGSL shall execute and handover to HSVP E
all documents which are required for effectuating the
transfer of operations, maintenance and assets to HSVP or
their nominees with a view to fulfill the obligation of the
concessionaires in Article 25 of the Concession Agreement
dated 9 December 2009 and clause (vi) contained in the
order of the High Court dated 20 September 2019, as F
modified on 4 October 2019 and 15 October 2019; and
(vi) The writ petitions filed before the High Court by the
respondents shall stand disposed of.
61. The present judgment shall not affect any ongoing investigation
or criminal proceedings in respect of the IL&FS group of companies. G
The appeals shall be disposed of in the above terms. There shall be no
order as to costs.
62. Pending application(s), if any, stand disposed of.

Nidhi Jain Appeals disposed of.
H