State Bank of India has filed corporate insolvency proceedings against Reliance Infrastructure (RInfra) led Mumbai Metro One Private Limited (MMOPL), which operates Versova – Andheri – Ghatkopar Metro Rail, to recover around ₹416.08 crore.
The petition has been moved by India’s largest bank under the Insolvency and Bankruptcy Code (IBC). MMOPL is a joint venture between RInfra and Mumbai Metropolitan Region Development Authority (MMRDA). RInfra holds 74% of the equity share and the balance 26% is held by the MMRDA.
This is India’s first metro project to be financed by Indian banks and also the first such metro project in the country to be awarded on Public – Private Partnership basis.
“SBI has filed a petition under section 7 of IBC against MMOPL… before the NCLT Mumbai for recovery of ₹416.08 crore,” RInfra announced in a regulatory filing.
Section 7 of IBC permits the financial creditor or a ground of creditors to file an application for Corporate Insolvency Resolution Process (CIRP) against the debtor if a default has occurred.
Future course of action
On the future course of action, RInfra stated that “MMOPL is seeking appropriate legal advice and will take all appropriate steps to protect its interest in the aforesaid matter. The financial implication on the company cannot be ascertained and is contingent upon the final outcome of the said proceedings and subsequent legal challenges.”
Other than the State Bank of India, the other lenders of MMOPL are Canara Bank being the lead bank, IDBI Bank, Indian Bank, Bank of Maharashtra, IDBI Bank and India Infrastructure Finance Company (UK).
Ever since the start of commercial operations on June 8, 2014, Mumbai Metro 1, MMOPL representatives have been giving out feelers about financial stress the special purpose vehicle has been in. They have been demanding higher fares, which has been a bone of contention between MMOPL and the state government. MMOPL has also been seeking non-fare box revenue through commercial exploitation of certain areas of the metro assets, however, the plan did not go through.
Equity partners at loggerheads
The equity partners are at loggerheads over the construction cost as well as valuation of the 11.4 km long metro line. On March 7, 2007, concession agreement between the MMRDA and RInfra was inked for an estimated construction cost of ₹2,356 crore, towards the end of construction, MMOPL claimed that the cost escalated to ₹4,321 crore, hence permitted to levy higher fares. This was contested in the Bombay High Court.
Additionally, in 2014-15, MMOPL had filed for an arbitration claim to the tune of ₹2,830 crore, including interest up to June 2020 for “various defaults by MMRDA under the Concession Agreement.” To counter it, the MMRDA had filed counterclaims of ₹1,644 crore.
Back in January 2021, MMRDA had floated a request for proposal to appoint a consultant, however, not much headway has been made on the same.