Delhi-Gurgaon Expressway: New tiff between IDFC, DSC

Next court hearing on Monday, when it would be seen if compromise possible between the parties

A tiff has erupted between the lenders and concessionaire of the Delhi-Gurgaon expressway over the terms of liability payment, raising doubts on a speedy solution over ownership of the project.

IDFC, the lead lender, is in the midst of a takeover battle on the project. It had held meetings with the government and the concessionaire after the National Highways Authority of India (NHAI) decided to terminate the contract awarded to DSC Ltd. The lenders were forced to take over as they stood to lose Rs 1,400 crore if NHAI terminated the project.


 

On Wednesday, though, IDFC informed the high court here that DSC was not willing to bear open-ended liabilities, or claims that could arise in the future which were not paid in the past. The HC set a final hearing for the coming Monday and IDFC said DSC has to agree to the terms if a compromise has to be reached.



NHAI had awarded the build-operate-transfer project to Jaypee DSC Ltd in 2002 but Jaypee Group exited in 2004. While the concession period started in January 2003, the project was completed in 2008 and the company (now called Delhi Gurgaon Super Connectivity Ltd) owns the rights to operate the expressway and collect toll till 2023.

DGSCL, an SPV set up to undertake the landmark project, was initially funded by a consortium led by Hudco, later replaced by SBI. The SPV then raised loans from IDFC and, in violation of its concession agreement, did not inform the government. The IDFC-led consortium has Punjab national Bank, Oriental Bank of Commerce and State Bank of Bikaner and Jaipur. If NHAI had terminated the project, these lenders would have had to incur a combined loss of Rs 1,400 crore, as the highways authority would refund only Rs 175-200 crore. This prompted IDFC to start negotiations with the government.

“Either DSC signs the compromise formula or the matter goes on,” Harish Salve, senior counsel for IDFC, told Business Standard. The HC had asked IDFC, NHAI and DSC to present a compromise formula for a takeover of the project. IDCC also informed the court it was willing to make the Delhi-Gurgaon commute toll-free.

The lenders had also agreed to take over the liabilities of the project, including vendor liabilities, dues to NHAI and a severance package for employees. “IDFC and the lenders have agreed to take over the liabilities amounting to Rs 20 crore. But what if there are some claims that arise in the future, where the SPV did not pay? We want DSC to pay that,” an NHAI official said. "DSC cannot walk free completely.” 

A spokesperson for DSC said, "The Draft Consent Order references the agreement between IDFC and DGSCL, which details the responsibility and treatment of the various liabilities. These details are still being discussed between IDFC and the concessionaire. The judge gave both parties time till February 17 (Monday) to settle all issues and arrive at a settlement or else, argue on merit.”

Close to 600 employees of the project are likely to lose their jobs; IDFC is set to retain only 400 of the existing 1,000. The expressway was the first project to be awarded on a premium by the government, in 2002. However, traffic congestion at the toll gates and allegations of financial mismanagement against DSC saw the case landing at the court. NHAI had sent a termination letter to the concessionaire in 2012 and maintained the lenders could take over the project if it removed the toll plaza.  

DSC would, however, lose Rs 998 crore, which it had claimed from NHAI for change of scope of work. This is the term for additional work by a concessionaire on a road project. In January, NHAI had also paved way for IDFC to take over the project, after it recognised IDFC as a lender to it; it had till then not done so because a change of lenders by DGSCL had not been approved. DGSCL had in 2010 replaced its authorised lender, State Bank of India (SBI), with an IDFC-led consortium, which has an exposure of Rs 1,600 crore in the project.