SBI Initiates Corporate Insolvency Proceedings Against Mumbai Metro One, Seeks Recovery of Rs416 Cr
The State Bank of India (SBI) has taken a significant step by filing a corporate insolvency petition against Mumbai Metro One Private Limited (MMOPL), which is operated by Reliance Infrastructure (RInfra). The move aims to recover approximately Rs416.08 crore from the metro rail operator.
Under the Insolvency and Bankruptcy Code (IBC), India’s largest bank has approached the National Company Law Tribunal (NCLT) with this petition. MMOPL is a joint venture between RInfra and the Mumbai Metropolitan Region Development Authority (MMRDA), with RInfra holding a majority 74% equity share and the remaining 26% being held by MMRDA.
In response to this development, RInfra has announced that MMOPL is seeking appropriate legal advice and will take all necessary steps to safeguard its interests in this matter. The financial implications for the company are uncertain and depend on the final outcome of the proceedings and subsequent legal challenges.
Apart from SBI, other lenders of MMOPL include Canara Bank as the lead bank, IDBI Bank, Indian Bank, Bank of Maharashtra, IDBI Bank, and India Infrastructure Finance Company (UK).
Since its commencement of commercial operations on June 8, 2014, MMOPL has been indicating financial strain. The disagreement over fares between MMOPL and the state government has been a major source of contention. Additionally, MMOPL has been exploring ways to generate non-fare revenue through commercial utilization of certain metro assets, although these plans did not materialize.
The equity partners are currently embroiled in a dispute over the construction cost and valuation of the 11.4 km long metro line. While the concession agreement signed between MMRDA and RInfra in 2007 estimated the construction cost to be around Rs2,356 crore, MMOPL claimed that the cost escalated to Rs4,321 crore by the end of construction. Consequently, MMOPL sought permission to raise fares, which was challenged in the Bombay High Court.
This development highlights the challenges faced by MMOPL and its equity partners in managing the financial aspects of the metro project. The insolvency petition filed by SBI underscores the urgency to address the outstanding dues owed to the bank.
As the legal proceedings unfold, it remains to be seen how MMOPL will respond to the insolvency petition and what impact this will have on the future of Mumbai Metro One. Both sides will likely present their arguments and evidence before the NCLT as the case progresses. Only time will tell how this issue will be resolved and how it will shape the future trajectory of the metro rail operator.
In conclusion, SBI’s move to file an insolvency petition against MMOPL underscores the significant financial challenges faced by the metro rail operator. With recoveries worth Rs416 crore at stake, the outcome of this legal battle will have far-reaching implications for both parties involved. The resolution of this dispute will be closely watched as it unfolds in the NCLT.
