New Delhi: In a fresh twist to the ongoing tussle between road authorities and Infrastructure Development Finance Co. (IDFC Ltd), the road ministry has told the Prime Minister’s Office (PMO) in a strongly worded letter that it does not recognize the company as a bona fide lender of the Delhi-Gurgaon expressway.

Explaining its stance, the ministry said the IDFC-led consortium had replaced the consortium led by State Bank of India (SBI) for the project without the approval of the National Highways Authority of India (NHAI), which was in violation of the concession agreement.

“(It) is a clear violation of provisions of concession agreement viz. no prior consent taken from NHAI, no 30 days prior notice was given to NHAI before amending the financing documents and no true copy of executed loan agreement was given to NHAI within 7 days of execution. Moreover, the monthly escrow account reports from July 2010 to April 2011 were suppressed from NHAI," the ministry said in the letter reviewed by Mint.

If NHAI’s view prevails, the IDFC-led consortium will not be able to recover 1,600 crore loans.

The letter comes in response to IDFC’s move to approach the PMO to seek relief after negotiations with the road ministry and NHAI failed.

Rajiv Lall, chairman, IDFC, in a letter dated 20 December addressed to Pulok Chatterjee, principal secretary to the prime minister, said senior lenders had fulfilled all the pre-conditions to the execution of the substitution and escrow agreements, adding, “The fact is that it is the concessionaire that has defaulted on his obligations to both NHAI as well as senior lenders under the MoU."

“NHAI remains stubbornly opposed to recognizing the loan extended by senior lenders. Neither NHAI, nor Morth (ministry of road transport and highways) have shown any inclination to resolve the issue," said the letter.

NHAI is also pursuing a court battle against Delhi Gurgaon Super Connectivity Ltd (DGSCL) over the termination notice it served the firm in 2013.

While IDFC’s exposure to the project stands at 500 crore, the consortium includes lenders such as the Punjab National Bank, Bank of India, Oriental Bank of Commerce and State Bank of Bikaner and Jaipur.

A senior official in the road ministry who requested anonymity said, “IDFC did not do proper due diligence and extended excessive loan. Financial liability of NHAI is linked to the debt in case of termination of the contract. NHAI’s initial liability was much lower, then IDFC extended a loan of 1,600 crore without prior consent of NHAI board. We can’t compromise on the debt due."

IDFC spokesperson Arun Raste confirmed IDFC, on behalf of senior lenders, did write to PMO to help resolve this matter in larger “public interest".

An official at NHAI said, “Our liability to the original lender was to the tune of 150 crore and we have all along maintained that in case of substitution subject to conditions being followed, our liability will not change. Neither in the case of SBI nor IDFC did NHAI reach the approval stage as the pre-conditions were not met in either case."

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