Mon Feb 24 17:08:23 UTC 2025: **Madras High Court Questions Validity of India-JICA Loan Agreement for Chennai Metro Project**
Chennai, February 24, 2025 – The Madras High Court on Monday questioned its authority to interfere with a 2018 loan agreement between India and the Japan International Cooperation Agency (JICA) for Chennai’s Metro Rail Phase II project. The query arose during a hearing of a writ petition filed by OTIS Elevator Company (India) Limited, which alleges that the agreement’s terms unfairly favor Japanese companies.
OTIS claims that the loan agreement’s tender conditions mandate that 75% of project components be sourced from Japanese entities, effectively discriminating against Indian bidders. The company argues these conditions are unconstitutional.
The Phase II project, encompassing three corridors totaling 107.55 km, was initially estimated at ₹85,047 crore. After revisions incorporating a new Metro Rail Policy and the introduction of GST, the cost was revised down to ₹79,961 crore. JICA agreed to provide a loan of ₹20,196 crore for two priority corridors (Corridors 3 and 5). A loan agreement for the first tranche (approximately ₹4,770 crore) was signed in December 2018.
OTIS, initially unsuccessful in challenging the tender conditions in 2024, has now directly challenged the loan agreement itself. The company’s lawyers argued that the favorable terms for Japanese companies, stemming from JICA’s low-interest loan (0.01%), are unreasonable. They highlighted the disparity between interest rates in India (6-8%) and Japan (around 0.12%).
The Additional Solicitor General countered that the loan was essentially interest-free and that the full amount had already been disbursed. He also emphasized that OTIS, an Indian subsidiary of an American company, lacks standing to challenge a bilateral agreement signed by the President of India. CMRL’s counsel further reinforced this point, highlighting the agreement’s high-level ratification.
The court adjourned the hearing until February 27, requesting further submissions from all parties. The case raises significant questions about the balance between international development agreements and domestic competition.
First Piper 