2016 (10) TMI 1400 - HC - Indian Laws

PIL challenging toll concession agreement succeeds partially - user fee levy provisions violate Article 14 and excessive delegation principles

Federation of Noida Residents Welfare Association Versus Noida Toll Bridge Company Ltd. and Ors.

The Allahabad HC held that the PIL challenging a toll concession agreement was maintainable and warranted judicial interference under Article 226. The ... Maintainability of the Public Interest Litigation (PIL) - scope of interference in the matter of public contracts in exercise of power under Article 226 of the Constitution of India and the test therefore - award of the Contract/Concession Agreement in favour of Noida Toll Company (the Concessionaire) is justified or not - 'User fee' levied and collected by Noida Toll Bridge Company is legally sustainable or not - its effect on Article 13 (the Clause) of the Concession Agreement - Articles 14 (the Clause) of the Concession Agreement (for computation and recovery of total cost of project and returns thereon) - effect of proposed amendments to the Concession Agreement viz-à-viz relief prayed. HELD THAT:- It is concluded as follws: (a) This Public Interest Litigation is legally maintainable. (b) In the facts of the case, interference with the Concessionaire agreement is warranted in exercise of powers of judicial review under Article 226 of the Constitution of India. (c) Selection of Concessionaire in the facts of the case is violative of Article 14 of the Constitution of India and is found to be unfair and unjust. We, however, do not deem it fit to nullify the entire Concession Agreement. (d) Right to levy and collect User fee from the commuters as conferred upon the Concessionaire under the Concession Agreement suffers from excessive delegation and is contrary to the provisions of the U.P. Industrial Area Development Act' 1976. Article 13 (Clause) of the Concession Agreement is held to be bad and inoperative in the eyes of law. (e) The method of calculation of the Total Project Cost and appropriation of the User fee collection under Article 14 (Clause) of the Concession Agreement is held to be arbitrary and opposed to Public Policy. Article 14 (Clause) of the Concession Agreement is severed, therefrom. (f) The proposed Amendments do not affect the reliefs which have been prayed for in the petition. It is directed that, henceforth, NOIDA Toll Bridge Company, the Concessionaire shall not impose or recover any User fee/Toll from the commuters for using the DND Flyover. This Public Interest Petition is allowed to the extent indicated above. Issues Involved:1. Maintainability of the Public Interest Litigation (PIL).2. Scope of interference in public contracts under Article 226 of the Constitution of India.3. Legality and fairness of awarding the contract to Noida Toll Company.4. Legality of the user fee levied and collected by Noida Toll Bridge Company.5. Validity of Article 14 (Clause) of the Concession Agreement regarding Total Cost of Project and Returns.6. Impact of proposed amendments to the Concession Agreement.Issue-wise Detailed Analysis:1. Maintainability of the Public Interest Litigation (PIL):The PIL is maintainable as it represents the cause of commuters using the DND Flyover, challenging the continuous levy and collection of toll/user fee by Noida Toll Bridge Company even after recovering the cost of construction and reasonable returns. The delay in filing the PIL was justified as the levy of toll/user fee is a continuing cause of action. The petition raises significant questions of public interest regarding the validity of the Concession Agreement and its continuance.2. Scope of interference in public contracts under Article 226 of the Constitution of India:The court held that the government must act reasonably and in public interest when granting contracts. The principles of reasonableness, fairness, and public interest must guide governmental actions. The government cannot act arbitrarily or capriciously and must follow a transparent process. The court has the power to invalidate governmental actions that fail to meet these standards.3. Legality and fairness of awarding the contract to Noida Toll Company:The awarding of the contract to Noida Toll Company without inviting tenders or advertisements was found to be violative of Article 14 of the Constitution of India. The court noted that there was no justification for selecting IL&FS and Noida Toll Bridge Company without a transparent process. The contract was awarded based on a Memorandum of Understanding (MOU) and a Steering Committee's decision, which lacked transparency and fairness.4. Legality of the user fee levied and collected by Noida Toll Bridge Company:The court found that the user fee levied and collected by the Concessionaire was not legally sustainable. The power to levy fees was not delegated to the Concessionaire under the Uttar Pradesh Industrial Area Development Act, 1976. The Regulations, 1998, framed by NOIDA, could not authorize the Concessionaire to levy fees. The court held that Article 13 of the Concession Agreement, which conferred the power to levy user fees, was bad in law and struck it down.5. Validity of Article 14 (Clause) of the Concession Agreement regarding Total Cost of Project and Returns:The court found that the method of calculating the Total Cost of Project and Returns under Article 14 of the Concession Agreement was arbitrary and opposed to public policy. The escalating Total Cost of Project made it impossible to recover the costs within a reasonable period, leading to perpetual toll collection. The court held that Article 14 of the Concession Agreement was severable and struck it down.6. Impact of proposed amendments to the Concession Agreement:The proposed amendments to the Concession Agreement, which included fixing the transfer date as 1st April 2031 and amending the Total Cost of Project, did not affect the reliefs prayed for in the petition. The court held that the Concessionaire could not continue to levy user fees as it had already recovered the cost of construction and reasonable returns.Conclusion:The court directed that henceforth, Noida Toll Bridge Company shall not impose or recover any user fee/toll from the commuters for using the DND Flyover. The PIL was allowed to the extent indicated, and the offending clauses of the Concession Agreement were severed.