Public contract transparency and user-fee authority: Court rejects non-competitive concession and open-ended toll recovery on public infrastructure

A public infrastructure concession was examined for compliance with Article 14, public procurement fairness, and statutory authority to levy user charges. The challenge to continued toll collection was treated as a continuing public interest grievance and laches was rejected. The Court found the concessionaire's selection through negotiation without advertisement or competitive bidding to be unfair and non-transparent, and held that the contractual delegation of power to levy user fee was beyond the enabling framework and therefore unenforceable. It also held that the cost-recovery formula was arbitrary and opposed to public policy because it created an open-ended escalation of returns. The offending clauses were severed, and further user fee or toll recovery was barred.

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Issues: (i) Whether the public interest litigation was maintainable despite delay and the nature of the petitioner's challenge; (ii) whether the award of the concession for the DND Flyway without advertisement or competitive bidding violated Article 14 of the Constitution of India; (iii) whether the concessionaire had lawful authority to levy and collect user fee/toll under the agreement and the regulations framed by NOIDA; (iv) whether the formula for computation of Total Cost of Project and returns under Article 14 of the agreement was arbitrary and opposed to public policy; and (v) whether the proposed amendments to the agreement affected the relief claimed.

Issue (i): Whether the public interest litigation was maintainable despite delay and the nature of the petitioner's challenge

Analysis: The challenge was directed against continuing levy of user fee on a public bridge used by commuters and raised issues affecting a section of the public. The grievance was treated as one of continuing cause, and the petitioners were held to have approached the Court to vindicate a public interest rather than a private contractual claim.

Conclusion: The petition was held maintainable and the objection based on laches was rejected.

Issue (ii): Whether the award of the concession for the DND Flyway without advertisement or competitive bidding violated Article 14 of the Constitution of India

Analysis: Public contracts and disposal of public largesse must satisfy the tests of fairness, reasonableness, transparency and non-arbitrariness. The material showed that no advertisement or tender process was adopted and that the private company was selected through negotiation, without an open opportunity to other eligible participants. The reasons advanced for bypassing competition were found insufficient to justify departure from the constitutional norm.

Conclusion: The selection of the concessionaire was held to be unfair, unjust and violative of Article 14, though the Court declined to nullify the entire concession agreement.

Issue (iii): Whether the concessionaire had lawful authority to levy and collect user fee/toll under the agreement and the regulations framed by NOIDA

Analysis: The Act and regulations were examined and it was held that the statutory framework permitted NOIDA to collect fee in accordance with law, but did not authorise an impermissible sub-delegation of the power to levy fee to a private developer. The regulations could not enlarge the parent Act or retrospectively validate a contractual arrangement entered into before the enabling provision came into force. The delegation of levy power, and not merely collection, to the concessionaire was found to be beyond authority.

Conclusion: The clause conferring the right to levy and collect user fee was struck down as illegal and inoperative, and the levy of user fee by the concessionaire was held unsustainable.

Issue (iv): Whether the formula for computation of Total Cost of Project and returns under Article 14 of the agreement was arbitrary and opposed to public policy

Analysis: The contractual formula caused the projected cost to escalate continuously by adding unrecovered returns and various expenses, making the recovery period effectively indefinite. The Court held that such a mechanism enabled continued extraction from the public long after the actual investment and reasonable returns had been recovered, and that this offended the standards of public policy, fairness and proportionality in the use of public property.

Conclusion: Article 14 was held arbitrary and opposed to public policy, and was severed from the agreement.

Issue (v): Whether the proposed amendments to the agreement affected the relief claimed

Analysis: The proposed amendments continued to preserve user fee collection up to 2031 and did not remove the illegality found in the existing levy and cost-recovery structure. They therefore did not cure the defects in the challenged arrangement.

Conclusion: The proposed amendments did not alter the relief granted.

Final Conclusion: The Court upheld the challenge to the continued levy of user fee on commuters, severed the offending contractual provisions, and directed that no further user fee or toll be recovered for use of the DND Flyway.

Ratio Decidendi: A public authority cannot, through contract or subordinate regulation, confer on a private concessionaire an unfettered power to levy user charges on public infrastructure or sustain an open-ended recovery mechanism that is arbitrary, non-transparent, and contrary to public interest; such offending clauses are severable and unenforceable.

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