TaxTMI 
TaxTMI 
2021 (3) TMI 1180
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....Dhodi, AOR Mr. Sanjay Bajaj, Adv. Mr. Amit K. Nain, AOR JUDGMENT Dr Justice Dhananjaya Y Chandrachud, J This judgment has been divided into the following sections to facilitate analysis: A Factual background B Submissions of counsel C Analysis of the Concession Agreements D Terms of the consent order dated 20 September 2019 passed by the High Court E Obligations of HMRTC and HSVP to pay the debt due F Conclusion A Factual background 1 In 2008, Haryana Shehri Vikas Pradhikaran ("HSVP"), the second respondent, issued a Request for Qualification and Request for Proposal ("RFQ/RFP") for developing a metro rail link from Delhi Metro Sikanderpur Station on MG Road to NH-8 ("Project No1"). A Consortium Agreement was entered into on 1 December 2008 between IL&FS Rail Limited ("IRL"), IL&FS Transportation Networks Limited ("ITNL") and DLF Metro Limited in which IRL was identified as the lead member of the consortium. HSVP accepted the bid submitted by the consortium and issued a letter of award of 16 July 2009, subject to the condition that a concession agreement would be executed within 60 days. Pursuant to the letter of award, the consortium incorporated the ....
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....ober 2018, a petition - Company Petition No 3638 of 2018 was instituted by the Union of India under Section 241(2) read with Section 242 of the Companies Act, 2013 (the "Act of 2013") before the Mumbai Bench of the National Company Law Tribunal ("NCLT") against Infrastructure Leasing and Financial Services Limited ("IL&FS") and its Board of Directors ("Board"), on the ground that the affairs of the company and its subsidiaries were being conducted in a manner prejudicial to public interest. Both RMGL and RMGSL form part of the IL&FS group of companies. Acting on the petition, the NCLT by its order dated 1 October 2018 superseded the existing Board of IL&FS with a newly constituted Board, which was appointed on the recommendation of the Union government. The new Board took charge of the affairs of the IL&FS and was authorised to conduct its business and formulate a road map for recovery. 8 The National Company Law Appellate Tribunal ("NCLAT") by an order dated 4 February 2019 appointed Mr Justice D K Jain, a former Judge of this Court, to supervise the resolution process for the IL&FS group of companies. The appellants, RMGL and RMGSL, were categorized as a "red" entity of the IL....
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....1 to HMRTC, which in turn would hand it over to Delhi Metro Rail Corporation ("DMRC"). A similar notice of termination was issued to RMGSL, coupled with an analogous direction for handing over Project No 2. 13 On 6 September 2019, Justice D K Jain permitted RMGL to handover possession and control of Project No 1 to HSVP pursuant to the termination of the Concession Agreement dated 9 December 2009, on or before 9 September 2019. By a separate order on the same date, RMGSL was permitted to handover possession and control of Project No 2 by the same date. 14 Further, also on 6 September 2019, the same day as the order of Justice D K Jain permitting handover, the respondents instituted a Writ Petition - WP (C) No 24949 of 2019 under Article 32 of the Constitution before the High Court for the State of Punjab and Haryana challenging notice of termination dated 7 June 2019 issued by RMGL, inter alia, on the ground that the period of 90 days shall start from the date of permission, which had not been yet granted by Justice D K Jain. An interim direction was sought for the continuance of the operation of Project No 1 by RMGL. Another Writ Petition - WP (C) No 24951 of 2019 was instit....
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....me when the handing over and taking over after the same should take place. No explanation whatsoever is forthcoming as to why, on the receipt of Termination Notice dated June 7, 2019, HSVP/HMRTC did not take any steps to ensure smooth handing over of the project by RMGSL to them, all this while. In so far as the question of validity of the termination notice issued RMGSL to HSVP is concerned, the issue is to be decided at an appropriate forum and not by the undersigned in terms of the afore-extracted direction by the Hon'ble NCLAT. 20. Accordingly, RMGSL is permitted to handover the possession and control of Metro link from Delhi Metro Sikanderpur Station on MG Road to Sector 56, Gurugram to ASVP, pursuant to the termination of the Concession Agreement dated January 3, 2013. It goes without saying that this permission is without prejudice to the rights and contentions of the contesting parties to take recourse to appropriate legal proceedings' to assail the validity and consequences of termination of the Concession Agreement by both of them. It is, however, clarified that HSVP, shall still be free to engage the services of RMGSL, albeit at the mutually discussed/negotiated....
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.... (2) Commitment to take handover the Project by HSVP; (3) Commitment to pay at least 80% of debt due as termination payment to RMGL/RMGSL by HSVP; (4) Handover to start immediately; (5) RMGL/RMGSL to act as agent of HSVP for further work post 09.09.2019; (6) Cost and benefit to be on HSVP's account; (7) Indemnification of RMGL/RMGSL from any third party claims and from HSVP's actions; (8) Rights and benefits of parties get frozen on the date termination of Concession Agreement becomes effective, be-09-09-2019-- and. (9) Issuance of vesting certificate by HSVP. Learned senior counsel appearing on behalf of the petitioners has submitted that all these issues would be discussed in the joint meeting of the parties. Till the next date of hearing i.e. 17.09.2019, the respondent shall operate and manage the Rapid Metro Rail at Gurgaon on both the lines but subject to reimbursement of the insurance and operation and maintenance cost by the petitioners of this period. A copy of this order be given to both the parties under signatures of Bench Secretary of this Court. To be taken up in ....
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.... and RMGSL would continue to operate the rapid metro link for 30 days, during which the 'debt due' as per the financing documents in terms of their respective Concession Agreements would be determined by an auditor; and secondly, an undertaking would have to be furnished by HSVP that on determination of the 'debt due' by the auditor, at least 80 per cent of the amount so determined should be deposited in the Escrow Account in terms of the Concession Agreements. The respondents HMRTC and HSVP submitted their response to the proposal which was made by the appellants, which was adverted to in the earlier order. The response was in the following terms: "(i) With respect to the request of the RMGL and RMGSL to continue to operate the said Metrolines fora period of 30 days, it is stated that HMRTC and HSVP have already entered into a formal agreement with the Delhi Metro Rail Corporation Ltd. "(DMRC)" on 16" September, 2019 for Operations and Maintenance "(O&M)" of the said Metro Lines. And it is categorically stated that HMRTC and HSVP has signed the said agreement on account of the fact that previously RMGL/RMGSL were not acceding to the request of HMRTC/HSVP to run th....
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....ained by the auditors depends solely on the outcome of the report as would be submitted by the learned auditor as shall be appointed by the Hon'ble Court and the HMRTC and HSVP do hereby commit and confirm to adhere to the directions as would be passed by the Hon'ble High Court or NCLAT or any other court or any other order under any other legal proceeding(s) passed by any other competent authority in that respect, in terms of the concession contract subject to the all other rights and entitlements in favour of both the parties arising out of the same. (v) With respect to the submission that RMGL/RMGSL is reserving their right to claim differential payment, it is apprised that by having stated that, RMGL/RMGSL are trying to keep options open to challenge whereby RMGL/RMGSL may rekindle this entire matter again after having settled the matter in the light of aforesaid statement i.e. after having settled the amount which becomes due i.e. 80% of the debt due in terms of the definition contained in the concession agreement as linked with the total project cost which shall be ascertained by an auditor as shall be appointed by the Hon'ble Court. As such the same cannot be accede....
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....r as "debt due" as defined under the concession contract is concerned, direction is issued to the Comptroller and Auditor General of India (for short 'CAG') to appoint a team of auditors for the financial audit of the "debt due" and also for examining the scope of the audit of "debt due" audited by the HSVP with the assistance of the auditors appointed by the parties to the lis. It is needless to say that the CAG shall complete the aforesaid audit within a period of 30 days. (iii) It is directed that the arrangements made by this Court vide order dated 09.09.2019 shall continue till the process of handing over the operations is complete. (iv) It is further directed that amount of 80% of the debt due, determined in terms of the audit report of the CAG, shall be deposited by the HSVP in the Escrow account which shall be subject to any order passed by the NCLAT or any other competent statutory authority, within a period of 30 days after the receipt of the audit report. (v) It is further directed that rest of the disputes between the parties to the lis, arising out of the audit report, shall be agitated and decided in the arbitration proceedings, a m....
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....or final transfer of the assets the same be given by the RMGL and RMGSL to HSVP after payment of the debt due. However, in the meanwhile the proposed documentation in terms of concession agreement may also be communicated by the RMGL and RMGSL to the petitioners. With the aforesaid clarifications/modifications, present applications are hereby disposed of. Further, on the joint request, of counsel for the parties, CAG is directed to complete the audit, as ordered by this Court, by counting the period of 30 days from the date of receipt of certified copy of this order." 18 On 15 October 2019, the High Court allowed an extension of seven days for implementing the directions issued in its orders dated 20 September 2019 and 4 October 2019. The High Court also corrected its earlier order with the consent of the contesting parties, in the following terms: "Accordingly, the applications are allowed. However, Mr. Puneet Bali has pointed out that there is an error in the order dated 04.10.2019. He has further submitted that instead of reading the order, "The CAG will also examine the scope of the audit of debt due suggested by the HSVP in terms of the concession....
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....andards and Guidelines in particular, Ind_AS 11 on Construction Contracts, Ind_AS 23 on Borrowing Costs, Ind_AS 38 on Intangible Assets, Ind_AS 115 on Revenue from Customer Contracts. 8. Audit would cover verification of other aspects as may be considered necessary, ring the course of audit, to verify the amount of Debt Due. 9. Above Audit would be conducted for the concession period, since inception, by following the applicable standards of Auditing issued by CAG/CAI (inter alia 200- 299 on General Principals and Responsibilities, 300-499 on Risk Assessment and Response to Assessed Risks, 500-599 on Audit Evidence with emphasis on SA 530 on Audit Sampling and 600-699 on Using Work of Others). 10. Nature, timing and extent of audit procedure will be impacted by the audit evidence obtained. A risk assessment or problem analysis may be conducted and the scope may be revised as necessary in response to the audit findings. Unimpeded and quick access to relevant records/ documents may be ensured by the auditee. Any delay in getting records would be recorded so as to maintain Audit trail. Deliverables and timelines 1. Within two weeks from dat....
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....pellants sought a direction for: (a) Opening the sealed cover submitted by CAG containing its report of the financial audit of the debt due in terms of the Concession Agreements; and (b) Directing the deposit of 80 per cent of the debt due in terms of the order of the High Court dated 20 September 2019. 22 On 2 September 2020, the High Court issued notice on the application filed by the appellants and listed it on 10 September 2020. On 28 September 2020, the sealed cover was opened and the report of the CAG was taken on the record. The CAG report adverts to the scope of the audit which was undertaken in respect of the debt due under the Concession Agreement dated 9 December 2009 with RMGL in the following extract: "The scope of audit was suggested by RMGL and HMRTC through communications and presentations. The scope of audit as suggested by both the parties were examined and the scope of audit of "debt due" was accordingly firmed up. The suggestions made through presentations and the scope of audit, as decided by were submitted to the Court vide CMA no. 15397 dated 20 November 2019 by CAG. It was also informed to the Court that only those Issu....
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....lated parties, i.e. IRL worth Rs. 623 crore (52 per cent of total project cost) is a subsidiary of ITNL. Further, INL and IRL are the promoters in the RMGL. * New board of Directors, in January 2019, has initiated a third- party forensic examination for the period from April 2013 to September 2018, in relation to certain companies of the Group, which is currently ongoing. The same is one of the basis of disclaimer of opinion given by statutory auditors of IL&FS for FY2018-19, * 9 packages which were awarded to IRL, were sub-contracted to various related and unrelated parties as explained by the management. This includes companies with irregularities as pointed out by Income Tax Department as mentioned in the income Tax Show Cause Notice!!, dated: 15.11.2018, ref no. ADIT(INV]-3{4}/Show Cause Notice/ENSO/2018-19/251. Income tax scrutiny/assessments on-going. Table 12 - Party-wise break-up of the packages sub- contracted by IRL (Amount in crore) Related parties Sub-contracting of IRL Level IECCL 248 Unrelated Parties Others 311 Companies with irregularities as pointed out by lncome Tax Department 31 Balancing figure ....
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....acted it to the related parties and other parties which includes companies with irregularities as pointed out by Income Tax Department as mentioned in the Income Tax Show Cause Notice', dated: 15.11.2018, ref no. ADITIINV]-3(4]/Show Cause Notice/ENSO/2018-19/251. Income tax scrutiny/assessments is on-going. Table 13- Party-wise break-up of the packages sub- contracted by IRL (Amount in crore) Particulars Total Cost % of Total Cost incurred Related parties IL&FS Technologies 29 3 IRL 75 7 Unrelated parties Siemens 595 58 Compaines with irregulariries as pointed out by Income Tax Department 66 7 Others 221 22 Balancing fiture 39 3 1,025 100 Our report is submitted solely for the purpose set forth in the first paragraph of this report. This report relates only for the items specified and does not extend to any financial statements of RMGSL, taken as a whole." 24 On 10 October 2020, an affidavit was filed before the High Court by the Advisor (Planning) HMRTC on behalf of the respondents, objecting to the audit report. The substance of the objection was tha....
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....erein to pay 80 per cent of the debt due within 30 days of the CAG report, and no liberty has been granted to challenge the report at this stage. Secondly, it was urged that despite ample opportunities provided by CAG, HMRTC had not furnished any objections to the draft report. Thirdly, it was alleged that the objections filed before the High Court is an attempt to delay the fulfillment of the obligation to pay 80 per cent of the debt due despite the entirety of Project No 1 having been handed over. A similar reply was also filed by RMGSL. 27 An affidavit was also filed before the High Court by CAG in response to the objections filed by HMRTC. In its affidavit dated 28 October 2020, CAG noted: "That the scope of financial audit of debt due suggested by both the parties was examined by CAG being the Constitutional authority, and after due consideration, decided the scope of audit of debt due to be conducted and further it was decided that CAG will examine only those issues, that are related and relevant to examination of the debt due as per the concession agreements. It was also decided that the issues mentioned in the scope provided by the HMRTC like encumbrances and li....
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.... limited scope to arrive at the amount of debt due in terms of the applicable Concession Agreements. The amount of debt due has been worked out after examination of documents as well as verification of records, wherever required. 3) The draft report was shared with the HMRTC but it did not respond despite repeated requests. So the CAG was constrained to finalise the report without the response of HMRTC. 4) The issues pointed out like reconstitution of Board of Parent Company IL&FS and investigation against its officers by Enforcement Directorate, FIR lodged by Economic offence wing, issue of income tax notice to group company, investigation by SFIO etc. are matter of investigation / forensic audit and does not form part of financial audit. It was categorically informed to the High Court that issues relating criminal acts etc, can be got audited/examined by HMRTC through other agencies or through separate forensic audit. 5) Although the debt due has been worked out as on 08 September 2019, the Report was neither required nor delve upon / comment upon which party's 'Event of default' occurred." CAG has thus submitted that the report of the financial audi....
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....after, and have been taken up for final disposal. We have heard Mr Mukul Rohatgi and Mr Puneet Bali, learned Senior Counsel appearing on behalf of the appellants, Mr Tushar Mehta, learned Solicitor General appearing on behalf of the respondents and Mr Dhruv Mehta, learned Senior Counsel appearing on behalf of Andhra Bank and Canara Bank. B Submissions of counsel 31 Mr Mukul Rohatgi and Mr Puneet Bali, learned Senior Counsel appearing on behalf of the RMGL and RMGSL, submitted that: (i) The directions contained in the order of the High Court dated 20 September 2019 are by consent of parties, the High Court having recorded that a consensus had been arrived at in the presence of senior officials of the contesting parties; (ii) The appointment of CAG has to be understood in the backdrop of the earlier orders of the High Court dated 9 September 2019 and 18 September 2019, which highlighted the concerns of RMGL and RMGSL that in terms of the Concession Agreements between the parties 80 per cent of the debt due was required to be deposited as termination payment by HSVP; (iii) Responding to these concerns, HMRTC and HSVP had agreed to the proposed appointm....
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....osited in an Escrow Account within 30 days; (xi) The High Court has no jurisdiction to reopen the terms of a consent order; (xii) The CAG submitted the scope of audit to the High Court. Right from the inception, it was evident that the audit was to be carried out for determining the debt due in terms of the Concession Agreements. CAG has specifically clarified in the affidavit filed before the High Court that the audit is neither incomplete nor inconclusive and that the objections which have been raised by HMRTC are without any substance; (xiii) On the above facts which have been submitted, RMGL/RMGSL have handed over the entire assets consisting of the rapid metro links to HSVP. The ground that there is an FIR against the IL&FS group of companies cannot furnish a valid basis for defeating a contractual obligation to deposit 80 percent of the debt due in Escrow Account, which has been confirmed by the consent order of the High Court. The amount will not be paid over to either RMGL/RMGSL but would be deposited in an Escrow Account with Andhra bank and Canara bank, which are public financial institutions. The amount deposited would abide by the ultimate dir....
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....sum of Rs. 1,109 crores was availed of by RMGLS from the Senior Lenders, Rs. 391 crores from India Infrastructure Finance Company (UK) Limited, ECB Lenders (forming part of Senior Debt) as well as USD 30 million from IndusInd Bank Limited, being the Derivate Facility Lender. As such, an Escrow Account Agreement dated 2 July 2013, read with Supplementary Agreements dated 15 January 2014 and 24 September 2014, was executed between RMGSL, HSVP and Canara Bank, under which Canara Bank was appointed as the Escrow Agent. It was stated that as on 31 July 2019, the lenders of RMGSL had an outstanding claim of Rs. 1651 crores approx. Hence, on termination of the Concession Agreement dated 3 January 2013 by "HUDA", now HSVP, under Article 32.4 of the Concession Agreement dated 3 January 2013, an amount of 80 per cent of the debt due has to be paid to the lenders of Project No 2. The lenders had filed a reply before Justice D K Jain stating that they had no objection of the handing over of the assets to HMRTC, subject to the deposit of the amount due to the lenders in an Escrow Account. Hence, the debt due having now been determined in terms of the audit report, it has to be deposited in the ....
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....eements to any Senior Lender, and (iii) any pre-payment charges in relation to accelerated repayment of debt except where such charges have arisen due to Authority Default; and (c) any Subordinated Debt and all accrued interest thereon, which is included in the Financial Package and disbursed by Lenders for financing the Total Project Cost as per the Financing Documents." The above expression indicates that the term debt due comprises of three components: (i) The principal amount of the debt provided by the senior lenders under the financing agreement; (ii) All accrued interest, financing fees and charges payable under the financing agreement; and (iii) Any subordinated debt which is included in the financial package. 37 In terms of Article 3.1, HUDA granted to the concessionaire the exclusive right, license and authority during the subsistence of the Concession Agreement to implement the project and the concession over a period of 99 years. Under Article 17.1, the concessionaire was to provide to HUDA a copy of the financing package furnished by it to the prospective lenders. As and when the financing package was agreed upon by the lenders....
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....ersons as may be specified in the Financing Documents (iv) O&M Expenses subject to the ceiling, if any set forth in the Financial Documents (v) Connectivity charges and Revenue Share due to HUDA from the Concessionaire under this Concession Contract (vi) Monthly proportionate provision of debt service payments due to Senior Lenders in an accounting year and payment of Debt Service Payments to Senior Lenders in the month when due (vii) Debt service payment in respect of Subordinate Debt; (viii) Any reserve of requirements required to be settled in terms of financial document. (ix) Balance in accordance with the instructions of the Concessionaire. 18.2.2 The Concessionaire shall not in any manner modify the order of payment specified in Sub-Article 18.2.1 except with the prior written approval of HUDA 18.3 Notwithstanding anything to the contrary contained in the Escrow Agreement and subject to the provisions contained in Sub-Articles 25.5 and Article 27, upon Termination of this Concession Contract, all amounts standing to the credit of the Project Escrow Account shall be appropriated and dealt with in the follo....
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....adjusted equity. Article 24.7 which provides for the termination payments reads as follows: "24.7 Termination Payments: The Termination Payment pursuant to this Concession Contract shall become due and payable to the Concessionaire by HUDA within thirty days of a demand being made by the Concessionaire with the necessary particulars duly certified by the Statutory Auditors. If HUDA fails to disburse the full Termination Payment within 30 (thirty) days, the amount remaining unpaid shall be disbursed along with interest an annualised rate of SBI PLR plus two per cent for the period of delay on such amount." 40 Article 30 of the Concession Agreement provides for dispute resolution. Article 30.2 contains an arbitration agreement, which reads as follows: "30.2 Arbitration 30.2.1 Dispute Due For Arbitration Disputes or differences shall be due for arbitration only if all the conditions in Sub- Article 30.1 are fulfilled." D Terms of the consent order dated 20 September 2019 passed by the High Court 41 Pursuant to the petition filed under Section 241(2) read with Section 242 of the Act of 2013 before the NCLT, the Board of IL&FS was super....
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....ts order dated 6 September 2019 directed RMGL and RMGSL to continue the operation of the rapid metro rail till the midnight of 9 September 2019. On 9 September 2019, the High Court observed that the dispute between the parties would have to be resolved by negotiations, and hence the order of stay, under which the rapid metro rail projects were to be continued in operation by RMGL and RMGSL, was continued till midnight of 17 September 2019. From the order of the High Court dated 9 September 2019, it is evident that RMGL and RMGSL, while referring to the terms of the proposed discussion which HMRTC/HSVP, catalogued inter alia: (a) A time bound handover of the project to HSVP and corresponding commitment for taking it over by HSVP; and (b) A commitment to pay at least 80 per cent of the debt due as termination payment to RMGL and RMGSL by HSVP. 43 On 18 September 2019, the appellants proposed that they would continue to operate the metro link Projects until 16 October 2019, during which period the debt due under the financing documents, in terms of the Concession Agreements, may be determined by an auditor to be appointed by the High Court. Further, the process fo....
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....eptember 2019, and thereafter consequent upon mutual discussions, RMGL/RMGSL agreed to operate the rapid metro link Projects until 16 October 2019, within which period the handover to DMRC would take place. Equally, the concerns by RMGL/RMGSL, as concessionaires, was that in terms of the Concession Agreements, 80 per cent of the debt due had to be deposited in the Escrow Account in terms of the provisions contained in Article 24.4 in Concession Agreement dated 9 December 2009. All the parties specifically agreed before the High Court that there would be a reference to the CAG for conducting an audit for the purpose of determining the debt due. The High Court by its order dated 20 September 2019, issued directions which were specifically noted to be emanating from the "consensus...arrived at in the presence of senior officers of both the parties" namely Mr D Suresh, IAS, Managing Director, HMRTC, Chief Administrator, HSVP, Mr Rajiv Banga, Managing Director, RMGL and Director, RMGSL. The consensual order passed by the High Court envisaged that: (i) RMGL and RMGSL would continue to operate the rapid metro lines for 30 days from 16 September 2019; (ii) The transfer of....
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....dit of the debt due suggested by HSVP in terms of the Concession Agreements. Moreover, it was envisaged that the rest of the dispute either arising out of the CAG report, the validity of the termination notices issued by both the parties and any past or future claims/liabilities inter se would be agitated in arbitration. On 15 October 2019, there was a further clarification by the Division Bench that CAG would examine the scope of the audit of the debt due suggested by both the parties in terms of the Concession Agreements. Thus, it was understood by both the parties that the determination of the debt due would be in terms of the Concession Agreements. CAG specifically placed before the High Court its understanding of the role to be performed by it. In its written statement before the High Court on 19 November 2019, CAG stated that it had decided to appoint an auditor "for the financial audit of debt due as on the transfer date". The terms as envisaged define the scope of the work of the auditor to be: (i) Verification of the debt due with reference to the terms and conditions of the Concession Agreements and all financing agreements/documents which have a bearing on the c....
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....by the appellants, an objection was raised in the form of an affidavit by HMRTC on 10 October 2020, as noticed in the earlier part of this judgment. According to HMRTC, the audit report was inconclusive and incomplete, since several aspects which will have an impact on the debt due remain to be determined. Now, at this stage, it is necessary to note that the auditors stated that the scope of the audit as decided by CAG was submitted to the High Court on 19 November 2019, and it was intimated that only those issues which are relevant and related to examining the debt due under the Concession Agreements would be examined. Hence, other issues mentioned by HMRTC, such as encumbrances and liabilities on the metro project, shareholding/share in the valuation of the assets of the concessionaire, change of shareholding rights, criminal acts and liabilities, would require forensic and technical audit. It is important to note that such audits are ongoing independently. The audit conducted by the auditors appointed by the CAG herein, was limited to examining the debt due as defined in the Concession Agreements. While arriving at the principal and interest component of the debt due, the audito....
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....termined; (ii) The manner in which the scope of the audit report would be prescribed; and (iii) The consequence of the determination by the auditors to be appointed by the CAG. 49 Clause (ii) of the order dated 20 September 2019 makes it abundantly clear that the basic purpose underlying the entrustment of the reference to the CAG was the determination of the debt due "as defined under the Concession Contract". The High Court, it must be emphasized, was seized of a proceeding under Article 226 of the Constitution, and its writ jurisdiction had been invoked to challenge the notices of termination issued by RMGL and RMGSL, and for ensuring that the consequence which would emanate on the expiry of the notice period of 90 days by the cessation of the metro operations could be prevented by the judicial intervention in the course of the public law jurisdiction. The issuance of a notice of termination, the consequences which would ensue, and the resolution of disputes is specifically provided in the arbitration agreement between the parties, which is an intrinsic part of the Concession Agreements. Hence, there was an evident interface between this element of public in....
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....rt's exercise of its writ jurisdiction under Article 226 in the present case was justified since non-interference, which would have inevitably led to the disruption of rapid metro lines for Gurgaon, would have had disastrous consequences for the general public. However, as a measure of abundant caution, we clarify that ordinarily the High Court in its jurisdiction under Article 226 would decline to entertain a dispute which is arbitrable - Bisra Lime Stone Co. Ltd. vs Orissa SEB, (1976) 2 SCC 167. Moreover, remedies are available under the Arbitration and Conciliation Act, 1996 for seeking interim directions either under Section 9 before the Court vested with jurisdiction or under Section 17 before the Arbitral Tribunal itself. 50 It is also important to note that the termination of the Concession Agreements had consequences in terms of the provisions contained in the Agreement requiring a deposit of 80 per cent of the debt due under Article 24.4. The contesting parties agreed to an independent third-party determination of this amount by a neutral entity, namely the CAG. The primary function of CAG was to appoint a team of auditors for conducting a financial audit of the debt du....
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.... through Justice Ruma Pal, in Manish Mohan Sharma vs Ram Bahadur Thakur Limited (2006) 4 SCC 416 has observed: "28...A consent decree has been held to be a contract with the imprimatur of the Court superadded. It is something more than a mere contract and has the elements of both a command and a contract. (See: Wentworth v. Bullen 141 ELR 769; C.F. Angadi v. Y.S. Hirannayya [1972] 2 SCR 515). As was said by the Privy Council as early as 1929, "The only difference in this respect between an order made by consent and one not so made is that the first stands unless and until it is discharged by mutual agreement or is set aside by another order of the Court; the second stands until and unless it is discharged on an appeal (See: Charles Hubert Kinch v. Edward Keith Walcott and Ors.)." In the face of the clear stipulations contained in the order of the High Court, it would be impermissible to interdict the consequences emanating from the working out of the directions contained in the above orders of the High Court upon the submission of the CAG report. 53 CAG in the course of its affidavit filed before this Court and High Court by the Deputy Accountant General Shri KSN Pra....
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.... 2009 clearly envisaged the purpose of the Escrow Account in Article 18. HUDA, the predecessor of HSVP, entered into a Concession Agreement dated 9 December 2009, which in Article 17 expressly recognizes the linkage between the financing package and the Concession Agreement. In fact, Article 17.2 emphasizes that the rights of the concessionaire would stand waived if financial closure was not to occur within six months within the cure period of six months. Further, Article 18.1 envisages that all funds constituting the financing package for meeting the concessionaire's capital cost shall be credited to the Escrow Account during the period of operations, and all fare and non-fare revenues collected by the concessionaire shall be exclusively deposited in it. Under Article 18.2, the concessionaire was required to give to the Escrow bank irrevocable instructions while opening the Escrow Account that the deposits into the Escrow Account would be appropriated in the manner indicated in clauses (i) to (ii) of Article 18.2.1. This includes provision for debt service payments. These provisions in the Concession Agreement have a vital bearing on the subject matter of the present dispute. Cana....
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....heir obligations would be manifestly impermissible for three reasons: (i) Firstly, the obligation to deposit 80 per cent debt due as a consequence of the termination emanates from Article 24.4 of the Concession Agreement dated 9 December 2009; (ii) Secondly, the obligation to deposit 80 per cent of the debt due as determined in the report of the auditor has been assumed voluntarily before the High Court by HSVP/HMRTC from which, as public bodies, they cannot be permitted to resile; and (iii) Thirdly, there is a vital public interest element in ensuring that the monies which are committed by banks and financial institutions towards financing infrastructure projects are secured to them in terms of the Concession Agreements. 57 The underlying wrongdoing which was allegedly conducted by the promoters in the erstwhile management of IL&FS undoubtedly needs to be investigated. The process of pursuing the forensic audit, the investigation by the SFIO and by the law enforcement machinery must follow to its logical conclusion. The NCLT is supervising the resolution process with a government appointed Board now being in charge of the management of IL&FS. Equally,....
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....MRTC and HSVP, it must be emphasized, are not left without remedy. The deposit into the Escrow Account has to be maintained in that form and will abide by such orders that may be passed by NCLAT or by a competent statutory authority. Besides this, the Concession Agreements provides a clear-cut remedy for seeking reliefs under the arbitration agreement. 59 As noted earlier, the invocation of the writ jurisdiction of the High Court under Article 226 of the Constitution by HMRTC and HSVP was to challenge the termination notices dated 17 June 2019, and to obviate the consequence of the cessation of the rapid metro operations, which would have ensued on the expiry of the notice period. The arbitration clause of the Concession Agreements provides sufficient recourse to remedies which can be availed of. That apart, the order of the High Court dated 4 October 2019 has also clarified that the rest of the dispute that remains after the deposit of 80 per cent of the debt due, either arising out of the CAG report, the validity of the termination notices issued by both the parties and any past or future inter se claims and liabilities shall be agitated and decided in the arbitration proceedi....