TaxTMI 
TaxTMI 
2017 (10) TMI 1582
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....n 9 of the Arbitration & Conciliation Act 1996 ('A&C Act' for short) with the following directions: "106. In view of the above, (i) JETPUR is directed to furnish an unconditional and irrevocable Bank Guarantee, in favour of NHAI undertaking to pay to NHAI an amount not exceeding Rs. 348.604 Crores [i.e. 90% of 640.86 = 576.774 (minus) 222.03 {already paid} (minus) 6.14 {agreed to be payable by NHAI} = 348.604]; and (ii) on deposit of the Bank Guarantee, NHAI shall forthwith deposit in the Escrow Account the sum of Rs. 354.744 Crores (i.e. 348.604 + 6.14); and (iii) the encashment of the Bank Guarantee shall be subject to the final award of the Arbitral Tribunal; and (iv) JETPUR shall keep the bank guarantee alive for unto a period of four months after the making of the final award by the Arbitration Tribunal; and (v) Parties shall comply with the provisions of Section 9(2) of the Act." 3. A Concession Agreement dated 7th February, 2011 was executed between NHAI and JSTL for construction, operation and maintenance of the four laning of Jetpur-Somnath section of National Highway 8-D from k.m. 0.00 to k.m. 127.00 in the ....
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.... 31.2 Deposits into Escrow Account The Concessionaire shall deposit or cause to be deposited the following inflows and receipts into the Escrow Account: (a) all funds constituting the Financial Package; (b) all Fee and any other revenues from or in respect of the Project Highway, including the proceeds of any rentals, deposits, capital receipts or insurance claims; and (c) all payments by the Authority, after deduction of any outstanding Concession Fee: Provided that the Senior Lenders may make direct disbursements to the EPC Contractor in accordance with the express provisions contained in this behalf in the Financing Agreements. 31.3 Withdrawals during Concession Period 31.3.1 The Concessionaire shall, at the time of opening the Escrow Account, give irrevocable instructions, by way of an Escrow Agreement, to the Escrow Bank instructing, inter alia, that deposits in the Escrow Account shall be appropriated in the following order every month, or at shorter interval as necessary, and if not due in a month then appropriated proportionately in such month and retained in the Escrow Account and paid out therefrom in the mon....
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....dance with the instructions of the Concessionaire: Provided that no appropriations shall be made under Sub-clause (j) of this Clause 31.4.1 until a Vesting Certificate has been issued by the Authority under the provisions of Article 38. 31.4.2 The provisions of this Article 31 and the instructions contained in the Escrow Agreement shall remain in full force and effect until the obligations set forth in Clause 31.4.1 have been discharged." 6. There was also a stipulation in the Concession Agreement that the Concessionaire, upon occurrence of Financial Close, was to notify the NHAI forthwith and was to provide to the NHAI, at least two days prior to the Financial Close, three true copies of the Financial Package and the Financial Model, duly attested by a Director of the Concessionaire, along with three soft copies of the Financial Model, which was acceptable to the Senior Lenders. Senior Lenders could make direct disbursement to the specified contractor in accordance with the express provisions regarding such payments in the Finance Agreement. 7. In terms of the aforesaid agreement JSTL opened an escrow account with PNB, vide an Escrow Agreement dated 16th Au....
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....ce including the balance of Debt Due; (g) outstanding Subordinated Debt; (h) incurred or accrued O & M Expenses; (i) any other payments required to be made under the Concession Agreement; and (j) balance, if any, in accordance with the instructions of the Concessionaire: Provided that the disbursements specified in Sub-clause (j) of this Clause 4.2 shall undertaken only after the Vesting Certificate has been issued by the Authority." 8. Thus, in terms of clause 3.2 of the Escrow Agreement, NHAI has to deposit in the Escrow Account the Termination Payment as soon as the same becomes due and payable. In terms of Clause 4.2, after payment of taxes due and payable by JSTL, the Senior Lenders have the right to appropriate 90% of the Debt Due excluding Subordinate Debt. Priority of appropriation under the respective clauses is stipulated. 9. The Financing Agreement was the third agreement which was executed between PNB and JSTL on 19th August, 2011. NHAI is not a party to the Financing or Lenders Agreement, though a copy of the Lenders Agreement was furnished and given to NHAI, who as noticed above, was a party to the Escrow Agreement am....
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....e 37.3.1 of the Concession Agreement. JSTL also filed OMP (I) (Comm.) No. 221/2017 under Section 9 of the A&C Act for similar directions to NHAI to deposit Rs. 359.19 crores being the balance of minimum termination payment under the Concession Agreement into the escrow account. Reliance was placed upon Clause 37.3.2. of the Concession Agreement. 13. The impugned order dated 31st July, 2017 has directed NHAI to deposit Rs. 354.744 crores in the escrow account, subject to JSTL first furnishing an unconditional and irrevocable bank guarantee in favour of NHAI, undertaking to pay NHAI an amount not exceeding Rs. 348.604 crores. It directs that the bank guarantee shall be subject to the final award by the Arbitral Tribunal and would be kept alive by JSTL for a period of four months after making the final award by the Arbitral Tribunal. It also directs that the parties will comply with the provisions of Section 9(2) of the A&C Act. 14. The impugned order holds that NHAI under Clause 37.3.1, relating to 'Termination Payment' on account of default by the Concessionaire, cannot make any deductions on account of NHAI's claims or that the recoveries or adjustments must be ma....
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....son whatsoever, the Authority shall: (a) be deemed to have taken possession and control of the Project Highway forthwith; (b) take possession and control of all materials, stores, implements, construction plants and equipment on or about the Site; (c) be entitled to restrain the Concessionaire and any person claiming through or under the Concessionaire from entering upon the Site or any part of the Project; (d) require the Concessionaire to comply with the Divestment Requirements set forth in Clause 38.1; and (e) succeed upon election by the Authority, without the necessity of any further action by the Concessionaire, to the interests of the Concessionaire under such of the Project Agreements as the Authority may in its discretion deem appropriate, and shall upon such election be liable to the Contractors only for compensation accruing and becoming due and payable to them under the terms of their respective Project Agreements from and after the date the Authority elects to succeed to the interests of the Concessionaire. For the avoidance of doubt, the Concessionaire acknowledges and agrees that all sums claimed by such Contractors as bei....
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....o the Concessionaire for the Concessionaire's default occurring prior to COD. The expression "COD" has been defined in the definition clause of the Concessionaire Agreement as "Commercial Operation Date", which has its meaning as set forth in clause 15.1. Clause 15.1 stipulates that four-laning shall be deemed to be complete when completion certificate or provisional certificate, as the case may be, is issued under the provisions of Article/clause 14 and accordingly the Commercial Operation Date of the project shall be the date on which such completion certificate or provisional certificate is issued. The Concessionaire is entitled to collect fee and receive payments in accordance with the Article/clause 27 of the Concessionaire Agreement after issue of COD. The NHAI in the grounds of appeal have stated and accepted that they had issued provisional certificate on 4th May, 2015 and as per Article/clause 15, the Project Highway was put to commercial use from 4th May, 2015. This aspect is important and relevant when we examine the contention of the NHAI that they are entitled to set off the alleged recoveries of Rs. 242.42 Crores while making payment under clause 37.3.1. 17. Th....
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....re-payment charges in relation to accelerated repayment of debt except where such charges have arisen due to NHAI's default, are to be excluded. Under Clause (c) subordinated debt which is included in the financial package and disbursed by the lenders for financing of the Total Project Cost is to be added. Clause (c) like Clause (a) refers to the financing of the Total Project Cost. Proviso thereto stipulates that any debt due convertible into equity at the option of the Senior Lender or the Concessionaire shall be deemed to be debt due even after conversion, and the principal thereof shall be dealt with as if conversion had not been undertaken. It is clear from the reading of the definition that the expression the "debt due" refers to the principal amount of debt provided by the Senior lender under the Financing Agreement but excluding any part of the principal that had fallen due for repayment two years prior to the transfer date. The principal amount should be for financing the Total Project Cost. It also includes aggregate interest, financing fees, and charges which had fallen due within one year prior to the transfer date and excludes penal interest and other charges and a....
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.... forth in the financial package i.e. the Finance Agreement between the Concessionaire/JSTL and the Senior Lenders. As per clause (b) the Total Project Cost is the actual capital cost of the project upon conclusion of the four laning of the project less equity support. Clause (b), therefore, refers the actual capital cost of the project upon completion. From this amount equity support has to be excluded or reduced. The distinction between Clauses (a) and (b) is that Clause (a) relates to capital cost of the project as per the Finance Agreement and Clause (b) relates to actual capital cost of the project upon conclusion. Clause (a) would therefore be applicable even when the actual cost of the project upon completion is unavailable or lower. Under the two clauses equity support is to be reduced but for clause (a) equity support to be reduced would be as set forth in the financial package and under clause (b) from the actual capital cost on completion. Clause (c) refers to the pre-determined figure of Rs. 828.00 Crores and states that Total Project Cost for the said clause would be the above figure less equity support. It is submitted by NHAI that this amount of Rs. 828.00 crores was ....
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....nd from this amount another amount of Rs. 242.42 crores was deducted on account of recovery to arrive at the figure under Serial No. 10, described as 'Net Termination Payment', of Rs. 228.17 crores. Out of this Rs. 222.03 crores was already deposited and Rs. 6.14 crores has been paid by NHAI to escrow account with PNB during the pendency of the present appeal. 23. However, factual position is that outstanding debt due as on termination date was Rs. 640.86 Crores i.e. 621.45 towards principal and Rs. 19.4 crores towards interest. The aforesaid principal and the interest amount have been calculated in terms of the definition clause of debt due, quoted above. Ninety percent (90%) of the debt due is Rs. 576.774 crores out of which an amount of Rs. 222.03 crores and 6.14 crores totaling to Rs. 228.17 have been deposited by NHAI in the escrow account. Thus, the balance amount payable as per JSTL and PNB is Rs. 348.60 Crores. The impugned order refers to the figure of Rs. 354.774 crores that includes Rs. 6.14 crores which now stands paid. 24. At the outset, we would have to reject the contention of the appellant, NHAI that for the purpose of Clause 37.3.1 interest component ....
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....clause 25.2.1. The clause 25.2.1 falls under the heading "Grant" under Article 25 and is deleted. Hence, the term "equity support" remains undefined. The expression "equity support" before deletion of clause 25.2.1 had referred to the Grant credited to the escrow account to be applied by the Concessionaire for meeting the Total Project Cost. It was to be restricted and not exceed 20% of the Total Project Cost. In the present case, we would only hold that there was no "equity support". Hence, deduction was not required to be made while computing the amount under clauses (a) to (c) for computing the figure of Total Project Cost. 28. The financing agreement had computed the estimated total cost on development of the highway project at Rs. 981 crores instead of estimated cost of the project mentioned in Clause (c) by NHAI of Rs. 828 crores. Relevant clause in the Financing Agreement reads as under: "The total cost of construction and development of the Project High Way (defined hereinafter) is estimated to be Rs. 9,81,00,00,000 (Rupees Nine Hundred and Eighty One Crores Only), which is proposed to be funded, as follows: 29. The Senior Lenders had agreed to provide financ....
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....nce to total project cost of Rs. 981 crores. 32. The next question, which arises for consideration is what would be the capital cost of project under clause (a) for determining the Total Project Cost under the definition clause. It appears to us that the capital cost of project for the purpose of clause (a) would mean the capital cost incurred on a particular date. In the context of the present case, it would mean the capital cost incurred for construction, maintenance etc. on the date of termination. On the said aspect, it appears that the factual position was that capital cost of more than Rs. 640.86 Crores had already been incurred. This would be also the figure under Clause (b), if we treat the project as complete. This figure of Rs. 640.86 Crores was the debt due as on the termination date. Further, NHAI has not relied upon clauses (a) or (b) of the Total Project Cost in their computation. NHAI in their computation quoted in paragraph 20 above have applied clause (c) of the total project cost for they have referred to the figure of Rs. 828 Crores. 33. The contention of NHAI is that they are entitled to reduce and exclude from Rs. 828 crores, Rs. 106.60 crores for the unc....
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....he expression 'interim measure of protection' as distinct from the expression 'temporary injunction' used in Rules 1 and 2 of Order XXXIX of the Code of Civil Procedure, 1908. Interim injunction is one of the measures or orders prescribed in Clause (d) to Section 9(ii) of the A&C Act, albeit a party to the arbitration agreement is entitled to apply for and seek 'interim measure of protection'. Clause (e) to Section 9(ii) is a residuary power of the court to issue or direct other "interim measures of protection". Thus, the court has the power to issue or direct other interim measures of protection as may appear to the court to be just and convenient. Section 9 encompass the power of making orders as the Civil Court has for the purpose of, and in relation to any proceedings before it. This decision refers to Rule 10 of Order XXXIX of the aforesaid Code which empowers the Court to direct to deposit payment of the admitted amount. Therefore the court exercising power under Section 9 of the A&C Act has the same power as that of a civil court during pendency of the suit. 36. The aforesaid dictum is re-enforced and reiterated in the recent decision of another Di....
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....use of the term 'mandatory' to describe the injunction, the same question of substance will determine whether the case is 'normal' and therefore within the guideline or 'exceptional' and therefore requiring special treatment. If it appears to the court that, exceptionally, the case is one in which withholding a mandatory interlocutory injunction would in fact carry a greater risk of injustice than granting it even though the court does not feel a 'high degree of assurance' about the plaintiff's chances of establishing his right, there cannot be any rational basis for withholding the injunction." (underlining supplied) 37. The impugned order takes care of the interest of NHAI as it directs furnishing of an unconditional, irrevocable bank guarantee in favour of the NHAI for an amount not exceeding Rs. 348.604 crores and only upon the said guarantee being furnished deposit of the same figure is to be made in the escrow account. The bank guarantee is subject to final award of the arbitral tribunal. The impugned order also notices the adverse impact and the consequences which JSTL would suffer in case of non-deposit of the termination paym....