TaxTMI 
TaxTMI 
2024 (4) TMI 120
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....Appeal (AT) No. 346 of 2018 praying for certain reliefs. Brief facts necessary to be noticed for deciding the Application are: (i) A Concession Agreement dated 24.04.2012 was executed between the National Highways Authority of India ("NHAI") (Respondent No.1) and Baleshwar Kharagpur Expressway Ltd. ("BKEL") (Respondent No.2.) in relation to development of a Road Project in Baleshwar-Kharagpur Section of NH-60 in the States of Orissa and West Bengal. IL&FS Transportation Networks Limited ("ITNL") promoted and incorporated BKEL as Special Purpose Vehicle to develop the Project. The BKEL availed financial facilities from State Bank of Patiala and two other Banks, i.e., Allahabad Bank and IL&FS Financial Services Limited. A Common Loan Agreement was executed. In terms of the Common Loan Agreement, Respondent No.2, State Bank of Patiala (as the Senior Lenders' representative), Respondent No.1 and SBP (as the Escrow Bank) entered into an Escrow Agreement. (ii) State Bank of Patiala was merged with State Bank of India ("SBI"). SBI presently is a lead Bank under the Common Loan Agreement. Under the Concession Agreement, the BKEL was obliged to pay Concession Fees and Prem....
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.... "(a) This Hon'ble Tribunal direct that Respondent No. 1 shall not be permitted to recover, and Respondent No. 2 is not required to pay to Respondent No. 1 any amount towards the premium payment and other dues (in the nature of default interest and penal interest etc) other than in accordance with the waterfall mechanism prescribed under Clause 4.1 .1 of the Escrow Agreement and prior to debt repayment to the Senior Lenders by Respondent No. 2; (b) This Hon'ble Tribunal declare that the payments towards premium dues and other dues in the nature of default interest, premium interest, double charge penalty, damage penalty, penal interest etc. as demanded by Respondent No.1 from Respondent No. 2 are not in the nature of going concern payments of Respondent No. 2; (c) This Hon'ble Tribunal be pleased to cancel and annul the process initiated by Respondent No. 1 for replacing Respondent No. 2 from collecting tolls arising out of the Project; (d) This Hon'ble Tribunal be please to order and direct that pending resolution of Respondent No. 2 in terms of the Resolution Framework read with the lnvlT Resolution Process and BKEL lnvlT Transfer appr....
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....tor. Premium payment to NHAI are not related to the operation and maintenance of the Project developed by Respondent No.2. The premium payments can be deferred by Respondent No.1 and has also been deferred earlier from 2015 to 2025. NHAI's demand for payment of premium is more than INR 400 crores, whereas in Escrow Account at present the balance is only INR 291.41 crores Permitting payment from Escrow Account to NHAI shall put Respondent No.2 in jeopardy and it will not be possible to run Respondent No.2 as a going concern. 5. Shri Arvind Nayar, learned Senior Counsel appearing for Respondent No.1, refuting the submissions of learned Senior Counsel for the Applicant submits that the premium dues are nothing but concession fee. Learned Senior Counsel has referred to Clause 25.4 and 26.2.1 of the Concession Agreement and submits that payment of concession fee has priority over the Lenders debt, as per the distribution mechanism in the Escrow Agreement. Also the concession fee has to be paid before the services of debt of Lenders. It is submitted that payment of premium is payment as a going concern and the SBI itself has made the payment of premium till April 2021 and now it has s....
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....having relied on various clauses of Concession Agreement and Escrow Agreement, we need to notice the relevant clauses herein. The Concession Agreement dated 24.04.2012, in Article 25.4, defines 'premium' in following words: "25.4. Premium The concessionaire acknowledges and agrees that as set forth in the Bid, it shall pay to the Authority for each year of the Concession Period, a premium (the "Premium") in the form of an additional Concession Fee, as set forth in Clause 26.2.1, and in the manner set forth in Clause 26.4." 9. Clause 26.1 and 26.2, which are also relevant, are as follows: "26.1 Concession Fee In consideration of the grant of Concession, the Concessionaire shall pay to the Authority by way of concession fee (the "Concession Fee") a sum of Re. 1 (Rupee one) per annum and the Premium specified in Clause 26.2. 26.2 Additional Concession Fee 26.2.1 Without prejudice to the provisions of Clause 26.1, the Concessionaire agrees to pay to the Authority, on the Appointed Date a Premium in the form of an additional Concession Fee equal to Rs 35 Crores (Thirty Five Crores) as due to the authority during that year, due and....
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.... appropriated in the following order every month, or at shorter intervals 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 month when due: (a) all taxes due and payable by the Concessionaire for and in respect of the Project Highway; (b) all payments relating to construction of the Project Highway, subject to and in accordance with the conditions, if any, set forth in the Financing Agreements; (c) O&M Expenses, subject to the ceiling, if any, set forth in the Financing Agreements; (d) O&M Expenses and other costs and expenses incurred by the Authority in accordance with the provisions of this Agreement, and certified by the Authority as due and payable to it; (e) Concession Fee due and payable to the Authority; (f) monthly proportionate provision of Debt Service due in an Accounting Year; (g) Premium due and payable to the Authority; (h) all payments and Damages certified by the Authority as due and payable to it by the concessionaire, including repayment of Revenue Shortfall Loan; (i) monthly propor....
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.... (h) all payments and Damages certified by the Authority as due and payable to it by the Concessionaire pursuant to the Concession Agreement, including repayment of Revenue Shortfall Loan; (i) monthly proportionate provision of debt service payments due in an Accounting Year in respect of Subordinated Debt; (j) any reserve requirements set forth in the Financing Agreements; and (k) balance, if any, in accordance with the instructions of the Concessionaire." 12. When we look into Clause 31.3.1 and Clause 4.1.1, it is clear that both the provisions provide same priority and Clauses (e), (f) and (g) are the same. The bone of contention between the parties are that since Clause (e) uses word 'Concession Fee due and payable to the Authority', it is higher in priority from Clause (f), which deals with 'monthly proportionate provision of Debt Service due in an Accounting year' and concession fee includes the premium, hence, the premium has to be paid priority to the payment under Clause (f). We have already noticed the relevant Clauses of Concession Agreement, i.e., 25.4, 26.1 and 26.2, where Concessionaire has agreed to make payment of premium. Under t....