TaxTMI 
TaxTMI 
2016 (10) TMI 1400
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....khar Singh, learned Additional Chief Standing Counsel. 2. This is a public interest litigation challenging the levy and collection of toll in the name of User fee by NOIDA Toll Bridge Company from the Commuters for using the Eight-lane DND Flyway having stretch of 9.2 km. from NOIDA to Delhi. 3. The petitioner Federation Of NOIDA Residents Welfare Association is a society duly registered under the Societies Registration Act, 1860. The aims and objects of the society are to look after the welfare of the denizens of NOIDA, by espousing their cause before the authorities and to ensure that they are provided required Civic amenities and other developments in and around NOIDA. 4. New Okhla Industrial Development Authority (hereinafter referred to as "NOIDA") has been established under the U.P. Industrial Area Development Act, 1976 for planned development of the area within the territorial limits of NOIDA including roads and bridges etc. for the commuters. 5. 'NOIDA' in furtherance of its obligation to provide road communication facilities to the denizens made an arrangement with a private company namely NOIDA Toll Bridge Company Limited (hereinafter referred as "NOID....
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.... physical possession of the land so acquired to IL&FS for the execution of the Project. This apart NOIDA Authority was to solicit and obtain required permission from the Authorities of State of U.P. and Delhi. Salient features of the MOU are; (1) The Project was conceived as toll-way Project on a Build-Operate-Transfer ("BOT") basis. (2) The financial resources as required for the Project would be mobilized by IL&FS and the investment in the Project would be recovered by levy of toll on the users of the link bridge. (3) IL&FS would be entitled to recover its capital outlays for the execution of the bridge together with interest @ 20% per annum from the date of disbursement of funds till the date of recovery by the levy and collection of toll on the vehicles intend to use the proposed link road, subject to the permission and approval to be granted by the Union/State Government. (4) After full recovery of the investment landed cost of IL&FS for the Project, NOIDA Authority would be entitled to continue to levy and collect toll for the recovery of their remainder investment, if any, with due permission and consent of the State Government. ....
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....prising of representatives of Government of U.P., Delhi Government, NOIDA and IL&FS was established to monitor the progress of the Project. It was decided by the Steering Committee that the Project be implemented by a Cooperate entity promoted by IL&FS. The respondent No. 1 namely NOIDA Toll Bridge Company (hereinafter referred to as the "Concessionaire") was incorporated on April 8, 1996 to implement the NOIDA Toll Bridge Project. The MOU was placed before the Cabinet of Government of U.P. in August 1997. The Cabinet approved the Project package and constituted an Empowered Committee to make special recommendation on the Concession Agreement as well as the Support Agreement. A Committee was constituted for finalising the Concession Agreement and the Support Agreement. On November 12, 1997, the Concession Agreement for the NOIDA Bridge Toll Project was executed between the NOIDA Authority, IL&FS and NOIDA Toll Bridge Company. A support agreement dated 14.1.1998 was executed by the Government of U.P. and the Government of Delhi to effectuate the terms of the Agreement. On 23.10.1998, a Delhi land lease deed was executed between the President of India and NOIDA. A Delhi land sub-leas....
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....nt Of India, the Delhi Development Authority, the NOIDA Authority and IL&FS (which was termed as "the Steering Committee") was established to monitor the progress of the Project. (3) Clause (f) of the Concession Agreement provides that the Steering Committee was chaired by the Secretary of the Ministry of Urban Affairs and Development, Government of India. Upon satisfaction in full of all conditions precedent set forth in Article 3 of the Concession Agreement, the Steering Committee will be dissolved and will have no further role in the Project. With the approval of the Steering Committee a detailed Project Report was prepared after the Feasibility Study conducted by Kampsax another private company engaged for the purpose. (4) Clause (h) says that the Steering Committee had determined that the Project should be a toll-way connecting Maharani Bagh, at the Delhi end, with Okhla Barrage, at the NOIDA end and would comprise of the NOIDA Bridge with approach roads. (5) Clause (i) says that in order to ease the traffic congestion that would result due to the increase in volume of traffic, due to construction of NOIDA Bridge, a Flyway be constructed at ....
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.... to the Concessionaire the exclusive right and authority during the Concession Period in accordance with the terms and conditions of the agreement to determine, demand, collect, retain and appropriate a fee from the Users of the NOIDA Bridge and apply the same in order to recover the Total Cost of Project and the Returns thereon. 17. Section 2.2 (a) says that NOIDA undertook and agreed not to propose, recommend, implement or permit to be implemented any bridge or other road transport service network (including tunnels) which does not involve the collection of fee or other charges or involves the collection of fee or other charges which are lower than the fee being charged for the NOIDA B ridge for the spans within the area as described in "Appendix E" of the Agreement for a period of 10 years or till the NOIDA Bridge achieves its Full Rated Capacity, whichever is later. 18. Section 2.2 (e) says that NOIDA undertook and agreed not to acquire or take possession of the NOIDA Bridge otherwise than in accordance with Section 16.7. 19. Clause (f) of Section 2.2 says that NOIDA agreed not to levy any fee, charge or tax on the use of the NOIDA Bridge, or close down or otherwise ca....
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.... says that the Concessionaire, within four weeks of determination that all the conditions precedent set forth in Section 3.1 have been complied with to its satisfaction, shall be under obligation to issue a Certificate of Compliance with conditions precedent known as "Certificate of Compliance". 28. Section 4.1 provides for grant of Development Rights in the event that the Independent Auditor determines that the fee collected from the Project is not generating sufficient revenues for the Concessionaire to recover the Total Cost of Project and the Returns thereon. 29. The "Development Rights" has been defined in Section 1.1 of the Concession Agreement which reads as under:-- "Development Rights: means such additional rights, property and assets that are not part of and are not anticipated to be part of the Project as on the date of this Agreement but are granted to the Concessionaire by NOIDA in relation to the Project in accordance with Article 4 for enabling the Concessionaire to generate additional revenue, and may include without in any manner being limited to, provision of advertising services, right to develop hotels, restaurants and other facilities, services c....
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....ation of NOIDA to issue a notification, if required under the rules framed by it under Section 19 of Uttar Pradesh Industrial Area Development Act, 1976 to enable the Concessionaire to demand, collect, retain and appropriate fee, for and on behalf of NOIDA, from the Users of the NOIDA Bridge. 38. Article 10 deals with the appointment of the Independent Auditor by Lenders, Concessionaire and NOIDA, who shall determine and certify the Project Cost in consultation with the Independent Engineer and shall submit report which determines Total Cost of Project on the Project Commissioning Date. 39. Article 13 deals with the collection of fee, determination of fee, annual revision of fee, establishment of fee Review Committee. 40. Relevant Clauses of Article 13 are quoted as under:-- "Section 13.1 Collection of fee (a) The fee shall be determined by the fee Review Committee in accordance with the provision of this Article 13 except for the Base fee Rates which have already been determined and approved by the Steering Committee and has been specified in Section 13.2 herein below. (b) The fee shall be, collected, retained and appropriated from the Users of ....
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....e formula in Section 14.2(a). Section 14.2 Calculation of Returns (a) The amounts available for appropriation by the Concessionaire for the purpose of recovering the Total Cost of Project and the Returns thereon, as illustrated in Appendix F, shall be calculated at annual intervals from the Effective Date in the following manner: Start with: Gross revenues from fee collections, income from advertising and Development Income less O&M Expenses, less Taxes (excluding any customs or import duties) (b) The Total Cost of Project and the recovery thereof and of the Returns shall be determined by the Concessionaire annually in arrears, and certified by the Independent Auditor." 41. The 'Project Cost', 'Returns' and "Effective Date" have been defined in Section 1.1 of the Concession Agreement, which reads as under:-- "Project Cost means, collectively (a) the Cost of Construction and (b) the Other Costs of Commissioning. The Independent Auditor shall, in consultation with the Independent Engineer, determine the Project Cost as on the Project Commissioning Date." "Returns means the returns on the Total ....
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....by the Concessionaire (including, without limitation, attorneys' and accountants' fees) in the ordinary course of business. The O&M Expense shall be determined and certified by the Independent Auditor. "Other Costs of Commissioning" means all costs and expenses of whatever kind, as specified in the accounts maintained by the Concessionaire, NOIDA, Sponsor, GOUP and DG in the format approved by the Independent Auditor and are duly audited by the Independent Auditor, incurred in respect of the Project, prior to the Project Commissioning Date, other than the cost of Construction including but without being limited to: (a) cost incurred in relation to the acquisition and preparation of the land....... xxxx............. (b) all pre-operative expenses incurred by NOIDA, the Sponsor and the Concessionaire prior to entering into this Agreement, (c) management overhead such as....xxxxxxx........ (d) all consulting and advisory service fees incurred prior to the Project Commissioning Date, including...... xxxxx....... (e) expenses incurred by the Concessionaire for mobilization of financial resources,....... xxxxxxxx...... (f) any duties (including stamp duty payable on the ....
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....uality, all of the Concessionaire's right, title and interest in and to the Project Assets shall be transferred to NOIDA or its nominated agency in accordance with Article 19 and Article 17; respectively, and NOIDA or its nominated agency, as the case may be, shall accept such transfer. However, as a precondition to such transfer, NOIDA shall have to pay the Concessionaire, the aggregate of (i) all sums due and owing to the Lenders under the respective Financing Agreements, including any interest accrued thereon and any other amounts due and payable; (ii) an amount equal to the Total Cost of Project and the Returns thereon, outstanding until the termination date of the Concession Period as per this Article {excluding the amounts specified in sub-clause (i)}[only in case of NOIDA EVENT OF DEFAULT (under Section 18.13)] and (iii) all such additional costs that may be incurred in transferring the NOIDA Bridge as specified in Section 19.7(b); after deducting the aggregate of (i) any cash reserve(s) created for meeting debt service obligations of the Concessionaire, provided that such reserve(s) is utilised for the purpose for which it was created and (ii) the proceeds from the Insu....
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...."Sponsor" under the Concession Agreement which has agreed to be (a) share holder in the Concessionaire and; (b) a confirming party to the Agreement which (c) which shall provide all reasonable support to the Concessionaire for the implementation of the Project until the Transfer date, Management Fee of 1% of the Project cost is payable to the "Sponsor" upon Financial close which is not to include in the Project cost for the purpose of calculating the Management Fee." 44. The factual grounds for challenge, (besides the legal pleas) with reference to different clauses of agreement as noted above taken by the petitioner are that the total cost of the Project incurred by the Concessionaire relating to DND Flyover (alongwith Ashram Chawk) and support roads etc. till the date of commissioning as stated by Concessionaire was approx Rs. 408.17 Crores. The cumulative toll income from 2001 to 2014 is Rs. 803.524 Crores and other income from advertisement such as hoardings etc., from 2001 to 2014 is Rs. 38.01 Crores. Thus the total income upto 31.3.2014 comes to Rs. 841.25 Crores which is more than double the total cost of project incurred by the Concessionaire whereas after deducting the ....
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....OIDA to compensate the Concessionaire for the debt and debt service outstanding in accordance with Section 18.1 of the agreement. 46. The counsel for the petitioner refers to the Company's Auditor report dated 20.6.2012 for the year ended on 31.3.2012 enclosed with the supplementary affidavit dated 9.1.2013 of the petitioner (para '134') for referring to the Unrecovered Cost of Project, relevant portion is reproduced below:-- "The company considers that they will not be able to earn the assured return under the concession agreement over 30 years. The company has an assured extension of the concession as required to achieve project cost and designated returns. Based on the independent professional expert advice, the estimated life of the bridge has now been considered as 100 years". 47. Learned counsel for the petitioner on the above facts with reference to the clauses of the Concession Agreement as noted above submits that various clauses of the Concession Agreement are against the public interest as Article 14 of the Concession Agreement gives a right to the Concessionaire to collect "User Fees" not only to set off the Cost of the Project but also assure....
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....property and the authority of allotment should not be misused. There is no promissory estoppel for compelling the Government to implement a condition which is prohibited by law. 53. Reference is also made to Sharma Transport v. Govt. of A.P. 2002 (2) SCC 188. 54. NOIDA Authority paid Rs. 10 Crores and gave 68 acres of land for the Project on a lease for Rs. 1/- per annum. Lease right also include right to mortgage the land. Only 32 acres of land has been utilized whereas the remaining 36 acres of surplus public land can be transferred to third party under the Agreement. 55. NOIDA has admitted in its counter affidavit that Section 14 of the Agreement read with Annexure 'F', i.e. the method of computing total project cost is not in public interest. The Concession Agreement, therefore, is not serving public interest. The Independent Auditor, the Independent Engineer are not appointed by NOIDA Authority, it has no control, no mechanics and no say in computation of total project cost by the Concessionaire by adopting unreasonable formula agreed between the parties which ensures that the Project cost is always escalating and returns can never match the Total Cost of Proj....
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....Agreement which provides for annual review of fee and revision in line with changes in C.P.I. (Consumer Price Index) published by the Reserve Bank of India is against Public Interest. 63. The Apex Court in Padma v. Hira Lal Moti Lal Desarda and others 2002 (7) SCC 564 has not approved of such action by Public Authority and cancelled the lease in a public interest litigation. Action of State in granting the contract in violation of Article 14 makes it unfair and arbitrary. 64. Reference to Humanity and another v. State of West Bengal 2011 (6) SCC 125, Akhil Bhartiya Upbhokta Congress v. State of Madhya Pradesh 2011 (5) SCC 29 and City Industrial Development Corporation v. Platinum Entertainment and others 2015 (1) SCC 558 has been made. 65. Placing reliance upon the judgment of the Apex Court in LIC of India & others v. Consumer Education & Research Centre & others 1995 (5) SCC 482 and Kumari Shrilekha Vidyarthi v. State of U.P. 1991 (1) SCC 212, it is urged by the learned counsel for the petitioner that any action of the State or its instrumentality or public authority having public element if arbitrary, unjust and unfair, the Court under writ jurisdiction has a duly act t....
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....ucture Leasing and Financial Services Limited (IL&FS) was a public sector Company, 80% of its shares were held by Public Financial Institutions and PSU Banks. The Government instead of undertaking the project on its own decided to invite IL&FS to undertake the project. IL&FS was a pioneer in the private sector participation in development of infrastructure facilities in India and one of the proponents of PPP (Public Private Partnership) projects in infrastructure in India. It was one of the India's leading infrastructure development and finance Company. 69. The only financial contribution of the Government in the project is Rs. Ten Crores equity participation by NOIDA. All other funding has commercially been raised with no government subsidies or guarantees. The petitioners herein did not challenge the project when it commenced rather the residents of NOIDA at that point of time wrote to the Chief Minister and the Government to fast-track the project as there was urgent need for another connectivity between Delhi and NOIDA. 70. The project was completed on 07.02.2001 and was commissioned for use by public. Reasonable returns were excepted from the bridge and roads constru....
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.... The infrastructure facility alongwith Project Assets, ultimately is to be handed back to the government by the developer." 74. Reliance is placed upon the judgements of Bombay High Court in Kiran Anandrao Pawar & others v. Chief General Manager, IRB Kolhapur Integrated & others and Nandu v. State of Maharashtra & others to submit that PPP Model on BOT basis under the Concession Agreement has been recognized by the Court. It was approved that the project cost can be recovered by the private party who can collect toll from the users of the said project. 75. There were number of risks associated with undertaking of this pioneer project. Noida Toll Bridge was a greenfield project which had to be constructed from the scratch. There was no preexisting road at the site of the DND flyway between Delhi and NOIDA. Within a 3 KM radius of DND Flyway, there were two preexisting facilities namely Kalindikunj Road/Okhla Barrage and the Nizamuddin Bridge which were being used by the commuters without payment of any fee. Further there were many risks to the project like departmental, statutory clearances, land acquisition issues, traffic volume risk, political risk, technical issues like co....
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....established to monitor the progress and for development of the project. 81. The Steering Committee decided that the project should be implemented by a Corporate entity promoted by IL&FS. 82. The Uttar Pradesh Cabinet approved the project and constituted an Empowered Committee to make recommendations on the Concession Agreement as well as support Agreement. Draft Concession Agreement was reviewed by the concerned departments of Government of U.P. Formal approval of Government of U.P. was conveyed to the Concessionaire by the Special Secretary, Industrial Development, Government of U.P. 83. The World Bank approved the funding of the project via a line of credit to IL&FS, technical aspect of the projects were also examined. The project cost was reviewed and approved by the Board of Directors of NOIDA Toll Bridge Company. The Steering Committee gave various directions in regard to the Project and finally on 12.11.1997, the project was approved and the Concession Agreement was executed. 84. There is no infirmity in the process of execution of the Concession Agreement as it was not an arbitrary decision made in haste but after comprehensive deliberations at various government....
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....gd.) v. Union of India, 2002 (2) SCC 333, Villianur Iyarkkai Padukappu Maiyam (supra) and Raunaq International Ltd. v. I.V.R. Construction Ltd., 1991 (1) SCC 492, it is submitted that scope of interference in contractual matters for adjudicating the constitutional validity relating to economic policy matters of State is neither within the domain of the Courts, nor amenable to judicial review. 89. The power to levy the User fee can be traced to Section 6-A of U.P. Industrial Area Development Act, 1976 read with New Okhla Development Area (Levy of Infrastructure Fee) Regulations, 1998 framed under section 19 of the Act, 1976. The validity of these provision is not subject matter of challenge in the present PIL. The concessionaire is levying and collecting User fee under the Concession Agreement and it cannot be termed the "toll tax", as alleged. 90. Reference is made to Narmada Bachao Andolan v. Union of India, 2000 (10) SCC 664 to submit that where there is a valid law requiring the Government to act in a particular manner, the Court ought not to, without striking down the law, give any direction which is not in accordance with law. 91. Reference is also made to Col. T. Pra....
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....period and instead requires NOIDA Authority to extend the Concession Period by two years at a time. If NOIDA does not extend the Concession Period in advance by two years, the day that is immediately following the last day of the Concession Period under Section 2.3 (a) of the Concession Period will be the Transfer Date. The NOIDA Authority has discretion in the matter of extension of the Concession Period. 96. The Transfer date as per the definition in Section 1.1 is the date immediately following the last day of the Concession Period including any extensions thereto or earlier termination thereof, in accordance with the terms of the Concession Agreement". Thus if a concession period is not extended by NOIDA then the day immediately following the last day of the initial thirty years Concession Period shall be the transfer day and the company shall be under obligation to transfer the project together with the project asset to NOIDA. 97. There was rationale for the formula for computation of Total cost of project. The concept of Total cost of project and Termination payment was devised by experts keeping in view the factors such as:-- "1. It was first greenfield PPP pr....
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.... of project has been recovered. The Court may appoint a panel of expert to analyze the accounts of the Company namely NTBCL to ascertain the correctness of rival allegation of the parties in this regard. 101. It is further submitted that the NOIDA has been non-cooperative after the DND flyover was commissioned. Non compliance of the provisions of the agreement by NOIDA has resulted in spiraling of total cost of project. On September 3, 2001, a letter was written by the independent Auditor to NTBCL based on the traffic data from February 7, 2001 to July 31, 2001 that revenue generated by NTBCL would not be sufficient to recover the total cost of the project and the returns thereon within the stipulated Concession period. On September 4, 2001, said letter was forwarded by the Independent Auditor to NOIDA with a request to grant the development rights to NTBCL. On November 15, 2001 the meeting of Sub-Committee constituted by the Board of NOIDA for grant of development rights was held. The Sub Committee realised that revenues are not sufficient to recover the financial obligation of NTBCL and grant of development rights is needed, however, recommended that the grant of development r....
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.... contract was initiated at the behest of NOIDA. The Concessionaire had submitted following proposal and is awaiting clearance by NOIDA/State of U.P.;- "a. handing over of the project assets including the DND Bridge to NOIDA in 2031. b. freezing of total cost of project as on March 31, 2011 to be relevant only if NOIDA stands in default of the Concession Agreement or seeks to prematurely terminate the Concession Agreement in an arbitrary manner." 105. Several letters have been written by concessionaire to NOIDA and Government of U.P., however, NOIDA has failed to take further steps in this regard. Statements in this regard have been given in paragraph No. 12 to 19 of the Supplementary Counter Affidavit dated 14.09.2015 and in paragraph No. 4 to 7 of the Supplementary Counter Affidavit dated 21.01.2016 filed by the Concessionaire. 106. It is thus submitted that in case this Court considers Article 14 and Appendix 'F' of the Concession Agreement as unconscionable, even then by applying the doctrine of severability, the concession period of 30 years under section 2.3 of the Concession Agreement will remain intact, Section 27.4 of the Concession Agreement....
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....estion of extension after thirty years will depend upon various variable and unpredictable factors which at this juncture can neither be predicted nor advanced decision based on the situation suppose to prevail at that time can be made. 110. It is lastly submitted that the project has contributed immensely to the growth of the region and economic activity. The execution and existence of the project is certainly in the interest of public at large. Any adverse view will adversely impact the PPP model of infrastructure development and dissuade private players/lenders and investor from participating in PPP Projects. It will result into an adverse impact on the development of infrastructure projects in the Country and more importantly affect the creation of jobs for the poor and marginalized section. 111. Referring to judgements of the Apex Court in Dr. B. Singh v. Union of India & others, 2004(3) SCC 363 and Soma Isolux NH One Tollway Private Limited v. Harish Kumar Puri & others 2014(6) SCC, 75. It is urged that the Court has to be extremely careful that under the guise of redressing a public grievance, it does not encroach upon the sphere reserved by the Constitution to the Exe....
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....ourt in State of M.P. v. Narmada Bachao Andolan & another 2011(7) SCC 639, Jal Mahal (P) Ltd. v. K.P. Sharma and others 2014 (8) SCC 804, Ekta Shakti Foundation v. Government of NCT of Delhi. 2006 (10) SCC ?? 117. On a pointed query made by the Court as to how the contract for development of Public road/bridge was settled in favour of NTBCL with IL&FS as the promoter that too without inviting others, submissions of the learned counsel for the Concessionaire have been adopted. It is reiterated that 81% (approx) of the equity share capital of IL&FS was owned by the public financial institution. There were two Government of India nominees on the Board of IL&FS in 1992 namely the Secretary, Ministry of Surface Transport and the Secretary, Ministry of Urban Development. Thus the Board was overwhelmingly controlled by the Government of India. The overall scenario in late 1980 and early 1990 was characterized by the financial crisis and economic situation faced by the Government of India and also the State Governments. Against this back drop, a policy decision was taken to invite private sector participation in development of infrastructure across sectors to minimize recourse to govern....
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.... Transfer basis can never be equated with intended sale of government lands or transfer of state largesse. 120. Further the Apex Court in the case of Madhya Pradesh v. Narmada Bachao Andolan & another, 2011 (7) SCC 639, Jal Mahal Resorts (P) Ltd. K.P. Sharma, 2014 (8) SCC 804, Ekta Shakti Foundation v. Govt. NCT Delhi, 2006 (10) SCC 337 and State of Orissa and others v. Gopinath Dash and others, 2005 (13) SCC 495 has held that the power of judicial review of the executive and legislative action must be kept within the bounds of constitutional scheme and the policy matters of the Government must be left to it. In the matter of policy decision or exercise of discretion by the Government so long as the infringement of fundamental right is not shown, Courts will have no occasion to interfere. 121. It is vehemently argued that the Doctrine of Unconscionable contract is not applicable in relation to the Concession Agreement dated 12.11.1997. The doctrine of Unconscionability of the contract has its basis in Section 23 of the Indian Contract Act, 1872 and is attracted, in a case, where the contracting parties have grossly unequal bargaining power due to great disparity in economic s....
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....rivate sector financing basis. The said concept has received approval of the Apex Court in Narendra Road lines (supra). 124. It is vehemently urged that the concept of total cost of project and returns thereon has no linkage to the fee being charged from the User of the Delhi Noida Bridge. The fee does not get adjusted on account of high or unachievable Total Cost of Project and Returns thereon. The fee is determined by its own separate formula and any revision to the fee has to be undertaken only through the Fee Review Committee. The concept of Total Cost of Project and Returns is not an actual monetary liability and there is no right to receive the same except in the event of termination of contract by the Concessionaire in the case of a NOIDA Events of Default. It was incorporated precisely to safeguard against the political risks as in case of the long term agreement by government entity, there is continued risks that the private party to the Concession Agreement may face a situation of wrongful termination. 125. The Noida cannot be allowed to use the judicial process in the name of PIL to renege a valid Concession Agreement for no fault or breach by the Concessionaire an....
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....ered into on the basis of PPP (Public Private Partnership) to develop a large Scale Infrastructure facility. 130. We may notice at this stage that the New Okhla Industrial Development Authority i.e. respondent No. 2 did not file any reply till 31.1.2013 when the matter was taken up by this Court and specific direction was issued requiring NOIDA to make its stand clear, whether it is in favour of continuance of Agreement dated 12.11.1997 made with NOIDA Bridge Company Limited i.e. the respondent No. 1 or it is with the petitioner in public interest. 131. NOIDA the respondent No. 2, thereafter, filed an affidavit dated 18th February, 2013 referring to various clauses of the Agreement and submitted that the provisions of Section 14 read with Appendix "F" of the Concession Agreement which guarantees an annual return of 20% of the Project cost and addition of the shortfall in the return of the previous year in the next year, is against public interest. 132. It is submitted that the Project Cost calculated on the date of commissioning of the bridge on 7.2.2001 was Rs. 407.64 Crores which was compounded and risen over Rs. 953 Crores just about five years thereafter. Going by the ....
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....nd has to be returned by the Concessionaire to NOIDA. 137. The Committee also suggested that the income generated by the Concessionaire through these development rights, if granted, be treated as equity of NOIDA in the Company namely NOIDA Toll Bridge Company Limited. 138. The Concessionaire namely NOIDA Toll Bridge Company refused to accept this citing the reasons:-- "(a) All the Project assets including lands are mortgaged to the Lenders as security. (b) Treating the development income as NOIDA's equity will result in NOIDA taking over the management control of the Company. The paid up equity of the Company is Rs. 122 Crores of which NOIDA has paid Rs. 10 Crores which comes to 8.6%. Taking the development income as Rs. 50 Crores, in case of treating it equity, NOIDA will become the largest shareholder." 139. It is categorically submitted in paragraph '6' of the supplementary affidavit dated 11.5.2016 that the development rights have not been granted by NOIDA to the NOIDA Toll Bridge Company Limited as yet. 140. During oral submissions, Sri C.B. Yadav learned Senior Advocate assisted by Sri Shivam Yadav, learned counsel for the respondent ....
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....Delhi-NOIDA Bridge Project (DND Flyway) under the tripartite Memorandum of Understanding (MOU) signed on 7.4.1992 by NOIDA, Delhi Administration and IL&FS. 147. It is further submitted by Sri C.B. Yadav, learned Senior Advocate for NOIDA that 68 acres of land has been given by NOIDA Authority and Delhi Government has handed over 342 acres of land. Out of the total area approximately 400 acres of land which was handed over to the Concessionaire, it has utilised only 144 acres of land for the purpose of construction of Flyway and Bridge. The rest of the land has not been utilised, but the entire land has been mortgaged by the Concessionaire to different banks to take loan against the same. The Concessionaire appears to have exercised the right conferred upon it under Section 15.2 (a) of the Concession Agreement. 148. Sri C.B. Yadav, learned Senior Advocate for NOIDA lastly stated that NOIDA is helpless inasmuch as it is not in a position to terminate the agreement in view of the liability/obligations which it would incur under Section 18.1 and 18.2 of the Concession Agreement. In the event of termination of agreement, the NOIDA would be under obligation to pay to the Concession....
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....t. 153. Referring to "Compilation III" of the list of documents filed on behalf of the State of U.P., it is submitted that Sri Pradeep Puri who was projected as Director of company was not discharging any function/obligation for the company yet all expenses including the remuneration paid to Mr. Pradeep Puri were added to the project cost. Sri Pradeep Puri in the letter dated 29th August, 2007 sent to the Chief Executive Officer, NOIDA (appended as Annexure A-7, (para '11') to the Supplementary Affidavit No. 326053 dated 14.9.2015 had enclosed a certificate on the total unrecovered project cost upto March 31, 2007 as verified by the Independent Auditor, M/s. A.F. Ferrguson & Co. This certificate discloses the increase in the Unrecovered Total Project Cost as per the formula given in Annexure 'F' of the Concession Agreement and that the closing balance after 30 years of the Concession Agreement as on March 31, 2031 would be approximately Rs. 53353 Crores, the term of the Project be now taken as 100 years. 154. He further submits that O&M expenses (Office and Maintenance Expenses) though are not included in the total cost of Project as per Section 14.1(b) of the....
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....els Private Limited through Director and other 2010 (10) SCC 157, to submit that once the State or a NOIDA which is instrumentality of the State enters into a contract, it has an obligation in law to act fairly, justly and reasonably as required under Article 14 of the Constitution of India, Writ Court can issue suitable directions to set right the arbitrary action of the State or its instrumentality. 158. The contractual matter are not beyond the realm of judicial review though its application is limited. Where the public interest is affected, the power of judicial review will be permissible even in contractual matters. 159. Referring to judgment of Apex Court In Tata Cellular v. Union of India 1994 (6) SCC 651 (in Compilation II), it is submitted though the Government has freedom in the matter of contract, inviting of tender and refusal of any tender which pertains to its policy matter, but the decision/action of the Government is to be tested on the touchstone of "Wednesbury" principles of unreasonableness. When the decision is such as no reasonable person on proper application of mind could not take or there is procedural impropriety, the Court would intervene and set rig....
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....ts/returns thereon having been recovered by the Concessionaire. (b) The period of 30 years fixed by the Concessionaire for realizing the toll in the name of "User Fee" is arbitrary and opposed to public policy. The petitioners have challenged the Concession Agreement on various grounds narrated in the preceding part of this judgment. 164. The respondents have vehemently opposed the petition on the ground of maintainability with the assertion that the petitioner Noida Residents Welfare Association was well aware of the execution of the Concession Agreement as well as the construction of the project and commencement of its operation. There is no explanation nor any justification for the delay of more than 22 years in challenging the MOU and 17 years in challenging the Concession Agreement. Moreover, 15 years have passed from the Commissioning of the bridge and commencement of the levy of fee for the use of Delhi Noida Bridge. The Concessionaire and IL&FS have discharged their obligations and duties under the MOU as well as the Concession Agreement. This inordinate delay on the part of the petitioner has not been satisfactory explained. Moreover, the credentials of the petitioner a....
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....nterest in simple terms means that principle of law which holds that no subject can lawfully do that which has a tendency to cause injury to the public or is against the public good. The doctrine of public interest is founded on the current needs of the Community. The issue is always raised with reference to the interest of a Section of the Community. It is thus sufficient to show that the interest of such section of the community is the interest of the Public. The injury or tendency to injure that particular section of the community would be against the Public Interest. However, no satisfactory definition could be found as to what is public interest. We will go by what has been stated in Pollock "On contract" (12th Edition) at page 290:-- "Frequently in considering the interests of the public as a whole, the interests of a section of it have been taken into account in actual decisions in which the question of public policy has been raised; but the seeming paradox is explained by the fact that, although these decisions may relate primarily to sectional interests they nevertheless reckon with the interests of the community at large." 169. Thus in our, opinion, the injury....
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....facility, specifically when the challenge is to the very levy of the fee. The State and its Concessionaire have to meet the challenge on merits rather than taking shelter behind technical objections like the use of other linkages. 176. The plea that this petition has been prompted by NOIDA to avoid its contractual obligation has been so stated before us without any material to support such vague sweeping allegations. The petitioners have stated in so many terms before us that the levy and collection of Toll/User Fee must stop. All other rights and obligations of party to the agreement is of no concern of the petitioners. 177. We further find that Government of India and Delhi Government are not party to the Concession Agreement nor they have signed the same. No rights of the two governments are being reflected upon by this Court in any manner while considering the issues in hand. Therefore, we record that they are neither necessary nor proper party to the petition. Their impleadment is, therefore, not required. 178. So far as the share-holders of Noida Toll Company are concerned, we may record that their interest is looked after by the Company itself. Despite opportunity, ....
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....ily and without reason and if it does, its action would be liable to be invalidated. If the Government awards a contract or leases out or otherwise deals with its property or grants any other largess, it would be liable to be tested for its validity on the touch-stone of reasonableness and public interest and if it fails to satisfy either test, it would be unconstitutional and invalid." "12. Now what is the test of reasonableness which has to be applied in order to determine the validity of governmental action. It is undoubtedly true, as pointed out by Patanjali Shastri, J. in State of Madras v. V.G. Rau, that in forming his own conception of what is reasonable, in all the circumstances of a given case, it is inevitable that the social philosophy and the scale of values of the judge participating in the decision, would play an important part, but even so, me test of reasonableness is not a wholly subjective test and its contours are fairly indicated by the Constitution. The concept of reasonableness in fact pervades the entire constitutional scheme. The interaction of Arts. 14, 19 and 21 analysed by this Court in Maneka Gandhi v. Union of India, clearly demonstrated that t....
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....inciples. What according to the founding fathers constitutes the plainest requirement of public interest is set out in the Directive Principles and they embody par excellence the constitutional concept of public interest. If, therefore, any governmental action is calculated to implement or give effect to a Directive Principle, it would ordinarily, subject to any other overriding considerations, be informed with public interest." 184. It was thus held that the Government action which fails to satisfy the test of reasonableness and public interest and is found to be wanting in the quality of reasonableness or lacking in the element of public interest, would be liable to be struck down as invalid. The principles which flow as a necessary corollary of this proposition is that the Government cannot act in a manner which would benefit a private party at the cost of the State; such an action would be both unreasonable and contrary to public interest. The Government while granting the contract or lease of its property cannot give a Contract or lease out its property for a consideration less than the highest that can be obtained for it, unless of course there are other considerations whi....
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....aw that governmental action must be kept within the limits of the law if there is any transgression the Court must be ready to condemn it." 186. With regard to the second limitation on the discretion of the Government in the grant of largesse to choose the persons to whom such largesse may be granted, it has been held that in selecting the recipients for its largesse, the Government cannot choose to deal with any person it pleases in its absolute and unfettered discretion. Following principles have been laid down in Ramana Dayaram Shetty (supra) in paragraph '15' as under:-- "15. It is held that The second limitation on the discretion of the Government in grant of largess is in regard to the persons to whom such largess may be granted. It is now well settled as a result of the decision of this Court in Ramana D. Shetty v. International Airport Authority of India & Ors. (supra) that the Government is not free like an ordinary individual, in selecting the recipients for its largess and it cannot choose to deal with any person it pleases in its absolute and unfettered discretion. The law is now well established that the Government need not deal with anyone. but if ....
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....son whose acts have the insignia of public element to say that their actions are in the field of private law and they are free to prescribe any conditions or limitations in their actions as private citizens, simplicitor do in the field of private law. Its action must be based on some rationale and relevant principles. In paragraph '24', it was thus observed:-- "24......... .....xxxxxxxx............ that even in contractual relations the Court cannot ignore that the public authority must have constitutional conscience so that any interpretation put up must be to avoid arbitrary action, lest the authority would be permitted to flourish as imperium a imperia. Whatever be the activity of the public authority, it must meet the test of Article 14 and judicial review strikes an arbitrary action." 188. It was held that the State, when acting in its executive power, enters into contractual relations with the individual, Article 14 would be applicable to the exercise of such power. The relevant paragraphs '25', '26', '27' and '29' are quoted as under:-- "25. In Mahabir Auto Stores v. India Oil Corporation, AIR 1990 SC 1031, it was ....
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....aking objectively all the relevant options into consideration and in a manner that is reasonable, relevant and germane to effectuate the purpose for public good and in general public interest and it must not take any irrelevant or irrational factors into consideration or arbitrary in its decision. Duty to act fairly is part of fair procedure envisaged under Articles 14 and 21. Every activity of the public authority or those under public duty or obligation must be informed by reason and guided by the public interest." 29. "........... xxxxxxxxxxx........ In Sterling Computers Ltd. v. M&N Publications Ltd., (1993)1 SCC 445 at page 464 para 28, it was held that even in commercial contracts where there is a public element, it is necessary that relevant considerations are taken into account and the irrelevant consideration discarded. In Union of India v. M/s. Graphic Industries Co., (1994)5 SCC 398, this Court held that even in contractual matters public authorities have to act fairly; and if they fail to do so approach under Article 226 would always be permissible because that would amount to violation of Article 14 of the Constitution..... xxxxxxxxxxxxxxxx...." 189. The Ap....
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....al Development Corporation (CIDCO) (supra), it was observed that whenever the Government dealt with the public establishment in entering into a contract or issuance of licence, the Government could not act arbitrarily on its sweet will but must act in accordance with law and the action of the Government should not smack of arbitrariness. The principles laid down by the Apex Court in Akhil Bhartiya Upbhokta Congress (supra) have been approved in paragraph '38' as under:-- "38. In the case of Akhil Bhartiya Upbhokta Congress v. State of Madhya Pradesh & ors., (2011) 5 SCC 29, this Court while considering the question of legality of allotment of land by the State or its agencies on the basis of applications made by individual, observed as follows:-- "65. What needs to be emphasised is that the State and/or its agencies/instrumentalities cannot give largess to any person according to the sweet will and whims of the political entities and/or officers of the State. Every action/decision of the State and/or its agencies/instrumentalities to give largesse or confer benefit must be founded on a sound, transparent, discernible and well-defined policy, which shall be....
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.... is a welfare State and is the regulator and dispenser of special services and provider of a large number of benefits including contracts, licences, quotas, mineral rights etc. The valuables dispensed by Government may take many forms, but they all share One characteristic. That is where the Government is dealing with the public, whether by way of giving jobs or entering into contracts or granting other forms of largesse, the Government cannot act arbitrarily at its sweet will, and like a private individual, deal with any person it pleases. Its action must be in conformity with such standards or norms and must not be arbitrary or irrational." 195. In Akhil Bhartiya Upbhokta Congress (supra), Justice G.S. Singhvi speaking for the Bench observed in paragraphs '47', '48' and '49' as under:-- "47. When the Constitution was adopted, people of India resolved to constitute India into a Sovereign Democratic Republic. The words 'Socialist' and 'Secular' were added by the Constitution (Forty-second Amendment) Act, 1976 and also to secure to all its citizens Justice - social, economic and political, Liberty of thought, expression, belief, fa....
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....e and the Central Governments and local authorities. Licences are required before one can engage in many kinds of businesses or work. The power of giving licences means power to withhold them and this gives control to the Government or to the agents of Government on the lives of many people. Many individuals and many more businesses enjoy largesse in the form of Government contracts. These contracts often resemble subsidies. It is virtually impossible to lose money on them and many enterprises are set up primarily to do business with Government. Government owns and controls hundreds of acres of public land valuable for mining and other purposes. These resources are available for utilisation by private corporations and individuals by way of lease or licence. All these mean growth in the Government largesse and with the increasing magnitude and range of governmental functions as we move closer to a welfare State, more and more of our wealth consists of these new forms. Some of these forms of wealth may be in the nature of legal rights but the large majority of them are in the nature of privileges." 196. In paragraph '50', it was further observed that in our constitutional ....
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....urt Cases 1 has held that the natural resources belong to the people, the State legally own them on behalf of its people and from that point of view the natural resources are considered as national assets, more so because the State benefits immensely from their value. The State is empowered to distribute natural resources. However, while distributing, the State is bound to act in consonance with the principles of equality and public trust and ensure that no action is taken which may be detrimental to public interest. 200. In paragraphs '75', '80', '86', '87', '88' and '89', it has been stated as under:-- "75. The State is empowered to distribute natural resources. However, as they constitute public property/national asset, while distributing natural resources, the State is bound to act in consonance with the principles of equality and public trust and ensure that no action is taken which may be detrimental to public interest. Like any other State action, constitutionalism must be reflected at every stage of the distribution of natural resources. In Article 39(b) of the Constitution it has been provided that the ownership a....
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....1) 1 SCC 212, LIC v. Consumer Education and Research Centre (1995) 5 SCC 482, New India Public School v. HUDA (1996) 5 SCC 510 and held: 65. "What needs to be emphasised is that the State and/or its agencies/instrumentalities cannot give largesse to any person according to the sweet will and whims of the political entities and/or officers of the State. Every action/decision of the State and/or its agencies/instrumentalities to give largesse or confer benefit must be founded on a sound, transparent, discernible and well-defined policy, which shall be made known to the public by publication in the Official Gazette and other recognised modes of publicity and such policy must be implemented/executed by adopting a non-discriminatory and non-arbitrary method irrespective of the class or category of persons proposed to be benefited by the policy. The distribution of largesse like allotment of land, grant of quota, permit licence, etc. by the State and its agencies/instrumentalities should always be done in a fair and equitable manner and the element of favouritism or nepotism shall not influence the exercise of discretion, if any, conferred upon the particular functionary or offi....
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....cts and circumstances to find out the nature of the activity or scope and nature of the controversy. 202. In Sterling Computers Limited v. M&N Publications Ltd. 1993 (1) SCC 445, it was held that even in commercial contracts where there is public element, it is necessary that relevant considerations are taken into account and the irrelevant considerations discarded. 203. In Union of India v. Graphic Industries Co. 1994 (5) SCC 398, it is held that even in contractual matters, public authorities have to act fairly and if they fail to do so, the enquiry under Article 226 would always be permissible because that would amount to violation of Article 14 of the Constitution. 204. The scope of judicial review in contractual matters came up for consideration before the Apex Court in Tata Cellular (supra) wherein it is observed in paragraphs '70', '71', '72', '73' and '74' as under:-- "70. It cannot be denied that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, it must be clearly stated that there are inherent limitation....
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....f judicial control over administrative action. 74. Judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision-making process itself." 205. S. Mohan J. speaking for the bench of three judges in the case of Tata Cellular (supra) framed two questions for explaining the law on judicial review of administrative action. These questions have been beautifully framed as (i) "What is this charming principles of Wednesbury unreasonableness? (ii) Is it a magical formula?" In answering these questions, the statement about judicial review by Lord Denning where he emphasises the supervisory nature of the jurisdiction of the Court, has been quoted in paragraph '83' as under:-- "83. A modem comprehensive statement about judicial review by Lord Denning is very apposite; it is perhaps worthwhile noting that he stresses the supervisory nature of the jurisdiction: "Parliament often entrusts the decision of a matter to a specified person or body, without providing for any appeal. It may be a judicial decision, or a quasi-judicial decision, or an administrative decision.....
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....ke into account any reasons which the body may give for its decisions. If it gives no reasons in a case when it may reasonably be expected to do so, the courts may infer that it has no good reason for reaching its conclusion, and act accordingly. See Padfield case (as AC pp. 1007, 1061)1968 AC 997: (1968) 1 All ER 694." 206. Dealing with the concept of "reasonableness" in administrative law elaborated by Venkatachaliah, J. in G.B. Mahajan v. Jalgaon Municipal Council 1991 (3) SCC 91, it is noted that in the administrative law, test of reasonableness is not by the standards of the 'reasonable man' of the torts law. Emphasis was supplied to what Prof. Wade says in his book on "Administrative Law" in paragraphs '89' & '90' as under:-- "89. This is not therefore the standard of "the man on the Clapham omnibus". It is the standard indicated by a true construction of the Act which distinguishes between what the statutory authority may or may not be authorised to do. It distinguishes between proper use and improper abuse of power. It is often expressed by saying that the decision is unlawful if it is one to which no reasonable authority could have come.....
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....ednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides. (6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure." (e) Concept of public policy under Section 23 of the Indian Contract Act:-- 209. We may first refer to Section 23 of The Indian Contract Act, 1872:-- "23. What consideration and objects are lawful, and what not The consideration or object of an agreement is lawful, unless -It is forbidden by law; or is of such nature that, if permitted it would defeat the provisions of any law or is fraudulent; of involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy." 210. Simply put, the section says that in each of such cases where the consideration or object is unlawful or opposed to Public Policy, the agreement is void. 211. As it is understood in legal parlance, the doctrine of public policy has been explained and applied by the Apex Court in the case of Gherulal Parakh v. Mahadeodas Maiya a....
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....t regards as public policy. This is laid down in section 23 of the Indian Contract Act and in India therefore it cannot be affirmed as a matter of law as was affirmed by Lord Halsbury in Janson v. Driefontein Consolidated Mines, Limited (1902 A. C. 484 at p. 491) that no Court can invent a new head of public policy, but the dictum of Lord Davey in the same case that " public policy is always an unsafe and treacherous ground for legal decision " may be accepted as a sound cautionary maxim in considering the reasons assigned by the learned Judge for his decision ". The same view is confirmed in Bhagwant Genuji Girme v. Gangabisan Ramgopal (2) and Gopi Tihadi v. Gokhei Panda (3). The doctrine of public policy may be summarized thus: Public policy or the policy of the law is an illusive concept; it has been described as " untrustworthy guide ", " variable quality ", " uncertain one ", " unruly horse ", etc.; the primary duty of a Court of Law is to enforce a promise which the parties have made and to uphold the sanctity of contracts which form the basis of society, but in certain cases, the Court may relieve them of their duty on a rule founded on what is called the public pol....
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....sides, and the defendant was to bring his action against the plaintiff, the latter would then have the advantage of it; for where both are equally in fault, potior est conditio defendentis............." 214. In Central Inland Water Transport Corporation Limited and Another v. Brojo Nath Ganguly and Another, 1986 (3) SCC 156, while expounding the principle governing public policy in the matter of contract between employer and employees, the principle of "test of reasonableness or fairness" of a clause in contract had been applied in a case where there was inequality of bargaining power. 215. Though the instant case proceeds on a different footing however, for the purpose of understanding the expression "public policy" or "opposed to public policy", under the Indian Contract Act, paragraphs 92 and 93 of the aforementioned judgment, in our opinion, are relevant and quoted as under:-- "92. The Indian Contract Act does not define the expression "public policy" or "opposed to public policy". From the very nature of things, the expressions "public policy", "opposed to public policy" or "contrary to public policy" are incapable of precise definition. Public policy, however, ....
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....he growth of the nation, necessarily acquires some fixed principles, and if it is to maintain these principles it must be able, on the ground of public policy or some other like ground, to supress practices which, under ever new disguises, seek to weaken or negative them. "It is thus clear that the principles governing public policy must be and are capable, on proper occasion, of expansion or modification. Practices which were considered perfectly normal at one time have today become obnoxious and oppressive to public conscience. If there is no head of public policy which D covers a case, then the court must in consonance with public conscience and in keeping with public good and public interest declare such practice to be opposed to public policy. Above all, in deciding any case which may not be covered by authority our courts have before them the beacon light of the Preamble to the Constitution. Lacking precedent, the court can always be guided by that light and the principles underlying the Fundamental Rights and the Directive Principles enshrined in our Constitution. 93. The normal rule of Common Law has been that a party who seeks to enforce an agreement whic....
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....ous to ride" and as observed by Cave, J. in re Mirams, [189] 1 QB 594 at 595 it is "a branch of the law, however, which certainly should not be extended, as judges are more to be trusted as interpreters of the law than as expounders of what is called public policy". But as observed by Prof. Winfield in his article 'Public Policy in the English Common Law'. "Some judges appear to have thought it [the unruly horse of public policy] more like a tiger, and refused to mount it at all perhaps because they feared the fate of the young lady of Riga. Others have regarded it like Balaam's ass which would carry its rider nowhere. But none, at any rate at the present day, has looked upon it as a Pegasus that might soar beyond the momentary needs of the community." All courts are at one time or the other felt the need to bridge the gap between what is and what is intended to be. The courts cannot in such circumstances shirk from their duty and refuse to fill the gap. In performing this duty they do not foist upon the society their value-judgments. They respect and accept the prevailing values, and do what is expected of them. The courts will, on the other hand, fai....
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....e group of persons which certainly would come within the meaning of arbitrariness on the part of CIDCO and against the public policy. Such an action on the part of CIDCO, it appears to us, is nothing but a favouritism based on nepotism and was irrational and unreasonable and functioning in a discriminatory manner as voiced by this Court in the case of Raman Dayaram Shetty." 218. It was held that in the matter of allotment of plots by CIDCO, the arbitrariness had a role to play and the allotment made in favour of one group of persons would be against the public policy. The action of CIDCO was found tainted with favoritism based on nepotism and opposed to public policy. 219. In the most recent case of Board of Control For Cricket In India v. Cricket Association of Bihar and others 2015 (3) SCC 251, the concept of public policy has been discussed in paragraph No. 90 to 96. The meaning attached to the expression "public policy" has been discussed with reference to what has been stated in paragraph No. 92 of the judgement in the case of Central Inland Water Transport Corporation (supra). 220. We only reproduce paragraph Nos. 90, 94 and relevant portion of paragraph No. 96....
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.... and bring transparency and objectively and promote probity in the discharge of public functions would also constitute public policy. Conversely, any deviation, abrogation, frustration or negation of the salutary principles of justice, fairness, good conscience, equity and objectively will be opposed to public policy. It follows that any rule, contract or arrangement that actually defeats or tends to defeat the high ideals of fairness and objectivity in the discharge of public functions no matter by a private non-governmental body will be opposed to public policy."............. 221. The rule of law requiring opportunity to all who may be invited before grant of contact is thus settled. A public Authority cannot adopt pick and choose method while entering into the Public Contract. In cases, the Court is not denuded of the powers to look into the agreement and see whether the clauses of agreement are such as would benefit the private person at the cost of public. 222. There cannot be a doubt that the law has to grow in order to satisfy the needs of the fast changing society and keep abreast with the economic development taking place in the country. As new situations arise the l....
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....he existing port facility. It was therefore, held that the development of existing port on BOT basis cannot be equated with the transfer of State largess and therefore, non inviting of tender was not found fatal. 226. The Raunaq International (supra) was a case where tenders were invited, evaluation committee of experts was appointed to evaluate offers. After giving due consideration to the records and past performance of the tenderers, the Committee selected the tenderer of higher price for a better equality of work. It was therefore, held by the Apex Court that merely because lowest tender was not accepted by the committee, it cannot be said that the decision was faulty and the Court, therefore, will not substitute the decision of an experts. 227. The judgments relied upon by the Concessionaire on the issue are distinguishable in the facts of the present case. 228. We will, therefore, first proceed to examine as to whether in the facts of the case, there are exceptional reasons for the NOIDA to enter into the Concession Agreement with NOIDA Toll Company and IL&FS, without satisfying the requirements of Article 14 of the Constitution of India. 229. From the stand taken....
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....o experience in the matter of construction of such road projects and, therefore, the entire case pleaded by ILFS and NOIDA Toll Bridge Company for suggesting that there was no requirement of advertisement/notice inviting tenders in the facts of the case falls to ground. 236. It would also be appropriate for us to record that in case other competitors had been invited, probably better favourable condition both in the matter of what would be the fair and reasonable expenses which could be deducted from the tolls recovered, and to what extent could have been ascertained. 237. Similarly, if others were permitted to compete, probably the State/NOIDA could have found more commercially viable project and a better deal. Similarly, there would have been offers much more attractive and much more in the public interest, if a transparent procedure for awarding the contract, as per the law explained by the Apex Court in the case of M/s. Kasturi Lal Lakshmi Reddy (supra), had been adopted by the respondents. 238. We may also record that the execution of the Concession Agreement has not resulted in any benefit either to NOIDA/State owing to the various clauses of the agreement, specifica....
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....41. We have no hesitation to record that IL&FS had only negotiated with the NOIDA authority and has succeeded in the contract being awarded to a private company under the agreement dated 12th November, 1997 in a manner which, in our opinion, is unfair. 242. We would have directed that, in the facts of the case that the award of the contract itself was hit by Article 14 of the Constitution of India and, therefore, liable to be declared null and void, but we are deliberately avoiding such a direction only because during this period the Concessionaire has performed its part of obligation and has completed the construction of the Toll Bridge. Whether the user fee charge by Noida Toll Company is legally sustainable or not. 243. So far as levy and collection of user fee by the Concessionaire is concerned, submission is that the Concessionaire has been authorized under the Concession Agreement to levy and collect fee from the users of the NOIDA Toll Bridge and appropriate the same for recovery of the investments made plus returns thereon. 244. The Concessionaire has contended that the User fee is being charged under 1998 Regulations which have been framed by NOIDA in exercise ....
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....ease; or (c) the minimum value determined in accordance with the rules made under the Indian Stamp Act, 1899, whichever is more. (2) If the State Government considers it necessary or expedient in the public interest it may, by a general or special order, exempt wholly or partly - any such transferee or occupier or any class thereof from the taxes levied under sub-section (1)". 246. Section 19(1) read with Section 19(2)(e) confer a power upon the Authority to frame regulations for administration of its affairs in consonance with the provisions of the Act and Rules with the previous approval of the State Government. The relevant provisions are reproduced as under:-- "Section 19. Power to make regulations (1) The Authority may with the previous approval of the State Government make regulation not inconsistent with the provisions of this Act or the rules mode thereunder for the administration of the affairs of the Authority. (2) In particular, and without prejudice to the generally of the foreboding power, such regulations may provide for all or any the following matters namely- (e) fee to be levied in the discharge of its functions;" ....
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....the reasonable returns for the Developer. (vi) Procedure for surrender, release or extinguishing of the rights of the Developer or otherwise the transfer of an infrastructure. (vii) Rights of the lenders of the Developer in relation to an infrastructure; (viii) Termination of the Agreement; (ix) Mechanism for settlement of disputes; and (x) Any other terms and conditions as may be agreed upon by the Authority, Developer or lender of the Developer. Regulation 5. (1) For the purpose of providing or maintaining or continuing to provide or maintain an infrastructure in the Area either by itself or through a Developer the Authority may levy and collect at the rate determined on the basis of a formula prescribed and notified by the authority. In case an infrastructure is developed, constructed or maintained or provided under an agreement such formula shall be such as may be determined and agreed to between the Authority and the Developer. The formula prescribed may provide for different rates for different classes of infrastructure. (2) The authority shall have the powers to authorise the developer to collect and appropriate ....
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....e Act, it is clear that the NOIDA could authorise a developer only to collect the fee or tax levied therefore and this power to collect was available only after the Regulations 1998 were enforced. 255. The words "Levy" and "Collect" are not synonyms, while "Levy" would mean the assessment or charging or imposing a tax or fee; "Collect" would be physical realisation of the tax/fee which is levied or imposed, an act to be performed at a subsequent stage. 256. This is also clear from the dictionary meaning of words "Levy" and "Collect". 257. "Levy" in the Black's law Dictionary, Ninth Edition means as under:-- "Levy, (levies), n. 1. "The imposition of a fine or tax; the fine or tax so imposed - Also termed tax levy." Levy, vb. 1. "To impose or assess (a fine or a tax) by legal authority". 258. The literal meaning of words "Levy" and "Collect" in 'the New Lexicon Webster's Dictionary of the English Language' Deluxe Encyclopedic Edition:-- "Levy 1. pl. lev.ies n. the imposition by a state or organization of a tax, duty, fine etc." "Collect 1. v.t. to gather in or together, to collect taxes, to accumulate (things of a simila....
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.... levied and collected in such a manner as may be prescribed the duty of excise...' It is to be noted that subsection (i) uses both the expressions "levied and collected" and that clearly shows that the expression 'levy' has not been used in the Act or the Rules as meaning actual collection". 262. So far as levy of fee under the Act, 1976 is concerned, we may state that the State Government has power to legislate under Article 246 of the Constitution of India for levy of fee in respect of any of the matters with reference to the Entry '66' in List-II in VII Schedule of the Constitution of India. Under the Statute to be so framed, the State Legislature may delegate such power to a local authority. We may also record that the power to levy fee has been delegated to the NOIDA Authority in discharge of its functions under Section 19 of the Act, 1976. 263. It is settled law that an authority vested with the power to frame Subordinate legislation has to act within the limits of its power and cannot transgress the same. The initial difference between Subordinate legislation and the Principal Statute lies in the fact that a Subordinate law making body is bound by t....
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....t to collect tolls/User fee could have been provided to the Concessionaire that too by framing regulations while the power to levy the fee would remain with the NOIDA Authority under its delegated power as per Section 19(2)(e) of the Act. 269. The NOIDA Authority on the other hand by framing Regulations 1998 has not only delegated the power to collect fee but also to levy (devising mechanism for determination, revision and publication of rate of fee) upon the developer by an Agreement. Under the Parent Act, 1976, it has no such power to sub-delegate or authorise the levy of fee. 270. In our opinion, sub-delegation of power, to levy and thereafter collect the toll/user fee upon a private company namely the Concessionaire under the Concession Agreement is bad. The Regulations 1998 framed by NOIDA Authority to justify such delegation runs contrary to Section 6-A read with Section 19 of the Act. 271. Furthermore, Section 6-A to U.P. Act No. 6 of 1976 was added subsequent to the execution of the contract/agreement to be precise on 12th Day of November, 1997. 272. The amended provision has no retrospective operation. In Zile Singh v. State of Haryana and others 2004 (8) Supre....
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....ion can be given a retrospective effect and retroactive operation, if any power in this behalf is contained in the main Act. The rule-making power is a species of delegated legislation. A delegatee therefore can make rules only within the four corners thereof. 42. It is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. (See West v. Gwynne)[(1911) 2 Ch 1 : 104 LT 759 (CA)]." 274. In paragraph '24' the Apex Court referring to paragraph of the another judgment of the Apex Court in the case of Ahmedabad Urban Development Authority v. Sharadkumar Jayanti-Kumar Pasawalla 1992 (3) SCC 285 stated as under:-- "24. In Ahmedabad Urban Development Authority v. Sharadkumar Jayantikumar Pasawalla and others, a three-Judge Bench has ruled thus: "7... in a fiscal matter it will not be proper to hold that even in the absence of express provision, a delegated authority can impose tax or fee. In our view, such power of imposition of tax and/or fee by delegated authority must be very specific and the....
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....tute. 281. Reliance placed upon another judgment of the Maharashtra High Court in Sammer Desai is misplaced in view of the categorical finding recorded therein that the Concessionaire has not been able to recover the capital outlay. 282. In Col. T. Prasad v. Union of India (supra), the issue being examined by us was not subject matter of challenge. The said judgments relied upon by the Concessionaire being based on the individual facts of the case are clearly distinguishable. 283. This case is a glaring example of misuse of power by a Public Authority in first entering into the agreement and then framing Regulations to bring the clauses of Agreement with a private person (Company) in line with the legislation so as to give it a statutory backing. 284. In view of the above, we hold that 'Article 13' of the Concession Agreement suffers from want of legal authority. It is, therefore, held to be bad and liable to be struck down. Resultantly, no User fee can be legally levied/charged by the Concessionaire under the Concession Agreement. Whether the concept of Total Cost of Project and Returns under Article 14 (Clause) of the Concession Agreement is arbitrary, oppo....
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....er the definition of "Returns" in section 1.1, it is the amount computed at the rate of 20% per Annum on the Total Cost of Project, which is recoverable by the Concessionaire, from the Effective date. Any short fall in recovery of returns is added to the unrecovered total cost of project of the previous year to arrive at the unrecovered project cost of that particular year (ending on 30th March). 290. This apart the O&M expenses as defined in Section 1.1 of the Concession Agreement include all fees and expenses, without limitation, of attorney's consultants and experts retained by the Concessionaire in the ordinary course of its business. The O&M expenses are to be determined and certified by the Independent auditor under the Concession Agreement. The agreement has not provided any specification nor there are norms based on estimate of cost as to what should be the expenses allowed nor there is any limit on the expenses. The Concessionaire is at liberty to add expenses in the estimate of cost without any limitation. 291. The result is that going by the formula adopted in Article 14 of the Concession Agreement, the unrecovered cost goes on escalating and it would not be po....
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....Cost of Project would be ever escalating. 295. Thus from the report of Company's Auditor and the admission of Company's Executive, the Total Cost of Project has reached a point of no return and it would not be possible for the Concessionaire to revert the Project Assets free of cost to NOIDA Authority even after expiry of 100 years what to say of the period of 30 years. 296. This element of perpetuity in the Public contract where the assets belonging to State have been put in the hands of a public Company (under PPP model) is bothering us. 297. From the position that emerges can it be said that the Court is handicapped in such a situation and should sit quiet by showing its inability to touch the contract under the fear that it may enter into the realm of contract i.e. an area where rights and obligations of the contracting parties are likely to be affected. 298. We are sure that the Court cannot be a silent spectator and allow the contracting parties before us to perpetuate an illegality writ large on the face of the record. The situation has to be remedied by us by balancing the rights and obligation of the litigating parties namely the Public/Commuters on one....
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.... for the period from April 8, 1996 to February 6, 2001, for Delhi NOIDA Bridge and Ashram Flyover, the Project Cost incurred by the respondent No. 1 as certified by M/s. A.F. Ferrguson & Co. (Independent Auditor) vide certificate dated April 23, 2001 was INR 3776.56 millions (i.e. approximately Rs. 377 Crores). The cost of construction as submitted by Project Engineer incurred by respondent No. 3 towards construction of Noida Toll Bridge DND Flyover was approximately Rs. 188.3 Crores and the Project Cost of which is disclosed as Rs. 265.7 Crores. The cost of construction of Ashram Flyover included in the Project though was subject matter of separate Construction agreement, was approximately Rs. 20 crores and was also added in the Project cost computed as on February 6, 2001. Relevant part of the report of the Independent Auditor as narrated in paragraph '70' of the counter affidavit of the Concessionaire is reproduced below:-- NOIDA TOLL BRIDGE COMPANY LIMITED Project Cost As per Concession 06.02.2001 DND Flyway 2,657,975,837.64 Ashram Flyover 20,454,320.58 Total 1 2,678,430,158.22 Premilinary 422,089,255.47 Fund Mobilisation....
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....in the counter affidavit filed by NOIDA Toll Bridge Company Ltd. in paragraph No. 84, Statement of computation of returns and arrears as on 31.03.2014, the document filed at page '488' of the counter affidavit as also from the Statement of account of returns and arrears as on 31.03.2012 forwarded under letter of NOIDA Toll Bridge Company Ltd. dated 06.12.2012 to NOIDA (appended as Annexure No. CA-1 to the counter affidavit dated 11.05.2014 filed by the NOIDA authority), following facts are established:-- "a. Total Cost of the Project on a day prior to its commissioning was Rs. 325.99 Crores. b. The total toll income from the toll receipt till 31.03.2014 was Rs. 810.18 Crores and the surplus after taxes was Rs. 578.80/-Crores after excluding the O&M expenses and Corporate taxes. These figures, however, do not tally from the Statement of Computation of returns in arrears as verified by the Chartered Account M/s. S.N. Dhawan & Company dated 20.06.2012 appended with the letter dated 6.12.2012 of the Company Executive annexed as Annexure '1' to the counter affidavit but this much is reflected that the total income from the toll and the surplus is much i....
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....e Project Cost has been fully recovered. 315. The Concessionaire and IL&FS (respondent No. 9) vehemently submitted is that the company has not been able to earn the assured returns under the Concession Agreement. For the remaining Concession period of 30 years, it can make efforts to achieve the Total project cost and the designated returns. It is argued by the Concessionaire that the revenue collected from the User Fee was much lower than the projected figures although the company has kept on incurring expenditures in maintenance of the Bridge. In order to achieve the reasonable returns, the company had approached the Noida authority for grant of development rights. Refusal by NOIDA to grant such rights made the recovery onerous. The Concessionaire has a right to collect and appropriate user fee during the Concession period. It is also sought to be submitted that the Total Cost of Project is only a notional figure, it represents the risk of the investors and is not linked to user fee. It is only a risk insurance clause against premature and arbitrary termination of contract by Noida. It is urged that the amount of user fee paid by the Commuters is independent and does not get a....
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....lause has become redundant. 319. Considering the submissions made even if we accept that the high returns in the PPP model of the contract has been provided considering a reward for high risk or the figures shown as total cost of project are notional figures as a risk insurance against arbitrary termination of contract by Noida, at any time, in our considered opinion, this contention has lost efficacy now in the year 2016 no such risk survives. The political scenario or the uncertainty in completion of project, even if it was there, at some point of time does not survive now. The project has been completed and the Concessionaire has been able to recover cost and reasonable profits from the project. It is not open to the Concessionaire to say that there are still risks and it they would have to leave the project, in between, without realizing the actual investments with reasonable interest incurred by it. 320. We may also take note of one more admission of the Concessionaire on record that is the Company has started giving dividends to its share holders to the extent of 5% in the year 2010-11, 10% in the year 2011-12, 10% in the year 2012-13 and 25% in the year 2013-14. This s....
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.... used by the Public and the contract has worked for about 15 years, we do not propose to traverse all the contractual obligations and liability of the parties but in order to rectify the situation before us we can take the help of "Doctrine of Severability" so as to see that only offending clauses of the Agreement to the extent they are harming the "Public interest" i.e. the interest of the commuters are severed from the contract leaving the contracting parties to perform their other obligations. 325. We may also take assistance from the Concession Agreement itself which contains a clause of severability. Relevant section 27.5 of the Agreement says:-- "If any provisions of this Agreement are declared to be invalid, unenforceable or illegal by any competent arbitral tribunal or court, such invalidity, unenforceability or illegality shall not prejudice or affect the remaining provisions of this Agreement which shall continue in full force and effect." 326. The doctrine of severability has been considered in paragraph No. 14, 15, 16 & 17 in the judgement Shin Satellite Public Co. Ltd., which is quoted as under;- 14. "In Halsbury's Laws of England (Fourth Ed....
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....The same question arises in relation to bonds where the condition is partly against the law." 16-189 Partial statutory invalidity. It was laid down in some of the older cases that there is a distinction between a deed or condition which is void in part by statute and one which is void in part at common law. This distinction must now be understood to apply only to cases where the statute enacts that an agreement or deed made in violation of its provisions shall be wholly void. Unless that is so, then provided the good part is separable from and not dependent on the bad, that part only will be void which contravenes the provisions of the statute. The general rule is that "where you cannot sever the illegal from the legal part of a covenant, the contract is altogether void; but, where you can sever them, whether the illegality be created by statute or by the common law, you may reject the bad part and retain the good." Thus, a covenant in a lease that the tenant should pay "all parliamentary taxes," only included such as he might lawfully pay, and a separate covenant to pay the landlord's property tax, which it was illegal for a tenant to contract to pay, although void, d....
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....ief Gammon v. State of Orissa, 1975 (2) SCC 649 at 656. In M.J. Sivani and others v. State of Karnataka, S.L.P. No. 11012/1991 etc. dated April 17, 1995, it was contended that since the High Court held that a part of the notification was inapplicable to the licence for Video games, it was not severable from the rest of the notification and the whole notification must be declared to be ultra vires or inapplicable to video games. Rejecting the contention of the licensees on that ground, this Court held that the entire order did not become invalid due to in applicability of a particular provision or a clause in the general order unless the invalid part is inextricably interconnected with the valid part. The court would be entitled to consider whether the rule as a whole or in part is valid or becomes invalid or inapplicable. On finding that to the extent of the rule was not relevant or invalid, the court is entitled to set aside or direct to disregard the invalid or inapplicable part leaving the rest intact and operative. In that case Para 3(2) of the notification for licencing public places or the places of public resort or amusement for conducting video in gaming house though was he....
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....thout affecting the contract as a whole and leaving the Concessionaire and Noida Authority to perform their part of contract. 329. As reasonable returns/interest in addition to the Cost of Construction of DND Flyway (NOIDA Toll Bridge), have been recovered by the Concessionaire, they are not entitled to recover any amount over & above what they had already received. 330. We, therefore, hold that, henceforth, the Concessionaire will not be entitled to realise User fee from the Users/Commuters of the NOIDA Toll Bridge (DND Flyover). 331. On the above discussion made on each issue, we find that the judgments relied upon by learned counsel for the Concessionaire in Soma Isolux NH One Tollway Private Limited v. Harish Kumar Puri & others, Villianur Iyarkkai Padukapu Maiyam, Pathan Mohammed Suleman Rehmatkhan v. State of Gujarat and Centre for Public Interest Litigation v. Union of India & others, Pathan Mohammad Suleman Rehmatkhan, Arun Kumar Agarwal v. Union of India and others and Centre of Public Interest Litigation v. Union of India are distinguishable, in the facts and circumstances of this case. Proposed Amendments 332. Both the learned counsels for the respondent N....
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.... Part 'B'; Consequential amendments would be inter alia:-- (i) The description of 'Concessionaire' be amended as follows:-- "NOIDA TOLL BRIDGE COMPANY LIMITED, a public limited company incorporated under the Indian Companies Act, 1956 and having its registered office at Toll Plaza, DND Flyway, NOIDA-201301 (hereinafter referred to as the "Concessionaire" which expression shall include its successors and permitted assigns)". (ii) In Section 1.1, a new definition of the term 'Amendment Agreement' would be added as follows:-- "Amendment Agreement" means the agreement titled "Amendment Agreement to the Concession Agreement dated 12.11.1997 for the Delhi NOIDA Bridge Project" executed on [], 2015". (iii) Article 3 would stand deleted completely. (iv) Article 10 would be amended and replaced by the following:-- "10.1 The Lenders, Concessionaire and NOIDA shall appoint the Independent Auditor. There shall be an Independent Auditor for the entire term of the Concession Period. Subject to Section 25.2 the Parties agree that the Independent Auditor so appointed shall have the status of an expert whose ....
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....s the proposed "Transfer date". (b) In the case of arbitrary termination of the Concession (amended) Agreement, NOIDA will have to compensate and shall have to pay Rs. 2168 Crores to the Concessionaire for getting back the Project Assets. (c) Shortfall in the recovery of Total Project Cost of Rs. 2168 Crores as on 31.3.2031 shall be paid by NOIDA to the Noida Toll Company." 336. It is vehemently argued by the counsels for both the Concessionaire (respondent No. 1) and IL&FS (respondent No. 9) that the parties are voluntarily negotiating an amendment to the contract, in terms of the contract and are close to a settlement. An intervention by the Court would restrict the contractual choices of the parties and interfere with the contractual rights of the parties and will amount to rewriting the terms of the contract by the Court. 337. We have repeatedly observed that we are not entering into the rights of the Contracting parties under the Concession Agreement, it is open for them to make any amendment (s) which they choose to agree. As we have already held that the User fees realised by the Concessionaire under the Concession Agreement, (in the guise of power de....