TaxTMI 
TaxTMI 
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2016 (10) TMI 1400
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....ng 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 "NOIDA Toll Company" or the "Concessionaire") for constr....
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....ution 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. (5) The Rate of Return or Interest charge would be revisable on the changes in the policy of the Res....
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....ring 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-lease deed dated 23.10.1998 was executed between NOIDA Authority and Toll Bridge Company. 11. NOIDA land lease dated 23.10.1998 was executed between NOIDA and Toll Bridg....
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....lause (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 Ashram Chowk to be included as part of the Project. (6) Clause (j) further says that the Steering Committee determined, after due consideration of DG's proposal that the Concessionaire shall construct a flyov....
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.... 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 cause any diversion of traffic on the approach roads to the Noida bridge so as to materially affect the free flow of traffic to and from the Noida bridge. 20. Section 2.3 (a) provides for the "Concession Period" to commence on the "Effective Date" and extend unt....
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....ate 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 contracts and agreements and/or real property interests." 30. Upon receipt of such a request from the Concessionaire, the NOIDA may in its sole discretion, grant Development Rights to the Concessionaire for the generation of Development Income. 31. A separate agreement is to be arrived ....
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....th 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 the NOIDA Bridge by the Concessionaire, commencing on the Project Commissioning Date. (c) Power to Concessionaire to delegate its function to collect fee to the O&M contract in accordance with the Rules framed by NOIDA. (d) NOIDA and the Concessionaire expressly recognizes (i) the right of the fee Review Committee to determine fee in accor....
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....toms 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 Cost of Project recoverable by the Concessionaire from the Effective Date at a rate of 20% per annum, as defined in Section 14.2 of this Agreement." "The Effective Date as defined in Section 1.1 of the definition clause of the agreement and referred to in Section 2.3 as above, means the earlier of two dates (a) the date of issuance of Certificate of Compliance or (b) the date of issuance of Certificate of the Commencement." 42. The 'O&M Expense', 'Other Costs of Commissioning' and 'Major Maintenance Expenses' ha....
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....er 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 Financing Agreements), taxes, levies, fees and commissions, duly grossed up, (g) other specific expenses as agreed upon and incurred by the Concessionaire, Sponsor, NOIDA, GOUP and DG under the Support Agreement or their respective agencies during implementation of the Project, (h) all costs of the insurance required to be obtained in connection with the Project prior to the Project Commissioning Date and (i) the Management fee. It is provided that only such amounts as are maintained in the format approved by the Independent Auditor shall be considered for dete....
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....he 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 Insurance covers; as determined by the Independent Auditor; and the Concessionaire shall deliver to NOIDA all Proprietary Material and all correspondence and other documents concerning the project in the Concessionaire's control or possession. The privileged information, if any, shall be delivered to NOIDA in accordance with the agreement under which such privileged information had been delivered to the Concessionaire." 43. It is, thereafter, provided that inability to commence the construction of an/or commission of the Ashram Flyover shall not be a Concessionaire Event of Default enabling NOIDA to terminat....
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....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 expenses including payment of taxes and the initial losses suffered during the year 2001 to 2005, the Cumulative Net Profit as on 31.3.2014 is Rs. 165.80 Crores. Thus in any case, the Concessionaire had earned profits more than 20% of its investment after exclusion of expenses upto 31.3.2014. Thereafter for another two years and 6 months i.e. from 1.4.2014 to September 2016 further toll/user fee has been recovered which according to the petitioner would be around 300 crores. The concept of user fee/toll is to meet out the "Cost of Construction" plus some reasonable returns on the investment. As soon as the entire Cost of Construction plus reasonable returns had been r....
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....rns. 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 assured returns @ 20% per annum. The Concession period has to be extended beyond 30 years i.e. the initial period of BOOT in case of unrecovered Total Cost of project. There is no cap on the Total Project Cost and O&M expenses which are to be ultimately borne by Users. Increase in the Total Project Cost would mean that toll levels and the Concession period have to be adjusted upwards to permit recovery of Cost and returns. Users would end up paying unnecessary high tolls and for a longer period than warranted. 48. On the legal side, it is contended that no tender was invited before grant of contract for DND Flyover, there was no advertisement, no bidding. It was a clandestine deal that....
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....he 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 Project, even if the term of contract is extended. 56. The public interest is in ensuring that only "appropriate" expenses are taken care of, the Agreement has not provided specifications nor any reasonable norms as to what would be the extent of expenses to be allowed. There is a cap on the expenses. The Concessionaire is at liberty to add expenses in the estimate of cost without any limitation. For instance attorney fees associated with the settling of pending or threatened suits/claims allowed the Concessionaire to add unlimited and uncapped expenses to the Project cost. This is against the public interest. 57. The selection of Independent Auditor and Independent Engineer who have substantial de....
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....5 (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 to protect the public from such acts of public authority. It has the power to remedy injustice. Judicial review is permitted in public policy and contractual matters on the plea of arbitrary State action. The action of NOIDA in awarding the Concession Agreement dated 10.11.1997 in favour of NOIDA Toll Bridge Company i.e. the Concessionaire fails to satisfy the test of reasonableness and public interest as has been laid down by the Apex Court in M/s. Kasturi Lal Lakshmi Reddy v. State of Jammu & Kashmir 1980 (4) SCC 1. 66. Sri P.H. Parikh Senior Advocate appearing on behalf of respondent No. 1, NOIDA Toll Bridge Company i.e. the Concessionaire raised preliminary objections that the present petition is liable to be di....
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....ith 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 constructed and maintained by NOIDA Toll Bridge Company, however, in the initial year the traffic was far below the expectation. The Noida Toll Bridge Company realized that it could not reverse its debt leave alone earning of the designated returns within the Concession Period of 30 years, as such it approached the government for grant of development rights. The company had accumulated losses of 79.16 crores as on 31.03.2003 which had risen up to Rs. 100.264 crores as on 31.03.2004. 71. NOIDA is a signatory to the agreement, it cannot dispute the clauses of the agreement and it is not permissible for NOIDA to challenge the agreement after so many years. There was intervention of the Central Government. The roads for connecting Noid....
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....e 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 construction over the river bed, reluctance of the private sector to invest in road projects and competition. Government has not invested a single penny, only land was handed over to the Company and as such certain rights were given to the Company to secure the inherent risk. 76. He laid much stress on the fact that the IL&FS being the pioneer in Public Sector participation and one of the proponents of PPP project of infrastructure in India was the only India's leading infrastructure development and finance company. IL&FS was incorporated in 1987 by Central Bank of India, Housing Development Finance Corporation Limited (HDFC) and Unit Trust of India (UTI) for the specific purpose of enabling and promoting infrastructure development on non government recourse b....
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.... 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 levels which took place over a long period of time and reflected proper application of mind. No arbitrariness can be attributed to the decision making process. The petitioner has failed to establish the same. The project has been extensively examined, reviewed, analyzed and approved by the concerned Wings of the Government. 85. Reliance is placed upon the judgements of the Apex Court in Pathan Mohammed Suleman Rehmatkhan v. State of Gujrat, 2014 (4) SCC 156 & Villianur Iyarkkai Padukappu Maiyam v. Union of India, 2009 (7) SCC 561to submit that non-floating of tenders and absence of public auction or invitation alone is not a sufficient reason to characterize the action of a public authority as either arbitrary or unreasonable or improper exercise of power. No malafide can be att....
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....ement 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. Prasad v. Union of India, 2007 (95) DRJ 146 to submit that there is a difference between tolls/fees, charged for a private funded project and toll/fees charged for a project which has been funded entirely by Government funds at public expenses. 92. In the case of the fee charged by the company, the funding is entirely private. No part of it has come from tax revenues or other revenues raised by the Government. It is for this reason that the Company has been permitted by the Act 1976 and Regulations 1998 framed thereunder to not only collect the fee but also to appropriate and retain the same so as to recover the entire cost of the project and also to make profit thereon. No such situation is contemplated in the Indian Tolls Act, where the concept of toll tax is entirely different from the user fe....
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....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 project in India implemented through Private Financing. 2. Interest rates were at an all time high. 3. The investors in the project needed adequate returns and insulation from risk, to consider investing in the project. 4. The formula for return on project is standard accepted formula for project financing and was comparable with the return formula in the power sector at that point of time. 5. In absence of such formula, no developer would have risked such huge investment especially in view of inherent risks. Even otherwise, the Total cost of project was very much an achievable target. However, due to default of NOIDA in satisfying its obligation under the Concession Agreement, the recovery of Total Cost of Project has become onerous." 98. The formula of the Total Cost of Project and Termination payment wa....
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....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 rights should be contingent to an increase in paid up equity of NOIDA in NTBCL, equal to the value realized by the Company through the exercise of development rights. On November 20, 2001 the NTBCL wrote to NOIDA stating therein that the recommendation of the NOIDA Sub Committee in the matter of development rights was not in compliance with the Concession Agreement and defeated the purpose of grant of development rights as income generated from the Development Rights was required to be applied towards recovery of total project cost. On November 27, 2001, NTBCL wrote to the Industrial Development Commissioner with a copy to CEO, NOIDA forwarding a legal opinion in respect of the conditions proposed by the Sub committee for grant of development rights. From 2001 till 2009, NTBCL continuously followed up with NOIDA on the issue of grant of development rights, howeve....
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.... 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 will take care of this situation. Moreover, concession period of 30 years has not been challenged. There are various precedents which show that a period of 30 years is not unconscionable per se. It was devised amongst the parties after due consideration and deliberation and the parties to the contract should not be permitted to renege from the same. 107. The doctrine of frustration of contract shall not apply as it is a case of default of NOIDA itself. Reliance is placed upon the judgment of Apex Court in the case of Shin Satellite Public Co. Ltd. v. Jain Studios Ltd., 2006(2) SCC 628, Eacom's Controls (India) Ltd. v. Bailey Controls Company & Others, 1998 (ILR) Delhi 392 to submit that the contract cannot be held totally illegal or void because certain parts of it are illegal or against public policy. The question then arises whether any unobjectionable clauses may be enforced w....
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....(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 Executive and the Legislature. The tool of PIL cannot be used to effect the contractual agreement itself which reduces a valid and legal document into a worthless piece of paper. The relationship between the parties is governed and supported by a valid and legal contract and cannot be interfered in the guise of PIL interest. 112. Lastly it is reiterated that the parties are voluntarily negotiating for an amendment to the contract and are close to a settlement, any intervention by the Court would be an inference in the contractual rights of the parties and restrict their contractual choices and thus amount to rewriting the terms of the contract which is not permissible. 113. Ultimately NOIDA will be benefited from its wrongs as the project assets will revert prior to the expiry of the Concession Period. 114. Sri Piyush Joshi learned counsel appearing on behalf of respondent No. 9, the Infrastruct....
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....y 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 government funds for maintenance and development of road network. This policy decision also finds reflection in the 7th Five Year Plan issued by Planning Commission for the year 1985-90. 118. It is a project where the role of the concessionaire under the contract was to undertake the project on the concept of Build, own, Operate and Transfer (BOOT) basis. The basic reason why no competitive bid process had been undertaken at that time was because there was no other entity in the private sector undertaking for such huge investments as well in developing large infrastructure project in the Road Sector. The respondent No. 9, a public sector financial corporation being Pioneer in the field, undertook to develop an infrastructure of World class. The project was implemented under the supervision of High power Steering Committee. Reliance is placed upon judgment in the case of Pathan Mohammed Suleman Rehmatkhan v. Stat....
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....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 strengths to the point where free consent may not be presumed on behalf of the weaker party. Given the fact where the State authority was a stronger party to the Concession Agreement, there can be no claim founded in law or fact that the contract was unconscionable to the Government. The Noida authority which is an arm of the State Government cannot claim to be at a lesser or disadvantage or unequal bargaining position to a Company that has been incorporated to implement a specific project. The Concession Agreement was not unconscionable either at the time of execution, nor has it becomes unconscionable after almost 20 years during which the significant public infrastructure has been built and successfully operated under the terms of the Concession Agreement. The Apex Court in the case of Central Inland Water Transport Corporation v. Brojo Nath Ganguly, 1986 (3) SCC 156 has held that the power of the Court to strike....
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....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 and in the situation when it has been part performed by the Concessionaire with significant investments and deployment of technological and human resources. None of the two events which may impose a liability of payment upon Noida has occurred nor can be foreseen by the Court as 15 years are still to go. 126. The Concessionaire is continuously approaching Noida to grant development rights and submitted proposal for grant of development rights under the terms of the Concession Agreement. It is the conduct of Noida which has directly resulted in the total cost of project and returns thereon rising to the levels that it did. The position faced by the project is a direct result of the contribution or in-action of Noida, it cannot be said that the provisions of the Concession Agreement were or have become unconscionable. None of the elements on which the concept of total cost of project and returns thereon has been framed are ag....
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....st 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 same method of calculation, the unrecovered total Project Cost as per the Concession Agreement (calculated under Article 14 read with Appendix "F") as against of Rs. 407.64 Crores on 7.2.2001 has risen to Rs. 2339.07 Crores on 31.3.2012. If this Project is to be taken back by the NOIDA Authority as on 31.3.2012, the NOIDA Authority will have to pay Rs. 2339.07 Crores to the Concessionaire. Going by the same method of calculation, at the end of the Concession period of 30 years in addition to the Toll fee which the Concessionaire has collected so far and would continue to collect in future till 31.3.2031, the total liability would be about Rs. 53,000 Crores to be paid by NOIDA. In case of non payment of this amount by NOIDA, it has necessarily to extend the period of Concession in favour of the Concessionaire. It is averred in paragraph '9' of the affidavit of NOIDA Authority dated 18 t h February, 2013 that at the time of making....
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....ghts 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 No. 2 submitted that the relief sought in the amended writ petition is for quashing of the Concession Agreement which was arrived in the year 1997 incorporated by filing an amendment application on 12.2.2013. The Concession Agreement cannot be challenged after 16 years. 141. On the power to levy toll/user of fee by the Concessionaire, submission of Sri C.B. Yadav, learned Senior Counsel on behalf of NOIDA is that under Section 19(2)(e) of the Uttar Pradesh, Industrial Area Development Act, 1976, NOIDA has a power to make regulations with the previous approval of the State Government, to levy fees in discharge of its function. 142. He further submitted that Section 6-A of the Act 1976, NOIDA confers a power on NOIDA to authorise a person to provide or maintain or continue to provide or maintain any infrastructure or amenities under the Act and to collect taxes or fees, as the case may be, levied therefore. 143. In exercise of powers under Section 19 read with sect....
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....e 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 Concessionaire a huge sum i.e. something more than Rs. 5,000 Crores as on 31.3.2016. On the question of Agreement being unconscionable and the Court's power of judicial review to test reasonableness of the Agreement on the touchstone of public interest, submission is that the Court is not powerless to examine whether the agreement is unconscionable in the facts of the present case. 149. Referring to the affidavit dated 28th July, 2016 of the Secretary, Infrastructure and Industrial Development Department, Government of U.P., it is submitted by the learned Additional Advocate General that the said affidavit has been filed in compliance to the order dated 26.7.2016 passed by this Court to clarify the stand of the State Government on the issue of grant of contract without advertisement or inviting others working in the same field to participate in the process of awarding of public contract. 150. In paragraph '5' of the said affidavit, it is stated that the State Government did not....
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....oject 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 Concession Agreement, however, under Clause 14.2 (a) calculation of returns is to be done by addition of gross revenues, from User fee collection, income from advertising and development income minus the O&M expenses. For computation of Total Cost of Project. As per Clause (b)(iii) of Section 14.1 of the Concession Agreement, shortfalls in the recovery of returns in a specific financial year as per the formula in Section 14.2 (a) has to be added to Total Project Cost. This results in addition of O&M expenses in the total cost of Project whereas the Section 14.1(b) contemplates only addition of Major Maintenance Expenses. 155. Alongwith the aforementioned compilation III (containing list of documents) a chart has been appended at page '2' and '3' to state that exorbitant expenditure has been made by the Concessionaire on payment of remuneration to two key managerial personnel namely Mr. Pradeep Puri and Ms. Monisha Macedo. In the accounts of the year 2003, 2005, 2006, 2007 and....
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....asonableness. 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 right the decision making process. 160. In rejoinder Sri Ranjit Saxena learned counsel for the petitioners contends that under the Uttar Pradesh Industrial Area Development Act, 1976, there was no provision for levy of toll "User Fee" on the date the Concession Agreement was executed on 12th November, 1997. The levy of toll or user fee is a Government function. A private company has no competence to levy fee. The Regulations, 1998 in exercise of the powers conferred under Section 19 of the Act was framed by NOIDA after the execution of the Concession Agreement. 161. Consequently, the power under Section 2 of the Indian Tolls Act, 1851 could be the only source with NOIDA to levy toll/user fee for bridges etc. 162. On the submission made by learned counsel for the parties, the following questions do arise for consideration in the present Public Interest Litigation:-- "a. Whether this Public Interest Litigation is maintainable under law? b. What is the scope of interference in the matter of public cont....
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....nordinate delay on the part of the petitioner has not been satisfactory explained. Moreover, the credentials of the petitioner are tainted with vested interest to gain free excess to the Delhi Noida Bridge. In fact this is a proxy litigation set up by Noida Authority in order to avoid its obligation under the Contract. Reliance is placed upon the judgement in the cases of Chennai Metropolitan Water Supply and Sewerage Board and others v. T.T. Murali Babu, 2014(4) SCC 108, State of M.P. And others v. Nandlal Jaiswal and others, 1986 (4) SCC 566, Ramana Dayaram Shetty v. International Airport Authority of India and others, 1979 (3) SCC, 489, Gram Panchayat of Village Mundhal Khurd v. Amar Singh (Dead) and others, 2000 (10) SCC 644 to submit that this petition does not meet the test for Public Interest Litigation as laid down by the Apex Court and the petitioner has no locus to file and maintain this petition. 165. So far as the credentials of the petitioner association are concerned, suffice it to say that in paragraph No. 4 of the writ petition it is categorically stated that the Federation of Noida Residents Welfare Association is a society duly registered under the Societies Regi....
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.... they nevertheless reckon with the interests of the community at large." 169. Thus in our, opinion, the injury to this section of the community "i.e. the Commuters", who are petitioners before us does need examination on merits to see whether the Concession Agreement and its continuance is opposed to Public Policy or not. 170. The cause espoused before us is Pro Bono Publico and no exception can be taken thereof. 171. Thus, in our opinion, since continuance of the contract/agreement as on date has been questioned, the plea of laches appears to be wholly misconceived. Whether the confessional agreement/contract has outlived its term or not or whether restrain is to be put on realization of toll (user fee) now, have necessarily to be adjudicated on the pleadings of the parties to the present writ petition. 172. Completion of the DND Flyover and its use by the members/Commuters since 2001 are facts, which are of not much substance for judging the issue in hand nor it is fair on the part of the respondents to raise the plea of latches in such circumstances. 173. In fact what is contended before us by the petitioner is that the concession period has come to an end in view of Sectio....
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....e may record that their interest is looked after by the Company itself. Despite opportunity, counsel for the share-holders could not explain to the Court as to what rights of the share-holders are not being taken care of by the Company. 179. The judgments relied upon by Concessionaire and IL&FS are distinguishable in the fact and circumstances of the instant case. 180. We, therefore, find it difficult to accept the preliminary objection raised on behalf of the respondents to the maintainability of this petition. 181. Legal position regarding the scope of interference in Public Contract:-- "(a) The test of reasonableness and fairness:-- to be applied in the matter of grant of contract in order to determine the validity of the Governmental action in public contracts has been laid down by the Apex Court in the celebrated judgment, in the case of M/s. Kasturi Lal Lakshmi Reddy (supra). It has been held that there are two limitations imposed by law which structure and control the discretion of the Government in the matter of grant of Government largess, licence etc. The first is in regard to the terms on which largess may be granted and the other in regard to the persons who may be....
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.... in Maneka Gandhi v. Union of India, clearly demonstrated that the requirement of reasonableness runs like a golden thread through the entire fabric of fundamental rights and, as several decisions of this Court show, this concept of reasonableness finds its positive manifestation and expression in the lofty ideal of social and economic justice which inspires and animates the Directive Principles. It has been laid down by this Court in E.P. Royappa v. State of Tamil Nadu, and Maneka Gandhi's case (supra) that Article 14 strikes at arbitrariness in State action and since the, principle of reasonableness and rationality, which is legally as well as philosophically an essential element of equality or non-arbitrariness, is protected by this article, it must characterise every governmental action, whether it be under the authority of law or in exercise of executive power without making of law. So also the concept of reasonableness runs through the totality of Article 19 and requires that restrictions on the freedoms of the citizen, in order to be permissible, must at the best be reasonable. Similarly Article 21 in the full plenitude of its activist magnitude as discovered by Maneka G....
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...., unless of course there are other considerations which render it reasonable and in public interest to do so. Such considerations may be that some Directive Principle is sought to be advanced or implemented or that the contract or the property is given not with a view to earning revenue but for the purpose of carrying out a welfare scheme for the benefit of a particular group or section of people deserving it or that the person who has offered a higher price is not otherwise fit to be given the contract or the property. 185. Going further in the matters of evaluation of Governmental action, whether reasonable and in public interest, the role of the Court has been described in paragraph '14' as under:-- "14.- ........... xxxxxxxxx....................... We have referred to these considerations to only illustratively, for there may be an infinite variety of considerations which may have to be taken into account by the Government in formulating its policies and it is on a total evaluation of various considerations which have weighed with the Government in taking a particular action, that the Court would have to decide whether the action of the Government is reasonable and i....
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.... need not deal with anyone. but if it does so, it must do so fairly without discrimination and without unfair procedure. Where the Government is dealing with the public, whether by way of giving jobs or entering into contracts or granting other forms of largess. the Government cannot act arbitrarily at its, sweet will and, like a private individual, deal with any person it pleases, but its action must be in conformity with some standard or norm which is not arbitrary, irrational or irrelevant. The governmental action must not be arbitrary or capricious, but must be based on some principle which meets the test of reason and relevance. This rule was enunciated by the Court as a rule of administrative law and it was also validated by the Court as an emanation flowing directly from the doctrine of equality embodied in Article 14. The Court referred to the activist magnitude of Article 14 as evolved in E.P. Royappa v. State of Tamil Nadu (supra) and Maneka Gandhi's case (supra) and observed that it must follow "as a necessary corollary from the principle of equality enshrined in Article 14 that though the State is entitled to refuse to enter into relationship with anyone, yet if i....
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....as 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 the power. The action of the State or its instrumentality can be checked under Article 14. Their action must be subject to rule of law. If the governmental action even in the matter of entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would be unreasonable. Rule of reason and rule against arbitrariness and discrimination, rules of fair play, natural justice are part of the rule of law applicable in situation or action by State/instrumentality in dealing with citizens. Even though the rights of the citizens, therefore, are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play and natural justice, equality and non-discrimination. It is well settled that there can be "malice in law". It was also further held that whatever be the act of the public authority in such monopoly or semi- monopoly, it must be subject to r....
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....upra) while dealing with the matter of bulk sale for land by CIDCO (City Industrial Development Corporation) a Government Company incorporated under Section 617 of the Companies Act, has pointed out that the land acquired and entrusted to CIDCO cannot just be permitted to be parted with, guided by the sole consideration of money-making. CIDCO is not a commercial concern whose performance is to be assessed by the amount it earns. Rather its performance would be assessed by finding out the number of needy persons who have been able to secure shelter through CIDCO and are benefited by the beauty of township and improved quality of life for people achieved by CIDCO through its planned development schemes. So long as such objectives are fulfilled, CIDCO's operation on 'No-profit-No Loss' basis cannot be found faulted with. 190. In Humanity (supra) applying the test of fairness and non-discrimination in the matter of granting largesse, the Supreme Court has reiterated that whenever any governmental action fails to satisfy the test of reasonableness and public interest, it is liable to be struck down as invalid. The Government cannot act in a manner which would benefit a priv....
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.... in the Official Gazette and other recognised modes of publicity and such policy must be implemented/executed by adopting a non-discriminatory and nonarbitrary 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 officer of the State. 66. We may add that there cannot be any policy, much less, a rational policy of allotting land on the basis of applications made by individuals, bodies, organisations or institutions dehors an invitation or advertisement by the State or its agency/instrumentality. By entertaining applications made by individuals, organisations or institutions for allotment of land or for grant of any other type of largesse the State cannot exclude other eligible persons from lodging competing claim. Any allotment of land or grant of other form of largesse by the State or its agencies/instrumenta....
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.... among them all Fraternity assuring the dignity of the individual and the unity and integrity of the Nation. The expression 'unity of the Nation' was also added by the Constitution (Forty-second Amendment) Act, 1976. The idea of welfare State is ingrained in the Preamble of the Constitution. Part III of the Constitution enumerates fundamental rights, many of which are akin to the basic rights of every human being. This part also contains various positive and negative mandates which are necessary for ensuring protection of the Fundamental Rights and making them real and meaningful. 48. Part IV contains 'Directive Principles of State Policy' which are fundamental in the governance of the country and it is the duty of the State to apply these principles in making laws. Article 39 specifies certain principles of policy which are required to be followed by the State. Clause (b) thereof provides that the State shall, in particular, direct its policy towards securing that the ownership and control of the material resources of the community are so distributed as best to sub-serve the common good. Parliament and Legislatures of the States have enacted several laws and the ....
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....cretion. The very idea of unfettered discretion is totally incompatible with the doctrine of equality enshrined in the Constitution and is an antithesis to the concept of rule of law. 197. While rejecting the theory of absolute discretion, Lord Denning's principles have been cited with approval by the Apex Court in paragraphs '54' and '55' as under:-- "54. In Breen v. Amalgamated Engineering Union (1971) 2 QB 175, Lord Denning MR said: "The discretion of a statutory body is never unfettered. It is a discretion which is to be exercised according to law. That means at least this: the statutory body must be guided by relevant considerations and not by irrelevantly. If its decision is influenced by extraneous considerations which it ought not to have taken into account, then the decision cannot stand. No matter that the statutory body may have acted in good faith; nevertheless the decision will be set aside. That is established by Padfield v. Minister of Agriculture, Fisheries and Food which is a landmark in modern administrative law." 55. In Laker Airways Ltd. v. Department of Trade 1977 QB 643, Lord Denning discussed prerogative of the Minister to give direct....
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....ive legislation has been enacted to generally define natural resources and a framework for their protection. Of course, environment laws enacted by Parliament and State legislatures deal with specific natural resources, i.e., Forest, Air, Water, Costal Zones, etc. 80. In Jamshed Hormusji Wadia's case, this Court held that the State's actions and the actions of its agencies/instrumentalities must be for the public good, achieving the objects for which they exist and should not be arbitrary or capricious. In the field of contracts, the State and its instrumentalities should design their activities in a manner which would ensure competition and non-discrimination. They can augment their resources but the object should be to serve the public cause and to do public good by resorting to fair and reasonable methods. 86. In Akhil Bharatiya Upbhokta Congress v. State of M.P. (2011) 5 SCC 29, this Court examined the legality of the action taken by the Government of Madhya Pradesh to allot 20 acres land to an institute established in the name of Kushabhau Thakre on the basis of an application made by the Trust. One of the grounds on which the appellant challenged the allotment of ....
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....positions: 40. ........ xxxxxx........ State-owned or public-owned property is not to be dealt with at the absolute discretion of the executive. Certain precepts and principles have to be observed. Public interest is the paramount consideration. One of the methods of securing the public interest, when it is considered necessary to dispose of a property, is to sell the property by public auction or by inviting tenders. Though that is the ordinary rule, it is not an invariable rule. There may be situations where there are compelling reasons necessitating departure from the rule but then the reasons for the departure must be rational and should not be suggestive of discrimination. Appearance of public justice is as important as doing justice. Nothing should be done which gives an appearance of bias, jobbery or nepotism." 89. In conclusion, we hold that the State is the legal owner of the natural resources as a trustee of the people and although it is empowered to distribute the same, the process of distribution must be guided by the constitutional principles including the doctrine of equality and larger public good." (d) Scope of Judicial review:-- 201. Having considered the law....
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....ny other tender is always available to the Government. But, the principles laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the Government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down. 71. Judicial quest in administrative matters has been to find the right balance between the administrative discretion to decide matters whether contractual or political in nature or issues of social policy; thus they are not essentially justifiable and the need to remedy any unfairness. Such an unfairness is set right by judicial review." 72. Lord Scarman in Nottinghamshire County Council v. Secretary of State for the Environment proclaimed: "Judicial review' is a great weapon in the hands of the judges; but the judges must observe the constitutional limits set by our parliamentary system upon the exercise of this beneficial power." Commenting upon this Michael Supperstone and James Goudie....
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....aring of the matter. See Healey v. Minister of Health (1955) 1 QB 221: (1954) 3 All ER 449: (1954) 3 WLR 815. But nevertheless, the courts will, if called upon, act in a supervisory capacity. They will see that the decision-making body acts fairly. See H.K. (an infant), Re (1967) 2 QB 617,630: (1967) 1 All ER 226: (1967) 2 WLR 692, and R.V. Gaming Board for Great Britain, ex p Benaim and Khaida (1970) 2 QB 417: (1970) 2 All ER 528: (1970) 2 WLR 1009. The courts will ensure that the body acts in accordance with the law. If a question arises on the interpretation of words, the courts will decide it by declaring what is the correct interpretation. See Punton v. Ministry of Pensions and National Insurance (1963) 1 WLR 186: (1963) 1 All ER 275. And if the decision-making body has gone wrong in its interpretation they can set its order aside. See Ashbridge Investments Ltd. v. Minister of Housing and Local Government (1965) 1 WLR 1320: (1965) 3 All ER 371. (I know of some expressions to the contrary but they are not correct). If the decision-making body is influenced by considerations which ought not to influence it; or fails to take into account matters which it ought to take into accoun....
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....nt to note is that a thing is not unreasonable in the legal sense merely because the court thinks it is unwise." 207. In paragraph '92', the observation of the Apex Court in Sterling Computers Limited (supra) is quoted that:-- "92..... xxxxxxx............. It is not possible for the courts to question and adjudicate every decision taken by an authority..... xxxxxxxxxx........... Under some special circumstances a discretion has to be conceded to the authorities who have to enter into contract giving them liberty to assess overall situation for purpose of taking a decision as to whom the contract be awarded and at what terms. If the decisions have been taken in bona fide manner although not strictly following the norms laid down by the courts, such decisions are upheld.......... xxxxxxxxxxxxx.......... ". 208. The following principles of Judicial Review have been laid down in the matters of Government Policy in paragraph '94' in Tata Cellular (supra):-- 94. "(1) The modem trend points to judicial restraint in administrative action. (2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made. (3) The court doe....
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....bjects, been worked into a set of tolerably definite rules. The application of these to particular instances necessarily varies with the conditions of the times and the progressive development of public opinion and morality, but, as Lord Wright has said public policy, like any other branch of the Common Law, ought to be, and I think is, governed by the judicial use of precedents. If it is said that rules of public policy have to be moulded to suit new conditions of a changing world, that is true; but the same is true of the principles of the Common Law generally. " In Halsbury's Laws of England, 3rd Edn., Vol. 8, the doctrine is stated at p. 130 thus: "Any agreement which tends to be injurious to the public or against the public good is void as being contrary to public policy. It seems, however, that this branch of the law will not be extended. The determination of what is contrary to the so-called policy of the law necessarily varies from time to time. Many transactions are upheld now which in a former generation would have been avoided as contrary to the supposed policy of the law. The rule remains, but its application varies with the principles which for the time being g....
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.... governed by precedents; the principles have been crystallized under different heads and though it is permissible for Courts to expound and apply them to different situations, it should only be invoked in clear and incontestable cases of harm to the public...." 212. Crisply put, the Apex Court had laid down the principle in the matter of public policy by terming it as 'illusive concept', "unruly horse," a branch of common law which is governed by judicial precedents. A word of caution has been added by saying that "public policy" is always an unsafe and treacherous ground for legal decision. Simultaneously it was held that by application of such principle, it is inevitable that the judge must find the facts on which he must decide whether the fact so found do or do not come within the principle i.e. a principle of public policy, recognized by the law, which suggested contract is infringing, or shall infringe. 213. In Kedar Nath Motani And Others v. Prahlad Rai And Others,, AIR 1960 SC 213 Hidayatullah J, speaking for the three judges bench after considering the English law on the subject as stated by Lord Mansfield in Holman v. Johnson [(1775) 1 Cowp. 341, 343; 98 E.R. 11....
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....the courts and similarly where there has been a well-recognized head of public policy, the courts have not shirked from extending it to new transactions and changed circumstances and have at times not even flinched from inventing a new head of public policy. There are two schools of thought - "the narrow view" school and "the broad view" school. According to the former, courts cannot create new heads of public policy whereas the latter countenances judicial law-making in this area. The adherents of "the narrow view" school would not invalidate a contract on the ground of public policy unless that particular ground had been well-established by authorities. Hardly ever has the voice of the timorous spoken more clearly and loudly than in these words of Lord Davey in Janson v. Uriefontein Consolidated Mines Limited [1902] A.C. 484, 500 "Public policy is always an unsafe and treacherous ground for legal decision." That was in the year 1902. Seventy-eight years earlier, & Burros, J., in Richardson v. Mellish, [1824] 2 Bing. 229, 252; S.C. 130 E.R. 294, 303 and [1824-34] All E.R. Reprint 258, 266, described public policy as "a very unruly horse, and when once you get astride it you never ....
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....gh Court and restoring the decree passed by the trial court declaring the appellants' title to the lands in suit and directing the respondents who were the appellants' benamidars to restore possession, this Court, after discussing the English and Indian law on the subject, said (at page 873): "The correct position in law, in our opinion, is that what one has to see is whether the illegality goes so much to the root of the matter that the plaintiff cannot bring his action without relying upon the illegal transaction into which he had entered. If the illegality be trivial or venial, as stated by Willistone and the plaintiff is not required to rest his case upon that illegality, then public policy demands that the defendant should not be allowed to take advantage of the position. A strict view, of course, must be taken of the plaintiff's conduct, and he should not be allowed to circumvent the illegality by restoring to some subterfuge or by mis-stating the facts. If, however, the matter is clear and the illegality is not required to be pleaded or proved as part of the cause of action and the plaintiff recanted before the illegal purpose was achieved, then, unless it be o....
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....uoted as under;- "49. State and its agencies and instrumentalities cannot give largesse to any person at sweet will and whims of the political entities or officers of the State. However, decisions and action of the State must be founded on a sound, transparent and well defined policy which shall be made known to the public. The disposal of Government land by adopting a discriminatory and arbitrary method shall always be avoided and it should be done in a fair and equitable manner as the allotment on favoritism or nepotism influences the exercises of discretion. Even assuming that if the Rule or Regulation prescribes the mode of allotment by entertaining individual application or by tenders or competitive bidding, the Rule of Law requires publicity to be given before such allotment is made. CIDCO authorities should not adopt pick and choose method while allotting the Government land. 50. Furthermore, this Court has already stated in Akhil Bhartiya Upbhokta Congress v. State of M.P. (2011) 5 SCC 29, that the State or its agencies or instrumentalities must give largesse founded on a sound, transparent, discernible and well-defined policy, which should be made known to the public a....
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....e expression represents a dynamic concept and is, therefore, incapable of any straitjacket definition, meaning or explanation. That has not, however, deterred jurists and courts from explaining the expression from very early times. 94. We may also refer to the decision of this Court in ONGC Ltd. v. Saw Pipes Ltd., wherein this Court was considering the meaning and import of the expression "public policy of India" as a ground for setting aside an arbitral award. Speaking for the Court M.B. Shah, J. held that the expression "public policy of India" appearing in the Act aforementioned must be given a liberal meaning for otherwise resolution of disputes by resort to arbitration proceedings will get frustrated because patently illegal awards would remain immune to court's interference. This Court declared that what was against public good and public interest cannot be held to be consistent with public policy. The following passage aptly summed up the approach to be adopted in the matter: (Saw Pipes Ltd. Case, SCC pp. 727-28, para 31) "31. Therefore, in our view, the phrase, 'public policy of India' used in Section 34 in context is required to be given a wider meaning. It....
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....conomic scenario. 223. At the same time it is also settled principle of law that every action of the public authority or the person acting in public interest or any act that gives rise to public element, should be guided by public interest. It should be no answer for the State, its instrumentality, public authority or person 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 actions must be based on some rationale and relevant principles and should be in public interest. Whether awarding of the contract in favour of Noida Toll Company in the facts of the case is legally sustainable? 224. Thus following legal principles emerge in the matter of scrutiny in the case of award of contract, by Government or Public Authority which reflect upon public money/properties:-- "(a) In view of the Article 14 of the Constitution of India the Government or an instrumentality of the State while awarding the contract must select the recipient after due advertisement/notice inviting tenders. Refe....
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....ntrolled by public sector, inasmuch as 81% (approx) of its shares at the relevant time were held by the L.I.C./Nationalized Banks. 230. We are of the considered opinion that none of the above three reasons make out a case of exception in the case of non-compliance of the requirements of Article 14 of the Constitution of India for awarding of the contract in favour of NOIDA Toll Company by private negotiation. 231. The allegation that there was no other private player interested in such projects at the relevant time is based on mere surmises and conjunctures of respondents being not supported by any material with which it could be demonstrated that any such similar project was advertised at the relevant time and no offers were received. 232. So far as the IL&FS is concerned, we need not to comment upon its credibility, but it is apparent from the Concession Agreement that the Memorandum of Understanding was designed and signed by the then Secretary, Urban Affairs and Development, Union of India. The State of U.P. is not a signatory to the said Memorandum of Understanding. 233. It is surprising to notice that under the Concession Agreement itself it is mentioned that a Steering C....
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....project under the MOU. From the letter dated 18.05.1995 [reference paragraph No. 5 of the counter affidavit filed by the State Government dated 28.07.2016](appended as Annexure No. 1 to the counter affidavit), it is clear that pursuant to the signing of MOU, a Steering Committee was constituted of which the Secretary, Ministry of Urban Development, Government of India was the Chairman i.e. Sri R.K. Bhargava. From the Clause (f) of the Concession Agreement, it is further evident that the Steering Committee was chaired by the Secretary of the Ministry of Urban Affairs & Development (now Ministry of Urban Development), Government of India. In Clause (k) of the Concession Agreement, it is mentioned that the Steering Committee had decided to implement the project by a Corporate entity promoted by IL&FS to be incorporated in the State of U.P., pursuant thereto, NTBCL (Noida Toll Bridge Company Ltd.) was incorporated and registered under the Companies Act having its office in the State of U.P with Sri R.K. Bhargava as Chairman of the Company. [Reference communication dated 08.07.2011 sent by the Chief Executive Officer, Noida to Sri R.K. Bhargava as Chairman to NTBCL (enclosed with the li....
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....velopment area. (2) Without prejudice to the generality of the objects of the Authority, the Authority shall perform the following functions:-- (a) to acquire land in the industrial development area, by agreement or through proceedings under the Land Acquisition Act, 1894 for the purpose of this Act; (b) to prepare a plan for the development of the industrial development area; (c) to demarcate and develop sites for industrial, commercial and residential purposes according to the plan; (d) to provide infrastructure for industrial, commercial and residential purposes; (e) to provide amenities; (f) to allocate and transfer either by way of sale or lease or otherwise plots of land for industrial, commercial or residential purposes; (g) to regulate the erection of buildings and setting up of industries; and (h) to lay down the purpose for which a particular site or plot of land shall be used, namely for industrial or commercial or residential purpose or any other specified purpose in such area." "Section 11 Levy of tax:-- (1) For the purposes of providing, maintaining, or continuing any amenities in the industrial development area, the Authority may, with the previou....
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....rced it sometime in the month of September, 1998. The relevant clauses of Regulations 1998 are as under:-- "Regulation 2-A (b) 'Agreement' means an agreement entered into between the authority and Developer on which basis the Developer develops, constructs, maintain or provides an infrastructure or collects fee therefore in the area. (e) 'Developer" means a person who constructs, develops, maintains or provides an infrastructure or collects fee therefore in the Area on the basis of an agreement made before or after the commencement of these regulations, providing or maintaining or continuing to provide or maintain any infrastructure in the New Okhla Industrial Development Area. (f) ' Fee' in relation to an infrastructure means an amount levied upon or payable by a person under these regulations for the use of an infrastructure in the Area. Regulation 3. (a) The Authority may either itself or through a Developer on the basis of an agreement, develop, construct, provide or maintain or continue to provide or maintain an infrastructure in the Area. (b) In particular, any without prejudice to the generality of the powers of the Authority in this behalf the ....
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.... Article 13 which confers a power upon the Concessionaire to levy fee find specific reference here. 251. We may reproduce the definition of "fee" provided under Section 1.1 of the Concession Agreement hereunder:-- "Fee means the amount of money demanded, charged, collected, retained and appropriated by the Concessionaire, for and on behalf of the NOIDA, from the users of NOIDA Bridge as fee for the provision of the Noida Bridge, in accordance with the rules prepared by NOIDA under Section 19 of the Act and the provisions of Article 13 herein." 252. From a careful reading of the above mentioned provisions of the Act, 1976, it is clear that under Section 11 of the Act, 1976, there is a provision for levy of taxes by the Authority, with the approval of the State Government for providing, maintaining or continuing any amenities in the Industrial Development Area to the extent of 25% of the annual value of the site or the building. Section 19 of the Act, 1976 confers power to make regulations consistent with the provisions of the Act which includes the power to frame regulations for levy of fee under Sub-section 2(e) of Section 19 of the Act. 253. Till the insertion of Section 6-A ....
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....e- rally used for the, levy of a tax or duty by legislative provision indicating the subject matter of the tax and the rates at which it has to be taxed. The term "assessment", on the other hand, is generally used in this country for the actual procedure adopted in fixing the liability to pay a tax on account of particular goods or property or whatever may be the object of the tax in a particular case and determining its amount. The Division Bench appeared to equate "levy" with an "assessment" as well as with the collection of a tax when it. held that "when the payment of tax is enforced, there is a levy". We think that, although the connotation of the term "levy" seems wider than that of "assessment", which it includes, yet, it does not seem to us to extend to "collection". Article 265 of the Constitution makes a distinction between "levy" and "collection". We also find that in N.B. Sanjana Assistant Collector of Central Excise, Bombay & Ors. v. The Elphinstone Spinning & Weaving Mills Co. Ltd., A. (1), this Court made a distinction between "levy" and "collection" as used in the Act and the Rules before us. It said there with reference to Rule 10:-- "We are not inclined to accep....
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....o make rule which travels beyond the scope of the enabling Act or which is inconsistent therewith or repugnant thereto. From the above discussion, we have no hesitation to hold that by amending the Rules and Form P-5, the rule-making authority have exceeded the power conferred on it by the Land Reforms Act." 267. In the case of M. Chandru v. Member-Secretary, Chennai Metropolitan Development Authority and another 2009 (4) Supreme Court Cases 72, the Apex Court has held in paragraph '18' that the power to delegate being a statutory requirement must find its place in the Principal Act itself and not in the regulations. "18. The Sewerage Board is a State within the meaning of Article 12 of the Constitution of India. It is a creature of a statute. It can delegate its power provided there exists a provision in the Act. Power to delegate, thus, being a statutory requirement must find its place in the principal Act itself and not in the Regulation. The High Court, in our opinion, has asked unto itself a wrong question. The appropriate question required to be posed was not as to whether the CMDA was appointed as an agent, but was as to whether the Sewerage Board could delegate i....
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....ction between the parent Act and the subordinate legislation like rules and regulations framed there-under as well as after noticing the meaning to be attached to Section 14 and Section 21 of the General Clauses Act, 1897, has specifically laid down that the Subordinate Legislation has to act within the four corners of the parent Act and the authority delegated therein. If the parent Act does not confer any power upon the Subordinate Legislation, like framing of regulations with retrospective effect then there cannot be any theory of implied intent or the concept of incidental and ancillary power in the matter of exercise of fiscal power. Relevant paragraph '21' is quoted as under:-- "21. There is no dispute over the fact that a legislature can make a law retrospectively or prospectively subject to justifiability and acceptability within the constitutional parameters. A subordinate legislation can be given retrospective effect if a power in this behalf is contained in the principal Act. In this regard we may refer with profit to the decision in Mahabir Vegetable Oils (P) Ltd. and another v. State of Haryana and Others [ (2006) 3 SCC 620], wherein it has been held that:-- ....
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....1998 cannot travel beyond the main Section 6-A of U.P. Act No. 6 of 1976 nor can it infuse life to the confessional agreement/contract by giving retrospective operation to the Regulations 1998. The base user fee had been determined under the agreement itself that is on a date when the Regulations 1998 had not seen the light of the day. 278. The plea raised on behalf of the Concessionaire to support the levy of user fee under the provisions of Section 6A of U.P. Act No. 6 of 1976 read with the Regulations 1998 cannot, therefore, be legally sustained. 279. Under the Indian Tolls Act 1851, the Government or a public authority is empowered to levy fee/toll upon any road or bridge, however, lease for the right to collect tolls can be given to a contractor for specified period provided therein. The idea is that the amount spent towards cost of construction of the bridge or road is realised. 280. In the case of Kiran Anandrao Pawar & others v. Chief General Manager, IRB Kolhapur Integrated & others and Nandu v. State of Maharashtra & others relied by the Concessionaire to justify levy, it was found by the Bombay and Nagpur High Courts that the relevant statute permitted the recovery of....
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....st" as defined means, "the cost of construction" and "the other Costs of Commissioning" "to be determined" on the "project commissioning date" by the Independent Auditor in consultation with the Independent Engineer. According to us, after commissioning of the Project, the Concessionaire would only be entitled for the maintenance cost plus interest/reasonable profits on the investments. 288. The Total Project cost under the method of "Cost and Accounting" as provided under Article 14 read with Annexure 'F' of the Concession Agreement, is continuously increasing. The reason is obvious, as per Section 14.1 of the Agreement, the Total Cost of Project is aggregate of (a) the project cost, (b) major maintenance expenses and (c) short fall in the recovery of returns in a specific financial year as per the formula in section 14.2(a). 289. Section 14.2 says that the amount available for appropriation by the Concessionaire for the purpose of recovering the total cost of project and returns thereon (as illustrated in Appendix-F) shall be calculated by deduction of Operation and Maintenance expenses and taxes (excluding any custom or import duties) from the Gross revenues i.e. from ....
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....mpany forwarded to the Chief Executive Officer, NOIDA Authority regarding the proposal for construction of office building adjacent to DND Toll Plaza, submitted as under:-- "Though the traffic and revenue of the Project has increased significantly, the Project is still not earning sufficient revenues to cater for the designated returns. The total Unrecovered Project Cost, computed by the Independent Auditor as per formula provided in the Concession Agreement works out to Rs. 1109 crores as on March 31, 2007 and based on projected estimates of traffic and revenue attached at Annexure-I, it is unlikely that the Project Cost can ever be recovered. In other word, this has become a perpetual concession. Annexure-I also provides a scenario wherein the Company has recourse to a stream of rental income. It may be seen that in the event, that the proposal outlined below, is implemented, the project alongwith its assets would revert free of cost to NOIDA in 2030." 294. The Concessionaire had thus realized as early as in the year 2007 that it would not be able to ever recover the Total Cost of Project as per the formula provided in Article 14 read with Annexure 'F' by adding assure....
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..... The Concessionaire in reply with reference to clauses of the agreement would contend that it is entitled to realise the user fee as it has not achieved the figure of Total Cost of Project under the agreement which has been entered into with open eyes by the NOIDA. 301. We would, therefore, examine from the records as to whether the money invested by the Concessionaire in the Project has been recovered alongwith reasonable interest and returns or not. 302. The record indicates that the Independent Auditor namely M/s. A.F. Ferrguson & Co. gave its report dated April 23, 2001 determining the project cost upto the commissioning date i.e. February 6, 2001, calculated as per provisions of Article 10.1 of the Concession Agreement. The said report is appended at page '466' of the counter affidavit of the Concessionaire dated 13.11.2014 (hereinafter referred to as 'CCA') and at page '46' of the Supplementary Affidavit No. 326046 dated 14.9.2015 and appended as Annexure SCA-'5' to the said affidavit. 303. A careful reading of the said documents and the admission of the Concessionaire in paragraph '67' and '68' of the counter affidavit date....
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....arrears' as on 31, March, 2014, appended at page '488' of the 'CCA' of the Concessionaire and as Annexure S.C.A.-3 (at page 96 of Supplementary Affidavit No. 326053 dated 14.09.2015 filed by the concessionaire), it is clear that the gross revenues i.e. total income from the toll earned by Concessionaire in each year is increasing gradually. 307. From the said document, it is further clear that the Project Cost incurred by the Concessionaire upto February 6, 2001 was Rs. 325.9 crores. The Unrecovered Project Cost between 7th February, 2001 to 31st March, 2001 has been mentioned as Rs. 407.6 crores which includes returns of 20% to the tune of Rs. 81.6 crores (approx). 308. From the same document it is further clear that the surplus i.e. the net income under column-7 in the year ended on 31, March, 2014 from toll was approximately Rs. 947 crores. 309. The amount of total income from 31.03.2014 till 30.9.2016 i.e. for 2 1/2 years is yet to be added to the income which, if, calculated on the basis of receipt of the financial year 2014-15, would be another 300 crores. 310. From the statement made on oath in the counter affidavit filed by NOIDA Toll Bridge Company ....
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....rt to accept that all the projects which had been executed by the Company and the income and losses thereto must also be taken into consideration for dealing the issue in hand. The facts given in the affidavits of Concessionaire in our opinion are not answer to the challenge made by the petitioner. 313. It is sought to be submitted in paragraph '87' of the counter affidavit that the figure of outstanding project cost under the Concession Agreement is an amount to be recovered in the future from an indeterminable class of Users i.e. Users of the DND Flyway through payment of User fees and the same is not reflected in the Profit & Loss Account of the company. 314. It is further submitted in paragraph '86' and '88' of the counter affidavit that the resultant figure in the Profit & Loss Account is a different concept from the "Returns" as defined under the Concession Agreement. Thus although the Company may have made some profits in a given financial year by dint of the total revenue exceeding the total expenditure, that by itself would not imply or lead to the conclusion that the Project Cost has been fully recovered. 315. The Concessionaire and IL&FS (respo....
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....ontract by NOIDA, keeping in view that the investors in the project needed adequate returns and insulation from risk, to consider investment in the project. 318. The assertion on page 25 of the written submission dated August 19, 2016 of the Concessionaire (respondent No. 1) is reproduced as under:-- "The concept of the Total Cost of Project was (a) devised by experts keeping in view the above mentioned factors (b) clause duly approved by various governments (c) notional figure only represents the risks of the investors (d) no claim/bill on NOIDA (e) no assurance of the amount to the Concessionaire (f) not linked to user fee (g) not void ab-initio as per admission of NOIDA (Page-14, Para-31 of Counter Affidavit dt. 11.05.2015 of Noida) (h) it is a risk insurance clause against premature and arbitrary termination of contract by NOIDA. Lenders have been made stake holders in the agreement under Article 15. The formula of the Total Cost of Project and Termination Payment were devised to impart requisite confidence to the Lenders who were instrumental to the Project." Risk Insurance Clause has become redundant. 319. Considering the submissions made even if we accept that the high ....
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....d not beyond that. For this reason also we record that authorisation by NOIDA to adjust the Cost of Construction of infrastructure (Ashram Flyover) from collection of User fee is without authority. 323. Viewed from any angle, we find that the Concessionaire have been able to recover not only the cost of construction i.e. the Project Cost but also reasonable profits which are being shared with the shareholders in the form of dividends since 2010-11. In view of the clauses of the agreement on cost being recovered, the bridge can be handed over to NOIDA even before 2031 i.e. 30 years period under the agreement. 324. We are also sure that in the instant case, if we would have gone into the question of decision making process for looking into the validity of the Concession Agreement, we could have quashed the entire Concession Agreement being opposed to Public Policy and hit by Article 14 of the Constitution of India. However, giving due consideration to the fact that the Concessionaire has performed its part of the obligations and the bridge has been constructed and is being used by the Public and the contract has worked for about 15 years, we do not propose to traverse all the contr....
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....as afore-mentioned, the court will not do this if to do so would alter entirely the scope and intention of the agreement. Fourthly, the contract, shorn of the offending parts, must retain the characteristics of a valid contract, so that if severance will remove the whole or main consideration given by one party the contract becomes unenforceable. Otherwise, the offending promise simply drops out and the other parts of the contract are enforceable." Reference may be made to Chitty on Contracts (29th Edition); Volume I; pp. 1048-49; "16-188 Introductory. Where all the terms of a contract are illegal or against public policy or where the whole contract is prohibited by statute, clearly no action can be brought by the guilty party on the contract; but sometimes, although parts of a contract are unenforceable for such reasons, other parts, were they to stand alone, would be unobjectionable. The question then arises whether the unobjectionable may be enforced and the objectionable disregarded or "severed". 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 t....
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....and in consonance of law. 17. In several cases, courts have held that partial invalidity in contract will not ipso facto make the whole contract void or unenforceable. Wherever a contract contains legal as well as illegal parts and objectionable parts can be severed, effect has been given to legal and valid parts striking out the offending parts." 327. In LIC of India (supra) while considering the question whether the offending clauses in the contract can be severed by an order of the Court, it has been observed in paragraphs No. 50, 51 & 52 that:-- 50. "It is settled law that the arms of the court are long enough to reach injustice wherever it is found and the court would mould the relief appropriately to meet the peculiar and complicated requirements of the country vide Dwarkanath v. Income Tax Officer, Kanpur, 1965 (3) SCR 536 at 540, Andi Mukta Trust v. V.R. Rudani, 1989(2) SCC 691 at 699-700, Unni Krishnan v. State of A.P., 1993 (1) SCC 645 at 693-97 and Hochitief 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 o....
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....t. They are not seeking any mandamus to direct the appellants to enter into contract of life insurance with them. The rest of the conditions age etc are valid and do not call for interference. The offending clause extending the benefit only to the salaried class in Government, semi-Government and reputed firms is unconstitutional. Subject to compliance with other terms and conditions, the appellant is free to enforce Table 58 policy with all eligible lives. The declaration given, therefore, is perfectly valid. The offending part is severable from the rest of the conditions" 328. Considering the legal position and the fact that certain clauses of the Concession Agreement are affecting the public at large i.e. commuters who are subjected to pay toll for the use of public road in perpetuity due to wrongful arbitrary terms and conditions of the contract, we have no hesitation to hold that the offending clauses can be severed from the rest of the agreement without 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 Br....
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....he NOIDA Bridge to NOIDA in accordance with the terms of Article 19, on the transfer date i.e. 1st April 2013. (iv) Deletion of Section 2.4 (extension of Concession period) and Section 2.5 (earlier termination of concession period)(which provides that the Concessionaire shall transfer the Project Assets to NOIDA upon recovery of the Total Cost of the Project and the Returns thereon). (v) Section 14.1 to be amended as follows:-- "Section 14.1 Total Cost of Project For the duration of the Concession Period, the Total Cost of Project be as on 31st March, 2011 (as has been certified by the Independent Auditor). Provided that in the event of Termination, the Total Project Cost shall be deemed to be modified to the extent it has been recovered through collection of fees till the termination date (as certified by the Independent Auditor) in accordance with Article 18". 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, N....
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....the tune of Rs. 2168 Crores (approx), would be the figure only with reference to Article 18.1 (a) so as to act as a Risk Insurance Measure against arbitrary termination of the Concession Agreement by NOIDA (to repeat, after the amendment is approved). In the event of automatic termination of the Concession Agreement at the end of Concession period so amended, the total project cost shall be deemed to be modified to the extent that 'it has been recovered through collection of fees till the termination date (as certified by the Independent Auditor) in accordance with Article 18'. 335. As we understand the Amendment proposed by the Concessionaire are:-- "(a) The Concessionaire will keep on charging 'User fees till the year 2031 i.e. 1st April, 2031 which is 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 coun....