Monday, December 26, 2016

NOIDA Toll Bridge Company Ltd. V.s Federation of NOIDA Residents Welfare Association -November 11, 2016


                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                 Special Leave Petition (C) No……………….of 2016
                          (Diary No. 36526 of 2016)

NOIDA Toll Bridge Company Ltd.            .... Petitioner(s)

Federation of NOIDA Residents Welfare
Association & Ors                             ….Respondent(s)

                                  O R D E R


      I.A. No…………………of 2016 which  is  an  application  for  exemption  from
filing certified copy of judgment dated 26.10.2016 passed by the High  Court
of Judicature at Allahabad in Public Interest Litigation (PIL) No. 60214  of
2012 is allowed.
Issue notice.  Respondent Nos. 1, 2, and 9 are  represented  by  Mr.  Sanjay
Hegde, learned Senior Advocate, Mr. Ranjit Saxena, Advocate and  Mr.  K.  K.
Venugopal, learned Senior Advocate respectively. Notice shall now go to  the
remaining Respondents only.
Federation of NOIDA Residents Welfare Association &  Ors.,  Respondent  No.1
herein, filed PIL No.60214 of 2012  in  the  High  Court  of  Judicature  at
Allahabad for a declaration that collection of toll fee  should  be  stopped
on the DND Flyover between New Delhi and NOIDA.
A Concession Agreement (hereinafter referred  to  as  “the  Agreement”)  was
entered into between the Petitioner, NOIDA (Respondent No.2)  and  IL  &  FS
Ltd. (Respondent No.9)  on  12.11.1997  for  development  of  infrastructure
facility of a bridge and an access  road.   The  Project  was  conceived  on
Build-Operate-Transfer (BOT) basis.   The 9th Respondent  IL  &  FS  had  to
arrange the investment for the Project which could be recovered by  levy  of
toll from the users of the road and the Project.
As the main dispute in the PIL filed in the High Court revolves  around  the
recovery of the Project Cost by the proponent, it is essential to  refer  to
some important provisions of  the  Agreement.  Section  2.3  refers  to  the
concession period which is as follows:
“Section 2.3 Concession Period

(a) The Concession Period shall commence on the  Effective  Date  and  shall
extend until the earlier of:

A period of 30 years from the Effective Date; or

(ii)  The date on which the concessionaire shall recover the Total  Cost  of
Project and the Returns  as  determined  by  the  Independent  Engineer  and
Independent Auditor in accordance with Section 14 thereon  through  (a)  the
demand, collection, retention and Appropriation of  Fee,  (b)  the  receipt,
retention and appropriation of Development Income, or (c) any  other  method
as determined by the Parties.

(b)   Upon the termination of  the  Concession  Period,  the  Concessionaire
shall transfer the Project Assets to NOIDA in accordance with the  terms  of
Article 19.”

It is relevant to refer to the definition of ‘Effective  Date’  which  means
the earlier of (a) the date of issuance of Certificate of Compliance or  (b)
the date of issuance of Certificate of  Commencement.  Article  19  provides
that NOIDA will continue the operations of the DND project  either  directly
or by its nominated agency  from  the  ‘Transfer  Date’  which  is  the  day
immediately following the last day of the concession period,  including  any
extension thereto or earlier termination  thereon  in  accordance  with  the
terms of the Agreement.
Fixation and calculation of the fee is dealt with in  Section  13.   As  per
Section 14.1, the Total Cost of the Project shall be the  aggregate  of  (i)
Project Cost, (ii) Major Maintenance Expenses  &  (iii)  Shortfalls  in  the
recovery of returns in a specific financial  year  as  per  the  formula  in
Section 14.2 (a).
Section 14.2 contemplates that recovery of the Total  Cost  of  the  Project
and  Returns  therefrom  shall  be  as  illustrated  in  Annexure  F.    The
calculation of the Returns shall  be  made  at  annual  intervals  from  the
effective date in the following manner:
“Start  with:   Gross  revenue  from  fee  collections,   income        from
advertising and Development income.

      Less:        O & M expenses

Less:   Taxes (excluding any customs and   import duties).”

“Returns” is defined in the Agreement as the returns on the  Total  Cost  of
Project recoverable by the Concessionaire from the  effective  date  at  the
rate of 20 per cent per annum as per Section 14.2 of the Agreement.
Respondent No.  1 contended in the writ petition that the Total Cost of  the
DND Flyover Project was approximately Rs. 408.17 Crores and  the  cumulative
toll income from the years 2001 to  2014  was  Rs.  803.524  Crores.  As  on
31.03.2014 the cumulative net profit was Rs. 165.08 Crores.  Respondent  No.
1 further contended that the Total Cost of the Project as per the report  of
the Company’s Auditor  was  Rs.  2,339.69  crores  as  on  31.03.2012  which
increased to Rs. 2,955.1 crores as on 31.03.2013 and Rs. 3,448.95 crores  as
on 31.03.2014. It was further urged that the projected figure of  the  Total
Cost of the Project as on 31.03.2016 was Rs. 5,000 crores. It was  contended
by Respondent No. 1 that as per  the  calculation  of  the  Auditor  of  the
Petitioner herein, the Total Cost of the Project can never be recovered  and
the Project will never be free from levy of toll.
The Petitioner contested the Writ Petition on several grounds including  the
maintainability. The Petitioner herein relied upon  the  Agreement  and  the
reports  of  the  Independent  Auditor  appointed  in  accordance  with  the
Agreement to contend that the  Total  Cost  of  the  Project  has  not  been
The High Court framed six  questions  for  consideration  and  concluded  as
“This Public Interest Litigation is legally maintainable.

In the facts of the case, interference with the Concessionaire agreement  is
warranted in exercise of powers of judicial review under Article 226 of  the
Constitution of India.

Selection of Concessionaire in  the  facts  of  the  case  is  violative  of
Article 14 of the Constitution of India  and  is  found  to  be  unfair  and
unjust.  We, however, do not deem it fit to nullify  the  entire  concession

Right to levy and collect User fee from the commuters as conferred upon  the
Concessionaire  under  the  Concession  Agreement  suffers  from   excessive
delegation and is contrary to the provisions of  the  U.P.  Industrial  Area
Development Act, 1976.  Article 13 (Clause) of the Concession  Agreement  is
held to be bad and inoperative in the eyes of law.

The method of calculation of the Total Project  Cost  and  appropriation  of
the User  fee  collection  under  Article  14  (Clause)  of  the  Concession
Agreement is held to be arbitrary and opposed to Public Policy.  Article  14
(Clause) of the Concession Agreement is severed, therefrom.

The proposed Amendments do not affect the reliefs  which  have  been  prayed
for in the petition.”

On the  basis  of  the  above  conclusions,  the  High  Court  directed  the
Petitioner not to impose any user fee/toll from the commuters for using  the
DND flyover.
Dr. Abhishek Manu  Singhvi,  learned  Senior  Advocate  for  the  Petitioner
submitted  that  the  reports  of  the  Independent  Auditor  appointed   in
accordance with the Agreement were  not  properly  considered  by  the  High
Court. He handed over two charts which, according to him, were  prepared  in
accordance with the terms of  the  Agreement.  Relying  on  the  charts,  he
submitted that the Total Cost of the Project  has  not  been  recovered.  He
urged that the Petitioner has created a world-class  facility  of  a  bridge
over the river Yamuna and a 8 lane highway of 9.5  kilometres.  Dr.  Singhvi
submitted that the veracity of the Petitioner’s claims that the  Total  Cost
of the Project has  not  been  recovered  can  be  verified  by  taking  the
assistance of the Comptroller and  Auditor  General  of  India.  Finally  he
submitted that the Petitioner would suffer irreparable loss if the  judgment
of the High Court is not stayed.
Prima facie, we are of the opinion that the various  issues  that  arise  in
this SLP warrant a detailed scrutiny.  Conflicting  claims  have  been  made
regarding  the  recovery  of  the  Total  Cost  of  the   Project   by   the
Concessionaire.  To  resolve  the  dispute,  it  is  appropriate   that   an
independent agency is requested to examine the relevant records of  the  DND
flyway. The said agency  should  examine  the  reports  of  the  independent
auditors appointed by the Petitioner  and  submit  a  report  regarding  the
correctness of the Petitioner’s claim that the Total  Cost  of  the  Project
has not been recovered. We accept  the  suggestion  of  the  Petitioner  and
request the Comptroller and Auditor General of India (CAG) to assist  us  in
this  matter.  The  Petitioner  is  directed  to  place  the  entire  record
pertaining to the recovery of the Total Project  Cost  of  the  DND  flyover
project as per the Agreement before  the  CAG.   The  CAG  is  requested  to
verify the claim of the Petitioner that the Total Cost of  the  Project  has
not been recovered and submit a report within four weeks. The CAG  shall  be
at liberty to call for and examine all such records having a bearing on  the
financial aspects, as it requires to facilitate  its  decision.   This  will
include matters and information pertaining to all the  benefits  which  have
flowed to the Petitioner under the entirety of the agreement, including  the
utilisation, if any.  The Petitioner shall co-operate in all  respects  with
the CAG and provide all documents, information and details as sought.
We do not agree  with  the  submission  that  the  Petitioner  would  suffer
irreparable loss if the judgment of the High Court is not stayed.   It  will
be impossible to provide restitution to the lakhs  of  commuters  from  whom
the fee would be collected to repay them in the event of  dismissal  of  the
SLP. On the other hand, if the Petitioner succeeds, it  can  be  compensated
suitably by extension of time.  The balance of convenience is  also  against
the Petitioner. Therefore, we are not inclined to grant the  interim  relief
as prayed for.

A copy of this order shall be provided to the CAG expeditiously.
Three weeks time granted to the respondents for filing  their  Counters  and
one week thereafter to the petitioners  for  filing  a  Rejoinder,  if  any.
List the matter after four weeks.

                 [T. S. THAKUR]

                           [Dr. D. Y. CHANDRACHUD]

                                                 [L. NAGESWARA RAO]

New Delhi,
November 11, 2016

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