The
following note is a brief summary of the order pronounced by the High Court of
Allahabad in matter of Noida Toll Bridge Limited. The emphasis laid on some
parts is mine and may not be a part of the judgement.
Also
incorporated in brackets and in italics are my thoughts on some of the
arguments/ counter arguments put forth by different parties to the case. My
thoughts should not be construed as comments on the judgement. This is an
academic exercise to understand reasoning behind the order and risks
undermining the contracts, more so when one of the parties is an instrument of
the State.
To
fully understand and get a grip on the arguments, you should read the complete
order at this link.
CASE:
Public Interest Litigation (PIL) No.
60214 of 2012
Petitioner:
Federation of NOIDA Residents Welfare Association
Respondent
No. 1:- NOIDA Toll Bridge Company Ltd
Respondent
No. 2:- NOIDA
Respondent
No. 9:- IL & FS
Matter
at hand: This is a public
interest litigation challenging the levy and collection of toll as 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.
The Concession Agreement
was executed on Nov 12th, 1997 between the Noida Authority,
IL&FS and Noida Toll Bridge Company Limited.
Crux
of the case:
1. Submission
of the petitioner :
a) Cost
of construction of the project plus reasonable returns (no figure has been
supplied for reasonable returns) have been achieved by the Concessionaire. Now,
there is no justification for continuing the toll.
b) Based on the formula in the
concession agreement, till 31.3.2016, the total cost of project based on 20%
assured returns reached a figure of Rs. 5,000 Crores plus. This amount will go
on increasing further in view of the formula adopted in Article 14 of the
Concession Agreement to determine the Total cost of project. The Total cost
of Project can never be recovered and the bridge will never be free from levy
of Toll.
(Courts will be inclined to take a very strong view on this point. Any
project aimed to have a limited life for collection of fee, if transforms
itself to a perpetual money collecting machine, courts might not take a kind
view. This kind of an agreement is like bonded labour.)
c) Various clauses of the
Concession Agreement are against the public interest.
d) There is no cap on the Total
Project Cost and O&M expenses which are to be ultimately borne by Users.
e) No tender was invited before
grant of contract for DND Flyover, there was no advertisement, no bidding. It
was a clandestine deal that too with the view to benefit a private company at
the cost of public. The award of the contract is, therefore, in violation of
Article 14 of the Constitution of India.
(This is a charge with very serious ramifications. If the award of
contract is in violation of the Constitution, it can be declared null and void.
Calculation of returns and shortfall of returns will be out of the picture,
then)
f) Only the cost of actual construction and some
reasonable amount towards maintenance of roads can be recovered that too only
by the State Government which can charge the toll tax.
(Only the State Government is allowed to charge the toll tax, and nobody else.
That puts the whole agreement allowing Noida Toll Bridge Company to charge user
fee bad in law.)
g) The action of NOIDA in awarding the Concession
Agreement dated 12.11.1997 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 vs. State of
Jammu & Kashmir.
2. Submission of NOIDA
NOIDA has admitted in its counter affidavit that
Section 14 of the Agreement read with Annexure 'F', i.e. the method of
computing total project cost is not in public interest. The Concession
Agreement, therefore, is not serving public interest. The unfair, untenable and
irrational clauses in the contract make it arbitrary, unjust, opposed to public
policy and amenable to judicial review.
3. Response of Noida Toll Bridge Company Limited
a) The present petition is liable to be dismissed
on the ground of latches. (From Wikipedia: Laches from Old French laschesse
refers to a lack of diligence and activity in making a legal claim)
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.
The Steering Committee was chaired by the Secretary of the Ministry of
Urban Affairs and Development, Government of India (presently Ministry of Urban
Development), however, the Ministry of Urban Development has not been made
party in the petition.
The plea of violation of Article 14 of the Constitution of India is not
available after so many years.
(These are weak arguments in my view. I believe that there is never a
wrong time to do the right thing.)
b) 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.
c) It is submitted that scope of interference in
contractual matters for adjudicating the constitutional validity relating to
economic policy matters of State is neither within the domain of the Courts,
nor amenable to judicial review.
d) The power to levy the User fee can be traced to
Section 6-A of U.P. Industrial Area Development Act, 1976 read with New Okhla
Development Area (Levy of Infrastructure Fee) Regulations, 1998 framed
under section 19 of the Act, 1976. The validity of these provisions is not
subject matter of challenge in the present PIL.
e) The amount of user fee paid by the commuters is
also independent and does not get affected by the increasing value of
the total cost of project.
(This again is quite a weak argument. If the term of the agreement gets
extended due to shortfalls in returns, the commuters would have to pay to use
the bridge and hence it is not independent of total cost of the project. This
argument doesn’t have legs to stand.)
f) Amendment to the terms of the contract is under
negotiation between the parties.
g) “Doctrine of Unconscionable Contract” is
not applicable in relation to the Concession Agreement. This doctrine is
attracted in a case, where the contracting parties have grossly unequal
bargaining power, to the point where free consent may not be presumed on behalf
of the weaker party.
h) In case the concession agreement is considered
unconscionable, even by applying the “Doctrine of Severability”, the
concession period of 30 years will remain intact.
i) “Doctrine of Frustration of Contract”
shall not apply as it is the case of default of NOIDA itself.
4.
Comments of the Honourable High Court of
Allahabad
a) Where the public interest is affected, the power
of judicial review will be permissible even in contractual matters.
b) The Government has the freedom in the matters of
contract; the decision/action of the Government is to be tested on the
touchstone of “Wednesbury principles of unreasonableness”. If there is
procedural impropriety, the court would intervene and set right the decision
making process.
c)
Under UP Industrial Area Development Act 1976;
there was no provision of levying “User Fee” on the date of the Concession
Agreement, Nov 12th 1997. Only the Government could levy toll or User
Fee. A private company couldn’t do that. Insertion of Section 6 A to the Act
was made through an Amendment to the regulations on 14.08.1998 which is after
the execution of the concession agreement i.e. 12.11.1997. There is no
retrospective operation of Section 6 A which is specified in law.
In Zile Singh vs. State of
Haryana and others, the Apex
Court held in paragraph '13' as
under:-
“It is a cardinal principle
of construction that every statute is prima facie prospective unless it is
expressly or by necessary implication made to have a retrospective operation.
But the rule in general is applicable where the object of the statute is to
affect vested rights or to impose new burdens or to impair existing
obligations. Unless there are words in the statute sufficient to show the
intention of the Legislature to affect existing rights, it is deemed to be
prospective only 'nova constitutio futuris formam imponere debet non
praeteritis' __ a new law ought to regulate what is to follow, not the past."
Hence, sub-delegation of power to levy and thereafter collect the
toll/user fee upon a private company under the Concession Agreement is bad.
(This is an important point. On the date of execution of the
concession agreement, the State Government did not have the power to authorise
any private player to levy and collect fee. Due to lack of a legal provision to
do so, the whole concession agreement then becomes illegal.)
d) 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.
e) Agreement/ Contract itself hit by Article 14 of
the constitution of India and therefore, liable to be declared null and void.
In light of the above arguments more elaborately dealt upon in the
order, the High Court pronounced that no user fee can legally be levied/
charged by the Concessionaire and in light of the facts that the concessionaire
has already recovered the cost of project in addition to reasonable returns,
the Concessionaire cannot collect any user fee from the commuters, hereon.
This is quite a complex situation in my opinion. The whole business and
its earnings stream are now overcast. More than returns, the constitutional and
legal validity of concession agreement is in question. If the Supreme Court
were to uphold the judgement of the Allahabad High Court, the whole business of
Noida Toll Bridge stands to get decimated. Only time and the Supreme Court will
tell which way the shareholders of Noida Toll are headed.
