Yes Bank Limited vs National Highways Authority Of India ... on 19 May, 2023

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Delhi High Court - Orders

Yes Bank Limited vs National Highways Authority Of India ... on 19 May, 2023

1. By way of the present petition, the petitioner is challenging - i) notice bearing no. NHAI/12019/2/ROJ-2022/JR/Tech./2442, dated 16.11.2022 ("Intention to Terminate Notice"); ii) letter bearing no. NHAI/PIU/Sikar/2022-23/667, dated 13.12.2022 for retention of funds in Escrow Account; iii) Notice bearing no. NHAI/PIU/Sikar/J-R/E 121974- 69633, dated 15.12.2022 ("Termination Notice") and iv) Letter, dated 15.12.2022 bearing No. NHAI/PIU/SIKAR/Tatiyawas FP/2022-23/675 issued by the respondent No.1 to respondent No.2, which is in complete O.M.P.(I) (COMM.) 19/2023 Page 1 of 11 This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 24/09/2023 at 16:05:28 contravention of the clause 3.3.1 and 9.10 of the Substitution Agreement, dated 27.04.2011 entered between respondent No.1, respondent No.2 and the petitioner and clause 37.3.1 of the Concession Agreement dated 19.02.10 entered into between respondent no.1 and 2. In issuing the said Letters, respondent No.1 has acted in abrogation of the contractually agreed terms under the above mentioned agreements.

2. The brief facts are NHAI awarded the work of designing, engineering, finance, construction, improvement, operation& maintenance and upgrading by 4-laning of the existing road from Jaipur (246.300 Km) to Reengus (298.075 Km) (approx. 52.650 km) stretch of NH-11 on a BOT (Build, Operate and Transfer basis) to the Concessionaire, M/s J.R.Tolls Road Private Ltd. (Petitioner in connected OMP (I) (COMM) No.390/2022). A Concession Agreement (CA) was signed between M/s J.R.Tolls Road Private Ltd. (JRTRPL) and NHAI on 19.02.2010 with concession period for 18 years. The COD (Commercial Operation Date) for the project was achieved on 15.07.2013 after which the Concessionaire collected toll from the users. During this O&M period, the Concessionaire was required to operate and maintain the project Highway as per the specifications and standards prescribed.

3. The Concessionaire availed loan facility from Yes Bank Ltd. (YBL). As per Article 31 of the CA, Escrow Account was opened with Escrow Bank i.e YBL. In consequence to the CA, an Escrow Agreement and Substitution Agreement dated 27.04.2011 were executed. During the O & M period, the Concessionaire allegedly neglected to maintain the highway and as a result, the position of the road deteriorated to alarming extent endangering the safety of travelers. Various notices were issued by O.M.P.(I) (COMM.) 19/2023 Page 2 of 11 This is a digitally signed order.

4. Since no action was being taken, a cure period notice under Article 37.1 of CA was issued on 18.07.2022. Again, when the Concessionaire failed to cure the defects within a period of 60 days, finally a Notice of Intention to Terminate (NIT) was issued on 16.11.2022. Though this notice (NIT) was issued to Concessionaire, a copy of it, was also sent to YBL in compliance of Clause 37.1.3 of CA under which 15 days' time was granted to Lender Bank for making a representation for substitution.

5. After considering the response of JRTRPL's dated 26.11.2022 to the NIT which was found inadequate and since no representation was received from YBL, the CA was terminated on 15.12.2022.

6. The Termination order was acted upon and NHAI took over the Toll Plaza on 15.12.2022 and handed over the same to Toll Collection Agency, M/s Ridhi Siddhi Associates on the same day. The said Toll Collection Agency was selected through a tender process started prior to the termination order to which, also, neither the Concessionaire nor Yes Bank raised any protest.

7. It is alleged after the toll collection was taken over, JRTRPL filed OMP (I) (COMM) No.390/2022 which was listed on 22.12.2022 wherein the said Petitioner took adjournment after the Court was not inclined to entertain the petition since the contract already stood terminated.

8. Subsequent thereto, YBL wrote a representation on 29.12.2022. In this, YBL nowhere stated it did not receive the NIT but alleges NIT was not served upon it on its current address in terms of Clause 9.10 of Substitution Agreement. Interestingly, this letter is typed on Company's letter head and O.M.P.(I) (COMM.) 19/2023 Page 3 of 11 This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 24/09/2023 at 16:05:29 on bottom of Page 377, one of the emails, is mentioned as "[email protected]" which is one of emails on which NIT was sent and NHAI received a return email acknowledging receipt.

9. Now the petitioner argued the purpose of entering into the Substitution Agreement, and subsequently an Escrow Agreement, with the respondent Nos.1 and 2, was to ensure the petitioner had the right to recover the loan granted by it to respondent No. 2; and to be able to choose a company to step into the shoes of respondent No.2 in case of default. However, when the occasion to exercise its rights aroused, the petitioner was deprived of the said right, since the notices were not duly served upon the petitioner at its current address. It is alleged entire interest payments as also part of the quarterly dues, were being met from the amounts so deposited into the Escrow account in accordance with clause 31.3.1 of the Concession Agreement. However, pursuant to the issuance of the termination notice and the notice for retention of the Escrow Account, the repayment towards the loan facility has completely stopped, thereby depriving the petitioner of its rightful claim towards the loan facility.

10. It is argued if the petitioner is not afforded an opportunity to substitute respondent no.2 with its nominated company under the CA in light of the Substitution Agreement and the Escrow Agreement, the petitioner will suffer irreparable losses and injury, hence this petition.

11. In support of his arguments the learned senior counsel for the petitioner had referred to the Substitution Agreement-Document 5 annexed to the present petition which in fact was a tripartite agreement executed between NHAI; the lender and Yes Bank Limited- petitioner herein. Certain provisions of the said agreement are as under:

O.M.P.(I) (COMM.) 19/2023 Page 4 of 11

This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 24/09/2023 at 16:05:29 "3.3 Substitution upon occurrence of Concessionaire Default 3.3.1 Upon occurrence of a Concessionaire Default, the Authority shall by a notice inform the Lenders' Representative of its intention to issue a Termination Notice and grant 15 (fifteen) days time to the Lenders' Representative to make a representation, stating the intention to substitute the Concessionaire by a Nominated Company.

3.3.2 In the event that the Lenders' Representative makes a representation to the Authority within the period of 15 (fifteen) days specified in Clause 3.3.1, stating that it intends to substitute the Concessionaire by a Nominated Company, the Lenders' Representative shall be entitled to undertake and complete the substitution of the Concessionaire by a Nominated Company in accordance with the provisions of this Agreement within a period of 180 (one hundred and eighty) days from the date of such representation, and the Authority shall either withhold Termination or undertake Suspension for the aforesaid period of 180 (one hundred and eighty) days; provided that upon written request from the Lenders' Representative and the Concessionaire, the Authority shall extend the aforesaid period of 180 (one hundred and eighty) days by a period not exceeding 90 (ninety) days.

3.4 Procedure for substitution 3.4.1 xxxxx 3.4.2 To be eligible for substitution in place of the Concessionaire, the Nominated Company shall be required to fulfil the eligibility criteria that were laid down by the Authority for short listing the bidders for award of the Concession; provided that the Lenders' Representative may represent to the Authority that all or any of such criteria may be waived in the interest of the Project, and if the Authority determines that such waiver shall not have any material adverse effect on the Project, it may waive all or any of such eligibility criteria.

3.4.3 xxxxx 3.4.4 If the Authority has any objection to the transfer of Concession in favour of the Nominated Company in accordance with this Agreement, it shall within 15 (fifteen) days from the date of proposal made by the Lenders' Representative, give a reasoned order after hearing the Lenders' Representative. If no such objection is raised by the Authority, the Nominated Company shall be deemed to have been accepted. The Authority thereupon shall transfer and endorse the Concession within 15 (fifteen) days of its acceptance/deemed acceptance of the Nominated Company; provided that in the event of such objection by the Authority, the Lenders' Representative may propose another Nominated Company whereupon the procedure set forth in this Clause 3.4 shall be followed for substitution of such Nominated Company in place of the Concessionaire. 9.10 Notices All notices or other communications to be given or made under this Agreement shall be in writing, shall either be delivered personally or sent O.M.P.(I) (COMM.) 19/2023 Page 5 of 11 This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 24/09/2023 at 16:05:29 by courier or registered post with an additional copy to be sent by facsimile or e-mail. The address for service of each Party, its facsimile number and e-mail address are set out under its name on the signing pages hereto. A notice shall be effective upon actual receipt thereof, save that where it is received after 5.30 (five thirty) p.m. on any day, or on a day that is a public holiday, the notice shall be deemed to be received on the first working day following the date of actual receipt. Without prejudice to the foregoing, a Party giving or making a notice or communication by facsimile or e-mail shall promptly deliver a copy thereof personally, or send it by courier or registered post to the addressee of such notice or communication. It is hereby agreed and acknowledged that any Party may by notice change the address to which such notices and communications to it are to be delivered or mailed. Such change shall be effective when all the Parties have notice of it."

12. It is argued by the learned senior counsel for the petitioner the notices were to be sent at the address mentioned at the Substitution Agreement, physically as also on the facsimile/email of the company. It is alleged the Concession Agreement gives the address of the petitioner as Nehru Centre, 9th Floor, Discovery of India, Dr.Annie Besant Road, Worli, Mumbai- 400018. It is submitted notice(s) was to be sent mandatorily at the address mentioned above. The addresses later changed twice but admittedly the petitioner never notified the respondent/NHAI of its new addresses, though in its correspondences with other Government agencies, those new addresses were updated from time to time.

13. The learned senior counsel for the petitioner referred to Escrow Agreement dated 27.04.2011 entered into between the lender; the Yes Bank Limited-petitioner herein and NHAI and alleged the escrow team and the petitioner's team were totally different and even otherwise only after the payments were made to the monies due under clause a to e of clause 31.3.1 of CA only then the money was to be paid to the petitioner herein, hence even if prayer e and f of this petition is to be allowed it would not prejudice O.M.P.(I) (COMM.) 19/2023 Page 6 of 11 This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 24/09/2023 at 16:05:29 the case of respondent. It is submitted on 16.11.2022 the NHAI had issued a termination notice, sent at the address IFC Tower 2, 8th Floor, Elphinstone (W), Senapati Bapat, Mumbai-400013 which admittedly is not in Substitution Agreement. It is submitted the respondent is rather taking benefit of a letter sent by the Escrow Team, who has its office at a different place than that of the petitioner herein and hence any change in address given by the Escrow Team could not be treated as an address of petitioner, hence there was no compliance of the notice clause 9.10 of the Substitution Agreement and thus prayer e and f of the petition need be allowed. Heard.

14. The argument is fallacious as the Escrow Team also belong to the petitioner herein, hence it cannot take benefit by alleging Escrow Team since has a different office, the petitioner had no intimation of notice of intention to terminate.

15. YBL's plea the notice to intention to terminate was not served upon it, is false and mischievous, firstly, in the petition, it has not been denied the notice was not received through email. A copy of the letter dated 23.01.2023 sent by NHAI in response to YBL's representation dated 29.12.2022, was filed by YBL along with the additional documents on 15.04.2023. At page 8 of these documents, it is clear that the NIT was sent on 3 email addresses of YBL, namely [email protected], "[email protected]"

and [email protected]. NHAI sent email on 16.11.2022 at 12:20 PM from [email protected]. At page 43 of additional documents, is an acknowledgment email received from YBL on 16.11.2022 at 12:25 PM. Thus, clearly the NIT was received through email. YBL is claimed to have received the Termination Order dated 15.12.2022 on the same day, was also sent on the same emails and mode.

O.M.P.(I) (COMM.) 19/2023 Page 7 of 11

This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 24/09/2023 at 16:05:29

16. With regard to dispatch of physical copy of NIT, YBL contends that it was sent on an address, namely, Yes Bank Ltd, IFC, Tower, 2, 8th floor, Elphinstone (W) Senapati Bapat; Mumbai - 400013, which is not its current address and thus, never served upon it. This averment is made without disclosing and without filing the letter dated 02.06.2015 of YBL written to NHAI whereby YBL had specifically requested the NHAI to send all future communications at the aforesaid address.

17. Admittedly, thereafter, no other communication notifying any other address was given to the concerned office of NHAI handling this project. Clause 9.10 of Substitution Agreement clearly provides it is agreed and acknowledged that any party may by notice change the address to which such notices and communications to it, are to be delivered or mailed. Such change shall be effective when all the parties have notice of it. Therefore, the service by NHAI at the last notified address is correct as admittedly, there was no notice of the alleged current address. Further, in view of the communication dated 02.06.2015, NHAI could not have served the NIT on the address mentioned in the Substitution Agreement.

18. The learned senior counsel for the petitioner argued the letter dated 02.06.2015 was only with regard to Escrow Bank Related Communications and not a notice for Substitution Agreement. This plea is totally wrong as admittedly, it is the same party to both Substitution and Escrow Agreement and cannot have different addresses for these agreements which are interlinked and connected as all of them arose out of and are linked to the CA dated 19.02.2010.

19. Further, as per Clause 9.10 Substitution Agreement, NHAI cannot make inquires with regard to the current address of the party on its own from O.M.P.(I) (COMM.) 19/2023 Page 8 of 11 This is a digitally signed order.

20. The learned senior counsel for the petitioner invoked equities in its favor on the ground public money is involved and hence, stressed upon prayer c viz. NHAI should be directed to deposit the toll collected in the Escrow Account. This prayer cannot be granted unless the Termination order is finally found to be illegal as the entire arrangement stands terminated. It is settled law that a contract already terminated, cannot be revived by way of interim order under Section 9 as it would amount to specific performance of a determinable contract in violation of Section 14 (1) (c) of the Specific Relief Act. Even in case of wrongful termination, the relief is only in the form of damages and not specific performance. Further, in a Section 9 petition, the Court cannot go into the validity of the termination order per IRCTC vs. Cox and Kings; 2012 SCC Online Del 113 upheld in (2012) 7 SCC 587; Bharat Catering Corporation vs. IRCTC- 2009 (113) DRJ 435 (DB); Overnite Express Ltd. vs. DMRC 2020 SCC Online Del 2093.

21. Even otherwise, the relief sought by both parties and particularly, stay of termination order cannot be granted in view of the statutory bar created under Section 20-A and 41 (ha) of the Specific Relief Act, 1963 (as amended w.e.f 01.10.2018 since it would delay the work of rectification of defects of an infrastructure project for which NHAI has issued a tender amounting to Rs.88.74 Crores as mentioned in para 3 of letter dated 11.05.2023. The toll revenue being collected, is being utilized for the repairs and rectification of the defects of the project road. The petitioner is even otherwise fully protected. It has failed to demonstrate as to how the O.M.P.(I) (COMM.) 19/2023 Page 9 of 11 This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 24/09/2023 at 16:05:29 monitory relief is not an adequate remedy. Clause 37.3 of the CA, quoted below, provides for Termination payment which is required to be paid by NHAI for termination due to Concessionaire's default after the COD.

"37.3 Termination Payment "37.3.1 Upon Termination on account of a Concessionaire's default during the Operation Period, the Authority shall pay to the Concessionaire, by way of Termination Payment, an amount equal to 90% (ninety percent) of the Debt Due less Insurance Cover; provided that if any insurance claims forming part of the Insurance Cover are not admitted and paid, then 80% (eighty percent) of such unpaid claims shall be included in the computation of Debt Due. For the avoidance of doubt, the Concessionaire hereby acknowledges that no Termination Payment shall be due or payable on account of a Concessionaire's default occurring prior to COD."

22. Besides this, the Bank will have adequate securities and guarantees from the Concessionaire and its promoters. They have right to challenge the computation of Termination Payment in arbitration apart from claiming other monetary reliefs in nature of damages etc. Further, after the orders dated 25.01.2023, 07.02.2023, 13.03.2023, the representation of petitioner was considered by NHAI and a detailed order dated 11.05.2023 was passed as it was found the petitioner was interested in delaying and not interested in contributing to the rectification of defects in highways, the NHAI. Further funds were diverted to the petitioner in breach of the waterfall mechanism under Clause 31.3 and instead of utilizing the toll revenue towards O&M expenses which enjoyed precedence, funds were utilized for debt service leading to pathetic condition of the highway. The alleged EOI (Expression of Interest) submitted by the petitioner from one entity was found to be unclear and hedged with conditions and lacking in seriousness.

23. Thus, opportunity to make representation has already been given to the petitioner under the orders of the Court. The petitioner only had a O.M.P.(I) (COMM.) 19/2023 Page 10 of 11 This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 24/09/2023 at 16:05:29 contractual right to make a representation for substitution and there is no right that NHAI is bound to accept any party proposed by YBL. This is for the reason only a qualified and competent party which is technically and financially eligible can be substituted considering the fact the project Highway is required to be operated and maintained by such party.

24. In view of the above, the petition stands dismissed. Pending application(s), if any, also stands disposed of.

YOGESH KHANNA, J.

MAY 19, 2023 DU O.M.P.(I) (COMM.) 19/2023 Page 11 of 11 This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 24/09/2023 at 16:05:29

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Delhi High Court - Orders