Delhi High Court
Hk Toll Road Private Limited vs National Highways Authority Of India on 12 April, 2022
Author: Vibhu Bakhru
Bench: Vibhu Bakhru
$~66
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 12.04.2022
+ O.M.P.(I) (COMM.) 118/2022
HK TOLL ROAD PRIVATE LIMITED ..... Petitioner
Through: Mr. Salim A. Inamdar, Mr.
Modassir Husain Khan & Mr.
Abhishek Thakral, Advs.
versus
NATIONAL HIGHWAYS AUTHORITY
OF INDIA .. Respondents
Through: None.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
VIBHU BAKHRU, J. (ORAL)
IA No.5668/2022 (for exemption)
1. Exemption is allowed, subject to all just exceptions.
2. The application is disposed of.
O.M.P.(I) (COMM.) 118/2022
3. The petitioner has filed the present petition under Section 9 of the Arbitration & Conciliation Act, 1996 (hereafter the 'A&C Act'), inter alia, praying as under:
"a) Grant an injunction against the Respondent from recovering any amount whatsoever for alleged breach of contractual obligations in terms of letter dated 08.10.2021 from the Escrow Account bearing No. 1903201010137 of Canara Bank at Prime Corporate Branch, Mumbai.Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:18.04.2022 OMP(I)(COMM) No.118/2022 Page 1 of 11
b) Grant an injunction on the operation of the letter dated 09.09.2021 issued by the Respondent and the IE's letters dated 22.10.2021 and 02.02.2022, directing the proposed levy and recovery of the damages from the Petitioner.
c) Grant ex parte ad interim reliefs in terms of the above."
4. The respondent (hereinafter 'NHAI') had invited proposals by issuing a Request for Qualification (RFQ) for shortlisting the bidders for "construction, operation and maintenance of NH-7 Six-laning of Hosur-Krishnagiri, Km 33.130 to Km 93.000 in the state of Tamil Nadu under NHDP Phase-V on BOT (Toll) on DBFOT basis" (hereinafter 'the Project').
5. On 13.05.2010, NHAI had accepted the bid of Reliance Infrastructure Ltd. and instructed furnishing of the Bank Guarantee for a sum of ₹52.60 crores. Thereafter, the petitioner company was incorporated as a Special Purpose Vehicle for executing the Project.
6. On 02.07.2010, the parties entered into the Concession Agreement for executing the said Project.
7. It is stated that the petitioner had completed the Project and on 05.04.2016, a Provisional Completion Certificate was issued by the Independent Engineer. The Project was thereafter, placed in commercial service.
8. The petitioner indicates that there were some issues with regard to collection of toll and carrying out the maintenance works. The petitioner claims that it had notified NHAI about the occurrence of a Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:18.04.2022 OMP(I)(COMM) No.118/2022 Page 2 of 11 force majeure event on account of the outbreak of Covid-19 and the measures taken for combating the pandemic. The petitioner also claimed certain reliefs on account of the said force majeure events.
9. According to the respondent, the petitioner was required to carry out certain rectification works and to maintain the highway. On 01.12.2020, the Independent Engineer issued a letter to the petitioner to carry out certain rectification work in respect of certain defects, in terms of Clause 17.8 of the Concession Agreement. Thereafter, on 16.12.2020, NHAI also issued a notice under Clause 17.9.1 of the Concession Agreement requiring the petitioner to carry out certain repair/remedial measures in respect to the stated defects, within a period of fifteen days. According to the petitioner, it submitted a detailed work programme and also complied with the said directions. However, it apparent that there is a dispute in this regard because according to NHAI, certain defects have not been remedied.
10. On 05.08.2021, the Independent Engineer sent a letter to the respondent estimating the damages at ₹10,24,42,009/-, on account of breach on the part of the petitioner to comply with its maintenance obligations. The petitioner disputes that it is in default of any of its obligations.
11. On 08.10.2021, NHAI sent a letter to the Canara Bank (Escrow Agent) requesting it to charge damages amounting to ₹10,24,42,009/- from the Escrow Account (Account bearing no. 1903201010137) of the petitioner. The said letter also indicates the abstract of damages, which the respondent claims is payable in terms of Clause 17.8.1 of the Concession Agreement.
Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:18.04.2022 OMP(I)(COMM) No.118/2022 Page 3 of 1112. The aforesaid letter dated 08.10.2021 is at the center of the controversy in the present petition.
13. It is the petitioner's case that the said damages are not payable as the same are disputed and therefore, subject to resolution / adjudication under the Dispute Resolution Mechanism, as provided in the Concession Agreement. It is contended that unless the dispute regarding levy of damages is adjudicated, the same cannot be charged or recovered from the aforementioned Escrow Account.
14. Mr Inamdar, learned counsel appearing for the petitioner, also referred to Clauses 17.8.1, 17.8.2 17.9 and 31.3.1 of the Concession Agreement. The said clauses are relevant and set out below:-
"17.8.1 In the event that the Concessionaire fails to repair or rectify any defect or deficiency set forth in the Maintenance Requirements within the period specified therein, it shall be deemed to be in breach of this Agreement and the Authority shall be entitled to recover Damages, to be calculated and paid for each day of delay until the breach is cured, at the higher of (a) 0.5% (zero point five per cent) of Average Daily Fee, and (b) 0.1% (zero point one per cent) of the cost of such repair or rectification as estimated by the Independent Engineer.
Notwithstanding anything contained in this Agreement, should the actual traffic exceed the design capacity, during any year or part thereof and the Concessionaire fails to repair or rectify any defect or deficiency set forth in the Maintenance Requirements within the period Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:18.04.2022 OMP(I)(COMM) No.118/2022 Page 4 of 11 specified therein, it shall be deemed to be in breach of this Agreement and the Authority shall be entitled, from such date, to recover Damages, to be calculated and paid for each day of delay until the breach is cured, at the higher of (a) 5% (five per cent) of Average Daily Fee, and (b) 1% (one per cent) of the cost of such repair or rectification as estimated by the Independent Engineer, for the balance period of the Concession. Recovery of such Damages shall be without prejudice to the rights of the Authority under this Agreement, including the right to Termination thereof.
17.8.2 The Damages set forth in Clause 17.8.1 may be assessed and specified forthwith by the Independent Engineer; provided that the Authority may, in its discretion, demand a smaller sum as Damages, if in its opinion, the breach has been cured promptly and the Concessionaire is otherwise in compliance with its obligations hereunder. The Concessionaire shall pay such Damages forthwith and in the event that it contests such Damages, the Dispute Resolution Procedure shall apply.
17.9.1 In the event the Concessionaire does not maintain and/or repair the Project Highway or any part thereof in conformity with the Maintenance Requirements, the Maintenance Manual or the Maintenance Programme, as the case may be, and fails to commence remedial works within 15 (fifteen) days of receipt of the O&M Inspection Report or a notice in this Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:18.04.2022 OMP(I)(COMM) No.118/2022 Page 5 of 11 behalf from the Authority or the Independent Engineer, as the case may be, the Authority shall, without prejudice to its rights under this Agreement including Termination thereof, be entitled to undertake such remedial measures at the risk and cost of the Concessionaire, and to recover its cost from the Concessionaire. In addition to recovery of the aforesaid cost, a sum equal to 20% (twenty per cent) of such cost shall be paid by the Concessionaire to the Authority as Damages. For the avoidance of doubt, the right of the Authority under this Clause 17.9.1 shall be without prejudice to its rights and remedies provided under Clause 17.8.
17.9.2 The Authority shall have the right, and the Concessionaire hereby expressly grants to the Authority the right, to recover the costs and Damages specified in Clause 17.9.1 directly from the Escrow Account as if such costs and Damages were O&M Expenses, and for that purpose, the Concessionaire hereby agrees to give irrevocable instructions to the Escrow Bank to make payment from the Escrow Account in accordance with the instructions of the Authority under this Clause 17.9.2 and debit the same to O&M Expenses.
31.3.1 The Concessionaire shall, at the time of opening the Escrow Account, give irrevocable instructions, by way of an Escrow Agreement, to the Escrow Bank instructing, inter alia, that Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:18.04.2022 OMP(I)(COMM) No.118/2022 Page 6 of 11 deposits in the Escrow Account shall be appropriated in the following order every month, or at shorter intervals as necessary, and if not due in a month then appropriated proportionately in such month and retained in the Escrow Account and paid out therefrom in the month when due:
(a) all taxes due and payable by the Concessionaire;
(b) all payments relating to construction of the Project Highway, subject to and in accordance with the conditions, if any, set forth in the Financing Agreements;
(c) O&M Expenses, subject to the ceiling, if any, set forth in the Financing Agreements:
(d) O&M Expenses and other costs and expenses incurred by the Authority in accordance with the provisions of this Agreement, and certified by the Authority as due and payable to it;
(e) Concession Fee due and payable to the Authority;
(f) monthly proportionate provision of Debt Service due m an Accounting Year;
(g) all payments and Damages certified by the Authority as due and payable to it by the Concessionaire, including repayment of Revenue Shortfall Loan;Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:18.04.2022 OMP(I)(COMM) No.118/2022 Page 7 of 11
(h) monthly proportionate provision of debt service payments due 111 an Accounting Year in respect of Subordinated Debt;
(i) any reserve requirements set forth in the Financing Agreements; and G) balance, if any, in accordance with the instructions of the Concessionaire.
Provided, however, that no withdrawals or appropriation shall be permitted prior to Financial Close, save and except for payment of taxes, Concession Fee and O&M expenses.
xxx xxx xxx"
15. It is apparent from the above that in terms of Clause 31.3.1 of the Concession Agreement, NHAI is entitled to the payments and damages as certified by it. The contention that payment of such damages is contingent upon the same being adjudicated by an Arbitral Tribunal, is unmerited. Clause 17.8.2 of the Concession Agreement provides that the damages as set forth in Clause 17.8.1 of the Concession Agreement may be assessed by the Independent Engineer.
16. In terms of Clause 17.8.2 of the Concession Agreement, NHAI may, in its discretion, demand a lesser amount if in its opinion the breach has been cured and the Concessionaire is otherwise in compliance with its obligations. The Concessionaire is bound to pay the said amount forthwith. However, in the event the Concessionaire contests the damages, recourse is available under the Dispute Resolution Mechanism as agreed under the Concession Agreement. However, Clause 17.8.2 of the Concession Agreement cannot be Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:18.04.2022 OMP(I)(COMM) No.118/2022 Page 8 of 11 construed to mean that the damages as certified by NHAI are not payable till the same are adjudicated.
17. The petitioner has not annexed a copy of the Escrow Agreement with Canara Bank. However, it is conceded that the provisions are similar to those as included in Clause 31.3.1 of the Concession Agreement. A plain reading of Clause 31.3.1(g) the said Agreement indicates that NHAI is entitled to charge all payments and damages, as may be certified, as due and payable to it by the Concessionaire. Thus, once NHAI has certified the damages as payable, the same is required to be charged to the Escrow Account. The Escrow Agent (Canara Bank) has no other option except to charge the account in the manner as contemplated under the Concession Agreement. There is no provision in the Concession Agreement, which supports the view that a certificate issued by NHAI is suspended till the disputes are finally adjudicated or resolved under the Disputes Resolution Mechanism.
18. Mr Inamdar also referred to Clause 17.9 of the Concession Agreement and submitted that the language of Clause 17.9 of the Concession Agreement is different from Clause 17.8 of the said Agreement. He submitted that insofar as the payments to be made for work executed at the risk and costs of the petitioner are concerned, NHAI's certificate would be binding and such payments would be required to be made forthwith. However, since the language of Clause 17.8 of the Concession Agreement is different, the same cannot be interpreted to mean that the damages as assessed are required to be paid forthwith even if they are disputed.
Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:18.04.2022 OMP(I)(COMM) No.118/2022 Page 9 of 1119. The aforesaid contention is unpersuasive.
20. A plain reading of Clauses 17.8.2 and 17.9 of the Concession Agreement indicate that the remedy available in Clause 17.9 is an additional remedy. The same entitles NHAI to get the works executed at the risk and costs of the Concessionaire and such amounts are recoverable. However, that does not preclude the respondent from certifying the damages as assessed in terms of Clause 17.8.2 of the Concession Agreement. It is also material to note that NHAI had also referred to Clause 17.9 of the Concession Agreement, in its letter dated 08.10.2021. The aforesaid two clauses are required to be read in conjunction. It is open for NHAI to certify the damages under Clause 17.8.1 and Clause 17.8.2 of the Concession Agreement and seek recovery of the same in accordance with Clause 31.3.1 of the Concession Agreement. Additionally, it is also open for NHAI to get the works executed at the risk and cost of the respondent in terms of Clause 17.9 of the Concession Agreement. Any damage to be recovered under Clause 17.8.2 of the Concession Agreement will obviously have to be adjusted against any damages claimed under Clause 17.9 of the Concession Agreement. However, the fact that the parties have contemplated an additional remedy for NHAI to get the deficient maintenance works executed at the risk and cost of the respondent does not, in any manner, dilute the provision for charging the Escrow Account in respect of any damages as certified by the respondent, in terms of Clause 31.3.1(g) of the Concession Agreement.
Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:18.04.2022 OMP(I)(COMM) No.118/2022 Page 10 of 1121. In view of the above, the present petition is unmerited and is accordingly, dismissed.
VIBHU BAKHRU, J APRIL 12, 2022 'gsr' Click here to check corrigendum, if any Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:18.04.2022 OMP(I)(COMM) No.118/2022 Page 11 of 11