Delhi High Court
M/S Gwalior-Jhansi Expressway Limited vs National Highway Authority Of India on 12 March, 2014
Author: Manmohan Singh
Bench: Manmohan Singh
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Order delivered on: March 12, 2014
+ O.M.P. No.302/2014
M/S GWALIOR -JHANSI EXPRESSWAY LIMITED ..... Petitioner
Through Mr.Mukul Rohatgi, Sr.Adv. with
Ms.Meghna Mishra, Ms.Manmeet
Kaur, Mr.Jatin Mongia &
Mr.Gurmehar Sistani, Advs.
versus
NATIONAL HIGHWAY AUTHORITY OF INDIA ..... Respondent
Through Mr.Mukesh Kumar, Adv. with
Ms.Meenakshi Sood & Ms.Tanu
Priya Gupta, Advs.
CORAM:
HON'BLE MR. JUSTICE MANMOHAN SINGH
MANMOHAN SINGH, J. (ORAL)
I.A. No.4592/2014 (exemption) Exemption allowed, subject to just exemptions. The application is disposed of.
OMP No.302/20141. The abovementioned petition has been filed by the petitioner, namely, M/s Gwalior-Jhansi Expressway Limited, under Section 9 of the Arbitration and Conciliation Act, 1996, inter-alia, seeking an injunction for restraining the respondent/NHAI from acting pursuant to the Notices of Intention for Termination of the Concession Agreement dated 27th February, 2014 and 7th March, 2014, including terminating the Concession Agreement pending the decision of the dispute by the Arbitral Tribunal.
OMP No.302/2014 Page 1 of 62. Brief facts of the case are that the petitioner, under a Concession Agreement dated 7th December, 2006, was granted the right to design, construct, develop, finance, operate, maintain and convert the existing two lane portion into 4 lanes from KM 16.00 to KM 96.127 covering 80.127 KM on National Highway-75 in the States of Uttar Pradesh and Madhya Pradesh on (BOT) Annuity basis. Under the said Concession Agreement, the respondent was to hand over the entire land to the Concessionaire by 4 th June, 2008, i.e. within 12 months from the commencement date (which is 180 days from the date of signing of the Concession Agreement) and the petitioner was supposed to complete the construction of the project road by 4th December, 2009, i.e. within 30 months from the commencement date.
3. It is further submitted that in consideration of the petitioner accepting the concession and undertaking to perform and discharge its obligations under the Agreement which includes bearing the entire cost and risk for the construction, operation and maintenance of the Highway, the respondent was supposed to pay 35 semi-annual annuity installments of `52.29 crores each commencing from 3rd June, 2010 onwards in accordance with the schedule provided in Schedule-G of the Concession Agreement. However, the respondent did not under the Concession Agreement hand over the entire land by 4th June, 2008 and the same was handed over after the delay of more than 4 years. It is the case of the petitioner that the said delay has not only adversely affected the progress of the project, but has also led to an increase in costs and has upset the cash flows of the project drastically. Even, despite repeated requests, the respondent has also failed to release 8 annuity payments of `52.29 crores each which have fallen due as per the schedule OMP No.302/2014 Page 2 of 6 provided in the Concession Agreement, on the plea that the same was payable only upon completion of the project.
4. Mr.Mukul Rohatgi, learned Senior counsel appearing on behalf of the petitioner has argued that even the lenders' representative, i.e. Punjab National Bank has been requesting the respondent to release the annuity payments in view of the fact that its attempt at substituting the petitioner with another selectee also failed for the reason that the bidders too were demanding payments of the lapsed annuities and also the scheme that the petitioner continues in the concession and completes the project. The Bank has also sought the intervention of the High Court of Madhya Pradesh in this regard. However, despite of that, Mr.Rohatgi states, that the respondent till date has not released any money with respect to the project. Thus, the notice issued by the respondent on 7th March, 2014 of intention of termination of the Concession Agreement is arbitrary and contrary to the terms of agreement and the averment made in the said notice is false and frivolous. The threat extended by the respondent is totally unjustified and against the spirit of agreement. He states that so far the agreement has not been terminated by the respondent.
5. With regard to legal position, learned Senior counsel in support of his submissions has referred the following decisions:-
(i) Pioneer Publicity Corporation vs. Delhi Transport Corporation, 103(2003) DLT 442 The petitioner in a Section 9 petition sought to injunct DTC from terminating a contract for advertisement on buses. DTC resisted the same on the grounds that since the contract was determinable, specific performance could not be directed in terms of Section 14 of the Specific Relief Act. Reliance was OMP No.302/2014 Page 3 of 6 also placed on Rajasthan Breweries Ltd. vs. The Stroh Brewery Company, AIR 2000 Del. 450 and Indian Oil Corporation Ltd.
vs. Amritsar Gas Service, (1991) 1 SCC 533. The learned Single Judge distinguished these cases on the ground that Government contracts have to be treated differently. Held that action of the Government has to pass rigorous inquisition of fair play, lack of arbitrariness, and its being founded on good and sound reasons. Further held that the powers under Order XXXIX Rule 2 permit the Court to prevent breach of contract, and in the realm of public enterprise, it is an obligation of the Court to do so. Accordingly, DTC was restrained from taking down the advertisements.
(ii) Atlas Interactive (India) Pvt. Ltd. vs. BSNL, OMP No.482/2004, decided on 17th February, 2005 The petitioner in a Section 9 petition sought a stay on the operation of the impugned notice seeking to terminate a Franchisee Agreement for providing Broad Band Services on T.V. BSNL resisted the same placing reliance upon Section 14 of the Specific Relief Act, Rajasthan Breweries etc. The petitioner on its part relied upon Mahabir Auto & Pioneer Publicity. The learned Single Judge granted the stay on the basis that BSNL being an instrumentality of the State has a duty to act fairly, and further on the basis that the petitioner had invested large amounts in a unique project [Section 10(ii)(a) SRA] and thus termination would impact its trade reputation and goodwill apart from the obvious financial loss. It was also observed that the Court was not ordering specific performance (which would fall in the domain of the Arbitrator), rather it was only preserving the subject matter of the contract till adjudication of the controversies.
(iii) Softline Media Ltd., Softlines & Shalimar Advertisers vs. Delhi Transport Corporation, 2002 II AD (Delhi) 849 This case related to a BOT project for construction of bus queue shelters. The learned Single Judge allowed Section 9 petition in light of the special nature of the project whereunder the petitioner had spent substantial amounts on the legitimate expectation that they would recover the same from OMP No.302/2014 Page 4 of 6 advertisement revenue for a period of 3/5 years. Held that an instrumentality of State must act fairly and further that the nature of breach must be fundamental.
(iv) KSL & Industries Ltd. vs. National Textile Corporation Ltd., 2012 (3) ArbLR 470 (Delhi) This case related to an MoU for formation of a JV for reviving sick textile mills which was sought to be NTCL for non- execution of Definitive Agreements. NTCL resisted the petitioner's prayer for a stay on termination under Section 9 by placing reliance on Section 14(a) to (d) read with Section 41(e) of the Specific Relief Act, Rajasthan Breweries, Amritsar Gas, etc. The learned Single Judge held that the principles applicable to Section 9 are the same as that under Order XXXIX Rules 1 & 2 and thus, the petitioner's case has to be tested on a prima facie basis only. Further, held that petitioner was not seeking restoration of the MoU, but only preservation of the subject matter of the dispute. Balance of convenience was in preservation of subject matter and in continuance of the status quo already granted. Irreparable loss and injury would result if the textile mills are not preserved and their assets are sold.
Re. S.14(a) - held that the contract involved a unique opportunity, the expenditure and return of which cannot be estimated, and thus it cannot be said that damages are an adequate remedy. Reference was made to Atlas Interactive (India) Pvt. Ltd. vs. BSNL, 126 (2006) DLT 504.
Re. S.14(d) - held that the principle does not hold good where State has acted arbitrarily/unfairly. Amritsar Gas and Canoro Resources Ltd. vs. Union of India, 179 (2011) DLT 72 distinguished on the ground that their agreement could be terminated by giving a fixed time notice, whereas in the present case it could be terminated only on the happening of a contingency.
(v) Hyderabad Cricket Association vs. Visakha Industries Ltd., 2012 I ArbLR 341 (AP) OMP No.302/2014 Page 5 of 6 This was an appeal under Section 37 of the Arbitration Act against an order granting interim injunction restraining the appellant from acting in breach of the Agreement granting advertising, publicity and display rights at a Stadium. The Court observed that the respondent had invested Rs.4.32 crores towards such rights and that the loss which would be occasioned to the respondent cannot be ascertained in terms of money. Thus, the injunction was upheld.
6. Having gone through the averments made in the petition and the documents placed on the record, it appears to this Court that the petitioner has been able to make out a strong prima-facie case for passing an interim protection as sought in the petition. In case, the interim direction is not passed, the petitioner will suffer an irreparable loss and injury.
7. Issue notice to the respondent. Learned counsel appearing on its behalf accepts notice. Let the reply be filed within three weeks, with an advance copy thereof to the learned counsel for the petitioner who may file the rejoinder thereto within two weeks thereafter.
8. List on 1st May, 2014.
9. Till the next date of hearing, the respondent shall not take any coercive action on the basis of the notice issued on 7 th March, 2014 without the leave of the Court.
10. Dasti.
(MANMOHAN SINGH) JUDGE MARCH 12, 2014 OMP No.302/2014 Page 6 of 6