Delhi High Court - Orders
Shamlaji Expreesway Private Limited vs National Highway Authority Of India on 20 March, 2024
Author: Anup Jairam Bhambhani
Bench: Anup Jairam Bhambhani
$~31
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P.(I) (COMM.) 90/2024
SHAMLAJI EXPREESWAY PRIVATE LIMITED ..... Petitioner
Through: Dr. Amit George with Mr. Abhishek
Gupta, Mr. Suyash Gupta, Mr.
Mukesh Kumar, Ms. Meenakshi
Sood, Mr. Bharat Rayadurgam and
Mr. Satpal Yadav, Advocates.
versus
NATIONAL HIGHWAY AUTHORITY OF INDIA ..... Respondent
Through: Mr. Santosh Kumar, Standing
Counsel with Mr. Adithya Ramni and
Mr. Kushagra Aman, Advocates.
CORAM:
HON'BLE MR. JUSTICE ANUP JAIRAM BHAMBHANI
ORDER
% 20.03.2024 I.A. 6548/2024 Exemption granted, subject to just exceptions.
Let requisite compliances be made within 01 week.
The application stands disposed of.
O.M.P.(I) (COMM.) 90/2024 By way of the present petition filed under section 9 of the Arbitration & Conciliation Act, 1996, the petitioner impugns Suspension Notice dated 11.03.2024 whereby Concession Agreement dated 02.05.2018 („Concession Agreement‟) between the petitioner and the respondent has been terminated by the respondent. The Concession Agreement was a contract based on a Hybrid Annuity This is a digitally signed order. O.M.P.(I) (COMM.) 90/2024 Page 1 of 7 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 27/03/2024 at 20:33:38 Mode, whereby on a private-public-participation model, the petitioner was engaged for "Six Laning of Shamla Ji to Motachilodha from KM 401.200 to KM 494.410 (Length 93.210 KM) section of NH-8 in the state of Gujarat".
2. Dr. Amit George, learned counsel appearing for the petitioner submits, that the broad terms of the contract were that the petitioner was to undertake „six-laning‟ of the road over a period of 02 years, whereafter the petitioner was to be entitled to receive annuities for a 15-year period. The annuities were to commence from the Provisional Commercial Operation Date („PCOD‟), after which date the respondent/National Highways Authority of India („NHAI‟) was also to become entitled to receive 100% of the toll (instead of the 75% that they were to receive until that date).
3. Dr. George submits, that the petitioner has admittedly completed about 84% of the stretch of the road; and the remaining 16% could not be completed principally for reasons of non-availability of land. This position, it is pointed-out, has been duly verified by an Independent Engineer („I.E.‟) appointed in terms of Article 21.1 of the contractual terms by the respondent itself. The aim and intent of appointing an I.E. was that he would act as an independent consultant to review, inspect and monitor the construction of the highway and render reports from time-to-time, after conducting requisite tests.
4. Dr. George argues, that Article 21.6 provides that if the report of the I.E. was not acceptable to any of the parties, they could take resort to the dispute resolution mechanism, whereby either of the parties could "dispute any advice, instruction, decision, direction or award of the This is a digitally signed order. O.M.P.(I) (COMM.) 90/2024 Page 2 of 7 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 27/03/2024 at 20:33:38 Independent Engineer", in accordance with the mechanism provided in Article 38 of the contract. Under Article 38, the parties were required to attempt to settle the disputes amicably by conciliation in terms of Article 38.2, failing which, the disputes were to be referred to arbitration under the aegis of the Society for Affordable Redressal of Disputes („SAROD‟), in accordance with Article 38.3.
5. Dr. George further points-out, that under Article 15 of the contract, the respondent was also required to issue to the petitioner a completion certificate or provisional certificate of completion, which would lead to achieving the Commercial Operation Date („COD‟), with a further provision in Article 14.3.1 that the I.E. may, at the request of the petitioner, issue a provisional certificate of completion if the tests were successful and the project could safely and reliably be put to commercial operation. The provision specifically also said that "..... the Independent Engineer shall not withhold the Provisional Certificate for reason of any work remaining incomplete if the delay in completion thereof is attributable to the Authority; provided further that the Punch List shall also include the cost of completion for each of the outstanding items" (emphasis supplied).
6. It is argued, that for any remaining items of work the I.E. was to issue a „Punch List‟ setting-out the items of work to be completed by the petitioner, which was to happen" ..... within 90 days of the date of issue of provisional certificate", in terms of Article 14.4.1 of the contract.
7. Dr. George submits, that vide communication dated 25.10.2023, the I.E. issued to the respondent the requisite communication for issuance This is a digitally signed order. O.M.P.(I) (COMM.) 90/2024 Page 3 of 7 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 27/03/2024 at 20:33:39 of a provisional certificate to the petitioner under Article 14.3.1, in which the I.E. specifically recorded that it had been discussed at the meetings held under the Chairmanship of the CGM (T) NHAI "..... that certain works which are affected because of non-availability of land and other clearances and not affecting the operations of the Highway, may be delinked from the PCOD provided these are not associated with the Road safety and safe operation of the Highway. ....." (emphasis supplied).
8. Counsel submits, that after a detailed inspection and consideration of the matter, the I.E. concluded that the project highway was in „traffic worthy condition‟ after completion of the main carriageway except 13.806 kilometres, which stretch was therefore to proposed to be delinked for issuance of PCOD, for the reasons recorded in the communication dated 25.10.2023. The I.E. further suggested that the respondent should obtain an undertaking from the petitioner for execution of a supplementary agreement, for completing the balance work.
9. In this backdrop, counsel submits, the I.E. has duly certified and recommended as follows :
"C. Recommendation In view of above, the concessionaire has provisionally completed the construction works of 87.738 Km on LHS & 84.380 Km on RHS of Main Carriageway on which Tests as per Schedule-I of Concession Agreement have been jointly conducted and witnessed by I.E. and looking to the revenue loss to the Authority as the toll is being realized @ of 75% rates and to come out from the stand still situation, It is recommended to consider issuance of Provisional Certificate of the Project in part length stated above, which can be safely and reliably placed in Commercial Operation with effect from This is a digitally signed order. O.M.P.(I) (COMM.) 90/2024 Page 4 of 7 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 27/03/2024 at 20:33:39 issuance of this letter or approval of Provisional Completion by the Competent Authority."
(emphasis supplied)
10. Dr. George submits however, that the respondent has neither accepted nor rejected the recommendation made by the I.E. vide his communication dated 25.10.2023; nor has the respondent invoked the dispute resolution mechanism contemplated in Article 21 of the contract. Counsel submits that instead, the respondent has proceeded to suspend the contract by way of the impugned Suspension Notice dated 11.03.2024.
11. It is pointed-out, that in the impugned suspension notice as well as other relevant communications issued by the respondent, reference to the I.E.‟s communication dated 25.10.2023 is conspicuously missing, for reasons best known to the respondent.
12. Dr. George submits, that the initial project cost was supposed to be Rs.1361 crores, of which Rs.166.6 crores was to be infused into the project by the petitioner; Rs.650 crores was to be invested by way of loans to the petitioner by banks and financial institutions; and Rs.544.4 crores was to be invested by the respondent. Counsel submits, that given the cost escalation, the petitioner has already invested about Rs.247.852 crores, and as certified by the I.E., has completed nearly 84% of the highway, the remaining portion being incomplete by reason of non-availability of land and requisite permissions.
13. Upon a prima-facie view of the matter, issue notice.
This is a digitally signed order. O.M.P.(I) (COMM.) 90/2024 Page 5 of 7The 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 27/03/2024 at 20:33:39
14. Mr. Santosh Kumar, learned Standing Counsel appears for the respondent on advance copy; accepts notice; and seeks time to file reply.
15. Let reply be filed within 06 weeks; rejoinder thereto, if any, be filed within 04 weeks thereafter; with copies to the opposing counsel.
16. Mr. Santosh Kumar submits, that the recommendation of the I.E. contained in communication dated 25.10.2023 is not binding upon the respondent. Mr. Kumar further submits, that the petitioner has failed to complete the project within the stipulated time. Counsel submits that several accidents, including fatal accidents, have happened by reason of defects in the road; and that the road is not safe for public use.
17. In response, Dr. George refers to a summary of the causes for the road accidents, which has been filed as Document-55 with the petition, and which shows that most of the accidents have happened on straight sections of the road, by reason of over-speeding or drunken driving. Counsel submits therefore, that there is no co-relation between the accidents and the quality of the road built by the petitioner; and in any case, the I.E. has certified that the road is in „traffic worthy condition‟. Counsel submits that the summary is based on the monthly inspection report rendered by the I.E. in that regard.
18. Upon a prima-facie conspectus of the matter, it is evident that the I.E., who was appointed by the respondent under Article 21 of the contract, has certified the road to be traffic-worthy; he has further said that about 84% of the road is complete; and that the reason for a section remaining incomplete is the non-availability of land and other This is a digitally signed order. O.M.P.(I) (COMM.) 90/2024 Page 6 of 7 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 27/03/2024 at 20:33:39 requisite permissions; and that even the respondent is losing money since it is unable to collect the entire toll from the users, since it has not notified the PCOD.
19. Besides, it is also noticed that the contract provides a comprehensive dispute resolution mechanism in Article 21.6, whereby it was available for the respondent to have raised any dispute in relation to communication dated 25.10.2023 issued by the I.E., which they have admittedly not done.
20. In the circumstances, the effect and operation of Suspension Notice dated 11.03.2024 shall remain stayed, till the next date of hearing.
21. Re-notify on 15th July 2024.
ANUP JAIRAM BHAMBHANI, J MARCH 20, 2024/ak This is a digitally signed order. O.M.P.(I) (COMM.) 90/2024 Page 7 of 7 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 27/03/2024 at 20:33:39