* IN THE HIGH COURT OF DELHI AT NEW DELHI Judgment reserved on : 1st June, 2010 Date of decision: 10th August, 2010 + W.P.(C) No.13034/2009 VHCPL-ADCC PINGALAI INFRASTRUCTURE PVT. LTD. AND ANR...... ...... Petitioner Through Mr. U.U. Lalit, Sr. Adv. with Mr. Arunabh Chowdhary, Mr. Anupam Lal Das and Mr. Raktim Gogoi, Advocates versus UNION OF INDIA & ORS. .... Respondents Through Mr. G. E. Vahanvati, Attorney General of India and Mr. A.S. Chandhiok, ASG with Mr. Atul Nanda, Mr. Jatan Singh, CGSC and Mr. Rahul Malik, Advs. for Respondent no. 1/UOI Mr. Vivek Tankha, ASG with Ms. Padma Priya, Mr. Rishabh Sancheti and Ms. Meenakshi Sood, Advs. For Respondent no.2 Dr. A.M. Singhvi, Sr. Adv. and Mr. C.U. Singh, Sr. Adv. with Mr. Shivaji, Advs. for respondent no.3 CORAM: HON'BLE MS. JUSTICE GITA MITTAL HON'BLE MS. JUSTICE INDERMEET KAUR 1. Whether reporters of local papers may be allowed to see the Judgment? Yes 2. To be referred to the Reporter or not? Yes 3. Whether the judgment should be reported in the Digest? Yes GITA MITTAL, J 1. “A mans greed is like a snake that wants to swallow an elephant”. - a Chinsese proverb which completely sums up the case in hand. The petitioner, who was awarded a contract for the W.P.(C) No. 13034/2009 page 1 of 121 construction and operation of a project involving a major bridge over the Pingalai river with approaches covering a total stretch of 2.2 km, claims that the Concession Agreement entered into by him in 2004 tantamounts to his having a preferential right of first refusal for award of the contract relating to the project for the four laning of a 66.73 Kms stretch of National Highway-6, being its Talegaon-Amravati KM 100 to KM 166.725 section, in the State of Maharashtra, without participation in the bidding process and completely unmindful of the public interest involved in the matter. 2. The record of the present case discloses, that on behalf of the MORT&H, the Public Works Department of the Government of Maharashtra had invited tenders for this project from eligible persons of construction, operation and maintenance of a major bridge and its approaches across the Pingalai river in KM 113/800 on the Nagpur-Edlabad Road section of N.H.6 with private sector participation on build, operate and transfer ('BOT') basis. It appears that a Memorandum of Understanding dated 21st February, 2003 (Schedule 'V') was entered into by two companies, Vishvaraj Housing Company Pvt. Ltd. and ADCC Computing and Research Centre Ltd. Pursuant thereto, a consortium formed by them for the purpose of bidding for the project, had submitted a bid for the project. 3. The MORT&H accepted the bid submitted by the said consortium and issued a letter of acceptance dated 4th July, 2003. As per the requirements of the tender/bid, this W.P.(C) No. 13034/2009 page 2 of 121 consortium incorporated the 'concessionaire'-petitioner herein, as a special purpose vehicle to implement the said project on BOT basis. Pursuant to the aforesaid acceptance letter, on 14th May, 2004, the President of India represented by the Ministry of Road Transport and Highways of the Government of India entered into a 'Concession Agreement' with the VHCPL-ADCC Pingalai Infrastructure Pvt. Ltd. (the petitioner herein), who has been referred to as the 'concessionaire' in the agreement. 4. The work which forms subject matter of the agreement is described in schedule A of the Concession Agreement and is referred to as “the project” therein. The agreement was entered into on behalf of the President of India by the Ministry of Road Transport and Highways (hereinafter referred to as MORT&H) which is responsible for the development and maintenance of national highways in India. 5. Learned senior counsels for all the parties have extensively relied on the terms of the Concession Agreement dated 14th May, 2004, essential terms whereof are as follows :- “xxxx F. In accordance with the requirements of the said tender/bid submitted by the Consortium, the Consortium has incorporated the Concessionaire as a“ special purpose vehicle to implement the Project on BOT basis, and GOI has agreed to grant to the Concessionaire, the Concession (as hereinafter defined) on the terms, conditions and covenants hereinafter set forth in this Agreement.” xxxxx Definitions & Interpretations :- W.P.(C) No. 13034/2009 page 3 of 121 “Project” means the project described in Schedule 'A' which the Concessionaire is required to design, engineer, finance, construct, operate, maintain and transfer in accordance with the provisions of this Agreement.” “Project Assets” means all physical and other assets relating to and forming part of the Project including but not limited to (i) rights over the Project Site in the form of license, right of way or otherwise, (ii)tangible assets such as civil works including the foundations, embankments, pavements, road surface, interchanges, bridges, approaches to bridges and flyovers, road overbridges, drainage works, lighting facilities, traffic signals, sign boards, milestones, toll plaza, equipment for the collection of tolls or relating to regulation of traffic, electrical works for lighting on the Project, telephone and other communication systems and equipment for the Project, rest areas, wayside amenities, administration and maintenance depots, relief centers, service facilities etc.(iii) Project Facilities situate on the Project Site, (iv) the rights of the Concessionaire under any Project Agreements, (v) financial assets, such as security deposits for electricity supply, telephone and other utilities, etc.(vi) insurance proceeds subject to Lenders' rights thereto and (vii) Applicable Permits and authorisations relating to or in respect of the Project.” “Project Facility” means collectively the facilities on the Project site to be constructed, built, installed, errected or provided by the Concessionaire for use of the traffic by implementing the Project and more specifically set out in Schedule 'C'. “Project Site” means the real estate particulars whereof are set out in Schedule 'B' on which the Project is to be implemented and the Project Facility is to be provided in accordance with this Agreement. Definition of COD “COD” means the commercial operations date of the Project, which shall be the date on which the independent Engineer has issued W.P.(C) No. 13034/2009 page 4 of 121 the Completion Certificate or the Provisional Certificate upon completion of construction of the Project and which shall, subject to the provisions of this Agreement, be not later than....... 6. Schedule A describes the need for as well as the project and the relevant portion whereof reads as follows :- “ 'Schedule A' 1. Need for the Project The existing Nagpur Edlabad road section of N.H.6 crosses the Pinglai river in Km. 113/800 near Tiwasa village. There is existing submersible bridge having 22 spans of 2.2 mt c/c and width of 6.10 m. The existing bridge gets over topped during heavy floods of river and result interruption to traffic for 4 to 6 hours duration for several times and the traffic is held up. Tiwasa village is situated on just bank of river. Therefore it is necessary to construct high level bridge at an early owing to demand from public. 2. Project Location The project is situated in Amravati District of Maharashtra State. There is existing submersible bridge. The proposed bridge alignment is taken @ 15 m D/s away from the center of existing bridge. The necessary index map is enclosed in indicate drawings for reference...................” 7. Some light on the issues raised before us is also thrown on by the contents of Schedule B defining the Project Site which are as follows :- “ Schedule B – Project Site Description and particulars of Land : The entire project is to be implemented on available departmental land. The land width available is 45 m. The proposal involves construction of 4 lane major bridge with foot path including 4 lane approaches, CD, works, Minor bridges, Under passes, road side drainage, service road and toll plaza complex and other structures included in the project cost within two phases, within the available land W.P.(C) No. 13034/2009 page 5 of 121 width without any new land acquisition.” 8. The scope of the work concerned is described under Schedule C, under the heading of 'Project Facility' which makes a reference to the phases in which the work was to be completed. 9. So far as the concession which was granted under the agreement to the petitioner is concerned, the same is detailed in article 2.1 of Article 2 which reads as follows :- “GRANT OF CONCESSION Subject to and in accordance with the terms and conditions set forth in this Agreement, GOI hereby grants and authorizes the Concessionaire to investigate , study, design, engineer, procure, finance, construct, operate and maintain the Project/Project Facility and to exercise and/or enjoy the rights, powers, privileges, authorisations and entitlements as set forth in this Agreement, including but not limited to the rights to levy, demand, collect and appropriate fee from vehicles and persons liable to payment of fee for using the Project/Project Facility or any part thereof (collective “the Concession”).” 10. The petitioner was thus granted such concession, in terms of article 2.2, for a period of twelve years, nine months and nine days commencing from the commencement date, during which the petitioner was authorised to implement the project and operate the project facility. Clause A of article 2.2 envisaged extension, while clause B postulated the concession period as ending with the termination, upon such eventuality. 11. The petitioner has premised its entire claim in the present writ petition on Article 14 of the Concession Agreement, the relevant portion whereof reads as follows :- “Article 14 W.P.(C) No. 13034/2009 page 6 of 121 CAPACITY AUGMENTATION AND ADDITIONAL FACILITY 14.1 Capacity Augmentation of the Project (a) The GOI may following a detailed traffic study conducted by it, at any time after COD decide to augment/increase the capacity of the Project (Capacity Augmentation) with a view to provide the desired level of service to the users of the Project Facility. (b) The GOI shall invite proposals from eligible Persons for Capacity Augmentation. The Concessionaire shall have option to submit its proposal for Capacity Augmentation. (c) The bid document for Capacity Augmentation shall specify a Termination Payment to be made to the Concessionaire in case the Concessionaire chooses not to submit its proposal or fails or declines to match the preferred offer as mentioned in sub-article (e) below. (d) in case the Concessionaire, after participating in the bidding procedure, fails to give the lowest offer, the Concessionaire shall be given the first right of refusal to match the preferred offer. If the Concessionaire matches the preferred offer the Parties shall enter into a suitable agreement supplemental to this Agreement to give effect to the changes in scope of the Project, Concession Period and all other necessary and consequential changes. In such an event the Concessionaire shall pay to the bidder who had made the lowest offer sum of Rs.1.05 lacs (One Lac Five Thousand Only) towards bidding costs incurred by such bidder. (e) In case the Concessionaire (i) chooses not to submit its proposal for Capacity Augmentation or (ii) is not the preferred bidder and also fails or declines to match the preferred offer, GOI shall be entitled to terminate this Agreement upon payment to the Concessionaire of the Termination Payment. (f) The Termination Payment referred to in the preceding sub-articles (c) and (e) above shall be the amount equivalent to the amount of Termination Payment set out in W.P.(C) No. 13034/2009 page 7 of 121 Article 16.2(b). 14.2 Additional Facility GOI shall not construct and operate either itself or have the same, interalia, built and operated on BOT basis or otherwise a competing facility, either toll free or otherwise during the Concession Period Provided, GOI may build and operate such a facility subject to the fee charged for vehicles using such facility being at any not less than 133% of Fee for the time being charged for the vehicles using the Project Facility.” 12. The Concession Agreement describes a Force Majeure Event in clause 15.1 of Article 15; a non-political event in clause 15.2; an indirect political event in clause 15.3; a political event in clause 15.4 of the concession agreement. The effect of a force majeure event has been described in clause 15.5 which also describes the eventuality and the manner in which termination of the agreement upon the occurrence of a force majeure event would take place. Clause 15.7 postulates a mutual decision to terminate or continue the agreement on continuation of the Force Majeure event beyond 120 days. Inasmuch as the instant case is not concerned with a force majeure event, it is not necessary to advert to the other clauses of Article 15 dealing with costs, dispute resolution, liability for other losses and other events. 13. Article 16 of the Concession Agreement is concerned with events of default and termination of the Concession Agreement. The present case also does not involve any allegation of a default or breach by the petitioner of the Concession Agreement. 14. Dispute resolution is provided in Article 19 of the W.P.(C) No. 13034/2009 page 8 of 121 agreement. First an effort to amicably resolve any dispute/difference or a controversy of whatsoever nature, however arising out of or in relation to the agreement including completion of the project (clause 19.1) by reference to the Director General (Road Development) Government of India, and the Chairman of the Board of Directors of the concessionaire, is to be attempted. Any dispute which is not so resolved, is to be finally settled as per Clause 19.2 by binding arbitration under Arbitration & Conciliation Act, 1996. 15. A State Support Agreement was also entered into by the petitioner with the President of India in his executive capacity for the Government Of India (referred to as 'GOI' in the agreement and hereafter) represented by MORT&H and the Governor of Maharashtra in his executive capacity for the State of Maharashtra acting through the Public Works Department, Government of Maharashtra on the 14th May, 2004, with the view to facilitate completion and operation of the project by the concessionaire in accordance with the Concession Agreement and to extend continued support and grant certain rights and authorities to the concessionaire. 16. Subsequently, a gazette notification dated 27th July, 2005 was issued by the Government of India under section 48 of the National Highways Act, 1956, whereby the concessionaire was entitled to collect toll from the “users of the major bridge and its approaches across Pingalai river at KM 113/800”. 17. On 29th May, 2008, the National Highway Authority of India- W.P.(C) No. 13034/2009 page 9 of 121 respondent no. 2 herein (also referred to as the 'NHAI' hereafter), issued an advertisement in leading newspapers including the Hindustan Times and the Financial Express both dated the 29th of May, 2008 inviting Requests for Qualification ('RFQ' for brevity hereafter) to undertake inter alia the work involving the Talegaon-Amravati KM 100 to KM 166.725 (length- Km 66.73) Section of the National Highway No. 6 in the State of Maharashtra under NHDP Phase III, on design, build, finance, operate and transfer pattern ('DBFOT' pattern). The RFQ document was available from 27th of May, 2008 at a cost of Rs.10,000/- and the last date for its submission was the 15th of July, 2008. 18. The respondent no. 2 has explained that sixteen RFQs were received by the 24th of July, 2008 which was the extended last date for its submission. Though 11 applicants including respondent no. 3 had pre-qualified, as per the prescribed procedure, only names of six top shortlisted candidates were announced on 5th November, 2008. Some of the eligible applicants withdrew. Hence on 12th November, 2008, in terms of clause 2.2 of the RFQ, letters were issued to the next four out of the remaining qualified/eligible parties calling upon them to signify in writing whether they were willing to submit their bid for the project or wished to withdraw. The respondent no. 3 was consequently included in the revised list of short listed bidders in accordance with the notified procedure and vide a letter dated 25th November, 2008 was informed of the same. The final list of W.P.(C) No. 13034/2009 page 10 of 121 5 qualified bidders was announced on 15th December, 2008. 19. So far as the project is concerned, the NHAI-respondent no. 2 has explained, that on 29th September, 2008, a proposal had been sent to the Department of Economic Affairs, Ministry of Finance of the Government of India for taking the approval of the Public Private Partnership Appraisal Committee ('PPPAC' hereafter) of the respondent no. 1 by the NHAI for clearance of the said project, alongwith all relevant documents including the draft concession agreement. A draft preliminary project report and a proposal to buy back the existing toll rights was also enclosed. This communication refers to an earlier decision of the PPPAC in its meeting held on 5th November, 2007 whereby it was decided to adopt a two stage bidding process and that accordingly the RFQ and the RFP had been prepared as per the guidelines of the Ministry of Finance. 20. The PPPAC considered this proposal as agenda item no. 3 in its 23rd meeting held on 20th February, 2009 which refers to it as the “Four laning of Talegaon Amravati section of NH-6 in the state of Maharashtra under NHDP III on DBFOT (Toll) Basis”. The minutes of its meeting recorded on 20th February, 2009 notice the submission of the Chairman of the NHAI that the plan project highway was a 'segment of the Kolkata-Mumbai East- West link in the country' and that its four laning would result in the four laning of the entire east west link. The cost of the project at Rs.9.27 crore per km was considered very high. The PPPAC suggested that the project could be considered for grant W.P.(C) No. 13034/2009 page 11 of 121 of approval subject to the NHAI reviewing the project structures to reduce the project cost to Rs.8 crore per km. It was also noted that the traffic would reach the design capacity of the project highway in 22 years. The PPPAC therefore approved the concession period as being fixed as 22 years instead of 18 years proposed by the sponsoring authority. The proposal was granted final approval, subject to buy back of tolling rights being included in the pre-construction costs and not in the total project costs of the project. 21. The suggestions as made by the PPPAC were duly incorporated and thereafter the Cabinet Committee on Infrastructure ('CCI' hereafter) in its meting dated 30th July, 2009 considered the proposal for the instant project of four laning of the Talegaon-Amravati Section of NH-6 as well as another project relating to NH-9 in the State of Maharashtra and also granted approval to the same. This approval was communicated to the NHAI by a letter dated 10th August, 2009 from the Ministry. 22. The NHAI had issued and published the notice for RFP in leading newspapers and posted the same on the website of the NHAI. The RFP document was purchasable against payment of a non-refundable amount of Rs.10 lakhs and envisaged deposit of a security deposit of Rs.11.01 crores which was to be submitted alongwith the bid. A schedule for the various steps envisaged for submission of the RFP also stood notified. 23. The last date for submission of the RFP was appointed as W.P.(C) No. 13034/2009 page 12 of 121 20th March, 2009 and the pre bid meeting was scheduled on 12th May, 2009. An addendum I to the RFP was issued on 29th May, 2009 while 26th of June, 2009 was appointed as the last date for submission of the bid. 24. It is at this stage that the petitioner, for the first time, wrote a letter dated 20th June, 2009 to the Chief Engineer of the Ministry of Shipping, Road Transport and Highways referring to a purported claim under article 14.1 of the Concession Agreement dated 14th May, 2004. In furtherance of this letter, the petitioner submits that it also sent reminders dated 14th July, 2009 and a second reminder dated 22nd July, 2009 to the respondent no. 1. 25. Our attention has been drawn to a communication dated 24th July, 2009 addressed by the MORT&H-respondent no. 1 to the NHAI, referring to the claim and representation of the petitioner seeking its comments on the following aspects :- “(i) Did the consultant of the proposed four- laning project of NHAI considered the fact that there exists a BOT project awarded by the Ministry, which forms part of the Section; and if they did; what advise was given to NHAI in this regard. (ii) NHAI did not make any reference to the concessionaire or to the Ministry with regard to this BOT stretch. NHAI may indicate how it is going to deal with this now. (iii) Since the BOT concessionaire has certain rights (Article 14 of Agreement) under existing concession agreement, NHAI should indicate what will be the status of this right in the new scheme of the project.” 26. The NHAI responded to the MORT&H by a letter dated 18th August, 2009, inter alia informing it as follows :- W.P.(C) No. 13034/2009 page 13 of 121 “(i) The consultant of the proposed 4 laning project from Talegaon to Amravati Section of NH- 6 considered the fact that there exists a BOT Project awarded by the Ministry which forms part of the section and advised for buy-back of bridge from existing Concessionaire. The cost of buy- back proposed is Rs.7.97 Cr. which is included in the total project cost. (ii) The cost of buy-back was included in the proposal submitted to Ministry for PPPAC Approval and PPPAC approved the proposal with buy-back of bridge from existing Concessionaire in its meeting held on 20.02.2009, NHAI intends to buy- back the bridge before commercial operation date of the project which is around 3 years from now i.e. October, 2012 (likely). The cost of buy-back shall be borne by NHAI. (iii) Since, the copy of Agreement of existing BOT Concessionaire is not available with NHAI, it is required to provide a copy of the Agreement so that necessary action as per the provisions of the Agreement can be taken for buy-back of the stretch under existing Concession Agreement.” 27. The petitioner also relies on a notice dated 23rd September, 2009 issued as a follow up to its reminders. 28. So far as the acceptance of the bid was concerned, the NHAI- respondent no. 2 issued a letter of acceptance dated 27th August, 2009 to the respondent no. 3 accepting its proposal. All participants in the bidding process have accepted the process initiated and undertaken by the respondent no. 2 (NHAI) as well as the decisions taken by the respondent no. 1. 29. Inter alia, aggrieved by the failure of the respondent no.1 to favourably respond to its requests, the petitioner finally filed the present writ petition on or about the 30th October, 2009 making the following prayers :- “(a) issue a writ of mandamus and/or any other appropriate writ, order or direction quashing and W.P.(C) No. 13034/2009 page 14 of 121 setting aside the entire tender process including RFP dated March 2009 and all subsequent actions of the Respondent No.2 NHAI in pursuance of the said tender/RFP for four laning of Talegaon Amaravati Section of NH-6 from km 100.000 to km 166.725 (length -km66.73) (Annexure-P.4 -; and (b) issue a writ of mandamus and/or any other appropriate writ, order of direction declaring the award of contract by Respondent no.2 NHAI for four laning of Talegaon Amravati Section of NH06 from km 100.000 to km 166,725(length- km 66.73) in favour of Respondent no.3, as void and illegal and violative of the Petitioners fundamental rights under Articles 14 & 19 (1) (g) of the constitution of India apart from being contrary to the express terms of the subsisting Concession Agreement and the State Support Agreement dated 14.05.2004, in favour of the Petitioner No.1; and (c) issue a writ of mandamus or any other appropriate writ, order or direction prohibiting Respondent Nos 1 & 2