National Highways Authority Of India ... vs M/S Gwalior Jhansi Expressway Limited ...

2. Shorn of unnecessary details, some of the relevant facts are that the appellant (a body corporate, constituted under the National Highways Authority of India Act, 1988) entered into a Concession Agreement dated 17th December, 2006 with the respondent (a consortium comprising of Apollo Enterprises Limited and D.S. Construction Limited) for works of widening the existing two-lane portion of Km 16.000 to Km 96.127 on National Highway No.75 to four lanes in the States of Uttar Pradesh and Madhya Pradesh on the terms and conditions specified therein. The appellant asserts that the respondent failed to undertake the project work at the requisite pace, inter alia, due to inadequate deployment of machinery, plant, material and manpower. The respondent had merely achieved 3 62% progress and eventually abandoned the project site in March, 2012. The appellant, therefore, had to issue a Cure Period Notice dated 19th October, 2013 requiring the respondent to cure the breaches within 30 days from receipt of the notice, failing which the appellant may be forced to initiate further action to terminate the contract in terms of the Concession Agreement. The respondent denied the correctness of the stated notice by a written reply. The appellant then issued letters dated 27th February, 2014 and 7th March, 2014 expressing its intention to issue termination notice of the Concession Agreement. The respondent immediately rushed to the court by filing a petition under Section 9 of the Act seeking stay of the Cure Period Notice dated 19th October, 2013 as well as the notice expressing the intention to issue termination notice. The High Court of Delhi passed an interim stay on 12th March, 2014 restraining the appellant from taking any coercive action. The petition under Section 9 of the Act was finally disposed of on 22nd April, 2015 with a direction to the Arbitral Tribunal, which was already constituted in the meantime, that the interim order dated 12th March, 2014 4 would continue during the pendency of the arbitral proceedings with liberty to the parties to seek its modification or revocation before the Arbitral Tribunal.

3. The appellant accordingly moved an application dated 8th April, 2016 under Section 17 of the Act before the Arbitral Tribunal seeking permission to complete the balance works of the project as it was causing huge distress due to traffic congestion, unsafe highway, increase in expenditures, higher wear and tear of the vehicles and, in particular, national loss to the public at large. The respondent also filed an application under Section 17 of the Act on 17th May, 2016 seeking interim directions against the appellant to pay Rs.400 crores to the respondent at the risk and costs of the respondent for completing the balance works of the project. The reliefs claimed in the application filed by the respondent read thus:

4. During the pendency of the aforementioned proceedings before the Arbitral Tribunal, a meeting was held on 19th April, 2016 in the Chamber of Member (P) at NHAI – HQ to discuss and conclude the issues of Gwalior-Jhansi project pursuant to Ministers‟ meeting dated 15th March, 2016 in order to get the work restarted without further delay. Another meeting was convened on 27th April, 2016 before the said Authority, as a result of which the hearing of the matter was deferred till 18th 6 May, 2016. On the adjourned date, the advocate appearing for the appellant placed reliance on the minutes of the meetings held on 19th April, 2016 and 27th April, 2016. The hearing of the applications was then deferred till 29th May, 2016, as the respondent submitted a construction-linked financial plan for completing the balance work within a maximum period of 24 months from the date of receipt of advance payment from the appellant. The appellant filed its response on 28th May, 2016 to the proposal submitted by the respondent. The appellant asserted that the financial plan submitted by the respondent was not in accord with the NHAI Circular dated 19th June, 2015. In the meantime, on 25th May, 2016, the respondent filed its reply to the application filed by the appellant under Section 17 of the Act. The appellant had stated that it was agreeable to infuse funds for completion of the project as per the policy with condition of first charge of NHAI, considering the larger public interest. The respondent accepted the offer given by the appellant including the conditions specified by the appellant. 7 The conditions suggested by the appellant have been noted by the Arbitral Tribunal as under:

5. The arguments were heard by the Arbitral Tribunal on 28th May, 2016. Before the application filed by the parties under Section 17 of the Act could proceed further, the appellant filed an application under Section 23 of the Act for amendment of its reply dated 25th May, 2016 so as to withdraw its acceptance of prayer (b) for modification of procedure order No.9 dated 28th May, 2016, for the reasons mentioned therein. Finally, the Arbitral Tribunal disposed of the applications by a common order dated 23rd July, 2016. It accepted the relief claimed by the respondent in terms of prayer clause

24. In view of the above, we have no hesitation in concluding that the decision of the Arbitral Tribunal as confirmed by the High Court, falls foul of the fundamental policy of Indian law and cannot be countenanced.

25. Accordingly, the order passed by the Arbitral Tribunal dated 24th May, 2017 as also the order dated 21st August, 41 2017 passed by the learned Single Judge of the High Court, deserve to be quashed and set aside and resultantly, the application preferred by the respondent under Section 17 of the Act dated 24th April, 2017 ought to be dismissed. We order accordingly.

26. The appeal is allowed in the above terms with no order as to costs.

.………………………….CJI.

July 13, 2018.