M/S. Soma Isolux Nh One Tollway Pvt.Ltd vs Harish Kumar Puri & Ors

2. This appeal by special leave has been filed assailing the order dated 27.5.2013 passed by the High Court of Punjab and Haryana at Chandigarh in C.M.No. 3301/2013 arising out of CWP No. 13848/1998 whereby certain adverse directions to be related hereinafter were issued having grave implication on the contractual rights of the appellant- M/s. Soma Isolux NH One Tollway Pvt. Ltd. (hereinafter referred to as ‘the Concessionaire company’) as it was saddled with a fine of Rs.60 crores and Rs.7 crores to be paid by the appellant-Concessionaire Company and its Director respectively which were to be deposited with the Registrar General of the High Court within one month of the date of the order. The respondent No.6 National Highways Authority of India (shortly referred to as ‘the NHAI’) was further directed to proceed in the matter forthwith and take possession of the Highway project and ensure that collection of toll is deposited in a separate account and the work of repairs of the highway commenced within a week and the work of construction of highway commenced and completed within a month thereafter. The High Court further issued direction that the entire matter relating to the contract, the completion of the work of the highway, collection from tolls without existence of six- lanes be enquired into and a report in that regard be placed before the High Court within three months. It was also made clear that the enquiry shall not be construed to be an excuse to delay the construction of the highway. It was further observed that the Chairman, NHAI shall be personally responsible for ensuring that the work of six-laning of the highway between Panipat and Jullunder is completed within six months failing which the Chairman, NHAI would be held personally liable to pay fine similar to the terms imposed on the Concessionaire Company –respondent No.7. The appellant-Concessionaire Company has, therefore, come up to this Court challenging the impugned order passed by the High Court.

4. In order to appreciate and adjudicate the controversy involved and to put the matter in proper perspective certain factual background may be related which disclose that this appeal by way of special leave petition has its genesis in a writ petition bearing CWP No. 13848/1998 which came to be filed in the High Court of Punjab and Haryana at Chandigarh as a public interest litigation on 25.7.1998 by the respondent No.1 herein Harish Kumar Puri whose son had died in a road accident on 14.5.1996 at Pipli Chowk, Kurukshetra due to the criminal negligence alleged on the part of the traffic police posted on the said chowk. In the PIL, the respondent No.1 Mr. Puri prayed for issuance of a writ in the nature of mandamus directing for enforcement of traffic rules and to maintain the signal system, rumble strips on crossing, first aid units, control over speeding on G.T. Road National Highway No.1 and a further writ or direction holding the State functionaries liable for the criminal negligence on the part of its employees and saddle it with monetary liability.

5. Interestingly, this writ petition which was filed as a PIL with the laudable object of improving management of traffic on the highway in the interest of the commuters and the public at large over the years metamorphosed into a long drawn litigation alleging breach of contractual obligations between the appellant-concessionaire company and the respondent No.7 NHAI wherein the respondent Union of India as also the respondent/PIL petitioner in the High Court have jumped into the fray giving rise to several rounds of litigation. In the process it affected the very purpose and object for which the writ petition had been filed as also the construction of the Highway for which a concession agreement had been executed between the appellant-concessionaire company and the respondent No.6 NHAI by way of a competitive bidding process during pendency of the PIL as a step towards resolving the issue of management of traffic.

6. While tracing out the background of the matter, bereft of not so essential factual details, it may be sufficient to state that the Division Bench of the High Court issued notice of motion on 1.9.1998 in the writ petition (PIL) which came up before the High Court for consideration from time to time spanning over several years and finally on 11.4.2002, an order was passed by the High Court on 11.4.2002 for impleading the Secretary to the Government of India, Ministry of Road Transport and Highways, New Delhi when the issue camp up regarding non- opening of the railway bridge near Dera Bassi for the general public. Several years thereafter, notice was also issued to the National Highways Authority of India (NHAI) to appear before the High Court through its authorized representative as on 9.5.2008 a Concession Agreement had been executed between NHAI and the appellant-company since the appellant succeeded in a competitive bidding process by which it was granted exclusive rights, license and authority to construct, operate and maintain its project namely, six-laning of a part of NH 1 from KM 96.00 to KM 387.100 (approximately 291.10 KM) from Panipat to Jullundur for a period of 15 years. While awarding the contract, the credentials and track record of the appellant was taken note of which indicated that the appellant M/s Soma Isolux NH One Tollway Pvt. Ltd. is a joint venture company with Isolux Corsan Group which is a multinational company having vast experience of Infrastructure Development in various part of the world including Europe, South America, North America and Asia and has successfully developed Highway Projects in various countries including Spain, Mexico, Brazil, India etc. Isolux Corsan Group is the leading European Investor in infrastructure in India and M/s Soma Enterprise Ltd. is a renowned Development Construction firm and has several National Highway Projects in the past 13 years and have completed projects ahead of schedule. It has also undertaken and completed projects in other infrastructure sectors like Irrigation Hydro Power and Railways.

7. The Concession Agreement envisaged reciprocal obligations from various parties including NHAI, the State of Haryana and the State of Punjab. Under Clause 4.1.2 (a) NHAI is/was required to provide right of way and the appellant-company is/was entitled to demand and collect appropriate fee commonly known as toll fee from vehicles and persons liable to pay toll fee for using the national highway. The Concession Agreement was drafted as per the model approved by the Planning Commission of India and the draft concession was in fact circulated with the RFP (Tender Document) and, therefore, neither the appellant-company nor the NHAI could have changed the contents of the agreement pursuant to the award of contract.

8. In so far as the financing and investment to the Highway Project is concerned the agreement envisaged that the appellant-company and the NHAI would be on the basis of Build, Operate, Trade (BOT) mode which enumerated that the project being in BOT mode, all investment in the project will have to be made by the appellant-company by the income generated from toll collection and no amount was to be invested/received from the NHAI. On the contrary, the appellant-company as per the Agreement, offered to pay to the respondent/NHAI premium equal to 20.14 per cent of the total collection of toll for the first year and this premium was to be increased by one per cent every subsequent year. Based on a detailed analysis of the Concession Agreement, the NHAI thus is not only not funding any part of the project development cost, it is receiving a significant portion of the revenue collected as premium by way of collection of toll. However all the amount collected by way of toll were to be deposited in the ESCROW account as a result of which any amount from this account cannot be withdrawn by the appellant without signature from the other contracting party i.e. NHAI. It may further be noted that the agreement between the appellant and respondent/NHAI acknowledges and confirms the role of lending institutions, mainly nationalised banks as a major significant holder in project implementation. All the financial agreement dealing in the administration occurred between lending institutions and the appellant and the financial model for the project had been submitted regarding revenue and approval prior to the commencement of the project. Agreement entered into between the appellant/company and the NHAI also envisages continuous support and co-operation from the respective State Governments of Punjab and Haryana and the Concession Agreement as per Article 47.3 requires the execution of Tripartite State Support Agreement between NHAI, Concessionaire and respective State Governments for which support agreements were signed by the State of Punjab on 11.9.2009 and the State of Haryana on 16.9.2009. As per the agreement six laning was to be retrofitted on the existing four-lane as per standards and specifications which temporarily was to put the travelling public to some inconvenience. On 8.9.2008, the Division Bench of the High Court which was seized of the matter passed an order impleading M/s. Himalayan Expressway Limited as respondent No.7 herein and on 11.9.2009 the State Support Agreement mentioned hereinbefore was executed between the Governor of the State of Punjab, NHAI and the appellant-company regarding the obligations of the Government of Punjab and its continued support for grant of certain rights and authorities for mobilization of resources by the appellant-company. The agreement visualizes continuous support and co-operation of the Government of Punjab.

10. The High Court thereafter vide order dated 2.1.2012 on an oral request impleaded the appellant-company as a party respondent and issued notice to it on 2.1.2012 to ascertain the progress of the Highway Project. The appellant-company responded to the notice and sought time to file its reply. Thereafter, on 28.1.2012, an affidavit was filed by the Project Chairman, NHAI, Ambala before the High Court in the pending PIL informing the status of Panipat – Jullundur Section of NH 1 stretch from KM 96.000 to KM 387.100 wherein it was stated that the Concessionaire-appellant company could not achieve the milestone –II on the specified date due to delay in various clearance, tree cutting, utility shifting etc. and further stated that the scheduled six laning date has been extended to 15.6.2012. In the meantime and in response to the notice, the appellant also had filed affidavit on 12.3.2012 giving details of the progress of the construction on the highway as also the difficulties and impediments encountered in the construction.

16. The Division Bench of the High Court however, did not feel convinced and satisfied, hence passed an order on 19.4.2012 wherein it observed that the appellant-company is not serious about the undertaking given to the Court and that it entertained serious doubts with regard to sincerity of the appellant-company to complete the work within the time frame undertaken. The High Court, therefore, directed that in the event of work not completed on schedule which was December 2012 and March 2013 which were the dates furnished by the appellant-company to complete the project before the Court, it would be liable to pay a sum of Rs. 50 crores by way of penalty and its Director Shri Patri Ramachandra Rao who was responsible for running the day-to-day affairs of the company would be personally liable to the extent of Rs. 5 crores. The High Court further observed that the Concession Agreement appears to be one sided in its application i.e. in favour of the Concessionaire and contrary to public interest ignoring the fact that the terms and conditions of the agreement were in consonance with the guidelines of the Planning Commission which had been approved by the Government of India. The High Court thereafter directed that the matter be listed after two months for further monitoring.

17. The appellant in the meantime preferred a Special Leave petition (Civil) No. CC 8974/2012 before this Court on 3.5.2012 which was later dismissed as subsequent development had taken place in the High Court itself. Thereafter, the Division Bench of the High Court on 6.7.2012 modified the order dated 19.4.2012 and increased the penalty to be paid by the appellant-company to Rs. 60 crores and the personal liability of the Director of the appellant No.1 company to Rs. 7 crores in case the project was not completed within the time granted by the Court on 19.4.2012.

18. On 3.8.2012 when the matter was further listed before the High Court, the counsel for the appellant-company informed the Court that the NHAI had issued a show cause notice to the appellant as to why the contract be not terminated. The High Court, however, passed an order that the operation of the show cause notice issued by the NHAI be kept in abeyance till further orders. In the said order, the High Court also directed the Ministry of Defence, Government of India to pass an appropriate order regarding the land needed for widening of NH 1 falling within the area of Jullundur Cantt. in the State of Punjab and granted 15 days time to the authorities concerned to do the needful. The High Court vide Order dated 24.8.2012 also directed the Ministry of Defence, Government of India to hand over the land for widening of the National Highway forming part of the Concession Agreement against which the Ministry of Defence approached this Court by filing a Special Leave Petition bearing No. 26544-26545/2012 which however were dismissed vide Order dated 5.9.2012 granting further six weeks time to the authorities concerned to comply with the orders and directions issued by the High Court. The Ministry of Defence, Government of India, thereafter handed over the land for the project to the appellant in October 2012 after dismissal of the special leave petitions before the Supreme Court on 5.9.2012. According to the appellant’s plea the work at the said defence land could not commence due to utility shifting, boundary wall shifting in 4 kms. of length.

19. In order to explain and highlight the impediments faced by the appellant-company seeking extension of time to fufill its undertaking, the appellant/company filed an application bearing C.M. No. 14936/2012 in the pending writ petition in the High Court of Punjab and Haryana at Chandigarh which is pending disposal. It was stated therein that the appellant/concessionaire company was making every effort to complete the six laning works at the earliest provided there was complete co-operation by all concerned and work was not hampered for any reason beyond the control of the concessionaire as the agreement itself envisaged continuous support and co-operation from the respective State Governments of Punjab and Haryana and the Concession Agreement as per Article 47.3.

25. In order to honour the proposal of Haryana Government and keeping in view the national interest and public utility of the project, the appellant agreed to follow the proposal of Haryana Government to relocate the Toll Plaza at KM 211 instead of KM 182. The appellant reserved its rights regarding the shifting of Toll Plaza as per the provisions of the Concession Agreement while communicating its willingness to follow the proposal of Haryana Government as suggested by the respondent. Subsequently, the respondent NHAI gave approval for relocation of Toll from KM 213 to KM 211.550 to 212.250 on the basis of recommendation of the Independent Engineer, consent of appellant and the Government of Haryana vide its letter dated 11.10.2011.

58. Besides the aforesaid legal protection which the appellant enjoyed on account of the judgment and order in its favour given by the High Court, the terms and conditions in the Concession Agreement itself regarding shifting of Toll Plaza was approved by the NHAI which permitted that the Toll Plaza could be shifted provided the Independent Engineer appointed by the NHAI approved of the same. No doubt, initially the Independent Engineer (I.E. for short) initially expressed certain reservations regarding the relocation of the Toll Plazas vide letters dated 18.3.2010, 2.4.2010 and 29.5.2010 but subsequently the Independent Engineer, Project Director and CGM NHAI in their recommendations recorded their view that the location of two Toll Plazas is for different facilities provided to the public and, therefore, there is no reservation locating Toll Plaza at KM 110. In fact, it needs to be highlighted that in terms of Article 48.1 of the Concession Agreement, liberty has been granted to the appellant to decide the locations of Toll Plaza in consultation with the I.E. and the same was finally approved by the I.E. M/s. Louis Berger who conveyed his approval to the change of location as proposed by the appellant and hence the same cannot be allowed to be re- agitated despite confirmation of the same by the High Court vide its judgment and order passed in the writ petitions and the LPA against which no appeal was preferred either by the NHAI or the PIL petitioner or any other concerned respondents.

66. As a consequence and fall out of the above position, we deem it just and appropriate to set aside the impugned directions of the High Court, and permit the appellant to restore the construction of the balance stretch/area of the highway project by further directing the NHAI to permit the appellant to shift the Toll Plaza from KM 146 to any point between KMs 110 and KMs 117 with concurrence of the NHAI. The exact point of construction of Toll Plaza between KMs 110 to KMs 117 shall thus be decided by the NHAI holding mutual consultation with the appellant/concessionaire in the light of the approval already granted by the Independent Engineer in terms of the Agreement which also had been approved by the High Court earlier. However, we take note of the fact that the High Court although by its order referred to hereinbefore permitted shifting of the Toll Plaza in dispute to point KM 110, we have noticed that the distance between KMs 96 where Toll Plaza of L & T is existing and the proposed toll plaza at KMs 110 would be at a distance of only 14 KMs which may not be in the interest of the commuting public and, therefore, we direct that the shifting although may not be permitted at KMs 110, it may be allowed to be shifted at any point between KMs 110 and KMs 117 in consultation and with concurrence of the NHAI. In fact, we could have directed the appellant to shift the Toll Plaza even beyond 117, KMs but we have been informed that beyond KM 117 the area is thickly populated and would not be practically possible to set up the Toll Plaza beyond KMs 117.

67. Therefore, and in order to facilitate and expedite completion of the Highway Project, we direct the respondent NHAI to permit shifting of Toll Plaza from 146 to anywhere between KMs 110 and KMs 117 expeditiously but not later than a period of two months from the date of this order during which period the required legal formality of notifying the area for construction of the Toll Plaza shall also be complied with by the NHAI by getting it notified through the Competent Authority and making the land available free from all encumbrance. The appellant thereafter shall forthwith restart the construction including setting up of Toll Plaza at the agreed point and continue with construction of the remaining area of the Highway Project and shall complete the entire construction of the Highway on or before 31st of March 2015 failing which the appellant/concessionaire company shall be liable for penal consequences to be determined by the NHAI in terms of the Concession Agreement.

68. The appellant/concessionaire company is further directed to report/update the progress/development of the construction to the NHAI referred to in the Concession Agreement after every three months from the date of compliance of the required statutory notification for shifting of Toll Plaza at the instance of the NHAI and the Ministry of Road Transport and Highways/any other competent authority. However, we make it explicitly clear that no dispute shall be allowed to be raised further by any of the parties before any court which may impede or slow down the progress of completion of the Highway Project as this measure most certainly would not be in the interest of the Highway Project and consequently not in public interest in any manner. However, the main contesting parties i.e. the appellant-Concessionaire Company and the NHAI would be at liberty to seek such other or further direction from this Court in case there is bona fide need to resort to such an eventuality in regard to the Highway Project referred to in the Agreement. The appeal accordingly is allowed but in the circumstances leave the parties to bear the costs on their own.