M.C. MEHTA versus UNION OF INDIA & ORS.
[2016] 7 S.C.R. 962, Supreme Court of India, 2016
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Segment: Ratio
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[2016] 7 S.C.R. 962 
M.C. MEHTA 
v. 
UNION OF INDIA & ORS. 
[IDBI Bank Limited and State Bank of India .... Applicants] 
(I.A. Nos.363-364, I.A. No. 425 in I.A. No. 364 in 
I.A. Nos. 344, 355, 362) 
In 
(Writ Petition (Civil) No.13029of1985) 
MAY 13,2016 
[T. S. THAKUR, CJI AND R. BANUMATHI, J.) 
Contract: Bid invited by HS/JDC for developing 135.65 kms 
1011g Ku11dli-Ma11esar-Palwal Expressway - Three co111pa11ies set 
up a concessionaire - Loan raised by concessionaire - Delay in 
execution of work by concessionaire resulting in /er111inatio11 - On 
IA filed by Government, Supreme Court directed State of Haryana 
to replace the existing concessionaire - HSI/DC informed IDB/-
lender bank about the said order - IDBI intimated HS//DC that 
senior lenders have agreed that the entity selected by HSI/DC shall 
be selectee of the lenders for the purpose of the substitutio11 
agreement - Lender banks asked HS/JDC lO ensure that the new 
co11cessio11aire takes over the debt due to the lenders - New 
concessio11aire appointed - However, in the tender as well as the 
concession agree111ent there was neither mention of debts due to the 
le11der ba11ks nor any clause incorporated to secure the loans of 
the lender banks - Thus, instant /As by Consortium of banks seeking 
directions to HS/JDC to e11sure that new concessionaire assumes all 
the existing liabilities and obligations of the existi11g concessionaire 
towards se11ior lenders - Held: Such a relief
cannot be granted by 
an order of this Court, as the same would amount to variation of 
the contractual terms between the parties - Any such dispute 
regarding the alleged violation of the terms and conditions of a 
contract shall have to be resolved in an appropriate civil action 
before the competent civil court - The tripartite agreement between 
the lender banks, HSIIDC and erstwhile concessionaire provide 
for adjudication inter-se disputes between the parties by way of 
arbitration - Therefore, parties are directed lo refer matter to 
arbitration - Howeve1; in the ends of justice, toll amount collected 
is secured to the extent of 80% by deposit of the sa111e in escrow 
account while balance 20% for use by HSI/DC for 111aintenance. 
962
M.C. MEHTA v. UNION OF INDIA & ORS. 
Disposing of the IAs, the Court 
HELD: 1. Such a relief cannot be granted by an order of 
this Court, as the same would amount to variation of the 
contractual terms between the parties i.e. HSIIDC and ESSEL. 
Even so the lender banks are complaining about the violation of 
the terms of the tripartite agreement between them and 
concessionaire. Any such dispute regarding the alleged violation 
of the terms ancl conditions of a contract shall have to be resolved 
in an appropriate civil action before the competent civil court. 
That is because the same are not amenable to adjudication in 
these proceedings. However, the parties may not have to resort 
to any civil action because of the presence of clause 7.11 in the 
tripartite agreement between the lender banks, HSIIDC and 
erstwhile concessionaire which provide for adjudication i11ter-se 
disputes between the parties by way of arbitration. [Para 15) [973-
B-D) 
2. Certain disputes between HSIIDC and the 
concessionaire have already been referred by arbitration to an 
Arbitral Tribunal. Given the fact that two of the parties to the 
disputes sought to be raised in the present applications, are 
already before the Arbitral Tribunal, there is no reason why the 
disputes raised in the present applications should also not be 
referred to the Arbitral Tribunal in terms of clause 7.11. However, 
some arrangements are made to protect the interest of all 
concerned. That is so, because Manesar RD
83.320 km to Palwal 
RD 135.650 km = 52.330 km has been completed at least in part 
by the outgoing concessionaire while the remaining was 
completed by new concessionaire The amount advanced by the 
lender banks to the outgoing concessionaire has been, it is 
reasonable to presume, utilized for construction of the said portion 
of the road. HSIIDC has now appointed an agent to collect the 
toll for the use of the said road. In the ends of justice, the amount 
so collected is secured to the extent of 80 percent by deposit of 
the same in an escrow account to be opened in the IDBI (Lead 
bank) while, the balance 20 percent can be utilized by the HSIIDC 
for maintenance etc. The amount so collected shall be available 
to the arbitral tribunal for disbursement in such ratio as the arbitral 
tribunal may after hearing the parties deem just and proper to 
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direct. [Paras 16, 17) [973-G-II; 974-A, B-E) 
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[2016] 7 S.C.R. 
CIVIL ORIGINAL JURISDICTION : I.A. Nos.363-364, I.A. 
No. 425 in I.A. No. 364 in I.A. Nos. 344, 355, 362 in Writ Petition (Civil) 
No.13029of1985. 
Under Article 32 of the Constitution of India. 
Ranjit Kumar, (SG), Tushar Mehta, ASG, Anil Grover, Alok 
Sangwan, AAG, Harish N. Salve, Neeraj Kishan Kaul, Ms. V. Mohna, 
Shyam Divan, Sr. Advs., Sidhartha Chowdhury (AC), Ms. Aparaj ita Singh 
(AC), A.D.N. Rao (AC), S.N. Terdal, D.N. Goburdhan, L. 
Vishwanathan, Amex Pathak, Raunak Dhillion, Sumit Attri, Cyril 
Amarchand Magaldas, Ms. Meenakshi Grover, G.S. Makkar, B.K. 
Prasad, Shadman Ali, S. W.A. Qadri, Ajay Sharma, Zaid Ali, D.S. Mahra, 
Ms. Bi nu Tamta, Ravindra Bana, Vijay Panjwani, Garvesh Kabra, Samir 
Ali Khan, Abhishek Chaudhary, Ms. Manali Singhal, Santosh Sachin, 
Rohit Kaul (For Mr. Abhijat P. Medh), Ms. Vanita Bhargava, Ajay 
Bhargava, Ms. Abhisaar Bairagi (For Mis. Khaitan & Co.), Shri Narain, 
Tavinder Sidhu, Gunjan S. Jain, Sidha11h Agrawal, Vivek Paul (For Mis. 
M.V. Kini & Associates), Advs. for the appearing parties. 
The followingjudgment of the Court was delivered 
I. Interlocutory applications No.363 and 364 of 2015 have been 
filed by the Consortium of Banks seeking direction from this Court that 
the rights of the Consortium of Banks who has financed the Kundli-
Manesar-Palwal Expressway ('BOT') in the State of Haryana and has 
outstanding dues approximately Rs.1419.15 crores as on
28.02.2015 are 
not prejudiced by this Court's order dated 30.01.2015 passed in I.As. 
No.344, 355 and 362 in W.P.(C) No.13029 of 1985. 
2. Shorn of unnecessary details, facts leading to the present 
applications are as follows: Haryana State Industrial and Infrastructure 
Development Corporation Limited (HSIIDC) invited bids for developing 
of 135.650 kms long Kundli-Manesar-Palwal Expressway in the State 
ofHaryana. Following the bidding process, three companies viz., Mis. 
Madhucon Projects Limited, Mis. D.S. Construction Limited and Mis. 
Appolo Enterprises set up a Special Purpose Vehicle (SPY) named' KMP 
Expressways Limited' ("concessionaire") and letter of acceptance was 
issued on 14.11.2005. The concessionaire and HSllDC entered into a 
concession agreement dated 31.01.2006 and the same was for a period 
of twenty three years and nine months from the appointed date. 
3. The concessionaire raised a loan from consortium of banks 
H 
comprising of the banks namely IDBI Bank, State Bank of India, the
M.C. MEHTA v. UNION OF INDIA & ORS. 
applicants herein and other banks such as State Bank of Mysore, State 
Bank ofTravancore, State Bank of Patiala, Canara Bank, Dena Bank, 
United Bank oflndia, UCO Bank, Vijaya Bank and India Infrastructure 
Finance Company Ltd. The original project cost of Rs.1915 .00 crores 
was proposed to be financed by way of equity capital of Rs.766.00 
crores and Rupee Term Loan of 
Rs.1149 .00 crores. The lender 
banks have disbursed sums aggregating to Rs. I 075.03 crores for the 
project. On 08.01.2007, a loan agreement was executed between the 
lender banks and concessionaire recognizing and strengthening the 
lenders' security interest over the concession agreement. In terms of 
loan agreement, concessionaire had inter alia agreed to create security 
interest over various documents like all project documents which include 
concession agreement and all other assets and properties of the existing 
concessionaire. The concessionaire executed the indenture of mortgage 
dated 09.01.2007 securing the interest of the lenders as per the 
requirement of the loan agreement. In order to further secure the interest 
of the lender banks, on the same date i.e. 08.01.2007, a tripartite 
agreement was also entered into between HSllDC, the concessionaire 
and the IDBI Bank as lenders' agent. 
4. Proposed Kundli-Manesar-Palwal Expressway I 35.650 kms 
long takes off from NH- I near Kundli, crosses NH-I 0 in the west of 
Bahadurgarh, crosses NH-8 near Manesar and
finally joins NH-2 near 
Palwal. As the project is being developed around the national capital, 
Delhi, by an order of this Court dated 18.08.2005 in IA No. 182-183 in 
W.P. (C) No. 13029/1985 titled as 'MC. Mehta v. Union of India' the 
same is being monitored by a special monitoring committee under the 
chairmanship of Secretary, Ministry of Road Transport and Highways 
with Chief Secretaries of Delhi, Haryana and U.P., Chairman, NHAI 
and Chairman, Environmental Pollution Control Authority (EPCA) as 
members. Also, the progress of the project was being reviewed by a 
High Powered Committee established under the chairmanship of Chief 
Secretary, Haryana and others. There was delay in execution of the 
work and the concessionaire was unable to achieve the commercial 
operation of the project. Consequently, this Court appointed the 
Environmental Protection Control Authority Committee (EPCA) to 
expedite the project. Several meetings were held between EPCA, 
HSllDC, the concessionaire and the lender banks, the details of which 
may not be relevant for the issue raised before us. Suffice to note that it 
was agreed that an amicable substitution of the existing concessionaire 
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shall be made so as to expedite the project. It was fu11her agreed that in 
terms of the contract, the concessionaire would be paid Rs.1300.00 crores 
as termination payment for utilization towards payment of the debts due. 
However, HS II DC vi de its letter dated 28.01.2015 addressed to EPCA 
informed that it had revoked the arrangement of making termination 
payment to the concessionaire and approval for payment of the same 
was withdrawn. At the same time, HSIIDC issued a notice dated 
28.01.2015 to the then existing concessionaire conveying its intention to 
terminate the Concession agreement, subject to a cure period of one 
month for curing the defaults. 
5. At this juncture, applications being I.As. No.344/2012 and 362/ 
2014 were filed by the amicus curie and 1.A.No.355/2014 filed by 
Government ofNCT of Delhi in WP (C) No.13029/1985. This Court 
vi de its order dated 30.01.2015, directed the State of Haryana to replace 
the existing concessionaire by following due procedure. The operative 
part of the order dated 30.01.2015 reads as under:-
"/11 the meanwhile, the State of Hmyana will ensure that 
appropriate steps would be taken to award the contract for 
the project to the new concessionaire within two months' time 
fiwn today. The new concessionaire shall commence the work 
within a months time thereafte1: " 
6. Later, vide a letter dated 13.02.2015. HSIIDC informed IDBI 
Bank that in view of
the order of the Supreme Court dated 30.01.2015, 
the process of selecting a new concessionaire through its own efforts is 
under process and that if lender banks propose to bring a new 
concessionaire, the lenders would have to adhere to the time frame fixed 
by the Supreme Court. Vide its letter dated 16.02.2015, IDBI intimated 
HSIIDC that in order to facilitate compliance with the order of the 
Supreme Court, the senior lenders have agreed that the entity selected 
by HSllDC shall be the 'seleclee' of the lenders for the purposes of the 
substitution agreement. However, lender banks asked HSIIDC to ensure 
that the new concessionaire takes over the debt due to the lenders. 
Applicant No. I-IDBI Bank vide letters dated 16.02.2015, 25.02.2015, 
27.02.2015, 05.03.2015, 16.04.2015 and 02.05.2015 repeatedly asked 
HSllDC to comply with clause 3 .5 (i) of the substitution agreement and 
to ensure that the new concessionaire takes over the senior lenders' 
debt dues.
M.C. MEHTA v. UNION OF INDIA & ORS. 
7. Subsequently, l-ISIIDC issued tender dated 20.02.2015 and 
subsequent addendum dated I 0.03.2015 and 13.03.2015 inviting bids 'for 
execution of development of access controlled Kundli-Manesar-
Palwal Expressway Section (Manesar RD. 83.320 km to Palwal RD 
135.650 kms) (Balance Work) on item Rate Mode amounting to 
Rs.4,01,49,97,931.00'. Bid submitted by Mis. KCC Buildcon Pvt. Ltd.-
Dilip Buildcon Ltd. (JV) was accepted by HSIIDC on 28.03.2015 for 
execution and development of the project on 'Item Rate Mode' for the 
said stretch of the road project of 52.33 km (Manesar-Palwal) (Balance 
Work). Subseq;.1ently, in the first week of April, 2015, HSIIDC issued 
invitation for bids for development of access controlled six lane Kundli-
Manesar Section (km 0.00 to km 83.320) valued at Rs.1774.00 crores 
on 'BOT' (annuity basis). After evaluation of the bids from the qualified 
bidders, HSIIDC accepted the bid of ESSEL on 'BOT' (annuity basis) 
and issued letter of acceptance on 31.07.2015 with a project cost of 
Rs.1863 .00 crores. ESSEL incorporated Mis. Kundli-Manesar 
Expressways Limited as a limited liability company and the concession 
agreement was executed by HSIIDC with M/s. Kundli-Manesar 
Expressways Limited on 03.09.2015 for execution of work of 
development of access controlled six lane Kundli-Manesar Section km 
0.00 to km 83.320 in the State ofHaryana on 'BOT' (annuity basis). Be 
it noted, in the tender as well as the
concession agreement with the 
ESSEL, there was neither mention of debts due to the lender banks nor 
any clause was incorporated to secure the loans of the lender banks. 
8. In this factual background, the lender banks have come before 
us by these applications inter alia seeking various directions: 
(a) To direct HSIIDC to amend the concession agreement between 
HSIIDC and ESSEL so as to include a suitable condition to 
take over the notice and other amounts owed to the senior 
lenders; 
(b) To direct HSIIDC to take over the balance loan and other 
amounts owed to the lenders under the financing documents 
proportionate to the 52.33 km~. of the project road which is 
constructed and completed by the new EPCA Director and 
subsequently taken over by the HSIIDC: 
(c)To direct HSllDC to ensure that new concessionaire/ ESSEL 
who would substitute the existing concessionaire to assume all 
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the existing liabilities and obligations of the existing 
concessionaire towards the senior lenders proportionate to 
83.320 kms.; 
(d) To direct HS II DC to enter into a supplementary agreement 
with the ESSEL so as to include a suitable condition to ensure 
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that the rights of senior lenders under the substitution agreement 
are duly protected; 
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( e) To direct and collect all tax levy from both the sections of the 
project road i.e. Kundli-Manesar Section (83.320 kms) 
awarded to ESSEL and Mensar-Palwal of52.33 kms as taken 
over by HSIIDC are deposited into Escrow Account to be 
opened with applicant No. I the lead bank 
9. Grievance of the lender banks is that though the rights of the 
senior lenders were acknowledged by HSIIDC in its letter dated 
13.02.2015, HSIIDC proceeded with the bid without disclosing to the 
new concessionaire that it will have to take upon debts due to the lender 
banks. On behalf of the appellants, the learned Attorney General, Mr. 
Mukul Rohtagi appearing along with Additional Solicitor General oflndia, 
Mr. Neeraj Kishan Kaul submitted that inspite of repeated letters by 
banks asking HSllDC to act in terms of substitution agreement, HS II DC 
has ignored the request of lenders and has gone ahead with the 
appointment of new concessionaire without acknowledging the rights of 
the lenders and thus HSlIDC failed to act in terms of the contract, in 
particular clause 3.5 (i) of
the substitution agreement. 
10. Contention of the lender banks is that in terms of clause 3.5 (i) 
of the substitution agreement while substituting the concessionaire by 
ESSEL, HSlIDC ought to have taken into account lenders' dues and 
ought to have incorporated necessary clause in the concession agreement 
obligating the Selectee to take over lender banks' dues. It is contended 
that HSIIDC is bound to execute a substitution agreement with the 
Selectee on the same terms and conditions as provided in the substitution 
agreement dated 08.01.2007 and that HSlIDC has committed breach of 
contract. Further grievance of the lender banks is that unilateral 
revocation of HSIIDC's commitment to make termination payment of 
Rs.1300.00 crores for utilization towards payment of dues payable to 
the lender banks has caused serious prejudice to the rights of the lender 
banks. Yet another grievance of the lender banks is that corresponding 
to clause 3.5.(i) of the substitution agreement. no clause was shown in
M.C. MEHTA v. UNION OF INDIA & ORS. 
the advertisement for development of six lane access controlled Kundli-
Manesar Expressway km 0.00 to km 83.320 nor the same was 
incorporated in the concession agreement which was awarded to ESSEL 
for the development of six lane access controlled Kundli-Manesar 
Expressway from km 0.00 to km 83.320. It was submitted that while 
awarding the work to ESSEL, HSIIDC ought to have acted in accordance 
with the terms of substitution/tripartite agreement dated 08.01.2007 and 
HS II DC committed breach of contract by not incorporating the suitable 
condition in the new concession agreement for the payment or take over 
oflenders' dues by the new concessionaire/ESSEL. It was further argued 
that unilateral revocation of consensus arrived at between HSIIDC and 
lender banks to make termination payment of Rs.1300.00 crores for 
utilization towards payment of dues to the lender banks was in breach of 
HSllDC's contractual obligations and the same caused serious prejudice 
to the rights of the banks. 
11. Lender banks relied upon clause 7.1.2 of the Common Rupee 
Term Loan Agreement dated 08.01.2007 between the lender banks and 
concessionaire where right of the lenders to receive toll collections from 
the project, deposited in an escrow account is recognised. Lender banks 
rely upon various clauses in tripartite agreement/substitution agreement 
dated 08.01.2007 between HSIIDC, the concessionaire and the lenders' 
agent. As per the substitution
agreement/tripartite agreement, obligation 
of the HSIIDC to inform the lenders' agent about any notice of 
termination of the concession agreement is provided in clause 5.1 of the 
substitution agreement. In case of default, right is given to lender banks 
to substitute the concessionaire by a Selectee subject to approval of 
such 'Selectee' by HSIIDC. Clause 2.1 of the substitution agreement 
provides for substitution of the concessionaire by a 'Se/ectee '.Clause 3 
of the substitution agreement provides the modality for substitution of 
the Selectee by the lender banks. On behalf of the banks, much emphasis 
is laid upon clause 3.5.1 to contend that as per clause 3.5.1 it is the 
responsibility of HSIIDC to ensure that a suitable condition acceptable 
to the lenders' agent is provided for payment or take over of the lenders' 
dues. Clause 3.5 (i) of the substitution agreement very much relied by 
the banks reads as under:-
"3.5 (i) If HSllDC decides to substitute the Concessionaire by 
any other person ("HSIIDC Nominee''), it shall take into account 
the Senior Lender's Dues while considering offers from such 
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persons and shall include a suitable condition as agreed to by the 
lenders' agent on behalf of the Senior Lenders for payment or 
take over of such dues by such HSllDC Nominee to the extent 
agreed by the lenders' agent while substituting the Concessionaire 
by the HSllDC Nominee. The HSIIDC Nominee shall similarly 
be bound to execute a supplementary/fresh substitution agreement 
on the same terms and conditions as provided herein." 
12. Having regard to the nature of the order we propose to pass, 
it is not necessary for us to go into the merits of the submission of the 
banks and interpretation of the various clauses relied upon by the lender 
banks. Suffice to notice the facts emerging and the material on record 
and the need to protect the interest of the lender banks by an interim 
order. 
13. (a) Delay in Completion of Work and Substitution of 
Concessionaire there<(fter: As brought on record that though 
concessionaire had executed part of the work, progress of the work by 
the concessionaire was delayed and the concessionaire was unable to 
achieve the work target. The lender banks served a notice ofoccurrence 
of default dated 13.08.2013 to the concessionaire asking him to cure the 
defects within a period of thirty days from the date of delivery of the 
notice. The concessionaire replied to the default notice vide its reply 
dated 17 .09.2013 stating that the payment default was on account of
delay by HSllDC in making payments to the concessionaire. On 
13.01.2014, substitution notice was served on concessionaire by the lender 
banks under article 2.2 of the substitution agreement which was objected 
by the concessionaire vi de its letter dated 03.02.2014. 
(b) 
Termination Payment and Unilateral Revocation of the same 
by HSIIDC: While hearing I.A. No.344of2012, an interim order dated 
10.03.2014 was passed by this Cou1t, thert:by authorizing Environmental 
Protection Control Authority (EPCA) to proceed with the proposal of 
replacing the concessionaire. Accordingly several meetings were held 
between the lenders, HSI IDC and the EPCA. Vi de letter dated · 
01.07 .2014, EPCA recorded its comments to the Government ofHaryana 
on the proposal regarding fixation of amount of 'consideration for work 
done' sent to EPCA by the lenders. The lender banks sought termination 
payment to the tune of Rs.1711.38 crores. However, HSIIDC vide its 
letter dated 05.08.2014 conveyed its decision to pay Rs.1300.00 crores 
as a settlement/termination payment and the same was maint:iined in
M.C. MEHTA v. UNION OF INDIA & ORS. 
the EPCA meeting on 09.08.2014. In the said meeting, HSIIDC infonned 
that termination payment of Rs. 1300.00 crores has been approved by its 
highest authority and HSIIDC cannot accede to the lenders request to 
increase the amount to Rs. 1711.38 crores. In the EPCA meeting dated 
01.11.2014 HSIJDC informed that in view of formation of the new 
government in the State of Haryana, a fresh approval from the new 
government would be required on the amount ofRs.1300.00 crores fixed 
to be paid as termination payment. According to the lender banks in its 
letter dated 05.08.2014 (Annx. R-3), HSllDC stated that: 
"it has been decided that INR 1300 crore (fa) the most 
reasonable amount out of different valuations done by the 
Lenders' Engineer, !11depende11t Consultant, Lenders' 
Consultant and Lead Lenders·• ....... "while conveying as 
above, I would also like to assure full support and co-
operation of the State Government in your endeavour for 
getting the Project implemented. " 
Later, HSllDC is said to have unilaterally revoked its consent to 
termination payment ofRs.1300.00 crores vide its letter dated 28.01.2015 
to EPCA while simultaneously issuing notice of default to the 
concessionaire. According to lender banks, HSIIDC had not kept up its 
commitment and has not honoured the consensus arrived at between 
the lender banks and HSllDC regarding the termination payment of 
Rs.1300.00 crores and committed breach of contract. 
(c)
Order of this Court dated 30.01.2015: As noticed earlier, by order 
dated 30.01.2015, this Court directed HSIIDC to appoint a new 
concessionaire. On behalf of the applicants, it was submitted that the 
above developments and various communications between the lender 
banks and HSIIDC and concessionaire, consensus arrived at between 
the parties to pay termination payment of Rs.1300.00 erores and the 
rights of the lender banks were not brought to the notice of this Court. It . 
was submitted that in order to facilitate compliance of the order of this 
Cou11, lenders vi de letters dated 16.02.2015 and 25.02.2015 intimated 
HSIJDC that the Selectee by HSIIDC is acceptable to the lenders as 
Selectee for the purpose of substitution agreement. However, lender 
banks repeatedly requested HSJJDC to ensure that the Selecteel 
concessionaire takes over the debts due to lender banks and secure the 
same by incorporating appropriate clauses in the concession agreement. 
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(d) 
Proceedings before the Debt Recovery Tribunal: As seen from 
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the material on record, the consortium of banks has filed an application 
before the Debts Recovery Tribunal for recovery of their dues of 
Rs.1607,97,51, I 08 against the previous concessionaire and others. It is 
brought on record that in the said proceeding, by order dated 23.12.2015, 
the Debts Recovery Tribunal restrained outgoing concessionaire Mis. 
KMP Expressways Limited from receiving any amount/fee/charges from 
the Government of I-laryana or any other authority in respect of refund/ 
transfer of KMP Expressway Project without permission of Debts 
Recovery Tribunal. This was communicated by the lender banks to 
HSllDC vide its letter dated 27.01.2016 calling upon HSJIDC not to 
make any payment to the outgoing concessionaire. 
(e) Arbitration Proceedings: As seen from legal notice dated 
03.07.2015, Mis. KMP Expressways Limited invoked arbitration clause 
contained in clause 39.2 of the concession agreement. Arbitration claim 
is pending before theArbitral Tribunal comprising of Justice N.K. Sodhi 
(Former Chief Justice) presiding Arbitrator, Justice (Retd.) T.S. Doabia, 
arbitrator and Shri K.B. Lal Sin gal (Engineer-in-Chief) (Retd.), arbitrator 
in Arbitration Case No. I 03of2013 against HSIIDC. 
14.As discussed earlier, development of 4/6 lane Kundli-Manesar-
Palwal Expressway from km 0.00 to km 83.320 in the State ofHaryana 
on 'BOT' basis was awarded to erstwhile concessionaire Mis. KMP
Expressways Limited. Because of the incompletion of the work as 
aforesaid and intervention of this Court by order dated 30.01.2015, the 
work was divided into two parts and awarded to Mis. KCC Buildcon 
Pvt. Ltd.-Dilip Buildcon Ltd. (JV) and ESSEL as under:-
Stretch 
Amount 
To whom awarded 
Manesar· Pal wal 
INR401.49 
Mis. KCC Buildcon 
Expressway 
Section 
crores 
Pvt lld.-Dilip 
(Manesar RD.83.320 km 
Buildcon Ltd. (JV) 
to Palwal RD 135.650km) 
(Balance Work) on Item 
Rate Mode. 
Development of access 
IN R 1774 crores 
Mis ESSEL 
controlled 
416 
Lane 
Kundli-Manesar (0.00km 
to 83.320 km) in the State 
of Haryana on 
Build-
Operate-Transfer (Annuity 
basis) (Balance Work
M.C. MEHTA v. UNION OF INDIA & ORS. 
I 5. Since the work of development of access controlled six lane 
Kundli-Manesar Section (from km 0.00 to km 83 .320) is awarded to M/ 
s. ESSEL, the applicants now seek a direction to amend the concession 
agreement between HSIIDC and ESSEL, so as to include a suitable 
condition to take over lenders' dues and other amounts due to the senior 
lenders. fn our view, such a relief cannot be granted by an order of this 
Court, as the same would amount to variation of the contractual terms 
between the parties i.e. HSllDC and ESSEL. Even so the lender banks 
are complaining about the violation of the terms of the tripartite agreement 
between them and concessionaire. Any such dispute regarding the alleged 
violation of the terms and conditions of a contract shall have to be 
resolved in an appropriate civil action before the competent civil court. 
That is because the same are not amenable to adjudication in these 
proceedings. Fortunately, however, the parties may not have to resort to 
any civil action because of the presence of clause 7 .11 in the tripartite 
agreement between the lender banks, HSIIDC and erstwhile 
concessionaire which provide for adjudication inter-se disputes between 
the patties by way of arbitration. Clause 7.11 reads as under:-
"7.11 Any dispute, difference or claim arising out of or in 
connection with or in relation to this Agreement which is not 
resolved amicably shall be decided finally by reference to
arbitration 
to a board of arbitrators comprising of one nominee of each party 
to the dispute. Such arbitration shall be held in accordance with 
the Rules of Arbitration of the Indian Council of Arbitration and 
shall be subject to the provisions of the Arbitration and Conciliation 
Act, 1996. The arbitrators shall issue a reasoned award. The 
venue of such arbitration shall be at Chandigarh, India. The award 
shall be final and binding on the parties. The parties agree and 
undertake to carry out the award of the arbitrators (the "Award") 
without.delay." 
16. That certain disputes between HSllDC and the concessionaire 
have already been referred by arbitration to an Arbitral Tribunal 
comprising of Justice N.K. Sodhi, Former Chief Justice of Karnataka 
High Court and Justice (Retd.) T.S. Doabia, former Judge of the Jammu 
and Kashmir High Court is admitted. Given the fact that two of the 
parties to the disputes sought to be raised in the present applications, 
are already before the Arbitral Tribunal, we see no reason why the disputes 
raised in the present applications should also not be referred to the Arbitral 
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SUPREME COURT REPORTS 
[2016] 7 S.C.R. 
Tribunal in terms of clause 7.11 (supra). To the credit oflearned counsel 
for the parties, we must mention that they were also agreeable to the 
making of such a reference leaving it open to the arbitral tribunal to 
entertain claims and counter claims based on the contractual obligations 
flowing from the agreements and to adjudicate upon the same. 
17. The only question then is whether we ought to make any 
interim arrangement pending adjudication of the disputes by the arbitral 
tribunal. Having heard learned counsel for the parties at some length, 
on that aspect, we are inclined to make a suitabe arrangement to protect 
the interest of all concerned. We say so, because Manesar RD 83.320 
km to Palwal RD 135.650 km= 52.330 km has been completed at least 
in part by the outgoing concessionaire while the remaining was completed 
by Mis. KCC Buildcon Pvt. Ltd. The amount advanced by the lender 
banks to the outgoing concessionaire has been, it is reasonable to presume, 
utilized for construction of the said portion of the road. HSIIDC has 
now appointed an agent to collect the toll for the use of the said road. 
Ends of justice, in our opinion, demand that the amount so collected is 
secured to the extent of 80 percent by deposit of the same in an escrow 
account to be opened in the IDBI (Lead bank) while, the balance 20 
percent can be utilized by the HSIIDC for maintenance etc. The amount 
so collected
shall be available to the arbitral tribunal for disbursement in 
such ratio as the arbitral tribunal may after hearing the parties deem just 
and proper to direct. 
I 8. In the result, we dispose of these applications with the following 
directions:-
(i) All disputes between the lender banks, the HSIIDC and the 
outgoing concessionaire-KMP Expressways Ltd. arising out of 
or in relation to the tripartite agreement dated 08.0 I .2007 executed 
between the parties shall stand referred to the arbitral tribunal 
headed by Justice N.K. Sodhi. 
(ii) The patties namely, the lender banks, HSIIDC and the outgoing 
concessionaire shall file their claims, and counter claims before 
the arbitral tribunal who shall then adjudicate upon and decide the 
same in accordance with the law giving to each one of them an 
opportunity of being heard in the matter. 
(iii) Pending adjudication of the claims as aforesaid, we direct 
deposit of eighty percent of the amount collected towards toll for
M.C. MEHTA v. UNION OF INDIA & ORS. 
use ofManesar-Palwal Section (Manesar RD 83.320 km to Palwal 
RD 135.650 km= 52.330 km) in an escrow account to be opened 
in IDBI-the lead bank. The said amount shall then be available to 
the arbitral tribunal for disbursement to the lender banks by way 
of an interim arrangement or otherwise as it may consider 
appropriate after hearing the parties. 
(iv) This order of reference to arbitration or the pendency of the 
proceedings before the arbitral tribunal shall not be considered as 
an impediment for the new concessionaire to commence its work 
of widening 4/6 lane work pertaining to Kundli-Manesar (0.00 
km-83.320 km.), subject however, to the condition that before 
ESSEL, the new concessionaire commences the work in Kundli-
Manesar (0.00 km-83.320 km) in terms of the contract allotted to 
it, HSIIDC shall appoint a committee of engineers/experts for 
measurement of the work done on (i) Kundli-Manesar-0.00km-
83.320km and (ii) Manesar-Palwal-83.320km-135.650km by the 
outgoing concessionaire. The report shall be filed before the 
arbitrators within four weeks from the date of this order. The 
outgoing concessionaire, the lender banks and the new 
concessionaire shall associate with the process of measurement 
of the work. 
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commencement of the work by ESSEL. 
Reference of the disputes to arbitration shall not be an impediment for 
the Debts Recovery
Tribunal to proceed with the application filed by the 
banks pending before it. We make it clear that we have not expressed 
any opinion as to the merits of the claims or contentions opened to the 
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parties before the arbitral tribunal. No costs. 
Devika Gujral 
!As disposed of.