National Highway Authority of India v. TK Toll Pvt Ltd

Delhi High Court | OMP (COMM) 24 of 2023

Background facts

  • In December 2006, National Highway Authority of1 India (NHAI) invited proposals for the design, engineering, finance, construction, operation, and maintenance of Trichy-Karur Section from 135.800 km to 218.000 km of National Highway - 67 in the state of Tamil Nadu. This project intended to augment the current roadway of the Trichy-Karur Section, expand it to four lanes, and enhance its operation and upkeep using a BOT concession model.
  • In March 2007, Reliance Energy Ltd (Contractor) was declared as the successful bidder for the project, and NHAI issued a Letter of Acceptance (LoA) in their favor. The parties executed a Concession Agreement (CA) on July 19, 2007. Additionally, a tripartite State Support Agreement (SA) was also executed with the Government of Tamil Nadu.
  • The project was set to be completed 30 months from the designated Appointed Date, with a concession tenure of 30 years. The Appointed Date, as declared by NHAI, was January 15, 2008. Thus, the scheduled completion date for the project was set as July 14, 2010, with the concession duration extending until January 14, 2038.
  • On November 14, 2013, both parties signed a SA which granted the Contractor a PCC, thereby allowing it to start toll collection in a section of the project. The parties also agreed to waive claims on project delays up to the SA date, and the completion date was rescheduled to February 24, 2014.
  • However, on account of disputes arising between the parties, the Contractor issued a notice of arbitration to NHAI on December 17, 2018.
  • The Arbitral Tribunal passed its final award on October 1, 2022, awarding the Contractor a sum of INR 1056.54 crore. Vis-à-vis the SA, the Tribunal found that it had been executed under coercion.
  • Being aggrieved, NHAI challenged the Award before the High Court of Delhi (HC) under Section 34 of the Arbitration and Conciliation Act, 1996 (Act), whereas the Contractor filed an application under Section 36(1) of the Act for enforcement of the award. NHAI also sought a stay against the operation of the award under Section 36(3) of the Act

Issue at hand?

  • Whether the Arbitral Tribunal's failure to appreciate that the SA, under which parties had agreed not to raise any claims on account of delay and extension of the project, was a bar on the claims?

Decision of the Court

  • At the outset, the HC observed that based on the evidence put forth by the Contractor's expert witness, a delay of 1668 days was attributable to NHAI on account of failure to hand over the project site, while a delay of 300 days was attributable to the Contractor. Such a delay by NHAI could not have been overlooked by the Contractor unless there was pressure to sign the SA. This finding was further corroborated by the testimony of NHAI's witness. During cross-examination, the witness acknowledged the absence of any documentation indicating that the request for the SA originated from the Contractor. The witness had also admitted that without receiving the PCC and the rights to collect tolls, the Contractor could not have recovered any portion of its investment.
  • The HC highlighted that NHAI had issued a circular which approved the execution of an SA in the given circumstances. However, the circular mandated that the SA must include an undertaking by the Contractor to forego any claims against the NHAI under any clause of the CA, for delay in handing over the affected stretch of the project highway. Further, the arbitral record showed that the drafts of the SA underwent two revisions, and the Contractor had raised objections to the clause stating that neither party would seek damages against the other.
  • Regarding the issue of limitation, the HC observed that NHAI had not dismissed the immediate claims put forward by the Contractor, and without such dismissal the limitation period had not started. The HC noted that since the project was ongoing, the payable dues under each claim could be quantified only after completion of the project. Therefore, there was no question of the claims being barred by limitation.
  • Drawing from the aforementioned findings, the HC opined that there was a clear effort on NHAI's part to protect itself from potential financial repercussions stemming from its own delays. Consequently, the HC found that NHAI was unable to demonstrate any apparent glaring error which would entitle it to a stay on the operation thereof. Accordingly, the Application filed by NHAI challenging the arbitral award was dismissed with the observation that no stay was warranted. NHAI was directed to pay 50% of the awarded sum to the Contractor within 4 weeks, and the balance 50% within 4 weeks thereafter.

Eversmile Construction Company Pvt Ltd & Anr v. Municipal Corporation of Greater Mumbai & Ors

Bombay High Court I Writ Petition No. 2038 of 2016

Background facts

  • Maharashtra has two planning authorities - a special planning authority called Mumbai Metropolitan Region Development Authority (MMRDA) and the Municipal Corporation of Greater Mumbai (MCGM), a statutory planning authority constituted by the Maharashtra Regional and Town Planning Act, 1966.
  • Planning Authorities constituted by the Government are empowered under the Right to Fair Compensation Act, 2013 to acquire land for public purposes, provided a fair compensation is paid to the owner of the land. The Right to Fair Compensation Act replaced the Land Acquisition Act.
  • However, the MCGM is the only Planning Authority which can issue a Transferrable Development Right (TDR), which is given by the MCGM to the owner of a land if the land or a part of the land is acquired by the MCGM. Provision for TDRs is made in the Maharashtra Regional and Town Planning Act, 1966. Later, these became a part of Developmental Control and Promotion Regulations for Greater Mumbai and then were included in the latest DCPR 2034.
  • The TDR corresponds to the area acquired, and the holder of the TDR can sell it on the open market or can use it to develop other undeveloped areas barring those mentioned under appropriate laws. TDRs are recorded in a certificate called the Developmental Rights Certificate (DRC).
  • The Petitioners in this case were the owners of land bearing CTS No: 145 measuring approximately 2200 sq mts. Out of this land, 145/B/3/2 and 145/B/3/3 were used and a Development Plan Road came about. The Development Plan Road was later converted into the Sahar Elevated Road.
  • The Sahar Elevated Access Road, also known as SEAR, was an access road connecting the Western Express Highway, near Vile Parle to the Terminal 2 of the Chhatrapati Shivaji International Airport. This Sahar Road was maintained by the Mumbai International Airport Limited (MIAL), a privately owned entity in Public-Private Partnership with the Airports Authority of India. MIAL was mainly concerned with the upkeep and maintenance of the Chhatrapati Shivaji International Airport. It was clear from the description of MIAL itself that it was not a Planning Authority.
  • The Petitioners' land was used to build the Sahar Elevated Road, which was used by a lot of people in order to access the Chhatrapati Shivaji International Airport. Arguing that the land acquired in this case was used for 'public purpose', the Petitioners approached the Bombay High Court seeking compensation for a part of their land which was acquired and subsequently made into the Sahar Expressway.
  • However, since it was the Planning Authority which can acquire land and then provide compensation in lieu of acquisition, the payer of the compensation became a major issue especially since both the MCGM and the MMRDA claimed that they did not have any jurisdiction over the land where the road was built and hence were not the appropriate Planning Authorities and therefore could not provide compensation to the Petitioner. Both these authorities went so far as to disclaim all 'control, supervision and planning authority rights and responsibilities' over that stretch of road.
  • In their petition, the Petitioners put forth 2 very simple scenarios. Some authority had to have acquired the road and then given to MIAL for upkeep and maintenance. Therefore, it was highly likely that:
    • Either the MCGM had acquired the land and built the road, in which case the Petitioners asked the Court to direct the MCGM to give them compensation in the form of TDR.
    • Or the MMRDA had acquired the land and built the road, in which case the Petitioners asked the Court to direct MMRDA to recommend to the MCGM to issue TDR.

Issues at hand?

  • Are the Petitioners were entitled to get compensation in the form of TDR?
  • Which Planning Authority would have jurisdiction over the stretch of Sahar Road and thus be liable to pay the aforementioned compensation?

Decision of the Court

  • Entitlement for getting compensation in the form of TDR:
    • The Court carefully perused the facts of the case and recorded that the facts were legitimate and this was actually a case of a private property being taken for a public purpose without paying any compensation to the holder.
    • The Court held that this was a clear case of violation of Article 300A of the Constitution of India which states that 'No person shall be deprived of his property save by authority of law'. Thus, in this case, Right to Fair Compensation must be followed and the Petitioners were entitled to compensation in cash or in kind. Since the Petitioners preferred TDR, TDR was to be granted to them. The State Government, which was a Respondent in the suit, had also made the averment that the Petitioners were entitled to the TDR.
  • Planning Authority liable to pay compensation:
    • The Court found it very surprising that neither the MCGM nor the MMRDA were claiming jurisdiction over that stretch of road. This was indeed highly improbable as one of the authorities had acquired this land, built a road on it and then handed it over to MIAL.
    • The MCGM had made the averment that it could issue the requisite TDR but if it was directed to do so by the MMRDA, it would. The MMRDA, on the other hand, had averred that as a Special Planning Authority, it had jurisdiction over the airport and the land but had no jurisdiction over that specific strip of road.
    • Therefore, the Court decided to issue the writ of mandamus, since the Petitioner was entitled to TDR. Since it was only MCGM who could issue the TDR, the Court decided to only put the MCGM within the ambit of this writ.
    • The Court made this decision because it could not issue the Mandamus with respect to MMRDA since MMRDA was actively denying any jurisdiction over that stretch of road and even if it was later discovered that the property was under the jurisdiction of the MMRDA, at best, MMRDA could issue a No Objection Certificate (NOC) or direct the MCGM to issue the DRC.
    • Thus, the Court directed MCGM to issue the DRC within a period of 4 weeks from the date of the order, i.e September 13, 2023.

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