Delhi High Court
National Highways Authority Of ... vs Irb Ahmedabad Vadodara Super ... on 6 February, 2017
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 06.02.2017
+ O.M.P (COMM) 298/2016 & IA No. 7250/2016
NATIONAL HIGHWAYS AUTHORITY OF INDIA ..... Petitioner
versus
IRB AHMEDABAD VADODARA SUPER EXPRESS
TOLLWAYS PRIVATE LIMITED ..... Respondent
Advocates who appeared in this case:
For the Petitioner : Mr Sandeep Sethi, Senior Advocate with Mr
Mukesh Kumar and Ms Gunjan Sinha Jain,
Advocates alongwith Mr R. K. Garg, Manager,
NHAI.
For the Respondent : Mr P. Chidambaram and Mr Jayant Bhushan,
Senior Advocates with Mr Shivaji M. Jadhav,
Mr Anshuman Animesh, Mr Nipun Katyal, Mr
Ketan Paul, Mr Ankit Nigam and Ms Reeja
Varghese, Advocates.
CORAM
HON'BLE MR JUSTICE VIBHU BAKHRU
JUDGMENT
VIBHU BAKHRU, J
1. National Highways Authority of India (hereafter 'NHAI') has filed
the present petition under Section 34 of the Arbitration and Conciliation
Act, 1996 (hereafter 'the Act') inter alia impugning the arbitral award dated
08.01.2016 (hereafter 'the impugned award') made and published by the
Arbitral Tribunal (by majority).
2. By the impugned award, the Arbitral Tribunal has allowed the
claims made by the respondent, M/s IRB Ahmedabad Vadodara Super
Express Tollways Pvt. Ltd. (hereafter 'IRB') and has rejected the counter-
claims made by NHAI.
3. IRB was awarded a project for Six Laning of Ahmedabad to
Vadodara Section of NH 8 from Km. 6.400 to Km. 108.700 (Length
102.300 Km.) in the State of Gujarat (hereafter referred to as 'the NH8
section') and Improvement of Existing Ahmedabad Vadodara Expressway
from Km. 0.000 to Km. 93.302 in the State of Gujarat(Length 93.302Km.)
(hereafter referred to as 'the Expressway') under NHDP Phase V on Design
Build Finance Operate Transfer (DBFOT) Toll Basis (hereafter
collectively referred to as „the works‟).
4. The principal dispute between the parties relates to the applicability
of concessions for local vehicles and frequent travellers using the
Expressway. While IRB claims that concessional passes are not required to
be issued either as per the provisions of the agreement between the parties
or the National Highways Fee (Determination of Rates and
Collection) Rules, 2008 (hereafter 'the 2008 Toll Rules'), NHAI contends
to the contrary.
5. Briefly stated, the relevant facts to address the aforesaid controversy
are as follows:
5.1 NHAI invited bids by Request for Proposals (RFP) for the works,
prescribing technical and commercial terms. Thereafter, the selected
bidder‟s bid, submitted in response to the RFP, was accepted by NHAI and
a Letter of Award (LOA) dated 28.04.2011 was issued in favour of the
selected bidder. Thereafter, IRB (the concessionaire) was incorporated by
the selected bidder as a limited liability company to perform the
obligations and exercise the rights of the selected bidder pursuant to the
LOA. Subsequently, on 25.07.2011, the Concession Agreement was
executed between NHAI and IRB for a concession period of 25 years. The
appointed date was declared as 01.01.2013.
5.2 On 15.12.2012, IRB sent a letter submitting the proposal for
validation of the toll rates for the Expressway. IRB further requested NHAI
to issue the toll fee Notification and provide the validated toll rates to start
the toll collection activity at the Expressway. These rates provided for
discounts/concessions; IRB claims that the same were included by
inadvertence. In response, NHAI validated the rates by a letter dated
26.12.2012, which did not provide for discounts/concessions on the
Expressway. However, subsequently the issue was clarified and NHAI
insisted that concessions be provided to local and frequent users of the
Expressway as well. NHAI states that IRB started issuing return passes
and multi journey passes after six months with effect from 01.07.2013; that
is, after six months from the appointed date of 01.01.2013. Further NHAI
did not issue monthly passes for local users (non-commercial vehicles,
registered within 20 kilometres of the toll plazas). This led to disputes
between the parties.
5.3 As the disputes between the parties could not be resolved, IRB sent a
notice invoking the procedure for conciliation as per clause 44.2 of the
concession agreement for amicable settlement of the disputes. However
since amicable settlement of the disputes could not be arrived at, the parties
executed a supplementary agreement dated 14.07.2014 for resolution of
disputes through rules and procedure of Society of Affordable Resolution
of Disputes (hereafter 'SAROD Rules'). While IRB nominated Prof. Dr.
Vandana Bhatt, NHAI nominated Mr Basant Kumar as their nominee
arbitrators respectively. Both the appointed arbitrators appointed Maj. Gen.
(Retd.) S.K. Sahijpal as the Presiding Arbitrator.
6. IRB filed its Statement of Claims which are summarised as under:
1. NHAI to allow IRB to issue only single journey tickets
without giving any discounts/concessions on Ahmedabad -
Vadodara Expressway.
2. NHAI to make good the recurring losses incurred by IRB
on account of forced issuance of concession passes to the
vehicles.
3. NHAI to protect IRB, if users object and protest against
removal of Concession passes on Ahmedabad Vadodara
expressway and bear the cost of damages, if IRB is unable
to withdraw the Concessions.
4. Pendente lite interest at the rate of 18% per annum.
5. Cost of arbitration.
7. Before the Arbitral Tribunal, IRB contended that Rule 9 of the 2008
Toll Rules - which required the Concessionaire (IRB) to provide a pass for
multiple journeys to cross a toll plaza - was applicable only with respect to
the NH8 section and could not be made applicable to the Expressway. IRB
claimed that granting concessions as per Rule 9 of the 2008 Toll Rules
would be applicable on the Highway having open tolling system but not on
the Expressway, having access controlled/closed tolling system. IRB
further pleaded that a concessional pass could be issued only to cross a
specified toll plaza and not any toll plaza. In other words, it contended that
a pass could not be used to cross or enter another toll plaza which is not
located in a district in which the pass is issued.
8. Next, it was contended that the term "Project Highway" as used in
Sub-article 27.3 and 27.5 of the concession agreement would not include
within its ambit, the Expressway as Sub-article 27.1.1 of the concession
agreement distinctly defined the word "Project Highway" to mean the
Ahmedabad - Vadodara section of the National Highway No. 8. IRB
claimed that Article 48 - which included both, the Expressway and the
NH8 section in the definition of "Project Highway" - would not be
applicable as there was no ambiguity about the language of Sub-article
27.3 and 27.5 as regards the word "Project Highway".
9. IRB further alleged that before the appointed date of the project, the
Expressway was operated by a 100% subsidiary of NHAI under a
concession agreement and the National Highways (Collection of Fees by
Any Person for the Use of Section of National Highways / Permanent
Bridge / Temporary Bridge on National Highways) Rules, 1997 and no
concessions were given to the local users of the Expressway and further
that even after the 2008 Toll Rules came into force, the concessions were
not offered on the Expressway. Therefore, NHAI's interpretation as regards
the applicability of concessions on the Expressway prior to the appointed
date, was in line with that of IRB.
10. IRB also referred to the Review of Toll Policy Report published by
the Planning Commission, Government of India to contend that provision
of concessions under the 2008 Toll Rules was for Toll Plazas under Open
Toll system and not for the Closed Toll system.
11. NHAI countered the claims made by IRB. NHAI asserted that the
concession agreement provided for concessions with respect to the
Expressway as well, and the same had already been clarified in response to
pre-bid queries. It further asserted that fee for the NH8 section and the
Expressway was provided under the same notification issued by the
Ministry of Road Transport and Highways which also expressly provided
for concessions and therefore, IRB could not avoid its obligations to
provide the necessary concessions. NHAI further explained that its
subsidiary was collecting toll on the Expressway prior to the execution of
the concession agreement, on the basis of a separate concession agreement
dated 05.03.2002, which was completely different from the concession
agreement entered into with IRB. NHAI also challenged the manner in
which IRB had sought to quantify its claims. Further NHAI also raised
counter claims which are summarised as under :
1. IRB shall give concessions to local and frequent users of
the Expressway.
2. Allow recovery of Rs 5.05 crores with interest @bank rate
+ 5% p.a till the date of payment from IRB.
3. Recovery with damages at 25% and interest @ bank rate
+5% p.a. for not giving monthly passes for non-commercial
vehicles by IRB.
4. Cost of arbitration.
Impugned Award
12. The Arbitral Tribunal passed the impugned award allowing the
claims made by IRB and rejecting the claims of NHAI. The Arbitral
Tribunal held that there was no provision for issuance of a monthly pass or
tickets at concessional rates in the concession agreement and the intention
of the parties was that two roads (the Expressway and the NH8 section)
were to be treated differently. The Arbitral Tribunal referred to a letter
dated 03.01.2013 issued by the General Manger of NHAI wherein it was
admitted by NHAI that the NH8 section and the Expressway are to be
treated as two separate roads for collection of toll.
13. It was further held that before the commencement of the concession
agreement, concessions were granted on the NH8 section but no
concessions were granted by NHAI on the Expressway; even though both
the toll roads were being operated by a 100% subsidiary of NHAI.
14. The Arbitral Tribunal further held as follows :
"Expressway cannot be considered and treated at par with
National Highway nor National Highway can offer the
services being offered by Expressway.
Expressway is a superfast, unhindered driveway from
point to point without any possibility of a 'U' turn on the
road, whereas the National Highway offers exit and entry
to the interim points for short drive and there is no
sanctity to provision of a 'U' turn being possible.
**** **** ****
The intention of the parties under the Agreement and the
scheme is plain and clear. The public has been offered
option of interim stations visit or a thorough speedy travel
from one end of Expressway to the other. There is no
reason for any other confusion so that the people using the
Expressway are not taxed rationally for the better facility.
It is therefore, absolutely essential that the Claimants
contention need be endorsed. The Respondents - case
stands rejected.
**** **** ****
The Tribunal is completely conscious and aware that the
parties have referred this issue based on whether a return
toll ticket need be issued as interpreted by NHAI. The
Tribunal is fully convinced and the same will be against
the intention, spirit, the terms of the contract and purpose
of providing two separate and different of categories of
roads will be defeated and hence it will be cardinal breach
of contract. Hence, the status quo ante to the direction of
NHAI for recovery and subsequent action is awarded to be
restored with immediate effect."
15. In view of the above, the Arbitral Tribunal (by majority) made the
following award:
"THE AWARD
We, member of Arbitral Tribunal having entered upon
reference and heard the parties, pursued all documentation
brought on record, DO HEREBY DECLARE and publish
the award by majority of two Arbitrators as below. The
dissenting award by Shri Basant Kumar is attached
herewith separately alongwith this majority Award.
1. The Respondents must allow the Claimants
the authority to issue only single journey
without any discount on the Ahmedabad
Vadodara Expressway.
2. The Recurring losses incurred by the
Claimants on account of forced issuance of
concession passes to the vehicles
amounting to Rs. Rs.24,89,59,565.00 (July
2013 to April 2015). The amount will
attract interest @ 15 % p.a from the date of
the award till date of realization.
3. The recurring losses from May 2015 till
effective steps to restore situation of single
journey pass and no concession to locals.
This amount will attract interest @ 15 %
from the day audited account is submitted
till date of realization of payment.
Shri Basant Kumar (Co-Arbitrator) has desired to make
and publish a dissent Award may be annexed to the
majority Award in full. The majority Award is being made
and pronounced by the two Arbitrators viz. Maj. Gen.
(Retd) S. K. Sahijpal (Presiding Arbitrator) and Prof. Dr.
Vandana Bhatt (Co-Arbitrator)."
16. Mr Basant Kumar entered a dissenting opinion rejecting the claims
and counter-claims made by the parties. He held that Article 27.3 and 27.5
of the concession agreement were also applicable to the Expressway and
the word "Project Highway" was used for both the sections - the
Expressway as well as the NH8 section. Mr Basant Kumar rejected the
contention of IRB that implementation of concessions was impossible on
the Expressway by holding that lakhs of passes at concessional rates were
issued by IRB. He also rejected IRBs claim for compensation of loss on
account of discounted passes, holding that calculations had been made
without examining the correctness of numbers and further that the loss
claimed was presumptive. Mr Kumar also rejected the counter claims of
NHAI by holding as under :
"11.3 The stated amounts are not a loss to the Respondents
but it is the public that were deprived of the concessions. I
agree with the Claimants that the Respondents do not have
a claim on this presumptively calculated amount. There is
no mechanism by which the Respondents can restore to the
public the loss suffered.
11.4 I hold that the Respondents cannot be paid the amount
claimed and reject the Counter Claim."
Submissions
17. Mr Sethi, the learned senior counsel appearing for NHAI submitted
that the impugned award was contrary to the plain terms of the concession
agreement inasmuch as Article 27 of the Concession agreement plainly
provided for discounted fares to be applicable for the "Project Highway",
which was defined under Article 48 of the concession agreement to include
both, the NH8 section as well as the Expressway. He submitted that in the
circumstances, the impugned award, which sought to distinguish the NH8
section and the Expressway for the purposes of applicability of
concessional fare, was contrary to the plain language of the concession
agreement. He submitted that IRB's entitlement of demand and collection
of appropriate fee from users was subject to the conditions of the
concession agreement and the applicable rules, which required providing
discounts. Thus, IRB could not avoid its obligation to provide the
necessary discounts as contemplated under the concession agreement as
well as under the applicable rules. He earnestly contended that the
impugned award was perverse as no reasonable person could interpret the
concession agreement in the manner as was done by the Arbitral Tribunal
in the impugned award.
18. He further submitted that the impugned award had failed to deal
with the counter-claims made by NHAI and the same were rejected without
providing any reason.
19. Mr Sethi, contended that the reliance placed on the letter dated
03.01.2013 sent by the General Manager was wholly misplaced as that was
an internal communication from General Manager to Chief General
Manager (Tech) seeking his comments and in any event, the said letter was
rejected by a subsequent letter dated 11.01.2013, issued by the Chief
General Manager, directing implementation of concessions to the users of
the Expressway. He further submitted that the difficulties expressed by
IRB in implementing the scheme of discounts were non-existent as IRB
had implemented the scheme of discounts and in another similar case of
Allahabad bypass, similar concessions were being granted.
20. Mr Chidambaram, the learned senior counsel appearing for IRB
contested the arguments advanced on behalf of NHAI. He advanced his
contentions broadly on two fronts. First of all, he contended that Rule 9(1)
of the 2008 Toll Rules was wholly inapplicable to an expressway which
worked on a closed tolling system. He submitted that in a close tolling
system, the entry and exit points are limited and a user pays the toll
depending on the distance covered from the point of entry to the point of
exit; the fee is based on the distance covered and not on crossing a toll
plaza. He submitted that it is only in the case of NH8 section that toll is
collected on crossing a toll plaza with no reference to the actual distance
covered by the user. He earnestly contended that discounts as referred to
in Rule 9(1) of the 2008 Toll Rules were only applicable where the charge
of toll was based on crossing a toll plaza and not on the actual distance
covered.
21. Secondly, Mr Chidambaram contended that it was impractical to
provide the concessions as contemplated under the Rule 9(2) of the 2008
Toll Rules. He submitted that in terms of Rule 9(2) of the 2008 Toll Rules,
the concessionaire was required to charge 1.5 times the fee payable for a
single journey for two one way journeys within the validity period of 24
hours. He submitted that it would be impracticable to monitor the same.
He submitted that there are five toll plazas on the Expressway. As an
illustration, he submitted that if a person enters the Expressway at
Ahmedabad toll plaza and claims to be travelling to Nadiad, he would be
required to be issued an Ahmedabad - Nadiad return pass. He submitted
that the user could exit at Nadiad and take an alternate route (other than the
Expressway) to Vadodara and on return journey, enter the Expressway at
Vadodara and travel to Ahmedabad. And, would produce the Ahmedabad-
Nadiad return pass (and not the ticket issued at Vadodara) while exiting the
Toll Plaza at Ahmedabad. Thus, not making any further payment for the
journey for the section from Vadodara to Nadiad. He submitted that a
similar issue would arise in the case of a monthly pass system as well.
22. Lastly, Mr Chidambaram referred to the decision of the Supreme
Court in Associate Builders v. Delhi Development Authority : (2015) 3
SCC 49 and submitted that the findings of the Arbitral Tribunal are final
and cannot be interfered with unless the same are found to be perverse.
Reasoning and conclusion
23. As stated hereinbefore, the project in question consisted of works on
two stretches of road from Ahmedabad to Vadodara. The first being
National Highway No. 8 from Ahmedabad to Vadodara (NH8 section) and
second being the Ahmedabad and Vadodara expressway (the Expressway).
Both the stretches of road connect Ahmedabad to Vadodara albeit by a
different route. The controversy between the parties relates to applicability
of discounts for users of the Expressway and concern three kinds of
concessions: (i) multiple journey tickets for frequent travellers using a
section of the highway for two one way journeys during the period of 24
hours at the rate of 1.5 times the fare for a single journey ticket - return trip
passes for users of the Expressway; (ii) monthly passes consisting of 50
single journey coupons at the rate of 2/3rd of the aggregate fare for 50
single journeys; and (iii) passes in respect of non-commercial vehicles
which are owned by persons residing within 20 kilometres of the nearest
Toll Plaza.
24. The first and foremost issue to be addressed is whether IRB was
obliged to provide the necessary concessions to the users of the
Expressway in terms of the concession agreement. In this regard, it is
necessary to refer to Article 27 of the concession agreement which relates
to „User Fee‟. Sub-article 27.1 provides for collection and appropriation of
fee. By virtue of Sub-article 27.1.1 of Article 27 of the concession
agreement, IRB has the sole and exclusive right to demand, collect and
appropriate fee from the users of the Expressway subject to and in
accordance with the concession agreement and the 2008 Toll Rules read
with National Highways Fee (Determination of Rates and Collection)
Amendment Rules, 2010 and National Highways Fee (Determination and
Collection) Amendment Rules, 2011. Sub-article 27.1.1 also expressly
provides that IRB would not be entitled to demand any fee from the users
of the NH8 section till completion of six laning of the said highway.
25. Sub-article 27.3 of Article 27 of the concession agreement provides
for exemption to local users and Sub-article 27.5 provides for discounted
fee from frequent users. The relevant extracts of Article 27 of the
concession agreement are set out below:-
"27.1 Collection and appropriation of Fee
27.1.1 On and from the COD till the Transfer Date, the
Concessionaire shall have the sole and exclusive right
to demand, collect and appropriate Fee from the Users
of Ahmedabad - Vadodara Expressway Section
subject to and in accordance with this Agreement and
the National Highways Fee (Determination of Rates
and Collection) Rules, 2008, read along with National
Highways Fee (Determination of Rates and Collection)
Amendment Rules, 2010, read along with National
Highways Fee (Determination of Rates and Collection)
Amendment Rules, 2011 (the "Fee Rules"); Provided
that the Concessionaire shall not be entitled to demand,
collect and appropriate Fee from the Users of the
Project Highway from km. 6.400 to km 108.700 of
Ahmedabad Vadodara Section of NH 8 till the
completion of Six Laning i.e. before COD provided
that for ease of payment and collection, such Fee shall
be rounded off to the nearest 5 (five) rupees in
accordance with the Fee Rules; provided further that
the Concessionaire may determine and collect Fee at
such lower rates as it may, by public notice to the
Users, specify in respect of all or any category of Users
or vehicles.
27.1.2 The Parties acknowledge that a notification for levy
and collection of Fee shall be issued by the
Government under Section 8A of the Act (the "Fee
Notification"), read along with National Highways
Fee (Determination of Rates and Collection)
Amendment Rules, 2010, read along with National
Highways Fee (Determination of Rates and Collection)
Amendment Rules, 2011 within 120 (One hundred and
twenty) days hereof substantially in the form set forth
in Schedule-R.
27.1.3 The Concessionaire acknowledges and agrees that upon
payment of Fee, any User shall be entitled to use the
Project Highway and the Concessionaire shall not
place, or cause to be placed, any restriction on such
use, except to the extent specified in any Applicable
Law, Applicable Permit or the provisions of this
Agreement.
27.1.4 The Concessionaire acknowledges and agrees that any
User who is not liable for payment of the Fee shall be
entitled to use the Project Highway without any
restrictions, except to the extent specified in any
Applicable Law, Applicable Permit or the provisions
of this Agreement. For the avoidance of doubt, the
Concessionaire hereby acknowledges that Exempted
Vehicles are not liable to payment of Fee.
*** *** *** ***
27.3 Exemption for Local Users
The Concessionaire shall not collect any Fee from a
Local User for non-commercial use of the Project
Highway, and shall issue a pass in respect thereof for
commuting on a section of the Project Highway as
specified "in such pass and for crossing the Toll Plaza
specified therein. For carrying out the provisions of
this Clause 27.3, the Concessionaire shall formulate,
publish and implement an appropriate scheme, and
make such modifications to the scheme as may
reasonably be suggested by the Authority or by Local
Users from time to time; provided that for defraying its
expenses on issuing of passes and handling of Local
Users, the Concessionaire shall be entitled to charge a
monthly fee of Rs.150 (Rupees one hundred and fifty
only), with reference to the base year 2007-08, to be
revised annually in accordance with the Fee Rules to
reflect the variation in WPI, and then rounded off to
the nearest 5 (five) rupees; provided further that no
passes will be required or Fee collected from a vehicle
that uses part of the Project Highway and does not
cross a Toll Plaza.
*** *** *** ***
27.5 Discounted Fee for frequent Users
27.5.1 The Concessionaire shall, upon request from any
person, issue a return pass on payment of a sum equal
to 150% (one hundred and fifty per cent) of the Fee
payable for the respective vehicle if it were to
undertake a single one-way trip on the Project
Highway. Such return pass shall entitle the specified
vehicle to undertake a return journey within 24 (twenty
four) hours from the time of payment of Fee.
27.5.2 The Concessionaire shall, upon request from any
person for issue of 50 (fifty) or more one-way toll
tickets, issue such tickets at a discounted rate
equivalent to two-thirds of the Fee payable for the
respective vehicle. Such discounted tickets shall entitle
the specified vehicle to commute on the Project
Highway by using one ticket for a single one-way trip
at any time during a period of one month from the date
of payment of Fee.
*** *** *** ***
27.8 Fee collection points
Fee shall ordinarily be collected at the Toll Plazas from
vehicles crossing the Toll Plazas and using the whole
or part of the Project Highway; provided that for
preventing evasion of Fee by any vehicle
circumventing one or both of the Toll Plazas and using
the whole or part of the Project Highway located
between such Toll Plazas, the Concessionaire shall be
entitled to set up at its own risk and cost, and in
consultation with the Independent Engineer, its
temporary or permanent Fee collection booths, as may
reasonably be necessary for preventing such evasion.
For the avoidance of doubt, the Concessionaire hereby
acknowledges and agrees that it shall not determine or
collect Fee from Users who do not use any part of the
Project Highway which is situated between the two
Toll Plazas. It is further acknowledged and agreed that
the restrictions hereunder shall not extend beyond a
distance of 10 (ten) kilometres from the Toll Plazas
and the provisions of this Clause 27.8 shall be so
enforced as to minimise inconvenience to Users who
are not liable to payment of Fee. Notwithstanding
anything contained in this para "Fee Collection points"
shall always be governed by provisions of National
Highways Fee (Determination of Rates and
Collections) Rules 2008, read along with National
Highways Fee (Determination of Rates and Collection)
Amendment Rules, 2010, read along with National
Highways Fee (Determination of Rates and Collection)
Amendment Rules, 2011 (the "Fee Notification") in
this regard."
26. The Arbitral Tribunal has interpreted the aforementioned provisions,
which pertain to exemptions/concessions for local users and discounted fee
for frequent users, to be inapplicable to the Expressway as according to the
Arbitral Tribunal, the expression "Project Highway", as used in sub-article
27.3 and 27.5 of the concession agreement, only referred to the NH8
section and not the Expressway.
27. In my view, the aforesaid interpretation is ex facie flawed and
militates against the plain language of the concession agreement. Article
48.1 of the concession agreement defines the words and expressions as
used in the concession agreement including the expression "Project
Highway". The relevant extract from Article 48.1 is set out below:-
"48.1 Definitions
In this Agreement, the following words and
expressions shall, unless repugnant to the context or
meaning thereof, have the meaning hereinafter
respectively assigned to them:"
*** *** *** ***
"Project Highway" means the Site comprising the
existing road comprising NH- 8 from km 6.400 to km
108.700 (Length 102.300 km) in the State of Gujarat
and improvement of existing Ahmedabad Vadodara
Expressway from km 0.000 to km 93.302 (Length
93.302 km) in the State of Gujarat and all Project
Assets, and its subsequent development and
augmentation in accordance with this Agreement."
28. It is apparent from the above that the expression "Project Highway"
would include both the NH8 section as well as the Expressway. The
Arbitral Tribunal has referred to sub-article 27.1.1 of the concession
agreement to hold that the expression "Project Highway" only referred to
the NH8 section. This is plainly unsustainable. Sub-article 27.1.1, inter
alia, provides that ".....the Concessionaire shall not be entitled to demand,
collect and appropriate Fee from the Users of the Project Highway from
km. 6.400 to km 108.700 of Ahmedabad Vadodara Section of NH 8 till the
completion of Six Laning". This cannot be read to mean that the expression
"Project Highway" in Article 27 of the concession agreement would only
mean the NH8 section and exclude the Expressway. On the contrary, the
above language specifies that the reference is to the NH8 section of the
Project Highway; which only means that it does not refer to the other
section of the Project Highway, that is, the Expressway. The conclusion
that sub-article 27.1.1 defines Project Highway, is ex facie erroneous.
29. Sub-article 27.1.3 and sub-article 27.1.4 of the concession agreement
also records the acknowledgement and agreement of the concessionaire
that upon payment of fee, the user shall be entitled to use the Project
Highway; admittedly this applies to the Expressway as well. Plainly, the
expression "Project Highway" would also include the Expressway and
there was no occasion for the Arbitral Tribunal to hold that in the context
of Article 27, the expression "Project Highway" would only mean the NH8
section. It is well settled that an arbitral award that is contrary to the plain
language of the agreement between the parties would be amenable to
judicial review within the scope of Section 34 of the Act.
30. It is important to note that in response to the pre-bid queries, NHAI
had clarified that exemptions as per Article 27.3 of the Draft concession
agreement would be applicable. Further in response to another query as to
whether discounts would be applicable on the Expressway, NHAI had
responded that Toll would be as per the "Fee Rules". The relevant queries
and NHAI‟s response thereto are provided as under :
Exemption of Local users: Are the local users of the
Expressway also eligible for the clause 27.3 i.e.
"Exemption for Local Users" Should they be given the
facility of monthly fee of Rs.150/-.
Reply : As per Clause 27.3 of the Draft Concession
Agreement.
*** *** ***
Query No. 119 : Schedule R : Toll rates on Express way
Provide the base toll fee matrix of NE-1 since it is a closed
tolling system.
And also kindly confirm if the NH 8 Toll fee determination
rules is applicable for NE-1 Expressway also.
Reply : For both NH-8 and NE-1, toll would be collected as
per National Highways Fee (Determination of Rates and
Collection) Amendment Rules, 2011, read in conjunction
with National Highways Fee (Determination of Rates and
Collection) Amendment Rules, 2010 and National
Highways Fee (Determination of Rates and Collection)
Rules, 2008."
31. NHAI, on the strength of the aforesaid, had contended that there was
no scope for any confusion that concessions for local users/frequent users
would be available in the use of Expressway as well. The Arbitral Tribunal
has completely ignored the aforesaid contention and there is no discussion
regarding the same in the impugned award.
32. The reliance placed by the Arbitral Tribunal on the letter dated
03.01.2013 is also not warranted. The said letter was an internal
communication and more importantly was expressly withdrawn by a
subsequent letter dated 11.01.2013, which has been completely ignored by
the Arbitral Tribunal.
33. The next issue to be examined is whether Rule 9 of 2008 Toll Rules,
which provides for discounts to users, is inapplicable in the case of the
Expressway.
34. Rule 2(g) of the 2008 Toll Rules defines "expressway" as under:-
"(g) "expressway" means a national highway having a
divided carriageway suitable for high speed traffic
and with control of access."
35. It is apparent from the above that the word "expressway" is also a
National Highway, albeit with control of access. Entry 23 of the List I of
the Seventh Schedule to the Constitution of India reads as under:
"23. Highways declared by or under law made by
Parliament to be national highways."
36. Admittedly, the 2008 Toll Rules apply to expressways and have
been made in exercise of powers under Section 9 of the National Highways
Act, 1956, which is enacted by the Parliament. And, the legislative
competence for which is traceable to Entry 23 of List I.
37. Rule 3(1) of the 2008 Toll Rules provides for levy of fee and reads
as under:-
"3. Levy of fee.- (1) The Central Government may by
notification, levy fee for use of any section of national
highway, permanent bridge, bypass or tunnel forming part
of the national highway, as the case may be, in accordance
with the provisions of these rules:
Provided that the Central Government may, by notification,
exempt any section of national highway, permanent bridge,
bypass or tunnel constructed through a public funded
project from levy of such fee or part thereof, and subject to
such conditions as may be specified in that notification."
38. It is apparent from the above that the right of IRB to collect toll is
traceable to Rule 3(1) of the 2008 Toll Rules which, inter alia, provides for
levy of fee for use of any section of the National Highway. Admittedly,
this includes levy of fee for use of an expressway.
39. Rule 6 of the 2008 Toll Rules provides for collection of fee. Rule
6(1) and 6(2) are relevant and are set out below:-
"6. Collection of fee.- (1) Fee levied under these rules
shall be collected by the Central Government or the
executing authority or the concessionaire, as the case may
be at the toll plaza.
(2) Every driver, owner or person in charge of a
mechanical vehicle shall for the use of the section of
national highway, permanent bridge, bypass or tunnel,
before crossing the toll plaza, pay the fee specified under
these rules."
40. Rule 9 of the 2008 Toll Rules provides for discounts. Sub-rule 1,2
and 3 of Rule 9 reads as under:-
"9. Discounts.-(1) The executing authority or the
concessionaire, as the case may be, shall upon request
provide a pass for multiple journeys to cross a toll plaza
within the specified period at the rates specified in sub-rule
(2) of rule 9.
(2) A driver, owner or person in charge of a mechanical
vehicle who makes use of the section of national highway,
permanent bridge, bypass or tunnel, may opt for such pass
and he or she shall have to pay the fee in accordance with
the following rates, namely:-
Amount payable Maximum Number Period of validity
of one way
journeys allowed
One and half times of Two Twenty four
the fee for one way hours from the
journey time of payment
Two-third of amount Fifty One month from
of the fee payable for date of payment
fifty single journeys.
(3) A person who owns a mechanical vehicle registered for
non-commercial purposes and uses it as such for
commuting on a section of national highway, permanent
bridge, bypass or tunnel, may obtain a pass, on payment of
fee at the base rate for the year 2007-2008 of Rupees one
hundred and fifty per calendar month and revised annually
in accordance with rule 5, authorising it to cross the toll
plaza specified in such pass:
Provided that such pass shall be issued only if such
driver, owner or person in charge of such mechanical
vehicle resides within a distance of twenty kilometers from
the toll plaza specified by such person and the use of such
section of national highway, permanent bridge, bypass or
tunnel, as the case may be, does not extend beyond the toll
plaza next to the specified toll plaza.
Provided further that no such pass shall be issued if a
service road or alternative road is available for use by such
driver, owner or person in charge of a mechanical vehicle."
41. The contention that Rule 9 is not applicable for use of the
Expressway since the toll charged is for the specified distance and not on
mere crossing of a toll plaza is inconsiderable. In terms of Rule 6(1), the
fee for usage of the section of a national highway - which includes the
Expressway - can only be collected at the toll plaza. Thus, the reference to
a toll plaza in Rule 9 cannot be read as restricted to only a toll plaza on a
national highway other than an expressway. Whether the toll is collected
only on crossing of a toll plaza or it is collected for the specified journey,
would make little difference for the purposes of Rule 9 of the 2008 Toll
Rules as in either case, toll is collected only at a toll plaza in terms of Rule
6(1) of the 2008 Toll Rules.
42. Indisputably, the method of toll collection in respect of national
highways other than expressways and expressways is different. Whereas in
the case of former, toll is collected at a toll plaza irrespective of the
distance covered and in the latter case, toll is collected either at the toll
plaza at point of entry or at the toll plaza at the point of exit but the fee
collected depends on the distance covered. However, the difference in the
method of collecting toll does not in any manner dilute the provision that
the toll is collected at a toll plaza and in terms of Rule 9(1) of the 2008 Toll
Rules, a user would be entitled to obtain a pass at the rates as provided
under Rule 9(2) of the 2008 Toll Rules to cross a toll plaza. Obviously, the
expression 'toll plaza' in Rule 9(1) refers to the toll plaza at which the toll
is collected.
43. It is difficult to accept that whereas user fee can be collected on
crossing a toll plaza, the concessions for crossing a toll plaza would not be
available. The use of the word „toll plaza‟ in Rule 9(1) and the expression
"the toll plaza" in Rule 6(1) cannot have different connotations. In the
scheme of the 2008 Toll Rules, the right to collect toll cannot be divorced
from the obligation to provide concessions as provided.
44. It is also important to mention that the Ministry of Road Transport
and Highways had issued a notification dated 17.12.2012 (S.O. 2921(E))
under Section 8A of the National Highways Act, 1956 read with Rule 3 of
the 2008 Toll Rules as amended, fixing the rates for collection of fees. The
said notification expressly applied to both the NH8 section (which was
described as „Section 1‟) and the Expressway (which was referred to as
„Section 2‟). The notes at the end of the notification also prescribed the
rates for monthly passes for non-commercial vehicles owned by persons
residing within a distance of 20 kilometres from the Toll Plazas as also the
rates for passes for frequent users. The relevant extract from the notes to
the said notification are as under:-
"1. The fee levied and collected hereunder shall be due and
payable at the following Toll Plazas for the distance
specified for such Toll Plaza(s):
(a) For Ahmedabad - Vadodara section of NH 8 from COD.
Location of Toll Plaza(s) (Chainage) Length (in km) for which Fee is
payable
Km/Ch. 44.005, (near Radhvanaj 50.815
village in Kheda District)
Km/Ch. 92,000, (near Vasad village 50.486
in Vadodara District)
(b) For Ahmedabad - Vadodara expressway of NE 1 from
Appointed Date.
Location of Toll Plaza (chainage) Length (Km)
Ahmedabad Toll Plaza at Km 2.600
AUDA Ring Road Toll Plaza at Km
3.800
For the actual length travelled
Nadiad Toll Plaza at Km 43.855
Anand Toll Plaza at Km 58.616
Vadodara Toll Plaza at Km 86.000
3. The rate of monthly pass for a person who owns a
mechanical vehicle registered for non-commercial
purposes and resides within a distance of twenty
kilometres from the toll plaza is Rs.200.00 (Rupees Two
Hundred only) for the year 2012-13 and is subject to
revision every year as per the provisions of the National
Highways Fee (Determination of Rates and Collection)
Rules, 2008.
4. For multiple journeys on the highway section, passes
shall be issued at the following rates, namely.
Amount Payable Maximum number Period of validity
of one way journeys
allowed
One and half times of Two Twenty four hours
the fee for one way from the time of
journey payment
Two-third of amount of Fifty or more One month from date
the fee payable for fifty of payment
single journeys or more
*** *** *** ***
9. Based on the base rates of fee per km for the Base Year
2007-2008 as mentioned in Table 1 & 2 above, the actual
amount of fee to be charged from the mechanical vehicles
and the discounts will be calculated by the Authority and
revised annually in accordance with the rule 5 of the said
Rules provided that no revision shall be effected within six
months and the same shall be published in at least one
newspaper, each in English and vernacular language
accordingly."
45. The next controversy to be examined is whether issuance of passes
for multiple journeys on an expressway renders the monitoring of the
discounts impracticable, as contended on behalf of IRB.
46. In order to address the aforesaid issue, it is essential to understand
the manner in which the toll is collected on the Expressway. The
Expressway has five toll plazas situated at Ahmedabad, Auda Ring Road,
Nadiad, Anand and Vadodara. A person travelling on the Expressway can
only enter at one of the said five toll plazas and exit at another. It is stated
that when a user enters the Expressway at a toll plaza, he receives a ticket
indicating the toll plaza at which he had entered. The ticket also specifies
the toll plaza where he has to exit. The user then pays for the distance
travelled at the plaza where he exits the Expressway. It was contended that
the system of tolling makes it impracticable for issue of return journey
passes which are issued at 1 ½ times the fee for the single journey. The
illustration that was provided by Mr Chidambaram was of a user who
would enter the toll plaza at Ahmedabad for a journey to Nadiad; he would
be issued a ticket at the Ahmedabad toll plaza. He could exit at Nadiad
and then take an alternative route to go to Vadodara. On the return
journey, he would enter the Expressway at Vadodara where he would
collect a fresh ticket (bearing the name of the Vadodara Toll Plaza) for his
journey to Ahmedabad. However, while crossing the toll plaza at
Ahmedabad, he would not produce the ticket issued to him at Vadodara but
would produce the pass issued to him indicating the return journey from
Nadiad. It was contended that in this manner, the user would effectively
avoid paying for the journey from Vadodara to Nadiad and only paying for
the journey from Ahmedabad to Nadiad and back at concessional rate.
47. A closer examination of the aforesaid illustration would clearly
indicate that the difficulties expressed are only illusory. A person who
enters the Expressway from a toll plaza for his journey to another
destination - in the above mentioned illustration from Ahmedabad to
Nadiad - would be issued a ticket at the point of entry which would also
specify the exit plaza. Thus, in a case of return journey, a ticket would also
enable the user to enter again from the point of exit and complete the return
journey to the point of original entry. In the illustration mentioned above, it
would be from Nadiad to Ahmedabad. Thus, when a person using the
return pass enters the Expressway at Ahmedabad, he would be issued a
pass for the return journey as well which would indicate the exit toll plaza.
In the above illustration, the pass would indicate Nadiad as the exit toll
plaza. At the exit toll plaza at Nadiad, the user would pay 1 ½ times the
fare for the return pass. On the return journey, he would again have to pass
through the Nadiad toll plaza where the said pass could be validated
/stamped. He would not be charged any further fare on his exiting at the
Ahmedabad toll plaza within the period of validity of the pass on his
showing the return pass validated at Nadiad. There would be no difficulty
in implementing the same because the user would have to show his pass at
Nadiad toll plaza while entering the Expressway on the return journey and
that pass would be validated / stamped. In the illustration which was
earnestly canvassed, it was contended that the user could travel by an
alternate route to Vadodara after exiting at Nadiad and enter from
Vadodara and produce the return journey pass from Nadiad to Ahmedabad
while exiting the Expressway at Ahmedabad. This is plainly addressable
as the user would not be able to show the entry endorsement for the return
journey segment from Nadiad to Ahmedabad. In other words, his ticket
would not bear the endorsement of Nadiad Toll Plaza from where he ought
to have entered the Expressway on his return journey - the only proof of
entry on the Expressway on return journey would be the entry ticket issued
to him at Vadodara.
48. It is also important to note that it is not disputed that IRB has been
implementing and providing concessions to the users of the Expressway.
On a pointed query by the Court as to how the discount for a return journey
pass was being implemented; IRB produced a scanned copy of one of the
passes which clearly indicates the date; the validity period; the toll plaza at
which the user entered the Expressway; the exit toll plaza as well as other
particulars such as the fee, vehicle class, pass type etc. Thus, in fact, IRB
has been providing concessional passes for return journey at the
concessional rate of 1.5 times the fare of one way journey.
49. Similarly, there is no plausible reason why the monthly pass
covering 50 single journeys cannot be issued at 2/3 rd the amount of fee
payable for 50 single journeys.
50. Thus, the contention that the issuance of discounts in terms of Rule 9
of the 2008 Toll Rules is impracticable, is also unsustainable.
51. The Arbitral Tribunal was persuaded to hold in favour of IRB, inter
alia, for the reason that prior to the commencement of the concession
agreement, toll was being collected by a subsidiary of NHAI and no
concessions were provided by the said entity. NHAI had explained that toll
was being collected on the Expressway prior to execution of the concession
agreement dated 05.03.2002 which did not provide for any concessions.
According to NHAI, the concession agreement dated 05.03.2002 was
completely different from the concession agreement with IRB. The
impugned award does not indicate any reason or any discussion for
rejecting the aforesaid contention.
52. Before concluding, it is also relevant to note that in the financial
model (financial closure) submitted to NHAI, the financials clearly
indicated fund flows from collection of toll adjusted for the discount
applicable. In other words, in the financial closure statement submitted to
NHAI, it was contemplated that the discount on fee would be provided to
users of the Expressway. Mr Jayant Bhushan, the learned counsel
appearing for IRB did not dispute the above. He, however, submitted that
the financial closure had been appraised by the banks and it was the banks,
who were responsible for computing the fund inflow from toll collection.
This contention is also unpersuasive as admittedly, the financial closure
was submitted to NHAI on behalf of the concessionaire - IRB. At that
stage, IRB did not object that projected fund inflow submitted to NHAI
had been under stated on account inapplicable discount factor. Thus, IRB
cannot now be heard to contend otherwise.
53. For the reasons stated above, this Court is of the view that the
impugned award is fundamentally flawed, contrary to the express language
of the concession agreement and, thus, wholly unsustainable on the
touchstone of Section 34(2)(b)(ii) of the Act. Further the Arbitral Tribunal
has also failed to address all the issues raised by NHAI.
54. The impugned award is, accordingly, set aside. The pending
application stands disposed of. The parties are left to bear their own costs.
VIBHU BAKHRU, J
FEBRUARY 06, 2017
RK
