Delhi High Court
Mep Infrastructure Developers ... vs South Delhi Municipal ... on 6 November, 2020
#21 & 22
IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment Reserved on: 25.09.2020
Judgment Pronounced on: 06.11.2020
+ LPA 165/2020, CM APPL.13389/2020 & CM APPL.13580/2020
SOUTH DELHI MUNICIPAL CORPORATION .....Appellant
versus
MEP INFRASTRUCTURE DEVELOPERS LTD ...Respondents
+ LPA 167/2020 & CM APPL.14462/2020
MEP INFRASTRUCTURE DEVELOPERS LTD. .... Appellant
versus
SOUTH DELHI MUNICIPAL CORPORATION ..... Respondent
Advocates who appeared in this case:
For the SDMC : Mr. Sanjay Jain, ASG, Ms. Garima Prashad, Standing
Counsel for SDMC
For the MEP ': Mr. Mukul Rohatgi, Senior Advocate and Mr.
Abhishek Manu Singhvi, Senior Advocate with
Mr.Rajiv S. Dwivedi and Mr. Azeem Samuel,
Advocates
CORAM:
LPA 165/2020 & 167/2020 Page 1 of 85
HON'BLE MR. JUSTICE SIDDHARTH MRIDUL
HON'BLE MR. JUSTICE TALWANT SINGH
JUDGMENT
TALWANT SINGH, J. (via Video Conferencing)
1. The present matter has been taken up for hearing by way of
Video Conferencing on account of COVID-19 pandemic.
2. By this common order, we are adjudicating LPA No. 165/2020
titled as South Delhi Municipal Corporation v. MEP Infrastructure
Developers Ltd. and LPA No.167/2020 titled as MEP Infrastructure
Developers Ltd. v. South Delhi Municipal Corporation as both of them
have, in sum and substance, challenged the order dated 12.06.2020
passed by learned Single Judge in W.P.C. No.2241/2020 and order
passed on 24.06.2020 in review petition No.107/2020. By order dated
12.06.2020, the learned Single Judge had taken up for hearing
C.M.No.11093/2020 moved by MEP Infrastructure Developers Ltd.
(hereinafter referred to as "MEP") for modification of order dated
02.03.2020 alongwith other miscellaneous applications to place
additional facts on record, amendment of writ petition and for
extension of effective date of termination of the contract and for
hearing W.P.C. No. 2241/2020 and W.P.C. No.370/2020 together as
well as an application moved by South Delhi Municipal Corporation
(hereinafter referred to as "SDMC") seeking dismissal of the writ
petition. However, no order was passed in C.M.No.11397/2020 filed
by SDMC for dismissal of the writ petition and the same was
adjourned till the next date.
3. The writ petition No.2241/2020 was filed mainly challenging an
order dated 31.01.2020 passed by Commissioner of SDMC and a
subsequent notice of termination of the contract dated 14.02.2020
served upon MEP. During the pendency of the writ petition, an
amendment application was moved and said application was allowed
by learned Single Judge. Now the writ petition No.2241/2020 has
enlarged reliefs as under:
"a. Issue of a writ of mandamus or any other appropriate
writ and appoint an independent Adjudicator to adjudicate
the claims of the petitioner.
b. Issue a declaratory writ to the effect that clause 16 of the
agreement which provides for adjudication mechanism has
been left unworkable on account of actions and inactions of
the SDMC Commissioner;
c. Issue a writ of certiorari and quash the order dated
31.01.2020 passed by the Commissioner SDMC;
d. Quash the Impugned Notice dated 14.02.2020 issues
consequent to the Impugned Order;
e. During the pendency of the writ petition, stay the
Impugned Notice dated 14.02.2020;
f. Issuance a suitable writ, order and direction declaring
that in the guise of section 113 (2) (g) of the Delhi
Municipal Corporation Act, 1957 the petitioner cannot be
compelled to pay to the respondent no. 1 more than the
actual collected towards toll tax from commercial vehicles
entering the NCT, Delhi;
g. issue a writ in the nature of mandamus directing the
respondents to make a fresh assessment as to the
circumstances affecting toll collection taking into account
the circumstances highlighted by the petitioner and reassess
and re-determine the annual weekly amount payable by the
petitioner to the SDMC towards toll tax;
h. Issue a writ in the nature of mandamus directing the
respondents to take into consideration the change in
circumstances make suitable downward revision in the
weekly/annual remittance commensurate with the reduction
in toll tax paying commercial vehicles and taking into
account the tax leakage on account of free lanes;
i. Issue a writ in the nature of certiorari quashing the
demand of .1% per that that is 36.5% per annum in the
demand letter dated 18.11.2019 as being in terrorem and
inequitable;
iA. Be pleased to quash the letter of termination dated
16.03.2020 issued by the respondent to the petitioner;
iB. Be pleased to quash the NIT dated 28.04.2020 issue by
the respondent consequent to the notice of termination
16.03.2020;
iC. During the pendency of this writ petition, pass an
interim order directing the respondent to keep in abeyance
the Termination Notice dated 16.03.2020 as well as NIT
dated 28.04.2020 for fresh bidding for collection of tax, till
the final disposal of the instant writ petition;
j. To issue a Writ order or direction in the nature of
CERTIORARI and quash the Termination Notice dated
16.03.2020 and subsequent extension of termination dated
issued by the respondent as being illegal;
k. To issue a writ order or direction in the nature of
CERTIORARI and quash the NIT dated 27.04.2020 issued
by the Respondent consequent to the notice of termination
dated 16.03.2020;
l. During the pendency of this writ petition, pass ad interim
order direction the respondent to keep in abeyance the
Termination Notice dated 16.03.2020 and subsequent
extension of termination date as well as NIT dated
27.04.2020 for fresh bidding for collection of tax, till the
final disposal of the instant writ petition;
m. Direct that the money appropriated by the Respondent by
way of encashment of bank guarantee for Rs.64 crore, will
be held by the respondent as a security deposit after
adjusting therefrom the amount payable by the petitioner
towards ECC;
n. Pass such other order/orders as this hon'ble court may
deem fit and proper in the facts and circumstances of this
case."
4. If we go little back in history, the SDMC had issued an NIT and
had called for tenders for collection of the entry tax/toll tax in Delhi in
the year 2017 and the contract was awarded to MEP and since then
MEP is managing about 124 Toll Plazas, which have been established
on all the roads through which one can enter the National Capital
Territory of Delhi. It is pertinent to mention here that apart from
collection of the toll, MEP is also authorized to collect ECC i.e.
Environment Compensation Cess, which is imposed upon certain type
of vehicles entering Delhi as per direction of Hon'ble Supreme Court.
The amount of ECC is not part of the contract and it is to be collected
and handed over by MEP to Government over and above the contract
amount. The terms on which the contract was awarded to MEP by
SDMC vide agreement dated 28.09.2017 was that MEP had agreed to
pay cumulative and lump sum weekly remittance of Rs.23.13 crores,
totaling to Rs.1,206 crores per annum for two years with effect from
01.10.2017 and thereafter to enhance the weekly amount to Rs.24.29
crores, i.e., Rs.1,266 crores per annum with effect from 01.10.2019
after giving effect to 5% enhancement. The safeguards for due
performance of the contract, by way of submission of bank guarantees
etc., were also taken. As per SDMC, when certain violations were
committed by the MEP, it sent a demand notice dated 18.11.2019 by
which MEP was required to pay a sum of Rs.450.69 crores as dues
besides penalty @ 0.1 % per day. This demand notice was challenged
by MEP by filing a writ petition bearing No.12483/2019, in which an
order was passed on 26.11.2019 by learned Single Judge reducing the
weekly commitments of MEP for the time being to Rs.20.00 crores
per week and SDMC was directed to pass a fresh order giving reasons.
The order dated 26.11.2019 in W.P.C.No.12483/2019 is reproduced as
under:
W.P.(C) 12483/2019 and CM APPL. No.50933/2019
1. This writ petition is filed seeking the following reliefs:
"a. Issuance a suitable writ, order and direction
declaring that in the guise of section 113 (2) (g) of
the Delhi Municipal Corporation Act, 1957 the
petitioner cannot be compelled to pay to the
respondent no. l more than the actual amount
collected towards toll tax from commercial vehicles
entering the NCT, Delhi;
b. Issue a writ in the nature of declaration, declaring
that the Toll Tax & ECC Agreement is ultra vires
Section 113 (2) (g) of the Delhi Municipal
Corporation Act, 1957 to the extent it contemplates
payment of amount by the petitioner to the
respondent no. l in excess of the toll tax actually
collected by the petitioner;
c. Issue a writ in the nature of mandamus directing
the respondents to make a fresh assessment as to the
circumstances affecting toll collection taking into
account the circumstances highlighted by the
petitioner and reassess and re-determine the annual/
weekly amount payable by the petitioner to the
SDMC towards toll tax;
d. Issue a writ in the nature of mandamus directing
the respondents to take into consideration the
change in circumstances make suitable downward
revision in the weekly/ annual remittance
commensurate with the reduction in toll tax paying
commercial vehicles and taking into account the tax
leakages on account of free lanes;
e. Issue a writ in the nature of certiorari quashing
the demand notice dated 18.11.2019 issued by the
respondent to the petitioner for payment of
Rs.450.6973 crores.
f. Issue a writ in the nature of certiorari quashing
the demand of .1 % per day that is 36.5% per annum
in the demand letter dated 18/11/2019 as being in
terrorem and inequitable.
g. Issue a writ in the nature of Mandamus directing
the SDMC to provide a suitable mechanism for
resolution of disputes/grievances of the petitioner as
the mechanism provided by the contract has become
unworkable."
2. The case of the petitioner is that for the purpose of
collecting Toll Tax, SDMC floated a tender on 21.07.2017
inviting bids from interested parties to collect Toll Tax and
ECC from specified commercial vehicles at 124 toll
plaza/post/barriers location bordering Delhi.
3. The petitioners made a bid and were declared successful.
An agreement was signed between the petitioner and
respondent No. 2 on 28.09.2017. As per the agreed terms,
the petitioner agreed to pay to the respondent a sum of Rs.
23.12 crores per week being a total of Rs. 1206 crores per
annum for the period of five years subject to enhancement of
5% in the awarded amount after completion of every two
years. Presently, it is stated that as per the agreement, the
petitioner are obliged to pay Rs.24.28 crores per week.
4. The grievance of the petitioner is that the Eastern
Peripheral Expressway was opened for general public
traffic on 27.05.2018. On 16.01.2019, a meeting of a High
Level Committee of the respondent took place. In the said
meeting, they deliberated that the traffic entering Delhi has
reduced due to opening of the Eastern peripheral
Expressway. It was estimated in the meeting that was held
on 31.08.2018 amongst SDMC, NHAI and the petitioner
that on opening of the Eastern Peripheral Expressway there
is a reduction of 30% in the commercial traffic
approximately and it would be higher on the completion of
the Western Peripheral Expressway. The grievance of the
petitioner is that at present weekly expected revenue from
124 entry points is only Rs.19.25 crores taking into
consideration all other aspects. On the annual basis
collection of amounts calculated on the basis of survey
report is approximately Rs.1000 crores which is far below
the awarded contract of Rs.1206 crores per annum.
5. It is the case of the petitioner that they have been
regularly sending representations to the respondent with
regard to decline in toll revenue due to diversion of traffic
from 01.06.2018. On the representation of the petitioner, a
High-Level Committee was constituted to look into all the
aforesaid claims as raised by the petitioner. The committee
on 17.10.2019 is said to have made a recommendation and
approved that a sum of Rs. 18,98,54,798/- be reduced from
the outstanding claim made by the respondent of
Rs.446,46,55,359/-.
6. On 18.11.2019, the respondent has issued a demand
notice to the petitioner asking them to deposit a sum of Rs.
450.69 crores and the penalty amount of .1% per day i.e.
36.5% per annum within a period of seven days failing
which action shall be taken for revocation of the bank
guarantee and post-dated cheques.
7. Learned senior counsel for the petitioner has vehemently
urged as follows:
(i) He has urged that as is apparent from the minutes of the
meeting noted above, there has been a reduction of at least
30% in the traffic on the opening of the Eastern peripheral
Expressway. This has further reduced on the opening of the
Western Peripheral Expressway. Hence, he submits that the
petitioner cannot be made to pay toll tax which they have
not been collecting and will not be able to collect given the
volume of traffic that is passing through various toll booths.
(ii) It is further pleaded that on 04.06.2018, a direction was
issued by the respondent not to collect toll tax and ECC
from other than the allotted six lanes. It is stated that this
itself is causing a loss of Rs.36.81 lakhs per day.
(iii) It is further pleaded that Clause 16 of the agreement
between the parties stipulates a dispute resolution clause.
Under the said clause, in case any disputes are stated,
decision has to be given by a competent officer in
connection with or arising out of the agreement. If the
competent officer fails to give his instructions or decision in
writing or if the contractor is dissatisfied with the
instructions of the competent officer, an appeal to the
Commissioner, SDMC shall lie who shall give an
opportunity to the contractor to be heard, if the later so
desires. The Commissioner, SDMC shall give his decision in
writing within 30 days on receipt of the contractor's appeal.
It further pleaded that the respondent before raising a
demand of Rs. 450 crores ought to have followed the
principles of natural justice.
8. Learned senior counsel for the respondent has pleaded as
follows:
(i) He submits that the floor price of the bid was Rs.636
crores but the petitioner themselves made a bid of Rs. 1206
crores per annum. The second highest bid was of the bidder
whose bid was at Rs. 811 crores. Meaning thereby, the
petitioner themselves had made a much higher bid in an
effort to grab the contract in question.
(ii) He further submits that in case toll tax is collected is
higher than the petitioner's bid offer, the balance would be
retained by the petitioner with themselves and would not be
handed over to the respondent. Hence, he states that it was
for the petitioner to have properly judged the possible
revenue collection and made a bid accordingly.
(iii) He further states that presently, a total amount of
Rs.450 crores is outstanding whereas the respondent have
only a bank guarantee of Rs. 64 crores and some post-dated
cheques as a security.
9. Given the nature of submissions made, this writ petition
can be disposed of at this stage.
10. I may note that the dispute resolution clause in the
agreement between the parties reads as follows:
"16. Dispute Resolution Clause:
16.1 Except where otherwise provided in the
agreement, all questions and disputes in any way
arising out of or relating to the agreement shall be
dealt with as mentioned below.
16. 2 In the event the Contractor consider any work
demanded of it as being outside the requirement of
the Agreement, or disputes any record or decision
given in writing by the Competent officer in any
matter in connection with or arising out of the
Agreement, to be unacceptable, it shall promptly
within (15) days request the Competent Officer in
writing to give his instructions or decision 1 in
respect of the same. Thereupon, the competent Officer
shall give his written instruction or decision within a
period of (30) days for the receipt of the Contractor's
Letter.
16.3 If the Competent Officer fails to give his
instructions or decision in writing within the
aforesaid period or if the Contractor is dissatisfied
with the instructions or decision of the Competent
Officer, the Contractor may, within (15) days of
receipt of Competent Officer's instruction or decision,
appeal to the Commissioner, SDMC who shall afford
an opportunity to the Contractor to be heard, if the
later so desires, and to offer evidence in support of its
appeal. The Commissioner, SDMC shall give his
decision in writing within (30) days of receipt of
Contractor's appeal which shall be acceptable to the
Contractor."
11. It is manifest from the above that a procedure has been
incorporated in the Agreement whereby in case any
contractor, namely, the petitioner has any dispute or any
grievance, he can approach a competent officer/the
Commissioner, SDMC who has to after giving a hearing
pass a reasoned order.
12. In my opinion, it would be in the interest of justice that
before the W.P. (C) 12483/2019 Page 7 of 10 respondent
enforces their demand as now claimed by demand dated
18.11.2019, first they should give a hearing to the petitioner
and thereafter taking into account the submissions of the
petitioner pass an appropriate reasoned order.
13. Reference may be had to the judgment of the Supreme
Court in the case of Swadeshi Cotton Mills vs. Union of
India, (1981) 1 SCC 664 where the court held as follows:
"32. The maxim audi alteram partem has many
facets. Two of them are: (a) notice of the case to
be met; and (b) opportunity to explain. This rule
is universally respected and duty to afford a fair
hearing in Lord Lore-burn's oft quoted language,
is "a duty lying upon everyone who decides
something", in the exercise of legal power. The
rule cannot be sacrificed at the altar of
administrative convenience or celerity; for,
"convenience and justice" -- as Lord Atkin
felicitously put it -- "are often not on speaking
terms [General Medical Council v. Spackman,
1943 AC 627, 638]".
xxxxx
94. The further question to be considered is: What
is the effect of the non-observance of this
fundamental principle of fair play? Does the non-
observance of the audi alteram partem rule,
which in the quest of justice under the rule of law,
has been considered universally and most
spontaneously acceptable principle, render an
administrative decision having civil
consequences, void or voidable? In England, the
outfall from the watershed decision, Ridge v.
Baldwin [1964 AC 40: (1963) 2 All ER 66 (HL)]
brought with it a rash of conflicting opinion on
this point. The majority of the House of Lords in
Ridge v. Baldwin [(1978) 1 SCC 248] held that
the nonobservance of this principle, had rendered
the dismissal of the Chief Constable void. The
rationale of the majority view is that where there
is a duty to act fairly, just like the duty to act
reasonably, it has to be enforced as an implied
statutory requirement, so that failure to observe it
means that the administrative act or decision was
outside the statutory power, unjustified by law,
and therefore ultra vires and void (see Wade's
Administrative Law, ibid., p. 448). In India, this
Court has consistently taken the view that a quasi-
judicial or administrative decision rendered in
violation of the audi alteram partem rule,
wherever it can be read as an implied
requirement of the law, is null and void (e.g.
Maneka Gandhi case [1964 AC 40 : (1963) 2 All
ER 66 (HL)] and S.L. Kapoor v. Jagmohan
[(1970) 2 WLR 1009: (1970) 2 All ER 528 (CA)].
In the facts and circumstances of the instant ease,
there has been a noncompliance with such implied
requirement of the audi alteram partem rule of
natural justice at the pre-decisional stage. The
impugned order therefore, could be struck down
as invalid on that score alone. But we refrain
from doing so, because the learned Solicitor-
General in all fairness, has both orally and in his
written submissions dated August 28, 1979,
committed himself to the position that under
Section 18-F, the Central Government in exercise
of its curial functions, is bound to give the
affected owner of the undertaking taken-over, a
"full and effective hearing on all aspects touching
the validity and/or correctness of the order and/or
action/of takeover", within a reasonable time
after the takeover. The learned Solicitor-General
has assured the court that such a hearing will be
afforded to the appellant Company if it
approaches the Central Government for
cancellation of the impugned order. It is pointed
out that this was the conceded position in the
High Court that the aggrieved owner of the
undertaking had a right to such a hearing."
14. Given the terms of the contract as noted above i.e.
Clause 16 and the legal position regarding compliance of
the principles of natural justice, it is appropriate that the
respondent give a proper hearing to the petitioner and
thereafter pass a reasoned order. In the interest of justice, I
pass the following directions:
(i) Present writ petition would be treated as a
representation of the petitioner to the
Commissioner, SDMC.
(ii) He may give a hearing to the petitioner within
four weeks from today. If the Commissioner so
desires, he may nominate a retired judge of this
court for the necessary hearing and passing of a
reasoned order.
(iii) The Commissioner/Nominee of the
Commissioner would thereafter pass a reasoned
order. This exercise may be done within two
months from today.
(iv) The Commissioner/nominee of the
Commissioner is requested to pass a reasoned
order uninfluenced by any observations that have
been made by this court while passing this order.
Once the order is passed, the respondent is free to
take steps as per law. Needless to add, in case the
petitioner are not satisfied with the said order,
they are at liberty to take steps to challenge the
same as per law.
(v) In the meantime, the petitioner shall continue
to pay a sum of Rs.20crores per week starting
from the current week. In case there are two
consecutive defaults in making payment, the right
of the petitioner to a hearing and reasoned order
shall stand superseded.
(vi) Demand notice dated 18.11.2019 is kept in
abeyance subject to speaking order passed by the
Commissioner/Nominee of the Commissioner.
15. It has been pointed out that certain post-dated cheques
that were given by the petitioner are expiring in the next two
months. The petitioner will ensure that fresh post-dated
cheques are given to the respondent with the same validity
as was given earlier.
16. This order has been passed without prejudice to the
rights and contentions of the parties.
17. With the above, the present petition stands disposed of.
Pending application also stands disposed of."
5. In compliance to directions in the above order, a detailed order
was passed by Commissioner, SDMC on 31.01.2020 by which certain
claims of MEP were partially allowed and rest of the claims of MEP
were rejected. In terms of the order dated 31.01.2020, SDMC issued a
demand notice for Rs.592.67 crores alongwith penalty @ 0.1%, being
Rs.163.90 crores. By way of writ petition No.2241/2020, the order
dated 31.01.2020 passed by Commissioner of SDMC and the demand
notice dated 14.02.2020 were challenged. While hearing the interim
prayers of the MEP, i.e., the petitioner, the learned Single Judge was
pleased to pass an order dated 02.03.2020, which is reproduced
hereunder:
"W.P.(C) 2241/2020 & CM APPL. No.7822/2020
1. Issue notice. Learned counsel for respondent accepts
notice.
2. This Writ Petition is filed seeking to impugn the
speaking order passed dated 31.1.2020 and Demand
Notice dated 14.2.2020 issued pursuant to a hearing given
as directed by this court in its order dated 26.11.2019.
3. Learned senior counsel for the petitioner has raised
various submissions to plead as to why the impugned
order has been wrongly passed. He further submits that
the connected matter being W.P.(C)570/2020 is coming
up on 6.3.2020.
4. Learned senior counsel appearing for the respondent
has pointed out that there has not been proper compliance
of the order of this court dated 26.11.2019 inasmuch as
the petitioners have defaulted in making payment of (a)
Rs.20 crores per week as stated by this court; (b) have not
given fresh Post-Dated Cheques as was directed by this
court.
5. Counter-Affidavit be filed within one week. Rejoinder
thereto, be filed within one week thereafter. In the
meantime, petitioner will deposit all arrears, as directed
by this court in its order dated 26.11.2019, which as per
the respondent is Rs.115.04 crores in three equal monthly
instalments without prejudice to their rights and
contentions. First instalment will be payable within 15
days from today. He will also continue to pay Rs.20 crore
per week as stated in the earlier order dated 26.11.2019.
They will also ensure compliance of the order of this court
dated 26.11.2019 regarding issue of fresh Post-Dated
Cheques.
6. Subject to compliance of these directions, no coercive
steps may be taken against the petitioner, till the next
date of hearing.
7. List on 31.3.2020 at 2:15 PM.
8. Needless to add, in case the payment of Rs.20 crore per
week in future is defaulted or any other default takes
place as stated above, the interim order passed shall
automatically stand vacated.
9. In the meantime the respondent will take instructions
as to whether the matter can be referred to a Retired
Judge of this court as a Sole Arbitrator to be nominated by
the respondent.
10. A copy of this order be given dasti under signatures of
the Court Master to learned counsel for the parties."
6. Being not satisfied with the order dated 02.03.2020, MEP
moved C.M.No.11093/2020 for modification of order dated
02.03.2020 and vide impugned order dated 12.06.2020, the learned
Single Judge was pleased to modify the order dated 02.03.2020. The
relevant portion of the said order is reproduced hereunder:
"23. Both the notifications refer to suspension of continuous
obligation between the parties w.e.f. 19.02.2020. The
petitioner had, in the first instance, invoked the said force
majeure clause on 19.03.2020, therefore, at least till the
said date it was not effected apropos the operation of the
toll collections. The nation-wide lockdown was announced
on 24.03.2020 to be effective from the next day. The force
majeure period has not abated as per any government
notification; free movement of traffic is being regulated
even now at borders between the States. Evidently, the full
operability of the contract is hindered by orders of the
National and the State governments i.e. by circumstances
beyond the control of the petitioner.
24. In Halliburton Offshores (supra) the essence of the
dicta of the Supreme Court in Energy Watchdog (supra)
regarding force majeure has been summarized as under:
"..... 56. It is under this factual backdrop that the
ground of Force Majeure taken in March, 2020 would
have to be adjudged. The grounds taken to invoke the
Force Majeure clause are that due to outbreak of
COVID-19 experts from France who may be required
cannot travel to India. Since the Force Majeure clause
in the contract covers epidemics and pandemics, the
Contractor claims that its non-performance is justified
and the invocation of Bank Guarantees is liable to be
stayed. There is no doubt that COVID-19 is a Force
Majeure event. But was this event the cause of the non-
performance?
57. The law relating to Force Majeure has been
recently settled by the Supreme Court in the case of
Energy Watchdog v. Central Electricity Regulatory
Commission, (2017) 14 SCC 80. The principles laid
down by the Supreme Court in paragraphs 34-42 are
as under:
a) Force Majeure would operate as part of a
contract as a contingency under section 32 of the
Indian Contract Act 1872 (`ICA‟).
b) Independent of the contract sometimes, the
doctrine of frustration could be invoked by a party
as per Section 56, ICA.
c) The impossibility of performance under Section
56, ICA would include impracticability or
uselessness keeping in mind the object of the
contract.]
d) If an untoward event or change of
circumstance totally upsets the very foundation
upon which the parties entered their agreement it
can be said that the promisor finds it impossible
to do the act which he had promised to do.
e) Express terms of a contract cannot be ignored
on a vague plea of equity.
f) Risks associated with a contract would have to
be borne by the parties.
g) Performance is not discharged simply if it
becomes onerous between the parties.
h) Alteration of circumstances does not lead to
frustration of a contract.
i) Courts cannot generally absolve performance
of a contract either because it has become
onerous or due to an unforeseen turn of events.
Doctrine of frustration has to be applied
narrowly.
j) A mere rise in cost or expense does not lead to
frustration.
k) If there is an alternative mode of performance,
the Force Majeure clause will not apply.
l) The terms of the contract, its matrix or context,
the knowledge, expectation, assumptions and the
nature of the supervening events have to be
considered.
m) If the Contract inherently has risk associated
with it, the doctrine of frustration is not to be
likely invoked.
n) Unless there was a break in identity between
the contract as envisioned originally and its
performance in the altered circumstances,
doctrine of frustration would not apply.
58. The principles as laid down in Energy Watchdog
(supra) by the Supreme Court have to be applied to the
facts of the present case in order to assess as to
whether the performance of the Contractor was
prevented by the Force Majeure condition. Did
COVID-19 prevent the Contractor from bringing the
work on the three fields to completion and conclusion?
If so, is the encashment of Bank Guarantees liable to
be injuncted? ...
....
62. The question as to whether COVID-19 would
justify nonperformance or breach of a contract has to
be examined on the facts and circumstances of each
case. Every breach or non-performance cannot be
justified or excused merely on the invocation of
COVID-19 as a Force Majeure condition. The Court
would have to assess the conduct of the parties prior to
the outbreak, the deadlines that were imposed in the
contract, the steps that were to be taken, the various
compliances that were required to be made and only
then assess as to whether, genuinely, a party was
prevented or is able to justify its nonperformance due
to the epidemic/pandemic.
63. It is the settled position in law that a Force
Majeure clause is to be interpreted narrowly and not
broadly. Parties ought to be compelled to adhere to
contractual terms and conditions and excusing non-
performance would be only in exceptional situations.
As observed in Energy Watchdog (supra) it is not in the
domain of Courts to absolve parties from performing
their part of the contract. It is also not the duty of
Courts to provide a shelter for justifying non-
performance. There has to be a „real reason‟ and a
„real justification‟ which the Court would consider in
order to invoke a Force Majeure clause..."
25. What is clear from the aforesaid is that in terms of the
2nd March order i) Rs.20 crores were payable per week, ii)
the arrears of Rs.115.04 crores were payable in three equal
monthly instalments, the first instalment was to be paid in a
fortnight i.e. on 17.03.2020 and iii) the petitioner was to
issue fresh post-dated cheques in terms of the said order
dated 26.11.2019. As a corollary to the said order, the first
amount payable by the petitioner was Rs.20 crores as on
09.05.2020. Till 09.03.2020 the petitioner had paid Rs.12
crores into the account of the respondent. There was a
balance amount of Rs. 8 crores due on the said date. Ex
facie, it could be construed as a breach of the said order.
However, the order has to be read in the context of the
contract between the parties. There was a Bank Guarantee
of an amount of Rs.64 crores with the respondent. This was
a surety which the respondent could have easily utilised
whenever there was a shortfall in the promised payment by
the petitioner. The dipping into the said cash fund by the
Corporation is permissible and is the prerogative of the
Corporation. It is clearly envisaged between the parties,
particularly in Clause 12(b) of the agreement/contract.
26. Apparently, the objective of the said Bank Guarantee
was to remedy the petitioner's defaults in payments, if any.
The second amount of Rs.20 crores was due on 16.03.2019.
In effect the total amount payable to the respondent was
Rs.78 crores, of which, the respondent had already received
Rs.14.5 crores directly into its bank account from toll
collection and Rs. 64 crores in the form of Bank Guarantee,
which it encashed later on. The encashment is only a
ministerial act because the money was otherwise secured to
it.
27. Evidently, the existence of the Bank Guarantee or its
likely encashment in case of default in payment, was not
argued when the 2nd March order was passed because there
is no reference in the order to the said facility of ready
cash/monetary security to the Corporation. Had it been
argued, the order would obviously have interpreted and
noted the scheme of payment as has been envisaged between
the parties. Clause 12(b) is an integral part of the said
agreement. Therefore, insofar as monies were secured to the
respondent in the form of Bank Guarantee, from which the
respondent could have easily taken out the money on
09.03.2020 as well as on 16.03.2020, there cannot be a
deemed default. In any case, the Corporation encashed the
BG and appropriated to itself the monies due as of 16th
March. There was a default of Rs.20 crores by the petitioner
the subsequent week on 24.03.2020. However, prior thereto
a few instances occurred as noted hereinabove:
(i) The respondent Corporation itself referred to
Circular dated 19.02.2020 issued by the Ministry
of Road Transport Highways (MORTH) which
notified that the COVID-19 pandemic was a force
majeure occurrence. In effect, the force majeure
clause under the agreement immediately becomes
applicable and the notice for the same would not
be necessary. That being the position, a strict
timeline under the agreement would be put in
abeyance as the ground realities had substantially
altered and performance of the contract would not
be feasible till restoration of the pre force
majeure conditions.
(ii) A Full Bench of this Court by order dated
25.03.2020 has ordered that interim orders
obtaining as on 16.03.2020 would continue till
15.05.2020, which has subsequently been
extended. In the interim, on 16.03.2020 the
respondent cancelled the agreement with the
petitioner, on grounds of what it perceived as a
clear breach of the orders of this Court dated
02.03.2020.
28. De hors the merits of the Corporation's contentions or
justification, its impugned order dated 16.3.2020 was pre-
mature at least by one day. It could not have been passed
till midnight of 16th March. Furthermore, the due amounts
of Rs.78 crores as of the said date stood paid and/or
secured in terms of the contract. The impugned order is
therefore non-est.
29. Once the force majeure clause is acknowledged by the
respondent as on 23.03.2020 in view of the public
declaration of COVID-19 pandemic, the force majeure
comes into effect w.e.f. 19.02.2020 itself. This vital change
in ground reality was not brought to the notice of the Court
when the order dated 02.03.2020 was passed. Had it been
known to the court that the pandemic had been declared as
force majeure by the Government of India the relevant
clause 15(1) of the contract between the parties immediately
gets operational, which in effect means that the amount
payable by the petitioner to the respondent would have to be
put into abeyance i.e. the strict timelines would not be
applicable.
30. The interim order of 2nd March subsumed the previous
directions and claims or arrears. The arrears were
quantified at Rs. 115.04 crores. This was payable prior to
the ground reality having being altered because of the
global pandemic/nationwide lockdown or reduction of
volume of traffic, as a consequence thereof. Therefore, the
said amounts ought to be paid as directed. The first
instalment was payable on 17.03.2020 which was duly
encashed through the Bank Guarantee and the second
amount was payable on 02.04.2020 and the third was on
02.05.2020. However, because of the interim orders the said
amounts have not been paid to the Corporation. The
balance amount of Rs.77.04 crores shall be made available
to the respondent within ten working days from the date of
this order failing which the interim order shall stand
vacated.
31. As regards the weekly payment of Rs.20 crores, the
same would stand suspended in view of the force majeure
clause. Nevertheless, the amounts collected by the petitioner
shall be deposited into the account of the respondent
Corporation after deduction of 15% towards operation and
maintenance charges, subject to final adjustments. The
requisite post-dated cheques shall be issued within two
weeks.
32. In view of the above, CM No. 11093/2020 filed by
petitioner for modification of the interim order dated
02.03.2020 is allowed and the order stands modified.
Keeping in view the reliefs already sought in the writ
petition, the petitioner's application being CM Nos.
11094/2020 & 11398/2020, seeking permission to place
additional facts on record and amendment applications are
allowed. Amended petition be filed within two weeks from
today, to which reply and rejoinder be filed in four
successive weeks each. CM No. 11092/2020 is not on
record. The Registry is directed now to show the same in the
cause list. The respondent's application being CM No.
11397/2020 for dismissal of the writ petition is held over
with till the next date. CM 11095/2020 and CM 11096/2020
stand disposed-off".
7. The MEP also filed a review petition No. 107/2020, which was
disposed of on 24.06.2020 by learned Single Judge and relevant
portion of the said order is reproduced hereunder:
"REVIEW PET. 107/2020
5. The hearing was conducted through video
conferencing.
6. This Review Petition seeks modification of the order
dated 12.06.2020 on the ground that there are two
errors: (i) that once force majeure has been made
applicable by the court from 19.02.2020, then the Rs.20
crores weekly payment by the petitioner would stand
suspended and as a corollary, the outstanding amount of
Rs.115.04 crores, as recorded in this Court's order dated
02.03.2020, would be reduced by roughly Rs.38 crores
(i.e. amount computed for 19th February to 2 nd March
2020 @Rs.20 crores per week) . It is contended that
Rs.115.04 crores as recorded, was the sum total of the
earlier weekly payments, claimed as dues by the
respondent Corporation. Thus, after deducting Rs.38
crores from Rs.115.04 crores, only an amount of Rs.77
crores would be payable. Of this Rs.68.05 crores stand
paid, leaving a payable balance of Rs.8.99 crores. It is
contended that nevertheless, the petitioner is ready and
willing to pay the respondent a larger amount of Rs.15
crores by way of a Bank Draft, instead of the Rs.77.04 as
directed by the order dated 12.6.2020 and (ii) that once
the force majeure clause was made applicable by
MORTH from 19.02.2020, as recorded by this court, then
that day becomes the cut-off date for suspension of all
subsequent contractual obligations.
7. The court, however, is not persuaded by either of the
said contentions and does not find any error on the face
of the record to review its order. Para 30 of the order
clearly reasons that the amount, which was admittedly
agreed between the parties as payable as of 02.03.2020
was Rs.115.04 crores. No objection was raised by the
petitioner apropos the said quantum either at that stage
or at any subsequent stage. An issue is being raised now
only on the basis of this court's order of 12.6.2020.
Furthermore, the petitioner had never contended at any
earlier stage, of it being prejudiced by the force majeure
condition from 19.2.2020 till 2.3.2020, as invoked by
MORTH, or that its revenue/toll collection had reduced
in any manner during that period because of the force
majeure condition. Indeed, the petitioner itself referred to
the 19.2.2020 Circular of MORTH for the first time, a full
month later, on 19.3.2020. The national lockdown took
effect from midnight of 24th/25th March, thereby virtually
barring movement of motor vehicular traffic. It is only as
a result of this bar that the revenue collection of the
petitioner could be said to have been affected.
Resultantly, only the recurring weekly payment after 2nd
March could be said to be affected. The acknowledged
outstanding amount of Rs.115.04 crores cannot be sought
to be revised now, because it was not dependent on fresh
revenue collection but were dues of many weeks, prior to
2nd March. If the petitioner had an any reservation
apropos the same i.e. such previous amount of Rs.115.04
crores, having already been affected by force majeure
disability, it could have brought the same to the notice of
the court or expressed its inability to pay the same. The
acknowledged dues of Rs.115.04 could have been a
subject matter of review on 2.3.2020 only if the petitioner
had averred or shown that motor vehicular traffic
between 19th February and 2nd March had already been
affected on date. Surely the petitioner would have known
of the ground reality/toll collections/traffic volume,
between 19.2.20 and 2.3.20. Therefore, for the petitioner
to now submit that the force majeure had affected its toll
collection before 2nd March, is untenable. The order of
12.6.2020 is clear apropos the amount due before 2nd
March and the recurring weekly dues thereafter. It does
not call for any review or modification.
8.The Court finds no merit in the review petition. It is,
accordingly, dismissed.
9. The order be uploaded on the website forthwith. Copy
of the order be also forwarded to the counsels through
email. "
8. In the meantime, SDMC and others have challenged the order
dated 12.06.2020 by filing LPA No. 165/2020 praying for setting
aside the order dated 12.06.2020 and allowing C.M.No.11397/2020
seeking dismissal of the writ petition. On the other hand, MEP has
also filed an appeal bearing LPA No. 167/2020 challenging certain
parts of order dated 12.06.2020 as well as the order dated 24.06.2020
in review petition No. 107/2020. Notices were issued and extensive
arguments have been heard in both the LPAs together. Certain interim
directions were also passed during pendency of the LPAs for ensuring
interim compliance of order dated 12.06.2020 passed by the learned
Single Judge. Written submissions have also been submitted on
behalf of both the parties along with bulky compilation of documents,
submissions and the case laws etc. filed on behalf of them.
9. Ld. ASG Sh. Sanjay Jain, assisted by Ms. Garima Prashad, Standing
Counsel for SDMC, has vehemently argued the appeal on behalf of
the SDMC and he has stressed the following points:
(1) REPEATED VIOLATION OF ALL COURT ORDERS:
It has been submitted by Ld. ASG that the Ld. Single Judge has
erred in granting relief to MEP, which has repeatedly violated each
and every order passed by this Hon'ble Court. MEP failed to comply
with order dated 26.11.2019 in W.P.(C) No. 12483/2019 and orders
dated 02.03.2020, 20.04.2020, 12.06.2020 in W.P.(C) No. 2241/2020.
MEP even failed to comply with order dated 20.03.2020 passed by
this Hon'ble Division Bench in LPA 139/2020 & LPA 140/2020. It
has also not deposited the ECC amounts in gross violation of orders
dated 09.10.2015 & 16.12.2015 passed by Hon'ble Supreme Court.
(2) MEP ALLOWED TO WRIGGLE OUT OF ALL ITS
CONTRACTUAL OBLIGATIONS IN PERPETUITY:
It has been submitted on behalf of SDMC that as per clause 1 of
the Contract Agreement dated 28.09.2017, MEP has agreed to pay a
cumulative and lump-sum weekly remittance of Rs.23.13 crores
(which is Rs.1206 crores per annum) for two years w.e.f. 01.10.2017
and Rs. 24.29 crores (which is Rs.1206 crores per annum) w.e.f.
01.10.2019 after enhancement of 5% in the awarded amount/
committed amount. As per SDMC, the Ld. Single Judge, while
exercising Writ jurisdiction, has arbitrarily permitted the Contractor to
wriggle out of all its past, present and future contractual obligations in
the name of COVID-19, without appreciating the past conduct of
MEP. Judgment of Hon'ble Supreme Court in the case of Energy
Watchdog vs. Central Electricity Regulatory Commission, (2017) 14
SCC 80 has been relied, in which it is held that "Every breach or non-
performance cannot be justified or excused merely on the invocation
of COVID-19 as a Force Majeure condition. The Court would have to
assess the conduct of the parties prior to the outbreak."
(3) PAST CONDUCT OF MEP PRIOR TO THE OUTBREAK
OF COVID-19:
It has been the case of SDMC that even before the first
lockdown took place from 25.03.2020, MEP was in default of toll tax
dues of Rs.840.17 crores as per Agreement. The breach or non-
performance by MEP since October, 2017 cannot be justified or
excused merely by invocation of COVID-19 as a Force Majeure event.
The termination notice dated 16.03.2020 was issued by SDMC
considering the past conduct of the MEP and repeated violation of
terms and conditions of contract agreement dated 28.09.2017 by MEP.
The said company has neither paid Rs.24.29 crores per week as per
contract nor paid Rs.20.00 crores per week in compliance of the Court
orders dated 26.11.2019 and 02.03.2020. It has also violated other
conditions imposed by Courts.
(4) NHAI FOUND MEP ILLEGALLY COLLECTING
ENTRY TAX FROM FREE LANES:
As per SDMC, MEP has been misrepresenting that SDMC has
restricted it to six lanes at NH8 and is not allowing it to collect Toll
Tax from the free lanes. This is a totally false plea and contrary to
records. The true facts submitted by SDMC are as under:
(a) NHAI has provided only 6 Toll Lanes out of 16 Toll Lanes
to SDMC for its Toll Collection under the directions of Hon'ble
High Court of Delhi in OMP No. 171/2014 dated 26.02.2014.
(b) Therefore, the Agreement with MEP allowed it to collect
toll tax only through the above 6 toll lanes located on extreme
left side on Jaipur-Delhi bound carriageway. The remaining 10
lanes were never available to SDMC to authorise collection of
toll through its contractor. MEP was thus never authorized to
collect Toll Tax from these 10 free lanes.
(c) However, MEP was authorised to collect penalty from the
vehicles found evading toll tax by passing through the free
lanes, and as per its own data, MEP has collected penalty
amount of Rs.138.15 crores from 01.10.2017 to 31.10.2019.
SDMC has never restricted MEP from collecting penalty from
the free lane violators.
(d) That a PIL No. 1238/2018 was filed in Delhi High Court
alleging mismanagement of Toll Plazas. The Hon'ble Court
directed NHAI to take remedial action. Thereafter, NHAI made
inquiries and found that there is gross mismanagement at the
Toll Plazas due to illegal Entry Tax being collected from the
free lanes beyond the authorized jurisdiction of SDMC. NHAI
directed SDMC as well as MEP vide letter dated 25.04.2018 to
restrict collection of Toll through the earmarked 06 Toll lanes
only. This letter has been challenged MEP before this Hon'ble
Court in W.P.(C) No. 570/2020.
Thus, MEP is trying to hide its own wrongs and is misleading
the Court by making false statements only to avoid making payments
as per terms of contract.
(5) MEP NOT ENTITLED TO ANY BENEFIT FROM
OPENING OF WPE & EPE:
It is also case of SDMC that MEP has been misrepresenting that
SDMC is not compensating for loss of traffic after opening of EPE
(Eastern Periphery Expressway) and WPE (Western Periphery
Expressway). This is a totally false plea. To the contrary, this issue
had been addressed during the pre-bid meeting prior to receipt of
tender bid and therefore, the Clause of "Surrender of Contract" was
introduced in the Agreement dated 28.09.2017.
Since the Agreement was on the basis of cumulative and lump-
sum fixed weekly amount of Rs.23.13 crores, irrespective of actual
collection, SDMC would not be entitled to claim any further amount
in case the Contractor's collection increases. Also, in the same vein,
SDMC would not compensate the Contractor in case its collection
decreases due to any reason whatsoever. MEP thus acknowledged
that it will not seeks reduction in Contract Fee due to any reason
whatsoever. Clause 3 (e) of the contract is as under:
"The Contractor agrees and confirms that it shall not be
entitled to any compensation rebate or reduction in Toll
Collection Contract Fee on account of change or variation in
traffic pattern, volume or intensity for any reason whatsoever
other than as specifically permitted in accordance with this
Agreement."
(6) MEP IS DIRECTLY COLLECTING MORE THAN 50%
OF TOTAL TOLL TAX REVENUE WHICH IT IS NOT
DEPSITING. SDMC IS GETTING LESS THAN 50% AND
NOT 85%
As per SDMC, the MEP has been making false statements that
since 23.03.2020 SDMC is getting more than 85% of toll tax amount
directly from the RFID system installed at 13 entry points which have
a total traffic volume of around 85%. This is absolutely wrong and
misleading statement. 85% Traffic Volume does not mean 85%
revenue.
A study of the data of 2017-19 provided by MEP including
statement of income, monthly passes and the income from penalty
shows that less than 50% amount, out of total collection, directly
comes to SDMC.
(7) FALSE STATEMENTS BY MEP BEFORE COURT:
The Ld. ASG on behalf of SDMC stressed that MEP, through
its senior counsels, has made several blatant false statements
misrepresenting the facts before the learned Single Judge and recorded
in the impugned order dated 12.06.2020 in para 6, 8, 9 and 10, which
are contrary to record and terms of the agreement. In fact, in para 6 of
the impugned order it is recorded that "Presently, the petitioner is
paying approximately Rs.19.27 crores per week." This is a blatantly
false statement. The impugned order passed on the basis of such false
and misleading statements is wrong and deserves to be set aside.
(8) BREACH OF AGREEMENT BY MEP- Non-replenishment
of performance Guarantee within 10 days:
Case of the SDMC is that the Ld. Single Judge has ignored
breach of Clause 12.1 (a) (b) of the Agreement by MEP, which
requires that once the Bank Guarantee has been encashed due to
default, the Performance Guarantee shall be replenished by the
Contractor within 10 days from the date of such recovery, failing
which the contract is liable to be terminated. The Bank Guarantees
were encashed by SDMC on 31.03.2020, 03.04.2020 and 07.04.2020
in view of repeated defaults. MEP did not replenish the Performance
Guarantee worth Rs.64 crores within 10 days in breach of the contract.
Thus, the finding of the Ld. Single Judge that since the Bank
Guarantee was encashed later, there was no breach of order dated
02.03.2020 is erroneous and deserves to be set aside.
(9) SDMC WAS BOUND BY ORDER DATED 02.03.2020 AND
COULD NOT HAVE ENCASHED BANK GUARANTEE
ON 09.03.2020:
It is further submitted on behalf of SDMC that the order dated
02.03.2020 had restrained it from taking any coercive steps against
MEP which included encashment of BG. Accordingly, the conclusion
by Ld. Single Judge that "It was a ready fund to be dipped into and
appropriated by the respondent, in case of default in payments" on
09.03.2020, thereby expecting SDMC to violate the order dated
02.03.2020 and encash the BG on 9th March 2020, is a gravely wrong
finding and deserves to be set aside. Significantly, it has been
overlooked that a Bank Guarantee could have been invoked only if
there was a default of the contractual amount and not to prevent a
default.
It is also submitted that MEP has itself admitted in its letter
dated 19.03.2020 that it has not complied with order dated 02.03.2020.
MEP admits in para 6 of the letter that the first compliance of order
dated 02.03.2020 was to be made on 09.03.2020 and it was not able to
pay. It seeks application of Force Majeure on operation of order dated
02.03.2020. It is relevant to state that the letter does not even mention
O.M. dated 19.02.2020 issued by Ministry of Finance, Government of
India.
(10) MEP IS NEITHER GIVING TRAFFIC DATA NOR
DEPOSTING TOLL AMOUNT RECEIVED:
As per SDMC, MEP has deliberately not given data of
"Average Weekly Traffic Count" since 01.11.2019 even though the
same is specifically required under Clause 8.7 of the agreement. In
fact, since 23.03.2020, MEP has not deposited any amount directly
with SDMC, which is in gross violation of High Court orders dated
20.04.2020 and 12.06.2020.
(11) FORCE MAJEURE RELIEF TO BE GOVERNED BY
MORT&H LETTER DATED 18.05.2020, NOT O.M.
DATED 19.02.2020:
Further case of SDMC is that Ld. Single Judge has erred in
holding that the OM dated 19.02.2020 issued by the Ministry of
Finance will be applicable in present case in the context of Force
Majeure for the period of COVID-19. This O.M. is not applicable in
the present case as it is applicable only for procurement of goods. The
NHAI has later issued directions in accordance with MORT&H letter
dated 18.05.2020 giving Force Majeure relief for all National
Highways for Toll contractors having effective date starting from
26.03.2020. It further provides for a 2nd Force Majeure period post
resumption of tolling from 24.04.2020 till traffic resumes 90% of the
traffic in pre-lockdown (period 15.03.2020 to 21.03.2020) weekly
average traffic count. The impugned order giving a finding contrary
to the NHAI directives applicable to both MEP and SDMC is wrong
and deserve to be set aside.
(12) DOCTRINE OF FORCE MAJEURE CANNOT BE
APPLIED ON COMPLINCE OF THE COURT ORDER:
The basic contention of the SDMC is that the doctrine of Force
Majeure cannot be applied on the compliance of the Court Order so as
to annihilate the Court directions and it cannot be applied except in
accordance with the prerequisite and the procedure laid out in the
contract. Moreover, learned Single Judge fell into error by misreading
the OM dated 19.02.2020 issued by the Ministry of Finance in the
context of Force Majeure. The letter dated 19.03.2020 having been
issued by MEP after the termination of the contract, so there was no
occasion for MEP to invoke Force Majeure and in any event, notice
was not issued within 5 days following such occurrence as provided in
the contract.
(13) ENTIRE TENDER PROCESS FOR NEW CONTRACTOR
DONE WITH APPROVAL OF THE COURT:
Another argument put forward by SDMC is that the entire
tender process for appointing the new contractor was repeatedly
approved by the Division Bench of this Hon'ble Court in W.P.(C)
2995/2020 (order dated 27.05.2020) and W.P.(C) No. 3129/2020
(order dated 15.05.2020). Also, on 20.04.2020, Ld. Single Judge in
W.P.(C) 2241/2020 further approved the tender process and permitted
SDMC to continue with it and also award the contract to a third party
subject to handing over of sites only on 25.05.2020. This order was
challenged in review by MEP but again no relief was granted to MEP
on 27.04.2020. LOI was thus issued on 27.05.2020 to the successful
bidder in compliance of directions of Hon'ble High Court dated
20.04.2020, which order is still valid and subsisting.
(14) STATUTORY PUBLIC FUNDS BEING ILLEGALLY
SIPHONED OFF BY MEP:
As per SDMC, toll tax is a major source of revenue for the
Municipal Corporation. While MEP has misappropriated thousands of
crores of public funds, SDMC is facing a major financial crisis and is
unable to fulfil its municipal duties or even pay salaries of its
employees. The impugned order makes a serious mistake in giving a
carte blanche to MEP and permit them to escape from their liability to
pay even as per the Court order. Since the beginning of the contract,
MEP has been playing tactics to delay and avoid paying its contractual
dues. It has been further submitted that in view of the above, all
applications filed by MEP were liable to be dismissed including the
application for modification of the order dated 02.03.2020. In fact, the
petition itself ought to be dismissed in view of the subsequent events
as held in Shipping Corporation India Ltd. vs. Machado Brothers &
Ors. (2004) 11 SCC 168. The impugned order based on such a
misconstrued and misconceived presuppositions has resulted in a
grave miscarriage of justice and unless it is set aside, till then it leaves
no scope for the Appellant to stay afloat in the original writ. The
above conduct of MEP ought to have been noticed by the learned
Single Judge and no reliefs were merited to such a litigant. The above
anomalies need to be corrected by this Appellate Court.
CITATIONS ON BEHALF OF SDMC
10. Ld. ASG has relied upon the following judgments in support of
his arguments:
1. Energy Watchdog Vs. CERC & Ors. (2017) 14 SCC 80: It is
held in this judgment that Force Majeure is governed by Section
32 and Section 56 of the Indian Contract Act, 1872, depending
upon the circumstances as to whether it is part of the contract or
not.
2. Satyabrata Ghose Vs. Mugneeram Bangur & Co. AIR 1954
SC 44: As per this decision, in context of India, the supervening
impossibility is governed by Section 56 of the Indian Contract
Act.
3. O.M.P.(I)(Comm) No. 88/2020 M/S Halliburton Offshore
Services Inc. Vs. Vedanta Limited & Anr: This judgment
reiterates the law laid down in Energy Watchdog vs. CERC
(Supra). Conduct of the parties prior to COVID-19 is to be
examined.
4. Assistant Collector of Central Excise Chandan Nagar, West
Bengal Vs. Dunlop India Ltd. & Ors. (1985) 1 SCC 260: It is
observed that Governments do not run on Bank Guarantees.
5. Kerala State Electricity Board & Anr. Vs. Kurien E.
Kalathil & Ors. (2000) 6 SCC 293: It is held that interpretation
and implementation of a clause in a contract cannot be the
subject matter of a writ petition.
6. Nabha Power Limited (Npl) Vs. Punjab State Power
Corporation Limited (Pspcl) & Anr. (2018) 11 SCC 508: The
contract is to be read as a whole and a particular clause should
not do violence to another part of the contract.
7. Burmah Shell Oil Distributing Now Known as Bharat
Petroleum Corporation Ltd. Vs. Khaja Midhat Noor & Ors.
(1988) 3 SCC 44: It was held that notice must be read in the
context of the facts of each particular case having regard to the
situation of the parties to whom it is addressed.
8. Akash Ganga Builders & Engineers (P) Ltd. Vs. G.P. Seth
HUF & Anr. 1999(50) DRJ (DB): As per this judgment, earlier
communication to terminate the tenancy by end of the month
and vacate the premises and hand over the possession is to be
read with the subsequent letter which gave one week's more
grace to the tenant and it does not render the earlier notice
invalid.
9. Shipping Corporation of India Ltd. Vs. Machado Brothers
& Ors. (2004) 11 SCC 168: Continuation of a suit after
disappearance of the cause of action would amount to an abuse
of process of the court.
10. State of Kerala & Ors. Vs. M.K. Jose (2015) 9 SCC 433:
Where alternative and equally efficacious remedy is available,
the litigant should pursue that remedy instead of filing a writ
petition.
We have gone through all the above-mentioned judgments thoroughly
and have taken into consideration the law laid down in these
judgments while deciding these appeals.
SUBMISSIONS ON BEHALF OF MEP:
11. Mr. Mukul Rohatgi, Senior Advocate and Mr. Abhishek Manu
Singhvi, Senior Advocate with Mr. Rajiv S. Dwivedi and Mr. Azeem
Samuel, Advocates have submitted on behalf of MEP as under:
A. THE FORCE MAJEURE (FM) CLAUSE COMES INTO
OPERATION FROM 19.02.2020 EVEN THOUGH NOTICE
INVOKING FM CLAUSE IS DATED 19.03.2020:
A1. The FM Clause 15 of the contract is very clear. It provides
for reduction of weekly instalments if any circumstance causes
a "material adverse impact". It is settled law that an FM clause
by its very nature tends to override all other provisions of the
agreement.
A2. It is impossible to pin point a starting date for an FM Event
such as the Coronavirus and MEP believes that impact in
collection were being felt from start of February 2020.
However, since SDMC itself acknowledged that circular of
19.02.2020 constituted FM, so MEP has also accepted the same.
A3. SDMC being a public body must be penalized for acting in
such an unbecoming manner. On one hand, it says that the
circular dated 19.02.2020 constitutes FM and on the other it
says that for MEP it doesn't.
A4. There are two kinds of FMs defined in the agreement
between MEP and SDMC. FM simpliciter (Clause 15.1) and
FM event (Clause 15.2 and 15.3). The requirement for giving
notice is only with respect to FM event and not FM simpliciter.
COVID pandemic is covered under FM simpliciter - as a
circumstance having "material adverse impact". Therefore, no
notice required to be given within 5 days under clause 15.3.
A5. Even guidelines issued by MORTH dated 18.05.2020
supports the contention that COVID-19 pandemic constitutes
FM and toll concessionaires such as MEP can't be asked to
deposit full amount as per the agreement.
A6. The Hon'ble Single Judge has therefore rightly concluded
vide the order dated 12.06.2020 that COVID-19 pandemic
constitutes a Force Majeure and that all payments thereafter
would have to be guided by special equities.
B. EFFECT OF 19.02.2020 BEING DATE ON WHICH FM
CLAUSE COMES INTO OPERATION:
B1. Even though Hon'ble Single Judge has rightly concluded
vide order dated 12.06.2020 that 19.02.2020 is the effective date
on which FM clause came into operation, he has erred in
application of the said finding. MEP has filed LPA 167/2020 in
respect of the same.
B2. From a conjoint reading of paras 25, 29, 30 and 31 of the
order dated 12.06.2020, the following are discernible:
(i) That the Force Majeure clause between the parties came
into operation with effect from 19.02.2020. "which in
effect means that the amount payable by the petitioner to
the respondent would have to be put into abeyance"
implying thereby that MEP was not required to pay
Rs.20.00 Cr/week after 19.02.2020.
(ii) That this finding is contradicted in para 30, where court
holds that "The interim order of 2nd March subsumed the
previous directions and claims or arrears. The arrears
were quantified at Rs.115.04 crores. This was payable
prior to the ground reality having being altered because
of global pandemic/nationwide lockdown or reduction of
volume of traffic, as a consequence thereof. Therefore,
the said amounts ought to be paid as directed",
B3. The chart below shows that as on 19.02.2020, MEP was
only in default of Rs.15.00 Cr. in respect of the directions
contained in order dated 26.11.2019:
Amount payable between 26.11.2019 to 17.02.2020 as per 240.00 Cr.
order dated 26.11.2020 (12 weeks x 20 cr/week)
Amount paid between 26.11.2019 to 17.02.2020 161.55 Cr
Balance amount 79.00 Cr.
Amount of BG encashed by SDMC 64.00 Cr.
Balance payable 15.00 Cr.
B4. This amount of Rs.15.00 Cr. has already been paid by MEP.
C. WHETHER MEP HAS BEEN AN HABITUAL DEFAULTER
WHO HAS REFUSED TO PAY DUES TO SDMC?
C1. THIS IS ABSOLUTELY INCORRECT. In respect of the same
it has been submitted that MEP had bid to give Rs.23.12 Cr./week
in the absence of any FM circumstances exerting downward
pressure on the said figure. It is important to mention herein that
toll collected by MEP is in the nature of a tax and MEP acts only as
a tax collection agency. MEP cannot be expected to pay tax that it
has not been able to collect on account of intervening FM
circumstances.
C2. There are two major FM circumstances that MEP has been
trying to get adjudicated but a fair adjudication has been
deliberately denied to MEP by the SDMC.
a. Vehicles evading toll tax using free lanes and SDMC not
permitting MEP to collect toll tax nor penalty on free
lanes. SDMC's own report says Rs. 37 lakhs lost/day
excluding penalty as per a report by Tesidel. This issue
has been eating into collection of MEP from the very
beginning as is evidenced from letter dated 17.11.2017
and regularly thereafter, written by MEP. In this regard,
it is most important to note herein that SDMC has vide its
letter dated 04.06.2018 has specifically prohibited MEP
from collecting toll from these vehicles running away
from free lanes. Despite tying the arms of the MEP
behind its back and not allowing it to collect toll tax from
evading vehicles, SDMC refuses to give relief on the
basis of the said claim.
b. Opening of Eastern and Western Peripheral Highway,
which has reduced traffic inflow by 30%. They opened
on 25.05.2018 (9 months post MEP taking over on
28.09.2017). SDMC's own report (Samarth Softech)
says gross toll collecting maxing out at Rs.19.25 Cr/week
and letter dated 22.10.2019 to this effect was sent by the
Commissioner to the Municipal Secretary. It is to be
noted that the Senior advocate and ASG advising SDMC
had himself held that there has been a reduction of traffic
due to opening of EPE & WPE.
C3. The total loss suffered by MEP on account of various FM
circumstances on the basis of which MEP sought reduction in
liability to pay was to the tune of Rs.2068 Cr.
C4. The order dated 31.01.2020 passed by SDMC
commissioner rejected the aforementioned claims without
giving any reasons whatsoever. The loss on account of vehicle
evading by using free lanes and opening of EPH and WPH is
admitted in the own reports commissioned by SDMC and yet
SDMC does not wish to treat the same as FM. It is humbly
submitted that common sense dictates that both these facts have
"material adverse effect" on collection and therefore concession
is required.
C5. It has been further humbly submitted by MEP that
especially with respect to the issue of free lanes, since 17th
October, 2017 MEP has been writing letters to SDMC on the
issue of facing problem in collecting tolls from specified
vehicles as per Toll Tax Bye Laws dated 31st October, 2007. If
MEP allows vehicles to run free, how are they supposed to meet
the revenue collecting target? SDMC has so far refused to give
a concrete answer in respect of the same in any forum.
C6. MEP points out that it is also argued by SDMC that there
is an option to surrender the contract if MEP does not find it
viable. This argument has no legal basis. Surrender of contract
is an additional elective right given to MEP, it is under no
obligation to choose. Also, it is important to note that MEP has
so far before the COVID pandemic paid an average amount of
Rs.19 Cr./week to SDMC as against the Rs.15.00 odd crores it
will get from the new contractor. Why SDMC officials are
keen to given contract to a contractor that undercuts SDMC
revenues is any body's guess.
D. WHETHER MEP IS SEEKING TO ARGUE FM AGAINST
THE COURT ORDER?
D1. As per MEP the answer is "No".
D2. It has been submitted by MEP that SDMC is deliberately
trying to twist the facts.
D3. The Impugned Order has been passed in an application
moved by MEP seeking modification of the direction to pay
Rs.20.00 Cr./week basis on FM clause coming into operation.
D4. There is no bar in law to seek modification of an order, and
once order has been modified then the argument raised by
SDMC has no legs to stand on.
E. WAS TERMINATION OF THE CONTRACT OF MEP AND
SUBSEQUENT ALLOCATION OF THE SAME TO SAHAKAR
VALID?
E1. Termination notice dated 16.03.2020 issued to MEP is on
the basis of non-compliance with the twin directions contained
in the order dated 02.03.2020 to pay 1/3rd of Rs.115 Cr by 17th
March and to continue to pay 20.00 Cr/week.
E2. 1/3rd of Rs.115 Cr. amounts Rs.38 Crore. SDMC has
encashed MEP's BG of Rs.64 Cr. There SDMC recovered
almost twice of Rs.38 Cr.
E3. On the issue of liability to pay Rs.20 Cr/week, as
correctly held vide order dated 12.06.2020, once the FM clause
kicks in, there is no requirement to continue to pay
Rs.20Cr/week. Therefore, the argument of SDMC that they
could have issued termination letter any day after 9th March
2020, has no legs to stand. Even otherwise, SDMC always had
option to first make good the shortfall from the BG.
E4. Also, to be noted that order of 3 Judges bench, dated
25.03.2020 has extended all interim orders operating on
16.03.2020 till 15.05.2020, which has been extended further.
Therefore, the notice of termination issued to MEP is per se
bad, as rightly held to be non-est by the Hon'ble Single Judge.
E5. The selection of "Sahakar" as a replacement for MEP is
also bad. There have been three NITs so far:
1st dated 16.03.2020- which was withdrawn. Reserve
Price of Rs.636 Cr. only.
2nd dated 06.04.2020- wherein bids were held but since
only one bid came, it had to be withdrawn. Reserve Price
of Rs.636 Cr. only.
3rd NIT dated 28.04.2020- where two bids came on
15.05.2020. However, only one proper bid as the other
bid is much below the reserve price of Rs.636 Cr.
E6. The Bid which SDMC is taking so much effort now to
execute is for Rs.787 Cr. annually which is approx Rs.15
Cr/week. This sum is peanuts as compared to the sum offered
by MEP. Even this amount shall be payable by Sahakar, only
after the Force Majeure situation of Corona Virus is over.
E7. The termination notice has been rightly cancelled by Ld.
Single Judge vide his order dated 12.06.2020.
F. WHETHER A RETIRED JUDGE SHOULD BE
APPOINTED TO ADJUDICATE THE DISPUTES
BETWEEN THE SDMC AND MEP?
F1. As per MEP, it is evident from a bare reading of the order
dated 31.01.2020 that though it is lengthy order, it is non-
reasoned and reflects of prejudice. The SDMC has not been
asked to file its reply. The documents of SDMC have suddenly
appeared in the order, without the same being either brought on
record by SDMC, nor the same were argued or even presented
by them. The Commissioner proceeded as if he is the Party
Respondent, therefore, he is aware of all the documents and
facts of SDMC. It is to be further noted that many of the
arguments advanced by the Commissioner to deny relief were
not argued by SDMC. Since they had not filed any reply,
therefore there is no question of any pleading on behalf of
SDMC. In fact, SDMC barely replied orally to any assertion
made by MEP and the order of the Commissioner, SDMC dated
31.01.2020 appears at best to be a reply of the SDMC to the
allegations made by MEP. These allegations and "reply" in the
form of an "Order" needs to be independently adjudicated.
F2. This dispute resolution clause 19 contained in Agreement
is provided for a two-step adjudication. The first step is
presided over by the Competent Officer, clause 5, and the
second step is presided over by the Commissioner, SDMC.
F3. The unique thing of this case is that till 16.12.2019, the
Commissioner SDMC was adjudicating as the Competent
Officer and he had already rejected the claims of MEP. It is for
this reason that the order dated 26.11.2019 passed by this
Hon'ble Court gave the Commissioner a way out by appointing
a Retired Judge.
F4. It is to be noted that in order to cover up the loophole of
not having appointed a "Competent Officer", the Commissioner
sought to do the same on 16.12.2019 and they proceeded to hear
the matter.
F5. MEP specifically moved an application before the
Commissioner to appoint a Retired Judge dated 20.12.2019 and
07.01.2019 which was dismissed, it seems orally without even
the decision being communicated to MEP and MEP learning of
the same only in the order dated 31.01.2020.
F6. When the MEP made a prayer before the Ld. Single
Judge to appoint a retired High Court Judge, to give report on
the disputes between the parties, the SDMC, to counter this
contention, relied upon the decision of the Supreme Court in
State of Kerala & Ors. v. M. K. Jose (2015) 9 SCC 433, referred
to in para 18 & 19 of the 12th June order and the Court held:
Para 18. As regards the petitioner's request for seeking
appointment of a retired High Court Judge to prepare a report
after hearing both sides, the Corporation contends that the
same is impermissible.....
Para 19. The Court agrees with the contention of the
respondent in this regard, therefore, such an appointment
cannot be considered. The argument for seeking such
appointment is untenable and is accordingly rejected.
F7. In this regard, MEP begs to submit that the aforesaid
judgement is wholly inapplicable in the facts of this case. This
was a case where in a writ petition, the Division Bench had
appointed two Advocates as Joint Commissioners to inspect the
site and to submit the report in respect of the disputed questions
mentioned in the order.....
F8. In the instant case, the prayer of the MEP is that since the
Dispute Resolution Clause (Clause 16) of the Agreement has
been rendered un-workable by the conduct of SDMC, and
SDMC has violated the first principle of natural justice,
therefore, a retired High Court Judge may be nominated to
adjudicate the disputes between the parties. This prayer has
wrongly been rejected by the Single Judge on the basis of an
inapplicable judgment. The said rejection has been challenged
in the LPA 167/2020.
G. WHETHER the orders of the High Court precluded SDMC
from encashing the Bank Guarantee therefore the BG does not
amount to payment?
G1. As per MEP, the FM comes into effect on 19.02.2020 and
therefore the liability to pay Rs.20 Cr. per week stood suspended
from 19.02.2020. Therefore, per se MEP could not have been
defaulted due to non-payment of Rs.20 Cr. on 09.03.2020 and
16.03.2020.
G2. Without prejudice to the above contention, it is submitted
by MEP that a bare reading of orders dated 26.11.2019 and
02.03.2020 shows clearly that the Court did not disturb the
working of the Contract, except to the extent of reducing the
weekly remittance.
H. Issue of Post-Dated Cheques.
H1. At the outset it is stated that PDC's never formed part of
the agreement between MEP and SDMC. The very fact that
SDMC now insists on the same shows the arbitrary manner in
which it functions taking advantage of its dominant position.
H2. It was argued by SDMC that MEP offered to pay PDCs to
secure amount, which statement is false as this illegal demand
was generated on account of advice received by SDMC from
it's legal advisor Mr. Gaurav Banerjee, Sr. Advocate and Ms.
Pinky Anand, Sr. Advocate, ASG and the same is recorded in
the letter dated 21.10.2018.
H3. That the said demand for PDC was first communicated to
MEP vide letter dated 07.02.2019, wherein the requirement was
only for one-month worth of PDC's.
H4. It is pertinent to mention herein that on one hand SDMC
refuses to refer the matter to an independent arbitrator for
adjudication since according to it clause 16 does not permit the
same and yet on the other hand it modified the contract to suits
its interests.
In the light of the above submissions, it has been prayed on behalf of
MEP that this Hon'ble court may kindly be pleased to allow the LPA
167/2020 and dismiss LPA No. 165/2020.
12. While considering the case of both parties, it is to be kept in
mind that original writ petition bearing No. 2241/2020 is still pending
and it has not progressed any further after the impugned orders have
been passed. The orders dated 12.06.2020 and 24.06.2020 impugned
before us are interim orders and any observations made therein are to
be taken prima facie for disposal of the applications pending before
the learned Single Judge without affecting the merits of the case and
these interim directions/orders shall finally merge with the final order
to be passed by the learned Single Judge on merits of the writ petition
after giving chance to both the sides to make submissions in support
of their respective stands before the learned Single Judge on the
dispute in hand. We will endeavor not to express any opinion on the
pending controversies before the learned Single Judge, although both
the parties have made submissions beyond the scope of these appeals.
13. The order dated 02.03.2020 is basically a continuation of earlier
order passed on 26.11.2019 by which MEP was directed to pay
Rs.20.00 crores per week. There had been some defaults in the
meantime and on 02.03.2020, the learned Single Judge quantified the
said defaults in compliance with the order dated 26.11.2019 to the
tune of Rs.115.04 crores and as mentioned in para 5 of the said order,
this amount was directed to be paid by MEP to SDMC in three equal
monthly installments; the first installment to be paid within 15 days
from 02.03.2020 and the said payments were to be made without
prejudice to the respective rights and contentions of the parties. Apart
from this, MEP was to pay Rs.20.00 crores per week in terms of the
earlier order dated 26.11.2019 and another direction regarding
issuance of fresh post-dated cheques was also to be complied with by
MEP. Stay against coercive steps was granted subject to compliance
of these directions and it was clarified that in case the payment of
Rs.20.00 crores per week is not made or MEP commits any other
default, the interim order shall stand automatically vacated. It appears
that SDMC was more or less satisfied with this order, being interim in
nature, subject to final outcome of the writ and the payments being
made at reduced rate of Rs.20.00 crores per week by MEP instead of
the contractual amount. On the other hand, MEP filed a detailed
application being C.M.No.11093/2020 for modification of order dated
02.03.2020 purportedly on account of certain events which had taken
place in the meantime. The main ground urged is the application of
clause 15 of the contract regarding Force Majeure with effect from
19.02.2020 in terms of Govt. of India's notification of even date by
which the spread of Pandemic i.e. Covid-19 was termed as an instance
of Force Majeure (FM) and on the same basis modification of the
order dated 02.03.2020 was prayed seeking exemption from paying
Rs.20.00 crores per week and from making other payments during the
period when Force Majeure is in force. Reliance was also placed on
notification dated 18.05.2020 of Ministry of Road Transport and
Highways (hereinafter referred as "MORTH"), Government of India
wherein details have been mentioned as to how period of pandemic is
to be treated in the contracts entered into by NHAI for construction of
highways and for collection of tolls.
14. Another development which had taken place in the meantime
was that on 16.03.2020 SDMC had served a notice on MEP
terminating the contract of MEP for committing defaults in making
payments in terms of order dated 02.03.2020. It is the admitted case
of both parties that the court ordered payment of Rs.20.00 crores per
week was not paid in full on 09.03.2020 when the first payment was
due for the week commencing from 02.03.2020 to 08.03.2020 and as
per SDMC, only Rs.13.50 crores were received from MEP leaving
behind a short payment of Rs.6.50 crores. Similarly, for the second
week i.e. from 09.03.2020 to 15.03.2020, out of due payment of
Rs.20.00 crores, as per SDMC, only a sum of Rs.3.00 crore was
received from MEP leaving behind an unpaid amount of Rs.23.50
crores for these two weeks. Moreover, the 1/3rd payment due out of
Rs.115.04 crores as quantified in the order dated 02.03.2020 was not
paid. In these circumstances, SDMC served termination notice under
clause 17 of the contract and MEP was directed to hand over the toll
booths to SDMC by 14.04.2020. On 19.03.2020 MEP sent a letter to
SDMC claiming invocation of Force Majeure. On 20.03.2020 in LPA
No. 140/2020, filed by MEP against order dated 02.03.2020, the
Division Bench ordered MEP to comply with the order dated
02.03.2020 by 24.03.2020. On 24.03.2020 MEP again wrote a letter
to the SDMC invoking Force Majeure on the basis of Government of
India's O.M. dated 19.02.2020.
15. Another incident on which MEP has based its claim for
modification of order dated 02.03.2020 and for challenging the
termination of the contract by SDMC on 16.03.2020 is that on
25.03.2020 a Full Bench of this Court passed an order extending all
interim orders in operation as on 16.03.2020 and thereafter this order
was extended from time to time due to the pandemic situation as the
physical hearings were suspended in the High Court of Delhi. SDMC
encashed bank guarantees submitted by MEP totalling to Rs.64.00
crores between 31.03.2020 to 07.04.2020. In the meantime, the date of
handing over of the toll booths was extended from time to time by
learned Single Judge. On 14.05.2020, MEP had withdrawn its earlier
LPAs against order dated 02.03.2020 passed in WPC No. 2241/2020
and a final order passed on 26.11.2019 in the earlier writ petition filed
by the MEP. An online tender was issued by the SDMC and letter of
intent was issued on 27.05.2020 to the successful bidder M/s Sahakar
Global Limited.
16. By the impugned order dated 12.06.2020, learned Single Judge
has come to the conclusion that the Force Majeure clause was rightly
invoked by MEP vide notice dated 19.03.2020; however, national
lockdown was declared on 24.03.2020, which was to be effective from
the next day. Learned Single Judge had noticed that till the invocation
of Force Majeure, the MEP had to comply with the directions issued
by the Court and as per the said directions, a sum of Rs.20.00 crores
had fallen due on 09.03.2020, out of which MEP had paid only
Rs.12.00 crores, leaving behind an unpaid amount balance of Rs.8.00
crores on the said date and it has been further observed that ex-facie, it
could be construed as breach of the interim stay order. In view of the
learned Single Judge, as bank guarantees of Rs.64.00 crores were
lying with SDMC, which could have been encashed to meet the short
fall in the payment promised by MEP and it was prerogative of the
SDMC to invoke the said bank guarantees as per clause 12 (b) of the
contract. Hence, on the basis of availability of the bank guarantee
amount of Rs. 64.00 crores, which was ultimately invoked by MCD in
the end of March 2020/early April, 2020, learned Single Judge came
to conclusion that there was no breach of the order passed by him on
02.03.2020. The calculation done by learned Single Judge in para 26
of the impugned order shows that on 16.03.2020, a sum of Rs.78.00
crores was due, which comprises of two weekly installments of
Rs.20.00 crores each and Rs.38.00 crores as the 1/3rd payment of
Rs.115.04 crores as arrears. A sum of Rs.14.50 crores was directly
paid into the bank account of SDMC by MEP and if this amount is
added with Rs.64.00 crores bank guarantee encashed later on, the total
sum becomes Rs.78.50 crores which is more than Rs.78.00 crores due
on the said date. It seems that learned Single Judge has inadvertently
missed out the amount of Environment Compensation Cess (ECC),
which was to be paid over and above contractual amount and as
mentioned in para 32 and 33 of C.M.No.11094/2020 moved by MEP
itself, the said amount overdue amount was Rs.22.60 crores. The
calculation made by MEP shows that on the date of encashment of the
bank guarantee, after excluding the ECC amount, which was payable
as per the directions of the Hon'ble Supreme Court and the said
amount was to be collected by the MEP and to be deposited in
Government exchequer, the amount liable to be adjusted against the
court directed payments comes to Rs.41.40 crores out of the bank
guarantee amount of Rs.64.00 crores and if we add Rs.14.50 crores
said to be paid by MEP to it, the total amount available with SDMC
comes to only Rs.55.90 crores. The net short fall on 16.03.2020 is
Rs.22.10 crores, for which there is no explanation in the impugned
order.
17. As per learned Single Judge, the nest installment of Rs.20.00
crores had fallen due on 24.03.2020, which apparently is wrong date
as it should have been 23.03.2020 and the said payment of Rs.20.00
crores has been said to be deferred on the ground of Force Majeure as
per circular dated 19.02.2020 as well as order of the Full Bench of this
Court dated 25.03.2020 extending interim orders prevailing as on
16.03.2020 till 15.05.2020 in first instance, which had subsequently
been extended from time to time. It appears that the learned Single
Judge has fallen into the error while observing in para 29 of the
impugned order that Force Majeure came into effect from 19.02.2020
itself and this vital change was not brought to the notice of Court
when order dated 02.03.2020 was passed. In the said paragraph itself,
it was also observed that the payments due from MEP would have to
be put into abeyance and directed time-line would not be applicable.
18. It appears that the relevant paras of the notification issued by
MORTH, Government of India on 18.05.2020 might has escaped the
minute attention of the learned Single Judge, although the notification
was reproduced in the impugned order itself. If we read the entire OM
dated 18.05.2020, it clarifies that as far as the national highway works
being executed under HAM and EPC models by the contractors are
concerned, the Force Majeure comes into effect w.e.f. 19.02.2020 in
terms of the notification of Department of Expenditure and
accordingly in para 2(a) the reliefs to be provided to the said
contractors, who are constructing the roads/highways, have been
enlisted. Similarly, in para 2(b), the reliefs granted to the contractors
executing the highway works on BOT method have been enlisted.
The relevant para for toll collection contracts granted by NHAI is para
2 (c), which is again reproduced hereunder for reference and for clear
explanation of the applicability of Force Majeure in the present case
and the relevant periods during which it shall be applicable:
"2(C) For all National Highway tolling contract being
operated by NHAI
MORTH vide letter no. H-25016/01/2018-Toll dated 25th
March 2020 conveyed that the lockdown period and the
subsequent prevailing condition of low traffic due to
unprecedented COVID-19 epedemic outbreak, may be
treated as Force Majeure of the Concession/Contract
Agreement as per Ministry of Finance letter no. F-
18/4/2020-PPD dated 19th Feb, 2020 and subsequent
instructions of MOF with regard to Force Majeure
Condition, NHAI is directed to provide the undermentioned
Force Majeure relief to the User Fee Collection
Contractors/ Agencies by dividing the entire Force Majeure
period in two phases, first phase during the period user fee
collection was suspended and second phase due to low
traffic count post resumption of the user fee collection due
to COVID-19 pandemic.
I. 1st Force Majeure period during suspension of
tolling during complete lockdown from 26.03.2020
to 19.04.2020.
(i) Waiver of the agreed remittance of the contractor for
the period of suspension of user fee collection for the
above period.
(ii) Reimbursement of 75& of the Administrative & Toll
Collection Expenses to be calculated based on the
fixed annual administrative charges on lane basis as
per NHAI procedure, on account of ensuring
functioning of ETC systems, security and safety of fee
plaza infrastructure during the suspension period.
II. 2nd Force Majeure period post resumption of tolling
with effect from 20.04.2020 (00:00hrs) till traffic
resumes 90% of the traffic in pre-lockdown period
weekly average traffic count. During this period the
following has to be provided:
(i) Waiver of the difference between agreed remittance
as per contract agreement and the estimated
remittance based on the traffic data during the above
period.
(ii) Waiver of penal interest for delayed/short remittance
for the above period as per contract provisions.
(iii) Reimbursement up to 50% of the Administrative Toll
Collection Expenses to be calculated based on fixed
annual administrative charges on lane basis as per
NHAI procedure."
19. As per OM dated 18.05.2020, the first period for which Force
Majeure is to be invoked for toll collection is from 26.03.2020 to
19.04.2020 and the Government of India was pleased to waive the
entire agreed remittance of the contractors and apart from this it was
ordered that 75% of the administrative and toll collection expenses
incurred by the collectors were to be reimbursed. It is to be noticed
that this was the period of first nationwide lockdown/curfew during
which the Government of India had suspended collection of tolls on
the toll booths being operated by NHAI or its contractors. Since there
was no collection of tolls by various contractors employed by NHAI,
so the Government had waived off the agreed remittance amount due
from the said contractors. In the present case, it has been vehemently
argued on behalf of SDMC on the basis of details of the toll tax
collected by the MEP that no suspension of collection of toll tax was
ordered or implemented at the entry points of Delhi and MEP was
regularly collecting the toll charges from the vehicles entering Delhi
even during this period. The said details of collection made during
this period have been detailed by SDMC as under:
Date wise details of Toll Tax Collection: February-20
Date RFID [email protected] Cash Collection for Total Collection
13 toll plazas all 124 toll plazas
01.02.2020 2423700 3963800 6387500
02.02.2020 2137200 3717300 5854500
03.02.2020 2377900 4091800 6469700
04.02.2020 2579000 4239000 6818000
05.02.2020 2559400 4221800 6781200
06.02.2020 2569100 4228700 6797800
07.02.2020 2357700 3737000 6094700
08.02.2020 1976300 3294000 5270300
09.02.2020 2174200 3838800 6013000
10.02.2020 2643200 4189000 6832200
11.02.2020 2625300 4193800 6819100
12.02.2020 2604700 4314400 6919100
13.02.2020 2617400 4360000 6977400
14.02.2020 2475500 4441900 6917400
15.02.2020 2258000 4324200 6582200
16.02.2020 2064800 4026000 6090800
17.02.2020 2301400 4232500 6536900
18.02.2020 2424200 4318900 6743100
19.02.2020 2451900 4374500 6826400
20.02.2020 2359900 4277900 6637800
21.02.2020 2273900 4117500 6391400
22.02.2020 2147100 3811000 5958100
23.02.2020 1897200 3683800 5581000
24.02.2020 2077300 3924300 6001600
25.02.2020 2346600 3170300 5516900
26.02.2020 2372500 3150600 5523100
27.02.2020 2479800 3285000 5764800
28.02.2020 2494100 3370900 5865000
29.02.2020 2253300 2917500 5170800
Feb-20 68322600 113819200 182141800
Date wise details of Toll Tax Collection: March-20
Date RFID [email protected] Cash Collection for Total Collection
13 toll plazas all 124 toll plazas
01.03.2020 1885700 1496198 3381898
02.03.2020 2101900 1498502 3600402
03.03.2020 2150100 1473273 3623373
04.03.2020 2228900 1487400 3716300
05.03.2020 2285600 1498267 3783867
06.03.2020 2319800 1499701 3819501
07.03.2020 2190200 1509335 3699555
08.03.2020 1776500 1476458 3252958
09.03.2020 1405100 929137 2334237
10.03.2020 783900 575831 1361731
11.03.2020 1755000 1254234 3009234
12.03.2020 2132100 1497366 3629466
13.03.2020 2079100 1450355 3529455
14.03.2020 1885500 1393796 3279296
15.03.2020 1630800 1345931 2976731
16.03.2020 1869500 1377844 3247344
17.03.2020 1891400 1430643 3322043
18.03.2020 1949900 1465927 3415827
19.03.2020 1873600 1442066 3315666
20.03.2020 1823700 1470390 3294090
21.03.2020 1439200 1022826 2462026
22.03.2020 405300 298400 703700
23.03.2020 191400 240000 431400
24.03.2020 162100 171600 333700
25.03.2020 110700 113900 224600
26.03.2020 121300 162600 283900
27.03.2020 121600 136900 258500
28.03.2020 141900 138700 280600
29.03.2020 124900 140000 264900
30.03.2020 141300 154400 295700
31.03.2020 74100 104900 179000
Feb-20 41052100 30258900 71311000
Monthly Pass collection for the month 208890000
Total Collection 280201000
20. As per the OM dated 18.05.2020, the second phase of Force
Majeure, post resumption of tolling activities, was from 20.04.2020
till traffic resumes 90% of the traffic plying during the pre-lockdown
period on the basis of actual average traffic count and during this
period, the agreed remittance was waived and estimated remittance
based upon actual traffic data was allowed to be deposited by the
contractors with NHAI subject to meeting of 50% of administrative
and toll collection expenses to be calculated based upon fixed annual
administrative charges. It means that from 20.04.2020, till the traffic
reaches 90% of the weekly traffic prior to declaration of lockdown,
the contractors were allowed to remit the actual collection of toll tax
made by him after deduction of 50% of their administrative and toll
collection expenses. In the present case, since toll collection activities
were never suspended, so the para No. 2(C) (I) is not applicable and
the appropriate paragraph of OM dated 18.05.2020, which is
applicable, is para 2(C) (II) and as such with effect from the date when
lockdown was declared, i.e., 26.03.2020 onwards MEP was required
to remit the actual toll collection to SDMC on the basis of invocation
of Force Majeure after deducting 7.5% as administrative and toll
collection expenses and not 15% as claimed by them and so ordered
by Ld. Single Judge, because as per OM dated 18.05.2020 only 50%
of the administrative and toll collection expenses were to be
reimbursed and not 100% of the same. We hold that there was no need
to give notice of Force Majeure as the Government of India itself has
made the said declaration to be effective from 26.03.2020 vide its OM
dated 18.05.2020. It also takes care of the objection of the SDMC that
MEP had given notice of invocation of Force Majeure only on
19.03.2020.
21. As far as the observation of the learned Single Judge that the
notice dated 16.03.2020 by which SDMC had cancelled the contract
awarded to MEP is short by one day as 15 days' period to make
payment of Rs.38.00 crores was to be over only on 17.03.2020, we
agree with him. Although it has been argued on behalf of SDMC that
mere availability of a right to invoke bank guarantee cannot be treated
equal to the payment to be made on weekly basis by MEP but the act
of invocation of these bank guarantee by SDMC, without any
reference to the Court, clearly shows that at least the amount of
Rs.41.40 crores (after adjusting the ECC amount) was available to
MCD at any given point of time and the short-fall in the weekly
payment due on 09.03.2020 and 16.03.2020 could have been met by
invoking the said bank guarantees. It is made clear that although by
16.03.2020 MEP was not in default in view of availability of the bank
guarantees at the disposal of SDMC but on 17.03.2020 the MEP had
committed default of the order of the court by not remitting the
deficient amount to clear the payment of Rs.38.00 crores due on the
said date. Moreover, on 23.03.2020 when the next payment of
Rs.20.00 crore as due, there was no lockdown and hence no Force
Majeure benefit was available to MEP, hence Rs.20.00 crores was to
be paid on 23.03.2020, which apparently was not paid by MEP to
SDMC, although SDMC must have collected a portion of it through
the fast tag mode which transfers the money directly to the bank
account of SDMC from the automated fast tag toll booths. For the
next three days i.e. 23.03.2020, 24.03.2020, 25.03.2020, the
proportionate amount was due from MEP to SDMC, which MEP is
liable to make payment as the applicability of the Force Majeure
clause is applicable for toll collections from 26.03.2020 onwards till
90% of the traffic resumes as per MORTH's notification dated
18.05.2020.
22. Keeping in view that gradually the lockdown has been opened
up in different phases, an independent assessment is to be made by the
learned Single Judge, with the help of officials from MORTH/NHAI
or any other specialized agency as to whether 90% of the traffic has
resumed so far, and if so, from which date. It is to be calculated in
reference to the weekly traffic prior to the applicability of Force
Majeure clause w.e.f. 26.03.2020. This direction has been issued
keeping in view that almost all economic activities, barring opening of
schools, etc. are open now and accordingly the traffic movement to
and from Delhi to the neighbouring States has increased to a large
extent.
23. It is needless to state that if the traffic has reached its 90%
strength in comparison to the pre-lockdown period, which event might
have already taken place or will take place in the near future, MEP is
bound to comply with the directions contained in the interim order
dated 02.03.2020 of remitting Rs.20.00 crore per week from the date
of reaching 90% traffic level during the pendency of the writ petition.
Learned Addl. Solicitor General appearing on behalf of SDMC has
vehemently argued that the writ petition itself is not maintainable for
enforcement of a contract entered into by SDMC with one of its
vendors and their application in this regard, being
C.M.No.11397/2020, is pending disposal for the last many months. It
is expected that the said application will be taken up on priority and
disposed of at the earliest after affording opportunity to both sides to
put forward their respective submissions.
24. It has been noticed that no progress has been made by both the
parties in the main writ petition although there is no stay of
proceedings ordered by this Court at any point to time. It is expected
that both the parties shall complete the pleadings at the earliest and the
writ petition will be disposed of as expeditiously as possible by the
learned Single Judge after affording opportunity to both sides to
address their arguments. The option of ordering the settlement of
dispute by alternative dispute resolution mechanism is also open to the
learned Single Judge, of course with consent of the parties.
25. There is a serious dispute regarding the actual number of
vehicles passing through the toll gates during the Force Majeure
period as MCD is claiming that a large number of vehicles are passing
through the said toll gates whereas claim of MEP is that lesser number
of vehicles are passing through the said gates. MEP was expected
under the clauses of the contract to give average weekly traffic count
and to calibrate the toll collection system with the servers of MCD. To
put this controversy at rest, the learned Single Judge may explore all
the possibilities to arrive at a reasoned conclusion as to whether the
number of vehicles passing through these toll plazas are correct or not
as different figures are being claimed by the contesting parties. The
said exercise is also necessary to decide two contempt petitions filed
by both the parties against each other, which are pending adjudication
before this Court. The MCD has submitted a video film showing the
traffic passing through toll gates and on the other hand MEP has
challenged even the appointment of the agency, which has allegedly
conducted the said survey.
26. In case the system of actual collection of toll tax to be deposited
by MEP with SDMC after adjustment of administrative and toll
collection expenses continues for some time, the SMCD will be at
liberty to get the said toll plazas inspected by its inspectors/staff on
regular basis and/or by continuously monitoring the said toll plazas by
installing the CCTV system or any other appropriate gadgets to enable
it to count the actual number of vehicles passing through toll gates and
paying the toll, so as to avoid continuous bickering between the two
parties on this issue and the court being unable to continuously
monitor implementation of directions to deposit the amount so
collected by MEP in the bank accounts of SDMC after deducting the
administrative and toll collection expenses @ 7.5%. It is made clear
that the excess 7.5% administrative and toll expenses for the period
from 26.03.2020 till today deducted by MEP from collection of toll
tax made by it is to be deposited in the bank account of SDMC within
15 days of passing of this order by MEP as the actual rate of
administrative and toll collection expenses allowed to be deducted by
the contractor is 50% of the agreed expenses, which comes to 7.5%
and not 15% as claimed earlier by the MEP.
27. As far as the appeal of MEP being LPA No.167/2020 is
concerned, we are not inclined to allow the same as it has been clearly
held by learned Single Judge that no objection was raised to the due
amount arrived at on 02.03.2020 in compliance of the court order
dated 26.11.2019, being Rs.115.04 crores. However, both the parties
may reconcile their accounts from 03.03.2020 onwards to ensure strict
compliance of the order dated 02.03.2020. The MEP shall ensure that
all the bank guarantees and post-dated cheques have been deposited
with SDMC and the bank guarantees are kept valid during the period
when the writ petition No. 2241/2020 remains pending before the
learned Single Judge. The steps to extend the bank guarantees and
revalidate the post-dates cheques be taken well in time by MEP to
ensure that no lapse is committed in this regard. As far as the request
of MEP to appoint a retired Judge to decide the dispute is concerned,
we are not inclined to order the same without the consent of the other
party.
28. As far as the order of the Full Bench of this Court regarding
extension of the interim order prevailing as on 16.03.2020 vide order
dated 25.03.2020 is concerned, it is clarified that the said order
nowhere states that the conditional stay orders will be extended
without complying with the conditions. Although the cancellation the
contract cannot take place but if the contractor does not comply with
condition of payment of ordered amount, it cannot take any benefit of
the order of the Full Bench dated 25.03.2020.
29. In view of the above, we hereby dispose of both the Letters
Patent Appeals by holding that:
1). The Force Majeure clause stands invoked w.e.f.
26.03.2020 in terms of OM dated 18.05.2020 issued by
MORTH, Govt. of India and it shall stand revoked when 90%
traffic, in comparison to the traffic before lockdown period of
weekly basis, stands resumed.
2). The SDMC shall be entitled to weekly payments of
Rs.20.00 crores till 25.03.2020 and after resumption of 90%
traffic in comparison to the pre-lockdown period on weekly
basis during pendency of the writ petition. Arrears of Rs.115.04
crores are held to be cleared without being affected by Force
Majeure clause.
3). With effect from 26.03.2020 till resumption of 90%
traffic in comparison to pre-lockdown period on weekly basis,
MEP shall continue to deposit entire collection of toll tax, ECC,
cash received from sale of monthly passes, fast tag stickers and
any other revenue generated from any toll collection in the bank
accounts of SDMC on daily basis by next day after deduction of
administrative and toll collection expenses @7.5%. Excess
administrative and toll collection expenses deducted by MEP
are to be deposited by MEP with SDMC in 15 days.
4). Ld. Single Judge may order for an exercise to be
conducted by a reputed agency to estimate the flow of traffic
passing through toll gates managed by MEP from 26.03.2020
onwards on the basis of the available data and material. In the
meantime, SDMC is at liberty to get the regular inspections
done at toll plazas or to install CCTV or any other mechanism
to count the vehicles passing through toll gates till 90% traffic
is resumed.
5). The finding of the learned Single Judge regarding
termination notice dated 16.03.2020 is upheld as it was issued a
day in advance.
6). The full Bench order dated 25.03.2020 cannot be read to
mean that MEP can take benefit of the interim stay order
without complying with the conditions mentioned in the said
order.
8). There is no occasion to appoint a Retired Judge to adjudicate
the dispute at this stage. However, the Ld. Single Judge may
explore the possibility of referring the matter to alternative
dispute resolution with consent of parties.
7). Date of hearing before the Ld. Single Judge is preponed to
24th November, 2020 and the Ld. Single Judge is requested to
decide the Writ Petition expeditiously. Both the parties shall
extend full cooperation in this regard.
30. With these directions, both the Letters Patent Appeals and pending
applications are disposed of.
TALWANT SINGH
(JUDGE)
SIDDHARTH MRIDUL
(JUDGE)
NOVEMBER 05, 2020
mr
