Idbi Bank Limited On Behalf Of The ... vs National Highways Authority Of ...
2022 Latest Caselaw 1810 Del

                          *     IN THE HIGH COURT OF DELHI AT NEW DELHI

                          %                                   Order reserved on: 31.05.2022
                                                            Order pronounced on: 01.06.2022

                          +     W.P.(C) 7806/2022, CM APPL. 23885/2022
                                IDBI BANK LIMITED ON BEHALF OF THE SENIOR LENDERS
                                                                            ..... Petitioner
                                                 Through: Mr.Sandeep Sethi, Sr. Adv. with
                                                           Mr.Raunak Dhillon, Ms.Madhavi
                                                           Khanna and Ms.Ananya Dhar
                                                           Choudhury, Advs.

                                                   versus

                                NATIONAL HIGHWAYS AUTHORITY OF INDIA AND ANR
                                & ANR.                                  ..... Respondents
                                             Through: Mr.Parag P. Tripathi, Sr. Adv. with
                                                      Mr.Ankur Mittal, Mr.Abhay Gupta
                                                      and Mr.Yash Kapoor, Advs. for
                                                      NHAI.
                                                      Ms.Kiran Suri, Sr. Adv. with
                                                      Mr.Suryadeep Singh, Mr.Sidhant
                                                      Dwibedi,    Mr.Rishabh       Sharma,
                                                      Mr.Sidhant Dwibedi, Ms.Radha R.
                                                      Tarkar, Mr.Aaron Shaw and
                                                      Mr.Vinay Tripathi, Advs. for R-2.

                          CORAM:
                          HON'BLE MR. JUSTICE YASHWANT VARMA
                                                   ORDER

1. This writ petition has been preferred by IDBI Bank on behalf of the senior lenders constituting a consortium of banks which had extended credit facilities to the second respondent. The writ petitioner prays for the

Signature Not Verified Digitally Signed By:NEHA Signing Date:01.06.2022 18:12:08 following reliefs: -

"a) Issue a writ in the nature of Mandamus, or any other appropriate writ, order or direction, thereby, directing the Respondent No. 1 (NHAI)to give its administrative approval for extension of the Concession Period till at least August 26, 2023 (a total period of28 months and 24 days commencing the expiry of the original Concession Period) in accordance with Article 29 of the Concession Agreement dated July 06, 2008 as per the assessment done by the Independent Engineer vide letter dated August 01, 2018;

b) Issue a writ in the nature of Mandamus, or any other appropriate writ, order or direction, thereby, directing the Respondent No.1 (NHAI) to give its administrative approval for extension of the Concession Period in accordance with Article 34 of the Concession Agreement dated July 06, 2008 for a period of 63, 94 days and 364 days for Covid 19 and Kisan andolan respectively;

c) Issue a writ in the nature of Mandamus, or any other appropriate writ, order or direction, thereby, directing the Respondent No. 1 (NHAI) to give its administrative approval for extension of the Concession Period in accordance with Article 35 of the Concession Agreement dated July 06, 2008 for a total period of 10 years and 2 months (approximately) from the expiry of the original Concession Period;

d) Pass any other order or direction requiring the Respondent No.1 to fulfil its obligations under the Concession Agreement dated July 06, 2008 and/or any other obligations qua the Senior Lenders which are required to be fulfilled and/or would aid in completion of the Project and extend its cooperation for achieving the same;

e) lssue a writ in the nature of Mandamus, or any other appropriate writ, order or direction, thereby, quashing the letter dated April 29, 2022 issued by Respondent No.1 (NHAI), refusing to grant extension of the Concession Period and deeming the Concession Period to expire on June 02, 2022;

f) In the alternative to prayers (a) to (d) hereinabove, classify the Project as a Stuck Project under the office memorandum dated March 9, 20 19, and direct NHAI to pay full and final payment as settlement to the Senior Lenders in terms of the aforesaid notification; and

g) Pending hearing and final disposal of the present Writ Petition, pass an order or direction extending the Concession Period to beyond June 02, 2022 and/or pass an order directing that the Concession Period shall not expire on June 02, 2022;"

2. The dispute itself arises out of a Concession Agreement executed by the first respondent - NHAI for the six-laning of the Gurgaon - Kotputli -

Signature Not Verified Digitally Signed By:NEHA Signing Date:01.06.2022 18:12:08 Jaipur section of National Highway No. 8 passing through the States of Haryana and Rajasthan. The second respondent was the chosen concessionaire. Undisputedly, the concession period as reserved under the Agreement was to run upto 02 April 2021. It was thereafter extended upto 02 June 2022. By an order of 29 April 2022, the NHAI has negatived the request of the concessionaire for extension of the concession period after 02 June 2022. The NHAI in terms of that letter has further held out that its communication of 10 December 2020 is final. It would be further pertinent to note that respondent Nos. 2 has also instituted a petition under Section 9 of the Arbitration and Conciliation Act, 19961 which stands numbered as O.M.P. (I) (COMM.) 166/2022. Although the petitioner here is arrayed as respondent No.2 in those proceedings, Mr. Sethi, learned Senior Counsel appearing in support of the present writ petition, has contended that the reliefs which are claimed in the present petition cannot possibly be urged or sought by the petitioner in those proceedings.

3. When the writ petition was initially taken up for consideration, Mr. Tripathi, learned Senior Counsel appearing for NHAI, raised an objection to the maintainability of the writ petition itself and contended that the petitioner would not be entitled to seek the reliefs as prayed for. It was the submission of Mr. Tripathi that the order of 29 April 2022 could at best be assailed or challenged by respondent No.2. Learned Senior Counsel would submit that the petitioner being merely lenders to the respondent No.2 cannot seek an extension of the concession period nor would they have the locus or the right to assail the validity of the order of 29 April 2022.

1996 Act

Signature Not Verified Digitally Signed By:NEHA Signing Date:01.06.2022 18:12:08

4. Responding to the aforesaid submission, Mr. Sethi submitted that in terms of the scheme of the Concession Agreement, it was duly acknowledged by NHAI that the entire project would be largely funded by senior lenders and therefore a preeminent requirement of ensuring that the rights and interests of senior lenders would be duly protected. Mr. Sethi has referred to the provisions contained in the Concession Agreement and more particularly to Clauses 40.3 and 47.10 thereof to submit that the Concession Agreement together with the Escrow Agreement, Substitution Agreement and Financing Agreement were to constitute a composite arrangement. It was pointed out that the interests of the lenders were protected under those agreements itself with all tolls being collected by the concessionaire being liable to be deposited in an escrow account and from which monies were to be transmitted to the lenders for servicing the credit facilities which were extended to the concessionaire.

5. Mr. Sethi further drew the attention of the Court to the fact that the right of substitution which was reserved in favour of senior lenders in terms of Article 37.1.3 of the Concession Agreement, a Substitution Agreement dated 12 February 2009 also came to be executed. It was pointed out that the same was a tripartite agreement to which the petitioner as well as respondent Nos. 1 and 2 were parties. It may be pertinent to note that the said agreement empowered the lenders to substitute the concessionaire itself in case of financial default. The respondent No.1 was conferred a corresponding right to substitute the concessionaire upon occurence of concessionaire default. The right of substitution conferred on the petitioner empowered it to substitute the concessionaire by a nominated company which may then take the project forward.

Signature Not Verified Digitally Signed By:NEHA Signing Date:01.06.2022 18:12:08

6. Mr. Sethi laid emphasis on that fact that almost 95% of the project has been constructed primarily from funds infused by the senior lenders and that the precipitate action which is proposed by NHAI would clearly jeopardize their interests and cause immense prejudice. Mr. Sethi submitted that financial lenders had acting upon the assurances held out by the respondent No.1, infused further capital in the project and submitted that in view thereof they had an intrinsic interest in ensuring that the concession does not come to an end since that would resultantly and inevitably impact their right to recover the loans which had been extended to the concessionaire. Mr. Sethi in furtherance of the aforesaid submission drew the attention of the Court to the Minutes of the meeting held 17 April 2020 to point out that the same would clearly establish that NHAI had unequivocally held out that the concession period would be modified by a further 28.8 months and consequently run till 26 August 2023. It was pointed out that based on the decision which was taken in that meeting, respondent No.1 had also issued a comfort letter in favour of petitioner so as to ensure that its interest was adequately protected.

7. Turning then to the provisions contained in the Concession Agreement itself, Mr. Sethi pointed out that in terms of the provisions of Articles 29, 34 and 35, the concession period was liable to be extended by virtue of a deeming fiction which stood engrafted in those provisions. It was submitted that in light of the admitted fact that traffic on the said highway had fallen below the projected figures, the concession period was liable to be extended automatically.

8. The submission in essence was that since the negation of the request for extension of the concession period would clearly impact the right of the lenders to recover their dues, they would clearly have the right to petition this

Signature Not Verified Digitally Signed By:NEHA Signing Date:01.06.2022 18:12:08 Court and seek the reliefs as prayed for.

9. Refuting the aforesaid submissions, Mr. Tripathi, learned Senior Counsel appearing for NHAI, contended that no right inheres in the lenders to seek reliefs as claimed in the present writ petition since the Concession Agreement does not confer on them any right to independently seek extension of the concession period. It was further submitted that the respondent No.2 had already instituted a petition under Section 9 of the 1996 Act and consequently the instant writ petition at the behest of the lenders was clearly not maintainable. Mr. Tripathi further drew the attention of the Court to the substantive claim laid by respondent No.2 before an Arbitral Tribunal in which the following prayers have been made: -

"In the fact and under the circumstances the Hon'ble Tribunal may be pleased to pronounce a declaratory award that the Claimant is entitled for Extension of Concession Period till 25-Mar-2031 as indicated in the table above.

That the Claimant's above noted claims do not includes the claims, which are not referred to mediation/amicable settlement through Chairman's meetings and other claims which have arisen after its claim invocation letter or otherwise has not been crystallized by this date to be referred to the process of mediation/settlement.

That the submission of the SOC herein is without prejudice to its right to refer the claims which might have arisen but the same has not been made part of the mediation/settlement. The Claimant also takes the leave of the Hon'ble Tribunal to add, delete, substitute, reduce and amend the claims herein referred following the due process of law.

In the fact and under the circumstances mentioned above the Claimant respectfully prays the Hon'ble Tribunal to be pleased to award the claims of the Claimant."

10. It was contended that a reading of the claim petition and more particularly paragraph 18.09 thereof would clearly establish that the

Signature Not Verified Digitally Signed By:NEHA Signing Date:01.06.2022 18:12:08 concessionaire had in those proceedings invoked the provisions of Article 29 of the Concession Agreement and sought extension of the concession period up to 25 March 2031. In view of the aforesaid, Mr. Tripathi would contend that the instant writ petition is in clear abuse of the process of Court and in any case parallel claims should not be entertained.

11. Mr. Tripathi then submitted that the claims as raised by the petitioner here as well as by respondent No.2 would necessarily entail consideration of various factual aspects on which there is a serious dispute inter partes. According to learned Senior Counsel, a writ petition under Article 226 of the Constitution would clearly not be the appropriate forum for the consideration of those issues. In any case according to learned Senior Counsel, the same issues cannot form subject matter of proceedings under Section 9 of the 1996 Act, a substantive claim before the Arbitral Tribunal and a parallel invocation of the jurisdiction of this Court under Article 226 of the Constitution.

12. Turning then to the minutes of the meeting of 17 April 2020, Mr. Tripathi submitted that it was clearly recorded in that meeting that the proposal for extension of the concession period was subject to consideration by the competent authority. It was further pointed out that the proposal for extension was itself subject to various other conditions being complied with including the payment of the balance One-Time Fund Infusion Scheme2 loan to the respondent No.1. It was submitted that there was a clear default in abiding by that condition and consequently NHAI was clearly justified in refusing to extend the concession period any further. Mr. Tripathi then submitted that the communication of 08 December 2020, had clearly apprised

OTFIS

Signature Not Verified Digitally Signed By:NEHA Signing Date:01.06.2022 18:12:08 the lenders as well as the concessionaire that the interim extension of the concession period would run only for fourteen months from the date of expiry of the original concession period. It was submitted that the competent authority of NHAI had on due consideration of all aspects and taking note of the fact that the principal outstanding of credit extended under the OTFIS would be repayable in about fifteen months, granted interim extension. Mr. Tripathi submits that out of the disbursed amount of Rs.345 Crores the principal amount of OTFIS of Rs.321 Crores excluding interest is still to be paid by the concessionaire. In view of the aforesaid, it was submitted that the extension of the concession period as prayed for has been justifiably rejected by NHAI.

13. While it is true that the Concession Agreement provisioned for the Supplementary, Escrow and Substitution agreements forming a cohesive, composite and interlinked repository of the bargain between the parties, the issue which arises for consideration in this petition is whether the senior lenders could be recognised as having the right to seek the issuance of a prerogative writ commanding NHAI to extend the validity of the concession period. It becomes relevant to note that Articles 29, 34 and 35 of the Concession Agreement do envisage situations where the concessionaire may seek extension of the concession period. However, and significantly, they do not confer any independent right on the senior lenders to invoke the same. No clause in the Concession, Escrow, Supplementary or Substitution Agreements confers a right upon the senior lenders to command NHAI to extend the concession period based upon their request.

14. The fact that those agreements incorporated adequate measures to

Signature Not Verified Digitally Signed By:NEHA Signing Date:01.06.2022 18:12:08 safeguard and secure the credit facilities extended by the senior lenders to the concessionaire, cannot be construed or interpreted as empowering them to seek extension of the concession period. That claim, in terms of the provisions of those agreements, can be asserted by the concessionaire alone.

15. The fact that the toll collection was to be placed in escrow, the right of the senior lenders to substitute the concessionaire itself in case of financial default are only indicative of the intent of parties to secure the credit and funding facilities extended by the lenders to the concessionaire. The fact that non-extension of the Concession Agreement would undoubtedly impact the rights of the lenders to recover the credit extended or recoup the loans sanctioned to the concessionaire perhaps cannot possibly be disputed. However, the right asserted by them in the writ petition cannot be recognised to flow from the provisions contained in the various agreements which came to be executed between the parties. Ultimately the Court rests its opinion on the terms which were struck between the parties and which stand embodied in those agreements. The Court while conscious of the adverse impact that the non-extension of the concession period may have on the ability of the lenders to recover their dues, finds itself unable to discern a right conferred upon them in any of the agreements based on which prayers (a) to (e) and (g) may be sustained.

16. The adverse consequences which may visit the lenders on account of non-extension of the concession period would not justify the Court reworking the Concession Agreement itself. The specter of default would not justify the Court by way of judicial interpretation or intervention amending or reinventing the terms of the contract itself. While senior

Signature Not Verified Digitally Signed By:NEHA Signing Date:01.06.2022 18:12:08 lenders may have other remedies for redressal of an asserted loss on account of the action of NHAI, the Court in the present cause is concerned only with the question of whether a writ would issue based upon the express terms of the Concession Agreement. That question, for reasons aforenoted, must necessarily be answered in the negative. This Court is of the considered opinion that for sustaining the instant writ petition, it was imperative for the petitioners to have established that the agreements conferred a positive right upon them to seek extension of the Concession Agreement. The right to seek extension of that period flowing from Articles 29, 34 and 35 stands invested in the Concessionaire alone. Absent such a clause or conferment of a corresponding right in the lenders, the Court is left with no option but to hold that they cannot seek issuance of a writ for extension of the concession period.

17. Regard must also be had to the fact that it is open to the Concessionaire to assail the order of 29 April 2022 on all possible legal grounds that may exist. The concession was undisputedly awarded to the second respondent. Whether the said order is invalid, contrary to the terms of the Concession Agreement or even arbitrary and illegal are issues which can surely be canvassed by the concessionaire in appropriate proceedings. Similarly, the question of whether Article 29 contemplates a deemed extension is one which can be raised and pursued by the concessionaire. All that the Court deems appropriate to note is that those assertions cannot be raised or urged by the lenders. The Court also takes into consideration the undisputed fact that the respondent no. 2 asserting such rights has not only filed a Section 9 petition, it has also commenced arbitration proceedings

Signature Not Verified Digitally Signed By:NEHA Signing Date:01.06.2022 18:12:08 seeking identical reliefs for extension of the concession period. This clearly constitutes an additional ground to not entertain the present writ petition insofar as reliefs (a) and (e) are concerned.

18. Learned senior counsels for respective sides also addressed elaborate submissions touching upon the merits of the dispute. Mr. Sethi contended that the additional credit facilities were extended to the Concessionaire based upon the letter of comfort which was issued by NHAI. It was argued that NHAI had clearly held out that the concession period would be extended and thus it is not permissible for it to renege from the said commitment. Mr. Tripathi on the other hand submitted that the extension of the concession period was a proposal which was only discussed in the meeting. However, according to learned senior counsel, that proposal was subject to approval of the competent authority. It was further pointed out that the extension of the concession period was subject to the fulfillment of various conditions and obligations being discharged by the petitioners and the concessionaire including repayment of the amounts lent and provided under OTFIS. It was submitted that the moneys lent under OTFIS had admittedly not been repaid. Mr. Tripathi further argued that in any case the decision to restrict the extension of the concession for a restricted period was clearly taken and communicated on 8 December 2020. It was submitted that the said communication was never questioned or assailed either by the petitioner or the concessionaire. In view of the above, Mr. Tripathi would submit that the present challenge is clearly misconceived.

19. The Court is of the opinion that it would be inappropriate to record any finding or observation in respect of the aforesaid contentions since that

Signature Not Verified Digitally Signed By:NEHA Signing Date:01.06.2022 18:12:08 may prejudice the rights of parties in parallel proceedings which are pending. In view of the above, it may only be observed that all contentions of respective parties on merits insofar as those issues are concerned are kept open.

20. That only leaves the Court to notice relief (f) as claimed. In the absence of instructions, Mr. Tripathi learned senior counsel was not in a position to address submissions insofar as the aforesaid relief is concerned. The Court therefore concludes that it is this relief alone which would warrant further consideration

21. Accordingly, it is held that the writ petition at the behest of the lenders insofar as reliefs (a) to (e) and (g) is concerned, is not maintainable. Insofar as relief (f) is concerned, let learned counsel representing NHAI take further instructions.

22. List again on 27.07.2022.

YASHWANT VARMA, J.

JUNE 01, 2022 bh

Signature Not Verified Digitally Signed By:NEHA Signing Date:01.06.2022 18:12:08