Bhilwara - Jaipur Toll Road (P) Ltd vs State Of Rajasthan
2021 Latest Caselaw 7849 Raj/2

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            HIGH COURT OF JUDICATURE FOR RAJASTHAN
                        BENCH AT JAIPUR

                    S.B. Civil Writ Petition No.21394/2019

     Bhilwara - Jaipur Toll Road (P) Ltd., A Company Incorporated
     Under The Companies Act, 1956 Having Its Registered Office At
     Om Tower, Church Road, M.I. Road, Jaipur And Business Office
     At J-28, Subhash Marg, C-Scheme, Jaipur - 302 001 Through Its
     Authorized Representative Shri Vikas Nair.
                                                                        ----Petitioner
                                        Versus
     1.      State Of Rajasthan, Through Chief Engineer (Roads),
             Public Works Department, Nirman Bhawan, Jacob Road,
             Jaipur (Raj.).
     2.      Punjab National Bank, Having Its Registered Office At 7,
             Bhikajicama Place, Africa Avenue, New Delhi And Mid-
             Corporate Branch At M.I. Road, Jaipur (Raj.).
     3.      ICICI Bank Limited, Having Its Office At 10th Floor,
             Videocon Tower, Jhandewalan Extension, New Delhi.
                                                                     ----Respondents

For Petitioner(s) : Mr. Swadeep Singh Hora Mr. T.C. Sharma For Respondent(s) : Mr. Rajesh Maharshi, AAG Mr. Bhag Chand Jain Ms. Suruchi Kasliwal

HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA

Judgment

RESERVED ON 23rd November, 2021

PRONOUNCED ON 20th December, 2021

1. The matter comes up on several applications which have

been filed from time to time in the present writ petition and the

case is there before this court.

2. For convenience and proper adjudication of the applications,

each application was heard separately and is accordingly decided.

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3. Application No.4/2021 has been filed seeking clarification

with regard to Escrow Account in respect of payment of Rs.191.79

crores by the respondent no.1 as directed by this court vide order

dated 12.10.2020.

4. Learned counsel for the applicant submitted that the amount

has already been deposited by the State Government in terms of

the order passed by this court after the order passed by the

Supreme Court on 26.02.2021, upholding the order of this court.

The actual control and possession of the project highway has

already been taken over by the State Government and the State

Government is enjoying the proceeds of the toll of the highway

and no amount has been deposited by the State Government with

the bank regarding collection of the toll. At the same time, an

amount of Rs.191.79 crores deposited by the respondents in the

Escrow Account is not being allowed to be utilized by the banks

and the demand against the applicant-petitioner is being raised by

the bank as against the said amount also.

5. It is, therefore, prayed by them that the amount lying in

Escrow Account may be allowed to be appropriated by the banks

namely respondent nos.2 & 3 in terms of Clause 34.1.1 of the

Concession Agreement.

6. Misc. application bearing No.6/2021 has been filed seeking

modification of the orders dated 12.10.2020 and 26.03.2021 by

the respondent nos.2 & 3 (Punjab National Bank & ICICI Bank

Limited) jointly wherein they have stated that after passing of the

order dated 12.10.2020 the State Government did not deposit the

amount of Rs.191.79 crores.

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7. The petitioners to the writ petition are facing imminent

threat of their account being classified as NPA for want of deposit

of the amount.

8. This court passed an order dated 26.03.2021 directing the

State Government to immediately deposit enough funds as would

be sufficient to save account of the petitioner from being classified

as NPA. At the same time, the bank was restrained to classify the

account of the petitioner as NPA. The applicants further stated

that the bank has written several letters to the State Government

to deposit the amount alongwith interest. However, without

depositing the amount, the State Government took over

possession of the project Bhilwara-Jaipur Toll Road and has

started running the same independently. It is stated that the letter

was again written on 05.04.2021 informing that as per the

Concession Agreement Clause 10 mentioned "after such handing

over the concessionaire shall stand discharged of all its obligations

in respect of Project of Highway under the Concession Agreement

and other ancillary agreements related to the project highway"

and therefore learned counsel for the Banks submitted that in the

garb of the order dated 12.10.2020, while the amount has not

been paid, the State Government has taken over the property in

question and has removed the valuable security of the banks and

therefore as per the agreement the State Government is liable to

make payment to the concessionaire, by way of termination

payment an amount equal to 90% of the debt due before

proceeding to take over possession of the subject road. The

respondent-banks has therefore prayed to modify the orders dated

12.10.2020 and 26.03.2021 to allow the applicant banks to adjust

the amount deposited by the State Government later on in the

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Escrow Account and allow the applicants banks to give credit

thereof in the loan accounts of the non-applicant-petitioner and

also further direct the State Government to deposit the interest

amount on the delayed payment of Rs. 191.79 crores. It is also

prayed that the respondent-State may not be allowed to use the

proceeds of the road handed over to it and restrain it from

handing over/taking over Bhilwara-Jaipur Toll Road.

9. Reply has been filed to both the applications by the State

Government and it is stated that there is no privity of contract

between the State Government and the Banks who had disbursed

the loan facility to the petitioner for carrying its obligations under

the Concession Agreement. It is further stated that as per Clause

44.3.5 of the Concession Agreement, the Banks are fully protected

and therefore the State Government has prayed for dismissal of

the applications.

10. In reply to the application filed by the petitioners, learned

counsel for the respondents stated that the amount has been

deposited in Escrow Account and therefore there is no further

clarification required to be made. Learned counsel for the

respondent-State has further submitted that the issues which

have been raised in the present applications would enlarge scope

of the writ petition and therefore need not be gone into at this

stage.

11. I have considered the submissions.

12. The present case is a typical example of the manner in which

the arbitration proceedings can be delayed one way or the other.

Hon'ble Mr. Justice P.P. Naolekar, Former Judge of the Supreme

Court was appointed as an Arbitrator to resolve the present

dispute. He passed an interim award directing the State

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Government to deposit an amount of Rs.191.79 crores in Escrow

Account as per Clause 37.3.3 for the payment to be made in

accordance with the terms and conditions of the Escrow Account.

He further directed that the State Government shall take steps to

take actual possession of the project highway in accordance with

the terms and conditions of Article 38 and Article 39.1 of the

Concession Agreement.

13. The State Government challenged the interim award before

the Commercial Court, Jaipur and the order dated 30.10.2019 was

stayed by the Commercial Court on 02.12.2019 against which the

petitioner preferred this writ petition before this court.

14. After taking into consideration all the aspects, this court

passed an order on 12.10.2020 with following directions:-

"16. Taking into consideration the aforesaid direction of the Arbitral Tribunal, this Court is of the view that the rights of the parties can be protected by directing the State to take over possession of the project highway as directed by the learned Sole Arbitrator. The amount of Rs. 191.79 crore shall be deposited with the Respondent-Banks equally in the Escrow Account by the State and shall not be released to the petitioner. It shall be kept with the Bank and would not be utilized for payment to the petitioner till final disposal of the appeal pending before the learned Commercial Court."

15. The said order was challenged by the State Government

before the Supreme Court in SLP Nos.3126-3127/2021 and the

same were dismissed by the Supreme Court by the following

order:-

"The Court is convened through Video Conferencing.

Having heard learned Senior counsel appearing for the petitioner-State of Rajasthan, learned Senior counsel appearing for the respondents and carefully

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perusing the material available on record, we see no reason to interfere with the impugned interim orders passed by the High Court of Judicature for Rajasthan Bench at Jaipur.

The Special Leave Petitions are, accordingly, dismissed. Consequent upon the dismissal of the Special Leave Petitions, pending applications filed in the matters also stand disposed of."

16. A recall application had been filed in between which was also

withdrawn by the State Government.

17. Even after passing of the order by the Supreme Court,

amount was not deposited and this court by passing an interim

order restrained the banks from declaring account of the petitioner

as NPA by 31.03.2021. It is however informed that now the

amount has been deposited by the State Government. However,

the respondents-banks by this application have prayed for

allowing them to utilize the amount deposited in the Escrow

Account towards the proceeds of the loan advanced to the

petitioner.

18. Having considered the submissions made at bar and taking

into consideration that the Arbitrator is seized with the arbitration

and is required to pass a final award, in the opinion of this court,

the Escrow Account wherein amount of Rs.191.79 crores has been

deposited by the State Government, shall continue to remain with

the banks. The mode of operation of an Escrow Account has been

described in the Concession Agreement entered between the State

Government and the respondent-banks. As per Clause 31.1 to

31.4 of the Concession Agreement, following procedure has been

laid down:-

"31.1 Escrow Account 31.1.1 The Concessionaire, shall prior to the Appointed Date, open and establish an Escrow Account with a Bank (the "Escrow Bank") in

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accordance with this Agreement read with the Escrow Agreement.

31.1.2 The nature and scope of the Escrow Account are fully described in the agreement (the "Escrow Agreement") to be entered into amongst the Concessionaire, the Government, the Escrow Bank and the Senior Lenders through the Lenders' Representative, which shall be substantially in the form set forth in Schedule-S.

31.2 Deposit into Escrow Account The Concessionaire shall deposit or cause to be deposited the following inflows and receipts into the Escrow Account:

(a) All funds constituting the Financial Package:

(b) all Fee and any other revenues from or in respect of the Project Highway, including the proceeds of any rentals, deposits, capital receipts or insurance claims: and

(c) all payments by the Government, after deduction of any outstanding Concession Fee:

Provided that the Senior Lenders may take direct disbursements to the EPC contractor in accordance with the express provisions contained in this behalf in the Financing Agreements.

31.3 Withdrawals during Concession Period 31.3.1 The Concessionaire, shall, at the time of opening the Escrow Account, give irrevocable instructions, by way of an Escrow Agreement, to the Escrow Bank instructing, inter alia, that deposits in the Escrow Account shall be appropriated in the following order every month, or at shorter intervals as necessary, and if not due in a month then appropriated proportionately in such month and retained in the Escrow Account and paid out therefrom in the month when due:

(a) all taxes due and payable by the Concessionaire for and in respect of the Project Highway.

(b) all payments relating to construction of the Project Highway, subject to and in accordance with the conditions, if any, set forth in the Financing Agreements:

(c) O&M Expenses, subject to the ceiling, if any, set forth in the financing agreements;

(d) O&M Expenses and other costs and expenses incurred by the Government in accordance with the provisions of this Agreement, and certified by the Government as due and payable to it;

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(e) Concession Fee due and payable to the Government.

(f) monthly proportionate provision of Debt Service due in an Accounting Year;

(g) all payments and Damages certified by the Government as due and payable to it by the Concessionaire, including repayment of Revenue Shortfall Loan;

(h) monthly proportionate provision of debt service payments due in an Accounting Year in respect of Subordinated Debt;

(i) any reserve requirements set forth in the Financing Agreements; and

(j) balance, if any, in accordance with the instructions of the Concessionaire.

31.3.2 The Concessionaire shall not in any manner modify the order of payment specified in Clause 31.3.1 except with the prior written approval of the Government.

31.4 Withdrawals upon Termination 31.4.1 Notwithstanding anything to the contrary contained in this agreement, all amounts standing to the credit of the Escrow Account shall, upon termination, be appropriated in the following order:

(a) all taxes due and payable by the Concessionaire for and in respect of the Project Highway.

(b) 90% (ninety per cent) of Debt Due excluding Subordinated Debt;

(c) outstanding Concession Fee

(d) all payments and Damages certified by the Government as due and payable to it by the Concessionaire, including (Premium and) repayment of Revenue Shortfall Loan;

(e) retention and payments relating to the liability for defects and deficiencies set forth in Article 39;

(f) Outstanding Debt Service including the balance of Debt Due;

(g) outstanding subordinated Debt;

(h) incurred or accrued O&M Expenses;

(i) any other payment required to be made under this Agreement; and

(j) balance, if any, in accordance with the instructions of the Concessionaire.

Provided that no appropriations shall be made under the Sub-Clause (j) of this Clause 31.4.1 until a

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Vesting Certificate has been issued by the Government under the provisions of Article 38. 31.4.2 The provisions of this Article 31 and the instructions contained in the Escrow Agreement shall remain in full force and effect until the obligations set forth in Clause 31.4.1 have been discharged."

19. Keeping in view the aforesaid provisions, the payment which

the State has already deposited in the Escrow Account, can be

utilized by the respondents-Banks in terms of Clause 31.4 which

allows the Banks to appropriate the amount standing in the credit

of the Escrow Account in terms as mentioned in Clause 31.4.1. of

the Concession Agreement. Since the State Government has

already taken over the Highway, the contract stands terminated.

The Bank would, therefore, be able to utilize the amount.

20. Both the Misc. Applications bearing No.4/2021 and 6/2021

are accordingly decided.

21. Taking into consideration that the arbitration proceedings

have been pending since long, it is directed that notwithstanding

the proceedings taken up by the Commercial Court against the

interim award, the learned Arbitrator Hon'ble Mr. Justice P.P.

Naolekar, Former Judge of the Supreme Court would be free to

proceed with the arbitration proceedings and conclude them

considering that the purpose of the Act of 1996 is to provide

efficacious and effective mechanism for adjudication of disputes in

an amicable atmosphere without any complicacy.

22. The interest claimed on the delayed payment of Rs.171.79

Crores would be of-course payable as per the interest Clause as

mentioned in the Concession Agreement. The same shall also be

released by the State Government.

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23. Since the State Government has already taken over the

Highway and the proceeds thereof shall now accrue with the State

Government, it would be against the interest of justice to allow

the Banks to declare the petitioners' account as NPA for the loan

advanced.

24. The Banks would also await for the final award before

invoking corporate guarantees made available to them by the

petitioner.

25. The order of restraining the Bank from declaring the

petitioners' account as NPA would continue to operate till disposal

of the arbitration proceedings.

26. In view of the order passed above, the rest misc.

applications bearing No.7/2021, 8/2021 and 9/2021 also

accordingly stand disposed of.

(SANJEEV PRAKASH SHARMA),J

Raghu/

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