The Division Bench of the Delhi High Court in the case of Pink City Expressway Pvt. Ltd. vs National Highways Authority of India & Anr. consisting of Justices Jyoti Singh and Anoop Kumar Mendiratta, in an appeal arising from the impugned judgment passed by the learned Single Judge in a petition filed u/s 9 of the Arbitration and Conciliation Act, 1996 (‘Act’) noted that powers u/s 9 can only be exercised for preservation of the subject matter of the dispute till the decision of the Arbitral Tribunal and cannot be extended to directing specific performance of the contract itself.
Facts
Appellant is a Special Purpose Vehicle incorporated specifically for the purpose of executing the work of Six-Laning of Gurgaon-Kotputli-Jaipur Section of NH-8 awarded by National Highways Authority of India (‘Respondent’) under a Concession Agreement (‘CA’).
Respondent conducted a Traffic Sample Survey as per Article 29.1.1of the CA, for the years 2016-2018 and it was established that the Actual Traffic had fallen short by 14.86% of the Target Traffic. It wrote to the Independent Engineer (‘IE’) for factual determination qua modification in the CA. As determined by the IE, the Concession Period was deemed extended by 28 months and 24 days. Still, the Senior Lenders/Respondent No.2 herein, wanted a formal letter from the Respondent acknowledging the extension before considering the Appellant’s Resolution Plan. Accordingly, the Senior Lenders and the Appellant requested the Respondent to issue the same. However, it was not issued and in absence thereof, the Senior Lenders started considering initiation of debt recovery proceedings against the Appellant.
Procedural History
Appellant approached this Court seeking a direction to the Respondent to give its administrative approval in accordance with the determination made by the IE, which directed the Respondent to communicate its stand within 4 weeks to the Appellant. Respondent communicated its acknowledgement for an interim extension of 14 months. Senior Lenders also wrote to the Respondent to communicate its approval for the entire period, however, due to the rigid stand of the Respondent, they refused to consider the Resolution Plan and initiated debt recovery proceedings against the Appellant and its promoter companies. Constrained by the said proceedings, Appellant approached this Court seeking a direction to the Respondent to grant the administrative approval. This Court directed the Respondent to duly evaluate the prayer and communicate a decision in respect thereof to the Appellant. A letter was sent by the Respondent to the Appellant communicating its stand that the interim extension granted was final and threatened to forcibly takeover the toll plazas after it. Respondent also issued Notice Inviting Tenders (‘NITs’) from third parties to collect the toll for the period post that period.
The aforesaid action of the Respondent triggered filing of a writ petition by the Senior Lenders, seeking a direction for extension of the Concession Period. Appellant, on the other hand, filed a petition u/s 9 of the Act seeking interim protection of its rights as a Concessionaire, pending arbitral proceedings. Respondent issued Letters of Awards (‘LOAs’) whereby selected entities were to pay a fixed lump-sum amount to the Respondent, irrespective of the actual toll collection. But the amounts quoted by the highest bidders were substantially lower than what was being collected/undertaken as minimum guarantee by the Appellant. Being aggrieved, Appellant filed a petition challenging the tendering process which was dismissed as withdrawn due to pendency of the Section 9 petition. The learned Single Judge dismissed the Section 9 petition, and the Respondent forcibly took possession of the toll plazas ousting the Appellant and compelling the Appellant to file the present appeal, assailing the said judgment.
Contentions Made
Appellant: The rigid stand of the Respondent in refusing to extend the period for 28 months and 24 days is contrary to Article 29 of the CA. Once the IE has factually determined the extension, there was no scope for further approval from the Respondent. Article 37 of the CA provides for termination of the Agreement and the said procedure has been circumvented by indirectly terminating the CA as the Respondent is aware that its termination on the alleged default of the Appellant would be unsustainable in law. On termination, Respondent would have not pay 90% of the debt due to the lenders under Article 37.1 of the CA The project was prolonged due to defaults of the Respondent, so it was agreed that Respondent would infuse OTFIS of Rs.347 crores. Respondent called bids from third-parties to collect the toll which is illegal and Appellant cannot be ousted since the CA had not been terminated. Appellant has admittedly completed 96% of the work and its promoters have invested Rs.735 crores without any returns. Learned Single Judge erred in holding that the extension was not automatic as the Appellant has not challenged the communication whereby Respondent communicated its extension for 14 months. Further, it was never the case of the Respondent that this was its final position. Third-parties have been engaged on a fixed/lump-sum remittance system at a rate of Rs.1.75 crore per day and thus there was a direct loss of Rs.112 crore annually to the public exchequer which is against public interest. Learned Single Judge erred in holding that grant of the relief sought by the Appellant would amount to extending the CA, overlooking that the Appellant was only seeking status quo pending further orders by the Arbitral Tribunal.
Respondent: Respondent had conveyed its decision to the Appellant not to grant any further extension. Appellant, however, chose not to challenge the said decision and thus, no extension for a further period of 15 months can even be sought. Appellant had earlier a petition seeking directions to the Respondent to decide the extension as recommended by the IE and the same was disposed of directing the Respondent to take the decision. The second writ petition was also disposed of, leaving it to the Respondent to take a decision thereon. Pursuant to the directions of the Court, Respondent decided not to extend the Concession Period. Appellant has failed to challenge the communication whereby a limited extension was granted with a caveat that the OTFIS infused by the Respondent would be refunded. Neither was there a challenge to the LOAs in the Section 9 petition already pending nor was the same amended subsequently to incorporate a challenge.
Observations of the Court
The Bench noted that communication regarding the interim extension in the Concession Period was not challenged by the Appellant. Appellant was unequivocally informed that no further extension could be granted and even this decision was not challenged by the Appellant. In this view of the matter, there is no infirmity in the prima facie view taken by the learned Single Judge that there is no automatic extension of the Concession Period and the extension pre-supposes approval of the Competent Authority. It was also rightly observed that in absence of such challenge, it was not open to the Appellant to seek extension of the Concession Period.
It was also noted that powers u/s 9 can only be exercised for preservation of the subject matter of the dispute till the decision of the Arbitral Tribunal and cannot be extended to directing specific performance of the contract itself. Further, Bench disentitled the Appellant from raising the issue regarding issuance of LOAs in favour of third-parties.
Judgment
The Bench did not find any merit in the present appeal. The view expressed by the learned Single Judge was noted as a prima facie view and Appellant was granted the liberty to seek such remedies as may be available in law. The appeal was dismissed.
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