Full Judgment Text
* IN THE HIGH COURT OF DELHI AT NEW DELHI
th
% Judgment reserved on: 28 July, 2017
st
Judgment delivered on: 31 July, 2017
+ O.M.P. (I) (COMM.) 221/2017
JETPUR SOMNATH TOLLWAYS LIMITED ..... Petitioner
Versus
NATIONAL HIGHWAYS AUTHORITY OF INDIA ..... Respondent
AND
+ O.M.P. (I) (COMM.) 227/2017
PUNJAB NATIONAL BANK ..... Petitioner
Versus
NATIONAL HIGHWAYS AUTHORITY
OF INDIA & ANR. ..... Respondents
Advocates who appeared in OMP(I) (COMM.) 221/2017
For the Petitioner : Mr Kapil Sibal, Senior Advocate and Mr. Sandeep Sethi,
Senior Advocate with Mr.Ajay Sondhi and Mr. Abhinav
Dhingra, Advocates.
For the Respondent : Mr Prag P.Tripathi, Senior Advocate with Ms Gunjan Sinha
Jain, Mr Mukesh Kumar, Mr Rishabh Kapur and Ms Bhavana
Duhoon, Advocates for NHAI/R-1.
Advocates who appeared in OMP(I) (COMM.) 227/2017
For the Petitioner : Mr. Rajiv Nayyar, Senior Advocate with Mr Mayank Grover,
Ms Isha J. Kumar, Advocates.
For the Respondent : Mr Prag P.Tripathi, Senior Advocate with Ms Gunjan Sinha
Jain, Mr Mukesh Kumar, Mr Rishabh Kapur and Ms Bhavana
Duhoon, Advocates for NHAI/R-1.
Mr Kapil Sibal, Senior Advocate and Mr. Sandeep Sethi,
Senior Advocate Mr. Ajay Sondhi and Mr. Abhinav Dhingra,
Advocates for R-2.
OMP 221/2017 & 227/2017 Page 1 of 36
CORAM:-
HON’BLE MR. JUSTICE SANJEEV SACHDEVA
JUDGMENT
31.07.2017
SANJEEV SACHDEVA, J. (ORAL)
O.M.P. (I) (COMM.) 221/2017 & O.M.P. (I) (COMM.) 227/2017
1. These are petitions filed under section 9 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the Act).
2. The petitioner, in OMP (I) (COMM.) 221/2017, JETPUR
Somnath Tollways Limited (hereinafter referred to as ‘JETPUR’ for
short) seeks a direction against respondent No.1 - National Highways
Authority of India (hereinafter referred to as NHAI for short) to
deposit a sum of Rs. 359.19 crores being the balance part of the
minimum Termination Payment into the Escrow Account.
3. The petitioner in OMP (I) (COMM.) 227/2017, Punjab National
Bank (hereinafter referred to as ‘PNB’ for short) seeks a direction to
NHAI to pay Rs. 374.51 crores into the Escrow Account for
appropriation by the Lenders.
4. NHAI had invited proposals for construction, operation and
maintenance of Four Laning of JETPUR-Somnath Section of NH-8D
for 127 kilometres in the State of Gujarat.
5. Consortium comprising of IDFC Projects Limited and
Expressways Berhad with IDFC Projects Limited as its lead member
OMP 221/2017 & 227/2017 Page 2 of 36
submitted its bid. The bid was accepted. On 13.09.2010, a letter of
award was issued to the Consortium. The Consortium subsequently
incorporated JETPUR for the purposes of undertaking the project.
6. On 07.02.2011, a Concession Agreement was executed between
JETPUR and NHAI.
7. On 16.08.2011, PNB acting as the Lender’s Representative and
also being the Escrow Bank executed a Tripartite Escrow Agreement
with JETPUR and NHAI. PNB, JETPUR and NHAI also executed a
Substitution Agreement on 16.08.2011 providing for securing of the
interest of Lenders through assignment, transfer, substitution of the
concession to a nominated Company to be selected by PNB.
8. On 19.08.2011, PNB along with the Consortium of
Bank/Financial Institutions extended a term loan facility of Rs. 712
crores to the JETPUR. The total project cost was stated to be Rs. 981
crores. The amount in excess of the term loan was to be financed by
JETPUR by raising equity from its shareholders.
9. JETPUR thereafter commenced execution of the project.
Disputes subsequently arose between NHAI and JETPUR with regard
to the execution of the work of a particular stretch of land concerning
inter alia the time period, the reasons for delay, the default and the
cost overrun for execution of the work.
10. On 13.05.2016, JETPUR issued a Cure Period Notice for
OMP 221/2017 & 227/2017 Page 3 of 36
Authority Default and requested NHAI to cure the defaults mentioned
in their notice.
11. On 10.08.2016, NHAI sent a notice of Intention to issue
Termination Notice .
12. On 05.09.2016, joint meeting between JETPUR, NHAI and
Senior Lenders was held. As per JETPUR and PNB, in the said
meeting, NHAI had represented that the Termination Payment to be
made to the Escrow Account would be upwards of Rs.550 crores.
13. JETPUR claims that on 26.09.2016 it confirmed that the debt
outstanding to the Senior Lenders was Rs. 640.86 crores.
14. On 18.10.2016, PNB convened a meeting of the Consortium of
Lenders with JETPUR wherein all the Lenders agreed not to exercise
their substitution rights on account of the commitment by NHAI to
pay upwards of Rs. 550 crores as Termination Payment being 90% of
the Debt Due.
15. The Minutes of Meeting dated 05.09.2016 circulated by NHAI
did not mention the figure of Rs. 550 crores as the minimum payment
that NHAI had agreed to pay into the Escrow Account. Both JETPUR
and PNB issued communications to NHAI contending that a
representation had been made by NHAI that they shall be depositing
upwards of Rs. 550 crores into the Escrow Account.
16. On 10.11.2016, NHAI issued the Termination Notice under
OMP 221/2017 & 227/2017 Page 4 of 36
Clause 37.1.2 of the Concession Agreement and took possession and
control of the project forthwith.
17. Subsequent to the termination, on 11.11.2016, PNB called upon
NHAI to confirm the Termination Amount before taking over the
project.
18. On 17.11.2016, JETPUR issued Notice of Termination with
Authority Event of Default under Clause 37.2 of the Concession
Agreement treating the Termination Notice of NHAI dated
10.11.2016 as a repudiatory breach of the Concession Agreement.
19. By another letter dated 17.11.2016, JETPUR demanded the
Termination Payment under Clause 37.3.2 of the Concession
Agreement in the sum of Rs. 945.83 crores along with claims for
compensation, losses, damages in the sum of Rs. 475.33 crores.
20. PNB, by its letters dated 21.01.2017, 04.03.2017 and
22.03.2017, informed NHAI that on account of non-release of the
Termination Payment by NHAI; JETPUR was not able to meet debt
service obligation and the account of JETPUR was likely to become a
Non Performing Asset (NPA). PNB further informed that as the
project had been handed over to NHAI; JETPUR was no longer
receiving any toll revenue and was accordingly not in a position to
service the interest amount and the account of JETPUR was classified
in SMA-2 category to become a NPA.
OMP 221/2017 & 227/2017 Page 5 of 36
21. On 27.03.2017, NHAI released an amount of Rs. 217.59 crores
(net of TDS) in the Escrow Account of JETPUR.
22. NHAI, despite several requests from PNB and JETPUR refused
to deposit any further amount in the Escrow Account leading to the
filing of the present petition.
23. The contention of the learned senior counsel for the JETPUR is
that the entire project had to be funded by JETPUR from its own
sources by raising loans as well as equity. NHAI was not to make any
contribution. The recoveries were to be made from Toll Collection
over the specified period.
24. It is contended that as per the Concession Agreement, on
petitioner completing at least 75% of the project, the Termination
Clause with regard to Termination Payments was to get triggered.
25. It is submitted that the Termination Clause in the Concession
Agreement stipulated that in case of termination on account of
Authority Default (NHAI’s default), NHAI was to pay the Debt Due
plus 150% of the Adjusted Equity. In case termination was on account
of JETPUR’s Default, NHAI had to make payment of 90% of the
Debt due less insurance cover.
26. It is contended that on termination, the minimum termination
payment to be made by NHAI is 90% of the Debt Due (if termination
is for default of JETPUR) and the maximum payment would be 100%
OMP 221/2017 & 227/2017 Page 6 of 36
of the Debt Due plus 150% of the Adjusted Equity (if termination is
on account of NHAI’s default). It is contended that even if assuming
that the termination by NHAI is for default of JETPUR, NHAI would
be required to pay into the Escrow Account 90% of the Debt Due,
which would amount to over Rs. 576 crores.
27. Learned senior counsel for JETPUR submits that this is so
stipulated because there is no financial burden on NHAI for execution
of the work and the entire project has to be executed by JETPUR from
its own sources and on termination, the entire project is to be taken
over by NHAI including the right to Toll Collection.
28. It is contended that if NHAI were permitted to take over the
project without any payment, then NHAI would stand to benefit for
the entire work already executed by JETPUR for its own sources,
which would include funds sourced by borrowing from Banks and
Financial Institutions. It is submitted that on termination NHAI has
got the entire project, which is nearly complete, virtually free of cost
and the entire cost has been borne by JETPUR from its own sources
and from loans.
29. It is contended that since the Debt Due is about Rs. 640 crores,
NHAI is liable to pay Rs.576.77 crores (being 90% of Debt Due of
Rs.640.86 crores : reference PNB letter dated 16.11.2016). As NHAI
has paid a sum of Rs.217.6 crores, NHAI is liable to pay the balance
sum of Rs.359.19 crores towards minimum Termination Payment
OMP 221/2017 & 227/2017 Page 7 of 36
under the Concession Agreement.
30. It is contended that NHAI has incorrectly sought to adjust
recoveries from JETPUR from the Termination Payment. It is
contended that NHAI is precluded from adjusting any amount as the
claims are yet to be adjudicated.
31. Reliance is placed on the judgment of the Supreme Court in
I NDIAN O IL C ORPORATION L IMITED V ERSUS SPS E NGG . L IMITED ,
(2011) 3 SCC 507 to contend that disputed claims cannot be adjusted
from crystallised liability.
32. It is contended that whether the breach, leading to termination,
is of NHAI or of JETPUR, is an issue which would be decided in
terms of the Arbitration Clause and till it is decided, no recovery or
deduction can be made by NHAI. NHAI being one of the parties
alleging breach on the part of JETPUR, cannot itself proceed further
to decide that the breach is of JETPUR and accordingly make
recoveries.
33. Reliance is placed on the decision of the Supreme Court in
J.G.E NGINEERS (P) L TD VERSUS U NION OF I NDIA , (2011) 5 SCC 758
to contend that adjudication of breach can only be by a court or a
tribunal and not by the alleged aggrieved party . It is further
contended that liquidated damages cannot be permitted to be deducted
by NHAI at this stage and NHAI, without any demur, has to make the
termination payment.
OMP 221/2017 & 227/2017 Page 8 of 36
34. Learned senior counsel for JETPUR submits that pending
adjudication of disputes, JETPUR is willing to be put to terms and is
willing to secure the entire amount being paid by NHAI into the
Escrow Account by way of an unconditional Bank Guarantee.
35. Reliance is further placed on the judgment in F ORBES
F ACILITY S ERVICES P RIVATE L IMITED VERSUS G.B.P ANT H OSPITAL ,
in OMP No.129/2015 decided on 18.02.2015, M AFATLAL I NDUSTRIES
IMITED NOTHER VERSUS AHANAGAR ELEPHONE IGAM
L & A M T N
L IMITED : 2002 (64) DRJ 94, V ALUE S OURCE M ERCANTILE L IMITED
VERSUS PAN ECHNOTRONIX IMITED
S M L (2014) 143 DRJ 505,
IMPLEX NFRASTRUCTURES TD V ATIONAL IGHWAYS UTHORITY
S I L . . N H A
F NDIA JAY INGH VERSUS AL IRWAYS
O I , ILR (2011) Delhi 274 , A S K A
RIVATE IMITED
P L FAO(OS)(COMM) 62/2016 decided by the
Division bench of this court dated 03.07.2017 to contend that under
section 9 of the Act it is just and convenient to direct NHAI to deposit
the balance termination payment in the Escrow Account .
36. Learned senior counsel appearing for PNB submits that apart
from the Concession Agreement, NHAI also executed Tripartite
Escrow Agreement and Substitution Agreement on 16.08.20911.
37. It is submitted that NHAI is also bound by the terms of the
Escrow Agreement. In terms of the Escrow Agreement, NHAI has to
deposit into the Escrow Account the Termination Payment as and
when it becomes due and payable. It is contended that NHAI has no
OMP 221/2017 & 227/2017 Page 9 of 36
discretion in the matter and the moment termination payment becomes
due and payable, the same has to be deposited in the Escrow Account.
38. It is contended that the NHAI has no discretion in the matter
and cannot first adjust its claim and then make deposit. NHAI has to
first deposit the amount, then raise disputes, and seeks settlement of
its claims against JETPUR in accordance with the Concession
Agreement.
39. It is further contended that the Substitution Agreement
empowers PNB to substitute a concessionaire in case of a default. It
is submitted that PNB and the Senior Lenders decided not exercise the
power of substitution because in the meeting held on 05.09.2016,
NHAI had assured that it shall deposit upwards of Rs. 550 crores in
the Escrow Account.
40. It is contended that the Escrow Agreement specifically
stipulates that upon termination of the Concession Agreement, all
amounts standing to the credit of the Escrow Account are to be
appropriated and adjusted in terms of Clause 4.2 of the Escrow
Agreement.
41. It is submitted that withdrawal of 90% of the Debt Due is at a
priority only after payment of all taxes in respect of the project and is
at a higher priority to all other claims including the claim of NHAI for
payments and damages due and payable to it by the Concessionaire
pursuant to the Concession Agreement.
OMP 221/2017 & 227/2017 Page 10 of 36
42. It is submitted that since payment of 90% of the Debt Due is at
a higher priority than the claims of NHAI against JETPUR even
towards damages and payments due under the Concession Agreement,
NHAI cannot withhold any payment or make any recoveries from the
stipulated Termination Payment.
43. It is contended that money lent for the project has been
earmarked for disbursal for infrastructure project and cannot be
withheld on account of any dispute between the JETPUR and NHAI.
It is contended that being public money, on recovery of the same, it is
to be utilized for other infrastructure projects and Bank cannot be
dragged into the inter se disputes between the JETPUR and NHAI.
44. It is contended that a claim for damages for breach of contract
is not a claim for a sum presently due and payable and NHAI cannot
recover the same from the termination payment. Reliance is placed on
the judgment in G ANGOTRI E NTERPRISES L TD . V . U NION OF I NDIA ,
(2016) 11 SCC 720.
45. It is submitted that court has inherent powers to pass orders as
may appear to the court to be just and convenient to prevent the ends
of justice from being defeated. Reliance is placed on the judgment in
S. H ARINDER S INGH VERSU S.N IRMAL S INGH & O RS . 2009(113) DRJ
784(DB)
46. Per contra, at the outset, learned senior counsel appearing for
NHAI disputes that any assurance was given by NHAI, in the Meeting
OMP 221/2017 & 227/2017 Page 11 of 36
held on 05.09.2016, that it would deposit upwards of Rs. 550/- crores.
47. It is further contended that the petitioners are seeking to enforce
the terms of the Contract by way of a petition under Section 9 of the
Act. It is contended that what petitioners are seeking are orders
analogous to Order XII Rule 6 of the Code of Civil Procedure (CPC),
i.e. passing of a judgment on admission.
48. It is contended that in a petition under Section 9 of the Act,
Court cannot pass an order directing payment of even admitted
amount.
HIN ATELLITE UBLIC
49. Reliance is placed on the decision in S S P
O TD V AIN TUDIOS IMITED ILU
C . L . . J S L , (2008) 153 DLT 604 ; N
ANDICRAFTS VERSUS OLPHIN ART IMITED
H D M L , 2009 SCC Online
RISSA ANGANESE AND INERALS VT TD VERSUS
Del 2659; O M M P . L .
YNERGY SPAT RIVATE IMITED ADHIKA
S I P L , (2014) 16 SCC 654 and R
A UTOMOBILES P RIVATE L IMITED VERSUS M ARUTI U DYOG L IMITED &
A NOTHER , 113(2004) DLT 837.
50. It is contended that Section 9 of the Act is for the purposes of
securing the subject matter of the dispute and petitioners are not
seeking security but in fact are seeking execution of the Contract and
an interim award, which is not permissible under Section 9 of the Act.
51. It is further contended that the Total Project Cost was stipulated
as Rs. 828 crores and the cost of un-finished construction work is
OMP 221/2017 & 227/2017 Page 12 of 36
Rs.106.6 crores. Accordingly, the adjusted Total Project Cost, comes
to Rs. 721.4 crores. It is contended that JETPUR had to have equity
contribution of 27.42% and a debt of 72.58%. It is submitted that
72.58% of Rs. 721.4 crores implies that the total Debt exposures
could not be more than Rs. 523.59 crores. It is submitted that
outstanding Debt Due thus becomes Rs. 522.88 crores, 90% of which
comes to Rs. 470.59 crores. It is submitted that the NHAI has to
make recoveries from JETPUR of Rs. 242.42 crores. The net
termination payment after adjustment and recoveries comes to
Rs.228.17 crores, out of which Rs. 222.03 crores have been paid by
NHAI leaving a balance of Rs. 6.14 crores, which NHAI is willing to
pay.
52. It is contended that the Debt equity ratio was 72.58 : 27.42%.
Under the Concession Agreement, the Bank, was to finance only the
debt element and not the equity contribution element and in case
JETPUR had got financing for the equity then NHAI is not liable to
make payment for the same. It is further submitted that since there is
a dispute, it is for the Arbitrators to adjudicate the same.
53. It is submitted that though this debt equity ratio is not part of
the Concession Agreement, the Financing Agreements have been
specifically made part of the Concession Agreements and the
Financing Agreements specifically refers to Total Project Cost as
Rs.981 crores and the Project Equity Capital out of the same as
Rs.269 crores and Facility as Rs. 712 crores, which shows that the
OMP 221/2017 & 227/2017 Page 13 of 36
debt to equity ratio is 72.58: 27.42.
54. It is further contended that respondents cannot rely on the
admissions contained in Annexure R – 6 to the counter-affidavit in
isolation. It is contended that Annexure R – 6, wherein the NHAI has
stated that outstanding Debt Due is Rs. 522.88 crores and has made
recoveries of Rs. 242.42 crores cannot be read in isolation and has to
be read as a whole. It is submitted that the said calculation when read
as a whole shows that NHAI has to make recoveries. Reference is
made to the judgment in H AJI C.H.M OHAMMAD K OYA VERSUS
UTHUKOYA
T.K.S.M.A.M , (1979) 2 SCC 8.
55. To resolve the controversy, we would need to examine some of
the relevant clauses of the Concession Agreement executed between
NHAI and JETPUR and the tripartite Escrow Agreement and the
Substitution Agreement executed between NHAI, JETPUR and PNB.
56. The relevant clauses of the Concession agreement with regard
to termination payment read as under:
37.3 Termination Payment
37.3.1 Upon Termination on account of a Concessionaire
Default during the Operation Period, the Authority shall
pay to the Concessionaire, by way of Termination
Payment, an amount equal to 90% (ninety per cent) of
the Debt Due less Insurance Cover; provided that if any
insurance claims forming part of the Insurance Cover
are not admitted and paid, then 80% (eighty per cent) of
such unpaid claims shall be included in the computation
OMP 221/2017 & 227/2017 Page 14 of 36
of Debt Due. For the avoidance of doubt, the
Concessionaire hereby acknowledges that no
Termination Payment shall be due or payable on account
of a Concessionaire Default occurring prior to COD.
37.3.2 Upon Termination on account of an Authority
Default, the Authority shall pay to the Concessionaire, by
way of Termination Payment, an amount equal to:
(a) Debt Due; and
(b) 150% (one hundred and fifty per cent) of the
Adjusted Equity.
37.3.3 Termination Payment shall become due and
payable to the Concessionaire within 15 (fifteen) days of
a demand being made by the Concessionaire to the
Authority with the necessary particulars, and in the event
of any delay, the Authority shall pay interest at a rate
equal to 3% (three per cent) above the Bank Rate on the
amount of Termination Payment remaining unpaid;
provided that such delay shall not exceed 90 (ninety)
days. For the avoidance of doubt, it is expressly agreed
that Termination Payment shall constitute full discharge
by the Authority of its payment obligations in respect
thereof hereunder.
37.3.4 The Concessionaire expressly agrees that
Termination Payment under this Article 37 shall
constitute a full and final settlement of all claims of the
Concessionaire on account of Termination of this
Agreement for any reason whatsoever and that the
Concessionaire or any shareholder thereof shall not have
any further right or claim under any law, treaty,
convention, contract or otherwise.
OMP 221/2017 & 227/2017 Page 15 of 36
37.4 Other rights and obligations of the Authority
Upon Termination for any reason whatsoever, the
Authority shall:
(a) be deemed to have taken possession and control of
the Project Highway forthwith;
(b) take possession and control of all materials,
stores, implements, construction plants and equipment on
or about the Site;
(c) be entitled to restrain the Concessionaire and any
person claiming through or under the Concessionaire
from entering upon the Site or any part of the Project;
(d) require the Concessionaire to comply with the
Divestment Requirements set forth in Clause 38.1; and
(e) succeed upon election by the Authority, without
the· necessity of any further action by the
Concessionaire, to the interests of the Concessionaire
under such of the Project Agreements as the Authority
may in its discretion deem appropriate, and shall upon
such election be liable to the Contractors only for
compensation accruing and becoming due and payable to
them under the terms of their respective Project
Agreements from and after the date the Authority elects
to succeed to the interests of the Concessionaire. For the
avoidance of doubt, the Concessionaire acknowledges
and agrees that all sums claimed by such Contractors as
being due and owing for works and services performed
or accruing on account of any act, omission or event
prior to such date shall constitute debt between the
Concessionaire and such Contractors, and the Authority
shall not in any manner be liable for such sums. It is
further agreed that in the event the Authority elects to
cure any outstanding defaults under such Project
Agreements, the amount expended by the Authority for
OMP 221/2017 & 227/2017 Page 16 of 36
this purpose shall be deducted from the Termination
Payment.
(underlining supplied)
57. Clause 37.3 of the Concession Agreement makes it clear that
upon Termination on account of JETPUR’S Default during the
Operation Period, NHAI has to pay to JETPUR, by way of
Termination Payment, an amount equal to 90% (ninety per cent) of
the Debt Due less Insurance Cover and upon Termination on account
of NHAI’s default, NHAI has to pay to JETPUR, by way of
Termination Payment, an amount equal to the Debt Due plus 150% of
the Adjusted Equity.
58. “Termination Payment” has been defined by the Concession
Agreement to mean “the amount payable by the Authority to the
Concessionaire upon Termination and may consist of payments on
account of and restricted to the Debt Due and Adjusted Equity, as the
case may be, which form part of the Total Project Cost in accordance
with the provisions of this Agreement; provided that the amount
payable in respect of any Debt Due expressed in foreign currency
shall be computed at the Reference Exchange Rate for conversion into
the relevant foreign currency as on the date of Termination Payment.
For the avoidance of doubt, it is agreed that within a period of 60
(sixty) days from COD, the Concessionaire shall notify to the
Authority, the Total Project Cost as on COD and its disaggregation
between Debt Due and Equity, and only the amounts so conveyed
OMP 221/2017 & 227/2017 Page 17 of 36
shall form the basis of computing Termination Payment, and it is
further agreed that in the event such disaggregation is not notified to
the Authority, Equity shall be deemed to be the amount arrived at by
subtracting Debt Due from Total Project Cost.”
59. “Debt Due” has been defined to mean the aggregate of inter
alia the sum expressed in Indian Rupees outstanding, on the Transfer
Date, of the principal amount of the debt provided by the Senior
Lenders under the Financing Agreements for financing the Total
Project Cost but excluding any part of the principal that had fallen due
for repayment two years prior to the Transfer Date;
60. The “Total Project Cost” has been defined to mean the lowest
of:
(a) the capital cost of the Project, less Equity Support as set
forth in the Financial Package;
(b) the actual capital cost of the Project upon completion of
Four-Laning of the Project Highway less Equity Support;
and
(c) a sum of Rs. 828.00 crore (Rupees Eight Hundred and
Twenty Eight crore ), less Equity Support;
provided that in the event of Termination, the Total Project
Cost shall be deemed to be modified to the extent of variation in
WPI or Reference Exchange Rate occurring in respect of
OMP 221/2017 & 227/2017 Page 18 of 36
Adjusted Equity and Debt Due, as the case may be, in
accordance with the provisions of this Agreement; provided
further that in the event WPI increases, on an average, by more
than 6% (six per cent) per annum for the period between the
date hereof and COD, the Parties shall meet, as soon as
reasonably practicable, and agree upon revision of the amount
hereinbefore specified such that the effect of increase in WPI, in
excess of such 6% (six per cent), is reflected in the Total
Project Cost.
61. The contention of JETPUR is that the Total Project cost was
subsequently increased, however for the purposes of the controversy
at hand we need not examine the same and assume the total project
cost to be the lowest of the three i.e. Rs. 828 Crores.
62. The Debt extended to JETPUR by PNB is over Rs. 712 Crores
and the balance outstanding as of the date of termination by NHAI is
Rs. 640.86 Crores.
63. Both NHAI and JETPUR have exercised their option to
termination. Each alleging default of the other. If termination is on
account of it is default of JETPUR then NHAI is liable to pay 90% of
the Debt Due and if the termination is on account of default of NHAI,
NHAI is to pay 100% of the Debt Due plus 150% of the Adjusted
Equity.
64. This, to my mind, has been stipulated because, under clause
OMP 221/2017 & 227/2017 Page 19 of 36
37.4 of the Concession Agreement, upon Termination for any reason
whatsoever, NHAI is deemed to have taken possession and control of
the Project Highway forthwith and NHAI upon its election succeeds
to the interests of JETPUR under such of the Project Agreements as
NHAI may in its discretion deem appropriate.
65. The sequitur of the above stipulation is that NHAI which has no
financial liability for the execution of the project would come into
possession of the Project Highway, which would be at least 75%
complete, and also succeed to all rights of JETPUR, including Toll
Collection.
66. The stipulation in the Concession Agreement is that the
Concessionaire would be entitled to obtain finance facility. The
Concession agreement gives a comfort to the lenders, that their debt is
secured in as much as on termination for any reason whatsoever, they
are assured that at least 90% of their debt outstanding would be
deposited in the Escrow Account by NHAI.
67. Clauses 3.2 and 4.2 of the tripartite Escrow Agreement
stipulate as under:
3.2 Deposits by the Authority
The Authority agrees and undertakes that, as and when
due and payable, it shall deposit into and/or credit the
Escrow Account with:
(a) Grant and any other monies disbursed by the.
Authority to the Concessionaire;
OMP 221/2017 & 227/2017 Page 20 of 36
(b) Revenue Shortfall Loan;
(c) all Fee collected by the Authority in exercise of its
rights under the Concession Agreement; and
(d) Termination Payments:
Provided that, notwithstanding the provisions of Clause 4.1.1,
the Authority shall be entitled to appropriate from the aforesaid
amounts, any Concession Fee due and payable to it by the
Concessionaire and the balance remaining shall be deposited
into the Escrow Account.
4.2 Withdrawals upon Termination
Upon Termination of the Concession Agreement, all
amounts standing to the credit of the Escrow Account
shall, notwithstanding anything in this Agreement, be
appropriated and dealt with 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
Authority as due and payable to it by the
Concessionaire pursuant to the Concession
Agreement, including {Premium,} repayment of
Revenue Shortfall Loan and any claims in
connection with or arising out of Termination;
(e) retention and payments arising out of, or in
relation to, liability for defects and deficiencies set
forth in Article 39 of the concession Agreement;
(f) outstanding Debt Service including the balance of
OMP 221/2017 & 227/2017 Page 21 of 36
Debt Due;
(g) outstanding Subordinated Debt;
(h) incurred or accrued O&M Expenses;
(i) any other payments required to be made under the
Concession Agreement; and
(j) balance, if any, in accordance with the instructions
of the Concessionaire:
Provided that the disbursements specified in Sub-clause
(j) of this Clause 4.2 shall undertaken only after the
Vesting Certificate has been issued by the Authority.
68. In terms of clause 3.2 of the Escrow Agreement, NHAI has to
deposit in the Escrow Account the Termination Payment as soon as
the same becomes due and payable. In terms of Clause 4.2, after
payment of taxes due and payable by JETPUR, the Lenders have the
right to appropriate 90% of the Debt Due excluding Subordinate Debt.
69. Clause 36.4 of the tripartite Substitution Agreement provides
for Substitution of Concessionaire and stipulates that At any time
during the period of Suspension, the Lenders’ Representative, on
behalf of Senior Lenders, shall be entitled to substitute the
Concessionaire under and in accordance with the Substitution
Agreement, and upon receipt of notice there under from the Lenders’
Representative, the Authority shall withhold Termination for a period
not exceeding 180 (one hundred and eighty) days from the date of
Suspension, and any extension thereof under Clause 36.1, for
OMP 221/2017 & 227/2017 Page 22 of 36
enabling the Lenders' Representative to exercise its rights of
substitution on behalf of Senior Lenders.
70. PNB in terms of clause 36.4 was entitled to substitute the
Concessionaire and if this right would have been exercised, NHAI
would have had to withhold Termination for a period of 180 days.
PNB did not exercise this right. As per PNB, this right was not
exercised because of an assurance by NHAI that it would make the
Termination Payment in excess of Rs. 550 Crores. However, this is
disputed by NHAI. In my view, the alleged assurance would make no
difference to the rights and liabilities of the parties for the purposes of
these petitions.
71. It is an admitted position that the contract has been terminated.
It is terminated by both NHAI and JETPUR alleging breach of the
other. There is a dispute as to who is at fault leading to the termination
but that would not affect the liability of NHAI to deposit, the Debt
Due in the escrow account, it would only affect the quantum of the
liability of NHAI to deposit the Debt Due in the escrow account. It
would range between 90% to 100% of the Debt Due.
72. Admittedly, the outstanding Debt Due on termination was
640.86 crores (i.e. 621.45 crores towards principal and balance
towards interest). 90% of the Debt Due is 576.774 Crores.
73. NHAI does not dispute its liability under the agreements to
deposit an amount towards the Debt Due in the Escrow account. The
OMP 221/2017 & 227/2017 Page 23 of 36
dispute is with regard to the quantum. It has admittedly deposited Rs.
222.03 in the Escrow Account. As per the calculation of NHAI,
balance payable is 6.14 Crores, which they have offered to deposit in
the Escrow Account.
74. NHAI has explained the calculation of the outstanding amount
as under:
S.No. Particulars Amount in
INR / Crores
1. NHAI Total Project Cost (TPC) 828.00
2. Less Cost of unfinished
construction (details enclosed as
Appendix-I)
106.60
3. Adjusted TPC 721.40
4. Debt (72.58% of adjusted TPC) 523.59
5. Debt repaid 0.71
6. Outstanding Debt Due 522.88
7. Accrued Interest of Rs. 19.4 Cr
(Wilful default, hence no payment)
Nil
8. 90% of debt due 470.59
9. Less Recoveries (details enclosed
as Appendix-II
242.42
10. Net Termination Payment 228.17
11. Paid by NHAI to Concessionaire 222.03
12. Balance to be paid 6.14
75. There are three broad heads under which NHAI has made
deductions. First of all , it has made an adjustment in the Total Project
Cost (TPC) and excluded the alleged cost of unfinished construction
(serial # 2 above). Secondly, it has made an adjustment in the Debt by
taking the Debt as 72.58% of the adjusted TPC. This adjustment has
OMP 221/2017 & 227/2017 Page 24 of 36
been made on account of its contention that the debt and equity ratio
to be maintained by JETPUR was to be 72.58 : 27.42 (serial # 4
above). Thirdly, adjustment has been made on account of alleged
recoveries to be made by NHAI from JETPUR (serial # 9 above).
76. In my view, NHAI has faulted in all the three deductions.
77. The first adjustment made is to the Total Project Cost on
account of unfinished Construction. There is no stipulation in any of
the clauses of the Concession agreement or the Escrow Agreement
that any such adjustment could be made prior to determining the
Termination Payment. The Termination Payment is correlated to the
actual Debt Due. There is no stipulation that any adjustment of the
said nature can be made from the Debt Due. This adjustment is clearly
not warranted from the Termination Payment.
78. The second adjustment made on account of taking the Debt as
72.58% of the adjusted TPC is also unwarranted. NHAI has taken the
debt and equity ratio to be maintained by JETPUR to be 72.58 : 27.42.
There is no such stipulation in the Concession Agreement. The
Concession Agreement does not require that JETPUR has to maintain
any such debt equity ratio. NHAI has sought to rely upon the
Common Loan Agreement dated 19.08.2011 between JETPUR and
the Lenders and PNB.
79. Reliance is placed on Recital B to the agreement which reads as
under:
OMP 221/2017 & 227/2017 Page 25 of 36
“ The total cost of construction and development of the
Project High Way (defined hereinafter) is estimated to be
Rs. 981,00,00,000 (Rupees Nine Hundred and Eighty
One Crores Only), which is proposed to be funded, as
follows:
Particulars Amount in Rupees
Crores
Project Equity Capital 269
Facility 712
Total Project Cost 981
80. Based on the above clause it is contended that the Debt to
equity ratio to be maintained is 72.58 : 27.42. Accordingly, from the
adjusted TPC another adjustment is made based on the above ratio. It
is contended that the Concession Agreement in its definition of
Project Agreements make the Financing Agreements as part of the
Project Agreements.
81. There is admittedly, no such stipulation in the Termination
Payment clause that any such adjustment is to be made prior to
payment of the Debt Due. As per the definition of Termination
Payment and Debt Due, only the actual Debt Due has to be taken into
account.
82. It is not the contention of NHAI that the lenders have financed
or provided finance more than what was stipulated under the
agreement. As per JETPUR, the sanctioned Loan was Rs. 712 Crores
but JETPUR has availed only Rs. 622 Crores. Admittedly, the project
OMP 221/2017 & 227/2017 Page 26 of 36
is more than 75% complete. As per JETPUR, the project is nearly
complete.
83. Third adjustment has been made on account of alleged
recoveries to be made by NHAI from JETPUR. This is also contrary
to the stipulations contained in the Concession Agreement with regard
to Termination Payment.
84. The clause relating to Termination Payment does not
contemplate any deduction being made there from. According to
Clauses 3.2 and 4.2 of the Escrow Agreement and Clauses 31.2 and
31.4 of the Concession Agreement, NHAI is obliged to deposit the
Termination Payment comprising of 90% of Debt Due into the
Escrow Account. The lenders are entitled to appropriate the amount in
priority to any claim of damages or recoveries that NHAI may have
from JETPUR. The appropriation of Debt Due is only lower in
priority to payment of taxes by JETPUR.
85. This stipulation, as noticed above, appears to be to protect the
interest of the lenders, who are not concerned with the inter se
disputes between NHAI and JETPUR. Clearly, NHAI has faulted in
making the deductions from the Termination Payment.
86. It is clarified that the merits of the claim for deduction by
NHAI and the defence of JETPUR to the same is not being examined
in this petition. It would be for the arbitral tribunal to consider the
same in accordance with law.
OMP 221/2017 & 227/2017 Page 27 of 36
87. The Supreme Court of India in G ANGOTRI E NTERPRISES L TD .
(supra), reaffirmed the earlier decision in U NION OF I NDIA V ERSUS
R AMAN I RON F OUNDRY (1974) 2 SCC 231, wherein the Supreme
Court approved the proposition laid down by the Bombay High Court
in I RON AND H ARDWARE (I NDIA ) C O . V ERSUS S HAMLAL AND B ROS
AIR1954 BOM 423, that “ damages are the compensation which a
court of law gives to a party for the injury which he has sustained.
But, and this is most important to note, he does not get damages or
compensation by reason of any existing obligation on the part of the
person who has committed the breach. He gets compensation as a
result of the fiat of the court. Therefore, no pecuniary liability arises
till the court has determined that the party complaining of the breach
is entitled to damages. Therefore, when damages are assessed, it
would not be true to say that what the court is doing is ascertaining a
pecuniary liability, which already existed. The court in the first place
must decide that the defendant is liable and then it proceeds to assess
what that liability is. But till that determination there is no liability at
all upon the defendant.” (underlining supplied)
88. The Supreme Court of India in I NDIAN O IL C ORPN . L TD . (supra)
held
“26. We may at this stage refer to one aspect of the claim
for extra cost. The award amount due to the respondent
under the award dated 27-10-2008 is an ascertained sum
due, recoverable by executing the award as a decree. On
the other hand the claim of the appellant for
reimbursement of the extra cost for getting the work
OMP 221/2017 & 227/2017 Page 28 of 36
completed, is a claim for damages which is yet to be
adjudicated by an adjudicating forum. The appellant
cannot therefore adjust the amount due by it under the
award, against a mere claim for damages made by it
against the respondent. The appellant will have to pay
the award amount due to the respondent and if necessary
modify its claim for extra cost against the respondent.”
89. Similarly, in the present case, there is no dispute that NHAI has
to make the Termination Payment. NHAI has sought to make
recoveries of Rs. 242.42 Crores. The recoveries are yet to be
adjudicated and determined. It is yet to be determined as to who is at
fault. Pending determination and adjudication, NHAI cannot be
permitted to make recoveries on its own.
NGINEERS RIVATE IMITED
90. The Supreme Court in J.G. E P L
(Supra) held that the question whether the other party committed
breach cannot be decided by the party alleging breach. A contract
cannot provide that one party will be the arbiter to decide whether he
committed breach or the other party committed breach. That question
can only be decided by only an adjudicatory forum, that is, a court or
an Arbitral Tribunal. Adjudication upon the issue relating to a breach
of condition of contract and adjudication of assessing damages
arising out of the breach are two different and distinct concepts and
the right to assess damages arising out of a breach would not include
a right to adjudicate upon as to whether there was any breach at all.
One of the parties to an agreement cannot reserve to himself the
power to adjudicate whether the other party has committed breach.
OMP 221/2017 & 227/2017 Page 29 of 36
91. The contention of Learned Counsel for NHAI is that admission
cannot be read in isolation and should be read as a whole. This
submission is made on the premise that the payment of Rs. 222.03
Crores by NHAI into the escrow amount is being treated as an
admission.
92. Reliance placed by Learned Senior Counsel for the NHAI on
S HIN S ATELLITE P UBLIC C O . L TD (supra) to contend that powers
under section 9 of the Act should not be exercised to enable the
petitioner to recover the sums on account of damages in advance of
the hearing even if part of the liability is undisputed and monetary
award for some amount may be made , is misplaced in the facts of the
present case.
93. The claim of PNB and JETPUR is not for recovery of any sum
on account of damages. The claim is for payments in terms of the
Concession Agreement which stipulates the payment of a minimum
amount on the happening of the event of Termination irrespective of
the party at fault. On the other hand the claim of NHAI is on account
of damages, which cannot be adjusted from the Termination Payment.
94. The Judgment in the case of H AJI C.H. M OHAMMAD K OYA
(Supra) to contend that admission cannot be split up and part of it
used; admission must be used either as a whole or not at all , is not
applicable to the facts of the present case. Reliance placed on
R ADHIKA A UTOMOBILES P VT . L TD (supra) is also misplaced as in the
OMP 221/2017 & 227/2017 Page 30 of 36
said case, the claim was for recovery of money disputed.
95. In the present case, the admission is not sought to be split up.
When read as a whole, it is clear that there is no dispute that the Debt
Due is over Rs. 640 crores. No dispute has been ever raised that the
amount of loan is in excess of the sanctioned limit. There is no dispute
that NHAI has to make the termination payment. NHAI is seeking to
make adjustment, which as noticed above cannot be made from the
Termination Payment.
96. The Termination Payment has to be made to the Lenders and
inter se dispute between NHAI and JETPUR cannot affect the right of
the Lenders to appropriate 90% of the Termination Payment. There is
admittedly no dispute with the lenders.
RISSA ANGANESE AND
97. Further, the judgment in the case of O M
INERALS IMITED
M L (supra) relied upon by Learned Senior Counsel
for the Respondent is also not applicable to the facts of the present
case. In the said case, damages were found to be an adequate
compensation for the loss, if any, to be sustained by the respondent.
98. In the present case, damages would not be an adequate
compensation as on the one hand JETPUR is liable to be declared as
NPA, which would have irreversible consequences and PNB and the
lenders would also suffer irreparable loss and injury. On the other
hand the interest of NHAI, which has taken over the Project Highway
and the right of Toll Collection can be adequately protected by putting
OMP 221/2017 & 227/2017 Page 31 of 36
JETPUR to terms.
99. In the present case, there was no financial outflow of NHAI for
the Project Highway. The cost of the Project is upwards of Rs. 828
Crores. The entire Highway had to be constructed by JETPUR from
its own sources. JETPUR has admittedly constructed more than 75%
of the Highway. As per JETPUR, apart from loans, JETPUR has also
made substantial equity contribution. The recovery of cost and
investment by JETPUR was to be from Toll Collection. The Lenders
have advanced loans of over Rs. 622 Crores. As per PNB the Debt
Due, including interest, as on date of termination was over Rs. 640
Crores. On termination, the Project Highway including the right of
Toll Collection has been taken over by NHAI, without any financial
outflow except the liability of Termination Payment.
100. At this stage, the maximum financial outflow from NHAI
would be 90% of the Debt Due i.e. 90% of Rs. 640.86 Crores (i.e.
Rs.576.774 crores). With this outflow, NHAI gets the entire
constructed Project Highway and the right to collect Toll. NHAI has
already made the payment of Rs. 222.03 Crores. The Balance due is
Rs. 354.744 Crores, out of which NHAI has offered to make the
additional payment of Rs. 6.14 Crores.
101. In case, this payment is not made by NHAI, the account of
JETPUR would be declared as NPA and irreparable loss and injury
would be suffered. Not only would JETPUR suffer irreparable, the
OMP 221/2017 & 227/2017 Page 32 of 36
Lenders including PNB would suffer grave injury. The concern is
more of the public funds that have been provided by PNB and the
lenders which would be embroiled in the inter se disputes between
JETPUR and NHAI. Equity demands that the lenders and PNB should
get their amount and the inter se disputes can be sorted out between
the NHAI and JETPUR through the process of Arbitration.
102. Under section 9 of the Act, Court has the power to pass orders
as appear to the court to be just and convenient to prevent ends of
1
Justice from being defeated.
AL IRWAYS RIVATE
103. The Division bench of this court in K A P
IMITED
L (supra) held as under:
“26. Though apparently, there seem to be two divergent
strands of thought, in judicial thinking, this court is of the
opinion that the matter is one of the weight to be given to
the materials on record, a fact dependent exercise, rather
than of principle. That Section 9 grants wide powers to
the courts in fashioning an appropriate interim order, is
apparent from its text. Nevertheless, what the authorities
stress is that the exercise of such power should be
principled, premised on some known guidelines -
therefore, the analogy of Orders 38 and 39. Equally, the
court should not find itself unduly bound by the text of
those provisions rather it is to follow the underlying
principles. In this regard, the observations of Lord
Hoffman in Films Rover International Ltd. v. Cannon
Film Sales Ltd.(1986) 3 All ER 772 are fitting:
“But I think it is important in this area to
1
S. H ARINDER S INGH (supra)
OMP 221/2017 & 227/2017 Page 33 of 36
distinguish between fundamental principles and
what are sometimes described as ‘guidelines’, i.e
useful generalisations about the way to deal with
the normal run of cases falling within a particular
category. The principal dilemma about the grant of
interlocutory injunctions, whether prohibitory or
mandatory, is that there is by definition a risk that
the court may make the ‘wrong’ decision, in the
sense of granting an injunction to a party who fails
to establish his right at the trial (or would fail if
there was a trial) or alternatively, in failing to
grant an injunction to a party who succeeds (or
would succeed) at trial. A fundamental principle is
therefore that the court should take whichever
course appears to carry the lower risk of injustice
if it should turn out to have been ‘wrong’ in the
sense I have described. The guidelines for the
grant of both kinds of interlocutory injunctions are
derived from this principle.”
27. It was observed later, in the same judgment that:
“The question of substance is whether the granting
of the injunction would carry that higher risk of
injustice which is normally associated with the
grant of a mandatory injunction. The second point
is that in cases in which there can be no dispute
about the use of the term ‘mandatory’ to describe
the injunction, the same question of substance will
determine whether the case is ‘normal’ and
therefore within the guideline or ‘exceptional’ and
therefore requiring special treatment. If it appears
to the court that, exceptionally, the case is one in
which withholding a mandatory interlocutory
injunction would in fact carry a greater risk of
injustice than granting it even though the court
does not feel a ‘high degree of assurance’ about
the plaintiff's chances of establishing his right,
OMP 221/2017 & 227/2017 Page 34 of 36
there cannot be any rational basis for withholding
the injunction.”
(underlining supplied)
104. In exercise of powers under section 9 of the Act, several
benches, Single and Division, of this court, in the facts of the case,
have passed mandatory interlocutory directions, directing respondents
to make payments subject to terms. (See F ORBES F ACILITY S ERVICES
P RIVATE L IMITED (supra); M AFATLAL I NDUSTRIES L IMITED &
A NOTHER (supra); V ALUE S OURCE M ERCANTILE L IMITED (supra),
S IMPLEX I NFRASTRUCTURES L TD . (Supra).
105. In my view the petitioners have shown strong prima facie case
for grant of interim mandatory measures. Balance of convenience is in
favour of PNB and JETPUR and against NHAI. As noticed
hereinabove, in case interim measures are not granted, irreparable loss
and injury is likely to be caused to the petitioners.
106. In view of the above,
(i) JETPUR is directed to furnish an unconditional and
irrevocable Bank Guarantee, in favour of NHAI,
undertaking to pay to NHAI an amount not exceeding Rs.
348.604 Crores [i.e. 90% of 640.86 = 576.774 (minus)
222.03 {already paid} (minus) 6.14 {agreed to be payable
by NHAI} = 348.604]; and
(ii) on deposit of the Bank Guarantee, NHAI shall forthwith
OMP 221/2017 & 227/2017 Page 35 of 36
deposit in the Escrow Account the sum of Rs. 354.744
Crores (i.e. 348.604 + 6.14); and
(iii) the encashment of the Bank Guarantee shall be subject to the
final award of the Arbitral Tribunal; and
(iv) JETPUR shall keep the bank guarantee alive for unto a
period of four months after the making of the final award by
the Arbitration Tribunal; and
(v) Parties shall comply with the provisions of Section 9(2) of
the Act.
107. It is clarified that this court has neither considered nor
expressed any opinion on the merits of the claim of NHAI and the
defence of JETPUR with regard to the alleged recoveries and the issue
of the unfinished project.
108. The Petitions are allowed in the above terms. There shall be no
orders as to costs.
109. Copy of the Order be supplied Dasti to parties under signatures
of Court Master.
SANJEEV SACHDEVA, J
JULY 31, 2017
Sn/HJ
OMP 221/2017 & 227/2017 Page 36 of 36