Supreme Court of India
M.C. MEHTAversusUNION OF INDIA & ORS.
- Citation
- 2016 INSC 417
- Decided
- 13 May 2016
- Disposal
- Disposed off
Holding
The Court cannot grant relief that varies the concession agreement; all disputes must be referred to arbitration under the tripartite agreement, with toll revenues held in escrow as an interim safeguard.
Summary
The Supreme Court was approached by a consortium of banks that had financed the Kundli‑Manesar‑Palwal Expressway project, seeking directions to ensure that the newly appointed concessionaire would assume the outstanding loan liabilities of the outgoing concessionaire. The Court noted that ordering such a variation of the concession agreement would amount to altering contractual terms between HSIIDC and the new concessionaire, which is beyond its jurisdiction. It held that any dispute over alleged breaches of the tripartite agreement must be resolved either in a civil court or, more appropriately, through the arbitration clause contained in that agreement. Consequently, the Court directed that all disputes be referred to the arbitral tribunal constituted under the tripartite agreement. As an interim measure, it ordered that 80% of toll revenues from the completed stretch be deposited in an escrow account with IDBI, with the balance 20% available to HSIIDC for maintenance, pending arbitration. The applications were disposed with these directions, without expressing any view on the merits of the claims.
Issues considered
- The Court can vary the concession agreement to impose the lenders' liabilities on the new concessionaire.
- Whether disputes arising under the tripartite agreement are cognizable by this Court or must be referred to arbitration.
- The appropriate interim mechanism to protect the lenders' interests pending arbitration.
Legislation cited
Subjects
ArbitrationContract variationEscrow accountPublic‑private partnershipConcession agreementTripartite agreementInterim reliefArticle 32
Judgment
[2016] 7 S.C.R. 962
A M.C. MEHTA
v.
UNION OF INDIA & ORS.
[IDBI Bank Limited and State Bank of India .... Applicants]
(I.A. Nos.363-364, I.A. No. 425 in I.A. No. 364 in
I.A. Nos. 344, 355, 362)
B
In
(Writ Petition (Civil) No.13029of1985)
MAY 13,2016
[T. S. THAKUR, CJI AND R. BANUMATHI, J.)
Contract: Bid invited by HS/JDC for developing 135.65 kms
c 1011g Ku11dli-Ma11esar-Palwal Expressway - Three co111pa11ies set
up a concessionaire - Loan raised by concessionaire - Delay in
execution of work by concessionaire resulting in /er111inatio11 - On
IA filed by Government, Supreme Court directed State of Haryana
to replace the existing concessionaire - HSI/DC informed IDB/-
lender bank about the said order - IDBI intimated HS//DC that
D
senior lenders have agreed that the entity selected by HSI/DC shall
be selectee of the lenders for the purpose of the substitutio11
agreement - Lender banks asked HS/JDC lO ensure that the new
co11cessio11aire takes over the debt due to the lenders - New
concessio11aire appointed - However, in the tender as well as the
E concession agree111ent there was neither mention of debts due to the
le11der ba11ks nor any clause incorporated to secure the loans of
the lender banks - Thus, instant /As by Consortium of banks seeking
directions to HS/JDC to e11sure that new concessionaire assumes all
the existing liabilities and obligations of the existi11g concessionaire
towards se11ior lenders - Held: Such a relief cannot be granted by
F
an order of this Court, as the same would amount to variation of
the contractual terms between the parties - Any such dispute
regarding the alleged violation of the terms and conditions of a
contract shall have to be resolved in an appropriate civil action
before the competent civil court - The tripartite agreement between
G the lender banks, HSIIDC and erstwhile concessionaire provide
for adjudication inter-se disputes between the parties by way of
arbitration - Therefore, parties are directed lo refer matter to
arbitration - Howeve1; in the ends of justice, toll amount collected
is secured to the extent of 80% by deposit of the sa111e in escrow
account while balance 20% for use by HSI/DC for 111aintenance.
H
962
M.C. MEHTA v. UNION OF INDIA & ORS. 963
Disposing of the IAs, the Court A
HELD: 1. Such a relief cannot be granted by an order of
this Court, as the same would amount to variation of the
contractual terms between the parties i.e. HSIIDC and ESSEL.
Even so the lender banks are complaining about the violation of
the terms of the tripartite agreement between them and B
concessionaire. Any such dispute regarding the alleged violation
of the terms ancl conditions of a contract shall have to be resolved
in an appropriate civil action before the competent civil court.
That is because the same are not amenable to adjudication in
these proceedings. However, the parties may not have to resort
to any civil action because of the presence of clause 7.11 in the c
tripartite agreement between the lender banks, HSIIDC and
erstwhile concessionaire which provide for adjudication i11ter-se
disputes between the parties by way of arbitration. [Para 15) [973-
B-D)
2. Certain disputes between HSIIDC and the D
concessionaire have already been referred by arbitration to an
Arbitral Tribunal. Given the fact that two of the parties to the
disputes sought to be raised in the present applications, are
already before the Arbitral Tribunal, there is no reason why the
disputes raised in the present applications should also not be
referred to the Arbitral Tribunal in terms of clause 7.11. However, E
some arrangements are made to protect the interest of all
concerned. That is so, because Manesar RD 83.320 km to Palwal
RD 135.650 km = 52.330 km has been completed at least in part
by the outgoing concessionaire while the remaining was
completed by new concessionaire The amount advanced by the F
lender banks to the outgoing concessionaire has been, it is
reasonable to presume, utilized for construction of the said portion
of the road. HSIIDC has now appointed an agent to collect the
toll for the use of the said road. In the ends of justice, the amount
so collected is secured to the extent of 80 percent by deposit of
the same in an escrow account to be opened in the IDBI (Lead G
bank) while, the balance 20 percent can be utilized by the HSIIDC
for maintenance etc. The amount so collected shall be available
to the arbitral tribunal for disbursement in such ratio as the arbitral
tribunal may after hearing the parties deem just and proper to
direct. [Paras 16, 17) [973-G-II; 974-A, B-E) H
964 SUPREME COURT REPORTS [2016] 7 S.C.R.
A CIVIL ORIGINAL JURISDICTION : I.A. Nos.363-364, I.A.
No. 425 in I.A. No. 364 in I.A. Nos. 344, 355, 362 in Writ Petition (Civil)
No.13029of1985.
Under Article 32 of the Constitution of India.
Ranjit Kumar, (SG), Tushar Mehta, ASG, Anil Grover, Alok
B Sangwan, AAG, Harish N. Salve, Neeraj Kishan Kaul, Ms. V. Mohna,
Shyam Divan, Sr. Advs., Sidhartha Chowdhury (AC), Ms. Aparaj ita Singh
(AC), A.D.N. Rao (AC), S.N. Terdal, D.N. Goburdhan, L.
Vishwanathan, Amex Pathak, Raunak Dhillion, Sumit Attri, Cyril
Amarchand Magaldas, Ms. Meenakshi Grover, G.S. Makkar, B.K.
Prasad, Shadman Ali, S. W.A. Qadri, Ajay Sharma, Zaid Ali, D.S. Mahra,
c Ms. Bi nu Tamta, Ravindra Bana, Vijay Panjwani, Garvesh Kabra, Samir
Ali Khan, Abhishek Chaudhary, Ms. Manali Singhal, Santosh Sachin,
Rohit Kaul (For Mr. Abhijat P. Medh), Ms. Vanita Bhargava, Ajay
Bhargava, Ms. Abhisaar Bairagi (For Mis. Khaitan & Co.), Shri Narain,
Tavinder Sidhu, Gunjan S. Jain, Sidha11h Agrawal, Vivek Paul (For Mis.
D M.V. Kini & Associates), Advs. for the appearing parties.
The followingjudgment of the Court was delivered
I. Interlocutory applications No.363 and 364 of 2015 have been
filed by the Consortium of Banks seeking direction from this Court that
the rights of the Consortium of Banks who has financed the Kundli-
E Manesar-Palwal Expressway ('BOT') in the State of Haryana and has
outstanding dues approximately Rs.1419.15 crores as on 28.02.2015 are
not prejudiced by this Court's order dated 30.01.2015 passed in I.As.
No.344, 355 and 362 in W.P.(C) No.13029 of 1985.
2. Shorn of unnecessary details, facts leading to the present
applications are as follows: Haryana State Industrial and Infrastructure
F
Development Corporation Limited (HSIIDC) invited bids for developing
of 135.650 kms long Kundli-Manesar-Palwal Expressway in the State
ofHaryana. Following the bidding process, three companies viz., Mis.
Madhucon Projects Limited, Mis. D.S. Construction Limited and Mis.
Appolo Enterprises set up a Special Purpose Vehicle (SPY) named' KMP
G Expressways Limited' ("concessionaire") and letter of acceptance was
issued on 14.11.2005. The concessionaire and HSllDC entered into a
concession agreement dated 31.01.2006 and the same was for a period
of twenty three years and nine months from the appointed date.
3. The concessionaire raised a loan from consortium of banks
H comprising of the banks namely IDBI Bank, State Bank of India, the
M.C. MEHTA v. UNION OF INDIA & ORS. 965
applicants herein and other banks such as State Bank of Mysore, State A
Bank ofTravancore, State Bank of Patiala, Canara Bank, Dena Bank,
United Bank oflndia, UCO Bank, Vijaya Bank and India Infrastructure
Finance Company Ltd. The original project cost of Rs.1915 .00 crores
was proposed to be financed by way of equity capital of Rs.766.00
crores and Rupee Term Loan of Rs.1149 .00 crores. The lender
B
banks have disbursed sums aggregating to Rs. I 075.03 crores for the
project. On 08.01.2007, a loan agreement was executed between the
lender banks and concessionaire recognizing and strengthening the
lenders' security interest over the concession agreement. In terms of
loan agreement, concessionaire had inter alia agreed to create security
interest over various documents like all project documents which include c
concession agreement and all other assets and properties of the existing
concessionaire. The concessionaire executed the indenture of mortgage
dated 09.01.2007 securing the interest of the lenders as per the
requirement of the loan agreement. In order to further secure the interest
of the lender banks, on the same date i.e. 08.01.2007, a tripartite
D
agreement was also entered into between HSllDC, the concessionaire
and the IDBI Bank as lenders' agent.
4. Proposed Kundli-Manesar-Palwal Expressway I 35.650 kms
long takes off from NH- I near Kundli, crosses NH-I 0 in the west of
Bahadurgarh, crosses NH-8 near Manesar and finally joins NH-2 near
Palwal. As the project is being developed around the national capital,
E
Delhi, by an order of this Court dated 18.08.2005 in IA No. 182-183 in
W.P. (C) No. 13029/1985 titled as 'MC. Mehta v. Union of India' the
same is being monitored by a special monitoring committee under the
chairmanship of Secretary, Ministry of Road Transport and Highways
with Chief Secretaries of Delhi, Haryana and U.P., Chairman, NHAI F
and Chairman, Environmental Pollution Control Authority (EPCA) as
members. Also, the progress of the project was being reviewed by a
High Powered Committee established under the chairmanship of Chief
Secretary, Haryana and others. There was delay in execution of the
work and the concessionaire was unable to achieve the commercial
operation of the project. Consequently, this Court appointed the G
Environmental Protection Control Authority Committee (EPCA) to
expedite the project. Several meetings were held between EPCA,
HSllDC, the concessionaire and the lender banks, the details of which
may not be relevant for the issue raised before us. Suffice to note that it
was agreed that an amicable substitution of the existing concessionaire H
966 SUPREME COURT REPORTS (2016] 7 S.C.R.
A shall be made so as to expedite the project. It was fu11her agreed that in
terms of the contract, the concessionaire would be paid Rs.1300.00 crores
as termination payment for utilization towards payment of the debts due.
However, HS II DC vi de its letter dated 28.01.2015 addressed to EPCA
informed that it had revoked the arrangement of making termination
payment to the concessionaire and approval for payment of the same
B
was withdrawn. At the same time, HSIIDC issued a notice dated
28.01.2015 to the then existing concessionaire conveying its intention to
terminate the Concession agreement, subject to a cure period of one
month for curing the defaults.
5. At this juncture, applications being I.As. No.344/2012 and 362/
c 2014 were filed by the amicus curie and 1.A.No.355/2014 filed by
Government ofNCT of Delhi in WP (C) No.13029/1985. This Court
vi de its order dated 30.01.2015, directed the State of Haryana to replace
the existing concessionaire by following due procedure. The operative
part of the order dated 30.01.2015 reads as under:-
D "/11 the meanwhile, the State of Hmyana will ensure that
appropriate steps would be taken to award the contract for
the project to the new concessionaire within two months' time
fiwn today. The new concessionaire shall commence the work
within a months time thereafte1: "
E 6. Later, vide a letter dated 13.02.2015. HSIIDC informed IDBI
Bank that in view of the order of the Supreme Court dated 30.01.2015,
the process of selecting a new concessionaire through its own efforts is
under process and that if lender banks propose to bring a new
concessionaire, the lenders would have to adhere to the time frame fixed
F by the Supreme Court. Vide its letter dated 16.02.2015, IDBI intimated
HSIIDC that in order to facilitate compliance with the order of the
Supreme Court, the senior lenders have agreed that the entity selected
by HSllDC shall be the 'seleclee' of the lenders for the purposes of the
substitution agreement. However, lender banks asked HSIIDC to ensure
that the new concessionaire takes over the debt due to the lenders.
G Applicant No. I-IDBI Bank vide letters dated 16.02.2015, 25.02.2015,
27.02.2015, 05.03.2015, 16.04.2015 and 02.05.2015 repeatedly asked
HSllDC to comply with clause 3.5 (i) of the substitution agreement and
to ensure that the new concessionaire takes over the senior lenders'
debt dues.
H
M.C. MEHTA v. UNION OF INDIA & ORS. 967
7. Subsequently, l-ISIIDC issued tender dated 20.02.2015 and A
subsequent addendum dated I 0.03.2015 and 13.03.2015 inviting bids 'for
execution of development of access controlled Kundli-Manesar-
Palwal Expressway Section (Manesar RD. 83.320 km to Palwal RD
135.650 kms) (Balance Work) on item Rate Mode amounting to
Rs.4,01,49,97,931.00'. Bid submitted by Mis. KCC Buildcon Pvt. Ltd.-
B
Dilip Buildcon Ltd. (JV) was accepted by HSIIDC on 28.03.2015 for
execution and development of the project on 'Item Rate Mode' for the
said stretch of the road project of 52.33 km (Manesar-Palwal) (Balance
Work). Subseq;.1ently, in the first week of April, 2015, HSIIDC issued
invitation for bids for development of access controlled six lane Kundli-
Manesar Section (km 0.00 to km 83.320) valued at Rs.1774.00 crores c
on 'BOT' (annuity basis). After evaluation of the bids from the qualified
bidders, HSIIDC accepted the bid of ESSEL on 'BOT' (annuity basis)
and issued letter of acceptance on 31.07.2015 with a project cost of
Rs.1863 .00 crores. ESSEL incorporated Mis. Kundli-Manesar
Expressways Limited as a limited liability company and the concession
D
agreement was executed by HSIIDC with M/s. Kundli-Manesar
Expressways Limited on 03.09.2015 for execution of work of
development of access controlled six lane Kundli-Manesar Section km
0.00 to km 83.320 in the State ofHaryana on 'BOT' (annuity basis). Be
it noted, in the tender as well as the concession agreement with the
ESSEL, there was neither mention of debts due to the lender banks nor E
any clause was incorporated to secure the loans of the lender banks.
8. In this factual background, the lender banks have come before
us by these applications inter alia seeking various directions:
(a) To direct HSIIDC to amend the concession agreement between
HSIIDC and ESSEL so as to include a suitable condition to F
take over the notice and other amounts owed to the senior
lenders;
(b) To direct HSIIDC to take over the balance loan and other
amounts owed to the lenders under the financing documents
proportionate to the 52.33 km~. of the project road which is G
constructed and completed by the new EPCA Director and
subsequently taken over by the HSIIDC:
(c)To direct HSllDC to ensure that new concessionaire/ ESSEL
who would substitute the existing concessionaire to assume all
H
968 SUPREME COURT REPORTS [2016] 7 S.C.R.
A the existing liabilities and obligations of the existing
concessionaire towards the senior lenders proportionate to
83.320 kms.;
(d) To direct HS II DC to enter into a supplementary agreement
with the ESSEL so as to include a suitable condition to ensure
B that the rights of senior lenders under the substitution agreement
are duly protected;
(e) To direct and collect all tax levy from both the sections of the
project road i.e. Kundli-Manesar Section (83.320 kms)
awarded to ESSEL and Mensar-Palwal of52.33 kms as taken
c over by HSIIDC are deposited into Escrow Account to be
opened with applicant No. I the lead bank
9. Grievance of the lender banks is that though the rights of the
senior lenders were acknowledged by HSIIDC in its letter dated
13.02.2015, HSIIDC proceeded with the bid without disclosing to the
D new concessionaire that it will have to take upon debts due to the lender
banks. On behalf of the appellants, the learned Attorney General, Mr.
Mukul Rohtagi appearing along with Additional Solicitor General oflndia,
Mr. Neeraj Kishan Kaul submitted that inspite of repeated letters by
banks asking HSllDC to act in terms of substitution agreement, HS II DC
has ignored the request of lenders and has gone ahead with the
E appointment of new concessionaire without acknowledging the rights of
the lenders and thus HSlIDC failed to act in terms of the contract, in
particular clause 3.5 (i) of the substitution agreement.
10. Contention of the lender banks is that in terms of clause 3.5 (i)
of the substitution agreement while substituting the concessionaire by
F ESSEL, HSlIDC ought to have taken into account lenders' dues and
ought to have incorporated necessary clause in the concession agreement
obligating the Selectee to take over lender banks' dues. It is contended
that HSIIDC is bound to execute a substitution agreement with the
Selectee on the same terms and conditions as provided in the substitution
G agreement dated 08.01.2007 and that HSlIDC has committed breach of
contract. Further grievance of the lender banks is that unilateral
revocation of HSIIDC's commitment to make termination payment of
Rs.1300.00 crores for utilization towards payment of dues payable to
the lender banks has caused serious prejudice to the rights of the lender
banks. Yet another grievance of the lender banks is that corresponding
H to clause 3.5.(i) of the substitution agreement. no clause was shown in
M.C. MEHTA v. UNION OF INDIA & ORS. 969
the advertisement for development of six lane access controlled Kundli- A
Manesar Expressway km 0.00 to km 83.320 nor the same was
incorporated in the concession agreement which was awarded to ESSEL
for the development of six lane access controlled Kundli-Manesar
Expressway from km 0.00 to km 83.320. It was submitted that while
awarding the work to ESSEL, HSIIDC ought to have acted in accordance
B
with the terms of substitution/tripartite agreement dated 08.01.2007 and
HS II DC committed breach of contract by not incorporating the suitable
condition in the new concession agreement for the payment or take over
oflenders' dues by the new concessionaire/ESSEL. It was further argued
that unilateral revocation of consensus arrived at between HSIIDC and
lender banks to make termination payment of Rs.1300.00 crores for c
utilization towards payment of dues to the lender banks was in breach of
HSllDC's contractual obligations and the same caused serious prejudice
to the rights of the banks.
11. Lender banks relied upon clause 7.1.2 of the Common Rupee
Term Loan Agreement dated 08.01.2007 between the lender banks and D
concessionaire where right of the lenders to receive toll collections from
the project, deposited in an escrow account is recognised. Lender banks
rely upon various clauses in tripartite agreement/substitution agreement
dated 08.01.2007 between HSIIDC, the concessionaire and the lenders'
agent. As per the substitution agreement/tripartite agreement, obligation
of the HSIIDC to inform the lenders' agent about any notice of E
termination of the concession agreement is provided in clause 5.1 of the
substitution agreement. In case of default, right is given to lender banks
to substitute the concessionaire by a Selectee subject to approval of
such 'Selectee' by HSIIDC. Clause 2.1 of the substitution agreement
provides for substitution of the concessionaire by a 'Se/ectee '.Clause 3 F
of the substitution agreement provides the modality for substitution of
the Selectee by the lender banks. On behalf of the banks, much emphasis
is laid upon clause 3.5.1 to contend that as per clause 3.5.1 it is the
responsibility of HSIIDC to ensure that a suitable condition acceptable
to the lenders' agent is provided for payment or take over of the lenders'
dues. Clause 3.5 (i) of the substitution agreement very much relied by G
the banks reads as under:-
"3.5 (i) If HSllDC decides to substitute the Concessionaire by
any other person ("HSIIDC Nominee''), it shall take into account
the Senior Lender's Dues while considering offers from such
970 SUPREME COURT REPORTS [2016] 7 S.C.R.
A persons and shall include a suitable condition as agreed to by the
lenders' agent on behalf of the Senior Lenders for payment or
take over of such dues by such HSllDC Nominee to the extent
agreed by the lenders' agent while substituting the Concessionaire
by the HSllDC Nominee. The HSIIDC Nominee shall similarly
be bound to execute a supplementary/fresh substitution agreement
B
on the same terms and conditions as provided herein."
12. Having regard to the nature of the order we propose to pass,
it is not necessary for us to go into the merits of the submission of the
banks and interpretation of the various clauses relied upon by the lender
banks. Suffice to notice the facts emerging and the material on record
c and the need to protect the interest of the lender banks by an interim
order.
13. (a) Delay in Completion of Work and Substitution of
Concessionaire there<(fter: As brought on record that though
concessionaire had executed part of the work, progress of the work by
D the concessionaire was delayed and the concessionaire was unable to
achieve the work target. The lender banks served a notice ofoccurrence
of default dated 13.08.2013 to the concessionaire asking him to cure the
defects within a period of thirty days from the date of delivery of the
notice. The concessionaire replied to the default notice vide its reply
E dated 17 .09.2013 stating that the payment default was on account of
delay by HSllDC in making payments to the concessionaire. On
13.01.2014, substitution notice was served on concessionaire by the lender
banks under article 2.2 of the substitution agreement which was objected
by the concessionaire vi de its letter dated 03.02.2014.
F (b) Termination Payment and Unilateral Revocation of the same
by HSIIDC: While hearing I.A. No.344of2012, an interim order dated
10.03.2014 was passed by this Cou1t, thert:by authorizing Environmental
Protection Control Authority (EPCA) to proceed with the proposal of
replacing the concessionaire. Accordingly several meetings were held
between the lenders, HSI IDC and the EPCA. Vi de letter dated ·
G 01.07 .2014, EPCA recorded its comments to the Government ofHaryana
on the proposal regarding fixation of amount of 'consideration for work
done' sent to EPCA by the lenders. The lender banks sought termination
payment to the tune of Rs.1711.38 crores. However, HSIIDC vide its
letter dated 05.08.2014 conveyed its decision to pay Rs.1300.00 crores
H as a settlement/termination payment and the same was maint:iined in
M.C. MEHTA v. UNION OF INDIA & ORS. 971
the EPCA meeting on 09.08.2014. In the said meeting, HSIIDC infonned A
that termination payment of Rs. 1300.00 crores has been approved by its
highest authority and HSIIDC cannot accede to the lenders request to
increase the amount to Rs. 1711.38 crores. In the EPCA meeting dated
01.11.2014 HSIJDC informed that in view of formation of the new
government in the State of Haryana, a fresh approval from the new
B
government would be required on the amount ofRs.1300.00 crores fixed
to be paid as termination payment. According to the lender banks in its
letter dated 05.08.2014 (Annx. R-3), HSllDC stated that:
"it has been decided that INR 1300 crore (fa) the most
reasonable amount out of different valuations done by the
Lenders' Engineer, !11depende11t Consultant, Lenders' c
Consultant and Lead Lenders·• ....... "while conveying as
above, I would also like to assure full support and co-
operation of the State Government in your endeavour for
getting the Project implemented. "
Later, HSllDC is said to have unilaterally revoked its consent to D
termination payment ofRs.1300.00 crores vide its letter dated 28.01.2015
to EPCA while simultaneously issuing notice of default to the
concessionaire. According to lender banks, HSIIDC had not kept up its
commitment and has not honoured the consensus arrived at between
the lender banks and HSllDC regarding the termination payment of E
Rs.1300.00 crores and committed breach of contract.
(c) Order of this Court dated 30.01.2015: As noticed earlier, by order
dated 30.01.2015, this Court directed HSIIDC to appoint a new
concessionaire. On behalf of the applicants, it was submitted that the
above developments and various communications between the lender F
banks and HSIIDC and concessionaire, consensus arrived at between
the parties to pay termination payment of Rs.1300.00 erores and the
rights of the lender banks were not brought to the notice of this Court. It .
was submitted that in order to facilitate compliance of the order of this
Cou11, lenders vi de letters dated 16.02.2015 and 25.02.2015 intimated
HSIJDC that the Selectee by HSIIDC is acceptable to the lenders as G
Selectee for the purpose of substitution agreement. However, lender
banks repeatedly requested HSJJDC to ensure that the Selecteel
concessionaire takes over the debts due to lender banks and secure the
same by incorporating appropriate clauses in the concession agreement.
(d) Proceedings before the Debt Recovery Tribunal: As seen from H
972 SUPREME COURT REPORTS (2016) 7 S.C.R.
A the material on record, the consortium of banks has filed an application
before the Debts Recovery Tribunal for recovery of their dues of
Rs.1607,97,51, I 08 against the previous concessionaire and others. It is
brought on record that in the said proceeding, by order dated 23.12.2015,
the Debts Recovery Tribunal restrained outgoing concessionaire Mis.
KMP Expressways Limited from receiving any amount/fee/charges from
B
the Government of I-laryana or any other authority in respect of refund/
transfer of KMP Expressway Project without permission of Debts
Recovery Tribunal. This was communicated by the lender banks to
HSllDC vide its letter dated 27.01.2016 calling upon HSJIDC not to
make any payment to the outgoing concessionaire.
c (e) Arbitration Proceedings: As seen from legal notice dated
03.07.2015, Mis. KMP Expressways Limited invoked arbitration clause
contained in clause 39.2 of the concession agreement. Arbitration claim
is pending before theArbitral Tribunal comprising of Justice N.K. Sodhi
(Former Chief Justice) presiding Arbitrator, Justice (Retd.) T.S. Doabia,
D arbitrator and Shri K.B. Lal Sin gal (Engineer-in-Chief) (Retd.), arbitrator
in Arbitration Case No. I03of2013 against HSIIDC.
14.As discussed earlier, development of 4/6 lane Kundli-Manesar-
Palwal Expressway from km 0.00 to km 83.320 in the State ofHaryana
on 'BOT' basis was awarded to erstwhile concessionaire Mis. KMP
E Expressways Limited. Because of the incompletion of the work as
aforesaid and intervention of this Court by order dated 30.01.2015, the
work was divided into two parts and awarded to Mis. KCC Buildcon
Pvt. Ltd.-Dilip Buildcon Ltd. (JV) and ESSEL as under:-
Stretch Amount To whom awarded
F Manesar· Pal wal INR401.49 Mis. KCC Buildcon
Expressway Section crores Pvt lld.-Dilip
(Manesar RD.83.320 km Buildcon Ltd. (JV)
to Palwal RD 135.650km)
(Balance Work) on Item
Rate Mode.
G Development of access IN R 1774 crores Mis ESSEL
controlled 416 Lane
Kundli-Manesar (0.00km
to 83.320 km) in the State
of Haryana on Build-
Operate-Transfer (Annuity
basis) (Balance Work
H
M.C. MEHTA v. UNION OF INDIA & ORS. 973
I 5. Since the work of development of access controlled six lane A
Kundli-Manesar Section (from km 0.00 to km 83 .320) is awarded to M/
s. ESSEL, the applicants now seek a direction to amend the concession
agreement between HSIIDC and ESSEL, so as to include a suitable
condition to take over lenders' dues and other amounts due to the senior
lenders. fn our view, such a relief cannot be granted by an order of this
B
Court, as the same would amount to variation of the contractual terms
between the parties i.e. HSllDC and ESSEL. Even so the lender banks
are complaining about the violation of the terms of the tripartite agreement
between them and concessionaire. Any such dispute regarding the alleged
violation of the terms and conditions of a contract shall have to be
resolved in an appropriate civil action before the competent civil court. c
That is because the same are not amenable to adjudication in these
proceedings. Fortunately, however, the parties may not have to resort to
any civil action because of the presence of clause 7.11 in the tripartite
agreement between the lender banks, HSIIDC and erstwhile
concessionaire which provide for adjudication inter-se disputes between
D
the patties by way of arbitration. Clause 7.11 reads as under:-
"7.11 Any dispute, difference or claim arising out of or in
connection with or in relation to this Agreement which is not
resolved amicably shall be decided finally by reference to arbitration
to a board of arbitrators comprising of one nominee of each party
to the dispute. Such arbitration shall be held in accordance with E
the Rules of Arbitration of the Indian Council of Arbitration and
shall be subject to the provisions of the Arbitration and Conciliation
Act, 1996. The arbitrators shall issue a reasoned award. The
venue of such arbitration shall be at Chandigarh, India. The award
shall be final and binding on the parties. The parties agree and F
undertake to carry out the award of the arbitrators (the "Award")
without.delay."
16. That certain disputes between HSllDC and the concessionaire
have already been referred by arbitration to an Arbitral Tribunal
comprising of Justice N.K. Sodhi, Former Chief Justice of Karnataka G
High Court and Justice (Retd.) T.S. Doabia, former Judge of the Jammu
and Kashmir High Court is admitted. Given the fact that two of the
parties to the disputes sought to be raised in the present applications,
are already before the Arbitral Tribunal, we see no reason why the disputes
raised in the present applications should also not be referred to the Arbitral
H
974 SUPREME COURT REPORTS [2016] 7 S.C.R.
A Tribunal in terms of clause 7.11 (supra). To the credit oflearned counsel
for the parties, we must mention that they were also agreeable to the
making of such a reference leaving it open to the arbitral tribunal to
entertain claims and counter claims based on the contractual obligations
flowing from the agreements and to adjudicate upon the same.
B 17. The only question then is whether we ought to make any
interim arrangement pending adjudication of the disputes by the arbitral
tribunal. Having heard learned counsel for the parties at some length,
on that aspect, we are inclined to make a suitabe arrangement to protect
the interest of all concerned. We say so, because Manesar RD 83.320
km to Palwal RD 135.650 km= 52.330 km has been completed at least
c in part by the outgoing concessionaire while the remaining was completed
by Mis. KCC Buildcon Pvt. Ltd. The amount advanced by the lender
banks to the outgoing concessionaire has been, it is reasonable to presume,
utilized for construction of the said portion of the road. HSIIDC has
now appointed an agent to collect the toll for the use of the said road.
D Ends ofjustice, in our opinion, demand that the amount so collected is
secured to the extent of 80 percent by deposit of the same in an escrow
account to be opened in the IDBI (Lead bank) while, the balance 20
percent can be utilized by the HSIIDC for maintenance etc. The amount
so collected shall be available to the arbitral tribunal for disbursement in
such ratio as the arbitral tribunal may after hearing the parties deem just
E and proper to direct.
I 8. In the result, we dispose of these applications with the following
directions:-
(i) All disputes between the lender banks, the HSIIDC and the
F outgoing concessionaire-KMP Expressways Ltd. arising out of
or in relation to the tripartite agreement dated 08.0 I .2007 executed
between the parties shall stand referred to the arbitral tribunal
headed by Justice N.K. Sodhi.
(ii) The patties namely, the lender banks, HSIIDC and the outgoing
G concessionaire shall file their claims, and counter claims before
the arbitral tribunal who shall then adjudicate upon and decide the
same in accordance with the law giving to each one of them an
opportunity of being heard in the matter.
(iii) Pending adjudication of the claims as aforesaid, we direct
deposit of eighty percent of the amount collected towards toll for
H
M.C. MEHTA v. UNION OF INDIA & ORS. 975
use ofManesar-Palwal Section (Manesar RD 83.320 km to Palwal A
RD 135.650 km= 52.330 km) in an escrow account to be opened
in IDBI-the lead bank. The said amount shall then be available to
the arbitral tribunal for disbursement to the lender banks by way
of an interim arrangement or otherwise as it may consider
appropriate after hearing the parties.
B
(iv) This order of reference to arbitration or the pendency of the
proceedings before the arbitral tribunal shall not be considered as
an impediment for the new concessionaire to commence its work
of widening 4/6 lane work pertaining to Kundli-Manesar (0.00
km-83.320 km.), subject however, to the condition that before
ESSEL, the new concessionaire commences the work in Kundli-
c
Manesar (0.00 km-83.320 km) in terms of the contract allotted to
it, HSIIDC shall appoint a committee of engineers/experts for
measurement of the work done on (i) Kundli-Manesar-0.00km-
83.320km and (ii) Manesar-Palwal-83.320km-135.650km by the
outgoing concessionaire. The report shall be filed before the D
arbitrators within four weeks from the date of this order. The
outgoing concessionaire, the lender banks and the new
concessionaire shall associate with the process of measurement
of the work.
(v) Needful shall be done expeditiously to avoid any delay in E
commencement of the work by ESSEL.
Reference of the disputes to arbitration shall not be an impediment for
the Debts Recovery Tribunal to proceed with the application filed by the
banks pending before it. We make it clear that we have not expressed
any opinion as to the merits of the claims or contentions opened to the F
parties before the arbitral tribunal. No costs.
Devika Gujral !As disposed of.
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