2021 Supreme(SC) 175

SUPREME COURT OF INDIA
DHANANJAYA Y. CHANDRACHUD, M.R. SHAH, SANJIV KHANNA, JJ.
Rapid MetroRail Gurgaon Limited Etc. – Appellant
Versus
Haryana Mass Rapid Transport Corporation Limited & Ors. – Respondents
Civil Appeals Nos.925-926 of 2021 (Arising out of Special Leave Petition (C) Nos.1832-1833 of 2021)
Decided On : 26-03-2021

IMPORTANT POINT
Ordinarily, High Court in its jurisdiction under Article 226 would decline to entertain a dispute which is arbitrable. Remedies are available under Arbitration and Conciliation Act,1996 for seeking interim directions either under Section 9 before Court vested with jurisdiction or under Section 17 before Arbitral Tribunal itself.

Headnote:

Government Contract – Work Contract – Termination – Where Concession Agreement has been terminated by HUDA on account of a default by concessionaire, HUDA was required to take over complete project and assets, and to pay to lenders of Project, as per financing documents, an amount equal to 80 per cent of debt due as termination payment – Where on other hand, termination is by concessionaire on account of a default by HUDA, concessionaire was entitled to receive by way of a termination payment, sum equal to debt due and 110 per cent of adjusted equity – Parties clearly understood that once debt due was ascertained in terms of audit report, 80 per cent would be deposited by HSVP in Escrow Account while rest of disputes in respect of audit report would be governed by arbitration – It was understood by both parties that determination of debt due would be in terms of Concession Agreements – High Court was evidently concerned over a fundamental issue of public interest which was hardship that would be caused to commuters who use rapid metro as a vehicle for mass transport in Gurgaon – As such, High Court’s exercise of its writ jurisdiction under Article 226 in present case was justified since non-interference which would have inevitably led to disruption of rapid metro lines for Gurgaon, would have had disastrous consequences for general public – However, ordinarily High Court in its jurisdiction under Article 226 would decline to entertain a dispute which is arbitrable – Moreover, remedies are available under Arbitration and Conciliation Act,1996 for seeking interim directions either under Section 9 before Court vested with jurisdiction or under Section 17 before Arbitral Tribunal itself – HSVP shall within a period of three months from date of present judgment deposit into Escrow Account 80 per cent of debt due as determined in reports of Auditors dated 23 June 2020, in the case of RMGL and RMGSL respectively – Deposit into Escrow Account shall continue to be maintained in Escrow, subject to any order that may be passed by NCLAT or any competent statutory authority, and shall not be appropriated by Escrow Bank without specific permission – Directions issued. (Paras 39, 46, 49 and 60)

Facts of the case:

In 2008, Haryana Shehri Vikas Pradhikaran (HSVP), the second respondent, issued a Request for Qualification and Request for Proposal (RFQ/RFP) for developing a metro rail link from Delhi Metro Sikanderpur Station on MG Road to NH-8 (Project No1). A Consortium Agreement was entered into on 1 December 2008 between IL&FS Rail Limited (IRL), IL&FS Transportation Networks Limited (ITNL) and DLF Metro Limited in which IRL was identified as the lead member of the consortium. HSVP accepted the bid submitted by the consortium and issued a letter of award of 16 July 2009, subject to the condition that a concession agreement would be executed within 60 days. Pursuant to the letter of award, the consortium incorporated the first appellant, Rapid Metro Rail Gurgaon Limited (RMGL), under the Companies Act, 1956 (Act of 1956) and requested HSVP to accept RMGL as the entity which would undertake, fulfill and exercise the rights of the consortium under the letter of award. On 9 December 2009, HSVP entered into a Concession Agreement with RMGL for the execution of Project No 1 on a design, build, finance, operate and transfer basis. HSVP granted a concession to RMGL for a period of 99 years from the effective date, including the exclusive right, license and authority during the subsistence of the Concession Agreement to implement and operate Project No 1. On 7 June 2019, RMGL issued a notice of termination to HSVP seeking to bring an end to the Concession Agreement dated 9 December 2009 in terms of Article 24.5.1, upon the expiry of 90 days from the date of delivery of this termination notice. A similar termination notice was issued by RMGSL to HSVP, in terms of Article 32.5.1 of the Concession Agreement dated 3 January 2013. Further, on 7 June 2019, the appellants responded to the letter of HSVP complaining of material breaches alleged to have been committed by the appellants under their respective Concession Agreements.

Findings of Court:

Invocation of writ jurisdiction of the High Court under Article 226 of the Constitution by HMRTC and HSVP was to challenge termination notices dated 17 June 2019, and to obviate the consequence of cessation of the rapid metro operations, which would have ensued on the expiry of notice period. The arbitration clause of the Concession Agreements provides sufficient recourse to remedies which can be availed of.

Result : Appeals disposed of with directions