The court upheld the directions issued under the impugned order dated 31st July, 2017, to protect the interest of lenders and the power of the court under Section 9 of the A&C Act.

SANJIV KHANNA, J.

1. National Highways Authority of India (‘NHAI’ for short) has filed these intra Court appeals impugning the common order dated 31st July, 2017 passed in OMP(I) (Comm.) No.221/2017 ‘M/s. Jetpur Somnath Tollways Limited Vs. National Highways Authority of India & Anr’ and in OMP(I) (Comm.) No.227/2017 ‘Punjab National Bank Vs. National Highways Authority of India & Anr’.

2. The impugned order allows the aforestated OMPs filed by M/s. Jetpur Somnath Tollways Limited (‘JSTL’/ JETPUR for short) and the Punjab National Bank (‘PNB’ for short) under section 9 of the Arbitration & Conciliation Act 1996 (‘A&C Act’ for short) with the following directions:

“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 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.”

3. A Concession Agreement dated 7th February, 2011 was executed between NHAI and JSTL for construction, operation and maintenance of the four laning of Jetpur-Somnath section of National Highway 8-D from k.m. 0.00 to k.m. 127.00 in the State of Gujarat. The agreement had required the Concessionaire to on toll basis design, build, finance, operate and transfer (DBFOT) the project highway under NHDP Phase -III Project for a period of 30 years commencing from the date of appointment. The agreement had also postulated construction of Junagadh bypass for length of 19.80 k.m.

4. The concessionaire JSTL, in other words, had to incur entire costs, expenses and arrange for finances to construct the highway and operate, maintain, and manage the same. In turn the Concessionaire had the right to regulate its use by third parties, demand and collect an appropriate fees from vehicles and users for using the project highway or any part thereof, and refuse entry of any vehicle if fee due was not paid.

5. The Concession Agreement had mandated as a condition precedent that JSTL would have to open an escrow account with a bank, prior to the appointed date. For this purpose the Concessionaire was required to execute an escrow agreement with the bank. All deposits, inflows, and receipts of funds constituting the financial package of fees and other revenues, from or in respect of the project highway including rental deposits or capital receipts or insurance cover were to be deposited in the said account. Similarly, all payments towards expenditure on construction, maintenance, taxes, etc. including payment to NHAI after deducting cancellation fees, if any, were to be debited and paid from the said account. For the sake of convenience, we are reproducing clause 31.1 relating to escrow account, clause 31.2 relating to deposit into escrow account, clause 31.3 relating to Withdrawal during Concession Period and clause 31.4 relating to Withdrawals upon Termination as stipulated in the Article 31 of the Concessionaire Agreement, which read as under:

“31.1 Escrow Account

31.1.1 The Concessionaire shall, prior to the Appointed Date, open and establish an Escrow Account with a Bank (the “Escrow Bank”) in accordance with this Agreement read with the Escrow Agreement.

31.1.2 The nature and scope of the Escrow Account are fully described in the agreement (the “Escrow Agreement”) to be entered into amongst the Conces