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IN THE HIGH COURT OF DELHI AT NEW DELHI
VIBHU BAKHRU, J.
Punjab National Bank - Petitioner
Versus
The National Highways Authority of India & Anr. - Respondents
O.M.P. (I) (COMM) No. 211 of 2020
Decided On : 22-10-2021
Code of Civil Procedure, 1908 - Order XXXVIII - Rule 5, 1 and 2 - Arbitration & Conciliation Act, 1996 - Section 9 and 36 - Specific Relief Act - Substitution of Agreement and termination of Concession Agreement entered into between NHAI and respondent West Haryana Highways Projects - PNB further prays that NHAI be directed to deposit Termination Payment in an Escrow Account in accordance with Concession Agreement amounting to as on along with interest at bank rate plus for first ninety days and thereafter, at bank rate plus till date of payment - PNB further prays that payments be released to it without prejudice to rights and contentions of Concessionaire to recover higher Termination Payment in arbitration proceedings that may ensue - Whether NHAI is responsible for Concessionaire’s financial default and, if so, whether it entitles Concessionaire to claim that termination of Concession Agreement as demanded by PNB be considered as termination on account of NHAI’s default, are contentious issues and it is not necessary to address same in these proceedings - Whether relief as sought for, can be granted to PNB in view of aforesaid prima facie view of Court.
Finding of the Court: Any claim that PNB may have for recovery of any amount from NHAI is not required to be secured, as PNB has not raised any doubt as to NHAI’s inability to repay its debts - PNB has rested its case for relief in present petition entirely on premise that there is no real dispute regarding NHAI’s obligations to terminate Concession Agreement on a demand made by PNB after issuance - Concessionaire is able to recover any amount from NHAI, PNB would be well within its right to seek attachment of said proceeds or take such steps for recovery of amount from Concessionaire - However, PNB would require to institute separate proceedings for recovery of amounts from Concessionaire and clearly same cannot be directed by an order under Section 9 of A&C Act. Importantly, an arbitral award is required to be enforced as a decree of court in terms of Section 36 of A&C Act. - Said procedure cannot be circumvented by seeking directions under Section 9 of A&C Act. - Thus, PNB is not precluded from instituting appropriate proceedings for attachment of awarded amount on Arbitral Award being enforced, however no relief in regard can be granted in these proceedings - PNB has prayed that NHAI be directed to deposit awarded amount in terms of Arbitral Award in Escrow Account - Concessionaire had prevailed in arbitration instituted against NHAI and is, thus, entitled to receive certain amounts in terms of Arbitral Award - However, NHAI has contested said Arbitral Award - Court is not persuaded to accept on anvil of tests of irreparable loss/injury as well as balance of convenience, that an interim order be.
Result: Petition dismissed.
JUDGMENT :
Vibhu Bakhru, J.
Introduction:
1. The petitioner Punjab National Bank (hereafter the ‘PNB’) has filed the present petition under Section 9 of the Arbitration & Conciliation Act, 1996 (hereafter the ‘A&C Act’) inter alia praying that the respondent no.1, National Highways Authority of India (hereafter the ‘NHAI’), be directed to perform its obligations under Clause 5.1 of the Substitution Agreement and terminate the Concession Agreement entered into between NHAI and respondent no. 2, West Haryana Highways Projects Pvt. Ltd. (hereafter the ‘Concessionaire’). PNB further prays that NHAI be directed to deposit the Termination Payment in an Escrow Account [Escrow Account bearing No. 2164002100009137 maintained with PNB] in accordance with the Concession Agreement amounting to Rs.617,23,00,000/-(Rupees Six Hundred Seventeen Crores Twenty-Three Lakhs Only) as on 22.11.2019, along with interest at the bank rate plus 3% for the first ninety days and thereafter, at the bank rate plus 5% till the date of payment. PNB further prays that the payments be released to it without prejudice to the rights and contentions of the Concessionaire to recover higher Termination Payment in the arbitration proceedings that may ensue.
2. In addition, PNB states that NHAI be also directed to deposit the amount awarded in favour of the Concessionaire in terms of the Arbitral Award dated 29.08.2019 in the Escrow Account and, it be further directed that the said amount be applied in terms of Clause 4.2 of the Escrow Agreement.
Factual Context:
3. By a Letter of Acceptance dated 05.07.2007 (hereafter the ‘LoA’), NHAI awarded the project for design, engineering, construction, finance, operation and maintenance of Delhi-Haryana Border to Rohtak Section of NH-10 from KM 29.70 to KM 87.00 including construction of Bahadurgarh and Rohtak bypasses in the state of Haryana (hereafter the ‘Project’) to a consortium of Karam Chand Thapar & Brothers Ltd. and Era Infra Engineering Ltd., on build, operate and transfer basis. The said consortium incorporated the Concessionaire as a Special Purpose Vehicle for the purpose of the Project.
4. Thereafter, on 06.11.2007, NHAI and the Concessionaire entered into a Concession Agreement. The consortium of lenders comprising of PNB (as the lead bank), India Infrastructure Finance Company Ltd., Central Bank of India, State Bank of Patiala (now merged with State Bank of India), Dena Bank (now merged with Bank of Baroda) entered into a Common Loan Agreement to finance the Project. The said consortium of banks (hereafter referred to as ‘PNB Consortium’) agreed to extend a Rupee Term Loan of an aggregate amount not exceeding Rs.410,23,00,000/-(Rupees Four Hundred Ten Crores and Twenty-Three Lakhs Only) to the Concessionaire for executing the Project.
5. Thereafter, on 02.05.2008, the Concessionaire and the Subordinate Lenders under Structured Mezzanine Credit Facility (SMCF) through IL&FS Financial Services Ltd. (Facility Manager) entered into a Common Loan Agreement for Subordinated Debt for a sum of Rs.29,30,00,000/-(Rupees Twenty-Nine Crores and Thirty Lakhs only). On 29.09.2008, an Escrow Agreement was executed between PNB (acting as the Lenders’ Representative) and the respondents. In terms of the said Escrow Agreement, an Escrow Account bearing No. 2164002100009137 was opened with PNB (hereafter the ‘Escrow Account’).
6. PNB claims that all amounts credited in the Escrow Account are to be appropriated in terms of the Escrow Agreement, which placed payments to PNB as the second highest in the order of priority, next to payment of all taxes in relation to the Project in the event of termination of the Concession Agreement.
7. PNB acting as the Lenders’ Representative entered into a Substitution Agreement with the respondents on 29.09.2008. This was in the format provided under Schedule-V to the Concession Agreement.
8. The Senior Lenders entered into a Second Supplementary Agreement dated 31.01.2014 to the Common Loan Agreement and
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