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2021 Supreme(Del) 1644

IN THE HIGH COURT OF DELHI AT NEW DELHI
Rekha Palli, J.
M/s. Mep Sanjose Talaja Mahuva Road Pvt. Ltd. - Appellant
Versus
M/s. National Highways Authority Of India - Respondent
O.M.P. (I) (Comm) (Original Miscellaneous Petition (I) (Comm)) No. 312 of 2020, 315 of 2020, 328 of 2020, 329 of 2020; I.A. (Interlocutory Application) No. 8975 of 2020, 8981 of 2020, 8974 of 2020, 8982 of 2020
Decided On : 17-02-2021

Advocates appeared:
Abhishek Manu Singhvi, Advocate, Rajiv Shankar Dwivedi, Advocate, Azeem Samuel, Advocate, Sushant Kumar Sarkar, Advocate, Rishabh Jain, Advocate, Parag Tripathi, Advocate, Padma Priya, Advocate, Shreya Sethi, Advocate, Mukul Rohatgi, Advocate, Atul Nanda, Advocate, Sandeep Sethi, Advocate, Sanjay Gupta, Advocate, Shivansh Singh, Advocate, Mehaak Jaggi, Advocate, Dhruv Nayar, Advocate

Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 9 - Concession Agreements dated 08.07.2016 and 09.08.2016 - The petitioners sought a stay against the termination notices issued by the NHAI due to alleged defaults in project milestones. The court emphasized the necessity to adhere to terms within contracts and recognized the COVID-19 pandemic as a force majeure event, yet stressed the importance of the parties' obligations prior to the force majeure declaration. The court found that the petitioners had defaulted under the agreements, and thus were not entitled to the benefits as per the issued circulars post the pandemic as they were already in default prior to that date. The petitioners' reliance on circulars for extensions was denied as they failed to demonstrate adherence to required conditions, specifically not being in default as of 19.02.2020. Resultantly, the requests for extensions based on the circumstances of the pandemic were rejected. (Paras 1, 2, 12, 17, 66)

Table of Content
1. background on petitions and parties involved (Para 1 , 2 , 3 , 4 , 5 , 6 , 8)
2. arguments presented by the parties (Para 9 , 10 , 11)
3. court observations on the context and agreements (Para 12 , 14 , 17)
4. determination of default and contractual obligations (Para 39 , 66 , 70)
5. final dismissal of petitions (Para 72)

JUDGMENT

Rekha Palli, J. - The present decision disposes of four petitions under section 9 of the Arbitration & Conciliation Act, 1996 raising disputes in relation to two separate but similar Concession Agreements dated 08.07.2016 and 09.08.2016, executed between MEP, the Concessionaire and the National Highways Authority of India (NHAI). The first two petitions, being O.M.P.(I) (COMM.) 312/2020 and O.M.P.(I) (COMM.) 315/2020, have been filed by the Concessionaire seeking stay of the two notices issued by the NHAI on 18.09.2019 expressing its intention of terminating (IOT notice) the two Concession Agreements in question, as also from initiating any coercive actions in that respect. Whereas, the remaining two petitions, being O.M.P.(I) (COMM.) 328/2020 and O.M.P.(I) (COMM.) 329/2020, have been filed by the senior lenders' representative, India Infrastructure Finance Company Limited (IIFCL), seeking certain specific injunctions against the NHAI for the purpose of ensuring that the rights of the senior lenders under the two Concession Agreements and the consequently executed two Substitution Agreements, are not frustrated by the actions of the NHAI stemming from these IOT notices.

2. Though no formal reply has been filed by the respondents in any of the four petitions, both sides have filed extensive written submissions and documents, on which they sought to place reliance. Accordingly, with the consent of the parties, the petitions were taken up for final disposal.

3. The Concessionaires in the Concession Agreements dated 08.07.2016 and 09.08.2016 are M/s MEP Sanjose Talaja Mahuva Road Pvt. Ltd. and M/s. MEP Sanjose Mahuva Kagavadar Road Pvt. Ltd. respectively, which are special purpose vehicles formed out of a joint venture between M/s MEP Infrastructure Developers Ltd. and M/s Sanjose India Infrastructure & Construction Pvt. Ltd. - only for the purpose of carrying out the work set out in the two Concession Agreements. The respondent no.1 in all these petitions is the National Highways Authority of India (NHAI), an autonomous statutory body responsible for development, maintenance, management, operation and toll collection of the country's national highways.

4. The two Concession Agreements related to the conversion of a contiguous stretch of National Highway-8E (NH-8E) in the state of Gujarat, falling between design chainages 53.585-100.100 KM (Talaja-Mahuva section or Package II) and 100.100-139.915KM (Mahuva-Kagavadar section or Package III), into a four-lane highway. These two projects were being executed under the NHAI's Project Implementation Unit at Bhavnagar, which had four coastal road network construction projects under its jurisdiction, and Packages II and III formed a part thereof.

5. The projects were based on the Hybrid Annuity Mode (HAM) mode introduced by the Central Government under NHDP-IV, which meant that part of the funds required to carry out the work under the Concession Agreements would be provided by the Government, whereas the remaining had to be arranged by the Concessionaire. This is when, in the year 2017, the senior lenders' consortium stepped in. They appointed IIFCL to represent their interests and extended credit facilities to the Concessionaires to enable it to meet its remaining financial needs for completing the project work. The senior lenders executed two Substitution Agreements; one with the NHAI and M/s MEP Sanjose Talaja Mahuva Road Pvt. Ltd., on 07.04.2017 (O.M.P.(I) (COMM.) 329/2020) and the other with the NHAI and M/s. MEP Sanjose Mahuva Kagavadar Road Pvt. L

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