The court ruled that the Concession Agreement's provisions for toll collection were invalid as NTBCL had recovered its project costs and profits, violating public policy and constitutional norms.

JUDGMENT :

SURYA KANT, J.

1. Leave granted.

2. The NOIDA Toll Bridge Company Limited (NTBCL), has preferred the instant appeal questioning the judgement dated 26.10.2016 passed by the High Court of Judicature at Allahabad (High Court). The issue before the High Court concerned a challenge to the collection and levying of toll, as legitimised by the provisions enumerated in the Agreement dated 12.11.1997 (Concession Agreement), executed between NTBCL, the New Okhla Industrial Development Authority (NOIDA) and the Infrastructure Leasing and Financial Services Limited (IL&FS). The Concession Agreement conferred upon NTBCL the rights necessary for the implementation of the Delhi NOIDA Bridge Project or the Delhi-NOIDA Direct Flyway (DND Flyway/Project) and, in connection thereto, the collection and levying of toll.

3. The High Court has vide the impugned judgement held Articles 13 and 14 of the Concession Agreement to be bad in law and directed NTBCL to cease the imposition of user fees or toll upon commuters using the DND Flyway.

(A) FACTS

4. Having laid out the observations of the High Court in brevi, it is essential at this juncture to delve into the facts of the instant case:

4.1. The controversy at hand concerns the toll levied on the users of the DND Flyway. The inception of this dispute can be traced to the 1980s when the State of Uttar Pradesh (State of UP) sought to construct a bridge connecting South Delhi and NOIDA, to improve connectivity between the two regions. However, the State of UP recognised that significant financial expenditure would be involved in this ambitious endeavour, which it could not undertake independently.

4.2. NOIDA and the Delhi Administration entered into a Memorandum of Understanding (MoU) with IL&FS on 07.04.1992, intending to construct the DND Flyway. IL&FS at that point in time, was a Company promoted by Public Financial Institutions to enable non-governmental investment in infrastructure development. In pursuance of the MoU, a Committee comprising representatives of the Government of India, the Government of NCT of Delhi, the State of UP and IL&FS was constituted on 08.06.1993 to take important decisions relating to the Project and its implementation (Steering Committee).

4.3. Thereafter, the Steering Committee on 08.04.1996 approved the incorporation of NTBCL by IL&FS in accordance with the Companies Act, 1956, which was contemplated to operate as a Special Purpose Vehicle for developing the DND Flyway on a Build, Operate, Own and Transfer (BOOT) basis. It was thereby intended that NTBCL would recover its investment in developing the DND Flyway infrastructural facility by imposing user fees on the commuters availing such services.

4.4. In pursuance thereto, the State of UP accorded approval for the implementation of the DND Flyway and constituted an Empowered Committee, tasked with negotiating the Concession Agreement with IL&FS. The draft Concession Agreement was approved by the State Cabinet and reviewed by multilateral agencies financing the project, including the World Bank and the Asian Development Bank. This initiative was recognised as one of the pioneering projects in India developed under the Public Private Partnership model (PPP).

4.5. The Concession Agreement was executed on 12.11.1997, designating NOIDA and IL&FS as the ‘Sponsors’ and NTBCL as the ‘Concessionaire’. The aforesaid Concession Agreement expressly provided for the construction of the DND Flyway, from the Okhla Barrage in NOIDA to a location close to Maharani Bagh in Delhi. The project encompassed the development, establishment, financing, design, construction operation and maintenance of the DND Flyway, including the development, financing, design and construction of a flyover at Ashram Chowk.

4.6. In terms of Section 2.7 of the Concession Agreement, the State and the Government of NCT of Delhi entered into a State Support Agreement on 14.01.1998, which facilitated: (i) the execution of the Delhi Lands Lease Deed on 23.10.1998