Point of Law: Concession Agreement - Termination/Suspension Notice - Article 36, it is required to mandatorily await lapse of 180 days before termination can occur or that once suspension has been invoked, termination can only be on efflux of 180 days.

JUDGMENT :

ASHA MENON, J:

1. The following observations by the learned Single Judge in the order dated 12th March, 2021 passed in O.M.P.(I) (COMM.) 98/2021 has brought the appellant/National Highways Authority of India (“NHAI”, for short) before us: -

“21. Mr. Mehta has laid much emphasis on the intent of the language used in Clause 37.1.2 which begins with the words “without prejudice to any other rights or remedies”. There is no doubt that the Respondent could take recourse to the aforesaid provision without prejudice to other rights and remedies and proceed to suspend the Petitioner and accord it an opportunity to cure the defects. However, that does not mean that in case the Respondent has elected to exercise this remedy, it could simultaneously also proceed to terminate under Clause 37.1.2 on the basis of same set of facts. Since the Respondent has elected to go down the path of suspending the rights of the Petitioner as available under the agreement, the opportunity to cure the defects has to be necessarily given, failing which, the Clause itself would become redundant.

22. Be that as it may, we are at the stage of admission. The Petitioner has made out a prima facie case in its favour and in case no stay is granted, it will suffer an irreparable loss. The balance of convenience also lies in favour of the Petitioner and against the Respondent. The matter certainly requires consideration. Accordingly, till the next date of hearing, the termination notice dated 5th March, 2021 is directed to be kept in abeyance. The arrangement between the parties would continue as per the orders passed in O.M.P. (I) (COMM) No. 421/2020, noted above.”

2. The crux of the submissions of Sh. Tushar Mehta, learned Solicitor General of India appearing for the NHAI, is that the provisions under Article 36 and Article 37 of the Concession Agreement (“CA”, for short) do not operate in separate and mutually exclusive spheres but form a “composite scheme” and both options are available to the NHAI in the event there is a concessionaire default.

3. Per contra, Dr. Abhishek Manu Singhvi and Sh.Harish Malhotra, learned senior counsel appearing for the respondent/Panipat Jalandhar NH-I Tollway Pvt. Ltd. (“PJT”, for short) contended that the two Articles are mutually exclusive and if the NHAI exercised its choice of proceeding under Article 36, it could not jump to Article 37 to terminate the CA, without allowing the entire procedure provided under Article 36 to play out.

4. At this stage, it may be appropriate to briefly refer to the facts of the present case. On 9th May, 2008, the parties entered into the CA in respect of ‘Six-Laning of Panipat-Jalandhar Section of NH-1 From Km 96.00 to Km 387.10 (length of 291.10 Km) in the State of Haryana and Punjab to be executed on Built-Operate-Transfer (Toll) basis on Design-Build-Finance-Operate (DBFO) pattern under NHDP Phase-V’ (hereinafter referred to as the “Project”). The CA was entered for a period of fifteen years from 11th May, 2009 till 11th May, 2024. The project was scheduled to be completed by 9th November, 2011 (in 910 days or 2.5 years). In terms of the CA, the parties had also executed an Escrow Agreement dated 6th May, 2009 with the Lenders, where State Bank of India (“SBI”, for short) was the Escrow Agent for operation of the Escrow Account. The estimated cost of the project was Rs.2747.50 crores but the Capital Cost submitted by the respondent/PJT amounted to Rs.4518.17 crores. Disputes arose between the parties even before the Provisional Completion Certificate was issued by the Independent Engineer (“I.E.”, for short) on 30th September, 2015. These disputes, relating to the year 2013, are before an Arbitral Tribunal.

5. According to the NHAI, the respondent/PJT failed to meet its O & M obligations as per the CA, in particular, relating to safety standards leading to accidents and the completion of balance work after issuance of the Provisional Completion Certificate. On 13th September, 2019, the NH