2024 (12) TMI 1153 - SC - Companies Law

Legality of Articles 13 and 14 of the Concession Agreement - direction to NTBCL to cease the imposition of user fees or toll upon commuters using the DND Flyway - maintainability of Writ Petition purportedly filed in public interest, before the High court - non-floating of tenders - power to levy fees could be delegated to the Appellant or not - excessive delegation - Article 14 of the Concession Agreement, opposed to public policy or not - recovery of Total Project Cost and Returns - recovery of dues from the Appellant, in regards to the display of outdoor advertisements. Maintainability of the Writ Petition before the High Court - Locus standi of Respondent No. 1 - HELD THAT - In the instant case, Respondent No. 1 is a Society duly registered under the Societies Registration Act, 1860, with the primary objective of promoting the welfare of NOIDA residents. The society acts as a bridge between the residents and public authorities, catering to the former s needs for essential civic amenities. Given this object, it is clear that Respondent No. 1 approached the High Court in good faith, with a view to safeguard the interests of NOIDA residents, who had been subjected to the levy of toll at the DND Flyway under the guise of user fees by NTBCL. Consequently, there are no merit in NTBCL s contention that Respondent No. 1 lacked locus standi in approaching the High Court - As regard to NTBCL s contentions pertaining to the alleged collusion between Respondent No. 1 and NOIDA, there is not an iota of material on record to substantiate these sweeping insinuations. Delay and laches - HELD THAT - The High Court rightly observed that the plea of delay lacks substance, as the commuters, including Respondent No. 1, were justified in trusting that NOIDA would protect their interests. However, in 2012, after learning that they were being misled and subjected to an illegal toll based on an audit report from NTBCL s Auditor and Chartered Accountant indicating that as of 31.05.2012, Rupees 2340 crores were still to be recovered from the public, and the recovery period had extended from 30 years to 100 years they were prompted to immediately approach the High Court - the challenge laid by Respondent No. 1 before the High Court, regarding the levying of toll or user fees, being rooted in public interest and involving en masse potential violations of Fundamental Rights of citizenry, warrants thorough examination. Scope of judicial intervention - HELD THAT - The High Court was justified in entertaining the petition filed by Respondent No. 1 in public interest. The continued levy of toll and the Concession Agreement were directly impacting the rights and interests of commuters. NTBCL s attempts to classify the Concession Agreement as a purely private contractual matter, sequestered from such scrutiny, thus holds no ground. The Project, having been developed for public benefit, cannot escape judicial oversight, particularly when the allegations pertain to the public s rights and interests, which are being infringed upon by the levying of user fees. The contention of NTBCL seeking dismissal of Respondent No. 1 s petition at the threshold was thus rightly rejected by the High Court. The contention that there were no suitable companies capable of undertaking such infrastructural development during that period lacks any substantiation or material on record to support such sweeping claims - The selection of NTBCL without following proper procedure and without giving any opportunity to bid, to other competitors, was nothing but an opaque device resorted to, in contravention of Article 14 of the Constitution of India. Delegation of power to levy fees and its validity - HELD THAT - NTBCL cannot assert that NOIDA has a genuine 'choice' or the ability to 'withhold consent' from extending the Concession Agreement. NOIDA effectively has no choice and is perversely being browbeaten to continue enforcing the Concession Agreement. Despite the supposed 'choice,' it is burdened with the obligation to repay an exorbitant sum, which we have already established is unreasonably calculated. This consensual extension is solely a show of smoke and mirrors and has been cunningly engineered by NTBCL and IL FS. They successfully ensured that first, the formula was designed in such a way that the Total Project Cost and returns would escalate each year; second, inflated and unnecessary expenses could be included in the Total Project Cost, making repayment impossible; third, the Concession Agreement would only terminate upon full repayment of the Total Project Cost and returns, knowing as early as 2007 that 30 years would not suffice for recovery; and finally, NOIDA was left with no real choice but to extend the concession period due to the ultimatum presented in Article 18, masked as consent. An exhaustive reading of the CAG Report highlights the extent to which the public has been defrauded. The general public has been forced to part with hundreds of crores by IL FS and NTBCL, under the guise of providing necessary public infrastructure. This could not have been done but for the collusion of the then officers of the two State Governments and of NOIDA, who closed their eyes while the contractual obligations were incurred. Had Respondent No. 1 not been vigilant of their rights, the public funds would have continued to be misappropriated for private profiteering. Furthermore, the role played by IL FS in this entire scheme is highly questionable. Since NTBCL has recovered the costs of the project and substantial profits thereon by virtue of imposition of user fees/tolls and given the existing position of law, there are no error in the High Court s judgment and its directions in restraining the imposition and collection of user fees/tolls. Recovery of dues arising out of display of outdoor advertisements - HELD THAT - The question pertaining to outdoor advertisements does not constitute the subject matter of the present appeal, where the matter assailed by the Respondent Welfare Association before the High Court was restricted to the imposition and levy of user fees or toll by NTBCL and concomitantly, the validity of certain provisions of the Concession Agreement. Regardless, Respondent No. 2, NOIDA, has alleged that NTBCL owes substantial dues to them, accrued through outdoor advertising, for which the license had been granted by NOIDA - NOIDA shall be at liberty to initiate recovery proceedings as per the dispute resolution mechanism outlined in the Delhi Land Lease and NOIDA Land Lease Agreements. Such a process shall be subject to the defence and objections that may be available to NTBCL before the appropriate forum. Consequently, this issue does not fall within the scope of the instant appeal and therefore we have not expressed any opinion on its merits. Application disposed off.

Summary

Issues Involved:

1. Maintainability of the Writ Petition before the High Court.
2. Justification for non-floating of tenders.
3. Delegation of power to levy fees and its validity.
4. Whether Article 14 of the Concession Agreement is opposed to public policy.
5. Recovery of Total Project Cost and returns by NTBCL.
6. Recovery of dues from NTBCL regarding outdoor advertisements.

Detailed Analysis:

1. Maintainability of the Writ Petition before the High Court:

The court examined the locus standi of the Respondent No. 1, delay and laches, and the scope of judicial intervention in a commercial contract. The court found that the Respondent No. 1, a registered society representing NOIDA residents, had the requisite locus standi to file the petition in public interest. The court also rejected the contention of delay and laches, noting that the cause of action was continuous due to the ongoing toll collection. The court emphasized that judicial review is permissible in contracts involving public authorities, particularly when public interest is at stake.

2. Justification for Non-Floating of Tenders:

The court scrutinized the awarding of the contract to NTBCL without a formal tender process. It emphasized that the State must act transparently and fairly, especially when public welfare is involved. The court found that NTBCL was selected without any competitive bidding, which contravened Article 14 of the Constitution. The absence of tenders indicated an opaque process, favoring NTBCL unjustly.

3. Delegation of Power to Levy Fees and its Validity:

The court analyzed whether NOIDA could delegate the power to levy fees to NTBCL. It concluded that while NOIDA could delegate the collection of fees, it could not delegate the power to levy them. The court found that NOIDA exceeded its statutory authority by delegating this power to NTBCL, rendering the delegation invalid.

4. Whether Article 14 of the Concession Agreement is Opposed to Public Policy:

The court examined the reasonableness of the formula in Annexure F of the Concession Agreement, which calculated the Total Project Cost and returns. The court found the formula to be unreasonable, leading to perpetual toll collection and unjust enrichment of NTBCL. It held that the provisions were arbitrary and violated Article 14 of the Constitution, warranting severance from the Agreement.

5. Recovery of Total Project Cost and Returns by NTBCL:

The court reviewed the claims regarding the recovery of the Total Project Cost. It relied on the CAG Report, which indicated that NTBCL had largely recovered the project costs and substantial profits. The court found no justification for continued toll collection, as NTBCL had already recouped its investment and profits.

6. Recovery of Dues from NTBCL Regarding Outdoor Advertisements:

The court noted that the issue of outdoor advertising dues was not part of the present appeal. It stated that NOIDA could pursue recovery through the dispute resolution mechanisms outlined in the relevant agreements, subject to NTBCL's defenses.

Conclusion:

The court upheld the High Court's judgment, dismissing the appeal. It confirmed that the writ petition was maintainable, the contract was unfairly awarded, the delegation of fee-levying power was invalid, and NTBCL had recovered its costs, negating the need for further toll collection. The court also clarified that the issue of outdoor advertising fees was outside the scope of this appeal.