9911796707
Advanced Search 
TMI Blog2017 (10) TMI 1582X X X X Extracts X X X X X X X X Extracts X X X X ..... 96 ('A&C Act' for short) with the following directions: "106. In view of the above, (i) JETPUR is directed to furnish an unconditional and irrevocable Bank Guarantee, in favour of NHAI undertaking to pay to NHAI an amount not exceeding Rs. 348.604 Crores [i.e. 90% of 640.86 = 576.774 (minus) 222.03 {already paid} (minus) 6.14 {agreed to be payable by NHAI} = 348.604]; and (ii) on deposit of the Bank Guarantee, NHAI shall forthwith deposit in the Escrow Account the sum of Rs. 354.744 Crores (i.e. 348.604 + 6.14); and (iii) the encashment of the Bank Guarantee shall be subject to the final award of the Arbitral Tribunal; and (iv) JETPUR shall keep the bank guarantee alive for unto a period of four months after the making of the final award by the Arbitration Tribunal; and (v) Parties shall comply with the provisions of Section 9(2) of the Act." 3. A Concession Agreement dated 7th February, 2011 was executed between NHAI and JSTL for construction, operation and maintenance of the four laning of Jetpur-Somnath section of National Highway 8-D from k.m. 0.00 to k.m. 127.00 in the State of Gujarat. The agreement had required the Concessionaire to on toll basis design, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d receipts into the Escrow Account: (a) all funds constituting the Financial Package; (b) all Fee and any other revenues from or in respect of the Project Highway, including the proceeds of any rentals, deposits, capital receipts or insurance claims; and (c) all payments by the Authority, after deduction of any outstanding Concession Fee: Provided that the Senior Lenders may make direct disbursements to the EPC Contractor in accordance with the express provisions contained in this behalf in the Financing Agreements. 31.3 Withdrawals during Concession Period 31.3.1 The Concessionaire shall, at the time of opening the Escrow Account, give irrevocable instructions, by way of an Escrow Agreement, to the Escrow Bank instructing, inter alia, that deposits in the Escrow Account shall be appropriated in the following order every month, or at shorter interval as necessary, and if not due in a month then appropriated proportionately in such month and retained in the Escrow Account and paid out therefrom in the month when due: (a) all taxes due and payable by the Concessionaire for and in respect of the Project Highway; (b) all payments relating to construction of the Project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement shall remain in full force and effect until the obligations set forth in Clause 31.4.1 have been discharged." 6. There was also a stipulation in the Concession Agreement that the Concessionaire, upon occurrence of Financial Close, was to notify the NHAI forthwith and was to provide to the NHAI, at least two days prior to the Financial Close, three true copies of the Financial Package and the Financial Model, duly attested by a Director of the Concessionaire, along with three soft copies of the Financial Model, which was acceptable to the Senior Lenders. Senior Lenders could make direct disbursement to the specified contractor in accordance with the express provisions regarding such payments in the Finance Agreement. 7. In terms of the aforesaid agreement JSTL opened an escrow account with PNB, vide an Escrow Agreement dated 16th August, 2011, which was jointly executed and signed amongst PNB, JSTL, and NHAI. The Escrow Agreement under heading Clause 3 had prescribed deposits required to be made in the escrow account by JSTL, NHAI, and the Senior Lenders represented by PNB. Clause 4 was in relation to and regulated withdrawals from the escrow account during the period of Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus, in terms of clause 3.2 of the Escrow Agreement, NHAI has to deposit in the Escrow Account the Termination Payment as soon as the same becomes due and payable. In terms of Clause 4.2, after payment of taxes due and payable by JSTL, the Senior Lenders have the right to appropriate 90% of the Debt Due excluding Subordinate Debt. Priority of appropriation under the respective clauses is stipulated. 9. The Financing Agreement was the third agreement which was executed between PNB and JSTL on 19th August, 2011. NHAI is not a party to the Financing or Lenders Agreement, though a copy of the Lenders Agreement was furnished and given to NHAI, who as noticed above, was a party to the Escrow Agreement amongst the three parties. The Concession Agreement had stipulated in Clause 4.1.3(e) that the Concessionaire shall have executed the Financing Agreements, duly attested by the Director of the Concessionaire, as a condition precedent to be satisfied by the Concessionaire, prior to the appointed date. 10. The undisputed position is that there is an arbitration clause both in the Concession Agreement between JSTL and NHAI and in the Escrow Agreement amongst JSTL, NHAI and PNB. 11. Dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an unconditional and irrevocable bank guarantee in favour of NHAI, undertaking to pay NHAI an amount not exceeding Rs. 348.604 crores. It directs that the bank guarantee shall be subject to the final award by the Arbitral Tribunal and would be kept alive by JSTL for a period of four months after making the final award by the Arbitral Tribunal. It also directs that the parties will comply with the provisions of Section 9(2) of the A&C Act. 14. The impugned order holds that NHAI under Clause 37.3.1, relating to 'Termination Payment' on account of default by the Concessionaire, cannot make any deductions on account of NHAI's claims or that the recoveries or adjustments must be made by proportionately reducing equity component from the Total Project Cost to compute the termination payment. 15. In order to appreciate controversy and the respective contentions raised by the parties, we would first reproduce clause 37.3 of the Concession Agreement, relating to termination payment which reads as under: "37.3 Termination Payment 37.3.1 Upon Termination on account of a Concessionaire Default during the Operation Period, the Authority shall pay to the Concessionaire, by way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , without the necessity of any further action by the Concessionaire, to the interests of the Concessionaire under such of the Project Agreements as the Authority may in its discretion deem appropriate, and shall upon such election be liable to the Contractors only for compensation accruing and becoming due and payable to them under the terms of their respective Project Agreements from and after the date the Authority elects to succeed to the interests of the Concessionaire. For the avoidance of doubt, the Concessionaire acknowledges and agrees that all sums claimed by such Contractors as being due and owing for works and services performed or accruing on account of any act, omission or event prior to such date shall constitute debt between the Concessionaire and such Contractors, and the Authority shall not in any manner be liable for such sums. It is further agreed that in the event the Authority elects to cure any outstanding defaults under such Project Agreements, the amount expended by the Authority for this purpose shall be deducted from the Termination Payment. (underlining supplied) Clause 37.3.2 relates to termination on account of an Authority Default, i.e. NHAI default. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued. The Concessionaire is entitled to collect fee and receive payments in accordance with the Article/clause 27 of the Concessionaire Agreement after issue of COD. The NHAI in the grounds of appeal have stated and accepted that they had issued provisional certificate on 4th May, 2015 and as per Article/clause 15, the Project Highway was put to commercial use from 4th May, 2015. This aspect is important and relevant when we examine the contention of the NHAI that they are entitled to set off the alleged recoveries of Rs. 242.42 Crores while making payment under clause 37.3.1. 17. The expression "debt due" has been defined in the Concession Agreement, the relevant portion of which reads as under: "Debt Due" means the aggregate of the following sums expressed in Indian Rupees outstanding on the Transfer Date: (a) the principal amount of the debt provided by the Senior Lenders under the Financing Agreements for financing the Total Project Cost (the "principal") but excluding any part of the principal that had fallen due for repayment two years prior to the Transfer Date; (b) all accrued interest, financing fees and charges payable under the Financing Agreements on or in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndertaken. It is clear from the reading of the definition that the expression the "debt due" refers to the principal amount of debt provided by the Senior lender under the Financing Agreement but excluding any part of the principal that had fallen due for repayment two years prior to the transfer date. The principal amount should be for financing the Total Project Cost. It also includes aggregate interest, financing fees, and charges which had fallen due within one year prior to the transfer date and excludes penal interest and other charges and also pre payment charges on accelerate payments. Thus, there is specific and clear-cut definition of the "debt due" which would become payable under clause 37.3.1 of the Concession Agreement. 19. The first contention of the appellant is that under Clause (a) of the definition clause defining debt due, the principal amount of debt should be for financing of the Total Project Cost. It is submitted that in the present case there was reduction of the Total Project Cost by Rs. 106.60 Crores, as Junagadh bypass was not constructed. The second submission is that the NHAI is also entitled to set off recoveries, they had to make, of Rs. 242.42 Cror ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost of the project upon completion is unavailable or lower. Under the two clauses equity support is to be reduced but for clause (a) equity support to be reduced would be as set forth in the financial package and under clause (b) from the actual capital cost on completion. Clause (c) refers to the pre-determined figure of Rs. 828.00 Crores and states that Total Project Cost for the said clause would be the above figure less equity support. It is submitted by NHAI that this amount of Rs. 828.00 crores was the estimated or projected cost of the Project Highway. This is correct. Thus, the projected or estimated cost need not be the actual or financed capital cost, a facet which is recognized and accepted in Clauses (b) and (a). As per NHAI, adjustment is required to be made from this figure of Rs. 828 Crores for in this case JSTL had not executed and constructed Junagadh bypass 19.80km in length, the cost of construction of which was Rs. 106.60 crores. This figure of Rs. 106.60 crores was included in Rs. 828 crores. We shall subsequently examine the said contention. However, at this stage, we would only record that Total Project Cost being the lowest of the amount computed under Cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... %) of the debt due is Rs. 576.774 crores out of which an amount of Rs. 222.03 crores and 6.14 crores totaling to Rs. 228.17 have been deposited by NHAI in the escrow account. Thus, the balance amount payable as per JSTL and PNB is Rs. 348.60 Crores. The impugned order refers to the figure of Rs. 354.774 crores that includes Rs. 6.14 crores which now stands paid. 24. At the outset, we would have to reject the contention of the appellant, NHAI that for the purpose of Clause 37.3.1 interest component of Rs. 19.4 crores or recoveries of Rs. 242.42 crores can be adjusted. This is impermissible and not what is stated and permitted under Clause 37.3.1 or under expressions Debt Due or Total Project Cost. We do not, therefore, think that the appellant NHAI can make adjustment on account of the recoveries which it claims are payable by JSTL, or exclude accrued interest of Rs. 19.4 crores on account of alleged willful default by JSTL. The said adjustment being impermissible and not as per the mandate of the clauses mentioned above, are unsustainable. 25. NHAI's claim for damages is yet to be adjudicated and remains a mere inchoate demand till it is determined and decided. It is not a cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on development of the highway project at Rs. 981 crores instead of estimated cost of the project mentioned in Clause (c) by NHAI of Rs. 828 crores. Relevant clause in the Financing Agreement reads as under: "The total cost of construction and development of the Project High Way (defined hereinafter) is estimated to be Rs. 9,81,00,00,000 (Rupees Nine Hundred and Eighty One Crores Only), which is proposed to be funded, as follows: 29. The Senior Lenders had agreed to provide financing facility to the extent of Rs. 712 crores and the promoters were required to provide equity capital to the extent of Rs. 269 crores to make up the capital cost of Rs. 981 crores. NHAI, accordingly submits that the debt and equity ratio on total project cost of Rs. 981 crores was 72.58 : 27.42. Applying the said formula of debt and equity ratio they have calculated adjustment what is called adjusted total project cost as 523.59 crores, after excluding Rs. 106 crores from total project costs of Rs. 828 crores. 30. The aforesaid contention of NHAI, is contested by JSTL and PNB. The figure of Rs. 828 Crores it is stated is taken from Clause (c) of the definition of Total Project Cost. The said figure of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as complete. This figure of Rs. 640.86 Crores was the debt due as on the termination date. Further, NHAI has not relied upon clauses (a) or (b) of the Total Project Cost in their computation. NHAI in their computation quoted in paragraph 20 above have applied clause (c) of the total project cost for they have referred to the figure of Rs. 828 Crores. 33. The contention of NHAI is that they are entitled to reduce and exclude from Rs. 828 crores, Rs. 106.60 crores for the unconstructed Jungadh bypass. On the said reduction, the Total Project Cost would be Rs. 721.40 Crores. Even if we accept the said contention as correct, it would not make any difference for this figure of Rs. 721.40 Crores is higher or more than the amount calculated under clauses (a) and (c), defining the expression "debt due". The accepted position is that Rs. 640.86 crores i.e. Rs. 621.45 crores towards principal and Rs. 19.4 Crores as interest is payable under clauses (a) (or even clause (b) if we treat the project as completed) or clause (c) of the definition "debt due". 34. As held by the learned Single Judge the clause relating to termination payment is apparently to protect the interest of the lenders, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers as the Civil Court has for the purpose of, and in relation to any proceedings before it. This decision refers to Rule 10 of Order XXXIX of the aforesaid Code which empowers the Court to direct to deposit payment of the admitted amount. Therefore the court exercising power under Section 9 of the A&C Act has the same power as that of a civil court during pendency of the suit. 36. The aforesaid dictum is re-enforced and reiterated in the recent decision of another Division Bench of this Court in Ajay Singh v. Kal Airways Private Limited FAO(OS)(Comm.) No. 62/2016 decided on 03rd July, 2017. Explaining the scope and ambit of Section 9 of the A&C Act it was held as under: "26. Though apparently, there seem to be two divergent strands of thought, in judicial thinking, this court is of the opinion that the matter is one of the weight to be given to the materials on record, a fact dependent exercise, rather than of principle. That Section 9 grants wide powers to the courts in fashioning an appropriate interim order, is apparent from its text. Nevertheless, what the authorities stress is that the exercise of such power should be principled, premised on some known guidelines - therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nconditional, irrevocable bank guarantee in favour of the NHAI for an amount not exceeding Rs. 348.604 crores and only upon the said guarantee being furnished deposit of the same figure is to be made in the escrow account. The bank guarantee is subject to final award of the arbitral tribunal. The impugned order also notices the adverse impact and the consequences which JSTL would suffer in case of non-deposit of the termination payment in the escrow account, which would have the effect of declaring the account of JSTL as non-performing asset which would amount to irreparable loss and injury. However, we are more concerned and want to protect the rights of the lenders i.e. PNB, who would suffer a grave injury and adverse consequences, which will follow in case NHAI does not make the termination payment as agreed and stipulated in Clause 37.3.1 of the Concessionaire Agreement on fault of Concessionaire read with Clauses 3.2 and 4.2 of the Tripartite Escrow Agreement which formed the basis of the finance. 38. In view of the aforesaid discussion, we do not find any reason to interfere with the impugned order dated 31st July, 2017. The appeals are accordingly dismissed and the directio ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
