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2024 (12) TMI 1153

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..... sidents. 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, .....

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..... luded 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 ex .....

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..... A 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 .....

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..... nce 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 between NTBCL and NOIDA; and (ii) the execution of the Ashram Flyover Site Lease Deed on 30.08.1999 between the Government of NCT of Delhi and NTBCL, for the construction of the Ashram Flyover. 4.7. The Project was thereafter initiated and completed, with the DND Flyway being opened for public use on 06.02.2001 (Commissioning Date). It consisted of: (i) the main bridge; (ii) three minor bridges; (iii) a 32-lane approach road with a 300-metre-wide toll plaza in NOIDA; (iv) an 11-lane toll plaza at Mayur Vihar; and (v) a flyover at Ashram Chowk. 4.8. Respondent No. 1 is an Association established to espouse the cause of NOIDA residents before the Public Authorities, particularly concerning civic issues. Nearly 15 years after the execution of the Concession Agreement, Respondent No. 1 approached the High Court (through a Writ Petition) pu .....

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..... t... 14. Prima facie, we are of the opinion that the various issues that arise in this SLP warrant a detailed scrutiny. Conflicting claims have been made regarding the recovery of the Total Cost of the Project by the Concessionaire. To resolve the dispute, it is appropriate that an independent agency is requested to examine the relevant records of the DND flyway. The said agency should examine the reports of the independent auditors appointed by the Petitioner and submit a report regarding the correctness of the Petitioner s claim that the Total Cost of the Project has not been recovered. We accept the suggestion of the Petitioner and request the Comptroller and Auditor General of India (CAG) to assist us in this matter. The Petitioner is directed to place the entire record pertaining to the recovery of the Total Project Cost of the DND flyover project as per the Agreement before the CAG. The CAG is requested to verify the claim of the Petitioner that the Total Cost of the Project has not been recovered and submit a report within four weeks. The CAG shall be at liberty to call for and examine all such records having a bearing on the financial aspects, as it requires to facilitate i .....

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..... le during the relevant period to float tenders in order to develop the necessary infrastructure, due to the absence of non- governmental infrastructure developers from whom competitive bids could have been solicited. IL FS was explicitly selected because it was a pioneer in the field, with 81% of its ownership held by public sector institutions. That apart, it is well-established in law that the non-floating of tenders alone does not constitute a sufficient basis to deem the actions of a public authority as arbitrary and illegal, nor does it invalidate the consequential contract. (d) The Concession Agreement resulted from extensive deliberations and consultations among various Government entities over several years and thus could not be termed as an arbitrary decision. It received approval from the Steering Committee, which comprised of representatives from all stakeholders, and the Empowered Committee established by the State. Additionally, the World Bank, which provided funding for the Project through a line of credit to IL FS, also endorsed the Agreement. The Concession Agreement being an outcome of consensual deliberations, the High Court ought not to have construed it as viola .....

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..... other infrastructure sectors to secure debt funding and equity investment from the private sector. Article 14 of the Concession Agreement, in the light of these mitigating circumstances, therefore, is not opposed to public policy. (h) NTBCL is currently facing losses and has not yet recovered the Total Project Cost or returns. The CAG Report indicates that, at a minimum, Rupees 30 crores remain recoverable by the Appellant, as of date. Thus, the High Court erred in concluding that NTBCL had fully recovered the Total Project Cost and has made reasonable profits. Additionally, if the High Court s decision were upheld, NTBCL would be compelled to continue bearing maintenance costs until 2031 without any incoming revenue. Following the cessation of toll collection, NTBCL has become entirely dependent on the revenue generated from advertising hoardings. However, the Court has failed to take notice that NTBCL shares its revenue with NOIDA through license fees for outdoor advertisements. (i) NOIDA s failure to provide regular fee hikes as per the terms of the Concession Agreement has contributed to the escalation of the Total Project Cost and as such, NOIDA cannot be permitted to benefit .....

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..... hority to authorise the imposition of fees to another entity. Section 6A was introduced much after the execution of the Concession Agreement and it is not retroactive in nature. (d) The Concession Agreement is perpetual in nature and, therefore, contrary to public policy. Section 2.3 of the Concession Agreement stipulates that the concession period shall extend until the earlier of the two events: the completion of a 30-year period from the effective date or the date on which NTBCL recovers the Total Project Cost and returns, as determined by the Independent Engineer and Independent Auditor in accordance with Article 14 thereof. Furthermore, Section 2.4 states that if the Total Project Cost and returns are not recovered by the end of the 30-year period, the concession period shall, without qualification, be extended for two years at a time until recovery is achieved by NTBCL. According to the report dated 29.08.2007, the Total Project Cost has reached a critical point, rendering it improbable that NTBCL would return the assets to NOIDA, even after a century. (e) Furthermore, under the stipulated formula, the Total Project Cost escalates annually as it comprises of: (a) the Project .....

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..... 33 crores. Consequently, the Total Project Cost is substantially higher than the actual investment made, and NTBCL has already received sums far exceeding their original investment, including reasonable profits and interest accrued from toll income. D. CONTENTIONS ON BEHALF OF RESPONDENT NO. 9 (IL FS) 7. Mr. Gopal Jain, Senior Counsel representing IL FS, primarily supported the Appellant. The contentions put forth by him which were unique to IL FS, may however be summarised as follows: (a) As of present day, IL FS is under the control of the Union of India, pursuant to the order dated 01.10.2018 passed by the NCLT, Mumbai, directing the suspension of the then-existing Board of Directors of IL FS and constitution of a new Board of Directors comprising of nominees of the Ministry of Corporate Affairs. (b) IL FS, as the Sponsor of the Project, not only enabled and arranged the entire financing of the Total Project Cost but provided an indemnity under the Concession Agreement to NOIDA that it would ensure the due implementation of the Project by the Appellant. (c) The concession period is not perpetual as there is no automatic renewal of the Concession Agreement due to the inability t .....

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..... t was maintainable before the High Court? ii. Whether the non-floating of tenders was justified in the instant case? iii. Whether the power to levy fees could be delegated to the Appellant and if so, whether it was a case of excessive delegation? iv. Whether Article 14 of the Concession Agreement read with the formula used therein is opposed to public policy? v. Whether the Total Project Cost and Returns thereon have been recovered by the Appellant? vi. Whether NOIDA is entitled to recover dues from the Appellant, in regards to the display of outdoor advertisements? G. ANALYSIS G.1 Maintainability of the Writ Petition before the High Court 10. At the very outset, it is essential to adjudicate the prefatory issue of maintainability before addressing the merits of the present case. In this regard, three primary prongs arise from NTBCL s contention challenging the very maintainability of the Writ Petition: (i) the locus standi of Respondent No. 1; (ii) ascertaining delay and laches; and (iii) the scope of judicial intervention in a commercial contract such as the Concession Agreement. All of these issues require careful analysis. G.1.1. Locus standi of Respondent No. 1 11. NTBCL conte .....

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..... 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, we do not find any merit in NTBCL s contention that Respondent No. 1 lacked locus standi in approaching the High Court. 15. As regard to NTBCL s contentions pertaining to the alleged collusion between Respondent No. 1 and NOIDA, we find that there is not an iota of material on record to substantiate these sweeping insinuations. G.1.2. Delay and laches 16. NTBCL contended that there was an inordinate delay on the part of the Respondent Association in filing the Writ Petition before the High Court. NTBCL argued that the DND Flyway had been operational since 2001, with the MoU and Concession Agreement having been executed as far back as 1992 and 1997, respectively. Given this, the Writ Petition was 6 Villianur Iyarkkai Padukappu Maiyam v. Union of India, (2009) 7 SCC 561. filed by Respondent No. 1 only in 2012 nearly 20 years after the execution of the MoU and 15 years afte .....

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..... ears to 100 years they were prompted to immediately approach the High Court. 20. Furthermore, it must be acknowledged that the levying of user fees or tolls by NTBCL constituted a continuing cause of action, which was challenged by the Association of affected commuters. An established exception to the defence of delay is the presence of a continuous injury stemming from an ongoing wrong. Union of India and another v. Tarsem Singh, (2008) 8 SCC 648. The plea of delay and laches cannot be raised in a case of a continuing cause of action. 21. In our considered view, 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. Given that NTBCL s actions represented a continuing cause of action, we concur with the High Court in rejecting the hyper technical objection of delay and laches. G.1.3. Scope of judicial intervention 22. In the context of maintainability, NTBCL has also contended that the High Court should not have intervened in a commercial contract such as the Concession Agreement and rendere .....

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..... aprice. Silippi Constructions Contractors v. Union of India, (2020) 16 SCC 489. In such situations, where State action is challenged as arbitrary or capricious, courts are justified in intervening through judicial review to determine whether the State has adhered to the principles embodied in Article 14 of the Constitution of India, which mandates fairness and non-arbitrariness in State actions. Considering that the Concession Agreement involves not only entities like IL FS and NTBCL but also a Public Authority such as NOIDA, it is evident that the Concession Agreement, though commercial in nature, is subject to judicial scrutiny. This is particularly true given the public interest concerns raised by Respondent No. 1, while challenging the fairness and legality of the toll collection and overall execution of the Agreement. The involvement of a public authority necessitates cognizance to ensure that the Agreement upholds constitutional principles. In such scenarios, it becomes the solemn duty of the judiciary, entrusted under the Constitution as an independent arbiter, to intervene and protect the interests of the public at large. 28. Second, it is crucial to recognise that when a c .....

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..... omprising of public funds and public assets. When such a project is undertaken by the State in partnership with a private entity, the element of public interest necessitates strict adherence to Constitutional obligations. The State is obligated to ensure that its actions remain free from any arbitrariness or capriciousness, particularly when public welfare is at stake. 32. Considering the onus placed upon the State, it requires no further elaboration that every action or decision of the State or its instrumentalities in conferring any form of largesse or benefit must be grounded in a just, transparent, and well-defined policy. Such a policy should be made known to the public through appropriate publication and implemented through non-discriminatory means, free from bias or favouritism. City Industrial Development Corporation v. Platinum Entertainment, (2015) 1 SCC 558. Even when the Government awards a contract or grants similar benefits, such bestowal must meet the standards of reasonableness and public interest. Should either of these criteria remain unmet, the conferment would be deemed unconstitutional. Kasturi Lal Lakshmi Reddy, supra note 12. As a necessary corollary thereto, .....

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..... ly serve the public and not merely enrich private entities. When public interest is overshadowed, it does raise concerns as to whether the Government has acted in a manner that appears capricious or arbitrary. It then becomes imperative for the Court to scrutinise whether such actions vitiate the Constitutional mandate of equality. Such procedures, must therefore satisfy the litmus test of due application of mind, fairness, transparency and most pertinently, being bona fide. 36. Turning to the events of the case in hand, it is a matter of record that the Government made no efforts to issue tenders, invitations, or seek competitive bids from other interested entrepreneurs. There is no basis at all to claim that following such a procedure would have been detrimental to the proposed Project. Contrarily, NOIDA, in collaboration with IL FS, assigned the mammoth responsibility of constructing this novel infrastructure upon NTBCL. Interestingly, NTBCL was a non- existent entity, as it came to be incorporated only on 08.04.1996, i.e. four years after the MoU was executed between the Delhi Administration, NOIDA, and IL FS, to establish a bridge between Delhi and NOIDA. 37. The justification .....

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..... priate fees from users of the DND Flyway starting from the Commissioning Date. The fee amount is to be determined by the Fee Review Committee. Additionally, NTBCL is empowered to delegate the collection function to the O M Contractor, who would collect fees on behalf of NTBCL, in accordance with the Rules framed under the 1976 Act. Notably, in contingencies where neither NTBCL nor the O M Contractor is unable to collect fees as a result of any change in law or any restriction or injunction based on any process of law, NTBCL is entitled to receive compensation from NOIDA in lieu thereof. 43. It thus becomes evident that the authority to collect fees by NTBCL has been purportedly derived from certain Rules that were to be framed by NOIDA. Given this background, it is equally imperative, if not more, to delve into what are the statutory provisions dealing with the levy and collection of such fees; who may collect or levy such fees under the relevant legal framework; whether such authority could be delegated; and if so, by whom? 44. As on the date of the execution of the Concession Agreement, the 1976 Act was the relevant Statute in vogue. Section 6 thereof outlines the Functions of th .....

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..... its authority by delegating the power to levy fees to NTBCL through the Concession Agreement and Regulations, exceeding the scope of its powers. In this context, the High Court rightly noted that it is a well-established law that an authority vested with the power to frame subordinate legislation must act within the bounds of that power and refrain from exceeding its limits. It goes without saying that the power to delegate must be expressly discernible in the Principal Act itself and in the absence of such provisions, no circular method can be countenanced to extract such power. 48. In complete contradiction and violation of the scheme of the Statute, NOIDA in purported exercise of its power to formulate Regulations not only delegated the power to collect fee but also authorised NTBCL to revise and levy such charges. Such a delegation was totally in violation of the provisions of the 1976 Act. The responsibility to determine the amount and rate of fees lies with NOIDA; by delegating this function to NTBCL via the Concession Agreement and reinforcing it through the Regulations, NOIDA exceeded its authority moored under the 1976 Act. 49. It is pertinent to underscore herein that tax .....

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..... ct (a) The Project Cost shall be determined as on the Project Commissioning Date by the Independent Auditor who shall seek the assistance of the Independent Engineer to determine the Cost of Construction component of the Project Cost. (b) The Total Cost of Project shall be the aggregate of: (i) Project Cost; (ii) Major Maintenance Expenses; and (iii) Shortfall in the recovery of Returns in a specific financial year as per the formula in Section 14.2(a). Section 14.2: Calculation of Returns (a) The amounts available for appropriation by the Concessionaire for the purpose of recovering the Total Cost of Project and the Returns thereon, as illustrated in Appendix F, shall be calculated at annual intervals from the Effective Date in the following manner: Out of gross revenues from fee collections, income from advertising and Development Income deduct O M Expenses. (b) The Total Cost of Project and the recovery thereof and of the Returns shall be determined by the Concessionaire annually in arrears, and certified by the Independent Auditor. Section 14.3: Accounts of Concessionaire The Concessionaire shall keep and maintain the books of accounts for the Project in accordance with the for .....

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..... he formula adopted, held that Article 14 of the Concession Agreement was perpetual in nature and it entitled NTBCL to recover user fees/ toll indefinitely. Such a clause, therefore, being opposed to public policy was unjust and arbitrary and liable to be severed from the Concession Agreement. 58. We find no error in the analysis undertaken by the High Court. It is pertinent to understand that the formula in Annexure F of the Concession Agreement calculates the Total Project Cost and returns. As per the formula, the Total Project Cost is the aggregate of (a) the Project cost; (b) major maintenance expenses; and (c) shortfall in the recovery of returns in a specific financial year. 59. To gain further clarity on the costs and structure of the formula involved, it is essential to consider the figures underpinning the calculation of the Total Project Cost. The original cost as on the Commissioning Date was Rupees 325.99 crores. Operation and Maintenance (O M) expenses are deducted from the gross revenue, and the Concession Agreement, per Section 1.1, does not specify any cap or detailed guidelines for these expenses. Further, returns are calculated at a 20% annual rate on the Total Pro .....

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..... 06.02.2001 to 31.03.2016. NTBCL booked excessively high O M expenses of Rupees 272.40 crores during 2000-01 to 2015-16, which was higher than the standard norms used by NHAI/MoRTH, as well as the Feasibility Report of the DND Flyway itself. v. After the appointment of the ITNL Toll Management Services Limited, a subsidiary of NTBCL, as the O M contractor, the expenditure on account of the O M contractor s fee increased from Rupees 5.16 crores between 2008-09 to Rupees 10.49 crores between 2015-16. Thus, the O M contractor s fee increased by 103% over eight years from 2008-09 to 2015-16. vi. NTBCL did not apply economic prudence and allowed liberal increases in benefits, concessions, and remuneration to its employees, management, O M contractor etc., which burdened the Project, resulting in O M expenses of the Project exceeding the project feasibility norms by more than 100%. This inflated the Total Project Cost due to the compounding effect of the formula. 62. The CAG Report shockingly reveals that the Directors of NTBCL, including Pradeep Puri (who it seems was a senior bureaucrat), apparently did not perform any responsibility, yet all their expenses, including high-end remunera .....

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..... ld not be extended without NOIDA's explicit consent. Section 2.4 lacks any provision for an automatic or deemed extension, requiring instead that NOIDA actively extend the Concession Agreement by two-year increments. If NOIDA does not approve an extension in advance, the day following the concession period's final day becomes the transfer date, at which point NTBCL must transfer the Project. The language of Section 2.4 does not imply that an unrecovered Total Project Cost or returns would automatically extend the concession period. Rather, it grants NOIDA the sole discretion to determine extensions, thereby preventing an indefinite levy of user fees or tolls. 67. The High Court observed that, given the continual escalation of Total Project Cost, it would be infeasible to achieve full returns even over a 100-year period, resulting in NTBCL indefinitely collecting user fees. This assessment was corroborated by the Independent Auditor s report for the year ending 31.03.2012, as well as a letter dated 29.08.2007 from Pradeep Puri to the CEO of NOIDA, which noted that the concession period had effectively become perpetual. Consequently, it was clear that NTBCL would be unable to .....

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..... s specified in Section 8.1 of the Agreement. 73. As previously mentioned, a letter dated 29.08.2007 from the CEO of the Appellant to NOIDA indicated that the Total Project Cost after 30 years would be approximately Rupees 5,353 crores, suggesting that the term of the Project should be extended to 100 years. The CAG Report pertinently states that, if NTBCL continues to operate under the current terms of the Concession Agreement, with extensions as per its provisions, the unrecovered Total Project Cost could rise to around Rupees 7,200 crores by 31.03.2020 and Rupees 15,200 crores by 31.03.2029. This unending escalation in the Total Project Cost leaves no room to doubt that the Concession Agreement was cleverly designed to remain perpetually operational. 74. A conjoint reading of these aspects reveals that NOIDA effectively faced two options: (i) allow NTBCL to recover the Total Project Cost and returns through user fees, even after the initial 30-year concession period, by granting indefinite 2-year extensions, or (ii) pay the Total Project Cost of and returns themselves, to terminate the Concession Agreement either at the end of 30 years or before. Therefore, NOIDA's choice was .....

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..... whether the parties would have agreed to the valid terms of the agreement if they knew that the invalid terms would be removed. Beed District Central Coop. Bank Ltd. v. State of Maharashtra, (2006) 8 SCC 514. Given the extent of manipulation in the instant case, we must intervene and hold that Article 14 of the Concession Agreement, read with the formula in Annexure F, is opposed to public policy and must be cut apart from the Concession Agreement. G.5. Recovery of Total Project Cost and returns thereon by NTBCL 79. It is pertinent to note that NTBCL has consistently claimed that the Total Project Cost and returns thereon have not been recovered so far. This claim is the primary reason that the extension of the concession period has come under scrutiny. In contrast, Respondent No. 1 asserts that the project costs and reasonable profits have long been recovered by NTBCL, thereby negating the need to continue imposing user fees/tolls. 80. The High Court has categorically held that NTBCL was not entitled to recover any amount over and above what had already been received by it. This was determined on the following basis: (i) The project cost incurred for the Delhi-NOIDA Bridge and Ash .....

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..... e collection of tolls was discontinued, NTBCL became solely reliant on the revenue generated from advertisement hoardings. 83. We find that no independent evaluation of these competing claims is required to be undertaken by us as the issues raised by NTBCL have been effectively answered by the independent arbiter, namely the CAG, through its Report submitted to this Court concluding that: (i) The total expenses incurred by NTBCL are Rupees 1,136.26 crores. (ii) The total income generated by NTBCL is Rupees 1,103 crores. (iii) The Total Project Cost has been recovered to a large extent and only around Rupees 15 crores remained to be recovered as of 31.03. 2016. (iv) Other future recurring costs which would be incurred over the life span of the DND Flyway are the O M costs. These are to be calculated as per the norms adopted in the Feasibility Study of the DND Flyway based on which the expenditure for the year 2015-16 can be reasonably estimated to be around Rupees 19 crores. 84. The sum of Rupees 1,136 crores, i.e. the total expenses incurred by NTBCL are based on the statutory accounts from 2001 to March 2016. This sum includes all the unrecovered project costs added before the dat .....

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..... eon by virtue of imposition of user fees/tolls and given the existing position of law, we find no error in the High Court s judgment and its directions in restraining the imposition and collection of user fees/tolls. G.6 Recovery of dues arising out of display of outdoor advertisements 89. 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. 90. All that we thus observe, is that 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 sco .....

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