NATIONAL HIGHWAYS AUTHORITY OF INDIA vs GURUVAYOOR INFRASTRUCTURE PVT. LTD.
$~30
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 2nd May, 2024
+ OMP (ENF.) (COMM.) 97/2024 & EX.APPLs.(OS) 703-707/2024
NATIONAL HIGHWAYS AUTHORITY
OF INDIA ….. Decree Holder
Through: Mr. Ankur Mittal, Mr.Abhay Gupta, Ashish Gajwani & Ms. Ikshita Parihar, Advs. (M: 9958500980)
versus
GURUVAYOOR INFRASTRUCTURE
PVT. LTD. ….. Judgement Debtor
Through: Mr. Arjun Syal, Mr. Shreyan Das, Mr. Pranay Chitale & Ms. Smiti Verma, Advs. (M: 9971322560)
CORAM:
JUSTICE PRATHIBA M. SINGH
Prathiba M. Singh, J.(Oral)
1. This hearing has been done through hybrid mode.
EX.APPL.(OS) 705/2024 (for exemption)
2. This is an application filed by the Decree Holder herein seeking exemption from filing originals/certified/cleared/typed or translated copies of documents, proper margins, electronic documents, etc. Original documents shall be produced/filed at the time of Admission/Denial, if sought, strictly as per the provisions of the Commercial Courts Act and the DHC (Original Side) Rules, 2018.
3. Exemption is allowed, subject to all just exceptions. Accordingly, the application is disposed of.
EX.APPL.(OS) 706/2024 (for exemption)
4. Allowed, subject to all just exceptions. Application is disposed of.
EX.APPL.(OS) 707/2024 (for delay)
5. This is an application for condonation of delay in re-filing. For the reasons stated in the application, the delay is condoned. Application is disposed of.
EX.APPL.(OS) 704/2024 (for additional documents)
6. The additional documents in the form of escrow account statements are permitted to be placed on record with advance copy to ld. Counsel for the Respondent/Judgment Debtor herein. The Respondent is free to rebut the same. Application is disposed of.
OMP (ENF.) (COMM.) 97/2024 & EX.APPL.(OS) 703/2024
7. This is a petition filed on behalf of the Decree Holder herein – National Highways Authority of India (hereinafter, NHAI) under Section 17(2) of the Arbitration and Conciliation Act, 1996. Vide the present petition NHAI is inter alia, seeking enforcement of orders dated 11th October, 2022 and 10th May, 2023 passed by the ld. Arbitral Tribunal in Guruvayoor Infrastructure Pvt. Ltd. v. National Highways Authority of India. Further, NHAI is seeking the following reliefs:
a) Pass an Order directing the Respondent to deposit and secure the amount of Negative Grant to the extent of Rs. 614,41,01,903/- (as on 31-12-2023) in the sub account of escrow account without any delay;
b) Pass an order directing the respondent to return and bring back the amount of Rs. 246,90,45,130 wrongly taken out of escrow account as detailed in para no. 37 above;
c) Pass an order directing the Respondent to strictly comply with the Interim Order dated 11.10.2022 and Order dated 10.05.2023 passed by the Hon’ble Arbitral Tribunal;
d) Pass an order directing the Respondent to meticulously follow waterfall mechanism under the Escrow Agreement including not to service any debt payments unless and until the provision for negative grant is made in the escrow account.
e) Pass an order directing detention of directors of Respondent to be detained in civil prison for violating the Order passed by the Hon’ble Arbitral Tribunal;
f) Pass an order imposing exemplary costs upon the Respondent for violating the Order passed by the Hon’ble Arbitral Tribunal;
g) Pass such other order or orders as this Hon’ble Court may deem fit and proper in the facts and circumstances of the present case;
8. The background of the present case as stated in the petition is that the Judgment Debtor herein – M/s Guruvayoor Infrastructure Pvt. Ltd. entered into a Concession Agreement dated 27th March, 2006 (hereinafter, Concession Agreement) with NHAI for a project involving widening of two lane portion from Km 270.000 (Thrissur) to Km. 316.70 (Angamali) section of the National Highway 47 to four lanes and improvement, operation and maintenance of Km. 316. 70 (Angamali) to Km. 342.0 (Edapalli) on National Highway 47 in the State of Kerala (hereinafter, project)
9. It is the case of NHAI that as per Clause 23 of the Concession Agreement, the Judgment Debtor herein undertook an obligation to provide NHAI a negative grant to the tune of Rs. 215 Crores. However, the Judgment Debtor has paid only an initial amount of Rs. 15 Crores and since then, no payment has been made, thereby causing an outstanding principal amount of Rs. 200 Crores on behalf of the Judgment Debtor.
10. Further, in terms of the Concession Agreement, an Escrow Agreement was executed between the parties on 16th March, 2007 along with certain Supplementary Agreements dated 23rd November, 2009 and 3rd December, 2011. However, meanwhile, it is stated that the project was completed and a certificate of completion dated 18th April, 2016 was issued to the Judgment Debtor. On 31st March, 2017 a new Escrow Agreement (hereinafter, escrow agreement) was executed between the parties as per which the lenders representative and the escrow agent were changed to IDFC Bank Ltd(hereinafter, escrow agent). The escrow agreement further in Clause 3.3 provided the terms in which withdrawals may be made by the escrow agent from the escrow account
11. In 2019, certain disputes arose between the parties and subsequently on the basis of a notice invoking arbitration issued by the Judgment Debtor, a three member arbitral tribunal was constituted to adjudicate disputes between the parties. It is averred in the petition that on 3rd October, 2019 the Judgment Debtor filed a statement of claim and on 19th December, 2019 NHAI filed a statement of defence as well as the counter claim. However, due to alleged non payment of dues on behalf of the Judgment Debtor, NHAI on 11th January, 2022 issued a legal notice to the Judgment Debtor for default in payment of negative grant along with interest in terms of the Concession Agreement.
12. It is stated that on 11th April, 2022 an application was filed by NHAI before the ld. Arbitral Tribunal under Section 17 of the Arbitration and Conciliation Act, 1996 seeking interim measures for securing the amount constituting the negative grant in terms of the Concession Agreement. In the said application, vide order dated 11th October, 2022, the ld. Arbitral Tribunal directed the Judgment Debtor to re-deposit in the escrow account whatever amounts that had been withdrawn by the Judgment Debtor for investments in mutual funds or in fixed deposits. Further, the ld. Arbitral Tribunal directed that the escrow account shall be operated strictly in terms of the escrow account agreement dated 31st March, 2017. The order of the ld. Tribunal dated 11th October, 2022 is as under:
1. In the proceedings of the Tribunal held on 26.02.2022, after addressing the Tribunal at considerable length on the Claimant’s Application under Section 17 of the Arbitration & Conciliation Act, 1996 (for short “the Act”), the Parties were directed to file their respective Affidavits in relation to the status of the amounts deposited and withdrawn from the Escrow Account, opened in terms of the Concession Agreement dated 27.03.2006, within three weeks from that date.
2. The Claimant has not complied with the said direction. However, National Highway Authority of India (“NHAI”) filed its Additional Affidavit on 30.03.2022. NHAI has also filed an Application dated 11.04.2022, under Section 17 of the Act, praying for certain interim directions, particularly, in relation to the operation of the Escrow Account.
3. At the outset, Mr. Abhimanyu Bhandari, Ld. Counsel for the Claimant, prays for further time to file Affidavit in terms of the Order dated 26.02.2022 and Reply to the Application filed by NHAI. In the interest of justice, the Claimant is granted further three weeks’ time from today to file its Affidavit/Reply. No further opportunity for the said purpose shall be granted.
4. On being asked to seek instructions on the letter dated 10.12.2021, addressed by the Independent Engineer to the Project Director, NHAI, filed with the Application by the NHAI, Mr. Bhandari states, on instructions, that whatever amounts had been withdrawn from the Escrow Account for investments, either in the Mutual Funds or in Fixed Deposits, shall be re-deposited by the Claimant in the Escrow Account, within ten days from today. Further, in future, the Escrow Account shall be operated strictly in terms of the Escrow Account Agreement dated 31.03.2017. It is ordered accordingly.
5. Having regard to the objection raised on behalf of NHAI in relation to the quantum of the Arbitral Fee payable to the Members of the Tribunal in these proceedings, vide Order dated 03.08.2019, it was, inter alia, directed that the Arbitral Fee payable to the Members of the Tribunal shall be as per the Fourth Schedule to the Act. The question of final determination of the costs etc., of these proceedings was, however, kept open. Since the controversy with regard to the payment of Arbitral Fee under the Fourth Schedule has now been set at rest by the Hon’ble Supreme Court, the Tribunal hereby directs that the Arbitral Fee payable to the Members of the Tribunal in respect of the Counter Claims shall also be as per the Fourth Schedule, which, as already directed, shall be shared by the Parties in equal proportion.
6. The Parties shall furnish the details of the Arbitral Fee remitted by them to the Members of the Tribunal in terms of Orders dated 03.08.2019 and 07.06.2021, within two weeks from today.
7. The Tribunal shall now assemble on 12.12.2022 at 4.30 p.m., by virtual mode, for consideration of the Applications filed by the Parties under Section 17 of the Act, and for further directions.
8. Necessary arrangements for the sitting through video conferencing shall be made by the Claimant and the link for the same shall be circulated to all
concerned, at least a day before the sitting.
13. According to NHAI, it has repeatedly asked the escrow agent to operate the escrow account strictly in terms of the agreement. A letter to this effect dated 12th October, 2022 was also sent by NHAI to the escrow agent. Relevant portion of the said letter is hereiunder:
6. Thus, in view of the above facts and Arbitration Order dated 11.10.2022 passed by the Hon’ble Arbitral Tribunal, it is once again requested to ensure that the Escrow Account shall be operated strictly in terms of the Escrow Agreement. The Concessionaire shall not be permitted to withdraw any amount for investment in the mutual funds, fixed deposits and pay debt services to its lenders before paying/providing for the Negative Grant to the NHAI as stipulated in the waterfall mechanism.
7. Please note that the Negative grant payable to NHAI is INR 445,48,37,933 as on 28.02.2022 (which has now increased to INR 479,26,58,448 as on 30.09.2022). Therefore, please ensure that till the entire Negative Grant is secured/ paid to NHAI as per the waterfall mechanism of the Escrow Agreement, no debt service shall be affected.
8.In the light of the aforesaid, it is requested to ensure compliance with the Order dated 11.10.2022 passed by the Hon’ble Tribunal and ensure that no such investment and payments are being made by the Concessionaire and further ensure that the waterfall mechanism is being strictly followed by the Concessionaire as well as the Escrow Agent. In case, you or concessionaire fail to comply with the orders of the Hon’ble Arbitral Tribunal, we shall be constrained to take appropriate action against you including proceeding for contempt.
14. It is stated that a letter dated 21st October, 2022 was issued by the escrow agent as a reply to the letter dated 12th October, 2022. According to NHAI, the escrow agent misinterpreted the direction passed by the ld. Arbitral Tribunal vide order dated 11th October, 2022 and amounts were continuously being withdrawn by the Judgment Debtor.
15. On 22nd October, 2022 a second application was filed by NHAI before the ld. Arbitral Tribunal under Section 17(2) of the Arbitration and Conciliation Act, 1996 in which order dated 10th May, 2023 has been passed. The said order disposed of two applications of the Decree Holder herein and one application filed by Judgment Debtor. Vide the said order, the ld. Tribunal inter alia observed that the Concession Agreement is alive and the rights and obligations of the parties are to be governed by the said Concession Agreement, which would include the escrow agent and the Judgment Debtor to follow the terms of the escrow agreement. The relevant portion of the order dated 10th May, 2023 passed by the ld. Arbitral Tribunal is as under:
7. Having bestowed its anxious consideration to the rival submissions, the Tribunal is of the view that the Interim Order dated 11.10.2022, quoted above, is clear and admits of no ambiguity Admittedly, the Concession Agreement is still alive and hence the rights and obligations of the Parties are still governed by the contractual stipulations therein, which obviously, includes the Escrow Agreement/Escrow Account and the mechanism agreed to between the Parties for operation of the Escrow Account. Needless to add that Parties to the Escrow Agreement remain bound by the terms thereof till the Agreement continues to be in force. If, however, for any reason, NHAI is convinced that the Claimant and/or the Escrow Agent is committing any breach of the Interim Order passed by the Tribunal under Section 17 of the Act, it is always open to it to seek redressal in accordance with law. Enforcement of its Order passed under Section 17 of the Act would be beyond the domain of the Tribunal [See: Amazon.Com NV Investment Holdings LLC. Future Retail Limited & Ors., (2022) 1 SCC 209].
8. As regards the interim reliefs prayed for by NHAI in its Application dated 11.04.2022, inter-alia, seeking a direction to the Claimant to secure the amount of Negative Grant to the extent of an amount of approximately 446 crores and not to divert funds from the Escrow Account towards debt servicing, the Tribunal is of the view that in the light of its Interim Order dated 11.10.2022, no further directions, as prayed for in the Application, can be issued. It will, however, be open to the Parties to the Escrow Agreement to consider and work out some mutually agreeable arrangement whereby the interest of NHAI, at least to the extent of ?200 Crores [?215 towards the principal amount of Negative Grant less ?15 crores already paid], is protected and at the same time the debt of the Claimant is serviced from the balance amount in the Escrow Account, after meeting the O&M Expenses. If the Parties arrive at any such interim arrangement, the Escrow Agent shall secure a sum of ?200 crores, before any amount towards the debt servicing is released, till further Orders by the Tribunal in that regard.
16. It is these two orders dated 11th October, 2022 and 10th May, 2023 passed by the ld. Arbitral Tribunal of which enforcement is being sought in the present petition.
17. Ld. Counsel for the Decree Holder NHAI points out that as per clause 23 and 23.1 of the Concession Agreement, the payment of a sum of Rs 215 Crores, which is described as the negative grant was to be made by the Judgment Debtor herein. The said clauses are extracted hereinunder:
XXIII. NEGATIVE GRANT/ GRANT
The Concessionaire agrees to provide to NHAI cash payment (the “Negative Grant”) equal to the sum, set forth in the Bid of the Bidder and accepted by NHAI in accordance with the provisions of this Article XXIII
23.1 The Negative Grant shall be paid by Concessionaire as proposed by the Concessionaire in its Bid as set forth below:
For Negative Grant (Rs in crores) Rs. 215.00 Crores
Concession
Year
1
2
3
4
5
6
7
8
9
10
11
12
13
Negative Grant (upto 13rd year of the Concession Period)
15
0
0
0
0
0
0
0
40
40
40
40
40
Negative Grant shall be paid in advance within 90 days of the commencement of the year for which it is due and payable.
18. It is submitted by the ld. Counsel for NHAI that the said amount was to be paid in a manner that, in the first year, an amount of Rs.15 Crores was to be paid. For years two to eight no payment was to be made. However, for the years nine to thirteen, a payment of Rs. 40 crores was to be paid per annum and, thereafter, in terms of the said clauses, the remaining amounts including servicing of debt, etc. was to be made. Further, according to NHAI, in terms of Clause 25.2.1 of the Concession Agreement, the negative grant stood at a higher footing than any of the expenditure to be incurred by the Concessionaire/Judgment Debtor or the debt service payments. For the sake of ready reference, the said clause is set out below:
25.2.1 The Concessionaire shall give, at the time of the opening of the Escrow Account, irrevocable instructions by way of an Escrow Agreement substantially in form set forth in Schedule ‘Q’ (the “Escrow Agreement”) to the Escrow Bank instructing, inter alia, that the deposits into the Escrow Account shall subject to Clause 25.2.3, be appropriated in the following order every month 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 unless otherwise expressly provided in the instruction letter:
(i) All taxes due and payable by the Concessionaire;
(ii) All expenses in connection with and relevant to the Construction of Project Highway by way of payment to the EPC Contractor and such other persons as may be specified in the Financing Documents;
(iii) O&M Expenses including Fees, collection expenses incurred by the Concessionaire directly or through O&M Contractor and/or Tolling Contractor, if any, subject to the items and ceiling in respect thereof as set forth in the Financing Documents but not exceeding 1/12 (one tweth) of the annual liability on this account;
(iv) The whole of the expense on completion of Punch List items incurred by NHAI.
(v) The whole or part of the expense on repair work or O&M Expense including Fees collection expenses incurred by NHAI;
(vi) All Concession Fees and any Negative Grant due to NHAI from the Concessionaire under this Agreement;
(vii) Reimbursements of expenditure incurred by NHAI, if any, for payment of insurance premía, etc., which are otherwise Concessionaire’s responsibility, on account of failure on part of the Concessionaire to keep such insurance(s) effective and in force.
(viii) Monthly proportionate provision of Debt Service Payments due in an Accounting Year and payment of Debt Service Payments in the month when due;
(ix) One-half of such remuneration, cost and expenses of the Independent Consultant in case the Concessionaire does not reimburse the remuneration, cost and expenses of the Independent Consultant to NHAI within 15 (fifteen) days of receiving a statement of expenditure from NHAL.
(x) Any payments and Damages due and payable by the Concessionaire to NHAI pursuant to this Agreement, including repayment of Revenue Shortfall Loans, recovery due to reduction in the scope of work, penalty for non completion of Punch List items, penalty for O&M expenses incurred by NHAI; and :
(xi) Balance in accordance with the instructions of the Concessionaire
19. It is the case of NHAI that despite this being the position, post the initial payment of Rs.15 Crores, no payment has been made till date towards the negative grant, as per the Concession Agreement. However, large sums of money are being transferred by the Judgment Debtor herein towards interest payments, legal payments, retainer payments, servicing of debt, etc. A complete chart has been set out in page 42 to 47 of the petition where the total comes to approximately Rs. 246.90 crores. This also includes fixed deposit investments of Rs. 100.41 crores. It is averred by the Decree Holder NHAI that despite directions from the ld. Arbitral Tribunal to maintain the escrow account in terms of the escrow agreement, the Judgment Debtor undertook the aforesaid transactions.
20. It is further submitted by ld. Counsel for NHAI that the ld. Arbitral Tribunal vide orders dated 11th October, 2022 and 10th May, 2023 had clearly directed strict compliance with the escrow agreement which the Judgment Debtor herein is not adhering to. Various proposals were made by the Concessionaire/Judgment Debtor but they were not acceptable as they did not take care of the total amount due to the NHAI which is more than Rs.600 crores as on date. This amount includes Rs. 200 crores as the principal amount and the interest in terms of the Concession Agreement.
21. Mr. Mittal, ld. Counsel appearing for the NHAI submits that the NHAI is apprehensive of the fact that entire revenues which are payable to it may be completely whittled away by operation of the escrow account in an unauthorised manner which is contrary to the agreement itself.
22. On the other hand, ld. Counsel Mr. Arjun Syal, appearing for the Judgment Debtor herein submits that non-payment on behalf of the Judgment Debtor herein for several years has been with the consent of NHAI in view of various impairments that have occurred in the project. Set off and adjustments were given by the NHAI itself. Further, the Judgement Debtor herein has given two different proposals suggesting the manner of payment, however, NHAI has rejected both the proposals.
23. It has been NHAIs stand that till the principal amount as also the interest, per the Concession agreement is secured, NHAI would not be satisfied, though, the fact remains that the claim for negative grant amount and the interest is still pending adjudication before the ld. Arbitral Tribunal.
24. It is further submitted by ld. Counsel for the Judgment Debtor that insofar as the fixed deposits are concerned, two fixed deposits to the tune of Rs. 125 crores have been submitted to the Enforcement Directorate. However, as on date, the Judgment Debtor is willing to release a sum of Rs. 40 Crores in favour of NHAI and also make a monthly payment to NHAI for the principal amount due. The above would be without prejudice to the rights and contentions of the Judgment Debtor. Ld. Counsel further submits that more than Rs. 600 crores have been invested by the Judgment Debtor in the project and consequently, the Judgment Debtor is entitled to recover its investment and profits from the operation of the toll. It is further submitted that NHAI has repeatedly created impediments in the enjoyment and curtailment of the revenues of the Judgment Debtor by providing concessions such as free passes for locals, not charging the buses which are run by the Government of Kerala, etc. Thus, there has been a major impact in the revenues which are earned by the Judgment Debtor. These contentions are disputed and refuted by ld. Counsel for the Decree Holder.
25. Mr. Ankur Mittal, ld. Counsel in the rejoinder reiterates that under Clause 31.1 of the Concession Agreement NHAI is entitled to charge interest in respect of any default payments at the rate of SBI PLR plus 2% and, thus, the charge cannot be stated to be unreasonable, it is in fact within the four corners of the Concession Agreement itself. He, thus, submits that NHAI deserves to be secured for a sum of Rs. 614 Crores.
26. The Court has considered the matter. The ld. Arbitral Tribunals observations are clear to the effect that the Respondent/Judgment Debtor herein has to abide by the escrow agreement. In fact amounts which were unauthorisedly withdrawn had to be brought back by the Judgment Debtor. The escrow agreement brooks no ambiguity. It clearly provides that the negative grant amount stands at a higher pedestal than any other amounts therein including reimbursement of expenditure debt service payments etc. Be that as it may, on a query from the Court the categorical admission of the Judgment Debtor is that apart from the initial Rs.15 crores, no amount has been paid to NHAI since 2011 and more than 14 years have in fact passed.
27. According to the Judgment Debtor, NHAI has not insisted on the payments and has given various waivers which have created an impediment for the Judgment Debtor to collect toll from the project.
28. However, it is observed that the concessionaire relationship, per the Concession Agreement has been extended till 2028. Even going by what the Judgment Debtor itself is arguing, in the last five years of the agreement, a sum of Rs. 40 crores is to be paid per annum to NHAI. The chart which has been filed in the petition would show that various payments and amounts are being withdrawn or debited to the escrow account and such amounts include:
i. Transfers to GIPL the Judgement debtor.
ii. Interest payment.
iii. Legal payments and legal retainership fee.
iv. FDRs carved out of escrow funds in the name of GIPL.
v. Payments to IDFC and others in respect of loans.
vi. Professional fees to CAs.
vii. Payment to statutory auditors.
viii. Fixed Deposit payments etc.
29. However, it is observed that, none of these payments stand on a higher footing than the negative grant payment to NHAI as per the Concession Agreement. Under such circumstances, ld. Counsel for the Judgment Debtor has sought time to file a reply.
30. This Court is of the opinion that in the letter and spirit of the ld. Arbitral Tribunals orders dated 11th October, 2022 and 10th May, 2023, the amount deserves to be secured for NHAI. For a period of 5 years the amounts payable to NHAI is Rs. 200 Crores in principal itself. The interest would have to be considered after pleadings are completed.
31. The Judgment Debtor has itself given two proposals to NHAI dated 23rd April, 2023 and 3rd May, 2023. The following are extracted for reference:
Dear Sir,
In terms of the liberty granted by the Ld. Tribunal by way of its order dated 21.04.2023, kindly find herewith our proposal with respect to the payment of Negative Grant in terms of the Article 23 of the Concession Agreement dated 27.03.2006;
I. GIPL shall pay an upfront amount of Rs. 29.85 Cr (say Rs. 30 Crs ) towards part payment of its obligation to pay Negative Grant in terms of Article 23 of the CA.
II. This represents Rs. 26.8 Crs received from Government of Kerala in the month of April 22 towards outstanding dues pertaining to free passes ,and Rs. 3.05 crs received from Kerala State Road Transport Corporation on July 21 against outstanding dues towards nonpayment of toll fees.
III. In addition to the aforesaid, GIPL shall earmark a portion of the projected cashflow towards payment of Negative Grant in terms of Article 23 in the following manner;
a. The average projected monthly cashflow till the FY 27-28 after deducting the expenses operation and maintenance is Rs. Rs 11crs;
b. GIPL undertakes to earmark 50% of the this projected cashflow (after deducting expenses for operation and maintenance) towards Negative Grant, till the satisfaction of its obligation in terms of Article 23 of the CA;
A detailed chart depicting the earmarking of the Negative Grant dues from the projected monthly cashflow is enclosed herewith for your reference.
The present Proposal in without prejudice to the rights and contentions of GIPL/Claimant and is being proposed only as a via media suggestion so that not only are the interests of both the parties can be protected during the pendency of the Arbitration Proceedings but also to avoid burdening the Ld. Tribunal with these interlocutory applications and assist and enable the Ld. Tribunal to proceed with the main matter.
Second proposal dated 3rd May 2023:
1. We hope this letter finds you in good health and spirits. We would also like to take this opportunity to express our sincere appreciation for your exceptional leadership and proactive initiatives in revitalizing road and highways development through the Public-Private Partnership (PPP) mode and announcing a slew of projects to be awarded in Build Operate Transfer (BOT) mode.
2. We truly believe that your visionary approach and commitment to fostering collaborations between the public and private sectors would undoubtedly play a crucial role in addressing the infrastructure challenges faced by our country.
3. As a stakeholder in roads and highway development in the country, while we are optimistic that your proactive steps in revitalising BOT projects will address some of the existing challenges in the sector, we also find it imperative to highlight some of our concerns which might erode the confidence of infrastructure developers in participating in the upcoming projects with renewed vigour.
4. At times when BOT projects are slowly finding its way back into the infrastructure landscape, it is disheartening to notice an unrelenting reluctance in finding amicable ways in resolving longstanding issues in the existing projects and an unusual affinity for resorting to excessive and anarchic methods such as issuing notices, levying damages and penalties over disputed O&M issues.
5. The aforesaid becomes evident especially in the project for 4/6 laning of Thrissur Angamali section on NH47 in the state of Kerala being undertaken by Guruvayoor Infrastructure Private Limited. We take immense pride in referring that the project is one of the most well maintained highways under National Highways Authority of India and has been appreciated in the past for its innovative services such as transplantation of trees under Green Highways Mission and moreover has also been recognised for maintaining the highest standard of social services through various CSR initiatives such as donation for relief of Kerala Flood victims, promoting education along project stretch through study material distribution for poor students, organising Blood Donation Camp, Eye and health check-up Camp for employees and locals etc.
6. Although, GIPL mobilized its resources for the timely completion of its obligations under the Concession Agreement, NHAI committed several breaches of its obligations which caused major delays and losses to GIPL as well as the public at large. These inter alia include delay in handing over the right of way, which caused a delay in commencement of operations on the project land, and additional costs incurred due to change in widening scheme/ change in scope of work prior to commencement of tolling operations.
7. We wish to highlight herein that then the Provisional COD for the project was received on 4th Dec’11 but the toll collection could not be started immediately due to large scale protest and agitation by locals for reduction in toll rates. Govt of Kera la (GOK) had a series of discussions with NHAI and issued a Government Order (GO) for modification of Toll rate which was duly acknowledged by NHAI and forwarded to GIPL for compliance with a clear understanding that GOK, as per notification, was to pay the differential toll rate for the local users. This marked an unprecedented intervention by a State Government in adjusting toll rates, undermining the authority of both the NHAI and the Ministry of Roads, Transport, and Highways in shaping the PPP framework. Despite the Concessionaire’s willingness to cooperate with NHAI officials despite huge financial constraints stemming from this arbitrary intervention by the State Authority, it’s noteworthy that NHAI, rather than backing the Concessionaire’s legitimate request, chose to adopt a passive stance during the ensuing disagreement with the State Government over resolving the Concessionaire’s rightful dues. Despite this loss to the concessionaire being a matter of undisputed record, and even NHAI initially appearing to be considerate towards the concern by not pressing for Negative grant due of Rs 200 cr payable from 2016-2020 by agreeing for set off from outstanding due from GoK and KSRTC basis the recommendation from none other than the high ranking officers of NHAI itself, we were completely shocked to see a complete reversal of stand In the recent past.
8. It is important to highlight that with an attempt to support the cause of the Concessionaire, NHAI initially had even recommended GoK dues to be adjusted with CRF allocation from the state of Kerala, but we are yet to achieve any positive resolution to the matter for the last 12 years and the matter has been under arbitration since 2019 and as a result, GIPL has been deprived of huge sums of monies which have become due against issuance of free passes in terms of the aforesaid GO.
9. You will appreciate that the payment of negative grant is a reciprocal obligation that can only be made if a concessionaire is able to recover the amounts as envisaged, from project operations. If the concessionaire is itself incapacitated from collecting toll due to any reason or is not paid the pending dues in a timely manner, payment of any amount towards negative grant would not only be unworkable, but would also holistically impair the project highway in such a situation. In this regard, it may be noted that the actual cashflows are much lesser in comparison to the projected cashflows which were expected at the time of entering into the concession agreement and it was keeping in mind the potential revenue that the concessionaire had entered into the concessionaire agreement. However, due to various reasons, the concessionaire has suffered and continues to suffer loss of revenue despite having duly fulfilled its obligations
10. Without prejudice to our rights and contentions to seek appropriate remedy to recover our losses, we would also like to bring it to your kind attention that GIPL, in the larger public interest and keeping in mind the interests of all the stakeholders, have made several attempts in the past in proposing various potential solutions to resolve the disputes either by way of setting off the respective claims and counter claims or by earmarking the cashflow for payment of negative of grant till the resolution of disputes under arbitration. However, all efforts made by GIPL have gone in vain and there has been no inclination by NHAI to resolve these issues.
11. However, be that as it may, with an effort to uphold the spirit of partnership under PPP model, we propose to share overlying cashflow from the project towards negative grant till the resolution of the outstanding disputes and settlement of dues from GoK and KSRTC, without prejudice to our rights and contentions and subject to the outcome of the arbitration. On a without prejudice basis, the Concessionaire hereby makes an offer to pay the Negative Grant to the extent of Rs. 200 Cr in terms of the Schedule enclosed along with the present letter. Further, Interest, if applicable, subject to outcome of the Arbitration will be made from future Cash Flow.
12. The surplus cashflow from the project accrued over the next three years may be utilised towards negative grant payment. The detailed modalities of the payment structure along with the quantum and tenor may be finalised once NHAI is agreeable to the above proposal. We sincerely hope that NHAI will heartily reciprocate and extend their support to safeguard the interest of all the stakeholders.
Once again, we extend our heartfelt appreciation for your tireless efforts in revitalizing infrastructure projects and look forward to witnessing the continued success of these initiatives under your guidance.
Looking forward to your support and guidance to resolve the outstanding issues and encourage the investor community to look into the PPP projects with renewed hope and vigour.
32. As per Clause 31.1 of the Concession Agreement which prescribes compensation for breach of agreement, as extracted below, the recoverable amounts as per NHAI is more than Rs. 600 crores.
31.1 In the event of Concessionaire being in material default of this Agreement and such default is cured before Termination, the Concessionaire shall pay to NHAI as compensation, all direct additional costs suffered or incurred by NHAI arising out of such material default by the Concessionaire, in one lumpsum within 30 (thirty) days of receiving the demand or at the Concessionaires option in 3 (three) equal semi-annual installments with interest @ SBI per PLR plus 2%(two cent).
33. Bearing these proposals in mind and the schedule which was provided in the Concession Agreement, prima facie, the Court is of the opinion that the amount termed as negative grant per the Concession Agreement, deserves to be secured. It also appears from the submissions today that there are some proceedings which the Enforcement Directorate has also commenced against the Judgment Debtor herein. These factors, in fact, lend credence to the further apprehension of the NHAI that the revenues may not be recoverable later on. Under such circumstances, the following directions are issued:
i. By 15th May, 2024, the Respondent/Judgment Debtor herein shall pay a sum of Rs. 50 Crores to NHAI. Thereafter, by the 10th of every month a further sum of Rs. 10 Crores shall be continued to be paid to the NHAI.
ii. It shall be ensured that a minimum balance of Rs. 100 crores is maintained in the escrow account at any point in time.
iii. None of the FDs created by GIPL from the funds arising out of the Escrow account, shall be encashed or withdrawn.
iv. Further an affidavit shall be filed confirming the status of the amounts which were to be put back in the Escrow account as recorded in order 11th October 2022, of the Arbitral Tribunal.
v. The Escrow Agent shall be bound to act strictly in terms of the Escrow Agreement and not permit any withdrawals contrary to the said Agreement. An affidavit shall be filed by the Escrow Agent confirming this, failing which stringent action would be liable to be taken against IDFC the Escrow Agent.
The present order shall be communicated by NHAI as also the Judgement Debtor to the Escrow Agent, for strict compliance of the same.
34. It is directed that if there is any violation or non compliance of the directions passed above, the NHAI is free to move an application to seek a freezing of the escrow account/ further debits that are being made from the said escrow account.
35. Let reply be filed to this petition within four weeks. Rejoinder, thereto, be filed within four weeks thereafter.
36. List on 5th August, 2024.
PRATHIBA M. SINGH
JUDGE
MAY 2, 2024
dj/rks
OMP (ENF.) (COMM.) 97/2024 Page 2 of 2