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Judgment
Manmohan Singh, J.—This petition u/s 9 of the Arbitration and Conciliation Act, 1996 has been filed by the Petitioner seeking restraint against the Respondent Nos. 1 and 2 from in any manner interfering with the Petitioner''s collection of toll tax and retaining 11% thereof as collection charges or causing interference in the smooth flow of traffic on the Delhi-Gurgaon expressway and also directing the Respondent No. 3 or such other independent Government agency to determine service/collection charges payable to the Petitioner.
The controversy in this matter arises out of a concession agreement whereby the Petitioners became concessionaire for conversion of the Delhi Gurgaon section of National Highway-8 from KM 14.3 to KM 42.00 into an access controlled 8/6 lane expressway on Build Operate and Transfer (BOT) basis for NHAI.
It is averred in the petition that the Petitioner has completed the entire project successfully in accordance with the concession agreement and the design provided by the NHAI. Under the said concession agreement, the entire cost of conversion of the Highway was to be, and in fact has been, incurred by the Petitioner. The said expenditure was to be recovered by the Petitioner by way of collection of toll from the commuters for a certain number of years. The Petitioner invested about Rs. 1,000 crores on the construction of the expressway.
It is submitted by the Petitioner that Respondent No. 2 has been designated by the Respondent No. 1 as the agency with which the Petitioner is required to enter into suitable agreements in view of certain provisions in the concession agreement and State Support agreement. The expressway became operational with effect from 23.01.2008 and on the said date, there was no agreement between the parties. Consequently, a service charge was levied @ 14%. Thereafter, Respondent No. 2 appointed a company called M/s PKSS Infrastructure Pvt. Ltd. as its agent to receive the toll tax collected by the Petitioner and in this regard a Memorandum of understanding dated 15.05.2008 (hereinafter referred to as "MoU") was executed between the Petitioner, Respondent No. 2 and M/s PKSS Infrastructure Pvt. Ltd. and under the said MoU the Petitioner was empowered to collect MCD toll tax from specified category of commercial vehicles at Rajokari boarder. Under the MoU it was provided that after deducting the collection charges so fixed, the Petitioner would remit the amount of MCD toll tax to M/s PKSS Infrastructure Pvt. Ltd. The MoU was valid upto 16.05.2011. The MoU also provided as follows:
the decision with respect to the collection charges to be received by (the Petitioner), shall be settled between the parties by referring the same to a mutually agreed Govt. Agency. The recommendation of the said Govt. Agency shall binding on all the parties.
Therefore, the parties mutually appointed Respondent No. 3, M/s RITES Ltd., a well reputed Govt. of India enterprise, to determine the collection charges payable to the Petitioner for the integrated toll tax collection. The Respondent No. 3 computed the collection charges to be at 11.28% and in doing so, it took into account, inter alia, civil costs, equipment/software costs, projected inflation, an added margin of 10% of the cost of collection etc. The determination made by the Respondent No. 3 was accepted by both the Petitioner and the Respondent No. 2 , subject only to rounding off the figure to 11% and remitting the balance to the Respondent No. 2 through the latters contractor M/s PKSS Infrastructure Pvt. Ltd.
It is submitted by the Petitioner that over the last three years the costs involved in toll tax collection have increased substantially and consequently the collection charges are due for upward revision, therefore, few months prior to the expiry of the MoU the Petitioner had requested for the same on and from 16.05.2011. However, on the contrary, Respondent No. 2 conveyed to the Petitioner that the rate of service charges on collection of MCD toll tax by the Petitioner at Rajkori boarder should be reduced from 11.5 to 3% because the same rate has been agreed by the concessionaire operating the Badarpur-Faridabad Toll-Way. This was unacceptable to the Petitioner.
Before expiry of the MOU, the Respondent No. 2 sent a letter dated 18.04.2011 to the Petitioner asking to accept the proposed rate. In response, the Petitioner informed the Respondent No. 2 that unless an amicable resolution on the rates was reached before 16.05.2011 (5:59 a.m.), the Petitioner would not collect any toll tax on behalf of the Respondent No. 2. Thereafter, a meeting was held between the parties on 10.05.2011, however, the issue could not be resolved. The Petitioner, thereafter sent a letter dated 12.05.2011 to the Respondent No. 2 suggesting that the issue may be resolved by appointing an independent government agency such as Respondent No. 3(as earlier mutually agreed by the parties), to determine the service charge payable to the Petitioner, then again on 14.05.2011, another letter was sent to the Respondent No. 2 by the Petitioner informing that since the Respondent had not made any arrangement to collect toll tax and sudden appearance of their representatives to do the same from 16.05.2011 was likely to result in huge traffic jams causing problems to the public at large, therefore, the Petitioner would continue to collect the toll tax on behalf of Respondent No. 2 and made it clear that the rate of service charge collection would be 11% or such other rate as decided by Respondent No. 3 or any other independent government agency. The Petitioner also intimated the Respondents that incase the Petitioner did not receive reply to the aforesaid effect, then the Petitioner would assume that the Respondent No. 2 has no objection to the Petitioner''s collection of toll tax. As the Respondent No. 2 did not reply to the Petitioner''s letters dated 12.05.2011 and 14.052011, the Petitioner continues to collect toll tax beyond 16.05.2011.
The main contention of the Respondent No. 2 is that the MoU/Tripartite Agreement executed on 15.05.2008 between M/s Delhi Gurgaon Super Connectivity Ltd., M/s PKSS Infrastructure Pvt. Ltd. and MCD for collection of MCD''s Toll Tax has already expired on 16.05.2011. A fresh agreement for collecting the toll tax between the parties has also not been executed. The negotiations between MCD and concessionaires about the rate of service charges have not materialized. Therefore, the Respondent No. 2 is insisting that the service charges of such collection by the concessionaires should be fixed @ 3% only. The justification given by Mr Sudhir Nandrajog, Sr. Adv., appearing on behalf of the MCD is that the MCD has to bring down the rate of integrated border Toll Plazas viz; Badarpur, Rajoukari and Noida-DND Flyway Borders, which is rationally justified, so that the revenue stream of MCD is not affected.
Mr. Nandrajog, learned senior advocate has argued that the above revision of service charges to 3% has been approved by the Competent Authority of Municipal Corporation of Delhi, which is a statutory body constituted under the Act of Parliament of India. He has referred to Section 113, 113(2)(g) of MCD Act, 1957 and submits that the MCD does not need any support of the Government being independent and statutory body itself who has taken the policy decision, therefore, the revised service charges @3% are applicable to all three above mentioned Toll Plazas. He further submits that the collection of toll tax from all the border entry points of Delhi from notified commercial vehicles is an obligatory function of MCD. Therefore, the concessionaires of NHAI are bound to collect the toll tax on behalf of the MCD and remit the same to MCD after deduction of the service charges. Since the MCD has already decided to give 3% service charges to concessionaires to NHAI, any deviation from the order passed by the MCD would be taken seriously. He further submits that the present petition is not maintainable because of the reason that the Respondent No. 2 was not a party to the concession agreement dated 18.04.2002 as well as State Support Agreement dated 24.05.2004 and the reliefs sought by the Petitioner is not liable to be granted in the absence of Respondent No. 2 being parties to the agreements.
In support of his submissions, he has referred to Indowind Energy Ltd. Vs. Wescare (I) Ltd. and Another, and Indusind Bank Ltd. v. National Highways Authority 166 (2010) DLT 354. He mainly stressed on Indowind Energy Limited v. Wescare (India) Limited and Anr. (supra). The relevant extract of the same reads as under:
Wescare puts forth the agreement dated 24-2-2006 as an agreement signed by the parties containing an arbitration agreement but the said agreement is signed by Wescare and Subuthi and not by Indowind. It is not in dispute that there can be appointment of an arbitrator if there was any dispute between Wescare and Subuthi. The question is when Indowind is not a signatory to the agreement dated 24-2-2006, whether it can be considered to by a "party" to the arbitration agreement. In the absence of any document signed by the parties as contemplated under Clause (a) of Sub-section (4) of contemplated in Clauses (b) or (c) of Sub-section (4) of Section 7 and in the absence of a contract which incorporates the arbitration agreement by reference as contemplated under Sub-section (5) of Section 7, the inescapable conclusion is that Indowind is not a party to the arbitration agreement. In the absence of an arbitration agreement between Wescare and Indowind, no claim against Indowind or no dispute with Indowind can be the subject-matter of reference to an arbitrator. This is evidence from a plain, simple and normal reading of Section 7 of the Act.
Mr. Nandrajog has referred to Clause 10 of the MoU/agreement dated 15.05.2008 which provides that in case of any dispute the jurisdiction will lie in the courts of Delhi. He argued that in view thereof, the petition filed by the Petitioner is liable to be dismissed. He submits that in any case, the Respondent No. 2 has no objection in case the dispute of determination of collection/service charges in lieu of MCD toll collection at Rajoukari Toll Plaza at NH-8 be referred to independent agency, i.e. Comptroller and Auditor General of India, who will give its report after considering the points raised by the Petitioner as well as the Respondent No. 2, however in the meanwhile, the Petitioner should charge revised service charge @3% as per the decision taken by the MCD in the meeting held on 10.05.2011.
Before considering the submissions made by the learned Counsel for the parties, there are certain clauses of the agreement and relevant facts which are necessary to be referred to for coming to the conclusion in the matter. The Clause 6.7 of concession agreement, inter alia, provides as under:
6.7 The Concessionaire shall make arrangements to collect taxes/levies/duties from the users of the Project Facility for and on behalf of GOI/GNCT/GOH (i.e. Government of India/ Government of National Capital Territory of Delhi/Government of Haryana) as the case may be including inter alia entry fee, if so required. The Concessionaire shall enter into a suitable agreement with GOI/GNCTD/GOH or their designated agencies or assigns as the case may be after taking due approval from NH Ai, which approval shall no be unreasonably withheld. The Concessionaire may collect service charges from GOI/GNCTD/ GOH or their designated agencies or assigns as the case may be for the arrangemnts to collect taxes/levies/duties under the provisions of this Clause 6.7. The terms, conditions and extent of such service charges shall be negotiated and settled directly between the Concessionaire and GOI/ GNCTD/GOH or their designated agencies or assigns as the case may be without any obligation on the part of NHAI to cause the Concessionaire or GOI/GNCTD/GOH or their designated agencies or assigns to negotiate and/or arrive at such a settlement as provided in this Clause 6.7. Provided however that nothing contained in this Agreement shall entitle the Concessionaire to collect, levy, appropriate or dispose of any service charges, whether directly or indirectly for the collection of Fees from vehicles using the Project Highway.
The similar provision is contained in State Support Agreement dated 24.05.2004 which reads as under:
3.1(xii) to Concessionaire making arrangements to collect taxes/levies/duties from the users of the Project Facility for and on behalf of the GNCTD/GOH, as the case may be, including inter alia entry fee, if so required. The Concessionaire shall enter into a suitable agreement with GNCTD/GOH or their designate agencies or assigns, as the case may be after taking due approval from NHAI, which approval shall not be unreasonably withheld. The Concessionaire may collect service charges from GNCTD/GOH or their designated agencies or assigns as the case may be for the arrangements to collect taxes/levies duties under the provisions of Clause 6.7 of Concession Agreement. The terms, conditions and extent of such service charges shall be negotiated and settled directly between the Concessionarire and GNCTD/GOH or their designated agencies or assigns as the case may be without any obligation on the part of NHAI to cause the Concessionarire or GNCTD/GOH or their designated agencies or assigns to negotiate and/or arrive at such a settlement as provided in Clause 6.7 of Concession Agreement.
Expressway has three toll plazas for collecting the toll, one of which is at Rajokari on the Delhi-Gurgaon border from where the Petitioner operates. The other two are Badarpur and Noida DND Flyway borders. The Petitioner has devised its Toll Collection system at the Rajokari Toll Plaza Delhi-Gurgaon Expressway with the MCD toll tax incorporated in the system and the toll tax can be collected simultaneously along with the toll fees through the integrated toll receipt generated by the system.
In terms of the State Support Agreement the Respondent No. 2 was acting as an agency of the Govt. of NCT, with which the Petitioner was required to enter into suitable agreements in view of the above provisions of the concession agreement and State Support Agreement. Initially, when commercial operation of the Expressway commenced on 23.01.2008, there was no agreement in place between the Petitioner and the Respondent No. 2. Consequently, service charge was being levied at 14%. Subsequently, the Respondent No. 2 appointed a company called M/s PKSS Infrastructure Pvt. Ltd. as its agent to receive the toll tax collected by us on behalf of the Respondent No. 2.
To facilitate the collection of toll tax and payment to Respondent No. 2 using the Petitioner''s integrated toll collection system, the Petitioner, MCD and M/s PKSS Infrastructure Pvt. Ltd. executed a Memorandum of Understanding dated 15.05.2008. Under the said MoU, the Petitioner was to collect MCD toll tax from specified category of commercial vehicles at Rajokari Border. It was further provided that the decision with respect to the collection charges to be received by the Petitioner, shall be settled between the Petitioner and the MCD by referring the same to a mutually agreed Govt. agency. The recommendation of the said Govt. agency was to be binding on the parties to the MoU, i.e., Petitioner and the MCD. The MoU also provided that after deducting the collection charges so fixed, the Petitioner would remit the amount of MCD toll tax to M/s PKSS Infrastructure Pvt. Ltd. The validity of the MoU was up to 16.05.2011 (5.59 a.m.).
Subsequently, pursuant to the aforesaid clause set out in the MoU, the parties mutually appointed M/s RITES Ltd., a well reputed Government of India enterprise, to determine the collection charges payable to the Petitioner for the integrated toll tax collection. The said M/s RITES Ltd computed the collection charges to be at 11.28%. In computing the collection charges, M/s RITES Ltd took into account civil costs, equipment/software costs, manpower costs, operation and maintenance costs, reporting costs and miscellaneous costs, inflation and added thereto a margin of 10% of the cost of collection.
Both, the Petitioner and the MCD, accepted the determination made by M/s RITES Ltd, subject only to rounding off the figure to 11%. As such, the Petitioner began deducting collection charges at 11% and remitted the balance to MCD contract M/s PKSS Infrastructure Pvt. Ltd. This arrangement continued throughout since the execution of the said MoU.
One of contentions of the Petitioner is that for the past three years the costs involved in toll tax collection have substantially increased and consequently the collection charges are due for upward revision. As such, a few months prior to expiry of the MoU on 16.05.2011, the Petitioner requested for upward revision of the service charges on and from 16.05.2011. But, instead of increasing the service charge rate, the MCD conveyed that the rate of service charges on collection of MCD toll tax by the Petitioner at Rajokari Border should be drastically reduced from 11% to 3%. The reason given for the reduced service charges was that the same rate has been agreed by the concessionaire operating the Badarpur - Faridabad Toll-way, which is the smallest of all toll plazas bordering the city.
In view thereof, the Petitioner issued a notice dated 17.05.2011 to the Respondent No. 2 stating that since the dispute could not be amicably resolved between the parties, therefore, the Petitioner is left with no alternative except to invoke the arbitration Clause 9.2 of the State Support Agreement and the request was made to the Respondent No. 2 to nominate one person who will act as an arbitrator on behalf of the NCT of Delhi/MCD and request was also made to the Respondent No. 2 to appoint new contractor from 15.05.2011 under the fresh contract.
On 18.05.2011, the Petitioner issued another reminder to Assistant Commissioner (Toll Tax), MCD, Minto Road New Delhi, by referred to the other letters as well as the minutes of meeting held on 10.05.2011 showing their willingness to appoint M/s RITES or any other appropriate agency to determine the service charges payable to the Petitioner.
The submission of Mr Mukul Rohatgi, learned senior counsel appearing on behalf of the Petitioner, is that the provisions of concession agreement and State Support Agreement have only authorized MCD to negotiate and to settle with the concessionaire the rate of service tax. However, he submits that the said agreements have not given the MCD any authority to decide the rate of service charges. According to Mr. Rohatgi, if the Petitioner is to collect the toll tax, then the method of determination of collection of service charges has to be governed solely by the provisions of concession agreement and the State Support Agreement as relied upon by the Petitioner and the Petitioner is bound by the clauses mentioned in these agreements and not contrary decision taken by the MCD.
He further states that the Petitioner is always ready to act in accordance with the said provision mandated by the Govt. of NCT of Dehli who is a party in the State Support Agreement and the provisions mandated by the Govt. of NCT of Delhi in the State Support Agreement be adhered to by the MCD, otherwise any decision taken by the MCD would be contrary to the provisions of the siad agreement. He submits that the Petitioner is ready and willing to settle the issue amicably through discussion between the parties and not merely arbitrary decision taken by the MCD. It is also stated by Mr Rohatgi that the Petitioner is ready to continue to render its services at the same rate, i.e., 11% despite of the fact that the cost of collection has increased enormously over the last three years. In case the MCD is not ready to comply with the terms of the concession agreement and State Support Agreement and negotiations between the parties, then the Petitioner is prepared to stop to collect the MCD toll tax from Rajokari Toll Plaza and the MCD be asked to make its own arrangement for collecting the toll tax. He also referred to certain portion of Clause 3 of the State Support Agreement dated 24.05.2004/22.02.2005 in which the Govt. of National Capital Territory of Delhi had agreed to discharge, inter alia, the following obligations:
(iv) To ensure that no barriers are erected or placed by GNCTD/GOH or any Govt. Agency of GNCTD/GOH that interrupts free flow of traffic on the project highway except on account of law and order situation or situation arising out of any court''s directives or upon national security consideration. (viii) To support, co-operate with and facilitate NHAI and the Concessionaire in the implementation of the project. (x) Enure, subject to and in accordance with the applicable laws that all the relevant municipal and other authorities and bodies including panchayats in the National Capital Territory of Delhi/State of Haryana do not put any barriers or other obstruction that interrupt free flow of traffic on the project highway.
Mr. Rohtagi has also referred to Section 23 (1) of National Highways (Land and Traffic) Act, 2002 which provides that "All lanes forming part of a highway which vest in the Central Government or which do not already vest in the Central Government but have been acquired for the purpose of highway shall for the purposes of this Act and other Central Acts be deemed to be the property of the Central Government as owner thereof. Further, Section 24(1) of the Act provides that no person shall occupy the highway land or discharge any material through drain on such lane without obtaining prior permission for such purpose in writing of the Highway administration or any officer authorized by such administration in this regard. Section 28(1) provides that "no person shall have right of access to a highway lanes either through any vehicle or on foot by a group of 5 or more persons except permitted by the Highway administration either generally or specifically in the manner specified in Section 29.
He argues that National Highway Authority of India had accorded its permission by way of the provision made in Clause 6.7 of the concession agreement for integrated toll collection so that the traffic flow remains unaffected and in the event integrated toll collection cannot be persisted with, then as a pre-condition for any such change the existing permission from NHAI for MCD Toll Collection as contained in Clause 6.7 will need to be changed and the Petitioner will be entiteld to be compensated for all losses arising from the amendment of the clause.
As far as the objection raised by the Respondent No. 2 that the Respondent No. 2 is not a party to the concession agreement dated 18.04.2002 and the State Support Agreement, he relied upon Clause 6.7 wherein it was specifically specified that the concessionaire/Petitioner shall enter into suitable agreement with Govt. of NCT of Delhi and the Govt. of Haryana or their designated agencies or assigns as the case may be after taking approval from NHAI which approval shall not be unreasonably withheld. A similar provision is also contained in the State Support Agreement dated 24.05.2004/22.02.2005.
Mr. Rohtagi has argued that the Respondent No. 2, though is not a party, but admittedly the designated agency, against whom an interim order can be issued, otherwise, where is the question of MCD to have the Memorandum of Understanding dated 15.05.2008 with the Petitioner and with the consent of the parties both agreed to refer the matter to the RITES Ltd., a Govt. of India Enterprise to determine collection/service charges in lieu of MCD toll collection tax collection at Rajokari Toll Plaza on NH-8. The Memorandum of Understanding dated 15.05.2008 continued for three years between the parties as per the arrangement arrived at between the parties in view of concession agreement dated 18.04.2002 and the State Support Agreement, which is still in existence between the parties to the said agreement. It further appears that before executing Memorandum of Understanding, the MCD, in its letter dated 21.01.2008, itself referred to Clause 6.7 of the concession agreement and also referred to the State Support Agreement dated 24.05.2004 which provided the terms and conditions. In the said letter, admittedly, the MCD itself had referred to the terms and conditions of the agreements in order to determine the service charges by way of negotiation and settlement directly between the concessionaire and GOI/GNCTD/GOH or their designated agencies or assigns as the case may be.
Mr Mukul Rohatgi argued that the MCD has to be read as designated agency or assign to the concession agreement as well as the State Support Agreement dated 24.05.2004. As far as Clause 10 of the Memorandum of Understanding, that in case of any dispute, the jurisdiction will lie to Courts of Delhi, is concerned, he submits that the said Memorandum of Understanding/Agreement was valid up to 16.05.2011. Therefore, the Respondent No. 2 MCD cannot take the advantage of the said clause.
He argues that the decision, referred to by the Respondent No. 2, are not applicable to the facts and circumstances of the present case particularly in view of Clause 6.7 of the concession agreement, State Support Agreement and as per the conduct of the MCD in the matter. This Court can exercise its power u/s 9 of the Arbitration and Conciliation Act to issue the direction against the third party but, it depends upon the facts of each case. He stressed that this is a fit case in which the directions can be passed against the Respondent No. 2 MCD.
With regard to the grounds of similarly situated party in respect of Badarpur Border project who entered into with another concessionaire, Mr. Rohtagi has informed that the said project is different than the present project as in Badarpur Border Project, it is small in size, traffic flow is less therefore it is of no relevance to make comparison between the two and even the facts are materially different between the two.
After having considered the entire gamut of the case, this Court is satisfied that prima facie the present petition is maintainable particularly in view of the provisions of the concession agreement and State Support Agreement who have authorized the MCD to negotiate and to settle with the concessionaire the rate of service tax.
Further, the Petitioner has shown its willingness and readiness to settle the issue amicably through discussion with the Respondents No. 1 and 2. The Petitioner is prepared for appointment of any independent agency including RITES Ltd. or any other Government agency other than the Comptroller and Auditor General of India for the purpose of determining of the service charges in lieu of toll collection at Rajokari toll plaza on NH-8. Mr. Rohtagi submits that since the dispute in the present case is small therefore in place of agency suggested by the MCD any other independent Govt. agency be appointed who may determine the rate of service charges payable to the Petitioner upon rendering the service of collection of toll tax for and on behalf of the Govt. of National Capital Territory of Delhi and MCD. The learned Counsel has also stated that the Petitioner has no objection if any other company is appointed to collect the toll tax for and on behalf of the Respondents No. 1 and 2 subject to the rights claimed by the Petitioners.
One more opportunity is granted to the parties to settle the issue amicably through discussion themselves or by taking assistance of any independent Govt. agency, if agreed between them to determine the rate of service charges payable to the Petitioner for rendering the service of collection of toll tax for and on behalf of Respondents No. 1 and 2.
Issue notice to the Respondents. The response be filed by the Respondent No. 2 MCD within four weeks, rejoinder, if any, by the next date. Notice be also issued to the Respondents No. 1 and 3, on filing of process fee within one week, returnable on 25.08.2011.
Till the next date, it is directed that the Respondents No. 1 and 2 shall not alter the status quo and/or interfere with the Petitioner''s collection of toll tax for and on behalf of the Respondents No. 1 and 2 from commercial vehicles arriving from Gurgaon to New Delhi and Delhi by using the Delhi-Gurgaon Expressway.