Haryana State Industrial and Infrastructure Development Corporation Limited (HSIIDC) – All disputes between the lender banks, the HSIIDC and the outgoing concessionaire-KMP Expressways Ltd. arising out of or in relation to the tripartite agreement dated 08.01.2007 executed between the parties shall stand referred to the arbitral tribunal headed by Justice N.K. Sodhi.
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
(T.S. THAKUR, CJI.) (R. BANUMATHI) JJ.
May 13, 2016
I.A. Nos.363-364, I.A NO.425 IN I.A. NO.364 IN I.A. NOS.344, 355, 362 IN WRIT PETITION (CIVIL) No.13029/1985
M.C.MEHTA …Appellant Versus UNION OF INDIA & ORS. …Respondents
IDBI BANK LIMITED AND STATE BANK OF INDIA …Applicants
J U D G M E N T
Interlocutory applications No.363 and 364 of 2015 have been filed by the Consortium of Banks seeking direction from this Court that the rights of the Consortium of Banks who has financed the Kundli-Manesar-Palwal Expressway (‘BOT’) in the State of Haryana and has outstanding dues approximately Rs.1419.15 crores as on 28.02.2015 are not prejudiced by this Court’s order dated 30.01.2015 passed in I.As. No.344, 355 and 362 in W.P.(C) No.13029 of 1985.
2. Shorn of unnecessary details, facts leading to the present applications are as follows:-
Haryana State Industrial and Infrastructure Development Corporation Limited (HSIIDC) invited bids for developing of 135.650 kms long Kundli-Manesar-PalwalExpressway in the State of Haryana. Following the bidding process, three companies viz., M/s. Madhucon Projects Limited, M/s. D.S. Construction Limited and M/s. Appolo Enterprises set up a Special Purpose Vehicle (SPV) named ‘KMP Expressways Limited’ (“concessionaire”) and letter of acceptance was issued on 14.11.2005. The concessionaire and HSIIDC entered into a concession agreement dated 31.01.2006 and the same was for a period of twenty three years and nine months from the appointed date.
3. The concessionaire raised a loan from consortium of banks comprising of the banks namely IDBI Bank, State Bank of India, the applicants herein and other banks such as State Bank of Mysore, State Bank of Travancore, State Bank of Patiala, Canara Bank, Dena Bank, United Bank of India, UCO Bank, Vijaya Bank and India Infrastructure Finance Company Ltd. The original project cost of Rs.1915.00 crores was proposed to be financed by way of equity capital of Rs.766.00 crores and Rupee Term Loan of Rs.1149.00 crores. The lender banks have disbursed sums aggregating to Rs.1075.03 crores for the project. On 08.01.2007, a loan agreement was executed between the lender banks and concessionaire recognizing and strengthening the lenders’ security interest over the concession agreement. In terms of loanagreement, concessionaire had inter alia agreed to create security interest over various documents like all project documents which include concession agreement and all other assets and properties of the existing concessionaire. The concessionaire executed the indenture of mortgage dated 09.01.2007 securing the interest of the lenders as per the requirement of the loan agreement. In order to further secure the interest of the lender banks, on the same date i.e.08.01.2007, a tripartite agreement was also entered into between HSIIDC, the concessionaire and the IDBI Bank as lenders’ agent.
4. Proposed Kundli-Manesar-Palwal Expressway135.650 kms long takes off from NH-1 near Kundli, crosses NH-10 in the west of Bahadurgarh, crosses NH-8 near Manesar and finally joins NH-2 near Palwal. As the project is being developed around the national capital, Delhi, by an order of this Court dated 18.08.2005 in IA No. 182-183 in W.P. (C) No. 13029/1985 titled as ‘M.C. Mehta v. Union of India’ the same is being monitored by a special monitoring committee under the chairmanship of Secretary, Ministry of Road Transport and Highways with Chief Secretaries of Delhi, Haryana and U.P., Chairman, NHAI and Chairman, Environmental Pollution Control Authority (EPCA) as members. Also, the progress of the project was being reviewed by a HighPowered Committee established under the chairmanship of Chief Secretary, Haryana and others. There was delay in execution of the work and the concessionaire was unable to achieve the commercial operation of the project. Consequently, this Court appointed the Environmental Protection Control Authority Committee (EPCA) to expedite the project. Several meetings were held between EPCA, HSIIDC, the concessionaire and the lender banks, the details of which may not be relevant for the issue raised before us. Suffice to note that it was agreed that an amicable substitution of the existing concessionaire shall be made so as to expedite the project. It was further agreed that in terms of the contract, the concessionaire would be paid Rs.1300.00 crores as termination payment for utilization towards payment of the debts due. However, HSIIDC vide its letter dated 28.01.2015 addressed to EPCA informed that it had revoked the arrangement of making termination payment to the concessionaire and approval for payment of the same was withdrawn. At the same time, HSIIDC issued a notice dated 28.01.2015 to the then existing concessionaire conveying its intention to terminate the Concession agreement, subject to a cure period of one month for curing the defaults.
5. At this juncture, applications being I.As. No.344/2012 and 362/2014 were filed by the amicus curie and I.A.No.355/2014filed by Government of NCT of Delhi in WP (C) No.13029/1985. This Court vide its order dated 30.01.2015, directed the State of Haryana to replace the existing concessionaire by following due procedure. The operative part of the order dated 30.01.2015 reads as under:-
“In the meanwhile, the State of Haryana will ensure that appropriate steps would be taken to award the contract for the project to the new concessionaire within two months’ time from today. The new concessionaire shall commence the work within a month’s time thereafter.”
6. Later, vide a letter dated 13.02.2015, HSIIDC informed IDBI Bank that in view of the order of the Supreme Court dated 30.01.2015, the process of selecting a new concessionaire through its own efforts is under process and that if lender banks propose to bring a new concessionaire, the lenders would have to adhere to the time frame fixed by the Supreme Court. Vide its letter dated 16.02.2015, IDBI intimated HSIIDC that in order to facilitate compliance with the order of the Supreme Court, the senior lenders have agreed that the entity selected by HSIIDC shall be the ‘selectee’ of the lenders for the purposes of the substitution agreement. However, lender banks asked HSIIDC to ensure that the new concessionaire takes over the debt due to the lenders. Applicant No.1-IDBI Bank vide letters dated 16.02.2015, 25.02.2015, 27.02.2015, 05.03.2015, 16.04.2015 and 02.05.2015repeatedly asked HSIIDC to comply with clause 3.5 (i) of the substitution agreement and to ensure that the new concessionaire takes over the senior lenders’ debt dues.
7. Subsequently, HSIIDC issued tender dated 20.02.2015 and subsequent addendum dated 10.03.2015 and 13.03.2015 inviting bids ‘for execution of development of access controlled Kundli-Manesar-Palwal Expressway Section (Manesar RD. 83.320 km to Palwal RD 135.650 kms) (Balance Work) on Item Rate Mode amounting to Rs.4,01,49,97,931.00’. Bid submitted by M/s. KCC Buildcon Pvt. Ltd.-Dilip Buildcon Ltd. (JV) was accepted by HSIIDC on 28.03.2015 for execution and development of the project on ‘Item Rate Mode’ for the said stretch of the road project of 52.33 km (Manesar-Palwal) (Balance Work). Subsequently, in the first week of April, 2015, HSIIDC issued invitation for bids for development of access controlled six lane Kundli-Manesar Section (km 0.00 to km 83.320) valued at Rs.1774.00 crores on ‘BOT’ (annuity basis). After evaluation of the bids from the qualified bidders, HSIIDC accepted the bid of ESSEL on ‘BOT’ (annuity basis) and issued letter of acceptance on 31.07.2015 with a project cost of Rs.1863.00 crores. ESSEL incorporated M/s. Kundli-Manesar Expressways Limited as a limited liability company and the concession agreement was executed by HSIIDC with M/s. Kundli-Manesar ExpresswaysLimited on 03.09.2015 for execution of work of development of access controlled six lane Kundli-Manesar Section km 0.00 to km 83.320 in the State of Haryana on ‘BOT’ (annuity basis). Be it noted, in the tender as well as the concession agreement with the ESSEL, there was neither mention of debts due to the lender banks nor any clause was incorporated to secure the loans of the lender banks.
8. In this factual background, the lender banks have come before us by these applications inter alia seeking various directions:-
(a) To direct HSIIDC to amend the concession agreement between HSIIDC and ESSEL so as to include a suitable condition to take over the notice and other amounts owed to the senior lenders;
(b) To direct HSIIDC to take over the balance loan and other amounts owed to the lenders under the financing documents proportionate to the 52.33 kms of the project road which is constructed and completed by the new EPCA Director and subsequently taken over by the HSIIDC;
(c) To direct HSIIDC to ensure that new concessionaire/ ESSEL who would substitute the existing concessionaire to assume all the existing liabilities and obligations of the existing concessionaire towards the senior lenders proportionate to 83.320 kms.;
(d) To direct HSIIDC to enter into a supplementary agreement with the ESSEL so as to include a suitable condition to ensure that the rights of senior lenders under the substitution agreement are duly protected;
(e) To direct and collect all tax levy from both the sections of the project road i.e. Kundli-Manesar Section (83.320 kms) awarded to ESSEL and Mensar-Palwal of 52.33 kms as taken over by HSIIDC are deposited into Escrow Account to be opened with applicant No.1 the lead bank
9. Grievance of the lender banks is that though the rights of the senior lenders were acknowledged by HSIIDC in its letter dated 13.02.2015, HSIIDC proceeded with the bid withoutdisclosing to the new concessionaire that it will have to take upon debts due to the lender banks. On behalf of the appellants, the learned Attorney General, Mr. Mukul Rohtagi appearing along with Additional Solicitor General of India, Mr. Neeraj Kishan Kaul submitted that inspite of repeated letters by banks asking HSIIDC to act in terms of substitution agreement, HSIIDC has ignored the request of lenders and has gone ahead with the appointment of new concessionaire without acknowledging the rights of the lenders and thus HSIIDC failed to act in terms of the contract, in particular clause 3.5 (i) of the substitution agreement.
10. Contention of the lender banks is that in terms of clause 3.5 (i) of the substitution agreement while substituting the concessionaire by ESSEL, HSIIDC ought to have taken into account lenders’ dues and ought to have incorporated necessary clause in the concession agreement obligating the Selectee to take over lender banks’ dues. It is contended that HSIIDC is bound to execute a substitution agreement with the Selectee on the same terms and conditions as provided in the substitution agreement dated 08.01.2007 and that HSIIDC has committed breach of contract. Further grievance of the lender banks is that unilateral revocation of HSIIDC’s commitment to make termination payment of Rs.1300.00 crores for utilization towards payment of duespayable to the lender banks has caused serious prejudice to the rights of the lender banks. Yet another grievance of the lender banks is that corresponding to clause 3.5.(i) of the substitution agreement, no clause was shown in the advertisement for development of six lane access controlled Kundli-Manesar Expressway km 0.00 to km 83.320 nor the same was incorporated in the concession agreement which was awarded to ESSEL for the development of six lane access controlled Kundli-Manesar Expressway from km 0.00 to km 83.320. It was submitted that while awarding the work to ESSEL, HSIIDC ought to have acted in accordance with the terms of substitution/tripartite agreement dated 08.01.2007 and HSIIDC committed breach of contract by not incorporating the suitable condition in the new concession agreement for the payment or take over of lenders’ dues by the new concessionaire/ESSEL. It was further argued that unilateral revocation of consensus arrived at between HSIIDC and lender banks to make termination payment of Rs.1300.00 crores for utilization towards payment of dues to the lender banks was in breach of HSIIDC’s contractual obligations and the same caused serious prejudice to the rights of the banks.
11. Lender banks relied upon clause 7.1.2 of the Common Rupee Term Loan Agreement dated 08.01.2007 between the lenderbanks and concessionaire where right of the lenders to receive toll collections from the project, deposited in an escrow account is recognised. Lender banks rely upon various clauses in tripartite agreement/substitution agreement dated 08.01.2007 between HSIIDC, the concessionaire and the lenders’ agent. As per the substitution agreement/tripartite agreement, obligation of the HSIIDC to inform the lenders’ agent about any notice of termination of the concession agreement is provided in clause 5.1 of the substitution agreement. In case of default, right is given to lender banks to substitute the concessionaire by a Selectee subject to approval of such ‘Selectee’ by HSIIDC. Clause 2.1 of the substitution agreement provides for substitution of the concessionaire by a ‘Selectee’. Clause 3 of the substitution agreement provides the modality for substitution of the Selectee by the lender banks. On behalf of the banks, much emphasis is laid upon clause 3.5.1 to contend that as per clause 3.5.1 it is the responsibility of HSIIDC to ensure that a suitable condition acceptable to the lenders’ agent is provided for payment or take over of the lenders’ dues. Clause 3.5 (i) of the substitution agreement very much relied by the banks reads as under:-