NOIDA TOLL BRIDGE COMPANY LTD. versus FEDERATION OF NOIDA RESIDENTS WELFARE ASSOCIATION AND OTHERS

Summary

The Supreme Court upheld the High Court's order stopping toll collection on the DND Flyway. It held the residents' PIL maintainable, found the award of the concession without tender arbitrary, held that NOIDA could delegate collection but not the levy of fees, severed Article 14 of the Concession Agreement and its Annexure F formula as opposed to public policy, and accepted the CAG Report showing the concessionaire had recovered its costs with substantial profit.

Issues

1. Whether a public interest petition by a residents' welfare association challenging toll on the DND Flyway was maintainable, having regard to locus standi, delay and laches, and the scope of judicial review of a commercial contract with a public authority.
2. Whether awarding the project to NTBCL without inviting tenders was justified.
3. Whether NOIDA could delegate the power to levy fees to NTBCL, and whether the delegation was excessive.
4. Whether Article 14 of the Concession Agreement, read with the formula in Annexure F, was opposed to public policy and liable to be severed.
5. Whether NTBCL had recovered the Total Project Cost and returns.
6. Whether NOIDA's claim for outdoor advertisement dues fell within the appeal.

Provisions considered

• Section 6A, Uttar Pradesh Industrial Area Development Act, 1976Inserted with effect from 14.08.1998, it lets the Authority authorise a person by agreement to provide or maintain infrastructure and to collect taxes or fees levied for it; the Court held it permits delegation of collection only, never of the power to levy. (¶¶ 45, 46, 47, 50)
• Section 19(1) read with Section 19(2)(e), Uttar Pradesh Industrial Area Development Act, 1976Empowers NOIDA to frame regulations, including on levy of fees; it does not authorise NOIDA to delegate the levy of fees through an agreement under Section 6A, so the 1998 Regulations authorising NTBCL to levy and revise fees exceeded the Act. (¶¶ 44, 45, 46, 48)
• Section 11, Uttar Pradesh Industrial Area Development Act, 1976Noted as the source of the Authority's power, subject to State approval, to levy taxes for amenities, confirming that the power to levy rests with the Authority. (¶ 44)
• Regulations framed under Section 6A read with Section 19(2)(e), NOIDA (Levy of Infrastructure Fee) Regulations, 1998Held to be an afterthought framed after the Concession Agreement to validate it post facto; they are not retrospective and, in sub-delegating the levy of fees to NTBCL, undermine the object of Section 6A. (¶¶ 45, 50, 51, 52)
• Article 14, Constitution of IndiaContracts of State instrumentalities must be fair and non-arbitrary; the Court held that selecting NTBCL without any invitation of bids and the compounding cost formula in Annexure F both violated Article 14. (¶¶ 27, 31, 32, 33, 34, 35, 40, 65)
• Article 226, Constitution of IndiaWrit jurisdiction is governed by the doctrine of delay and laches, applied flexibly in public interest matters, rather than the Limitation Act; a contract with a public authority affecting the public is amenable to judicial review. (¶¶ 17, 26, 27, 28, 29)

Held

• A registered society formed to promote NOIDA residents' welfare approached the High Court in good faith for commuters subjected to the toll and had locus standi; the allegation that it was a proxy for NOIDA had no material support. (¶¶ 12, 13, 14, 15)
• Writ petitions are governed by the flexible doctrine of delay and laches, not the Limitation Act, and it is not applied strictly to public interest petitions; the cause of action arose only after a reasonable period for cost recovery, and the continuing levy of toll was a continuing wrong, so the objection of delay was rightly rejected. (¶¶ 17, 18, 19, 20, 21)
• Commercial contracts involving the State or its instrumentalities are not immune from judicial review; where contractual power is used for public purposes, courts may examine whether the action is fair and non-arbitrary, and a State action that disproportionately favours a private entity at the cost of public welfare is liable to be struck down. (¶¶ 26, 27, 28, 29)
• Though absence of tenders alone does not make a public authority's action arbitrary, State largesse must be conferred through a transparent, non-discriminatory process with due application of mind; awarding the project, without any attempt to invite bids, to NTBCL, a company incorporated only after the MoU, on an unsubstantiated claim that no other developer existed, was an opaque device violating Article 14. (¶¶ 32, 33, 35, 36, 37, 38, 39, 40)
• The power to levy a tax or fee must be expressly conferred by statute and cannot be implied; no private entity can be given power to levy taxes or fees, although collection of fees or toll may be assigned to a developer for a defined period, including to recover its investment. NOIDA exceeded its powers by delegating the levy and revision of fees to NTBCL. (¶¶ 46, 47, 48, 49, 50, 52)
• The Annexure F formula, which added annual shortfalls in a fixed 20% return to the Total Project Cost with no cap on operation and maintenance expenses, ensured the cost would escalate every year and allowed fees to be collected indefinitely; relying on the CAG Report on inflated costs and extraneous expenditure, the Court held it unreasonable and contrary to Article 14. (¶¶ 58, 59, 60, 61, 62, 63, 65)
• NOIDA's supposed power to refuse extensions of the concession was illusory, since refusing would oblige it under Article 18 to compensate NTBCL for the unrecovered, unreasonably computed cost; the agreement was in effect perpetual. Contract terms so unfair and unreasonable are opposed to public policy, and Article 14 of the Concession Agreement with Annexure F was severed, the remainder being able to survive without it. (¶¶ 66, 67, 68, 70, 72, 73, 74, 75, 76, 77, 78)
• No person may make undue profit from public property at the public's expense, and toll cannot continue once construction and maintenance costs are recovered; accepting the CAG Report that by 31.03.2016 NTBCL had recovered its project and maintenance costs with significant profit, repaid its debt and paid dividends, the Court upheld the High Court's restraint on collecting toll. (¶¶ 83, 85, 86, 88)
• NOIDA's claim for outdoor advertisement dues was outside the scope of the appeal; NOIDA was left at liberty to pursue recovery under the dispute resolution mechanism in the lease agreements, subject to NTBCL's defences, without any opinion on the merits. (¶¶ 89, 90)

Result

Appeal dismissed and the High Court's judgment restraining levy and collection of toll on the DND Flyway upheld; NOIDA left at liberty to pursue advertisement dues under the lease agreements' dispute resolution mechanism; the connected SLP on arbitration proceedings to be heard separately; pending applications disposed of.