NOIDA Toll Bridge Company Ltd. vs Federation of NOIDA Residents Welfare Association and Others

Held: The contention regarding delay and laches in filing the writ petition is wholly misconceived and misdirected for the reason that, writ proceedings u/Art.32 or 226 are not guided by the provisions of the Limitation Act, 1963, but instead, by the Doctrine of Delay and Laches – It is ubiquitous that the doctrine of delay and laches cannot be applied stricto senso to writ petitions invoking public interest jurisdiction unless the court is satisfied that the party has not approached it with clean hands – While delay is a material factor there is no fixed period of limitation for invoking jurisdiction u/Art.226 and each case should be considered on its own facts and circumstances, thus allowing for a more liberal approach when applying this doctrine – The doctrine is not a rigid rule but is rather a practice that is founded on exercise of sound judicial discretion – Also, cause of action in the circumstances of the case could have arisen and perhaps actually arose only after expiry of a reasonable period, within which cost of the Project was expected to be recovered – Further, levying of user fees or tolls by NTBCL constituted a continuing cause of action, which was challenged by the Association of affected commuters – Plea of delay and laches cannot be raised in a case of continuing cause of action. [Paras 17, 18, 20]

Constitution of India – Art.226 – Toll charged to users of DND Flyway – Contract involving a State instrumentality – Scope of judicial intervention:

Held:1. Judicial review, being a dynamic process as opposed to static, has experienced a significant shift in terms of the degree of judicial interference in contractual disputes, especially when one of the parties involved is the State or its instrumentalities – This is because when contractual power is exercised for public purposes, the State and its instrumentalities bear the responsibility to act fairly, without arbitrariness or caprice – 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 Art.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. [Paras 26, 27]

2. Second, it is crucial to recognise that when a contract involves a State instrumentality like NOIDA, significantly impacting the public, the metes and bounds of judicial review ought to be expanded – The State is duty-bound to act equitably and in accordance with the Public Trust Doctrine, ensuring that no action harms the broader public interest. [Para 28]

3. It is evident that the High Court was justified in entertaining the petition filed by Respondent No. 1 in public interest – The continued levy of toll and the Concession Agreement were directly impacting the rights and interests of commuters – NTBCL’s attempts to classify the Concession Agreement as a purely private contractual matter, sequestered from such scrutiny, thus holds no ground – The Project, having been developed for public benefit, cannot escape judicial oversight, particularly when the allegations pertain to the public’s rights and interests, which are being infringed upon by the levying of user fees – Contention of NTBCL seeking dismissal of Respondent No. 1’s petition at the threshold was thus rightly rejected by the High Court. [Para 29]

Contract – Award of contract for development and construction of DND Flyway project to NTBCL – Challenged, for not following any formal tender procedure – Contract awarded to NTBCL through the Concession Agreement by State authorities and NOIDA was unfair, unjust and inconsistent with Constitutional norms:

Held:1. NTBCL entered into an agreement with NOIDA to undertake a project that involved an overwhelming public element, comprising 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. [Para 31]

2. 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 – 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 – The golden principle is that Government procedures or policies pioneered in public interest must genuinely serve the public and not merely enrich private entities. [Paras 32, 35]

3. In the case in hand, the Government made no efforts to issue tenders, invitations, or seek competitive bids from other interested entrepreneurs – As the High Court rightly observed, the selection of NTBCL appears to have been strategically aligned, given that the Concession Agreement entrusted the Steering Committee with selecting a private company promoted by IL&FS to implement the DND Flyway project – Further, this private company—NTBCL— was incorporated only after the MoU had been executed and thus could not be considered as having extensive experience in developing such large-scale infrastructural projects – The contention that there were no suitable companies capable of undertaking such infrastructural development during that period lacks any substantiation or material on record to support such sweeping claims – The selection of NTBCL without following proper procedure and without giving any opportunity to bid, to other competitors, was nothing but an opaque device resorted to, in contravention of Art.14 of the Constitution of India. [Paras 36, 38, 39, 40] Delegated Legislation – Scope of – Toll charged to users of DND Flyway – Concession Agreement, executed between NTBCL, NOIDA and IL&FS sub-delegated the power to levy and collect user fees to NTBCL – Delegation of power to levy user fees and its validity – NOIDA exceeded its authority by delegating the power to levy fees or impose tolls to NTBCL, rendering such delegation invalid – NOIDA (Levy of Infrastructure Fee) Regulations, 1998 – Uttar Pradesh Industrial Area Development Act, 1976 – s.6A r/w s.19:

Held:1. A plain reading of Section 6A of Uttar Pradesh Industrial Area Development Act, 1976 makes it unequivocally clear that the ‘Authority’ is empowered to delegate the power to collect taxes or fees levied by it – However, under no circumstances does Section 6A authorize the delegation of the power to levy taxes or fees – Similarly, s.19(2)(e) of the 1976 Act enables NOIDA to frame Regulations governing the levy of taxes or fees – This provision, however, cannot be interpreted as empowering NOIDA to delegate the power of levying taxes or fees through an agreement under s.6A of the Act. [Para 46]

2. An authority vested with the power to frame subordinate legislation must act within the bounds of that power and refrain from exceeding its limits – 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. [Para 47]

3. 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 – The Concession Agreement, in so far as it sub-delegates the power to levy and collect fees to NTBCL, is unlawful, and the Regulations justifying such sub-delegation undermine the objective of s.6A of the 1976 Principal Act – Moreover, these Regulations were introduced by NOIDA in the aftermath of enacting the Concession Agreement, serving merely as an afterthought, while having no authority to do so – Thus, NOIDA did not have any competence to delegate the power to levy fees and toll to NTBCL, and thereby overstepped its statutory bounds. [Paras 48, 50, 52]

Contract – DND Flyway project – Terms opposed to public policy – 'Total Cost of the Project' and its calculation methodology – Dissonance between Art.14 of the Concession Agreement read with the formula vis-à-vis public policy Doctrine of Severability – Invocation of: Held: Contracts loaded with terms which are so unfair and unreasonable, that they truly baffle this Court, are undoubtedly opposed to public policy and must be adjudged void – The Court is always cautious when determining if a particular contract or action is opposed to public policy, but in doing so, it cannot shirk from its duty and approve helplessly the interpretation of a Statute or a document or of an action which is certain to subvert the societal goals and endanger the public good – To do so, the Court may invoke the Doctrine of Severability and sever the incurable parts of the contract from the whole – The Court can do so only when the rest of the contract can breathe and survive without the aid of its void covenants – The Court must ask itself whether the parties would have agreed to the valid terms of the agreement if they knew that the invalid terms would be removed – In the instant case, the High Court held that Art.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 – There is no error in the analysis undertaken by the High Court – It is evident that, despite approval from various authorities, the formula used was far from reasonable – The compounding nature of the formula granted NTBCL the right to collect user fees indefinitely; the absence of a cap on O&M expenses allowed for potential inflation of costs by including extraneous expenditures in the Total Project Cost; and the fixed, unrealistic return rate of 20% ensured that the Total Project Cost would escalate yearly without possibility of adjustment by the parties involved – The method used to calculate the Total Project Cost was fundamentally a mechanism for unjust enrichment by a select few and, as such was rightly deemed to be inherently arbitrary by the High Court – Accordingly, the formula outlined in the Concession Agreement is unreasonable and contravenes Art.14 of the Constitution – Given the extent of manipulation in the instant case, Art.14 of the Concession Agreement, read with the formula, is opposed to public policy and must be cut apart from the Concession Agreement. [Paras 57, 58, 63, 65, 77, 78] Contract – DND Flyway project - Recovery of Total Project Cost and returns – No justification for continued imposition or collection of user fees or tolls upon commuters using the DND Flyway:

Held: No person or entity can be allowed to make an undue and unjust profit from public property, at the cost of the public at large – Since NTBCL has recovered the costs of the project and substantial profits thereon by virtue of imposition of user fees/tolls and given the existing position of law, there is no error in the High Court’s judgment and its directions in restraining the imposition and collection of user fees/tolls. [Paras 85, 88] Interpretation of Statutes – Taxing Statutes – Interpretation thereof:

Held: Taxing statutes, being penal in nature, must be construed strictly – The power to levy a tax or fee cannot be inferred by implication but must be expressly conferred by Statute – Under our Constitutional framework, no private entity can be granted the authority to levy taxes or fees, for such powers are exclusively vested in public authorities. [Para 49]