Supreme Court of India
NOIDA TOLL BRIDGE COMPANY LTD.versusFEDERATION OF NOIDA RESIDENTS WELFARE ASSOCIATION AND OTHERS
- Citation
- 2024 INSC 1027
- Decided
- 19 December 2024
- Bench
- SURYA KANT
Holding
The High Court’s judgment is upheld: NOIDA’s delegation of toll‑levying power to NTBCL is ultra vires, the cost‑recovery formula is void as contrary to public policy, and NTBCL must cease collection of user fees.
Summary
The Supreme Court examined an appeal by NOIDA Toll Bridge Company Ltd. (NTBCL) against a High Court order that halted toll collection on the Delhi‑NOIDA Direct Flyway (DND Flyway). The dispute arose from a 1997 Concession Agreement granting NTBCL the right to build, operate and collect tolls, which a residents' welfare association challenged as a public interest writ. The Court considered NTBCL's claims of delay, lack of locus standi, alleged excess delegation of fee‑levying power, and the fairness of the formula used to calculate project costs and returns. It held that the High Court was correct in finding that NOIDA exceeded its statutory authority by delegating toll‑levying powers, that the formula violated public policy under Article 14, and that NTBCL had already recovered its costs and profits, leaving no justification for continued tolls. Consequently, the appeal was dismissed and the High Court’s directions to cease toll collection were affirmed.
Issues considered
- Whether the writ petition filed in public interest was maintainable before the High Court.
- Whether the non‑floating of tenders for the project was justified.
- Whether the power to levy fees could be delegated to NTBCL and if such delegation amounted to excess delegation.
- Whether Article 14 of the Concession Agreement, read with the cost‑recovery formula, is opposed to public policy.
- Whether NTBCL has recovered the Total Project Cost and returns.
- Whether NOIDA is entitled to recover dues from NTBCL for outdoor advertising licences.
Legislation cited
Headnote
Issue for Consideration The issue concerned a challenge to collection and levying of toll, as legitimised by provisions enumerated in Agreement dated 12.11.1997 (Concession Agreement), executed between Appellant-NOIDA Toll Bridge Company Limited (NTBCL), the Development Authority (NOIDA) and the Infrastructure Leasing and Financial Services Limited (IL&FS); The Concession Agreement conferred upon NTBCL the rights necessary for implementation of the Delhi NOIDA Bridge Project or the Delhi-NOIDA Direct Flyway (DND Flyway/Project) and, in
Subjects
public interest litigationtoll levyconcession agreementdelegated legislationexcessive delegationArticle 14public policyjudicial reviewcontractual fairnessPPP infrastructureCAG reportdoctrine of severabilitylaches
Judgment
[2024] 12 S.C.R. 1997 : 2024 INSC 1027
NOIDA Toll Bridge Company Ltd.
v.
Federation of NOIDA Residents Welfare
Association and Others
(Civil Appeal No. 14826 of 2024)
20 December 2024
[Surya Kant* and Ujjal Bhuyan, JJ.]
Issue for Consideration
The issue concerned a challenge to collection and levying of
toll, as legitimised by provisions enumerated in Agreement
dated 12.11.1997 (Concession Agreement), executed between
Appellant-NOIDA Toll Bridge Company Limited (NTBCL), the
New Okhla Industrial Development Authority (NOIDA) and the
Infrastructure Leasing and Financial Services Limited (IL&FS);
The Concession Agreement conferred upon NTBCL the rights
necessary for implementation of the Delhi NOIDA Bridge Project
or the Delhi-NOIDA Direct Flyway (DND Flyway/Project) and,
in connection thereto, the collection and levying of toll; In a
writ petition purportedly filed in public interest by Respondent
No.1-Association established to espouse the cause of NOIDA
residents before the public authorities, the High Court vide the
impugned judgment directed NTBCL to cease the imposition of
user fees or toll upon commuters using the DND Flyway.
In the instant appeal filed by NTBCL, inter alia the following issues
arose for consideration, namely, (i) Whether the Writ Petition
purportedly filed in public interest was maintainable before the High
Court; (ii) Whether the non-floating of tenders was justified in the
instant case; (iii) Whether the power to levy fees could be delegated
to the Appellant and if so, whether it was a case of excessive
delegation; and (iv) Whether Art.14 of the Concession Agreement
read with the formula used therein was opposed to public policy.
Headnotes†
Constitution of India – Art.226 – Writ Petition filed seeking
direction to discontinue toll charged to users of DND Flyway –
Maintainability of – High Court rightly entertained the writ
* Author
1998 [2024] 12 S.C.R.
Supreme Court Reports
petition filed by Respondent No. 1, which had the requisite
locus standi – The writ petition filed in public interest was
maintainable – PIL:
Held: While public interest litigation serves as an effective tool
for addressing the grievances of the public, it must be carefully
scrutinised to prevent misuse or abuse by those with ulterior
motives – Courts must look beyond the surface to assess whether
the litigation has been genuinely initiated in the interest of the
public or as a result of mischief – The essence of PIL lies in its
aim to remedy genuine public wrongs or injuries rather than being
driven by personal vendetta or malice – On facts, Respondent
No. 1 is a Society duly registered under the Societies Registration
Act, 1860, with the primary objective of promoting the welfare
of NOIDA residents – The society acts as a bridge between the
residents and public authorities, catering to the former’s needs
for essential civic amenities – Given this object, it is clear that
Respondent No. 1 approached the High Court in good faith, with a
view to safeguard the interests of NOIDA residents, who had been
subjected to the levy of toll at the DND Flyway under the guise of
user fees by NTBCL-Appellant – Consequently, there is no merit
in NTBCL’s contention that Respondent No. 1 lacked locus standi
in approaching the High Court. [Paras 12, 14, 15]
Constitution of India – Art.226 – Toll charged to users of
DND Flyway – Respondent No. 1 filed Writ Petition in High
Court seeking direction to discontinue the toll – On facts,
continuing cause of action – No delay or laches in filing the
writ petition – Doctrine of Delay and Laches:
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
[2024] 12 S.C.R. 1999
Noida Toll Bridge Company Ltd. v.
Federation of Noida Residents Welfare Association and Others
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]
2000 [2024] 12 S.C.R.
Supreme Court Reports
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
[2024] 12 S.C.R. 2001
Noida Toll Bridge Company Ltd. v.
Federation of Noida Residents Welfare Association and Others
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
2002 [2024] 12 S.C.R.
Supreme Court Reports
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
[2024] 12 S.C.R. 2003
Noida Toll Bridge Company Ltd. v.
Federation of Noida Residents Welfare Association and Others
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]
Case Law Cited
Joshi Technologies International Inc. v. Union of India [2015] 6
SCR 1042 : (2015) 7 SCC 728; City and Industrial Corporation
of Maharashtra Limited v. Shishir Realty [2021] 13 SCR 190:
2004 [2024] 12 S.C.R.
Supreme Court Reports
(2022) 16 SCC 527; Meerut Development Authority v. Association
of Management Studies [2009] 6 SCR 663 : (2009) 6 SCC 171;
Mandsaur Transport Assn. v. State of M.P. (2001) 9 SCC 328;
MSK Projects (I) (JV) Ltd. v. State of Rajasthan [2011] 9 SCR
402 : (2011) 10 SCC 573 – relied on.
Chennai Metropolitan Water Supply and Sewerage Board and
others v. T.T. Murali Babu [2014] 1 SCR 987 : (2014) 4 SCC
108; Ramana Dayaram Shetty v. International Airport Authority of
India [1979] 3 SCR 1014 : (1979) 3 SCC 489; Janata Dal v. H.S.
Chowdhary [1991] 3 SCR 752 : (1992) 4 SCC 305; City Industrial
Development Corporation v. Platinum Entertainment [2014] 10
SCR 704 : (2015) 1 SCC 558; Balco Employees’ Union v. Union
of India and Ors. [2001] Supp. 5 SCR 511 : (2002) 2 SCC 333;
Dattaraj Nathuji Thaware v. State of Maharashtra [2004] Supp.
6 SCR 900 : (2005) 1 SCC 590; Villianur Iyarkkai Padukappu
Maiyam v. Union of India [2009] 9 SCR 225 : (2009) 7 SCC 561;
R&M Trust v. Koramangala Residents Vigilance Group [2005]
1 SCR 582 : (2005) 3 SCC 91; State of Madhya Pradesh and
Another v. Bhailal Bhai and Others [1964] 6 SCR 261 : AIR 1964
SC 1006; Union of India and Another v. Tarsem Singh [2008] 12
SCR 104 : (2008) 8 SCC 648; Subodh Kumar Singh Rathour v.
Chief Executive Officer [2024] 7 SCR 532 : 2024 SCC Online SC
1682; Silippi Constructions Contractors v. Union of India (2020)
16 SCC 489; Kasturi Lal Lakshmi Reddy. v. State of Jammu and
Kashmir [1980] 3 SCR 1338 : (1980) 4 SCC 1; Centre for Public
Interest Litigation v. Union of India [2012] 3 SCR 147 : (2012)
3 SCC 1; Pathan Mohammed Suleman Rehmatkhan v. State of
Gujarat [2013] 12 SCR 446 : (2014) 4 SCC 156; Tata Cellular v.
Union of India [1994] Supp. 2 SCR 122 : (1994) 6 SCC 651;
Central Inland Water Transport Corpn. Ltd. v. Brojo Nath Ganguly
[1986] 2 SCR 278 : (1986) 3 SCC 156; Rattan Chand Hira
Chand v. Askar Nawaz Jung [1991] 1 SCR 327 : (1991) 3 SCC
67; Beed District Central Coop. Bank Ltd. v. State of Maharashtra
[2006] Supp. 6 SCR 895 : (2006) 8 SCC 514; Institute of Law,
Chandigarh v. Neeraj Sharma [2014] 11 SCR 1096 : (2015) 1
SCC 720 – referred to.
List of Acts
Constitution of India; Uttar Pradesh Industrial Area Development
Act, 1976; NOIDA (Levy of Infrastructure Fee) Regulations, 1998.
[2024] 12 S.C.R. 2005
Noida Toll Bridge Company Ltd. v.
Federation of Noida Residents Welfare Association and Others
List of Keywords
Locus standi; Maintainability; Project; Construction; NOIDA;
Contract; Doctrine of Severability; Public policy; Public interest
litigation; Taxing statute; Interpretation; DND Flyway project;
Delegated Legislation; State instrumentality; Maintainability of writ
petition; Constitutional norms; Judicial intervention.
Case Arising From
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 14826 of 2024
From the Judgment and Order dated 26.10.2016 of the High Court
of Judicature at Allahabad in PIL No. 60214 of 2012
Appearances for Parties
Ravindra Raizada, Sr. Adv./A.A.G., Dr. Abhishek Manu Singhvi,
Gopal Jain, Parthiv K. Goswami, Ravindra Kumar Sr. Advs.,
Raunak Dhillon, Ms. Madhavi Khanna, Nihaad Dewan (for M/s.
Cyril Amarchand Mangaldas), Ms. Diksha Rai, Mrs. Atiga Singh,
Arijit Dey, Ms. Apurva Sachdev, Binay Kumar Das, Ms. Priyanka
Das, Ms. Neha Das, Shivam Saxena, Raj Bahadur Yadav, Adarsh
Upadhyay, Aman Pathak, Mrs. Pooja Kabra, Ms. Pallavi Kumari,
Shashank Puchauri, Pradeep Misra, Daleep Dhyani, Suraj Singh,
Manoj Kumar Sharma, Rakesh Chaterjee, M/s. Ap & J Chambers,
Advs. for the appearing parties.
K.R. Chitra, Adv. for the Intervenor.
Respondent-in-person.
Judgment / Order of the Supreme Court
Judgment
Surya Kant, J.
Leave granted.
2. The NOIDA Toll Bridge Company Limited (NTBCL), has preferred the
instant appeal questioning the judgement dated 26.10.2016 passed
by the High Court of Judicature at Allahabad (High Court). The issue
before the High Court concerned a challenge to the collection and
levying of toll, as legitimised by the provisions enumerated in the
2006 [2024] 12 S.C.R.
Supreme Court Reports
Agreement dated 12.11.1997 (Concession Agreement), executed
between NTBCL, the New Okhla Industrial Development Authority
(NOIDA) and the Infrastructure Leasing and Financial Services Limited
(IL&FS). The Concession Agreement conferred upon NTBCL the
rights necessary for the implementation of the Delhi NOIDA Bridge
Project or the WDelhi-NOIDA Direct Flyway (DND Flyway/Project)
and, in connection thereto, the collection and levying of toll.
3. The High Court has vide the impugned judgement held Articles 13
and 14 of the Concession Agreement to be bad in law and directed
NTBCL to cease the imposition of user fees or toll upon commuters
using the DND Flyway.
A. Facts
4. Having laid out the observations of the High Court in brevi, it is
essential at this juncture to delve into the facts of the instant case:
4.1. The controversy at hand concerns the toll levied on the users
of the DND Flyway. The inception of this dispute can be
traced to the 1980s when the State of Uttar Pradesh (State
of UP) sought to construct a bridge connecting South Delhi
and NOIDA, to improve connectivity between the two regions.
However, the State of UP recognised that significant financial
expenditure would be involved in this ambitious endeavour,
which it could not undertake independently.
4.2. NOIDA and the Delhi Administration entered into a Memorandum
of Understanding (MoU) with IL&FS on 07.04.1992, intending
to construct the DND Flyway. IL&FS at that point in time, was
a Company promoted by Public Financial Institutions to enable
non-governmental investment in infrastructure development. In
pursuance of the MoU, a Committee comprising representatives
of the Government of India, the Government of NCT of Delhi,
the State of UP and IL&FS was constituted on 08.06.1993
to take important decisions relating to the Project and its
implementation (Steering Committee).
4.3. Thereafter, the Steering Committee on 08.04.1996 approved
the incorporation of NTBCL by IL&FS in accordance with the
Companies Act, 1956, which was contemplated to operate
as a Special Purpose Vehicle for developing the DND Flyway
on a Build, Operate, Own and Transfer (BOOT) basis. It was
[2024] 12 S.C.R. 2007
Noida Toll Bridge Company Ltd. v.
Federation of Noida Residents Welfare Association and Others
thereby intended that NTBCL would recover its investment in
developing the DND Flyway infrastructural facility by imposing
user fees on the commuters availing such services.
4.4. In pursuance thereto, the State of UP accorded approval for
the implementation of the DND Flyway and constituted an
Empowered Committee, tasked with negotiating the Concession
Agreement with IL&FS. The draft Concession Agreement was
approved by the State Cabinet and reviewed by multilateral
agencies financing the project, including the World Bank and
the Asian Development Bank. This initiative was recognised
as one of the pioneering projects in India developed under the
Public Private Partnership model (PPP).
4.5. The Concession Agreement was executed on 12.11.1997,
designating NOIDA and IL&FS as the ‘Sponsors’ and NTBCL
as the ‘Concessionaire’. The aforesaid Concession Agreement
expressly provided for the construction of the DND Flyway, from
the Okhla Barrage in NOIDA to a location close to Maharani
Bagh in Delhi. The project encompassed the development,
establishment, financing, design, construction operation and
maintenance of the DND Flyway, including the development,
financing, design and construction of a flyover at Ashram
Chowk.
4.6. In terms of Section 2.7 of the Concession Agreement, the
State and the Government of NCT of Delhi entered into a
State Support Agreement on 14.01.1998, which facilitated: (i)
the execution of the Delhi Lands Lease Deed on 23.10.1998
between NTBCL and NOIDA; and (ii) the execution of the
Ashram Flyover Site Lease Deed on 30.08.1999 between the
Government of NCT of Delhi and NTBCL, for the construction
of the Ashram Flyover.
4.7. The Project was thereafter initiated and completed, with the
DND Flyway being opened for public use on 06.02.2001
(Commissioning Date). It consisted of: (i) the main bridge;
(ii) three minor bridges; (iii) a 32-lane approach road with a
300-metre-wide toll plaza in NOIDA; (iv) an 11-lane toll plaza
at Mayur Vihar; and (v) a flyover at Ashram Chowk.
4.8. Respondent No. 1 is an Association established to espouse
the cause of NOIDA residents before the Public Authorities,
2008 [2024] 12 S.C.R.
Supreme Court Reports
particularly concerning civic issues. Nearly 15 years after
the execution of the Concession Agreement, Respondent
No. 1 approached the High Court (through a Writ Petition)
purportedly in public interest seeking a direction to discontinue
toll charged to the users of the DND Flyway. The Writ Petitioner
contended that NTBCL had already recovered the project costs,
thereby eliminating the need to continue imposing user fees.
Respondent No. 1 thereafter on 08.09.2014, amended the Writ
Petition, seeking additional relief to annul both the MoU and
the Concession Agreement.
4.9. The High Court, vide the impugned judgment dated 26.10.2016,
while considering the constitutional validity of the Concession
Agreement, has primarily held that: (i) Article 13 of the
Concession Agreement, which governed the determination,
collection, and appropriation of user fees by NTBCL, was invalid
in law; (ii) Article 14 thereof, which outlined the calculation of
the Total Project Cost, Returns, and their recovery by NTBCL,
was to be severed from the Concession Agreement; and (iii)
NTBCL was prohibited from continuing to impose or collect user
fees. The High Court further held that the selection process of
NTBCL for the Project violated Article 14 of the Constitution.
4.10. The aggrieved NTBCL, has preferred the instant appeal. The
record reveals that this Court passed a self-speaking order on
11.11.2016, (i) outlining the facts of the case; (ii) identified that
the matter contained issues that required thorough scrutiny; and
(iii) also noted the conflicting claims regarding the Total Project
Cost recovered by NTBCL. Thereafter, this Court directed
the Comptroller and Auditor General of India (CAG) to verify
NTBCL’s claims and submit a Report. The salient features of
the order dated 11.11.2016 may be highlighted at this stage:
“….3. Federation of NOIDA Residents Welfare
Association & Ors., Respondent No.1 herein, filed
PIL No.60214 of 2012 in the High Court of Judicature
at Allahabad for a declaration that collection of toll
fee should be stopped on the DND Flyover between
New Delhi and NOIDA.
4. A Concession Agreement (hereinafter referred to
as “the Agreement”) was entered into between the
[2024] 12 S.C.R. 2009
Noida Toll Bridge Company Ltd. v.
Federation of Noida Residents Welfare Association and Others
Petitioner, NOIDA (Respondent No.2) and IL & FS Ltd.
(Respondent No.9) on 12.11.1997 for development
of infrastructure facility of a bridge and an access
road. The Project was conceived on Build-Operate-
Transfer (BOT) basis. The 9th Respondent IL & FS
had to arrange the investment for the Project which
could be recovered by levy of toll from the users of
the road and the Project...”
“…14. Prima facie, we are of the opinion that the
various issues that arise in this SLP warrant a
detailed scrutiny. Conflicting claims have been made
regarding the recovery of the Total Cost of the Project
by the Concessionaire. To resolve the dispute, it is
appropriate that an independent agency is requested
to examine the relevant records of the DND flyway.
The said agency should examine the reports of the
independent auditors appointed by the Petitioner
and submit a report regarding the correctness of the
Petitioner’s claim that the Total Cost of the Project
has not been recovered. We accept the suggestion
of the Petitioner and request the Comptroller and
Auditor General of India (CAG) to assist us in this
matter. The Petitioner is directed to place the entire
record pertaining to the recovery of the Total Project
Cost of the DND flyover project as per the Agreement
before the CAG. The CAG is requested to verify
the claim of the Petitioner that the Total Cost of the
Project has not been recovered and submit a report
within four weeks. The CAG shall be at liberty to call
for and examine all such records having a bearing
on the financial aspects, as it requires to facilitate its
decision. This will include matters and information
pertaining to all the benefits which have flowed to
the Petitioner under the entirety of the agreement,
including the utilisation, if any. The Petitioner shall
co-operate in all respects with the CAG and provide
all documents, information and details as sought.
15. We do not agree with the submission that the
Petitioner would suffer irreparable loss if the judgment
2010 [2024] 12 S.C.R.
Supreme Court Reports
of the High Court is not stayed. It will be impossible
to provide restitution to the lakhs of commuters from
whom the fee would be collected to repay them in the
event of dismissal of the SLP. On the other hand, if the
Petitioner succeeds, it can be compensated suitably
by extension of time. The balance of convenience
is also against the Petitioner. Therefore, we are not
inclined to grant the interim relief as prayed for…”
4.11. In compliance, the CAG conducted a detailed examination of
NTBCL’s records, carrying out numerous surveys and tests to
arrive at its findings, which have been submitted to this Court
by way of a self-explanatory report, a detailed reference to
which shall be made in the later part of this judgement.
B. Contentions on behalf of the Appellants
5. Dr. Abhishek Manu Singhvi, Learned Senior Counsel appearing on
behalf of NTBCL, contended that the High Court has committed
multiple errors while rendering the impugned judgement. In this
regard, they made the following submissions:
(a) Owing to the considerable delay and laches in filing the
original petition, the High Court ought to have rejected it at
the threshold. The Writ Petition was filed twenty years after
execution of the MoU and fifteen years after execution of the
Concession Agreement, with no explanation provided to justify
such a significant delay.
(b) The Writ Petition allegedly filed in public interest could not
serve as a vehicle to interfere with a commercial contract like
the Concession Agreement or render it invalid. A PIL cannot be
utilised to annul or modify a Government Policy established and
implemented through the Concession Agreement. It is beyond
the scope of judicial review to invalidate a Government Policy
decision solely based on the belief that an alternative policy
might have been more appropriate. Consequently, the subject
PIL was beyond the purview of judicial powers exercisable
under Article 226 of the Constitution of India.
(c) It was impossible during the relevant period to float tenders
in order to develop the necessary infrastructure, due to the
absence of non-governmental infrastructure developers from
[2024] 12 S.C.R. 2011
Noida Toll Bridge Company Ltd. v.
Federation of Noida Residents Welfare Association and Others
whom competitive bids could have been solicited. IL&FS was
explicitly selected because it was a pioneer in the field, with 81%
of its ownership held by public sector institutions. That apart, it
is well-established in law that the non-floating of tenders alone
does not constitute a sufficient basis to deem the actions of a
public authority as arbitrary and illegal, nor does it invalidate
the consequential contract.
(d) The Concession Agreement resulted from extensive deliberations
and consultations among various Government entities over
several years and thus could not be termed as an arbitrary
decision. It received approval from the Steering Committee,
which comprised of representatives from all stakeholders,
and the Empowered Committee established by the State.
Additionally, the World Bank, which provided funding for the
Project through a line of credit to IL&FS, also endorsed the
Agreement. The Concession Agreement being an outcome of
consensual deliberations, the High Court ought not to have
construed it as violating Article 14 of the Constitution.
(e) Article 13 of the Concession Agreement does not lack legal
authority, as the rate of fees charged to users was determined
by the Fee Review Committee. This determination was made
by applying the formula specified in the Concession Agreement
and the base rate established by the Steering Committee. The
Fee Review Committee itself comprised of representatives
from both NOIDA and NTBCL, along with a third party, with
each representative duly qualified and possessing adequate
experience in the management, operation, and maintenance of
bridges. Additionally, the involvement of the Independent Auditor
and Engineer ensured a mechanism of checks and balances.
There was thus no factual foundation on the basis of which it
could be inferred that the authority to levy fees was exclusively
delegated to NTBCL.
(f) NTBCL was empowered to collect user fees pursuant to
Regulation 5(2) of the NOIDA (Levy of Infrastructure Fee)
Regulations, 1998 (Regulations). These Regulations were
formulated by NOIDA, in exercise of its powers under Section
6A read with Section 19 of the Uttar Pradesh Industrial Area
Development Act, 1976 (1976 Act). The collection of user
fees commenced only in 2001, after the 1998 Regulations
2012 [2024] 12 S.C.R.
Supreme Court Reports
had come into force. That being so, there is no legal or factual
foundation to hold that Section 6A of the 1976 Act was applied
retroactively. The Regulations were a condition precedent in
the Concession Agreement, as outlined in Section 3.1 (a) (iv),
which stipulated the formulation of such Regulations to authorise
NTBCL to collect fees. There is thus no lack of legal authority,
and Article 13 of the Concession Agreement does not suffer
from excessive delegation.
(g) Article 14 of the Concession Agreement does not contravene
public policy, and the High Court erred in applying the Doctrine
of Severability. The rationale behind the formulation of the Total
Project Cost took into account that NOIDA only contributed
Rupees 10 crores towards the project, and the Internal Rate
of Return (IRR) formula employed is a standard, accepted
methodology. Without the safeguard of such a formula, no
developer would be willing to undertake substantial investments,
particularly given the risk of premature and arbitrary termination
of the contract by NOIDA. Furthermore, the return of 20%
cannot be deemed arbitrary, as the project had to compete with
other infrastructure sectors to secure debt funding and equity
investment from the private sector. Article 14 of the Concession
Agreement, in the light of these mitigating circumstances,
therefore, is not opposed to public policy.
(h) NTBCL is currently facing losses and has not yet recovered the
Total Project Cost or returns. The CAG Report indicates that,
at a minimum, Rupees 30 crores remain recoverable by the
Appellant, as of date. Thus, the High Court erred in concluding
that NTBCL had fully recovered the Total Project Cost and has
made reasonable profits. Additionally, if the High Court’s decision
were upheld, NTBCL would be compelled to continue bearing
maintenance costs until 2031 without any incoming revenue.
Following the cessation of toll collection, NTBCL has become
entirely dependent on the revenue generated from advertising
hoardings. However, the Court has failed to take notice that
NTBCL shares its revenue with NOIDA through license fees
for outdoor advertisements.
(i) NOIDA’s failure to provide regular fee hikes as per the terms
of the Concession Agreement has contributed to the escalation
of the Total Project Cost and as such, NOIDA cannot be
[2024] 12 S.C.R. 2013
Noida Toll Bridge Company Ltd. v.
Federation of Noida Residents Welfare Association and Others
permitted to benefit from the impugned judgment. As stipulated
in Clause 14.2 of the Concession Agreement, the aggregate of
gross revenue from fee collections, income from advertising,
and development income (minus Operation and Maintenance
expenses) should yield 20% of the Total Project Cost annually.
Consequently, the Appellant should be permitted to continue
collecting user fees.
(j) The annulment of the Concession Agreement would deter future
investors and undermine the sentiment for investment in similar
projects. Instead, the residents in proximity to the project could
be offered concessional treatment, while frequent users could
benefit from discounted pricing.
C. Contentions on behalf of Respondent No. 1
6. Per contra, Mr. Parthiv Goswami, Learned Senior Counsel,
representing the Respondent Welfare Association, supported the
findings of the High Court and urged as follows:
(a) The Writ Petition was maintainable as it was filed promptly after
NTBCL’s Chartered Accountant’s report was made available to
the Respondents on 31.05.2012, revealing that users of the DND
Flyway were being subjected to an illegal tax. Given that the
cause of action is continuous, the issue of delay is irrelevant.
The irreversible injury suffered by commuters necessitated
examination on its merits, and therefore, no exceptions, including
delay and laches, can be allowed to be raised to question the
maintainability of the petition.
(b) The Writ Petition cannot be turned down at the outset merely
on the ground that users have two alternative routes available,
which do not require payment of user fees or tolls. The Project
in question constitutes public property, and the Concession
Agreement necessitates judicial scrutiny and potential
intervention.
(c) The High Court correctly concluded that Article 13 of the
Concession Agreement suffered from excessive delegation and
was inconsistent with the provisions of the 1976 Act, thereby
determining that NTBCL could not levy any user fees. Until
the insertion of Section 6A of the 1976 Act on 14.08.1998,
NOIDA lacked the authority to empower a developer to collect
2014 [2024] 12 S.C.R.
Supreme Court Reports
any tax or fee. Under Section 6A, the right to collect user fees
could have been granted to NTBCL through the formulation of
Regulations; however, the authority to levy such fees would
remain with NOIDA as per Section 19(2)(e) of the 1976 Act.
Furthermore, under the said parent Act, NOIDA had no authority
to authorise the imposition of fees to another entity. Section 6A
was introduced much after the execution of the Concession
Agreement and it is not retroactive in nature.
(d) The Concession Agreement is perpetual in nature and, therefore,
contrary to public policy. Section 2.3 of the Concession
Agreement stipulates that the concession period shall extend
until the earlier of the two events: the completion of a 30-year
period from the effective date or the date on which NTBCL
recovers the Total Project Cost and returns, as determined
by the Independent Engineer and Independent Auditor in
accordance with Article 14 thereof. Furthermore, Section 2.4
states that if the Total Project Cost and returns are not recovered
by the end of the 30-year period, the concession period shall,
without qualification, be extended for two years at a time until
recovery is achieved by NTBCL. According to the report dated
29.08.2007, the Total Project Cost has reached a critical point,
rendering it improbable that NTBCL would return the assets to
NOIDA, even after a century.
(e) Furthermore, under the stipulated formula, the Total Project
Cost escalates annually as it comprises of: (a) the Project Cost;
(b) major maintenance expenses; and (c) any shortfall in the
recovery of returns for a specific financial year. This aggregation
directly contributes to the continual increase of the Total Project
Cost, rendering it impossible to achieve full returns even after
100 years. This situation necessitates a remedy by balancing
the rights of the involved parties. Moreover, if an alternative
were pursued and NOIDA were to terminate the Concession
Agreement, it would be obligated to compensate NTBCL in
excess of Rupees 5000 crores. Given that these clauses impact
the contract in its entirety, they must be severed from the rest
of the agreement without undermining the overall contract.
Consequently, Article 14 of the Concession Agreement, when
read in conjunction with the formula, is ex-facie arbitrary and
violative of Article 14 of the Constitution.
[2024] 12 S.C.R. 2015
Noida Toll Bridge Company Ltd. v.
Federation of Noida Residents Welfare Association and Others
(f) The Independent Engineer and the Independent Auditor are
appointed by a Committee comprising lenders, NTBCL, and
NOIDA. Given that the lenders and NTBCL were effectively
one and the same, NOIDA was consistently in the minority and
lacked the authority to appoint either the Independent Engineer
or the Independent Auditor. Consequently, NTBCL retained the
power to appoint the personnel responsible for determining the
extent of recovery of the Total Project Cost and Returns. This
arrangement in a way allowed NTBCL to become a judge in
its own cause, which is inherently unfair and unjust, thereby
contravening Article 14 of the Constitution.
(g) NTBCL was granted 68 acres of land for a negligible annual
fee, which was subsequently mortgaged. In allocating this
land to NTBCL, NOIDA alone incurred the costs associated
with compensation, rehabilitation, revised enhancements, and
provision of employment. The assertion that NTBCL independently
raised funds for the project is thus false and misleading.
(h) Pradeep Puri, designated as the Director of NTBCL, did not
perform any substantive function; nevertheless, all expenses
associated with his role, including his hefty remuneration, were
incorporated into the Total Project Cost. A letter circulated by
Puri indicated that the unrecovered Project Cost would stand
at Rupees 5330 crores as of 31.03.2031. This figure included
legal fees amounting to Rupees 11 crores, travel expenses
of Rupees 4 crores, and costs associated with restructuring
deep discount bonds totalling Rupees 33 crores. Consequently,
the Total Project Cost is substantially higher than the actual
investment made, and NTBCL has already received sums far
exceeding their original investment, including reasonable profits
and interest accrued from toll income.
D. Contentions on behalf of Respondent No. 9 (IL&FS)
7. Mr. Gopal Jain, Senior Counsel representing IL&FS, primarily
supported the Appellant. The contentions put forth by him which
were unique to IL&FS, may however be summarised as follows:
(a) As of present day, IL&FS is under the control of the Union of India,
pursuant to the order dated 01.10.2018 passed by the NCLT,
Mumbai, directing the suspension of the then-existing Board of
2016 [2024] 12 S.C.R.
Supreme Court Reports
Directors of IL&FS and constitution of a new Board of Directors
comprising of nominees of the Ministry of Corporate Affairs.
(b) IL&FS, as the Sponsor of the Project, not only enabled and
arranged the entire financing of the Total Project Cost but
provided an indemnity under the Concession Agreement to
NOIDA that it would ensure the due implementation of the
Project by the Appellant.
(c) The concession period is not perpetual as there is no automatic
renewal of the Concession Agreement due to the inability to
recover the Total Project Cost and returns. This is because
Clause 2.4 of the Concession Agreement does not provide
for a deemed extension of the concession period and instead
requires NOIDA to extend it by two years at a time. If NOIDA
does not do so, the day immediately following the last day of the
concession period would be the transfer date and the obligation
to transfer the Project would become effective. The language
of Clause 2.4 does not say that if the Total Project Cost and
returns were not recovered, the concession period would stand
extended or be deemed to have been extended. Instead, it
specifically vests the discretion to extend it with NOIDA.
(d) The recovery of the Project Cost was miscalculated by the High
Court as it did not consider the actual rate of return received
by the Appellant on the total investment made into the Project,
which included not only the costs of construction but also the
expenditure towards operation and maintenance, and taxes.
The computation of the recovery of the Project cost as stated
in the impugned judgment did not consider: (i) the final/actual
project cost of Rupees 461.11 crores; (ii) the interest on debt
paid by the Appellant till March 2014 (being an amount of
Rupees 296.26 crores); (iii) the repayment of principal amount
undertaken by the Appellant till March 2014 (being an amount
of Rupees 280.36 crores); and (iv) other expenses of Rupees
22.90 crores, and additional taxes such as MAT and FBT,
that had been paid by the Appellant, aggregating to Rupees
50.42 crores. In light of this and the fact that the Appellant only
collected Rupees 810.18 crores, as on 31.03.2014, means that
the Appellant was in loss of Rupees 454.71 crores—which
continues to remain recoverable.
[2024] 12 S.C.R. 2017
Noida Toll Bridge Company Ltd. v.
Federation of Noida Residents Welfare Association and Others
E. Submissions by Respondent No. 2 (NOIDA)
8. Lastly, NOIDA, as represented by Mr. Ravindra Kumar, Sr. Adv. &
Mr. Binay Kumar Das, Advocate-on-Record, made the limited
submission that the Appellant failed to pay the charges under
the permission granted for the display of outdoor advertisements.
The outstanding dues on 31.10.2021 were Rupees 37.59 crores.
Additionally, the Appellant has not placed on record the amount
collected from outdoor advertisements.
F. Issues
9. Having given our thoughtful consideration to the rival submissions at
length, the following issues arise for the consideration of this Court:
i. Whether the Writ Petition purportedly filed in public interest
was maintainable before the High Court?
ii. Whether the non-floating of tenders was justified in the instant
case?
iii. Whether the power to levy fees could be delegated to the
Appellant and if so, whether it was a case of excessive
delegation?
iv. Whether Article 14 of the Concession Agreement read with
the formula used therein is opposed to public policy?
v. Whether the Total Project Cost and Returns thereon have
been recovered by the Appellant?
vi. Whether NOIDA is entitled to recover dues from the Appellant,
in regards to the display of outdoor advertisements?
G. Analysis
G.1 Maintainability of the Writ Petition before the High Court
10. At the very outset, it is essential to adjudicate the prefatory issue
of maintainability before addressing the merits of the present case.
In this regard, three primary prongs arise from NTBCL’s contention
challenging the very maintainability of the Writ Petition: (i) the locus
standi of Respondent No. 1; (ii) ascertaining delay and laches; and (iii)
the scope of judicial intervention in a commercial contract such as the
Concession Agreement. All of these issues require careful analysis.
2018 [2024] 12 S.C.R.
Supreme Court Reports
G.1.1. Locus standi of Respondent No. 1
11. NTBCL contended that the petition before the High Court amounted
to proxy litigation, initiated by Respondent No. 1 at the behest of
NOIDA, allegedly to enable NOIDA to evade its obligations under the
Concession Agreement. In support of this contention, NTBCL cited
landmark cases such as Chennai Metropolitan Water Supply and
Sewerage Board and others v. T.T. Murali Babu1 and Ramana
Dayaram Shetty v. International Airport Authority of India,2
arguing that the petition filed by Respondent No. 1 did not satisfy
the test of espousing a public cause which is a sine qua non for the
maintainability of a PIL.
12. It is well-established that while public interest litigation serves as
an effective tool for addressing the grievances of the public, it must
be carefully scrutinised to prevent misuse or abuse by those with
ulterior motives. Courts must look beyond the surface to assess
whether the litigation has been genuinely initiated in the interest of
the public or as a result of mischief.3 The essence of PIL lies in its
aim to remedy genuine public wrongs or injuries rather than being
driven by personal vendetta or malice.4
13. In Janata Dal v. H.S. Chowdhary, 5 while adjudicating a PIL
challenging FIRs filed in the Bofors scandal, this Court elaborated
on the rule of locus standi in a PIL. The Court held that there is no
rigid litmus test to determine locus standi in a PIL, given the broad
contours of such litigations. However, the Court must distinguish
between genuine petitions and those filed for private gain or profit.
Only individuals acting in good faith and with sufficient interest in the
PIL should be permitted to proceed.6 Accordingly, vexatious petitions
disguised as PILs, aiming to address personal grievances, deserve
rejection at the threshold.
14. In the instant case, Respondent No. 1 is a Society duly registered
under the Societies Registration Act, 1860, with the primary objective
of promoting the welfare of NOIDA residents. The society acts as a
1 Chennai Metropolitan Water Supply and Sewerage Board and others v. T.T. Murali Babu, (2014) 4 SCC 108.
2 Ramana Dayaram Shetty v. International Airport Authority of India, (1979) 3 SCC 489.
3 Balco Employees’ Union v. Union of India, 3 (2002) 2 SCC 333.
4 Dattaraj Nathuji Thaware v. State of Maharashtra, 4 (2005) 1 SCC 590.
5 Janata Dal v. H.S. Chowdhary, (1992) 4 SCC 305.
6 Villianur Iyarkkai Padukappu Maiyam v. Union of India, (2009) 7 SCC 561.
[2024] 12 S.C.R. 2019
Noida Toll Bridge Company Ltd. v.
Federation of Noida Residents Welfare Association and Others
bridge between the residents and public authorities, catering to the
former’s needs for essential civic amenities. Given this object, it is
clear that Respondent No. 1 approached the High Court in good faith,
with a view to safeguard the interests of NOIDA residents, who had
been subjected to the levy of toll at the DND Flyway under the guise
of user fees by NTBCL. Consequently, we do not find any merit in
NTBCL’s contention that Respondent No. 1 lacked locus standi in
approaching the High Court.
15. As regard to NTBCL’s contentions pertaining to the alleged collusion
between Respondent No. 1 and NOIDA, we find that there is not an
iota of material on record to substantiate these sweeping insinuations.
G.1.2. Delay and laches
16. NTBCL contended that there was an inordinate delay on the part of
the Respondent Association in filing the Writ Petition before the High
Court. NTBCL argued that the DND Flyway had been operational
since 2001, with the MoU and Concession Agreement having been
executed as far back as 1992 and 1997, respectively. Given this, the
Writ Petition was filed by Respondent No. 1 only in 2012—nearly
20 years after the execution of the MoU and 15 years after the
Concession Agreement. NTBCL asserted that this substantial delay
should have been sufficient grounds for the High Court to dismiss
the Writ Petition at the outset.
17. This contention, in our considered opinion is wholly misconceived and
misdirected. We say so for the reason that firstly, writ proceedings
under Articles 32 or 226 are not guided by the provisions of the
Limitation Act, 1963, but instead, by the Doctrine of Delay and
Laches. Without adverting much into its pith and substance, 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. It is now well established that while delay is a material
factor, there is no fixed period of limitation for invoking jurisdiction
under Article 226 and that each case should be considered on its own
facts and circumstances, thus allowing for a more liberal approach
when applying this doctrine.7 It is indeed beyond any doubt that the
7 R&M Trust v. Koramangala Residents Vigilance Group, (2005) 3 SCC 91; State of Madhya Pradesh and
another v. Bhailal Bhai and others, AIR 1964 SC 1006.
2020 [2024] 12 S.C.R.
Supreme Court Reports
doctrine is not a rigid rule but is rather a practice that is founded on
the exercise of sound judicial discretion.
18. In a much more rudimentary sense, it must also be borne in mind that
the cause of action in these set of circumstances could have arisen
and perhaps actually arose only after expiry of a reasonable period,
within which the cost of the Project was expected to be recovered.
The filing of the Writ Petition immediately after the Concession
Agreement and other Supporting Agreements were entered into,
would have been highly premature and ill-advised, without giving a
reasonable time to the project proponent to recover the actual cost
of the project.
19. In this vein, the High Court rightly observed that the plea of delay
lacks substance, as the commuters, including Respondent No. 1,
were justified in trusting that NOIDA would protect their interests.
However, in 2012, after learning that they were being misled and
subjected to an illegal toll based on an audit report from NTBCL’s
Auditor and Chartered Accountant—indicating that as of 31.05.2012,
Rupees 2340 crores were still to be recovered from the public, and
the recovery period had extended from 30 years to 100 years—they
were prompted to immediately approach the High Court.
20. Furthermore, it must be acknowledged that the levying of user
fees or tolls by NTBCL constituted a continuing cause of action,
which was challenged by the Association of affected commuters.
An established exception to the defence of delay is the presence
of a continuous injury stemming from an ongoing wrong.8 The plea
of delay and laches cannot be raised in a case of a continuing
cause of action.
21. In our considered view, the challenge laid by Respondent No. 1
before the High Court, regarding the levying of toll or user fees,
being rooted in public interest and involving en masse potential
violations of Fundamental Rights of citizenry, warrants thorough
examination. Given that NTBCL’s actions represented a continuing
cause of action, we concur with the High Court in rejecting the hyper
technical objection of delay and laches.
8 Union of India and another v. Tarsem Singh, (2008) 8 SCC 648.
[2024] 12 S.C.R. 2021
Noida Toll Bridge Company Ltd. v.
Federation of Noida Residents Welfare Association and Others
G.1.3. Scope of judicial intervention
22. In the context of maintainability, NTBCL has also contended that the
High Court should not have intervened in a commercial contract such
as the Concession Agreement and rendered its provisions invalid,
as it amounts to judicial interference into a Governmental Policy.
23. While considering these submissions, the High Court conducted a
detailed analysis and has addressed them based on two principal
rationales: (i) the judicial review of administrative action, and (ii) the
public interest factor. These rationales were employed to determine
whether the Court had the jurisdiction to adjudicate on the validity of
the Concession Agreement and the levying of toll upon commuters
using the DND Flyway.
24. Having said that, we also deem it necessary to embark on an
independent analysis and assess whether the conclusion of the
High Court having employed such rationale would hold sway. First,
regarding the judicial review of administrative action, NTBCL has
contended that courts cannot interfere in contractual obligations or
policy decisions.
25. It is indeed true that the Concession Agreement and the MoU
involved the NOIDA authorities as a party, and the decision to grant
development and construction rights to NTBCL was somewhat a
policy decision by the Government, considering the financial and
technical constraints present at the time. The crucial question,
however, is whether such commercial contracts, which may stem
from a Government Policy decision or where one of the parties is
the State or its instrumentalities, are entirely insulated from judicial
review.
26. This issue is no longer res integra and there is no absolute bar
on the maintainability of writ petitions, even in matters concerning
contracts or monetary claims. In such cases, the discretion lies
with the Court as held in Joshi Technologies International Inc.
v. Union of India,9 which summarised the legal position on judicial
review of contracts entered into by public authorities with private
parties. Judicial review, being a dynamic process as opposed to
static, has experienced a significant shift in terms of the degree of
9 Joshi Technologies International Inc. v. Union of India, (2015) 7 SCC 728.
2022 [2024] 12 S.C.R.
Supreme Court Reports
judicial interference in contractual disputes, especially when one of
the parties involved is the State or its instrumentalities.10
27. 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.11 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 Article 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.
28. Second, it is crucial to recognise that when a contract involving a
State instrumentality like NOIDA, significantly impacting the public,
the metes and bounds of judicial review ought to be expanded. The
guiding principle is that every State action must prioritise public
interest. If a governmental action disproportionately favours a private
entity at the expense of public welfare, it is liable to be struck down as
invalid.12 As rightly acknowledged by the High Court also, 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.13
29. In light of the above, 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
10 Subodh Kumar Singh Rathour v. Chief Executive Officer, 2024 SCC Online SC 1682.
11 Silippi Constructions Contractors v. Union of India, (2020) 16 SCC 489.
12 Kasturi Lal Lakshmi Reddy. v. State of Jammu and Kashmir, 1980 (4) SCC 1.
13 Centre for Public Interest Litigation v. Union of India, 2012 (3) SCC 1.
[2024] 12 S.C.R. 2023
Noida Toll Bridge Company Ltd. v.
Federation of Noida Residents Welfare Association and Others
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. The contention of NTBCL seeking
dismissal of Respondent No. 1’s petition at the threshold was thus
rightly rejected by the High Court.
G.2 The validity of awarding the contract to NTBCL
30. One of the primary contentions raised by Respondent No. 1 before
the High Court was that the contract for the development and
construction of a significant project like the DND Flyway had been
awarded to NTBCL without NOIDA having followed any formal tender
procedure, such as advertising or issuing a notice inviting competitive
tenders. In response, NTBCL argued that, at the time, it would not
have been feasible to float tenders due to a shortage of private
companies capable of undertaking such large-scale infrastructure
projects. NTBCL further contended that the mere absence of a
competitive tendering process was not, in itself, sufficient grounds
to invalidate the agreement.
31. In this context, it is evident that 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.
32. Considering the onus placed upon the State, it requires no
further elaboration that 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.14 Even when the Government awards a contract or
14 City Industrial Development Corporation v. Platinum Entertainment, (2015) 1 SCC 558.
2024 [2024] 12 S.C.R.
Supreme Court Reports
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.15
As a necessary corollary thereto, the Government must not act in a
manner benefitting private entities at the expense of the State. Such
actions, if unreasonable and contrary to the aegis of public interest,
would undermine the State’s Constitutional obligations.16
33. The Concession Agreement for the development of the DND Flyway,
entered into between NOIDA, IL&FS and NTBCL, is conspicuously
silent regarding the issuance of any tender or inviting bids from other
competitors. It may be true that the mere non-floating of tenders
or absence of a public auction or invitation alone cannot, serve as
sufficient grounds to term the actions of a public authority as arbitrary
or mala fide.17 The Courts have rather consistently held that the
State and its instrumentalities are free to make financial decisions,
provided such decisions are guided by considerations of economic
viability and public interest. This, however, does not absolve the
State or its instrumentalities from their obligation to demonstrate
due application of mind, ensure transparency and fairness in their
decision-making process.
34. To instantiate, in the case of City and Industrial Corporation of
Maharashtra Limited v. Shishir Realty,18 this Court reiterated the
well-established principle that Article 14 of the Constitution, which
abhors arbitrariness, imposes a duty on public authorities to ensure that
bias or favouritism does not infiltrate the bidding process. A transparent
bidding process is essential to fulfil Constitutional obligations. Further,
in Meerut Development Authority v. Association of Management
Studies,19 the Court noted that while invitations to tender typically
fall within the realm of contract law and are subject to limited judicial
scrutiny, Courts are justified in reviewing cases where the terms of
the invitation appear tailored to favour a particular person or entity,
thereby excluding all others from the bidding process.
15 Kasturi Lal Lakshmi Reddy, supra note 12.
16 Ibid; Villianur Iyarkkai Padukappu Maiyam v. Union of India and others, (2009) 7 SCC 561.
17 Pathan Mohammed Suleman Rehmatkhan v. State of Gujarat, 2014 (4) SCC 156; Tata Cellular v. Union
of India, (1994) 6 SCC 651.
18 City and Industrial Corporation of Maharashtra Limited v. Shishir Realty, (2022) 16 SCC 527.
19 Meerut Development Authority v. Association of Management Studies, (2009) 6 SCC 171.
[2024] 12 S.C.R. 2025
Noida Toll Bridge Company Ltd. v.
Federation of Noida Residents Welfare Association and Others
35. The golden principle thus is that Government procedures or policies
pioneered in public interest must genuinely serve the public and not
merely enrich private entities. When public interest is overshadowed,
it does raise concerns as to whether the Government has acted
in a manner that appears capricious or arbitrary. It then becomes
imperative for the Court to scrutinise whether such actions vitiate
the Constitutional mandate of equality. Such procedures, must
therefore satisfy the litmus test of due application of mind, fairness,
transparency and most pertinently, being bona fide.
36. Turning to the events of the case in hand, it is a matter of record
that the Government made no efforts to issue tenders, invitations,
or seek competitive bids from other interested entrepreneurs. There
is no basis at all to claim that following such a procedure would
have been detrimental to the proposed Project. Contrarily, NOIDA,
in collaboration with IL&FS, assigned the mammoth responsibility
of constructing this novel infrastructure upon NTBCL. Interestingly,
NTBCL was a non-existent entity, as it came to be incorporated only
on 08.04.1996, i.e. four years after the MoU was executed between
the Delhi Administration, NOIDA, and IL&FS, to establish a bridge
between Delhi and NOIDA.
37. The justification rendered by NTBCL and NOIDA that there was no
other infrastructure development company at the time, who could
undertake the construction of the DND Flyway, is nothing but a self-
serving claim by an entity who is the sole beneficiary of the State
largesse. The assertion that IL&FS, being the only institution or
agency controlled by the public sector, was uniquely positioned to
offer expertise in specialised infrastructure development and generate
the necessary financing, is also hardly a justification for the undue
favour extended to NTBCL.
38. 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. As already
noticed, 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.
39. The contention that there were no suitable companies capable of
undertaking such infrastructural development during that period lacks
2026 [2024] 12 S.C.R.
Supreme Court Reports
any substantiation or material on record to support such sweeping
claims. In our considered view, the aforesaid plea could carry some
weightage had there been even a single attempt to invite bids. It
is difficult to accept that there was such a dearth of experienced
companies offering better financial terms and solutions for developing
the DND Flyway alongside IL&FS.
40. 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 Article
14 of the Constitution of India.
G.3 Delegation of power to levy fees and its validity
41. Delving deeper into one of the core issues, we encounter the
matter of the levy and collection of user fees by NTBCL, which the
Appellant claims to be duly authorised under Section 13.1 of the
Concession Agreement. NTBCL has further urged that this user
fee is being charged in the exercise of powers conferred upon it by
NOIDA, pursuant to the Regulations formulated under Section 6A
in conjunction with Section 19 of the 1976 Act.
42. Section 13.1 of the Concession Agreement deals with the ‘Collection
of Fee.’ It grants NTBCL the right to collect, retain, and appropriate
fees from users of the DND Flyway starting from the Commissioning
Date. The fee amount is to be determined by the Fee Review
Committee. Additionally, NTBCL is empowered to delegate the
collection function to the O&M Contractor, who would collect fees
on behalf of NTBCL, in accordance with the Rules framed under
the 1976 Act. Notably, in contingencies where neither NTBCL nor
the O&M Contractor is unable to collect fees as a result of any
change in law or any restriction or injunction based on any process
of law, NTBCL is entitled to receive compensation from NOIDA in
lieu thereof.
43. It thus becomes evident that the authority to collect fees by NTBCL
has been purportedly derived from certain Rules that were to be
framed by NOIDA. Given this background, it is equally imperative,
if not more, to delve into what are the statutory provisions dealing
with the levy and collection of such fees; who may collect or levy
such fees under the relevant legal framework; whether such authority
could be delegated; and if so, by whom?
[2024] 12 S.C.R. 2027
Noida Toll Bridge Company Ltd. v.
Federation of Noida Residents Welfare Association and Others
44. As on the date of the execution of the Concession Agreement, the
1976 Act was the relevant Statute in vogue. Section 6 thereof outlines
the ‘Functions of the Authority’, aimed at ensuring the planned
development of Industrial Areas. The Authority means the Corporate
Body constituted by the State of Uttar Pradesh. Section 11 of the 1976
Act provides that the Authority may levy taxes to provide, maintain,
or continue amenities within the Industrial Development Area, subject
to the approval of the State government. More specifically, Section
19(1) of the Act, read with Section 19(2)(e), grants the Authority
the power to frame Regulations necessary for the administration
of its affairs, including for the levying of fees in the discharge of
its functions. Thus, the Authority’s ability to levy and collect fees is
traceable in the provisions of the 1976 Act.
45. Thereafter, Section 6A of the 1976 Act was inserted vide the
Uttar Pradesh Act No. 2 of 1999, with effect from 14.08.1998. It
enumerated that the ‘Authority may by agreement authorise any
person to provide or maintain or continue to provide or maintain
any infrastructure or amenities, and to collect taxes or fees, as the
case may be, levied thereof’. In furtherance of the power conferred
under Section 6A, read with Section 19(2)(e) of the 1976 Act, NOIDA
framed the Regulations, which came into force in September 1998.
These Regulations, in simple terms, effectively empowered NOIDA to
authorise the designated developer to levy and collect the applicable
fee, which would in turn, be based on a mutually agreed formula
between the parties. This designated developer in the instant case
would be NTBCL.
46. A plain reading of Section 6A 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,
Section 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 Section 6A of the Act. It is,
therefore, evident that while the power to levy taxes or fees remains
exclusively vested in the Authority, from 14.08.1998 onwards, the
power to collect such taxes or fees could be delegated to any person
with whom an agreement for the maintenance of infrastructure or
amenities has been executed.
2028 [2024] 12 S.C.R.
Supreme Court Reports
47. However, NOIDA overstepped its authority by delegating the power
to levy fees to NTBCL through the Concession Agreement and
Regulations, exceeding the scope of its powers. In this context,
the High Court rightly noted that it is a well-established law that an
authority vested with the power to frame subordinate legislation must
act within the bounds of that power and refrain from exceeding its
limits. It goes without saying that 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.
48. 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.
49. It is pertinent to underscore herein that 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.
50. Nevertheless, the collection of fees or toll can be assigned to a
developer or contractor for a defined period, including for the purpose
of recovery of the investment made in developing the infrastructure.
Thus, we concur with the High Court’s conclusion that 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 Section 6A of the
1976 Principal Act.
51. Not only this, the Regulations came to be enacted only after the
Concession Agreement had been executed, and were seemingly
designed to validate the actions already taken by NTBCL and NOIDA.
We may also hasten to add that the subject Regulations are neither
retroactive nor can be applied retrospectively and are thus alien to
the terms and conditions of the Concession Agreement.
[2024] 12 S.C.R. 2029
Noida Toll Bridge Company Ltd. v.
Federation of Noida Residents Welfare Association and Others
52. It seems that NTBCL and NOIDA have indulged in trickery and
placed the cart before the horse, in attempting to authorise actions
post facto, thereby obscuring the full extent of misuse of power. We
find it evident that 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. We thus hold
that NOIDA did not have any competence to delegate the power to
levy fees and toll to NTBCL, and thereby overstepped its statutory
bounds. Accordingly, we are not inclined to interfere with the findings
of the High Court on this issue.
G.4 Dissonance between Article 14 of the Concession Agreement
read with the formula vis-à-vis public policy
53. Article 14 of the Concession Agreement defines the ‘Total Cost of the
Project’ and its calculation methodology, as elaborated in Annexure
F. The issue herein concerns whether this provision aligns with the
principles of public policy and the Constitution of India. To elucidate,
the relevant language of Article 14 of the Concession Agreement
states:
“Article 14: Costs and Accounting
Section 14.1: Total Cost of Project
(a) The Project Cost shall be determined as on the Project
Commissioning Date by the Independent Auditor who
shall seek the assistance of the Independent Engineer
to determine the Cost of Construction component of
the Project Cost.
(b) The Total Cost of Project shall be the aggregate of:
(i) Project Cost;
(ii) Major Maintenance Expenses; and
(iii) Shortfall in the recovery of Returns in a specific
financial year as per the formula in Section 14.2(a).
Section 14.2: Calculation of Returns
(a) The amounts available for appropriation by the
Concessionaire for the purpose of recovering the Total
2030 [2024] 12 S.C.R.
Supreme Court Reports
Cost of Project and the Returns thereon, as illustrated
in Appendix F, shall be calculated at annual intervals
from the Effective Date in the following manner:
Out of gross revenues from fee collections, income
from advertising and Development Income deduct
O&M Expenses.
(b) The Total Cost of Project and the recovery thereof
and of the Returns shall be determined by the
Concessionaire annually in arrears, and certified by
the Independent Auditor.
Section 14.3: Accounts of Concessionaire
The Concessionaire shall keep and maintain the
books of accounts for the Project in accordance with
the format approved by the Independent Auditor and
the accounting practices specified by the Independent
Auditor and the statutory requirements consistently
applied in accordance with Indian law.”
54. To this end, NTBCL has defended the validity of Article 14 and argued
that the provision, when read alongside the formula in Annexure F,
does not contravene the Constitution or public policy. It further
contended that the formula was reasonable, ensuring adequate
returns for developers, and emphasized that the concession period
could not be extended without NOIDA’s consent, thereby preventing
indefinite imposition of user fees. Per contra, Respondent No. 1
contended that the continually escalating Total Project Cost and
returns have effectively transformed the Concession Agreement into
a perpetual arrangement, ensuring that NTBCL would not return the
assets to NOIDA even after 100 years. They further argued that such
provisions are detrimental to public interest and should be severed
from the Concession Agreement without affecting the validity of the
contract as a whole.
55. We are of the considered view that this issue hinges on two primary
prongs requiring detailed analysis: (i) the reasonableness of the
formula outlined in Annexure F, and (ii) the perpetual nature of the
Concession Agreement.
[2024] 12 S.C.R. 2031
Noida Toll Bridge Company Ltd. v.
Federation of Noida Residents Welfare Association and Others
G.4.1. Reasonableness of the formula in Annexure F
56. NTBCL contended that the formula in Annexure F of the Concession
Agreement was reasonable and computed by experts. It asserted
that the Concession Agreement was executed after proper application
of mind entailing extensive deliberations and consultations over the
years between the two State governments and their agencies. It was
further explained that the Steering Committee decided the Project
to be implemented by NTBCL. Subsequently, the State approved
the Project and constituted an Empowered Committee to make
recommendations on the Concession Agreement. Finally, the World
Bank approved funding for the Project via a line of credit to IL&FS.
The rationale behind adopting such a formula was that the Project
was the first of its kind in India, interest rates were at an all-time
high, and investors had to be guaranteed adequate returns. It was
also adopted with the justification that, sans such a formula, no
developer would have shouldered the risks of the Project.
57. The High Court while analysing the reasonableness of the formula
adopted, held that Article 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.
58. We find no error in the analysis undertaken by the High Court. It
is pertinent to understand that the formula in Annexure F of the
Concession Agreement calculates the Total Project Cost and returns.
As per the formula, the Total Project Cost is the aggregate of (a) the
Project cost; (b) major maintenance expenses; and (c) shortfall in
the recovery of returns in a specific financial year.
59. To gain further clarity on the costs and structure of the formula
involved, it is essential to consider the figures underpinning the
calculation of the Total Project Cost. The original cost as on the
Commissioning Date was Rupees 325.99 crores. Operation and
Maintenance (O&M) expenses are deducted from the gross revenue,
and the Concession Agreement, per Section 1.1, does not specify
any cap or detailed guidelines for these expenses. Further, returns
are calculated at a 20% annual rate on the Total Project Cost from
the effective date. According to Section 14.1(b)(iii), any shortfall
in return recovery is added to the unrecovered Total Project Cost
2032 [2024] 12 S.C.R.
Supreme Court Reports
of the previous year, thus increasing the base amount on which
returns at the prescribed rate are computed for the following year.
Consequently, annual shortfalls in returns inflate the Total Project
Cost year over year.
60. To understand the increasing Total Project Cost, the CAG Report
submitted to this Court is illuminating. The Report highlights those
provisions in the Concession Agreement—including fixed, assured
high returns without risk-sharing by the Concessionaire, overlapping
roles with potential conflicts of interest for key stakeholders,
unrestricted project costs, unlimited charge of O&M expenses, and
lack of effective revenue control—all primary contributors to the
growing unrecovered Total Project Cost.
61. In this regard, the Comptroller-Auditor General made the following
germane observations:
i. There was no justification to: (a) allow an assured and high
rate of Return of 20% in 1997, when the Prime Lending Rate
was 13%; (b) not include a clause for revision of the rate of
Return based on the Reserve Bank of India’s policies; and (c)
not use the opportunities provided at various stages for revising
the rate of Return.
ii. Since no competitive bidding was held, the Project Cost was
not decided in advance nor capped. Thus, NTBCL had no
incentive to control the Project Cost and minimise expenses.
This violates the principles of financial propriety.
iii. The Project Cost, determined by the Independent Auditor,
was inflated by Rupees 44.87 crores. The Project Cost on
the Commissioning Date should have been Rupees 281.12
crores instead of Rupees 325.99 crores. Such inflated project
cost occurred only because returns were allowed before the
date of commissioning. The Independent Auditor’s certificate
stated that there was an unrecovered Project Cost of Rupees
407.64 crores as on 06.02.2001, which included Rupees
325.99 crores (Project Cost) and Rupees 81.65 crores
(unrecovered returns at the rate of 20% from 30.12.1998 to
06.02.2001). The Project Cost prior to the commissioning
date should have been taken as nil since no returns before
06.02.2001 were recoverable, as per Sections 14.1 and 14.2
of the Concession Agreement.
[2024] 12 S.C.R. 2033
Noida Toll Bridge Company Ltd. v.
Federation of Noida Residents Welfare Association and Others
iv. The Independent Auditor certified O&M expenses of Rupees
272.40 crores from 06.02.2001 to 31.03.2016. NTBCL booked
excessively high O&M expenses of Rupees 272.40 crores during
2000-01 to 2015-16, which was higher than the standard norms
used by NHAI/MoRTH, as well as the Feasibility Report of the
DND Flyway itself.
v. After the appointment of the ITNL Toll Management Services
Limited, a subsidiary of NTBCL, as the O&M contractor, the
expenditure on account of the O&M contractor’s fee increased
from Rupees 5.16 crores between 2008-09 to Rupees 10.49
crores between 2015-16. Thus, the O&M contractor’s fee
increased by 103% over eight years from 2008-09 to 2015-16.
vi. NTBCL did not apply economic prudence and allowed liberal
increases in benefits, concessions, and remuneration to its
employees, management, O&M contractor etc., which burdened
the Project, resulting in O&M expenses of the Project exceeding
the project feasibility norms by more than 100%. This inflated
the Total Project Cost due to the compounding effect of the
formula.
62. The CAG Report shockingly reveals that the Directors of NTBCL,
including Pradeep Puri (who it seems was a senior bureaucrat),
apparently did not perform any responsibility, yet all their expenses,
including high-end remuneration were added in the Total Project Cost.
Further, legal fees amounting to Rupees 11 crores, travelling expenses
amounting to Rupees 400 lakhs, and the cost of restructuring deep
discount bonds at Rupees 33 crores, were also added to the Total
Project Cost. More egregiously, NTBCL seems to have incurred an
expenditure of Rupees 72.25 lakhs on account of purchase and
distribution of ‘Corporate Gifts’, including the generous distribution
of gold coins to its employees, sub-staff and drivers.
63. 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.
2034 [2024] 12 S.C.R.
Supreme Court Reports
64. This situation reflects serious impropriety not only by IL&FS and
NTBCL but also by the then officers of NOIDA, the State of UP,
and the NCT of Delhi. It is inconceivable that multiple layers of
Government, advised by some of the most astute financial minds,
failed to foresee that this formula would impose an undue and unfair
burden on the users—the general public. Such an outcome could
only arise through extraneous considerations influencing several
stakeholders. This blatant misuse of power and breach of public trust
has profoundly shocked the conscience of this Court. The manner
in which some senior bureaucrats manipulated the siphoning of
project funds for their personal gains clearly make out a fit case for
investigation under the Prevention of Corruption Act, 1988, although
the ship might have sailed for such action at this stage.
65. In our considered view, 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, we have no hesitation to hold that
the formula outlined in Annexure F of the Concession Agreement is
unreasonable and contravenes Article 14 of the Constitution.
G.4.2. Perpetuity of the Concession Agreement
66. NTBCL argued that under Section 2.4 of the Concession Agreement,
the concession period could not be extended without NOIDA’s
explicit consent. Section 2.4 lacks any provision for an automatic or
‘deemed’ extension, requiring instead that NOIDA actively extend the
Concession Agreement by two-year increments. If NOIDA does not
approve an extension in advance, the day following the concession
period’s final day becomes the transfer date, at which point NTBCL
must transfer the Project. The language of Section 2.4 does not imply
that an unrecovered Total Project Cost or returns would automatically
extend the concession period. Rather, it grants NOIDA the sole
discretion to determine extensions, thereby preventing an indefinite
levy of user fees or tolls.
67. The High Court observed that, given the continual escalation of
Total Project Cost, it would be infeasible to achieve full returns even
over a 100-year period, resulting in NTBCL indefinitely collecting
user fees. This assessment was corroborated by the Independent
Auditor’s report for the year ending 31.03.2012, as well as a letter
dated 29.08.2007 from Pradeep Puri to the CEO of NOIDA, which
[2024] 12 S.C.R. 2035
Noida Toll Bridge Company Ltd. v.
Federation of Noida Residents Welfare Association and Others
noted that the concession period had effectively become perpetual.
Consequently, it was clear that NTBCL would be unable to revert the
Project assets to NOIDA free of cost, even after a century.
68. The prolonged success of this arrangement appears rooted in the
deliberately crafted language of the Concession Agreement. The
Concession Agreement contains provisions under Section 2.3 that
establish a concession period of either 30 years from the effective
date or until NTBCL recovers the Total Project Cost and returns,
based on determinations made by the Independent Engineer and
Auditor per Article 14 of the Concession Agreement. Should recovery
not be achieved within 30 years, Section 2.4 provides for two-year
extensions, repeating as necessary, until full recovery is realized.
This clause raises the key question of whether such extensions are
automatic or contingent upon NOIDA’s explicit consent, as NTBCL
contends.
69. Given the critical roles of the Independent Auditor and Independent
Engineer in determining the recovery of Total Project Cost and
returns, it is essential to clarify whether their appointment lies with
NTBCL, NOIDA, or both parties jointly.
70. According to Articles 8 and 10 of the Concession Agreement, the
Independent Engineer and Independent Auditor are appointed by
a Committee formed by the lenders, including IL&FS, NTBCL,
and NOIDA. As NTBCL is a subsidiary of IL&FS, this arrangement
positioned NOIDA as a minority member without meaningful authority
in the appointments. Thus, IL&FS and NTBCL effectively controlled
the selection, which casts serious doubts on the transparency and
so-called independence of these appointments. This structure enables
IL&FS and NTBCL to unilaterally influence as to whether the Total
Project Cost and returns are deemed recovered, with NOIDA obliged
to accept these determinations with hardly any other alternative.
71. The next point to address is whether NOIDA’s consent is required
to extend the concession period or whether the concession period
automatically extends based on the certification by the Independent
Auditor and Independent Engineer regarding the recovery of the
Total Project Cost after 30 years.
72. It is important to note that Article 18 of the Concession Agreement
stipulates that if NOIDA decides to terminate the Concession
Agreement before the Total Project Cost and returns are fully
2036 [2024] 12 S.C.R.
Supreme Court Reports
recovered, in that case NOIDA is obligated to compensate NTBCL
the deficiency in Total Project Cost, returns, and any other expenses,
as specified in Section 8.1 of the Agreement.
73. As previously mentioned, a letter dated 29.08.2007 from the CEO of
the Appellant to NOIDA indicated that the Total Project Cost after 30
years would be approximately Rupees 5,353 crores, suggesting that
the term of the Project should be extended to 100 years. The CAG
Report pertinently states that, if NTBCL continues to operate under
the current terms of the Concession Agreement, with extensions
as per its provisions, the unrecovered Total Project Cost could rise
to around Rupees 7,200 crores by 31.03.2020 and Rupees 15,200
crores by 31.03.2029. This unending escalation in the Total Project
Cost leaves no room to doubt that the Concession Agreement was
cleverly designed to remain perpetually operational.
74. A conjoint reading of these aspects reveals that NOIDA effectively
faced two options: (i) allow NTBCL to recover the Total Project
Cost and returns through user fees, even after the initial 30-year
concession period, by granting indefinite 2-year extensions, or (ii)
pay the Total Project Cost of and returns themselves, to terminate
the Concession Agreement either at the end of 30 years or before.
Therefore, NOIDA’s ‘choice’ was limited to either bearing the financial
burden itself—by paying Rupees 5,353 crores through public
funds—or allowing the Concession Agreement to continue, forcing
the general public to pay user fees indefinitely. In either case, the
inevitable result is the unjust enrichment of NTBCL at the cost of
public suffering.
75. In such dire circumstances, NTBCL cannot assert that NOIDA has
a genuine ‘choice’ or the ability to ‘withhold consent’ from extending
the Concession Agreement. NOIDA effectively has no choice and is
perversely being browbeaten to continue enforcing the Concession
Agreement. Despite the supposed ‘choice,’ it is burdened with
the obligation to repay an exorbitant sum, which we have already
established is unreasonably calculated.
76. This ‘consensual’ extension is solely a show of smoke and mirrors
and has been cunningly engineered by NTBCL and IL&FS. They
successfully ensured that: first, the formula was designed in such
a way that the Total Project Cost and returns would escalate each
year; second, inflated and unnecessary expenses could be included
[2024] 12 S.C.R. 2037
Noida Toll Bridge Company Ltd. v.
Federation of Noida Residents Welfare Association and Others
in the Total Project Cost, making repayment impossible; third, the
Concession Agreement would only terminate upon full repayment
of the Total Project Cost and returns, knowing as early as 2007 that
30 years would not suffice for recovery; and finally, NOIDA was left
with no real choice but to extend the concession period due to the
ultimatum presented in Article 18, masked as ‘consent.’
77. 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.20 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.21
78. 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.22 Given the extent of
manipulation in the instant case, we must intervene and hold that
Article 14 of the Concession Agreement, read with the formula in
Annexure F, is opposed to public policy and must be cut apart from
the Concession Agreement.
G.5. Recovery of Total Project Cost and returns thereon by
NTBCL
79. It is pertinent to note that NTBCL has consistently claimed that the
Total Project Cost and returns thereon have not been recovered
so far. This claim is the primary reason that the extension of the
concession period has come under scrutiny. In contrast, Respondent
No. 1 asserts that the project costs and reasonable profits have long
been recovered by NTBCL, thereby negating the need to continue
imposing user fees/tolls.
20 Central Inland Water Transport Corpn. Ltd. v. Brojo Nath Ganguly, (1986) 3 SCC 156.
21 Rattan Chand Hira Chand v. Askar Nawaz Jung, (1991) 3 SCC 67.
22 Beed District Central Coop. Bank Ltd. v. State of Maharashtra, (2006) 8 SCC 514.
2038 [2024] 12 S.C.R.
Supreme Court Reports
80. The High Court has categorically held that NTBCL was not entitled to
recover any amount over and above what had already been received
by it. This was determined on the following basis:
(i) The project cost incurred for the Delhi-NOIDA Bridge and Ashram
Flyover was Rupees 377 crores.
(ii) The cost of construction, as submitted by the Project Engineer,
was Rupees 188.3 crores but was disclosed as Rupees 265.7
crores.
(iii) The cost of construction of the Ashram Flyover was Rupees
20 crores and was included in the Project cost even though it
was the subject matter of a separate construction agreement.
(iv) The gross income for the year ending on 31.03.2014 was
Rupees 810.18 crores, as per NTBCL. The surplus after tax
was Rupees 578.80 crores (not including income from other
sources).
(v) The Statement of Computation of Returns and Arrears dated
14.09.2015 (filed by NTBCL) revealed that the gross revenues
earned by NTBCL have been increasing gradually each year.
(vi) The income from advertisement and rent is not included in the
Statement of Computation.
(vii) The user fees collected between 01.04.2014 and 30.09.2016
would tally to an additional sum of approximately Rupees 300
crores.
(viii) NTBCL even started giving dividends to its shareholders to the
extent of 5% in 2010-2011, 10% in 2011-2012, 10% in 2012-
2013, and 25% in 2013-2014. This meant that NTBCL had
earned sufficient profits from the revenue generated via the
user fees. The Project could thus be handed over to NOIDA
even before the expiry of the concession period, i.e. 30 years.
81. NTBCL contended that the impugned judgment failed to account for:
(i) the total user fee collected, considering only the provisional
project cost of Rupees 377 crores; (ii) the interest on debt paid
by NTBCL until March 2014; (iii) the repayment of the principal by
NTBCL, which amounted to Rupees 280.36 crores; and (iv) other
expenses of Rupees 22.9 crores and additional taxes, including
MAT and FBT, totalling Rupees 50.42 crores. NTBCL argued that
[2024] 12 S.C.R. 2039
Noida Toll Bridge Company Ltd. v.
Federation of Noida Residents Welfare Association and Others
since these amounts were not kept in view by the High Court, it still
needed to recover an aggregate sum of Rupees 454.71 crores from
user fees and other income, which was the computation of losses
it had suffered as on 31.03.2014.
82. NTBCL further contended that it generated a revenue of Rupees
743.34 lakhs (out of Rupees 2028.88 lakhs) from the display of
advertisement hoardings on the NOIDA side of the Project in 2019-
2020, which increased to Rupees 399.81 lakhs in 2020-2021. Out
of this advertising revenue, Rupees 339.87 lakhs were paid towards
license fees in 2019-2020, and Rupees 84.97 lakhs in 2020-2021.
After the collection of tolls was discontinued, NTBCL became solely
reliant on the revenue generated from advertisement hoardings.
83. We find that no independent evaluation of these competing claims
is required to be undertaken by us as the issues raised by NTBCL
have been effectively answered by the independent arbiter, namely
the CAG, through its Report submitted to this Court concluding that:
(i) The total expenses incurred by NTBCL are Rupees 1,136.26
crores.
(ii) The total income generated by NTBCL is Rupees 1,103 crores.
(iii) The Total Project Cost has been recovered to a large extent
and only around Rupees 15 crores remained to be recovered
as of 31.03. 2016.
(iv) Other future recurring costs which would be incurred over the
life span of the DND Flyway are the O&M costs. These are
to be calculated as per the norms adopted in the Feasibility
Study of the DND Flyway based on which the expenditure for
the year 2015-16 can be reasonably estimated to be around
Rupees 19 crores.
84. The sum of Rupees 1,136 crores, i.e. the total expenses incurred
by NTBCL are based on the statutory accounts from 2001 to
March 2016. This sum includes all the unrecovered project costs
added before the date of commissioning of the Project and the
inflated and unnecessary expenditures undertaken by NTBCL
such as, travelling expenses, legal fees, extraordinary salaries and
bonuses to employees, etc. as specified in paragraph 62 of this
judgement.
2040 [2024] 12 S.C.R.
Supreme Court Reports
85. It seems to us that 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.23 In Mandsaur Transport Assn. v. State of M.P., when
dealing with the aspect of the collection of toll to recover the costs
of construction of a bridge, this Court held that there was no reason
for the collection of the toll to continue if the State Government had
recovered the costs of construction and maintenance several times
over.24 This reasoning was reiterated in MSK Projects (I) (JV) Ltd. v.
State of Rajasthan.25
86. The CAG Report further states that the annual toll income of NTBCL
during 2001-2016 was Rupees 892.51 crores. NTBCL has been
making profits for the last 11 years; has no accumulated losses
as of 31.03.2016; has paid dividends of Rupees 243.07 crores till
31.03.2016 to its shareholders; and repaid all its debt with interest.
NTBCL had thus, by 31.03.2016, recovered the project costs, the
maintenance costs, and a significant profit on its initial investment.
There is no rhyme or reason for the collection of user fees/tolls to
continue.
87. An exhaustive reading of the CAG Report highlights the extent to
which the public has been defrauded. The general public has been
forced to part with hundreds of crores by IL&FS and NTBCL, under
the guise of providing necessary public infrastructure. This could not
have been done but for the collusion of the then officers of the two
State Governments and of NOIDA, who closed their eyes while the
contractual obligations were incurred. Had Respondent No. 1 not
been vigilant of their rights, the public funds would have continued
to be misappropriated for private profiteering. Furthermore, the role
played by IL&FS in this entire scheme is highly questionable. We say
nothing except that the facts speak for themselves. Res ipsa loquiter.
88. That being said, 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, we find no error in the
High Court’s judgment and its directions in restraining the imposition
and collection of user fees/tolls.
23 Institute of Law, Chandigarh v. Neeraj Sharma, (2015) 1 SCC 720.
24 Mandsaur Transport Assn. v. State of M.P., (2001) 9 SCC 328.
25 MSK Projects (I) (JV) Ltd. v. State of Rajasthan, (2011) 10 SCC 573.
[2024] 12 S.C.R. 2041
Noida Toll Bridge Company Ltd. v.
Federation of Noida Residents Welfare Association and Others
G.6 Recovery of dues arising out of display of outdoor
advertisements
89. The question pertaining to outdoor advertisements does not
constitute the subject matter of the present appeal, where the
matter assailed by the Respondent Welfare Association before
the High Court was restricted to the imposition and levy of user
fees or toll by NTBCL and concomitantly, the validity of certain
provisions of the Concession Agreement. Regardless, Respondent
No. 2, NOIDA, has alleged that NTBCL owes substantial dues to
them, accrued through outdoor advertising, for which the license
had been granted by NOIDA.
90. All that we thus observe, is that NOIDA shall be at liberty to initiate
recovery proceedings as per the dispute resolution mechanism
outlined in the Delhi Land Lease and NOIDA Land Lease Agreements.
Such a process shall be subject to the defence and objections that may
be available to NTBCL before the appropriate forum. Consequently,
this issue does not fall within the scope of the instant appeal and
therefore we have not expressed any opinion on its merits.
H. Conclusion and directions
91. In light of the above analysis, it is held that there is no infirmity in the
impugned judgement and we find no reason to interfere with it. The
instant appeal is consequently dismissed. Nonetheless, we consider
it essential to summarize our conclusions on the issues raised:
i. The High Court rightly entertained the writ petition filed by
Respondent No. 1, who had the requisite locus standi. The said
writ petition filed in public interest was maintainable;
ii. There were no delay or laches in approaching the High Court;
iii. The contract awarded to NTBCL through the Concession
Agreement by State authorities and NOIDA was unfair, unjust
and inconsistent with Constitutional norms;
iv. NOIDA exceeded its authority by delegating the power to levy
fees or impose tolls to NTBCL, rendering such delegation invalid.
v. Article 14 of the Concession Agreement, read with the formula
in Annexure F, contravenes public policy and is, therefore, liable
to be severed from the Agreement.
2042 [2024] 12 S.C.R.
Supreme Court Reports
vi. NTBCL has recovered the project costs and substantial profits,
eliminating any justification for the continued imposition or
collection of user fees or tolls.
vii. The issue pertaining to outdoor licensing fees between NOIDA
and NTBCL does not fall within the purview of the present
challenge.
92. As regard to SLP(C) No. 8060/2019, concerning the challenge to the
arbitration proceedings between NOIDA and NTBCL, it is clarified
that the said matter shall be heard and decided separately on its
own merit.
93. Ordered accordingly. Pending applications if any, to be disposed of.
Result of the case: Appeal dismissed.
†
Headnotes prepared by: Bibhuti Bhushan Bose
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