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CASE NO.:

Appeal (civil) 6123 of 2001

Special Leave Petition (civil) 3716 of 2001

Appeal (civil) 6124 of 2001

Special Leave Petition (civil) 13473 of 2001

PETITIONER:

STATE OF WEST BENGAL ... V.

Vs.

RESPONDENT:

DATE OF JUDGMENT: 2001

@

03/09/2001

BENCH:

Doraiswamy Raju, S.R.Babu

JUDGMENT:

Raju, J.

Special leave granted.

These appeals have been filed by the National Highways

Authority of India, who was not a party to the proceedings in the High

Court, but with the permission granted by this Court and the State of

West Bengal against the judgment dated 20.11.2000 in FMAT

No.3607 of 1999, whereunder a Division Bench of the Calcutta High

Court has not only stayed the action initiated by the Superintending

Engineer to re-bid the right to collect the toll in question but also

ordered the continuance of the Receiver in respect of the possession

of the expressway and collection of toll charges, meeting the

expenses and deposit with the State, etc., and a further direction to

the State Government to take a decision in terms of Clause 15 of the

Memorandum No.15/1(3)/PR/N/DEW/IE-12/94(V) dt.11.3.1998.

The disputes between the parties relate to the right of collection

of toll charges from the vehicles using part of Durgapur Expressway

between 22 km. to the end point Palsit - a stretch of 48 km. of road

on National Highway No.2, known as Durgapur Expressway. That

the said stretch forms part of a National Highway which vest with the

Central Government and the Central Government, in exercise of its

powers under Section 5 of the National Highways Act, 1956

[hereinafter referred to as "The Highways Act"], issued a Notification

to the extent that the functions in relation to the execution of works

pertaining to this National Highway shall be exercisable also by the

State Government of West Bengal, subject to the condition that the

State Government concerned shall, in the exercise of such functions,

be bound to comply with the rules for the time being in force made

under the Act is indisputable. The Parliament has enacted The

National Highways Authority of India Act, 1988 [hereinafter referred to

as "The Highways Authority Act"] in order to get over the difficulties

experienced from time to time in maintaining effectively the National

Highways through the "Agency System" pursuant to a delegation

Notification under Section 5 of the Highways Act in favour of the State

Governments concerned. Among other things, the Central

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Government also framed rules called, The National Highways (Fees

for the use of National Highway Section and Permanent Bridge-

Public Funded Project) Rules, 1997 [hereinafter referred to as "The

Fee Collection Rules"]. These Rules provide for fixation of rates of

fee by the Central Government, the display of rates for fees,

procedure for collection - either departmentally or through

Franchisee, the manner of its remittance from time to time, and

submission of returns, etc.

Rules 6 to 8 of the Fee Collection Rules provide for collection of

fees departmentally, mode of collection and the manner of its

remittance. Rule 9 provides for the collection of fees through

Franchisee to whom the Franchise to collect has been awarded

through auction for specific periods as the Central Government may

issue, as per terms and conditions of the agreement executed for

such purposes and remittance of the auction money collected from

the Franchisee by the Executing Agency to the Pay and Accounts

Officer (National Highways), Ministry of Surface Transport, New

Delhi. Rule 5 mandates that all fees levied under the rules shall be

collected by the Executing Agency concerned departmentally or

through Private Contractors "on the basis of competitive bidding on

behalf of the Central Government". Executing Agency has been

defined to mean, the National Highways Authority of India in the case

of those National Highways or part thereof entrusted to NHAI and

State Government or Union Territory, to which such functions are

delegated under Section 5 of the Highways Act. So far as the part of

the Highway in question, though there had been earlier Notification

under Section 5, as noticed supra, subsequently, the Central

Government has issued a Notification dated 4.2.1999, in exercise of

its powers under Section 11 of the Highways Authority Act, entrusting

the stretch of the Highway under consideration to the National

Highways Authority of India and indisputably the NHAI became, as a

consequence thereof, the Executing Agency in respect of the stretch

of the National Highway in the place of the State of West Bengal.

Tenders seem to have been called for in sealed covers, initially

for the grant of franchise for collection of toll charges in respect of the

portion of the Highway under dispute. Since, the highest bid offered

in a sum of Rs.1,51,000/- per day was not acceptable to the

authorities concerned for a second time bids were called for and

though the highest bid in a sum of Rs.1,99,909/- per day, was

accepted, there has been violation of the terms and conditions of the

grant, resulting in termination of the same and forfeiture of earnest

money. Once again sealed tenders were called for and the 1st

respondent, whose bid was for Rs.2,20,701/- per day, was accepted

and entrusted with the collection of toll charges in question. A written

contract was entered into on 13.11.97 for the purpose for a period of

one year commencing from 13.12.97 between the 1st respondent and

the State of West Bengal, which at that point of time happened to be

the Executing Agency. It is interesting to note that Clause 1 of the

terms and conditions of the agreement stipulated that the Agency for

toll collection shall be for one year and in no case extension of the

period would be allowed. However, the additional clauses agreed

(Addl. Clause 1) provided that the Agency for toll collection, which is

for one year, "may be extended/fresh agreement may be made

subject to fulfillment" of clauses 8 and 9 of the terms and conditions

of the bid. It also contained a clause for termination for non-payment

of advance bid money (Clause 5) and the power to terminate the

agreement (Clause 9) without showing any cause and call for a fresh

bid, by giving forty five days' notice with similar option to the

collecting agent also to put an end by giving similar notice, if he is

unwilling to continue or unable to offer revised bid due to revision of

rates, if any - and in such eventualities, to handover vacant and

peaceful possession of site, structures and toll gates etc., forthwith on

receipt of the notice of termination.

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Formal inauguration of toll collection was said to have been

made on 12.12.97 and from 13.12.97, the 1st respondent-contractor

commenced regular collections. Though, he was obliged to deposit

seven days bid money in advance, he committed defaults from

inception and started making several pleas to avoid compliance.

Regular and repeated defaults in the deposit of advance bid money

as well as actual bid money are attributed to him, driving the

authorities to issue show-cause notices for taking appropriate action.

Instead of dealing with the officials, the 1st respondent seems to have

approached the Minister-in-Charge, for installment deposits and on

the same date (5.1.98) approached the Minister with offer to pay

Rs.2,90,000/- per day when another stretch of 17 kms of the

Durgapur Expressway upto Dankuni is open for traffic and handed

over to him and for extension of the contract period to 40 years after

the expiry of original period of one year, in addition to making several

other claims in utter disregard and against the terms of the very

written contract. On 15.1.98, the Secretary PW and PW (Roads),

Govt. of West Bengal, appears to have directed the concerned

Engineer not to take penal action against the contractor till his

representations to the Minister are decided. As on 15.1.98, the

arrears of tolls due from him are stated to be Rs.22,07,010/-.

Surprisingly, on 11.3.98 the Joint Secretary PW and PW (Roads)

seems to have issued a Memorandum to the Chief Engineer,

Durgapur Expressway, directing him to allow the contractor to deposit

at the rate of Rs.1.10 lakh per day (an amount far less than the bid

which was not initially accepted as being low) for six months with

effect from 16.12.97 subject to the condition that he would pay at the

original contracted rate after six months and dues will be paid in 10

equal installments. The very Joint Secretary issued another

Memorandum dated 11.3.98, permitting him to deposit bid money

with effect from 16.12.97 and further ordering that the Toll Collector

will be liable to continue to deposit bid money at the rate of

Rs.2,90,000/- per day, if Dankuni and 17 kms of Durgapur

Expressway is opened during currency of the present contract period,

provided the toll charges are increased proportionately. After

referring to the payment schedule permitted under the other Memo

dated 11.3.98, several other concessions like dispensing with the

requirement of deposit of bid money in advance and modifications of

the earlier agreed terms seem to have been also indiscriminately

made, of which strong reliance has been placed for the 1st

respondent on para 15, which read as follows:

"15. Subject to satisfactory performance of the

toll collector during the contract period of one

year, to be decided by PW (Roads)

Department, the Toll Collector will continue to

collect toll charges on Durgapur Expressway

for 30 (thirty) years to start with, beyond the

initial contract period of one year, on a lease

basis, (since the agency has been referred to

as leassee in condition 22 of the Annexure A)

subject to renewal of the lease at the end of

every three years to the satisfaction of PW

(Roads) Department."

Such reckless favoritism seems to have been shown, despite

the fact that as on 10.3.98, the arrears of toll due from 1st respondent

was stated to be Rs.1,41,24,864/-, unmindful of the interests of the

Central Government, the beneficiary on whose behalf alone the State

Government was acting.

The Superintending Engineer concerned seems to have invited

on 21.10.98 sealed bids for the selection of fresh franchise for

collection of toll for the period commencing from 13.12.98 (for the

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period subsequent to the one year duration of the contract with the 1st

respondent).

The 1st respondent appears to have filed on 6.11.98 T.S. No.

273 of 1998, before the Court of Civil Judge, Senior Division,

Burdwan, against the Authorities of the State Government not only

challenging the notice inviting tenders but also for a declaration that

there is a subsisting valid contract by and between the plaintiff and

defendant for 30 years with effect from 16.12.98 by virtue of the

Memorandum dated 11.3.98; for a mandatory injunction to direct the

Authorities to hand over 17 kms stretch of Calcutta-Durgapur

Expressway from Dankuni to Singur as and when ready; and for

permanent injunction restraining the defendant from taking any steps

pursuant to the notice dated 21.10.98 inviting tenders. Relief in the

nature of ad-interim, prohibitory order of injunction also seems to

have been sought. Denying even reasonable time, as it is claimed, to

file objections, interim order appears to have been granted on

12.11.98, permitting, at the same time, the 1st respondent to carry on

toll collection in terms of the agreement dated 19.11.97, as modified

by the Govt. Memos dated 11.3.98 and further directing the

Authorities to hand over the 17 km stretch of the Highway from

Dankuni to Singur, on its completion, for collection of toll on the road

from Palsit to Dankuni. These orders were to be in force till the

disposal of the injunction petition and the same was adjourned to

4.1.99 for hearing with permission to file objections, if any, in the

meantime.

By this time, the Central Government, which came to know of

this litigation, seems to have on 15.2.99 issued instructions to the

State Government to challenge the injunction order passed by the

Court, expeditiously. On 1.7.99, a request seems to have been also

made to the State Government to initiate action to transfer toll

collection arrangement as well the stretch of the National Highway in

question to the NHAI in view of the Notification dated 4.2.99

entrusting the Highway in question to NHAI. On the willingness

expressed by the State on 16.8.99, NHAI also has been directed by

the Central Government to take necessary follow up action, indicating

further that the arrears due from the 1st respondent were said to be

Rs.4,19,75,250/- for 13.12.97 to 12.12.98; and Rs.35,31,210/- for

13.12.98 to 18.1.99. The State of West Bengal appears to have filed

Miscellaneous Appeal FMAT No.2360 of 1999 before the Calcutta

High Court, challenging the order dated 12.11.98. A separate suit for

recovery of the outstanding arrears from the 1st respondent for the

period upto 31.5.99 appears to have been also filed. By a

Memorandum dated 24.8.99, the very Joint Secretary, PW (Roads)

Department, with reference to the issues raised by the Chief

Engineer, Durgapur Expressway, clarified the real position regarding

the nature of action culminating in the issue of memo dated 11.3.98

by stating as hereunder:

"His memo nos. 314-R/DEW dated

21.10.1998 and 317-R/DEW dated

21.10.1998 may be referred to. His

Suggestion contained there regarding memo

under reference has been carefully examined.

M.R. Mondal who having been selected the

toll collector Durgapur Expressway between

Palsit end and intersection with B.T.C. Road

at Singur through process of agreement

submitted certain representations in his letter

No. MRM/RD/97-98/36 dated 05.01.1998 in

terms of certain long term and short-term

concessions and benefit in the operation of toll

collection. After careful consideration the

Govt. in its memo no. 15/PR/N/DEW/IE-12/94

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(V) dated 11.03.1998 placed certain proposals

on the issue for further discussion subject to

approval by the competent authority, Ministry

of Surface Transport, Govt. of India. But M.R.

Mondal did not respond to the said memo and

no amended agreement has also executed.

Thus, memo no. 15/PR/N/DEW/IE-12/94 (V)

dated 11.03.1998 of P.W. (Roads) Deptt. has

no application in the matter of collection of toll

charges from Durgapur Expressway by M.R.

Mondal. This is without any prejudice to legal

cases pending before different courts of law in

the matter of collection of toll charges.

Concerned parties are informed accordingly"

On 3.9.99, FMAT No. 2360 of 1999 came to be disposed of

with a direction to the Trial Court to dispose of the injunction

application, at an early date. By an Order dated 5.10.99, the Trial

Judge vacated the interim injunction and dismissed the injunction

petition both on merits and also for the reason that the interim orders

were obtained by misleading the Court. On 11.10.99, the Authorities

of the State took over possession of the Highway in question and it is

stated that as on 10.10.99 the arrears due from the 1st respondent is

said to be Rs.8,39,08,440/-. Yet, at the intervention of the Minister-in-

Charge, the 1st respondent managed to get directions in his favour

and sought for restoration of the collection work to him. The matter

was pursued before the High Court in FMAT No.3607/99 and by an

order dated 27.10.99, Shri Tarun Kumar Banerjee, Advocate, Ex-

Chief Judge of City Civil Court, Calcutta, was appointed as Receiver

to supervise the collection of toll charges, until further orders. Prior to

this on 11.10.99, an order for maintaining the status quo also appears

to have been made. The Special Leave Petition file by the State

against the order dated 27.10.99 in SLP (C) No.17123/99 came to be

dismissed on 17.12.99 on the following terms:

"Both the parties agree that the receiver after

collecting the amount of toll shall pay the

entire amount to the State. In that view of the

matter, no orders are sought by the learned

counsel for the petitioner. The Special Leave

Petitions are disposed of accordingly.

If there is any objection regarding the

expenses incurred by the receiver or any

other amount spent by him, it shall be open to

the petitioner to approach the High Court."

The grievance of the State Government seems to be that the

Receiver is not able to cope up with the work and there had been

default in not only filing the returns properly but also in the remittance

of the amounts. The public exchequer continued to be the loser and

with the Court Receiver on the job, the State was unable to properly

assess the quantum of collection and the ultimate loss of revenue to

the public exchequer. The Department appears to have taken a

census on the Durgapur Expressway from 8 a.m. on 12.6.2000 to

8 a.m. on 15.6.2000 and it was found that at Azapur near Palsit,

average toll collection should have been Rs.4.95,575/- per day.

Similar census at Dankuni also, the other point of the Highway in

question, revealed that the collection should have been Rs.4,49,565/-

per day. The deposits made by the Receiver seem to have been,

apart from the same being irregular and not systematic, were only in

the range of Rs.70,000/- to Rs.2,25,000/- per day.

The Division Bench of the Calcutta High Court, as indicated

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above, disposed of the appeal on 20.11.2000, by giving certain

directions, both learned Judges rendering separate but concurring

opinions. Hence, the above appeals.

Heard the learned Senior Counsel for the appellants as well as

the respondents. On an overall consideration of the indisputable

facts on record and the submissions made on either side, we are

unable to persuade ourselves to appreciate or approve the manner of

approach adopted, the method of consideration undertaken and

statements on some abstract principles of law, unmindful of the stage

of the proceedings and the serious as well as irretrievable public

detriment that is bound to result from the conclusions arrived at and

directions issued on a perfunctory understanding of the rights of

parties, the statutory provisions of the Act, Rules and Regulations

governing the issue.

The observations of the learned Judges of the Division Bench

on the question of existence of `prima facie case' to justify or warrant

the grant of the prohibitory as well as mandatory directions of the

nature issued in the case, in our view, suffer from serious self-

contradictions, apart from impermissibility of several assumptions

made in this regard on the basis of perfunctory and inchoate

materials which could not provide any basis in law for such claims.

All relevant materials also do not seem to have been adverted to in

their proper and legal perspective and the conclusions arrived at

appears to have arrived at throwing to winds the elementary and

basic principles of law pertaining to the creation of contractual

relationship between the parties. The judgment under challenge also

seems to be oblivious to the obvious facts emanating from records

that those materials relied upon for the plaintiff-contractor do not, in

law, constitute any or sufficient basis of evidence, which could

establish even if not rebutted by evidence adduced on the other side,

the plaintiff's case for an extended term in law. The fact that

substantial mischief or injury is likely to be necessarily caused by the

grant of the order, under challenge, unlike in the case of refusal of the

relief, and that the grant would lead to irreparable loss and damage to

the interest of the State as well as public interest, seems to have

been completely lost sight of notwithstanding the serious violations of

the conditions and terms of the contract between parties.

The learned Judges of the Division Bench of the High Court

ought to have seen that there can be no legal impediment for the

Department to make preparations ahead of the period of expiry of the

one year contract given in favour of the plaintiff to facilitate the

entrustment of the task of collecting the toll in question for the period

subsequent thereto, to a newly selected contractor at competitive

rates. The Division Bench further overlooked the vital legal

proposition that the Memorandum dated 11.3.1998 of the Joint

Secretary cannot, per see, have the legal consequence of bringing

into existence an extended period of contract and that too for 30

years though said to be renewable periodically every three years. On

a proper consideration of the Memorandum dated 11.3.1998, which

was also stated to have been never communicated to the plaintiff,

and the subsequent Memorandum dated 24.8.1999 of the very Joint

Secretary, who issued the earlier Memo, that Memorandum dated

11.3.1998 contained only certain proposals and not any final orders

of extension or renewal of the contract as assumed in the judgment

under challenge. Paragraph 15 of the Memorandum dated

11.3.1998, which has been relied upon as the basis for claiming an

extended period of contact, itself has been misconstrued out of

context though by itself, it cannot have the effect of bringing into

existence such an extended term of contract to warrant or justify the

grant of the directions of the nature in the present case. Even

assuming for consideration without accepting that paragraph 15 of

the Memorandum dated 11.3.1998 had any effect, it can by no stretch

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of imagination be construed to bring into existence ipso facto an

extended period of contract beyond the one year period for which

alone the contract had been given to the plaintiff in this case. An

order passed but retained in file without being communicated to the

plaintiff can have no force or authority whatsoever and the same has

no valid existence in the eye of law or claim to have come into

operation and effect. No reliance can be placed on the same to even

assert a claim based on its contents. If its utility depended upon a

decision to be taken on the performance of the plaintiff by the

Competent Authority, neither the authority could be compelled to take

a decision nor any concrete rights could be said to have been

acquired by the plaintiff, to warrant the grant of the type of directions

given in this case. It is really surprising that the discretionary power

to grant injunction, be it of prohibitory or mandatory nature, has been

availed of to bring into existence and force upon the State a new

contract, which could never have been the intention of the State itself.

The relevant and vital facts apparent on record and the stark

realities of the case go to show that the plaintiff has been entrusted

with the contract for collecting the toll in question only for a period of

one year from 13.12.1997 and that as per the provisions of law

noticed supra, such collection by the Executing Agency

departmentally or through franchisee as in this case, is to be for and

on behalf of the Central Government and the amounts have to be

remitted to the Central Government, which only is the beneficiary of

such collection. When the statutory rules provided for collection

through franchisee and the selection of the contractor only through

public auction under the instructions for specific periods as the

Central Government may issue, at competitive rates and in this case

such grant was made on behalf of the Central Government for one

year initially, there can be no extension granted in law by the

Executing Agency without the prior instructions or approval of the

Central Government. It would be futile for anyone to claim or for

Courts to countenance any claim that without reference to the Central

Government on whose behalf the State Government was acting as

Executing Agency could under the pretext of a proposed extension

proceed to extend the same for 30 years with a provision for

periodical review of three years unmindful of the financial interest of

the Central Government and the ultimate loss that may result to the

public exchequer. The mere fact that if departmentally the collection

is made by the Executing Agency it can be in perpetuity in the sense

that as long as the Executing Agency is continuing to be the Agency,

a person like the plaintiff, who has been entrusted for the task only for

one year, cannot seek umbrage under clause (11) of the Rule. Unlike

contracts entered into in exercise of the executive power of the State

wherein terms can be stipulated and settled at the will and pleasure

of the State, a franchise or contract envisaged for the collection of toll

in question is limited and circumscribed by the provisions of the Fee

Collection Rules, 1997 and what could be only the subject-matter of

an auction, selection and grant on the basis of competitive rates of

the bid cannot be the subject of whim and fancy of any authority,

particularly when public interest and public exchequer of the Central

Government is and will be at stake. Thus, without the concurrence of

the Central Government, which also has to be necessarily

inconformity with the statutory rules governing the same, there cannot

be any extension granted in favour of the plaintiff and the High Court

could not have directed the doing of a thing not permissible in or

contrary to the statutory rules.

It is now an indisputable fact on record that the Central

Government has issued a statutory Notification dated 4.2.1999

published in the Government of India Gazette of even date, in

exercise of its powers under Section 11 of NHAI Act entrusting the

Highways including the stretches in question, to the National

Highways Authority of India and that with the said Notification, the

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status of the State Government as Executing Agency has come to an

end, though the plaintiff, first respondent herein, seeks to place

reliance upon Section 12(1)(a) of the National Highways Act. In our

view, the said provision will have no relevance or application to the

case on hand. The transitional provision in the form of transfer of

assets and liabilities of the Central Government to the authority,

would take in only subsisting rights already acquired or obligations

and liabilities incurred as on the date of publication of the Notification

and that too in accordance with law and not in derogation of law. So

far as the case on hand is concerned, the plaintiff could not

legitimately claim to have acquired any rights by virtue of the

Memorandum dated 11.3.1998 which has no force or sanctity in law

and the Central Government or the NHAI cannot be said to have

incurred any obligation or liability thereby, stepping into the shoes of

the State Government which acted as an Executing Agency for the

period commencing from 4.2.1999. We are unable to appreciate as

to how the Division Bench, in the teeth of concrete and clinching

material that from the inception of the contract the first respondent

plaintiff had been playing foul and has been devising methods and

ways to avoid his responsibilities and has been shown to be guilty of

serious lapses in depositing regularly the amounts due, could have

been given any protection by issuing directions of the nature under

challenge in these appeals. The obvious impracticalities involved in

the appointment of an Advocate-Receiver to supervise such a

stupendous task of the nature in question seems to have also been

overlooked and escaped the attention of the Court and no serious

thought seems to have been also bestowed upon the materials

brought to its notice even about the inability of the Advocate-Receiver

to effectively function to safeguard the financial interest of the public

exchequer.

For the reasons stated above, we are of the view that the

judgments under challenge have not only the effect of conferring an

undue, undeserved and unjustified benefits and rights on the plaintiff,

first respondent herein, but also have the consequence of doing

grave injustice to public interest and great loss to public Revenue.

We are also of the view that not only the order of the Division Bench

dated 20.11.2000 is liable to be set aside, but consequential direction

should be issued to retrieve the situation before any further

irreparable damage is caused to the public exchequer.

Consequently, we order :-

1. The order dated 20.11.2000 of the Division Bench is hereby

set aside and that of the learned Trial Judge is restored.

2. The Advocate-Receiver appointed by the High Court shall

stand discharged forthwith and he shall cease to function as such

from the day the authorities of the NHAI directly assume supervision

and control of the Highway and the collection of toll in question, under

intimation to the Receiver.

3. The authorities of the NHAI, who has jurisdiction and control

over the stretch of the Highways pursuant to the notification, are

hereby authorized and permitted to assume the right to collect and

regulate/control the collection of toll by serving a letter to that extent

on the Advocate-Receiver and on such service, the Advocate-

Receiver shall stand discharged for all purposes, except for rendering

accounts to the collections already made to the authorities of the

NHAI. If there is any dispute in this regard, it shall be worked out by

obtaining appropriate directions from the Calcutta High Court, which

appointed the Receiver.

Consequently, the appeals shall stand allowed on the above

terms. No costs.

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