Delhi High Court

Delhi High Court: The Division Bench of Satish Chandra Sharma, C.J. and Subramonium Prasad, J.* dismissed the Letters Patent Appeal and upheld the decision of a Single Judge that the appellant could not invoke the extraordinary writ jurisdiction of the High Court under Article 226 of the Constitution and the disputes arising between the parties should be resolved in accordance with the Contract Act and in appropriate civil proceedings before the appropriate Court.


The respondent floated a tender inviting bid from interested parties to collect Toll Tax and Environment Compensation Charge (“ECC”) from specified commercial vehicles at the toll plazas/posts/barriers bordering Delhi. The appellant submitted its bid for the said tender and was declared as the successful bidder. Thereafter, in 2017, the appellant and the respondent entered into a Toll Tax & ECC Collection Agreement (“Contract Agreement”). It was stated that as per the terms of the Contract Agreement, the appellant was entitled to collect penalties from specified commercial vehicles evading toll tax by using free lanes. The appellant wrote multiple letters to the respondent informing them of several vehicles which were using free lanes to avoid paying toll tax, and that the appellant was unable to deploy its officials on the free lanes to collect toll tax and penalty. In 2018, the Eastern Peripheral Expressway was opened for public use and later, a strike was called by the All-India Motor Transport Congress, which the appellant stated to be a force majure event and thus claimed a set off of Rs 5.96 Crores from the toll tax payable by the appellant.

Further, the appellant submitted a claim for the loss suffered by it due to restrictions on entry of vehicles in Delhi and collection of Tax and ECC. For this, a survey was conducted and as per its report, a daily average of 35,315 vehicles were evading payment of toll tax by using free lanes. Therefore, the respondent issued a demand notice upon the appellant to deposit Rs. 450.69 crores and a penalty amount of 0.1% per day, that is, 36.5% per annum. Thereafter, the appellant filed a writ petition seeking adequate directions to the respondent to enable the appellant to collect toll tax/penalty from specified commercial vehicles evading the same using free lanes.

A Single Judge dismissed the writ petition by holding that the writ jurisdiction of this Court could not be invoked by a party who wanted to avoid the contractual obligations or attempts to modify the terms of the contract. A Single Judge further held that the writ court should not exercise its powers under Article 226 of the Constitution which had the effect of obstructing the exercise of contractual rights and a Single Judge also held that the writ petition was an attempt by appellant to re-write the contract and that the appellant had not been able to make out the case as to why the writ court must exercise its jurisdiction under Article 226 of the Constitution of India, and that the conduct of the respondent was so arbitrary or discriminatory so as to force a writ court to interfere in the facts and circumstances of the present case. The decision of a Single Judge was appealed before this Court.

Analysis, Law, and Decision

The Court observed that “the traditional view had always been that in contractual matters between the States and private parties, the Courts must not ordinarily exercise its jurisdiction under Article 226 of the Constitution. However, when instrumentalities of the State act completely contrary to the parameters of Article 14 of the Constitution and the action of the State was arbitrary and discriminatory then the writ courts do interfere by exercising jurisdiction under Article 226 of the Constitution. The Court relied on Shrilekha Vidyarthi (Kumari) v. State of U.P., (1991) 1 SCC 212 wherein the Supreme Court held that “it was difficult and unrealistic to exclude the State actions in contractual matters, after the contract had been made, from the purview of judicial review to test its validity on the anvil of Article 14 of the Constitution. This decision was relied on by the Supreme Court in M.P. Power Management Co. Ltd. v. Sky Power Southeast Solar India (P) Ltd., (2023) 2 SCC 703.

The Court further opined that the award of contract whether by a State or by a private party was a commercial transaction having its own terms. Therefore, after participating in the tender and after being a successful bidder, it was not open for the person who was the successful bidder to turn around and state that the clauses were unfair or had become unworkable as the person who bids for the contract must consider the risks that could occur in future and resort to available remedies under the contract. The parties could sit at a table for negotiation, and they might go for a novation of contract. If such discussion fails, then the parties must invoke the remedies available under the contract and prove their case by leading oral and documentary evidence.

The Court observed that in the present case, there was a Dispute Resolution Mechanism under the Request for Proposal (“RFP”) and in accordance with this, the dispute between the parties was decided by the Competent Officer and an Order was passed, by which the claims of the appellant were rejected. Further, the appellant submitted that the Competent Officer was not an independent adjudicator, and therefore, the decision-making process was faulty and flawed. Thus, the Court opined that “a Single Judge had rightly held that in the case of contracts entered into between the State and an individual/entity pursuant to floating of tenders, the mutual rights and liabilities of the parties were governed by the terms of the contracts and the laws relating to the contracts and there was no compulsion on anyone to enter into these contracts and it was voluntary on both sides. Therefore, there could be no question of the State power being involved in such contracts and the State did not guarantee profit to the licensees in such contracts and there was no warranty against incurring losses. It was a business for the licensees and whether they made profit or incurred loss was not a concern of the State”.

The Court further noted that as per the RFP, the appellant had been allowed adequate access to the Site and the Contract facilitates for inspection and review of the site and that the appellant would not be entitled to any compensation, rebate or reduction in Toll Collection Contract Fee on account of change or variation in traffic pattern, volume or intensity for any reason. The Court further noted that the agreement entered into between the parties also provided that the appellant had agreed that the RFP was a part of contract, and its terms would govern the relationship between the appellant and the respondents.

The Court opined that it was a matter of common knowledge and common prudence that the Eastern and Western Peripheral Expressways project had been in consideration before the RFP was brought out and persons who were to bid for the contract knew of the impact on the volume of traffic into Delhi, the opening of the expressways would have. It was, therefore, not appropriate for the appellant to state that a subsequent event has reduced the traffic on the roads leading to a decrease in revenue and it was not open for the appellant to expect that the State would show indulgence by reducing the amount payable.

The Court noted that the RFP provided for instructions to applicants/bidders wherein it was provided that prior to the submission of the bid, the applicants/bidders were advised to visit and examine the toll collection point and their surroundings to obtain and ascertain for themselves all technical data, demands or any other information necessary for preparing their proposal. It was also provided that the bidders should have full knowledge of the site conditions whether physically inspected or not. The RFP further provided that prospective bidders must conduct their individual and separate site inventories and traffic services as deemed necessary to verify the traffic volume. Therefore, the Court opined that the appellant could not claim that it did not have knowledge of the toll sites and the traffic inflow. The Court also noted that the RFP provided that the selected bidder at its own costs and expenses was responsible for charging a penalty from the commercial vehicles which were evading toll tax. Thus, the Court opined that the appellant could not claim that the respondents did not permit or provide adequate authorization or personnel to the appellant to charge penalty from such specified commercial vehicles which were evading toll tax and ECC by using free lanes.

The Court therefore opined that the decision of a Single Judge of not entertaining the writ petition under Article 226 of the Constitution did not require any interference. The Court further stated that the issues raised could be adjudicated only by leading evidence before an appropriate forum and a writ court was not the appropriate forum for the same”. Thus, the Court dismissed the appeal and held that a Single Judge had rightly held that the appellant could not invoke the extraordinary jurisdiction under Article 226 of the Constitution and the same did not warrant any interference by this Court.

[MEP Infrastructure Developers Ltd. v. South Delhi Municipal Corporation, 2023 SCC OnLine Del 2088, decided on 10-4-2023]

Advocates who appeared in this case:

For the Appellant: Dushyant Dave, Senior Advocate and Rajiv Shankar Dvivedi, Mahesh Agarwal, Karan Luthra, Aarashi Tiku, Akshat and Rishabh Jain, Advocates;

For the Respondents: Sanjay Vashishtha, Standing Counsel and Phagun Kalra and Vishal Kumar, Advocates.

*Judgment authored by: Justice Subramonium Prasad

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