Widening And Improvement Of An Existing Road Would Be A ‘Bypass’ When Such Improvement Diverts Traffic From Project Road Resulting In Loss Of Toll Revenue: Delhi High Court

The High Court of Delhi has held that development, improvement, widening and construction over an existing narrow highway would be considered to be a ‘bypass’ when such improvement makes the road viable for heavy vehicles and becomes an alternate road, resulting in reduction of the traffic from the project highway, affecting the toll revenue. The bench of Justices Suresh Kumar Kait and Neena Bansal Krishna upheld the setting aside of an arbitral award wherein the tribunal had rejected the claims of the contractor by observing that the widening or development of an existing road would not be a ‘bypass’ even if does lead to reduction in the traffic on the project highway. The Court upheld the finding of the ld. Single Judge that a ‘bypass’ need not be a new road, nor does it necessarily have to have its starting and ending at points proximate to the project highway. A road that offers an alternative to the commuters to avoid the project road would amount to a bypass. The Court held that when the agreement prohibits the creation of any additional toll way or bypass, the purpose of such contractual stipulation is to protect the interest of the contract who builds the highway on negative or BOT basis and the consideration for the contractor in such contracts is the revenue received from the traffic toll, therefore, the upgradation of an existing narrow road to an extent where it becomes viable for heavy commercial vehicles, would be a ‘bypass’ if it leads to diversion of traffic and offers to the commuters an alternative option to avoid the toll, thereby, causing loss of revenue to the contractor. The Court also held that an arbitral award passed after ignoring crucial evidences would be liable to be set aside under Section 34 of the A&C Act. Facts The dispute revolved around a contract involving the National Highways Authority of India (NHAI) and GMR for the development of NH-21 and NH-22 National Highways. NHAI invited bids based on a Detailed Project Report (DPR), which projected annual toll revenue from 2009 to 2024. Bidders who opted for a "negative grant" were required to pay a specific amount to NHAI. GMR's bid was accepted, leading to a Concession Agreement signed on November 16, 2005 Additionally, a State Support Tripartite Agreement was executed among NHAI, GMR, and the states of Haryana and Punjab. Clause 8 of Concession Agreement and Clause 3 of the State Support Agreement prohibited construction of an additional toll way on the same stretch of road and also the construction of any bypass which could divert the traffic. The dispute arose when the State of Haryana improved and strengthened an alternative road, rendering it suitable for commercial traffic. This development was seen as a breach of the Concession Agreement and the State Support Concession Agreement, as it diverted traffic away from the project highway, reducing toll collection. GMR, which had based its bid on the expectation of increased commercial traffic, suffered revenue losses. To quantify their loss in toll collection, GMR engaged the services of M/s ICRA Management Consultancy Service Limited. Their report indicated a significant decline in traffic on the project highway, particularly for commercial traffic, while the alternative road experienced growth in traffic. GMR made several representations and sought relief from NHAI and the State of Haryana, even resorting to dispute resolution mechanisms outlined in the Concession Agreement. However, a resolution was not reached. Subsequently, GMR initiated arbitration proceedings under the Arbitration and Conciliation Act, 1996, claiming a substantial amount from NHAI and the State of Haryana. Arbitral Award The arbitral tribunal rejected the claims filed by GMR by observing that the widening, construction or improvement of the existing roads did not lead to creation of a ‘bypass’ as for a road to be constituted as a bypass it must have its start and end at points proximate to the project road and the existing roads were 23 kms away from the project road. In the arbitral proceedings, GMR had requested the tribunal to direct NHAI to bring on record certain documents which would constitute an admission on their part about the development of the existing road acting as a bypass which resulted in the reduction of the traffic, however, despite several orders from the arbitral tribunal, NHAI did not produce such documents. The tribunal passed the award without pursuing those documents and rejected them as mere inter-departmental communications having no evidentiary value. GMR also produced certain traffic volume reports prepared by IMACS with the consent of NHAI. However, the tribunal rejected them to be of no evidentiary value on the ground that they were in the nature of executive summaries and not the entire reports. Aggrieved by the impugned award, GMR challenged it under ...

Widening And Improvement Of An Existing Road Would Be A ‘Bypass’ When Such Improvement Diverts Traffic From Project Road Resulting In Loss Of Toll Revenue: Delhi High Court

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