NHAI's Contracts With Toll Collectors Not Violative Of National Highways Act and 2008 Rules: Delhi High Court

The Delhi High Court has ruled that the National Highways Authority of India (NHAI) can enter into contracts for the purpose of collecting fee on behalf of the Central Government under Section 7 of the National Highways Act, 1956.

The court said that the contracts which have been entered into by NHAI for the purpose of performing its functions to collect fee on behalf of the Central Government, cannot be said to be violative of Rule 7 of the National Highways Fees (Determination of Rates and Collection) Rules, 2008.

The bench comprising Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad was hearing Public Interest Litigation (PIL), which challenged the process of invitation of tenders by NHAI for collection of toll on plazas and the sharing of the portion of toll with the Toll Collectors/Concessioners. The PIL stated that since a substantial part of the amount collected by way of toll is given to the toll operators, huge losses are being suffered by NHAI which results in deterioration of the quality of services rendered by NHAI, affecting the growth of National Highways in the country.

The PIL thus sought a direction to NHAI to amend its contract with the Toll Collectors and make it compliant with Rule 7 of the 2008 Rules. It further sought a direction to NHAI to recover the additional money which has been earned by the Toll Collectors as a result of non-compliance of Rule 7.

The bench noted that the 2008 Rules, which prescribes the rate of fee to be levied on national highways, provides under Rule 7 that the prescribed and collected fee is to be remitted to the Central Government by NHAI.

The court remarked that nothing had been shown in the writ petition that the fee which is being remitted by NHAI to the Central Government are lesser than the rates prescribed by the Central Government under the 2008 Rules.

“No material had been shown as to how the contracts which have been entered into by the NHAI with concessionaries way hit by the various provisions of the National Highways Act, 1956 or that the toll which is being collected is lesser than the fee fixed under the 2008 Rules. The entire basis of the present writ petition is, therefore, fallacious,” the court observed.

The court observed that Entry 23 of list-1 of the Seventh Schedule of the Constitution of India gives exclusive power to the Parliament to bring legislations in respect of National Highways. Further, Section 9 of the National Highways Act, 1956 confers power on the Central Government to frame Rules and in exercise of the same, the 2008 Rules were framed, the court noted.

It further took note that as per Section 5 of the National Highways Act, the Central Government may, by notification in the Official Gazette, direct that any function in relation to the development or maintenance of any national highway shall also be exercisable by the State Government within which the national highway is situated or by any officer or authority subordinate to the Central Government or State Government.

The court remarked that under the National Highways Act, the responsibility for development and maintenance of national highways, which was with the Central Government, has now been entrusted to NHAI.

The court said that in exercise of the powers under Section 14 of the NHAI Act, which gives NHAI the power to enter into and perform any contract for discharge of its functions, NHAI enters into contracts for the purpose of collecting toll.

“The contracts prescribe the fee which can be retained by the contractor from the toll collected. Nothing has been shown in this writ petition that the fee which is being remitted by the NHAI to the Central Government are lesser than the rates prescribed by the Central Government under the 2008 Rules,” the court observed.

The bench added: “A wholesome reading of Section 14 of the NHAI Act, 1988 and Rule 7 of the 2008 Rules shows that NHAI can enter into contracts for the purpose of collecting fee on behalf of the Central Government for the services and benefits rendered under Section 7 of the National Highways Act, 1956. The contracts which have been entered into by the NHAI for the purpose of performing its functions to collect fee on behalf of the Central Government cannot be said to be violative of Rule 7 of the 2008 Rules which were enacted by the powers conferred under Section 9 of the National Highways Act, 1956.”

The court concluded that the fee collected by NHAI, which is one of its functions prescribed under Section 16 of the NHAI Act, for which purpose it enters into contracts for operating toll plazas, and the fee that is being sent to the Central Government, is in accordance with the 2008 Rules.

“The NHAI is free to enter into contracts for the purpose of collecting toll and that toll that is collected takes into account the fee that is to be paid to the Central Government under the 2008 Rules and also the amount that is paid to the toll contractor under the contract,” the bench ruled, while dismissing the petition.

Case Title: Rakesh Agrawal vs National Highway Authority of India and Anr.

Citation: 2023 LiveLaw (Del) 562

Counsel for the Petitioner: Mr. Praveen Agarwal, Advocate

Counsel for the Respondent: Mr. Santosh Kumar, Standing Counsel for NHAI with Mr. Daksh Arora and Mr. Prakhar Prakash, Advocates. Ms. Radhika Bishwajit Dubey, SPC with Mr. Siddhant Gupta, GP for R-2/UoI.

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