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M.C. Mehta Vs. Union Of India & Ors, on 13th May 2016; Supreme Court of India: Case Brief – Read Judgement

Violation of the terms of contract leads to Civil action; Court found availability of arbitral clause, hence matter referred Arbitrator
I.A. Nos.363-364, I.A No.425 in I.A. No.364 in I.A. Nos.344, 355, 362 In Writ Petition (Civil) No.13029 of 1985
Bench: Chief Justice of India T. S. Thakur; Justice R. Banumathi

Case Brief: In the present case, there are several applications preferred by the Consortiums of Banks and others. And facts leading to the present applications include that the Haryana State Industrial and Infrastructure Development Corporation Limited- HSIIDC earlier invited offers for developing of 135.650 kms long Kundil- Manesar- Palwal Expressway in the State. As such, the KMP Expressways Limited (concessionaire) was set up by the three companies which were issued the 2005’s letter of acceptance. Then the HSIIDC and said concessionaire entered into a concession agreement, 2006 which was having validity of three years from date of appointment. This concessionaire raised loan from consortium of banks. Besides, loan agreements which were entered into between concessionaire and consortium of banks, there was also a notable tripartite agreement entered into between HSIIDC, Concessionaire and IDBI Bank as lenders’ agent. As there was delay in execution of work and the concessionaire was unable to achieve the commercial operation of the project, the Apex Court then appointed the Environmental Protection Control Authority Committee- EPCA for expediting the project. That time, it was agreed that an amicable substitution of the existing concessionaire shall be made so as to expedite the project. As such the M/s. KCC Buildcon Pvt. Ltd.- Dilip Buildcon Ltd. (JV) and ESSEL were selected to carry on the work which was divided among them into two parts.

 Moreover, the applicants herein were claiming the directions for amending the concession agreement between HSIIDC and ESSEL, for including a suitable condition for taking over lenders’ dues and other amounts due to the senior lenders. However, this bench found that no such relief can be granted by an order of this Court, as the same would amount to variation of the contractual terms between the HSIIDC and ESSEL. Moreover, the lender banks were found complaining about the violation of the terms of the tripartite agreement between them and concessionaire, but this bench saw that such disputes to be dealt with by the civil court. But here, fortunately, the parties were not required to resort to any civil action as their tripartite agreement contains clause 7.11 as arbitration clause, under which the disputes between parties to be referred to the arbitrator for adjudication, and the parties here already did same. As such suitable arrangements were made by the bench for referring the matter before the arbitral tribunal and also asked the parties to appear and claim their interests in the matter before that tribunal.

Read the Judgement: M.C. Mehta Vs. Union Of India & Ors

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