1 WP-2605-15
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 2605 OF 2015
Mumbai Metropolitan Region
Development Authority,
an authority established under
the Mumbai Metropolitan
Region Development Authority
Act, 1974, and having
its administrative office at
Bandra Kurla Complex,
Bandra (East), Mumbai 400051. .. PETITIONER
Versus
1 The Fare Fixation Committee,
comprising Mr.Jusice E.Padmanabhan
(Retd), Mr.T.K.Vishwanathan (Retd)
and Mr.Jayanth Kumar Banthia,
through the Ministry of Urban
Development, Union of India
2 Union of India, through the
Ministry of Urban Development,
Nirman Bhavan Maulana Azad Road
New Delhi 110001
3 State of Maharashtra, through
the Department of Urban
Development, Mantralaya
Madam Cama Road,
Mumbai 400032.
Tilak
::: Uploaded on – 04/12/2017 ::: Downloaded on – 05/12/2017 01:50:29 :::
2 WP-2605-15
4 Mumbai Metro One Private Limited
a Private Company incorporated
under the provisions of the Companies
Act, 1956 and having its registered
Office at E-4(i) 3rd flor, MIDC area,
Marol, Andheri (East)
Mumbai 400093. .. RESPONDENTS
…
Mr.Aspi Chinoy, Sr. Advocate with Dr.Birendra Saraf, Mr.Ayush
Agarwala, Ms.Akriti Sarkar, Mr.C. Nageshwaran, Aditya
Thakkar i/b Khaitan Co. for the petitioner.
Mr.Dushyant Kumar, AGP for the State.
Mr.Vijay Kantharia with Mr.D.P. Singh and Mr.Anil Yadav for
Union of India.
Mr.Janak Dwarkadas, Sr. Advocate with Mr.Chirag Kamdar,
Mr.D.J. Kikalia, Tushaar Kikalia i/b M/s.Mulla Mulla for
respondent no.4.
CORAM: DR. MANJULA CHELLUR, CJ.
M.S.SONAK, J.
RESERVED ON: 31st OCTOBER, 2017
PRONOUNCED ON: 4th DECEMBER, 2017
Tilak
::: Uploaded on – 04/12/2017 05/12/2017 01:50:29 :::
3 WP-2605-15
JUDGMENT (Per Dr.MANJULA CHELLUR, CJ):
1 The present petition is filed challenging the
recommendations and the decision made by the Fare Fixation
Committee (hereinafter referred to as ‘FFC’) for increase in
the Mumbai Metro Fare from Rs.9 – Rs.13 in the year 2014-
15 which came to be increased to Rs.10 – Rs.110 from
January 2015.
2 The petitioner before us is Mumbai Metropolitan
Region Development Authority (hereinafter referred to as
‘MMRDA’). It is an authority established under Mumbai
Metropolitan Region Development Authority Act, 1974 which
is mainly concerned with the Planning, Co-ordination and
Supervision of proper, orderly and rapid development of areas
in the Metropolitan Region of Mumbai. It is also under an
obligation to execute the plans, projects and schemes for such
development as well as matter connected therewith. The
petitioner – MMRDA is also the authority for implementing
Metro project i.e. Versova-Andheri-Ghatkopar Corridor Mass
Rapid Transit System (Metro project). This came to be
Tilak
::: Uploaded on – 04/12/2017 05/12/2017 01:50:30 :::
4 WP-2605-15
planned by the State Government in order to absolve chaotic
conditions faced by users of public transport i.e. BEST buses
and local trains.
3 The respondent no.1 is the Fare Fixation
Committee constituted by second respondent – Union of India
in terms of Section 34 of the Metro Railway (Operation and
Maintenance) Act of 2002 {for short known as ‘Metro Act’}.
The first respondent was constituted by an order dated 7 th
April 2015 to determine the fares for Metro project.
Respondent no.3 is the State of Maharashtra which has
constituted/designated the petitioner as Project
Implementation Agency for Metro project. Respondent no.4 –
Mumbai Metro One Pvt.Ltd (for short known as MMOPL) is a
private company jointly incorporated by M/s.Reliance Ltd,
Veolia Transport S.A. and the MMRDA and are holding 69%,
5% and 26% shareholding respectively. The MMOPL is a
Special Purpose Vehicle (SPV) to undertake the business of
designing, building, operating and maintaining the Metro
project on Build, Own, Operate and Transfer (BOOT) basis,
Tilak
::: Uploaded on – 04/12/2017 05/12/2017 01:50:30 :::
5 WP-2605-15
subject to and in accordance with the terms of the Concession
Agreement which came to be entered into between MMRDA
and MMOPL.
4 It is not in dispute that MMRDA as Implementing
Agency for Metro project came out with a Detailed Project
Report (DPR) providing for actual commencement of
operations in 2011, and stipulated that the Metro fares should
be fixed at 1.5 times the ordinary (Non Air-conditioned) BEST
bus fares. This corresponds to fare ranging between Rs.6 to
10 in 2011 to be revised by 11% every four years. The DPR
also estimated Ridership figures ranging from 5.66 lakhs per
day in 2011 to 12.06 lakhs passengers per day in 2041. An
international competitive bidding/global tenders came to be
invited by the MMRDA on 21st August 2004 by a notice. This
was an invitation for proposal of Metro Project on BOOT basis
subject to terms and conditions specified in the request for
proposals. The project was to be implemented on
Private/Public Partnership (PPP) basis. Some of the salient
features in the proposals were mentioned as under :
Tilak
::: Uploaded on – 04/12/2017 05/12/2017 01:50:30 :::
6 WP-2605-15
(a) The Concession Agreement was to be for 35
years, including the construction period of five
years.
(b) The Metro was to operate on an East-West
corridor of 11.50 kms along 12 stations.
(c) The estimated Ridership was 5.66 lakhs per day
opening at the beginning in the year 2011 and
this was to enhance upto 12.06 lakhs per day at
the end of 30 years term in 2041 from 2011.
(d) The Bidders were, however, required to make
their own estimates of Ridership, financial and
other details.
(e) The initial fare was fixed between Rs.6 – 8 – 10
for the year 2003-04 and was subject to upward
revision by 11% at every four years.
(f) Each of the bidder was required to submit a
Detail Business Plan indicating arrangement of
finances, operation and maintenance plan,
sources and usage of the funds, projected
annual income statement, cash flow statement
etc.
5 The project/concession was to be awarded to the
qualified Bidder whose tender complied with the required
minimum capital contribution, funding – Viability Gap
Funding (VGF) subject to above fare terms.
Tilak
::: Uploaded on – 04/12/2017 05/12/2017 01:50:30 :::
7 WP-2605-15
6 Apparently, amongst the other bidders, the fourth
respondent consortium comprising Reliance Energy Ltd and
Veolia Transport S.A on 10th January 2006 submitted its
complete business plan along with the bid. It is relevant to
mention that subject to all technical and commercial
considerations being fulfilled, the bidder who ever seeks
minimum finance contribution from MMRDA and the State, in
the form of Viability Gap Funding was to be considered for
the award of Concession Agreement. The Consortium bid
sought Rs.1251 crores which after several negotiations was
reduced to Rs.650 crores.
7 After evaluation of all the bids based on the
recommendations made by MMRDA, the State by resolution
dated 14th June 2006 awarded the concession to the
Consortium. A Letter of Intent dated 20 th June 2006 was
accordingly, issued to the Consortium.
8 On 7th March 2007, Reliance Comex was declared
as the successful bidder and MMRDA executed a Concession
Tilak
::: Uploaded on – 04/12/2017 05/12/2017 01:50:30 :::
8 WP-2605-15
Agreement with their SPV – MMOPL for implementation for
Metro project on BOOT basis. By virtue of this Concession
Agreement, MMOPL was contractually required to levy and
collect fare from the users of Metro project only in accordance
with the Schedule – L i.e. Rs.6 – 8 – 11 for the year 2011 to be
enhanced by 11% every fourth year. It is not in dispute that
a provision was made for upward revision of the fare beyond
the stipulation in Schedule-L in the event of “any
unanticipated rise in the operating costs of the Metro project”.
9 The said Metro Project which was to be made
operational in the year 2011, was actually made operational
only in the year 2014 – 15. Apparently, a dispute between the
parties is pending for adjudication in arbitration between the
parties as to which of them is liable for delay and who should
bear the escalation in the project costs from estimate of
Rs.2356 crores as contemplated in the bid raised to Rs.4321
crores alleged to have been costed for completion of the
work. The independent consultant one Louis Burger
Consulting Pvt. Ltd in its independent final report dated 25 th
Tilak
::: Uploaded on – 04/12/2017 05/12/2017 01:50:30 :::
9 WP-2605-15
September 2014 attributed various causes for the delay, as
claimed by MMOPL to the acts on omission and commission
on the part of MMOPL itself. However, the MMOPL disagrees
with the report and blames MMRDA for the delay.
10 A fare order determining the maximum fare which
could be charged from the rider using Metro system came to
be issued by the State on 3rd September 2013. In terms of this
order, as reflected in the Fare Schedule-L to the Concession
Agreement at Rs.6 – 8 – 10 for the year 2011 which has to be
enhanced by 11% every fourth year. Union of India by order
dated 18th November 2013 extended the application of the
Metro Act to the project which includes, inter alia, the
Constitution of a Fare Fixation Committee for the purpose of
recommending fare for carriage of passengers by Metro
Railway. In terms of Metro Act, MMOPL claims to have
become “Metro Railway Administration” as defined under the
Metro Act. MMOPL also assumes the right to determine the
initial fares under the Metro Act. A Meeting of Board of
Directors came to be held on 29th May 2014 wherein MMOPL
Tilak
::: Uploaded on – 04/12/2017 05/12/2017 01:50:30 :::
10 WP-2605-15
sought to unilaterally revise or increase the initial fares
stipulated in the Concession Agreement from Rs.9 – 13 for the
year 2014-15 to Rs.10 – Rs.40/-. The Directors who were
nominated by MMRDA opposed and voted against the said
resolution.
11 As stated above, the commercial operation of the
Metro project commenced on 8th June 2014, and MMOPL
charged an introductory fare at Rs.10/- and achieved a
Ridership of 3.58 lakhs per day.
12 When unilateral enhancement in the initial fare
came to be made by MMOPL, a dispute arose between
MMRDA and MMOPL which came to be submitted to
arbitration. MMDRDA also initiated Arbitration Petition in
1096 of 2014 under the Arbitration and Conciliation Act,
1996, seeking interim relief restraining the implementations
of the resolution of the Board dated 29th May 2014, revision
of fares were unilaterally done.
Tilak
::: Uploaded on – 04/12/2017 05/12/2017 01:50:30 :::
11 WP-2605-15
13 This petition came to be dismissed by learned
Single Judge on 24th June 2014. In the Appeal before the
Division Bench, MMOPL made a statement that it would
charge fare between Rs.10 to Rs.20 as an interim measure.
The Division Bench also ordered that the Union of India
should be impleaded, so also the State so as to direct the
expeditious constitution of FFC in terms of Section 34 of the
Metro Act. Ultimately, by an order dated 8th January 2015,
the Appeal came to be dismissed by the Division Bench.
14 SLP No.7034 of 2014 came to be filed wherein a
direction was given on 16th March 2015 for Constitution of
FFC for determination of fares by end of April 2015. This
period again came to be extended upto July 2015. However,
as an interim measure, MMOPL was given liberty to charge
increased fare, subject to condition that 50% of the
differential amount be deposited with the Registry of this
Court on weekly basis. This condition came to be modified
subsequently by order dated 7th August 2015. Since January
2015, MMOPL has been charging fares between Rs.10 to
Tilak
::: Uploaded on – 04/12/2017 05/12/2017 01:50:30 :::
12 WP-2605-15
Rs.40. By a notification dated 7th April 2015, Union of India
constituted Fair Fixation Committee comprising of Mr.Justice
E. Padmanabhan (Retired), Mr.Justice P.K Vishwanathan
(Retired) and Mr.Jayanth Kumar Banthia (Ex. Chief
Secretary) in terms of Section 34 of the Metro Act to
recommend fare for Metro project. Apparently, in terms of
Section 37 of the Metro Act, recommendations made by FFC
is binding on the Metro Administration.
15 The FFC by order dated 30th April 2015, appointed
three experts bodies/committees i.e. Mr.G. Raghuram,.
Ramakrishna T.S, Prashanath Udayakumar of IIM,
Ahmedabad. The Welingkar Institute of Management and
Development and Research and thirdly Sanjeev Kumar
Lohiya, IRSE to assist FFC to arrive at the fares to be
recommended.
16 On 24th April 2015, MMOPL made an application
seeking revision of fares. MMRDA also made application/
responses on 7th May 2015 followed by 22 nd May 2015 and
Tilak
::: Uploaded on – 04/12/2017 05/12/2017 01:50:30 :::
13 WP-2605-15
10th June 2016. The above said three Committees submitted
their reports. In addition to the three reports of three
different experts, a report from Price Water House, Cooper
Pvt.Ltd was also placed on record. After analyzing these
reports, the FFC came out with the impugned order dated 8th
July 2015.
17 In the impugned order, the majority members
comprises of Mr. Justice E.Padmanabhan (Retd.) and T.K.
Vishwanathan (Retd) have recommended fare revision from
Rs.9 to Rs.13 (as in the year 2014-15) to Rs.10 – Rs.110 from
the said year onwards. The minority member of the
Committee Mr. Jayanth Kumar Banthia has recommended
fare revision of Rs.18 – Rs.26. Aggrieved by the same,
MMRDA has filed the present Writ Petition challenging the
impugned decision of the FFC dated 8th July 2015.
18 Mr.Aspi Chinoy, learned Senior Counsel arguing
for the petitioner – MMRDA by referring to provisions of
Section 33 and Section 103 of Metro Act, contends that FFC
Tilak
::: Uploaded on – 04/12/2017 05/12/2017 01:50:30 :::
14 WP-2605-15
has totally misinterpreted those provisions, and further argues
that, at the most, those provisions empowered FFC to
recommend the Metro fares. According to him, while
recommending Metro fares, FFC has to necessarily apply the
terms and conditions of Concession Agreement dated 7 th
March 2007 i.e. the rates and the formula for such revision.
According to him, FFC totally ignoring the terms and
conditions of Concession Agreement dated 7th March 2007,
and misconstruing the provisions of Metro Act, has arrived at
the impugned fare, and this amounts to excluding vital and
relevant considerations.
19 In the alternate, he submits that even though the
Concession Agreement may not be per se binding on the FFC,
nevertheless, the terms and conditions of Concession
Agreement which consists of vital and important relevant
material, ought to have been taken into consideration by the
FFC. To substantiate his contention, he brings to our notice
the DPR, RFP, and the Business Plan submitted by consortium
for the purpose of bidding process. Therefore, his main
Tilak
::: Uploaded on – 04/12/2017 05/12/2017 01:50:30 :::
15 WP-2605-15
impetus is that FFC has unjustifiably excluded the terms and
conditions of Concession Agreement. According to Mr.Chinoy,
learned Senior Counsel for the petitioner, by excluding the
relevant material, as stated above, FFC has completely
destabilized the integrity of the tender process, by which the
consortium was awarded the contract for the Metro project.
He submits that only on the basis of the Business Plan,
consortium could secure the tender in their favour, especially
having considered the financial and technical issues
mentioned in the Business Plan. Therefore, the impugned
decision of the FFC would impact the terms and conditions of
the Concession Agreement and it amounts to totally ignoring
the binding effect of Concession Agreement, including the
term that during the tenure of the project, the tenderer will
charge from the commuters the fare at a specified rate,
including the revision of the fares as per the specified
formulae in the agreement.
20 In terms of DPR and tender documents, the fares
were fixed and only the ridership would vary. In other words,
Tilak
::: Uploaded on – 04/12/2017 05/12/2017 01:50:30 :::
16 WP-2605-15
the bidder along with the private partner was to earn profits
by maintaining the fixed fares, but only through increased
ridership. Mr.Chinoy submits that this was the precise
manner in which the Metro project was conceived as a Mass
Rapid Transit System. The impugned decision, by which,
fares have been increased is by many folds compared to the
fares agreed between the parties. Therefore, this would
virtually deprive the public from the benefits of the Metro
project. According to him, if the impugned decision is
allowed, it would change the character of the project thereby
frustrating the very purpose of Metro project under which
several benefits in the form of VGF, public properties and
construction rights over the public properties came to be
granted to the project proponent. Mr.Chinoy submits that the
fares were to correspond to 1.5 times of ordinary, non-air
conditioned bus fares, but the recommended fares by the FFC
is 10 times more than such fares agreed under the terms of
Concession. Therefore, he contends that it deserves to be set
aside.
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:30 :::
17 WP-2605-1521 To substantiate his contentions, Mr.Aspi Chinoy,
learned Senior Counsel brings out several facts, which
according to him, are irrelevant material taken into
consideration by FFC. In other words, according to him, it
appears that FFC was carried away and impressed by the
contentions brought before FFC by MMOPL that the fares
stipulated in the Concession Agreement were on the basis of
the fact that VGF would be Rs.1,251 crores, and the estimated
costs of the construction of the Metro project would be at
Rs.2356 crores. Mr.Chinoy submits that upon mutual
negotiation, the consortium reduced the VGF from Rs.1252
crores to Rs.650 crores. Since there is a serious dispute by
both the parties with regard to the fact who are responsible
for such delay and the quantum of costs overruns, as well as
reasons for such cost being overrun, the dispute between the
parties is pending adjudication in arbitration proceedings. In
the mean while, there was no justification for FFC to take into
consideration the facts and figures submitted by MMOPL. In
other words, according to learned Senior Counsel, there is no
admission of figures projected by the Project proponent
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:30 :::
18 WP-2605-15holding MMRDA as responsible for the cost overruns.
Learned Senior Counsel Mr.Cninoy submits that this is
nothing but putting the cart before the horse, which would
cause immense detriment to the interest of the commuter
public.
22 Learned Senior Counsel also contends that the
impugned decision of the FFC is vitiated by non-application of
mind, failure to take into account relevant considerations, but
taking irrelevant considerations, therefore, it has led to
perversity in the order. Learned Senior Counsel brought to
our notice the details with reference to the opinion of the
experts in their reports with regard to the fares vis-a-vis
ridership, and contends that even such reports have been
misconstrued by FFC, and therefore, there are errors
apparent on the face of record. According to learned Senior
Counsel, FFC failed to notice that for the first eight years of
the operation of the Metro, MMOPL was not even expected to
make any profit or offer any returns to the stakeholders. The
impugned decision rather recommends exclusive and
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:30 :::
19 WP-2605-15disproportionate fares which will change the very complexion
of the Metro project which is meant to be a Mass Rapid
Transit System.
23 Mr.Chinoy, learned Senior Counsel submits that
the FFC proceeds on the misdirection that the Metro project
was an ordinary Greenfield Commercial Project, and
therefore, its fare was required to cover all operational costs,
repayment of loan, depreciation, return of share holding etc.
right from the first year of its operation. He further submits
that because of FFC misdirecting itself to consider and realize
the above fact, and prompted the impugned decision in
arriving at the enhanced fare of Rs.9 to Rs.19 and Rs.10 to
Rs.110. According to Mr.Chinoy, most of the contentions
raised and most of the materials produced by MMRDA, in its
letter dated 7th May 2015 and 10th June 2015 are totally
ignored by FFC rather has proceeded to make its
recommendation based on irrelevant considerations like the
reduced offer of VGF and the cost overruns.
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:30 :::
20 WP-2605-1524 According to learned Senior Counsel, the
impugned decision suffers from serious perversity since the
majority, while stating that lower average fare was being
recommended, has in fact, recommended a substantially
higher fare. Even in the brief reasoning, there are serious
contradictions that can be seen from the report of the
majority, is the stand of the learned Senior Counsel.
According to him, virtually the FFC ignored the
contributions made by the State and the MMRDA. Therefore,
for all these reasons, the impugned decision deserves to be set
aside on the grounds of perversity based on unreasonable
considerations. Mr. Chinoy further submits that the decision
has virtually offered a bonanza to MMOPL to charge
exorbitant fares, that too, on irrelevant considerations. He
pointed out that the fares are so exorbitant that even the
MMOPL in its pleadings has referred to them as "Tariff
shock", and resolved not to implement the same to the extent
recommended by the FFC. According to him, if it is left to
MMOPL to charge the fares from commuters at the
recommended rate, then the very public interest will be a
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:30 :::
21 WP-2605-15causality since there might be no restraint upon MMOPL to
increase the fare upto the recommended rate at any time.
25 To substantiate his contention, that FFC is neither
an expert body, nor can its functions be regarded as legislative
in character, proceeds to rely on several decisions which are
referred to below, opining that FFC was dealing only with a
particular situation and a particular entity. He relied upon
(1) Union of India Vs. Cynamide India Ltd. Anr.
(1987) 2 SCC 720.
(2) Shri Sitaram Sugar Company Limited vs. Union of
India
(1990) 3 SCC 223(3) Rohtas Industries vs. S.D. Agarwal
1969(1) SCC 325(4) C.I.T. vs. Mahindra and Mahindra Limited
(1983) 4 SCC 392.26 Mr.Chinoy submits that the principle of
Wednesbury unreasonableness, will have to be invoked in the
present situation, and the impugned decision has to be
interfered with.
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:30 :::
22 WP-2605-1527 According to Learned Senior Counsel, Mr.Chinoy
that even if the impugned decision is regarded as legislative
or quasi legislative, judicial review applying the touchstone of
Wednesbury unreasonableness, is not ruled out. According
to him, since the impugned decision is vitiated by illegality
and irrationality and even procedural impropriety, it is a fit
case where the relevant considerations have been ignored by
taking into irrelevant considerations, therefore, Wednesbury
unreasonableness principle have to be applied.
28 According to him, the impugned decision is
nothing, but a decision without acquiring any authority, but
based on incorrect facts, rather than correct facts. Therefore,
according to him, if only correct principles could have been
applied, FFC would have arrived at a right conclusion. The
impugned decision, according to him, is manifestly
unreasonable and suffers from perversity. Therefore, on all
these grounds, judicial review is possible and permissible.
Therefore, it ought to be an exercise by interfering with the
impugned decision. Mr. Chinoy, after making his submission
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:30 :::
23 WP-2605-15has also filed notes of arguments, re-iterating the above
contention and has sought the impugned decision to be
quashed and set aside.
29 Per contra, learned Senior Counsel Mr.Dwarkadas
arguing for MMOPL, at the outset, questions the locus standi
of MMRDA to maintain the present petition on the ground
that MMRDA being a joint venture partner in MMOPL having
stakes of 26% equity shares, and therefore, contends that as a
shareholder, MMRDA has no right whatsoever, in law to
challenge the actions of MMOPL, unless such challenge is
based on the provisions of Companies Act of 1956. According
to him, a shareholder can speak only through the Company as
its member. It is further contended that once Metro Act came
into existence, MMRDA ceases to be an implementation
agency. Therefore, for want of locus standi, petition deserves
to be dismissed, is the stand of MMOPL. Reliance is plased on
Daman Singh Vs. State of Punjab 1 to substantiate the above
contention.
1 (1985) 2 SCC 670
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:30 :::
24 WP-2605-1530 It is argued that under the RFP, it was accepted
that project of this magnitude requires joint efforts by all the
persons concerned. Minimum assistance from the MMRDA by
way of financial contribution if required during the period of
construction of the Metro project is envisaged. This was for
the purpose of assessment of type of assistance. Form 29
prescribed the financial proposal. The financial proposal in
Format 29 is entirely different from the business plan referred
to by the MMRDA, therefore, according to the learned Senior
Counsel Mr.Dwarkadas, Business Plan was not at all required
and relevant for the purpose of evaluation of the bids or
determining the award of contract.
31 The contract was to be awarded solely on the
basis of the quantum of financial assistance required by the
bidder or the VGF expected by the bidder from the MMRDA
or the State. According to learned counsel, from reading of
clause 27(3) of the RFP, this is clear. Therefore, Mr.
Dwarkadas contends that repeated reference made by
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:30 :::
25 WP-2605-15learned Senior Counsel Mr.Chinoy to the Business Plan is
nothing but misplaced argument since the business plan or
the projections therein are totally irrelevant, so far as not only
with regard to bid evaluation process, but also the fare
determination made by FFC.
32 Learned Senior Counsel Mr.Dwarkadas further
submits that in fact, the consortium had sought for VGF of
Rs.1251 crores as against the estimation of the cost of the
project at Rs.2356 crores. However, for reasons which are
entirely attributable to the MMRDA, the construction of
project was delayed thereby the cost of the construction also
rose to Rs.4260 crores.
33 Learned Senior counsel further points out that the
consortium upon negotiation reduced the VGF demand to
Rs.650 crores from Rs.1251 crores. This was agreed because
of the assurances given by the MMRDA that it would support
a very aggressive construction schedule, high traffic forecast
and aggressive financing work. He further contends that
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:30 :::
26 WP-2605-15there was strong assurance of timely handing over of the site,
grant of all statutory clearances in a time bound manner. To
substantiate his contention, Mr.Dwarkadas refers to
communication dated 10th May 2006 addressed by
consortium indicating several conditions which were to be
adhered to by the MMRDA and the reasons for increase in the
construction cost rising upto Rs.4026 crores. According to
him, none of these conditions were complied with by
MMRDA. According to Mr.Dwarkadas, mere extension of time
for completion of the construction and the fact of not
choosing to opt for cancellation of the contract or imposition
of any penalties would suggest that MMRDA is well aware of
the delay in completion of the project was attributable to
deficits on the part of MMRDA and not the consortium. He
refutes the contention raised by petitioners that there is an
obligation to abide by Business Plan submitted by the
consortium at the time of the bid and the same to be taken
into consideration by FFC.
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:30 :::
27 WP-2605-1534 According to learned Senior Counsel
Mr.Dwarkadas taking into consideration the changed
circumstances as detailed above, it was neither fair, nor
proper to restrict MMOPL to the schedule of the fares set out
in the Concession Agreement dated 7th May 2007. According
to him, by extension of the Metro Act, the fares stipulated in
the Concession Agreement lapses,. and the same are
completely irrelevant so far as determination of fares by FFC.
35 According to him, even assuming that the RFP, the
Business Plan and the Concession Agreement have some
relevancy to the issue of fare determination by the FFC
(which, according to him are not applicable because of
extension of Metro Act), he contends that MMRDA is bent
upon misleading and misconstruing the scope and ambit of
the documents. According to him, there is nothing binding in
the Business Plan which suggest that Metro project was to run
at a loss for the first 8 years since its operation. According
to him, the Business Plan always envisaged that there would
be enough cash surplus at the end of each financial year and
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:30 :::
28 WP-2605-15that is the reason why the project was regarded as bankable
and viable one. He submits that such a cash surplus is
absolutely necessary to cover the operating cost part,
repayment of the principle loan amount borrowed, interest
and other such matters.
36 Mr.Dwarkadas, by referring to certain passengers
from the book "Public-Private Partnership Projects in
Infrastructure - An Essential Guide for Policy Makers" by
Jeffrey Delmon, a Senior Infrastructure Specialist at the
World Bank in Washington D.C. submits that government
support is key to commercial viability in PPP Project.
Mr.Dwarkadas also contends that unbankable or unviable
project is contrary to the very concept of PPP Project.
Therefore, according to him, for all these reasons, the
MMRDA cannot bank upon the DPR, RFP, Business Plan or the
Concession Agreement. He relies upon Section 103 of the
Metro Act to contend that said provision would render all
such instruments/agreements inapplicable since they are
irrelevant to the issue of the fixation of fare to be determined
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:30 :::
29 WP-2605-15by the FFC. He strenuously contends that several clauses in
the Concession Agreement cannot be relied upon since the
position has undergone a sea-change for act of omissions and
commission solely attributable to MMRDA.
37 According to Mr.Dwarkadas, there is
overwhelming material on record in the form of balance-sheet
and other material establishing that estimated cost of the
construction of Rs.2356 escalated to Rs.4026 crores. The
balance-sheets have been approved by Board of Directors of
MMOPL which includes atleast three nominee Directors of
MMRDA, is the stand of Mr.Dwarkadas. The balance-sheet of
MMOPL is said to have been audited by one of the reputed
four accounting firms i.e. M/s.Deloitte Haskins Sells LLP.
Therefore, according to Mr.Dwarkadas, the fares have to be
determined on the basis that MMOPL incurred additional cost
of construction, or at escalated cost, for which they are
required to be suitably compensated if the Metro Project is to
remain bankable or viable.
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
30 WP-2605-1538 It is also contended that there is ample material
on record which establishes that the escalation of cost of
construction was primarily attributable to the MMRDA on
account of various breaches committed by MMRDA so far as
terms of Concession Agreement such as delay in handing over
the site, delay in providing right of way, failure to provide
agreed area of land for putting up the construction yard, etc.
Mr.Dwarkadas further points out that MMOPL has also made
a claim for Rs.1939 crores against MMRDA, and the said
claim is pending for consideration before the arbitrators.
39 Mr.Dwarkadas, learned Senior Counsel further
points out that though the MMRDA supports dissenting
report of one Jayant Kumar Banthia, both majority as well
as minority reports accepts and proceed on the basis that
the construction costs have escalated to Rs.4000 crores. Even
the experts appointed by the FFC have verified the same and
have opined indeed that the cost of construction was
escalated to Rs.4000 crores or so. Therefore, according to
Mr.Dwarkadas, the FFC was entirely justified in determining
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
31 WP-2605-15the fares based on the escalated costs of construction from
Rs.2356 crores to Rs.4000 crores. Therefore, according to
him, the moment said escalation is accepted, fundamental
assumptions and presumptions set out in the Concession
Agreement cannot apply, and under no circumstances
MMOPL can be tied down to the fares stipulated in the
Concession Agreement.
40 Mr.Dwarkadas further submits that it is nothing
but a misconception to connect the rate of fares to the
ridership. According to him, there is no material either to
support or sustain the nexus between the fares and the
ridership. He submits that even though the impugned
decision permits fares ranging between Rs.10 to Rs.110, the
MMOPL has made it clear that it does not intend to give any
shock so far as tariff is concerned to the commuters/riders
and therefore, for the time being, it desires to increase the
fares from the present rate of Rs.10:20:30:40 to
Rs.10:20:25:35:45. He refers to paragraph no.19 of MMOPL's
affidavit in reply at page 1773 of the paper book for this
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
32 WP-2605-15purpose. According to learned Senior Counsel, the admission
of nexus between the fares and the higher ridership
contended by the petitioner is totally a misplaced concept,
since low fares would result in higher losses and higher cash
deficit, even assuming that the ridership would be double
from the existing position. According to him, the experts did
consider all these aspects while proposing the enhanced fares.
The FFC, according to him, preferred the rates which will
cause minimum prejudice to the commuters so that there is
no tariff shock. Mr.Dwarkadas further contends that there is
no unreasonableness or perversity so far as the impugned
decision of the committee while fixing the fares.
41 According to him, the contention of MMRDA that
the Metro is not operating as a Mass Rapid Transit System, is
totally incorrect. He refers to the meaning of the word
"Mass" from the dictionary to mean a large volume of
commuters. According to learned senior counsel, the material
on record establishes that on an average week day ridership
from August 2016 is about 3.5 lakh per day. To run the
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
33 WP-2605-15project as a Mass Rapid Transit System, this quantity of
ridership is more than sufficient. Therefore, there is neither
any intention nor any possibility of the project ceasing to
operate as a Mass Rapid Transit System. Mr.Dwarkadas
further contends that MMRDA is misinterpreting the
impugned decision as well as the reports of the experts.
Because of such misinterpretation, the MMRDA is arriving at
an argument of perversity. On the other hand, according to
Mr.Dwarkadas, upon proper construction of the impugned
decision and the reports of the expert, it is apparent that
neither there is perversity, whatsoever involved in the
impugned decision nor absurdity. Mr.Dwarkadas, referring
to the four reports submitted before the FFC attempts to
explain the correct interpretation of the reports of the said
note.
42 According to Mr.Dwarkadas, in terms of Union of
India Vs. Cynamide India Ltd. (supra) and Shri Sitaram
Sugar Company Limited vs. Union of India (supra), the
scope of judicial review in such matters is extremely limited.
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
34 WP-2605-15Since the impugned decision of FFC is based upon reports of
experts, scope of judicial review is further limited, since the
Court, in a matter of this nature should always defer to the
opinion of the experts rather than interpreting the same.
Mr.Dwarkadas submits that fare fixation is legislative in
character and the FFC was not even obliged to give reasons in
its impugned decision. In any case, since cogent reasons are
backing the decision, i.e. the reports of experts, there is no
scope for exercising judicial review. Learned Senior Counsel
also places on record notes of arguments in support of
impugned decision.
43 In order to address the controversial issue, it
would be proper to know the salient features of Metro Act,
and the scheme in the said Act. Originally, the Metro Act was
titled as "The Delhi Metro Railway (Co-operation and
Maintenance Act) Act of 2002". This Act was enacted by
Parliament for the purpose of regulating the working of the
Metro Railway in the National Capital Region, apart from
indicating provisions for operation and maintenance of the
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
35 WP-2605-15same. Apart from National Capital Region, it also provided
operation and maintenance of Metro Railways in
Metropolitan Area for all the matters connected therewith
and incidental thereto. The Act came into force with effect
from 29th October 2002.
44 An Amendment came to be brought in 2009
known as "Metro Railways" (Amendment Act of 2009). The
short title came to be made by referring to the same as "Metro
Act of 2002". Sub-Section (2) of Section 1 provides that the
Act extends in the first instance to the National Capital
Region and by way of notification, the Central Government,
may, after consultation with the State Government extend the
Act to such other Metropolitan area and Metropolitan city,
except the Metropolitan City of Kolkatta. It further says from
what date, such act comes into effect in the Metropolitan area
and Metropolitan city, shall be specified in the notification
and the provisions of the Act will apply to that Metropolitan
area and Metropolitan city accordingly.
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
36 WP-2605-1545 So far as Metro area of Mumbai, the Central
Government, after consultation with the State Government,
by Notification dated 16th October 2009 declared that the
Metro Act shall extend to the Metropolitan area of Mumbai,
Maharashtra with effect from date of publication of the
Notification in the Official Gazette, i.e. 16th October 2009.
46 Section 2 of the Metro Act refers to definitions
and Section 2(e) defines the meaning of 'fare'. According to
section 2(e), 'fare' means the charge levied for the carriage of
the passengers. Section 2(f) defines 'Government Metro
Railway' to mean Metro Railway owned by the Central
Government. The term 'Non Government Metro Railway' is
defined in section 2(l) to mean a Metro Railway other than a
non-government metro railway. The term 'Metro Railway' is
itself defined in section 2(i). The term 'Metro Railway
Administration' is defined in section 2(j) to mean in relation
to Government Metro Railway means the General Manager of
that Railway; or in relation to a 'Non Government Metro
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
37 WP-2605-15Railway' means the person who is the owner or the lessee of
that Metro Railway, or the person working at Metro Railway
under an arrangement with the owner or lessee of that Metro
Railway.
47 Chapter VII of the Metro Act deals with 'Fare
Fixation' issue. Section 33 provides that the Metro
Administration shall, from time to time, on recommendations
made by the FFC constituted under the Act can fix the fares
for the carriage of passengers for travelling from one Metro
Railway Station to another. Provided that the Metro Railway
Administration may fix the fare under this section without the
recommendation of the FFC on the initial opening of the
Metro Railway. Section 34 prescribes how the Constitution of
the FFC is made. Section 35 deals with the terms and
conditions as well as the procedure to be followed by the
FFC. Section 36 provides that the FFC shall submit its report
along with its recommendations to the Metro Railway
Administration within such period not exceeding three
months, as may be specified by order made by the Central
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
38 WP-2605-15Government. Section 37 provides that the recommendations
made by the FFC shall be binding on the Metro Railway
Administration. Section 103 of the Metro Act provides that
the provisions of the Act shall have effect notwithstanding
inconsistent therewith contained in any enactment other than
the Metro Act, or in any instrument having effect by virtue of
any enactment other than the Act.
48 With the above provisions on hand, we have to
now analyze how FFC report per majority recommended the
fares which led to the impugned decision. The decision is
divided into two. The majority report of Mr.Justice
E.Padmanabhan, Chairperson and T.K. Vishwanathan,
Member which recommended the fares at Rs.10 to Rs.110.
The minority report of Jayanth Kumar Banthia, Member
recommended fare at Rs.18 - Rs.26. As stated above, in
terms of Section 37 of the Metro Act, the recommendations of
the FFC shall be binding on Metro Railway Administration.
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
39 WP-2605-1549 At paragraph nos.1 and 2 of the report of the
majority, it makes brief reference to the circumstances in
which the FFC came to be constituted under the Metro Act.
Paragraphs 3 to 8 of the majority report contains material
placed on record by MMOPL and contentions of MMOPL in
support of revision of Metro fares. At paragraph 9, the
majority has observed that a fine balance between the
affordability and the business viability needs to be carefully
evolved. Paragraph 10 refers to public hearings and aspects
to which such public hearings relates to. Paragraph 11 of the
majority report observed that the different persons appeared
before FFC, barring one or two, expressed that for services of
Mumbai Metro, they are willing to pay a higher fare as it
deserves. According to them, the value proposition and the
reduction of traffic congestion along the corridor is
appreciable and there is every justification for the Mumbai
Metro to be operated on self sustainable basis, and they are
agreeable for a revision of fares.
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
40 WP-2605-1550 The majority report, again records the contention
of Mumbai Metro that the payment ability of user is one of
the most important factor, rather key factor, to be taken into
consideration. In paragraphs thereafter, especially paragraphs
13 and 14, the majority opined as under :
13. Hence, affordability of the facility is governed
by the ability to pay, willingness to pay by the
commuters across the metro alignment. The
commuters were interviewed by the Welingkar
Institute (independent expert appointed by the Fare
Fixation Committee) on several days throughout
the corridor and it has been reported by the said
experts that the commuters are willing for a
upward revision of the Fare.14. In other words the commuters belong to a
particular section of the society living along those
who travel from the adjacent railways suburban
systems operated by Western and Central Railways.They enjoy various conveniences while traveling by
Mumbai Metro, such as air-conditioning, lifts,
escalators, hygiene, cleanliness, toilets, etc being
maintained at top model as against pitiable
conditions prevailing in suburban railways. Being a
prime service, the commuters who belong to a
special class among the common public have a level
of affordability and are willing to pay fares which is
commensurate with the efficiency of service,
security, punctuality, on time availability,
cleanliness, etc. which they get by operations of
Mumbai Metro. The other transport facilities along
the corridor are rather inaccessible and costlierTilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
41 WP-2605-15also. Ac bus operation is a rarity along the corridor
but only ordinary Non-AC BEST buses are being
operated apart from auto rickshaws and taxis. The
prevailing fare of AC buses in Mumbai,
Autorickshaws and Taxis is as under:Sl. Mode of Transport Fares (Rs)1. AC BEST Buses Rs.30 to Rs.100 Along the
corridor2. Autorickshaws Rs.18 to Rs.201 Along the
corridor3. Taxi (Non Ac) Rs 22 to Rs.245 Along the
corridor51 At paragraphs 16 and 17 of the majority report,
they briefly make a comparison between the fares of BEST
Buses and fares charged by Delhi Metro Railway Corporation
(DMRC). The distinction drawn is that the BEST fares are
gross subsidized and financing, and scale of operation at
DMRC are entirely on a different footing.
52 Paragraphs 17 and 18 of the report refers to
appointment of three experts (agencies) as well as the report
submitted by Price Water House Corporation Private Limited
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
42 WP-2605-15(PWC). In paragraph 19, it states that after the reports were
placed on record by the experts, the FFC Members discussed
and analyzed the same amongst themselves. In this
paragraph, FFC specifically mentions that whilst assessing the
requirement for fare revision, they took into consideration the
following:
(1) Entire spectrum of Project cost;(2) Equity, return on investments
(3) Servicing of debts ;
(4) operation costs, etc.;
(5) Present traffic and collection of the fare for the
past few months.53 In paragraph 21, there is a general observation
that in any public utility transport project, it is very difficult to
satisfy every sector, and there is bound to be certain amount
of hue and cry from various sectors, including press and
political parties.
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
43 WP-2605-1554 In paragraph 22 of the report, certain measures
are suggested to improve the Metro Project including increase
in non-fare box revenue, and provision of operational subsidy
from the Government. However, the majority report, in terms
admits that any recommendation as to such measures "will
not fall within the purview of Fare Fixation Committee".
55 At paragraph 23 of the report of the majority, they
expressed inability to accept the fare revision formula
suggested by MMOPL "as it requires a thorough study of the
formula, and more so, in the absence of any guidelines laid
down under the Metro Railway (Operation and Maintenance)
Act, 2002 for fare fixation."
56 The only reasoning or discussion, if at all, set out
it is mentioned in paragraphs 24, 25 and 26 of the majority
report which reads as follows:
"24. We have considered the reports submitted by the
four expert committees. In terms of reports we find
that they have suggested higher average Fare.Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
44 WP-2605-15However, we are fixing the fare hereunder, which
works out to be a lower average Fare than the average
Fare suggested by the four expert committees. Even
after this revision, as set out below, Mumbai Metro will
not be able to break-even and they will sustain loss on
a day to day basis, which would have a far reaching
effect on its finances and operations in due course. In
our considered view, the Mumbai Metro One should at
least be sustainable for the time being not to speak of
return on equity which on a long term basis be able to
earn 17% (post-tax Equity IRR) and it should be in a
position to absorb the shock of loss for some more time
till traffic increases considerably. If the Mumbai metro
turns the corner and makes a profit, it is definitely
open to the Mumbai Metro One Private Limited to pay
dividends to the investors depending upon the income
at that stage and not immediately. The Mumbai
travelling public/commuters expecting convenience,
facilities, punctuality and top ranking operations,
should be ready to sacrifice and should not mind
paying revised fares, otherwise they will have to lose
the Mumbai Metro One facility and convenience of
Mumbai Metro once and for all.25. There are twelve stations in Mumbai Metro one
with ten intermediate stations placed equidistance
approximately. We fix the Fare at Rs.10 for commuting
from one station to the next station and the said rate of
Rs.10 is to be multiplied by number of stations one
commuters in either direction and such fare shall be
applicable for either direction.26. In our considered view and an analysis of the
entire materials placed before us including the report
of three expert agencies and the details/statistics etc
placed before the fare fixation committee we have noTilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
45 WP-2605-15hesitation to fix the above Fare. We are also conscious
of the fact any sharp upward revision will have a far
reaching effect on the operations of the Mumbai Metro
as well as the commuters who travel.57 Paragraphs 27 to 30 of the majority report records
that Mr.Jayant Kumar Banthia has taken a different view,
MMOPL is at liberty to fix different rates for peak hours and
non-peak hours; MMOPL may consider even giving
concession to the differently abled persons, school going
children etc.. Finally, in paragraph 30, the FFC makes notes
that under section 33 of the Metro Act, there is no necessity
for prescribing guidelines indicating the factors to be taken
into consideration by FFC, so that this will facilitate the task
of the FFC in future. By way of illustration, the majority
report makes reference to factors like rate of return to
investment, affordability to the public etc. The conclusion is
recorded in paragraph 31, which reads as follows:
"31. Conclusion: In terms of the majority
members of the Fare Fixation Committee, the Fare
is fixed as under:Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
46 WP-2605-15"Fare is fixed at Rs. 10 for commuting from one station
to the next station and the said rate of Rs.10 is to be
multiplied by number of stations one commutes in
either direction and such fare shall be applicable for
either direction. "58 The dissenting report submitted by Mr. Jayant
Kumar Banthia, Retired Chief Secretary of Government of
Maharashtra is appended to the report of the majority of the
FFC. As stated above, the dissenting report of the minority
recommended the fares from Rs.18 to 26.
59 The next question which would fall for our
consideration is what is the scope of judicial review in the
present situation ? Learned Senior Counsel on both the sides
raises several contentions on the scope of judicial review so
far as Fare Fixation order. For this, one has to evaluate the
rival contentions. According to Mr.Chinoy, learned Senior
Counsel, the impugned decision is quasi-judicial or, at the
most, it can come under the category of quasi-legislative. For
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
47 WP-2605-15this proposition, he placed reliance in Associated Provincial
Picture Houses Limited vs. Wednesbury Corporation1.
60 Per contra, Mr.Dwarkadas, another Senior Counsel
arguing for respondent no.4 (MMOPL) submits that exercise
of Fare Fixation is purely legislative so far as its nature, and
therefore, the scope of judicial review is extremely limited.
He further submits that the impugned decision is backed by
the reports of experts, and therefore, the Court must defer to
the opinion of the experts in a matter of this nature. As
already stated above, for this proposition, he placed reliance
in the case of Cynamide (supra), so also Sitaram Sugar
(supra).
61 Since both learned counsel placed reliance on
Cynamide (supra) and Sitaram Sugar (supra), it would be just
and proper to extract certain passages which are relevant for
the present case, and for the purpose of convenience, relevant
paragraphs are referred herein :
1(1947) 2 ALL E.R. 682
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
48 WP-2605-1562 In Cynamide (supra), reliance was placed on
certain passages in paragraphs, 4, 5, 7 and 27.
"4. We start with the observation, "Price
fixation is neither the function nor the forte of the
court". We concern ourselves neither with the
policy nor with the rates. But we do not totally
deny ourselves the jurisdiction to enquire into the
question, in appropriate proceedings, whether
relevant considerations have gone in and
irrelevant considerations kept out of the
determination of the price. For example, if the
legislature has decreed the pricing policy and
prescribed the factors which should guide the
determination of the price, we will, if necessary,
enquire into the question whether the policy and
the factors are present to the mind of the
authorities specifying the price. But our
examination will stop there. We will go no further.
We will not deluge ourselves with more facts and
figures. The assembling of the raw materials and
the mechanics of price fixation are the concern of
the executive and we leave it to them. And, we
will not re-evaluate the considerations even if the
prices are demonstrably injurious to some
manufacturers or producers. The court will, of
course, examine if there is any hostile
discrimination. That is a different "cup of tea"
altogether.5. The second observation we wish to make is,
legislative action, plenary or subordinate, is not
subject to rules of natural justice. In the case of
Parliamentary legislation, the proposition is self-evident. In the case of subordinate legislation, it
may happen that Parliament may itself provide for
a notice and for a hearing -- there are severalTilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
49 WP-2605-15instances of the legislature requiring the
subordinate legislating authority to give public
notice and a public hearing before say, for
example, levying a municipal rate -- in which
case the substantial non-observance of the
statutorily prescribed mode of observing natural
justice may have the effect of invalidating the
subordinate legislation. The right here given to
rate payers or others is in the nature of a
concession which is not to detract from the
character of the activity as legislative and not
quasi-judicial. But, where the legislature has not
chosen to provide for any notice or hearing, no
one can insist upon it and it will not be
permissible to read natural justice into such
legislative activity.7. The third observation we wish to make is,
price fixation is more in the nature of a legislative
activity than any other. It is true that, with the
proliferation of delegated legislation, there is a
tendency for the line between legislation and
administration to vanish into an illusion.
Administrative, quasi-judicial decisions tend to
merge in legislative activity and, conversely,
legislative activity tends to fade into and present
an appearance of an administrative or quasi-
judicial activity. Any attempt to draw a distinct
line between legislative and administrative
functions, it has been said, is "difficult in theory
and impossible in practice". Though difficult, it is
necessary that the line must sometimes be drawn
as different legal rights and consequences may
ensue. The distinction between the two has
usually been expressed as "one between the
general and the particular". "A legislative act is
the creation and promulgation of a general rule of
conduct without reference to particular cases; an
administrative act is the making and issue of aTilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
50 WP-2605-15specific direction or the application of a general
rule to a particular case in accordance with the
requirements of policy". "Legislation is the process
of formulating a general rule of conduct without
reference to particular cases and usually operating
in future; administration is the process of
performing particular acts, of issuing particular
orders or of making decisions which apply general
rules to particular cases." It has also been said:
"Rule-making is normally directed toward the
formulation of requirements having a general
application to all members of a broadly
identifiable class" while, "an adjudication, on the
other hand, applies to specific individuals or
situations". But, this is only a broad distinction,
not necessarily always true. Administration and
administrative adjudication may also be of
general application and there may be legislation
of particular application only. That is not ruled
out. Again, adjudication determines past and
present facts and declares rights and liabilities
while legislation indicates the future course of
action. Adjudication is determinative of the past
and the present while legislation is indicative of
the future. The object of the rule, the reach of its
application, the rights and obligations arising out
of it, its intended effect on past, present and
future events, its form, the manner of its
promulgation are some factors which may help in
drawing the line between legislative and non-
legislative acts. A price fixation measure does not
concern itself with the interests of an individual
manufacturer or producer. It is generally in
relation to a particular commodity or class of
commodities or transactions. It is a direction of a
general character, not directed against a particular
situation. It is intended to operate in the future. It
is conceived in the interests of the general
consumer public. The right of the citizen to obtainTilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
51 WP-2605-15essential articles at fair prices and the duty of the
State to so provide them are transformed into the
power of the State to fix prices and the obligation
of the producer to charge no more than the price
fixed. Viewed from whatever angle, the angle of
general application, the prospectiveness of its
effect, the public interest served, and the rights
and obligations flowing therefrom, there can be
no question that price fixation is ordinarily a
legislative activity. Price fixation may occasionally
assume an administrative or quasi-judicial
character when it relates to acquisition or
requisition of goods or property from individuals
and it becomes necessary to fix the price
separately in relation to such individuals. Such
situations may arise when the owner of property
or goods is compelled to sell his property or goods
to the Government or its nominee and the price to
be paid is directed by the legislature to be
determined according to the statutory guidelines
laid down by it. In such situations the
determination of price may acquire a quasi-
judicial character. Otherwise, price fixation is
generally a legislative activity. We also wish to
clear a misapprehension which appears to prevail
in certain circles that price fixation affects the
manufacturer or producer primarily and therefore
fairness requires that he be given an opportunity
and that fair opportunity to the manufacturer or
producer must be read into the procedure for
price fixation. We do not agree with the basic
premise that price fixation primarily affects
manufacturers and producers. Those who are
most vitally affected are the consumer public. It is
for their protection that price fixation is resorted
to and any increase in price affects them as
seriously as any decrease does a manufacturer, if
not more.Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
52 WP-2605-1527. We are unable to agree with the submissions
of the learned counsel for the respondents either
with regard to the applicability of the principles of
natural justice or with regard to the nature and
the scope of the enquiry and review contemplated
by Paras 3 and 27. While making our preliminary
observations, we pointed out that price fixation is
essentially a legislative activity though in rare
circumstances, as in the case of a compulsory sale
to the Government or its nominee, it may assume
the character of an administrative or quasi-
judicial activity. Nothing in the scheme of the
Drugs (Prices Control) Order induces us to hold
that price fixation under the Drugs (Prices
Control) Order is not a legislative activity, but a
quasi-judicial activity which would attract the
observance of the principles of natural
justice..........."63 In the case of Cynamide, the issue was with price
fixation under the Drugs (Prices) Control Order of 1979. This
order is relatable to the Essential Commodities Act of 1955.
The Supreme Court, after opining that the price fixation is
neither the function nor the forte of the Court proceeds to say
that the Courts do not totally deny themselves jurisdiction to
enquire into question, in appropriate proceedings, whether
relevant considerations have gone in and irrelevant considerations
are kept out of the determination of the price. The
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:31 :::
53 WP-2605-15Supreme Court has also cleared the misconception prevalent
in certain circles that price fixation affects a manufacturer or
producer primarily, and therefore, fairness requires affording
opportunity to such manufacturer or producer. The Supreme
Court has further held that those who are most vitally
affected in such matters are the consumer public. It is their
protection that price fixation is resorted to, and any increase
in price would affect them as seriously as any decrease would
affect a manufacturer. It is important to note that most of the
observations in Cynamide (supra) were made in the context
of insistence on the part of manufacturers or producers of
drugs that price fixation of drugs without the compliance with
principles of natural justice and fair play was ultra vires,
arbitrary and unconstitutional. The said contention was
rejected by the Apex Court on the above basis. The
observations made in Cynamide (surpa), by the Apex Court
at paragraph 7 are very relevant. It proceeds to explain in
what circumstances price fixation is regarded as legislative in
character, and under what circumstances, it can assume the
character of administrative or quasi judicial. The Apex Court
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:32 :::
54 WP-2605-15further observed that price fixation measure does not concern
with the interests of the individual manufacturer or producer.
It is generally in relation to a particular commodity or class of
commodities or transactions. It is in the nature of a general
character, not directed under any particular situation. The
intention is very clear that it has to operate in the future. It is
conceived in the interest of the general consumer public. The
right of the citizen to obtain essential articles at fair prices,
and the duty of the State to so provide them are transformed
into the power of the State to fix prices, and the obligation of
the producer to charge no more than the price fixed. The
Supreme Court then further observes that price fixation may
occasionally assume the character of administrative or quasi-
judicial especially when it relates to acquisition or requisition
of goods or property from individuals, and it becomes
necessary to fix the price separately in relation to such
individuals.
64 Such situations may arise when the owner of
property or goods is compelled to sell his property or goods to
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:32 :::
55 WP-2605-15the Government or its nominee and the price to be paid is
directed by the legislature to be determined in accordance
with the statutory guidelines laid down by it. In such
situations, the determination of price may acquire the nature
of quasi-judicial character. Otherwise, price fixation is
generally a legislative activity. The Supreme Court, in this
paragraph itself, opines that the contention that price fixation
primarily affects the manufacturer or producer, is not correct.
Those who are most vitally affected are the consumer public.
It is for their protection that price fixation is resorted to, and
any increase in price affects them as seriously as any decrease
does a manufacturer, if not more.
65 So far as Sitaram Sitaram Sugar (supra), reliance
was placed on certain passages in paragraphs 44, 45, 48, 49,
50, 51, 52, 56, 57 and 58, which read as follows :
"44. The individual orders, calculating the
"amounts" payable to the individual producers,
being administrative orders founded on the
mechanics of price fixation, they must be left to
the better instructed judgment of the executive,Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:32 :::
56 WP-2605-15and in regard to them the principle of audi
alteram partem is not applicable. All that is
required is reasonableness and fair play which are
in essence emanations from the doctrine of
natural justice as explained by this Court in A.K.
Kraipak vs. Union of India. See also the
observation of Mukharji, J. as he then was, in
Renusagar. (at SCC p.105)."45. Price fixation is in the nature of a legislative
action even when it is based on objective criteria
founded on relevant material. No rule of natural
justice is applicable to any such order. It is
nevertheless imperative that the action of the
authority should be inspired by reason: Saraswati
Industrial Syndicate Ltd. [at SCR pp. 961, 962;
SCC p. 636, para 13]. The government cannot fix
any arbitrary price. It cannot fix prices on
extraneous considerations: Renusagar.48. The doctrine of judicial review implies that
the repository of power acts within the bounds of
the power delegated and he does not abuse his
power. He must act reasonably and in good faith.
It is not only sufficient that an instrument is intra
vires the parent Act, but it must also be consistent
with the constitutional principles: Maneka Gandhi
v. Union of India (SCC pp. 314-15).49. Where a question of law is at issue, the court
may determine the rightness of the impugned
decision on its own independent judgment. If the
decision of the authority does not agree with that
which the court considers to be the right one, the
finding of law by the authority is liable to be
upset. Where it is a finding of fact, the court
examines only the reasonableness of the finding.When that finding is found to be rational and
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:32 :::
57 WP-2605-15reasonably based on evidence, in the sense that all
relevant material has been taken into account and
no irrelevant material has influenced the decision,
and the decision is one which any reasonably
minded person, acting on such evidence, would
have come to, then judicial review is exhausted
even though the finding may not necessarily be
what the court would have come to as a trier of
fact. Whether an order is characterized as
legislative or administrative or quasi-judicial, or,
whether it is a determination of law or fact, the
judgment of the expert body, entrusted with
power, is generally treated as final and the judicial
function is exhausted when it is found to have
"warrant in the record" and a rational basis in
law: See Rochester Tel. Corp. v. United States. See
also Associated Provincial Picture Houses Ltd. v.
Wednesbury Corporation.50. As stated by Lord Hailsham of St.
Marylebone L.C. (HL) in Chief Constable of the
North Wales Police v. Evans:"The function of the court is to see that lawful
authority is not abused by unfair treatment and
not to attempt itself the task entrusted to that
authority by the law.... The purpose of judicial
review is to ensure that the individual receives fair
treatment, and not to ensure that the authority,
after according fair treatment, reaches on a matter
which it is authorized by law to decide for itself a
conclusion which is correct in the eyes of the
court".In the same case Lord Brightman says:
"Judicial review, as the words imply, is not an
appeal from a decision, but a review of the
manner in which the decision was made."Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:32 :::
58 WP-2605-1551. A repository of power acts ultra vires either
when he acts in excess of his power in the narrow
sense or when he abuses his power by acting in
bad faith or for an inadmissible purpose or on
irrelevant grounds or without regard to relevant
considerations or with gross unreasonableness.
See Associated Provincial Picture Houses Ltd. v.
Wednesbury Corporation. In the words of Lord
Macnaghten in Mayor C. Westminster
Corporation v. London and North Western
Railway."....It is well settled that a public body
invested with statutory powers such as those
conferred upon the corporation must take care not
to exceed or abuse its powers. It must keep within
the limits of the authority committed to it. It must
act in good faith. And it must act reasonably. The
last proposition is involved in the second, if not in
the first."In Barium Chemicals Ltd. v. Company Law Board,
this Court states: (SCR pp. 359-60, per Shelat, J.)".... Even if (the statutory order) is passed in
good faith and with the best of intention to
further the purpose of the legislation which
confers the power, since the authority has to act in
accordance with and within the limits of that
legislation, its order can also be challenged if it is
beyond those limits or is passed on grounds
extraneous to the legislation or if there are no
grounds at all for passing it or if the grounds are
such that no one can reasonably arrive at the
opinion or satisfaction requisite under the
legislation. In any one of these situations it can
well be said that the authority did not honestlyTilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:32 :::
59 WP-2605-15form its opinion or that in forming it, it did not
apply its mind to the relevant facts."In Renusagar, Mukharji, J., as he then was, states:
(SCC p. 104, para 86)
"The exercise of power whether legislative
or administrative will be set aide if there is
manifest error in the exercise of such power or the
exercise of the power is manifestly arbitrary.
Similarly, if the power has been exercised on a
non-consideration or non-application of mind to
relevant factors the exercise of power will be
regarded as manifestly erroneous. If a power
(whether legislative or administrative) is exercised
on the basis of facts which do not exist and which
are patently erroneous, such exercise of power
will stand vitiated".52. The true position, therefore, is that any act of
the repository of power, whether legislative or
administrative or quasi-judicial, is open to
challenge if it is in conflict with the Constitution
or the governing Act or the general principles of
the law of the land or it is so arbitrary or
unreasonable that no fair minded authority could
ever have made it.56. The court has neither the means nor the
knowledge to re-evaluate the factual basis of the
impugned orders. The court, in exercise of judicial
review, is not concerned with the correctness of
the findings of fact on the basis of which the
orders are made so long as those findings are
reasonably supported by evidence. In the words of
Justice Frankfurter of the U.S. Supreme Court in
Railroad Commission of Texas v. Rowan Nichols
Oil Company:Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:32 :::
60 WP-2605-15"Nothing in the Constitution warrants a
rejection of these expert conclusions. Nor, on the
basis of intrinsic skills and equipment, are the
federal courts qualified to set their independent
judgment on such matters against that of the
chosen State authorities.... When we consider the
limiting conditions of litigation -- the adaptability
of the judicial process only to issues definitely
circumscribed and susceptible of being judged by
the techniques and criteria within the special
competence of lawyers -- it is clear that the Due
Process Clause does not require the feel of the
expert to the supplanted by an independent view
of judges on the conflicting testimony and
prophecies and impressions of expert witnesses".This observation is of even greater significance in
the absence of a Due Process Clause.57. Judicial review is not concerned with matters
of economic policy. The court does not substitute
its judgment for that of the legislature or its
agents as to matters within the province of either.
The court does not supplant the "feel of the
expert" by its own views. When the legislature
acts within the sphere of its authority and
delegates power to an agent, it may empower the
agent to make findings of fact which are
conclusive provided such findings satisfy the test
of reasonableness. In all such cases, judicial
inquiry is confined to the question whether the
findings of fact are reasonably based on evidence
and whether such findings are consistent with the
laws of the land. As stated by Jagannatha Shetty,
J. in Gupta Sugar Works: (SCC p. 479, para 4)
"... the court does not act like a charteredTilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:32 :::
61 WP-2605-15accountant nor acts like an income tax officer. The
court is not concerned with any individual case or
any particular problem. The court only examines
whether the price determined was with due
regard to considerations provided by the statute.
And whether extraneous matters have been
excluded from determination."58. Price fixation is not within the province of
the courts. Judicial function in respect of such
matters is exhausted when there is found to be a
rational basis for the conclusions reached by the
concerned authority. As stated by Justice Cardozo
in Mississippi Valley Barge Line Company v.
United States of America:"The structure of a rate schedule calls in
peculiar measure for the use of that enlightened
judgment which the Commission by training and
experience is qualified to form.... It is not the
province of a court to absorb this function to
itself.... The judicial function is exhausted when
there is found to be a rational basis for the
conclusions approved by the administrative body."66 In Sitaram Sugar (supra), the Supreme Court was
concerned with the price fixation under the Essential
Commodities Act 1955. After holding that such price fixation
was in the nature of legislative action, and no rule of natural
justice was applicable, the Supreme Court added that it is
nevertheless imperative that the action of the authority
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:32 :::
62 WP-2605-15should be inspired by reason. To arrive at this opinion,
Supreme Court placed reliance on its earlier decision in
Saraswati Industrial Syndicate Ltd. Ors. vs. Union of
India (1974) 2 SCC 630. The Apex Court further held that
the Government cannot fix any arbitrary price, or fix any
prices on extraneous considerations. The doctrine of judicial
review implies that the repository of power acts within the
bounds of the power delegated, and it does not abuse its
power. He must act reasonably, and in good faith. It is not
only sufficient that an instrument is intra vires, the parent
Act, but it must also be consistent with the constitutional
principles in Maneka Gandhi vs. Union of India [1978]2
SCR 621. Sitaram Sugar (supra) is relevant for yet another
principle of judicial review which is set out in paragraph 49 as
mentioned above. In this paragraph, the Supreme Court has
emphasized that where a question of law is at issue, the Court
may determine the rightness of the impugned decision on its
own independent judgment. If the decision of the authority
does not agree with that which the Court considers to be the
right one, the finding of law by the authority is liable to be
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:32 :::
63 WP-2605-15upset. This is the same principle established by the House of
Lords in Council of Civil Service Union vs. Minister of Civil
Service - (1984) 3 ALL ER 935 (HL). Therein, Lord Diplock
summarised the principles of judicial review by conveniently
classifying under three heads, i.e., "illegality, irrationality and
procedural impropriety". Illegality was explained to mean
that the decision maker must correctly understand the law
that regulates its decision making power and give effect to it.
Whether he has or not is a justifiable question to be decided,
in the event of dispute, by a court exercising powers of
judicial review.
67 The Wednesbury principle of unreasonableness
was discussed at paragraphs 44, 45, 48, 49, 51 and 52 of
Sitaram Sugar (supra), and says that it can be invoked to
judicially review price fixation, subject ofcourse, to the
limitations, discussed in the said passages. For example, if
judicial review relates to a finding of fact, then, the Court,
will only examine the reasonableness of the finding. When
that finding is found to be rational and reasonably based on
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:32 :::
64 WP-2605-15evidence, in the sense that all relevant material has been
taken into account, and no irrelevant material had influenced
the decision, and the decision is one which any reasonably
minded person, acting on such evidence, would have come to,
then judicial review is exhausted even though the finding may
not necessarily be what the court would have come to if it
was called upon to determine facts, in the first place.
68 In para 51 of Sitaram Sugar (supra), the Supreme
Court after referring to Justice Mukharji, in State of U.P. vs.
Renusagar Power Co. (1988) 4 SCC 59, states that the
exercise of power whether legislative or administrative will
be set aside if there is manifest error in the exercise of such
power or the exercise of such power is manifestly arbitrary.
Similarly, if the power has been exercised on a non-
consideration or non-application of mind to a relevant factor,
the exercise of power will be regarded as manifestly
erroneous. If a power, whether legislative or administrative is
exercised on the basis of facts which do not even exist, and
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:32 :::
65 WP-2605-15which are patently erroneous, such exercise of power will
stand vitiated.
69 The principles of judicial review, as discussed in
Sitaram Sugar (supra) or Renusagar (supra) is essentially, the
Wednesbury unreasonableness principle. Therefore, even
proceeding on the basis that the impugned decision is
legislative in character, limited judicial review as explained in
Cynamide (supra), Sitaram Sugar (supra), Renusgar (supra)
is available and is required to be exercised, if the situation so
warrants.
70 From reading of the above decisions, as discussed
above, certain well defined principles of judicial review, have
emerged so far as price fixation. To begin with, the Court
which is required to exercise judicial review, cannot be
equated or will not assume appellate jurisdiction or review
merits, unless a case of unreasonability or absurdity is made
out. The Court will always keep in mind that the exercise of
fare fixation is ordinarily a legislative exercise in nature. It
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:32 :::
66 WP-2605-15may assume the nature of administrative or quasi judicial
when it concerns/affects the interests of an individual
manufacturer or producer, or is directed against a particular
circumstance. Even where the exercise of price fixation is
legislative in nature, the Court will not deny itself jurisdiction
to enquire into whether relevant considerations have gone in,
and irrelevant considerations are kept out at the time of
determination of price. In matters of price fixation, the
interests of those who are most vitally affected, i.e., the
consumer public cannot be ignored.
71 In exercise of judicial review, the question as to
whether the decision maker has arrived at the conclusion by
acting arbitrarily or unreasonably, can be looked into. Where
a question of law is at issue, the Court may determine the
validity of the impugned decision on its own independent
judgment and upset the decision, if the decision of the
authority does not agree with that which the Court considers
to be the right one. However, where the question of finding of
fact is involved, judicial review is only concerned with the
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:32 :::
67 WP-2605-15issue of perversity or unreasonableness. Thus, where a finding
of fact is found to be rational and reasonably based on
evidence, in the sense that all relevant material has been gone
into/taken into account; no irrelevant material has influenced
the decision; and the decision is one which any reasonably
minded person acting on such material would have come to
such conclusion, then judicial review is exhausted even
though the finding may not necessarily correspond to what
the Court would have come to, if it was called upon to
determine the facts, in the first instance. If power, legislative
or administrative, has been exercised on basis of facts which
do not exists or are patently erroneous, such exercise of
power will stand vitiated.
72 Even though price fixation may be a legislative
action, it is imperative that the action should be inspired by
reason, and not arbitrary or extraneous consideration. The
legislative action, therefore, must be consistent with
constitutional principle. When the judgment is entrusted to
an expert body, the same is generally treated as final and
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:32 :::
68 WP-2605-15judicial function. It is exhausted when it is found to have
warrant in the record and rational basis in law; the Court is
not supposed to supplant the feel of the experts by its own
views. However, even a legislative action will be set aside, if
there is any manifest error in exercise of power or the
exercise of power is manifestly arbitrary. Similarly, if power,
whether legislative or administrative has been exercised on a
non-consideration or non-application of mind to relevant
factors, the exercise of power will be regarded as manifestly
erroneous.
73 The circumstances, in the present case, differ from
the circumstances in Cynamide (supra) or Sitaram Sugar
(supra) on certain issues or crucial aspects. In the present
case, the price fixation measure is directed against a
particular situation. The price fixation measure concerns a
particular agency, i.e., MMOPL. At least that is the manner in
which the FFC has approached the issue. Therefore, we see
some substance in the contention of Mr. Chinoy, learned
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:32 :::
69 WP-2605-15Senior Counsel that the impugned decision partakes a quasi
judicial nature. However, we propose to exercise judicial
review on the basis that the impugned decision is legislative
or quasi legislative in nature. As stated above, even a
legislative or quasi legislative exercise of price fixation is not
immune from judicial review, though the grounds of judicial
review may be quite restricted/limited.
74 According to respondent no.4 - Project Proponent,
the petitioner has no locus standi to file the present petition
since the petitioner is a joint venture partner along with
respondent no.4 holding 26% equity stake. The balance 74%
is held by consortium of Reliance Energy Ltd and Veolia
Transport S.A. They also rely upon judgment in Daman
Singh Vs. State of Punjab (supra). In order to consider the
locus standi, we have to analyze the background in which the
consortium in question came to be formed. Apparently,
MMRDA has not instituted the present petition either in its
capacity in a MMOPL or to question any action of MMOPL or
its other shareholders.
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:32 :::
70 WP-2605-1575 Apparently, there is no dispute that MMRDA was
appointed as Project Implementation Agency to complete the
Metro Project, and it was appointed at the behest of the State
of Maharashtra. The petition is instituted by MMRDA as the
Project Implementation Agency. Rather, in this character,
MMRDA certainly has sufficient interest to contend that the
impugned decision, if, permitted to prevail, will be contrary
to the interest of the riders or contrary to public interest. It is
the case of MMRDA that if the fare determined as per the
impugned decision is permitted to be corrected, then the very
character of the Metro Project as a 'Rapid Mass Transit
System' will be destroyed.
76 MMRDA was a party before the FFC. It was also
allowed to urge its contention wherein MMRDA urged that
there should be revision of the fare only as stipulated in the
Concession Agreement dated 7th March 2007. MMRDA, apart
from raising this issue, pleaded before the FFC that the fare
scheduled in the Concession Agreement, was at least a very
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:32 :::
71 WP-2605-15relevant consideration required to be taken into account
while fixing the fares. Though FFC has not accepted this
contention of the MMRDA, quite rightly did not deny or
question locus standi of the MMRDA when it addressed its
grievance before the FFC.
77 MMRDA in its capacity as the Project
Implementing Agency, is the best person to represent the
interest of various stakeholders of the Metro Project, specially
the interests of the commuters and members of the public.
As a matter of fact, the FFC entertained the applications of
MMRDA. When the contentions of MMRDA were not
accepted by FFC, the MMRDA certainly has a right to seek
judicial review. Therefore, its locus standi cannot be
questioned.
78 Two commuters initiated Writ Petition No. 863/16
wherein there is specific challenge to the impugned decision
dated 8th July 2015 on several grounds, including the ground
that section 33 of the Metro Act is itself unconstitutional.
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
72 WP-2605-15Similarly, another Public Interest Litigation No. 39 of 2016
initiated by NGO called 'Public Concerned for Government
Trust' (PCGT) , in which again, a challenge is made to the
Notification dated 16th October 2009, in terms of which, the
Metro Act was made applicable to the Metro Project. In these
petitions, they have sought a restraint order against MMOPL
from charging commuter fare, except in accordance with the
provisions of Concession Agreement dated 7 th March 2007.
These petitions were to be considered along with the present
writ petition. However, on account of constraint of time, it
was not possible to take up these two Writ Petitions for final
disposal along with the present petition. There is no serious
challenge to the locus standi of the petitioners in the said two
writ petitions. The circumstance of MMRDA holding 26%
stake in MMOPL, is certainly not some statutory bar to
MMRDA to question the impugned decision of the FFC,
merely because majority of the shareholders of MMOPL or the
MMOPL itself regards the impugned decision as favourable to
them. As noted earlier, MMRDA has neither instituted this
petition in its capacity as shareholder of MMOPL, nor does
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
73 WP-2605-15the petition question any action of MMOPL or its other
shareholders.
79 Now, let us consider whether the decision in
Daman Singh (supra), is applicable to the facts of the
present case. In Daman Singh's case, the challenge before
the Supreme Court was to the vires of section 13(8) of
Punjab Cooperative Societies Act, which provided for the
compulsory amalgamation of cooperative societies if it is in
the interest of Cooperative Societies. In this context, one of
the contentions was that section 13(8) did not make express
provision for issue of notice to members of concerned
cooperative societies, and therefore, the provision was
violative of principles of natural justice. In the alternate, it
was contended that principles of natural justice should be
read into the provision and notice to members be regarded as
imperative. It is in this context, that the Apex Court observed
that once a person becomes a member of a cooperative
society, he looses his individuality qua the society, and he has
no independent right except those given to him by the Statute
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
74 WP-2605-15and bye-laws. He must act and speak through the society or
rather, the society alone can act and speak for him qua the
rights and duties of the society as a body. The notice to the
society in such a case will be deemed as notice to all its
members. Although, the challenge to vires of section 13(8)
was rejected by the Supreme Court, such rejection was on
merits and not on the ground that the members of the
societies proposed to be amalgamated, had no locus standi to
challenge the same. In the light of observations of the Apex
Court, in Daman Singh's case, we are of the opinion the
decision in Daman Singh's case does not apply to the facts of
the present case, and we reject the challenge raised to the
locus standi of the petitioner to file this petition. We hold
that the present petition filed by the petitioner is
maintainable.
80 Now, we come to the contention of the petitioners,
rather challenge made by the petitioner to the FFC report
impugned in this Writ Petition. According to the petitioner,
on account of irrelevant facts being taken into consideration,
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
75 WP-2605-15by excluding relevant considerations by FFC, it has directed
itself to come to wrong conclusion, and therefore, the
decision of FFC is vitiated. According to them, there was no
justification for FFC to exclude consideration of vital and
relevant material which were placed before them in the form
of DPR, RFP, Bid Documents, Business Plan and the
Concession Agreement dated 7th March 2007 while
determining the Metro fares. According to them, the FFC
arriving at the conclusion in determination of the fares only
based on the material relied upon by 4th respondent which
were totally irrelevant and immaterial, is erroneous. It is
further contended that FFC did not even give reasons why
relevant material, as stated above, was excluded from
consideration. According to them, only during the pleadings
filed by MMOPL and the submissions made by them, they
tried to defend the exclusion of material by FFC.
81 According to 4th respondent, the consortium at the
time of the bid, sought VGF to the extent of Rs.1251 crores
equivalent to 53% of the estimated project costs. However,
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
76 WP-2605-15same was reduced to Rs.650 crores equivalent to 28% of the
then estimated project cost. The total cost of the project
turned out to be Rs.4026 crores and VGF actually made by
MMRDA, till date, was Rs.567 crores out of Rs.650 crores,
which is equal to only 14% of the actual project cost. They
further contend that the petitioners have misread the Business
Plan. According to 4th respondent, a close scrutiny of the
Business Plan would indicate that it was always envisaged
that there would be a cash surplus at the end of each financial
year. It is for this reason why project became fundable.
According to them, cash surplus would mean it is surplus
after providing for all operating cost as well as part
repayment of the principal loan amounts, and serving of
interest thereof as per the financing agreements. The figures
of cash surplus as per the Business Plan, would clearly
indicate cash surplus in crores by 2019 as Rs.51 crores and
project profit as Rs.33 crores. By reason of delay on the part
of the petitioner to secure right of way and the land for
construction of the project, the 4 th respondent has suffered a
cash loss i.e. actual profit in crores in 2015 was Rs.277 crores
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
77 WP-2605-15and actual cash surplus was Rs.161 crores; in 2016 actual
profit was Rs.287 crores and actual cash surplus was Rs.145
crores; and in 2017 (projected) actual profit was Rs.348
crores and actual cash surplus was Rs.203 crores. This was
despite the fares being fixed at Rs.10-20-30-40. According to
them, suffering as annual cash loss effectively meets the
Metro project unviable and it becomes no longer bankable.
According to them, this was specifically recognized by FFC in
the following terms :
"8 (b)(ii) An affordable fare is critical for
attracting ridership which in turn is key to the
business viability and also to serve the
commuters need.9. It can be construed to be a fine balance
between the affordability and the business
viability needs to be carefully considered. It is
pointed out that there is a large revenue gap at
the existing fare structure and the revenue gap
to be bridged aggregated to Rs.573 crores for
the year 2014-15.24. We have considered the reports
submitted by the four expert committees. In
terms of reports we find that they have
suggested higher average Fares. However, we
are fixing the fare hereunder, which works out
to be a lower average Fare than the average
Fare suggested by the four expert committees.Even after this revision, as set out below,
Mumbai Metro will not be able to break-even
and they will sustain loss on a day to day basis,Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
78 WP-2605-15which would have a far reaching effect on its
finances and operations in due course. In our
considered view, the Mumbai Metro One
should be at least be sustainable for the time
being not speak of return on equity which on
an long term basis be able to earn 17% (post
tax Equiry (IRR) and it should be in a position
to absorb the shock of loss for some time till
traffic increases considerably. If the Mumbai
Metro turns the corner and makes a profit, it is
definitely open to the Mumbai Metro One
Private Limited to pay dividents to the
investors depending upon the income at that
stage and not immediately. The Mumbai
travelling public/commuters expecting
convenience, facilities, punctuality and top
ranking operations, should be ready to sacrifice
and should not mind paying revised fares,
otherwise they will have to lose the Mumbai
Metro One facility and convenience of Metro
once and for all.They also rely upon the observations made by Professor G.
Raghuram "IAM - Ahmedabad Report".
"6.4 With all the above efforts, the issue of
bridging the viability gap would remain a
significant one for the Mumbai Metro, as per their
own projections (Exhibit-8). The deficit is
increasing year on year, primarily due to
increasing borrowings to cover the cash
losses. Hence there is urgency in financial
restructuring to enable viability of the
metro.As per our analysis, the full cost fare over the
next five years would stabilize at Rs.12 per
km, resulting in an average passenger fare of
Rs.60 with a 5 km (sic) lead. However, as alreadyTilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
79 WP-2605-15discussed in Section 3.6, this is not a viable fare,
being significantly higher than the revenue
maximizing fare, which for the peak is Rs.7.25 per
km and with a significant discount for the offpeak.
The weighted revenue maximizing fare can at best
yield an increase in revenue of 16 over what is
projected by MMOPL.For a target year like 2016-17, we are looking
at a deficit of about Rs.560 cr including a
cash deficit of over Rs.180 cr. The cash
deficit can be reduced at best by Rs.30
cr due to the revenue maximizing fare,
and Rs.40 crore due to non fare box revenues
and possibly Rs.20 cr due to improved (10%
efficiency) operations and maintenance.
This would still leave a cash deficit of nearly
Rs.100 cr, which will need additional
financing resulting in increased cash
outflows due to interest.The cash deficit needs to be plugged at
the earliest. MMOPL would require an
amount subsidy of over Rs.100 cr or a
one time grant of Rs.1000 cr. This can at
best stop the 'bleeding'Additional funds to cover the replacement
costs and return to shareholders would be
required to the tune of Rs.360 cr per
annum.82 On perusal of opinion of the FFC, we note that
FFC had excluded vital and relevant material from its
consideration with reference to DPR, RFP, Bid Documents,
Business Plan and the Concession Agreement dated 7 th March
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
80 WP-2605-152007. The members of FFC who submitted the majority
report have ignored the above material. Even in the
pleadings as well as submissions, there is not even a whisper
by MMOPL that such material was taken into consideration by
FFC, and they do not even say on what grounds and why they
were excluding such material. On the other hand, MMOPL
tries to defend by making the statement that FFC was justified
in excluding such material from its consideration at the time
of arriving at the fares. On the other hand, there is an
attempt to contend that consideration of such material might
have vitiated the very exercise because it is settled position in
administrative law that reliance on irrelevancies vitiates the
decision based thereon. In the pleadings as well as
submissions of MMOPL, it defended the exclusion of the
material by FFC broadly on the following three grounds.
(1) That by virtue of the provisions in section 33 and 103
of the Metro Act, all such material stands obliterated and
therefore, cannot even be looked into for the purposes of
fare determination by FFC;Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
81 WP-2605-15(2) The material in the form of Business Plan was not
even the basis for evaluation of MMOPL bid or award of
the contract of Metro Project on BOOT basis. The selection
of concessionaire was totally based on the capital
contribution of VGF demanded by the bidder, and this is
clearly indicated at Clause 27.3 of the RFP that the
bidder who required minimum capital requirement would
be selected; and(3) That there has been a sea-change in circumstances
from the time of submission of Business Plan and the
Concession Agreement that was entered into between the
parties. At that stage, MMOPL was persuaded to reduce
the demand for VGF from Rs.1251 crores to Rs.650 crores
based upon certain assurances by MMRDA and the State.
The assurances were never honored by the two agencies.
Further, the rates in the Concession Agreement or the
formula of upward revision of fares by 11 percent at every
4th year was on the basis of construction estimate of Rs.
2356 crores. In reality, for reasons entirely attributable to
MMRDA, there was delay in completing the construction,
and therefore, there was consequent escalation to Rs.4026
crores. In such drastically changed circumstances,
according to 4th respondent, it would be neither legal nor
fair to tie down MMOPL to the fares stipulated in the
Concession Agreement or forcing them to stick to the
Business Plan submitted at the stage of filing bids.Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
82 WP-2605-1583 Based upon three contentions, learned Senior
Counsel Mr. Dwarkadas arguing for 4th respondent
strenuously contends that reasons are obvious, why the DPR,
RFP, Bid Documents, Business Plan and the Concession
Agreement were not considered by the FFC. According to
him, they were not considered since they were irrelevant and
immaterial documents. Before we proceed to examine the
above three grounds alleged by Mr.Dwarkadas, it is pertinent
to mention that the majority report of the FFC really makes
no reference to any such grounds as justification for
exclusion of the material in the form of DPR, RFP, Bid
Documents, Business Plan and the Concession Agreement.
Inferentially, it can be said that the FFC has excluded such
material from consideration based on its interpretation of
sections 33 and 103 of the Metro Act.
84 The statutory scheme of the Metro Act, is
indicated above, and so also the situation in which Sections
33 and 103 of the Metro Act appear. Section 33 of the Metro
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
83 WP-2605-15Act provides that the FFC shall recommend the fares for the
carriage of passengers in a Metro Rail. Section 37 of the
Metro Act provides that such recommendation shall be
binding on the Metro Railway Administration. Section 103 of
the Metro Act deals with the effect of the Act on any other
enactments or instruments which may be inconsistent with
the Metro Act.
85 Section 33 of the Metro Act and the proviso reads
as follows:
"33. Fixation of Fare for carriage of
passengers : The Metro railway administration
shall, from time to time, on the recommendations
made to it by the Fare Fixation Committee
constituted under sub section (1) of section 34, fix,
for the carriage of passengers, fare for travelling
from one station to another of the metro railway.Provided that the metro railway administration
may fix the fare under this section without
recommendations of the Fare Fixation Committee on
the initial opening of the metro railway."Section 37 of the Metro Act reads as follows :
37 Recommendations to be binding on metro
railway administration : The recommendations
made by the Fare Fixation Committee shall be
binding on the metro railway administration.Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
84 WP-2605-15Section 103 of the Metro Act reads as follows :
"103. Effect of Act inconsistent with other enactments .-
The provisions of this Act shall have effect
notwithstanding anything inconsistent therewith
contained in any enactment other than this or in any
instrument having effect by virtue of any enactment
other than this Act."86 On perusal of FFC report, in its introductory
grounds, it refers to the interim orders made by this Court
while disposing of an application under section 9 of the
Arbitration and Conciliation Act, 1996 in the context of
MMOPL asserting rights to fix the initial fare of the Metro and
further since, Mr. Dwarkadas relies upon such orders, a brief
reference to them will not be out of place.
87 In Arbitration Petition (L) No. 890/14 disposed of
on 24th June 2014, learned Single Judge of this Court
expressed prima facie opinion that MMOPL was entitled to fix
the initial fare without being bound by the stipulation in the
Concession Agreement. This prima facie opinion was upheld
by the Division Bench of this Court in Appeal No. 621 of 2014
by an order dated 8th January 2015. The Division Bench also
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
85 WP-2605-15expressed the prima facie opinion that once Metro Act was
extended to Metro Line - 1, the fixation of fare could be done
by MMOPL only on the recommendation of Fare Fixation
Committee under the substantive part of section 33, but for
fixation of initial fare, MMOPL cannot be held to be bound by
the fare structure provided in the Concession Agreement
without the operation of Clause 6.5.2 for upward revision.
The regime of contractual obligations under the Agreement in
relation to fixation of fares, cannot, therefore, be
straightaway read into the proviso to section 33 for the
purpose of tying down the MMOPL to the fare structure under
the agreement without any scope for upward revision. The
Division Bench at paragraph 22 clarified that the observations
in the order are for the limited purpose of decision under
Section 9 petition and the Arbitral Tribunal or the FFC shall
not be influenced by the observations made in the order. The
SLP, challenging these orders were also disposed of.
88 The aforesaid orders were made to dispose of
application under Section 9 of the Arbitration and
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
86 WP-2605-15Conciliation Act, 1996 taken out by MMRDA to restrain
MMOPL from fixing the initial Metro fares contrary to the
stipulation in the Concession Agreement. It was made clear
that the observations were only prima facie and for the
limited purpose of decision under section 9 petition, and the
Arbitral Tribunal or the Fare Fixation Committee shall not be
influenced by the observations made in the order. Besides, all
the observations state that prima facie MMOPL cannot be
held to be bound by the fare structure or the formula of
revision stipulated in the Concession Agreement. None of the
orders specifically held that the Concession Agreement stands
obliterated or that the fares stated in the Concession
Agreement are totally irrelevant while determination of the
fares by FFC.
89 As to the construction of Section 103 of the Metro
Act, no doubt, the provision contains a non obstante clause.
Therefore, the provisions of the Metro Act shall have effect
notwithstanding anything inconsistent therewith contained,
in any enactment, other than the Metro Act, or in any
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
87 WP-2605-15instrument having effect by virtue of any enactment other
than this Act.
90 In the present case, it was not even the contention
of any of the parties that any enactment other than the Metro
Act was in issue or was sought to be enforced even though the
provisions of such other enactments were inconsistent with
anything contained in the Metro Act. The contentions,
though are not very clearly formulated, it was argued that the
Concession Agreement is an instrument having effect by
virtue of some enactment, other than the Metro Act. Again,
none of the parties specified which was such enactment, by
virtue of which the instrument or the concession agreement
was having effect. This factor is very relevant in the light of
the observations of Supreme Court in Sharda Devi vs. State
of Bihar1 wherein it has held that the expression
'notwithstanding anything contrary to any enactment' cannot
take away effect of any provision in law, which is an
enactment.
1 2002 (3) SCC 705
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
88 WP-2605-1591 The principles of statutory interpretation of non-
obstante clause in a Statute are well settled by now. While
construing a non-obstante clause, it is necessary to determine
the purport and object for which the same was enacted. The
non-obstante nature of a provision although, may be of wide
amplitude, the interpretative process thereof must be kept
confined to the legislative policy. A non-obstante clause must
be given effect to, to the extent Parliament intended and not
beyond the same. This is well settled by the Apex Court in
the case of ICICI Bank Ltd. Vs. SIDCO Leathers Ltd. and
ors.1
92 In A.G. Varadarajulu and anr. Vs. State of Tamil
Nadu and ors.2 the Supreme Court has held that it is well
settled that while dealing with a non-obstante clause under
which the legislature wants to give overriding effect to a
section, the Court must try to find out the extent to which the
legislature had intended to give one provision overriding
1(2006) 10 SCC 452
2(1998) 4 SCC 231Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
89 WP-2605-15effect over another provision. Such intention is to be gathered
from the enacting part of the section.
93 In Madhav Rao Scindia vs. Union of India 1, the
Supreme Court again observed that the non - obstante clause
is no doubt a very potent clause intended to exclude every
consideration arising from other provisions of the same
Statute or other Statute, but for that reason alone, the scope
of the provision must be determined strictly. When such
section containing non-obstante clause does not refer to any
particular provision which it intends to override, but refers to
the provisions of the Statute generally, it is not permissible to
hold that it excludes the whole Act and stands all alone by
itself. A search has, therefore, to be made with a view to
determine which provision answers the description and
which does not.
94 Again in Central Bank of India vs. State of
Kerala and ors,2 the Supreme Court opined that non-
1(1971) 1 SCC 85
2(2009) 4 SCC 94Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
90 WP-2605-15obstante clause is generally incorporated in the Statute to
give overriding effect to a particular section or the Statute as
a whole. While incorporating non-obstante clause, the Court
is required to find out the extent to which the legislature
intended to do so, and the context in which the non-obstante
clause is used. By reference to State of West Bengal vs.
Union of India,1 it was held that the Court must ascertain the
intention of the legislature by directing its attention not
merely to the clauses to be construed, but to the entire
Statute; it must compare the clause with other parts of the
law and the setting in which the clause to be interpreted
occurs.
95 In R.S. Raghunath Vs. State of Karnataka 2 , the
three Judge Bench of the Supreme Court, after making
reference to earlier judgments in Aswini Kumar Ghose vs.
Arabinda Bose3, Dominion of India vs. Shrinbai A. Irani4,
1AIR (1963) SC 1241
2(1992) 1 SCC 335
3AIR 1952 SC 369,
4 AIR 1954 SC 596,
Tilak::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
91 WP-2605-15Union of India vs. G.M. Koil1, and Chandavarkar Sita
Ratna Rao vs. Ashalata S. Guaram 2 observed that the non
obstante clause is appended to a provision with a view to give
the enacting part of the provision an overriding effect in case
of a conflict. But the non-obstante clause need not
necessarily and always be coextensive with the operative part
so as to have the effect of cutting down the clear terms of an
enactment, and if the words of the enactment are clear and
are capable of a clear interpretation on a plain and
grammatical construction of the words "the non obstante
clause" cannot cut down the construction and restrict the
scope of its operations. In such cases, the non obstante clause
has to be read as clarifying the whole position and must be
understood to have been incorporated in the enactment by
the legislature by way of abundant caution and not by way of
limiting the ambit and scope of the Special Rules.
96 In the light of above principles, or the law
declared by the Apex Court with regard to the word non-
1(1984) Supp SCC 196
2(1986) 4 SCC 447
Tilak::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
92 WP-2605-15obstante clause in a Statute, we have to now consider the
effect of such non-obstante clause in Section 103 of the Metro
Act. Even if we regard the Concession Agreement as an
instrument having effect by virtue of the another enactment
i.e. Contract Act, Section 103 of the Metro Act, in terms
provides that the provisions of the Metro Act shall have effect
notwithstanding anything inconsistent therewith in any
instrument having effect by virtue of any enactment other
than the Metro Act. Applying the principles of statutory
interpretation as discussed above, it is not possible to accept
the extreme position that the concession agreement totally
stands obliterated on account of non-obstante clause
contained in section 103 of the Metro Act. The section itself
states that the provisions of the Metro Act shall prevail over
"anything inconsistent therewith" in any instrument having
effect by virtue of any enactment other than the Metro Act.
Therefore, it becomes relevant and necessary to determine
whether there is anything inconsistent between the
Concession Agreement and the provisions of the Metro Act. To
the extent of inconsistency however, the provisions of Metro
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
93 WP-2605-15Act shall prevail. This is the proper manner in which one has
to construe the provisions of section 103 of the Metro Act.
The extreme position that section 103 of the Metro Act
completely obliterates the Concession Agreement, or even
obliterates the portions of Concession Agreement not
inconsistent with the provisions of Metro Act is not
acceptable. The acceptance of such an extreme position might
render the very authority of MMOPL to embark upon or
operate the Metro project, itself vulnerable.
97 In the present case, we are not concerned with the
right of MMOPL to seek fixation and Metro fares without the
recommendation of FFC on the initial opening of the Metro
Rail. That issue admittedly is pending consideration in an
arbitration proceeding. However, in the context of the legal
submissions made, there is bound to be some unavoidable
overlapping. The real issue in the present petition is whether
FFC, upon consideration of section 103 of the Metro Act, was
entitled to virtually ignore the Concession Agreement, or treat
the Concession Agreement as obliterated or completely
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
94 WP-2605-15regard the fares and formulae in the Concession Agreement as
irrelevant, extraneous and redundant to the determination of
Metro fares.
98 In terms of the Concession Agreement, MMOPL is
obliged to collect fares from riders at the Metro Project as per
the rates set out in Schedule - L, i.e., Rs.6-8-10 with upward
revision of 11% every fourth year. This corresponds to fare of
Rs.9-11-13 in the year 2014. The Concession Agreement also
provides for upward revision of fare beyond the stipulation in
Schedule - L in case of any unanticipated rise in the operating
costs of the Metro Project. The determination in this regard
was left to the State Government. These provisions in the
Concession Agreement may, to the extent, they provide for a
fixed fare or a fixed formula for determination of the fare, be
regarded as inconsistent with the scheme of determination of
Metro fares in sections 33 and 37 of the Metro Act. To the
extent of inconsistency, therefore, the provisions of the Metro
Act will prevail and the inconsistent provisions of Concession
Agreement may have to give way. The inconsistency arises if
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
95 WP-2605-15the fare or the formula of revision stipulated in the
Concession Agreement is held as binding on the parties to the
Concession Agreement. The inconsistency may also arise if
the fare or the formula of revision stipulated in the
Concession Agreement is held as binding on the FFC in the
discharge of its statutory functions under section 33 of the
Metro Act. To the extent of such inconsistency, the binding
nature of the stipulation as to fare or the formula of revision,
will have to yield or give way.
99 There is no question of any inconsistency if the
rate or formula for revision stipulated in the Concession
Agreement is to be taken into consideration by the FFC as
some relevant material for determining the Metro fare. The
stipulation about rates may not be binding but that does not
mean that the same is irrelevant when it comes to
determination of the fares. On the basis of stipulation in the
Concession Agreement, it may not be possible for MMRDA to
insist that the FFC determines the same fares and the FFC,
may not be bound to determine the same fares or apply the
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
96 WP-2605-15same formula for revision. However, that does not mean that
the FFC can refuse to look into the stipulation of fares or the
formula for revision. The binding nature of the stipulation in
the Concession Agreement is one thing and relevancy, is quite
another. The relevancy lies in the admitted fact that the
stipulation in the Concession Agreement were consensual and
contractual. It is not in dispute that these stipulations were
freely agreed to by the parties. There was consensus while
making the agreement. This is not even a case where the
parties can plead any inequality in bargaining power. This is,
in our view, the harmonious manner to interpret the
provisions of section 103 of the Metro Act and the stipulation
in the Concession Agreement. The extreme contention that
the Concession Agreement stands obliterated, might, then
render the position of MMOPL as Metro Railway
Administration, vulnerable.
100 By applying the principles of statutory
interpretation to the construction of non - obstante clause in
section 103 of the Metro Act, and adopting the principle of
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
97 WP-2605-15harmonious construction the statutory scheme in sections 33
and 37 of the Metro Act will have to be respected. This
means that FFC will have jurisdiction to recommend revision
of metro fares, notwithstanding the specification of fares and
the formula of revision in the Concession Agreement. There
is distinctly a distinction between an instrument operating as
a binding instrument and instrument affording evidence or
material on some vital and relevant factor to be taken into
consideration for determination of fares. The FFC, by
misconstruing the provisions of section 103 of the Metro Act,
appears to have lost sight of this distinction pointed out
above. In determining the fares, therefore, the FFC was
not justified in ignoring the fares fixed or formula for
revision in the Concession Agreement. This is particularly
because the fares fixed and the formula prescribed in the
Concession Agreement were based upon the terms and
conditions agreed between the parties i.e. MMOPL and
MMRDA. If the provisions of the Metro Act were not to be
extended to the Mumbai Metropolitan Area, the contractual
relation between MMOPL and MMRDA would be governed by
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
98 WP-2605-15such fares and such formula as prescribed in the Concession
Agreement. The consortium, in its Business Plan, had in fact
agreed to such fares and such formula. The consortium had
submitted its demand for VGF on basis of such fares and such
formula. Thus, although, such fares or formula prescribed in
the Concession Agreement may not be binding upon the FFC,
nevertheless, the same constitutes at least one of the relevant
factors to be taken into consideration which the FFC could
not have ignored on the basis of improper legal construction
of the provisions in section 103 of the Metro Act. Since this is
an error of law, judicial review will have to be exercised, as
held in Sitaram Sugar (supra) and Council of Civil Services
(supra).
101 By way of recapitulation, reference is necessarily
to be made to Sitaram Sugar (supra), upon which strong
reliance was placed by Mr. Dwarkadas, Senior Counsel
arguing for MMOPL. At paragraph 49 of the judgment, the
Supreme Court, has, in turn, held that where a question of
law is at issue, the court may determine the rightness of the
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:33 :::
99 WP-2605-15impugned decision on its own independent judgment. If the
judgment of the authority does not agree with that which the
court considers to be the right one, the finding of law by the
authority is liable to be upset.
102 Similarly, in the case of Council of Civil Services
(supra), Lord Diplock has explicitly explained what illegality
means. According to Lord Diplock, 'illegality' means that the
decision maker must correctly understand the law that
regulates its decision making power and give effect to it.
Whether he has or not is a justifiable question to be decided,
in the event of dispute, by a court exercising powers of
judicial review. The other ground upon which learned Senior
Counsel Mr. Dwarkadas was contending was for exclusion of
material like DPR, RFP or the business plan was that such
material was never the basis for selection of the bidder /
Consortium. We are afraid this may not be a correct
proposition. The award of the Metro Project on BOOT basis
to the Consortium was upon evaluation of the bid of the
Consortium which essentially included its business plan and
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
100 WP-2605-15the VGF demanded by it. Clause 27 of the RPF specifically
required the bidders to submit business plan with financial
projections, projected annual income statements, cash flow
statements and balance-sheets. This clause also stipulated
that the Bid Evaluation Committee (BEC) will evaluate and
compare only the bids to determine the eligibility in
accordance with clause 27.2 of RFP. This sub clause makes
specific reference to business plans and other detailed
information to be submitted or provided by the bidders in the
prescribed formats. Finally, clause 27.3 of RFP stipulated
that the bidder who required minimum capital contribution
would be selected, predicated that the bid made on
evaluation under clauses 27.1 and 27.2 had been found to be
compliant and acceptable.
103 From the material on record, it is apparent that
even the Consortium was clear in its understanding of the
terms of the RFP and tender notice. In particular, the
Consortium was quite clear as to the position of the Business
Plan which was required to be submitted as a part of the bid
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
101 WP-2605-15document. The consortium, in its business plan, specifically
stated that ridership forecast is the most critical parameter
for evaluating the viability of the project. The ridership
forecast estimated by MMRDA and provided in RFP and other
documents has been validated by the "REL LED Consortium".
Further, the bid document accepts that the structure for fare
provided in terms of Schedule L of the Concession Agreement
is the base for the fare rates used in financial model. This
corresponds to rate of Rs. 6 upto 3 kms.; Rs. 8 between 3
kms. and 8 kms.; and Rs.10 beyond 8 kms. The Schedule
contemplates upward revision of fares at 11% every fourth
year. Detailed financials were enclosed by the Consortium
along with the bid as required by RFP. The Consortium
specifically stated that the survey conducted at the time of
ridership estimation indicates the local population is willing
to use the Metro Project so long as the fare as in the range as
available in public modes of transport i.e. BEST buses and
local trains. All this is quite sufficient to reject the arguments
of learned Senior Counsel Mr. Dwarkadas that the Business
Plan was an irrelevant document to be considered in the bid
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
102 WP-2605-15evaluation process or that the bids had to be evaluated solely
on the basis of VGF demanded by the bidders.
104 The next contention urged by Mr. Dwarkadas for
exclusion of material like DPR, RFP, business plan and the
Concession Agreement was that there was a sea change in
circumstances since such material was issued or documents
were executed. This ground is more in the nature of
objections to the weight to be attached to such material, and
not to the very exclusion of such material from consideration.
The FFC, has completely excluded such material from
consideration. The aspect of any alleged sea change finds no
reference or even reflection in the majority report. At the
most, it can be said that there is reference to escalation of
construction costs from Rs.2356 crores to Rs.4000 crores or
thereabouts. The majority report, however, proceeds on the
basis that it is the MMRDA which was solely responsible for
delay and cost overruns. In proceeding so, the FFC does not
even advert to the material placed on record by MMRDA like
Louis Berger Report or the reports submitted by Lenders
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
103 WP-2605-15Engineers (SOWIL Limited and CREEC, China) which suggest
that MMRDA was not responsible for the cost overruns.
Based upon such presumption, the majority report places the
brunt of increased fares on the commuting public since,
MMRDA is held to represent the interests of the commuting
public. In our opinion, there is unreasonableness on the part
of the FFC to proceed on the basis that it is the MMRDA
which was solely responsible for the delay and the consequent
cost overruns. The reports are said to have suggested that it is
MMOPL which has padded up the expenses.
105 We are also unable to agree with Mr. Dwarkadas's
contention that since the MMRDA extended the period for
completion of the construction without terminating the
contract or without even levying any penalty, it should be
presumed that the MMRDA has accepted that it was solely
responsible for the delay and the consequent cost overruns.
The issue of the quantum of cost overruns and the
responsibility for the delay is actually pending adjudication in
arbitration proceedings, where, MMOPL has raised a claim for
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
104 WP-2605-15Rs.1939 crores or thereabouts. The FFC, was therefore, not at
all justified in proceeding on the basis that it is the MMRDA
which was responsible for the delay and the consequent cost
overruns and on this basis, proceeding to determine the fare,
which, even the MMOPL chooses to style as 'tariff shock'.
106 While MMOPL refuting the contention of MMRDA
significantly, placed reliance on Louis Berger report and other
material contending that since all issues are pending
adjudication in the Arbitration Proceedings, the same are of
no relevance to the present petition. However, the 4th
respondent MMOPL, abandons this yardstick when it defends
the FFC presumption that MMRDA is responsible for the delay
and the consequent cost overruns. Reference to the averments
in paragraphs 31 and 32 of MMOPL's affidavit-in-reply dated
3rd June 2016 is relevant in the context.
"31. I say that Respondent No.4 accordingly incurred
substantial cost overruns, primarily on account of
the Petitioner failing to comply with its
obligations under the Concession Agreement as
well as its duties at the time of accepting the re-negotiated offer dated 10th May 2006. I say that
the Respondent No. 4 was, therefore, constrained
to initiate arbitration proceedings against theTilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
105 WP-2605-15Petitioner seeking indemnification and
compensation for these breaches by the Petitioner.
I say that the said arbitration proceedings are
currently going on and the issues of breaches
committed by the Petitioner is sub judice therein.32. I say that the reliance placed by the Petitioner on
the report submitted by the Lenders Engineers
(SOWIL Ltd. And CREEC, China) and the report
submitted by the Louis Berger Consulting Pvt.
Ltd., is wholly misplaced. In any event, I say that
the subject matter of both reports is currently
pending adjudication before the Arbitration
Tribunal and, therefore, the same is of no
relevance for the present matter i.e. whether or
not the Impugned Report made by Respondent
No.1 must be interfered with.107 There is now a serious fallacy, both in the
contentions of MMOPL and approach of FFC in virtually
proceeding on the basis that it is MMRDA which was
responsible for the cost overruns. In the arbitration
proceedings, if ultimately it is held that MMRDA was not
responsible for the delay and the consequent cost overruns,
then, the prejudice to public interest, will be irreversible. At
the very least, MMOPL will be unjustly enriched at the cost of
commuters. Even if MMOPL succeeds in the arbitration
proceedings and is awarded the claimed amount of Rs.1939
crores, even then, the issue of unjust enrichment at the cost of
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
106 WP-2605-15commuters and tax payers will arise. This is because the
MMOPL, by then, will have recovered substantial amounts by
way of the enhanced fares, and will further have to be paid
compensation amount. The FFC, has altogether glossed over
this vital and relevant consideration, particularly as the
payments to MMOPL have to come from the commuters or
the tax payers. In a sense, in the present situation, the
impugned decision amounts to grant of substantial interim
monetary relief in the pending arbitration proceedings even
before the issue of liability for delay and cost overrun is yet to
be adjudicated.
108 In all probability, perhaps realizing the fallacies
which would arise out of such unjust enrichment, MMOPL
persistently submitted that in case its claim is upheld in the
arbitration proceedings, and if there is an award for
compensation, the MMOPL will pass on the benefit of such
award to the commuters. Reliance was placed upon the
interim orders granted by this Court in the context of fixation
of initial fares by MMOPL to urge that such a course is
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
107 WP-2605-15permissible. According to us, such reliance is misplaced
because the learned Single Judge as well as the Division
Bench noted that the FFC, was to determine the fares within a
period of three months. Therefore, they observed that there
would be no serious prejudice to the commuting public if the
initial fares fixed by the MMOPL continued for a period of
three months or thereafter. If ultimately, the FFC rules
against the MMOPL, adjustments could always be made. Such
a proposition does not operate in the present context. Besides,
when the issue is of larger public interest of the commuting
public, the prima facie observations made in the interim
orders, can neither be applied out of context nor can they
even otherwise support the contention of MMOPL. The
contention that VGF was reduced by the Consortium from the
bid amount of Rs.1251 crores to Rs.650 crores, is, at least
prima facie, not a relevant factor. At least, no material was
placed before us to suggest that such reduction was on the
basis of certain assurances made by the MMRDA and the
State Government. Further, there is no allegation that such
alleged assurances were not complied with by the MMRDA or
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
108 WP-2605-15the State Government. The unilateral address of letter dated
10th May 2006 by the Consortium is hardly of any evidence.
The Concession Agreement was executed on 7 th March 2007.
There is no reference to any such alleged assurances in the
said Concession Agreement. The reduction was obviously a
commercial judgment or a commercial call taken by the
Consortium for the reasons best known to it. This is surely
not a case involving any inequality of bargaining power, and
fortunately there is no such plea raised by the 4th respondent.
On such ground therefore, the FFC could not have ignored
the Business Plan or the Concession Agreement.
109 The FFC has completely ignored the Business Plan
submitted by the MMOPL which was vital and relevant
material to the exercise of fare determination. In the DPR and
RFP, certain estimates as to ridership as well as financials had
been made known to the prospective bidder. However, it was
made clear that the bidder must undertake independent
surveys or independently assess such factors before
submission of their bids, which essentially included the
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
109 WP-2605-15Business Plan. In this case, the consortium actually agreed
with the estimates and then submitted its Business Plan. From
the DPR and RFP, it is quite clear that the business model
contemplated was of reasonable fares which would attract
high ridership, which is to sustain the Metro project. One of
the prime objectives of the Metro project was to reduce the
burden on the existing infrastructure. The consortium, in
its Business Plan submitted in the prescribed format as a part
of its bid, accepted the estimates of ridership of 5.66 lakhs per
day corresponding to fare and non-fare revenue of Rs.226
crores. Upon excluding the operating expenses, interest
outgoings etc. in the first year of operations itself, i.e. 2011,
provision has to be made for depreciation of 137 crores, a
notional loss of Rs.115 crores was projected.
110 The projections so far as 2019, i.e. after 8 year of
operations where the ridership assumed to be increased to
6.60 lakhs per day. The aggregate revenue was projected at
Rs.420 crores. Upon exclusion of operating expenses, interest,
depreciation, tax, there would be actual surplus of Rs.33
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
110 WP-2605-15crores. The project was expected to break even from the 9 th
year. From the first 8 years of operations, the Business Plan
submitted by the consortium did not contemplate any
payment of dividend or return of equity to the promoters. For
the first 5 years of operations, there was to be no repayment
of loans. Finally, the Business Plan, also projected the position
in the 30th year of operations, i.e. in the year 2041. By this
year, the ridership was to increase to 12.11 lakhs per day and
profits projected were Rs.754 crores. Over a 30 year period,
the consortium, was to make profits of Rs. 8519 crores. There
is ample material on record which throws light on the
business model of Metro project. Since, this was to be a Mass
Rapid Transit System, the emphasis was on reasonable fares
and high ridership. The consortium also understood the
fundamentals of business model in this manner itself, which is
clear from the Business Plan submitted by it. One should not
forget that it is on evaluation of such Business Plan that the
consortium was selected for award of contract. The FFC, by
even refusing to look to the business plan, much less, take the
same into consideration, has virtually relieved the MMOPL of
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
111 WP-2605-15the very basis on which it got the contract. There is
accordingly, the issue of integrity of the tender process,
which, was not an irrelevant circumstance when it comes to
fare determination. If there was any indication in the DPR or
the RFP that revision of fares will not be restricted to the
formula of 11 percent every 4th year or revision in exceptional
circumstances of unanticipated increase in costs, it is possible
that other bidders might have offered more competitive
terms. Though, after the extension of the Metro Act, the fares
or the formula for the revision in the Concession Agreement
may not be binding, it is not correct to say that the same are
irrelevant, extraneous and therefore, liable for exclusion from
consideration.
111 The FFC, or for that matter, at least the three
experts appointed by the FFC, as directed by the FFC, have
not assessed the issue of Metro fares by taking into
consideration the entire spectrum of project cost, equity,
return on investments, servicing of debts, operation costs, and
such other parameters specifically referred to in paragraphs
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
112 WP-2605-1517 and 18 of the majority report. It is a situation whether
incorrect questions are put to, which will obviously result in
securing incorrect answers. If, as per the Business Plan
submitted by the consortium, there was to be no return on
equity for the first 8 years, there was to be no repayment of
loans for the first 5 years and host of such other factors, as
reflected in the business plan, then, assessment of fares by
ignoring all such relevancies, calls for judicial review. These
were the matters which were relevant to the issue for fare
determination. All such issues were squarely raised by
MMRDA in its submissions dated 7th May 2015 and 10th June
2015. However, the impugned decision "majority report"
reflects no consideration of the submissions and the issues
raised by MMRDA in their submissions. The objective for the
extension of the Metro Act was certainly not an act to relieve
the MMOPL of the representations held out in its business
plan, which was one of the considerations for the evaluation
of the bid. The objective was also certainly not to merely
relieve the MMOPL of the contractual obligations undertaken
by it under the Concession Agreement. The objective was to
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
113 WP-2605-15consider all price fixation mechanisms usually go into to
arrive at a fair fare, which would balance the interests of the
operator and the commuting public. A fare, which would
retain the character of the project as a Mass Rapid Transit
System, a fare which would retain the character of a PPP
model.
112 The FFC, by virtue of its statutory position, can
undoubtedly disregard the fare stipulated in the contract
between the parties. In a given case, it may determine fares,
even lesser than the stipulated contractual rates. Similarly, in
a given case the fares may be higher than the stipulated
contractual rates. As held in Cynamide (supra) a price
fixation measure does not concern itself with the interest of
an individual manufacturer or a producer, which in this case,
will imply the operator MMOPL. It is generally in relation to
a particular commodity or a class of commodities or
transactions, which, in this case, will imply, the operator
MMOPL. It is done in relation to a particular commodity or a
class of commodities or transactions, which, in this case, will
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
114 WP-2605-15mean the riders of the Metro Project. Most importantly, a
price fixation measure is conceived in the interests of the
general consumer public. The right of the citizens to obtain
essential articles at fair prices and the duty of the State to
provide them so are transformed into the power of the State
to fix prices and the obligation of the producer to charge no
more than the price fixed. Again, the Supreme Court has
clarified that price fixation is not something which primarily
affects only the manufactures and the producers. Those who
are most vitally affected are the consumer public. It is for
their protection that the price fixation is resorted to, and any
increase in price affects them as seriously as any decrease
does a manufacturer, if not more.
113 Even the MMOPL tacitly concedes that the fare
recommended by FFC i.e. Rs. 10 to 110, if implemented,
will amount to giving a 'tariff shock' to its valued
commuters. In order to avoid giving such 'tariff shock' to its
commuters, the MMOPL states that it chose to defer any fare
revision till 30th November 2015, and have a dialogue with
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
115 WP-2605-15the State of Maharashtra with an intention to find out a
viable solution. The MMOPL has stated that for the present,
though, in terms of the recommendation of the FFC it is
entitled to increase the fares to Rs.10 - 110, proposed
increase to Rs.10 - 40.
114 The averment with regard to tariff shock is set
out in the MMOPL's affidavit dated 7th December 2015 at
paragraph 18(e) which reads as follows :
"(e) The FFC had recommended a fare structure of Rs.
10 to Rs. 110 in July 2015 after detailed scrutiny
of all aspects but the 4th Respondent chose to defer
any fare revision till November 30, 2015 and
engage with the GoM with an intent to finding a
viable solution and to avoid giving any tariff
shock to its valued commuters.115 According to us, the defence raised by MMOPL
that though FFC recommended fare structure of Rs.10 to 110,
they did not want to implement the same immediately to
avoid 'tariff shock' to commuters, may not be much assistance
to them to defend the impugned decision. Once the
recommendation is allowed to prevail, it will be left open to
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
116 WP-2605-15MMOPL to implement the fare of Rs.10 to Rs.110 at anytime
they want. Recommendation by FFC is nothing but an
authorization to MMOPL to implement the increased fares
upto maximum absolutely according to its discretion. In that
case, the commuter public would be at the mercy of the
MMOPL so far as the fares are concerned. It would be
nothing but defeating the very purpose of 'Rapid Mass Transit
System''. Further, it is not certainly the objective for
prescribing price fixation measures. By adoption of this
methodology, even any attempts at future fare fixation, it may
be pre-empted by urging that the fare actually levied is less
than the maximum recommended.
116 In terms of DPR and RFP when the project was
conceived it was fixed at 1.5 times the BEST ordinary non-air
conditioned bus fare, on the other hand, when MMOPL filed
application for revision of fares, it pleaded that Metro fares
should be priced well above BEST fares because Metro travel
is time saving, reliable, comfortable and safe. It is best
comparable to A.C. Bus fare for the purpose of fixing of fares.
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
117 WP-2605-15117 In order to achieve higher ridership, it was
conceived to pay the fares to 1.5 times the BEST ordinary
non-air conditioned bus fare, since Metro project was
conceived as Mass Rapid Transit System. There is no merit in
the argument of the 4th respondent MMOPL that there is no
nexus between the low fares and high ridership. Even FFC
has not accepted such proposition, though the FFC may not
have paid much attention to the same. Even the Welingkar
Report, upon which, MMOPL relies has stated that with 20%
increase in the existing fares, ridership will be decreased by
33.71%.
118 Some extracts of its application read as follows:
"3.3.1.3. Affordability of the services
As discussed above, the Affordability of the facility will
be governed by the ability to pay, willingness to pay by a
majority of the strata of the potential commuters across
the metro alignment.Ridership need to be optimized since very low fares will
attract very high ridership but it will generate lower
revenue and on the other side very high fare may take
away the affordability of the facility and attract very lowTilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
118 WP-2605-15ridership and thus low revenue. The strategy needs to
adopt a balanced approach and since the system is
dynamic it should be able to cater to different segments
of the society by allowing time of the day fares wherein
peak hours may invite a differentially higher fare than
non-peak hour thereby allowing optimal capacity
utilization and safe running of the system."3.3.2. Comparison with Competing Modes of
Transport
In this section, we have compared the fare structure of
different modes of transport in the city (metro, buses,
AC buses, auto-rickshaws, and taxi) and have compared
the different parameters like time, security, safety,
comfort, reliability, automation for each of transportation
systems.3.3.2.1 Bus :
Bombay Electric Supply and Transport Undertaking
(BEST) operate the bus transportation system in the city
of Mumbai. The following fares are applicable for the
same; however, the bus operation has been heavily
subsidized with total revenue deficit of Rs.768 Crores in
the year 2013-14. Further, Rs.917 Crores has been
estimated as revenue deficit for year 2014-15.Table 3 : Current BEST fares
Current Fare
Sl. No. Distance Ordinary AC Buses
(Bus) Rs. (Rs.)
1 0 to 2 km 8 30
2 2 km to 4 km 10 35
3 4 km to 6 km 14 55
4 6 km to 10 km 18 65
5 10 km to 14 km 22 80Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
119 WP-2605-15"3.3.3. Comparison between various Parameters
for different modes of transport
Various models of transport have been compared to
understand the value proposition they provide and the
cost of using the same :Table - 10
Para -- Metro Best Bus Auto Taxis
meters
Time -21 minutes 60 minutes - 50 50 minutes -
Taken 100 minutes minutes - 90minutes
90minutes
Comfort Air- AC available No Option avai-
conditioned and not lable at a very
available on high price
metro route
Last Mile No No Yes Yes
connecti-
vity
Fare Automatic Pass facility Manual Manual
Collection available,
manual
otherwise
Reliabi-
lity on High Low Medium Medium
travel
time
Cost Intial fares Rs.8 - Rs.30 Rs.17-187 Rs.21-230
fixed as AC bus;
Rs.10-40 Rs.30 - Rs.100
Availa- Throughout Frequent Available Available on
bility the day callAuto- High-Limited Low: Human Low:Driver Dependent,there
mation human Intervention have been various complaints
Intervention required to RTO regarding non-
compliance.Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
120 WP-2605-15Safety High Low Low Medium
Trains to not People Unbalanced
move without hanging out on
door closure the doors from
the bus
Security Security None None None
Cameras and
round the
clock security
presence
Wait Average 2 to 4 Average 15 to Average 5 Average 5 to
time minutes 20 mins to 30 mins 30 minsHence, it is evident that :
(a) Metro brings in a significant amount of time
saving in comparison to all other modes of
transportation(b) The reliability of certainty of journey is highest
because of the dedicated right of way(c) Highly safe system, secured in comparison to all
other modes(d) Comfortable mode with Air-Conditioned coaches
and automated fare collection system; thus scores
above all other mode of transportation systems.Thus, air-conditioned metro should be priced well above
BEST fares because of the various value proposition it
provides viz. time saving, comfort, reliability, safety etc.
It is best comparable to AC bus services for the purpose of
fixation fares".Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
121 WP-2605-15119 According to us, the contention raised by MMOPL
that since the Metro Project, even with the enhanced fares
will be catering eventually to atleast 1 - 2 lakh riders each
day, the same is sufficient for the project to retain its Mass
Rapid Transit System, is not acceptable. According to them,
placing reliance on the dictionary meaning of the term "Mass"
is quite misplaced if the context in which it has to be
appreciated, is taken into consideration. It is also noticed that
the Mumbai Suburban Railway (local trains) commute 7.5
million or 75 lakh commuters each day. This is reported to be
2.5 times its capacity. The contention completely ignores the
profile and the basic structure of the project which came to be
reflected in the DPR, RFP and even the Business Plans.
120 The comparison made by MMOPL between the
Metro and the BEST A.C buses is also quite misconceived.
The percentage of such buses and the number of commuters
which used such buses is nothing compared to the percentage
of buses and commuters in BEST buses ordinary non-air-
conditioned ones. Apparently, in order to ease out pressure
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
122 WP-2605-15on the existing infrastructure i.e. the local trains and BEST
buses, or even on the congested public roads to reduce the
congestion, the Metro Project was envisaged. Because of this
purpose, construction was permitted on / above public roads
and public properties. Public property is leased at a nominal
rent of Rs.1/- for the Metro Project. The Metro Project is
expected to cater to the different class of commuters like
those commuting in air-conditioned buses or air-conditioned
taxis, virtually amounts to converting the character of a "Mass
Rapid Transit System" to a "Class Rapid Transit System".
According to us, these are all relevant considerations which
the FFC was bound to atleast take into account in determining
the Metro fares.
121 We are also of the opinion that FFC, appears to
have determined the fares on the basis that the Metro Project
was some Greenfield project. It has totally ignored the
circumstance why competitive bids were invited from the
bidders across the globe. The bidders, in terms of
requirement, under the RFP, have submitted their business
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
123 WP-2605-15plans which are to be evaluated for the purpose of
determination of the bidder. In such matters, the bidders are
required to make their own commercial judgments, including
commercial judgments, and then offer their own projections.
On the extension of the Metro Act, it is possible that such
projections may not be binding on FFC, but one cannot call
them irrelevant facts.
122 The issue of bankability or viability referred to by
Jeffrey Delmon, is no doubt a relevant consideration to a PPP
Project. Apparently, the Consortium submitted its bid
together with the business plan, there is no reason
whatsoever to doubt that the Consortium took into
consideration the issues of bankability or viability of the
project. There is reason to believe that the Consortium
took these vital aspects into consideration when it reduced
VGF demand from Rs.1251 crores to Rs.650 crores. Now,
MMOPL is raising the issues of bankability or viability on the
ground of escalation of construction costs, or the alleged
non-compliance of some assurances given to the Consortium
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
124 WP-2605-15at the stage of reduction of VGF demand. As stated above,
these are the issues pending for consideration/adjudication in
arbitration proceedings. According to us, FFC was disentitled
to proceed on the basis that it is MMRDA which was
responsible for the delay in the project which led to the
consequence of cost overruns. Again, viability of only the
private partner cannot be the sole or relevant consideration.
The viability of the project, in total, is an important and
relevant consideration. This, according to us, includes
reference to the payment capacity of the consumers of the
project. This again, has to be with reference to basic
structure of the project as a Mass Rapid Transit System. All
we want to say is that these were relevant facts and valid
considerations which ought to have been gone into in the
process of decision making by the FFC.
123 The FFC says it has taken into consideration the
reports of the the following expert/expert bodies to study the
equity investments, project costs, operational costs of Mumbai
Metro :
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
125 WP-2605-15(1) Professor G. Raghuram, (IIM), Ahmedabad;
(2) L. Welingkar Institute of Management
Development Research, Mumbai;(3) Mr. S. K. Lohia, Chief Engineer, Northern
Railways Ex-OSD (Urban Transport) Ministry of
Urban Development, Govt. of India.124 In addition to the above experts, the majority of
the FFC states that the Price Water House Coopers (PWC)
Report also was placed before them for consideration since
FFC thought it imminently fit to evaluate various policies that
are being followed in India and across the world.
125 The majority report at paragraph 20 notes that
Raghuram and Lohia Reports are recommended average fare
of Rs.60 and PWC has recommended increasing the fare by
3.5 times the existing fare.
126 On perusal of Raghuram Report, it is true that it
recommends average fare of Rs.60 as "Revenue Maximizing
Fare". This corresponds to peak hour fare of Rs.10 - 87 and
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
126 WP-2605-15non peak hour fare of Rs.10 - 32. At least, prima facie, this
was an 'all inclusive fare' in the sense it would cover not only
OPEX or Service of Interest on Loan, but also include like
repayment of the loan amounts, depreciation, return to
shareholders and several such factors, which, in terms of the
business plan, were not to be included for at least the first
eight years of operations. Most pertinently, even, the
Raghuram Report sounds the following caveats if the average
fare of Rs.60 is recommended :
"It is important to note that the fare estimated to cover
the cash outflows and the full cost does not provide for
any elasticity of demand with respect to fare. At such
high fares, in reality, the traffic would be driven away,
reducing the fare box revenues lower than that at the
revenue maximizing level"."From the affordability point of view, the full cost based
fare (option v. elaborated in section 3.5) would be
impractical, since it does not recognize elasticity of
demand and the competitive fares. It would not even
work from the viability perspective, since elasticity of
demand from the fare would drive away the passengers.""Going forward, we recommend drawing on the principle
of revenue maximization, subject to validation based on
competitive fares. It is important to note that even under
this scenario the viability of the project is not
guaranteed."Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:34 :::
127 WP-2605-15127 From the aforesaid reading, it is very clear that
the Raghuram Report had very guardedly recommended the
average fare of Rs.60 corresponding to the fare range of Rs.10
- 87, subject to several caveats. In fact, the report suggests
that even at these rates, the riders would be driven away. On
the other hand, the majority report misconstrues this
recommendation as some firm or unconditional
recommendation, and then proceeds to determine the fare
not even in the range of Rs.10 - 87, but in the range of Rs.10
- 110.
128 The Lohia Report draws distinction between
'Technical Fare' and 'Public Fare'. The Technical fare would
enable the operator to cover full cost, including reasonable
return to the shareholders. This was determined at average
fare of Rs.68 in the range of Rs.22 - 136. The Public fare was
determined on the basis of affordability, and was stated to be
Rs.60 in the range of Rs.10 - 120. Again, even this Public
fare included return to the shareholders at the rate of 10%,
and took into account interest payments and OPEX, much in
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:35 :::
128 WP-2605-15excess of what was projected in the Business Plan. Finally,
the Lohia Report concludes that the average Public fare
should be around Rs.68 per passenger, if the State or the
MMRDA were willing to bridge the viability gap by making
an interim payment of Rs.35 crores. The report also notes
that at these rates, the ridership would fall to about 1.90
lakhs per day. As noted earlier, the Raghuram Report, in
terms, has stated that even at the average fare of Rs.60 per
passenger, the commuters/riders will be driven away from the
Metro Project, and therefore, it was neither practical nor
viable to operate the Project at such rates. This is more or
less the position reflected from the pleading of Lohia Report
as well. Both the reports almost black out the Business Plan
and the projections submitted by the Consortium.
129 The Welingkar Report states that if there is 20%
increase in the fare structure from the existing Rs.10 - 40
levels, there would be reduction in ridership by about
19.14%. Increase of 30% in the fare would reduce ridership
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:35 :::
129 WP-2605-15by 33.71%, and users of the Metro Project would switch to
bus or train for their daily commuting. The report says that
66% and 80% of the commuters interviewed, were agreeable
for fare hike of 20% or 30% respectively. However, the
report also notes that 52% of the non metro users stated that
they were deterred even the existing fares of Rs.10 - 40,
which according to them, is too expensive. The Welingkar
Report, after referring to the caveats in fall in ridership,
ultimately, recommended fare increase by 20% to 30% i.e. in
the range of Rs.12 - 48 or Rs.13 - 52. The FFC has only
picked up the statement that 66% and 80% of the existing
users were agreeable to fare hike, and does not refer to any
other statement or details mentioned in the report.
130 The PCW Report had opined that the existing fare
of Rs.10 - 40 was adequate to meet OPEX, but not interest
payments. The report also states that fare of Rs.30 - 80
would be adequate to meet OPEX interest and depreciation.
Again, even the figures taken into account by PCW are much
in excess of the figures projected in the business plan.
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:35 :::
130 WP-2605-15131 From the aforesaid, at least one thing is quite
clear i.e. none of the reports recommended fare ranging
between Rs.10 - 110. Such fares may have been discussed in
the reports, but were definitely not recommended. On the
other hand, the FFC, in paragraph 24 of the majority report,
however states as follows :
"24. We have considered the reports submitted by
the four expert committees. In terms of the report
we find that they have suggested the higher
average fare. However we are fixing the fare
hereunder, which works out to be lower average
fare than the average fare suggested by the four
expert committee."132 After stating as stated above, the majority report
of the FFC proceeds to fix the fare in the range of Rs.10 -
110, which is certainly not the lower average fare than the
average fare suggested by the four experts. Even otherwise,
on what basis they arrive at such rates is not forthcoming.
133 Definitely, this is a case of manifest
unreasonableness. The FFC, it appears, has misread and
misconstrued the reports of the experts appointed by it. The
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:35 :::
131 WP-2605-15experts, by virtue of the incorrect terms of reference made to
them, have in turn, ignored several relevant considerations
like the projections in the business plans, and the financials
submitted by MMOPL itself along with its bid documents.
The experts, have naturally, not even gone into the issue of
liability for delay and cost overruns. This is, therefore, not a
case where we propose to supplant the feel of the experts by
our own views. According to us, even applying the limited
parameters of judicial review to the matter on hand, we are of
the opinion interference is warranted.
134 In the light of above discussion and reasons, we
are of the opinion that the impugned decision dated 8th July
2015 deserves to be set aside. Fresh assessment is required.
The Union of India has to once again resort to the exercise
contemplated in terms of Section 34 of the Metro Act for
constitution of the Fare Fixation Committee within a period of
one month from today. The FFC once constituted is to
consider the issue of Metro fare determination in accordance
with law. It is left open to them to seek opinion of experts if
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:35 :::
132 WP-2605-15they think it is necessary in the circumstances that exist.
However, once FFC is constituted within a month, as stated
above, it shall submit its report along with the
recommendations as expeditiously as possible, and in any
case, within a period not exceeding three months in terms of
Section 36 of the Metro Act.
135 Since the fare fixation issue on the initial opening
of the Metro Railway is pending in arbitration, MMRDA's plea
for interim relief stands rejected, the MMOPL subject to result
of the arbitration proceedings or the determination of the
fares by FFC, whichever is earlier, may continue with the
present fare structure of fares not exceeding Rs.10 - Rs.40/-.
136 We once again clarify that we have not examined
the issue of the constitutional validity of the Metro Act or the
Notifications by which said Act is made applicable to the
Mumbai Metropolitan area and the Metro-I line, since these
issues are pending consideration in WP No.863/2016 and PIL
No.39/2016. They could not be disposed of along with this
Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:35 :::
133 WP-2605-15petition on account of time constraint. Therefore, we clarify
that the determination of fares by the FFC under the
provisions of the Metro Act, will be ultimately subject to the
orders in WP No.863/2016 and PIL 39/2016 pending for final
hearing.
137 Accordingly, we dispose of the petition with the
following order :
(1) The impugned decision dated 8th July 2015 by the Fare
Fixation Committee recommending increase in the fares
of Metro from Rs.9 - 13 to Rs.10 - 110 effective from
2014-15 is hereby set aside ;(2) The Union of India is directed to proceed in terms of
Section 34 of the Metro Act within a period of one
month from today.(3) The FFC, once comes into existence, shall consider the
issue of Fare Fixation in accordance with law and on its
own merits in the light of our observations in this order
and submit its Report along with the recommendations, as
expeditiously as possible, and in any case, within a period
of three months from the date of reference by the Union
of India, in terms of the Metro Act;Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:35 :::
134 WP-2605-15(4) The MMOPL, subject to result of the arbitration
proceedings relating to fare fixation on the initial
opening of the Metro Railway or the determination of
Fares by FFC as now directed, whichever is earlier, may
continue with the present fare structure i.e. fares not
exceeding Rs.10 - 40.(5) Since the above process/exercise takes, in all, four
months period, no directions are issued for deposit of
excess amount of fares collected by MMOPL. However,
MMOPL is directed to file a statement before the FFC in
this regard.There is no order as to costs.
(M.S. SONAK, J) (CHIEF JUSTICE)Tilak
::: Uploaded on - 04/12/2017 05/12/2017 01:50:35 :::
