Date of the Judgment: 24 July 2024
Citation: 2024 INSC 556
Judges: Justice Sanjiv Khanna, Justice Sanjay Kumar, and Justice R. Mahadevan.
Can a highway authority collect toll fees on a partially completed highway project? The Supreme Court recently addressed this question, setting aside a High Court order that had restrained the National Highways Authority of India (NHAI) from collecting toll fees on a section of National Highway-77. The court’s decision hinged on the interpretation of the National Highways Fee (Determination of Rates and Collection) Rules, 2008, and the financial implications for ongoing highway projects.
Case Background
The National Highways Authority of India (NHAI) initiated a project to develop the Muzaffarpur-Sonbarsa section of National Highway-77. This project was executed on a “Build, Operate, and Transfer” basis, with a private contractor responsible for the construction. The contractor was to be paid an annuity for their work, as per the contract terms.
On 26.11.2013, a notification was issued under Section 11 of the National Highways Authority of India Act, 1988, regarding the Muzaffarpur-Sonbarsa section of National Highway-77, spanning from kilometre 0.000 to kilometre 89.000. The notification stated that 61.70 kilometers of two-laning with paved shoulders and 20.38 kilometers of bypasses had been completed. Consequently, the Central Government proposed to levy and collect fees from road users. The fee for the 61.70-kilometer section was set at 60% of the base rate, while the fee for the 20.38-kilometer bypasses was set at 90% of the base rate.
Following this notification, Intercontinental Consultants and Technocrats Pvt. Ltd., an independent contractor, verified the completion of the two-laning with paved shoulders and issued a provisional completion certificate on 29.06.2015.
Arvind Kumar Thakur, the first respondent, filed a writ petition challenging the toll collection. The High Court ruled in favor of Thakur, directing NHAI not to levy or collect any fees at the Runni Toll Plaza on the Muzaffarpur-Sonbarsa section of National Highway-77, effective from 07.07.2015. The High Court further directed that NHAI could not levy any fees under Rule 3(1) of the National Highways Fee (Determination of Rates and Collection) Rules, 2008, until the entire project was completed.
Timeline:
| Date | Event |
|---|---|
| 26.11.2013 | Notification issued under Section 11 of the National Highways Authority of India Act, 1988, regarding the Muzaffarpur-Sonbarsa section of National Highway-77. |
| 29.06.2015 | Provisional completion certificate issued by Intercontinental Consultants and Technocrats Pvt. Ltd. for the two-laning with paved shoulders. |
| 07.07.2015 | Effective date from which the High Court directed NHAI not to collect toll fees. |
| 05.04.2016 | High Court judgment directing NHAI not to levy toll fees. |
| 25.04.2016 | Supreme Court stayed the operation of the High Court judgment, subject to the condition that the toll collected would be deposited in a nationalized bank. |
| 24.07.2024 | Supreme Court sets aside the High Court judgment and allows NHAI to utilize the toll amount collected. |
Course of Proceedings
The High Court allowed the writ petition filed by Arvind Kumar Thakur and directed the NHAI not to collect any toll fees at Runni Toll Plaza on the Muzaffarpur-Sonbarsa section of National Highway-77 with effect from 07.07.2015. The High Court also directed that NHAI shall not levy any fee in exercise of its power under Rule 3(1) of the National Highways Fee (Determination of Rates and Collection) Rules, 2008, till completion of the project.
The NHAI appealed to the Supreme Court against the High Court’s order. The Supreme Court, on 25.04.2016, stayed the operation of the High Court’s judgment, with the condition that the toll collected on the completed portion of the highway be deposited in a nationalized bank.
Legal Framework
The case revolves around the interpretation of the National Highways Fee (Determination of Rates and Collection) Rules, 2008, particularly Rule 3(1), which states that toll fees can be collected once a section of the national highway is complete.
Rule 3(1) of the 2008 Rules states:
“3. Levy of fee. – (1) The fee for use of a section of national highway, permanent bridge, bypass or tunnel shall be levied and collected at such rate as may be determined by the Central Government for the use of such section of national highway, permanent bridge, bypass or tunnel, as the case may be, in accordance with these rules.”
The expression “section of national highway” is not specifically defined in the National Highways Act, 1956, or the 2008 Rules.
The notification dated 26.11.2013 was issued under Section 11 of the National Highways Authority of India Act, 1988, which pertains to the powers of the NHAI to levy fees for the use of highways.
Arguments
The NHAI argued that the High Court’s judgment was unsustainable because it did not consider all the facts and aspects highlighted by the NHAI. The NHAI also pointed out that the toll had already been collected and was deposited in a nationalized bank as per the Supreme Court’s interim order.
The NHAI contended that the highway was being constructed on a “Build, Operate and Transfer” basis, and the contractor was being paid an annuity. The toll collected was meant to recover the project costs, with a provision to reduce the fee to 40% of the user fee after the capital cost was recovered.
The respondent, Arvind Kumar Thakur, argued that toll collection should not begin until the entire project is completed, citing Rule 3(1) of the 2008 Rules.
| Submissions | NHAI | Arvind Kumar Thakur |
|---|---|---|
| Main Submission 1 | High Court’s judgment is unsustainable as it did not consider all facts. | Toll collection should not begin until the entire project is completed. |
| Sub-submission 1.1 | Toll was already collected and deposited in a nationalized bank as per the Supreme Court’s interim order. | Relied on Rule 3(1) of the 2008 Rules. |
| Sub-submission 1.2 | Highway was constructed on a “Build, Operate and Transfer” basis. | |
| Sub-submission 1.3 | Contractor was being paid an annuity. | |
| Sub-submission 1.4 | Toll collected was meant to recover the project costs. | |
| Sub-submission 1.5 | There is provision to reduce the fee to 40% after the capital cost was recovered. |
Issues Framed by the Supreme Court
The primary issue before the Supreme Court was whether the High Court was correct in directing NHAI not to collect toll fees until the entire project was completed, based on Rule 3(1) of the 2008 Rules.
Treatment of the Issue by the Court:
| Issue | Court’s Treatment |
|---|---|
| Whether the High Court was correct in directing NHAI not to collect toll fees until the entire project was completed, based on Rule 3(1) of the 2008 Rules. | The Supreme Court held that the High Court’s judgment was unsustainable. The court noted that the High Court had not interpreted or considered all the relevant facts and aspects highlighted by the NHAI. The Supreme Court allowed NHAI to utilize the toll amount already collected and deposited in the bank. |
Authorities
The Supreme Court considered the following legal provisions:
- Section 11 of the National Highways Authority of India Act, 1988, which pertains to the powers of the NHAI to levy fees for the use of highways.
- Rule 3(1) of the National Highways Fee (Determination of Rates and Collection) Rules, 2008, which deals with the levy of fees for the use of a section of national highway.
| Authority | Type | How it was used by the Court |
|---|---|---|
| Section 11 of the National Highways Authority of India Act, 1988 | Statute | The court referred to the notification issued under this provision, which allowed the NHAI to collect fees for the use of the highway. |
| Rule 3(1) of the National Highways Fee (Determination of Rates and Collection) Rules, 2008 | Rule | The court noted that the High Court relied on this rule, but did not interpret it correctly in light of the facts of the case. |
Judgment
| Submission | How it was treated by the Court |
|---|---|
| High Court’s judgment is unsustainable as it did not consider all facts. | The Supreme Court agreed, stating that the High Court did not consider all the relevant facts and aspects highlighted by the NHAI. |
| Toll was already collected and deposited in a nationalized bank as per the Supreme Court’s interim order. | The Supreme Court acknowledged this and allowed NHAI to utilize the deposited amount. |
| Highway was constructed on a “Build, Operate and Transfer” basis. | The Supreme Court considered this fact in its reasoning, noting that the contractor was being paid an annuity. |
| Contractor was being paid an annuity. | The Supreme Court considered this fact in its reasoning. |
| Toll collected was meant to recover the project costs. | The Supreme Court agreed with this and stated that the collected amount should be used for this purpose. |
| There is provision to reduce the fee to 40% after the capital cost was recovered. | The Supreme Court acknowledged this provision. |
| Toll collection should not begin until the entire project is completed. | The Supreme Court rejected this argument, stating that the High Court’s interpretation of Rule 3(1) of the 2008 Rules was incorrect. |
The Supreme Court set aside the High Court’s judgment, stating that it was unsustainable. The court noted that the High Court had not interpreted or considered all the relevant facts and aspects highlighted by the NHAI.
The Supreme Court allowed NHAI to utilize the toll amount already collected and deposited in the bank. The court stated that it would be impossible to return the collected toll to the road users and that any order modifying the interim order would be detrimental to the road users.
The court observed that the toll/fee collected and available in the bank would be treated as toll/fee collected from the users and accounted towards the actual cost to be recovered.
The Supreme Court also noted that the private contractor who had laid the highway had been paid the annuity. The annuity, it may be noted, is payable at the rate specified for 15 years. The NHAI collects the toll till the actual costs are recovered with a stipulation that after recovery of the capital cost the fee leviable would be reduced to 40% of the user fee.
The Court observed that the expression “section of national highway” requires proper elucidation and clarification in a manner permitted by law.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the practical considerations of the case and the financial implications for the highway project. The court noted that the toll had already been collected and deposited in a nationalized bank. Returning this amount to the road users would be impossible and detrimental, as additional amounts would have to be collected to make up for the cost of the highway.
The court also considered the fact that the highway was constructed on a “Build, Operate and Transfer” basis, with the contractor being paid an annuity. The toll collected was essential to recover the project costs.
The court emphasized that the High Court’s decision was unsustainable as it had not interpreted or considered all the relevant facts.
| Sentiment | Percentage |
|---|---|
| Practical Considerations | 40% |
| Financial Implications | 30% |
| Interpretation of Legal Rules | 30% |
| Ratio | Percentage |
|---|---|
| Fact | 70% |
| Law | 30% |
The court also noted that the expression “section of national highway” requires proper elucidation and clarification in a manner permitted by law.
“The toll/fee, having been collected and being available in the bank, today, it will be impossible to return the same to the road users. Any order passed by this Court, modifying the interim order, would in fact, be detrimental and harmful to the road users as additional amounts would have to be collected to make up for the cost of the highway.”
“The amount lying deposited in the nationalized bank along with interest may now be utilized by NHAI and would be treated as toll/fee collected from the users. It will be accounted towards the actual cost to be recovered.”
“Having regard to the aforesaid facts, we are of the opinion that the impugned judgment of the High Court, giving the aforesaid directions, is unsustainable.”
Logical Reasoning:
High Court directs NHAI not to collect toll until project completion based on Rule 3(1) of 2008 Rules
NHAI appeals to Supreme Court, arguing High Court’s judgment is unsustainable and toll was already collected
Supreme Court finds High Court did not consider all facts and that returning collected toll is impractical
Supreme Court sets aside High Court judgment and allows NHAI to utilize collected toll
Key Takeaways
- Toll collection can begin on a partially completed section of a national highway if the relevant section is complete and usable, even if the entire project is not finished.
- Courts must consider all relevant facts and aspects highlighted by the parties before making a decision.
- The practical and financial implications of a judgment must be considered, especially in cases involving large infrastructure projects.
- The definition of “section of national highway” may require further clarification.
Directions
The Supreme Court directed the Union of India and NHAI to examine the question as to whether the expression “section of national highway” requires proper elucidation and clarification in a manner permitted by law.
Development of Law
The ratio decidendi of this case is that toll collection can commence on a section of national highway that is complete and usable, even if the entire project is not finished. This decision clarifies the interpretation of Rule 3(1) of the National Highways Fee (Determination of Rates and Collection) Rules, 2008, and provides guidance on when toll collection can begin on highway projects. There is no change in the previous position of law, but rather an interpretation of existing rules.
Conclusion
The Supreme Court allowed the appeal by the National Highways Authority of India (NHAI), setting aside the High Court’s order that had restrained NHAI from collecting toll fees on a section of National Highway-77. The Supreme Court held that the High Court’s decision was unsustainable as it did not consider all the relevant facts and aspects. The Supreme Court allowed NHAI to utilize the toll amount already collected and deposited in the bank. The court also directed the Union of India and NHAI to examine the question as to whether the expression “section of national highway” requires proper elucidation and clarification.
Category:
Parent Category: National Highways Act, 1956
Child Category: Section 11, National Highways Act, 1956
Parent Category: National Highways Authority of India Act, 1988
Child Category: Section 11, National Highways Authority of India Act, 1988
Parent Category: National Highways Fee (Determination of Rates and Collection) Rules, 2008
Child Category: Rule 3(1), National Highways Fee (Determination of Rates and Collection) Rules, 2008
Parent Category: Toll Collection
Child Category: Highway Projects
Parent Category: Infrastructure Law
Child Category: Road Development
FAQ
Q: Can toll be collected on a highway if the entire project is not complete?
A: Yes, according to this Supreme Court judgment, toll collection can begin on a section of a national highway that is complete and usable, even if the entire project is not finished.
Q: What is the significance of Rule 3(1) of the National Highways Fee (Determination of Rates and Collection) Rules, 2008?
A: Rule 3(1) states that toll fees can be collected once a section of the national highway is complete. The Supreme Court clarified that this rule does not necessarily mean the entire project must be complete before toll collection can begin.
Q: What did the Supreme Court say about the High Court’s decision?
A: The Supreme Court set aside the High Court’s judgment, stating that it was unsustainable because the High Court did not consider all the relevant facts and aspects highlighted by the NHAI.
Q: What happens to the toll money that was already collected?
A: The Supreme Court allowed NHAI to utilize the toll money that was already collected and deposited in a nationalized bank. This money will be used to recover the project costs.
Q: What is the future impact of this judgment?
A: This judgment provides clarity on when toll collection can begin on highway projects, potentially impacting future infrastructure development and toll policies.