Supreme Court Upholds Toll Plaza Location: NHAI vs. Madhukar Kumar (23 September 2021)

Introduction

Date of the Judgment: 23 September 2021

Citation: (2021) INSC 621

Judges: K.M. Joseph, J., and S. Ravindra Bhat, J.

Can a toll plaza be established within a municipal area if it primarily serves the residents of that area? This was the central question before the Supreme Court in a case concerning the location of a toll plaza on National Highway 30. The Court had to determine if the National Highways Authority of India (NHAI) had correctly applied the rules regarding toll plaza locations, balancing the interests of local residents with the need for efficient toll collection. The judgment was delivered by a two-judge bench comprising Justice K.M. Joseph and Justice S. Ravindra Bhat.

Case Background

The case originated from a writ petition filed by residents (Respondent Nos. 1 to 17) of Patna, Bihar, challenging the construction of a toll plaza at 194 km of NH-30. The residents argued that the toll plaza’s location violated Rule 8 of the National Highways Fee (Determination of Rates and Collection) Rules, 2008, because it was within the municipal limits and would force them to pay tolls even when using the old highway. The petitioners contended that the toll plaza was primarily for the benefit of the residents of Patna Municipality area, and therefore, it should not be located within the municipal limits. They also argued that the location of the toll plaza caused them great difficulties, as they had to cross it multiple times a day.

Timeline

Course of Proceedings

The High Court initially heard the case through a single judge, who ruled in favor of the residents, directing the NHAI to shift the toll plaza to a location outside the municipal limits. The single judge held that the location of the toll plaza violated Rule 8 of the National Highways Fee (Determination of Rates and Collection) Rules, 2008. The court also noted that the residents were being forced to pay toll tax even when they were not using the new alignment of the road.

The NHAI and the concessionaire appealed the single judge’s decision to a Division Bench of the High Court. The Division Bench upheld the single judge’s decision, agreeing that the toll plaza’s location violated the rules and that the NHAI had prioritized commercial viability over statutory requirements. The Division Bench emphasized that the second proviso to Rule 8 requires that any construction within the municipal limits must be primarily for the use of the residents of that area.

Legal Framework

The primary legal framework for this case is the National Highways Act, 1956, specifically Section 7, which allows the Central Government to levy fees for services related to the use of national highways. The relevant rules are the National Highways Fee (Determination of Rates and Collection) Rules, 2008.

The key provision of law in this case is Section 7 of the National Highways Act, 1956 which states that:

“Section 7.(1) The Central Government may, by notification in the Official Gazette, levy fees at such rates as may be laid down by rules made in this behalf for services or benefits rendered in relation to the use of ferries, 1[permanent bridges the cost of construction of each of which is more than rupees twenty -five lakhs and which are opened to traffic on or after the 1st day of April, 1976,] temporary bridges and tunnels on national highways 2[and the use of sections of national highways].”

The core of the dispute revolves around Rule 8 of the National Highways Fee (Determination of Rates and Collection) Rules, 2008, which regulates the location of toll plazas. Rule 8(1) states that toll plazas should be established beyond 10 kilometers from municipal or town area limits. However, it includes two provisos:

• First Proviso: Allows the Executing Authority to locate a toll plaza within 10 kilometers but not less than 5 kilometers from municipal limits, for reasons to be recorded in writing.
• Second Proviso: Permits a toll plaza to be established within municipal limits or within 5 kilometers of such limits if the highway section is constructed primarily for the use of the residents of that area.

The second proviso is the main point of contention in this case, as the NHAI argued that the construction of the highway section was primarily for the use of the residents of Patna Municipality, thus justifying the toll plaza’s location within the municipal limits.

Arguments

Appellants (NHAI) Arguments:

• The NHAI argued that the High Court erred in requiring specific reasons for locating the toll plaza within municipal limits under the second proviso of Rule 8. They contended that the second proviso was fulfilled because the highway was constructed primarily for the benefit of the local residents.
• The appellants emphasized that the location of the toll plaza at 194 km was based on a detailed study by an expert body, which considered the ground conditions, future development, and viability of the project.
• The NHAI highlighted that the project road was a little over 50 kilometers long and that various developmental works were carried out, including the provision of nine ‘U’ turns, which benefited local residents.
• The appellants relied on the Supreme Court’s judgment in Chairman, National Highways Authority of India & others v. R. Murali & others, arguing that judicial review in such matters should be limited.

Respondents (Residents) Arguments:

• The residents argued that Rule 8 mandates that toll plazas should not be located within 10 km of municipal limits, with exceptions only under specific conditions.
• They contended that the first proviso requires reasons to be recorded for locating a toll plaza within 10 km of municipal limits, and the second proviso, which allows toll plazas within municipal limits, should be read in conjunction with the first proviso.
• The respondents argued that the toll plaza was forcing residents to pay tolls even when using the old national highway, which branches off just a short distance after the toll plaza.
• They emphasized that the toll plaza should have been located on the new bypass after the road branches off, not before, to avoid charging those not using the new bypass.
• The residents argued that the decision to locate the toll plaza at km 194 was not taken by the Executing Authority, as defined in the Rules, and that the second proviso to Rule 8 must be construed in subordination to the main rule.

The respondents also pointed out that the appellants had not filed an appeal against the judgment in Writ Petition No. 4526 of 2013, which was disposed of by the same judgment as Writ Petition No. 5643 of 2012, and that this precluded them from challenging the judgment in Writ Petition No. 5643 of 2012.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court framed the following key issues for consideration:

1. Whether the High Court was correct in holding that the location of the toll plaza at 194 km of NH-30 was in violation of Rule 8 of the National Highways Fee (Determination of Rates and Collection) Rules, 2008?
2. Whether the second proviso to Rule 8 requires the recording of reasons, similar to the first proviso, for locating a toll plaza within municipal limits?
3. Whether the construction of the highway section was primarily for the use of the residents of the municipal area, thereby fulfilling the requirements of the second proviso to Rule 8?
4. What is the effect of the appellants not challenging the judgment in Writ Petition No. 4526 of 2013?

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Chairman, National Highways Authority of India & others v. R. Murali & others [(2015) 15 SCC 647]: The Court followed this judgment, reiterating that judicial review in such matters should be limited.
• S.N. Mukherjee v. Union of India [(1990) 4 SCC 594]: The Court cited this case for the principle that administrative authorities must record reasons unless expressly excluded.
• M/s. Mahabir Jute Mills Ltd., Gorakhpore v. Shri Shibban Lal Saxena and others [(1975) 2 SCC 818]: This case was cited for the principle that administrative orders should contain reasons when they affect the rights of parties.
• Star Enterprises and others v. City and Industrial Development Corpn. of Maharashtra Ltd. and others [(1990) 3 SCC 280]: The Court cited this case for the principle that reasons should be provided when rejecting high offers in public tenders.
• Union of India and others v. E.G. Nambudiri [AIR 1991 SC 1216 / (1991) 3 SCC 38]: This case was cited for the principle that reasons are not always mandatory in administrative decisions.
• Maharashtra State Board of Secondary and Higher Secondary Education v. K.S. Gandhi and others [(1991) 2 SCC 716]: The Court cited this case for the principle that reasons are essential for fair procedure in administrative decisions.
• C.B. Gautam v. Union of India and others [(1993) 1 SCC 78]: This case was cited for the principle that reasons must be communicated to affected parties in certain cases.
• Sarat Kumar Dash and others v. Biswajit Patnaik and others [1995 Supp (1) SCC 434]: The Court cited this case for the principle that natural justice is not a rigid principle.
• Kranti Associates (P) Ltd. v. Masood Ahmed Khan [(2010) 9 SCC 496]: This case was cited for the principle that quasi-judicial bodies must provide reasons for their decisions.
• Rajeev Suri v. Delhi Development Authority and others [Transferred Case (Civil) No. 229 of 2020, Judgment dated 05.01.2020]: The Court cited this case for the principle that absence of reasons does not always indicate non-application of mind.
• Regina v. Secretary of State for the Home Department ex parte Doody [(1994) 1 A.C. 531]: The Court cited this case for the principle that fairness may require reasons in certain circumstances.
• Dover District Council v. CPRE Kent [(2017) UKSC 79]: This case was cited for the principle that public authorities may have a duty to disclose reasons for their decisions.
• Regina v. Higher Education Funding Council Ex parte Institute of Dental Surgery [(1994) 1 WLR 242]: The Court cited this case for the principle that reasons may be required when a decision appears aberrant.
• Mohan Kumar Singhania v. Union of India [1992 Supp (1) SCC 594]: The Court cited this case for the principle that a proviso can be a substantive provision.
• Commissioner of Commercial Taxes, Board of Revenue, Madras & Anr. v. Ramkishan Shrikishan Jhaver etc. [AIR 1968 SC 59]: The Court cited this case for the principle that a proviso may operate as a substantive provision.
• Indore Development Authority v. Manoharlal and others [2020 (8) SCC 129]: The Court cited this case for the principle that a proviso may operate as a substantive provision.
• Shenoy & Co. v. Commercial Tax Officer, Circle II, Bangalore and Others [(1985) 2 SCC 512]: The Court cited this case for the principle that a judgment setting aside a common judgment renders related judgments unenforceable.

The Supreme Court held that the second proviso to Rule 8 is a substantive provision, meaning that it operates independently of the first proviso. It clarified that the second proviso does not require the recording of reasons, as it has its own objective criteria. The Court found that the construction of the highway section was primarily for the use of the residents of the municipal area, thus fulfilling the requirements of the second proviso.

The Court also addressed the issue of the appellants not challenging the judgment in Writ Petition No. 4526 of 2013. The Court applied the principle from Shenoy & Co., stating that if the main judgment is set aside, related judgments also become unenforceable.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Objective Criteria of the Second Proviso: The Court emphasized that the second proviso to Rule 8 has its own objective criteria, which, if met, justify the location of the toll plaza within municipal limits. The key criterion was that the construction of the highway section was primarily for the use of the residents of that area.
• Factual Analysis: The Court carefully analyzed the facts and found that the construction of the highway, particularly the widening of the road, primarily benefited the residents of the Patna Municipality. The Court noted that the highway passed through the municipal limits for nearly 14 km, and the widening of the road in this congested area was a significant benefit to the local residents.
• Commercial Viability: The Court acknowledged that commercial viability is a relevant factor in the location of toll plazas. The Court recognized that the location of the toll plaza at 194 km was chosen to maximize toll collection and avoid leakage of traffic.
• Limited Judicial Review: The Court reiterated that judicial review in such matters should be limited, and that courts should not substitute their views for those of the authorities unless there is a clear violation of law.
• No Requirement of Reasons: The Court clarified that the second proviso does not require the recording of reasons, as its objective criteria are sufficient.

Sentiment Analysis of Reasons Given by the Supreme Court

Fact:Law Ratio

The ratio of fact to law in this judgment is approximately 60:40, with a greater emphasis on the factual circumstances of the case. The Court spent significant time analyzing whether the construction of the highway primarily benefited the local residents, which is a factual determination. The interpretation of the second proviso to Rule 8, which is a legal question, played a crucial role, but the factual analysis was decisive in determining whether the second proviso applied.

Final Order

The Supreme Court allowed the appeals filed by the NHAI and the concessionaire, setting aside the judgment of the High Court. The Supreme Court upheld the location of the toll plaza at 194 km of NH-30. The Court held that the location of the toll plaza was in accordance with the second proviso to Rule 8 of the National Highways Fee (Determination of Rates and Collection) Rules, 2008.

Implications

The Supreme Court’s judgment has significant implications for the location of toll plazas on national highways. Key takeaways include:

• Interpretation of Rule 8: The judgment clarifies the interpretation of Rule 8 of the National Highways Fee (Determination of Rates and Collection) Rules, 2008. It establishes that the second proviso is a substantive provision that operates independently of the first proviso. This means that if a highway section is constructed primarily for the use of residents of a municipal area, a toll plaza can be located within municipal limits without the need to record specific reasons.
• Balance between Development and Public Interest: The judgment balances the need for efficient toll collection with the interests of local residents. It recognizes that while toll plazas should ideally be located outside municipal limits, exceptions can be made when the highway primarily benefits the residents of that area.
• Limited Judicial Review: The judgment reinforces the principle that judicial review in such matters should be limited. Courts should not interfere with the decisions of authorities unless there is a clear violation of law or procedure.
• Commercial Viability: The judgment acknowledges that commercial viability is a relevant factor in the location of toll plazas. Authorities are allowed to consider the need to maximize toll collection and avoid leakage of traffic.
• Impact on Local Residents: The judgment clarifies that while local residents may have to pay tolls if they use the new highway, the toll plaza’s location is justified if the highway primarily benefits them. This means that residents who use the new highway will have to pay the toll, but the benefits of the new highway should outweigh the cost.

The judgment also highlights the importance of detailed project reports and expert studies in determining the location of toll plazas. Authorities must ensure that such reports are based on thorough analysis and consideration of all relevant factors.

Flowchart of the Decision-Making Process

Conclusion

The Supreme Court’s judgment in National Highways Authority of India & Others vs. Madhukar Kumar & Others is a significant ruling that clarifies the interpretation of Rule 8 of the National Highways Fee (Determination of Rates and Collection) Rules, 2008. The judgment establishes that the second proviso to Rule 8 is a substantive provision that operates independently of the first proviso. It also underscores the importance of factual analysis in determining the applicability of the second proviso. The Court’s decision strikes a balance between the need for efficient toll collection and the interests of local residents, while also emphasizing the principle of limited judicial review in such matters. This judgment provides a clear framework for future cases involving the location of toll plazas on national highways, ensuring that the authorities follow the rules while also considering the practical realities of infrastructure development.