NICE Road agreement analysis

Bangalore Mysore Infrastructure Corridor (BMIC) has been embroiled in controversies from the 1997 when the framework agreement was signed.  Though the agreement itself does not appear to be on a public domain, a good analysis of the mechanics of PPP agreement is attached.  Some excerpts:

It was the FWA and the subsequent actions of the Government which came to be challenged by Somashekar Reddy in the Karnataka High Court in what was to be the first of a spate of public interest litigations ["PIL"].  The Writ Petition filed by Somashekar Reddy (No. 29221 of 1997) was decided on 21-09-1998 in favour of the Government of Karnataka and NICE.

Initial dissent due to political reasons?

In the period between the decisions of the Single judge and the Division Bench there was a radical shift in the position of the government. This drastic step was prompted by the change in government in May 2004. Following former Prime Minister Deve Gowda‟s allegations of real estate profiteering, a note was sent to the principal secretary of the PWD regarding the same. Consequently, the KIADB was instructed to refrain from issuing notifications to acquire land for the final stages of the project. This clearly indicates that political and other extraneous considerations superseded the government‟s interest in fulfilling its contractual obligations. Fearing political consequences, the Government turned against NICE despite being co-respondents in the case.

 

The case was finally laid to rest in an appeal to the Supreme Court. The Supreme Court in a decision delivered on 20-04-2006 ... the project having been carried out for seven years, the State Government could not allege that excess land had been allotted.

 

... on March 25, 2008 with the Supreme Court issuing contempt notices to seven Karnataka Government Officials including the Chief Secretary for not obeying its orders on the implementation of the project.

Clear case of political ego, vendetta for reasons unknown.

Clause 3.2.3 of the Framework Agreement states that:
“GOK covenants that it will not restrict the use of the Land in any way and that the company shall have full freedom and discretion to industrially and commercially develop and use the Land, as generally contemplated by this Agreement, except that GOK shall zone an rezone, and shall cause to be zoned and rezoned, all Land in a manner consistent with its intended use in the Infrastructure Corridor Project as contemplated by this Agreement or as reasonably requested by the Company, all in accordance with applicable law.”

 

A spokesperson of NICE in conversation with the researchers claimed that the proposal for townships was made solely to make good the costs incurred in the construction of the infrastructure corridor. By mere collection of tolls the company would be able to recover the costs in not less than 150 years!

 

In addition, the government had invested no money and the entire amount came from NICE. The researchers believe that despite the claims of the consortium, the motive was to make some amount of profit and this is indicated clearly by the contractual clause. However, the benefits to the public arising out of the expressway outweigh the costs of such hidden agenda.

It is clear that private parties don't get involved for charity and that larger public interest would have been served.  Rather than political posturing and ego trumpeting, politicians would do well to ensure compliance with the spirit of the agreement and timely implemntation for the greater good.

the Court believed that the allegations of fraud and misrepresentation were a ruse and believed “the State Government was aware at the highest level... and had applied its mind before executing the FWA.”

Very clear that the govt. wanted to backtrack.

Clause 2.1.1.12 states that:

“there shall be no action, suit, proceeding, petition or similar action challenging the infrastructure corridor project or any component thereof or the award of contracts or responsibilities in respect of the infrastructure corridor project or otherwise in respect of the responsibilities of the parties as contemplated hereby or the validity or enforceability of this agreement or any other project contract which might adversely affect the implementation and development of the infrastructure corridor project or any part thereof.”

 

Such a clause, on plain reading, seems to be extremely illogical because it exempts the company from all liability. In a project of such magnitude it is only understandable that problems will arise and the common man should have a medium to address his grievances. By limiting such freedom, the clause violates the principles of justice and equity.

Self explanatory.  Govt. went all out to woo private investment to kickstart economy.

Model for improvement of contract and conclusion are along expected lines. 

... how such bold infrastructure projects can go rapidly out of kilter with baffling clauses, corruption and land mafia. 

 

.... no matter how well drafted the contract, if there is no political will and backing to enforce such an agreement, there is no way to proceed forward.

Political will is always necessary.  Transparency that is the spirit behind RTI also goes a long way.