The Delhi-Gurgaon Expressway operator may lose its contract for violating the terms of agreement it entered with the NHAI that also included decongesting the 28-km expressway that connects the Millennium City with the Capital.
The union road transport and highways ministry on November 11 wrote to the National Highways Authority of India (NHAI), its nodal agency which develops highways across the country, to initiate legal action against DSC Limited.
The Gurgaon-based Delhi-Gurgaon Super Connectivity Limited operates and maintains the expressway, which often sees long queues at toll counters leading to massive jams.
The expressway was the first public-private partnership (PPP) project, awarded in 2002, in the highways sector.
DSC, according to a note approved by road transport minister CP Joshi on November 3 and accessed by HT, has taken unilateral financial decisions that can cause "significant" losses to the government.
It also diverted funds from the escrow account - it jointly holds with the NHAI and where the toll collections also go - to its "own companies and to unknown account... bypassing...obligation to attend to capacity augmentation, easing of traffic flow and better tolling arrangement".
An escrow account is a special account in which money is held by a neutral third party until certain obligations under an agreement are met.
DSC denies any wrongdoing and says it kept the NHAI informed.
DSC changed financiers and took loan from them and used the money without the NHAI's approval, says the note.
"…not making NHAI a signatory has serious financial implication for NHAI" and could lead to a significant financial loss to the government out of whose funds the authority operates, it says.
The expressway project was awarded to a consortium of Jaypee Industries and DSC on built-operate-transfer (BOT) model.
It is now run solely by DSC, a company promoted by NRI businessman HS Narula. The firm is executing six more highway projects.
The ministry has told NHAI not to hesitate in terminating the contract. The authority, said sources, would soon issue a show-cause notice to the firm.
"If we are not satisfied by the response, we'll initiate termination process," an NHAI source said.
DSC says the concession agreement clearly defines the priorities for the utilisation of funds in escrow account.
"Concessionaire has been granted the right to utilise the funds as per his discretion and for payment to lenders after NHAI's payment and operations and maintenance expenses," a company spokesperson said.
On failure to decongest the expressway, the spokesperson said they had started work on the lanes that can come up on the land available. The spokesperson denied that the lenders were changed without the NHAI's permission.
"The financing documents were duly sent to NHAI for review and since, in terms of the concession agreement, NHAI did not provide any comments within the stipulated 30 days, it was taken as deemed approved."