October 03

Santanu Sabhapandit: Justiciability of Contracted-Out Public Services in India

The 2015 Supreme Court of India judgment in DSC-Viacon is a brief judgment. This case came to the Supreme Court on appeal from a High Court decision (also brief in nature). While the length of a judgment bears no reasonable indication of the gravity of the legal issues involved, given the complexity of the area that this judgment relates to, its brevity stands out. The case raised the question of the scope of judicial review of contractual arrangements between the government and a private entity. A concessionaire (DSC-Viacon Ventures Pvt. Ltd.) was granted a concession by the government for, inter alia, the maintenance of a stretch of highway. Under the concession agreement, the concessionaire was permitted to collect a toll from users of the road (to contribute to the expenditure associated with maintenance of the highway). A writ petition (a ‘writ petition’ is a technical term used in India to refer to judicial review applications under Article 32 or Article 226 of the Constitution) was filed by a user of the highway in the High Court of Chhattisgarh alleging that the road was in a bad condition due to the lack of maintenance, despite the users being charged a toll. The petitioner also alleged that his complaints to relevant government authorities regarding the condition of the road were not adequately dealt with. The High Court through two separate orders instructed the concessionaire to carry out repair work on the road within a specified time period and to deposit, from the date of the order, the toll collected from the users in a nationalized bank and not to withdraw the amount till further orders. The concessionaire appealed to the Supreme Court against these orders.

By the time the Supreme Court heard the matter, the government had already taken over the road project under the concession and the concessionaire was no longer collecting a toll from the users. This important change in the arrangement may have preempted issues that would have otherwise arisen, including, for example:

  1. the nature and extent of the legal rights or interests of the petitioner (or any users of a public service) against the concessionaire that may be’ protected through judicial review proceedings;
  2. the nature and extent of the legal rights of the petitioner against the government in the provision of public services that are contracted-out;
  3. the extent to which courts in judicial review proceedings may determine if the rate of toll (whether collected by the government or a private entity) is fair and proper, in light of the quality of the public service provided.

The judgment of the Supreme Court does not indicate that any of these issues were raised. However, a combined reading of the High Court orders and the Supreme Court judgment may shed some light on the importance and complexity of these issues and the way in which the courts may deal with them should they arise in future cases.

The petitioner in this case had filed the writ petition as a public interest litigant. On the issue of the standing of the petitioner, this may be relatively non-contentious. It could be argued that users of tolled public services in India will have standing in a matter pertaining to the quality of the service provided. This inference can be justified through the connection drawn by the Supreme Court between the collection of toll and a corresponding benefit to the users. Referring to its earlier judgment in State of U.P. vs. Devi Dayal Singh the Supreme Court held that

a “toll” may be defined as a sum of money taken in respect of a benefit arising out of the temporary use of land. It implies some consideration moving to the public either in the form of a liberty, privilege or service… for a valid imposition of a toll, there must be a corresponding benefit (at para 21).

However, it is not clear if the same applies to users of public services that are not tolled, but funded through general taxation.

The issue of whether issues relating to contracted-out public services are justiciable was raised by the concessionaire in the High Court where it argued that the repair of the road was a contractual matter between it and the government (at para 6 of the order of November 26, 2014). This argument did not prevent the High Court from entertaining the writ petition. However, it is not clear, from the concise orders of the High Court, the extent to which this contention was pressed by the concessionaire and on what principles the High Court prioritized the importance of the public interest contended by the petitioner (at para 7 of the order of November 26, 2014) over the contractual nature of the public service being provided. This issue was not raised in the Supreme Court and accordingly, it is difficult to conclude whether this judgment may have any precedential value for the issue of the scope of judicial review of contractual arrangements for the provisioning of a plethora of public services.

Further, the judgment does not indicate whether any argument was raised regarding the non-amenability of the concessionaire to judicial review, based on the concessionaire’s constitution as a private corporation. Courts in India commonly apply some jurisdictional criteria, primarily based on the institutional characteristics of an entity as public or private, to determine their amenability to judicial review. The petitioner in this case had filed the writ petition against both the government as well as the concessionaire. It is unclear if this may have had any effect on the issue of maintainability of the petition against the private concessionaire.

It is noteworthy that the petitioner had explicitly stated that his complaints to the government regarding the poor condition of the road were of no consequence. It is not known if the government was in a position to enforce the terms of the concession against the concessionaire to carry out the repair work. However, the petitioner’s contentions indicate that there was a failure of the government to adequately monitor the implementation of the concession and provide an efficient system of addressing the grievances of the users. Whether the imposition of a toll by the government for the provision of certain public services, which is then permitted to be collected by the concessionaire, creates any corresponding responsibility for the government in providing that service, is an important aspect to consider in determining the scope of judicial review. Although this issue was not considered in this case, from a users’ point of view, this case strongly indicates the efficacy of judicial review where the rights of the government against the concessionaires are not known to the user or the responsibilities of the government towards the users of the tolled service are uncertain. Judicial review not only provides an avenue for the judiciary to articulate and assess all the rights or interests involved in the matter, but also, as the position of the user in this case indicates, there may not be any alternative legal mechanisms available for the users of public services.

The Supreme Court in this case had constituted an expert committee to inspect the road and assess the nature and extent of repair work needed. Based on the report of the committee, the court held that the existing rate of toll was unjust and unfair given that the report had established the poor condition of the road. However, the court also observed that it was only certain patches of the road that were poorly maintained. It opined that the rate of toll should be reduced (halved) in view of the poor maintenance, and that such reduction was ‘proportionate’ to the extent of the damage. The court did not elaborate on how this rate was arrived at. However, it made a brief admission by stating that in the absence of empirical data on the extent of damage to the road and the resultant inconvenience to the users, the proportioning involved some amount of guesswork (at para 23). It is noteworthy that the rates of toll are determined by the National Highway Authority of India (NHAI) under the provisions of the National Highway Act, 1956. Although the court’s opinion in the case seems to have been triggered by the poor maintenance of the road, a related issue is whether the court in a judicial review application can determine the propriety of the rate of toll determined by the executive under statute, on the basis that it is disproportionate to the quality of public service. Unfortunately, this issue was not raised before the Supreme Court.  It will be important for this to be clarified in future cases.

Despite its conciseness, the DSC-Viacon judgment covers (or at least raises) a large territory of unresolved issues of administrative law in India. Unfortunately, none of these issues were dealt with by the judiciary in this case, in light of the government’s actions prior to the hearing of the appeal by the Supreme Court. Future clarification on these issues would build on groundwork from earlier judgments (see Flemingo Duty free Shops Pvt. Ltd. vs. Union of India and others) decided on the basis of the boundaries of the public/private distinction in administrative law. With the increasing presence of contracts in the infrastructure sector, one can expect these issues to come up again and hopefully be resolved in time.

Santanu Sabhapandit is a PhD candidate in comparative Administrative Law in Monash University, Melbourne. He holds a LLM degree jointly offered by Erasmus University, Rotterdam and Hamburg University, Hamburg and a LLB degree from Delhi University, Delhi. He worked as an in-house counsel for ten years prior to commencing doctoral studies.