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Noida Toll Bridge Company Ltd Management Discussions

15.09
(-2.01%)
Oct 10, 2024|12:00:00 AM

Noida Toll Bridge Company Ltd Share Price Management Discussions

The Noida Toll Bridge Company Limited ("NTBCL/the Company") was promoted by Infrastructure Leasing & Financial Services Limited, ("IL&FS") as a special purpose vehicle for the implementation of the Delhi Noida bridge project on a Build, Own, Operate and Transfer ("BOOT") basis. The Concession Agreement (Concession) executed between the Company, IL&FS and New Okhla Industrial Development Authority ("NOIDA") in November 1997, has given the Company the right to levy a User Fee. The Governments of Uttar Pradesh and National Capital Territory of Delhi have, in January 1998, executed a Support Agreement in favour of the Project/Concessionaire.

The Delhi Noida Bridge (commonly known as the DND Flyway or DND) was opened to traffic in February, 2001 and is an eight lane, 7.5 kms tolled facility across the Yamuna River, connecting Noida to South Delhi. A 1.7 km link connecting the DND Flyway to Mayur Vihar was commissioned in June 2007 (Phase I)/January 2008 (Phase II).

NTBCL is a public Company with Equity Shares listed on the National Stock Exchange and the Bombay Stock Exchange in India.

The Union of India on October 1, 2018 filed a petition with the National Company Law Tribunal ("NCLT") seeking an order under section 242(2) and section 246 read with section 339 of the Companies Act, 2013 on the basis of the interim reports of the ROC and on the following grounds:

(i) The precarious and critical financial condition of the IL&FS Group and their inability to service their debt obligations had rattled the money market.

(ii) On a careful consideration of the Union of India, it was of the opinion that affairs of the IL&FS Group were conducted in a manner contrary to the public interest due to its mis- governance; and

(iii) The intervention of the Union of India is necessary to prevent the downfall of the IL&FS Group and the financial markets.

It was felt that the governance and management change is required to bring back the IL&FS Group from financial collapse, which may require, among other things, a change in the existing Board and management and appointment of a new management.

The current composition of the Board of Directors is thus as follows:

Executive Director

Mr. Dheeraj Kumar

Non-Executive Directors

Mr. Nand Kishore Mr. Manish Kumar Agarwal Mr. Kazim Raza Khan Mr. Rakesh Chatterjee Ms. Jayashree Ramaswamy

The National Company Law Appellate Tribunal ("NCLAT") vide its Order dated October 15, 2018 gave a moratorium to IL&FS and its group entities including NTBCL which inter-alia stated that no creditors can proceed against it except under article 226 of the Constitution. Accordingly, the Company has not been servicing the debt obligations since October 15, 2018.

The New Board, as part of the resolution process, has submitted several progress reports to the NCLT. This includes framework for a resolution plan and process, steps undertaken for monetization of assets, appointment of consultants, and classification of group entities based on their abilities to meet various financial and operational obligations, measures for cost optimization and protocol for making payments beyond certain limits.

The resolution plan seeks a fair and transparent resolution for the Company while keeping in mind larger public interest, financial stability, various stakeholders interest, compliance with legal framework and commercial feasibility. It is proposed to have a timely Resolution Process which in turn mitigates the fallout on the financial markets of the country and restore investor confidence in the financial markets thereby serving larger public interest. The Company being an associate company of transportation vertical of IL&FS having projects through various group entities, depends on its group entities to continue operating as a going concern. The resolution plan and processes for various verticals are under way and options of restructuring business, as well as exits are planned.

The assessment of the New Board, based on analysis of the current position of and challenges facing the IL&FS group, is that an Asset Level Resolution Approach serves the best interest of all stakeholders to achieve final resolution.

The entities in the IL&FS group, have been classified into Indian and offshore entities. Further, the Indian IL&FS entities have been classified by an independent third party, into three categories of entities based on a 12-month cash flow based solvency test viz. "Green", "Amber" and "Red", indicating their ability to repay both financial and operating creditors, only operating creditors, or only going concern respectively.

The Company is classified as a "Red" entity, indicating that it is not able to meet all obligations (financial and operational) including the payment obligations to senior secured financial creditors. Accordingly, the Company is permitted to make only those payments necessary to maintain and preserve the going concern status.

ECONOMIC REVIEW Global Economy and Outlook

The global economy witnessed a challenging CY2023. While fluctuations in commodity prices led to inflation in both developed and developing nations, persistent geopolitical issues resulted in supply chain disruptions. Additionally, the global economy recorded the sharpest increase in interest rates in 40 years. As a result, the global growth decreased from 3.5% in CY2022 to 3.2% in CY2023. (https://www.imf.org/en/Publications/WEO/Issues/2024/04/16/ world-economic-outlook-april-2024) .

However, several economies demonstrated resilience in these times of adversity. Emerging markets and developing nations such as India, Mexico and Vietnam observed robust growth and foreign capital inflow. Furthermore, with debottlenecking of supply chains and easing of restrictive monetary policies, global inflation rate fell from its peak in CY2022 to 6.8% in CY2023. (https://www.imf.org/ en/Publications/WEO/Issues/2024/04/16/world-economic- outlook-april-2024) Certain low-income and frontier economies also reclaimed their position in the market.

Indian Economic Overview

Despite a sluggish global economy, India maintained its trajectory as one of the fastest growing economies in the world. This economic growth can be primarily attributed to robust domestic consumption and less reliance on foreign imports. While government initiatives facilitated domestic demand, increased investments to bolster manufacturing sector and improve digital and physical infrastructure mitigated supply chain issues effectively. The governments emphasis on improving infrastructure, as evident through initiatives such as the PM Gati Shakti National Master Plan, logistics upgradation and industrial corridors, is anticipated to increase industrial competitiveness and spur future growth. In FY2024, Indias GDP touched 7.6% with Current Account Deficit (CAD) at 1.9% of GDP.

With the improvement of business accessibility, the general investment climate is growing more favourable. Furthermore, with rising consumer confidence, progression of labour markets and increasing private consumption, the Government aims to improve capital investment and lower budget deficit. https://rbi.org.in/ scripts/AnnualReportPublications.aspx

CONSOLIDATED FINANCIAL PERFORMANCE

The Consolidated Gross Revenue from operations for FY 2023-24 was Rs. 2083.56 lakhs (Previous Year: Rs. 2372.43 lakhs) owing to reasons explained above. The Consolidated loss of the Company has narrowed down to Rs. 3166.02 lakhs (Previous Year: Rs. 3513.25 lakhs).

Key Ratios

As per provisions of SEBI Listing Regulations, 2015, the significant financial rations (calculated on standalone basis) are given below:

Particulars FY 23-24 FY 22-23 Explanation of Y-o-Y variance higher than 25%
Current Ratio 0.471 0.457 -
Debt Equity Ratio# 0.326 0.282 -
Debt Service Coverage Ratio* N.A N.A -
Return on Equity Ratio (0.144) (0.139) -
Inventory Turnover Ratio** N.A N.A -
Trade Receivable Turnover Ratio 13.989 5.188 The ratio has increased (improvement vis a vis 2022-23) on account of average trade receivables being lower in the current year (on account of improved realisation of Trade Receivables) as compared to previous year
Trade Payable Turnover Ratio 11.047 12.200 -
Net Capital Turnover Ratio 0.093 0.093 -
Net Profit Ratio (1.526) (1.487) -
Return on Capital employed (0.142) (0.138) -
Return on investment (0.156) (0.149) -

# Debt is defined as long-term, current maturity of long term, short term borrowings and interest accrued thereon.

* The Company has not made payment of monthly interest & quarterly repayment on account of Secured Term Loan ("Facility") and based on the ICICI Bank Limited recall notice dated September 27, 2018 the outstanding balance due has been grouped by the Company as Current Borrowings. Accordingly, there is no long-term debts in the company and pursuant to the Order of Honble NCLAT dated October 15, 2018 & March 12, 2020, the Company has not accrued any interest on its loan. Hence, Debt Service Coverage ratio is not applicable to the Company.

** The inventory turnover ratio pertains to the toll revenue & since the collection of the same has been suspended vis a vis the judgment dated October 26, 2016, of the Honble High Court of Allahabad, there is Nil Cost of goods sold pertaining to toll revenue. Also, there is no inventory in the books of the Company as at end of both reporting years. Hence, inventory turnover ratio is not applicable to Company.

Industry Structure and Development / Competition and Threats

The Noida Toll Bridge competes for traffic with two other free bridges across the Yamuna River. located on either side of the facility i.e. the Nizamuddin Bridge which is 2 kms upstream and the Okhla Barrage/KalindiKunj Bridge which is 1 km downstream.

To cater to the growing need for improved connectivity between Noida and Delhi, NOIDA is implementing a 6 lane road bridge parallel to the existing Okhla Barrage bridge.

The National Capital Region Transport Corporation (NCRTC) has implemented the Delhi to Meerut Rapid Rail Transit Systems (RRTS) and the alignment of the said corridor has crossed the Mayur Vihar Link Road (MVLR) near the MVLR Toll Plaza.

PWD Delhi-Flyover Division (PWD) has implemented the Extension of Ashram Flyover to DND Flyway. The work was approved by the Unified Traffic and Transportation Infrastructure (Planning & Engineering) Centre (UTTIPEC) considering the traffic problem between DND to Ashram Chowk. The extension on the AIIMS- Noida arm of flyover has merged with DND Flyover before Delhi Interchange Bridge and additional lanes have provided on LHS of DND Flyway for at grade traffic going to Noida.

National Highways Authority of India (NHAI) is implementing the project for Development of economic Corridors, Inter Corridors and Feeder routes to improve the efficiency of freight movement in India under Bharatmala Pariyojana (Lot-4/Package-1) Faridabad- Ballabhgarh Bypass Junction with Delhi-Vadodara expressway KMP-interchange. The project has been accorded priority-1 & has been approved by MoRT&H. New elevated proposed corridor crossing Delhi Interchange North to South direction to bypass the NH- 2 bound traffic in ITO/ Faridabad direction and vice versa and additional lanes will be provided on RHS arm at Km.1000 of DND Flyway to provide access to NH-2 bypass for the traffic coming from Noida.

Further, Government of Delhi is extending the Barapullah Nallah Elevated Road (BPNER) across the Yamuna River, to connect to the UP Link Road at a point less than 1 km upstream from the Mayur Vihar link Road.

There was also a proposal of Ghaziabad Development Authority to extend the Hindon Elevated Road to UP Link Road and connecting to the Mayur Vihar Link road. The proposed connector road also built along the Hindon Canal.

At present, pursuant to the judgement of the Allahabad High Court and interim order of the Supreme Court, the Company is not collecting toll from the users, However, in the event the toll is restored, the traffic and toll collections will have some impact by the above developments which cannot be quantified currently.

Strength and weakness:

Since 2016, when the tolling has been stopped due to Honble Allahabad High Court Order, the primary source of income is the income generated through lease of advertising space. DND Flyway has rebranded itself as a premium destination in the matter and commands significant premium. Under the guidance and supervision of the new Board, a comprehensive review of the existing advertisement contract has been undertaken. Post the review and market survey a new tender for advertisement contract has been floated and awarded by the Company in the month of February, 2023 for Noida Side and December, 2023 for Delhi side of DND Flyway at a significant premium compared to the previous contract.

Reliance on single source of income is always subject to lot of external factors and can be impacted by adverse development.

RISK AND CONCERNS

Income Tax Matters

The Company has been contesting an income tax demand including penalty of Rs. 23,127/- Crores for period from AY 2006-07 to AY 2014-15 at ITAT. Such hearing were greatly delayed on account of limited functioning of Tribunal on account of Covid related restrictions.

Subsequent to lifting of such restrictions and by means of proactive approach of the New Board in calling for early hearing, Company has been able to secure hearing in the matter.

Accordingly, the matter was heard, argued and counter argued on July 26, 2023, August 1, 2023 and was concluded on August 2, 2023. Consequently, vide its Order dated August 8, 2023, the Honble ITAT has pronounced its judgment for Assessment Years 2006-07 to 2011-12, wherein the appeals of the Revenue were dismissed and appeal of Company was allowed. As a result of this, approximately 72% of the total Demand of Rs. 23,127/- crores has been addressed by means of the ITAT Order dated August 8, 2023. On May 16, 2024 Honble ITAT basis its Order dated August 08, 2024 deleted the penalty levied in respect of AYs 2006-07 to 2011-12 and the Stay Application was also dismissed as infructuous. Further, penalty appeals and stay applications for AYs 2012-13, 2013-14 and 2014-15 stand adjourned to September 4, 2024.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

Income Tax Matters

On September 20, 2021, the Company has received an assessment order from the Income Tax Department u/s 143(3) read with section 144B of the Income Tax Act, 1961 for Assessment Year

2018-19, wherein a demand of Rs. 46.23 crores has been raised, primarily on account of valuation of land, by treating land as a revenue subsidy.

The Company, on September 30, 2021, requested the Assessing Officer to keep the penalty proceedings in abeyance and filed an appeal on October 19, 2021, with the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), against the aforesaid assessment order.

During December, 2019 the Company has received the assessment order from Income Tax Department u/s 143(3) of the Income Tax Act, 1961, for the Assessment Year 2016-17 and 2017-18, wherein a demand of Rs. 357.00 crores and Rs 383.48 crores respectively has been raised, based on the historical dispute with the Tax Department, which is primarily on account of addition of arrears of designated returns to be recovered in future, valuation of land and other recoveries. The Company has filed an appeal with the first level Appellate Authority. With the transition to Faceless Appeals, as introduced vide Faceless Appeal Scheme, 2020, both the appeals have been transferred to the NFAC.

The Company has also received a Show Cause Notice, dated May 15, 2021, u/s 270A from the NFAC for the AY 2016-17 and AY 2017-18. However, the Company has requested that the penalty proceedings be kept in abeyance as the appeals on merits are currently pending before the Commissioner of Income Tax (Appeals).

The Income Tax Department has, in earlier years, raised a demand of Rs.1,340.03 crores, which was primarily on account of addition of arrears of designated returns to be recovered in future from toll and revenue subsidy on account of allotment of land. Pursuant upon the receipt of order from CIT(A) on April 25, 2018, the Company has received the notice of demand from the Assessing Officer, Income Tax Department, New Delhi in respect of Assessment Years 2006-07 to 2014-15, giving effect to the said order from CIT (A), whereby an additional tax demand of Rs. 10,893.30 crores was raised. The enhancement of the demand was primarily on account of valuation of land. The Company has filed an appeal along with the stay application with Income Tax Appellate Tribunal (ITAT). The matter was heard by ITAT on December 19, 2018, January 2, 2019 and February 6, 2019 and based on the NCLAT order dated October 15, 2018, ITAT adjourned the matter sine die with directions to maintain status quo.

Further, in November, 2018, the CIT (A), Noida, passed a penalty order for Assessment Years 2006-07 to 2014-15, based on which the Assessing Officer Delhi, imposed a penalty amounting to Rs. 10,893.30 crores in December, 2018. The Company filed an appeal, along with a stay application with the Income Tax Appellate Tribunal (ITAT). The matter was heard by the ITAT on March 29, 2019 and May 3, 2019. ITAT has adjourned the matter sine die, with directions to maintain status quo.

On April 21, 2022, the Company has filed an application for early hearing of the appeals pending before Honble ITAT, in respect of Assessment Years 2006-07 to 2014-15. Subsequently, the matter was listed for hearing on May 6, 2022, July 21, 2022, October 20, 2022, January 25, 2023 and March 25, 2023.

The Company on June 5, 2023 requested the Honble ITAT for two clear dates to argue the matter and requested for no coercive action till the next date of hearing i.e. July 26, 2023. Accordingly, the matter was heard, argued and counter argued on July 26, 2023, August 1, 2023 and was concluded on August 2, 2023. Consequently, vide its Order dated August 8, 2023, the Honble ITAT has pronounced

its judgment for Assessment Years 2006-07 to 2011-12, wherein the appeals of the Revenue were dismissed and appeal of Company was allowed. As a result of this, approximately 72% of the total Demand of Rs. 23,127/- crores has been addressed by means of the ITAT Order dated August 8, 2023.

Further, for pending appeals pertaining to Assessment Years 201213 to 2014-15 the appeal on merit matter was partially heard on May 13, 2024 and was posted for hearing on May 21, 2024. The

matter has been fully heard and orders are reserved. Further, in respect of the appeals on Stay & penalty imposed for AYs 201213 to 2014-15, an application for early hearing was filed before the Honble ITAT on March 12, 2024. The matter in respect of AYs 2006-07 to 2011-12 was argued on May 16, 2024 and ITAT basis its Order dated August 08, 2024 deleted the penalty levied and the Stay Application was also dismissed as infructuous. Further, penalty appeals and stay applications for AYs 2012-13, 2013-14 and 2014-15 stand adjourned to September 04, 2024.

Name of the Statute Nature of the dues Amount (Rs. in Lakh) Period to which theamount relates Forum where dispute is pending
Income Tax Act Income Tax 10,181.75* AY 2007-08 ITAT, Delhi
Income Tax Act Income Tax 12,973.83* AY 2008-09 ITAT, Delhi
Income Tax Act Income Tax 14,190.24 AY 2009-10 ITAT, Delhi
Income Tax Act Income Tax 15,109.81 AY 2010-11 ITAT, Delhi
Income Tax Act Income Tax 15,865.45 AY 2011-12 ITAT, Delhi
Income Tax Act Income Tax 17,588.74* AY 2012-13 ITAT, Delhi
Income Tax Act Income Tax 18,936.55* AY 2013-14 ITAT, Delhi
Income Tax Act Income Tax 29,156.23 AY 2014-15 ITAT, Delhi
Income Tax Act Income Tax 10,89,330.52 AY 2006-07 to AY 2014-15 ITAT, Delhi
Income Tax Act Income Tax (Penalty) 10,89,330.52 AY 2006-07 to AY 2014-15 ITAT, Delhi
Income Tax Act Income Tax 35,700.33 AY 2016-17 CIT (Appeals), Delhi
Income Tax Act Income Tax 38,348.50 AY 2017-18 CIT (Appeals), Delhi
Income Tax Act Income Tax 4,621.52 AY 2018-19 CIT (Appeals), Delhi
Finance Act Service Tax 31.00 February 2016 to March 2017 Commissioner ofCentral Tax (Appeals) NOIDA

SLP before Supreme Court

The local resident welfare associations, Federation of Noida Resident Welfare Associations (FONRWA) had filed a Public Interest Litigation ("PIL") in 2012 in the Allahabad High Court ("HC") challenging the validity of the Concession Agreement and seeking the Concession Agreement to be quashed. The Honble HC of Allahabad in a judgement dated October 26, 2016 held that the two specific provisions relating to levy and collection of fee to be inoperative but refused to quash the Concession Agreement. Consequently, collection of user fee from the users of the NOIDA Bridge was suspended from October 26, 2016. However, the Company continues to maintain the Project Assets to the extent permitted by the available resources.

The Company had challenged the HC Judgment before the Honble Supreme Court of India ("SC") by way of Special Leave Petition (SLP No. 33403 of 2016). The Honble SC had on November 11, 2016, passed an order in the aforesaid matter, requesting the Comptroller and Auditor General of India ("CAG") to assist the court in the matter by verifying the claim of the Company that the Total Cost of the Project has not been recovered in accordance with the terms of the Concession Agreement dated 12.11.1997. The CAG filed an Affidavit along with sealed cover report to SC on March 22, 2017. The CAG report clearly specified that Total Cost of Project had not been recovered by the Company. The CAG report also contained some other observations by the CAG, which were outside the scope of its remit. The SC Bench directed that the CAG Report be kept in a sealed cover and need not be provided to the Respondents in the case. The SC stated that the CAG report would continue to remain in a sealed cover.

The matter came up for hearing and/or was heard by the SC on March 5, 2019, March 25, 2019, April 25, 2019 and on 05.10.2020, on which date it was posted for final disposal on 18.11.2020, and it was directed that the counsel for the parties may file written submission if any.

During the year under review, the matter was heard on July 27, 2023 and has been fixed for September 5, 2023. In the meanwhile, the Honble Supreme Court has requested the Learned Additional Solicitor General of India to examine the report submitted by the CAG and assist the Honble Supreme Court.

During the hearing of the matter on 25.09.2023, the Ld. Bench took note of the fact that the Respondents have been provided a copy of the CAG Report, and thus directed the matter to be listed for final arguments on 21.11.2023. On 21.11.2023 the Ld. Bench noted that service and pleadings in SLP(C) 33403 of 2016 were complete and directed the matter to be listed on 30.01.2024 for final hearing. However, the matter was not taken up on 30.01.2024 on account of one of the Ld. Judges sitting in a constitution bench hearing. Similarly, the matter was not taken up on 06.02.2024 and 20.02.2024 due to paucity of time. The matter was next listed on 05.03.2024, wherein the Honble Court, at the request of NTBCL, directed the matter to be listed in priority. The matter again listed on 02.04.2024 and 30.07.2024. The next date of hearing is 13.08.2024.

Arbitration Matters - New Okhla Industrial Development Authority

The Judgment of the Honble HC of Allahabad had constituted a Change in Law as per the Concession Agreement, which obligates NOIDA to modify or cause to modify the Concession Agreement so as to place the Company in substantially the same legal, commercial and economic position as it was prior to such Change in Law. Accordingly, the Company had sent a proposal dated November 17, 2016 under Section 6.3B(a) of the Concession Agreement notifying NOIDA of the resultant Change in Law and occurrence of Events of Default. However, NOIDA failed to take any steps in pursuance of the said proposal. The Company then sent a Notice of Arbitration to NOIDA on February 14, 2017 pursuant to Section 26.1 of the Concession Agreement. The Company had appointed Mr. Justice Vikramajit Sen (Retd.) as its designated Arbitrator. However, NOIDA had not nominated its Arbitrator. In light of

the foregoing, the Company had filed a petition on July 20, 2017 under Section 11(4) of the Arbitration and Conciliation Act, 1996 ("A & C Act") in the Honble HC of Delhi which heard the said petition on October 24, 2017 and appointed Mr. Justice S.B Sinha (Retd.) as the Arbitrator on NOIDAs behalf. The Arbitral Panel comprising of Mr. Justice (Retd.) Satya Brata Sinha and Mr. Justice (Retd.) Vikramjit Sen and Honble Justice (Retd.) R.C. Lahoti as Presiding Arbitrator had been constituted on November 15, 2017. At the preliminary hearing of the Arbitral Tribunal on December 2, 2017, schedule of steps to be followed upon had been agreed upon.

In compliance with the schedule, NTBCL had submitted their Statement of Claim aggregating to approximately Rs. 7000,00,00,000/- (Rupees Seven Thousand Crores) excluding interest and costs. Separately, IL&FS as the project sponsor and party to the Concession Agreement had filed an impleadment application with the Arbitral Tribunal along with a Statement of Claim. NOIDA had also filed a Counterclaim Statement of Defence and an Application under Section 16 of the A & C Act raising jurisdictional objections before the Arbitral Tribunal. The Company and IL&FS have filed their reply to the application of NOIDA under Section 16 objecting to the maintainability of the claims within the stipulated time. NOIDA too has filed its written submissions on May 18, 2018 for arguments on application under Section 16 of the A & C Act. On May 19, 2018, the Arbitral Tribunal heard the arguments of the legal counsel of NOIDA and on June 2, 2018 the Arbitral Tribunal heard the objections and arguments of the legal counsel of IL&FS. On September 12, 2018, NOIDA had moved an application for the amendment of their counter claim which was opposed by the Companys Legal Counsel. On September 20, 2018 the Arbitrators stated that (a) amendment of the counter claim filed by NOIDA be left open to be considered at the final hearing and the Company has been given time to file its reply to the said counter claims on or before October 31, 2018, (b) The next date of hearing is November 13, 2018 for (i) settling the points for determination, (ii) determining the order of production of witnesses and issuing such further directions as needed, (c) March 5, 2019 to March 9, 2019 are appointed for recording evidence and (d) April 8, 2019 to April 13, 2019 and April 15, 2019 are appointed for final hearing.

Due to the Order of NCLAT dated October 15, 2018, passed in the matter of IL&FS and its Group Companies including NTBCL, the arbitration proceedings by NOIDA against the Company were kept in abeyance by the Arbitral Panel. NOIDA had also filed an Application for Directions in the Honble Supreme Court (SC) seeking a stay on the arbitral proceedings and the stay of the interim award dated August 10, 2018 (rejecting NOIDAs Section 16 application) passed by the Arbitral Tribunal.

On April 12, 2019 the SC heard the matter along with the IA No. 170774 of 2019 filed by NOIDA and stayed the proceedings in the arbitration and fixed the matter for final disposal.

Arbitration Matter - M/s NAKS Creators and M/s Anant Solutions

The contract with its erstwhile Licensee M/s Naks Creators has been terminated as per terms of the License agreements. Subsequently, Company has awarded the Contract for Lease of Advertisement space to another Company at a much higher price. Pursuant to the termination of Contract, M/s Naks Creators have filed and application in Honble Delhi High Court, who in turn have directed for settlement of matter by means of Arbitration, a method prescribed under the Contract. On April 12, 2023 hearing have been completed and both parties have submitted their claims and counter claims.

The Ld. Arbitral Tribunal vide order dated 03.03.2023 had: (a) dismissed the Claimants prayer seeking an injunction on the termination of the License Agreements; and (b) directed NTBCL to submit a fixed deposit of INR 5 crores with the Arbitral Tribunal as security in the event an adverse award was passed against NTBCL.

On a limited appeal filed by NTBCL against the direction to make a deposit, the Honble Delhi High Court vide order dated April 12, 2023 (Arb. A (COMM) 8 of 2023) granted an interim stay in favour of NTBCL. The next date of hearing is October 16, 2023.

Another application filed by Claimants under Section 17 of the Arbitration Act seeking stay on encashment of Bank Guarantee dated 1.06.2018 was dismissed as withdrawn vide order dated April 19, 2023, since the Ld. Arbitral Tribunal was not inclined to stay the said encashment.

The matter has been heard by the Ld. Tribunal on 23.12.2023, 29.01.2024 and 01.03.2024. The matter was scheduled to be listed on 29.04.2024, however was adjourned. The next date of hearing before the arbitral tribunal is on May 28, 2024 (case management hearing). The erstwhile Licensee filed an SLP on February 26,2024 before Honble Supreme Court against the Order dated November 28, 2023 passed by Honble Delhi High Court in favour of the NTBCL. On April 08, 2024 the Honble Supreme Court declined to interfere with the impugned Order of the Honble Delhi High Court and accordingly the SLP filed by erstwhile License was dismissed.

Resolution process of IL&FS and its Group Companies

Pursuant to the proceedings filed by the Union of India under Sections 241 and 242 of the Companies Act, 2013, the National Company Law Tribunal, Mumbai Bench ("NCLT"), by way of an Order dated October 1, 2018, suspended the erstwhile Board of Directors of Infrastructure Leasing & Financial Services Limited ("IL&FS") and re-constituted the same with persons proposed by the Union of India (such reconstituted Board, referred to as the "New Board"). The National Company Law Appellate Tribunal ("NCLAT") by way of its order on October 15, 2018 ("Interim Order") in the Company Appeal (AT) 346 of 2018, after taking into consideration the nature of the case, larger public interest and economy of the nation and interest of IL&FS and its group companies (including NTBCL) has stayed certain coercive and precipitate actions against IL&FS and its group companies including NTBCL. IL&FS and its group companies are currently undergoing resolution process under the aegis of the NCLAT and NCLT which will impact the going concern status of the Company. Moreover, NCLT, Mumbai Bench vide its Order dated April 26, 2019 has also granted exemption to IL&FS and its Group Companies including NTBCL, regarding appointment of Independent Directors and Women Directors. Further, the Honble NCLAT vide its Order dated March 12, 2020 has approved the revised Resolution Framework submitted by New Board alongwith its amendments. In the said Order, Honble NCLAT has also approved October 15, 2018 as the Cut-off date for initiation for Resolution Process of IL&FS and its Group Companies. Accordingly, the Company has not accrued any interest on all its loans and borrowings with effect from October 15, 2018 ("Cut-off date").

Segment-Wise Performance

The non-toll revenue during FY 2023-24 is Rs. 2083.56 lakhs as compared to Rs. 2372.43 lakhs for FY 2022-23 which is a decrease of 12.18%.

Outlook

Outlook has to be appreciated in light following significant development:

1. Pertaining to stoppage of charging user fee - The matter is currently pending with Honble Supreme Court of India and the Company makes the best effort to have the matter heard. The commencement of hearing at Honble Supreme Court will provide the much needed clarity in terms of collection of user fee and the ensuing Arbitration.

2. Huge demand from Income tax - The ITAT decision dated August 8, 2023 has provided significant relief in terms of bringing clarity on Income tax matter (having addressed the demand to the extent of 72%) and it is highly likely that balance amount will also be addressed given it is but an extrapolation of demands that have been set aside. On May 16, 2024 and ITAT basis its Order dated August 08, 2024 deleted the penalty levied in respect of AYs 2006-07 to 2011-12 and the Stay Application was also dismissed as infructuous. Further, penalty appeals and stay applications for AYs 2012-13, 2013-14 and 2014-15 stand adjourned to July 29, 2024.

Financial and Operational Performance

Post stoppage of charging user fee, the Company has focussed on taking steps to maximize non toll revenues. It may be apt to note the contribution of new Board in taking steps to augment the revenue base of Company significantly through award of Advertisement Contract to a new licensee. Company has also made significant progress in terms of cost reduction, leaner and far more efficient organization. Further, the Company continues to maintain the Project Assets as permitted by the limited resources available at its disposal.

The Financial and Operational Performance of the Company for year under review and the previous year is given below:

(Rs. in lakhs

Particulars March 31, 2023 March 31, 2023
User Fee Income N.A. N.A.
Advertisement Income* 2083.56 2372.43
Profit / (Loss) before tax (3180.33) (3527.51)
Profit / (Loss) after tax (3180.33) (3527.51)
Average Toll realisation per vehicle (Rs) N.A. N.A.

Company, is responsible for upkeep of the DND Flyway as per the Concession Agreement. Pursuant to the Honble Hight Court order dated October 26, 2016, Company was stopped from charging user fee. Despite of significant reduction in its income, the Company in wider public interest and to cater to the safety and security of commuters, has awarded work for repair and maintenance of the DND Flyway in the month of August, 2023. The work among others includes change of street furniture and micro surfacing. This will enhance the ridership experience of the commuters.

Internal Control Systems and their Adequacy

The Company has an effective internal control which is constantly assessed and areas of improvement are identified and gaps filled. The Companys internal control system is commensurate with its size, scale and complexities of its operations. The internal audit for the year under review was entrusted to M/s Thakur Vaidyanath Aiyer & Co., Chartered Accountants.

The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same.

The Audit Committee of the Board of Directors, Statutory Auditors and the Business Heads are periodically apprised of the Internal Audit findings and corrective actions taken. Audit plays a key role in providing assurance to the Board of Directors. Significant audit observations and corrective actions taken by the management are presented to the Audit Committee of the Board. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee.

Human Resources

The Company considers its employees the most valuable resource and ensures the strategic alignment of HR practices to business priorities and objectives. The Company strongly believes in fostering a culture of trust and mutual respect amongst its employees and seeks to ensure that values and ethos are understood by everyone and are the reference point in all people matters.

Cautionary Statement

Certain statements in the Management Discussion and Analysis Report describing the Companys objectives, estimates and expectations or predictions may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ from those expressed or implied. Important factors which could make a difference to the Companys operations include traffic, government concession, network improvements, changes in government regulations and other incidental factors over which the Company does not have any direct control.

By order of the Board
For Noida Toll Bridge Company Limited
Nand Kishore
Chairman
DIN: 08267502
Date: August 9, 2024

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