| Citation | 2025: KER: 20142 |
| Date | 5 June 2025 |
| Court name | High Court of Kerala at Ernakulam |
| Plaintiff/appellant/petitioner | State of Kerala |
| Defendant/respondent | National Highways Authority of India (NHAI) |
| Judges | Justice Anil K. Narendran Justice G. Jayachandran |
FACTS OF THE CASE
The case arises from a prolonged dispute between the State of Kerala and the National Highways Authority of India (NHAI) over the continued operation of the Paliyekkara toll plaza, situated on the Thrissur–Edappally stretch of National Highway 544.
In light of growing public dissent and mounting political pressure due to frequent toll increases, the State of Kerala argued that allowing toll collection to persist at Paliyekkara was unreasonable and lacked justification. The State contended that the NHAI had already recovered substantial costs of construction and maintenance through toll collections over more than a decade, and that extending tolling periods or increasing rates burdened local commuters disproportionately.
The NHAI, however, defended its position by citing the provisions of the National Highways Act, 1956 and the terms of the concession agreement with the private concessionaire, which permitted toll collection over the stipulated concession period (20 years) to ensure recovery of project costs, maintenance expenses, and assured returns to investors. The NHAI maintained that the Paliyekkara toll plaza was functioning under a lawfully executed build-operate-transfer (BOT) agreement, which had been granted following a transparent competitive bidding process.
In December 2024, the State Cabinet decided to write to the NHAI demanding closure of the toll plaza, invoking public interest. In January 2025, the Kerala Public Works Department (PWD) served notices on the NHAI and the concessionaire, directing them to halt toll collection or risk facing action under state laws and safety laws and police regulations.
Following this, the NHAI moved the Kerala High Court under Article 226, requesting a writ to prevent the State from disrupting the toll operations. The High Court, in an interim order, allowed toll collection to continue pending final adjudication.
The State of Kerala, in turn, filed a writ petition contending that the collection of toll beyond reasonable cost recovery was unconstitutional and violative of Article 14 (equality) and Article 19(1)(d) (freedom of movement). The matter was consolidated into the present case.
LEGALLY RELEVANT FACTS
The project was awarded in 2008 under a BOT contract for a 20-year concession period.
In 2010, toll collection commenced at Paliyekkara with explicit approval from the Ministry of Road Transport and Highways
Multiple audits by CAG had flagged issues with calculation of toll rates and extensions.
Local residents had protested frequently, alleging that the facility did not warrant continued high tolls, especially after significant cost recovery.
The State asserted it had police powers to regulate road safety and public convenience under the Kerala Police Act, 2011.
ISSUES OF THE CASE
1. Whether the State of Kerala has the authority under state police or public safety laws to direct suspension or closure of a toll plaza operating under a central statute and concession agreement.
2. Whether the continued collection of toll at the Paliyekkara toll plaza violates the fundamental rights of citizens under Articles 14 and 19(1)(d) of the Constitution of India.
3. Whether the doctrine of proportionality requires the cessation of toll collection once reasonable costs are recovered, even if the concession period has not lapsed.
JUDGMENT : THE KERALA HIGH COURT RULED:
1. On the Competence of the State to Intervene in Toll Collection
The Court first addressed whether the State of Kerala could lawfully direct the suspension or termination of toll collection at the Paliyekkara plaza. The tolling arrangement was part of a Build-Operate-Transfer (BOT) project undertaken by a private concessionaire under a concession agreement executed with the National Highways Authority of India (NHAI). This agreement was framed pursuant to the National Highways Act, 1956, and the National Highways Fee (Determination of Rates and Collection) Rules, 2008 — both being central enactments.
The Court emphasized that the Constitution of India clearly assigns control over national highways to the Union Government under Entry 23 and Entry 13 of the Union List in the Seventh Schedule. This means that legislative and executive authority in respect of national highways rests exclusively with Parliament and the Union Executive. Therefore, any action taken by a State authority to regulate, suspend, or interfere with toll collection — even if based on state-level enactments such as the Kerala Police Act or Kerala Road Safety Act — would amount to an unconstitutional encroachment on the Union’s domain.
The Court concluded that the State of Kerala had no jurisdiction to interfere in toll operations that were governed by central laws and executed under the supervision of a central agency.
2. On the Alleged Violation of Fundamental Rights under Articles 14 and 19(1)(d)
The State had contended that continued toll collection amounted to a violation of Articles 14 and 19(1)(d) of the Constitution, given public grievances regarding the quality of road maintenance and the alleged burden placed on road users.
The Court rejected these contentions. It held that the toll was not arbitrary but was charged in accordance with a structured statutory framework. The toll rates were determined and revised as per the rules framed under the National Highways Act and were not imposed unilaterally. The collection process was thus a result of a legal mechanism, rather than an arbitrary executive decision.
Regarding Article 19(1)(d), which guarantees the right to move freely throughout the territory of India, the Court observed that this right does not preclude the government from imposing reasonable restrictions or charging users for improved infrastructure. Since the public had the option to use alternate, untolled state roads, there was no compulsion or restriction on their movement. Therefore, the toll did not violate the constitutional guarantee of free movement.
Similarly, the Court found no evidence of discriminatory treatment or unequal burden that would amount to a violation of Article 14. The uniform application of tolls, backed by legislation and enforceable contracts, indicated that the system was not arbitrary or unfair.
3. On the Application of the Doctrine of Proportionality
The Court next addressed whether the doctrine of proportionality would justify the suspension of toll collection based on the public perception of overcharging or inadequate maintenance.
Proportionality, as a principle of constitutional law, requires that any administrative or legislative action must not only pursue a legitimate objective but must also employ means that are appropriate, necessary, and not excessively burdensome on rights.
Here, the Court held that the tolling regime had built-in regulatory safeguards. The concession agreement contained provisions requiring the concessionaire to maintain the road as per prescribed standards, and it allowed for regular performance audits. Statutory mechanisms further permitted the NHAI to impose penalties, enforce compliance, or make deductions from annuity payments in cases of substandard maintenance.
The Court emphasized that mere dissatisfaction from a section of the public, unsubstantiated by evidence of systemic failure or breach of contractual terms, could not be the basis for judicially halting toll collection. Interference without a proven violation would not be proportional and would undermine the sanctity of legally binding concession agreements. The doctrine of proportionality, in this case, was deemed to be fully satisfied through the existing audit and enforcement mechanisms.
REASONING
The court undertook a detailed analysis of the constitutional division of powers, the statutory scheme under the National Highways Act, 1956, and the specific Rules of 1997 on fee collection framed under Section 7 of the Act.
1. Federal structure and legislative competence:
The court emphasised that national highways fall within the Union List (Entry 23 of List I), with exclusive legislative competence of Parliament. Toll collection under the National Highways Act is governed by central law, which prevails over any inconsistent state law by virtue of Article 246 and Article 254. The State could not invoke its police powers to override a central law on national highways.
2. On fundamental rights:
The court examined the claim of infringement of Article 19(1)(d) (right to move freely). It relied on previous Supreme Court rulings (such as Automobile Association of Eastern India v. State of Orissa (2017)) holding that reasonable restrictions on movement, like tolls, are constitutionally valid if imposed by law in the public interest. Since alternate non-toll routes existed, the impugned toll did not render free movement illusory.
3. Doctrine of proportionality:
The State argued that once capital costs were substantially recovered, continued tolling became excessive. The court rejected this by pointing to the concession model, where toll is not just for capital recovery but also for O&M (operations and maintenance), debt servicing, and ensuring long-term quality standards. Moreover, the contract included audit mechanisms for correction. The court concluded that the economic balancing was a matter for the legislature and executive, not for judicial interference unless there was manifest arbitrariness.
4. State’s public interest argument:
The Kerala Police Act provisions were found to regulate local safety issues but could not be used to override a central statutory and contractual framework. The court did note that the State retained power to regulate law and order at the site (such as managing protests) but not to suspend toll operations.
5. Equitable considerations:
Finally, the court observed that while there was genuine public concern about frequent toll hikes, the appropriate remedy lay in regulatory audits, tariff revision petitions or seeking central government intervention, not in unilateral state directives.
REFERENCES
1. National Highways Act, 1956 (Sections 5, 7, and related toll rules). https://www.indiacode.nic.in/handle/123456789/1493?locale=en
2. Constitution of India: Articles 14, 19(1)(d), 246, 254.
https://www.indiacode.nic.in/handle/123456789/2187?locale=en
3. Automobile Association of Eastern India v. State of Orissa (2017) 10 SCC 51.
https://indiankanoon.org/doc/146049230
4. CAG Audit Report on BOT projects in Kerala (2021).
5. Kerala Police Act, 2011 (limited reference on regulatory powers).
http://www.keralapolice.gov.in/pdfs/acts_rules/Kerala_Police_Act_2011.pdf
6. Supreme Court observations in Madras Bar Association v. Union of India on proportionality and economic policies (2020).
https://indiankanoon.org/doc/80517861
Written by Vanishree Singh, an intern under Legal Vidhiya.
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