Governance Now Visionary Talks Series

'PPPs are public authorities as they deliver public utilities'

Tirupur water project SPV is a public authority under RTI, rules Madras HC

kapil

Kapil Bajaj | April 20, 2010


Many PPPs are delivering essential public utilities like water
Many PPPs are delivering essential public utilities like water

In a significant verdict that is likely to affect how public-private partnerships (PPPs) will be treated in law, Madras high court has ruled that New Tiruppur Area Development Corporation (NTADCL), a water supply PPP, must be considered a ‘public authority’ under the RTI Act.
The verdict upholds an order of Tamil Nadu information commission made on an RTI application filed by Gaurav Dwivedi of Manthan, a Madhya Pradesh-based NGO, and is likely to give a fillip to efforts to get the PPPs that are mushrooming across the country to share with the public information about their formation, operations, and finances.

In holding NTADCL, which supplies water in the industrial town of Tirupur, as a public authority, the court not only favoured a “liberal interpretation” of Section 2 (h) of the RTI Act, but stated that the company was essentially carrying out an activity that constitutionally belongs to the state.

“The activity that is undertaken by the petitioner company is essentially a power vested on the municipal authority under article 243(W) read with items 5 and 6 of the XII schedule to the Constitution,” the order said.

Incorporated in 1995, NTADCL was jointly promoted by Tamil Nadu government and private company IL&FS as a special purpose vehicle (SPV) to implement the Tirupur area development programme.

While IL&FS holds 27.17 per cent shareholding in NTADCL, the state government holds 17.04 per cent, according to the facts presented in the court. AIDQUA Holdings, a Mauritius-based company, holds 27.89 per cent and public-sector insurance companies hold 10.85 per cent.

NTADCL, which was the petitioner in the case, argued that since it was not “substantially financed” by the government, it could not be deemed a public authority under Section 2(h) of the RTI Act.

The court took the view that since the law did not specify the proportion of funding required for an entity to become “substantially financed”, it “will have to apply proper test in each case and apply the provisions of the RTI Act to those authorities.”

The order also relied on the Comptroller and Auditor-General’s (duties, powers and conditions of service) Act, 1971, which allows CAG to audit the accounts of any body or authority that has received no less than Rs one crore in public funding, to contend that NTADCL was “substantially financed” by the government.

“The office of the CAG can audit the accounts of the petitioner company after getting prior approval from the state government…. It cannot be contended that the petitioner company will not come within the term ‘public authority’ under Section 2(h)(d).”
The court observed that the PPPs, which generally work on build-own-operate-transfer (BOOT) principle and often perform some of the activities of the local governments, “must explain to the people about their activities”.

“Every citizen has a right to know the working of such bodies, lest they may be fleeced by such companies,” the order passed by justice K. Chandru said.

“This order is important because the principles outlined in the order strengthen the arguments for all public-private-partnership, or privatized, projects, especially in water, health, and education, to come under the ambit of RTI,” Dwivedi of Manthan, which tracks the privatization projects in the water sector across the country, told Governance Now.
Dwivedi, however, expect NTADCL to stick to its guns and appeal the order to a division bench of the Madras high court.

It’s notable that PPPs, which have been coming up in significant numbers across the country in areas of roads, water supply, electricity supply, etc., are loath to share information with the public about their formation, operations, and finances.
Dwivedi had requested some information from NTADCL under the RTI Act, which the latter had refused stating that they were not a ‘public authority’.

Tamil Nadu information commission upheld Dwivedi’s appeal. NTADCL had challenged the order of the information commission in the Madras high court. The main issue was whether it was a public authority or not and would fall under the ambit of RTI. Manthan's case was argued by advocate P.V. Ravi Chandran.

Tamil Nadu government had privatised water supply to Tirupur industrial estate, Tirupur municipality and a number of neighbouring villages.
The project is one of India’s largest privatised water supply projects operated by NTADCL under concession with the state government and Tirupur municipality.
 

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