SCA/29265/2007 1/55 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 29265 of 2007 For Approval and Signature: HONOURABLE MR.JUSTICE ANANT S.DAVE ====================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? Yes 2 To be referred to the Reporter or not ? Yes 3 Whether their Lordships wish to see the fair copy of the judgment ? No 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? No 5 Whether it is to be circulated to the civil judge ? No ====================================== MUNDRA INTERNATIONAL CONTAINERTERMINAL PRIVATE LTD & Another Versus THE GUJARAT MARITIME BOARD & others ====================================== Appearance : Dr. Abhishek Singhvi, Mr. Nevroz Seervai, Mr. Mihir Thakore, Mr. Mihir Joshi, Senior Advocates, with Farhat Sorabjee, Mr. Bijal Chhatrapati, Mr. Parag Kabodih for M/s. Singhi & Company for the petitioners Mr. Kamal Trivedi, Advocate General, with Ms. Sangeeta Vishen, Advocate, for the respondent Nos.1 and 3 [on caveat] Mr. Dushayant A. Dave, Senior Advocate, with Mr. Rakesh Gupta for M/s. Trivedi & Gupta for respondent No.2 [on caveat] ====================================== CORAM : HONOURABLE MR.JUSTICE ANANT.S.DAVE SCA/29265/2007 2/55 JUDGMENT Date : 07/01/2008 CAV JUDGMENT 1 This writ petition under Article 226 of the Constitution of India challenges communication dated 3rd November 2007 addressed by the first respondent and consequential communication dated 8th November 2007 addressed by respondent No.2, as being contrary to law and violative of principles of natural justice, arbitrary, unreasonable, capricious and indicative of total non-application of mind, patently mala fide, collusive, illegal, ultra vires Articles 14 and 19(i)(g) of the Constitution of India and is null and void ab-initio and of no legal effect whatsoever. In paragraph 30 of the petition, the petitioners have prayed as under: “a. for a writ of prohibition or a writ in the nature of prohibition, or in any other appropriate writ order or direction under Article 226 of the Constitution of India restraining the respondents, by themselves, their servants, agents, officers and subordinates, from taking any steps or measures or action whatsoever in any manner whatsoever, against the petitioners pursuant to and/or in implementation of and/or in furtherance of the said impugned letter dated 3.11.2007 [Annexure “O” hereto] and/or the consequential letter dated 8.11.2007 [Annexure “H” hereto] b. for a Writ of Mandamus or a Writ in the nature of Mandamus or any other appropriate Writ, Order or Direction under Article 226 of the Constitution of India against the respondents: SCA/29265/2007 3/55 JUDGMENT 1. ordering and directing the 1st respondent to forthwith withdraw and cancel the said impugned letter dated 3rd November 2007 [Annexure “O” hereto] 2. restraining the respondents, by themselves, their servants, agents, officers and subordinates, from taking any prejudicial steps or measures or actions whatsoever in any manner whatsoever against the petitioners pursuant to and/or in implementation of and/or in furtherance of the said impugned letter dated 3.11.2007 [Annexure “O” hereto] and/or the said consequential letter dated 8.11.2007 [Annexure “H” hereto].” The petitioners have also prayed for an injunction against the respondents pending the hearing and final disposal of the present petition. 2 Before adverting to the factual matrix and legal issues involved in this petition, it is necessary to notice certain abbreviations used in the present proceeding by both the parties for the sake of convenience. They are as under: [a] MICTL : Mundra International Containers Private Limited, petitioner herein [sub-licensee], a Company incorporated under the Companies Act, 1956, engaged, inter alia, in the business of operation of container terminal at the Port of Mundra, State of Gujarat, petitioner No.1 and sub-licensee under Sub-Concession Agreement [SCA] [sub-licensee]. [a1] MICTPL : Mundra International Containers Terminal Private Limited. Pursuant to change in name granted by the Registrar of Companies in exercise of power under Section 23(1) of the Companies Act, 1956, M/s. Adani Containers [Mundra] Terminal Limited became Mundra International Containers Terminal Private Limited, petitioner SCA/29265/2007 4/55 JUDGMENT No.1 and is wholly owned subsidiary of P & O Ports [Mundra] Private Limited. Mauritius [b] GMB : Gujarat Maritime Board, respondent No.1 herein [licensor] is constituted for administration, control and management of minor ports in the State of Gujarat and for the matters connected therewith, as per the Gujarat Maritime Board Act, 1981, and Licensor as per Concession Agreement [CA] [Licensor]. [c] MPSEZ : The Mundra Port and Special Economic Zone Limited, respondent No.2 herein [licensee], erstwhile M/s. Gujarat Adani Port Limited [Licensee] [c] GAPL : M/s. Gujarat Adani Port Limited [d] ACTL : M/s. Adani Containers [Mundra] Terminal Limited. [e] P&O Ports : An affiliation of P & O Ports [Mundra] Private Limited [f] P&O Ports Mundra: P & O Ports [Mundra] Private Limited, a 100% shareholder of MICTL and a subsidiary of P & O Overseas Holding Limited, which is, in turn, held by P & O Property Holding Ltd. [g] P&O Dover : P & O Dover [Holdings] Limited, a 100% shareholder of P&O Mundra and itself is 100% held by POSNCO. [h] POSNCO : Peninsular & Oriental Steam Navigation Company, a 100% shareholder of P & O Dover, prior to March 2006 was listed in the London Stock Exchange. Thereafter, upon open offer to the shareholders, the shares were purchased by DPW, Dubai Port World on 9.3.2006. POSNCO is under DPW, which is again a sovereign company owned by the Government of Dubai. [i] DPW : Dubai Port World [j] FIPB : Foreign Investment Promotion Board [k] GPIDCL : Gujarat Port Infrastructure Development Company Limited, a company incorporated under the provisions of the Companies Act and jointly promoted by the GMB and GIIC [Gujarat Industrial Investment Corporation Limited]. SCA/29265/2007 5/55 JUDGMENT [l] BOOT : A package provided by resolution dated 29.7.1997 by the Department of Port & Fisheries, State of Gujarat, which means 'Built, Own, Operate, Transfer' as per the policy announced by the Government of Gujarat in December 1995 for development of ports and related infrastructure in the State of Gujarat. [m] CA : Concession Agreement [n] SCA : Sub-Concession Agreement [o] F.A. : Framework Agreement dated 8.11.2002 Details of nature of agreements, terms and conditions contained therein and inter-se relationship of the parties will be referred to hereinafter. 3 At the outset, a preliminary objection is raised by the learned Advocate General appearing for respondent No.1 on caveat about maintainability of the present petition under Article 226 of the Constitution of India. 4 The first petitioner is a Company incorporated under the Companies Act, 1956, and engaged in the business of operation of a container terminal at the port of Mundra. The second petitioner is a Director and shareholder of the first petitioner and is a citizen of India. Respondent No.2 is licensed by respondent No.1 to operate and run the Port of Mundra and is empowered under the CA dated 17.2.2001 to grant sub-concessions to parties for the purposes of development and operations of the Port of Mundra as per the terms and conditions laid down in the above CA. 4.1 As per the record annexed with the petition, a frame-work agreement was entered into between the parties on 8.11.2002 in view of the certain stages contemplated under the SCA for the development and management of contracted assets. The first stage assets comprising of 632 meters quay wall in Navinal Creek and 38.48 hectares of the back up SCA/29265/2007 6/55 JUDGMENT area came to be transferred to the petitioner on 18.7.2003 as stated earlier and achieved growth to the extent of 6 lacs TEUs per year. The SCA further envisaged transfer of second stage assets comprising of 618 meters quay wall and 19.633 hectares of back up area as per the clauses of SCA. It is further to be noted that there was a non-compete provision vide clause 17 read with clause 11 of the SCA and clauses 7 and 7.1 of F.A, which prohibited respondent No.2 from developing or permitting the development of the container handling facility in the Port of Mundra save and except as per clause 17. Earlier, FIPB granted approval for foreign collaborations vide letter dated 26.2.2003 on certain conditions. 4.2 On the basis of the terms and conditions laid down in the CA, on or about 7.1.2003, as amended on 17.4.2003, GAPL, now MPSEZ, entered into SCA with the petitioner for operating and maintaining container terminal at the Port of Mundra and, as per the letter dated 10.5.2003 addressed by respondent No.1 to respondent No.2, the State of Gujarat had approved in principle the transaction of transfer of 100% equity shares of ACTL now MICTL to P&O Mundra Ports. It was approved by the Government of Gujarat to allow GMB to grant permission to GAPL for transfer of quay wall [632 mt.length] to ACTL for container terminal under clause 20(b) of the CA. It is to be noted that the above approval in principle was granted subject to execution of legally enforceable documents by respondent No.2 and the shareholders of ACTL in respect of certain undertakings given vide letters dated 9th, 10th and 17th April 2003 and, in turn, the GMB granted permission to transfer 100% equity shares and quay wall for container terminal on certain conditions referred to later on. 4.3 The conditions of letter dated 10.5.2003 were based on the conditions imposed by FIPB in its letter dated 26.2.2003 of approval of SCA/29265/2007 7/55 JUDGMENT foreign collaborations as applied. It appears from the record that, by letter dated 2.8.2005, the GMB once again asked respondent No.2 to comply with certain lacunas on the terms of letter dated 10.5.2003 and undertaking given by the petitioner pursuant thereto. 4.4 Thereafter, the container terminal commenced operations on 18th July 2003 and handled increasing volumes of containers and, ultimately, the revenues collected from the container terminal have steadily increased from year to year and upto 31st October 2007, as per the unaudited report, it was Rs.53540.75 lakhs. 4.5 As per the requirement of the SCA, respondent No.2 is entitled to royalty being 10% of the gross revenue earned by the first petitioner and also to collect water front royalty from the users and pay to respondent No.2 for payment to respondent No.1. Thus, according to the petitioners, royalty amounting to Rs.5206.64 lakhs paid to respondent No.2 and in turn water front royalty paid by respondent No.2 to respondent No.1 upto 31.10.2007 is Rs.1207.79 lakhs. Therefore, according to the petitioners, the above arrangement worked smoothly and efficiently and there was no blockage and was a boon to the industry, trade and economy of the State of Gujarat and the country in general. Investment worth more than Rs.400 crores is made and other commercial enterprises also depend on the terminal for their business since their revenue earnings is 10% per annum of the above investment. 4.6 Later on, since respondent No.2 commenced construction of container terminal at the Port of Mundra, which, according to the petitioner, was in breach of the above non-compete clause 17 of the SCA and even the operations commenced sometime in August 2007, therefore, proceeding under Section 9 of the Arbitration & Conciliation SCA/29265/2007 8/55 JUDGMENT act, 1996 for injunction against respondent No.2 was initiated invoking the arbitration provision of the said SCA, which came to be dismissed vide order dated 13th September 2007 by the learned Judge of the City Civil Court, Ahmedabad, against which, First Appeal is pending before this Court for hearing. 4.7 The challenge in this petition qua the impugned communications dated 3rd and 8th November 2007 addressed by respondent No.1 and respondent No.2, respectively, on the ground of breach of principles of natural justice, etc., has genesis in the letters dated 10.5.2003 and 2.8.2005 and the show cause notice dated 24.2.2006 issued by the Chief Engineer of respondent No.1, a copy whereof was also addressed to respondent No.2, calling upon to show cause why permission/approval granted to the SCA should not be withdrawn as P&O Ports had reportedly been taken over by DPW which amounted to dilution of equity by P&O Ports [Mundra] without prior permission or approval of respondent No.1, as well as transfer of the undertaking, assets and property without prior consent of respondent No.1. It was indicated that the first petitioner was in breach of the undertaking furnished on 26.5.2003 and SCA was not finally approved by the GMB. 4.8 By letters dated 31.3.2006, 27.7.2006, 28.8.2006, 29.5.2007 and 23.7.2007, replies were submitted by the petitioner and personal hearings were granted on 30.5.2006 and 31.7.2006 and even written submissions were filed on 19.6.2006 and 11.8.2006. As per the replies and written submissions, the petitioner pointed out every compliance of all requirements and undertaking given and non-acceptance of additional conditions suggested as amendments to the existing SCA. The petitioner also furnished documentary evidence to establish that there was no change whatsoever in the company and no breach of any of the SCA/29265/2007 9/55 JUDGMENT conditions of the SCA and even after pre and post acquisition of POSNCO by DPW, the shareholding structure remained unchanged. It was pointed out that the first petitioner had not transferred any assets or property or undertaking and, according to the petitioner, final order was awaited. 4.9 It is the case of the petitioners that, however, respondent No.2, due to strain relationship between the petitioners and respondent No.2, willfully and deliberately refrained from supporting the first petitioner in the proceedings before respondent No.1 and no submissions were filed and, indirectly, supported the said show cause notice. 4.10 By the first impugned communication dated 3.11.2007, respondent No.1 directed respondent No.2 to immediately initiate legal action for termination of SCA and by the second impugned consequential communication dated 8.11.2007 by respondent No.2 to the petitioner, it is stated by respondent No.2 that SCA stood terminated. The above action, according to the petitioner, is contrary to the settled position of law, meaning thereby, no opportunity of hearing is given to the petitioners and without following any procedure of law, respondent No.1 has acted illegally. That, after having issued show cause notice dated 24.2.2006 and in spite of various replies and written submissions filed by the petitioners, without pronouncing any verdict on it, the action of the termination of SCA on the part of the respondents, during the pendency of the above proceedings between the petitioners and respondent No.1, amounts to colourable exercise of power by respondent No.1, a statutory body constituted under the Statute of 1981 and duty bound to act in just, fair and reasonable manner. Therefore, the impugned communication dated 3rd November 2007 issued by the first respondent and consequential communication dated 8th November 2007 issued by SCA/29265/2007 10/55 JUDGMENT respondent No.2 deserve to be quashed and set aside by this Court in exercise of extra-ordinary jurisdiction under Article 226 of the Constitution of India. 5 Dr. Abhishek Singhvi, learned Senior Counsel for the petitioners, submits that the challenge in this petition is against arbitrary, unreasonable and capricious action of respondent No.1 in communicating the letter dated 3.11.2007 to respondent No.2 to terminate the contract in terms of SCA entered into between respondent No.2 and the petitioner. According to the learned counsel for the petitioners, the above action is not only arbitrary, unreasonable or capricious, but the same suffers from non-application of mind, patently mala fide, collusive, illegal and also violative of principles of natural justice and ultra vires Articles 14 and 19(i)(g) of the Constitution of India and ab-initio null and void without any legal effect whatsoever. The learned counsel for the petitioners further submits that the question before this Court is not the interpretation of the terms and conditions and various clauses incorporated in CA or SCA as approved by respondent No.1, but the basic question is: whether respondent No.1- Gujarat Maritime Board, a statutory Board constituted under the Act of 1981, can act de hors the requirement of principles of natural justice, fair-play and reasonableness. It is further submitted that the impugned communication dated 3.11.2007 by respondent No.1 to respondent No.2, taking recourse to clauses 7.2[d], 7.2[e] and 8.5 of CA, directing the licensee, respondent No. 2 herein, to invoke clauses of SCA and to initiate necessary legal action for terminating SCA with the petitioner, is a camouflage and colourable exercise of power in as much as respondent No.1 had issued show cause notice to the petitioner on 24.2.2006, whereby, the petitioner was called upon to show cause within seven days from the date of receipt of above communication as to why SCA/29265/2007 11/55 JUDGMENT permission/approval granted to SCA vide order dated 10.5.2003 should not be withdrawn on the ground that the petitioner has acted in breach of the undertaking furnished and acted contrary to the approval of FIPB and the conditions laid down thereunder read with letter dated 10.5.2003. Even prior to the above show cause notice dated 24.2.2006, respondent No.1 addressed letter to the petitioner on 2.8.2005 for pending compliance to be carried out in respect of SCA by the petitioner since the SCA was not finally approved. The above show cause notice indicated that no prior consent of respondent No.1 was obtained for further transfer of property, assets or undertaking related to the container terminal at Port Mundra to a third party and no prior consent of GMB for dilution of equity shareholding in MICTL in spite of the fact that P & O Ports was to maintain minimum of 51% paid equity shares of MIACTL for a period of seven years from the date of acquiring share of MICTL. Not only that, the above show cause notice reflected that P & O Ports was reportedly taken over by another entity, namely, DPW, which amounts to dilution of equity of P & O Ports without prior permission of the Board. Therefore, when the above issues replied and denied any breach by the petitioner by various communications dated 31.3.2006, 27.7.2006, 28.8.2006, 29.5.2007, 23.7.2007 and written submission filed on 19.6.2006 and 11.8.2006 and personal hearings were given on two different occasions, respondent No.1, a State Authority within the meaning of Article 12 of the Constitution of India, was duty bound to hear the petitioner and pass a speaking and reasoned order in accordance with law and not to convey/direct respondent No.2 ultimately to terminate contract, namely, SCA, without adjudicating the issues involved in the show cause notice. 5.1 It is next contended by the learned counsel for the petitioners that respondent No.1 is like a quasi-judicial authority and, when the dispute SCA/29265/2007 12/55 JUDGMENT had arisen according to the Board, a procedure was required to be followed and a final decision on such enquiry is the necessity of the rule of law for any statutory authority, which is bypassed in the present case and, therefore, the exercise undertaken by respondent No.1 in addressing communication dated 3.11.2007 deserves to be quashed and set aside. 5.2 It is next contended by the learned counsel for the petitioners that even in the capacity of administrative authority under the statute, it is expected of the authority to act in just, fair and reasonable manner in exercise of its power even in the realm of contractual relationship, and respondent No.1, being a public authority amenable to the writ jurisdiction of this Court under Article 226 of the Constitution of India, every action of such Authority is to be tested on the anvil of Article 14 of the Constitution of India and by raising a plea of non-maintainability of the petition, which is to be decided by this Court as a preliminary issue, respondent No.1, GMB, cannot be excluded from its statutory liability as contended above. It is also contended by the learned counsel for the petitioners that without following the principles of natural justice as embodied in various decisions of the Apex Court and part and parcel of rule of law and having undertaken exercise of determining the issues between the petitioner and respondent No.2 and the Board, issuance of direction to respondent No.2 to terminate the contract and rendering the petitioner remedyless is nothing, but, exercise of power by the Authority in illegal manner and it amounts to malice in law, which deserves to be set right by this Court in exercise of power under Article 226 of the Constitution of India. 5.3 Even on merits also, learned counsel for the petitioners has SCA/29265/2007 13/55 JUDGMENT submitted that there is no violation of any clauses of CA or SCA in as much as the position of the petitioner-company was explained through various communications to the Board and it was emphasized that there was no change whatsoever in the holding of equity shares held in MICTL by P&O Ports [Mundra] Pvt. Ltd., Mauritius [P&O Mundra]. It was further submitted that there was no alienation of any assets or substantially the whole or any of the undertakings since the time P&O Mundra acquired 100% of equity capital of MICTL. Not only that, but since November 2002 and right until 2004, the entire equity share capital of P&O Mundra was owned and held by P&O Overseas Holdings Limited. On December 8, 2004, the entire shareholding was transferred to P&O Dover (Holdings) Ltd, which in turn till date holds the entire equity share capital of P&O Mundra. Both P&O Overseas Holdings Limited and P&O Dover (Holdings) Ltd are wholly owned subsidiaries of P&OSNCO. Prior to March 2006, P&OSNCO was listed in the London Stock Exchange and, thereafter, DPW made an open offer to the shareholders and the shares were purchased on or around 9.3.2006. The above metamorphosis of the corporate structure of the companies from time to time had no bearing on the terms of SCA or CA and, therefore, according to learned counsel Dr.Singhvi, the GMB could not have acted in arbitrary, unreasonable and unjust manner in violation of Article 14 of the Constitution of India. 5.4 Incidentally, it was submitted that, even the above change had no bearing on the violation of the any conditions of FIPB and even DPW is also a sovereign company owned by the Government of Dubai and opearting container terminals in 22 countries around the world including in India at various ports viz Visakhapatnam, Kochi, Chennai and other places. According to the learned counsel, a similar issue was also raised SCA/29265/2007 14/55 JUDGMENT by Jawaharlal Nehru Port Trust [JNPT] with regard to Nhava Sheva International Container Terminal Private Limited and upon clarification, the show cause notice was withdrawn. Therefore, when there was no dilution of equity or alienation or transfer of property as alleged, it was submitted that respondent No.1 ought not to have issued any direction to respondent No.2 for taking any legal action against the petitioner by placing reliance on certain terms of CA and SCA. According to the learned counsel for the petitioners, invoking provision of Section 9 of the Arbitration & Conciliation Act, 1994, was with regard to a dispute, which had arisen between the petitioner and respondent No.2 with regard to clause 17, a non-compete clause, and interpretation with regard to development of second stage assets, which has nothing to do with the relief prayed for in this petition, which is substantially against arbitrary, unreasonable, unfair and illegal action of respondent No.1, a statutory authority within the meaning of Article 12 of the Constitution of India and not acting as required by Article 14 of the Constitution of India. 5.5 The learned counsel for the petitioners has placed reliance on the following decisions [i] AIR 1978 SC 597 [Smt. Maneka Gandhi vs. Union of India & others] [ii] [1979] 2 SCC 491 [Smt. S.R. Enkataraman vs. Union of India and others] [iii] AIR 1991 SC 537 [Kumari Shrilekha Vidyarthi vs State of U.P.] [iv] [2004] 3 SCC 553 [ABL International Limited & another vs. Guarantee Corporation of India Limited and others] and submitted that, as per the above decisions of the Apex Court, this Court, in exercise of power under Article 226 of the Constitution of SCA/29265/2007 15/55 JUDGMENT India, can certainly look into even disputed questions of fact if any, which, of course, is not