Case: Villianur Iyarkkai Padukappu Maiyam Vs. Union Of India


Decision reasoning: 0[ds]20. It would be absurd on the part of the appellants to attribute motives to all by stating that the Letter of Intent was amended to the respondent No. 11 for oblique motives in order to favour respondent No. 11 arbitrarily. The appellants could not specify either in the petitions filed before the High Court or in the memorandum of appeals as to which member of the expert committee or which official of the Government of Pondicherry or which Minister of the Council of Ministers or which Chief Minister or Lt. Governor was interested in awarding Letter of Intent to respondent No. 11 for oblique motives. The record shows that the Government of Pondicherry had advertised three times calling for Expression of Interest from the interested firms and had identified respondent No. 11 for development of the Port after adopting transparent procedure. The procedure adopted for identifying the respondent No. 11 is crystalline, distinct, forthright, manifest and unambiguous. To say the least the appellants understanding of the issue is absolutely baseless and not only incorrect but also contrary to the records of the case. The selection of the respondent No. 11 as developer cannot be regarded as capricious, despotic, fanciful or personal as is sought to be made out by the appellants. It is rightly pointed out in the counter reply that the objective of the entire exercise was to get prepared a feasibility study report so that a private investor might not be required to conduct the study prior to deciding whether he would be required to invest or not. It was the understanding of the Government of Pondicherry that in such an event the possibility of attracting private investment in the development of the Port would substantially increase, which cannot be termed as impractical or not warranted in the facts of the case, more particularly, where earlier attempts made since the year 1973 to develop the Porthad failed. The Government of Pondicherry could not have risked loosing offers for privatisation of the Port by insisting upon the process of selection of developer merely on the ground that the advertisement was only for the selection of consultant and not for the selection of developer. On the facts and in the circumstances of the case, this Court is of the firm opinion that the events leading to the award of Letter of Intent to the respondent No. 11 in June, 2005 do not indicate, in any manner, that the Government had acted arbitrarily or that the Letter of Intent was issued to favour the respondent No. 11 with oblique motives and, therefore, the contention of the appellants in this regard is rejected21. The plea raised by the learned counsel for the appellants that the Government of Pondicherry was arbitrary and unreasonable in switching the whole public tender process into a system of personal selection and, therefore, the appeals should be accepted, is devoid of merits. It is well settled thatg of tenders or not holding of public auction would not be in all cases be deemed to be the result of the exercise of the executive power in an arbitrary manner. Generally, when any State land is intended to be transferred or the State largesse decided to be conferred, resort should be had to public auction or transfer by way of inviting tenders from the people. However, what is important to notice is that the old Pondicherry Port is very much in existence. This is not a case of establishment of new port at Pondicherry but this is a case of developing an existing port to meet rapid changes in transport technology and to improve the existing port facilities. The development of an existing port on Build, Operate and Transfer basis can never be equated with intended sale of Government land or transfer of State largesse. This is not a case where a State asset is sought to be sold or the State is out to purchase goods. Such cases stand on a different footing from a major issue of economic development such as development of a port. The respondent No. 11 is called upon to develop the Pondicherry Port on BOT basis. Thus after development of the Port, the same will have to be retransferred to the Government of Pondicherry. In the matter of policy decision and economic tests the scope of judicial review is very limited. Unless the decision is shown to be contrary to any statutory provision or the Constitution, the Court would not interfere with an economic decision taken by the State. The court cannot examine the relative merits of different economic policies and cannot strike down the same merely on ground that another policy would have been fairer and better. In a democracy, it is the prerogative of each elected Government to follow its own policy. Often a change in Government may result in the shift in focus or change in economic policies. Any such change may result in adversely affecting some vested interests. Unless any illegality is committed in the execution of the policy or the same is contrary to law or malafide, a decision bringing about change cannot per se be interfered with by the court. It is neither within the domain of the courts nor the scope of judicial review to embark upon an enquiry as to whether a particular public policy is wise or whether better public policy can be evolved. Nor are the courts inclined to strike down a policy at the behest of a petitioner merely because it has been urged that a different policy would have been fairer or wiser or more scientific or more logical. Wisdom and advisability of economic policy are ordinarily not amenable to judicial review. In matters relating to economic issues the Government has, while taking a decision, right to trial and error as long as both trial and error are bona fide and within the limits of the authority. For testing the correctness of a policy, the appropriate forum is Parliament and not the courts. Normally, there is always a presumption that the Governmental action is reasonable and in public interest and it is for the party challenging its validity to show that it is wanting in reasonableness or is not informed with public interest. This burden is a heavy one and it has to be discharged to the satisfaction of the court by proper and adequate material. The court cannot lightly assume that the action taken by the Government is unreasonable or against public interest because there are large number of considerations, which necessarily weigh with the Government in taking an action. In a case like this where the State is allocating resources such as water, power, raw materials, etc. for the purpose of encouraging development of the port, this Court does not think that the State is bound to advertise and tell the people that it wants development of the Port in a particular manner and invite those interested to come up with proposals for the purpose. The State may choose to do so if it thinks fit and in a given situation it may turn out to be advantageous for the State to do so, but if any private party comes before the State and offers to develop the port, the State would not be committing breach of any constitutional obligation if it negotiates with such a party and agrees to provide resources and other facilities for the purpose of development of the port. The State is not obliged to tell the respondent No. 11 please wait I will first advertise, see whether any other offers are forthcoming and then after considering all offers, decide whether I should get the port developed through you. It would be most unrealistic to insist on such a procedure, particularly, in an area like Pondicherry, which on account of historical, political and other reasons, is not yet industrially developed and where entrepreneurs have to be offered attractive terms in order to persuade them to set up industries. The State must be free in such a case to negotiate with a private entrepreneur with a view to inducing him to develop the port and if the State enters into a contract with such an entrepreneur for providing resources and other facilities for developing the port, the contract cannot be assailed as invalid because the State has acted bona fide, reasonably and in public interest. The terms and conditions of the contract entered into with the respondent No. 11 as well as the surrounding circumstances show that the State has acted bona fide and not out of improper or corrupt motive or in order to promote the private interest of the respondent No. 11 at the cost of the State. Therefore, it is difficult to interfere and strike down the State action as arbitrary, unreasonable or contrary to public interest. It is true that one of the methods of securing the public interest, when it is considered necessary to dispose of a property, is to sell the property by public auction or by inviting tenders. But as noted earlier, this is not a case of sale of property by the State. Though public auction or inviting of tenders is the ordinary rule in case where the State Government proposes to dispose of a property, it is not an invariable rule. There may be situations where there are compelling reasons necessitating departure from the rule, the reasons indicated in this case for the departure are shown to be rational and are not suggestive of discrimination. The Government is entitled to make pragmatic decisions and policy decisions which may be necessary or called for under the prevalent peculiar circumstances. The issue of privatisation of the Port had been engaging the attention of the Government of Pondicherry since 1973. The said issue had been delayed for a long time. Therefore, no fault can be found with the expert Committee, with the various officers of the Government including the Chief Secretary, the Ministers, the Chief Minister and the Lt. Governor for deciding to develop the Port with the assistance of the respondent No. 11 and not just restricting the process to appoint a consultant. The sole purpose behind the said exercise was to ensure development of the Port in a proper manner and as expeditiously as possible. It is necessary to mention that the Government of Pondicherry was trying to develop the Port and was looking for an appropriate partner. It must be remembered that technology for development of the Port would not be available for the mere asking of it. All the leading firms/companies were not found suitable to develop the Port and none of them has made grievance either before the High Court or before this Court regarding selection of respondent No. 11 as Developer of the Port. It is ultimately a matter of bargain. In such cases, all that needs to be assured is that the Government or the authority, as the case may be, has acted fairly and has arrived at the best available arrangement in the circumstances. The materials on record substantiated the absolute need and necessity to undertake the development of the Port by the Government of Pondicherry in furtherance of great public interest and for larger public and common good. The admitted dire financial position of the State Government and its inability to undertake such a project at the cost of Government coupled with the fact that the venture was long overdue apparently made the State Government and its authorities to avail of the project as unfolded and volunteered by the respondent No. 11, subject, of course, to further revisions, modifications and suggestions in the best interest of the State Government. A careful and dispassionate assessment and consideration of the materials placed on record does not leave any reasonable impression, on the peculiar facts and circumstances of this case, that anything obnoxious which requires either public criticism or condemnation by courts of law had taken place. The objective of the Government of Pondicherry to develop the Port was admitted to be fulfilled at the initial stage by short listing a consultant itself. However, the Government did not wish to continue the process of selection of the consultant and risk losing the chance of privatisation of the Port again. As firms/ companies had offered to develop the Port directly, the Government of Pondicherry could not have asked the firms/companies to first participate in the process of selection of a consultant, prepare a project report and require them to participate in the process for selection of the developer all over again. The Government of Pondicherry adopted a pragmatic approach and proceeded to short list the developer directly and in doing so the Government has acted in the best interest of the State to overcome the failed attempts in the past to secure a developer to develop the Pondicherry Port. Under the circumstances, this Court, which is a constitutional Court, is not expected to presume the alleged irregularities, illegalities or unconstitutionality nor this Court would be justified in substituting its opinion for the bona fide opinion of the State Government. Therefore, the plea raised on behalf of the appellants that the Government of Pondicherry had acted in arbitrary and unreasonable manner in switching the whole public tender process into a system of personal selection, is rejected22. The contention that a conjoint reading of Article 239 and 239A of the Constitution and Sections 46, 50 of the Government of Union Territories Act read with Rule 5 of the Rules of Business of the Government of Pondicherry, 1963, would show that the Government of Pondicherry has to take prior approval of the Central Government before awarding the contract to any private party and, therefore, the Letter of Intent issued in favour of the respondent No. 11 should be regarded beyond jurisdiction of the Government of Pondicherry, is misplaced and has no substance23. It is admitted position that the Pondicherry Port is not a major port and as such jurisdiction and control to develop the said port vests in the Government of Pondicherry. The guidelines relied upon by the learned counsel for the appellants relate to privatisation of major port. Those guidelines do not apply to minor ports. There is no manner of doubt that development and privatisation of minor ports can be undertaken by the respective State Government after formulating its own guidelines and modalities. The Indian Ports Act, 1908 permits the State Government to develop the minor ports. By virtue of power vested in the Parliament by Article 239A of the Constitution, the Government of Union Territories Act, 1963 was enacted and Pondicherry was provided with a Legislative Assembly. The extent of the legislative power of the State Legislative Assembly is laid down in Section 18 of the Act of 1963, which, inter alia, provides that the Legislative Assembly is empowered to make laws in respect of any matters in the State List or the Concurrent List. Entry 31 of the Concurrent List provides for Ports other than those declared by or under law made by Parliament or existing law to be major ports. As the Pondicherry Port has not been declared as a major port, the Legislative Assembly of Pondicherry has absolute power to make laws in relation to the Pondicherry Port. Article 162 of the Constitution provides that the executive power of a State ise with its legislative powers. Therefore, there is no manner of doubt that the Government of Pondicherry has complete jurisdiction in relation to Pondicherry Port, which is a minor port. The reliance placed upon Section 3(9) of the Indian Ports Act, 1908 read with Section 6(b) of the Pondicherry (Laws) Regulation, 1963 is totally misconceived. Section 3(9) of the said Act provides that the jurisdiction of ports other than major ports vests in the State Government. The learned counsel for the appellants have contended that reference to State Government, appearing in Section 3(9) of the Indian Ports Act, should be construed to be a reference to the Central Government and, therefore, only the Central Government will have jurisdiction over the ports in Pondicherry. Having considered the different provisions of the Constitution and Statutes, referred to by the learned counsel for the appellants, this Court finds that there is fundamental fallacy in the argument and it is that they rely upon Regulation 6(b) only in part. Though the said Regulation provides that reference to the State Government shall be construed as a reference to the Central Government, it also provides that reference to the State Government shall be construed as reference to the Chief Commissioner. The learned counsel for the appellants have failed to take note of the words and also as reference to the Chief Commissioner. This phrase must be read with the definition of Chief Commissioner provided under Regulation 2(b), which specifies that the Chief Commissioner means the Administrator of Pondicherry (now the Lt. Governor of Pondicherry). A conjoint and meaningful reading of the provisions of the Constitution read with Regulation 6(b) of the Pondicherry (Laws) Regulation, 1963 leaves no doubt that the power in respect of Pondicherry Port necessarily vests in the Government of Pondicherry and not in the Central Government. The reliance placed on Rule 5(2) of the Rules of Business of the Government of Pondicherry read with Rule 21 of the Delegation of Financial Rules to contend that prior approval of the Central Government was required to be taken by the Government of Pondicherry before entering into the Concession Agreement with the respondent No. 11 as it was beyond the financial powers of the Government of Pondicherry, is devoid of merits. Rule 21 relates to the power to sanction expenditure in relation to contracts. Execution of Concession Agreement or grant of Letter of Intent does not entail any expenditure to be incurred by the Government of Pondicherry and as such the learned counsel for the appellants are not justified in pressing into service those provisions. An attempt was made to demonstrate that in terms of Section 5 of the Pondicherry (Administration) Act, 1962 all properties and assets in the State of Pondicherry vest with the Union and, therefore, the Government of Pondicherry has no right to deal with the same in any manner24. It is relevant to notice that the Union Territory of Pondicherry gained its freedom in the year 1962. Therefore, several laws were passed by the Parliament for its integration with the Union of India. One such law was Pondicherry Administration Regulations Act, 1963. Article 240 of the Constitution deals with power of President to make regulations for certain Union Territories. The first proviso to Article 240, inter alia, provides that when any body is created under Article 239A to function as a Legislature for the Union Territory of Puducherry [substituted by Section 4 of the Pondicherry (Alteration of name) Act, 2006 for Pondicherry], the President shall not make any regulation for the peace, progress and good Government of that Union Territory with effect from the date appointed for the first meeting of the Legislature. Therefore, the Pondicherry Administration Regulation Act, 1963 will have to be regarded as a Transitional Legislation. Moreover, the primary reason for enacting Section 3 of the Pondicherry Administration Regulation Act, 1963 was to extend all the laws enacted by the Union of India under the Union List to the Pondicherry. It is only an Act akin to adaptation Act by which the laws of Union of India were extended to this Union Territory, which was incorporated with India after partition. The extension of laws of Union of India shall only mean that those laws would be applicable as they are applicable to any other State of India. As noticed earlier, the Port in question is admittedly a minor port and, therefore, not covered by the provisions of Indian Major Ports Act, 1908. The extension of law to Indian Major Ports Act, 1908 would only mean that a particular law is prevalent but its applicability would be dependant upon as to whether facts and circumstances warrant its invocation. Had the Port in question been a major port, Indian Ports Act, 1908 would have applied. In this case as the Port in question is a minor port, the Indian Major Ports Act, 1908 would not apply25. This Court finds that Section 5 is the provision by which all properties and assets, which earlier vested in the French Republic, stood transferred to the Union, i.e., Union of States (India). In other words, Section 5 was enacted for the purpose of transfer of properties from one sovereign State to another sovereign State. It has no power on the right of Government of Pondicherry over the properties and assets in Pondicherry. The vesting of land from French Republic to the Republic of India can have no bearing on the powers of Government of Pondicherry to dispose of land in accordance with the provisions of the Constitution. Further, it is to be noticed that the entire Pondicherry Administration Act, 1962 was a Transitional Act for transfer of power from the French Republic to the Republic of India, which is evident from the Statement of Objects and Reasons to the said Act. Therefore, the plea that the Government of Pondicherry could not have taken the decision to privatize the Pondicherry Port without consent/approval of the Central Government is totally misconceived26. Further, the Ministry of Shipping filed an affidavit before the High Court expressly endorsing the stand taken by the Government of Pondicherry that Pondicherry Port is not a major port and as such its jurisdiction and control vest with the Government of Pondicherry27. The record further shows that M/s. RITES India Limited through a letter dated March 12, 1996 submitted `Terms of Reference for offering consultancy assignment for privatisation of three major ports situated at Pondicherry, Karaikal and Mahe. The total consultancy fee for the assignments was initially put at Rs.30 lakhs, which was reduced to Rs.20 lakhs as the proposal for consultancy was subsequently limited to the Pondicherry Port only. The Joint Secretary, Ministry of Surface Transport, Government of India vide letter dated March 22, 1996 informed the Chief Secretary, Pondicherry Administration about the need to expand the existing capacity of the Pondicherry Port to meet the growth requirement of traffic handled by various major ports. In the said letter it was mentioned that a decision was taken to invite capital participation by private sector and fromd states. Further, by Government Order dated April 30, 2003 the Ministry of Shipping, Government of India, had nominated Mr. P.C. Dhiman as a Member of the Committee. Mr. Dhiman was appointed as a Member of the Committee by the Government of Pondicherry vide Government Order dated August 20, 2003. The first meeting of the Committee was held on June 2, 2003, which was attended by all the members of the Committee. In the said meeting various courses of actions were discussed. One of the issues related to seeking the consent of Government of India for the privatisation of the port. It was also decided to seek the clarifications from the Ministry of Shipping, Government of India, in this regard. The Chief Secretary, Government of Pondicherry in his noting dated June 25, 2003 mentioned that he had discussed the issue with former Secretary, Ministry of Shipping and he had informed the Chief Secretary that no permission was required for a minor port like Pondicherry and that the guidelines issued by the Government of India on private sector participation in the Port sector only applied to major ports. The Chief Secretary further noted that he had also asked the Assistant Liaison Commissioner, Government of Pondicherry in New Delhi to meet personally the officials of the Ministry of Shipping and report. The Assistant Liaison Commissioner, Government of Pondicherry in New Delhi, by hisl Report dated June 25, 2003, informed that the management and development of ports was a State subject and, therefore, no clearance from the Central Government was required. Under these circumstances the Chief Secretary recommended that further steps for privatisation of the port be taken. These facts indicate that the Government of Pondicherry had full jurisdiction to deal with the minor port situated in the Union Territory and it was not necessary for the Government of Pondicherry to take prior approval of the Central Government before awarding the contract. However, as noticed earlier, the Joint Secretary, Ministry of Surface Transport, Government of India by letter dated March 22, 1996 informed the Chief Secretary, Pondicherry Administration about the need to extend the existing capacity of the Pondicherry Port to meet the growth requirement of traffic handled by various ports and to invite capital participation by private sector and fromd states. The letter dated March 22, 1996 addressed by the Joint Secretary of India to the Chief Secretary of Pondicherry Administration read with decision taken by the Committee of which Director (Port Development), Ministry of Shipping, New Delhi, was one of the Member, to privatize the Port will have to be construed as approval/consent of the Central Government to the project for the development of Pondicherry Port by privatisation and it was not necessary for the Government of Pondicherry to seek further approval at every stage of development of the Port. Therefore, the plea that the Government of Pondicherry could not have taken the decision to privatize the Pondicherry Port without consent/approval of the Central Government is found to be misconceived and is rejected hereby28. The argument that the project in question is cleared without examining the environmental aspects by the Union Territory of Pondicherry in total violation of the Precautionary and Trusteeship principles and is also prohibited under the CRZ notification as the same is ae activity in the garb of port development, has no substance worth the name29. The record of the case indicates that concession agreement is already entered into between the Government of Pondicherry on one hand and the 11th and 12th respondents on the other, on January 21, 2006. Those respondents in terms of the concession agreement have incorporated a Special Purpose Vehicle (SPV) company known as Pondicherry Port Limited for implementation of the Port Development Project. An Assignment agreement to this effect in favour of Pondicherry Port Limited is executed by the Respondent Nos. 11 and 12 and confirmed by the Government of Pondicherry. In terms of the Concession agreement, the Government of Pondicherry has entered into Lease and Possession agreement with the Special Purpose Vehicle Company on February 4, 2006. Thed occupancy is given to the Pondicherry Port Limited subject to obtaining necessary clearance including environmental clearance from the Government of India. There is no manner of doubt that no one can be permitted to carry on construction activity which is prohibited by the CRZ. However, this being a project exceeding Rs.50 crores necessary environmental clearance has to be obtained from the Ministry of Environment and Forest Union of India. Before such consent is granted/obtained, a full Environmental Impact Assessment has to be done. During that exercise, public hearing would be conducted as a matter of rule and all the concerns expressed by the public will have to be taken due note of, by the authorities concerned. The specific objections raised by the appellants will also have to be considered and they would be entitled to hearing by the competent authority. Mere submission of DPR is not the end of any decision making process. The implementation of the project as per DPR is solely dependent on the clearance to be given by the Ministry of Environment and Forest Union of India. There is no manner of doubt that the Government has every power to stop the project if it violates environmental safeguards. The consideration of CRZ regulations would also be part of the said exercise. Further, the notification issued under the Environment Protection Act clearly requires a prior consent and provides for an appeal to be filed before the tribunal constituted for the said purpose by an aggrieved party. The plea that the environmental clearance must precede the award of the project is wholly misconceived and is incorrect. The application form for obtaining environment clearance under the notification of 2006 makes it very clear that the application has to be made by the entity which has been entrusted with the project. In the judgment, impugned in the appeals, appropriate directions addressing all the issues raised on behalf of the appellants relating to the environment have been issued by the High Court. In addition, the Ministry of Environment and Forest which has to given clearance for the project has to examine the proposals of the developer and follow due procedure before granting approval. Therefore, the judgment impugned is not liable to be set aside on the ground that environmental aspects were not examined by the Union Territory of Pondicherry in total violation of the Precautionary and Trusteeship principles or that the project in question is completely prohibited under the CRZ notification30. The argument that the Respondent No. 11 is permitted to carry one business by construction ofr hotels, a trade centre as well as a beach resort in the garb of development of Pondicherry Port and therefore, the project should be grounded, cannot be accepted. It can hardly be disputed by anyone that the main objective of the project is the development of Pondicherry Port. The Government of Pondicherry has not entered into Concession agreement with the Respondent No. 11 to permit the said respondent to run ae business. While developing the port, it is necessary to provide certain infrastructural facilities for passengers, shipping crew, port staff and other personnel associated with the port, as part of the port development activity. The Respondent No. 11 as developer of the Port has not yet submitted necessary plans for scrutiny of Ministry of Environment and Forest, Government of India, seeking clearance to the project. As and when, the plans are submitted for clearance, the competent authority can always decide upon the desirability of making of constructions which do not fall within the development of port. The ancillary activities to be undertaken while developing a port cannot be stopped by merely naming them ase business. The affidavit in reply filed on behalf of the Respondent Nos. 11 and 12 before the Madras High Court would indicate that the Government of Pondicherry is not going to make investment in the project at all. Therefore, the question of Government of Pondicherry favouring the Respondent No. 11 does not arise. The affidavit filed by the Respondent Nos. 11 and 12 makes it clear that they have taken up the project after conducting detailed study and have decided to make investment in the project. The Respondent Nos. 11 and 12 are permitted to develop the Port only on Build, Operate and Transfer (BOT) basis. No material was placed by the appellants before the High Court to substantiate the claim that the Respondent Nos. 11 and 12 are thee agents. The development of Port of Pondicherry on BOT basis makes it evident that, in effect and substance, the Government of Pondicherry would get back the assets built by the Respondent Nos. 11 and 12 after the expiry of period mentioned in the Concession agreement. Grant of Letter of Intent or execution of Concession agreement in favour of Respondent No. 11 to permit it to develop the Port on BOT basis cannot be regarded as gifting public largesse. The appellants have failed to bring on record any material to substantiate the allegation that there is a conspiracy to grab the land belonging to the Government of Pondicherry for the purpose of Realestate of Respondent No. 11 by permitting it to constructr hotel, commercial mall, etc. The reply affidavit filed by the Respondent before the High Court, on the contrary, shows that the feasibility report prepared by it indicated that the Port was to be developed in composite manner and therefore project should be commercially viable and therefore considering the enormous cost involved in the development of the Port, certain activities are sought to be undertaken for the benefit of passengers, crew of ships, staff etc. On the facts and in the circumstances of the case, this court is of the opinion that the appellants have failed to make out the case that the Pondicherry Government has permitted the Respondent No. 11 to carry one business and therefore the appeals should be accepted.