Apm Terminals B.V. Vs Union of India

REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.4270 OF 2011 (Arising out of S.L.P.(C)No.13893 of 2010)

APM TERMINALS B.V. … APPELLANT

Vs.

UNION OF INDIA & ANR. … RESPONDENTS

WITH T.C.(CIVIL) NOS.36-37 OF 2010

J U D G M E N T

ALTAMAS KABIR, J.

1. Leave granted in SLP(C)No.13893 of 2010, which

is being heard along with Transferred Case (Civil)

Nos.36-37 of 2010. While the appeal has been filed

by APM Terminals B.V. against the decision of the

High Court, dismissing its writ petition,

challenging the decision of the Board of Trustees

for the Jawaharlal Nehru Port Trust to exclude the

appellant from participating in the tender process

for the development of the Fourth Container

Terminal at the Bombay Port through public-private

partnership, the transfer petitions have been filed

by PSA Sical Terminals Ltd. for transfer of Writ

Petition Nos.19851 and 19384 of 2010 pending before

the Madras High Court, to this Court. As the

questions involved in the writ petitions pending

before the Madras High Court were the same as those

raised in the appeal filed by APM Terminals B.V.,

we had directed the transfer petitions to be heard

along with SLP(C)No.13893 of 2010, out of which the

present appeal arises.

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2. In the appeal, the appellant has challenged the

validity and propriety of the decision taken by the

Board of Trustees of the Jawaharlal Nehru Port

Trust, hereinafter referred to as the “JNPT”, to

exclude the appellant from participating in the

tender process for the Fourth Container Terminal

under the JNPT, through public-private partnership,

and praying for quashing of the said decision with

leave to the appellant to participate in the tender

process in accordance with the policy indicated in

Circular No. PD-12013/2/2005-JNPT dated 26th

September, 2007, issued by the Union of India. The

further prayer of the appellant was to read the

provisions of the said Circular into the Licence

Agreement dated 10th August, 2004, executed between

the appellant and JNPT, and, consequently, to

release the appellant from the restrictions

contained in Clause 8.31 of the Licence Agreement

and/or to treat the same as not binding on the

appellant. Clause 8.31 of the Licence Agreement

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which was executed by the Board of Trustees, JNPT,

in favour of the appellant, provides as follows :

“8.31 The Licensee acknowledges and agrees that it shall forego the right to bid for either directly or indirectly, including being a Management Contractor through any associate company, whether such company is registered in India or any other country, or any company in which the Licensee has a shareholding for the Additional Facilities or existing facilities during the term of this Agreement. The Licensee also agrees that in the event of it or its parent company taking over/acquiring/amalgamating/merging with the licensee or the parent company to whom the Additional Facilities are awarded it shall be obliged to divest its stake in one of the two licenses to a third entity not linked to the Licensee within 6 months from the date of such change in control failing which it shall be deemed to be a Licensee Event of Default. The Licensee also agrees that in the event of it or its parent company being taken over/acquired/amalgamated/merged by another licensee operating container facilities at JNPT it shall be obliged to divest the License to a third entity not linked to the Licensee within 6 months from the date of such change in control failing which it shall be deemed to be a Licensee Event of Default. The Licensee acknowledges, agrees and accepts the above as essence of this Agreement and the Licence granted to the Licensee.”

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3. Before the High Court, on behalf of the

appellant Company, it was claimed that on account

of subsequent resolutions adopted by the Board of

Trustees of JNPT, which had the effect of altering

the policy with regard to entrustment of

operational facilities at the port to provide

competition and to prevent monopolies, the

provisions of Clause 8.31 would have to be

reconsidered in the light of the changed

circumstances. Before proceeding any further it

will be worthwhile to briefly indicate the

background in which the present lis has arisen.

4. The Jawaharlal Nehru Port Bulk Terminal was

commissioned on 26th May, 1989, and was designed to

handle goods imported in bulk, such as fertilizers,

fertilizer raw materials and food grains, with the

help of mechanized bulk-handling facilities. With

the passage of time, the Central Government found

it difficult to maintain the Bulk Terminal and

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decided to convert the Bulk Terminal into a

Container Terminal and to remodel the same on a

Build, Operate and Transfer (BOT) Basis on licence

for a period of 30 years. Since 1996, it has been

the policy of the Central Government to permit

participation/investment by the private sector in

utilizing the assets of the Port, construction and

creation of additional assets, lease of equipment,

pilotage, cargo handling, etc. In fact, guidelines

had been issued from time to time by the Ministry

of Surface Transport which was to be followed by

the Major Ports for private sector participation.

In pursuance of such policy, the Central Government

introduced the process of privatization, subject

however, to the regulatory role of the JNPT.

Within the regulatory frame-work it was made clear

that the Port authorities should ensure that

private investment did not result in the creation

of private monopolies and that private facilities

were available to all users on equal and

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competitive terms.

5. The appellant is a Company incorporated under

the laws of the Netherlands. Together with the

Container Corporation of India Limited it formed a

Joint Venture Company under the name and style of

“Gateway Terminals India Pvt. Ltd.” registered

under the Companies Act, 1956. The said Joint

Venture Company, hereinafter referred to as the

“GTI”, was the successful bidder in the Tender

floated by JNPT for development of its existing

Bulk Terminal into a Container Terminal.

Thereafter, in keeping with the guidelines issued by

the Central Government in 1996, which were

described as mandatory, the JNPT floated a Tender

for the development of a new 600 meter Quay Length

Container Terminal at Navi Mumbai and Nhava Sheva

International Container Terminal, hereinafter

referred to as the “NSICT”, was the successful

bidder in respect of the said Tender. The licence

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granted to NSICT to operate the first Container

Terminal at JNPT culminated in a Build, Operate and

Transfer Licence Agreement dated 3rd July, 1997

between JNPT and NSICT which was to subsist for a

period of 30 years from the date of the agreement.

Clause 2.3 of the said Licence Agreement provides

as follows :

“The License will not bar the Licensee from participating in any subsequent bids invited by the Licensor for operation of Container Terminal.”

6. Accordingly, NSICT was given liberty to

participate in any subsequent bid for operation of

the Container Terminal.

7. In 2002, JNPT floated another Tender for the

development of the Second Container Terminal at

JNPT and invited Requests for Qualification (RFQ)

for the construction thereof. In order to prevent

monopoly and promote competition, the JNPT

subsequently incorporated Clause 1.3 in the Tender

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documents for the development of the Second

Container Terminal, which reads as follows :

“Clause 1.3 : The port is desirous of entrusting the Project of redevelopment of the bulk terminal to a container terminal, on BOT basis, to another licensee other than the existing Private Terminal Operator (Licensee) at JNPT i.e. Nhava Sheva International Container Terminal (NSICT) Limited or their associates, P&O or the associates, interconnected or sister companies or either of them.”

8. The net result was that NSICT was precluded

from participating in the Tender for the

development of the Second Container Terminal at

JNPT, despite the express provisions of Clause 2.3

of the Licence Agreement.

9. The said decision of the JNPT was challenged by

NSICT and its affiliate, P&O Australia Ports Pvt.

Ltd., by way of Writ Petition No.3083 of 2002 in

the Bombay High Court. During the hearing of the

said writ petition, the Union of India and JNPT

took the stand that the 1996 Policy and the

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guidelines would prevail over Clause 2.3 of the

Licence Agreement between the said Respondents and

the NSICT. Upholding the decision of the

Respondents to exclude P&O Australia Ports Pvt.

Ltd. and NSICT from participating in the bid for

the development of the Second Container Terminal,

the Bombay High Court dismissed the writ petition

by its order dated 28th January, 2003. The said

decision of the Bombay High Court was challenged

before this Court, which declined to interfere with

the order of the Bombay High Court. However, the

Petitioner’s Joint Venture Company, GTI Pvt. Ltd.,

was permitted to bid in the Tender for the

development of the Second Container Terminal at

JNPT. On completion of the bidding process, the

work of development of the Second Container

Terminal was awarded to GTI for a term of 30 years

from the date of the Licence Agreement which also

contained Clause 8.31, extracted hereinabove. In

fact, before the Bombay High Court, JNPT had taken

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a stand that Clause 8.31 had been subsequently

incorporated in the Licence Agreement in view of

the guidelines promulgated in 1996, which were then

in force.

10. In the meanwhile, on or about 26th September,

2007, a decision was taken by the Union of India to

alter the 1996 policy and a Circular No.PD-

12013/2/2005-JNPT, was issued indicating that the

JNPT should proceed to invite global competitive

bidding for an independent “Stand Alone” Container

Terminal to expand the Container towards North of

JNPT by 330 meters, which was designated as the

Third Container Terminal. It also clarified the

eligibility of existing private container terminal

operators at JNPT to compete and bid for any

project. In the said Circular dated 26th September,

2007, it was, inter alia, indicated as follows :

“In the instant case while JNPT is in the process of undertaking the bidding for the development of the 330 metre extension of

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container berth towards North of NSICT project as a stand alone project on BOT basis (330 metre extension project) there are two different private BOT operators operating container terminals in JN Port. As a rational and logical consequence of the stand taken earlier it has been decided that the successful bidder of the previous container terminal on BOT basis (Maersk A/S – CONCOR Consortium) and/or their subsidiaries/allied organizations should be excluded from bidding for the 330 metre extension project. This would mean that for the next BOT container terminal in JN Port in future, the successful bidder of the 330 metre extension project would be excluded and so on.

It has also been decided that the above convention shall be followed in all Ports in its true spirit with a view to avoid monopoly and promote competition till such time a formal Policy is finalized and notified.”

11. As a result of the above, neither the appellant

nor its affiliates and/or subsidiaries/allied

organizations were permitted to participate in the

bid for the Stand Alone Container Terminal.

Thereafter, in the year 2000, the JNPT floated yet

another Tender for development of the Third

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Container Terminal at JNPT, inviting Requests for

Qualification for selection of a developer for the

development of the said terminal in which it was

categorically mentioned as follows:

“JNPT is desirous of entrusting this project to a Licensee other than Maersk A/S-Concor Consortium and/or their subsidiaries/allied organizations including GTIPL.”

12. The explanation given for the insertion of the

said clause was to implement the Circular dated 26th

September, 2007. GTI’s plea to allow it to

participate in the bid was rejected. The appellant

was, therefore, subsequently barred from

participating in the Tender process for the

development of the Third Container Terminal at

JNPT. NSICT was, however, allowed to participate

in the said Tender process for the development of

the Third Container Terminal at the JNPT UN, but

such Tender has not yet been finalized.

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13. In the meantime, on 2nd March, 2009, JNPT

floated Tender No. PD/N-14th CT/C-60/2009 and issued

a global invitation of a Request for Qualification

for development of the Fourth Container Terminal at

JNPT. The said Tender contained the following

clause.

“The successful bidder/consortium members and/or their subsidiaries/allied organiza- tions in the project for the development of a Stand Alone Container Handling Facility with a key length of 330 meters towards North at JNPT was to be excluded from the bidding in respect of Fourth Container Terminal either as a single applicant or as a consortium.”

14. On a plain understanding of the above mentioned

clause, neither the appellant nor its associate

companies/allied organizations and/or consortium of

GTI was precluded from participating in the said

Tender for the development of the Fourth Container

Terminal and raising its bid therein. The

appellant, thereupon, along with its letter dated

5th March, 2009, addressed to the JNPT, forwarded a

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Demand Draft for Rs.10,000/- towards purchase of

the RFQ document for participation in the bidding

process for the Fourth Container Terminal. The

appellant was provided with a copy of the RFQ

documents, wherein, in Clause 2.2.1(e), it was

categorically stipulated as follows :

“2.2.1(e) To avoid private monopoly and to promote competition, the successful bidder/consortium members and/or their subsidiaries/allied organization in th project for the “Development of a stand alone contasiner handling facility with a quay length of 330-m towards North at NJPT” shall be excluded from the bidding for DEVELOPMENT OF FOURTH CONTAINER TERMINAL either as a single applicant or as a consortium. Further, for the next BOT container terminal in JN Port in future, the successful bidder/consortium members in the DEVELOMENT OF FOURTH CONTAINER TERMINAL Project would be excluded and so on.”

15. Even at this stage, JNPT did not preclude the

appellant from participating in the said tender in

respect of the Fourth Container Terminal at JNPT.

The appellant was, thereafter, invited to

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participate in the process for grant of licence for

the Fourth Container Terminal. However, to the

surprise of the appellant, on 29th June, 2009, the

appellant was informed that GTI and/or its

associates/allied organizations had been

disqualified from bidding for the Fourth Container

Terminal in view of Clause 8.31 of the Licence

Agreement. As indicated hereinbefore, it was after

such decision that the appellant, who was worried

about the rights and entitlements arising out of

the said Circular, filed Writ Petition No.1551 of

2008 before the Bombay High Court on 29th July,

2009. The said Writ Petition was listed before the

Bombay High Court on 25th August, 2009, which

dismissed the same on 10th March, 2010, relying

solely on the provisions of Clause 8.31 of the

Licence Agreement, which disqualified the appellant

from participating in the Tender process relating

to the Third Container Terminal.

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16. It is the said order of the High Court which

has been challenged in this appeal.

17. Appearing for the appellant, Mr. F.S. Nariman,

Senior Advocate, submitted that JNPT had awarded

NSICT, owned by P&O Ports, the licence for the

development of the First Container Terminal at

JNPT. Pursuant thereto, JNPT had entered into a

Licence Agreement dated 3rd July, 1997, with NSICT,

wherein Clause 2.3, which provided that the said

licence would not bar the licensee from

participating in any subsequent bids invited by the

licensor for operation of the container terminal,

was incorporated. Mr. Nariman submitted that

despite the 1996 Policy, which aimed at preventing

monopoly and promoting competition, the Licence

Agreement dated 3rd July, 1997, permitted NSICT to

participate in the subsequent bids invited by the

JNPT for operation of the Container Terminal.

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18. Mr. Nariman submitted that on 26th September,

2007, the Union of India issued Circular No.

PD-12013/2/2005-JNPT to JNPT indicating that it

should invite global competitive bidding for an

independent, Stand Alone Container Terminal

involving a 330 meter extension of container berth

towards the North of JNPT. The said Circular

clarified that existing private Container Terminal

Operators in JNPT would also be entitled to bid for

any project but the JNPT was required to ensure

that private investment did not result in the

creation of private monopoly and that private

facilities were available to all users on equal and

competitive terms. Paragraph 5 of the 2007 Policy

clearly provided that the successful bidder of the

previous Container Terminal on BOT basis and/or

their subsidiaries/allied organizations, should be

excluded from bidding for the 330 meter extension

project. The immediate fall-out of the same would

mean that for the next BOT Container Terminal in JN

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Port in future, the successful bidder of the 330

meter extension project would be excluded and so

on. What was also emphatically stated in paragraph

6 is that it had also been decided that the

aforesaid guideline should be followed in all Ports

in its true spirit with a view to avoiding monopoly

and promoting competition, till such time a formal

policy was finalized and notified. The 2007

Policy, therefore, provided that MAERSK S/T CONCOR

Consortium and/or their subsidiary/allied

organizations would be excluded from bidding for

the Third Container Terminal and the successful

bidder of the Third Container Terminal would be

excluded from bidding for the next project and so

on. Hence, a successful bidder would be ineligible

to bid for the next but one subsequent tender after

the immediate one awarded to it.

19. Mr. Nariman submitted that in accordance with

the guidelines contained in the 2007 Policy, the

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appellant was specifically barred from

participating in the tender process for the

development of the Third Container Terminal at

JNPT. NSICT who was the successful bidder for the

first container was allowed to participate in the

tender process for the development of the Third

Container Terminal at JNPT, though the said tender

is yet to be finalised.

20. Certain problems arose when on 2nd March, 2009,

JNPT floated Tender No. PPD/M-1/4TH CT/C-60/2009 and

issued a global invitation for Request for

Qualification for development of the Fourth

Container Terminal at JNPT, which contained a

clause to the effect that the successful

bidder/consortium members and/or their

subsidiaries/allied organizations in the project

for the development of a “Stand Alone Container

handling facility with a Quay length of 330 meter

towards North at JNPT should be excluded from the

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bidding for the development of the Fourth Container

Terminal either as a single applicant or as a

Consortium.

21. Mr. Nariman submitted that the Request for

Qualification excludes only the successful

bidder for the Third Container Terminal (which

is yet to be awarded) from bidding at the

tender for the development of the Fourth

Container Terminal. Consequently, the appellant

and/or its Associate Company/allied

organizations and/or consortium of GTI were not

precluded from participating in the tender for

the development of the Fourth Container

Terminal having been precluded from bidding for

the “Stand Alone” Container Terminal, in

accordance with the 2007 Policy. It was at

this stage that JNPT wrote to the appellant on

29th June, 2009, indicating that it has been

decided not to allow GTI Pvt. Ltd. and/or its

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associates to participate in the bidding for

the Fourth Container Terminal. Mr. Nariman

further submitted that inspite of the decision

in NSICT’s case, wherein the Union of India had

relied on the 1996 Policy, it subsequently

changed its stand on the strength of the 2007

Policy indicating that having regard to Clause

8.31 of the Agreement the appellant was barred

from bidding for the Fourth Container Terminal.

22. It was submitted that the stand of JNPT was

clearly wrong, arbitrary and discriminatory.

It was further submitted that the apprehension

of the JNPT in regard to creation of monopoly

was erroneous and unrealistic since monopoly

means the power to determine one’s own prices.

In the case of Ports, the prices for various

Port Services are determined by the Tariff

Authority for the Major Ports (TAMP) and

periodically operators are required to submit

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their proposed prices to TAMP and cannot charge

more than the TAMP approved prices for any of

their services. It was urged that without the

power to fix one’s own price, the question of

monopoly did not arise.

23. Mr. Nariman submitted that the problem has

arisen on account of the fact that the tender for

the Third Container Terminal is yet to be

finalised, and, in the meantime the tender for the

Fourth Container Terminal was floated.

Consequently, the Fourth tender was treated by the

concerned Respondents to be the tender for the

Third Container Terminal which meant that the

appellant Company stood disqualified from

participating in the said tender also, since under

the 2007 Policy it could only participate in the

next but one subsequent tender after the one

awarded to it, thereby suffering double prejudice

on account of no fault on its part. Mr. Nariman

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submitted that to debar the appellant Company from

participating in both the Third as well as the

Fourth Container Terminals was not justified and it

should be allowed to participate in the Fourth

tender in accordance with Clause 2.3 of its Licence

Agreement. Furthermore, if the stand taken on

behalf of the Respondent was to be accepted,

despite the supersession of the 1996 Policy by the

2007 Policy, the appellant would also be barred

from participating in future tenders for 30 years

by virtue of Clause 8.31 of the Licence Agreement,

which would only have the effect of reducing the

extent of competition which is, in fact, the object

of the 2007 Policy of the Union of India.

24. Mr. Nariman also contended that Clause 8.31 of

the Licence Agreement had been imposed upon the

appellant based on the principles of public policy

and keeping in mind the then prevailing Policy of

the Government of India, i.e., the 1996 Policy and

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not out of the free will of the parties. In any

event, Clause 8.31 of the Licence Agreement would

have to be read with the 2007 Policy and could not

be read in isolation.

25. Mr. Nariman urged that when the tender for the

Second Container Terminal was floated by the

Respondent No.2, it relied heavily on the 1996

Policy to prevent NSICT from bidding at the said

tender. When NSICT challenged the said decision by

filing a writ petition in the Bombay High Court,

the Respondents successfully urged before the Court

in the said Writ Petition that the 1996 Policy

would prevail over Clause 2.3 of the NSICT

contract. On the other hand, as stated

hereinbefore, in Writ Petition No.1551 of 2009

filed by the appellant, the Respondents took a

contrary stand by contending that Clause 8.31 of

the Licence Agreement would prevail over the 2007

Policy.

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26. Mr. Nariman lastly contended that by allowing

the appellant to raise the technical bid and to

participate in the pre-bid meeting for the

development of the Fourth Container Terminal, the

Respondents had given the appellant cause for

legitimate expectation of being eligible to bid for

and be awarded the contract. Mr. Nariman submitted

that the Respondents had acted in a manner

engineered to preclude the appellant from

participating in the tender for the development of

the Fourth Container Terminal at JNPT.

27. Appearing for the Petitioner, PSA Sical

Terminals Ltd., in Transferred Case Nos.36-37 of

2010, learned Senior Counsel, Ms. Nalini

Chidambaram urged that, although, there was a good

deal of similarity in the issues raised in the

Special Leave Petition filed by APM Terminals B.V.

and the Transferred Cases filed by PSA Sical

Terminals Ltd., the substantial question in the

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Transferred cases was whether a contractual right

could be superseded by a general policy decision

under Section 111 of the Major Port Trusts Act,

1963, without any legislation. In other words, in

the facts of this case, could the Petitioner with

whom a Licence Agreement had been signed on 15th

July, 1998, by the Respondent No.2, Tuticorin Port

Trust, with the previous sanction of the Central

Government under Section 42(3) of the Major Port

Trusts Act, 1963, be prevented from participating

in the tender for additional facilities in the

Tuticorin Port, by virtue of a policy decision

taken in the teeth of the provisions of the Licence

Agreement which vested the Licensee with the right

to participate in future tenders.

28. Ms. Chidambaram urged that after the policy of

liberalization adopted by the Central Government,

the Port Trusts permitted private operators to

operate Container Terminals on a Build, Operate and

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Transfer basis, through a process of tender. PSA

Sical participated in the Tender invited by the

Tuticorin Port Trust in 1997 for operating the

Seventh Berth at Tuticorin, which was the First

Container Terminal and was granted licence to

operate the said Berth for 30 years. During the

subsistence of the guidelines issued by the

Government of India on 28th October, 1996, the

Tuticorin Port Trust entered into a Licence

Agreement with the Petitioner on 15th July, 1998, to

operate the Seventh berth and specifically granting

a right to the Petitioner to participate in any

subsequent bids invited by the said Trust for

operation of additional facilities in the same port

under Clauses 2.3 and 6.2.3 of the Licence

Agreement. For the sake of convenience, the said

two clauses in the Licence Agreement are reproduced

hereinbelow :

“2.3 License Period

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The Licence Period shall be for the period of 30 years (including the time taken for the erection of container handling equipments at the Container Terminal) commencing from the Date of Award of License.

The license will not bar the licensee from participating in any subsequent bids invited by the licensor for development, designing, engineering, constructing, equipping, maintaining and operating any berth or related facility at the port”.

“6.2.3

The Licensor agrees that it shall not commission additional berths for handling containers until the traffic potential does not appear to exceed 90% of the maximum volume 1, 25,000 TEUs. Provided however that the Licensor shall always consider future expansions of the container berths to reasonably match the market demands and allow the Licensee to participate in its operation without any discrimination. This condition shall be applicable only within the port limits of the Licensor as notified under Indian Ports Act, 1908 and Major Port Trusts Act, 1963.”

29. Ms. Chidambaram submitted that it would,

therefore, be evident from the above clauses that

notwithstanding the 1996 guidelines, while

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executing the Licence Agreement, the Tuticorin Port

Trust consciously granted the Petitioner a specific

right to bid in Tenders for future development in

the same port and did not consider that the same

would result in the creation of a private monopoly.

30. It was submitted that at about the same time,

the issue relating to the disqualification of Nhava

Sheva International Container Terminal (NSICT),

which was operating the Container Terminal at the

JNPT and its Associate or interconnected or sister

companies, including P&O Ports, from participating

in the bid for the re-development of the Bulk

Terminal into a Container Terminal at JNPT was

taken up for consideration by the Bombay High

Court. In the said matter, the JNPT took the

stand that since P&O Ports was controlling 48% of

the Container traffic in India and was operating

the existing private Container Terminals at

Jawaharlal Nehru Port Trust and Chennai, a policy

30

decision had been taken by the Port Trusts of the

JNPT to debar an existing operator from bidding for

the next Container Terminal with the object of

avoiding concentration of control in one party and

to increase competition and efficiency in the

public interest. The said proposal was forwarded

to the Central Government which approved the same

vide its letter dated 11th November, 2002.

31. Ms. Chidambaram submitted that since P&O Ports

and its associates were controlling 48% of the

Container business in India, the Bombay High Court

upheld the policy of the Central Government aimed

at preventing monopolisation of the container

business in India by a private party. Ms.

Chidambaram submitted that the appeal filed by P&O

Ports before this Court was also dismissed, with

this Court upholding the comprehensive guidelines

that were issued by the Government of India,

Ministry of Surface Transport on 26th October, 1996.

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Ms. Chidambaram, however, urged that the P&O Ports’

case was decided on facts which were specific to

P&O Ports and could not, therefore, be treated as a

precedent for the Petitioner’s case. However, the

question as to whether a policy decision could

supersede the contractual right was not considered

by the Bombay High Court or by this Court.

32. Ms. Chidambaram submitted that on 31st May,

2005, the Tuticorin Port Trust invited Tenders for

development of Berth No.8 into a Container Terminal

and permitted the Petitioner to participate in the

tender process. The tender process remained

incomplete for over four years and in 2007 a draft

policy was formulated to promote inter port and

intra port competition in which it was stipulated

as follows :-

“Wherever the second terminal is to be set up at the same major port, or first terminal in an adjacent major port e.g. JN Port and Mumbai, Chennai and Ennore Ports, the existing terminal operator would be

32

excluded to ensure competition. If there are a minimum of two private operators in any major port, no restriction would be placed on the existing operators to bid for the subsequent terminal, subject to the condition that a single private operator will not be allowed to operate more than two terminals at the same Major Port including terminals at adjacent major port.”

33. Further to the aforesaid approved policy, the

Government of India wrote to the Tuticorin Port

Trust that it had been decided to debar the

existing operator, the Petitioner herein, who was

operating the first Private Terminal, from the

bidding process for the second Container Terminal

at Tuticorin Port in line with the aforesaid policy

decision. The Petitioner was, therefore, denied

permission from further participation in the tender

for the 8th Berth on account of the aforesaid

policy, notwithstanding the specific provision in

the Licence Agreement permitting the Petitioner to

participate in subsequent Tenders.

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34. The Petitioner challenged the aforesaid

decision denying permission to the Petitioner from

participating in the bid for the 8th Berth in Writ

Petition No.9746 of 2009. The learned Single Judge

dismissed the Writ Petition relying on the decision

in the P&O Ports case. In the Writ Appeal No.996

of 2009 filed by the Petitioner against the

decision of the learned Single Judge of the Madras

High Court, it was submitted on behalf of the Union

of India that the need for having a second Private

Container Terminal had been reassessed and that it

had been decided to scrap the project at the RFP

stage itself. The Petitioner’s writ appeal was,

therefore, dismissed as infructuous.

35. Subsequently, the Union of India issued a new

policy guideline under Section 111 of the Major

Port Trusts Act, 1963, on 2nd August, 2010, and

immediately thereafter on 4th August, 2010, the

Tuticorin Port Trust floated re-tender for the 8th

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Berth and restrained the Petitioner from

participating therein in keeping with the new

policy guidelines. Ms. Chidambaram submitted that

the 2010 Policy provided that if there was one

private Container/Berth Operator in a Port for a

specific cargo, the Operator of that Berth or his

Associates would not be allowed to bid for the next

Terminal/Berth for handling the same cargo in the

same Port. Ms. Chidambaram submitted that the

Petitioner was informed of the said decision of the

Tuticorin Port Trust by its letter dated 21st

August, 2010.

36. Aggrieved by the aforesaid decision to debar

the Petitioner from participating in the bidding

process for the 8th Berth/Container Terminal, the

Petitioner filed Writ Petition Nos.19384 of 2010

and 19851 of 2010, inter alia, for a direction upon

the Respondents to permit the Petitioner to

participate in the bid process for the development

35

of the 8th Berth at Tuticorin Port as a Container

Terminal and for a further direction upon the

authorities of the Tuticorin Port Trust to provide

the Request for Qualification documents and to

quash the decision not to provide the same.

37. In the background of the aforesaid facts, Ms.

Chidambaram contended that a right given to a

contractor could be nullified only by a legislation

specifically indicating that the agreement stood

nullified and not by a general policy decision.

Ms. Chidambaram submitted that while the 1996

Policy categorically indicated that the Port should

ensure that private investment did not result in

the creation of private monopolies, in the Licence

Agreement with the petitioner Clauses 2.3 and 6.2.3

were included giving the Petitioner a right to

participate in the bid for additional Container

Terminals in the same Port.

36

38. Ms. Chidambaram submitted that a draft Policy

was prepared by the Central Government on 10th

February, 2005, to promote inter port and intra

port competition, but the said Policy was never

notified and remained a draft. However, based on

the draft Policy, the Tuticorin Port Trust invited

tenders for the 8th Berth/Container Terminal at

Tuticorin and allowed the Petitioner to participate

in the tender process for about 3 years until it

suddenly took a unilateral decision to debar the

Petitioner from the bidding process on the strength

of a communication received from the Deputy

Secretary, Ministry of Shipping, dated 22nd May,

2009. Ms. Chidambaram submitted that in between

the aforesaid decision by which the Petitioner was

debarred from participating in the bidding for the

8th Berth/Container Terminal at Tuticorin, the Vizag

Port on 5th June, 2008, took a decision to shortlist

the existing BOT Operators while recording that the

same should not be taken as a precedent.

37

39. Ms. Chidambaram submitted that it was

unreasonable on the part of the Respondents to

debar the Petitioner from participating in the 8th

Berth/Container Terminal without formalising a

formal policy with regard to the intention of

promoting competition and avoiding monopoly. It

was also urged that P&O Ports, which had earlier

been debarred from participating in the bidding for

the Second Container Terminal at the JNPT, was

allowed to participate in the bid for the Third

Container Terminal, although the P&O Ports and its

Associates were controlling 48% of the Container

Terminal business in India and by allowing it to

participate in the Third Tender, the Central

Government was, in fact, going back on its desire

to eliminate monopoly by private Operators within

the Indian Ports.

40. Ms. Chidambaram urged that it would be apparent

from the changing policies adopted by the Central

38

Government that they were made to suit a particular

situation and possibly a particular tenderer. It

was submitted that even though the First Respondent

was entitled to change its policies from time to

time, such changes had to be informed by reason,

which was absent in the instant case. Ms.

Chidambaram added that the decision in the P&O

Ports’ case could not be taken to be a precedent as

far as the Petitioner, PSA Sical Terminals Ltd.,

was concerned, since P&O Ports was not a party to

the Licence Agreement at JNP and had no contractual

right to bid for the Second Container Terminal

there. Although, NSICT had such a right in view of

Clause 2.3 of its Licence Agreement to bid for

Container Terminal No.7, it did not assert its

right and the same was not also considered in the

judgment delivered by the High Court.

41. In support of her submissions, Ms. Chidambaram

first referred to the decision of this Court in

39

Delhi Cloth & General Mills Ltd. Vs. Rajasthan

State Electricity Board [(1986) 2 SCC 431], wherein

the High Court had quashed the decision of the

Rajasthan Electricity Board to charge uniform

tariff despite the prevailing concessional rates

granted to a consumer under an agreement, upon

holding that only a legislative amendment could

override a contractual right by specifically

overriding the contractual terms. Ms. Chidambaram

also referred to the decision of this Court in PTC

India Ltd. Vs. Central Electricity Regulatory

Commission [(2010) 4 SCC 603], wherein, in the

context of determination of tariff under the

Electricity Act, 2003, this Court held that the

making of a Regulation under Section 178 of the Act

became necessary because a Regulation made under

Section 178 had the effect of interfering with and

overriding the existing contractual relationship

between the regulated entities. This Court held

that a Regulation under Section 178 is in the

40

nature of subordinate legislation which could even

override the existing contracts, including Power

Purchase Agreements, which had to be aligned with a

Regulation under Section 178 and could not have

been done only on the basis of an order of the

Central Commission.

42. Ms. Chidambaram reiterated that while the

Central Government was entitled to alter its

policies regarding participation of candidates in

the bid process for the Second Container Terminal

at the Tuticorin Port, such alteration would have

to be informed by reason and not on the whims of

the authorities, which is so apparent in the facts

of the present case. Accordingly, in the absence

of a formal policy regarding the participation of

candidates in the bid process for the Second

Container Terminal of the Tuticorin Port Trust and,

in particular, the Petitioner, which was covered by

Clause 2.3 of the Licence Agreement, the Petitioner

41

could not have been barred from participating in

the tender process for being awarded the contract

for the Second Container Terminal at Tuticorin

Port. Ms. Chidambaram submitted that the decision

of the Tuticorin Port Trust Authorities to debar

the Petitioner from participating in the tender

process suffered from the view of Wadnesbury

unreasonableness and was liable to be quashed.

43. The learned Solicitor General, Mr. Gopal

Subramaniam, appearing for the Union of India in

both the matters, submitted that the case of the

appellant, APM Terminals B.V., and that of the

Petitioner, PSA Sical Terminals Ltd., stand on a

similar footing, despite Ms. Chidambaram’s efforts

to prove otherwise. The learned Solicitor General

submitted that the same policy decisions taken by

the Central Government in regard to private

participation in the development and operation of

Container Terminals in the Major Indian Ports

42

governed both the cases, though at different ports.

The learned Solicitor General submitted that on 26th

October, 1996, the Union of India issued guidelines

for all Major Port Trusts regarding private sector

participation in the major ports. In the preamble

of the said guidelines it was indicated that in

order to improve efficiency, productivity and

quality of service, as well as to bring in

competitiveness in port service, it had been

decided to throw open the port sector to private

sector participation. It was, however, made clear

in Clause 4 of the policy statement that ports

would have to ensure that private investment did

not result in the creation of private monopolies

and that private facilities were available to all

users on equal and competitive terms.

44. Pursuant to the said policy decision, the JNPT

decided to convert the Bulk Terminal which had been

commissioned on 26th May, 1989, and had been

43

designed to handle imported fertilizers, fertilizer

raw materials and food grains through mechanized

bulk handling facilities, into a Container Terminal

on Build, Operate and Transfer (BOT) basis on

licence for a period of 30 years. Tenders were

invited and, ultimately, NSICT proved successful

and was granted such licence by the JNPT for the

First Container Terminal. The learned Solicitor

General submitted that at the said point of time,

Clause 2.3 was included in the Licence Agreement

which provided that the Licence Agreement to NSICT

would not prevent it from participating in any

subsequent bid invited by JNPT for operation of

Container Terminals. However, in order to give

effect to its policy decision to prevent private

monopolisation, the JNPT floated another Tender on

28th October, 2002, for construction of a Second

Container Terminal in which Clause 1.3 of the

Tender documents provided that JNPT was desirous of

entrusting the project to another Licensee other

44

than the existing Licensee at JNPT or its

associates and interconnected or sister companies.

The learned Solicitor General submitted that in the

said process, GTI, a Joint Venture Company of APM

Terminals and CONCOR proved to be the successful

bidder.

45. Mr. Subramaniam also indicated that Clause 1.3,

referred to hereinabove, was challenged by NSICT in

Writ Petition No.3083 of 2002, before the Bombay

High Court which dismissed the same and upheld the

decision to exclude NSICT. The said decision of

the Bombay High Court was also upheld by this

Court.

46. The learned Solicitor General submitted that in

the agreement entered into with GTI it was

specifically mentioned in Clause 8.3 that the

Licensee would forego the right to bid for, either

directly or indirectly, the additional facilities

or existing facilities, during the term of the

45

agreement. It was submitted that certain other

conditions were also stipulated in the said clause

which were aimed at preventing private

monopolisation of the facilities of the port.

47. The learned Solicitor General submitted that in

keeping with its aforesaid policy decision, while

allowing the JNPT to invite Global Tenders for a

“Stand Alone” project, the Central Government

reminded JNPT of the Government policy formulated

in October, 1996, to ensure that private investment

did not create private monopolies. It was also

clarified that the policy adopted to exclude the

existing container operator from the tender for the

next container, would continue till such time a

formal policy was finalised and notified. It was

submitted that in the light of such decision, a

Global invitation was issued by JNPT on 2nd March,

2009, for development of the Fourth Container

Terminal at JNPT, and those who had been permitted

46

to participate for the Third Container Berths were

excluded. The learned Solicitor General submitted

that it was only a question of fortuitous

circumstances which resulted in the tender for the

Third Container Terminal remaining unfinalised.

Since GTI had been granted licence for the Second

Container Terminal, it was only in keeping with the

policy decision of the Respondents that the

appellant, APM Terminals B.V., was barred from

participating in the Tender for the Third Container

Terminal and was allowed to participate in the bid

for the Fourth Container Terminal. If the Tender

process for the Third Container Terminal had been

concluded, the present situation would not have

arisen. It is only because of the fact that the

Tender for the Third Container Terminal could not

be concluded that the Tender for the Fourth

Container Terminal was treated to be the Tender for

the Third Container Terminal and as a result, the

appellant stood disqualified.

47

48. The learned Solicitor General submitted that

the Central Government was only following its

decision to ensure healthy competition and to

prevent the concentration of control of the Major

Port Trusts in the hands of the private sector

which could result in unintended discrimination,

since the private operators had been given the

right to give priority berthing to their own ships

and other ships could be serviced on a ‘First come

First served’ basis.

49. Countering the submissions made by Mr. Nariman

and Ms. Chidambaram regarding the doctrine of

legitimate expectation and the right of the

Government to alter its policy, the learned

Solicitor General referred to the decision of this

Court in Punjab Communications Ltd. Vs. Union of

India & Ors. [(1999) 4 SCC 727], wherein, it was

held that a change in policy could defeat a

substantive legitimate expectation if it could be

48

justified on Wednesbury reasonableness. The

learned Solicitor General, therefore, submitted

that the decision taken by the Government to

prevent private monopoly in the handling of port

activities was fully justified and could have an

overriding effect over contractual terms arrived at

by the Government with a private party.

50. On behalf of the JNPT, it was submitted by Mr.

Vikas Singh, learned Senior Advocate, that the

challenge thrown to the order passed by the Bombay

High Court, upholding the decision of JNPT to

exclude the appellant from participating in any

Tender for development of the port facilities for a

period of 30 years from the date of signing of the

agreement, was fully justified. Mr. Vikas Singh

submitted that in view of Clause 8.3.1 of the

Agreement entered into between JNPT and the

appellant, it was not open to the appellant to

resile from the same. Furthermore, global tenders

49

had been invited for the construction of the Fourth

Container facility on 2nd March, 2009 and as per the

said agreement, the appellant remained ineligible

to participate in the said Tender also. Mr. Vikas

Singh submitted that it is no doubt true that

originally the appellant was provided with RFQ

documents, but subsequently it was informed that in

view of Clause 8.3.1 in its Agreement dated 10th

August, 2004, it was not entitled to participate in

the tender process for the Fourth Container

facility.

51. While adopting the submissions made by the

learned Solicitor General, Mr. Vikas Singh also

submitted that since the Tender for the Third

Container facility had not been proceeded with, the

Tender for the Fourth Container Terminal would be

treated to be the Tender for the Third Container

Terminal from which the appellant and its

50

associates stood excluded on account of the

existing policy dated 26th September, 2007.

52. Mr. Vikas Singh submitted that while deciding

the Writ Petition filed by NSICT, neither the

Bombay High Court nor this Court had the benefit of

the subsequent Constitution Bench decision of this

Court in PTC India Limited Vs. Central Electricity

Regulatory Commission [(2010) 4 SCC 603], in which

this court had held that “regulatory intervention

into the existing contracts across-the-board could

have been done only by making Regulations under

Section 178 and not by passing an Order under

Section 79(1)(j) of the 2003 Act”. Mr. Vikas Singh

submitted that the appeal filed by APM Terminals

B.V. was without merit and was liable to be

dismissed.

53. We have carefully considered the submissions

made on behalf of the respective parties and are ad

idem with the learned Solicitor General that the

51

appeals and the Transferred Cases raise the same

issue and the only difference between the two is

that the appellant had not referred to or sought

the benefit of Clause 2.3 of its agreement, which

permitted it to participate in future tenders in

relation to development work within the port area,

while in the petitioner’s case the same formed the

main plank of its claim. In substance, the

question that we are faced with is whether despite

the contractual right vested in the appellant as

well as in the petitioner in the Transferred cases

to participate in future tender processes for

developmental work within the port area, such right

could be taken away and/or curtailed by a

unilateral policy decision of the Central

Government. The further question in the case of

the appellant is whether having been debarred from

participating in the bid for the Third Container

Terminal in JNPT, it could also be excluded from

the bidding process of the Fourth Container

52

Terminal.

54. Both the Bombay High Court as well as this

Court have held that in public interest it was open

to the Government to alter its policies in order to

subserve the common good and that contractual

rights would have to give way to the greater public

interest, which in this case was to prevent the

creation of private monopolies in the management of

port facilities in the Major Ports in the country,

as this could have far-reaching and disastrous

consequences as far as shipping in such ports was

concerned. As already indicated hereinabove, the

policy decision of 26th October, 1996, made

provision for privatisation and also gave private

operators the right to give priority berthing to

their own ships. The said decision had the

potential of substantially disrupting the schedule

of other ships intending to use the port facilities

and could discourage foreign ships from coming to

53

Indian Ports and thereby disturb the very pattern

of the shipping trade in India.

55. While disposing of Writ Petition No.8083 of

2002, filed by P&O Australia Ports Pty. Limited

against the Board of Trustees of JNPT, the Division

Bench of the Bombay High Court examined the

question raised herein at length. It found that

the appellants were handling container terminals in

Karachi and Sri Lanka and also at JNP and Chennai,

thereby exercising control over 48% of the

container traffic in India. The High Court held

that the two existing terminals at JNP and Chennai

are the biggest container terminals in the country

and if the appellant and the petitioner in the

Transferred Cases were permitted to operate the new

container terminals also, they would have virtual

monopoly of the container traffic in the entire

country which would not be in the public interest.

54

56. The High Court also took note of the fact that

certain shipping agents and their associates had

expressed concern regarding the increased tariff

charged by the appellant at its container terminals

at JNP and the possibility of a monopoly being

created by it in the country. The High Court took

note of the fact that port authorities all over the

world had woken up to the possibility of private

monopolies controlling the use of port facilities

in such a manner so as to benefit their own ships

to the detriment of world-wide shipping as a whole.

The High Court took note of the fact that P&O Ports

itself had been excluded from bidding for the Third

Container Terminal in the Port of Melbourne on the

ground that it would give the said operator a

position of dominance which was to be avoided in

the interest of the shipping industry at large.

Two other examples of Port Klang in Malaysia and

Bhabange Port in Thailand, were also taken note of

by the Bombay High Court where different

55

independent operators were appointed to promote

competition.

57. It is precisely for such reason that it had

become necessary for the Central Government to

alter its policy decision regarding entrusting

control of the container terminals in the major

ports of India in a manner so as to eliminate

monopolisation and to encourage competition. The

decision of the High Court was duly endorsed by

observed that the High Court had rightly dismissed

the writ petition.

58. Insofar as the decision taken by the Central

Government to alter its policy regarding the grant

of licence for operating the container terminals in

the Major Ports in India as against the contractual

right embodied in the form of Clause 2.3 in the

agreements executed or entered into between the

Central Government and the appellant and the

56

petitioner in the Transferred Cases, is concerned,

the said controversy is no longer valid in regard

to the appellant, since such point had not been

taken on its behalf in the writ petition before the

Bombay High Court. However, the same has been

taken as a specific point on behalf of the

petitioner in the Transferred Cases as far as the

Tenders for the Second Container Terminal at the

Tuticorin Port are concerned. The said question

has to be considered in the light of Article 14 of

the Constitution and the greater public interest as

against the contractual right of the individual.

59. The provisions of Clause 2.3 in the Agreements

signed between the Tuticorin Port Trust and PSA

Sical cannot be read in isolation of the other

provisions in the agreement which prevented the

Licensee from bidding for other work within the

port area during the period of the licence. In

fact, in our view, the change in policy to prevent

57

private mobilization has been held to be justified

by the Bombay High Court as well as this Court. In

the absence of any arbitrariness in effecting such

change in policy and keeping in mind the larger

public interest, we are of the view, that the

Central Government was within its powers to strike

a balance with regard to the control of the port

facilities so that the same did not come to be

concentrated in the hands of one private group or

consortium which would be in a dominant position to

control not only the rights of tariff, but also the

entry of ships, not belonging to such group, into

the Major Ports and thereby give an undue advantage

to its own ships over other shipping agencies.

60. Normally, the Courts do not interfere with

policy decisions of the Government unless they are

arbitrary or offend any of the provisions of the

Constitution. In the present cases, the adoption

of such a course would, in our view, be apposite.

58

61. It has been the consistent view of this Court

that a change in policy by the Government can have

an overriding effect over private treaties between

the Government and a private party, if the same

was in the general public interest and provided

such change in policy was guided by reason.

Several decisions have been cited by the parties in

this regard in the context of preventing private

manopolisation of port activities to an extent

where such private player would assume a dominant

position which would enable them to control not

only the berthing of ships but the tariff for use

of the port facilities. In both the cases under

consideration, the same set of entrepreneurs are

interested in gaining control over the different

container terminals to the exclusion of other

players. The Central Government in its Ministry of

Shipping and Transport, therefore, took a decision

not to permit licensees who have been granted a

licence for running one of the container terminal

59

berths from participating in the bid process for

the immediate next container terminal, with the

intention of promoting healthy competition for the

benefit of the shipping industry and the ports in

India as well. The decision to alter its policy is

based on sound reasoning and the Central Government

has taken such decision for the benefit of the

consumers as a whole. The changed policy would

also have the effect of preventing cartelisation

and dominant status, which could inevitably affect

the ultimate pricing of consumer goods within the

country. As was held in Shimnit Utsch India

Private Ltd. Vs. West Bengal Transport

Infrastructure Development Corporation Limited and

Ors. [(2010) 6 SCC 303], the Government was

entitled to change its policies with changing

circumstances and only on grounds of change a

policy does not stand vitiated.

60

62. It was further held that Government has the

discretion to adopt a different policy, alter or

change its policy to make it more effective. The

only qualifying condition is that such change in

policy must be free from arbitrariness,

irrationality, bias and malice and must be in

conformity with the principle of Wednesbury

reasonableness. Although, it has been urged by Ms.

Chidambaram that such change in policy could be

effected only by way of legislation, such a

submission, if accepted, could stultify the powers

of the Central Government to alter its policies

with changing circumstances for the benefit of the

public at large. It is not as if the right of a

licensee to bid for a further container terminal

berth has been excluded for the entire period of

the Licence Agreement but in order to ensure proper

competition and participation by all intending

tenderers, the said policy has also been altered to

61

enable such licensees to bid for the next but one

tender as and when invited.

63. However, as far as the appellant is concerned,

it is because of certain fortuitous circumstances

that it came to be excluded from the tender process

for the Fourth Container Terminal. If the tender

process for the Third Container Terminal had been

concluded, the various complications could have

been avoided since under the revised policy, the

appellant was entitled to participate in the

alternate bids. The appellant having been excluded

from one bid on the basis of an existing policy,

cannot be debarred from participating in the next

bid, by taking recourse to a different yardstick.

Such a course of action would be contrary to public

policy. Accordingly, the authorities of the JNPT

shall allow the appellant to continue to

participate in the tender process for the Fourth

Container Terminal and the decision to the contrary

62

conveyed to the appellant on 29th June, 2009, is

quashed.

64. As far as PSA Sical Terminals Ltd. is

concerned, Ms. Chidambaram’s submission as to the

applicability of the doctrine of legitimate

expectation is at best an expectation if there are

cogent grounds to deny the same. The said doctrine

has been explained by this Court in Sethi Auto

Service Station Vs. Delhi Development Authority

[(2009) 1 SCC 180], and it was held that the

appellant in the said case had certain expectations

which were duly considered and favourable

recommendations had also been made, but the final

decision-making authority considered the matter

when the policy had undergone a change and the

cases of the appellants therein did not meet the

new criteria for allotment laid down in the new

policy. It was also observed that the concept of

legitimate expectation has no role to play where

63

State action is based on public policy and in the

public interest, unless the action taken amounted

to an abuse of power.

65. As we have indicated earlier, the Central

Government was within its powers to adopt a policy

to prevent the port facilities from being

concentrated in the hands of one private group or

consortium which could have complete control over

the use of the facilities of the ports to the

detriment of the shipping industry as a whole. The

decision taken by the Tuticorin Port Trust

Authorities to exclude PSA Sical Terminals Ltd.

from bidding for the 8th Berth Container Terminal

cannot, therefore, be said to be arbitrary or

unreasonable so as to warrant interference. In

fact, the position of PSA Sical Terminals Ltd. is

no different from that of A.P.M. Terminals B.V.

which had been excluded from the bid for the Third

Container Terminal at JNPT.

64

66. In the aforesaid circumstances, the appeal

filed by APM Terminals BV is allowed and the

decision of the Bombay High Court is set aside.

However, we are also of the view that the decision

of the Madras High Court does not call for any

interference and the Transfer Cases filed by PSA

Sical Terminals Limited are accordingly dismissed,

but without any order as to costs.

66. All interim orders are vacated.

………………………………………………J. (ALTAMAS KABIR)

………………………………………………J. (CYRIAC JOSEPH)

New Delhi, Dated: 11.05.2011.

65

APM TERMINALS B.V. Vs UNION OF INDIA

APM TERMINALS B.V. Vs UNION OF INDIA