REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.   2406   OF 2018 (Arising out of SLP (C) No.21364 of 2017)

ESSAR BULK TERMINAL LIMITED & ANR.      … APPELLANTS

VERSUS

STATE OF GUJARAT & ORS.      … RESPONDENTS

J U D G M E N T

R.F. NARIMAN, J.

1. Leave granted.

2. The  present  appeal  involves  a  challenge  to  a

notification  dated  18th January,  2016,  issued  under

Section  5  of  the  Indian  Ports  Act,  1908,  by  which  the

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State Government of Gujarat expanded the port limits of

Hazira port.  It is the case of the Appellants before us that

by doing so, the Appellants have been affected because

they  have  spent  huge  monies  on  lands  reclaimed  by

them, which would be directly affected by the expansion

of the aforesaid port limits.   

3. The  brief  facts  necessary  for  determining  the

questions that arise in this appeal are as follows.

In 1994, the parent company of  the Appellants entered

into  an  agreement  with  the  Gujarat  Maritime  Board

(hereinafter  referred to  as “GMB”)  for  use of  a  captive

jetty in Magdalla port.   Pursuant to a Port Policy framed

by the Government of Gujarat in 1995, and a Build, Own,

Operate and Transfer (BOOT) Policy framed for private

sector participation in development of the State’s ports in

1997, the GMB issued a Global Notice for Expression of

Interest  for  Development  of  Green  Field  Site  Port

Facilities, inviting bids in the name of Hazira port project.

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A  consortium  led  by  Shell  Gas  B.V.  was  selected  to

develop, operate and maintain certain facilities on leased

area in the port on a BOOT basis, together with related

LNG facilities.  Pursuant to the acceptance of its bid, Shell

Gas  B.V.  created  two  subsidiaries  in  Gujarat,  namely,

Hazira  Port  Private  Limited  (HPPL)  and  Hazira  LNG

Private  Limited.    A concession  agreement  dated  22nd

April, 2002 was entered into between the GMB, the State

Government and HPPL for the purpose of development,

operation and maintenance of Hazira port by HPPL.   A

notification dated 23rd June, 2004 was issued by the State

Government notifying Hazira port and setting out its limits,

in  exercise of  powers  under  Section 4(2)  of  the Indian

Ports  Act.   This  was  carved  out  of  the  port  limits  of

Magdalla port, which was so reduced as to exclude the

aforesaid Hazira port.   

4. Sometime in the year 2000, the Appellants had set

up a shallow draft captive jetty of 456 meters at the mouth

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of  the  River  Tapi,  which  connected  to  the  sea  at  a

distance of about 7 kilometers.  The initial depth of the

aforesaid draft captive jetty was about 3 to 4 meters.   

5. As many as three Memorandums of Understanding

(MOU)  were  entered  into  between  the  Appellants,  the

GMB and the State Government in the years 2007, 2011

and 2013, inter alia, for development of a RORO terminal

and  development  of  the  water-front  of  3000  meters.

Each of these MOUs was only for a period of 12 months.   

6. On  25th November,  2010,  HPPL  identified  Adani

Hazira  Port  Private  Limited  (Adani)  as  its

sub-concessionaire,  and  entered  into  a  sub-concession

agreement  with  Adani  on the same date.  On 21st July,

2014,  HPPL  requested  the  GMB  for

amendment/extension of its port facilities.   After entering

into an MOU with Adani, dated 27th February, 2015, for

exploring  business  opportunities,  which  fell  through,

HPPL,  by its  letter  dated 14th March,  2015,  revised its

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request for amendment of port facilities, citing the need

for additional back-up area, as a result of which a much

larger area than what was originally asked for was now

requested. This larger area would include lands reclaimed

and/or to be reclaimed by Essar by dumping earth out of

dredging  the  canal  next  to  the  captive  jetty  of  the

Appellants.  This proposal was approved by the GMB by

its resolution dated 19th March, 2015.   Meanwhile, on 7 th

April, 2015, Essar wrote a detailed representation to the

GMB stating its objections to the extension of port limits

on  various  grounds.   On  21st April,  2015,  the  State

Government wrote a letter to the GMB, inter alia, asking it

to examine the aforesaid representation of the Appellants.

A similar  representation dated 29th May, 2015 was also

made by the Appellants to the Chief Principal Secretary of

the State.  By a detailed letter dated 16 th July, 2015, the

GMB  dismissed  all  the  objections  of  the  Appellants.

However,  on  26th August,  2015,  the  State  Government

requested the GMB to reconsider the issue of extension

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of  port  facilities  in  its  forthcoming  board  meeting,  and

send its recommendations to the Government in relation

thereto.   On 28th September, 2015, the GMB passed a

resolution in which it recommended the original proposal

submitted by HPPL on 21st July, 2014.   However, on 5th

December,  2015,  the  Chief  Principal  Secretary  to  the

Chief Minister circulated a note stating that the number of

vessels at the port was expected to increase dramatically

from 30-40 to 70-80, and that the port limits need to be

extended  to  accommodate  customs  formalities,  safety

etc.  In view thereof, it was necessary to make adequate

facilities for  anchorage of  all  the said vessels and that,

therefore,  the  GMB’s  resolution  of  19th March,  2015

should be strictly implemented.  On 11th December, 2015,

the State Government then wrote to the GMB stating that

the port facilities will  be extended in terms of the GMB

resolution dated 19th March,  2015.   Following this, the

requisite notification dated 18th January, 2016, which has

been impugned by the Appellants in a writ petition before

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the Gujarat High Court, was then issued under Section 5

of the Indian Ports Act.   

7. Shri Mihir Joshi, learned senior counsel appearing

on  behalf  of  the  Appellants,  has  argued  that  the  first

proposal alone, which was sent on 21st July, 2014, ought

to  have  been  accepted  by  the  GMB.   The  second

proposal  for  the  increased area  would  directly  impinge

upon the land that was reclaimed or to be reclaimed by

the Appellants, after spending huge monies for the same.

The  learned  senior  counsel  specifically  stated  that  the

approval  for  the  second  proposal  was  done  in  great

haste, within a matter of four days.   He went on to add

that  the State  Government  had,  by its  letters  dated 1st

June, 2013, recommended to the Ministry of Environment

to  grant  CRZ  clearance  to  Essar  for  the  proposed

expansion of port facilities, which included additional 334

hectares of land.  It was his case that the said Ministry, on

6th May, 2014, granted the aforesaid clearance, despite

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which  the expanded port  limits  would  now eat  into  the

aforesaid area, as only an area of 140 hectares out of 195

hectares, which was reclaimed by the Appellants, could

be  used  by  the  Appellants.    He  argued  that  various

assurances were given and MOUs were entered into with

the Appellants, on the basis of which huge investments

were made, and at the very least the doctrine of legitimate

expectation  would  be  attracted.  He  attacked  the

notification stating that it was ultra vires Section 5 of the

Indian Ports Act,  which required public interest alone to

be seen.   Indirectly, the extension of the limits of Hazira

port  would  grant  HPPL an  extended  port  area  without

bidding,  which  would  be  contrary  to  the  Gujarat

Infrastructure Development Act, 1999.  According to him,

the overlapping of area with Essar was only in the second

proposal,  which was wholly  arbitrarily  recommended by

the GMB initially approving the second proposal of 2015,

and thereafter correctly approving only the first proposal

of 2014.  The GMB’s resolution of 28th September, 2015

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was  the  correct  decision,  which  could  not  have  been

arbitrarily interfered with by the Chief Principal Secretary

of the Chief Minister, on the basis of which the impugned

notification has been issued.  

8. On  the  other  hand,  Shri  Harish  Salve,  learned

senior  counsel  appearing  on  behalf  of  the  State  of

Gujarat, painstakingly took us through the Port Policy of

1995 and the BOOT Policy of 1997.   According to the

learned  senior  counsel,  since  13  berths  were  to  be

constructed,  out  of  which  5  berths  have  already  been

constructed,  a  total  of  1011  hectares  was  already

allocated for port related activities to HPPL.  This would

be  clear  from  a  reading  of  the  detailed  project  report

(DPR) of 2010, and this being the case, the expansion of

port limits by the impugned notification was well within the

originally conceived area of 1011 hectares.  He referred to

and  relied  upon  affidavits  submitted  by  the  State

Government as well as the GMB before the High Court, to

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argue  that  Essar’s  demands  for  reclaimed  land  had

nothing to do with the expansion of the limits of Hazira

port.   They operated in two completely different spheres.

He  further  went  on  to  state  that  no  permission  under

Section 35 of the Gujarat Maritime Board Act, 1981 has

been given to reclaim any land, which was a condition

precedent to Essar’s demands for further reclaimed land.

He also pointed out  that,  being a captive  port,  Essar’s

production was much less than what was projected and,

in  fact,  only 30% of  the cargo that  it  was supposed to

handle  was  being  handled.    According  to  the  learned

senior counsel, the objections to the expansion of Hazira

port’s  limits  are  completely  misconceived,  inasmuch as

what  the Appellants  really  sought  was  for  their  captive

port  to  become  a  commercial  port  by  bypassing  the

provisions of the Gujarat Infrastructure Development Act.

In  any  case,  the  Appellants’  captive  jetty  was  grossly

underutilised  and  the  Appellants  demands  for  grant  of

reclaimed land has nothing to do with HPPL demanding

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an alteration to the limits of Hazria Port, so as to cater to

the increased traffic of a commercial port open to all.

9. Shri  Tushar  Mehta,  learned  Additional  Solicitor

General  appearing on behalf  of  the GMB,  adopted the

arguments of  Shri  Salve.   In addition,  he defended the

GMB’s  approval  dated  19th March,  2015,  stating  that

despite the fact that the said approval came within four

days of the HPPL letter dated 14th March, 2015, this paled

into  insignificance  as  nothing  followed  from  this.  Also,

according to the learned ASG, on an examination of the

official records, he found nothing in support of the GMB’s

turn-around  on  28th September,  2015,  which  accepted

only  the  first  and  not  the  second  proposal  of  HPPL.

According  to  him,  finally  what  was  done  by  the  State

Government was in public interest and for good reason.  

10. Shri Kapil Sibal, learned senior counsel appearing

on  behalf  of  HPPL  and  Adani,  painstakingly  took  us

through various letters  written  by the Appellants  to  the

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GMB and permissions given.  According to the learned

senior  counsel,  it  was  clear  that  from a reading of  the

initial proposals of 2005 and 2006, and the later proposals

of  the  Appellants  that  their  real  aim  was  to  conduct

commercial operations on their captive jetty, which would

circumvent the need for a global tender as required by the

Gujarat Infrastructure Development Act.  In essence, he

also submitted that as the Appellants could claim no right

or expectation of any sort and as the present petition was

not a public interest litigation, the writ petition should have

been dismissed at the threshold as the Appellants could

show no right or expectation of any kind.  Dr. Singhvi and

Shri Harin P. Raval broadly supported the contentions of

Shri Sibal.

11. Before dealing with the arguments of counsel, it is

important to set out some of the important provisions of

the relevant Acts before us.  Sections 3(9), 4 and 5 of the

Indian Ports Act read as under:

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“3(9). “Government”, as respects major ports, for all purposes, and, as respects other ports for the purposes of making rules under clause (p) of section 6(1) and of the appointment and control of port health officers under section 17, means the Central Government, and save as aforesaid, means the State Government.  

4. Power to extend or withdraw the Act or certain portions thereof  

(1)  Government  may,  by  notification  in  the Official Gazette.-  

(a) extend this Act to any port in which this Act is not in force or to any part of any navigable river or channel which leads to a port and in which this Act is not in force;  

(b) specially extend the provisions of section 31  or  section  32  to  any  port  to  which  they have not been so extended;  

(c) withdraw this Act or section 31 or section 32 from any part thereof in which it is for the time being in force.  

(2) A notification under clause (a) or clause (b) of subsection (1) shall define the limits of the area  to  which  it  refers.   (3) Limits defined under sub-section (2) may include  any  piers,  jetties,  landing-places, wharves, quays, docks and other works made on  behalf  of  the  public  for  convenience  of traffic,  for  safety  of  vessels  or  for  the improvement,  maintenance  or  good government  of  the  port  and  its  approaches whether  within  or  without  high-water-mark,

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and, subject to any rights of private property therein, any portion of the shore or bank within fifty yards of higher-water-mark.  

(4)  In  sub-section  (3)  the  expression “high-water-mark”  means  the  highest  point reached by ordinary tides at any season of the year.  

5. Alteration of limits of ports  

(1) The Government may, subject to any rights of private property, alter the limits of any port in which this Act is in force.  

Explanation.- For the removal of doubts, it is hereby declared that the power conferred on the Government by this sub-section includes the  power  to  alter  the  limits  of  any  port  by uniting with that port any other port or any part of any other port.  

(2) When the Government alters the limits of a port under sub-section (1), it shall declare or describe, by notification in the Official Gazette, and by such other means, if any, as it thinks fit, the precise extend of such limits.

Section 35(1) of the Gujarat Maritime Board Act reads as

under :

“35.  (1)  No  person  shall  make,  erect  or  fix within the limits of a port or port approaches, any wharf, dock, quay, stage, jetty, pier, place of  anchorage,  erection  or  mooring  or undertake any reclamation of foreshore within the  said  limits  except  with  the  previous

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permission in writing of the Board and subject to such conditions, if any, as the Board may specify.

(2) If  any person makes, erects or fixes any wharf,  dock, quay, stage, jetty, pier, place of anchorage, erection or mooring or undertakes reclamation  of  foreshore  in  contravention  of sub-section  (1),  the  Board  may,  by  notice require such person to remove it within such time as may be specified in the notice and if the  person  fails  so  to  remove  it,  the  Board may cause it to be removed at the expense of that person.”

Further, Sections 8, 9 and 10 of the Gujarat Infrastructure

Development Act read as under:

“Section 8 - Selection of a person

(1) A concession agreement for undertaking a project may be entered into with a person who is  selected  through  a  competitive  public bidding as provided in section 9 or by inviting comparative bids as provided in section 10 or by  direct  negotiation  as  provided  in section 10A.

(2)  The  matters  relating  to  competitive bidding,  inviting  comparative  bids  and direct negotiation shall  be  such  as  may  be prescribed.

Section  9  -  Selection  of  person  by competitive public bidding

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On the acceptance of the recommendation of the  Board  made  under  sub-section  (2)  of section  5,  the  State  Government,  the Government agency or, as the case may be, the specified Government agency shall select a  developer  for  the  project  through competitive  public  bidding in  the manner  as may be prescribed.

Section 10 - Inviting comparative bids.

(1) Where a proposal for undertaking a project and  a  proposed  concession  agreement prepared  by  a  person  are  submitted  to  the State Government, the Government agency or a specified Government agency, it may,  

(a)  consider  the  proposal  and  the  proposed concession  agreement  from  all  aspects (including  technical  and  financial)  and  if necessary,  modify  the  same  in  consultation with  the  person  who  has  submitted  the proposal  and  the  proposed  concession agreement; and  

(b)  submit  the  proposal  and  the  proposed concession agreement to the Board, if - (i) the cost of the project exceeds the limit provided by regulations under sub-section (1) of section 5, and  

(ii)  the  undertaking  of  the  project  does  not require  financial  assistance  from  the  State Government,  the Government agency or the specified Government agency.

(2) On acceptance of the recommendation of the Board  made  under sub-section  (2)  of section 5,  the  State  Government,  the

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Government agency or, as the case may be, the specified Government agency shall adopt the  proposal  as  the  basis  for  selecting  a person with whom concession agreement for undertaking the project may be entered into, and  for  selecting  such  person,  the  State Government,  the Government  agency or, as the case may be,  the specified Government agency shall  follow  the  procedure  of competitive  public  bidding  prescribed  under section 9.

(3)  Where a person is  selected by following the  procedure  of  the  competitive  public bidding (hereinafter  referred  to  as  “the selected person”), the proposal of the selected person shall  be  compared  with  the  proposal which is earlier submitted by a person to the State  Government,  the  Government  agency or,  as  the  case  may  be,  the  specified Government  agency  under sub-section (1) (hereinafter  referred  to  as  “the  earlier proposer”).

(4) Where the proposal of the earlier proposer is  not  preferable  to  the  proposal  of  the selected person, the earlier proposer shall be given  an  opportunity  to  make his  proposal competitive  with  that  of  the selected person within a period of thirty days from the date on which he has been given the opportunity and where the earlier proposer fails to do so within the  said  period,  the  State  Government,  the Government agency or, as the case may be, the specified Government agency may enter into a contract with the selected person.

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(5)  (a)  Where  a  concession  agreement  has not  been  entered  into  with  the  earlier proposer,  the  cost  of  preparation  of  the proposal  and  the  concession  agreement incurred  by him shall  be  reimbursed  by  the State  Government,  the  Government  agency or,  as  the  case  may  be,  the  specified Government  agency  and  on  such reimbursement,  the  proposal  and  the concession  agreement submitted  by  the earlier  proposer shall  be  the  property  of  the State  Government,  the  Government  agency or,  as  the  case  may  be,  the  specified Government agency.

(b)  The  cost  of  preparation  of  the  proposal and  the  concession  agreement shall  be determined  in  such  manner  as  may  be prescribed.”

12. It is also necessary to set out some parts of the Port

Policy of 1995 and the BOOT Policy of 1997.

“Gujarat Port Policy

Gujarat  envisages  an  integrated  port development strategy, consisting of creation of port  facilities,  industrialisation  and development  of  infrastructure  facilities  like roads  and  railways  in  the  hinterland.  It  is estimated  that  around  3  billion  dollars  (Rs. 10,000  crores)  would  be  required  to  create new  port  facilities  along  with  necessary infrastructure in the coming 5 years. In view of the fact that ships of large sizes are used in the transportation, for the economies of scale

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in  international  trade,  ports  would  be developed  with  direct  berthing  facilities  and speedy mechanical handling facilities, so as to reduce waiting period of the ships and saving in the cargo expenses. To expedite creation of port  facilities  by 2000 AD,  it  is  proposed to have the participation of private enterprise in the development of port infrastructure.

The following ports are identified for exclusive investment by private sector:  

1. Simar Power port  

2. Mithiwirdi Steel and Automobile port  

3. Dholera General Cargo port  

4. Hazira Industrial port  

5. Vansi-Borsi Petroleum & liquid chemical        port  

6. Maroli Industrial port  

These ports will be privatised through a global tender bid. Gujarat  Maritime Board will  do a preliminary techno-economic feasibility report of  all  these  five  locations  except  Dholera, through a global  bid to  facilitate prospective bidders.  Dholera,  being an ancient  port  and privatisation bids were invited in the past, no techno-economic  feasibility  will  be  done  for this location. Dholera port will be the first port to  be  opened  up  for  privatisation  by  global tendering.  For  remaining locations based on the preliminary techno-economic study, global tenders  will  be  invited  for  privatisation. General guidelines are given below.

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These port locations are to be given on BOMT (Built, Operate, Maintain and Transfer) basis. The investment in infrastructure projects like ports  being  capital  intensive,  with  higher gestation period compared to other sectors of investment,  Government  of  Gujarat  is  very particular  that  the port  projects  taken up by private  entrepreneurs  should  be  a  profitable proposition  to  them.  The  viability  of  port project  depends  upon  the  location,  the maritime conditions, scale of investment and the  kind  of  cargo  to  be  handled.  The  port project has to be assured at a reasonable rate of return after accounting for capital recovery and interest repayment. Hence, it is essential that each port project is evaluated based on an investment analysis; consisting of a capital cost,  revenue  receipts,  revenue  expenditure and capital recovery. Gujarat Maritime Board will study the financing pattern adopted by the World Bank and the Asian Development Bank and  other  Financial  Institutions  to  evolve  a comprehensive package.  

Only the wharfage charges/waterfront charges will be as per the schedule decided by Gujarat Maritime Board. The promoters will be free to charge  any  other  service  charges  with  the prior approval of the Gujarat Maritime Board. After BOMT period, the ownership of the port and its assets will  get transferred to Gujarat Maritime Board and they will examine to give it further on lease basis to the same promoter. The terms and conditions will  be finalised at that  time.  The  general  guidelines  for investment  analysis  and  capital  recovery  for

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the port  projects  to  determine BOMT period will be announced within 2 months.  

CAPTIVE JETTIES FOR INDUSTRIES  

To  ensure  that  the  new  port  projects  are financially  viable,  permissions  for  captive jetties  would  be  given  only  in  exceptional cases, looking to the quantum of investment and  the  need  for  specialised  facilities.  All industrial units would be encouraged to make use of new port facilities being set up.  

To take care of the increasing traffic until the completion  of  the  new  port  projects,  it  is decided to make use of  the existing captive jetties  already  constructed  or  under construction,  for  which  the  permission  has already been given, to be utilized for specific commercial cargos with the prior approval of the Gujarat Maritime Board.  

(1)  This  facility  would  be  available  for  a reasonable  period  till  new  ports  become operative.  GMB will  review the policy  taking into  account  the  progress  made in  the  new ports.  

(2) Gujarat Maritime Board would be entitled to collect full wharfage charges on the cargos handled, which are not captive to the industrial units.  

Looking to the huge amount of cargo handled in a short period, captive Single Point Mooring (SPM) facilities of industries located in Gujarat will  be  charged  at  concessional  rate  of

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wharfage  for  their  captive  consumption. Nevertheless, for captive cargo for industries located  outside  Gujarat  and  non-captive commercial  and  industrial  cargo,  will  be charged  full  wharfage  by  Gujarat  Maritime Board.

Gujarat BOOT Policy

“Developer”- The word “Developer” has been used in this document to convey the various roles  played  by  private  parties  at  different stages of the development of the port.

(III)  OWNERSHIP RIGHTS OF DIFFERENT PARTIES

1. Ownership rights of the Government

The Government is vested with sovereign  rights  as  owner, overseer  and  conservator  of the  waterfront  and  licensor  to the Contract.

2.  Ownership Rights  and responsibilities  of the Developer

The  Ownership  rights  of  the Developer would include:

• The  right  to  mortgage, hypothecate  or  to  execute such  covenants  as  may  be required  for  effectively vesting a charge on the port assets in favour of a lender to the project.

• The  right  to  sell,  convey  or transfer to another entity, the right  title  and  interest  and concession  vested  in  the Developer, on the request of a  lender  to  the  project,

22

subject  to  contractual documents.  The  new Developer will be selected by the lender in consultation with the  GMB,  and  if  necessary, the  terms  and  conditions  of the  concession  Agreement may be renegotiated.

xxx xxx xxx

6.  Expansion  of facilities  and Competition between ports

(a) Expansion of facilities

The  developers  would  be encouraged to add capacity over and  above  the  capacity contracted  in  the  concession agreement. Such expansions will be  eligible  for  incentives  by the Government,  such  as  land acquisition,  extension  of  royalty holidays etc.

At the time of the signing of the Concession  Agreement,  the Developer  will  submit,  and  get approved  by  GMB,  a  broad perspective  plan  for  the development  of  the  port  in  the next fifteen to twenty years. The Government  will  not  place restrictions on any expansion and further  development  of  the  port which  is  within  the  envisaged perspective  plan,  subject  to statutory clearances. Expansions outside  the  scope  of  this  plan would be subject to the approval

23

of the GMB.

(b) Competition between ports

The  Government  would encourage  competition  between ports.  The  following,  however, would be ensured:  

• The  development  of  the  ten ports  would  be  appropriately phased over a period.  

• Permission  to  set  up  captive jetties  would  not  be  granted, save  in  exceptional circumstances.

13. At  this  point,  it  is  important  to  refer  to  the

correspondence between  the  Appellants  and  the  GMB.

By their  letters  dated 11th July, 2005 and 13th October,

2006, the Appellants stated that as Essar Steel was in the

process of doubling its steel production capacity and that

it was proposed to handle cargo around 25 MMT, it would

require a captive jetty of 550 meters.  This would be in

addition to the jetty which was already constructed of 592

meters plus 456 meters. In addition to the aforesaid, the

Appellants sought permission to deepen the navigational

24

channel  upto  8  meters  depth,  so  as  to  enable  direct

berthing  of  deep  draught  vessels  up  to  75,000  dead

weight tonnage (DWT).  For deepening the channel, the

dredged  material  would  have  to  be  dumped  and  the

Appellants sought permission, vide their letter dated 2nd

March, 2007, to dump the dredged material on an area of

about 252 hectares on the north side of the mangroves.

In  addition to  the 550 meters  jetty,  the Appellants  also

requested the GMB to allot 38 hectares of back-up area.

By  a  letter  dated  14th June,  2007,  the  GMB  granted

in-principle  approval  for  allotment  of  400  meters

waterfront,  with  back-up  area,  so as to  create  a  direct

berthing port, in which the channel could be dredged, so

as to obtain a draft of 8 meters. Apart from stating that

Essar  will  have  to  obtain  all  required  permissions  and

clearances, four conditions are of importance in this letter

and are set out hereinbelow:

“3. The new channel to be created by Essar will  be  common  user  channel  and  will  be allowed to be used by all other users. Essar

25

shall  not  be entitled to recover  any charges from other users, if they use the new channel.

7. The ownership of reclaimed land shall vest with  the  Government  of  Gujarat/Gujarat Maritime Board.

8. Essar shall not claim for reimbursement of any expenditure incurred for this reclamation.  

10. Essar has to reclaim 319.86 hectares area of  inter  tidal/mud  flats  except  67  hectares allotted to M/s HPPL and the portion of area in front of 67 hectares towards sea.”  

14. Vide  their  letter  dated  29th August,  2007,  the

Appellants demanded that 1100 meters, in addition to the

550  meters  waterfront  that  was  applied  for  earlier,  be

given.   The  Appellants  also  sought  permission  for

allotment  of  252  hectares  of  land  to  be  reclaimed  as

back-up area.  By their letter dated 1st October, 2012, the

GMB granted in-principle approval for allotment of 1100

meters waterfront to the Appellants.  

15. By  their  letter  dated  15th October,  2008,  the

Appellants asked the GMB to allow them to dredge the

channel  from  8  meters  depth  to  10  meters  depth  to

26

accommodate capesize vessels of 105,000 DWT.  Since

material  dredged  from  the  channel  would  have  to  be

dumped, an additional area of 316 hectares, towards the

south of the mangroves, to dump the material and reclaim

the said area was applied for.  No such permission was

granted by the GMB to go from a depth of 8 meters to 10

meters  or  to  reclaim  any  area  to  the  south  of  the

mangroves.  Shri  Mihir  Joshi,  however,  pointed  out  a

completion certificate dated 11th February, 2010, in which

it was mentioned that the width and depth of the channel

is being increased to 300 meters and 10 meters below

CD respectively in Phase-2.  However, this would clearly

not amount to permission for the same, as all that was

stated in the completion certificate was a reference to a

deep water  berth of  8 meters depth below CD,  the 10

meters depth being something which may be increased in

future.  

27

16. Despite this, what is clear from the record is that the

Appellants appear to have actually dredged the channel

to a depth of 14 meters and appear to have reclaimed an

area of 164 hectares plus 170 hectares to the south of the

mangroves, without any permission at all.  When this was

pointed out to Shri Mihir Joshi, the answer given was that

when permission is  granted under Section 35(1)  of  the

Gujarat  Maritime  Board  Act,  a  letter  granting  such

permission specifically says that  it  is  permission that  is

granted under Section 35(1) and for this purpose, a letter

dated 2nd August, 2008 was referred to.  According to him,

therefore, the letter dated 14th June, 2007, which referred

only to an NOC for reclamation, could not be given the

status of permission under Section 35(1).  According to

the learned counsel, therefore, if Section 35(1) were to be

read with Section 35(2), it would be clear that permission

for reclamation would only be necessary if a private asset

were  to  be  created  in  the  hands  of  a  private  person.

However, it is clear that the asset to be created belonged

28

only to the Government of Gujarat and it was for the GMB

to grant permission to the Appellants to use the same.

We are afraid that it is difficult for us to accept this line of

argument.  Section 35(1) is couched in negative language

and  does  not  refer  to  private  rights  being  created.

Section  35(2)  cannot  be  read  so  as  to  throw  light  on

Section 35(1), as under Section 35(2), the GMB is only

given a discretionary power to require a person, who has

acted in  contravention of  Section  35(1),  to  remove the

illegal  erection.   The  wide  language  of  Section  35(1)

cannot be whittled down by Section 35(2) in the manner

argued by Shri Joshi, as the GMB may or may not utilise

the discretionary power granted to it under Section 35(2).

The plain language of Section 35(1) cannot be curtailed

by reading by inference, into sub-section (2), the fact that

the GMB may, by notice, require a person to remove an

erection,  only when it  has been made without  previous

permission, so as to create a private asset in the hands of

a private person.   The wide language of  Section 35(1)

29

makes it clear that any reclamation within the limits of the

GMB  cannot  be  carried  out  except  with  the  previous

permission in writing of the GMB. It is clear, therefore, that

dredging to a depth of below 8 meters and reclamation of

any area to the south of the mangroves was done by the

Appellants  in  the  teeth  of  Section  35(1)  of  the Gujarat

Maritime Board Act.  

17. Mr. Sibal laid great stress on the letter dated 15 th

November, 2012 to show that, in point of fact, what the

Appellants  were  really  angling  for  was  to  conduct

commercial operations beyond the captive requirements

of  the  Essar  Steel  plant  at  Hazira.   This  letter,  while

asking for an addition of 3700 meters in addition to the

existing 1100 meters waterfront, also went on to speak of

developing a 700 meters berth, along with the GMB, for

handling  commercial  cargo.  Apart  from  this,  Essar

planned to build a world class container terminal and a

dry  dock,  which  would  serve  the  shipping  industry

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generally.  It  also  proposed  to  reclaim  a  further  334

hectares  land  on  the  southern  side  with  the  additional

dredged material.  A perusal of this letter would leave no

doubt about the fact that despite Essar Steel’s production

being  at  much  less  than  what  was  projected,  the

Appellants’ continued demands would show that the real

motive was to go beyond a captive jetty and to develop a

commercial port which, as we have seen, cannot be done

without  a global  tender under the Gujarat  Infrastructure

Development Act.

18. As  stated  hereinabove,  as  many  as  three  MOUs

were executed between the Appellants, the GMB and the

State  Government,  which  MOUs  were  valid  only  for  a

period of 12 months and were stated not to have granted

any  right  to  the  Appellants,  who  would  incur  all  the

expenditure for the same.   This being the case, it is a

little difficult to appreciate Shri Joshi’s contention that any

legitimate  expectation  could  be  based  on  any  of  the

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aforesaid expired MOUs.   The High Court is correct in its

conclusion that no such expectation could possibly have

arisen out of the aforesaid MOUs or the correspondence

between the Appellants and the GMB referred to.   

19. It is also important to note from the correspondence

between the Appellants and the GMB, that the Appellants

were  clearly  told  that  the  land  to  be  reclaimed  by  the

Appellants would not only belong to the Government of

Gujarat, but also that the GMB could utilize the aforesaid

land  for  any  purpose.   What  seems  to  emerge  on  a

reading  of  the  letters  between  the  parties  is  that  the

Appellants wished to dredge the canal, at their own cost,

which  was  next  to  their  captive  jetty,  for  their  own

purposes,  for  which  they  obtained  the  necessary

permission.    However,  since  dumping  of  earth,  which

would  emerge as  a  consequence of  dredging,  into  the

open sea would  be extremely expensive,  it  was  stated

that  instead  this  earth  could  be  dumped  to  create

32

reclaimed land next to the captive jetty, which would then

benefit both the Appellants and the GMB.  In point of fact,

140 hectares out of 195 hectares that is reclaimed by the

Appellants  is  allocated  to  the  Appellants  for  their  own

purposes, the balance to be given as and when a jetty of

1100  meters  plus  3700  meters  of  waterfront  is

constructed.   The argument that huge amounts had been

spent to reclaim land is wholly fallacious - huge amounts

were spent to dredge a canal which was permitted as the

Appellants  alone  were  to  bear  the  cost,  and  as  an

increased draft would benefit all, as the canal was open to

all  to  use.  Therefore,  any  plea  as  to  a  legitimate

expectation  of  reclaimed  land  being  allocated  for  the

Appellants’  own  use,  thanks  to  large  amounts  being

spent,  is  contrary  to  the  correspondence  by  the

Appellants themselves.   

20. In point of fact, it is important at this stage to advert

to the GMB’s detailed reply, dated 16th July, 2015, to the

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State  Government,  in  which  it  examined  the

representation  made  by  the  Appellants  dated  7th April,

2015 and rejected the same.  This letter expressly states

that  it  deals  with  the  representation  of  Essar,  with  the

comments of the GMB on the side of the representation of

Essar.  The following extracts from the aforesaid letter are

of great importance and are set out hereinbelow:

No. Representation  of Essar  Ports  Ltd.  to Hon’ble  CM

Comments

1. EBTL  through  an investment  of  more than Rs. 2000 Cr. has been  operating  deep draft  550m jetty  since 2010 and caters to the Essar’s  Steel  plant cargo  requirement. The   steel  plant   is expected to ramp  up its  production  in  line with  its  10  MMTPA capacity   and  would require  augmented marine  facility   and back  up  area  for handling  its  increased cargo requirements.

The  Proposed  port  limit excludes  the  area  of 550m jetty  and  back-up area  behind  the  jetty. Hence,  it  has  no  effect. The  present  capacity  of the  steel  plant  is  10 MMTPA  whereas  the actual steel production at the  plant  in  the  year 2014-15  is  only  3.15 MMTPA. No firm/definite plans  for  augmentation in  steel  production  are submitted.

34

2. GMB had  given  NOC for reclamation of 319 ha.  in  June  2007, pursuant  to  which Essar  started  the process  for development  of  back up  land  for  its expansion.  The allotment  of  the reclaimed  land  to Essar  was  also decided in the meeting held  under  the chairmanship  of  the then  Chief  Secretary in  November  2009. EBTL has developed a channel  of  more  than 7  km  length  with capacity  to  handle  up to  11m  draft  vessel and has plans to take it up to 14m draft and have  waterfront  of more than 5 km.

GMB  had  granted  NOC to  dump  dredged material  for  310  Ha.  of land in the mudflat area shown  in  the  map attached as Annexure 3. However,  as  per  the DILR  report,  the  actual reclaimed  area  is  only approx.  195  Ha.  Out  of this  area  approx.   98 hectares  of  reclaimed land is excluded from the proposed  expansion  of port  limit.  Further,  a specific  condition  was mentioned in the NOC of GMB that the ownership of  the  reclaimed  land shall  vest  with GMB/GOG. Further  it  is  also  be noted that NOC granted to EBTL for reclamation is also beneficial  to  the company.  In  case  of non-issuance  of  NOC for dumping the dredged material  in  the  mudflat area  (very  close  to dredged  area)  the company  had  to  dump the  dredged  material  in the  mid  sea  (very  far) which would have been expensive.

3. In  order  to  develop The  proposal  for

35

commercial  port facilities,  EBTL submitted  a  proposal to GMB in  2008 and signed  MOU  with GMB for expansion by 3.7  km.  waterfront along  with  the associated  back  up land  during  vibrant Gujarat  2013  in  the presence  of  Shri. Narendra  Modi- Hon’ble Prime Minister of  India.  Pursuant  to this  Essar  has invested  substantial amount  in  terms  of time  and  money  for development  of  the same.  After  the necessary recommendation  from the  Government  of Gujarat  EBTL  has received  the environment clearance of 6th May 2014.  EBTL has  made  investment of  more  than  Rs. 15000 Cr. till  date  for development  of waterfront  and  land reclamation  (233  Ha) and is  in  the  process of reclaiming further in order  to  undertake

development  of commercial  ports facilities  was  received. But,  the  permission granted to Essar is only for  captive  purpose  and thus,  without  performing bidding process, there is no  policy  of  GOG  to convert  captive  port facilities  into  a commercial  port terminal.  Further  HPPL has already rights under concession agreement to develop  common commercial port facilities cannot  be  accepted. GMC or GOG has never granted such permission for  commercial  port facilities development by Essar.

36

their  planned expansion  while  their application  remains pending.

6 The  proposed expansion  of  port limits  not  only constrains  the existing  steel  plant operations  but,  also infringe  on  EBTL expansion  as explained  above, thereby  jeopardizing the  proposed  port facilities  for  industry. Any  step  which restricts  EBTL’s development  plans would  deprive  a  port based  industry  of  its growth  and  realizing its full potential.

The future plans of EBTL are  for  commercial  port operation.  There  is  no policy to convert captive port  facilities  into commercial port facilities as  there  is  no  bidding process involved. Hence, the  same  may  not  be acceptable.

37

8. Essar plant at Hazira is  the  largest integrated  steel  plant facility  in  India  at  a single  location  and any  impact  on  the operation of the same would  be  lead  to substantial loss to the exchequer.  Essar group  has  invested more than INR 44500 Cr.  in  the  Hazira complex  in  its  steel, power  and  ports business  group infrastructure.

Essar  has  following captive  port  facilities operational.

N o.

Jetty Capacity (MMTPA)

1. 456  m lightera ge Main jetty

5

2. 592  m lightera ge  (1st expansi on)

5

3. 550  m deep water berth (2nd expansi on)

15

Tota l

1598 m 25

Further,  GOG  has approved  further  1100m waterfront for deep water jetty  (3rd expansion)  for which  construction permission  is  yet  to  be accorded  by  GMB. Adding  this  1100m waterfront,  total jetty/wharf of 2698m will be utilized by EBTL.

38

Against  the  capacity  of 25  MMTPA,  EBTL  has handled  cargo  as  per Annexure  4.  It  is  seen that during the last year 2014-15  Essar  has handled  total  10  million tons of cargo against the existing  capacity  of  25 MMTPA.

Further,  the  company has  gradually  reduced usages of the main jetty of  456m,  the  cost  of construction has already been  set  off  and  full wharfage  is  payable. EBTL  has  reduced  the cargo  handling  at  the main  jetty  and  it  has diverted  to  550m  deep water jetty where the set off  of  the  cost  is available  and  thus,  the concessional  wharfage rate is payable.

In  furtherance  to  the  above,  the  following

points may please be seen:

(1)- (3) xxx xxx xxx

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(4) ESSAR has submitted details vide letter dated 7th April,  2015 of  various proposals to GMB  for  development  of  waterfront  and back-up  area  from time  to  time.  GMB as  a regulatory authority scrutinizes every proposal and submits to Govt. for necessary approval. It  is to be noted that GMB granted NOC for dumping  dredge material  in  mudflat  area  at Magdalla  to  ESSAR  vide  letter  dated  14th

June, 2007 (Annexure 5) with a condition that the  ownership  of  reclaimed  land  shall  vest with GMB/GOG (Condition No.7) and ESSAR shall  not  claim  reimbursement  for  any expenditure,  incurred  for  this  reclamation (Condition No 8).”  

21. A  perusal  of  the  objections  of  Essar  and  the

comments offered by the GMB would show that, first and

foremost, actual steel production at the plant is way below

capacity, with no firm or definite plans for augmentation.

In fact, in the GMB’s affidavit filed in the High Court, it is

stated that only 30% of the total capacity of cargo sought

to be projected by the Appellants from 2011 onwards was,

in fact,  being handled by the Appellants.    Also,  it  was

noted that the reclaimed land will be of the ownership of

either  the  Government  or  the  GMB,  and,  that  it  is

40

beneficial  to  the  company,  as  otherwise  the  dredged

material would have to be dumped in the sea which would

have been very expensive.  However, Shri Joshi referred

us to a statement,  made in  a rejoinder  affidavit  by the

Appellants in the High Court, to the effect that the cost of

dumping dredged material  to  reclaim land was at  least

twice  as  much  as  the  cost  of  dumping  the  dredged

material  in  the  sea.   This  bald  averment  made  in  an

affidavit,  without  any  supporting  material,  cannot  be

accepted at its face value. The answer to objection 3 is

again of great importance, in that the GMB was alive to

the  fact  that  Essar  is  really  attempting  to  convert  its

captive jetty into a commercial port, without entering into

any bidding process, contrary to the Gujarat Infrastructure

Development Act.  Further, in answer to objection 8, the

GMB states that  the jetty is 1598 meters long with the

further 1100 meters which the Government has approved

for  a  capacity  of  25 MMTPA,  against  which  Essar  has

41

handled only 10 million metric tonnes of cargo in the year

2014-15.

22. At  this  point  it  is  also  important  to  note  that  the

GMB’s affidavit  filed  in  the High Court  also specifically

states  that  the  reclaiming  of  334  hectares  of  land  by

dredging  the  channel  to  14  meters’  depth  was  never

approved by the GMB.  Thus, the argument that the area

of  170  hectares  and  164  hectares  of  reclaimed  land,

which  the  altered  limits  of  the  port  has  been  said  to

impinge upon, has no legs to stand, in view of the fact

that no prior permission has been taken under Section 35

of the Gujarat Maritime Board Act to add reclaimed land

to the main land, as has been stated hereinabove.  Added

to this, the area of 195 hectares that has been reclaimed

is  allocated  to  the  Appellants  for  their  own  use  –  140

hectares immediately and the balance only after approval

and construction of the further elongated jetty.  It is clear

that even if the Appellants’ plea were to be accepted, the

42

alteration of the limits of the port cannot possibly be said

to affect the Appellants’ rights qua reclaimed land, which

has been reclaimed illegally i.e. without prior permission

under  the Gujarat  Maritime Board Act.   Thus,  the CRZ

clearance  by  the  Ministry  of  Environment  and  Forests

dated 6th May, 2014 for  reclamation of  334 hectares of

land does not further the Appellants’ case in any way.

23. We now come to the Appellants’ argument of  the

haste that  is  shown by the GMB in recommending the

second proposal for altered limits.   True, the GMB did act

within 4 days of the said proposal, but this fact, without

anything more, to demonstrate mala fides or lack of public

interest, cannot possibly hold water.  It is also to be noted

that Shri Salve’s plea, that 13 berths would require 1011

hectares of adjacent land and that much less land than

1011  hectares  has  been  allocated  for  the  use  of  a

commercial port, has to be accepted.    

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24. The further  plea,  that  the forest  land to the north

consisting of 300 hectares, having now been acquired in

October, 2016, would enure to the benefit of HPPL, would

also not  take the Appellants’ case any further, as even

these  300  hectares  would  be  subsumed  within  the

requirement of 1011 hectares, as has been pointed out, in

the DPR of 2010.

25. There can be no doubt that Shri  Joshi’s plea that

the power of the Government to alter the limits of any port

under Section 5(1) of the Indian Ports Act must be done

only in public interest is correct.  However, it has not been

shown  to  us  as  to  how  the  impugned  notification  is

contrary to public interest.  The affidavits filed in the High

Court, by the State Government and the GMB, show that

a commercial port’s limits were altered in public interest

because  the  number  of  vessels  at  Hazira  port  were

expected to increase dramatically and it  was,  therefore,

necessary  to  make  adequate  facilities  not  only  for

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anchorage  of  such  vessels,  but  also  for  reasons  of

customs formalities, port conversion, general security etc.

We are not, therefore, satisfied that the notification is ultra

vires Section 5 of the Indian Ports Act.  We have already

seen that the Appellants have no ‘right’ to private property

in view of the fact that the ownership of the captive jetty

that has been constructed and the ownership of reclaimed

land is with the GMB/State Government.  For this reason

also, the notification is intra vires as the alteration in the

limits  of  Hazira  Port  does  not  affect  any  ‘right’  of  the

Appellants to private property.  

26. In  conclusion,  for  the reasons given by us in  the

present judgment, the appeal deserves to be dismissed.

The appeal is dismissed with no order as to costs.

……………………………J. (R.F. Nariman)

……………………………J. (Navin Sinha)

New Delhi; February 22, 2018.   

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