Gujarat High Court
Adam Budha Chaki vs Union Of India & 4....Opponent(S) on 23 March, 2015
Author: R.P.Dholaria
Bench: Vijay Manohar Sahai, R.P.Dholaria
C/WPPIL/31/2015 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
WRIT PETITION (PIL) NO. 31 of 2015
FOR APPROVAL AND SIGNATURE:
HONOURABLE THE ACTING CHIEF JUSTICE
MR. VIJAY MANOHAR SAHAI
and
HONOURABLE MR.JUSTICE R.P.DHOLARIA
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1 Whether Reporters of Local Papers may be allowed to see
the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law as
to the interpretation of the Constitution of India or any order
made thereunder ?
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ADAM BUDHA CHAKI....Applicant(s)
Versus
UNION OF INDIA & 4....Opponent(s)
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Appearance:
MR EKRAMA QURESHI, ADVOCATE for the Applicant
MR KAMAL B TRIVEDI, ADVOCATE GENERAL WITH MR PR NANAVATI,
ADVOCATE for the Respondent No. 3
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CORAM: HONOURABLE THE ACTING CHIEF JUSTICE MR.
VIJAY MANOHAR SAHAI
and
HONOURABLE MR.JUSTICE R.P.DHOLARIA
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Date : 23/03/2015
ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE R.P.DHOLARIA)
1. By way of this writ petition in the nature of Public Interest Litigation, the petitioner has sought the following reliefs:
"A] Be pleased to issue a writ of mandamus or writ in the nature of mandamus or any other appropriate order, direction, in the public interest declaring and directing that the respondent no.2 has acted against the Port Policy 1995, Boot Policy 1997, in gross defiance of national interest, breached the public trust and acted against the principle of public exchequer and accountability, hence the decision of Government of Gujarat of selling its entire share to the respondent no.5 is illegal, unconstitutional, in defiance of the concession agreement dated 17th February, 2001 and in violation of Hon'ble Court's order dated 21.04.05 passed in Company Petition No. 15 of 2004 and as such requires to be quashed and set aside.
B] That the respondent no.2 may be directed to resume its stake and share in Mundra Port [now known as APSEZ] and take an effective equity control in consonance with the original Port and BOOT Policy, in national interest. C] Be pleased to further quash and set aside the act on the part of the respondents in not constituting the independent Port Regulatory Authority as contemplated under clause [IV][B][4] of Annexure-B of the resolution dated 29.07.1997 [Annexure-B (Colly)] and direct the respondents to constitute the same immediately to safeguard the public and national interest.
D] During the pendency and final disposal of this petition, the respondent no.5 may be restrained from creating any foreign interest or parting with management and administration and diluting, transferring any interest or equity stake with any foreign company in Mundra Port [now known as APSEZ].
2. The facts giving rise to the present petition may be summed up thus:
i. In December, 1995, the Government of Gujarat announced Port Page 2 of 27 C/WPPIL/31/2015 JUDGMENT Policy, 1995, wherein, it envisaged development of Mundra Port by Gujarat Maritime Board along with consortium of Govt. Public Sector Undertakings and/or private sector companies.
ii. It appears that the Government of Gujarat, on 29th July, 1997 passed a resolution announcing the package of Build-Own-Operate-
Transfer ["BOOT"] Policy for development of ten green field ports, six of them as fully private and four as joint sector ports.
iii. It further appears that respondent no.2 in principle approved development of Mundra Port jointly with government [Gujarat Maritime Board having 26% shares, private sector having 25% shares and public/financiers having 49% shares]. In para-5 of the said letter of the Government, it was provided that after completion of Phase I, the share of Govt. [GMB-26%] will be first offered to the private sector.
iv. On 22nd January, 1998, Article of Agreement was executed between the Gujarat Ports Infrastructure and Development Company Limited and Adani Port Limited. Article 4 of the said Articles of Agreement provides for structure of the Company. Article 4.3 thereof provides that subject to the provisions contained therein, the parties of the First and Second Part shall subscribe and participate in the capital of the Company at all times in proportion, that is, Party of first Part having 26% and Party of Second Part having 25% and General Page 3 of 27 C/WPPIL/31/2015 JUDGMENT and other institutions/parties and all permissible investments under the relevant laws like SEBI etc. with 49%. Article 7 of the said agreement provides for sale of shares. It provides that subject to the provisions of disinvestment in the Company by the Party of the First Part, contained in Article 10, in the event of any of the Promoters are desirous to dispose of any part of their share holdings, they shall first offer the said shares to the other promoter. It further provides that in short, first right of refusal with respect to these shares be first offered to the party other than the party who is desirous of disposing of any part of their share holding in the company. It is further agreed by and between the parties that in such event, respective representation on the Board of the new company shall be reduced proportionately with the shares sold. Clause-8 of the said agreement provides for mutual understanding on certain matters. Clause 10 provides for disinvestment of Equity by GPIDCL in the Company.
v. On 13.8.1998, a Shareholders' Agreement was executed between the Gujarat Ports Infrastructure and Development Company Limited ["GPIDCL"] and Adani Port Limited and Gujarat Adani Port Limited.
vi. It further appears that on 8th September, 2000, the respondent no.2 resolved to dilute the stake of GPIDCL to 11% from 26%.
vii. On 17th February, 2001, a Concession Agreement was executed Page 4 of 27 C/WPPIL/31/2015 JUDGMENT between the Gujarat Maritime Board, Gujarat Adani Port Limited and the Government of Gujarat. Clause-5 thereof provides for Regulatory Framework - provisions for Regulation. The said Regulatory Framework provides that Government of Gujarat may establish a regulatory framework in the future and constitute a Regulatory Authority for the port sector in Gujarat in accordance with BOOT Principles. Clause-7.2 thereof provides for composition of shareholders. Sub-clause [a] of Clause 7.2 provides that during the development Phase 1 the individual share holding of key promoters shall not be less than proposed in the Shareholders Agreement.
viii. On 2nd January, 2002, Amendment Agreement to the Shareholders' Agreement came to be executed between Gujarat Ports Infrastructure and Development Company Limited and Adani Port Limited and Gujarat Adani Port Limited.
ix. On 15th October, 2003, M/s. Gujarat Adani Port Limited filed [GAPL] Company Application No. 511 of 2003 before this Court, seeking direction to call meeting of equity shareholders of GAPL for approval of Scheme of Amalgamation of Adani Port Limited [APL] with Gujarat Adani Port Limited. It appears that learned Single Judge of this Court, vide order dated 17th October, 2003 granted the said application for calling for meeting of equity shareholders of GAPL.
x. It further appears that Company Petition No. 15 of 2004 was
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filed, wherein, the learned Single Judge of this Court, vide order dated 21st April, 2005 sanctioned the scheme of amalgamation of APL and GAPL. By way of such scheme, the Govt. stake in the port management was to reduce from 11% to 8.55%.
xi. Government of Gujarat, on 24th March, 2006 decided to disinvest its stake of 1.54 crore shares [8.55% equity stake] in GAPL at Rs. 110.60 per share. Accordingly, GPIDCL transferred those shares to the Govt. of Gujarat which realized Rs. 197.97 on the disinvestment. Consequently, the Shareholders Agreement dated 13.8.1998 executed between GPIDCL, APL and GAPL stood concluded.
xii. It appears that Report of Comptroller and Auditor General of India on Economic Sector for the year ended 31st March, 2013 was laid on the table of the State Legislative Assembly on 25.7.2014.
3. The main grievance of the present petitioner is that while developing the aforesaid port, the Government of Gujarat failed to implement the Port Policy framed in December, 1995. It is also alleged that slowly and gradually the government has made disinvestment from the Adani Port Limited and now it has come down to 0% investment in the aforesaid company. The next grievance of the petitioner is as regards non-constitution of independent Port Regulatory Authority as was envisaged by the government in its resolution as well as in the agreements. The petitioner has raised Page 6 of 27 C/WPPIL/31/2015 JUDGMENT several grievances that there are certain violations in implementation and development of the aforesaid Port.
4. We have heard Mr. Ekrama Qureshi, learned counsel for the petitioner and Mr. Kamal B. Trivedi, learned Advocate General assisted by Mr. P.R. Nanavati, learned counsel for respondent no.3.
5. Having heard the learned counsel for the respective parties and having gone through the materials available on record, so far as reliefs paras [A] and [B] of the petition are concerned, they relate to slow and gradual disinvestment made by the government from Adani Port Limited, Mundra and ultimately, it has been brought to 0% investment, which is the prime concern of the present petitioner. The petitioner has raised the issue that if such course is permitted to be adopted, then, it will run contrary to the Port Policy of the year 1995 as well as the Boot Policy of 1997 and even it will be violative of the judgment delivered by learned Single Judge of this Court in Company Petition No. 15 of 2004. Consequently, the petitioner seeks to set aside the decision of disinvestment made by the State Government.
6. In order to appreciate the aforesaid contention raised by the learned counsel for the petitioner, we have gone through the Port Policy envisaged in December, 1995 as well as the Boot Policy, 1997 which are annexed as Annexure:A and B respectively to the writ petition.
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7. Before dealing with the contentions raised by learned counsel for the respective parties, certain clauses of Port Policy as well as Boot Policy, which are relevant are required to be considered.
8. Clause-3 of the Port Policy, which provides for development of new port sites, the relevant part thereof is extracted as under:-
"3. DEVELOPMENT OF NEW PORT SITES Gujarat Maritime Board has identified 10 green field sites for development as direct berthing deep water ports. These sites have been identified taking into consideration the availability of draft, general marine conditions, minimum burden on the existing infrastructure, proximity to the hinterland cargo and promotion of regional development concept. Looking to the location and generation of cargo, each port has been earmarked for specific commodities to facilitate the movement of cargo through the existing infrastructure and also to ensure the financial viability of each project. xxx xxx xxx"
9. Clauses 4 and 5 of Guiding Principles for Boot Package [Boot Policy] as also other clauses which are relevant, are extracted hereunder for ready reference:
"4. MAINTAIN GOVERNMENT ROLE ONLY IN APPROPRIATE AREAS:
Since the ports are of strategic importance to the State, the Government has to ensure that the key interests in security, defence, environment and economic development are safeguarded. However, as a principle, the role of Government will be limited to areas where it is protected by establishing a suitable regulatory framework.Page 8 of 27
C/WPPIL/31/2015 JUDGMENT
5. ENSURING THAT GOVERNMENT'S FINANCIAL LIABILITIES ARE KEPT AT A MINIMUM:
The Ports are to be developed as commercially viable entities capable of operating without Government support. Given the commercial nature of port operations, their recourse to the Government would be kept to minimum and responsibility of financing the port will rest with the developer.
Government will grant licence/concession to private developer to build, own, operate and manage port facilities for a specific period. The Government will permit the developer to create a mortgage/hypothecation of real estate as a security for lenders to the project. This permission will be limited to BOOT period, after which the assets will be transferred back to the Government. The ownership of the land and waterfront will always with the Government."
xxx xxx xxx [II] THE BCIILD STAGE OF THE BOOT PACKAGE: 1 xxx xxx xxx 2 xxx xxx xxx 3 Terms of lease for land:
Land will be allotted on lease to the Developer for a term concurrent with the term of the concession agreement. The Lease rental will be charged for the land by way of a structured lease rental payment mechanism. The determination of lease rentals would be based on the cost of acquisition of land incurred by the Government.
xxx xxx xxx [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.
xxx xxx xxx [B] COMMERCIAL ISSUES: 1. xxx xxx xxx
2. Royalty Payments to the Government: A "Waterfront Royalty" will be set by and payable to the Government by the port. This will be charged on a per-ton-per-type-of-cargo basis.Page 9 of 27
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3. xxx xxx xxx
4. Regulation: The Government will provide for the institution of an independent Port Regulatory Authority in regard to all aspects concerning the working of a port and the sector as a whole.
The mandate for the Regulatory Authority will include environmental protection, safety, relief & rehabilitation, issues of security & national interest, protection of port user interests, and any other matter that is of public interest.
[V] TRANSFER OF ASSETS
1. Duration of the concession period: The duration of the BOOT Package would be 30 years. The Boot period would commence after three years or the period mentioned in the document by the developer whichever is earlier. The zero date will be date of signing the agreement between GMB and the Developer.
A BOOT period greater than 30 years could be considered for projects which entail sizable capital investment on account of site specific marine conditions and backup infrastructure such as road/rail linkages."
10. From the aforesaid Boot Policy, it is apparent that the government was to provide for institution of an independent Port Regulatory Authority, the Boot Package was for 30 years, property was under the lease with the private stakeholders and the sovereign right for the leased property was with the government.
11. In furtherance of the Boot Policy, for development of Mundra Port, in joint venture with Gujarat Maritime Board and Adani Group, a decision was taken by the government on 24th September, 1997, for development of Mundra Port in joint venture of Gujarat Maritime Board and Adani Group. Translated version of paras 1 and 5 thereof is reproduced here as under:
Page 10 of 27C/WPPIL/31/2015 JUDGMENT "1. Let us develop this port as a joint venture, in which, there will be 26% share contribution of Govt. Venture [Gujarat Maritime Board] and 25% share contribution of adventurers of private sector.
xxx xxx xxx
5. After the first stage of ports is being completed, the share contribution of the Govt. will be offered first to adventurers of private sector for sale.
12. The aforesaid Policies as well as the government resolution dated 24th September, 1997 make it clear that for constitution, development and making operational the Mundra Port, the aforesaid Port Policy was envisaged in consortium of private and govt.
participation. The intention of the government clearly reveals from the beginning that after making the Mundra Port operational as per the boot policy, the entire administration of the aforesaid port shall vest in the private developer till the boot policy gets over. In order to make the development of the said Port operational, Gujarat Port Infrastructure and Development Company Ltd was created and the aforesaid company, at the initial stage, invested to the extent of 25% and thereafter, slowly and gradually it reduced its stake to 11%, then to 8.55% and finally to 0%. When the stake was reduced from 11% to 8.55%, as stated above, Company Petition No. 15 of 2004 came to be filed before learned Single Judge of this Court challenging the aforesaid amalgamation, wherein, the order as stated above was passed by learned Single Judge of this Court. The learned Single Judge of this Court, after considering rival submissions, vide order Page 11 of 27 C/WPPIL/31/2015 JUDGMENT dated 21st April, 2005 observed in paras 9 to 15 thereof as under:-
"9. Despite the aforesaid objections filed before this Court against the sanction of the Scheme, it appears that the issue has been sorted out subsequently between the Adani Group and the State Government and as a result thereof, an affidavit is filed before this Court duly signed by the Deputy Secretary (Ports & Fisheries), Vice Chairman and Chief Executive Officer of GMB and the Managing Director of GPIDCL on the one hand and Chairman, Adani Port Ltd. & Managing Director, Gujarat Adani Port Ltd. on the other hand dated 11.04.2005. An undertaking is also filed by Shri Gautam S. Adani, Chairman, Adani Port Ltd. & Managing Director, Gujarat Adani Port Ltd. on 11.04.2005.
10. Mr. S.N. Shelat, learned Advocate General appearing for the State Government has submitted that GPIDCL is holding 11% shares of Gujarat Adani Ports Ltd.. The proposed merger will reduce the shareholding to 8.55%. The Managing Director of GAPL and Chairman of APL and its associate companies has addressed a letter to the Chairman - GPIDCL dated 22.01.2004 for negotiation with Government and thereafter after further negotiations with the State Government and on behalf of GAPL, APL and its associate companies, Shri Gautam Adani has suggested that the Company is prepared to either purchase the entire shareholding of GPIDCL or in the alternative the Company is also willing to offer shares to GPIDCL to continue to hold and maintain 11% equity stake in GAPL. Mr. Shelat has further submitted that during the course of negotiations, it was agreed between the parties that the State Government would appoint Valuer to determine the value of shares of GAPL and on such determination, Government of Gujarat through GPIDCL would exercise its option either to sell the shareholding or to purchase the shares to enable GPIDCL to hold and maintain 11% stake in GAPL at the value determined by the Valuer or to retain its shareholding of 8.55% as the case may be. Mr. Shelat has further submitted that the State Government has agreed to such proposal of the Company and thereupon the Company agreeing and undertaking to this Court to abide by the said agreement, the objections lodged by GPIDCL, GMB and the State of Gujarat shall not be pressed. The parties thereafter agreed that GPIDCL, GMB and the State of Gujarat do not press their objections and grant their consent to the proposed merger. The Government of Gujarat will appoint a Valuer for the determination of the value of the shares of GAPL. On such Valuer being appointed by the Government of Gujarat, the parties would approach the said Valuer and shall place their Page 12 of 27 C/WPPIL/31/2015 JUDGMENT respective stand before them. The Valuer shall also be requested to evaluate the shares before and after the merger. The valuation so determined shall be binding on both the parties. The parties have also agreed and undertaken to accept the valuation of the shares so determined by the Valuer as per the balance sheet as on 31.03.2004. The valuation shall be determined as per the Shareholders Agreement or any other method to be adopted by the Valuer. On such determination of the value of the Shares by the said Valuer, the Government of Gujarat through GPIDCL has right to exercise its option either to sell the shareholdings of GAPL or to buy further shares of GAPL at the value so determined by the Valuer to enable GPIDCL to maintain 11% equity stake in GAPL or to maintain its holding at 8.55% as the case may be. The Board of GPIDCL and GAPL have passed the resolution to the above arrangement and copies of the said Resolution are placed on record. On the exercise of option by the Government through GPIDCL, GAPL shall take all necessary and timely actions for facilitating the implementation and execution of the option so exercised by the GPIDCL and the same shall be as per the Shareholders agreement. Both the parties have agreed and undertaken before this Court that they shall abide by the terms of settlement arrived at between them.
11. Mr. Shelat has also referred to the undertaking filed by Shri Gautam Adani wherein it is stated that the Board of Directors of GAPL and APL have passed resolution on 11.04.2005 authorising him to file an undertaking before this Court in the proceedings initiated for the merger of Adani Port Limited with Gujarat Adani Port Ltd. It is further stated that GAPL, APL and its associate Companies agreed and undertook that GAPL, APL and its associate Companies shall abide by the Agreement arrived at between GPIDCL, GMB and the State Government with the GAPL, APL and its associate Companies in the aforesaid petitions. He has further undertaken that the valuation fixed by the Valuer, appointed by the Government of Gujarat for valuation of the shares of the Gujarat Adani Port Limited based on the audited Balance Sheet as at 31.03.2004 approved in the annual general meeting held on 22.11.2004 shall be binding on GAPL and APL and its associate Companies.GAPL, APL and its associate Companies shall take all necessary and timely actions to facilitate the implementation and execution of the option so exercised by the Government of Gujarat through GPIDCL either to sell the shareholdings in GAPL or to purchase shares of GAPL to maintain 11% stake in GAPL at the valuation so determined. In the event of the option being exercised for the sale of shares of GAPL, the said sale can be in favour of any of their nominees.
Page 13 of 27C/WPPIL/31/2015 JUDGMENT GAPL, APL and its associate Companies will undertake to take all necessary stepstofulfillall obligations/undertakings given by GAPL/APL and its associate Companies in the past and they also agree and undertake to transfer to GPIDCL zero percent debt instrument or preference shares or any other instrument as may be agreed and approved by the Government of Gujarat, for the amount calculated @ 11% or equivalent Indian Rupees of US $ 60 Million brought into GAPL.
12. In view of the aforesaid undertaking and the agreement arrived at between the parties, Mr. Shelat has submitted that the objections raised by the State Government do not survive and the Scheme may be sanctioned by this Court.
13. Though the agreement was arrived at by and between the State Government and the Adani Group, initially the objections were raised on the ground that the Scheme was contrary to the public policy and hence, the Court has asked Mr. S.N. Soparkar, learned Senior Counsel appearing for the petitioners that the Court cannot ignore these objections simply because an agreement was arrived at between the parties and hence, he has to satisfy the Court that the Scheme is not contrary to the public policy. In this regard, he has invitedthe Court's attention to the affidavit-in-rejoinder filed before this Court to both the affidavits-in-reply filed on behalf of the State Government. He has submitted that GAPL was incorporated for the purpose of development of a multipurpose commercial port. However, APL continues to do its business around the same premises. The activities of APL and GAPL are not only complementary, in a given case they may overlap. If a full fledged commercial port is to be developed, all the complementary activities should be carried out under one umbrella and if a part of the activities are being carried out by another entity, there would always be confusion and/or chances of inappropriate revenue sharing. The Shareholders' Agreement itself envisages that at some point of time GAPL may go in for a public issue. With this end in view the Adani Group made informal inquiries with the persons associated with the stock market to explore the possibility of making a Public Issue of GAPL. At that time the Adani Group was advised that the split entity of APL & GAPL is likely to create unnecessary suspicion in the minds of investors and hence, considering the synergy of activities carried out by two entities, according to the advice received by Adani Group, it is in the fitness of things to merge the two entities. Even the lenders of the respective entities at times during the personal discussion showed reservation about split of the port activities into two different companies i.e. GAPL & APL. Even from the Page 14 of 27 C/WPPIL/31/2015 JUDGMENT point of view of shareholders such split entities would create an unsatisfying position inasmuch as the true worth of one entity being dependant upon the worth of the other entity would always be a subject matter of doubt. It was with this end in view that the decision was taken to merge the two entities. He has further submitted that even bonafides of the petitioners as to the decision of merger cannot be doubted as APL is substantially owned by Adani Group. The Government of Gujarat, directly or indirectly does not hold a single share in APL. The profits thereof would, therefore, be enjoyed by Adani Group. As opposed to that GPIDCL holds 11% shares of GAPL and by merging APL into GAPL not only GPIDCL would be entitled to share the profits which, till now, are earned by APL and enjoyed only by Adani Group, it would also increase the value of its investments. He has further submitted that there is no substance in the argument that by reducing the percentage of interest/shareholding of Government of Gujarat in GAPL (and thereby in Mundra Port) below 10%, there is going to be serious problem and that the same would be contrary to public interest. This argument is developed on an underlying assumption that Government of Gujarat must necessarily retain more than 10% in a Port project. There is no policy decision or Govt. Resolution which mandates that government must necessarily have not less than 10% interest in a Port Project. As a matter of fact one Gujarat Pipavav Ports Ltd. a private entity exclusively owns a port. At one point of time, Government of Gujarat held 51% shares of the said Company and 49% shares were held by private parties. Later on, Government of Gujarat has disinvested entire holdings in the said Company and as on today, Government of Gujarat has no stake whatsoever in the said Company. In other words, Pipavav Port works as a private entity. If this is true for Pipavav, the same is equally true for Mundra Port and there is no logic for Government of Gujarat to argue that fall in its percentage holding below 10% is going to have disastrous results or it is against the Government Policy.
14. With regard to the objection raised by the State Government about the non-utilisation of funds realised as a result of transfer of the entire equity holding in Adani Container Terminal for investment for infrastructure of GAPL and instead of that the money being expended towards the purchase of financial instruments, viz. equity shares of APL in order to route the funds into the hands of APL shareholders, and thereby caused an erosion of funds in the hands of GAPL, Mr. Soparkar has submitted that the said objection has no bearing whatsoever to the present proceedings. The same pertain to one Adani Container Terminal Limited and transfer of shareholding in the said Company by Adani Group in favour of Page 15 of 27 C/WPPIL/31/2015 JUDGMENT a third party. In any case, the same has been done in accordance with law and after obtaining the approval of the Government and other necessary authorities. GAPL acquired shares of APL because it was a good investment decision. As a matter of fact, GAPL has, with the help of the funds so received, liquidated its substantial liabilities. The fact of investment made by GAPL into APL was duly discussed in the meting of the Board of Directors of GAPL held on 08.07.2003 which meeting was chaired by nominee of Government of Gujarat and also had an observer from the investor UTI. Even in the undertaking filed by Shri Gautam Adani, Chairman, Adani Port Ltd. & Managing Director, Gujarat Adani Port Ltd. has undertaken and assured that GAPL, APL and its associate Companies will undertake to take all necessary steps to fulfill all obligations/undertakings given by GAPL/APL and its associate Companies in the past and they also agree and undertake to transfer to GPIDCL zero percent debt instrument or preference shares or any other instrument as may be agreed and approved by the Government of Gujarat, for the amount calculated @ 11% or equivalent Indian Rupees of US $ 60 Million brought into GAPL. He has, therefore, submitted that in view of the above factual position as well as this undertaking, the objection raised by the State Government is not sustainable.
14. After having heard Mr. S.N. Soparkar, learned Senior Counsel with learned advocate Mrs. Swati Soparkar for the petitioners, Mr. S.N. Shelat, learned Advocate General with learned advocate Ms. Shruti D. Trivedi for the State Government and GMB and after having considered the report of the Official Liquidator as well as the report of the Regional Director and after having gone through the petitions, submissions, objections and their replies and after having considered the affidavit jointly filed by the respective parties as well as the undertaking given by Shri Gautam Adani, the Court is of the view that the amalgamation would be in the interest of the Companies and their members as well as Creditors.
15. Even after raising various objections against the Scheme, the State Government has settled the disputes with the Adani Group in terms of the joint affidavit filed before this Court. The core issue of objection is the reduction of the holding of GPIDCL in GAPL from 11% to 8.55% after the proposed merger of APL with GAPL. Now, this has been amicably resolved by and between the parties. Not only this, they have already started action on it. The Government of Gujarat has appointed Shri V.K. Shrunglu, former Comptroller and Auditor General, Government Page 16 of 27 C/WPPIL/31/2015 JUDGMENT of India, as the Valuer to determine the value of shares of Gujarat Adani Port Ltd., as on date 31.03.2004 and all parties shall be given an opportunity, through their authorised representatives to represent their respective case and furnish evidence for the determination of the value of the shares of GAPL. The Court is also informed that the Valuer will be requested to give a reasoned decision on the subject within a period of one month after all the parties file their submissions before him.
15. In view of this subsequent development, the objections raised by the State Government pale into insignificance. The Court is also convinced that the proposed Scheme of merger of APL with GAPL is in no way contrary to the public policy. It is true that the Mundra Port Project was initially started as joint sector project under the Port Policy and as per the shareholders agreement dated 13.08.1998, the originally contemplated equity participation of the State Government through GPIDCL was 26%. However, the State Government itself vide its letter dated 08.09.2000, decided to reduce the equity stake of GPIDCL in GAPL from 26% to 11%. Now, even after proposed merger of APL with GAPL, if the equity participation of GPIDCL may be reduced from 11% to 8.55%, the same may not be treated as the violative of public policy as there is no such governmental policy pointed out to the Court that the government must necessarily have not less than 10%, interest in Port Project. On the contrary, Gujarat Pipavav Ports Ltd., the State Government held 51% shares of the said Company which were, later on disinvested and as on today, the State Government has no stake whatsoever in the said Company. The proposed Scheme is, therefore, not against the public policy. Even otherwise, simply because, the present Scheme is sanctioned by this Court, the other group companies will not be absolved from their liabilities if they have committed any breach of their undertakings or assurances and the concerned authorities are not restrained from taking any action against them in accordance with law."
13. Thereafter, the Government of Gujarat, on 1st June, 2006 came up with a resolution for the purpose of disinvestment of equity shareholding [stakes] in M/s. Gujarat Adani Port Limited [GAPL] held by the State Government. The said resolution is extracted Page 17 of 27 C/WPPIL/31/2015 JUDGMENT hereunder:-
"xxx xxx xxx
Preamble:
Gujarat Adani Port Ltd.,[GAPL] was incorporated on 26.05.1998 as a Joint Sector Company by the Government of Gujarat through GPIDCL and Adani Port Ltd [APL]. Thereafter, the Shareholders Agreement was signed on 13.8.1998 between GPIDCL and APL and GAPL. Initially, when the Shareholders Agreement was signed, it was envisaged that the shares of GPIDCL in GAPL would be 26%. However, due to certain factors like providing of collateral guarantee of GAPL etc, it was then decided to limit the equity contribution in GAPL up to 11%. Accordingly, as per the Government order dated 8.9.2000, the equity contribution was reduced to 11%. Subsequently, the Shareholders Agreement was amended on 2.1.2002. Presently, Government holds 1,54,00,000 equity shares of Rs. 10/- each in GAPL. However, the absolute investment in GAPL remained at Rs. 15.40 crores. In view of the merger of APL into GAPL, it was under consideration of the Government whether too raise the equity in GAPL to maintain 11% or to disinvest the stake of 8.55%. In view of the objections filed by GPIDCL/GMB/GOG before the Hon'ble Court for various reasons, a joint affidavit was filed in the Hon'ble High Court by both the parties i.e., GPIDCL/GMB/GOG on one side and Adani Group on the other side and as agreed by all the concerned parties, Shri V.K. Shunglu-Former CAG of India was appointed as the Valuer by the Government of Gujarat. The Valuer, after hearing all the concerned parties, has submitted the final report on 15.11.2005. The decision of the Valuer is mentioned below:
A] The value of each share of Gujarat Adani Port Ltd., as on 31.3.2004 is determined at Rs. 101.30 prior to merger of APL with GAPL and at Rs. 110.60 after merger of APL with GAPL.
Both, for divestment of shares or purchase of share by GOG, the value of post merger i.e.Rs. 110.60, is the relevant value.
B] In case GOG decides to divest its holding, simple interest will be payable at 9 per cent from 31.3.2004 up to the date of sale. In case sale of shares after sixty days from the date of this order interest will not be payable after sixty days. Should GOG decides to subscribe to shares interest at the rate of 9 per cent will be payable from 31.3.2004 up to the date of purchase.
C] Both parties are urged to resolve the issue of preference shares which will ipso facto resolve the issue of Rs. 206 crore in Page 18 of 27 C/WPPIL/31/2015 JUDGMENT case GOG decides to divest its holding.
Government has accepted the Valuers recommendation and decided to offer 1,54,00,000 equity shares of Rs. 10/- each for sale to Gujarat Adani Port Limited [Adani Group] and in response to the offer made by Government of Gujarat, Adani Group has accepted the offer vice their letter dated 27.3.2006. In response to the Government offer M/s. Adani has also deposited 10% of the payable amount i.e. Rs.19,90,66,175 to the Government on 31st March, 2006 and also accepted Government Stipulation to pay 9% of interest from the date of offer till the date of payment [24.3.2006 to 31.5.2006] M/s. Adani has paid the remaining amount of 90% along with the interest i.e. Rs. 180,95k30,523/- vide demand draft/cheque dated 31.5.06 on 1.06.06.
RESOLUTION After careful consideration, the Government has decided to disinvest 1,54,00,000 equity shares held by the Government of Gujarat in Gujarat Adani Port Limited in favour of M/s. Adani at the rate of Rs. 110.60 per share, price determined by the Valuer, [Shri V.K. Shunglu, former Comptroller & Auditor General, Government of India], received consideration Rs. 170,32,40,000, interest thereon Rs. 30,53,56,698, totalling to Rs. 200,85,96,698 [Two Hundred Crores Eighty Five Lakhs Ninety Six Thousand Six Hundred Ninety Eight only] This issues with the concurrence of the Finance Department on this Department file of even number.
By order and in the name of Governor of Gujarat.
xxx xxx xxx"
14. By virtue of the aforesaid resolution dated 1st June, 2006, the entire shares have been disinvested by the Government reducing its total shareholding in Gujarat Adani Port Ltd.[GAPL] to Nil w.e.f. 1st June, 2006.
15. Mr. Ekrama Qureshi, learned counsel for the petitioner has heavily placed reliance upon the Articles of Agreement stating that Page 19 of 27 C/WPPIL/31/2015 JUDGMENT the government as well as Adani Port Ltd entered into the said Articles of Agreement [Shareholders' Agreement] in the year 1998 as well as on Concession Agreement entered into between the Gujarat Maritime Board, M/s. Gujarat Adani Port Limited and the Government of Gujarat in the year 2001. He has taken us through the various recitals contained therein as regards constitution, management as well as investment of the Mundra Port. His main contention is that disinvestment is made by the government not in consonance with the aforesaid agreements entered into among the parties to the contract.
16. We have carefully considered the contention raised by the learned counsel for the petitioner and there appears to be some force in his argument so far as the recitals contained in the agreements are concerned, but the aforesaid agreements are in the nature of merely tools of enforcing the government policy and therefore, whenever the government policy is very clear and the government is also very clear from the very inception that for constitution, development as well as for establishment of the aforesaid Mundra Port, consortium was created and investment of the government was involved therein, but slowly and gradually, by virtue of implementation of the government policy, the government has taken such decision by way of the resolution for disinvestment and while implementing the aforesaid resolution, disinvestment is effected.
Consequently, the value, so far as the recitals made in the aforesaid Page 20 of 27 C/WPPIL/31/2015 JUDGMENT agreements are concerned, is lesser as compared to the government policy. Here, clause 6.4 of the Concession Agreement is required to be seen, which is extracted as under:
"6.4 Obligations as per the Shareholder's Agreement The Licensee undertakes to perform the obligations of the Key Promoters under the Shareholders Agreement in accordance with its terms."
From the perusal of the above clause 6.4 of the Concession Agreement, it is clear that obligations of the licensee, that is, GAPL under the said agreement were to be in accordance with the terms of the Shareholders' Agreement. By Clause 4.1 of Article-4 of the Amendment Agreement to the Shareholders' Agreement, the words "up to 11%" in Article 13.1 of the original Shareholders' Agreement were removed and stood deleted and the resultant effect was that under the Shareholders' Agreement, the Government could disinvest its shares to the extent of 0%. According to Mr. Qureshi, learned counsel for the petitioner, as per Clause 5.2 of the Amendment Agreement to the Shareholders' Agreement, all the affairs of the project and the progress made in the implementation and working of the same and all the important events were to be informed by Adani Ports Limited to the GPIDCL and there is no factual dispute on this aspect. The effect of removal of embargo of 11% stake, which was required to be retained by the State Government was that the Government could disinvest its shares up to 8.55% or to a lesser Page 21 of 27 C/WPPIL/31/2015 JUDGMENT extent and even up to 0%. Mr. Qureshi contends that the Concession Agreement or the Shareholders' Agreement did not provide that disinvestment will be made up to 0%. However, it is required to be noted that the amendment made to the Shareholders' Agreement was never challenged by anybody. Once the words "up to 11%"
stood removed and deleted from the original Shareholders' Agreement by Clause 4.1 of the amendment agreement to the Shareholders' Agreement, that itself is indicative of disinvestment by the government up to 0%.
17. We have considered the arguments advanced by Mr. Qureshi, learned counsel for the petitioner as well as Mr. Kamal B. Trivedi, learned Advocate General appearing with Mr. P.R. Nanavati, learned counsel for respondent no.3 - Gujarat Maritime Board in light of the materials available on record. In our considered view, the intention of the government was very clear since the beginning only for making operational so far as four private ports were concerned and private as well as Government participation was involved therein, and it was also made clear that after making the said ports operational, sizable amount of investment by the private parties would be required and therefore, private participation was invited by the government under its policy and the actions have been taken by the government in pursuance of such policy, Concession Agreement and Shareholders' Agreement, and in order to implement the policy in question and for development of ports, whatever actions as regards disinvestment Page 22 of 27 C/WPPIL/31/2015 JUDGMENT were taken by the government are totally in consonance with the Port Policy of the government that has been enforced after passing necessary resolutions in light of the policy framed by the government. It is required to be noted that the wisdom of the policy maker cannot be judged by the Court.
18. Mr. Qureshi placed reliance upon the report of the CAG showing the fact of disinvestment. We have gone through the report of the CAG, wherein, it was observed that disinvestment ought to have been made by open public auction. However, we find that the same is contrary to the policy decision of the government dated 24th September, 1997, wherein, decision was taken by the government that after completion of first stage of the ports, the share contribution of the government will be offered first to adventurers of private sector for sale. It appears that this fact was not noticed by the CAG.
The Apex Court in the case of PATHAN MOHAMMED SULEMAN REHMATKHAN VS. STATE OF GUJARAT, reported in [2014] 4 SCC 156 has held that the policy decision of the government cannot be questioned on the basis of CAG report. The Apex Court in paras 10 to 14 has observed as under:-
"10. CAG is a key figure in the system of parliamentary control of finance and is empowered to delve into the economy, efficiency and effectiveness with which the departmental authorities or other bodies had used their resources in discharging their functions. CAG is also the final audit authority and is a part of the machinery through which the legislature enforces the regulatory and economy in the administration of public finance, as has been rightly pointed out by the High Court. But we cannot lose sight of the fact that it is the Page 23 of 27 C/WPPIL/31/2015 JUDGMENT Government which administers and runs the State, which is accountable to the people. State's welfare, progress, requirements and needs of the people are better answered by the State, also as to how the resources are to be utilized for achieving various objectives. If every decision taken by the State is tested by a microscopic and a suspicious eye, the administration will come to stand still and the decisions-makers will lose all their initiative and enthusiasm. At hindsight, it is easy to comment upon or criticize the action of the decision maker. Sometimes, decisions taken by the State or its administrative authorities may go wrong and sometimes it may achieve the desired results. Criticisms are always welcome in a Parliamentary democracy, but a decision taken in good faith, with good intentions, without any extraneous considerations, cannot belittled, even if that decision was ultimately proved to be wrong.
11. We have extensively referred to these principles in Arun Agrawal's case (supra), where we have held as follows:-
"41. ... This Court sitting in the jurisdiction cannot sit in judgment over the commercial or business decision taken by parties to the agreement, after evaluating and assessing its monetary and financial implications, unless the decision is in clear violation of any statutory provisions or perverse or taken for extraneous considerations or improper motives. States and its instrumentalities can enter into various contracts which may involve complex economic factors. State or the State undertaking being a party to a contract, have to make various decisions which they deem just and proper. There is always an element of risk in such decisions, ultimately it may turn out to be correct decision or a wrong one. But if the decision is taken bona fide and in public interest, the mere fact that decision has ultimately proved to be wrong, that itself is not a ground to hold that the decision was mala fide or taken with ulterior motives."
12. Reference in this regard may also be made to the judgment of this Court in Centre for Public Interest Litigation & Ors. v. Union of India & Ors. AIR 2012 SC 3725, wherein it was held that when the CAG report is subject to scrutiny by the Public Accounts Committee and the Joint Parliamentary Committee, it would not be proper to refer the findings and conclusions contained therein. The Court even went on to say that it is not necessary to advert to the reasoning and suggestions made, as well.
13. We have gone through the salient features of the Project Page 24 of 27 C/WPPIL/31/2015 JUDGMENT referred to in the various orders passed by the State Government and the resolutions dated 22.3.2011 and 7.6.2011 allotting lands to fourth respondent and also the notification dated 18.8.2011 issued under the Special Economic Zones Act, 2005, and we are in agreement with the High Court that it cannot be said that the State has acted against public interest. The Government has noticed the development and the employment opportunities that the project would bring into the State. The decision taken by the Government was also transparent and that the Government has also got substantial stake in the Public-Private Partnership and has also taken care of its interests while entering into the various agreements. Learned senior counsel fairly submitted that he is not attributing any motives or stating that the decision was taken for extraneous reasons, but contended that the Government had, without any application of mind, parted with a large tracks of land worth crores of rupees to the private party, which is not in the interest of the State.
14. We are of the view that these are purely policy decisions taken by the State Government and, while so, it has examined the benefits the project would bring into the State and to the people of the State. It is well settled that non-floating of tenders or absence of public auction or invitation alone is not a sufficient reason to characterize the action of a public authority as either arbitrary or unreasonable or amounted to mala fide or improper exercise of power. The Courts have always held that it is open to the State and the authorities to take economic and management decisions depending upon the public interest. We are of the view that is what has been done in the instant case and the High Court has rightly held so. We, therefore, find no reason to entertain this special leave petition and the same is dismissed."
19. In this view of the matter, we do not find that the government has taken any contrary action against its policy. As a matter of fact, the decision of the government is in consonance with its policy decision and therefore, we do not find that any illegality has been committed by the government in making disinvestment of its stake.
The petitioner is, therefore, not entitled to any reliefs claimed in prayer paras [A] and [B].
Page 25 of 27C/WPPIL/31/2015 JUDGMENT
20. Now, adverting to the next argument of the learned counsel for the petitioner, it is submitted the respondent be directed to constitute an independent Port Regulatory Authority in pursuance of Clause-4 of Annexure-A to the Govt. Resolution dated 29th July, 1997. On perusal of the said Clause-4, it appears that the said Clause-4 provides for institution of independent Port Regulatory Authority in regard to all aspects concerning the working of a port and the sector as a whole. It further provides that the mandate for the Regulatory Authority will include environmental protection, safety, relief and rehabilitation, issues of security & national interest, protection of port user interests, and any other matter that is of public interest.
21. As regards the contention for setting up and constituting an independent Port Regulatory Authority in pursuance of clause (4) of Annexure-A to the Government Resolution dated 29.7.1997, learned Advocate General Mr. Kamal Trivedi has drawn attention of this Court that the Government of Gujarat has already framed Gujarat Maritime Board Act, 1981 and he has further submitted that in the said Act ample provisions are there for taking regulatory measures so far as functioning of minor ports in the State of Gujarat is concerned and therefore, there was no necessity of setting up a special independent Port Regulatory Authority as envisaged in the aforesaid Government Resolution. We have perused the provisions of the aforesaid Act.
There are ample provisions to take care of the situation so far as Page 26 of 27 C/WPPIL/31/2015 JUDGMENT functioning of minor ports is concerned. In this view of the matter, the contention raised by learned advocate for the petitioner is not acceptable simply because whenever there is a special statute to regulate the functioning of minor ports, there appears no necessity of setting up independent Regulatory Authority for port like Mundra.
22. For the reasons recorded above, the present petition in the nature of public interest litigation is devoid of any merit and deserves dismissal at the admission stage. Hence the petition stands dismissed accordingly.
(V.M.SAHAI, ACJ.) (R.P.DHOLARIA,J.) pirzada Page 27 of 27