Gujarat High Court
Cargo Motors Pvt. Ltd vs Gujarat Maritime Board on 28 September, 2021
Equivalent citations: AIRONLINE 2021 GUJ 2018
Author: J.B.Pardiwala
Bench: J.B.Pardiwala, Vaibhavi D. Nanavati
C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 12877 of 2019
With
CIVIL APPLICATION (FOR DIRECTION) NO. 1 of 2021
In R/SPECIAL CIVIL APPLICATION NO. 12877 of 2019
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE J.B.PARDIWALA Sd/-
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI Sd/-
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1 Whether Reporters of Local Papers may be allowed YES
to see the judgment ?
2 To be referred to the Reporter or not ? YES
3 Whether their Lordships wish to see the fair copy NO
of the judgment ?
4 Whether this case involves a substantial question NO
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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CARGO MOTORS PVT. LTD
Versus
GUJARAT MARITIME BOARD
================================================================
Appearance:
MR MIHIR THAKORE, SR.ADVOCATE with Mr ROHAN LAVKUMAR for the
Petitioner.
MR KAMAL TRIVEDI, SR.ADVOCATE with MR G.H.VIRK, SIMRANJIT
H.VIRK AND PRASHANTH S.UNDURTI, ADVOCATES for the Respondent.
================================================================
CORAM:HONOURABLE MR. JUSTICE J.B.PARDIWALA
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI
Date : 28/09/2021
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) Page 1 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021
1. By this writ-application under Article 226 of the Constitution of India, the writ-applicant has prayed for the following reliefs :
"(a) Quash and set aside the termination of the letter of intent awarded to the petitioner, dated 19th July 2019 on the ground that it is arbitrary, unreasonable and violative of the principles of fairness and public policy;
(b) Issue a writ of mandamus, directing the respondent to extend the petitioner's LOI till 31st December 2019 or any such period as the Hon'ble Court deems fit;
(c) Pending hearing and final disposal restrain the respondent from issuing a fresh tender/bid and/or issuing the Letter of Intent for the development of the Nargol Port or any part thereof to any other party;
(d) Ex-parte ad-interim relief in terms of prayer (c) above may kindly be granted;
(e) Pass such other and further reliefs as may be deemed just and proper in the interest of justice."
2. The facts giving rise to this writ-application may be summarised as under :
2.1 On 21st April 2011, a request for proposal was issued by the Gujarat Maritime Board to develop a Greenfield Port at Nargol, District Valsad.Page 2 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022
C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 2.2 On 20th September 2011, the petitioner, in response to the request for proposal, submitted its proposal as a lead promoter (along with the key consortium partners) to develop the port.
2.3 On 30th August 2012, the Gujarat Maritime Board issued a Letter of Intent (LOI) to the petitioner for the development of the Greenfield Port at Nargol, District Valsad, on Build-Own-Operate-Transfer (BOOT) basis, in consortium with M/s.Amarillis Limited, a wholly owned subsidiary of the Israel Port Company.
2.4 The LOI was valid for a period of 8 months from the date of issuance. The petitioner was required to adhere to the conditions mentioned in Clauses 3 and 4 of the LOI, as mentioned below :
a. To submit the application for all the environment clearances for the project within 6 months of the issue of LOI;
b. To submit a Development Guarantee of Rs.17,50,00,000/- in form of a bank guarantee within 4 weeks of the issue of LOI;
c. To share the details of the proposed SPV, along with the Joint Equity Shareholders' Agreement within 3 months from the date of issue of LOI;
d. To submit a Detailed Project Report (DPR) within 12 months from the date of issue of LOI; and Page 3 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 e. To ensure that the Environment Clearance and Financial Closure of the project is achieved within 18 months from the date of issue of LOI.
2.5 On 4th September 2012, the petitioner accepted the LOI and on 16th August 2013, the petitioner sought for the extension of the LOI by one year.
2.6 On 8th October 2014, the petitioner sought for another extension of the LOI with the following extended time-lines :
a. Submission of DPR - March 2015
b. Obtaining Environment Clearance - December
2015
c. Obtain Financial Closure - December 2015
2.7 In the month of March 2015, the petitioner submitted
a draft Detailed Project Report which included the master plan of the entire project.
2.8 On 2nd June 2015, the Gujarat Maritime Board informed the petitioner that it was required to submit the Joint Equity Shareholders' Agreement, as mentioned in the LOI.
2.9 On 18th June 2015, the Maritime Board again requested the petitioner to submit the Joint Equity Shareholders' Agreement, along with the Monthly Progress Report.
Page 4 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 2.10 On 10th February 2016, the Maritime Board requested the petitioner to provide the information about the proposal for change in the consortium partner, along with the other details.
2.11 On 26th February 2016, the petitioner sought for the extension of the LOI, along with the information that it has appointed consultants for finding a consortium partner for the project.
2.12 On 13th July 2016, the Maritime Board informed the petitioner that its consortium partner, i.e. Amarilis Limited, had requested the Maritime Board for confirmation regarding its exit from the Nargol Port Project, and hence, the petitioner was requested by the Maritime Board to clear its stand on the issue and provide a status on the consortium partner.
2.13 On 5th October 2016, the LOI was extended till 31.12.2017, with a condition that the petitioner to inform the Maritime Board about the new consortium partner by 31.12.2017.
2.14 On 1st May 2017, the Gujarat Pollution Control Board rejected the petitioner's application dated 5.10.2015 for obtaining 'consent to establish', since the petitioner failed to submit the requisite land permissions along with its application.
2.15 On 27th September 2017, the Maritime Board requested the petitioner to provide the information about Page 5 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 the proposal for change in the consortium partner, along with other details.
2.16 On 7th October 2017, the petitioner once again sought for the extension of the LOI till 31.12.2019, inter alia, informing that it has appointed investment banks for finding a suitable consortium partner, but none of the companies have shown any definitive interest.
2.17 On 28th November 2017, the petitioner reiterated its request for extension of the LOI till 31.12.2019.
2.18 On 8th and 10th January 2018 respectively, since the petitioner attempted to revise the DPR, the Maritime Board clarified that it had neither agreed nor given any approval to revise the DPR (submitted earlier by the Cargo Motors). The Maritime Board further clarified that the Cargo Motors would have to adhere to the stipulations of the LOI dated 30.8.2012 and the Maritime Board's letter dated 17.9.2016.
2.19 On 22nd and 23rd March 2018 respectively, the Maritime Board requested the Cargo Motors to provide the following :
a. Details regarding the present status of the various approvals obtained/ to be obtained as per the terms and conditions of the LOI dated 30.8.2012.
b. The progress report and the latest update regarding the status of various approvals required as per the condition 4(d) and 4(e).Page 6 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022
C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 c. Any other details/updated regarding the Nargol Port Project.
2.20 On 28th March 2018, the Cargo Motors requested for extension of the LOI till December 2019.
2.21 On 2nd April 2018, the Cargo Motors once again requested the Maritime Board to extend the LOI for a further period of two more years, i.e. till December 2019.
2.22 In the month of May 2018, the petitioner submitted another draft of the Detailed Project Report to the Maritime Board.
2.23 On 7th May 2018, the Cargo Motors requested the Maritime Board to extend the LOI for a further period of two more years, i.e. till December 2019.
2.24 On 12th July 2018 and 6th September 2018 respectively, the Cargo Motors requested the Maritime Board to extend the LOI.
2.25 On 8th May 2019, the Maritime Board informed the Cargo Motors that the bank guarantee should be submitted along with the applicable GST amount and that the existing bank guarantee should also be revised and resubmitted (with GST amount).
2.26 On 12th June 2019, the Maritime Board once again requested the Cargo Motors to submit the revised bank Page 7 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 guarantee with the applicable GST amount without any further delay.
2.27 On 12th July 2019, the Maritime Board encashed the bank guarantee valued at Rs.17,50,00,000/-.
2.28 On 16th July 2019, the bank guarantee amount of Rs.17,50,00,000/- was credited in the Maritime Board's bank account.
2.29 On 17th July 2019, the petitioner filed the Special Civil Application No.12360 of 2019 before this Court, inter alia, praying for the following :
a. refund of the aforesaid amount of the bank guarantee;
b. reversal of the debit of the of the said amount in the petitioner's account; and c. restrain the GMB from invoking the said bank guarantee.
2.30 On 19th July 2019, the Maritime Board terminated the LOI dated 30.8.2012. The impugned order terminating the LOI reads thus :
"To, Managing Director Cargo Motors Private Limited 1/9B, Jindal House Asaf Ali Road, NEW DELHI 110002 Sub : Letter of Intent (LOI) for development of a Greenfield Port at Village Nargol, Dist. Valsad.Page 8 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022
C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 Ref : GMB Letter No.GMB/N/Pvt-1/1047/394 dated 30th August 2012 (Letter of Intent) Sir, In view of failure on part of Cargo Motors Private Limited to fulfill its obligations under the captioned Letter of Intent, the said Letter of Intent stands terminated with immediate effect.
The present communication addressed by Gujarat Maritime Board is without prejudice to all rights, entitlements (monetary or otherwise) and contentions of GMB, all of which are specifically reserved.
GMB reserves its rights to take out appropriate proceedings against Cargo Motors Private Limited, for the losses and damages suffered by it on account of the breach of terms of contract (Letter of Intent) with Cargo Motors Private Limited, and for the recovery of other statutory dues and payables.
Yours sincerely, Sd/-
(Vice Chairman & Chief Executive Officer)"
2.31 The petitioner filed the present Special Civil Application No.12877 of 2019, inter alia, praying for quashing and setting aside the aforesaid termination letter dated 19.7.2019, with a direction to the Maritime Board to Page 9 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 extend the LOI till 31.12.2019, with a further prayer for an interim relief for restraining the Maritime Board from issuing a fresh tender/bid, and/or issuing the LOI for the development of the Nargol Port or any part thereof to any other party.
2.32 A Coordinate Bench of this Court, vide judgment and order dated 13th September 2019, rejected the writ- application filed by the writ-applicant. This Court observed as under :
"37.1 This judgment is not applicable to present case. Reasons are obvious;
(i) The work has not been started and
completed.
(ii) Contract of Bank Guarantee is between the
Respondent No.1 and Respondent No.2.
(iii) The Petitioner has entered upon contract of mortgage with Respondent No.2.
(iv) The Bank Guarantee is unconditional.
(v) No proceedings before the Arbitrator is pending.
38. In view of the ratio laid down by the Hon'ble Apex Court in the above referred judgment, fact and circumstances of the case, fact that the Bank Guarantee is already invoked/encashed, no fraud of Page 10 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 an egregious nature in connection with the Bank Guarantee established; irretrievable harm or injustice to Petitioner shown and unconditional nature of Bank Guarantee, we are not inclined to grant ad-interim relief as prayed for by the Petitioner.
39. Considering the conditions mentioned in the LoI, terms and conditions of the bank guarantee, correspondences taken place between the parties which are produced on record, the ratio laid down by the Hon'ble Supreme Court in the above referred to judgments, facts and circumstances of the case, we are of the view that this is not the case wherein the writ jurisdiction is required to be exercised. Hence, we do not entertain the petition. Accordingly, we dismiss the petition."
3. In view of the action on the part of the Maritime Board in terminating the LOI dated 30th August 2012 as referred to in para-2.30, the writ-applicant came before this Court with the present writ-application.
SUBMISSION ON BEHALF OF THE WRIT-APPLICANT :
4. Mr.Mihir Thakore, the learned senior counsel assisted by Mr.Rohan Shah, the learned counsel appearing for the writ- applicant, vehemently submitted that the action on the part of the Maritime Board in terminating the LOI could be termed as arbitrary. Mr.Thakore very vociferously submitted that there was no laxity at the end of his client. His client tried his best to Page 11 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 obtain all the necessary and requisite permissions from various authorities, but the delay in the grant of such permissions could not have been attributed to his client as an act of laxity or negligence. He would submit that his client had to face various hardships in obtaining the environment clearance from the Ministry of Forests and Environment, Union of India, and ultimately, when the same came to be granted pursuant to the efforts put in by the writ-applicant, the Maritime Board terminated the LOI. Mr.Thakore would submit that till 19 th July 2019, i.e. the date when the LOI came to be terminated, the Maritime Board never complained of any deficiency in service nor asked the writ-applicant to cure any breach. This itself, according to Mr.Thakore, is suggestive of the fact that the act on the part of the Maritime Board is arbitrary and, therefore, violative of Article 14 of the Constitution of India.
5. Mr.Thakore would submit that the LOI between his client and the respondent Board was a concluded contract. His client incurred expenditure of almost Rs.50 crore in furtherance of the LOI. This cost incurred by the writ-applicant is in the form of various studies, seeking various approvals, making substituted land available, appointing various other agencies, etc. Mr.Thakore would submit that his client has a legitimate expectation from the respondent Board to honour the terms of the LOI and to extend the same for a particular period of time. Mr.Thakore would submit that the Government of India has been making desperate efforts to develop a port at Nargol since 1997 but till this date has not been successful in the project. With all the clearances in place and when the writ-applicant came close to executing the contract, the Board terminated the LOI. Mr.Thakore would submit that the Clause 3(i) of the Page 12 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 LOI casts an obligation on the respondent Board to make all possible efforts in assisting the writ-applicant in obtaining the necessary governmental clearances. Mr.Thakore would submit that there was no cooperation at the end of the Board in this regard.
6. Mr.Thakore also pointed out that his client appointed several agencies, such as, Ernst and Young, Price Waterhouse Coopers, Centrum, etc. to look for a consortium partner after the change in the Draft Final Proposal.
7. In such circumstances referred to above, Mr.Thakore prays that there being merit in his writ-application, the same may be allowed.
SUBMISSIONS ON BEHALF OF THE RESPONDENT -
BOARD:
8. On the other hand, this writ-application has been vehemently opposed by Mr.Kamal Trivedi, the learned senior counsel assisted by Mr.G.H.Virk, the learned counsel appearing for the Gujarat Maritime Board. Mr.Trivedi would submit that the impugned order terminating the LOI cannot be termed, in any manner, as arbitrary so as to make the present writ- application maintainable. Mr.Trivedi would submit that there was no concluded contract between the parties. A mere LOI was issued and this would express an intention of the parties to enter into a contract, but no concluded contract ultimately fulfilled. Mr.Trivedi would submit that the LOI issued by the Board can, at the best, be said to be an agreement to issue an allotment letter and to execute the agreement subject to the Page 13 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 fulfillment of the various conditions as stipulated in the LOI. Mr.Trivedi submitted that there were various contingencies at the time of issuing the LOI and one of those was obtaining environment clearance. It took almost 7 years from the date of issue of the LOI in obtaining the environment clearance.
9. Mr.Trivedi brought the following facts to our notice as averred in the affidavit-in-reply filed on behalf of the Maritime Board :
"14. Under the LOI, the Petitioner was required to construct an All Weather Direct Berthing Port with a minimum of 3 berths, each capable of handling a Panamax size vessel; and 2 of the said 3 berths being container berths and 1 being a multi-purpose berth, along with provision of 2 breakwaters, under Phase-I. This development was to, in fact, increase in subsequent phases of the contract's execution.
15. The Petitioner was obligated to ensure its application for Environment Clearance of the projected was made within 6 months from the issuance of the LOI, i.e. on or before February, 2013. It is an admitted fact, not even disputed in the Memo of its Writ Petition, that the Petitioner miserably failed to make the said EC Application within 6 months of the issuance of the LOI.
16. Under the LOI, the Petitioner had agreed to the Land Acquisition requirements for the development of Phase-I of the Port as "NIL". However, subsequently, the Petitioner even started demanding land from the Respondent; and this Page 14 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 was in fundamental breach of the consensus ad idem of the parties at the time of the execution of the contract ~ i.e. the LOI.
17. Now, since prime, waterfront access, which is a scarce resource, was being given to the Petitioner to develop the Port, so as to secure, at least to the minimal extent possible, GMB's commercial interests, the Petitioner voluntarily agreed to furnish a Bank Guarantee of Rs.17.50 (the "BG') crores as a "Development Guarantee", i.e. guarantee against Development of the Port in terms of the LOL.
18. The Petitioner was also obligated to create a Special Purpose Vehicle (SPV) within 3 months of the issuance of the LOI, for the development of the Port, along with the corresponding Joint Equity Shareholders' Agreement of the SPV. The Petitioner also failed to fulfil this fundamental contractual obligation; and, in fact, its technical-partner (one M/s.Amaryllis from Israel) withdrew from the project and formally informed GMB directly, that it would no longer participate in the project. It must be noted that this fundamentally destroyed all prospects of timely development of the project as the original bid of the Petitioner in and around September, 2011 was based on the proposed joint-venture that it would have with the aforementioned foreign technical-partner, who would infuse technical know-how for the development of the Port.
19. Next, under the LOI, the Petitioner was obligated to prepare and submit the Detailed Project Report (the "DPR") Page 15 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 for the project within 12 months from the date of issuance of the LOI, i.e. on or before the end of August, 2013. In fundamental breach of this obligation, the Petitioner submitted the DPR in 2015. Thereafter, the Petitioner itself chose to seek revision of the DPR submitted by it in view of the contention of the Petitioner itself, that the DPR's parameters were unrealistic. Subsequently, the Petitioner submitted a second version of the DPR, which liquidated the terms of the RIP and LOI, and was in stark contrast of the original understanding between the parties. Ultimately, even on the date when the two Special Civil Applications were preferred by the Petitioner before this Hon'ble Court, nothing was crystalized by the Petitioner and the Petitioner's paper- tiger approach to continuously seek extensions and yet, never actually deliver on the project's development, has caused the answering Respondent to suffer tremendously in terms of monetary and opportunity loss.
20. Next, under the LOI, the Petitioner was required to ensure the Environmental Clearance and Financial Closure of the project was achieved within 18 months of the issuance of the LOI. This 18 months' period gains significance because the LOI itself, was valid only for 18 months. It is an admitted matter of record that right up to the termination of the LOI (on 19.07.2019) by GMB, the Petitioner neither received Environmental Clearance for the project, nor achieved Financial Closure for the project. In fact, in the absence of a technical partner, the Petitioner could never achieve Financial Closure for the project.Page 16 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022
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21. The LOI categorically stated that should the Petitioner fail to fulfill the terms and conditions of the LOI (some of which are discussed herein above), the LOI could be cancelled by GMB, with written notice to the Petitioner.
22. It may be appreciated that time was of essence of the contract between the parties and yet, the Petitioner miserably failed to fulfill its contractual obligations. In fact, though not required to do so, the answering Respondent - GMB gave 5 extensions of the LOI to the Petitioner, so as to coax the Petitioner to develop the project and fulfill its contractual obligations. These 5 extensions extended the validity of the LOI till 30.06.2014, 31.12.2014, 31.03.2015, 30.09.2015 and finally till 31.12.2017.
23. Multiple letters were addressed by GMB to the Petitioner, highlighting the Petitioner's breach of the terms and conditions of the LOI. Illustratively, some of the said letters, being GMB's letters dated 02.06.2015, 18.06.2015,
10.02.2016, 13.07.2016, 05.10.2016, 27.09.2017, 08.01.2018 and 23.03.2018 are annexed hereto and marked as ANNEXURE-R3.
24. It is respectfully submitted that if the entire corpus of correspondence exchanged by and between the parties is seen, it becomes evident that Petitioner miserably failed in -
(i) making the EC application within 6 months of issuance of LOI, (ii) obtaining EC within 18 months of issuance of LOI, and (iii) achieving Financial Closure within 18 months of issuance of the LOI.Page 17 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022
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25. In fact, even after the 5 extensions granted by GMB, and despite passage of almost 6-7 years, the Petitioner has failed to achieve the aforementioned fundamental deliverables under the LOI. This being the case, the present is clear case of breach of contract on part of the Petitioner."
10. Mr.Trivedi would submit that the termination of the LOI is not a quasi-judicial act by any stretch of imagination. Hence, it was not necessary to observe the principles of natural justice. He would submit that the act complained is also not an executive or administrative act to attract the duty to act fairly. Much stress is laid by Mr.Trivedi on the fact that the matter on hand is governed by a contract/agreement between the parties. If the matter is governed by a contract, and that too not a concluded contract, the writ-application is not maintainable since it is a public law remedy and is not available in a private law field. In other words, the issue with regard to the legality and validity of the termination of a non-statutory contract cannot be agitated by invoking the writ jurisdiction of this Court under Article 226 of the Constitution of India.
11. Mr.Trivedi, in support of his submissions referred to above, has placed strong reliance on the following case-law :
(1) Silppi Constructions Contractors vs. Union of India and another, 2019 SCC Online SC 1133;
(2) Joshi Technologies International INC. vs. Union of India and others, (2015) 7 SCC 728;Page 18 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022
C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 (3) Michigan Rubber (India) Limited vs. State of Karnataka and others, (2012) 8 SCC 216;
(4) Bharat Cooking Coal Ltd. vs. AMR Dev Prabha, 2020 SCC Online SC 335;
(5) Sanjay Kumar Shukla vs. Bharat Petroleum Corporation Limited and others, (2014) 3 SCC 493;
(6) Raunaq International Limited vs. I.V.R. Construction Limited and others, (1999) 1 SCC 492;
(7) Authorized Officer, State Bank of Travancore and another vs. Mathew K.C., (2018) 3 SCC 85;
(8) Gujarat Maritime Board vs. Larsen and Toubro Infrastructure Development Projects Limited and another, (2016) 10 SCC 46;
(9) State of Gujarat and others vs. Meghji Pethraj Shah Charitable Trust and others, (1994) 3 SCC 552;
(10) Rishi Kiran Logistics Private Limited vs. Board of Trustees of Kandla Port Trust and others, (2015) 13 SCC 233; and (11) Montecarlo Limited and another vs. Gujarat Rail Infrastructure Development Corporation Limited (S.C.A.No.6767 of 2021, decided on 22nd July 2021)
12. In such circumstances referred to above, Mr.Trivedi prays that there being no merit in the present writ-application, the same be rejected.
Page 19 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 ANALYSIS :
13. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is, whether the act on the part of the Maritime Board in terminating the LOI could be termed as arbitrary or unfair and in consequence of violation of Article 14 of the Constitution of India ?
14. We should bear in mind the following principles of law for the purpose of deciding the present writ-application :
1. If a petitioner seeks to enforce a purely contractual term, the court normally does not entertain as application for such purpose under Article 226 of the Constitution of India.
2. But when one of the contracting parties is the State, and a challenge is thrown by the petitioner alleging that the action is arbitrary, an attack to such an action under Article 14 of the Constitution of India is fully available
3. The development of administrative law and the activist dimension of Article 14 of the Constitution of India, as laid down in the International Airport Authority's case has brought out a distinction between a purely private right and a right of an individual as a member of the public vis-a-vis the State. If there is an arbitrary revocation of contract by the State, the contractor has two rights available to him, namely, the Constitutional right as also the right under the contract. These two rights are available Page 20 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 when there is a concluded contract. When however, the citizen and the State are on the threshold of a contract, only the constitutional right is available.
4. The courts have maintained distinction between the statutory contracts, on one hand, and non-statutory ones, on the other. While judicial review was held to be permissible, both as regards award and cancellation of the contracts of the former category, the same was confined to certain aspects in the latter category. If the termination of contract is on the ground that a party thereto had violated the conditions therefor, such party is invariably required to work out his remedies as provided for under the relevant contracts, viz., arbitration or civil suit, as the case may be. However, where an element of administrative exercise is undertaken and executive power is exercised, considerations and parameters are somewhat different.
5. Generally, the court should not exercise its writ jurisdiction to enforce the contractual obligation. The primary purpose of a writ mandamus, is to protect and establish rights and to impose a corresponding imperative duty existing in law. It is designed to promote justice (ex debito justiceiae). The grant or refusal of the writ is at the discretion of the court.
6. The discretion must be exercised by the Court on grounds of public policy, public interest and public good.
The writ is equitable in nature and thus, its issuance is governed by equitable principles.
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7. The prime consideration for the issuance of the said writ is, whether or not substantial justice will be promoted.
15. It is now well-settled that judicial review would apply to the exercise of contractual powers by a State or an instrumentality of a State or a public authority in order to prevent arbitrariness. The decision of the Supreme Court in ABL International Limited and another vs. Export Credit Guarantee Corporation of India Limited and others, reported in (2004) 3 SCC 653, still holds the field. It is clear from the observations of the Supreme Court made therein that once the State or an instrumentality of the State is a party to the contract, it has an obligation in law to act fairly, justly and reasonably, which is the requirement of Article 14 of the Constitution of India. Arbitrariness in State action in commercial/contractual transactions with private parties hurts the spirit of Article 14 of the Constitution of India and would be open to judicial review. (see also State of U.P. vs. Sudhir Kumar Singh and others, Civil Appeal No.3498 of 2020 dtd. 16.10.2020)
16. The question we need to address is, whether the action on the part of the Maritime Board to terminate the LOI could be said to be arbitrary, in any manner, having regard to the materials on record.
17. Before answering the above question, we must try to understand the meaning and true import of arbitrariness.
MEANING AND TRUE IMPORT OF ARBITRARINESS:
18. In Ramana Dayaram Shetty vs. The International Airport Authority of India and others, AIR 1979 SC 1628, the Supreme Court held:
Page 22 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 "This rule also flows directly from the doctrine of equality embodied in Article 14. It is now well settled as a result of the decisions of this Court in E.P. Royappa vs. State of Tamil Nadu, AIR 1974 SC 555 and Maneka Gandhi vs. Union of India, AIR 1978 SC 597, that Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment. It requires that State action must not be arbitrary but must be based on some rational and relevant principle which is nondiscriminatory; it must not be guided by any extraneous or irrelevant consideration, because that would be denial of equality. The principle of reasonableness and rationality which is legally as well as philosophically an essential element of equality or non- arbitrariness is projected by Article 14 and it must characterise every State action, whether it be under authority of law or in exercise of executive power without making of law- The State cannot, therefore, act arbitrarily in entering into relationship, contractual or otherwise with a third party, but its action must conform to some standard or norm which is rational and non-discriminatory."
19. In Dwarkadas Marfatia and Sons vs. Board of Trustees of the Port of Bombay, AIR 1989 SC 1642, the matter was re- examined in relation to an instrumentality of the State for applicability of Article 14 to all its actions. Referring to the earlier decisions of this Court and examining the arguments for applicability of Article 14, even in contractual matters, Sabyasachi Mukherji, J. (as the learned Chief Justice then was), speaking for himself and Kama, J., reiterated that every action of the State or an instrumentality of the State must be informed by Page 23 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 reason......actions uninformed by reason may be questioned as arbitrary in proceedings under Article 226 or Article 32 of the Constitution.
20. In Kumari Shrilekha Vidyarthi etc. vs. State of U.P. and others, AIR 1991 SC 537, a two Judges Bench of the Supreme Court made an extensive and in depth analysis of the scope of equality clause and laid down the following propositions :
"It can no longer be doubted at this point of time that Act. 14 of the Constitution of India applies also to matters of governmental policy and if the policy or any action of the Government, even in contractual matters, fails to satisfy the test of reasonableness, it would be unconstitutional. (see Ramana Dayaram Shetty vs. The International Airport Authority of India, AIR 1979 SC 1628 and Kasturi Lal Lakshmi Reddy vs. State of Jammu and Kashmir, AIR 1980 SC 1982). In Col. A.S. Sangwan vs. Union of India, AIR 1981 SC 1545, while the discretion to change the policy in exercise of the executive power, when not trammeled by the statute or rule, was held to be wide, it was emphasized as imperative and implicit in Article 14 of the Constitution that a change in policy must be made fairly and should not give the impression that it was so done arbitrarily or by any ulterior criteria. The wide sweep of Article 14 and the requirement of every State action qualifying for its validity on this touch-stone, irrespective of the field of activity of the State, has long been settled. Later decisions of this Court have reinforced the foundation of this tenet and it would be sufficient to refer only to two recent decisions of this Court for this purpose.Page 24 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022
C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 It is now too well-settled that every State action, in order to survive, must not be susceptible to the vice of arbitrariness which is the crux* of Article 14 of the Constitution and basic to the rule of law, the system which governs us. Arbitrariness is the very negation of the rule of law. Satisfaction of this basic test in every State action is sine qua non to its validity and in this respect, the State cannot claim comparison with a private individual even in the field of contract."
21. The meaning and true import of arbitrariness is more easily visualized than precisely stated or defined. The question, whether an impugned act is arbitrary or not, is ultimately to be answered on the facts and in the circumstances of a given case. An obvious test to apply is to see whether there is any discernible principle emerging from the impugned act and if so, does it satisfy the test of reasonableness. Where a mode is prescribed for doing an act and there is no impediment in following that procedure, performance of the act otherwise and in a manner which does not disclose any discernible principle which is reasonable, may itself attract the vice of arbitrariness. Every State action must be informed by reason and it follows that an act uninformed by reason, is arbitrary. Rule of law contemplates governance by laws and not by humour, whims or caprices of the men to whom the governance is entrusted for the time being. It is trite that be you ever so high, the laws are above you.
22. In S.G.Jaisinghani vs. Union of India, AIR 1967 SC 1427, at p.1434], the Supreme Court indicated the test of arbitrariness Page 25 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 and the pitfalls to be avoided in all State actions to prevent that vice, in a passage as under :
"In this context it is important to emphasize that the absence of arbitrary power is the first essential of the rule of law upon which our whole constitutional system is based. In a system governed by rule of law, discretion, when conferred upon executive authorities, must be confined within clearly defined limits. The rule of law from this point of view means that decisions should be made by the application of known principles and rules and, in general, such decisions should be predictable and the citizens should know where he is. If a decision is taken without any principle or without any rule it is unpredictable and such a decision is the antithesis of a decision taken in accordance with the rule of law. (See Dicey
- "Law of the Constitution" - Tenth Edn., Introduction ex). "Law has reached its finest moments", stated Douglas, J. in United States vs. Wunderlick, (1951-342 US 98 : 96 Law Ed
113), "When it has freed man from the unlimited discretion of some ruler .....where discretion is absolute, man has always suffered". It is in this sense that the rule of law may be said to be the sworn enemy of caprice. Discretion, as Lord Mansfield stated it in classic terms in the case of John Wilkes (1770-98 E.R. 327), "means should discretion guided by law. It must be governed by rule, not humour: it must not be arbitrary, vague and fanciful."
23. In Liberty Oil Mills vs. Union of India, AIR 1984 SC 1271, the Supreme Court held that the expression 'without assigning any reason' implied that the decision has to be communicated Page 26 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 but reason for the decision has to be stated; but the reason must exist, otherwise the decision would be arbitrary. This decision was relied upon in Shrilekha Vidyarath's case (supra) to reject the argument made on behalf of the State of Uttar Pradesh that in term of Clause 3 of para 7.06 the services of the Government Pleaders could be terminated at any time without assigning any cause as would appear from the following extract of the decision of Supreme Court :
"The other part of Clause 3 which enables the Government to terminate the appointment at any time without assigning any cause can also not be considered in the manner, suggested by the learned Additional Advocate General. The termination may be made even during the subsistence of the term of appointment and without assigning any cause means without communicating any cause to the appointee whose appointment is terminated. However, without assigning any cause is not to be equated with without existence of any cause. It merely means that the reason for which the termination is made need not to be assigned or communicated to the appointee. It was held in Liberty Oil Mills vs. Union of India, AIR 1984 SC 1271 that the expression without assigning any reason implies that the decision has to be communicated, but reasons for the decision have not to be stated; but the reasons must exist, otherwise, the decision would be arbitrary. The non- assigning of reasons or the non-communication thereof may be based on public policy, but termination of an appointment without the existence of any cogent reason in furtherance of the object for which the power is given would be arbitrary Page 27 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 and, therefore, against public policy. Clause 3 of para 7.06 must, therefore, be understood to mean that the appointment of a District Government Counsel is not to be equated with appointment to a post under the Government in the strict sense, which does not necessarily mean that it results in denuding the office of its public character; and that the appointment may be terminated even during currency of the term by only communicating the decision of termination without communicating the reasons which led to the termination. It does not mean that the appointment is at the sweet will of the Government which can be terminated at any time, even without the existence of any cogent reasons during the subsistence of the term........In our opinion, the wide sweep of Article 14 undoubtedly takes within its fold the impugned circular issued by the State of U.P. in exercise of its executive power, irrespective of the precise nature of appointment of the Government counsel in the districts and the other rights, contractual or statutory, which the appointees may have. It is for this reason that we base our decision on the ground that independent of any statutory right, available to the appointees, and assuming for the purpose of this case that the rights flow only from the contract of appointment, the impugned circular, issued in exercise of the executive power of the State, must satisfy Article 14 of the Constitution and if it is shown to be arbitrary, it must be struck down."
24. In Dwarkadas Marfatia's case (supra), Sabyasachi Mukharji, J. (as he then was), indicated the extent of the power of judicial review by observing as under :
Page 28 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 "......Where there is arbitrariness in State action, Article 14 springs in and judicial review strikes such an action down. Every action of the executive authority must be subject to rule of law and must be informed by reason. So, whatever, be the activity of the public authority, it should meet the test of Article 14......"
25. Having regard to the following, if the Maritime Board decided to terminate the LOI, then in our view, such action cannot be termed as arbitrary so as to attract Article 14 of the Constitution of India and make the present writ-application maintainable.
"Different timelines for achieving various milestones indicated in Letter of Intent (LOI) dated 30.08.2012 (pg 25) to remain valid for18 months i.e. upto 28.02.2014 and terminated on 19.07.2019 Sr. Different Milestones Timelines as New Date when GMB No. (None of which have been per LOI timelines as inquired from achieved) (Pg.25) proposed the Petitioner by about achieving Petitioner the milestones.
vide letter dated 08.10.2014 (Pg.132) 1 Formation of Special 30.11.2012 (i) 10.02.2016 Purpose Vehicle (within 3 (ii) 13.07.2016 months) (iii) 27.09.2017 2 Execution of Joint Equity 30.11.2012 (i) 02.06.2015 Shareholders' Agreement (within 3 (ii) 18.06.2015 months) 3 Submission of detailed 30.08.2013 March 2015 22/23.03.2018 project report (within 12 (46) months) revised on 08.10.2018 (146) Page 29 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 4 Application to be made for 28.02.2013 22/23.03.2018 environment clearance (within 6 months) 5 Obtaining environment 28.02.2014 December 22/23.03.2018 clearance (within 18 2015 months) 6 Achieving financial closure 28.02.2014 December 22/23.03.2018 (within 18 2015 months) List of communications whereby Petitioner sought extension of LOI dated 30.08.2012 Sr. Date Particulars No. 1 16.08.2013 Petitioners sought extension of LOI by 1 year.
2 08.10.2014 Petitioner sought for another extension of LOI with following extended timelines for: (i) submission of DPR - March, 2015; (ii) obtaining environment clearance - December 2015; and (iii) achieving financial closure - December 2015.
3 26.02.2016 Petitioner sought extension for the LOI, while conveying that it has appointed the consultant for having a consortium partner for the project.
4 07.10.2017 Petitioner sought extension for LOI till 31.12.2019 for having a suitable consortium partner.
5 28.11.2017 Petitioner reiterated his request for extension of LOI till 31.12.2019 6 28.03.2018 Petitioner requested an extension of LOI for further period of 2 more years i.e. until December 2019.
7 02.04.2018 Petitioner requested to extend LOI for further period of 2 years i.e. till December 2019.
8 07.05.2018 Petitioner requested for extension of LOI for further period of 2 years i.e. till December 2019.
9 12.07.2018 Petitioner requested for extension of LOI.
10 06.09.2018 Petitioner requested for extension of LOI.Page 30 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022
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26. At this stage, we may also look into the decision of the Supreme Court in the case of Dresser Rand S.A. vs. M/s.Bindal Agro Chem Limited and another, AIR 2006 SC 871, more particularly, the observations made in paragraphs 33 and 34 "33. Clause 'C' of Letters of Intent provides that the Purchase Order shall be subject to the "General Conditions of Purchase" included in the inquiry, as amended by DR's comments thereto, Revision 4 dated 10.6.1991". Therefore, the General Conditions of Purchase which contains the arbitration clause, is not made a part of the Letters of Intent nor are the Letters of Intent made subject to the General Conditions of Purchase. The Letters of Intent merely provide that if and when the purchase order is placed, the purchase order will be subject to the General Conditions of Purchase, as modified by Revision No.4. Therefore, the point of time at which the General Conditions of Purchase will become applicable, is the point when the purchase order is placed and not earlier. Consequently, Clause 27.4.2 of the General Conditions of Purchase containing the arbitration clause would become applicable and available to the parties only when the purchase order was placed and not earlier. The term 'purchase order' has a specific meaning and connotation. The purchase order is the "agreement entered into between BINDAL and the prospective supplier as recorded in the purchase order form (prepared in the form of Attachment-VII to the General Conditions of Purchase) signed by the parties, including all Attachments and annexures thereto and all documents incorporated by Page 31 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 reference therein together with any subsequent modifications thereof in writing." Admittedly, no such purchase order was placed by either BINDAL or any one authorized by BINDAL. It is also evident from Clause (I) of the Letters of Intent that the purchase order was to be issued simultaneously with the Letter of Credit. Clause (M) made it clear that the Letters of Intent were being issued subject to necessary approvals being given by the Authorities of the Indian Government. These provisions clearly indicate that the Letters of Intent were only a step leading to purchase orders and were not, by themselves, purchase orders. Therefore, issue the Letters of Intent by KGK, assuming that it was done on behalf of BINDAL, did not mean that the General Conditions of Purchase which contains the provision for arbitration became a part of the Letters of Intent or became enforceable.
34. It is now well-settled that a Letter of Intent merely indicates a party's intention to enter into a contract with the other party in future. A Letter of Intent is not intended to bind either party ultimately to enter into any contract. This Court while considering the nature of a Letter of Intent, observed thus in Rajasthan Co-op. Dairy Federation Ltd. vs. Maha Laxmi Mingrate Marketing Service P. Ltd. [1996 (10) SCC 405] :
"... The Letter of Intent merely expressed an intention to enter into a contract. There was no binding legal relationship between the appellant and Respondent 1 at this stage and the appellant was entitled to look at Page 32 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 the totality of circumstances in deciding whether to enter into a binding contract with Respondent 1 or not."
It is no doubt true that a Letter of Intent may be construed as a letter of acceptance if such intention is evident from its terms. It is not uncommon in contracts involving detailed procedure, in order to save time, to issue a letter of intent communicating the acceptance of the offer and asking the contractor to start the work with a stipulation that the detailed contract would be drawn up later. If such a letter is issued to the contractor, though it may be termed as a Letter of Intent, it may amount to acceptance of the offer resulting in a concluded contract between the parties. But the question whether the letter of intent is merely an expression of an intention to place an order in future or whether is a final acceptance of the offer thereby leading to a contract, is a matter that has to be decided with reference to the terms of the letter. Chitty on Contracts (Para 2.115 in Volume 1- 28th Edition) observes that where parties to a transaction exchanged letters of intent, the terms of such letters may, of course, negative contractual intention; but, on the other hand, where the language does not negative contractual intention, it is open to the courts to hold the parties are bound by the document; and the courts will, in particular, be inclined to do so where the parties have acted on the document for a long period of time or have expended considerable sums of money in reliance on it. Be that as it may."
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27. At this stage, we deem fit to reproduce the entire LOI dated 30th August 2012 :
"To :
Mr.Dhruv Batra Director Cargo Motors Private Limited 1/9B, Jindal House, Asaf Ali Road, New Delhi-110002.
Sub: Letter of Intent (LOI) for development of a Greenfield Port at Village Nargol; Dist : Valsad.
1. This is in reference to the Proposal submitted by M/s.Cargo Motors Private Limited ("CMPL" or the "Lead Promoter") in consortium with M/s. Amarillis Limited, a wholly owned subsidiary of Israel Port Company (the "Consortium") by the Proposal Due Date (20 th September, 2011) in response to the Request for Proposal (RFP) Document released by Gujarat Maritime Board ("GMB") on 21st April, 2011 and subsequent addendums and clarifications issued by GMB.
2. The aforesaid Proposal was considered and evaluated by the bid evaluation committee constituted by GMB for this purpose; where the consortium was adjudged to be the Preferred Bidder. The proposal has been approved by Government of Gujarat through Ports & Transport Department memorandum no.WKS-102012-G-49-GH-1 dated 29th June 2012. Accordingly, we are pleased to convey that the consortium has been selected as the Page 34 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 Successful Bidder for Development of Port at Nargol on Build-Own-Operate-Transfer (BOOT) basis.
3. This letter is intended to convey GMB's acceptance of your proposal, subject to the terms & conditions specified in the RFP Document and the Draft Model Concession Agreement (DMCA). Accordingly, the Concession Agreement for the project may be signed between GMB and the proposed Special Purpose Vehicle (SPV) to be formed by the consortium members, whereby the Government of Gujarat (GOG) will be the confirming party and changes that may be incorporated by GOG, without prejudice to the rights of GMB to add, amend and alter conditions. The Concession Agreement will be signed after the approval of DPR. For the purpose of abundant clarity, while the acceptance of the proposal is subject to the terms as set out in the RFP document as a whole, some of the important conditions mentioned in the RFP, DMCA and the consortium's proposal are enumerated below:
a) According to the amended clause 2.14.1(a) of the RFP, the Port at Nargol shall be an All Weather Direct Berthing Port. A minimum of 3 berths (each capable of handling a panamax size vessel minimum); i.e. 2 container berths and 1 multipurpose berth, along with provision of 2 breakwaters shall be provided in the Phase-I.
b) According to clause 3.5.2(b) of DMCA, the consortium shall submit the application for all the environment clearances for the purpose of the Project within 6 months of the issue of LOI.Page 35 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022
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c) The consortium as per the proposal has quoted "0" (zero) Year Concessional Waterfront Royalty Period and offered to pay a premium of 171% (one hundred seventy one per cent) on Full Waterfront Royalty rates prescribed by GMB in the RFP from the date of Commencement of Operations.
d) According to clause 2.14.2 (2) of RFP and the proposal submitted by the consortium, it is clear that the Land Acquisition requirement for development of port facilities in Phase-I of the project is 'Nil'.
e) According to clause 7.2 (b) of DMCA, the Lead Promoter shall maintain a minimum interest of 26 % in the proposed SPV until completion of Two years from the date of commercial operation of the Project or till the completion of seven years from the Effective Date; whichever is later.
f) According to clause 7.2 (c) of DMCA, the combined share-holding of Key Promoters in the proposed SPV shall not be less than 51% for a period of two years from the date of commercial operation of the project or a period of seven years from the Effective Date; whichever is later.
g) An acquisition of more than 10% direct or indirect interest in the consortium/SPV by any person (either alone or together with its associates) shall require and shall be subject to the prior approval of the GMB. Such approval may be withheld if, inter alia, such acquisition is in the opinion of the GMB, prejudicial to national interest.
Page 36 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 h) Any change in the ownership of SPV
company/Consortium by way of equity sale/transfer/ amalgamation/merger/demerger etc., which has direct or indirect bearing on the ownership pattern of the SPV/Consortium shall require and shall be subject to prior approval of GOG/GMB.
i) According to clause 6.3 of the DMCA, the responsibility of all applicable clearances at both the Central and State Government levels for the performance of its rights and obligations under the RFP/DMCA lies with the consortium; while the GMB/GOG shall make reasonable efforts to assist the consortium in obtaining these clearances.
j) The GMB/GOG is reviewing the clause no.11.8 & 11.9 of the DMCA and desires to reduce the distance as well as number of years for which exclusivity is granted therein. The decision on the same shall be binding on the Licensee.
4. You are requested to take following actions on receipt of this Letter of Intent:
a) Send a copy of this letter duly signed by your authorized signatory within thirty (30) days from the date of issue of this letter as a token of your acknowledgement and acceptance of this LOI, failing which, this LOI shall be deemed to be automatically cancelled without further notice or liability of any kind on the part of GMB.Page 37 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022
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b) Submit within 4 weeks from the date of this letter, Development Guarantee for a sum of Rs.17,50,00,000/- (Rupees Seventeen Crore Fifty Lakhs only) to GMB in the form of a bank guarantee from a Nationalized bank in India, in the form as set forth in Appendix-I ("Development Guarantee").
c) Send the details of share holding of the SPV to develop this project within 3 months from the date of issuance of this letter to GMB along with Joint equity share holder's agreement.
d) Ensure that the Detailed Project Report (DPR) is prepared and submitted to GMB within a period of 12 months from issue of this Letter of Intent. To this end, you are expected to provide all the details and various milestones in the preparation of DPR; submit and discuss the Interim Reports with GMB, so that necessary changes can be incorporated in final DPR. You are also required to submit monthly progress reports to GMB for status update and submission to Government of Gujarat. The scope of the DPR shall include but not be limited to scope of work indicated in Appendix-II of this LOI.
e) Ensure that the Environmental Clearance and the Financial Closure of the Project is achieved within 18 months of this Letter of Intent.
5. Validity of LOI Page 38 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021
a) This Letter of Intent shall remain valid till 18 months from the date of issue of this LOI; unless renewed or cancelled by GMB.
b) Kindly note that in case GMB does not receive the duplicate copy mentioned herein duly signed, or you fail to comply with any of the conditions mentioned in clause 4 (a) to (e) above, GMB may cancel the Letter of Intent by written notice to Lead promoter.
c) Upon such notice for cancellation of LOI being issued, this Letter of Intent shall be deemed to be automatically cancelled without further notice or liability of any kind to Gujarat Maritime Board.
Yours sincerely, Sd/-
Vice Chairman and Chief Executive Officer"
28. We are of the opinion that the observations in the case of Dresser Rand S.A. (supra) would be squarely available in the case on hand wherein the Supreme Court held that the LOI merely indicates a party's intention to enter into a contract with the other party in future. An LOI is not intended to bind either party ultimately to enter into any contract. It is no doubt true that the LOI may be construed as a letter of acceptance if such intention is evident from its term. It is not uncommon in Page 39 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 contract involving a detailed procedure in order to save time to issue an LOI indicating the acceptance of the offer and asking the contractor to start with the work with the stipulation that a detailed contract would be drawn by later. If such a letter is issued to the contractor, though it may be termed as an LOI, it may amount to acceptance of the offer resulting into a concluded contract between the parties.
29. We do not propose to go any further in the aforesaid regard though this issue was touched in the course of the hearing of this matter.
30. It is not in dispute that as on date the writ-applicant has no working partner. Indisputably, the writ-applicant has failed to form the Special Purpose Vehicle. When confronted in this regard, the learned senior counsel appearing for the writ- applicant submitted that since the writ-applicant has been successful in obtaining the environment clearance, he may be in a position to get a working partner in a short period of time. We do not want anything to be left now to be done in future. We are saying so, because the Board issued a fresh tender notice almost three months back. We are informed that the Board has received many bids and those are to be opened now any time in the near future. The Board has taken a decision to go afresh. We should not come into the way of the Board in undertaking a fresh exercise. We can understand the predicament of the writ- applicant also. We do not want to say for a moment that the writ-applicant did nothing. The writ-applicant might have tried in his own way, but ultimately failed to deliver. It has now been almost nine years. We do not find any arbitrariness in the Page 40 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022 C/SCA/12877/2019 JUDGMENT DATED: 28/09/2021 decision of the Board to terminate the LOI. The action cannot be termed as unfair or without any reason or taken capriciously or at pleasure, without adequately determining the principle. It cannot be said that the impugned action merely implies depending upon the will alone rather than acting according to the reason or judgment.
30. In view of the aforesaid, this writ-application fails and is hereby rejected. The Civil Application stands disposed of.
(J. B. PARDIWALA, J.) (VAIBHAVI D. NANAVATI, J.) /MOINUDDIN Page 41 of 41 Downloaded on : Sun Jan 16 19:20:08 IST 2022