Bombay High Court
P & O Australia Ports Pty Limited And Ors. vs Board Of Trustees Of Jawaharlal Nehru ... on 28 January, 2003
Author: A.P Shah
Bench: A.P Shah
JUDGMENT Shah A.P., J.
1. This writ petition under Article 226 of the Constitution of India seeks to challenge the global tender notice inviting pre qualification bids for the redevelopment of the Bulk Terminal into a Container Terminal at Jawaharlal Nehru Port (JNP) on a Build, Operate and Transfer (BOT) basis for a licence period of 30 years. Clause 1.3 of the said tender notice disqualifies the petitioners and their associates and interconnected companies to participate in the bid. The petitioners are seeking direction or order in the nature of mandamus directing the 1st respondent Jawaharlal Nehru Port Trust (JNPT) to delete Clause 1.3 and permit the petitioners and their associates or interconnected companies to participate in the bid. In the alternative a direction is sought that the terms and conditions of the new bid for conversion of the existing bulk terminal into a container terminal should be no different from the terms and conditions on which the petitioners are required to operate the present private container terminal facility at JNP. The facts and circumstances leading to this petition stated briefly are as under.
2. The 1st petitioner company is registered under the laws of Australia and carries on business worldwide as Port and Terminal Operators. The 1st petitioner is a holding company of the second petitioner in which 95% of the equity is beneficially owned by the 1st petitioner and 5% of the equity is owned by other parties. The 1st respondent JNPT is a body corporate constituted under the Major Port Trusts Act, 1963. In December 1995 the 1st respondent invited bids for operating container terminal at JNP for a period of 30 years on BOT basis and the petitioners bid being highest was accepted and licence agreement was entered into between the 2nd petitioner and 1st respondent on 3-7-1997. The licence agreement provided concession to the 2nd petitioner to operate container terminal for period of 30 years, at the end of which entire assets would be transferred back to the 1st respondent free of cost. JNP has two terminals, container terminal and bulk terminal. In November 2001 the 1st respondent took a decision to redevelop the bulk cargo terminal on BOT basis and pursuant thereto pre qualification bids for redevelopment of bulk dated 28th October, 2002 on BOT basis for a license period of 30 years. Clause 1.3 of the said invitation reads as follows :
"The Port is desirous of entrusting the project of redeveloping of the Bulk Terminal to a Container Terminal, on BOT basis, to another licensee other than the existing private terminal operator (licensee) at JNPT i.e. Nhava Sheva International Terminal Container (NSICT) Ltd. or their associates, P & O Ports or their associates, interconnected or the sister companies of either of them."
Prior to the publication of the above advertisement by letter dated 25th November 2002 by Chairperson of the 1st respondent conveyed the decision of the Board of Trustees of the JNPT to the petitioners that to avoid concentration of control with one private party and to increase competition and efficiency and to prevent monopoly in public interest, the Board has decided to exclude the petitioners from bidding for the new container terminal. The petitioners contend that the decision of the 1st respondent in effecting the blacklisting of the companies and associates who are interconnected with the 1st petitioner from participating in the bid on the specious premise of preventing monopolies by a single private party is a bogey and merely an eye wash. There is no established or declared policy of the respondents that holding of one concession shall exclude a private operator from the grant of any more concessions in the future and the respondents have simply adopted an ad hoc Rule to exclude the petitioners for extraneous reasons from the bid for the new terminal. At the same time other companies like Maersk Port, Singapore Port Authority, and Dubai Port Trust Authority are allowed to bid though those companies have been operating container terminals in different ports in India. It is alleged that exclusion of the petitioners is solely due to the bias of the Secretary of the Ministry of Shipping who was previously holding the post of Chairman of JNPT for having faced international ridicule and criticism for the 1st respondent's inefficiency in comparison to the truly international performance of the petitioners despite being in the same or similar environment and circumstances in all respects. Therefore, it is contended that the petitioners have been treated with an unequal hand and hence the action of the respondent No. 1 is violative of Articles 14 and 19 of the Constitution of India. The petitioners have claimed that they are the most qualified potential bidders to be considered for entrusting the job inasmuch as the petitioners have a proven track record and has valuable experience in the Indian context and are pioneers in bringing foreign direct investment into the Ports Sector in India and attracting large mainline ships to the Ports of Jawarharlal Nehru Port and Chennai Port, operated by the 2nd petitioner. The impugned action of excluding the petitioners is thus per se discriminatory and arbitrary.
3. In resisting the petition the Ist respondent JNPT and the 2nd respondent Union of India have filed their respective affidavits. It is the case of the respondents that the petitioners were specifically excluded from participating in the said tender in view of the policy of the Government of India to prevent creation of private monopolies in ports sector. According to the respondents the decision to exclude the existing operator of container terminal at JNP was taken at the level of Ministry of Shipping in consultation with the Ministry of Law. The petitioners are handling container terminal at Karachi and Srilanka and are also handling container terminals at JNP and Chennai Ports and are already controlling over 48% of the container traffic in India. The said two existing terminals at JNP and Chennai are the biggest container terminals in the country. If the petitioners are permitted to operate in the new container terminal also, they will have virtual monopoly of the container traffic in the entire country which is not in public interest. The Mumbai and Nhava Sheva Ship Agents Associates (MANSA), and Container Shipping Lines Association of India (CSLA) have also expressed concern regarding the increased tariff charged by the petitioners at their container terminal at JNP and about the possibility of petitioners creating monopoly in container terminals in the country. Moreover it is stressed that the decision to give new terminals to different operator is in accord with the international practice. The 1st petitioner i.e. P & O Ports itself was excluded from bidding for third container terminal in Port of Melbourne as it was perceived that it would gain a dominant position. Similarly, privatization of a container terminal in Port Klang in Malaysia was done to create two separate operators for the West Port and the North Port as a conscious decision of the Government to encourage competition. In similar vein the team Bhabange Port Berth in Thailand, when taken up for privatization, was split up between five independent operators to promote competition. Therefore it is in public interest to ensure that there is a spread of risk brought about by having more than one operator and not allowing concentration of work in one operator only. It is the duty of the respondent No. 1 to ensure promotion of healthy competition and give opportunity to other operators. If the petitioners are permitted to bid and if they are successful in the bid it would lead concentration of large chunk of container operation in India and especially at JNP. Therefore, the policy decision was taken not to permit the petitioner and their associate companies to bid with a view to promote intra port competition and to enhance the efficiency for better services.
4. In order to appreciate the rival contentions of the parties it would be necessary to give brief background. Prior to introduction of the Major Port Trusts Act, 1963, ports were governed by the Indian Ports Act, 1908 and in the schedule annexed to the said Act different ports were listed which came within the jurisdiction and control of the respective State Governments within whose territories these ports are situated and all were subject to the provisions of the Indian Ports Act, 1908. By enacting the Major Port Trusts Act, 1963 the management and control of the major ports is vested in the hands of the Trustees appointed by the Government. Section 42(1) of the Major Port Trust Act provides for various services to be rendered by the port and section 42(3) provides that all such services may also be permitted to be rendered by a private party, provided that the private party will not charge for his services in excess of the tariff rates determined and published by the Tariff Authority for Major Ports (TAMP). In 1990 the Central Government introduced a policy or privatization and private participation in various fields of activities, which slowly percolated into the ports sector too. On 26th October, 1996 the Central Government issued guidelines to be followed by the Major Port Trusts and for private sector participation in major ports. Preamble of the said policy states that major expansion is required in the port infrastructure section in the country in order to handle the sea borne traffic on account of increasing foreign and coastal trade. In order to mobilize substantial resources required for the purpose and in order to improve efficiency, productivity and quality of service as well as to bring in competitiveness in port services the port sector has been thrown open to private sector participation. This is in consonance with the general policy of liberalization/globalization of economy of Government of India. It is expected that private sector participation would result in reducing the gestation period for setting up new facilities help bring in the latest technology and improved management techniques. The guidelines then enumerates various areas for participation/investment by the private sector including construction and operation of container terminals. Para 4 of the guidelines contain regulatory framework and is reproduced below :
"4. Regulatory Framework The Port will continue to maintain its regulatory role under Major Port Trusts Act, 1963. However, for purpose of fixing and revising port tariffs, an Independent Tariff Regulatory Authority will be set up. The tariff so fixed would be a ceiling and both the private entrepreneurs and the port would be free to charge less than such notified tariff. Till such a Regulatory authority is set up, the present procedure, namely, that of Ports Fixing the tariffs with the approval of Central Government will continue.
The port should ensures that private investment does not result in the creation of private monopolies, and that private facilities are available to all users on equal and competitive terms. However, in the case of berths constructed or taken on lease by private entrepreneurs, they would be permitted to give priority berthing to their own ships and they would service other ships on a first come first served basis.
The private entrepreneurs will be obliged to protect the national interests like national security whoever necessary and required and also honour priority berthing orders of the Central Government in this regard. The private entrepreneurs will also abide by the various statutory requirements on the protection of the environment anti pollution measures, safety, conservancy, etc. and also abide by the directives issued by the Government/Port in this regard from time to time.
The ports will with the approval of the Central Government take steps to frame regulations under relevant sections of Major Port Trust Act consistent with these guidelines to enable sector participation in Port Sector.
Till such regulations are framed, cases will continue to be governed by these guidelines."
Para 7 of the guidelines contains general tender conditions and procedure and provides that private participation will be on the basis of open competitive bidding. It is further provided that Tariff Regulatory Authority to be set up may fix a ceiling tariff and leave the private entrepreneur free to charge upto the ceiling at the rates to be notified by the entrepreneur. If the Tariff Regulatory Authority is satisfied a suitable periodic increases in tariff may be permitted on justified grounds. At the time of revision of tariff, again the revised tariff would only be a ceiling with the Port and the entrepreneur having the freedom to charge below that tariff. In the light of the policy decision the Major Port Trust Act has been amended by inserting Chapter VA for constitution and incorporation of Tariff Authority for Major Ports.
5. On 19th July, 2002 the Board of Trustees of the JNPT passed the resolution proposing to convert the bulk terminal of JNPT into a container terminal on BOT basis by inviting global tenders, subject to approval of the Government and further subject to the possibility of excluding the present private container terminal operator from bidding for this project. The board thereafter passed the following resolution on 7th September 2002:
"RESOLVED THAT the proposal to set up a Committee of Trustees consisting of the Chairman and Dy. Chairman, JNPT Shri ER Bhau, Shri S.S. Rangnekar, Shri V. Sridhar, Dr. Shanti Patel and Shri Arun Sathe, for deciding on the equity share of JNPT in a joint venture with a BOT operator, be and is hereby approved.
RESOLVED FURTHER THAT both at RFQ and REP stages, either in the joint venture with BOT proposal or BOT proposal, the advertisements should make it explicitly clear that the existing private operator at the JNPT viz. NSICT Ltd. or their associates. P & O Ports, or their associated or inter connected or sister companies, be specifically disentitled to participate in the bid, and the Chairman is authorized to suitably notify NSICT of the decision of the Board in advance, before the advertisement appears be and is hereby approved for the following reasons:
i) representations have been received by the Government from the Mumbai and Nhava Sheva Steamber Agents Association with copies to the Container Shipping Lines Association (India) Federation of Steamer Agents Association of India, the Bombay Chamber of Commerce and Industry, the Indian Merchants Chamber, and the Confederation of Indian Industry that no "private monopoly" is allowed to be developed in any port/terminal and that the Government should ensure that there are minimum two operators.
ii) the said association has sought a meeting in this behalf with the Hon'ble Minister for Shipping alongwith the Container Shipping Lines Association (India) (CLIA).
iii) the Board of Trustees is of the opinion that it is necessary to find a new private sector operator for the proposed conversion of the built terminal into container terminal on BOT/BOT with Joint Venture basis, other than NSICT who are already controlling Chennai Container Terminal and NSIC Terminal and adding the current terminal they would control in excess of 30% of the total container traffic to and from India; and
iv) the Board of Trustees is of the opinion that it is necessary not to give control to the entire container handling to a single private party i.e. NSICT and that it is essential to provide competition not only to increase efficiency in services and avoid concentration of control with one party but also to keep the cost of handling at the lowest, to make import/export trade economical and to avoid a situation of monopoly and therefore to prevent monopoly and in general public interest and/or any or their inter connected companies subsidiary or associate or sister companies in the proposed invitation to bid."
The above proposal was forwarded to the Central Government and was approved vide letter dated 22nd October, 2002. The Central Government has specifically permitted exclusion of the present container terminal operator as requested by the Board of Trustees.
6. The law relating to award of a contract by the State, its Corporations and bodies acting as instrumentalities and agencies of the Government has been settled by a series of decisions of the Supreme Court. In a recent decision in Air India v. Cochin International Airport Ltd., 2000(1) SCALE 346 the legal position is summarised as follows :
".....The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision considerations which are of a paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept the offer even though it happens to be the highest or the lowest. But the State, its Corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitratily. Though that decision is not amenable to judicial review, the Court can examine the decision making process and interfere if it is found vitiated by mala fide, unreasonableness and arbitrariness. The State, its corporations, instrumentalities and agencies have in public duty to be fair to all concerned. Even when some defect is found in the decision making process the Court must exercise its discretionary power under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The Court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the Court should intervene."
7. In Delhi Science Forum and others v. Union of India and another, the Court observed that many administrative decisions including decisions relating to awarding of contracts are vested in a statutory authority or a body constituted under an administrative order. Any decision taken by such authority or a body can be questioned primarily on the grounds; (i) decision has been taken in bad faith; (ii) decision is based on irrational or irrelevant considerations; (iii) decision has been taken without following the prescribed procedure which is imperative in nature. The Court observed that the onus to demonstrate that such decision has been vitiated because of adopting a procedure not sanctioned by law, or because of bad faith or taking into consideration factors which are irrelevant, is on the person who questions the validity thereof. This onus is not discharged only by raising a doubt in the mind of the Court, but by satisfying the Court that the authority or the body which had been vested with the power to take decision has adopted a procedure which does not satisfy the test of Article 14 of the Constitution or which is against the provisions of the statute in question or has acted with oblique motive or has failed in its function to examine each claim on its own merit on relevant considerations. The Parliament has adopted and resolved a national policy towards liberalization and opening of the national gates for foreign investors. The question of awarding licences and contracts does not depend merely on the competitive rates offered; several factors have to be taken into consideration by an expert body which is more familiar with the intricacies of that particular trade. While granting licences a statutory authority or the body so constituted should have latitude to select the best offers on terms and conditions to be prescribed taking into account the economic and social interest of the nation. Unless any party aggrieved satisfies the Court that the ultimate decision in respect of the selection has been vitiated, normally courts should be reluctant to interfere with the same.
8. In the celebrated case of Tata Cellular v. Union of India, the Supreme Court while laying down para meters of judicial review in the matter of exercise of contractual powers exercised by the Government bodies observed :
"93. The duty of the Court is to confine itself to the question of legality. It concern should be;
1. Whether a decision making authority exceeded its powers?
2. committed an error of law.
3. committed a breach of the Rules of natural justice.
4. reached a decision which no reasonable Tribunal would have reached or
5. abused its powers.
94. Therefore, it is not for the Court to determine whether a particular policy or particular decision taken in the fulfilment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under :
i) Illegality this means the decision maker must understand correctly the law that regulates his decision making power and must give effect to it.
ii) Irrationality, namely, Wednesbury unreasonableness.
iii) Procedural impropriety."
The Court cited with approval following passage in the speech of Lord Diplock in Council of Civil Service Unions v. Minister for the Civil Service, 1985(1) A.C. 374.
"By "irrationality" I mean what can now be succinctly referred to as "Wednesbury unreasonableness", Associated Provincial Picture House v. Wednesbury Corporation, 1948(1) K.B. 223 (233). It applies to a decision which is so outrageous in its defiance of logic of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at."
9. Mr. Chidambaram, learned Counsel appearing for the petitioners fairly conceded that in the light of the decided cases some of which are quoted above the scope for judicial review in the matter of awarding contracts by State authorities is limited. He however, submitted that there is no such policy nor can there be any such policy to exclude private operators. He submitted that the policy nowhere mentions that holding one concession shall exclude a private operator from grant of any more concessions in future. If that be the policy of the Central Government then how the petitioners have been permitted to bid in respect of Mumbai Port which is adjoining JNP. On the other hand other companies which have been allowed to participate in the bid are also given concession in different ports in India. Therefore, according to Mr. Chidambaram the policy that "the port should ensure that private investment does not result in the creation of private monopolies, and that private facilities are available to all users on equal and competitive terms" can only mean that all users shall be treated equally and no user shall be treated unequally or unfairly. Further according to him this objective is achieved by incorporating specific term in the licence agreement requiring the licensee to manage and operate the container terminal on a common user basis open to all and to refrain from indulging in any unfair or discriminatory practice against any user of the container terminal or persons desiring to avail themselves of the services by the container terminal. The learned Counsel submitted that the policy is aimed at monopolistic practice and not monopoly. By section 49 of the Major Port Trust Act the scale of rates and conditions for use of the property of belonging to the Board are decided by TAMP and the licensee have no say on the price. In the absence of power of controlling prices question of creating any monopoly would not arise. Reliance was placed on the decision of the US Supreme Court in United States of America v. E I DU PONT DE NEMOURS & Company, 351 US 377, and decisions of the Delhi High Court in Colgate Palmolive (India) P Ltd. v. Union of India and others, 1997 Company Cases 456 and Jiyajeerao Cotton Mills Ltd. and others v. Deputy Secretary to GOI and others, 1989 Company Cases 252. Relying upon these decisions the learned Counsel would submit that essential feature of monopoly is the existence of a power to control or fix prices and to exclude competition to the detriment of public interest and since in view of the provisions of the Major Port Trust Act and establishment of TAMP the operators have no power to fix price allowing the existing operators to participate in the bid would never result in monopoly. In any event, the Counsel urged that the State authorities while entering into contracts or issuing licences or concessions cannot act arbitrarily at its sweet will but its action must be in conformity with standard or norm which is not irrational, unreasonable or arbitrary but must be based on some principle. In this connection he referred to the decisions in M/s. Dwarkadas Marfatia and Sons v. Board of Trustees, Bombay Port, and Srilekha Vidyarthi v. State of U.P., . The learned Counsel submitted that there were impelling reasons to exclude the existing operators from bidding for the new terminal, and hence such action must be held to be arbitrary, capricious and discriminatory without being informed by reasons. The so called policy, if there be any, cannot be supported by any rationale or logic and would suffer from the vice of arbitrariness, perversity and irrationality.
10. The argument of Mr. Chidambaram indeed sounds plausible at first blush but on closer scrutiny does not hold water. The interpretation put by the learned Counsel on the policy cannot be accepted. The policy in clear terms lays down that private investment should not result in the creation of private monopoly and in our view for good reasons. It is not correct to say that monopoly is related to only price factor because allowing one single party to operate entire business would naturally result into creation of monopoly and would completely rule out competition. The policy strives at promoting competition and increasing efficiency in the ports. This is apparent from the preamble of the policy statement. If submission of Mr. Chidambaram is accepted the very purpose of the policy would be defeated as this would lead to concentration of control in one single operator. Whether grant of licence would create monopoly will depend upon the facts and circumstances of each case and decision will have to be taken in national interest and unless such action is demonstrably capricious or arbitrary or based on extraneous consideration the Court cannot strike it down. There is no dispute that the petitioners are controlling 48% container business in India though according to the petitioners their container capacity is only 27%. It is equally undisputed that on the East coast right from Port Quasim to Sri Lanka, petitioners are handling container business. The policy intends to prevent creation of monopoly. Therefore the policy in terms require the Board to ensure that the container handling business is not concentrated in the hands of one party and therefore, it is not correct to say that the policy does not allow exclusion. Although there is no clear evidence of any international practice not to permit new terminal to be operated by same operator, it is seen from the material placed on record that many important ports around the world are operated by more than one container terminal operator. On behalf of the respondents and intervener MANSA it is contended that the petitioners have increased rates both at JNP and Chennai and in Chennai the rate are increased by nearly 60%. It is also contended that the rates charged by the petitioners are excessive compared to the rates in other international ports. In our opinion it is not necessary for this Court to enter upon any exercise for finding out the wisdom of the policy decision of the respondents. Unless it is demonstrated that the policy decision is capricious or arbitrary and not informed by any reasons whatsoever, it is not permissible for this Court to interfere with such policy decision. In the facts of the present case we are satisfied that the decision to exclude the petitioners is based on national interest which is the paramount consideration. Upon consideration of the relevant material, the respondents have come to the conclusion that it is not desirable to give control of the entire container handling to one single private party and it is essential to provide competition not only to increase the efficiency in the service and avoid concentration of control in one single party but also to cut the cost of handling at the lowest to make import export trade economical and to avoid a situation of monopoly existing operator should not be permitted or allowed to bid for second terminal. Such a decision cannot be said to be in any way arbitrary or discriminatory.
11. It would be appropriate to refer to the decision of two Judge Bench of the Supreme Court in Krishnan Kakkanth v. Government of Kerala and others, where the decision of the Kerala Government to exclude private dealers was upheld by the Supreme Court. In that case a question arose as to whether the circular of the Government of Kerala directing that only KAICO and RAIDCO would arrange supply of pumpsets in eight northern districts of the State and in the remaining districts, supply will be effected by private dealers alongwith KAICO and RAIDCO offends Articles 14 and 19(1) of the Constitution. The Court categorically rejected the submission that circular offends the fundamental right for trading activities of the dealers in pumpsets in the State of Kerala as guaranteed under Article 19(1)(g) of the Constitution. As regards reasonableness of restrictions the Court observed :
"27. The reasonableness of restrictions is to be determined in an objective manner and from the stand point of the interests of general public and not from the standpoint of the interests of the persons upon whom the restrictions are imposed or upon abstract consideration. A restriction cannot be said to be unreasonable merely because in a given case, it operates harshly and even if the persons affected be petty traders, Mohd. Hanif v. State of Bihar. In determining the infringement of the right guaranteed under Article 19(1), the nature of right alleged to have been infringed, the underlying purpose of the restrictions imposed, the extend and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the prevailing conditions at the time, enter into judicial verdict. Laxmi Khandsari v. State of UP, D.K. Trivedi and Sons v. State of Gujarat and Harakchand Rtanchand Bonthia v. Union of India.
29. It may be indicated that where a right is conferred on a particular individual or group of individuals to the exclusion of others, the reasonableness of restrictions has to be determined with reference to the circumstances relating to the trade or business in question. Canalisation of a particular business in favour of specified individual has been held reasonable by this Court where vital interests of the community are concerned or when the business affects the economy of the country......"
As regards plea of unreasonableness or arbitrariness based on Article 14 of the Constitution the Court observed :
"To ascertain unreasonableness and arbitrariness in the context of Article 14 of the Constitution, it is not necessary to enter upon any exercise for finding out the wisdom in the policy decision of the State Government. It is immaterial whether a better or mere comprehensive policy decision could have been taken. It is equally immaterial if it can be demonstrated that the policy decision is unwise and is likely to defeat the purpose for which such decision has been taken. Unless the policy decision is demonstrably capricious or arbitrary and not informed by any reason whatsoever or it suffers from the vice of discrimination or infringes any statute or provisions of the Constitution, the policy decision cannot be struck down. It should be borne in mind that except for the limited purpose of testing a public policy in the context of illegality and unconstitutionality, courts should avoid "embarking on uncharted ocean of public policy."
12. In the instant case we are satisfied that decision to exclude the petitioners from participating in the bid for new container terminal was taken in public interest. In our view, the impugned tender notice does not offend Article 14 of the Constitution. Petition is dismissed.