Essar Bulk Terminal Limited & Anr. vs State of Gujarat & Ors.

Leave granted.,,,,

The present appeal involves a challenge to a notification dated 18th January, 2016, issued under Section 5 of the Indian Ports Act, 1908, by",,,,

which the State Government of Gujarat expanded the port limits of Hazira port. It is the case of the Appellants before us that by doing so, the",,,,

Appellants have been affected because they have spent huge monies on lands reclaimed by them, which would be directly affected by the",,,,

expansion of the aforesaid port limits.,,,,

The brief facts necessary for determining the questions that arise in this appeal are as follows.,,,,

In 1994, the parent company of the Appellants entered into an agreement with the Gujarat Maritime Board (hereinafter referred to as ""GMB"") for",,,,

use of a captive jetty in Magdalla port. Pursuant to a Port Policy framed by the Government of Gujarat in 1995, and a Build, Own, Operate and",,,,

Transfer (BOOT) Policy framed for private sector participation in development of the State''s ports in 1997, the GMB issued a Global Notice for",,,,

Expression of Interest for Development of Green Field Site Port Facilities, inviting bids in the name of Hazira port project. A consortium led by",,,,

Shell Gas B.V. was selected to develop, operate and maintain certain facilities on leased area in the port on a BOOT basis, together with related",,,,

LNG facilities. Pursuant to the acceptance of its bid, Shell Gas B.V. created two subsidiaries in Gujarat, namely, Hazira Port Private Limited",,,,

(HPPL) and Hazira LNG Private Limited. A concession agreement dated 22nd April, 2002 was entered into between the GMB, the State",,,,

Government and HPPL for the purpose of development, operation and maintenance of Hazira port by HPPL. A notification dated 23rd June,",,,,

2004 was issued by the State Government notifying Hazira port and setting out its limits, in exercise of powers under Section 4(2) of the Indian",,,,

Ports Act. This was carved out of the port limits of Magdalla port, which was so reduced as to exclude the aforesaid Hazira port.",,,,

Sometime in the year 2000, the Appellants had set up a shallow draft captive jetty of 456 meters at the mouth of the River Tapi, which",,,,

connected to the sea at a distance of about 7 kilometers. The initial depth of the aforesaid draft captive jetty was about 3 to 4 meters.,,,,

As many as three Memorandums of Understanding (MOU) were entered into between the Appellants, the GMB and the State Government in",,,,

the years 2007, 2011 and 2013, inter alia, for development of a RORO terminal and development of the water-front of 3000 meters. Each of",,,,

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

On 25th November, 2010, HPPL identified Adani Hazira Port Private Limited (Adani) as its sub-concessionaire, and entered into a sub-",,,,

concession agreement with Adani on the same date. On 21st July, 2014, HPPL requested the GMB for amendment/extension of its port facilities.",,,,

After entering into an MOU with Adani, dated 27th February, 2015, for exploring business opportunities, which fell through, HPPL, by its letter",,,,

dated 14th March, 2015, revised its request for amendment of port facilities, citing the need for additional back-up area, as a result of which a",,,,

much larger area than what was originally asked for was now requested. This larger area would include lands reclaimed and/or to be reclaimed by,,,,

Essar by dumping earth out of dredging the canal next to the captive jetty of the Appellants. This proposal was approved by the GMB by its,,,,

resolution dated 19th March, 2015. Meanwhile, on 7th April, 2015, Essar wrote a detailed representation to the GMB stating its objections to the",,,,

extension of port limits on various grounds. On 21st April, 2015, the State Government wrote a letter to the GMB, inter alia, asking it to examine",,,,

the aforesaid representation of the Appellants. A similar representation dated 29th May, 2015 was also made by the Appellants to the Chief",,,,

Principal Secretary of the State. By a detailed letter dated 16th July, 2015, the GMB dismissed all the objections of the Appellants. However, on",,,,

26th August, 2015, the State Government requested the GMB to reconsider the issue of extension of port facilities in its forthcoming board",,,,

meeting, and send its recommendations to the Government in relation thereto. On 28th September, 2015, the GMB passed a resolution in which it",,,,

recommended the original proposal submitted by HPPL on 21st July, 2014. However, on 5th December, 2015, the Chief Principal Secretary to",,,,

the Chief Minister circulated a note stating that the number of vessels at the port was expected to increase dramatically from 30-40 to 70-80, and",,,,

that the port limits need to be extended to accommodate customs formalities, safety etc. In view thereof, it was necessary to make adequate",,,,

facilities for anchorage of all the said vessels and that, therefore, the GMB''s resolution of 19th March, 2015 should be strictly implemented. On",,,,

11th December, 2015, the State Government then wrote to the GMB stating that the port facilities will be extended in terms of the GMB resolution",,,,

dated 19th March, 2015. Following this, the requisite notification dated 18th January, 2016, which has been impugned by the Appellants in a writ",,,,

petition before the Gujarat High Court, was then issued under Section 5 of the Indian Ports Act.",,,,

Shri Mihir Joshi, learned senior counsel appearing on behalf of the Appellants, has argued that the first proposal alone, which was sent on 21st",,,,

July, 2014, ought to have been accepted by the GMB. The second proposal for the increased area would directly impinge upon the land that was",,,,

reclaimed or to be reclaimed by the Appellants, after spending huge monies for the same. The learned senior counsel specifically stated that the",,,,

approval for the second proposal was done in great haste, within a matter of four days. He went on to add that the State Government had, by its",,,,

letters dated 1st June, 2013, recommended to the Ministry of Environment to grant CRZ clearance to Essar for the proposed expansion of port",,,,

facilities, which included additional 334 hectares of land. It was his case that the said Ministry, on 6th May, 2014, granted the aforesaid clearance,",,,,

despite which the expanded port limits would now eat into the aforesaid area, as only an area of 140 hectares out of 195 hectares, which was",,,,

reclaimed by the Appellants, could be used by the Appellants. He argued that various assurances were given and MOUs were entered into with",,,,

the Appellants, on the basis of which huge investments were made, and at the very least the doctrine of legitimate expectation would be attracted.",,,,

He attacked the notification stating that it was ultra vires Section 5 of the Indian Ports Act, which required public interest alone to be seen.",,,,

Indirectly, the extension of the limits of Hazira port would grant HPPL an extended port area without bidding, which would be contrary to the",,,,

Gujarat Infrastructure Development Act, 1999. According to him, the overlapping of area with Essar was only in the second proposal, which was",,,,

wholly arbitrarily recommended by the GMB initially approving the second proposal of 2015, and thereafter correctly approving only the first",,,,

proposal of 2014. The GMB''s resolution of 28th September, 2015 was the correct decision, which could not have been arbitrarily interfered with",,,,

by the Chief Principal Secretary of the Chief Minister, on the basis of which the impugned notification has been issued.",,,,

On the other hand, Shri Harish Salve, learned senior counsel appearing on behalf of the State of Gujarat, painstakingly took us through the Port",,,,

Policy of 1995 and the BOOT Policy of 1997. According to the learned senior counsel, since 13 berths were to be constructed, out of which 5",,,,

berths have already been constructed, a total of 1011 hectares was already allocated for port related activities to HPPL. This would be clear from",,,,

a reading of the detailed project report (DPR) of 2010, and this being the case, the expansion of port limits by the impugned notification was well",,,,

within the originally conceived area of 1011 hectares. He referred to and relied upon affidavits submitted by the State Government as well as the,,,,

GMB before the High Court, to argue that Essar''s demands for reclaimed land had nothing to do with the expansion of the limits of Hazira port.",,,,

They operated in two completely different spheres. He further went on to state that no permission under Section 35 of the Gujarat Maritime Board,,,,

Act, 1981 has been given to reclaim any land, which was a condition precedent to Essar''s demands for further reclaimed land. He also pointed out",,,,

that, being a captive port, Essar''s production was much less than what was projected and, in fact, only 30% of the cargo that it was supposed to",,,,

handle was being handled. According to the learned senior counsel, the objections to the expansion of Hazira port''s limits are completely",,,,

misconceived, inasmuch as what the Appellants really sought was for their captive port to become a commercial port by bypassing the provisions",,,,

of the Gujarat Infrastructure Development Act. In any case, the Appellants'' captive jetty was grossly underutilised and the Appellants demands for",,,,

grant of reclaimed land has nothing to do with HPPL demanding an alteration to the limits of Hazria Port, so as to cater to the increased traffic of a",,,,

commercial port open to all.,,,,

Shri Tushar Mehta, learned Additional Solicitor General appearing on behalf of the GMB, adopted the arguments of Shri Salve. In addition, he",,,,

defended the GMB''s approval dated 19th March, 2015, stating that despite the fact that the said approval came within four days of the HPPL",,,,

letter dated 14th March, 2015, this paled into insignificance as nothing followed from this. Also, according to the learned ASG, on an examination",,,,

of the official records, he found nothing in support of the GMB''s turn-around on 28th September, 2015, which accepted only the first and not the",,,,

second proposal of HPPL. According to him, finally what was done by the State Government was in public interest and for good reason.",,,,

Shri Kapil Sibal, learned senior counsel appearing on behalf of HPPL and Adani, painstakingly took us through various letters written by the",,,,

Appellants to the GMB and permissions given. According to the learned senior counsel, it was clear that from a reading of the initial proposals of",,,,

2005 and 2006, and the later proposals of the Appellants that their real aim was to conduct commercial operations on their captive jetty, which",,,,

would circumvent the need for a global tender as required by the Gujarat Infrastructure Development Act. In essence, he also submitted that as the",,,,

Appellants could claim no right or expectation of any sort and as the present petition was not a public interest litigation, the writ petition should",,,,

have been dismissed at the threshold as the Appellants could show no right or expectation of any kind. Dr. Singhvi and Shri Harin P. Raval broadly,,,,

supported the contentions of Shri Sibal.,,,,

Before dealing with the arguments of counsel, it is important to set out some of the important provisions of the relevant Acts before us.",,,,

Sections 3(9), 4 and 5 of the Indian Ports Act read as under:",,,,

3(9). ""Government"", as respects major ports, for all purposes, and, as respects other ports for the purposes of making rules under clause",,,,

(p) of section 6(1) and of the appointment and control of port health officers under section 17, means the Central Government, and save as",,,,

aforesaid, means the State Government.",,,,

Power to extend or withdraw the Act or certain portions thereof,,,,

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

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

which this Act is not in force;,,,,

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

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

(2) A notification under clause (a) or clause (b) of subsection (1) shall define the limits of the area to which it refers.,,,,

(3) Limits defined under sub-section (2) may include any piers, jetties, landing-places, wharves, quays, docks and other works made on",,,,

behalf of the public for convenience of traffic, for safety of vessels or for the improvement, maintenance or good government of the port and",,,,

its approaches whether within or without high-water-mark, and, subject to any rights of private property therein, any portion of the shore or",,,,

bank within fifty yards of higher-water-mark.,,,,

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

Alteration of limits of ports,,,,

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

Explanation.- For the removal of doubts, it is hereby declared that the power conferred on the Government by this sub-section includes the",,,,

power to alter the limits of any port by uniting with that port any other port or any part of any other port.,,,,

(2) When the Government alters the limits of a port under sub-section (1), it shall declare or describe, by notification in the Official Gazette,",,,,

and by such other means, if any, as it thinks fit, the precise extend of such limits.",,,,

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

(1) No person shall make, erect or fix within the limits of a port or port approaches, any wharf, dock, quay, stage, jetty, pier, place of",,,,

anchorage, erection or mooring or undertake any reclamation of foreshore within the said limits except with the previous permission in",,,,

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

(2) If any person makes, erects or fixes any wharf, dock, quay, stage, jetty, pier, place of anchorage, erection or mooring or undertakes",,,,

reclamation of foreshore in contravention of sub-section (1), the Board may, by notice require such person to remove it within such time as",,,,

may be specified in the notice and if the person fails so to remove it, the Board may cause it to be removed at the expense of that person.""",,,,

Further, Sections 8, 9 and 10 of the Gujarat Infrastructure Development Act read as under:",,,,

Section 8 - Selection of a person",,,,

(1) A concession agreement for undertaking a project may be entered into with a person who is selected through a competitive public,,,,

bidding as provided in section 9 or by inviting comparative bids as provided in section 10 or by direct negotiation as provided in section,,,,

10A.,,,,

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

Section 9 - Selection of person by competitive public bidding,,,,

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

agency or, as the case may be, the specified Government agency shall select a developer for the project through competitive public bidding",,,,

in the manner as may be prescribed.,,,,

Section 10 - Inviting comparative bids.,,,,

(1) Where a proposal for undertaking a project and a proposed concession agreement prepared by a person are submitted to the State,,,,

Government, the Government agency or a specified Government agency, it may,",,,,

(a) consider the proposal and the proposed concession agreement from all aspects (including technical and financial) and if necessary,",,,,

modify the same in consultation with the person who has submitted the proposal and the proposed concession agreement; and,,,,

(b) submit the proposal and the proposed concession agreement to the Board, if - (i) the cost of the project exceeds the limit provided by",,,,

regulations under sub-section (1) of section 5, and",,,,

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

Government agency.,,,,

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

agency or, as the case may be, the specified Government agency shall adopt the proposal as the basis for selecting a person with whom",,,,

concession agreement for undertaking the project may be entered into, and for selecting such person, the State Government, the",,,,

Government agency or, as the case may be, the specified Government agency shall follow the procedure of competitive public bidding",,,,

prescribed under section 9.,,,,

(3) Where a person is selected by following the procedure of the competitive public bidding (hereinafter referred to as ""the selected",,,,

person""), the proposal of the selected person shall be compared with the proposal which is earlier submitted by a person to the State",,,,

Government, the Government agency or, as the case may be, the specified Government agency under sub-section (1) (hereinafter referred",,,,

to as ""the earlier proposer"").",,,,

(4) Where the proposal of the earlier proposer is not preferable to the proposal of the selected person, the earlier proposer shall be given an",,,,

opportunity to make his proposal competitive with that of the selected person within a period of thirty days from the date on which he has,,,,

been given the opportunity and where the earlier proposer fails to do so within the said period, the State Government, the Government",,,,

agency or, as the case may be, the specified Government agency may enter into a contract with the selected person.",,,,

(5) (a) Where a concession agreement has not been entered into with the earlier proposer, the cost of preparation of the proposal and the",,,,

concession agreement incurred by him shall be reimbursed by the State Government, the Government agency or, as the case may be, the",,,,

specified Government agency and on such reimbursement, the proposal and the concession agreement submitted by the earlier proposer",,,,

shall be the property of the State Government, the Government agency or, as the case may be, the specified Government agency.",,,,

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

It is also necessary to set out some parts of the Port Policy of 1995 and the BOOT Policy of 1997.,,,,

Gujarat Port Policy",,,,

Gujarat envisages an integrated port development strategy, consisting of creation of port facilities, industrialisation and development of",,,,

infrastructure facilities like roads and railways in the hinterland. It is estimated that around 3 billion dollars (Rs. 10,000 crores) would be",,,,

required to create new port facilities along with necessary infrastructure in the coming 5 years. In view of the fact that ships of large sizes are,,,,

used in the transportation, for the economies of scale in international trade, ports would be developed with direct berthing facilities and",,,,

speedy mechanical handling facilities, so as to reduce waiting period of the ships and saving in the cargo expenses. To expedite creation of",,,,

port facilities by 2000 AD, it is proposed to have the participation of private enterprise in the development of port infrastructure.",,,,

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

1 . Ownership rights of the

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

to the Contract.",,,

2 . Ownership Rights and

responsibilities of the Developer","The Ownership rights of the Developer would include:

• The right to mortgage, hypothecate or to execute such covenants as may be required for effectively vesting a

charge on the port assets in favour of a lender to the project.

• The right to sell, convey or transfer to another entity, the right title and interest and concession vested in the

Developer, on the request of a lender to the project, subject to contractual documents. The new Developer will be

selected by the lender in consultation with the GMB, and if necessary, the terms and conditions of the

concession Agreement may be renegotiated.",,,

6 . Expansion of

facilities and

Competition between

ports","(a) Expansion of facilities

The developers would be encouraged to add capacity over and

above the capacity contracted in the concession agreement. Such

expansions will be eligible for incentives by the Government, such

as land acquisition, extension of royalty holidays etc.

At the time of the signing of the Concession Agreement, the

Developer will submit, and get approved by GMB, a broad

perspective plan for the development of the port in the next fifteen

to twenty years. The Government will not place restrictions on any

expansion and further development of the port which is within the

envisaged perspective plan, subject to statutory clearances.

Expansions outside the scope of this plan would be subject to the

approval of the GMB.

(b) Competition between ports

The Government would encourage competition between ports. The

following, however, would be ensured:

• The development of the ten ports would be appropriately phased

over a period.

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

exceptional circumstances.",,,

No.,Representation of Essar Ports Ltd. to Hon''ble CM,Comments,,

1.,"EBTL through an investment of more than L 2000 Cr. has been

operating deep draft 550m jetty since 2010 and caters to the

Essar''s Steel plant cargo requirement. The steel plant is expected

to ramp up its production in line with its 10 MMTPA capacity and

would require augmented marine facility and back up area for

handling its increased cargo requirements.","The Proposed port limit excludes the area of 550m jetty and back-up

area behind the jetty. Hence, it has no effect. The present capacity

of the steel plant is 10 MMTPA whereas the actual steel production

at the plant in the year 2014-15 is only 3.15 MMTPA. No firm/definite

plans for augmentation in steel production are submitted.",,

2.,"GMB had given NOC for reclamation of 319 ha. in June 2007,

pursuant to which Essar started the process for development of back

up land for its expansion. The allotment of the reclaimed land to

Essar was also decided in the meeting held under the chairmanship

of the then Chief Secretary in November 2009. EBTL has developed

a channel of more than 7 km length with capacity to handle up to

11m draft vessel and has plans to take it up to 14m draft and have

waterfront of more than 5 km.","GMB had granted NOC to dump dredged material for 310 Ha. of land

in the mudflat area shown in the map attached as Annexure 3.

However, as per the DILR report, the actual reclaimed area is only

approx. 195 Ha. Out of this area approx. 98 hectares of reclaimed

land is excluded from the proposed expansion of port limit. Further,

a specific condition was mentioned in the NOC of GMB that the

ownership of the reclaimed land shall vest with GMB/GOG.

Further it is also be noted that NOC granted to EBTL for reclamation

is also beneficial to the company. In case of non-issuance of NOC

for dumping the dredged material in the mudflat area (very close to

dredged area) the company had to dump the dredged material in the

mid sea (very far) which would have been expensive.",,

3.,"In order to develop commercial port facilities, EBTL submitted a

proposal to GMB in 2008 and signed MOU with GMB for expansion

by 3.7 km. waterfront along with the associated back up land during

vibrant Gujarat 2013 in the presence of Shri. Narendra Modi- Hon''ble

Prime Minister of India. Pursuant to this Essar has invested

substantial amount in terms of time and money for development of

the same. After the necessary recommendation from the

Government of Gujarat EBTL has received the environment clearance

of 6th May 2014. EBTL has made investment of more than L 15000

Cr. till date for development of waterfront and land reclamation (233

Ha) and is in the process of reclaiming further in order to undertake

their planned expansion while their application remains pending.","The proposal for development of commercial ports facilities was

received. But, the permission granted to Essar is only for captive

purpose and thus, without performing bidding process, there is no

policy of GOG to convert captive port facilities into a commercial port

terminal. Further HPPL has already rights under concession

agreement to develop common commercial port facilities cannot be

accepted. GMC or GOG has never granted such permission for

commercial port facilities development by Essar.",,

8.,"Essar plant at Hazira is the

largest integrated steel plant

facility in India at a single location

and any impact on the operation

of the same would be lead to

substantial loss to the

exchequer. Essar group has

invested more than INR 44500 Cr.

in the Hazira complex in its steel,

power and ports business group

infrastructure.","Essar has following captive port facilities

operational.",,

,,No.,Jetty,"Capacity

(MMTPA)

,,1.,"456 m lighterage Main

jetty",5

,,2.,"592 m lighterage (1st

expansion)",5

,,3.,"550 m deep water berth

(2nd expansion)",15

,,Total,1598 m,25

,,"Further, GOG has approved further 1100m

waterfront for deep water jetty (3rd expansion)

for which construction permission is yet to be

accorded by GMB. Adding this 1100m

waterfront, total jetty/wharf of 2698m will be

utilized by EBTL.

Against the capacity of 25 MMTPA, EBTL has

handled cargo as per Annexure 4. It is seen

that during the last year 2014-15 Essar has

handled total 10 million tons of cargo against

the existing capacity of 25 MMTPA.

Further, the company has gradually reduced

usages of the main jetty of 456m, the cost of

construction has already been set off and full

wharfage is payable. EBTL has reduced the

cargo handling at the main jetty and it has

diverted to 550m deep water jetty where the

set off of the cost is available and thus, the

concessional wharfage rate is payable.",,

immediately and the balance only after approval and construction of the further elongated jetty. It is clear that even if the Appellants'' plea were to,,,,

be accepted, the alteration of the limits of the port cannot possibly be said to affect the Appellants'' rights qua reclaimed land, which has been",,,,

reclaimed illegally i.e. without prior permission under the Gujarat Maritime Board Act. Thus, the CRZ clearance by the Ministry of Environment",,,,

and Forests dated 6th May, 2014 for reclamation of 334 hectares of land does not further the Appellants'' case in any way.",,,,

We now come to the Appellants'' argument of the haste that is shown by the GMB in recommending the second proposal for altered limits.,,,,

True, the GMB did act within 4 days of the said proposal, but this fact, without anything more, to demonstrate mala fides or lack of public interest,",,,,

cannot possibly hold water. It is also to be noted that Shri Salve''s plea, that 13 berths would require 1011 hectares of adjacent land and that much",,,,

less land than 1011 hectares has been allocated for the use of a commercial port, has to be accepted.",,,,

The further plea, that the forest land to the north consisting of 300 hectares, having now been acquired in October, 2016, would enure to the",,,,

benefit of HPPL, would also not take the Appellants'' case any further, as even these 300 hectares would be subsumed within the requirement of",,,,

1011 hectares, as has been pointed out, in the DPR of 2010.",,,,

There can be no doubt that Shri Joshi''s plea that the power of the Government to alter the limits of any port under Section 5(1) of the Indian,,,,

Ports Act must be done only in public interest is correct. However, it has not been shown to us as to how the impugned notification is contrary to",,,,

public interest. The affidavits filed in the High Court, by the State Government and the GMB, show that a commercial port''s limits were altered in",,,,

public interest because the number of vessels at Hazira port were expected to increase dramatically and it was, therefore, necessary to make",,,,

adequate facilities not only for anchorage of such vessels, but also for reasons of customs formalities, port conversion, general security etc. We are",,,,

not, therefore, satisfied that the notification is ultra vires Section 5 of the Indian Ports Act. We have already seen that the Appellants have no `right''",,,,

to private property in view of the fact that the ownership of the captive jetty that has been constructed and the ownership of reclaimed land is with,,,,

the GMB/State Government. For this reason also, the notification is intra vires as the alteration in the limits of Hazira Port does not affect any",,,,

`right'' of the Appellants to private property.,,,,

In conclusion, for the reasons given by us in the present judgment, the appeal deserves to be dismissed. The appeal is dismissed with no order",,,,

as to costs.,,,,