Infrastructure Project – Special Economic Zone – Gujrat Maritime Board (GMB) executed Lease and Possession Agreement thereby granting lease of undeveloped land to Gujarat Adani Port Limited (GAPL) for 30 years – GMB also granted development rights under a Concession Agreement to GAPL to develop port and other facilities – GAPL vide agreement dated 2nd June, 2004 sub-leased a plot of land admeasuring about 34 acres to appellant-CWC, a statutory Corporation under the 1962 Act, for setting up a warehouse for storage and handling of foodgrains, notified commodities and related activities – CWC set up two Godowns and also made payments for development of infrastructure – Meanwhile, the Special Economic Zones Act, 2005 came into force and vast area of the leased land came to be notified as a Special Economic Zone (SEZ) vide notification issued by Ministry of Commerce and Industry, Government of India (Ministry of C & I) – Appellant-CWC made representation to Ministry of C & I for de-notification of said 34 acres of land from the SEZ – Meanwhile, respondent no.1-Adani Ports Special Economic Zone Limited (APSEZL) addressed communication to appellant-CWC informing that it would not permit the latter to continue warehouse activities and declined to issue gate pass for transportation stating that it had violated conditions enumerated in agreement dated 2 nd June, 2004 – CWC filed writ petition – Single Judge of the High Court did not grant interim relief while issuing notice – CWC filed LPA – Division Bench granted ad-interim relief and directed respondents to allow CWC to carry out activities and to issue gate pass for transportation – In the meantime, request of CWC for delineation / de-notification of 34 acres of land rejected by Ministry of C & I – Appellant filed another writ petition – Attempts made by parties to amicably settle the matter – Proposal for settlement made by APSEZL that equivalent plot of land outside the SEZ zone would be earmarked, whereupon a godown of similar size would be constructed – Board of Directors of CWC accepted the settlement proposal on three conditions – APSEZL agreed on all the three conditions – However, it unilaterally resiled from the 3rd condition subsequently – Both parties thereafter informed the High Court that settlement was not possible – High Court held that though CWC was bound by the first two conditions as agreed between the parties, the second respondent was not bound by the 3rd condition offered by APSEZL and subsequently retracted by it – High Court held that, since there was a consensus on the first two conditions and no consensus on the 3rd condition, CWC was bound by the first two conditions and insofar as the 3rd condition was concerned, it was open for the parties to settle the same amicably between themselves or through mediation – On appeal, held: Approach adopted by High Court was not tenable – Offer given by respondent no.1-APSEZL was a composite one so also acceptance thereof by appellant-CWC was also composite – Acceptance of the first two conditions was also dependent upon the third condition – If High Court was so concerned about settlement of the dispute, then, while compelling appellant-CWC to accept the first two conditions, it also ought to have compelled respondent no.1-APSEZL to accept the third condition – When an issue involved the balancing of interests of a statutory Corporation and a private company, the approach of the High Court ought to have been balanced – The High Court ought to have taken into consideration that, unless all the three conditions were complied with, the interest of appellant-CWC, which is a statutory Corporation, could not have been safeguarded – Judgment of High Court not sustainable – Warehousing Corporation Act, 1962.
Statutory Corporation – Dispute between statutory corporation and a private entity – Settlement – Effect of – Held: Unless the settlement arrived is found to be in the interest of both the parties, it cannot be thrust upon a statutory Corporation to its detriment and to the advantage of a private entity. Government litigation – Two departments of the Union of India cannot be permitted to take stands which are diagonally opposite – Union of India to evolve a mechanism to ensure that ECONOMIC ZONE LTD. (APSEZL)
whenever conflicting stands are taken by different departments, they should be resolved at the governmental level itself.
Allowing the appeals, the Court
HELD:1. The present case, rather than being decided on law, requires to be decided on the factual position as emerges from the record. The appellant-CWC is a statutory corporation. It cannot act as per the independent decisions of any officer and has to act in accordance with the resolution of the Board of Directors. [Paras 26 and 29][1016-G; 1019-F-G]
2.1. Vide the impugned judgment and order, the Division Bench of High Court, in fact, held that though the appellant-CWC was bound by the first two conditions as agreed between the parties, the second respondent was not bound by the 3rd condition as was offered by respondent no.1-APSEZL on 9th March 2019 and subsequently retracted on 10th June 2019. The Division Bench went on to hold that, since there was a consensus on the first two conditions and no consensus on the third condition, the appellant-CWC was bound by the first two conditions and insofar as the third condition is concerned, it was open for the parties to settle the same amicably between themselves or through mediation. The Division Bench further observed that though APSEZL had initially proposed the 3rd condition, it had immediately explained and clarified the same in its next letter dated 10th June 2019. In the view of the Division Bench, a period of three months is ‘immediate’. The said approach is wholly untenable. [Paras 41 and 43][1026-D-G]
2.2 The approach adopted by the Division Bench was, in fact, forcing the appellant-CWC, which is a statutory body, to accept the settlement. The High Court, in effect, forced the MD of the appellant CWC, which is a statutory body, to accept the first two conditions and leave the third condition to be settled mutually through mediation. The offer given by respondent no.1APSEZL on 9th March 2019 was a composite one so also the acceptance thereof by the appellant-CWC was a composite one. The acceptance of the first two conditions was also dependent upon the third condition. If the Division Bench was so concerned about settlement of the dispute, then, while compelling the appellant-CWC to accept the first two conditions, it also ought to have compelled respondent no.1-APSEZL to accept the third condition. [Paras 44 and 45][1026-G; 1027-D-E]
3. The High Court ought to have taken into consideration that the appellant-CWC was a statutory body. There are already observations made by the CVC as early as in the year 2010 that the swapping of the warehousing facility from the present site to a changed site would cause serious financial implications and also that there could be various vested interests involved. The CVC had also observed that there was also a possibility of losing business. Further, the Division Bench totally ignored the stand taken by the Ministry of CAF&PD, which too had opposed such a swapping. When an issue involved the balancing of interests of a statutory Corporation and a private company, the approach of the High Court ought to have been a balanced one. The High Court ought to have taken into consideration that, unless all the three conditions were complied with, the interest of the appellantCWC, which is a statutory Corporation, could not have been safeguarded. If a settlement was to be arrived at, unless the same was found to be in the interest of both the parties, it could not have been thrust upon a statutory Corporation to its detriment and to the advantage of a private entity. [Para 47][1028-C-F]
4. The stands taken by two ministries of the Union of India are diagonally opposite to each other. On one hand, the Ministry of C&I has held that the delineation/denotification as sought by the appellant-CWC is not permissible in law. On the other hand, the Ministry of CAF&PD has taken a stand that such a delineation/denotification is permissible in law and has also stated that there are precedents for doing so. It is also a stand of the Ministry of CAF&PD that shifting of the warehouses to the alternate locations would be against the interest of the appellantCWC as well as public revenue. It does not augur well for the Union of India to speak in two contradictory voices. The two departments of the Union of India cannot be permitted to take stands which are diagonally opposite. It is impressed upon the ECONOMIC ZONE LTD. (APSEZL)
Union of India to evolve a mechanism to ensure that whenever such conflicting stands are taken by different departments, they should be resolved at the governmental level itself. [Paras 5053][1029-B, D, F-G; 1030-C]
Lloyd Electric and Engineering Limited v. State of Himachal Pradesh and Others (2016) 1 SCC 560 : [2015] 10 SCR 362 – referred to.
5.1. The best course available with the Division Bench was to direct the Single Judge to decide the petition on its merits. The impugned judgment and order of the Division Bench dated 30th June 2021 is not sustainable in law. [Paras 48 and 49]
5.2. Until further orders are passed by the learned Judge, the interim order dated 26th April 2019 passed by the Division Bench shall continue to operate. This order would not come in the way of the parties in arriving at a settlement which would be acceptable to both the parties. [Paras 56 and 57]
Krishnadevi Malchand Kamathia and Others v. Bombay Environmental Action Group and Others (2011) 3 SCC
363 : [2011] 3 SCR 291 and Ratnagiri Nagar Parishad v. Gangaram Narayan Ambekar and Others (2020) 7 SCC 275 : [2020] 6 SCR 303 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
This page is for informational and research purposes only and does not constitute legal advice. Consult a qualified advocate for advice specific to your situation.