Disqualification By JNPA Will Have A Cascading Effect On Other Contracts : Adani Ports Argues Before Supreme Court

The Supreme Court on Monday heard a plea by Adani Port Trust and Special Economic Zone aggrieved by Bombay High Court's order of dismissing its plea challenging the disqualification for upgradation of the container terminal in Navi Mumbai by the Board of Trustees of Jawaharlal Nehru Port Authority (JNPA).

The matter was listed before the bench of Chief Justice of India NV Ramana, Justices C.T. Ravikumar and Hima Kohli.

At the outset, Senior Advocate AM Singhvi, appearing for the Adani Port Trust, submitted that Adani was being disqualified in other tenders as a result of a cascading effect. He stated that–

"The SLP assails a denial of eligibility to me regarding a port in which the rival person who is getting it is Mr Rohatgi. I made a statement well before he appeared and again today...that I am not pressed for this contract that Mr Rohatgi is successful bidder or likely to be successful bidder. However, the disqualification in that SLP is such that it disqualifies me and makes him eligible. This has a cascading effect on three other ports and in future every day more contracts are coming. That disqualification should be stayed".

Singhvi further pointed out that the disqualification was on the ground that a subsidiary of Adani had terminated a 2011 contract with Vishakhapatnam Port Trust(VPT) in 2020. He pointed out that dispute with Vishakhapatnam Port Trust is a subject matter of a pending arbitration case and the sub-judice issue cannot be used to disqualify in JNPA tender.

"Secondly, the disqualification which I'm seeking a stay of relates to a termination done by me long ago. However, various noncompliances concerns the Vizag port. They then terminated me as a counter blast much later. Matter went to arbitration, it is pending in arbitration today. There is no judicial adjudication, no award, nothing. Using this first one which was is a dispute of 2011 pending in arbitration, they gave three cascading disqualification on that basis and that is why the writ challenges clause 2.28 with abundant precaution saying that a clause cannot be interpreted without an adjudication."

Clause 2.28 of the Tender stated that the bidder should not have any contract terminated by any public entity for breach by such Applicant, Consortium Member or Associate.   The Bombay High Court in June had dismissed the writ petition filed by Adani Ports challenging this clause with a cost of Rs 5 lakhs.

Sr. Adv. Singhvi further elaborated upon the three disqualifications, first of which was a VPT tender of 4.10.2021; second of which was one on 23.08.2021 by JNPA and third one was on 15th July. He stated that all three were on the same ground of contract termination. He requested the court to stay the second disqualification (by the JNPA) as an interim order while also simultaneously recording that Adani had terminated that contract. He stated that–

"Before somebody adjudicates, it cannot be that the Port Trust is a judge in its own case. Secondly, when you are actually under adjudication– in one case under arbitration, in other case under writ; then to apply it in future cases, gives you a complete power of arbitrariness. Any breach in Contract 1 cannot have three disqualifications in three other contracts on the ground that there is a breach, even though it is not adjudicated, even though I have won a division bench order, even though I have an ongoing arbitration. Secondly, termination for any breach cannot mean that I terminate for your breach."

The Solicitor General of India, Tushar Mehta, appearing for the Centre, highlighted that the clause in question was included due to a direction of Niti Aayog. He stated that–

"The Niti Aayog, directed all PSUs to have this clause(2.28) so that we do not deal with parties who have been terminated by the respective PSUs and who gets no relief of state. If there is a termination and termination is stayed, if there is an arbitration and the award is stayed then that stands on a different footing. All tenders by all PSUs would be affected by this. Second, the petitioner participated in tender with open eyes that this is the condition in the tender and now we are at a stage where we are opening the bids. At that stage, he comes and says stay this disqualification."

The bench will continue hearing the matter tomorrow. 

CASE TITLE: Adani Ports And Special Economic Zone Limited v. Board of Trustees of Jawaharlal Nehru Port Authority And Ors. | SLP(C) No. 11190/2022

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