The Visakhapatnam Port Trust vs. The Andhra Petrochemicals Limited
Original PDF →No AI summary yet for this judgment.
APHC010149502022
IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
WRIT APPEAL NO: 688 of 2022
Bench Sr.No:-55 [3483] ********** Advocate for Appellants: Mr. P. Sri Raghu Ram, Ld. Senior Counsel appearing vice Mr. Raviteja Padiri Advocate for Respondents: Sri N. Subba Rao, Ld. Senior Counsel representing CKR Associates.
CORAM: THE CHIEF JUSTICE DHIRAJ SINGH THAKUR SRI JUSTICE RAVI CHEEMALAPATI DATE: 03.11.2025 Per DHIRAJ SINGH THAKUR, CJ:
The present Writ Appeal under Clause 15 of the Letters Patent has been preferred against judgment and order dated 25.02.2022 passed in W.P.No.16057 of 2020. The learned Single Judge by virtue of the judgment and order impugned, while allowing the Writ Petition set aside the order dated 18.08.2020, cancelling the tender notification dated 07.08.2019 in which the petitioner was a sole bidder as also set aside the fresh tender notification dated 24.08.2020, with a further direction to execute the lease deed in favour of the petitioner No.1 - respondent No.1 herein.
WA_688_2022
Briefly stated the material facts are as under:
The petitioner No.1 is a Company which is engaged in the business of manufacture and production of OXO-ALCOHOLS. It entered into a Lease Agreement dated 27.06.1989, for setting up a Petro Chemical Industry over land measuring Acs.75.00 cents and the lease was to extend over a period of 30 years. The lease was to expire in the year 2019 and did not contain any automatic renewal clause. However, the existing lessee in terms of Clause 16(3) of the Land Policy Guidelines of 2014 for Major Ports (for short, “the Guidelines of 2014”) was entitled to the right of first refusal when the said parcel of land was required to be auctioned on the expiry of the existing lease period.
Since the lease in favour of the petitioner Company would expire in the year 2019, the Visakhapatnam Port Trust Authority issued an NIT dated 07.08.2019, inviting bids from eligible parties for grant of a long term lease of 30 years without any clause for renewal, for a plot measuring 3,03,515 Sq. Meters “for Industrial Purpose” at Visakhapatnam Port.
The petitioner Company, considering itself eligible, submitted its bid and was a sole bidder. The bid of the petitioner in two bid system was found to be responsive. According to the petitioner, the web portal of the Port Trust Authority showed the status of the financial bid of the petitioner as “opened” and the bid status as “accepted”. According to the petitioner, the rental which was payable in regard to the subject property was Rs.7,25,40,085/- per year.
WA_688_2022
Notwithstanding the fact that the status of the petitioner‟s bid was shown as accepted, the case of the petitioner was that, certain information was sought from the petitioner by the appellant regarding the industrial process, the raw material used and the finished product of the petitioner‟s industry. The petitioner‟s case is that the requisite information as sought was furnished to the appellant Port Authority and was willing to execute the lease deed with them, apart from paying the lease rental and the security deposit, however, no response was elicited from the respondents in that regard.
The petitioner‟s case is that vide letter dated 18.08.2020, the petitioner was informed regarding the cancellation of the tendering process in the following words:
“In this regard it is to inform that for various reasons the tender has been cancelled.
Therefore the DD submitted by you toward EMD amount for the subject tender is returned herewith.”
Apart from cancelling the tender, a fresh process was initiated on 24.08.2020 and this time bids were invited from eligible bidders for allotment of the property in question, on long term lease of 30 years for “commercial purpose”.
The difference in the tendering process being that whereas the initial bids were invited in regard to land use which was for „industrial purpose‟, the subsequent NIT was meant for „commercial purpose‟.
WA_688_2022
The action of the Port Trust Authority in cancelling the tender process earlier initiated vide NIT dated 07.08.2019 and issuing subsequent NIT dated 24.08.2020, came to be challenged before the learned Single Judge firstly on the ground that it was a non-speaking order which did not provide any reasons as to why the tendering process initially initiated was cancelled and further that no notice had been issued nor any opportunity given to the petitioner by the Port Trust Authorities to submit its response before cancellation and hence the petitioner claimed that the action of the respondents – appellants herein was arbitrary and in violation of principles of natural justice.
Secondly, on the ground that the Port Trust Authorities had given a go by to the mandatory requirements as stipulated in Clauses 13 and 20 (iv) of the Land Policy Guidelines for Major Ports, 2014, and inasmuch as the Port Trust Authorities had failed to show that they had invited objections and suggestions from the stakeholders before the change of land use from „Industrial‟ to „Commercial‟.
It was also the case of the petitioner Company that the subject property could not be leased out for commercial purposes as the said property was classified under Zone 4, which according to the Land Use Plan prepared under the Guidelines of 2014 had been classified to be used only for industrial purposes.
By virtue of the judgment and order impugned, the Writ Petition filed by the petitioner Company was allowed, by holding inter alia that the unilaterally WA_688_2022
cancelling the tender notification issued earlier, without affording any opportunity of being heard to the petitioner, violated the principles of natural justice and that an opportunity of hearing ought to have been given and that it was necessary on the part of the Port Trust Authority to serve a notice and afford an opportunity to the petitioner of being heard.
The learned Single Judge further held that the Port Trust Authority could not have unilaterally changed the Land Use of the subject property from Industrial to Commercial, without following due process in terms of the Guidelines of 2014, which required that any change of Land Use Plan be preceded by publication in the website of the Port Trust, and only after inviting objections and suggestions could be finalized by the Board of Trustees of the Port Trust Authority and issued directions to execute the Lease Deed in favour of the petitioner. Legal Position:
The Parliament enacted the Major Port Trusts Act, 1963, to make provision for the Constitution of the Port Authorities for certain major ports in India and to vest the administration, control and management of such ports in such authorities as also for matters connected therewith.
The said Act, however, was repealed by the Major Port Authorities Act, 2021, which came into force with effect from 03.11.2021. Notwithstanding the fact that the Act of 2021, repeals the Act of 1963, yet, in terms of Section 75 of the Act of 2021, pertaining to Repeal and Savings, anything done primarily by WA_688_2022
the Board of Trustees and Tariff Authority for Major Ports under the Act of 1963 in respect of inter alia any order or resolution or direction would be deemed to have been taken under corresponding provisions of the Act of 2021. 14. Since the impugned action of the Port Trust Authority was at a time when the provisions of the Act of 1963 were in force, it would be apt to refer to some of the provisions of the said Act.
Section 3 of the Act of 1963 envisages constitution of a Board of Trustees in respect of a major port, which consists of Chairman and Deputy Chairman to be appointed by the Central Government and not more than 17 persons in the case of a port, other than the Ports of Bombay, Calcutta and Madras.
Section 33 of the Act envisages that the Board shall be competent to enter into and perform any contract necessary for the performance of its function under the Act.
Section 34 deals with mode of executing contracts on behalf of the Board.
Second proviso to Section 34 inter alia envisages that no contract for acquisition, sale or lease of any immovable property shall be entered into for a term exceeding 30 years.
WA_688_2022
Section 111 envisages that the Tariff Authority as also the Board in the discharge of its function under the Act shall be bound by such directions on questions of policy as the Central Government may give in writing from time to time and further that the decision of the Central Government whether a question is one of policy or not shall be final.
In furtherance of the provisions of Section 111, the Central Government framed the Policy Guidelines for Land Management by Major Ports of 2014. 15. The main object of the policy as can be culled out on a reading of the policy was to ensure that the land resource belonging to the Port Authority was to be put to optimum use as per the approved Land Use Plan with focus on retaining/attracting port traffic as also to ensure that optimum value was realized by licensing/leasing port land through a transparent tender-cum- auction methodology.
The policy was framed to regulate allotment of land as it was considered to be an important resource for the Port Trust. Clause 13 of the policy envisages preparation of a Land Use Plan covering all the land owned or managed by the Port, which are required then to be approved by the Board. Clause 13 for facility of reference is reproduced hereunder:
“13. Land Use Plan: Every Major Port shall have a Land use plan covering all the land owned and/or managed by the Port. Such plans shall be approved by the Board and a copy would be forwarded to the Government. Any proposal for revision of land use plan shall be WA_688_2022
finalized by the Board only after considering the objections and suggestions received from the various stakeholders. Land use plan of major ports shall be reviewed by the Board at least once in every five years.”
Needless to say that whereas the need to place the prepared land use in public domain was referable to the Land Management Policy Guidelines of 2014, which may still continue to hold the field inasmuch as Section 111 of the 1963 Act envisaged the Tariff Authority as also the Board of the Port Trust to discharge its functions under the Act to be bound by the directions on questions of policy of the Central Government.
Even as per the first proviso to Section 22(2) of the Act of 2021, it is provided specifically that the “period and the manner of lease of land or immovable property for port related use and non-port related use shall be in such manner as my be prescribed.” Issue for Consideration:
The issue that arises for consideration is whether the petitioner being a sole bidder acquired any right to have the auction concluded in its favour and whether the decision of the Board of the Port Trust Authority to cancel the auction process could be said to be arbitrary or not? Terms and Conditions of the NIT:
According to the NIT, dated 07.08.2019, applications were invited from eligible companies for allotment of land on annual lease rental basis for 30 WA_688_2022
years, a plot of land falling in Zone 4 measuring 3,03,515 square meters at Exim Park area for industrial purpose.
According to Clause 1.41, which pertains to Acceptance of Tender, it was made clear that Visakhapatnam Port Trust would not be bound to accept the highest lease fees offered in the bid and that the Visakhapatnam Port Trust reserved its right to accept or reject without assigning any reasons whatsoever.
Clause 1.59 of the tender document envisages as under: “1.59 VPT reserves the right to accept any tender or reject any or all tenders or annul this tendering process without assigning any reason and liability whatsoever and to re-invite the tender at its sole discretion. VPT Board will consider & approve the tender document, pre-bid clarifications, short listing of bidders and selection of successful bidder.”
Clause 2.20 of the tender document dealt with Lease Execution which envisaged the issuance of Pre-acceptance Letter to the successful Bidder(s), and the successful Bidder was then required to remit the lease rentals and the security deposit amount along with the applicable taxes within 14 days from the date of issuance of the Pre-acceptance Letter by the Visakhapatnam Port Trust. For purposes of reference, Clause 2.20 is reproduced hereunder: “2.20 LEASE EXECUTION The allotment of Land is for the purpose of 'Industrial in Visal napatnam Port Area'. After evaluation of the technical bids and opening of CO IMERCIAL BID Visakhapatnam Port Trust will issue a Pre-acceptance Letter to the successful Bidder(s). The successful Bidder shall, within 14 days from the date of issue of the Pre-Acceptance letters by Visakhapatnam Port Trust, remit the lease rentals and security deposit amount along with the applicable taxes (1.e., on year rent as advance and another two years rent as refundable security deposit and WA_688_2022
G.S.T(SGST(9%)+CGST(9%)) at the rate as applicable time to tire), (fails to do so the allotment will be liable to be cancelled and their EMD will be forfeited without any notice). Upon the receipt of the premium amount, Visakhapatnam Port Trust will issue a letters of Allotment. The possession of the Lands will be effected only after the execution of the lease deeds/agreement which will have to be executed within two weeks from the date of issue of letters of allotment failing which the allotment will be liable to be canceled and total premium already paid, EMD & Security Deposit forfeited.”
A reading of the aforementioned clause would also make it clear that it was only after the issuance of a Pre-acceptance Letter to the successful Bidder, the deposit of the lease rentals as also the security deposit amount with applicable taxes that the Visakhapatnam Port Trust would issue a Letter of Allotment which would be followed by the execution of Lease Deed and only thereafter the possession of the land would be handed over to the successful Bidder.
In the instant case, the Visakhapatnam Port Trust Authorities did not issue any Pre-acceptance Letter to the petitioner, much less did the petitioner deposit the lease rental or for that matter the security deposit amount. The Visakhapatnam Port Trust Authorities also did not issue any Letter of Allotment in favour of the petitioner, this would have been done only if the previous condition that is the VPT Board had considered and approved the tender documents, pre-bid clarifications as also approved the selection of the judgment supra held as under:
“74. Judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision-making process itself.
The duty of the court is to confine itself to the question of legality. Its concern should be :
Whether a decision-making authority exceeded its powers?
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.”
The scope of judicial review in matters relating to award of contracts also came up for consideration before the Apex Court in Maa Binda Express
1 (1994) 6 SCC 651 WA_688_2022
Carrier vs. North-East Frontier Railway 2, it was held that the bidders participating in the tender process had no right to claim that the tenders be accepted simply because the tender was the highest or the lowest, it was held:
“8. The scope of judicial review in matters relating to award of contract by the State and its instrumentalities is settled by a long line of decisions of this Court. While these decisions clearly recognize that power exercised by the Government and its instrumentalities in regard to allotment of contract is subject to judicial review at the instance of an aggrieved party, submission of a tender in response to a notice inviting such tenders is no more than making an offer which the State or its agencies are under no obligation to accept. The bidders participating in the tender process cannot, therefore, insist that their tenders should be accepted simply because a given tender is the highest or lowest depending upon whether the contract is for sale of public property or for execution of works on behalf of the Government. All that participating bidders are entitled to is a fair, equal and non- discriminatory treatment in the matter of evaluation of their tenders. It is also fairly well-settled that award of a contract is essentially a commercial transaction which must be determined on the basis of consideration that are relevant to such commercial decision. This implies that terms subject to which tenders are invited are not open to the judicial scrutiny unless it is found that the same have been tailor made to benefit any particular tenderer or class of tenderers. So also the authority inviting tenders can enter into negotiations or grant relaxation for bona fide and cogent reasons provided such relaxation is permissible under the terms governing the tender process.”
Infrastructure Development Corporation3, the Apex Court held:
“64. It is true that the State or its tendering authority is bound to give effect to essential conditions of eligibility stated in a tender document and is not entitled to waive such conditions but that does not take away its administrative discretion to cancel the entire tender process in public interest provided such action is not actuated with ulterior motive or is otherwise not vitiated by any vice of arbitrariness or irrationality or in violation of some statutory provisions. It is always open to the State to give effect to new
2 (2014) 3 SCC 760 3 (2010) 6 SCC 303 WA_688_2022
policy which it wished to pursue keeping in view `overriding public interest' and subject to principles of Wednesbury reasonableness.” 25. proposal of the petitioner for purposes of allotment of the land on long-term annual rental basis for a period of 30 years.
The tender committee submitted and requested the Chairman, Visakhapatnam Port Trust, to place the same before the Visakhapatnam Port Trust Board. The Chairman as is evident from the note dated 11.12.2019, sought information as to what the sole bidder was manufacturing and whether it was a commercial activity.
4 (2010) 6 SCC 303 WA_688_2022
The query was answered to suggest that the petitioner - Andhra Petrochemicals Limited was a manufacturing unit having license under the Factories Act and was an industrial unit and therefore, could be charged only industrial rate. From the record, it appears that the Chairman on 17.12.2019, recorded as under: “Are they using any of our port facilities like berth/tug/wharfage etc., then they are doing port related activities, but it is not clear from the office note what is industrial activity and commercial activity in port parlance.”
In response to the said query, the reply was submitted as under: “Reply: M/s Andhra Petro chemicals Ltd is not directly using our port facilities as there are taking raw materials used by them i.e., Naphtha and propylene from Hindustan Petroleum Corporation Ltd which are by products produced by crude oil distillation.
The crude oil being imported by M/s HPCL and M/s HPCL using port facilities for handling crude oil. Hence the volume of naphtha, i.e., used by APCL is definitely included in the crude oil volume of HPCL, Hence APCL is indirectly used our port.
In VPT only petroleum outlets, shops selling goods, Ice selling units in fishing harbour are treated as commercial and land being allotted.
All other industries like, HPCL, ESSAR, Coromandel International, Alufluoride, IOCL, RCII are treated as industrial units only.”
In reply to the aforementioned response of the port authorities, the Chairman records as under:
“But other units like HPCL/ESSAR/Coromandel/IOCL are using our berth facilities in some form or the other, hence industrial. Andhra Petro not using our port facilities then why industrial. We may charge commercial rent because the land is used for commercial purpose only, now the lease is expired we have three categories of land use WA_688_2022
industrial/commercial/residential. The land is being used for commercial purpose so commercial rate shall be charged.”
Finally, on 08.07.2020, the Chairman records as under:
“The objective of land policy is mainly to optimally utilize the land for attracting port traffic and maximum revenue generation for the port. In this particular case, the firm is not using any of our port facilities and only using our land for processing raw materials and selling the final product in the market, if they use any of our port facilities, we would have got wharfage, tug charges and other revenues, but this particular one was commercial operation. Since land is very limited and we do not have any land bank, now in the interest of port, we must go for commercial rent; Since lockdown is over we may go ahead.”
It appears that after the noting recorded on 08.07.2020, the petitioner was informed vide letter, dated 18.08.2020, regarding the cancellation of the tendering process in terms, which have been reproduced in paragraph No.6 hereinabove.
By virtue of our order, dated 14.10.2025, we required the VPT to verify and respond on the aspect as to whether the decision of the Chairman to demand commercial rate of rent in regard to the parcel of land in question was required to be ratified or placed before the Board and whether the requisite action was done or undertaken.
The memo filed, however, is conspicuously silent on the issue as to whether the decision to charge commercial rate of rent was ever placed before the Board for its ratification. If that be so, then the decision to invite fresh tenders for the said plot situate in an Industrial Zone 4 would even WA_688_2022
otherwise be unsustainable, as no fresh tenders could be invited without first seeking a ratification by the Board in that regard.
The action in issuing a fresh notification, dated 24.08.2020, in our opinion, therefore, cannot be supported on that ground also.
Apart from this, although an effort has been made by learned counsel for the appellants to suggest that the Master Plan prepared in the year 2025, draws a distinction between port related activity and non-port related activity, yet, in our opinion, the said preparation of Master Plan is not at all relevant, as we are testing the decision taken as early as in the year 2019. Even otherwise, the sad Master Plan, does not at all declare an industrial activity which is non-port related, to be a commercial activity. We cannot forget the fact that Zone 4, in which the industrial unit was set up by the petitioner continues to remain as an industrial zone till date.
Assuming that the industry is non-port related, yet, there is no murmur in the Master Plan prepared even in 2025, which would either authorize the port authorities to charge or make liable the industry engaged in non-port related industrial activity to pay lease money at a commercial rate.
It would also be pertinent to make a reference to Clause 6.4 of the Master Plan of 2025, which defines Zone-4 and Zone-5 as being located outside of the port operation area. Not only this, the said land is envisaged to be used for industrial purpose. If the industrial area is located outside the port operation area, then without there being any specific provision which could WA_688_2022
otherwise authorize the port authorities to charge a commercial rate from the Unit such as the petitioner, the commercial rate, in our opinion, cannot be charged assuming the Port authorities were to insist on it even today.
It is, therefore, clear that only because an industrial activity was non- Narayan5 held:
“The expression “commerce” or “commercial” necessarily has a concept of a trading activity. Trading activity may involve any kind of activity, be it a transport or supply of goods. Generic term for almost all aspects is buying and selling. But in legal profession, there is no such kind of buying or selling nor any trading of any kind whatsoever. Therefore, to compare legal profession with that of trade and business is a far from correct approach and it will totally be misplaced.” Apex Court held:
“11. ……. In the absence of a definition, we have to go by its ordinary meaning. 'Commercial' denotes "pertaining to commerce" (Chamber's Twentieth Century Dictionary); it means "connected with, or engaged in commerce; mercantile; having profit as the main aim" (Collins English Dictionary) whereas the word 'commerce' means "financial transactions
5 (2005) 7 SCC 283 6 (1995) 3 SCC 583 WA_688_2022
especially buying and selling of merchandise, on a large scale" (Concise Oxford Dictionary).” „industry‟ had different nuances. The traditional meaning of „industry‟ may be manufacture or production of goods. When used in the context of „an industrial area‟ or „a land for industrial use‟ the word „industry‟ would refer to use for manufacture, production and allied activities.
On a plain reading of the definitions supra, it thus becomes clear that a commercial activity can never be placed at par with industrial activity and therefore, a commercial rate cannot be charged from an industrial unit unless and until it was specifically permitted by changing the Land Use Plan by following due process in terms of the Guidelines of 2014, which require that any change of Land Use Plan will be preceded by publication in the website of Port Trust and only after inviting of objections and suggestions from the Stakeholders.
Since the Land Use Plan did not specifically authorize the VPT to charge a commercial rate for an industrial unit situate in an industrial zone, the decision to invite fresh bids from eligible bidders for purposes of allotment of the land for commercial purpose, which was otherwise in occupation of the petitioner unit, was without any authority of law and therefore unsustainable.
7 (2011) 7 SCC 493 WA_688_2022
Having said so, while we are clear that the port authorities could not have issued a fresh tender notification inviting bids for the land in question for a commercial purpose without changing the Land Use Plan in accordance with the procedure prescribed under the Land Use Policy of 2014 as on the relevant date, we cannot deny the VPT its right to change the policy to provide for change of land use from „industrial‟ to „commercial‟ and to categorize a non-port related industrial activity to be a commercial activity for the purpose wished to pursue keeping in view „overriding public interest' and subject to principles of „Wednesbury reasonableness‟.
In the present case, the entire intention behind cancellation of the earlier tendering process by the VPT authorities was to garner more revenue from entities which had set up base in their industrial zone which were unrelated to the basic port related activities and therefore wished to encourage only those which would use their port facilities, so that more revenue would be flowing into the coffers of the port authorities.
Be that as it may, the decision to invite fresh bids vide the notification, dated 24.08.2020, is unsustainable for the reason that inviting bids for a plot WA_688_2022
of land to be used for commercial purpose was not supported by the change of Land Use Plan, which ought to have been done in accordance with the Land Use Policy of 2014. The Master Plan prepared in the year, 2025, would not support even on date, the action to allot the plot in question for commercial purposes, as the said Master Plan of 2025 does not specifically authorize the appellants to initiate such an action without properly changing the land use and tweaking the policy to that extent.
a. We hold that the petitioner – respondent No.1 herein had no indefeasible right to claim the execution of Lease Deed in its favour, as the contract had not been concluded between the petitioner and the appellants and it was within the right of the appellant to abandon or cancel the entire tendering process, which we have already stated was taken on account of genuine concern to rake in more revenue only and not for any mala fide reasons and further, we hold that there was no need to afford an opportunity of being heard to the petitioner before cancelling the tendering process.
b. In view of the above, the direction to execute the Lease Deed in favour of the petitioner is unsustainable and is accordingly set aside. We give liberty to the appellant to proceed to amend their Master Plan and change their Land Use Policy to bring it in consonance with the Land Use Policy of 2014 and the provisions of the Act of 2021, if they are so advised and till such time it is done, the petitioner would be permitted to continue with its industrial activity on the land in question, unless of course the VPT authorities decide to WA_688_2022
continue with the existing Land Use Policy and to allot it only for industrial purpose in future on lease rental fixed for industrial units, subject to a fair bidding process, by issuance of a notification in that regard, in which process the petitioner would be eligible to participate.
Accordingly, this Writ Appeal is, disposed of.
Consequently, pending miscellaneous applications, if any, in this case, shall stand closed. No costs.
DHIRAJ SINGH THAKUR, CJ.
RAVI CHEEMALAPATI, J.
SSN / KBS
Reproduced from the public record of the Andhra Pradesh High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.