Adani Ports & Special Economic Zone Ltd (APSEZ) is roiling after state-owned Jawaharlal Nehru Port Authority (JNPA) disqualified it from a tender to privatise the container handling terminal, citing a key tender clause that is being reckoned as “penalizing” and “restrictive”.
It comes close on the heels after APSEZ returned a coal handling terminal to Vishakhapatnam Port Authority a few years into the 30-year contract in December 2020. The coal terminal deal of APSEZ at Vishakhapatnam Port crumbled after the Indian government changed its policy to endorse the use of domestic coal, cutting imports of the commodity and leading to a drastic plunge in volumes at the terminal. Previously, the contract was bid-out to handle only imported steam/thermal coal.
Vishakhapatnam Port excluded APSEZ from the mechanisation of West Quay Berths 7 & 8 at the port of Vishakhapatnam with private funds citing the same tender condition. The port authority also communicated the details for termination to other state-owned ports.
Tender Condition
JNPA cited the premature termination of the coal terminal deal involving the APSEZ in Vishakhapatnam Port without mentioning it. This decision was taken abiding by Clause 2.2.8 of the tender conditions that states, “An Applicant including any Consortium Member or Associate should, in the last the last three years, have neither failed to perform on any contract, as evidenced by imposition of a penalty by an arbitral or judicial authority or a judicial pronouncement or arbitration award against the Applicant, Consortium Member or Associate, as the case may be, nor been expelled from any project or contract by any public entity nor have had any contract terminated by any public entity for breach by such Applicant, Consortium Member or Associate.”
Port Tenders “Lost”
In simple words, an applicant is considered disqualified if a public entity terminated any of its contracts for breach of terms in the last three years. Not only JNPA and Vishakhapatnam Port but Paradip Port Authority (Odisha) also disqualified APSEZ from a tender to build a 25 MT capacity dry bulk cargo terminal in March 2022. APSEZ also appealed to the Odisha High Court. The court allowed the firm to put a price bid but also put the onus of the final judgment on the outcome of the appeal filed by APSEZ in the Andhra Pradesh High Court.
In April 2022, APSEZ refrained from placing a price bid and saved itself from another embarrassment after VO Chidambaranar Port Authority (Tamil Nadu) contemplated excluding APSEZ from a tender to convert a bulk cargo berth into a container terminal.
Spotlight on Clause 2.2.8
Container News spoke with Dr. Asha Pillai, a maritime consultant from Kochi, who agreed that the clause is “restrictive” indeed. “The mentioned clause acts as a “check” on their triumph, holding them back from monopolising the Indian port sector completely. However, there is no doubt that APSEZ will continue to rein the Indian port sector. As of now, it is India’s largest port and integrated logistics company with deep hinterland connectivity, has a presence in 13 domestic ports in 7 maritime states and is continuously improving its operational performance”, said Dr. Pillai.
Legal enthusiasts in the maritime sector believe that Clause 2.2.8 is “flawed” and that the existing government policy restricting an operator to handle only one commodity for 30 year period is also restrictive and penalising.
Timeline
The Andhra Pradesh High Court rejected a petition filed by APSEZ on 3 March that sought to overturn the disqualification from the tender issued by the Vishakhapatnam port following which APSEZ appealed against the order on 3 March of the Andhra Pradesh High Court for which the appeal is yet to be decided. APSEZ is trying to prove that it was the “first” to terminate the contract, to avert disqualification. The JNPA, though, was not convinced by this argument put forth by APSEZ during a personal hearing.
However, Vishakhapatnam Port Authority told the court that it already had issued a consultation notice, deemed termination as the next step is termination, to Adani Vizag Coal Terminal Pvt Ld (AVCTPL) on 3 October 2020. The notice cited that AVCTPL failed to comply with the contractually stipulated minimum guarantee cargo (MGC) clause, the main ground for terminating the contract.
While APSEZ returned the coal handling terminal to Vishakhapatnam Port Authority, the port had to pay US$21 million as per the interim order of a three-member arbitration tribunal.
Container News reached out to APSEZ on whether or not it will appeal to the Bombay High Court regarding the disqualification by JNPA but it refrained from commenting.
Sheuly Ghosh
India Correspondent
