Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3572 OF 2009

(Arising out of SLP (C) No. 6977 of 2007)

Villianur Iyarkkai Padukappu Maiyam ... Appellant

Versus

Union of India and others ... Respondents

With

CIVIL APPEAL NO. 3573 OF 2009

(Arising out of SLP (C) No. 9988 of 2007)

J U D G M E N T

J.M. Panchal, J.

Leave granted in both the special leave petitions.

2.Appeal arising from Special Leave Petition (C) No.

9988 of 2007 is directed against judgment dated

August 10, 2006, rendered by the Division Bench of

Judicature at Madras, in Writ Petition No. 3304 of

2006 by which three prayers made by the appellant

to quash (1) the Letter of Intent dated June 3, 2005

granted by the Government of Pondicherry to the

respondent No. 11 herein, i.e., M/s. Subhash

Project and Marketing Limited, for development of

port in Pondicherry on Build Operate and Transfer

(‘BOT’ for short) basis, (2) approval dated January

21, 2006 accorded by the Lt. Governor of

Pondicherry to the detailed project report dated

November 16, 2005 submitted by the respondent

No. 11 and its partner M/s. Om Metals Limited for

the development of Pondicherry Port on BOT basis

as well as to the concession agreement to be entered

into between the Government of Pondicherry and

the respondent No. 11 with its consortium/partner

M/s. Om Metals Limited and with their affiliates for

the development of the Pondicherry Port and all

related and ancillary/other activities and (3)

direction dated January 24, 2006, issued by the

Director of Ports, Government of Pondicherry, Port

Department, to the officers concerned, to prepare a

2

list of all the existing moveable/immoveable assets

of the Pondicherry Port for handing over to the

respondent No. 11 by January 30, 2006,

consequent upon the decision taken by the

Government of Pondicherry for the development of

Pondicherry Port on BOT basis, are rejected.

3.Appeal arising from Special Leave Petition (C) No.

6977 of 2007 is also directed against judgment

dated August 10, 2006, mentioned above, rendered

in Writ Petition No. 12337 of 2006, by which two

prayers made by the appellant to quash (1) the

approval dated January 21, 2006 accorded by the

Lt. Governor of Pondicherry to the detailed project

report dated November 16, 2005, submitted by the

respondent No. 11 and its partner M/s. Om Metals

Limited, for the development of Pondicherry Port on

BOT basis as well as to the concession agreement to

be entered into between the Government of

Pondicherry and the respondent No. 11 with its

consortium/partner M/s. Om Metals Limited and

3

with their affiliates for the development of

Pondicherry Port and all related and ancillary/other

activities and (2) the direction dated January 24,

2006, issued by the Director of Ports, Government

of Pondicherry, Port Department, to the officers

concerned to prepare a list of all the existing

moveable/immoveable assets of the Pondicherry

Port for handing over the same to the respondent

No. 11 by January 30, 2006 pursuant to the

decision taken by the Government of Pondicherry

for the development of Pondicherry Port on BOT

basis, are rejected.

4.As both the appeals arise from the common

judgment delivered by the Madras High Court on

August 10, 2006 and common question of facts and

law arise for consideration of this Court, it is

proposed to dispose them of by this common

judgment.

4

5.In order to trace the development of events leading

to filing of these appeals, it is necessary to notice

certain basic facts.

6.Background

The existing Port of Pondicherry is situated in

the East Coast of India between two Major Ports of

India, i.e., Madras and Tuticorin. It is located at the

Ariankuppam River Mouth in Pondicherry. The

history of the Pondicherry Port dates back to the

tenth century A.D. The Pondicherry Port flourished

as a centre for international trade and commerce.

However, it could not maintain the pace of

augmentation in improving the port facilities with

respect to the rapid changes in transport

technology. Therefore, the port facilities became

obsolete and the Port lost much of its importance.

With the objective of developing the port

facilities, offers from various Marine Technical

Consultancy Firms were invited by the Government

of Pondicherry in the year 1973 for the preparation

5

of a Master Plan and a detailed project report. After

examining the offers received from various firms,

the Port Department of Government of Pondicherry

recommended that the project be awarded to

M/s. Consulting Engineers Services (India) Pvt. Ltd.

By Government order dated September 27, 1973 the

said organization was entrusted with the work of

preparation of the Master Plan and a detailed

project report. The said organization submitted

various reports and finally updated its project report

in May, 1982. On the basis of the reports, the

Ministry of Shipping and Transportation (Ports

Wing), Government of India approved the project for

the creation of certain facilities at the Pondicherry

Port and sanctioned the cost of the project by letter

dated June 26, 1984. The Government of

Pondicherry entered into an agreement with

M/s. Consulting Engineering Services (India) Private

Limited on January 22, 1985 for development of the

facilities in terms of the approval and sanction

granted by the Government of India. During the

6

construction of the facilities, there was a proposal to

create additional development facilities for

Commercial-cum-Fishing Vessels.

The creation of these additional facilities was

discussed in a meeting held on March 22, 1989

pursuant to which the Director (Ports), Port

Department, Government of Pondicherry vide letter

dated March 23, 1989 informed the Development

Commissioner, Government of Pondicherry that

creation of such additional facilities would require a

feasibility report. In the said letter it was also

stated that since the Port Department lacked

competent personnel in this regard, the same

should be got prepared by a body having the

requisite expertise. It was also mentioned in the

letter that M/s. Consulting Engineering Services

(India) Private Limited had no requisite expertise

and recommended the appointment of M/s. Rail

India Technical and Economic Services India

Limited, a Government of India undertaking under

the Ministry of Railways (“M/s. RITES India

7

Limited” for short) to conduct the study on the

technical feasibility and economic viability of the

proposed development facilities. This proposal was

examined and approved by various officials

including the then Chief Minister of Pondicherry on

March 27, 1989 and the then Lt. Governor,

Pondicherry on March 28, 1989. In terms of those

decisions, a Government order dated May 29, 1989

was issued by the Government of Pondicherry

sanctioning a techno-economic survey to be

conducted by M/s. RITES India Limited.

On June 10, 1991, M/s. RITES India Limited

submitted its Techno-Economic Feasibility Study

Report pertaining to the Development of the

additional facilities at Ariankuppam Port Project.

The said report noticed that the proposed

development was not only necessary for bridging the

gap of technological changes in the sea transport,

but was also necessary from the socio-economic

point of view. In the report it was mentioned that

the investments in the proposed project was

8

justified. By the said report a study to be done on

the ways and means of raising the funds for the

project was recommended. The report also pointed

out that Environmental Impact Assessment for the

proposed development indicated that the effect on

the environment was not significant and would be

well within the acceptable levels specified as per the

Indian standards.

In spite of the positive Feasibility Study Report

submitted by M/s. RITES India Limited, the project

could not be carried forward in view of the paucity

of funds.

Again, some time in March 1996 the

Government of Pondicherry made further attempt to

develop the Port by inviting the officials of M/s.

RITES India Limited to examine and provide

consultancy services by privatization of the ports at

Pondicherry, Karaikal and Mahe. Accordingly, a

meeting was held between the officials of

Government and the Company on March 12, 1996.

In the said meeting the officials of M/s. RITES India

9

Limited suggested that appropriate approach was to

adopt the Build, Own, Share and Transfer mode of

privatization. In terms of the said meeting

M/s.RITES India Limited, through a letter dated

March 12, 1996, submitted a ‘Terms of Reference’

for offering consultancy assignment for privatization

of aforementioned ports. The total consultancy fee

for the assignments was initially put as Rs.30 lakhs,

which was reduced to Rs.20 lakhs as the proposal

for consultancy was subsequently limited to the

Pondicherry Port only. The Joint Secretary,

Ministry of Surface Transport, Government of India,

vide letter dated March 22, 1996 informed the Chief

Secretary, Pondicherry Administration about the

need to expand the existing capacity of the

Pondicherry Port to meet the growth requirement of

traffic handled by various major ports. In the said

letter it was mentioned that a decision was taken to

invite capital participation by private sector and

from non-maritime land-locked states. In response

to the said letter the Director of Ports, Government

10

of Pondicherry addressed a letter dated April 18,

1996 enclosing therein the material for inviting

capital participation by the private sector and non-

maritime land-locked states.

One company, i.e., Megah Venture Lines (M)

SDN BHD vide letter dated March 28, 1996

addressed to the Secretary (Health & Welfare and

Port), Government of Pondicherry, referred to the

discussion it had on March 28, 1996 and made a

proposal to conduct a Feasibility Study relating to

the modernization/privatization of the Pondicherry

Port. The said company wanted permission to

conduct the said Feasibility Study. The said

proposal was examined by the Director (Ports),

Government of Pondicherry and by letter dated April

19, 1996, the Director (Ports), Government of

Pondicherry, recommended that as the entire

privatization of port was being examined by

M/s. RITES India Limited, the study sought to be

conducted by M/s. Megah Ventures Lines should be

11

permitted only after tenders for privatization were

invited by M/s. RITES India Limited.

The Managing Director of M/s. Mega Ventures

Lines along with letter dated January 25, 1997,

addressed the then Chief Minister, Pondicherry,

enclosed a draft of MOU pursuant to the meeting

which had taken place between the then Chief

Minister and the officials of M/s. Megah Ventures

Lines on January 23, 1997 and claimed that the

same was in accordance with the economic policy of

the Government of India. The benefits, which were

to accrue, were also mentioned in the said letter.

The Director of Ports, Government of Pondicherry,

by his letter dated June 24, 1997, made a proposal

to the Under Secretary (Ports), Pondicherry to

examine the issue as to whether it would be

preferable to call for competitive tenders. It was

also mentioned in the said letter that in the

meanwhile M/s. RITES India Limited be approached

for consultancy services. By the said letter the

Director of Ports also proposed that M/s. RITES

12

India Limited be appointed as the consultant for the

assignment of selection of suitable entrepreneurs

for ‘additional development facilities of

Ariankuppam Port Project’ by competitive tenders

on BOOST basis. The Director also requested for

sanction of Rs.14 lakhs as expenditure. On

September 19, 1997 a meeting was held between

the senior officials of the Government of

Pondicherry and the Group General Manager of

M/s. RITES India Limited. The minutes of the

meeting recorded that due to resource crunch at the

Centre and State level, the Government of

Pondicherry had decided to invite private

participation for the development of Pondicherry

Port. The minutes also reflected that a decision was

taken to call for pre-qualifications bids in order to

ascertain the technical capacity and financial

soundness of the entrepreneurs. The minutes also

indicated that a decision was taken that in order to

invite the best parties, the Government of

Pondicherry should grant concessions at par with

13

other maritime States. On November 4, 1997 a

meeting was held between the officials of the

Government of Pondicherry including the then

Lt. Governor and the Group General Manager of

M/s. RITES India Limited. At the said meeting the

officials of M/s. RITES India Limited gave a detailed

presentation relating to various aspects of

competitive bidding process. At the said meeting a

decision was taken to adopt a transparent open

competitive bidding procedure in preference to the

MOU Route. The minutes of the said meeting also

reflected that a decision relating to the appointment

of M/s. RITES India Limited as a consultant for this

purpose was also taken. The minutes further

recorded that the Pondicherry Port was a minor Port

and, therefore, the provisions of Major Ports Trust

Act were not applicable. The draft minutes were,

thereafter, approved and signed by the officials of

the Government of Pondicherry.

On November 6, 1997, a Government Order

was issued appointing M/s. RITES India Limited as

14

a consultant. The Consultancy Service Agreement

between the Government of Pondicherry and

M/s. RITES India Limited was signed on December

10, 1997. The Group General Manager (Ports) by

letter dated December 22, 1997 forwarded draft

advertisement titled “Invitation for Private

Investment in Pondicherry Port”, a Draft Invitation

Document for “Initial Proposals” and the Draft

Agreement to be entered into between the

Government of Pondicherry and M/s. RITES India

Limited. These draft documents and the draft

advertisement were forwarded for the purpose of

approval by the competent authority. The draft

advertisement and the draft initial proposal were

examined by various departments of the

Government of Pondicherry. The Secretary

(Finance), Government of Pondicherry in his noting

dated May 18, 1998 noted that there were long term

implications of the Draft Advertisement. He,

therefore, recommended that the draft initial

proposal and the Draft Agreement be placed before

15

the Council of Ministers. These recommendations

were approved by the Chief Secretary, Pondicherry

on August 3, 1998 and by the then Chief Minister

on August 13, 1998. Accordingly, a Cabinet

meeting was convened on January 19, 1999

wherein the agenda of the meeting was to discuss

and decide amongst other items, the proposal for

privatization of Port and calling for advertisements

by M/s. RITES India Limited. The Cabinet in the

said meeting resolved to defer the discussion on this

item till the next meeting. The said agenda was

again circulated to the Ministers of the Cabinet on

April 7, 1999 and all the Ministers of the Cabinet

approved the proposal for privatization of the Port

as well as calling for advertisement by M/s. RITES

India Limited. The proposals were finally approved

by the Cabinet on October 13, 1999. The then

Lt. Governor accorded his approval on October 15,

1999. After the said approval, various departments

of the Government of Pondicherry examined the

Draft Agreement to be entered into between the

16

Government of Pondicherry and M/s. RITES India

Limited. After necessary changes, the agreement

was entered into between the parties on January

10, 2000.

7.Relevant facts

The General Manager (Ports) of M/s. RITES India

Limited by his letter dated March 16, 2000 informed the

Secretary (Ports) Government of Pondicherry that the

advertisement seeking interest of the parties for

development of Pondicherry Port through private

investment had appeared in the Daily Hindustan Times

on March 16, 2000 and the same advertisement would

appear in editions of the Economic Times, Times of India

(Bombay edition), Hindu (Chennai and Delhi editions)

and Statesman (Calcutta edition) between 17

th

to 21

st

March, 2000. By this advertisement, the Government of

Pondicherry sought involvement of the private sector in

the development and operation of the Pondicherry Port

on BOST basis from reputed and financially sound

Indian and/or international parties. The last date for

17

submissions of proposal for pre-qualification of the above

project was May 20, 2000. However, the General

Manager (Ports) of M/s. RITES India Limited by his letter

dated May 9, 2000 sought permission from the

Government of Pondicherry for extension of last date by

one month, i.e., June 20, 2000, which was approved on

May 19, 2000. The General Manager (Ports) of

M/s. RITES India Limited by his letter dated June 29,

2000 informed the Principal Secretary (Power),

Government of Pondicherry about the developments of

private investment in the Pondicherry Port. In the said

letter it was mentioned that in response to the

advertisement, 48 parties had initially indicated interest

in the project and that certain firms were short listed. It

was mentioned that the document seeking initial

proposals from short listed parties was issued to all

interested parties and they were requested to submit

their initial proposals by May 20, 2000. However, by the

last date for submission of initial proposals, only five

parties/ consortiums had submitted their proposals. It

was also mentioned in the said letter that the evaluation

18

of the proposals by M/s. RITES India Limited would be

submitted on or before July 15, 2000. M/s. RITES India

Limited submitted its report on evaluation of initial

proposals as well as invitation documents for detailed

proposals. The said report indicated that M/s. RITES

India Limited had rejected the proposal of one party, i.e.,

M/s. Rockers (India) Pvt. Ltd. In the report preference

regarding remaining four parties was shown as under: -

1.M/s. Ashok Leyland of India – 81 marks out of 100

(This firm had unconditionally qualified).

2.M/s. Seaways Shipping Limited of India – 92 marks

out of 100 (This firm had qualified with some

conditions).

3.M/s. Kvaerner Construction International Ltd. – 73

marks out of 100 (This firm had qualified with some

conditions).

4.M/s. Durgeshwari Shipping Agency Pvt. Ltd. – 79

marks out of 100 (This Firm had qualified with some

conditions).

The short listing of four parties and recommendation of

M/s. RITES India Limited to invite detailed proposals

19

from the four parties within five months was approved by

the Government of Pondicherry on July 21, 2000. The

parties which were short listed subject to certain

conditions were asked to provide documentary proof in

support of their claims before September 15, 2000. In

consequence thereof, M/s. Durgeshwari Shipping Agency

Pvt. Ltd. had submitted the requisite documents.

Therefore M/s. RITES India Limited confirmed the short

listing of consortium of M/s. Durgeshwari Shipping

Agency Pvt. Ltd. whereas the other two short listed

parties had sought extension of time by about two

months for furnishing the required documentary proof.

Accordingly the General Manager (Ports) of M/s. RITES

India Limited had, by his letter dated September 22,

2000, sought approval of the Government of Pondicherry

in relation to (a) final confirmation of short listing of

consortium of M/s. Durgeshwari Shipping Agency Pvt.

Ltd. and (b) allowing time up to November 15, 2000 for

the parties mentioned at serial numbers 1 and 2 for

submitting proof in respect of conditions mentioned by

them. The Government of Pondicherry by its

20

communication dated October 8, 2000 informed

M/s. RITES India Limited that a decision in this regard

would be made after hearing the representations of the

consortium parties in the pre bid meeting to be held on

October 12, 2000. A pre bid meeting for the development

and operation of Pondicherry Port on the basis of the

clarifications sought by the short listed parties was held

in Delhi on October 13, 2000. This meeting was to clarify

all the doubts of the parties in relation to the project

prior to the submission of a detailed proposal. The

meeting was attended by the Principal Secretary (Power

and Ports), Government of Pondicherry, and only three

parties/ consortiums, i.e., (i) M/s. Ashok Leyland of

India, (ii) M/s. Seaways Shipping Limited of India and (iii)

M/s. Durgeshwari Shipping Agency Pvt. Ltd. After the

said pre bid meeting, only two parties/consortiums

submitted their detailed proposals, i.e., M/s. Ashok

Leyland of India and M/s. Durgeshwari Shipping Agency

Pvt. Ltd. M/s. Durgeshwari Shipping Agency Pvt. Ltd.

sought an extension of time till January 15, 2001 to

submit their detailed proposals, which was granted. The

21

General Manager (Ports) of M/s. RITES India Limited by

his letter dated January 15, 2001 informed the Principal

Secretary (Power and Ports) Government of Pondicherry

that till the last date of submission of detailed proposals

it had received proposals from two parties, namely,

(i) consortium with M/s. Ashok Leyland of India and

(ii) consortium with M/s. Durgeshwari Shipping Agency

Pvt. Ltd. In the said letter it was mentioned that both the

parties had not submitted valid Bank Guarantee as bid

securities and, therefore, both the proposals should be

rejected straightaway. As only two proposals were

received and both were found to be deficient with regard

to the bid security deposit, it was recommended that

both the parties should be given time of seven to ten

working days to enable them to submit valid Bank

Guarantees. The Government accordingly extended the

time up to January 25, 2001 to enable both the parties to

submit valid Bank Guarantees. The General Manager

(Ports) of M/s. RITES India Limited by his letter dated

January 27, 2001 informed the Principal Secretary

(Power and Ports), Government of Pondicherry that even

22

within the extended time limit, the parties mentioned had

not submitted valid Bank Guarantees. In the said letter

it was stated that the attitude of both the parties had

shown utter lack of conviction and commitment to the

project. It was further mentioned that the privatization

process was not successful. By the said letter the

General Manager recommended two other alternative

schemes for the development of Pondicherry Port. Those

recommendations were examined by various officials of

Government of Pondicherry. On the proposals made by

the General Manager, the then Lt. Governor of

Pondicherry in her note dated March 8, 2001 expressed

her desire to have a meeting with the officials of

M/s. RITES India Limited. On March 30, 2001 the then

Lt. Governor of Pondicherry convened a meeting with the

officials of M/s. RITES India Limited. At the said meeting

various alternative methods were suggested for the

development of the Pondicherry Port. At the said meeting

it was decided that a Corporation on the line of

Pondicherry Power Corporation be established and a

proposal be made to the Planning Commission for the

23

purpose of grant of funds to undertake the development

of the Pondicherry Port. This is how the first attempt

made by the State Government to develop the Port failed.

Again on February 6, 2003, a meeting was held in

the Chamber of the then Chief Minister of Pondicherry

regarding the development of Pondicherry Port. The

meeting was attended by the Chief Secretary, Secretary

(Port), the Director (Port) and a private party. In the said

meeting it was decided that an “Expression of Interest”

calling for private investment be floated. The Chief

Secretary, in his notings dated February 27, 2003,

proposed various steps to be undertaken for the

development of the Port. One of the steps proposed by

him was to immediately issue an Expression of Interest

from private parties. He also recommended that the

Director (Port) should propose the constitution of a

committee of officials to look into the entire gamut of the

privatization process as was done in relation to the power

sector. The recommendations of the Chief Secretary were

approved by the then Chief Minister of Pondicherry on

March 6, 2003. In terms of the said decision, an

24

advertisement titled as “Invitation of Expression of

Interest for the Development of Pondicherry Port by

Private Investment” was published in various

newspapers. The advertisement sought private

participation of the parties in the development and

operation of the project on Build, Own, Operate, Share

and Transfer basis. The advertisement also stated that

the interested parties should communicate their

Expression of Interest within 21 days. In terms of the

recommendations made by the Chief Secretary in his

letter dated February 27, 2003 a decision was taken by

the Government of Pondicherry, which was noted by the

Director (Port) in his noting dated March 25, 2003

recommending constitution of a committee to look into all

the matters relating to the privatization process. This

recommendation was approved by various Government

officials including the then Chief Minister of Pondicherry

on April 30, 2003 and by the then Lt. Governor of

Pondicherry on May 8, 2003. It was further decided that

the issue of re-engaging of M/s. RITES India Limited as

Consultant should be taken later on. The Government of

25

Pondicherry vide Government Order dated May 13, 2003

constituted a Committee to look into the privatization

process of the Port under the Chairmanship of Secretary

to Government (Port). After the constitution of the

Committee it was decided by the Government to co-opt a

representative of the Ministry of Shipping, Government of

India. By Government Order dated April 30, 2003, the

Ministry of Shipping, Government of India, nominated

Mr. P.C. Dhiman as a Member of the Committee.

Accordingly, Mr. Dhiman was appointed as a Member of

the Committee by the Government of Pondicherry vide

Government Order dated August 20, 2003. The first

meeting of the Committee was held on June 2, 2003,

which was attended by all the Members of the

Committee. In the said meeting various courses of

actions were discussed. One of the issues related to

seeking of consent of Government of India for the

privatization of the Port. It was also decided to seek

clarifications from the Ministry of Shipping, Government

of India in this regard. The Chief Secretary, Government

of Pondicherry in his notings dated June 25, 2003

26

mentioned that he had discussed the issue with the

former Secretary, Ministry of Shipping and he was

informed that no permission to develop a minor port like

Pondicherry port was required and that the guidelines

issued by the Government of India on private sector

participation in the Port sector were applicable only to

major ports. The Chief Secretary further noted that he

had also asked the Assistant Liaison Commissioner,

Government of Pondicherry in New Delhi to meet

personally the officials of the Ministry of Shipping and

report. The Assistant Liaison Commissioner,

Government of Pondicherry in New Delhi by his Inter

Departmental Report dated June 25, 2003, informed that

the management and development of ports was a State

subject and, therefore, no clearance from the Central

Government was required. Therefore, the Chief Secretary

recommended that further steps for privatization of the

Port be taken. One of the steps recommended by him

was to re-engage M/s. RITES India Limited as a

Consultant to the entire process. The then Minister of

Ports by his notings dated July 18, 2003 accepted the

27

proposals of the Chief Secretary but noted that instead of

engaging M/s. RITES India Limited straightaway, it

would be appropriate to issue notice inviting firms or

consultants in general. This proposal was approved by

the then Chief Minister of Pondicherry. Therefore

necessary advertisements were issued by the

Government of Pondicherry. In response to the

advertisements, 13 parties submitted Expression of

Interest for the development of Pondicherry Port. These

parties were asked to give detailed presentation to the

Pondicherry Port Privatisation Committee. Out of these

13 parties only six parties made their presentation before

the Committee on August 20, 2003. It was noticed that

out of six parties only IPCO-Menang, Singapore and

Larsen and Toubro, Chennai had experience

internationally and nationally in port development and

were also the only parties who had requisite technical

know-how as well as ability to mobilize funds. The

minutes of the meeting dated August 20, 2003 indicated

that M/s. Larsen and Toubro had put certain conditions

and wanted certain work to be done by the Port

28

Department. The Committee noticed that the conditions

were contrary to the expectation of the Government of

Pondicherry and accordingly the Committee proposed to

grant Letter of Intent to M/s. IPCO-Menang, Singapore.

In terms of the recommendations of the Privatization

Committee, the Government of Pondicherry, on

September 2, 2003, issued a Letter of Intent to

M/s. IPCO-Menang to undertake the preparation of a

Detailed Project Report and Feasibility Study for the

development of Pondicherry Port. The Detailed Project

Report as well as Feasibility Study Report were to be

submitted by November 5, 2003. M/s. IPCO-Menang

was not able to submit the above mentioned Reports by

November 5, 2003. In fact the said company through its

communication dated November 19, 2003 had requested

the Director of Ports to extend the time to submit the

report till December 31, 2003. In response thereof, the

Director of Port, by his letter dated November 19, 2003,

informed the said company that the request for extension

of time limit up to December 31, 2003 could be

considered only on the condition that the company

29

deposited an amount of Rs.50 lakhs to show its

seriousness and commitment towards implementation of

the project. The said company neither submitted the

Reports by December 31, 2003 nor deposited the

amount. In these circumstances, the Government of

Pondicherry decided to grant Letter of Intent to the other

party, which was short listed, i.e., M/s Larsen and

Toubro, Chennai. This decision was approved by the

Minister of Ports on April 5, 2004. A Letter of Intent

dated April 30, 2004 was issued to M/s. Larsen and

Toubro, Chennai. The said company did not respond to

the issuance of Letter of Intent. In such circumstances,

the second attempt for getting private investments for

development of Pondicherry Port also resulted into a

failure.

Sometimes in September 2004, the Chief Secretary,

Government of Pondicherry had a meeting with the

officials of Ministry of Shipping, Government of India,

relating to the development of Pondicherry Port. In the

said meeting the Joint Secretary, Ministry of Shipping

had informed that it would be possible to provide an

30

amount of Rs.20 lakhs for the purpose of preparing a

Feasibility Study Report and the rest of the expenditure

should be born by the State Government. The Chief

Secretary, Government of Pondicherry by his letter dated

September 6, 2004 requested the Secretary, Ministry of

Shipping, Government of India to provide an amount of

Rs.50 lakhs for the purpose of making the Feasibility

Study Report. A copy of the letter was sent to the

Director of Ports with a request to issue a press release in

the newspapers calling proposals from the interested

parties for preparation of Feasibility Study Report. The

objective of the entire exercise was to get prepared a

Feasibility Study Report so that a private investor might

not be required to conduct the study prior to decide

whether the private investor would be required to invest

or not. It was the understanding of the Government of

Pondicherry that in such an event the possibility of

attracting private investments in the development of Port

would substantially increase.

In terms of letter dated September 6, 2004 the

Director (Ports) submitted a proposal for issuing an

31

advertisement in various newspapers thereby calling for

the interested parties to prepare the Feasibility Study

Report. This proposal was approved by the Secretary

(Ports)/Chief Secretary. In response to the letter dated

September 6, 2004 the Ministry of Shipping, Government

of India by its letter dated September 30, 2004 informed

the Chief Secretary, Government of Pondicherry that in

terms of the guidelines framed by the Ministry, the

Central assistance would be restricted to 50% of the

expenditure to be incurred by the State Government and

the annual ceiling fixed was Rs.20 lakhs for a State in a

year on reimbursement basis. On October 5, 2004, the

officials of one company, i.e., Apollo Infrastructure

Projects Finance Company Limited, had a meeting with

the Minister of Port, Government of Pondicherry

regarding the development of the Port. The company

sought time from the Minister to make a technical and

financial presentation in this regard. The said company

also, by its letter dated November 22, 2004, requested for

an opportunity to submit a technical report. Another

company, i.e., Subhash Project and Marketing Limited

32

-respondent No. 11 herein - (‘SPML’ for short), by its

letter dated October 6, 2004, submitted an Expression of

Interest for development of ports, which is a Special

Economic Zone in Pondicherry. The company, by its

letter dated November 4, 2004, intimated the Principal

Secretary (Port) that they had identified their partner who

would be associated in the work and requested for an

appointment to make a presentation to the Principal

Secretary. The Director (Ports) submitted a proposal for

issuing an advertisement seeking “Expression of Interest”

from the consultants for the preparation of Feasibility

Study Report for the development of Pondicherry Port.

Based on this proposal a decision was taken to issue an

advertisement in various newspapers in this regard.

Accordingly, an advertisement was published in various

newspapers. In terms of the said advertisement the

consultants, interested in undertaking a Feasibility Study

for the Pondicherry Port Development, were required to

submit their Expression of Interest to the Director of

Ports within 21 days from the date of publication of the

advertisement. In pursuance of the advertisement, 33

33

firms/companies had responded and submitted their

Expression of Interest. Out of these 33 firms/companies,

27 firms/companies had responded within the time limit

specified in the advertisement. One of such consortium

(i.e. MOH Group) submitted their Expression of Interest

vide letter dated November 21, 2004. The Director of

Ports in his proposal dated November 24, 2004

recommended that the remaining six firms/companies,

which had not responded within the time stipulated in

the advertisement, should also be considered for the

purpose of obtaining a Feasibility Study Report to ensure

maximum benefit from the advertisement. The Director

of Ports also recommended that the Port Privatisation

Committee, including the Member co-opted from the

Ministry of Shipping, Government of India, constituted in

the earlier round, should examine the proposals made by

the firms/ companies. The proposal was examined and

approved by various officials of the Government of

Pondicherry and it was decided that the firms/companies

should be called upon to make their presentation before

the Committee from December 6, 2004 to December 8,

34

2004. In relation to the remaining six firms/companies,

who had submitted their Expression of Interest after the

time limit, it was recommended by the Under Secretary

(Port) in his noting dated December 3, 2004 that they

should not be considered in view of previous experience

and the General Financial Rules, 1963. This

recommendation was accepted by the Secretary

(Port)/Chief Secretary, Government of Pondicherry, which

is quite evident from his noting dated December 6, 2004.

Under the circumstances, it was decided to exclude those

six firms/companies from the exercise undertaken for

obtaining the Feasibility Study Report. On various dates

the Port Department, Government of Pondicherry, issued

e-mails to the 27 firms/companies to make a

presentation on the Expression of Interest for the

preparation of the Feasibility Study Report. These e-

mails were sent between December 2, 2004 and

December 4, 2004. Out of these 27 firms/companies, 10

firms/companies made their presentation on December

6, 2004. However, due to certain other pre-occupations,

the date for presentation was shifted to December 8,

35

2004. The other 10 firms/ companies were requested to

make their presentation on December 7, 2004, whereas

the remaining 7 other firms/ companies were requested

to make their presentation on December 8, 2004. Thus

in all, 27 firms/companies were invited to make their

presentation before the Committee.

On December 3, 2004 the Vice President of Marshall

Power & Consultancy Services informed the Director of

Ports by e-mail that the officials of the company were

busy on 7

th

and 8

th

of December, 2004 and, therefore,

meeting dated December 11, 2004 be postponed.

Similarly, the Advisor to Scott-Wilson Kirkpatrick (P) Ltd.

by e-mail dated December 3, 2004 sought for an

alternative date of December 10, 2004. Another

company, i.e., WAPCOS, through its e-mail dated

December 3, 2004, informed the Director of Ports that its

officials would not be able to reach for presentation and

sent necessary materials by courier. STUP Consultants

P. Ltd. vide its e-mail dated December 6, 2004 informed

the Director of Ports that it be allowed to make the

presentation on December 9, 2004. Mac Knight

36

Infrastructure P. Ltd., by its e-mail dated December 6,

2004, informed the Director of Ports that due to prior and

conflicting commitments, its official would not be able to

appear and requested for an alternative date. The

Director and Chief Operating Officer, DS Constructions

vide letter dated December 7, 2004 informed the Director

of Ports that officials of the Company wanted to make

presentation on development and construction of the

Pondicherry Port. The Vice President of SPML through

its e-mail dated December 7, 2004, informed the Director

of Ports that they were going to develop and operate the

ports and would like to work more as an operator and a

developer. By the said e-mail the said company

requested for an opportunity to enable it to make a

presentation. On December 7, 2004 and December 8,

2004 various firms/companies made presentations

before the Committee. The parties, who made their

presentations, were as under:-

1.Hauer Associates, Chennai, made the presentation

on December 7, 2004.

37

2.D.S. Constructions made the presentation on

December 7, 2004.

3.Howe India made the presentation on December 7,

2004.

4.Price Water House Corpus, Chennai, made the

presentation on December 7, 2004.

5.Royal Haskoning, Delhi, made the presentation on

December 7, 2004.

6.CRISIL made the presentation on December 7,

2004.

7.Mahindra Acres Consulting, Chennai, made the

presentation on December 7, 2004.

8.National Institute of Port Management, Chennai,

made the presentation on December 8, 2004.

9.Cullen Grummit & Roe, Bombay, made the

presentation on December 8, 2004.

10.Deloitte, Chennai, made the presentation on

December 8, 2004.

11.A.F. Ferguson, Chennai, made the presentation on

December 8, 2004.

38

Certain parties were unable to make their presentations

on the above mentioned dates and, therefore, the

Director of Ports, Government of Pondicherry, by his

e-mails dated December 10, 2004, requested the

following parties again to make a presentation on the

preparation of the Feasibility Report, on December 17,

2004. The parties, to whom the said e-mails were

dispatched, were as under: -

1.Scott Wilson Kirkpatrick India Pvt. Ltd.

2.Indian Ports Association, New Delhi.

3.Sree Eikon Constructions, Chennai.

4.Mott Macdonald, Mumbai.

5.Subhash Projects & Marketing Limited

6.Consulting Engineering Services India Limited

7.MECON Ltd., Ranchi.

8.Marshall’s Power & Telecommunication Limited,

Bangalore.

9.Larsen and Toubro, Ramboll

10.Mac Knight Infrastructure Private Ltd., Mumbai.

11.Beckett Rankine Partnership, Bombay.

12.National Institute of Oceanography.

39

In the meantime one company named Menang

Amalgamated Sdn Bhd vide its fax message dated

December 15, 2004 addressed a communication, to the

Minister of Port, Secretary of Port and Director of Port,

making a reference to the letter dated December 30, 2003

and stated that the company was in the process of

finalizing the Detailed Project Report as well as the

Feasibility Study Report and that the company was keen

on exploring ways to move forward after depositing the

earnest money of Rs.50 lakhs. It may be stated that the

letter was sent after more than a year from the date the

company was supposed to submit its report. In terms of

the e-mails dated December 10, 2004 the following

firms/ companies made their presentations on December

17, 2004 before the Committee: -

1.Consulting Engineering Services, New Delhi

2.Beckett Rankine, Mumbai

3.STUP Consultants, Mumbai

4.L & T Ramboll, Chennai.

40

The minutes of the meetings dated December 7, 2004,

December 8, 2004 and December 17, 2004 indicate the

nature of presentations, made by various parties. The

presentations included modes of development, etc. The

minutes of the meetings show that the Chief Secretary/

Secretary (Port), Government of Pondicherry while going

through the presentations of every party had asked them

whether they would be able to develop the Pondicherry

Port and would able to bring in investors for the purpose

of developing the Port. The minutes further reflect that

certain parties, like Hauer Associates, Haskoning India

Private Limitd, CRISIL Infrastructure Advisory,

Consulting Engineering Services India Limited, Beckett

Rankine Partnership, informed the Committee that they

might be able to get a private investor only at a later

stage or after seeking certain clarifications. These

firms/companies were, however, not willing to develop

and operate the Pondicherry Port. The minutes also

reflected that only two companies, i.e., M/s. Apollo

Infrastructure and M/s. D.S. Constructions stated that

41

they would be able to develop the Pondicherry Port on

their own.

The General Manager (Ports) of M/s. Larsen and

Toubro, Chennai, by his letter dated December 22, 2004,

informed the Chief Secretary/Secretary (Port),

Government of Pondicherry that the company was willing

to develop the Pondicherry Port. The said letter also

referred to a meeting held on December 20, 2004 with

the Chief Secretary and stated that the company be

allowed to enter into MOU with the Government of

Pondicherry for the development of Pondicherry Port.

This letter was received by Directorate of Ports on

December 27, 2004. M/s. Apollo Infrastructure Projects

Finance Company Limited, by its letter dated December

23, 2004, informed the Minister of Ports, Government of

Pondicherry that it was willing to develop Pondicherry

Port on DBOOT basis and proposed certain Development

Phases. This letter was received on December 31, 2004.

In the said letter a reference was made to the

presentation made by the company on December 17,

2004. These letters as well as minutes of the meetings of

42

the Port Privatisation Committee clearly show that

certain firms/companies were keen to develop and

operate the Port. The Director of Ports by his letter dated

January 12, 2005 forwarded a short note on the

proposals submitted by 27 firms/companies. It is clear

from the said note that the proposals received from the

firms/ companies were examined on the basis of their

experience in preparing the Feasibility Report as well as

in conducting the consultancy services in Port Sector in

India and abroad. This short note was prepared from the

view point of selecting a consultant to prepare a

Feasibility Study Report and not from the view point of

selecting a developer/operator for the purpose of

operating the Port. In the earlier process of privatization,

two companies were short listed and were granted Letters

of Intent. Those two companies, i.e., (i) IPCO Menang,

Singapore and (ii) M/s. Larsen and Toubro, Chennai, did

not submit the requisite reports and, therefore, their

claim lapsed. These two companies by letters dated

December 15, 2004 and December 22, 2004 respectively

again expressed their interest in developing the

43

Pondicherry Port. In view of these letters, the Director of

Ports by his letter dated January 7, 2005 sought a

decision from the Under Secretary (Port) about the future

course of action to be adopted. The Under Secretary

(Port) in his note dated January 19, 2005 recounted the

facts and circumstances in which the Letters of Intent

were issued as well as the conduct of the parties. The file

was thereafter submitted to the Secretary (Port)/Chief

Secretary for necessary orders. The Chief Secretary, who

was also Chairman of the Port Privatisation Committee,

by his note dated January 19, 2005, noticed that the Port

Privatisation Committee in its meeting had short listed

two parties and recommended that the Government

should consider short-listing M/s. Larsen and Toubro,

Chennai as the third party. It was mentioned in the note

that this was subject to the approval of the Government.

He also recommended that the legal position with regard

to the first two parties, who had desired to prepare

Feasibility Report, should be examined and thereafter the

project should be allotted. An Inter Departmental Note

dated January 20, 2005 was prepared. In the said note

44

the Under Secretary (Ports) referred to the notings made

by the Chief Secretary on January 19, 2005 and directed

the Director of Ports to send a proposal to the Law

Department for getting confirmation. In terms of the said

note a proposal dated January 25, 2005 was made by the

Director of Ports, who is also a Member of the Port

Privatisation Committee. In his proposal, he pointed out

the recommendation made by the Chief Secretary in his

notings and stated that the two parties mentioned in the

notings, i.e., (1) M/s. D.S. Construction, which had

applied for the preparation of the Feasibility Study Report

and was willing to take development of the Port and

(2) M/s. Apollo Infrastructure Projects Finance Company

Limited, could be considered. The other party, which

was recommended for short listing, was M/s. Larsen and

Toubro, Chennai. It was pointed out that the three

parties were short listed since they had shown interest in

developing the Port by Private Investment. In response to

the proposal for the Inter Departmental Note dated

January 25, 2005, the Law Department, Government of

Pondicherry, by its noting dated February 17, 2005,

45

stated that any consultancy firm, who was entrusted the

work of preparing the Feasibility Study Report, should

only select the promoter and cite example whether it was

so done. The Law Department further pointed out that

clearance from the Government should be taken in

respect of various issues involved in the proposal. The

said noting of the Law Department was examined by the

Chief Secretary. The Chief Secretary in his noting dated

February 24, 2005 noted that the issue of seeking

clearance from the Government of India had already been

clarified by his predecessor-in-Office vide noting dated

June 25, 2003 and, therefore, the said issue should not

delay the consideration of the matter. During this period

certain parties expressed their interest in developing the

Pondicherry Port. One company, i.e., Water-Bau-AG,

through its communication dated January 23, 2005,

informed the Chief Secretary, Government of Pondicherry

about its desire to participate in a Deep Sea Project on

BOT basis and submitted its profile. This letter was

received by the Directorate of Ports on February 2, 2005.

Similarly, another company, i.e., Digital Hub Sdn Bhd

46

through its letter informed the then Chief Minister of

Pondicherry that they wanted to participate in a Deep

Sea Project on BOT basis and submitted its analysis. In

the meantime on February 2, 2005, the Chief Secretary

had a meeting with Lt. Governor of Pondicherry. The

noting of the Executive Engineer, Directorate of Ports,

Government of Pondicherry dated February 2, 2005

indicate that after the meeting, the Chief Secretary

directed that a list of all the firms, which had expressed

their interest to develop the Port through Private

Investment, be forwarded to him. In terms of the said

direction the Director of Ports by his letter dated

February 3, 2005 gave the list of 11 firms and

companies, which had expressed desire to develop the

Port through Private Investment. It was also mentioned

therein that out of 11 firms/companies, seven

firms/companies had already made their presentation

before the Port Privatisation Committee on different

dates. The note was examined by various Government

officials and it was decided that the remaining four

firms/corporations should be again invited for making a

47

presentation before the Committee. The Director of Ports

through e-mails dated February 25, 2005 invited above

mentioned four firms/companies to make their

presentations on March 11, 2005. The firms/companies

were (1) Subhash Projects and Marketing Limited, New

Delhi, (2) Marshall Power & Telecom (I) Ltd., Bangalore,

(3) Digital Hub SDN BHD, Malaysia and (4) Walter Bau

AG, Germany. M/s. SPML, through its letter dated

February 4, 2005, informed the Principal Secretary (Port),

Government of Pondicherry that earlier it had not taken

interest in the project, but the said company expressed

its desire for development of the Port, Beaches, etc.

Similarly, the General Manager (Tech.), Ashoka Buildcon

Limited by his letter dated February 7, 2005, informed

the then Chief Minister of Pondicherry that they had

joined hands with an overseas Port Developer and,

therefore, would like to offer services for the Port Project

in Pondicherry on BDOOT basis. M/s. Apollo

Infrastructure Projects Finance Company Limited by its

letter dated February 8, 2005 informed the Minister of

Ports, Government of Pondicherry that it had entered into

48

a joint venture agreement with L&T Romboll, Chennai.

Similarly, LA-V-JAY and Associates Pvt. Ltd. through its

letter dated February 14, 2005 informed the then Chief

Minister of Pondicherry that the said company was part

of a consortium comprising of Royal Hoskoning and

Ashoka Buildcon. The said company also pointed out

that it would like to develop Pondicherry Port in a unique

manner. The said consortium also forwarded one letter

from the Director Operations, Royal Haskonin to La-V-

Jay and Associates wherein Royal Haskonin confirmed

that they were able to provide consultancy service to

La-V-Jay for the purpose of development of Port. The

Director of Ports, Government of Pondicherry by his

e-mail dated March 1, 2005 informed the consortium led

by M/s. LA-V-JAY and Associates that if they were

interested in developing the Pondicherry Port, they were

free to make presentation on March 11, 2005. In

response thereto, M/s. U-Pranav Consultancy, who was

acting on behalf of the consortium vide its e-mail dated

March 8, 2005, confirmed that they would be able to

make the presentation on March 11, 2005. The Director

49

(Operations) of M/s. Royal Haskoning by his letter dated

March 11, 2003 apologised to the then Chief Minister of

Pondicherry for absence of its officials on March 11, 2005

and requested that an opportunity be provided to enable

it to make presentation on March 14, 2005.

M/s. Digital Hub vide its e-mail dated March 7,

2005 informed the Deputy Director of Ports, Government

of Pondicherry that they would not be able to get their

investor from Germany. The Chief Executive Officer of

M/s. SPML vide letter dated March 7, 2005 informed the

Director of Ports that it would make a presentation on

March 11, 2005. The following statement indicates that

on March 11, 2005 following firms/companies had made

presentations before the Port Privatisation Committee: -

S.

No.

Date of

e-mail sent

Name of the Firm/

Company/Authority

Proposed

date of

presentation

Presentation

given and

date

01.2.12.2004Sree Eikon Construction06.12.2004

08.12.2004

17.12.2004

NO

02.2.12.2004National Institute of

Oceonography, Goa

06.12.2004

08.12.2004

17.12.2004

NO

50

03.2.12.2004National Institute of

Port Management,

Chennai

06.12.2004

08.12.2004

YES

8.12.2004

04 2.12.2004STUP Consultants (P)

Ltd., Mumbai

06.12.2004

08.12.2004

YES

17.12.2004

05.2.12.2004A.F. Ferguson & Co.,

Chennai

06.12.2004

08.12.2004

YES

8.12.2004

06.2.12.2004Hauer Associates,

Chennai

06.12.2004

08.12.2004

YES

7.12.2004

07.2.12.2004Subhash Projects &

Marketing Ltd., New

Delhi

06.12.2004

08.12.2004

17.12.2004

11.03.2005

YES

11.3.2005

08.2.12.2004Cullen Grumnit & Roe,

Mumbai

06.12.2004

08.12.2004

YES

8.12.2004

09.2.12.2004D.S. Constructions, New

Delhi

07.12.2004 YES

7.12.2004

10.2.12.2004KVR Rail Infra

Consultancy Services,

Secundrabad

07.12.2004 NO

11.2.12.2004Consulting Engineering

Services (I) Pvt. Ltd.,

New Delhi

07.12.2004 YES

17.12.2004

12.2.12.2004Howe India Pvt. Ltd.,

New Delhi

07.12.2004 YES

7.12.2004

13.2.12.2004Macknight

Infrastructure Pvt. Ltd.,

Mumbai

07.12.2004

17.12.2004

NO

14.2.12.2004Price Waterhouse

Coopers Pvt. Ltd.,

Chennai

07.12.2004 YES

7.12.2004

15.2.12.2004Royal Haskoning India

Ltd., New Delhi

07.12.2004 YES

7.12.2004

16.2.12.2004Mahindra Acres

Consulting Engineers

Ltd., Chennai

07.12.2004 YES

7.12.2004

17.2.12.2004(WAPCOS) Water &

Power Consulting

Services (I) Ltd., New

Delhi

08.12.2004 NO

18.2.12.2004Beckitt Rankine

Partnership, Bombay

08.12.2004

17.12.2004

YES

17.12.2004

19.2.12.2004Deloitte Touche

Tohmatsu India Ltd.,

Baroda

08.12.2004 YES

8.12.2004

20.2.12.2004MECON Ltd., Ranchi 08.12.2004

17.12.2004

NO

51

21.2.12.2004Bicard-JNTU Consortium

Poly-engineers &

Consultants, Hyderabad

08.12.2004 NO

22.2.12.2004Marshall’s Power &

Telecom (I) Ltd.,

Bangalore

08.12.2004

17.12.2004

11.03.2005

NO

23.2.12.2004L&T Ramboll Consulting

Engineers Ltd., Chennai

08.12.2004

17.12.2004

YES

7.12.2004

24.3.12.2004CRISIL Ltd., Mumbai 07.12.2004 YES

7.12.2004

25.4.12.2004Mottmacdonald, Mumbai06.12.2004

08.12.2004

17.12.2004

NO

26.4.12.2004Indian Ports Association,

New Delhi

06.12.2004

08.12.2004

17.12.2004

NO

27.10.12.04Scott Wilson Kirkpatrick

India Pvt. Ltd., New Delhi

07.12.2004

17.12.2004

NO

28.25.2.2005Digital Hub Group,

Malaysia

11.03.2005 NO

29.25.2.2005Water Bau, Germany 11.03.2005 NO

30.01.3.2005LA-V-JAY and Associates

Ahmedabad, Gujarat

11.03.2005 NO

On March 11, 2005 a consortium led by M/s. SPML

made its presentation. The minutes of the meetings of

the Committee held on December 7, 2004, December 8,

2004, December 17, 2004 and March 11, 2005 show that

the advertisement dated October 18, 2004 was only for

the purpose of conducting the Feasibility Study. The

minutes further indicate that certain other firms had also

come forward with offers for the development of the Port.

The minutes of the meetings clearly show that after

52

discussions and on the basis of the presentations four

firms were short listed in the following preferences: -

1.M/s. Subhash Projects and Marketing Limited

2.M/s. D.S. Constructions

3.M/s. Apollo Infrastructure Projects Finance

Company Limited

4.M/s. Larsen and Toubro, Chennai

The Committee, therefore, recommended that the Letter

of Intent be issued to M/s. SPML. The Committee also

felt that the development of Pondicherry Port was of

considerable importance and, therefore, the company

rightly recommended to the Government that

Government should appoint the National Institute of Port

Management, Chennai (NIPM) as a Consultant to the

Government of Pondicherry for the eventual development

of the Port.

The Under Secretary (Ports), Government of

Pondicherry issued a Letter of Intent dated June 3, 2005

in favour of M/s. SPML. It was stated in the said letter

that it was proposed to engage the said company for the

53

development of Pondicherry Port on BOT basis and the

Letter of Intent was subject to the condition that Detailed

Project Report was approved by the Competent Authority.

It was mentioned in the said letter that the said company

would have to undertake the preparation of a Detailed

Project Report and Feasibility Study at its own cost. It

was also mentioned therein that the Detailed Project

Report should be submitted within 45 days from the date

of issue of the letter and if the company agreed upon the

conditions stipulated in Letter of Intent then the

company should deposit a Bank Guarantee of Rs.50

lakhs within a period of 15 days. In terms of the

aforesaid Letter of Intent, the company made available a

Bank Guarantee to the Government of Pondicherry on

June 18, 2005. The company, along with its letter dated

July 18, 2005, submitted a Detailed Project Report to the

Government of Pondicherry. In terms of the

recommendations of the Committee for Port Privatisation

the Government of Pondicherry by order dated August 4,

2005 appointed National Institute of Port Management,

Chennai as a Consultant for the development of the Port.

54

The Under Secretary (Port), Government of Pondicherry,

by his letter dated August 4, 2005, forwarded a Detailed

Project Report submitted by M/s. SPML to NIPM with a

request to make a detailed analysis and evaluation of

technical, financial, environmental and legal aspects on

the Detailed Project Report. The Detailed Project Report

was examined in a meeting held on August 31, 2005 and

various draw-backs such as traffic forecast, detailing of

the plans, etc. emerging from the Detailed Project Report

were examined. It was thereafter decided that

M/s. SPML should have a re-look on the issues raised

and revise the Detailed Project Report suitably. The

NIPM submitted its draft report on September 13, 2005.

In terms of the discussions held on August 31, 2005,

M/s. SPML by its letter dated September 23, 2005

submitted the First Revised Detailed Project Report to the

Director of Ports. The meeting was held on September

24, 2005 and it was agreed that NIPM would examine the

First Revised Detailed Project Report and submit a

report. The reports submitted were examined.

M/s. SPML submitted the Second Revised Detailed

55

Project Report along with its letter dated October 5, 2005,

after which a meeting was held on November 12, 2005.

In the said meeting officials of M/s. SPML, the officials of

M/s. NIPM and the officials of the Government of

Pondicherry were present and the minutes were drawn

and noted. In pursuance thereof NIPM submitted its

final report on December 1, 2005. The issues raised by

all the parties concerned were resolved and, therefore,

the Second Revised Detailed Project Report was accepted

by the Government as Approved Detailed Project Report.

The Government of Pondicherry thereafter constituted a

Committee to draft the Concession Agreement to be

entered into between the Government of Pondicherry and

M/s. SPML. The Committee examined various model

Concession Agreement of various States and more

specifically of Gujarat State. The said Concession

Agreement was thereafter drafted on the basis of the

Approved Detailed Project Report. The said draft

agreement was examined and approved by various

departments of the Government of Pondicherry. The

draft agreement was placed before the Council of

56

Ministers for its approval. The Council of Ministers in a

meeting dated January 20, 2006 approved the same and

resolved that the existing Port Land of 153 acres be

handed over for Port development whereas remaining 107

acres should be acquired and handed over within 180

days to SPML. It was further resolved that a lease

amount of Rs.2,000/- per acre per annum should be

charged from SPML. The order dated January 21, 2006

issued by the Government of Pondicherry indicates that

approval of the Lt. Governor of Pondicherry was obtained

to the Detailed Project Report as revised on November 16,

2005 for the development of Port on BOT basis. The

Government Order also mentions that approval was also

granted to the Concession Agreement to be entered into

between the Government of Pondicherry and SPML along

with its consortium partners. On January 21, 2006 the

Government of Pondicherry entered into a Concession

Agreement with SPML along with its consortium

partners. On January 24, 2006 the Director of Ports,

Government of Pondicherry issued an Office

Memorandum in favour of SPML. By the said

57

Memorandum all the existing moveable/immoveable

assets of the Port were to be handed over to the developer

as per the Concession Agreement.

8.The Letter of Intent dated June 3, 2005, granted to

SPML – Respondent No. 11 – as well as approval dated

January 2, 2006 accorded by the Lt. Governor of

Pondicherry to the Detailed Project Report dated

November 16, 2005 submitted by respondent No. 11 on

BOT basis and to the Concession Agreement to be

entered into between the Government of Pondicherry and

the respondent No. 11 as well as direction dated January

24, 2006 issued by the Director of Ports to the officers

concerned to prepare list of all the existing moveable and

immoveable assets of the Pondicherry Port for handing

over the same to respondent No. 11 were challenged by

the appellants by filing Writ Petition No. 3304 of 2006

and Writ Petition 12337 of 2006 before the Madras High

Court on several grounds.

9.The Madras High Court has rejected the two

petitions giving rise to the instant appeals.

58

10.We have heard the learned counsel for the parties at

length and in great detail and considered the documents

forming part of the two appeals.

11.Mr. G.E. Vahanvati, learned Solicitor General of

India, spelt out three preliminary objections, namely, (1)

the appellants had fairly conceded before the High Court

that the selection of the Developer was correctly done

and, therefore, the argument advanced by the learned

counsel for the appellants, assailing the selection of the

respondent No. 11 as Developer of Pondicherry Port,

should not be considered by this Court at all and this

Court should confine itself to examination of

environmental impact that the project may have, which

was emphasized before the High Court; (2) the appellants

had no locus standi to file the writ petition challenging

the Award of Contract for the development of the

Pondicherry Port to the respondent No. 11, which is

purely commercial in nature; and (3) the list of events

and dates submitted by the appellants is not only

misleading but a calculated attempt made by the

59

appellants to prejudice the Court by suppressing and

omitting to make reference to relevant materials and

events and, therefore, the appeals should be dismissed.

12.Dealing with the first preliminary objection, raised

on behalf of the respondents, this Court finds that in

paragraph 19 of the impugned judgment the High Court

has observed as under: -

“19.It is at this juncture, the learned counsel

for the petitioners fairly conceded that his

clients’ concern was more on the

environmental impact that the project may

have and he was not canvassing the relative

merits of the parties, who had submitted offer

to the Government of Pondicherry. He

requested the Court to safeguard the interest

of the general public and future development

of the Union Territory of Pondicherry with

reference to the development of the

Pondicherry Port.”

A fair and reasonable reading of the above quoted

paragraph makes it very clear that the appellants had

fairly conceded before the High Court that they were not

assailing the selection of the respondent No. 11 as

Developer for the Pondicherry Port, but were more

concerned with the environmental impact that the project

60

may have and, therefore, the learned counsel for the

appellants had requested the Court to safeguard the

interest of general public and future development of the

Union Territory of Pondicherry with reference to the

development of the Pondicherry Port. It is relevant to

notice that in the grounds of memorandum of the Special

Leave Petitions it is not contended by the appellants that

no concession was made by the learned counsel before

the High Court or the concession made was different and

was not correctly recorded by the High Court. The

respondent Nos. 2 to 9 have filed counter affidavit to the

Special Leave Petitions filed by the appellants. The

respondents, in paragraphs 6 and 7 of the counter

affidavit filed before this Court, have stated as under: -

“6.I also say that the Hon’ble High Court,

during the course of the arguments and after

examining the documents, had expressed its

view that the selection of the Developer was

correctly done. In these circumstances, the

Hon’ble High Court ascertained from the

petitioner herein whether it would like to

concede on the issue of selection of the

Developer and agitate its concerns in relation

to the Environmental Impact of the project.

61

7.I say that the Counsel for the Petitioner

sought for a pass over of the matter and

requested the Hon’ble Court to list the matter

in the second half on the same day i.e. at 2.15

p.m. This was to enable the Counsel for the

present Petitioner to get his instructions. I

also say that in the afternoon, the Counsel for

the Petitioner pointed out to the Hon’ble Court

that he could not get in touch with his Clients

and therefore sought an adjournment on the

said date to seek instructions from his client.

That on the next date the counsel for the

Petitioner informed the Hon’ble Court that his

client had instructed him to concede on the

issue of the selection of the Developer.

However, he pointed out that his client seeks

certain safeguards relating to the issue of

environmental impact. In this regard, the

Petitioner’s counsel also handed over a note

containing the desired directions from the

Hon’ble High Court.”

Though the appellants were duly served with a copy of

the counter affidavit filed by the respondent Nos. 2 to 9,

they have failed to traverse the assertions and averments

made in paragraphs 5 to 6 of the counter affidavit

reproduced above. From the above quoted untraversed

paragraphs of the reply affidavit, it is evident that during

the course of the arguments and after examining the

documents, the High Court had expressed its view that

the selection of the Developer was correctly made and,

62

therefore, in those circumstances, the High Court had

ascertained from the appellants as to whether they would

like to concede on the issue of selection of the Developer

and agitate its concern in relation to the environmental

impact of the project. The above quoted paragraphs

further make it clear beyond pale of doubt that the

learned counsel for the appellants had sought for a pass

over of the matter and requested the Court to take up

the matter in the second half on the same day at 2.15

P.M. to enable him to get instructions from the

appellants. It is also evident that the learned counsel for

the appellants pointed out to the court that he was not

able to get in touch with his clients and, therefore,

sought an adjournment to seek instructions from the

appellants. What is relevant to notice is that on the next

date of hearing the learned counsel for the appellants

had informed the High Court that his clients had

instructed him to concede on the issue of selection of the

Developer, but had pointed out that his clients were

seeking certain safeguards relating to the issue of

environmental impact of the project and had handed over

63

a note containing the desired directions from the High

Court. The fact that the learned counsel for the

appellants had handed over the note to the High Court is

admitted but it is alleged that since the conditions

mentioned in the note were not accepted, there was no

concession as is sought to be made out by the

respondents. Having gone through the proceedings

before the High Court, this Court finds that the assertion

made on behalf of the appellants is factually wrong. The

judgment, impugned in the appeals, incorporates the

concerns of the appellants as reflected in the note in the

form of directions, which are to be found in paragraph 24

of the impugned judgment. No application was filed by

the appellants before the High Court making a grievance

that concession was never made and/or was wrongly

recorded by the court. On the facts and in the

circumstances of the case, this Court is of the firm

opinion that the appellants had fairly conceded before the

High Court that the selection of the respondent No. 11 as

Developer of the Pondicherry Port was never canvassed

nor the relative merits of the parties were pointed out to

64

the High Court and, therefore, the High Court has not

recorded any finding as to whether selection of the

Respondent No. 11 as Developer was correct or not. In

view of the concession made by the appellants, the

appellants are not entitled to canvass before this Court

that the selection of the respondent No. 11 as Developer

of the Pondicherry Port was not correctly made.

13.As far as second preliminary objection regarding

locus standi of the appellant to challenge the Award

of the Contract for the development of the

Pondicherry Port to the respondent No. 11 is

concerned, this Court finds that the contract

assailed in the writ petitions is purely commercial in

nature. Neither the parties, which had participated

in the process of selection of the

consultant/Developer nor one of those, who had

expressed desire to develop the Pondicherry Port

but was not selected, has come forward to challenge

the selection procedure adopted by the Government

of Pondicherry or the selection of the respondent

65

No. 11 as Developer of the Pondicherry Port. The

question of locus standi in the matter of awarding

the contract has been considered by this Court in

BALCO Employees’ Union (Regd.) vs. Union of India

[(2002) 2 SCC 333]. This Court, after review of law

on the point, has made following observations in

paragraph 88 of the judgment: -

“88.It will be seen that whenever the Court

has interfered and given directions while

entertaining PIL it has mainly been where

there has been an element of violation of

Article 21 or of human rights or where the

litigation has been initiated for the benefit of

the poor and the underprivileged who are

unable to come to court due to some

disadvantage. In those cases also it is the

legal rights which are secured by the courts.

We may, however, add that public interest

litigation was not meant to be a weapon to

challenge the financial or economic decisions

which are taken by the Government in exercise

of their administrative power. No doubt a

person personally aggrieved by any such

decision, which he regards as illegal, can

impugn the same in a court of law, but, a

public interest litigation at the behest of a

stranger ought not to be entertained. Such a

litigation cannot per se be on behalf of the poor

and the downtrodden, unless the court is

satisfied that there has been violation of Article

21 and the persons adversely affected are

unable to approach the court.”

66

From the passage quoted above it is clear that the only

ground on which a person can maintain a PIL is where

there has been an element of violation of Article 21 or

human rights or where the litigation has been initiated

for the benefit of the poor and the underprivileged who

are unable to come to the court due to some

disadvantage. On the facts and in the circumstances of

the case, this Court is of the view that the only ground on

which the appellants could have maintained a PIL before

the High Court was to seek protection of the interest of

the people of Pondicherry by safeguarding the

environment. This issue was raised by the appellants

before the High Court and the High Court has issued

directions regarding the same, which are to be found in

paragraph 24 of the impugned judgment. After the High

Court’s directions the element of public interest of the

appellants’ case no longer survives. The appellants

cannot, therefore, proceed to challenge the Award of the

Contract in favour of the respondent No. 11 on other

grounds as this would amount to challenging the policy

67

decision of the Government of Pondicherry through a PIL,

which is not permissible. Thus on the ground of locus

standi also the appeals should fail.

14.As far as the list of events and dates, submitted on

behalf of the appellants, is concerned, this Court

finds that the appellants have omitted to state

events, which have been narrated in the earlier part

of this judgment. The list of dates submitted by the

appellants straightaway refers to the advertisement

dated October 18, 2004, published in the Economic

Times, but omits to mention that even prior to

October 18, 2004, on October 5, 2004 the Apollo

Infrastructure Projects Finance Company Limited

had a meeting with the Minister of Ports,

Government of Pondicherry and had sought time to

make a presentation for the development of

Pondicherry Port and such an opportunity was

given to the said firm. Significant events, which

took place during January 12, 2005 to January 20,

2005, are not mentioned in the list of dates at all.

68

To enable the Court to know the factual

background, in the absence of records, clause (b) of

Rule 4(1) of Order XVI of the Supreme Court Rules,

1960 requires a list of dates in chronological order

with relevant material facts or events pertaining to

each of the dates to be furnished along with the

special leave petition. In practice, the list of dates is

prefaced by a brief synopsis of facts to give a

complete and coherent picture of the facts but in

the instant case this Court finds that in the special

leave petitions, the synopsis/list of dates filed

suffers from the defect of filing of a list of dates

without relevant material facts/events or synopsis

and from the defect of filing of inaccurate and

incomplete synopsis/list of dates. The above

defects have resulted in defeating the very purpose

of requiring the filing of synopsis/list of dates. The

filing of inaccurate and incomplete list of dates has

caused confusion necessitating detailed reference to

the facts carved out from the pleadings of the

parties before the High Court and this Court. But

69

for the filing of list of events on behalf of the

respondents, the list of events filed on behalf of the

appellants would have resulted into unintended

miscarriage of justice. To say the least, the list of

events submitted on behalf of the appellants cannot

be termed as accurate and such a practice of filing

of incomplete/inaccurate list of events is not

approved by this Court at all.

15.Having held that the appeals should fail because of

concession made by the appellants before the High

Court that the selection of the respondent No. 11 as

Developer was proper and that the appellants have

no locus standi to challenge the contract entered

into between the Government of Pondicherry and

the respondent No. 11 with its consortium, this

Court notices that the appeals were argued at

length and on behalf of the respondents also details

submissions were made on merit and, therefore,

this Court proposes to consider the submissions

made by the parties on merits also.

70

16.The contention that the Government of Pondicherry

having taken a conscious decision on the basis of

available guidelines to get a Feasibility Report before

taking up development of Pondicherry Port could

not have given it up in an arbitrary manner, all of a

sudden, to benefit M/s SPML and therefore grant of

Letter of Intent dated June 3, 2005 to the

Respondent No. 11 should be voided, has no factual

basis.

The record clinchingly establishes that right from

the year 1973, successive Governments of the Union

Territory of Pondicherry were concerned for development

of the Pondicherry Port. The first attempt to privatize the

Pondicherry Port was made in the year 1973 when offers

for preparation of a Master Plan and detailed project for

development of Pondicherry Port, were invited. The

project was awarded to M/s Consulting Engineering

Services (India) Private Limited for preparation of the

Master Plan and a Detailed Project Report. The said firm

submitted its report in May 1982. The report was

approved by the then Government of Pondicherry and

71

therefore an agreement with the said firm was entered

into on June 26, 1984 for development of certain

facilities. In the year 1989, a proposal was made to

create additional development facilities for commercial-

cum-fishing vessels. Later on, it was found that

M/s Consulting Engineering Services (India) Private

Limited had no expertise to develop certain facilities at

Pondicherry Port. Therefore, M/s RITES India Limited, a

Government of India undertaking, was appointed to

conduct a study on the technical feasibility and economic

viability of the facilities to be developed. M/s RITES

India Limited submitted its Feasibility Study Report. The

Techno-Economic Feasibility Report submitted by

M/s RITES India Limited pertained to additional

facilities. In spite of positive Feasibility Study Report

submitted by RITES India Limited, the project could not

be carried forward in view of paucity of funds. In 1996, it

was suggested by M/s RITES India Limited to adopt

Build, Own, Share and Transfer mode of privatisation.

The record of the case makes it clear that between 1996

and 2000 various proposals for privatisation of

72

Pondicherry Port including that of one Megah Venture

Lines (M) SDN BHD were received and considered.

It is necessary to notice that in response to

advertisement issued seeking interest of the parties for

development of Pondicherry Port through private

investment, 48 parties initially indicated their interest in

the project. However, only 5 parties/consortiums

submitted their proposals. Ultimately, after a long

process of deliberations/discussions, only two parties

were short listed but none of them submitted requisite

Bank Guarantees within time specified and therefore the

process initiated by issuing advertisement seeking

interest of parties for development of Pondicherry Port

through private investment, was called off.

From March 16, 2003 to March 18, 2003,

Advertisement titled “Invitation of Expression of Interest

for the Development of Pondicherry Port by Private

Investment” was published in various newspapers. On

May 13, 2003, the Government of Pondicherry

constituted a Committee to look into the privatisation

process of the Pondicherry Port and Secretary (Port) as its

73

Chairman. What is evident from the record is that the

Chief Secretary, Government of Pondicherry, in his

notings dated June 25, 2003 indicated that he had

discussion about the issue with the former Secretary,

Ministry of Shipping, who had informed him that it was

not obligatory to obtain permission from Central

Government for development of a minor Port like

Pondicherry and that the guidelines issued by the

Government of India on Private Sector Participation in

the Port Sector only applied to Major Ports. It was also

noted by the Chief Secretary in his notings that he had

asked Assistant Liaison Commissioner, Government of

Pondicherry in New Delhi to meet personally the officials

of the Ministry of Shipping and report to him. The

Assistant Liaison Commissioner, Government of

Pondicherry in New Delhi in his Inter-Departmental

Report dated June 25, 2003 mentioned that the officials

of the Ministry of Shipping had informed him that the

management and development of Minor Ports was a State

subject and therefore no clearance from the Central

Government was required. The Chief Secretary therefore

74

recommended that further steps for privatisation of the

Port be taken. One of the steps recommended by the

Chief Secretary was to re-engage M/s RITES India

Limited as a Consultant to the entire process. The

notings prepared by the Minister of Ports on July 18,

2003 indicate that he accepted the proposals of the Chief

Secretary but noted that instead of engaging M/s RITES

India Limited straightaway, it would be appropriate to

issue a notice inviting firms or Consultants in general.

This proposal of Minister of Ports was approved by the

Chief Minister. Accordingly, notice inviting firms or

Consultants was issued. In all, 13 parties submitted

Expression of Interest but only 6 parties made

presentation before the Committee on August 20, 2003.

Only 2 Consultants namely IPCO-Menang, Singapore and

M/s Larsen & Toubro, Chennai had the requisite

experience. Therefore, those two firms were short listed.

A Letter of Intent was issued in favour of IPCO-Menang,

Singapore. The said Consultant was asked to prepare a

Detailed Project Report by November 5, 2003. However,

the said consultant could not submit Detailed Project

75

Report within stipulated period. Therefore, the Letter of

Intent was issued in favour of M/s Larsen & Toubro,

Chennai on April 30, 2004. M/s Larsen & Toubro,

Chennai, also failed to respond to the Letter of Intent.

The events leading to the award of the Letter of

Intent in favour of Respondent No. 11 indicate that on

October 5, 2004, Apollo Infrastructure Projects Finance

Limited had a meeting with the then Minister of Ports

and had sought time to make a presentation for the

development of Pondicherry Port. The record also

indicates that the said firm was given an opportunity to

do so before the Minister on October 17, 2004. Similarly,

the Respondent No. 11 had also shown interest in the

development of the Port by addressing a letter dated

October 6, 2004 which was received in the office of Chief

Secretary on October 28, 2004. By another letter dated

November 4, 2004, Respondent No. 11 had indicated that

it had identified a partner who would be associated with

the work of development of the Port. In the meanwhile,

on October 18, 2004, advertisement was issued seeking

Expression of Interest from Consultants for preparation

76

of Feasibility Study Report for the development of

Pondicherry Port. The record shows that 27 firms were

called to make a presentation on December 6 and

December 7, 2004. But on representation of some of the

firms, the former date was shifted to December 8, 2004.

The Minutes of the Meeting of the Committee dated

December 7, 2004, December 8, 2004 and December 17,

2004 showed that the Chief Secretary had asked each

and every firm as to whether it was in a position to

develop the Pondicherry Port and whether it would be

able to bring investors for this purpose. The Minutes

indicate that some firms informed the Committee that

they would get a private investor at a later stage but two

companies namely Apollo Infrastructure and DS

Construction stated that they would be able to develop

the Pondicherry Port on their own.

Meanwhile, on December 15, 2004, Menang

Amalgamated Sdn Bhd sent a fax message stating that it

was in the process of finalizing a Detailed Project Report

as well as Feasibility Study Report. It may be mentioned

77

that the aforesaid communication was received after

more than one year.

After making reference to a meeting, which its

officials had with the Chief Secretary on December 20,

2004, M/s Larsen & Toubro, Chennai, also claimed on

December 22, 2004 that it was willing to develop the

Pondicherry Port.

The Apollo Infrastructure Projects Finance Company

Limited by its letter dated December 23, 2004 once again

reiterated that it was willing to develop the Pondicherry

Port on DBOOT basis. This letter was received by the

Committee on December 31, 2004.

The IPCO Menang, Singapore and M/s Larsen &

Toubro, Chennai, had participated in the Port

privatisation process in the year 2003 but had not

responded, though they were chosen. However, they had

expressed their intent to develop the Pondicherry Port by

communications dated December 15, 2004 and

December 22, 2004 as mentioned above. In view of these

letters, the Director of Ports by his letter dated January

7, 2005 sought a decision from the Under Secretary (Port)

78

regarding the future course of action to be taken in the

matter. The Under Secretary (Port) made a noting dated

January 19, 2005 recounting the facts and

circumstances relating to IPCO Menang, Singapore and

M/s Larsen & Toubro, Chennai. The Chief Secretary

expressed his view on this noting and recommended that

M/s Larsen & Toubro, Chennai, be called as third party

in addition to Apollo construction and M/s DS

Constructions. The Deputy Secretary (Law) was

requested to examine the issue. It was for this reason

that the Inter-Departmental Note dated January 21,

2005 was submitted to the Law Department. On

January 23, 2005, one Walter-Bau-AG sent a

communication informing the Chief Secretary about its

desire to participate in the Deep Sea Project on DBOOT

basis and submitted its profile. A letter was also written

by Digital Hub, Malaysia, stating that it wanted to

participate in the Deep Sea Project on DBOOT basis.

What is important to note is that the moment firm offers

for development of the Port came before the Government

of Pondicherry, the choice before the Government was

79

very clear. The Government had been trying to develop

the Port since 1973. As concrete proposals for the

development of the Port were available, the Government

felt that proper course was to move the proceeding

forward to select a developer. It is relevant to notice that

certain parties had sought permission to participate in

the process of development of the Port itself and not just

prepare a Feasibility Report. The records indicate that

the Chief Secretary met the Lieutenant Governor on

February 2, 2005 and it was decided that a list of firms,

which had expressed their interest to develop the Port

through private investment, should be prepared. This is

clearly reflected in the note of the Executive Director of

Port to the Government of Pondicherry dated February 2,

2005. In terms of the said direction, the Director (Ports)

in his note dated February 3, 2005 gave a list of 11

firms/ companies which had expressed their desire to

develop the Port through private investment. Out of the

11 parties, whose names were mentioned, IPCO Menang

and Larsen & Toubro were already short listed in the

year 2003. Hauer Associates, Mahindra Acres

80

Consulting Engineers Ltd., Marshals Power and Telecom

(I) Ltd. and M.O.H. Group did not give any firm indication

about their willingness to develop the Port. DS

Constructions, Subhash Projects & Marketing Ltd. and

Apollo Infrastructure Projects and Finance Co. Ltd.

expressed willingness to develop the Port. The Digital

Hub and Walter Bau AG came in the year 2005. The

record makes it very clear that this was only a list of the

firms/companies interested in developing the Port and

not ranking. The Digital Hub and Walter Bau AG had

also expressed their willingness to develop the Port in

January 2005 itself. The respondent No. 11 addressed a

letter dated February 4, 2005 reiterating its desire to

develop the Port. It was clearly pointed out by the

Respondent No. 11 that it was desirous of developing the

Port and was not interested in acting as a Consultant.

Around this time, the Apollo Infrastructure again

reiterated its interest in the development of the Port by

addressing letter dated February 8, 2005 wherein it was

81

also mentioned that it had tied up with Larsen & Toubro,

Ramboll, Chennai.

Another firm, LA-V-JAY Associates Pvt. Ltd. by its

letter dated February 14, 2005 mentioned that it was

part of consortium comprising Royal Haskoning and

Ashoka Buildcon. By the said letter, the said firm also

expressed its desire to develop the Pondicherry Port.

The Director (Ports) referred to the note dated

February 3, 2005 and stated that out of the 11 firms/

companies mentioned in the note, 7 firms and companies

had already made presentations before the Committee

but 4 firms had not made presentation. It is relevant to

notice that DS Constructions and Apollo Infrastructure

were part of the 7 firms who had already made

presentations. In these circumstances, it was decided on

February 25, 2005, that the remaining 4 firms namely,

the respondent No. 11, Digital Hub, Walter-Bau-AG and

Marshall Power should be called for giving presentation

before the Committee on March 11, 2005. Accordingly,

E-mails were sent to those parties on March 8, 2005

asking them to give presentation on March 11, 2005.

82

The E-mails were sent to the 4 firms listed in the note

dated February 25, 2005. Well before March 11, 2005,

Digital Hub expressed its inability to attend the meeting

and indicated that it would give the presentation on

another date. But even, later on also, the said firm failed

to make any presentation before the Committee. Though

U Pranav Consultancy acting on behalf of LA-V-JAY &

Associates - Royal Haskoning - Ashoka Buildcon

consortium confirmed by E-mail dated March 8, 2005

that the presentation would be made in the meeting

dated March 11, 2005, Royal Haskoning by its

communication sought for deferment of date for making

presentation. What is most important to notice is that in

the meeting held on March 11, 2005 only Respondent No.

11 was present. During the presentation made by the

Respondent No. 11, it was found that Respondent No. 11

had entered into consortium with Halcrow, a very

prominent company in the field of Port development

projects. The background of the said firm is set out in

the Minutes of the proceedings held on March 11, 2005.

The said firm is described as a company which has been

83

in India for more than 30 years and its expertise is in the

development of multi purpose ports.

It may be mentioned that the petitioners have not

made any reference to the proceedings of March 11, 2005

or the Minutes of the said Meeting. Instead, they have

straightaway referred to the note prepared on April 5,

2005 to suggest that Mr. S.D. Sunderesan, Director

(Ports) was opposed to the development of the Port and

for that reason he was transferred by the Government.

The affidavit in reply makes it very clear that this

allegation of the petitioner is factually wrong.

Mr. Sunderesan was recommended for promotion to

higher grade by Departmental Promotion Committee in

March 2005 itself and his posting as a Deputy Secretary

was effected in May 2005. Thus, it is wrong on the part

of the petitioners to allege/suggest that merely because

he was opposed to the development of the Port, he was

transferred by the Government. The note dated April 5,

2005 was considered and the Under Secretary (Port)

made a detailed note with reference thereto on April 8,

2005 dealing with every aspect, point-wise. The Chief

84

Secretary prepared a detailed note pointing out that the

matter had been considerably delayed and that the Port

Privatisation Committee had recommended that a Letter

of Intent be issued to SPML. The Chief Secretary sent a

note dated May 26, 2005 which was put-up before the

Minister of Ports for orders. The Minister of Ports

approved the note on June 1, 2005 recommending that

suitable clauses be incorporated to bind the party down

to ensure that the project did not get delayed. The Chief

Minister approved the proposal on June 3, 2005 and

thereafter the proposal was approved by the Lieutenant

Governor on June 3, 2005.

17.The different documents produced on record of the

case read with averments made in counter affidavits

clearly show that on the basis of the reports submitted by

M/s. Consulting Engineers Services (India) Private

Limited, The Ministry of Shipping and Transportation

(Ports Wing), Government of India had approved the

project for creation of certain facilities at the Pondicherry

Port and sanctioned the cost of the project by letter dated

85

June 26, 1984. Further, M/s. RITES India Limited had

submitted Techno-Economic Feasibility Study Report on

June 10, 1991, pertaining to development of additional

facilities to be provided at Ariankuppam Port Project and

in spite of said positive Feasibility Study Report, the

project could not be carried forward because of paucity of

funds. The record shows that after revival of the process

for development of the port in the year 2003, the

Government of Pondicherry had decided to issue an

advertisement calling for Expression of Interest from the

private parties and vide G.O.Ms. dated May 13, 2003

constituted a Port Privatisation Committee to go into the

entire gamut of the privatisation process of the Port of

Pondicherry through private investment. The Committee

so constituted was consisting of the following

Government officials and no politician was appointed on

the said Committee at all: -

(1)Secretary to Government (Port) Chairman

(2)Joint Secretary to Government (Revenue)Member

(3)The Director of Ports Member

86

(4)The Director of Science, Technology and

Environment Member

(5)Deputy Secretary to Government (Law)Member

(6)Under Secretary to Government (Finance)Member

(7)Under Secretary to Government (Port)Member

(8)Executive Engineer (Port) Member Secretary

Subsequently, Mr. P.C. Dhiman, Director (Port

Development), Ministry of Shipping (Port Wing), New

Delhi, was also nominated as Co-opted Member of the

above mentioned Committee. Pursuant to advertisement

dated February 3, 2003, 13 parties had responded and

out of them, only 6 parties had made presentations

before the expert committee, expressing interest for the

development of the Pondicherry Port through private

investment. The Committee, after considering the

presentations made by six firms, in its meeting held on

August 28, 2003, came to the conclusion that only two

firms, namely, (1) IPCO Menang, Singapore and (2)

Larsen and Toubro, Chennai had necessary experience in

port development and technical knowhow for the same

87

and, therefore, short listed those two firms. The

recommendations of the expert committee were accepted

by the Government of Pondicherry and a Letter of Intent

was issued on September 9, 2003 in favour of IPCO

Menang, Singapore, for feasibility studies and

preparation of Detailed Project Report for the

development of the Port. However, the said firm did not

submit the Report despite extension of time nor

deposited the required performance guarantee amount of

Rs.50 lacs. Therefore, the second short listed firm, i.e.,

M/s. Larsen and Toubro, Chennai, was issued Letter of

Intent, but this firm also did not respond to the said

Letter for more than eight months.

18.Under such circumstances, the Government of

Pondicherry decided to make one more attempt to attract

private investment for development of the Port and call

for Expression of Interest for undertaking feasibility

studies for development of the port. Accordingly,

advertisement dated October 18, 2004 was issued in the

leading newspapers, pursuant to which, 27 firms had

88

responded. However, out of 27 firms, only 15 firms had

given presentations before the expert committee during

December, 2004 in the presence of Minister of Ports.

Thereafter, it was decided by the Committee, after having

meeting with the then Lt. Governor of Pondicherry, that

out of 27 firms which had responded to the

advertisement, number of firms who were willing to

undertake the feasibility studies should be ascertained.

Accordingly such exercise was undertaken by the expert

committee and the expert committee found that only 11

firms had shown the willingness to undertake feasibility

studies. Seven out of those 11 firms had already made

presentations before the Committee and, therefore,

remaining four firms were called upon to make

presentation before the Committee.

19.The record further shows that the expert committee,

after approval of the Minister (Port), the Hon'ble Chief

Minister and the Lt. Governor, decided to short list the

under mentioned four firms in order of preference, out of

the firms which had expressed interest in development of

89

the Port by undertaking the feasibility studies and

Detailed Project Report: -

1.M/s. Subhash Projects and Marketing Ltd., New Delhi;

2.M/s. D.S. Constructions, New Delhi;

3.M/s. Apollo Infrastructure Project Finance Company

Ltd.; and

4.M/s. Larsen & Toubro, Chennai.

The order of preference was prepared by the Committee

keeping in mind the credentials and the presentations

made by the firms as well as on the basis of

recommendations and approval given by the Minister

(Port), the then Chief Minister and the Lt. Governor.

Thereafter a decision was taken by the Government of

Pondicherry to issue a Letter of Intent to the respondent

No. 11 as its name appeared first in the order of

preference. Another decision was also simultaneously

taken to appoint National Institute of Port Management,

a Government of India Undertaking, as the consultant for

the Government of Pondicherry and accordingly the

appointment order was issued to the respondent No. 14

90

for carrying out a detailed analysis and evaluation of the

Detailed Project Report (‘DPR’ for short) from all angles

and for submission of comprehensive report, as well as

finalization of DPR which would form the basic document

for the Port development. The respondent No. 14 was

also to advise and assist the Government of Pondicherry

in obtaining all the statutory clearance, preparation of

Draft Concession Agreement for the development of the

Port on BOT basis, assist the Government in negotiation

and finalization of final Agreement as well as to monitor,

supervise and other related work. It is necessary to

mention that pursuant to advertisement, which had

appeared in The Hindu dated October 18, 2004, the

respondent No. 14 had offered to prepare a feasibility

report. In the order of appointment issued to respondent

No. 14, it was mentioned that a Letter of Intent was

issued to the respondent No. 11 for preparation of DPR.

The record further establishes that the DPR was

submitted by the respondent No. 11 to the Government

which was forwarded to the respondent No. 14 for

offering comments/views along with an advance payment

91

of Rs.2 lacs. Thereafter, a number of meetings were held

between the officers of respondent No. 11, respondent

No. 14 and the officials of Government of Pondicherry to

discuss the DPR. During the meetings certain

shortcomings in the DPR prepared by the respondent No.

11 were pointed out and, therefore, the respondent No.

11 was called upon to revise the DPR. Accordingly 2

nd

and final revised DPR was submitted by the respondent

No. 11 on November 16, 2005. The 2

nd

revised DPR was

also sent to the respondent No. 14. After assessment,

analysis and evaluation of the 2

nd

revised DPR, the

respondent No. 14 gave independent analysis and

evaluation of the various aspects of the final DPR. In the

independent analysis made by the respondent No. 14 it

was stated that though the project was technically viable,

it was not financially viable. However the respondent No.

11 and its associates had come forward to undertake the

project with their own investment, whereas the

Government of Pondicherry was not expecting to invest

any money. Further, the Port Development Project

is/was to result in direct and indirect employment to a

92

large number of persons as well as other economic and

infrastructure development catering to the needs of the

shipping industry and development of allied industries in

the immediate hinter land and, therefore, the

Government of Pondicherry had decided to proceed

further in the matter. Accordingly the Government of

Pondicherry constituted a Committee to draft the

Concession Agreement to be entered into between the

Government of Pondicherry and M/s. SPML. The

Committee so constituted examined various model

concession agreements of different states and more

particularly of Gujarat State. After undertaking such

study, Concession Agreement was drafted on the basis of

approved DPR. The said draft agreement was examined

and approved by various departments of the Government

of Pondicherry. Thereafter, the draft agreement was

placed before the Council of Ministers for its approval.

The Council of Ministers in meeting dated January 20,

2006, approved the same and resolved that the existing

port land measuring 153 acres be handed over for port

development, whereas remaining 107 acres should be

93

acquired to be handed over to M/s. SPML. It was further

resolved that a lease amount of Rs.2000/- per acre, per

annum, should be charged from M/s. SPML. The order

dated January 21, 2006, issued by the Government of

Pondicherry, indicate that approval of the Lt. Governor

was obtained to the revised DPR as well as to the

Concession Agreement after which the Government of

Pondicherry entered into a Concession Agreement with

M/s. SPML along with its consortium partners on

January 21, 2006.

20.It would be absurd on the part of the appellants to

attribute motives to all by stating that the Letter of Intent

was amended to the respondent No. 11 for oblique

motives in order to favour respondent No. 11 arbitrarily.

The appellants could not specify either in the petitions

filed before the High Court or in the memorandum of

appeals as to which member of the expert committee or

which official of the Government of Pondicherry or which

Minister of the Council of Ministers or which Chief

Minister or Lt. Governor was interested in awarding

94

Letter of Intent to respondent No. 11 for oblique motives.

The record shows that the Government of Pondicherry

had advertised three times calling for Expression of

Interest from the interested firms and had identified

respondent No. 11 for development of the Port after

adopting transparent procedure. The procedure adopted

for identifying the respondent No. 11 is crystalline,

distinct, forthright, manifest and unambiguous. To say

the least the appellants’ understanding of the issue is

absolutely baseless and not only incorrect but also

contrary to the records of the case. The selection of the

respondent No. 11 as developer cannot be regarded as

capricious, despotic, fanciful or personal as is sought to

be made out by the appellants. It is rightly pointed out

in the counter reply that the objective of the entire

exercise was to get prepared a feasibility study report so

that a private investor might not be required to conduct

the study prior to deciding whether he would be required

to invest or not. It was the understanding of the

Government of Pondicherry that in such an event the

possibility of attracting private investment in the

95

development of the Port would substantially increase,

which cannot be termed as impractical or not warranted

in the facts of the case, more particularly, where earlier

attempts made since the year 1973 to develop the Port

had failed. The Government of Pondicherry could not

have risked loosing offers for privatisation of the Port by

insisting upon the process of selection of developer

merely on the ground that the advertisement was only for

the selection of consultant and not for the selection of

developer. On the facts and in the circumstances of the

case, this Court is of the firm opinion that the events

leading to the award of Letter of Intent to the respondent

No. 11 in June, 2005 do not indicate, in any manner,

that the Government had acted arbitrarily or that the

Letter of Intent was issued to favour the respondent No.

11 with oblique motives and, therefore, the contention of

the appellants in this regard is rejected.

21.The plea raised by the learned counsel for the

appellants that the Government of Pondicherry was

arbitrary and unreasonable in switching the whole

96

public tender process into a system of personal

selection and, therefore, the appeals should be

accepted, is devoid of merits. It is well settled that

non-floating of tenders or not holding of public

auction would not be in all cases be deemed to be the

result of the exercise of the executive power in an

arbitrary manner. Generally, when any State land is

intended to be transferred or the State largesse

decided to be conferred, resort should be had to

public auction or transfer by way of inviting tenders

from the people. However, what is important to notice

is that the old Pondicherry Port is very much in

existence. This is not a case of establishment of new

port at Pondicherry but this is a case of developing an

existing port to meet rapid changes in transport

technology and to improve the existing port facilities.

The development of an existing port on Build, Operate

and Transfer basis can never be equated with

intended sale of Government land or transfer of State

largesse. This is not a case where a State asset is

sought to be sold or the State is out to purchase

97

goods. Such cases stand on a different footing from a

major issue of economic development such as

development of a port. The respondent No. 11 is

called upon to develop the Pondicherry Port on BOT

basis. Thus after development of the Port, the same

will have to be retransferred to the Government of

Pondicherry. In the matter of policy decision and

economic tests the scope of judicial review is very

limited. Unless the decision is shown to be contrary

to any statutory provision or the Constitution, the

Court would not interfere with an economic decision

taken by the State. The court cannot examine the

relative merits of different economic policies and

cannot strike down the same merely on ground that

another policy would have been fairer and better. In a

democracy, it is the prerogative of each elected

Government to follow its own policy. Often a change

in Government may result in the shift in focus or

change in economic policies. Any such change may

result in adversely affecting some vested interests.

Unless any illegality is committed in the execution of

98

the policy or the same is contrary to law or malafide, a

decision bringing about change cannot per se be

interfered with by the court. It is neither within the

domain of the courts nor the scope of judicial review

to embark upon an enquiry as to whether a particular

public policy is wise or whether better public policy

can be evolved. Nor are the courts inclined to strike

down a policy at the behest of a petitioner merely

because it has been urged that a different policy

would have been fairer or wiser or more scientific or

more logical. Wisdom and advisability of economic

policy are ordinarily not amenable to judicial review.

In matters relating to economic issues the

Government has, while taking a decision, right to

“trial and error” as long as both trial and error are

bona fide and within the limits of the authority. For

testing the correctness of a policy, the appropriate

forum is Parliament and not the courts. Normally,

there is always a presumption that the Governmental

action is reasonable and in public interest and it is for

the party challenging its validity to show that it is

99

wanting in reasonableness or is not informed with

public interest. This burden is a heavy one and it has

to be discharged to the satisfaction of the court by

proper and adequate material. The court cannot

lightly assume that the action taken by the

Government is unreasonable or against public interest

because there are large number of considerations,

which necessarily weigh with the Government in

taking an action. In a case like this where the State is

allocating resources such as water, power, raw

materials, etc. for the purpose of encouraging

development of the port, this Court does not think

that the State is bound to advertise and tell the people

that it wants development of the Port in a particular

manner and invite those interested to come up with

proposals for the purpose. The State may choose to

do so if it thinks fit and in a given situation it may

turn out to be advantageous for the State to do so, but

if any private party comes before the State and offers

to develop the port, the State would not be committing

breach of any constitutional obligation if it negotiates

100

with such a party and agrees to provide resources and

other facilities for the purpose of development of the

port. The State is not obliged to tell the respondent

No. 11 “please wait I will first advertise, see whether

any other offers are forthcoming and then after

considering all offers, decide whether I should get the

port developed through you”. It would be most

unrealistic to insist on such a procedure, particularly,

in an area like Pondicherry, which on account of

historical, political and other reasons, is not yet

industrially developed and where entrepreneurs have

to be offered attractive terms in order to persuade

them to set up industries. The State must be free in

such a case to negotiate with a private entrepreneur

with a view to inducing him to develop the port and if

the State enters into a contract with such an

entrepreneur for providing resources and other

facilities for developing the port, the contract cannot

be assailed as invalid because the State has acted

bona fide, reasonably and in public interest. The

terms and conditions of the contract entered into with

101

the respondent No. 11 as well as the surrounding

circumstances show that the State has acted bona

fide and not out of improper or corrupt motive or in

order to promote the private interest of the respondent

No. 11 at the cost of the State. Therefore, it is difficult

to interfere and strike down the State action as

arbitrary, unreasonable or contrary to public interest.

It is true that one of the methods of securing the

public interest, when it is considered necessary to

dispose of a property, is to sell the property by public

auction or by inviting tenders. But as noted earlier,

this is not a case of sale of property by the State.

Though public auction or inviting of tenders is the

ordinary rule in case where the State Government

proposes to dispose of a property, it is not an

invariable rule. There may be situations where there

are compelling reasons necessitating departure from

the rule, the reasons indicated in this case for the

departure are shown to be rational and are not

suggestive of discrimination. The Government is

entitled to make pragmatic decisions and policy

102

decisions which may be necessary or called for under

the prevalent peculiar circumstances. The issue of

privatisation of the Port had been engaging the

attention of the Government of Pondicherry since

1973. The said issue had been delayed for a long

time. Therefore, no fault can be found with the expert

Committee, with the various officers of the

Government including the Chief Secretary, the

Ministers, the Chief Minister and the Lt. Governor for

deciding to develop the Port with the assistance of the

respondent No. 11 and not just restricting the process

to appoint a consultant. The sole purpose behind the

said exercise was to ensure development of the Port in

a proper manner and as expeditiously as possible. It

is necessary to mention that the Government of

Pondicherry was trying to develop the Port and was

looking for an appropriate partner. It must be

remembered that technology for development of the

Port would not be available for the mere asking of it.

All the leading firms/companies were not found

suitable to develop the Port and none of them has

103

made grievance either before the High Court or before

this Court regarding selection of respondent No. 11 as

Developer of the Port. It is ultimately a matter of

bargain. In such cases, all that needs to be assured is

that the Government or the authority, as the case may

be, has acted fairly and has arrived at the best

available arrangement in the circumstances. The

materials on record substantiated the absolute need

and necessity to undertake the development of the

Port by the Government of Pondicherry in furtherance

of great public interest and for larger public and

common good. The admitted dire financial position of

the State Government and its inability to undertake

such a project at the cost of Government coupled with

the fact that the venture was long overdue apparently

made the State Government and its authorities to

avail of the project as unfolded and volunteered by the

respondent No. 11, subject, of course, to further

revisions, modifications and suggestions in the best

interest of the State Government. A careful and

dispassionate assessment and consideration of the

104

materials placed on record does not leave any

reasonable impression, on the peculiar facts and

circumstances of this case, that anything obnoxious

which requires either public criticism or

condemnation by courts of law had taken place. The

objective of the Government of Pondicherry to develop

the Port was admitted to be fulfilled at the initial stage

by short listing a consultant itself. However, the

Government did not wish to continue the process of

selection of the consultant and risk losing the chance

of privatisation of the Port again. As firms/

companies had offered to develop the Port directly, the

Government of Pondicherry could not have asked the

firms/companies to first participate in the process of

selection of a consultant, prepare a project report and

require them to participate in the process for selection

of the developer all over again. The Government of

Pondicherry adopted a pragmatic approach and

proceeded to short list the developer directly and in

doing so the Government has acted in the best

interest of the State to overcome the failed attempts in

105

the past to secure a developer to develop the

Pondicherry Port. Under the circumstances, this

Court, which is a constitutional Court, is not expected

to presume the alleged irregularities, illegalities or

unconstitutionality nor this Court would be justified

in substituting its opinion for the bona fide opinion of

the State Government. Therefore, the plea raised on

behalf of the appellants that the Government of

Pondicherry had acted in arbitrary and unreasonable

manner in switching the whole public tender process

into a system of personal selection, is rejected.

22.The contention that a conjoint reading of Article 239

and 239A of the Constitution and Sections 46, 50 of

the Government of Union Territories Act read with

Rule 5 of the Rules of Business of the Government of

Pondicherry, 1963, would show that the Government

of Pondicherry has to take prior approval of the

Central Government before awarding the contract to

any private party and, therefore, the Letter of Intent

issued in favour of the respondent No. 11 should be

106

regarded beyond jurisdiction of the Government of

Pondicherry, is misplaced and has no substance.

23.It is admitted position that the Pondicherry Port is not

a “major port” and as such jurisdiction and control to

develop the said port vests in the Government of

Pondicherry. The guidelines relied upon by the

learned counsel for the appellants relate to

privatisation of “major port”. Those guidelines do not

apply to minor ports. There is no manner of doubt

that development and privatisation of minor ports can

be undertaken by the respective State Government

after formulating its own guidelines and modalities.

The Indian Ports Act, 1908 permits the State

Government to develop the minor ports. By virtue of

power vested in the Parliament by Article 239A of the

Constitution, the Government of Union Territories Act,

1963 was enacted and Pondicherry was provided with

a Legislative Assembly. The extent of the legislative

power of the State Legislative Assembly is laid down in

Section 18 of the Act of 1963, which, inter alia,

107

provides that the Legislative Assembly is empowered

to make laws in respect of any matters in the State

List or the Concurrent List. Entry 31 of the

Concurrent List provides for “Ports other than those

declared by or under law made by Parliament or

existing law to be major ports”. As the Pondicherry

Port has not been declared as a major port, the

Legislative Assembly of Pondicherry has absolute

power to make laws in relation to the Pondicherry

Port. Article 162 of the Constitution provides that the

executive power of a State is co-extensive with its

legislative powers. Therefore, there is no manner of

doubt that the Government of Pondicherry has

complete jurisdiction in relation to Pondicherry Port,

which is a minor port. The reliance placed upon

Section 3(9) of the Indian Ports Act, 1908 read with

Section 6(b) of the Pondicherry (Laws) Regulation,

1963 is totally misconceived. Section 3(9) of the said

Act provides that the jurisdiction of ports other than

major ports vests in the State Government. The

learned counsel for the appellants have contended

108

that reference to State Government, appearing in

Section 3(9) of the Indian Ports Act, should be

construed to be a reference to the Central Government

and, therefore, only the Central Government will have

jurisdiction over the ports in Pondicherry. Having

considered the different provisions of the Constitution

and Statutes, referred to by the learned counsel for

the appellants, this Court finds that there is

fundamental fallacy in the argument and it is that

they rely upon Regulation 6(b) only in part. Though

the said Regulation provides that reference to the

State Government shall be construed as a reference to

the Central Government, it also provides that

reference to the State Government shall be construed

as reference to the Chief Commissioner. The learned

counsel for the appellants have failed to take note of

the words “and also as reference to the Chief

Commissioner”. This phrase must be read with the

definition of “Chief Commissioner” provided under

Regulation 2(b), which specifies that the Chief

Commissioner means the Administrator of

109

Pondicherry (now the Lt. Governor of Pondicherry). A

conjoint and meaningful reading of the provisions of

the Constitution read with Regulation 6(b) of the

Pondicherry (Laws) Regulation, 1963 leaves no doubt

that the power in respect of Pondicherry Port

necessarily vests in the Government of Pondicherry

and not in the Central Government. The reliance

placed on Rule 5(2) of the Rules of Business of the

Government of Pondicherry read with Rule 21 of the

Delegation of Financial Rules to contend that prior

approval of the Central Government was required to

be taken by the Government of Pondicherry before

entering into the Concession Agreement with the

respondent No. 11 as it was beyond the financial

powers of the Government of Pondicherry, is devoid of

merits. Rule 21 relates to the power to sanction

expenditure in relation to contracts. Execution of

Concession Agreement or grant of Letter of Intent does

not entail any expenditure to be incurred by the

Government of Pondicherry and as such the learned

counsel for the appellants are not justified in pressing

110

into service those provisions. An attempt was made to

demonstrate that in terms of Section 5 of the

Pondicherry (Administration) Act, 1962 all properties

and assets in the State of Pondicherry vest with the

Union and, therefore, the Government of Pondicherry

has no right to deal with the same in any manner.

24.It is relevant to notice that the Union Territory of

Pondicherry gained its freedom in the year 1962.

Therefore, several laws were passed by the Parliament

for its integration with the Union of India. One such

law was Pondicherry Administration Regulations Act,

1963. Article 240 of the Constitution deals with

power of President to make regulations for certain

Union Territories. The first proviso to Article 240,

inter alia, provides that when any body is created

under Article 239A to function as a Legislature for the

Union Territory of Puducherry [substituted by Section

4 of the Pondicherry (Alteration of name) Act, 2006 for

Pondicherry], the President shall not make any

regulation for the peace, progress and good

111

Government of that Union Territory with effect from

the date appointed for the first meeting of the

Legislature. Therefore, the Pondicherry

Administration Regulation Act, 1963 will have to be

regarded as a Transitional Legislation. Moreover, the

primary reason for enacting Section 3 of the

Pondicherry Administration Regulation Act, 1963 was

to extend all the laws enacted by the Union of India

under the Union List to the Pondicherry. It is only an

Act akin to adaptation Act by which the laws of Union

of India were extended to this Union Territory, which

was incorporated with India after partition. The

extension of laws of Union of India shall only mean

that those laws would be applicable as they are

applicable to any other State of India. As noticed

earlier, the Port in question is admittedly a minor port

and, therefore, not covered by the provisions of Indian

Major Ports Act, 1908. The extension of law to Indian

Major Ports Act, 1908 would only mean that a

particular law is prevalent but its applicability would

be dependant upon as to whether facts and

112

circumstances warrant its invocation. Had the Port in

question been a major port, Indian Ports Act, 1908

would have applied. In this case as the Port in

question is a minor port, the Indian Major Ports Act,

1908 would not apply.

25.This Court finds that Section 5 is the provision by

which all properties and assets, which earlier vested

in the French Republic, stood transferred to the

Union, i.e., Union of States (India). In other words,

Section 5 was enacted for the purpose of transfer of

properties from one sovereign State to another

sovereign State. It has no power on the right of

Government of Pondicherry over the properties and

assets in Pondicherry. The vesting of land from

French Republic to the Republic of India can have no

bearing on the powers of Government of Pondicherry

to dispose of land in accordance with the provisions of

the Constitution. Further, it is to be noticed that the

entire Pondicherry Administration Act, 1962 was a

Transitional Act for transfer of power from the French

113

Republic to the Republic of India, which is evident

from the Statement of Objects and Reasons to the said

Act. Therefore, the plea that the Government of

Pondicherry could not have taken the decision to

privatize the Pondicherry Port without

consent/approval of the Central Government is totally

misconceived.

26.Further, the Ministry of Shipping filed an affidavit

before the High Court expressly endorsing the stand

taken by the Government of Pondicherry that

Pondicherry Port is not a major port and as such its

jurisdiction and control vest with the Government of

Pondicherry.

27.The record further shows that M/s. RITES India

Limited through a letter dated March 12, 1996

submitted ‘Terms of Reference’ for offering

consultancy assignment for privatisation of three

major ports situated at Pondicherry, Karaikal and

Mahe. The total consultancy fee for the assignments

was initially put at Rs.30 lakhs, which was reduced to

114

Rs.20 lakhs as the proposal for consultancy was

subsequently limited to the Pondicherry Port only.

The Joint Secretary, Ministry of Surface Transport,

Government of India vide letter dated March 22,

1996 informed the Chief Secretary, Pondicherry

Administration about the need to expand the existing

capacity of the Pondicherry Port to meet the growth

requirement of traffic handled by various major ports.

In the said letter it was mentioned that a decision was

taken to invite capital participation by private sector

and from non-maritime land-locked states. Further,

by Government Order dated April 30, 2003 the

Ministry of Shipping, Government of India, had

nominated Mr. P.C. Dhiman as a Member of

the Committee. Mr. Dhiman was appointed as a

Member of the Committee by the Government of

Pondicherry vide Government Order dated August 20,

2003. The first meeting of the Committee was held on

June 2, 2003, which was attended by all the members

of the Committee. In the said meeting various courses

of actions were discussed. One of the issues related

115

to seeking the consent of Government of India for the

privatisation of the port. It was also decided to seek

the clarifications from the Ministry of Shipping,

Government of India, in this regard. The Chief

Secretary, Government of Pondicherry in his noting

dated June 25, 2003 mentioned that he had

discussed the issue with former Secretary, Ministry of

Shipping and he had informed the Chief Secretary

that no permission was required for a minor port like

Pondicherry and that the guidelines issued by the

Government of India on private sector participation in

the Port sector only applied to major ports. The Chief

Secretary further noted that he had also asked the

Assistant Liaison Commissioner, Government of

Pondicherry in New Delhi to meet personally the

officials of the Ministry of Shipping and report. The

Assistant Liaison Commissioner, Government of

Pondicherry in New Delhi, by his Inter-Departmental

Report dated June 25, 2003, informed that the

management and development of ports was a State

subject and, therefore, no clearance from the Central

116

Government was required. Under these

circumstances the Chief Secretary recommended that

further steps for privatisation of the port be taken.

These facts indicate that the Government of

Pondicherry had full jurisdiction to deal with the

minor port situated in the Union Territory and it was

not necessary for the Government of Pondicherry to

take prior approval of the Central Government before

awarding the contract. However, as noticed earlier,

the Joint Secretary, Ministry of Surface Transport,

Government of India by letter dated March 22, 1996

informed the Chief Secretary, Pondicherry

Administration about the need to extend the existing

capacity of the Pondicherry Port to meet the growth

requirement of traffic handled by various ports and to

invite capital participation by private sector and from

non-maritime land-locked states. The letter dated

March 22, 1996 addressed by the Joint Secretary of

India to the Chief Secretary of Pondicherry

Administration read with decision taken by the

Committee of which Director (Port Development),

117

Ministry of Shipping, New Delhi, was one of the

Member, to privatize the Port will have to be

construed as approval/consent of the Central

Government to the project for the development of

Pondicherry Port by privatisation and it was not

necessary for the Government of Pondicherry to seek

further approval at every stage of development of the

Port. Therefore, the plea that the Government of

Pondicherry could not have taken the decision to

privatize the Pondicherry Port without

consent/approval of the Central Government is found

to be misconceived and is rejected hereby.

28.The argument that the project in question is cleared

without examining the environmental aspects by the

Union Territory of Pondicherry in total violation of the

Precautionary and Trusteeship principles and is also

prohibited under the CRZ notification as the same is a

real-estate activity in the garb of port development,

has no substance worth the name.

118

29.The record of the case indicates that concession

agreement is already entered into between the

Government of Pondicherry on one hand and the 11

th

and

12

th

respondents on the other, on January 21, 2006.

Those respondents in terms of the concession agreement

have incorporated a Special Purpose Vehicle (SPV)

company known as Pondicherry Port Limited for

implementation of the Port Development Project. An

Assignment agreement to this effect in favour of

Pondicherry Port Limited is executed by the Respondent

Nos. 11 and 12 and confirmed by the Government of

Pondicherry. In terms of the Concession agreement, the

Government of Pondicherry has entered into Lease and

Possession agreement with the Special Purpose Vehicle

Company on February 4, 2006. The Lease-hold

occupancy is given to the Pondicherry Port Limited

subject to obtaining necessary clearance including

environmental clearance from the Government of India.

There is no manner of doubt that no one can be

permitted to carry on construction activity which is

prohibited by the CRZ. However, this being a project

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exceeding Rs.50 crores necessary environmental

clearance has to be obtained from the Ministry of

Environment and Forest Union of India. Before such

consent is granted/obtained, a full Environmental Impact

Assessment has to be done. During that exercise, public

hearing would be conducted as a matter of rule and all

the concerns expressed by the public will have to be

taken due note of, by the authorities concerned. The

specific objections raised by the appellants will also have

to be considered and they would be entitled to hearing by

the competent authority. Mere submission of DPR is not

the end of any decision making process. The

implementation of the project as per DPR is solely

dependent on the clearance to be given by the Ministry of

Environment and Forest Union of India. There is no

manner of doubt that the Government has every power to

stop the project if it violates environmental safeguards.

The consideration of CRZ regulations would also be part

of the said exercise. Further, the notification issued

under the Environment Protection Act clearly requires a

prior consent and provides for an appeal to be filed before

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the tribunal constituted for the said purpose by an

aggrieved party. The plea that the environmental

clearance must precede the award of the project is wholly

misconceived and is incorrect. The application form for

obtaining environment clearance under the notification of

2006 makes it very clear that the application has to be

made by the entity which has been entrusted with the

project. In the judgment, impugned in the appeals,

appropriate directions addressing all the issues raised on

behalf of the appellants relating to the environment have

been issued by the High Court. In addition, the Ministry

of Environment and Forest which has to given clearance

for the project has to examine the proposals of the

developer and follow due procedure before granting

approval. Therefore, the judgment impugned is not liable

to be set aside on the ground that environmental aspects

were not examined by the Union Territory of Pondicherry

in total violation of the Precautionary and Trusteeship

principles or that the project in question is completely

prohibited under the CRZ notification.

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30.The argument that the Respondent No. 11 is

permitted to carry on Real-Estate business by

construction of five-star hotels, a trade centre as well

as a beach resort in the garb of development of

Pondicherry Port and therefore, the project should be

grounded, cannot be accepted. It can hardly be

disputed by anyone that the main objective of the

project is the development of Pondicherry Port. The

Government of Pondicherry has not entered into

Concession agreement with the Respondent No. 11 to

permit the said respondent to run a Real-estate

business. While developing the port, it is necessary to

provide certain infrastructural facilities for

passengers, shipping crew, port staff and other

personnel associated with the port, as part of the port

development activity. The Respondent No. 11 as

developer of the Port has not yet submitted necessary

plans for scrutiny of Ministry of Environment and

Forest, Government of India, seeking clearance to the

project. As and when, the plans are submitted for

clearance, the competent authority can always decide

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upon the desirability of making of constructions

which do not fall within the development of port. The

ancillary activities to be undertaken while developing

a port cannot be stopped by merely naming them as

Real-estate business. The affidavit in reply filed on

behalf of the Respondent Nos. 11 and 12 before the

Madras High Court would indicate that the

Government of Pondicherry is not going to make

investment in the project at all. Therefore, the

question of Government of Pondicherry favouring the

Respondent No. 11 does not arise. The affidavit filed

by the Respondent Nos. 11 and 12 makes it clear that

they have taken up the project after conducting

detailed study and have decided to make investment

in the project. The Respondent Nos. 11 and 12 are

permitted to develop the Port only on Build, Operate

and Transfer (BOT) basis. No material was placed by

the appellants before the High Court to substantiate

the claim that the Respondent Nos. 11 and 12 are the

Real-estate agents. The development of Port of

Pondicherry on BOT basis makes it evident that, in

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effect and substance, the Government of Pondicherry

would get back the assets built by the Respondent

Nos. 11 and 12 after the expiry of period mentioned in

the Concession agreement. Grant of Letter of Intent

or execution of Concession agreement in favour of

Respondent No. 11 to permit it to develop the Port on

BOT basis cannot be regarded as gifting public

largesse. The appellants have failed to bring on

record any material to substantiate the allegation that

there is a conspiracy to grab the land belonging to the

Government of Pondicherry for the purpose of Real-

estate of Respondent No. 11 by permitting it to

construct five-star hotel, commercial mall, etc. The

reply affidavit filed by the Respondent before the High

Court, on the contrary, shows that the feasibility

report prepared by it indicated that the Port was to be

developed in composite manner and therefore project

should be commercially viable and therefore

considering the enormous cost involved in the

development of the Port, certain activities are sought

to be undertaken for the benefit of passengers, crew of

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ships, staff etc. On the facts and in the

circumstances of the case, this court is of the opinion

that the appellants have failed to make out the case

that the Pondicherry Government has permitted the

Respondent No. 11 to carry on Real-estate business

and therefore the appeals should be accepted.

31.For the reasons stated in the judgment, this Court

does not find any merit in any of the appeals and both

the appeals are liable to be dismissed. Therefore,

both the appeals fail and are dismissed. Having

regard to the facts of the case, there shall be no orders

as to cost.

………………………. ...…CJI.

(K.G. BALAKRISHNAN)

.......................................J.

(P. SATHASIVAM)

…………………………. ...…J.

(J.M. PANCHAL)

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New Delhi;

May 14, 2009.

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