Supreme Court Upholds Expansion of Hazira Port Limits: Essar Bulk Terminal Ltd. vs. State of Gujarat (2018)

Introduction

Date of the Judgment: 22 February 2018

Citation: (2018) INSC 141

Judges: R.F. Nariman, J. and Navin Sinha, J.

Can a State Government expand the limits of a port, even if it affects private parties who have invested in the area? The Supreme Court of India recently addressed this question in a case concerning the expansion of Hazira Port in Gujarat. The core issue revolved around whether the State Government’s decision to expand the port limits was justified under the Indian Ports Act, 1908, and whether it infringed upon the rights of private entities. This judgment was delivered by a two-judge bench comprising Justice R.F. Nariman and Justice Navin Sinha, with the majority opinion authored by Justice Nariman.

Case Background

The case involves a dispute over the expansion of Hazira port limits by the State Government of Gujarat. In 1994, the parent company of Essar Bulk Terminal Limited (the Appellants) entered into an agreement with the Gujarat Maritime Board (GMB) for use of a captive jetty in Magdalla port. Subsequently, the GMB issued a Global Notice for Expression of Interest for development of Hazira port. A consortium led by Shell Gas B.V. was selected, which created two subsidiaries, Hazira Port Private Limited (HPPL) and Hazira LNG Private Limited. A concession agreement was signed between GMB, the State Government, and HPPL for the development of Hazira port. In 2004, the State Government notified the limits of Hazira port, carved out from Magdalla port.

The Appellants had set up a shallow draft captive jetty in 2000. They entered into several Memorandums of Understanding (MOUs) with the GMB and the State Government for development of a RORO terminal and the waterfront. HPPL later identified Adani Hazira Port Private Limited (Adani) as its sub-concessionaire. HPPL requested an amendment to its port facilities, which was approved by the GMB. This expansion included areas reclaimed by Essar, leading to objections from the Appellants. The State Government, after initial hesitation, ultimately approved the expansion, leading to the impugned notification under Section 5 of the Indian Ports Act, 1908. The Appellants challenged this notification, arguing it infringed on their reclaimed lands and violated the principle of legitimate expectation.

Timeline:

Legal Framework

The Supreme Court examined the following key legal provisions:

• Section 3(9) of the Indian Ports Act, 1908: Defines “Government” concerning ports. It states that for major ports, the Central Government is the relevant authority for all purposes. For other ports, the State Government is the relevant authority, except for specific functions like making rules under clause (p) of Section 6(1) and the appointment and control of port health officers under Section 17.
• Section 4 of the Indian Ports Act, 1908: Grants the Government the power to extend or withdraw the Act or certain portions thereof. Specifically, Section 4(2) states that a notification under clause (a) or (b) of sub-section (1) shall define the limits of the area to which it refers. Section 4(3) allows these limits to include piers, jetties, and other works made for public convenience, safety, or improvement of the port, subject to private property rights.
• Section 5 of the Indian Ports Act, 1908: Empowers the Government to alter the limits of any port, subject to private property rights. Section 5(2) states that when the Government alters the limits of a port, it must declare the precise extent of such limits by notification in the Official Gazette.
  
  “5. Alteration of limits of ports
  (1) The Government may, subject to any rights
  of private property, alter the limits of any port
  in which this Act is in force.”
• Section 35(1) of the Gujarat Maritime Board Act, 1981: Requires prior written permission from the Board for any construction or reclamation within port limits.
  
  “35. (1) No person shall make, erect or fix
  within the limits of a port or port approaches,
  any wharf, dock, quay, stage, jetty, pier, place
  of anchorage, erection or mooring or
  undertake any reclamation of foreshore within
  the said limits except with the previous
  permission in writing of the Board and subject
  to such conditions, if any, as the Board may
  specify.”
• Sections 8, 9, and 10 of the Gujarat Infrastructure Development Act, 1999: These sections outline the process for selecting a person for undertaking a project, emphasizing competitive public bidding as a primary method. They also provide for inviting comparative bids and direct negotiation under specific circumstances.

These provisions collectively govern the powers of the State Government and the Gujarat Maritime Board in relation to port development and management, as well as the rights and obligations of private entities involved in such projects.

Arguments

Appellants’ (Essar Bulk Terminal Limited) Arguments:

• The Appellants argued that the State Government should have accepted the first proposal of 21st July, 2014, and not the second proposal, which was approved in haste.
• The second proposal for increased port area directly affected the land reclaimed or to be reclaimed by the Appellants, on which they had spent substantial amounts.
• The State Government had recommended the Ministry of Environment to grant CRZ clearance to Essar for expansion of port facilities, which included 334 hectares of land, and the Ministry granted the clearance on 6th May, 2014. Despite this, the expanded port limits would encroach upon this area.
• Various assurances were given and MOUs were entered into with the Appellants, based on which they made huge investments, attracting the doctrine of legitimate expectation.
• The notification was ultra vires Section 5 of the Indian Ports Act, 1908, which requires public interest to be the sole consideration.
• The extension of Hazira port limits would indirectly grant HPPL an extended port area without bidding, which is contrary to the Gujarat Infrastructure Development Act, 1999.
• The overlapping of area with Essar was only in the second proposal, which was arbitrarily recommended by the GMB.

Respondents’ (State of Gujarat, GMB, HPPL, Adani) Arguments:

• The expansion of port limits was within the originally conceived area of 1011 hectares allocated for port-related activities to HPPL, as per the detailed project report (DPR) of 2010.
• Essar’s demands for reclaimed land had nothing to do with the expansion of Hazira port limits.
• No permission under Section 35 of the Gujarat Maritime Board Act, 1981, had been given to Essar to reclaim land, which was a condition precedent to their demands.
• Essar’s captive port was underutilized, handling only 30% of the projected cargo.
• The objections to the expansion of Hazira port limits were misconceived, as Essar sought to convert its captive port into a commercial port, bypassing the Gujarat Infrastructure Development Act.
• The GMB’s approval of 19th March, 2015, was valid, and the State Government’s actions were in public interest.
• The Appellants were attempting to conduct commercial operations on their captive jetty, circumventing the need for a global tender.
• The Appellants could claim no right or expectation, and their writ petition should have been dismissed at the threshold.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues:

1. Whether the notification dated 18th January, 2016, issued under Section 5 of the Indian Ports Act, 1908, by which the State Government of Gujarat expanded the port limits of Hazira port, is valid?
2. Whether the expansion of the port limits was done in public interest as required under Section 5 of the Indian Ports Act, 1908?
3. Whether the Appellants had any right to private property that was affected by the alteration of the port limits?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Supreme Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Section 3(9) of the Indian Ports Act, 1908: The Court used this to establish the relevant government authority for the port in question.
• Section 4 of the Indian Ports Act, 1908: The Court referred to this section to understand the powers of the government to extend or withdraw the Act.
• Section 5 of the Indian Ports Act, 1908: The Court examined this section to determine if the government had the power to alter port limits and whether it was done in public interest.
• Section 35(1) of the Gujarat Maritime Board Act, 1981: The Court relied on this to find that the Appellants had not obtained prior permission for reclamation of land.
• Sections 8, 9, and 10 of the Gujarat Infrastructure Development Act, 1999: The Court noted that the Appellants were attempting to circumvent the competitive bidding process outlined in these sections.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Public Interest: The Court emphasized that the expansion of port limits was necessary for public interest due to the expected increase in vessel traffic and the need for adequate facilities for customs, security, and port operations.
• Lack of Private Property Rights: The Court found that the Appellants had no right to private property in the reclaimed land, as the ownership vested with the GMB/State Government. The Appellants had not obtained prior permission for reclamation under Section 35(1) of the Gujarat Maritime Board Act.
• Attempt to Circumvent Bidding Process: The Court noted that the Appellants were attempting to convert their captive jetty into a commercial port without following the competitive bidding process required under the Gujarat Infrastructure Development Act.
• Underutilization of Captive Port: The Court pointed out that the Appellants’ captive port was underutilized, handling only 30% of the projected cargo.
• No Legitimate Expectation: The Court held that the MOUs entered into with the Appellants were only valid for 12 months and did not grant any rights or give rise to any legitimate expectation.

Sentiment Analysis of Reasons Given by the Supreme Court:

Fact:Law Ratio:

The Court’s reasoning was a combination of factual analysis and legal interpretation, with a greater emphasis on the factual aspects of the case.

The Court considered alternative interpretations, such as the Appellants’ claim of legitimate expectation and their assertion of private property rights. However, these were rejected based on the analysis of the facts and the relevant legal provisions. The final decision was reached by concluding that the expansion of port limits was a valid exercise of the government’s powers under Section 5 of the Indian Ports Act, 1908, and was done in public interest.

The Court’s decision was based on a combination of legal interpretation and factual analysis. The court reasoned that the Appellants had no legal right to the reclaimed land and that the expansion of the port limits was necessary for public interest. The court also found that the Appellants were attempting to circumvent the competitive bidding process required under the Gujarat Infrastructure Development Act. The court noted that the Appellants’ captive port was underutilized and that they had no legitimate expectation of ownership of the reclaimed land.

“The Government may, subject to any rights of private property, alter the limits of any port in which this Act is in force.”

“No person shall make, erect or fix within the limits of a port or port approaches, any wharf, dock, quay, stage, jetty, pier, place of anchorage, erection or mooring or undertake any reclamation of foreshore within the said limits except with the previous permission in writing of the Board and subject to such conditions, if any, as the Board may specify.”

“The ownership of reclaimed land shall vest with the Government of Gujarat/Gujarat Maritime Board.”

Key Takeaways

• Government’s Power to Alter Port Limits: The State Government has the power to alter port limits under Section 5 of the Indian Ports Act, 1908, subject to private property rights and public interest.
• No Private Property Rights in Reclaimed Land: Private entities do not have automatic rights to reclaimed land within port limits, especially if the ownership vests with the Government or the Maritime Board.
• Prior Permission for Reclamation: Any reclamation within port limits requires prior written permission from the relevant Maritime Board under Section 35(1) of the Gujarat Maritime Board Act, 1981.
• Public Interest: Port expansions must be in public interest, especially when they impact private parties.
• Competitive Bidding: Attempts to circumvent the competitive bidding process for port development will not be entertained.
• Legitimate Expectation: MOUs with limited validity do not create legitimate expectations of ownership or rights.

Potential Future Impact:

• This judgment reinforces the State’s authority over port development and management.
• It clarifies the rights and obligations of private entities involved in port-related projects.
• It emphasizes the importance of public interest in port development decisions.
• It sets a precedent for future cases involving port expansions and reclamation.

Directions

No specific directions were given by the Supreme Court in this case.

Specific Amendments Analysis

Not Applicable.