Research › Search › Judgment

Gujarat High Court · body

2021 DIGILAW 555 (GUJ)

Union Bank of India v. State of Gujarat

2021-07-09

ASHUTOSH J.SHASTRI

body2021
ORDER : 1. By way of this petition under Article 226 of the Constitution of India, the petitioner – Bank has prayed for the following reliefs :- “12(a) This Hon’ble Court may be pleased to issue a writ of mandamus and/or any other writ, order or direction in the nature of mandamus thereby directing the respondent no. 2 to declare the respondent no. 4 and 5 as the new Concessionaire by granting the Letter of intent and by entering into the concession agreement. (b) Issue interim and ad-interim relief restraining respondent no. 2 from appointing any other Concessionaire without involving petitioner herein in the process of selection and appointment; (c) Any other appropriate relief as this Hon’ble Court deems fit in the interest of justice equity and good conscience may be granted considering the facts and circumstances of the present case.” 2. The case of the petitioner is that the department of Ports and Fisheries, Government of Gujarat, announced a Build, Own, Operate, Transfer (“BOOT”) Policy for private sector participation in the development of ports in the state vide its Government Resolution dated 29.07.1997 and according to this BOOT Policy, the Gujarat Maritime Board i.e. respondent no. 2 herein seeks to develop the port facilities in Gujarat by entering into arrangements with the private sector for the design, functioning, financing, building and operation of Dahej port in Gujarat. The petitioner has also asserted that respondent no. 2 invited bids in July, 2007 for the said project in the name of Dahej Port Project and through a process of competitive bidding in December, 2008, selected Sterling Biotech Limited and its associated as “Key Promoters” led by Sterling Biotech Limited who was the lead promoter. Respondent no.2 awarded a letter of intent on 03.01.2009 to the Key promoters to develop, operate and maintain the port on BOOT policy basis and has agreed to license to the said key promoters under the Gujarat Maritime Board Act and accordingly, concession agreement came to be executed. According to the petitioner, respondent no. 2 also agreed to lease the leased premises for the purpose of development under the concession agreement b way of executing separate lease agreement. 2.1. According to the petitioner, respondent no. 2 also agreed to lease the leased premises for the purpose of development under the concession agreement b way of executing separate lease agreement. 2.1. It is the case of the petitioner that key promoters have executed a Shareholders Agreement dated 12.06.2013 allocating the responsibilities among the key promoters to which the key promoters promoted and incorporated M/s. Sterling Port Limited i.e. respondent no. 3 herein as a company under the Companies Act, 1956 to develop, finance, contract, own, maintain and operate the Port and also to transfer the leased premises and the assets thereon to respondent no. 2 on termination of the concession agreement. 2.2. It is further the case of the petitioner that respondent nos. 1 and 2 entered into concession agreement on 18.06.2014 with respondent no. 3 i.e. M/s. Sterling Port Limited and by virtue of the said agreement exclusive right, license and authority during the subsistence of the said concession agreement project work was entrusted. Respondent no. 2 approved the land use plant and 20 years’ development plan and in view of the terms of LOI, a detailed report was prepared and submitted by respondent no. 3 on 22.03.2010 and subsequent modification was also approved vide letter dated 29.04.2010. 2.3. In response to this work, Andhra Bank, Corporation Bank (both now amalgamated with the petitioner i.e. Union Bank of India) and SREI Infrastructure Finance Limited operated as consortium of lenders in the construction of Dahej Port and by virtue of term loan agreement dated 29.03.2011, Andhra Bank extended loan facility of INR 160,00,00,000 in favour of respondent no. 3 and by way of term loan agreement dated 31.03.2011, Corporation Bank also extended loan of INR 145,00,00,000 in favour of respondent no.3. During the passage of time, recently Andhra Bank and Corporation Bank having been merged and amalgamated with the petitioner i.e. Union Bank of India with effect from 01.04.2020 in view of the Gazette notification dated 14.03.2020 and thereby, the undertaking of the transferor Bank got transferred and vested in petitioner and as, such the petitioner has stepped into the shoes of Andhra Bank and Corporation bank, who were lenders, bank to respondent no.3. 2.4. It is the case of the petitioner that concession agreement confers on the lenders the rights of step-in or substitution of concession agreement in case of default being committed by respondent no. 2.4. It is the case of the petitioner that concession agreement confers on the lenders the rights of step-in or substitution of concession agreement in case of default being committed by respondent no. 3 and the said step-in or subsistence is provided in clause 14.3.7 of the concession agreement and as such, the petitioner according to them has got absolute right to substitute respondent no. 3 as a licensee, of course, subject to approval of respondent no. 2 and such selectee has become the new licensee in place of respondent no.3. The case of the petitioner is that respondent no. 2 issued a notice of intent dated 06.10.2016 terminating such concession agreement to respondent no. 3 stating that respondent no. 3 failed to submit construction bank guarantee worth Rs.37.5 crores and consequently, requested respondent no. 3 to cure the event of default within a period of 90 days from the date of the receipt of the notice failing which, steps would follow as provided under Clause 14.3.1 of the concession agreement. Respondent no.2 in furtherance of the said notice has also issued a termination notice on 26.05.2017 stating that respondent no.3 never submitted final loan documents nor informed the actual lenders of the project to respondent no. 2 and has failed to carry on the project and develop the work till the year 2017 despite the fact that LOI was long back granted almost prior to 8 years i.e. on 03.01.2009. The said notice was given in the year 2017and one of the lenders conducted numerous consortium meetings with other lenders and according to the petitioner for bringing the new investors/partners for operating the port and such meeting proceedings have been recorded in the minutes of Andhra Bank and thereafter respondent no. 5 submitted its proposal for operating the port on BOOT policy basis on 19.07.2017. 2.5. It is the case of the petitioner that on 18.10.2017 respondent no. 2 issued further to the lenders stating that new licensee shall be liable to pay full waterfront royalty with no concession and an undertaking by the petitioner on the entire outstanding dues and in response thereto further consortium meeting was held on 25.10.2017. It is the case of the petitioner that on 07.11.2017 external agency i.e. M/s. Price Water House Coopers Pvt. Ltd., was selected to run the process of inviting bids for the operation of the Dahej port. It is the case of the petitioner that on 07.11.2017 external agency i.e. M/s. Price Water House Coopers Pvt. Ltd., was selected to run the process of inviting bids for the operation of the Dahej port. On 05.11.2017, the petitioner published an advertisement for inviting Expression of Interest for substitution of Licensee under “Swiss Challenge methods” for the development of Dahej port in newspaper being Times of India and Economic Times and in response thereto, JSW infrastructure Limited i.e. respondent no. 4 and ILOG Port (Dahej) Private Limited i.e. respondent no. 5 submitted its joint bid and financial proposal on 26.12.2017 and 05.01.2018 lender issued letter to respondent nos. 4 and 5 stating that joint bid was selected by the lenders to substitute original licensee on BOOT policy and letter was issued indicating that such selection is subject to the approval from respondent no. 2 in accordance with the terms and conditions of concession agreement. The said letter was written on 05.01.2018 to respondent no. 4. 2.6. It is further the case of the petitioner that by that time vide letter dated 14.12.2017 lenders while informing respondent no. 2 of the tender process for substitution of Concessionaire have also recorded that the tender process will be completed latest by 28.12.2017 and will be nominating the substitution by 29.12.2017 and have extended thank you for the co-operation to respondent no. 2 and in turn respondent no.2 vide reply letter dated 16.12.2017 stated that they might give more time, but the issue will be put in the Board Meeting of respondent no. 2 and the decision of Board will be final. The said reply was given and thereafter, a letter was written to respondent no. 2 on 11.01.2018 informing the finalized licensee of consortium comprising of respondent nos. 4 and 5 as nominated licensee to replace respondent no. 3 in accordance with terms of concession agreement. The letter further recorded that LOI was issued to selected bidder and the selected bidder has issued in turn acceptance letters as well and as such, respondent no. 2 was requested to consider and accept the selected bidder i.e. respondent nos. 4 and 5 as new licensee to substitute the original licensee for implementation of the port project in accordance with concession agreement. The lender also issued consent letter to respondent no. 2 giving consent for substitution of original licensee with respondent nos. 2 was requested to consider and accept the selected bidder i.e. respondent nos. 4 and 5 as new licensee to substitute the original licensee for implementation of the port project in accordance with concession agreement. The lender also issued consent letter to respondent no. 2 giving consent for substitution of original licensee with respondent nos. 4 and 5 and in response thereto, respondent no. 2 on 02.02018 demanded for production of loan documents and to provide necessary evidence to to justify being bona fide lenders. A further correspondence took place between lender of respondent no.2 whereby a letter was issued upon respondent no. 2 requesting to schedule the meeting for substituting respondent nos. 4 and 5 as new licensee. Series of correspondence took place in respect of it, but then, the lender issued letter on 05.11.2018 to Hon’ble Chief Minister, Government of Gujarat, requesting for substitution of original licensee with the new licensee for recovering dues of the lenders and respondent no. 2. The lenders further requested for issuance of guidance and support for substituting new licensee. By way of further correspondence through E-mail, the petitioner requested the Chief Secretary, Government of Gujarat, for further appointment in respect of substitution of respondent no. 3, meeting was called on 11.01.2019. A discussion took place of the issue and after detailed discussion, the Chief Secretary was pleased to inform the lenders that the matter will be taken up with Hon’ble Chief Minister after vibrant Gujarat programme is over. Respondent no. 4 in furtherance had issued letter on 10.05.2019 to respondent no. 2 agreed to pay all the dues to respondent no. 2 after issuing letter of intent in favour of concessionaire of respondent nos. 4 and 5, but then respondent no.2 only purported to cancel all the permissions granted to respondent no.3 for development of the Dahej port and thereafter lenders requested respondent no. 2 again to consider substitution to original licensee led by respondent no. 4 and continuous follow up is made by the petitioner with respondent no. 2. But it is only after approval of respondent no. 2, special purpose vehicle shall be required to entered into a novation agreement and such other agreements/documents which may take place effectuate novation of the concession agreement, but despite several steps having been taken, delay is taking place and the petitioner could not proceed unless and until respondent no. 2. But it is only after approval of respondent no. 2, special purpose vehicle shall be required to entered into a novation agreement and such other agreements/documents which may take place effectuate novation of the concession agreement, but despite several steps having been taken, delay is taking place and the petitioner could not proceed unless and until respondent no. 2 shall grant letter of intent to substitute new licensee and it is only after approval of respondent no.2 credit facility can take place, but to the surprise according to the petitioner the issue has not been finalized either at Government level or at the level of respondent no. 2, which has led the petitioner to approach this Court by way of present petition under Article 226 of the Constitution of India for the reliefs which are sought in the petition. 3. Learned advocate Mr. Yogesh Dev appearing for the petitioner has submitted that it is the exclusive right of a lender to take decision about substitution by virtue of the clause contained under the relevant documents. By referring to clause 14.3.7 from the Concession Agreement, a justification is tried to be made that the petitioner has rightly selected the respondent Nos.4 and 5 as new concessionaires who have agreed to clear the dues of respondent No.2 and the loan of the petitioner as well. It is submitted that it is respondent No.2 who is not granting Letter of Intent or permitting substitution of Concession Agreement in favour of the respondent Nos.4 and 5, which has harmed the effective recovery process of public money, resulting into losses. Respondent No.2, according to Mr. Dev, should have considered letter dated 10.5.2019 addressed by respondent No.4 to respondent No.2 and ought to have substituted the concessionaire in the larger interest of recovery of public fund. Respondent No.2 should have also considered that by affecting such kind of substituted concessionaire, completion of Dahej Port will pave for growth of Port and the State as well and would boost the trade and industry and would also generate employment in the State of Gujarat and as such, since respondent No.2 has not yet finalized the lenders’ nomination of concessionaires, i.e. respondent Nos.4 and 5, for substitution of existing licensee, i.e. respondent No.3, the petitioner is constrained to approach this Court. No other submissions have been made. 4. No other submissions have been made. 4. As against the aforesaid submissions, on advance copy, learned advocate Mr. Gursharan H. Virk, on instruction of respondent No.2, has tendered a Brief Note, opposing the petition on the basis of undisputed facts which are stated and it is worth to be noted that against this Brief Note, though copy is served, no counter is submitted by learned advocate Mr. Dev and therefore, the contents of the Brief Note have gone undenied. The contents of the said Brief Note, since relevant to the present controversy, the Court deems it proper to reproduce the same hereunder, since same is tendered on record:- BRIEF NOTE ON BEHALF OF RESPONDENT NO. 2 GUJARAT MARITIME BOARD Prayer sought: 1. The singular prayer made in the captioned petition is to issue a Writ of Mandamus to declare Respondent Nos. 4 and 5 (JSW and Aviral) as “new concessionaires” and further, a direction to the Respondent No. 2 (GMB) to issue a Letter of Intent to R4 and RS. A decree for revival of a terminated contract is therefore sought in the matter at hand which is respectfully, impermissible. Undisputed facts: 2. Admitted Union Bank of India (Petitioner) had (in consortium with other lenders) lent huge sums of monies to Sterling Group (R3). Sterling Group underwent financial difficulties and its promoters presently face serious money laundering charges in terms of various proceedings initiated by the Enforcement Directorate, Govt. of India and other prosecution agencies. 3. The lenders of R3 (SPL) failed to secure their funds from the borrower; and, instead of prosecuting the borrower (for reasons not evident on record), have elected to take out completely vexatious proceedings against GMB. The said proceedings are not maintainable in law and on facts. Contractual framework (to which Petitioner is not a party): 4. Petitioner is not even a party) to the Concession Agreement dated 18.06.2014 (pg. 26). Only GOG, GMB and SPI: were parties to the said Concession Agreement. Petitioner has no relationship (contractual, fiduciary or otherwise) with GOG or GMB. The petitioner has impleaded GOG/GMB because without doing so, it would never have been able to file a Writ Petition. 5. GMB terminated the concession agreement more than 4 years ago on 26.05.2017 (termination notice at pg. 162). 6. Relevant provision of the Concession Agreement (pgs. Petitioner has no relationship (contractual, fiduciary or otherwise) with GOG or GMB. The petitioner has impleaded GOG/GMB because without doing so, it would never have been able to file a Writ Petition. 5. GMB terminated the concession agreement more than 4 years ago on 26.05.2017 (termination notice at pg. 162). 6. Relevant provision of the Concession Agreement (pgs. 78-79), is as under: “14.3.5 Termination Notice: (a) Upon the expiry of the Remedy Period, unless the parties have otherwise agreed to, or the Event of Default giving rise to the Notice of Intent to Terminate has ceased to exist or the default has been rectified or remedied by the defaulting party or a Lender, the non-defaulting party may terminate this Agreement by giving a 90 days written notice (“Termination Notice”) to the defaulting party with a copy to the Lenders. (b) Upon the expiry of such notice period unless the Lenders have successfully exercised the right to substitution in accordance with the provisions of this Agreement, this Agreement shall stand terminated and the provisions of Clause 15 and 16 shall be applicable. “14.3.7 Lenders’ Right of Substitution: (b) If within 90 days from the date of Termination Notice, the NL acceptable to the Licensor does not execute a novation of this Agreement, The Licensor may terminate this Agreement on the expiry of the 90 day Termination Notice period as if no Replacement Notice had been served.” 7. Therefore, following contractual position is undisputed and uncontroverted: 7.1. The Termination Notice was addressed by GMB to Sterling on 26.05.2017. 7.2. No fresh agreement/ novation of Concession Agreement was executed within 90 days from the date of issuance of the Termination Notice. 7.3. Therefore the Concession Agreement stood terminated on 26.05.2017 more than 4 years ago. Earlier proceedings: 8. Earlier, the lenders have already attempted to, and failed at, the following: a. One of the joint-lenders (acting for all lenders including the Petitioner) filed Commercial Civil Miscellaneous Application No. 24 of 2019 before the Hon’ble Commercial Court, Ahmedabad under Section 9 of the Arbitration and Conciliation Act, 1996 and failed to secure any relief against GMB. b. The lenders also initiated proceedings under the SARFAESI Act before the Hon’ble DRT, Kolkata [OA 421/2016] and maliciously made GMB a party to the said proceedings, but have not secured any declaratory relief as prayed for in the captioned petition. 9. b. The lenders also initiated proceedings under the SARFAESI Act before the Hon’ble DRT, Kolkata [OA 421/2016] and maliciously made GMB a party to the said proceedings, but have not secured any declaratory relief as prayed for in the captioned petition. 9. Having failed to get any relief from other Hon’ble Courts / Tribunals, the Petitioner has now attempted to take a chance under Writ Jurisdiction, and that too more than 4 years after the Concession Agreement was terminated by GMB. Even if regular-civil remedy is considered, the Petitioner’s cause of action is hopelessly barred by limitation. Therefore, the captioned petition deserves to be dismissed in limine. Commercial transaction Writ not maintainable: 10. Admittedly, the contract at hand is a purely commercial contract and is not a statutory contract or a contract having public-law character. Therefore, Writ jurisdiction may not be exercised in the facts of the present matter. 11. Under Writ Jurisdiction the Petitioner cannot claim declaratory reliefs to revive a contract terminated more than 4 years ago to which it was never a party. R3 (Sterling Port Limited), whose contract was terminated has never challenged the termination of the contract. 12. The Petitioner cannot demand that a party of its choice be awarded a precious tender without any public- tendering process. Neither the Petitioner nor the private Respondent Nos. 4 and 5 have any inherent right or /locus in the matter at hand. 13. In law, the appropriate remedy for lenders (including the Petitioner) was available against the borrowers (Sterling Group and its promoters) under SARFAESI Act, Insolvency and Bankruptcy Code and other applicable laws. Therefore, on the question of availability of alternative, efficacious remedy also, the captioned Petition deserves dismissal with cost. Additionally, the Concession Agreement contains an Arbitration Clause (pg.94) and therefore any aggrieved party to the Concession Agreement can initiate arbitration. Resultantly, question of entertaining the present Writ Petition may not arise. 14. There is, therefore, absolutely no basis for the Petitioner to demand that a terminated contract be reversed/revived, or status quo ante be restored, or a fresh contract be issued to private party (R4 and R5) without any basis. Therefore, the captioned petition deserves to be dismissed in limine with exemplary cost. 5. 14. There is, therefore, absolutely no basis for the Petitioner to demand that a terminated contract be reversed/revived, or status quo ante be restored, or a fresh contract be issued to private party (R4 and R5) without any basis. Therefore, the captioned petition deserves to be dismissed in limine with exemplary cost. 5. By referring to the aforesaid contents in the peculiar background of facts, it has been vehemently opposed that the petitioner has not come with clean hands as the petitioner ought to have disclosed the material particulars about the proceedings which went on in the Commercial Court at Ahmedabad. The lenders also initiated proceedings under the SARFAESI Act before the Hon’ble DRT, Kolkata in the form of O.A. No.421 of 2016, which are very material to the issue. Even there is a clause contained on page 94 that aggrieved party to the concession agreement can initiate arbitration proceedings. This ought to have been brought to the notice of the Court. Having not disclosed, the petitioner since having other remedy for recovery cannot invoke equitable jurisdiction of this Court on this premise. Apparently, it has been submitted that the petitioner has sought practically a declaratory relief to revive the contract which was already terminated, prior to around 4 years back, to which it was never a party. Hence, in absence of any challenge to the termination of contract by respondent No.2, there is hardly any case made out to call for any interference. Apart from that, the petitioner cannot demand a party of its own choice to substitute. Hence, in this view of the matter, since appropriate remedy is available to proceed ahead against the respondent No.3, i.e. Sterling Group and its promoters, and having efficacious remedy, the reliefs prayed for in the petition may not be granted. 6. Having heard learned advocates appearing for the parties and having gone through the material on record, undisputed and uncontroverted facts are that the petitioner is not a party to the concession agreement dated 18.6.2014 and even if right flows from the said agreement in favour of the petitioner, then also, the said concession agreement undisputedly has been terminated prior to almost 4 years, i.e. in the month of May 2017 and the petitioner has approached this Court in the month of June 2021 and for which, there is no explanation visible from the record. From the relevant provision of clause 14.3.5 of the concession agreement and from the stand of respondent No.2, it is evident that termination notice was addressed by the respondent No.2 to the respondent No.3, i.e. Sterling Port Limited, on 26.5.2017 and undisputedly, within a period of 90 days, no fresh agreement nor novation of concession agreement appears to have been executed and as such, the concession agreement as per the respondent stood terminated in the month of May 2017. The Court is not expressing any opinion on this action of the respondent No.2, but the fact is not possible to be ignored that the petitioner has approached the Court at a belated stage. 7. Additionally, the material facts related to filing of Commercial Civil Misc. Application No.24 of 2019 before the Hon’ble Commercial Court, Ahmedabad filed by one of the joint lenders and failed to secure any relief against the respondent No.2. This fact has not been disclosed in the petition nor even countered at least after disclosure of the same by respondent No.2 vide Brief Note and in addition thereto, the lenders also initiated proceedings under the provisions of the SARFAESI Act in the form of OA No.421 of 2016 before Hon’ble DRT, Kolkata and no relief appears to have been granted in favour of the lenders. This fact has also not been disclosed in the petition and after some time, declaratory relief is sought. The grievance arising out of the commercial contract and the issues are possible to be agitated before appropriate forum. 8. The Court is not inclined to exercise the jurisdiction since the petitioner has kept silence about the delay, about the remedy of arbitration and about what steps have been taken so far against the borrowers. On the contrary, the material facts have not been disclosed before the Court on the basis of the aforesaid uncontroverted facts disclosed by respondent No.2. Accordingly, the petition does not deserve to be entertained and stands DISMISSED. 9. However, it is made clear this dismissal of the petition may not come in the way of the petitioner to initiate appropriate proceedings to protect its interest in accordance with law.