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RISHI KIRAN LOGISTICS PVT. LTD. Versus BOARD OF TRUSTEES OF KANDLA PORT TRUST AND ORS.

2014 (4) TMI 1211 - SUPREME COURT OF INDIA

Eligibility of auction - permissible for the Port Trust to terminate the tender - Held that:- As already pointed out that can hardly be a ground to test the validity of a decision in administrative law. For the sake of argument, even if you presume that there a concluded contract, mere termination thereof cannot be dubbed as arbitrary. A concluded contract if terminated in a bonafide manner, that may amount to breach of contract and certain consequences may follow thereupon under the law of cont .....

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ent would be allowed to change its stand and has the power to withdraw from representation made by it which induced persons to take certain steps which may have gone adverse to the interest of such persons on account of such withdrawal. Merely because the resolution was announced for a particular period, it did not mean that the Government could not amend and change the policy under any circumstances. If the party claiming application of doctrine acted on the basis of a notification, it should h .....

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stage. Thus, we find that on the facts of this case it appears that a letter with intention to enter into a contract which could take place after all other formalities are completed. However, when the completion of these formalities had taken undue long time and the prices of land, in the interregnum, shot up sharply, the respondent had a right to cancel the process which had not resulted in a concluded contract. - We again emphasise that the issue of the argument of their being a concluded .....

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erformance can be ordered or not would be a moot question in writ proceedings. The appellant took the calculated risk in not going to the civil court and choosing to invoke extraordinary jurisdiction of the High Court, which is also discretionary in nature. Appeal dismissed. - C.A. 4655 OF 2014 - Dated:- 21-4-2014 - NIJJAR, S.S. AND SIKRI, A.K., JJ. A.K. SIKRI, J. For The Appellant : Vikas Singh, Sr. Adv., Nikhil Goel, Marsook Bafaki and Naveen Goel, Advs. For The Respondents : H.N. Salve and H. .....

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fferent sizes. The Port Trust took a decision, sometime in the year 2005, to allot these plots on leasehold basis for a period of 30 years for the purpose of enabling the allottees thereof to put up the construction of liquid storage tanks. For this purpose the Kandla Port Trust issued notice inviting tenders dated 12.3.2005. The annual rent in respect of these plots was fixed at a nominal rate of Re. 1/- per plot. However, the bidders were required to submit the price bid in the form of premium .....

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te permission from the competent authority under CRZ was required which would be obtained by the Kandla Port Trust. However, at the same time it was also made clear that any specific clearance like safety, pollution control etc. was to be obtained by the individual lessee (s). This was also reiterated vide communication dated 25.5.2005. In this letter it was also stated that the successful bidder was required to pay the premium within a period of 3 months from the issuance of formal letter of al .....

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crutinised by the Tender Committee of the Port Trust. Recommendations were placed before the Board of Trustees in its meeting held on 8.12.2005. It was followed by communication dated 7.1.2006 to the appellant in the form of Letter of Intent (LOI), inter alia stating that the leasehold rights in respect of Plot Nos. 14, 15 and 17 were given for a premium of ₹ 3,200/- per sq. mtrs., 3,150/- per sq. mtr. and 3,120 per sq. mtr. respectively. This communication further mentioned that the forma .....

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n of India for early clearance of CRZ permission. 5. It appears that CRZ clearance was ultimately received on 16.8.2010. However, this occurred more than 5 years after the NIT dated 12.3.2005 was floated. This prolonged time lag resulted in taking decision by the Board of Trustees on 9.12.2010, in the form of Resolution No. 108, deciding to cancel the tender process started in the year 2005. This decision of the Port Trust was conveyed to the appellant vide letter dated 9.12.2010. Similar letter .....

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y IMC Limited was also dismissed by detailed reasoned order on 7.2.2011. When the petition of the appellant herein i.e. SCA No. 1877 of 2011 came up before the same Bench of the High Court on 10.2.2011, following the decision in the said two Writ Petitions the Court dismissed the petition of the appellant as well with one paragraph order, which reads as follows:- Identical petitions for the same purpose and with the same prayer being Special Civil Application Nos. 286 of 2011 and 1328 of 2011 ha .....

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more similarly situated person had also filed Special Leave Petitions. All these four petitions were listed and were taken together for hearing from time to time. When these matters came up for hearing 14.3.2014 other three petitioners sought permission to withdraw their Special Leave Petitions which were accordingly dismissed as withdrawn on 14.3.2014. Case of the appellant herein only remain in which we have heard the arguments in detail. 9. Before we proceed to take note of the submissions of .....

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following premise:- I. With the issuance of LOI to the successful highest bidder, a concluded contract was arrived at between the parties and, therefore, it was not permissible for the Port Trust to terminate the tender process thereafter. II. Doctrine of promissory estoppel was applicable in as much as by its actions and conduct, the Port Trust had given a clear and unequivocal promise, with intention to create legal relation to arise in future and the Port Trust i.e. the promissory was bound b .....

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e Port Trust was just an information that the addressee (the petitioner therein) had been declared highest bidder for the plot for which it had submitted its tender. This letter further informed that formal allotment letter shall be issued after the receipt of CRZ clearance in general by Port Trust for tank forms for handling all hazardous and non- hazardous and also informing that additional CRZ clearance if required for installation, safety, pollution control etc. had to be obtained by the sai .....

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e steps were taken by the said petitioner despite the fact that it was informed by the Port Trust on 15.2.2006 that the work of preparation of EIA studies in respect to allotment of 17 plots for construction of Liquid Storage Tanks for obtaining CRZ clearance from the Government of India, Ministry of Environment has already been entrusted to M/s. NIOT, Chennai along with other project works and the said institute had already completed site survey work for the purpose. The petitioner was also inf .....

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report as early as possible for obtaining CRZ clearance in the matter. Since these informations were not supplied by the petitioner, another letter was issued by the respondent Trust on 13.5.2008 reiterating the same request to provide the said information. However, instead of doing the needful by furnishing the details it only indulged in worthless correspondence and ultimately vide letter dated 18.1.2010 sought permission to carry out construction portion and maintenance of storage tanks in th .....

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e was given by the respondent Port Trust to allot Plot No. 8 to the petitioner. The letter of intent issued by the respondent was merely an expression of intention and imparting an information that the petitioner stood highest bidder and on receipt of CRZ clearance, the formal letter of allotment would be issued. However, the petitioner had not cooperated in the meantime for obtaining CRZ clearance and before any formal letter of allotment is issued, the earlier tender process stood cancelled.. .....

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reas fresh tender premium, after the cancellation of the earlier tender process was fixed at ₹ 8358 per sq. mtrs. 13. In so far as argument of promissory estoppel is concerned the same was rejected on the ground that the LOI did not amount to any promise. Further, the petitioner had paid only ₹ 3 lakhs by way of earnest money as against the total premium amount which was 23.74 crores and was to be paid only after receipt of the said CRZ clearance, which amount was never paid. 14. The .....

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not be held responsible for delaying the tender process. It was, thus, argued that there was a concluded contract in their case and not a contingent one. Further, in any case the only contingency at the time of issuing LOI was the clearance of CRZ authorities which also was granted subsequently. In view of aforesaid argument, the court went into the specific question as to whether there was already a concluded contract between the parties. This issue has been answered against the petitioner in t .....

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document in favour of the petitioner subject to fulfilment of certain conditions. However, in absence of issuance of allotment letter, the said letter of intent cannot be enforced in the court of law. The Apex Court in Dresser Rand S.A. v. Bindal Agro Chem Limited and others (supra) clearly stated that a letter of intent merely indicates a party's intention to enter into a contract with the other party in future. Such a letter of intent is not intended to bind either party ultimately to ent .....

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le discussing the same, we would take note of the arguments which were advanced by both the sides on these propositions. I WHETHER DECISION CONTAINED INRESOLUTION NO. 108 DATED 9.12.2010 ISARBITRARY AND MALAFIDE. 16. Few facts, leading to this impugned Resolution, which need to be recapitulated are the following:- Tenders for allotment of plots on leasehold basis were floated on 12.3.2005. After receiving bids and evaluating technical as well as price bids respectively, the Tender Committee had .....

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as to be obtained by the appellant. The Port Trust applied to the Ministry of Environment, Government of India for such permission. However, for one reason or the other, this permission/ clearance was not forthcoming. Even when Ghandhidham Chamber of Commerce and Industry wrote to the Port Trust, on behalf of these allottees who were issued LOI's and were waiting for formal letter of allotment, in reply the Port Trust had requested the said Chamber of Commerce and Industry to also use its go .....

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n this backdrop the Port Trust wanted to take a decision as to whether it could go for fresh tenders. It is more than obvious that larger public interest demanded fresh tender process in order to receive maximum amount as the premium of ₹ 612/- per sq. mtr originally fixed and even the quotation of ₹ 3,000/- and odd of the appellant which were found to be highest, was far below the marked rate. Further, even when total premium amount to be paid by the appellant was to the tune of sev .....

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. Based upon the expert legal opinion i.e. there was no legal impediment in cancellation of the tender process, the decision was taken by the Port Trust to cancel the earlier tender process and to start fresh process. 17. On the aforesaid facts there is hardly any scope for argument that the decision of the Port Trust is arbitrary. It is based on valid considerations. We have to keep in mind that while examining this aspect we are in the realm of administrative law. The contractual aspect of the .....

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st v. public interest, then in the case of disposal of public property the question would be whether the right of the person, who has earned the right to the public property in a public auction, is to be preferred over the right of the public in ensuring that valuable public assets were not disposed of except for a fair price and in a fair and transparent manner. Whether this court should, in judicial review, sit in judgment over the decision of a public body which is of the view that it need no .....

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judgments discussed hereinafter. In Meerut Development Authority v. Assn. of Management Studies; (2009) 6 SCC 171, the decision related to disposal of public property by an instrumentality of the State. In the said context, the Court inter alia held as follows: 26. A tender is an offer. It is something which invites and is communicated to notify acceptance. Broadly stated it must be unconditional; must be in the proper form, the person by whom tender is made must be able to and willing to perfor .....

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cept the right to equality and fair treatment in the matter of evaluation of competitive bids offered by interested persons in response to notice inviting tenders in a transparent manner and free from hidden agenda. One cannot challenge the terms and conditions of the tender except on the above stated ground, the reason being the terms of the invitation to tender are in the realm of the contract. No bidder is entitled as a matter of right to insist the authority inviting tenders to enter into fu .....

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id and even to prefer a tender other than the highest bidder, if there exist good and sufficient reason, such as, the highest bid not representing the market price but there cannot be any doubt that the Authority's action in accepting or refusing the bid must be free from arbitrarinesses or favouritism. 20. Lucid enunciation on the scope of judicial review of administrative action, that too in tender matters can be found in Tata Cellular v. Union of India (1994 (6) SCC 651), where following .....

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tneder is always available to the Government. But the principles laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down. Judicial review is .....

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Therefore, it is not for the court to determine whether a particular policy or particular decision taken in the fulfilment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under: (i) Illegality: This means the decision maker must understand correctly the l .....

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n all these cases the test to be adopted is that the court should consider whether something has gone wrong of a nature and degree which requires its intervention. Two other facets of irrationality may be mentioned. i) It is open to the court to review the decision maker's evaluation of the facts. The court will intervene where the facts taken as a whole could not logically warrant the conclusion of the decision maker. If the weight of facts pointing to one course of action is overwhelming, .....

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ing done so, set it aside. Donaldson, L.J. Said that he could not see on what basis the Secretary of State had reached his conclusion. ii) A decision would be regarded as unreasonable if it is impartial and unequal in its operation as between different classes. On this basis in R.V. Barnet London Borough Council, ex. P. Johnson 35 (1989) 88 LGR 73 the condition imposed by a local authority prohibiting participation by those affiliated with political parties at events to be held in the authority& .....

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ning the process of judicial review and held that the writ court would not be justified in interfering with commercial transaction in which the State is one of the parties to the same except where there is substantial public interest involved and in cases where the transaction is mala fide. 22. In so far as argument of malafides is concerned, apart from bald averment, there are no pleadings and there is not even a suggestion as to how the aforesaid decision was actuated with malafides and on who .....

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as arbitrary. A concluded contract if terminated in a bonafide manner, that may amount to breach of contract and certain consequences may follow thereupon under the law of contract. However, on the touch stone of parameters laid down in the administrative law to adjudge a decision as are arbitrary or not, when such a decision is found to be bonafide and not actuated with arbitrariness, such a contention in administrative law is not admissible namely how and why a concluded contract is terminate .....

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e expectation etc. separating it from the issue pertaining to conclude contract and made following pertinent observation in the process: 23. If the dispute was considered as purely one relating to existence of an agreement, that is whether there was a concluded contract and whether the cancellation and consequential non- supply amounted to breach of such contract, the first respondent ought to have approached the civil court for damages. On the other hand, when a writ petition was filed in regar .....

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ue whether there was a concluded contract and breach thereof becomes secondary. In exercising writ jurisdiction, if the High Court found that the exercise of power in passing an order of cancellation was not arbitrary and unreasonable, it should normally desist from giving any finding on disputed or complicated questions of fact as to whether there was a contract, and relegate the petitioner to the remedy of a civil suit. Even in cases where the High Court finds that there is a valid contract, i .....

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judicial review of the administrative action. The requisition whether there was a contract and whether there was a breach may, however, be examined incidentally while considering the reasonableness of the administrative action. But where the question whether there was a contract, is seriously disputed, the High Court cannot assume that there was a valid contract and on that basis, examine the validity of the administrative action. In this case, the question that arose for consideration in the w .....

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High Court ought to have referred the first respondent to a civil court. But the High Court in exercise of its writ jurisdiction, proceeded as if it was dealing with a pure and simple civil suit relating to breach of contract. 25. Having noted the conceptual aspect of the doctrine of promissory estoppel, let us consider as to whether the appellant can successfully invoke this principle in the present case? For this, let us recapitulate the salient features of this case having bearing on this is .....

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e. For this reason it was specifically mentioned in the LOI itself that the premium amounts were to be paid by the appellant only after the receipt of CRZ clearance in general and after issuance of allotment letter as well as individual CRZ clearance and on execution of these documents. Before these events could happen, the Port Trust decided to cancel the entire process. Thus, except making payment of ₹ 3 lakhs by way of earnest money the appellants did not incur any other expenses or suf .....

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6. In MP Mathur & Ors. v. OIC & Ors.; 2006 (13) SCC 706 it is held that once the public interest is accepted as the superior equity which can override individual equity, the principle would be applicable. If there is a supervening public equity, the Government would be allowed to change its stand and has the power to withdraw from representation made by it which induced persons to take certain steps which may have gone adverse to the interest of such persons on account of such withdrawal .....

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y merits. III WHETHER THERE WAS CONCLUDED CONTRACT BETWEEN THE PARTIES:- 27. We have already indicated above that the of the doctrine of fairness as well as promissory estoppel are in the realm of administrative law, whereas the issue as to whether a concluded contract was entered into between the parties and if so, the question of enforcement of such a contract would be in the field of law of contract. Bearing in mind this distinction becomes more important as the High Court was dealing with th .....

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controlled sugar mills in Uttaranchal State which produced molasses. Sale of molasses by them was controlled by the Molasses Sale Committee (MSC) constituted by the State Government. A tender notice was published by the appellant sugar mill inviting offers from bona fide consumers for purchase of molasses from the other five sugar mills. The tenders were to be submitted to the ACC in accordance with the conditions specified in the tender notice. The proceedings in regard to the tenders received .....

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tinuance of supply of the entire quantity of 85,000 quintals of molasses to it. By an interim order, the High Court directed the State Government to decide the respondent's claim after hearing the respondent. Pending such decision, the High Court permitted the respondent to lift up to 20,000 quintals of molasses. After hearing the respondent, the Secretary (Sugar) held that there was no valid contract for supply of molasses to the first respondent and that, therefore, the allotment letter is .....

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t called the managers of two of the sugar mills and put some questions to them and recorded their statements. The High Court reached the conclusion that there was a concluded contract between the five sugar mills and the respondent for sale of 85,000 quintals of molasses at a price of ₹ 127 per quintal. Thereafter, it held that having regard to the doctrines of part performance, legitimate expectation, estoppel and acquiescence, the cancellation of the allotment letter issued by ACC was un .....

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r)? This court answered the aforesaid questions in the negative and set aside the judgment of the High Court holding that ordinarily, the remedy available for a party complaining of breach of contract lies for seeking damages. He would be entitled to the relief of specific performance, if the contract was capable of being specifically enforced in law. The remedies for a breach of contract being purely in the realm of contract are dealt with by civil courts. The public law remedy, by way of a wri .....

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contractual dispute is concerned that is outside the power of judicial review under Article 226 with the sole exception in those cases where such a contractual dispute has a public law element. 30. We have already held that the impugned decision of the Port Trust was not arbitrary, unreasonable or malafide and further that the doctrine of promissory estoppel has no application in the present fact situation. 31. In so far as the issue regarding concluded contract in the present case is concerned, .....

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s a dispute in regard to the facts, it may not be always necessary to relegate the parties to a suit. This was so stated in ABL International Ltd. & Anr. v. Export Credit Guarantee Corporation of India Ltd. & Ors.; JT 2013 (10) SC 300 in the following manner:- 37. In our opinion, this limited areas of dispute can be settled by looking into the terms of the contract of insurance as well as the export contract, and the same does not require consideration of any oral evidence or any other d .....

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e administrative action. Therefore, keeping in view the aforesaid understanding of the law, a very limited inquiry on this aspect is permissible. 33. Having considered the matter from this limited angle in exercise of powers of judicial review, we are of the view that on the facts of this case, no interference is required. Case of the appellant is that with the issuance of LOI a concluded contract was entered into. He had submitted that only CRZ clearance was required and even if LOI, which amou .....

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ndividual basis in this behalf were also to be obtained. 34. At this juncture, while keeping the aforesaid pertinent features of the case in mind, we would take note of the 'Rules and Procedure for Allotment of Plots' in question issued by Kandla Port Trust. As per clause 12 thereof the Port Trust had reserved with itself right of acceptance or rejection of any bid with, specific stipulation that mere payment of EMD and offering of premium will not confer any right or interest in favour .....

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n view of this material on record and factual position noted in earlier paras we are of the opinion that observations in the case of Dresser Rand S. A. v. M/s. Bindal Agro Chem. Ltd. & Anr.; AIR 2006 SC 871, would be squarely available in the present case, wherein the court held that a letter of intent merely indicates a parties intention to enter into a contract with the other party in future. A letter of intent is not intended to bind either party ultimately to enter into any contract. It .....

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nt to acceptance of the offer resulting in a concluded contract between the parties. But the question whether the letter of intent is merely an expression of an intention to place an order in future or whether there is a final acceptance of the offer thereby leading to a contract, is a matter that has to be decided with reference to the terms of the letter. When the LOI is itself hedged with the condition that the final allotment would be made later after obtaining CRZ and other clearances, it m .....

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