Disqualification in Tender Participation Overruled: Adani Ports Case Explained

The legal dispute between Adani Ports and Special Economic Zone Limited and the Board of Trustees of Jawaharlal Nehru Port Authority revolved around the disqualification of Adani Ports from participating in tenders for port operations. This case, arising from the termination of a Concession Agreement by the Visakhapatnam Port Authority, examined key legal principles involving disqualification in public tenders and the validity of contract clauses under the Indian Constitution.

Background of the Case

Adani Ports had been disqualified from two important tenders issued by the Jawaharlal Nehru Port Authority (JNPA) due to the termination of its Concession Agreement, which had been signed with the Visakhapatnam Port Authority in 2011. The issue was centered on the applicability of Clause 2.2.8 of the Request for Qualification (RFQ) documents of the tenders, which deemed disqualification following contract termination as an automatic bar from future participation in public tenders.

Adani Ports contended that the termination was legally disputed and that the clause in question was unconstitutional. As a result, Adani Ports filed a writ petition to challenge its disqualification and sought to participate in the tenders in question, which were in the process of being awarded.

Read also: https://judgmentlibrary.com/supreme-court-dismisses-curative-petition-in-pm-cold-storage-vs-monotrone-leasing-case/

The Arguments

Dr. A.M. Singhvi, Senior Advocate representing Adani Ports, argued that the disqualification was unjust. He emphasized that the termination of the Concession Agreement was a retaliatory act following earlier disputes with the Visakhapatnam Port Authority, and the matter was pending before an Arbitral Tribunal. Therefore, the termination should not automatically disqualify Adani Ports from participating in future tenders.

On the other hand, the Board of Trustees of Jawaharlal Nehru Port Authority, represented by Solicitor General Shri Tushar Mehta, argued that the terms of the tender were binding, and the disqualification clause was legally sound. However, a broader consensus emerged between the parties on the issue of the Concession Agreement’s termination and its impact on future tender participation.

Shri Shyam Divan, representing M/s. J.M. Baxi Ports & Logistics Ltd., the contesting respondent, indicated that they had no objections to the petitioner’s withdrawal from the ongoing tenders, provided that the appellant did not pursue any claims regarding those specific tenders.

Supreme Court’s Analysis

The Court carefully examined the facts, particularly the timing and context of the termination of the Concession Agreement by the Visakhapatnam Port Authority. The termination of the agreement had occurred in late 2020, and the issue was still under arbitration. The Court acknowledged the broad consensus between the parties regarding the peculiar circumstances of the case.

Read also: https://judgmentlibrary.com/supreme-court-dismisses-curative-petition-in-ice-tv-private-limited-vs-sreedevi-digital-systems-case/

The Court concluded that while Adani Ports would not be able to participate in the tenders in question, the termination of the Concession Agreement should not automatically serve as a disqualification for future participation in other public tenders. This judgment emphasized the need for flexibility in tender participation rules and stressed that such disqualifications must be considered in light of specific circumstances, such as ongoing legal disputes over contract terminations.

Outcome of the Case

The Supreme Court issued the following orders:

• The petitioner’s request for a reversal of the disqualification in the current tenders was dismissed, with the petitioner agreeing to refrain from any claims regarding these specific tenders.
• It was observed that the termination of the Concession Agreement by the Visakhapatnam Port Authority would not be considered a disqualification for the petitioner in future tender processes. This decision acknowledged the unique circumstances surrounding the dispute.
• The writ petition challenging Clause 2.2.8 of the RFQ documents was dismissed as withdrawn, with the petitioner retaining the right to challenge the clause’s validity in future legal proceedings.

This case sets a significant precedent for the treatment of contract termination in the context of public tenders, particularly when disputes over such terminations are pending resolution in arbitration. The judgment reflects a balanced approach, ensuring that public tender rules are upheld while also providing room for fair participation in future opportunities.

Petitioner Name: Adani Ports and Special Economic Zone Limited.
Respondent Name: The Board of Trustees of Jawaharlal Nehru Port Authority & Ors..
Judgment By: Justice M.R. Shah, Justice Krishna Murari.
Place Of Incident: Jawaharlal Nehru Port, India.
Judgment Date: 05-09-2022.

Don’t miss out on the full details! Download the complete judgment in PDF format below and gain valuable insights instantly!

Download Judgment: adani-ports-and-spec-vs-the-board-of-trustee-supreme-court-of-india-judgment-dated-05-09-2022.pdf