2022 (10) TMI 465 - SC - Indian Laws

Validity of directions issued by the HC in favor of Adani Ports (APSEZL) - Approval as a SEZ compliant Unit from the competent authority under the SEZ Act in respect of its Warehouse facility - seeking to obtain a waiver of the conditions to comply with the provisions of SEZ Act as a SEZ Unit - HELD THAT - It is not in dispute that, after the land was leased to the then GAPL by the GMB in the year 2000-2001, it entered into an agreement with the appellant-CWC on 2nd June 2004 with regard to the area admeasuring 34 acres. It is also not in dispute that the appellant-CWC was put in possession of the said plot and has constructed the warehouse on the same. It is also not in dispute that after the construction of the warehouse, the storage facilities were being utilized by the then GAPL. From a perusal of the communication dated 5th January 2017, it is seen that the appellant-CWC was restrained from continuing with the activities in the said premises. It further states that the appellant-CWC would not be able to get gate passes for the SEZ until the appellant-CWC either (a) obtains a Letter of Approval (LOA) from Development Commissioner (DC) as a SEZ Unit in compliance with the provisions of SEZ Act/Rules; or, (b) obtains specific permission from DC to carry out the activities of warehousing stuffing etc. in the said premises in the SEZ by waiving the requirement of being approved as an SEZ-compliant Unit - The CVC has clearly observed that due to the presence of CWC warehouse, various kinds of developmental activities have been undertaken by other related government undertakings like Railway etc. It has further been observed that by shifting the warehouse to another place, GAPL will be unduly benefited and at the same time, the appellant-CWC will not only lose business but will also have to struggle afresh in creating the same kind of infrastructure at the new location. The CVC further observed that there could be a vested interest in shifting of the CWC warehouse. The High Court ought to have taken into consideration that the appellant-CWC was a statutory body. There are already observations made by the CVC as early as in the year 2010 that the swapping of the warehousing facility from the present site to a changed site would cause serious financial implications and also that there could be various vested interests involved. The CVC had also observed that there was also a possibility of losing business - The High Court ought to have taken into consideration that, unless all the three conditions were complied with, the interest of the appellant-CWC, which is a statutory Corporation, could not have been safeguarded. If a settlement was to be arrived at, unless the same was found to be in the interest of both the parties, it could not have been thrust upon a statutory Corporation to its detriment and to the advantage of a private entity. The best course available with the Division Bench was to direct the learned Single Judge to decide the petition on its merits - the impugned judgment and order of the High Court dated 30th June 2021 is not sustainable in law. The appeals are allowed.

Issues Involved:
1. Inclusion of 34 acres of land in SEZ.
2. Compliance with SEZ Act and Rules.
3. Denotification/delineation of the 34 acres of land.
4. Validity of the lease agreement between CWC and APSEZL.
5. High Court's directive on relocation and construction of a new warehouse.
6. Dispute over underwriting future business losses.

Detailed Analysis:

1. Inclusion of 34 acres of land in SEZ:
The appellant-CWC argued that the 34 acres of land in its possession should not have been included in the SEZ areas. They contended that APSEZL suppressed the fact that the land was already under CWC's possession, which should have precluded its inclusion in the SEZ. The Ministry of Consumer Affairs, Food and Public Distribution (CAF&PD) supported this view, stating that the land was included in the SEZ by suppressing facts. The Ministry of Commerce and Industry (C&I), however, rejected the request for delineation/denotification, asserting that there was no provision in the SEZ Act and Rules for such action.

2. Compliance with SEZ Act and Rules:
APSEZL argued that CWC was required to comply with SEZ Act provisions, including obtaining necessary approvals for operating within SEZ. CWC countered that it was not required to seek such approvals as the land became part of SEZ after they had taken possession and constructed the warehouse. The Ministry of C&I maintained that compliance with SEZ regulations was mandatory, while the Ministry of CAF&PD argued that CWC had fulfilled its obligations under the original lease agreement.

3. Denotification/delineation of the 34 acres of land:
CWC's request for delineation/denotification was rejected by the Ministry of C&I, which stated there was no provision for such action. The Ministry of CAF&PD, however, cited precedents and argued that delineation/denotification was permissible and had been done in other cases. The High Court did not resolve this conflict but noted the opposing stands of the two ministries.

4. Validity of the lease agreement between CWC and APSEZL:
APSEZL contended that the lease agreement with CWC had become null and void as it was not registered within the stipulated time. CWC argued that the lease was valid as they had taken possession and made substantial investments in the warehouse. The Ministry of CAF&PD supported CWC's position, stating that the lease existed by virtue of actions taken by both parties.

5. High Court's directive on relocation and construction of a new warehouse:
The High Court directed CWC to either obtain SEZ compliance or relocate to an equivalent plot outside SEZ, with APSEZL constructing a new warehouse. CWC accepted the relocation proposal with conditions, including APSEZL underwriting future business risks. APSEZL initially agreed but later retracted from underwriting the revenue risk. The High Court upheld the first two conditions but left the third for mutual settlement or mediation, which CWC challenged.

6. Dispute over underwriting future business losses:
CWC insisted that APSEZL should underwrite future business losses as part of the relocation agreement. APSEZL retracted this commitment, leading to a dispute. The High Court did not compel APSEZL to adhere to this condition, which CWC argued was unfair as the original proposal was a composite one.

Judgment:
The Supreme Court found the High Court's approach untenable, noting that the High Court effectively forced CWC to accept a settlement without ensuring APSEZL's compliance with all conditions. The Court emphasized the need for a balanced approach, considering CWC's statutory nature and the potential financial implications. The conflicting stands of the two ministries were also highlighted, with the Court urging the Union of India to resolve such conflicts internally.

The Supreme Court set aside the High Court's judgment and remitted the writ petitions back to the Single Judge for fresh consideration, directing an expeditious resolution within six months. The interim order allowing CWC to continue its operations remained in force until further orders. The Court also encouraged both parties to seek an amicable settlement.

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