The Andhra Pradesh High Court has rejected a petition filed by Adani Ports and Special Economic Zone Ltd (APSEZ) seeking to overturn its disqualification from a tender issued by the state-owned Visakhapatnam Port Authority for mechanising West Quay berths 7 and 8 at the port with private funds.

APSEZ was excluded by Visakhapatnam Port Authority from participating in the tender on grounds that the firm “did not disclose” material facts pertaining to the termination of a separate contract it had signed with the port authority earlier for running a coal terminal, while submitting the qualification papers for the West Quay berths 7 and 8 tender.

The court order is a setback for APSEZ as it could bolster the case of other State-owned ports in blocking APSEZ from bidding on tenders, as the eligibility conditions for participation are the same across all the major ports.

“An applicant, including any Consortium Member or Associate should, in the last three years, have neither failed to perform on any contract, as evidenced by imposition of a penalty by an arbitral or judicial authority or a judicial pronouncement or arbitration award against the Applicant, Consortium Member or Associate, as the case may be, nor been expelled from any project or contract by any public entity, nor have had any contract terminated by any public entity for breach by such Applicant, Consortium Member or Associate,” according to clause 2.2.8 of the tender conditions.

Exclusion not legally tenable: APSEZ

APSEZ contended before the court that its exclusion from the bid was “not legally and factually tenable”. Besides, Adani Vizag Coal Terminal Pvt Ltd (AVCTPL), its unit which ran a coal terminal at Visakhapatnam Port, had terminated the contract and not vice versa, to show that clause 2.2.8 of the tender documents pertaining to qualification was “not applicable to the facts and circumstances of the case”.

APSEZ said it had not violated any of the bid clauses, nor was there any concealment.

However, this stand of APSEZ is contradicted by notes filed before the court, which showed that Visakhapatnam Port Authority had issued a consultation notice to Adani Vizag Coal Terminal on October 3, 2020, citing failure to achieve the minimum guaranteed throughput (MGT) stipulated in the coal terminal contract.

On October 8, 2020, AVCTPL rejected the consultation notice stating that force majeure (arising out of the pandemic) was in force for more than 120 days and sought mutual termination of the contract.

Visakhapatnam Port Authority sent another consultation notice on November 23, 2020, and then issued a termination notice on December 26, 2020, informing AVCTPL that the contract will be terminated from April 23, 2021.

On October 21, 2021, AVCTPL sent a termination notice on the contract to Visakhapatnam Port Authority.

The dispute is now undergoing arbitration before a three-member arbitration panel comprising former judges of the Supreme Court.

After hearing both the sides, the single judge bench of the AP High Court observed that “there should be disclosure about any non-performance or contractual non-compliance in past projects, along with contractual disputes and litigation / arbitration,” according to the bid documents.

“The petitioner, in this case, merely disclosed that there is an arbitration pending between the said AVCTPL and Visakhapatnam Port but did not disclose anything about the termination, the non-performance or contractual non-compliance in the earlier contract,” the court said.

APSEZ furnished false information: Court

“Clauses 2.2.8/2.7.3 of the bid documents are clear. They are clearly applicable to the facts and circumstances of this case,” the Court said.

“This Court is of the opinion that the decision-making process leading to a disqualification of the petitioner (APSEZ) cannot be found fault with. Their failure to disclose the termination of the contract of their 100 per cent owned subsidiary in October 2021 and the Visakhapatnam Port’s termination in December 2020 / March 2021 is a clear case of furnishing materially incorrect, false information,” the court said, while rejecting APSEZ’s petition.