The Andhra Pradesh High Court has dismissed APSEZ’s suit to have its disqualification from a Visakhapatnam Port Authority tender for mechanising West Quay berths 7 and 8 with private funding overturned. The Visakhapatnam Port Authority barred APSEZ from competing in the tender because the company “did not disclose” material facts about the termination of a separate contract it had signed with the port authority earlier for the operation of a coal terminal when submitting qualification papers for the West Quay berths 7 and 8 tender. The court judgement is a blow for APSEZ because it could help other ports argue that APSEZ should not be allowed to bid on bids, as the eligibility conditions for participation are the same across all the major ports.
Contentions of APSEZ
“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.
Before the court, APSEZ argued that its removal from the offer was “neither legally or factually tenable.” Furthermore, Adani Vizag Coal Terminal Pvt Ltd (AVCTPL), the company’s unit that operated a coal terminal at Visakhapatnam Port, had terminated the contract, not the other way around, to demonstrate that clause 2.2.8 of the tender documents relating to qualification was “not applicable to the facts and circumstances of the case.”
APSEZ claimed it had not broken any of the bid terms and had not hidden anything.
However, documents filed with the court show that on October 3, 2020, the Visakhapatnam Port Authority issued a consultation notice to Adani Vizag Coal Terminal, citing inability to meet the minimum guaranteed throughput (MGT) requirements 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.