PARADIP PORT AUTHORITY versus PARADEEP PHOSPHATES LTD.

Summary

In a two-decade dispute over revision of port tariff for a captive fertilizer berth, the Supreme Court set aside an informal arbitral award, the appellate order and the High Court judgment that had quashed the Port Trust's 1993 tariff revision, and also set aside the TAMP order and High Court judgment for the later period, remitting the whole dispute from October 1993 onwards to the Tariff Authority for Major Ports for fresh decision after hearing both sides; it recommended that an expert appellate body be constituted to hear appeals from TAMP or the Adjudicatory Board instead of direct appeals to the Supreme Court.

Issues

1. Whether a bilateral agreement fixing tariff for a captive berth, revisable by mutual consent, could override the Port Trust's statutory power to revise the scale of rates under the Major Port Trusts Act, 1963.
2. Whether the award in an informal in-house arbitration, to which the Arbitration Act was expressly made inapplicable, is open to challenge only on the limited grounds applicable to awards under the Arbitration and Conciliation Act, 1996.
3. Which authority should adjudicate the tariff dispute, given the constitution of TAMP from 01.04.1999 and the replacement of the 1963 Act by the Major Port Authorities Act, 2021.
4. Whether the TAMP order rejecting tariff revision for 1999-2000 to 2009-10 without an oral hearing and on a reimbursement-of-cost basis could be sustained.
5. Whether the direct statutory appeal to the Supreme Court from orders of the Adjudicatory Board/TAMP is an effective appellate remedy.

Provisions considered

• Sections 48 to 52, Major Port Trusts Act, 1963The Port Trust's notification of 05.10.1993 revising the scale of rates was issued under these provisions; the Court held that the agreement between the parties could not override the statute and that if the parties failed to agree on revision the law would take its course. (¶¶ 9, 21, 21.1, 29, 30)
• Chapter V-A, Sections 47-A to 47-H, Major Port Trusts Act, 1963These provisions, inserted with effect from 09.01.1997, constituted the Tariff Authority for Major Ports, an expert body which came into existence on 01.04.1999; the Court held that TAMP, as an independent authority of experts, was the right forum to resolve the tariff dispute. (¶¶ 32, 33, 49, 50)
• Section 54, Major Port Authorities Act, 2021Provides for an Adjudicatory Board for fixation of tariff; under its first proviso TAMP continues to discharge the Board's functions until the Board is constituted, and since no Board has been constituted it is TAMP that has jurisdiction. (¶¶ 32, 51, 52)
• Section 60, Major Port Authorities Act, 2021Provides for review by the Adjudicatory Board and a direct appeal to the Supreme Court within sixty days; the Court observed that a first appeal involving detailed factual and technical examination of accounts is not suited to this Court and recommended an expert appellate body. (¶¶ 52, 54, 56, 60)
• Section 34, Arbitration and Conciliation Act, 1996The respondent's argument that the award could be challenged only on the limited grounds in Section 34 was rejected because the parties had agreed that the Arbitration Act would not apply to their informal in-house dispute resolution, so the principles governing examination of awards under the 1996 Act did not apply. (¶¶ 24, 25)

Held

• An agreement between a port authority and a user cannot override the provisions of the statute; the agreement only created facilities and fixed a tariff revisable by consent, and where the parties fail to agree on revision the tariff cannot remain in abeyance and some authority must resolve the issue. (¶¶ 21, 29)
• Where parties adopt an informal in-house arbitration expressly excluding the Arbitration Act, the award is not insulated by the limited grounds of challenge applicable to awards under the 1996 Act. (¶ 25)
• The award was contrary to law and anomalous: holding that only Clause 1 of the agreement applied and not Clause 19 offended the basic principle that an agreement must be read as a whole; the finding that no revision of the 1985 rates was justified until 1999 ignored that port charges were periodically revised and that input costs and wages must have risen manifold in the interregnum. (¶¶ 26, 26.1, 26.2, 27)
• The appellate order was cryptic and merely re-wrote the arbitrator's findings without re-examining the facts, and the High Court misdirected itself by holding that the agreement overrode the 1963 Act and by relying on an Industrial Disputes Act decision. (¶¶ 28, 29)
• Once the respondent ceased to be a public sector unit during the informal arbitration, the dispute became contested litigation that required adjudication by an expert body; with no Adjudicatory Board constituted under the 2021 Act, TAMP has jurisdiction and the dispute for October 1993 to 31.03.1999 was remitted to it, all issues including limitation left open. (¶¶ 31, 32, 33, 34)
• TAMP's order for 1999-2000 to 2009-10 violated natural justice: where the parties had failed to agree and complicated factual issues were involved, an opportunity of hearing was required and could not be dispensed with on the footing that the parties had undergone a process of mutual agreement. (¶¶ 36, 43)
• The basis on which the original 1985 tariff was fixed was not a material consideration for its revision, which must proceed from the base point; and a reimbursement-of-cost principle is not the correct approach, the cost-plus-return approach being the principle even under the normal tariff fixation regime. (¶¶ 44, 45)
• Since the base for revision of tariff for the earlier period was yet to be determined, the TAMP order and High Court judgment for the subsequent period were also set aside and remitted to TAMP to be decided afresh along with the earlier period. (¶¶ 46, 47)
• Fixation of tariff is the work of experts and a first appeal from an expert body requires consideration of all questions of law and fact; following W.B. Electricity Regulatory Commission v. CESC and Rojer Mathew, the Court recommended that an expert appellate body be constituted to hear appeals from the Adjudicatory Board/TAMP, and directed that a copy of the order be sent to the Legislative Department. (¶¶ 54, 56, 57, 59, 60, 61.3, 62)

Result

Both appeals allowed: award of the arbitrator, order of the Appellate Authority and High Court judgment set aside and the tariff dispute for October 1993 to 31.03.1999 remitted to TAMP; TAMP order dated 22.11.2011 and High Court judgment for the later period set aside and remitted to TAMP for fresh decision with the earlier period after hearing both parties; recommendation for an expert appellate body, with a copy of the order to be sent to the Secretary, Legislative Department, Ministry of Law and Justice.