SCHEDULK

Case No. TAMP/27/2002-JNPT

M/s. Ganesh Benzoplast Limited

- - -

Applicant

Vs.

The Jawaharlal Nehru Port Trust

- - -

Respondent

Ft P E FE

(Passed on this 8th day of April 2002)

This case relates to a representation received from M/s. Ganesh Benzoplast Limited (GBL)

raising some issues relating to escalation in lease rentals on lands allotted to them by the Jawaharlal Nehru

port Trust (JNPT) for handling and storage of Class-B liquid chemicals.

2.1.

The GBL has made the following points in its representation:

/»

A Dlot of land admeasuring 6 hectares was allotted on leasehold basis by the JNPWor a

period of to,. 7 ° * ^{r s}^{v l d e l e t t e r d a t e d 2 9} September 1993, which was subject to lease rent @

Rs.105/- per sq. m, pt>i ^,"" ^{J t}" ' ^{o r t n e} entire leased area and the way leave corridor or 10%

of the pr«*8nt rate of CIDCO for then :*"*"*iop<*d land for warehousing, whichever is higher.

(ii).

The lease rentals Were accordingly fixed at Rs.150/- per sq m, per annum based on the

CIDCO rate (of Rs.1500/- per sq. m.) prevailing on that day. This rate ahall continue till the

end of the lease period since the terms of allotment did not stipulate any escalation clause.

(III).

The JNPT has intimated in March¹ 2000 that the lease rentals are subject to an escalation of

10% and forwarded the draft lease deed (With escalation clause) for execution. The subject

lease Wa"s signed (in August 2001) under threat of the JNPT to stop its operations at the

tank terminal.

(iv).

The general slow down in the industry and the changes in certain Government policy

resulted in the throughput below the expected levels, which effected the payment of lease

rentals also. On signing of the lease deed, the amount outstanding towards lease rentals

was firmed up; and, post-dated cheques for effecting the payment in 36 monthly instalments

were given to the JNPT. The cheques have been honoured so far without any default.

(v).

Another plot of land of about 6 hectares was allotted by the JNPT vide letter dated 25 May

1995 at lease rentals of Rs.250/- per sq m. per annum subject to 10% escalation

compounded annually. The escalation clause stipulated in case of other allottees during the

same period Is 5% per annum compounded.

2.2

In this backdrop the GBL has requested this Authority to

(i)

issue suitable orders to the JNPT to withdraw this escalation clause in respect of land

allotted in 1993, since the rate of lease rentals and the related terms and conditions are not

as per the terms of allotment; and,

(ii)

correct the anomaly of stipulating the escalation @ 10% in case of second plot of land;

whereas, the same Is @ 5% p.a. in respect of other allottees.

2.3.

The GBL has pointed out that the lease agreement allows it an option to raise the issue of

escalation before the TAMP or any other Authority.

Iiq~-L bil•&**.-

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[PART III—SEC. 4]

3.1.

In accordance with the procedure prescribed, a copy of the representation of the GBL was

forwarded for comments to the JNPT and various concerned representative bodies of port users. The

comments received from them are summarised below:

Jawaharlal Nehru Port Trust (JNPT)

(i).

The GBL has filed a writ petition in the Bombay High Court challenging the decision of the

port trust to discontinue the port services given to the GBL for its continuing failure to submit

three bank guarantees representing security deposit for 3 years for each of the two plots

and, a revolving bank guarantee; and, register the lease deed before the sub-registrar of

Assurances.

(ii).

The Bombay High Court had on 18 February 2002 directed the GBL to furnish Bank

Guarantees of Rs.63 lakhs and 2.92 orores towards the revolving bank guarantee and

security deposit for the first plot of land respectively; and, approach the TAMP for deciding

the issue of escalation charges.

On an appeal filed by the GBL on the above decision, the Bombay High Court directed the

GBL to furnish a Bank Guarantee of Rs.1 crore and cash deposit of Rs.10 lakhs; and,

directed the TAMP to decide the said issue within a period of four weeks from the date of

the order (i.e. 14 March 2002).

(m).

The GBL has disputed the escalation clause in the lease deed in respect of Phase I

allotment (i.e. land allotted in 1993). Insofar as the land allotted in Phase II is concerned, it

has accepted the escalation clause and has been making payment of lease rentals

accordingly. Therefore, the issue which is referred to the TAMP's decision relates to the

escalation clause in the lease deed dated 29 September-2001. The allotment letter dated

25 May 1995 for Phase II is not relevant here.

(iv).

Although the allotment letter dated 28 September 1993 did not stipulate any escalation

clause, it was incorporated in the lease deed. All the allotments of land made during that

period to other lessees contain the escalation clause.

(v).

The escalation is to be provided as per the directions received from the MOST.

(vi).

The GBL was not forced and coerced to sign the lease deed as nothing had prevented to

GBL to approach the High Court in August 2001. The Communications dated 3.8.2001,

4.9.2001, 12.10.2001, 16.10.2001, 18.10.2001 and 8.12.2001 received from the GBL show

its readiness and willingness to execute the lease deed.

(vii).

The escalation @ 10% per annum shall not have tremendous financial impact on the

economics of the project as alleged.

(vili).

There have been various defaults in payment of lease rentals; and, the premium agreed for

allotment of first plot of land has also not been paid by the GBL. The post dated cheques

issued to regularise the arrears of lease rental payments were dishonoured on several

occasions.

(ix).

The JNPT has suffered huge losses on account of non-payment of way leave and MGT by

the GBL. The exclusion of the escalation clause will enhance such losses.

(x).

As regard the subsequent allotment of the land made in 1995, the GBL has accepted the

escalation clause and has never raised any dispute about it. The other lessees have not

been allotted land with 5% escalation as alleged.

3.2.

The Bombay Chamber of Commerce and Industry, the Indian Merchant Chamber, the

Indian Chemical Manufacture Association and the All India Liquid Bulk Import and Export Association have

not sent any comments.

The Chemicals & Allied Product Export Promotion Council has advised consultation in this

case with the Basic Chemicals Pharmaceuticals & Cosmetics Export Promotion Council as the GBL is

registered with the latter council.

3,3.

A copy of the comments of the JNPT was sent to the GBL as feed back information.

The GBL has sent a letter (received on 20 March 2002) under cover of which It has

forwarded a copy of the Order of the Bombay High Court dated 14 March 2002, directing the Tariff Authority

to decide the representation of the GBL within a period of four weeks from the date of order.

A communication dated 27 March 2002 was sent to the Registrar General of the Bombay

High Court explaining the procedure adopted by this Authority in disposing of tariff cases. It was requested

that the High Court might allow a further period of four weeks to this Authority to enable an effective disposal

of the representation in reference.

The Authority has in its Order dated 12 May 2000 in a similar case regarding representation

of M/s. Indian Oil Corporation (IOC) set aside the (subsequent) changes introduced by the JNPT based on

the MOST guidelines on the following grounds:

(i).

The Allotment letter constitutes the contract in the absence of lease deed; and, the terms of

allotment do not provide scope for introduction of the (subsequent) changes.

(ii).

The Government Guidelines referred to in this case do not provide for revision of the basic

conditions long after the allotment and occupation of land.

(Hi).

It Is an established legal position that specific lease agreements will prevail over general

instructions relating to lease of such properties.

7.1.

A joint hearing in this case was held on 5 April 2002 at the JNPT office in Mumbai. At the

joint hearing, the following submissions were made:

M/« Ganash Benzoplast Limited (GBL)

(i).

In view of the paragraph after Clause (14), the LOA (1993) becomes the contract. There is

no provision in it for escalation or premium.

(ii).

(a).

Clause (3) of LOA (1995) prescribes an escalation of 10% for us. But, Reliance and

Indian Molasses were charged 5%. This is discriminatory.

(b).

Deepak Fertilisers' rent was only Rs.100/- and, escalation was only 5%.

Our

allotment was earlier; and, our rent is the highest.

(iii).

Suddenly, after six years of allotment, we are told about a 10% escalation. This is

unreasonable.

(iv).

(a.)

There was open coercion (threat) about stoppage of services in the Port Users

Meeting.

(b).

The single judge bench Order on this issue has been challenged by us. We are,

therefore, reiterating it here,

(v).

(a).

Stamp duty would be very high with the 10% escalation. We want the escalation

clause deleted. That is the reason for the delay in registration of the deed.

(b).

We will nesd six months time (after your decision) to register the deed.

(vi).

Th« matter went to Court because of the threat from the JNPT, Meanwhile, our Petition

dited 30 January 2002 to the TAMP wae ready. The High Court passed an order on 18

February 2002. Immediately thereafter we filed the Petition.

(vii).

Our petition to the TAMP has been Independent of the High Court case. Therefore, the fact

that the High Court case referred only to the 1993 lease is not relevant. Our petition dated

30 January 2002 refers to both 1993 and 1995 leases.

(viii).

We have challenged the 18 February 2002 order of the High Court. All findings of the single

judge are under challenge. The finding about 'no Coercion' can not, therefore, be held to be

final & binding at this stage. The Authority is free to go into that issue also.

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[PART in—SEC. 4]

(ix).

(a).

The JNPT talks of revision of rates for the RIL, IMC, etc. We are not aware of these

details. Are RIL, IMC, etc., paying according to those (revised) rates?

(b).

We have included the 1995 lease only to highlight the discriminatory approach.

(x).

The IMC allotment was after us. Ours was in September 1993. IMC was in December

1994. How were they given a different treatment?

[The JNPT says, the IMC rate has since (July 2000) been enhanced.]

The IMC is not paying at the enhanced rate.

(xi).

There are other defaulters. But, they are not given any notice of stoppage of services. Why

such a harsh treatment only for us?

(xii).

(a).

Escalation is not a minor term. It is a major term. Why did they not include It In the

LOA?

(b).

Even if it was omitted by mistake, why did they not inform us for six years?

The Jawaharlal Nehru Port Trust (JNPT)

(i).

The lease agreement relates only to the 1993 lease. The clause therein about approaching

the TAMP cannot cover the 1995 lease.

(ii).

They admit rescheduling of payments. That means there was default in payment. Why can

the JNPT not give a notice for recovery? We are within our liberty and right to adopt all

measures to effect recovery.

(iii).

(a).

Deepak Fertilisers was our very first lease case. The negotiation process started in

1991. Possession was given on 22 May 1992. Negotiations continued. Actual

LOA was issued in 1994. The rent was fixed with reference to the CIDCO rate as

on 22 May 1992.

(b).

By the time the GBL case matured, the CIDCO rate increased. Hence, the higher

rate for them.

(c).

There was no discrimination.

(iv).

The LOA cannot state everything. The lease agreement is very detailed. Please read the

Government approval (dated 15 September 1993). It directs us to adhere to the 1992

Guidelines while executing the agreement.

Hence the introduction of various clauses

including the escalation clause.

(v).

(a).

Lease rent cannot be uniform. It will depend on various factors. But, the escalation

rate has to be the same. We confirm that it Is uniform for all including the RIL.

(b).

Deepak Fertilisers is the only exception. At the instance of the Ministry of Fertilisers

and as directed by the MOST, some concession has been given.

(vi).

There cannot be any rent without escalation. There is a Supreme Court ruling on this point

(vii).

While rescheduling, we had taken into account the escalation factor.

(viii).

All Tank Farm Operators are regularly paying rentals. Only the GBL has been defaulting.

(ix).

All their payments involve delays, adjustments, change of cheques, etc. We do try to

accommodate. But, It can not be so in every payment.

(x).

Besides rentals & escalation, there are other payments involved. They are defaulting on

almost all. The data filed by them to show that all rentals have been cleared are not enough

to establish that the JNPT has taken steps wrongly to enforce recovery.

(xl).

The GBL has been surrendering lands (1995 allotment) In lots. We have accepted the

surrenders even after five years of allotment to accommodate them. We have suffered a

Ipss on this account.

(xli).

The lease agreement (and its registration) has to be with retrospective effect.

(xill).

Escalation was Included as per Government directive in their letter. The 'omission' was

pointed out by audit of the MOST. The MOST wrote in 1998 directing us to Include the

escalation clause. [GBL says, it was a mere enquiry; there was no directive.]

7.2.

At the joint hearing, the GBL filed copies of four documents - 1993 and 1995 allotment

letters, EMI calculation of outstanding balance alongwith bank statements, and a comparative position of

various leases granted by the JNPT.

7.3.

The JNPT filed copies of three documents - a comparative position of leases granted by it,

Government Guidelines (1992), and Government sanction dated 15 September 1993 for allotting six

hectares of lands to the GBL.

With reference to the totality of information collected during the processing of this case, the

following position emerges:

(I).

Before approaching this Authority for adjudicating the matter in dispute, the GBL had

approached the Bpmbay High Court for redressal of Its grievance. The Single Judge Bench,

which heard the case passed an Order on 18 February 2002 requiring the GBL to file a

petition before this Authority within one week; and, directing the Union of India to direct this

Authority to dispose of such petition within four weeks.

No directions in this case have been received from the Ministry of Shipping (Government of

India).

The GBL did file a petition (dated 30 January 2002) on 20 February 2002. Surprisingly,

even it did not refer to the time limit prescribed by the High Court; in fact, strangely, it did not

even refer to the proceedings before the High Court.

The petition received from the GBL was registered as a 'case' and processed in the normal

course in accordance with our Regulations.

In the meanwhile, on 20 March 2002, we received from the GBL a copy of an Order passed

in this case by the Division Bench of the Bombay High Court on 14 March 2002. It was for

the first time then that we came to know about the four-week time limit prescribed. After a

careful consideration, it was felt that this Authority should seek an extension of the time limit

from the Hon'ble High Court so that there would be no risk of even an Inadvertent violation

of Its Order, Notwithstanding such a course of action, this Authority did ultimately manage

to hold a Joint hearing in this case on 5 April 2002. The disposal of this case will, therefore,

be well within the tirpe limit prescribed.

(ii).

This is a case of lease of port lands. There have, therefore, been repeated references to

various Guidelines issued on the subject by the Government at different times. It has been

the general approach qf this Authority to recognise such Guidelines until it has had the time

to formulate its own Guidelines. In line with tjhis practice, here, again, the same approach

can be maintained.

(lil).

There have been two cases of allotments of land - 6 hectares each In 1993 and 1995 - to

the GBL. The petition filed by the GBL raises issues relating to both the cases.

The JNPT has objected to the 1995 allotment case being considered on the ground that the

matter before the High Court relates pnly to the first (1993) allotment case. The GBL has

sought to explain its action with the observation that its petition has been filed independently

of the High Court proceedings; It is not in any way linked to the case in the High Court.

The provisions of the Major Port Trusts Act empower this Authority to entertain all matters

relating to fixation of rates and related conditipnallties In cases of lease. That being so,

THE GAZETTE OF fNDIA . EXTRAORDINARY

|PAKI III—SF. . 4]

there can be no valid objection to both the cases being brought up by the GBL before this

Authority.

(iv).

Notwithstanding the jurisdlctional position and the legal aspect analysed above, there are

other considerations on which this Authority likes to examine whether one or both the cases

shall be entertained.

In the Letter of Allotment relating to the 1995 case, there is a specific mention about a 10%

annual escalation in the lease rent. It is an accepted position that, in such cases, in the

absence of a Lease Agreement, the Letter of Allotment will be deemed to be the Contract

. for all practical purposes. There can, therefore, no justifiable ground for the petitioner to

resile from the position he had accepted willingly. It is also noteworthy that, as has been

explained by the JNPT, not only has the GBL accepted the escalation clause but it has also

been making payments regularly on that basis.

The GBL has sought to reiterate its reference to the 1995 case on the plea that the 10% rate

applied for the escalation has been discriminatory against it. The JNPT has filed all the

relevant Information in a tabular format to show that there has indeed been no such

discrimination; all lessees have been uniformly dealt with in accordance with the

Government Guidelines relevant to the periods. Only one case of Deepak Fertilisers has

been shown to have enjoyed a more favourable consideration; and, this has also been

explained as an arrangement ordered by the (then) Ministry of Surface Transport at the

special request of the Ministry of Fertilisers.

In other words, there was not element of

arbitrariness or favouritism from the side of the JNPT.

In this backdrop, the GBL contention about discriminatory application of escalation of rates

also fails to hold water. In the circumstance, there is no justifiable reason for re-opening the

matters relating to the 1995 lease case.

(v).

As regards the 1993 lease case, the Letter of Allotment (dated 28 September 1993) does

not make any reference to annual escalation of lease rent.

But, the Lease Agreement

signed In August 2001 does incorporate a specific stipulation therefor.

The petitioner's

contention that he was coerced into signing the Agreement lacks substance in view of the

finding in the Single Judge Bench Order (dated 18 February 2002) that "... the

correspondence between the parties does not bear this out that the Petitioners were in any

way coerced in executing the lease deed". It has been argued on behalf of the GBL that the

whole Order of the Single Judge Bench has been challenged before the Division Bench and

that, therefore, the said observation shall not be seen to be conclusive.

It has to be

recognised in this context that while a Division Bench can surely question the findings of a

Single Judge Bench, It will be beyond the competence of this Authority to do so; and, when

the Division Bench has not stayed the operation of the Single Judge Bench Order at that.

Notwithstanding what has been stated above, the issue relating to the escalation clause can

still be brought up before this Authority by the GBL because of a specific stipulation in the

Lease Agreement about the lessee's right to approach the Tariff Authority or any other

relevant Authority to represent against the escalation clause.

(vl).

There is a reference to the Lease Agreement not being registered. This does not, however,

appear very materlaf to this proceeding.

The GBL has In any case explained that the

document could not be registered before the issue about escalation is settled, as It will have

substantial implications for Stamp Duty. The JNPT does not appear to have any serious

objection on this account. Also, the Single Judge Bench had recognised this position and

given the GBL time to register the document Immediately after disposal of Its petition by this

Authority.

(vli).

If the GBL petition is to be further considered in this backdrop, then, there can only be three

issues for consideration with reference to its first (1993) land lease case -

(a)

periodicity of escalation;

(b)

quantum of escalation; and,

(c)

uniformity of treatment.

The Government Guidelines on the subject unambiguously refer to an annual escalation;

and, so does the relevant clause in the Lease Agreement. In the ports sector, in cases of

lease lands, this has been the standard practice. There is, therefore, no scope for any

objection to or change in this prescription.

As regards uniformity of treatment, as has earlier been discussed, the port trust has dealt

with all comparable cases similarly except for the lone exception as directed by the

Government. Here, again, therefore, there is no scope for any justifiable objection.

As regards the quantum, there can surely be some consideration. Irrespective of the fact

that the Lease Agreement does specifically talk of a 10% escalation, it has to be seen

whether the said rate was duly determined by the Lessor.

The JNPT admittedly has

adhered to the 1992 Government Guidelines while processing this case.

The said

Guidelines only refer to a 'fixed percentage'. The basis on which the JNPT arrived at 10%

to be the fixed rate has not been explained. Even otherwise, going by accepted levels of

'return on capital' adopted in such cases, this does appear to be somewhat excessive.

Possibly, it was in realisation of this position that the Government Guidelines also

subsequently (January 1996) specified the escalation rate to be 5%. In this backdrop, this

Authority finds it reasonable to reduce the rate of escalation In the GBL case from 10% to

5%.

(viii).

Any alteration of the esealation rate in this case cannot come to be seen as a general

prescription by this Authority for common adoption in all lease cases. Wherever lessees

have accepted the rate stipulated either in the Letter of Allotment or in the Lease Agreement

without any provision for adjudication by this or any other Authority, such rates will be

deemed to prevail unaffected by this Authority's Order in this case. It will be relevant hereto

recall that this Authority has consistently gone by the well-established legal position that

specific Lease Agreements will prevail over general instructions relating to lease of such

properties. So long as the provision in dispute is not seen to be violative of the Scale of

Rates, there will be no reason to interfere with the volitional agreement between the parties.

In the 1993 lease case of the GBL, the change proposed in the rate of escalation is justified

by the specific provision for adjudication of the clause by this Authority and by the absence

of satisfactory explanation by the JNPT of the reasons for choosing a 10% rate. In other

words, not only can other lessees not take advantage of this Order but even the GBL itself

cannot seek it In its own second (1995) case.

(ix).

The GBL has sought to make much of attempts made by the JNPT to recover dues from it.

Notices for such recoveries accompanied by warnings about stoppage of services to the

GBL have been seen as 'threats' and shown to be malafide. The JNPT has explained such

proceedings as normal processes for effecting recoveries from the defaulters. The GBL has

filed voluminous data to show a number of payments made towards lease rentals. The

inadequacy of this rebuttal has been exposed by the JNPT argument that the GBL defaults

have been not only In respect of lease rentals but also covering various (other) payments.

Strictly speaking, it is not relevant for this Authority to go into these details at all. But, these

have been reckoned with only to ensure that the processing of this case by the JNPT has

not been coloured by palpable mala fides. And, as has already been discussed, the GBL

has not been able to establish that the JNPT has in any way acted arbitrarily or

discriminatorily In this case.

In the result, and for the reasons given above, and based on a collective application of mind,

this Authority allows the GBL petition only to the extent of reducing the rate of escalation from 10% to 5% in

respect of its first (1993) lease case. This revised rate will be applicable retrospectively.

S. SATHYAM. Chairman

[ADVT IMV/143/2OO2/E\1y.]

Primed by the Manager, Oovi. of India Press, Ring Road. Maynpun, New Dcllii-110064

nrM Puhlwhed bv the Controller of Publications, Delhi-110054