DP World (DPW), which has suffered a major setback with Gujarat High Court upholding Gujarat Maritime Board (GMB) decision to terminate DPW's sub-concession agreement to run the first container terminal at Mundra International Container Terminal (MICT), has decided to go ahead with its India plans involving a further investment of $500 million in the next few years, a company official has said.
While the fate of the first container terminal now hanged in balance, would DPW still be pursuing its case for the second terminal as it had sought an injunction on it against the Adani Group? Mr Kevin D'Souza, Director (Commercial), MICT, told Business Line in an e-mail query that the second terminal was "actually a second phase of our existing project and we will continue to pursue it as per the provisions of the sub-concession agreement".
Course of events
The Adanis had originally developed the first terminal at Mundra which was being operated by P&O Ports. Later, DPW acquired P&O and started running MICT. The State's maritime regulator, GMB, objected to it and terminated DPW's sub-concession agreement, against which DPW moved an Ahmedabad court, and then the High Court, both of which upheld GMB's decision.
On Monday, the High Court maintained that no change of control of MICT was permissible. GMB had disqualified DPW to operate MICT on the ground that it took holdings of the container facility without taking prior permission from GMB, which amounted to a dilution of equity by P&O and that without its consent, P&O could not transfer assets and property to DPW.
GMB had issued a show-cause notice in 2006 to UK-based P&O Ports which had picked up the Adanis' entire stake in MICT soon after which DPW had acquired P&O in 2005-06. Reacting to the latest development, and asked about the steps DPW contemplated now, Mr D'Souza said the company would pursue all available remedies to protect its interest and investments in India.
'No exit'
Asked whether the possible withdrawal of DPW from MICT could impact its business prospects in India, he said the company had not breached any terms of contract and there was no possibility of any exit from MICT. "The original shareholders continue to remain as shareholders of MICT. It is worthy to note that the Central Government, under whose auspices we operate the other terminals in India, has no issues with us."
Mr Jamal Majid bin-Thaniah, Executive Vice-Chairman of DPW, had announced at Mundra on November 5, 2007, to further invest $500 million in India. The company was committed to these plans and did not feel the need to alter them, the official said.
Asked whether the company apprehended its future in India in the wake of the DPW's exit from the US on security concerns last year, Mr D'Souza said there were no security concerns raised by the US Government against DP World.
"In fact DP World had all the necessary approvals. Certain interested lobbies created an atmosphere of insecurity. DP World is majority owned by the Dubai Government and hence there are no issues regarding security. The Government of India is extremely comfortable with DP World who have been in India since 2002, much prior to acquisition of P&O Ports".
DPW, leading global port operator with 42 container terminals across 22 countries, has so far invested $1.50 billion in India where it operates the Nhava Sheva International Container Terminal (NSICT) in Maharashtra, and ports at Chennai, Kolkata and Vishakhapatnam, besides MICT.
It handled four million TEUs in India in 2006-07, including 6.50 lakh TEUs at MICT. Since last year, DPW was locked in a legal battle with the Adanis over the transfer of "ownership" of second container terminal at Mundra from P&O Ports to MICT.
The Adanis had sold out their stake in existing MICT to P&O Ports for Rs 1,200-crore in the first terminal. According to sources, as per the agreement between the Adanis and P&O Ports, the former were supposed to hand over control of the second container terminal as well to P&O ports once the latter achieved a container cargo throughput of seven lakh TEUs.
However, this target could not be achieved as MICT handled only 5.21 lakh TEUs in 2006-07. MICT later moved the court in Ahmedabad invoking the dispute resolution clause in the MICT sub-concession agreement, based on the reliefs claimed by MICT, and sought an injunction against the operation of second container terminal for handling container cargo by the Adani Group.
The framework agreement contemplated a payment of $70 million by MICT to the Adanis for the handing over of the second container terminal. It contemplated a non-compete clause restricting the Adanis' right to carry on a container terminal business outside the port of Mundra in Gujarat.
The Adanis opposed the application saying that the framework had been superseded by the MICT sub-concession agreement overwriting all previous agreements between the parties. An Ahmedabad court rejected the interim application by MICT, which invoked the arbitration clause and appointed an arbitrator.
After the lower court ruled against it, MICT moved the High Court at Ahmedabad. The Adanis, which went to the capital market in November to raise up to Rs 1,771 crore for the development of Mundra Port and SEZ had cited this case amongst the risk factors in their Red Herring Prospectus (RHP).
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