SC Remands Port Tariff Dispute to Tariff Authority for Major Ports (TAMP), Calls for Expert Appellate Body

The Supreme Court of India heard a long-standing dispute over tariff fixation between Paradip Port Authority (formerly Paradip Port Trust) and Paradeep Phosphates Ltd. The onflict stemmed from a bilateral agreement signed in 1985, which allowed Paradeep Phosphates Ltd. exclusive use of a "Fertilizer Berth" at Paradip Port with a specified tariff.

This tariff was subject to mutual agreement for future enhancements. In 1993, the Port Authority unilaterally revised the tariff under the then-applicable Major Port Trusts Act, 1963. While Paradeep Phosphates initially paid to the other party but they subsequently filed a civil suit in 2000 challenging this unilateral revision.

Since both the companies were public sector units at the time, and during the dispute a supplementary agreement was signed providing for resolution to disputes by Arbitration. Nonetheless, this supplementary agreement was evidently an informal resolution which also made the the Arbitration Act inapplicable. During the arbitration, Paradeep Phosphates transitioned to a private entity. The Arbitration award directed the Port Authority to refund unilaterally enhanced charges from October 1993 to March 1999 and advised both parties to approach the Tariff Authority for Major Ports (TAMP) for subsequent periods.

Nonetheless, the arbitration award was upheld by an Appellate Authority and also subsequently by the High Court in 2023. Later, TAMP had also considered and rejected the Port Authority's tariff revision proposals for periods from 1999 onwards, a decision also upheld by the High Court.

The Supreme Court, in hearing the appeals against these concurrent findings, set aside all previous orders from the Arbitrator, Appellate Authority, and High Court and remitted the entire matter of tariff revision; covering all disputed periods from October 1993 onwards, back to TAMP for fresh adjudication.

Supreme Court made the following observations:
The Apex Court observed that an agreement between the parties cannot override the provisions of law, and the Court further observed that if the parties fail to mutually agree on tariff revisions, an authoritative body must resolve the issue first.

The Apex Court also clarified that the Arbitration and Conciliation Act, 1996, expressly rules out the applicability of the informal, in-house arbitration mechanism that once existed between public sector undertakings. Consequently, the principles for examining awards under the 1996 Act would not apply and that the Arbitration award seems “contrary to law and anomalous,” more particularly for interpreting isolated clauses of the agreement, instead of construing it as a whole.

The Supreme Court expressed surprise that neither the Arbitrator, Appellate Authority, nor the High Court found justification for tariff revisions from 1985 to 1999, despite significant increases in port charges and operating costs during that interregnum for other users.

The Appellate Authority's order was deemed "cryptic," failing to re-examine facts and merely reiterating the Arbitrator's findings.

The High Court was found to have "totally misdirected itself" by holding that the bilateral agreement would override the provisions of the 1963 Act. • Crucially, the Court determined that TAMP, being an independent expert authority, is the "right authority for resolution of dispute" regarding tariff fixation due to the complicated nature of such issues. • The Supreme Court found a "clear case of violation of principles of natural justice" by TAMP for not providing an opportunity for oral hearing when dealing with complicated factual and financial issues, despite documents being filed.

• A significant recommendation was made for the constitution of an "expert appellate body" to hear appeals against orders passed by the adjudicatory board/TAMP, instead of direct appeals to the Supreme Court. The Court referenced similar expert appellate tribunals in other sectors (Electricity, Telecom, Securities, Competition, Company Law) and reiterated its earlier observation in Rojer Mathew that direct appeals to the Supreme Court from tribunals impede constitutional functions and access to justice.

• The Registry of the Supreme Court was directed to send a copy of the order to the Secretary, Legislative Department, Ministry of Law and Justice, Government of India, to examine the issue of appellate authority constitution and take appropriate steps.

Coram: Justice M. M. Sundresh and Justice Rajesh Bindal