Supreme Court stops Adani takeover of CWC warehouse, raps HC

The Supreme Court on Thursday thwarted an effort by Adani Ports SEZ Ltd to take over a fully functional warehouse of Central Warehousing Corporation, a PSU, located over 34 acres at New Mundra Ports. The apex court criticised the Gujarat high court for "adopting dual parameters" to rule in favour of the business group.

The apex court set aside the order and asked a single judge bench of the HC, where the original dispute is pending, to decide the matter uninfluenced by the decisions of the HC and the SC.

An SC bench of Justices B R Gavai and C T Ravikumar accepted the arguments of senior advocate Maninder Singh on behalf of Central Warehousing Corporation (CWC) and said, "We are of the view that the approach adopted by the division bench (of the Gujarat HC) was, in fact, forcing appellant CWC, which is a statutory body, to accept the settlement."

The bench added, "By the January 28, 2021, order, the division bench goes on to observe that they were prima facie of the opinion that while the first two conditions (in the agreement with Adani) taken by the CWC in its June 12, 2019 meeting appeared to be fair and reasonable, the third condition which also takes into account the future escalation, costs etc. does not appear to be fair and may unnecessarily make the dispute linger on," it said.

Writing the judgment, Gavai said, "The HC, in effect, forces the MD of CWC, which is a statutory body, to accept the first two conditions and leave the third condition to be settled mutually through mediation. The offer given by Adani (APSEZ) on March 9, 2019, was a composite one so also the acceptance thereof by CWC was a composite one. If the HC was so concerned about settlement of the dispute, then, while compelling the CWC to accept the first two conditions, it also ought to have compelled APSEZ to accept the third condition."

Taking exception to "unwarranted" critical comments of HC against CWC, Justices Gavai and Ravikumar said, "The HC ought to have considered that CVC has already made observations as early as 2010 that the swapping of the warehousing facility from the present site to a changed site would cause serious financial implications and also that there could be various vested interests involved." The CVC had also said there was also a possibility of CWC losing business by swapping warehousing facilities.

The bench said, "The HC ought to have taken into consideration that, unless all the three conditions were complied with, the interests of CWC could not have been safeguarded. If a settlement was to be arrived at, unless the same was found to be in the interest of both the parties, it could not have been thrust upon a statutory corporation to its detriment and to the advantage of a private entity."

The SC also took exception to the divergent stands taken by the ministry of consumer affairs, food & public distribution and ministry of commerce and industry on this issue. "It does not augur well for the Union of India to speak in two contradictory voices. The two departments of the Union of India cannot be permitted to take stands which are diagonally opposite. We, therefore, impress upon the Union of India to evolve a mechanism to ensure that whenever such conflicting stands are taken by different departments, they should be resolved at the governmental level itself," the bench said.