The trust that runs India’s busiest container port, located at Nhava Sheva near Mumbai, overturned its May 2012 decision to scrap the contract of DBC Port Logistics Ltd for running a container freight station (CFS) over complaints of violating the licence agreement by charging customers more than the rates approved by the tariff regulator.
The move came after the additional solicitor general of India said there were no grounds for the termination, three people briefed on the decision said.
The decision to continue with the DBC contract was taken by the board of trustees of Jawaharlal Nehru (JN) Port at a meeting held on 23 March. A spokesman for the Union government-controlled JN Port confirmed the development. The board also authorized the port management to consider levying a penalty on DBC as a deterrent against potential contractual breaches in future, he added.
“In his opinion given to JN Port, Kevic Setalvad, the additional solicitor general, has said that the audit report prepared by accounting firm NK Shah and Associates does not substantiate or prove the charges made against DBC and hence the contract cannot be terminated,” said a trustee who attended the 23 March meeting and one of the three persons mentioned earlier. He spoke on condition of anonymity because he is not authorized to discuss the board deliberations publicly.
JN port had mandated NK Shah and Associates to audit the rates charged by DBC after the port’s board of trustees decided to conduct a check of DBC’s transactions by an external auditor following complaints of over-charging.
On 14 May 2012, based on the audit report, the board of trustees of JN Port decided to issue a notice to DBC asking the firm to show cause why the licence should not be terminated on charges of violating the provisions of the licence agreement.
The audit report prepared by NK Shah and Associates had concluded that DBC had violated the license agreement by charging customers more than the rates set by the Tariff Authority for Major Ports (TAMP) and by sub-letting the licensed premises to other parties for doing business, another trustee who attended the meeting said on condition of anonymity. These violations attract termination of the contract.
DBC, earlier known as Speedy Multimodes Ltd, has denied any wrongdoing in its response to the show-cause notice, saying it was not in default of any of the terms of the licence agreement signed with JN port.
JN Port had sought legal opinion from the additional solicitor general before proceeding against DBC.
DBC services JN Port through which more than half of India’s container cargo is shipped every year.
A CFS is a facility licensed by the customs department to help decongest a port by shifting containerized cargo and customs-related activities outside the port area. Due to customs procedures and space constraints at India’s ports, customs clearance takes place at the CFS.
Of the 29 CFSes that service the port, only DBC’s tariffs are regulated by TAMP, because its 68-acre facility is owned by JN Port but was given to DBC on an operation and maintenance contract for 20 years beginning 1 January 2006.
In 2011, port customers had lodged complaints against DBC saying it was charging them more than the rates approved by India’s port tariff regulator.
DBC is contractually mandated to levy rates approved by TAMP. DBC could not be reached immediately for comment.