DP World, Adanis head for legal battle over Mundra deal

DP World, Adanis head for legal battle over Mundra deal

Mumbai: The Dubai-government owned port operator, DP World, has resorted to arbitration, accusing the promoters of Mundra port, the Adani Group, of not honouring business agreements related to container terminals in Gujarat including non-compete clauses.

The dispute is over a late 2002 and an early 2003 agreement that specifically prohibits Gautam Adani, Rajesh Adani and Mundra Port and Special Economic Zone Ltd (formerly Gujarat Adani Ports Ltd or GAPL) from engaging in any manner, directly or indirectly, in developing or investing or operating any container terminal business in Gujarat.

A related concession agreement specifically prohibits GAPL from developing any container terminal facility until 1.5 million twenty-foot equivalent units (TEUs) were achieved, or 12 years, whichever is later.

A TEU is the standard size of a container and is a common measure of capacity in the container business.

The Adanis were required to hand over some assets, which comprised a quay wall of618m and 19.633ha of land, for a payment of $70 million (Rs275.8 crore), to Mundra International Container Terminal Pvt. Ltd (MICT) to be developed as a container terminal facility.

Under the terms of the agreement, the Adanis were also required to get the necessary approvals from the Gujarat Maritime Board for the handover of the quay wall as core assets.

However, the Adanis started operating a second container terminal at the port from August this year, which was built at a cost of Rs633 crore, significantly more than the$70 million that DP Worldhad to pay Adanis for the second terminal.

Adani group chairman Gautam Adani told Mint on Monday that his firm started operating the terminal from August after the construction of the facility was completed.

Since the assets could not be left idling, the Adanis decided to begin operations at theterminal.

MICT had filed an application on 27 August before the Ahmedabad civil court seeking an interim injunction to prevent the Adanis from operating a new container terminal on the grounds of violation of the non-compete clause pending the dispute being resolved by the arbitrators.

The court rejected the application on 13 September. MICT has appealed against the order before the Gujarat high court, besides referring the matter for arbitration.

Ganesh Raj, senior vice-president and managing director, subcontinent, DP World, said that the $292 million deal, concluded in 2003, was for assets as well as the non-compete obligations.

The Adanis were not supposed to set up a terminal, but were only required to hand over the 618m quay wall and 19.633ha of unpaved back-up area for container storage after it handled 7 lakh TEUs or on completing eight years ofoperations.

“They have now gone beyond the terms of the agreement and developed a full-fledged container terminal in violation of the non-compete provisions in the agreements," he claimed.