Kerala HC Strikes Down All Conditions Imposed By Panchayat For Grant Of D&O Licence For Adani Vizhinjam Seaport Project

The Kerala High Court has struck down all conditions imposed by the Nagaroor Grama Panchayat under the Kerala Grama Panchayat Raj Act, 1994 while issuing D&O/Trade Licence to Adani Vizhinjam Port Pvt Ltd. for the Vizhinjam Port project.

The Court termed the conditions highly arbitrary and illegal and held that they cannot stand the scrutiny of law. The conditions imposed by the Panchayat required that the company should withdraw the Police Protection Order against the President of the Panchayat and that the company should spend the CSR funds of the company in the Panchayat.

With respect to the condition requiring spending of the CSR fund of the petitioner within the territorial area of the Panchayat, the Bench of Justice N. Nagaresh observed, “When the Companies Act, 2013 has made special provisions governing CSR funds and the Central Government has made special rules for CSR fund spending, Grama Panchayat Committees constituted under the Kerala Panchayat Raj Act, 1994 cannot impose any conditions while issuing licences and permissions, which would go against the provisions of Section 135 of the Companies Act and the Rules made thereunder.”

Advocates Roshen D. Alexander represented the petitioner while Standing Counsel Siju Kamalasanan represented the Gram Panchayat.

Factual Background -

The petitioner company was aggrieved by the Ext.P20 resolution taken by the Gram Panchayat by which it issued a trade licence to the petitioner subject to four conditions. Taking into consideration the requirement of time-bound completion of the Vizhinjam International Seaport and the shortage of rock boulders faced by the petitioner, the Government decided that the petitioner shall be given priority in quarrying activities in Government land and the respective District Collectors shall give NOC to those applications for NOCs with respect to Vizhinjam Port.

The petitioner was issued with NOC by the District Collector, Thiruvananthapuram for quarrying a Government land and also obtained a Letter of Intent, approved Mining Plan, Environmental Clearance, Consent to Operate, and Explosives Licence. However, when the petitioner submitted an application for a D&O/Trade licence, it was informed that by a resolution, the Panchayat Committee has decided to grant licence to the petitioner for quarrying subject to some conditions. The petitioner, therefore, approached the court on the ground that the said conditions were illegal and violative of the provisions of the statute.

The High Court after hearing the contentions of the counsel noted, “I find that the Panchayat Committee has decided to constitute a committee under the aegis of the District Collector, to determine the environmental impact, possibility of disaster, the amount of mining carried out, etc. These are all issues falling within the powers of the statutory authorities specifically designated for the purpose. When the State Environmental Impact Assessment Authority, the Director of Mining and Geology and the District Collector who is the Chairman of the District Disaster Management Authority have given clearances to the petitioner, constitution of a committee by the Panchayat to determine these issues is unwarranted.”

The Court said that the formation of such a committee is not a statutory process and while issuing permissions and licences under Sections 232 and 233 of the Kerala Panchayat Raj Act, the Panchayat authorities are not justified in subjecting those permissions and licences to the decisions to be taken by a committee which has no statutory existence.

With respect to the condition that the company should withdraw the Police Protection Order against the President of the Panchayat, the Court observed that Section 28 of the Indian Contract Act, 1872 bars agreement that imposes fetters on a party from initiating legal proceedings or enforcing its rights.

“In our democracy governed by Rule of law, any blanket condition in restraint of legal proceedings cannot stand the Constitutional test of arbitrariness, when such conditions are unilaterally imposed by the State or by an instrumentality of the State. Such conditions are abhorred even in the field of contracts”, also noted the Court.

Accordingly, the High Court disposed of the plea and set aside the resolution to the extent it imposed conditions for permission under Sections 232 and 233 of the Kerala Panchayat Raj Act.

Cause Title- M/s. Adani Vizhinjam Port Pvt. Ltd. v. Nagaroor Grama Panchayat & Ors. (Neutral Citation: 2023:KER:39010)

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