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TE Raja Simhan | Chennai, June 9 | Updated on: Jun 09, 2022

PSA-Sical has failed to pay royalty dues worth ₹1,090 crore

Is it curtains for one of India’s first private sector container terminals? PSA-Sical, which signed a 30-year contract with Tuticorin Port Trust (now called VO Chidambaranar Port Authority) in 1998, has been served a termination notice by the port authority for non-payment of royalty dues to the tune of ₹1,090 crore as on December 31, 2021. The notice was issued after the terminal operator lost an appeal in the Madras High Court.

PSA-Sical, a joint venture between Port of Singapore Authority and Sical Logistics, has been operating the terminal for the last 23 years. The terminal, which has an annual capacity to handle 4.17 lakh twenty foot equivalent units (TEUs), handled handled 2.13 lakh TEUs in 2021-22, according to VOC port data.

But for over a decade, PSA-Sical and the port authority have been locked in a legal battle over payment of royalty. Multiple litigations were filed, and all of them were in favour of the port authority.

Second termination notice

This is the second termination notice issued by the port authority to the operator. The first one was in October 2021 after the Supreme Court ruled in favour of the port authority. Subsequently, PSA-Sical approached the Madras High Court against the termination order, but a Single Judge dismissed the writ petition in January. The operator then went on appeal. However, the Division Bench dismissed the appeal, upholding the order of the Single Judge.

The Division Bench comprising Justice M Duraiswamy and Justice TV Thamilselvi, in its order, said with PSA-Sical having accepted and entered into an agreement with the VOC Port Authority for payment of royalty with a provision for yearly escalation, cannot turn around and take a different stand now.

The Single Judge, taking into consideration all these aspects, found no perversity or arbitrariness in the act of the Port Authority and rightly dismissed the writ petitions. Though there is no dispute with regard to the ratio laid down in the judgments relied upon by the learned senior counsels appearing for the appellant, since the facts and circumstances of the cases on hand are different, the same are not applicable, said the Division Bench in the order.

The latest notice said PSA-Sical had not chosen to consult the port, and had also had not remedied or rectified the default even after a lapse of 103 days from the issuance of the notice of ‘Intent to Terminate.’ As the event of default was continuing, the port had issued the termination notice of Licence Agreement signed on July 15, 1998. As the default continues, this port, hereby, issues termination order. Necessary action shall be taken by the port to take possession of the licensed premises and recovery of the dues payable by PSA-Sical, said the notice.

In response to the notice, PSA-Sical said it is approaching the relevant authorities to explore options.

Published on June 09, 2022