THIRUVANANTHAPURAM: With the government approval requirement under Section 5(3) largely undisputed for MSC’s 49 per cent share acquisition in AVPPL, attention is now shifting to Section 5(9) of the Vizhinjam Concession Agreement.
The debate over Mediterranean Shipping Company's (MSC) proposed acquisition of a 49 per cent stake in Adani Vizhinjam Port Pvt Ltd (AVPPL) appears to be moving beyond Section 5(3) of the Vizhinjam International Seaport concession agreement, which requires the Kerala government's prior approval for a significant change in ownership.
While that provision is largely seen as a procedural requirement, legal attention is now shifting to Section 5(9) of the concession agreement - a competition clause whose interpretation could ultimately determine whether the proposed transaction is contractually permissible.
The issue has been brought into focus by former Finance Minister Dr Thomas Isaac, who has argued that the proposed investment may not be consistent with the concession agreement.
At the centre of the debate is MSC's reported 49 per cent stake in Dakshin Bharat Gateway Terminal (DBGT), a container terminal operating at Tuticorin Port, which lies within the 250-km radius specified in the concession agreement.
Section 5 (9) is the key
Section 5(9.2) requires the concessionaire to ensure that no person who "controls or operates any other port" within 250 km of Vizhinjam acquires more than a 25 per cent control or interest in the operations or services of the Vizhinjam port.
Since MSC proposes to acquire a 49 per cent stake in AVPPL, the transaction exceeds the agreement's 25 per cent threshold. The real question, however, is whether MSC's role in DBGT makes it a person who "controls or operates" another port within the meaning of the concession agreement.
That distinction could prove crucial
Those questioning the transaction contend that operating a container terminal amounts to operating one of the core services of a port and that Section 5(9) was intended to prevent competing port operators within the region from acquiring a significant interest in Vizhinjam.
Supporters of the transaction are likely to argue that DBGT is only one terminal within Tuticorin Port and that operating a terminal cannot automatically be equated with controlling or operating the port itself.
They may also contend that Tuticorin Port continues to be owned and administered by the VO Chidambaranar Port Authority, while DBGT functions under a separate concession.
Controls or operates?
The outcome may therefore depend less on the size of MSC's proposed investment in Vizhinjam - which is undisputed - and more on how the concession agreement interprets the expression "controls or operates any other port." Dr Thomas Isaac
If operating a container terminal is held to be equivalent to operating a port, Section 5(9) could emerge as a significant contractual hurdle. If not, the provision may not apply, leaving the transaction to be decided primarily through the approval process envisaged under Section 5(3).
In that sense, the legal debate surrounding the proposed investment has shifted from the relatively straightforward question of government approval to a more fundamental issue of contractual interpretation—one that could determine whether MSC's existing presence in Tuticorin stands in the way of its entry into Vizhinjam.
