‘Agreement Cannot Override Law’: Supreme Court Quashes Award & HC Order in Paradip Tariff Row, Sends It to TAMP — Flags ‘Natural Justice’ Breach and Moots Expert Appellate Body

“Cost-plus return is the principle” — On 12 August 2025, the Supreme Court reset a decades-long tariff battle between Paradip Port Authority and Paradeep Phosphates Ltd., tearing up an arbitral award, an appellate order, and a High Court judgment, and remitting the dispute to the Tariff Authority for Major Ports (TAMP) for a fresh, expert-driven determination. Writing for the Bench, Justice Rajesh Bindal underlined a first principles rule: “Merely because an Agreement was entered into between the parties, the same cannot override the provisions of law.”

The case springs from a 1985 captive-berth agreement and a 1993 notification revising port rates under the Major Port Trusts Act, 1963. The port’s unilateral increase led to a civil suit, an “informal” arbitration (the 1996 Arbitration Act was expressly kept out), and an award dated 27 December 2002 ordering refunds for 1993–1999, with the later period to be taken to TAMP. The High Court (11 January 2023) eventually upheld the award and the appellate order. The Supreme Court has now set the entire stack aside.

The Court stressed that private bargains cannot paralyse statutory tariff powers and processes. It reproduced Clause 1 (mutual enhancement) and Clause 19 (application of laws, rules, regulations) of the 1985 pact, but then delivered the key correction: the agreement fixes a starting point, not a ceiling against lawful revision — and if parties cannot agree, “some authority has to resolve this issue.”

The Bench was also blunt about due process at the regulator’s door. Calling out TAMP’s 22 November 2011 order (which had rejected upward revision for 1999–2010) for paper-only adjudication despite complex figures and a decade-plus horizon, the Court held: “It is a clear case of violation of principles of natural justice.” It added that it was “a little surprising that TAMP did not find any justification for revision of tariff even for a time gap of more than 10 years”, given manifold increases in costs and overheads.

On methodology, the Court rejected a mere “reimbursement of cost” approach and reaffirmed sector fundamentals: “Even under the normal tariff fixation regime, the cost-plus return approach is the principle to be followed.”

Since Parliament replaced the 1963 law with the Major Port Authorities Act, 2021 — introducing an Adjudicatory Board for tariff — the Court noted that no Board exists yet. “Hence, it is the TAMP which has jurisdiction to adjudicate the issue.”

In relief, the Court issued a two-part reset. First, for 1993–1999, it “set aside the Award of the Arbitrator, the order of the Appellate Authority and also the order passed by the High Court. We remit the matter to TAMP for adjudication of the dispute…” Second, for 1999–2010, it also set aside TAMP’s 2011 order and the High Court’s affirmance, reasoning that the base for later periods depends on the earlier period’s fresh determination; TAMP must now rehear both periods with full opportunity to the parties.

“Direct appeals to SC from technical tariff orders need a rethink”

Going beyond the parties, the judgment spotlights an institutional gap. Section 60 of the 2021 Act currently routes direct appeals from the Adjudicatory Board (or TAMP, in its absence) to the Supreme Court. Invoking this Court’s own caution in W.B. Electricity Regulatory Commission v. CESC Ltd. that High Courts and the Supreme Court are not ideal first-appellate forums for deeply technical tariff disputes, the Bench recounted how expert appellate structures have been created in electricity, telecom, securities, and competition regimes. It then cited Rojer Mathew urging the Union to revisit direct-to-SC appeal provisions in tribunal statutes.

The upshot is a pointed recommendation: “It would be appropriate if an expert appellate body is constituted to hear appeals against the orders passed by the adjudicatory board/TAMP.”

For ports and PPP stakeholders, the ruling restores the primacy of statutory tariff mechanisms over bespoke contracts, insists on audi alteram partem at TAMP, and re-anchors methodology in the cost-plus return frame. It also flags a structural reform: building a specialised appellate tier so that first-instance appeals on fact- and finance-heavy tariff orders don’t land straight in the Supreme Court’s lap.

Date of Decision: 12 August 2025