Madras High Court Stops Tamil Nadu Maritime Board From Prematurely Terminating Shop Licence

The Madras High Court has recently restrained the Tamil Nadu Maritime Board from prematurely terminating a shop licence after it chose to allot the premises through negotiations despite the availability of an open tender process, only to seek fresh bids before the agreed tenure expired.

Justice K. Kumaresh Babu observed that the Board could not rely on a policy that was already available when it granted the original allotment as a reason to terminate the arrangement before its expiry.

“It is to be noted that the first respondent is a Statutory Authority being funded by the Government from the money of the public exchequer. Having taken a conscious decision to appoint the applicant as licensee and to terminate by a policy which was available even at the point of appointing cannot be a reason for termination,” the court held.

The court was hearing two applications filed by PRG Shipping Private Limited seeking to stay the termination of its shop allotments at the Nagapattinam Passenger Terminal and fresh tenders for the same premises.

The dispute arose after the Tamil Nadu Maritime Board allotted vacant spaces at the passenger terminal to PRG Shipping on rental terms, after assessing the company's qualifications and suitability.

Although the initial allotment was for one year, the Board subsequently extended the tenure by two years. An approval letter dated December 15, 2025, confirmed that the extended period would expire on December 23, 2027.

However, the Board issued termination letters on June 12, 2026, followed by fresh e-tender notices on June 19, inviting bids for the same premises.

PRG Shipping challenged these actions, arguing that it was entitled to operate the shops until December 23, 2027. It also alleged that a ferry operator had complained about space constraints and interfered with its business, and that pressure from the operator led to the premature termination.

The Board defended its decision by arguing that the original allotment had been made through negotiations rather than the procedure prescribed under the Tamil Nadu Transparency in Tenders Act.

It relied on Clause 18 of the agreement, which permitted termination without cause, and contended that fresh tenders would ensure greater transparency and fetch higher rent. The Board also submitted that PRG Shipping could participate in the bidding process and obtain the lease if successful.

The court noted that the Board had consciously agreed to let out the spaces for a defined period but was seeking to shorten that period on the ground that an open tender could fetch a better price.

It also observed that premature termination could entitle PRG Shipping to damages for the remaining lease period.

“In that case, this Court is of the prima facie view that the applicant would be entitled for damages for termination of the lease for the remaining period,” it held.

The court pointed out that the Board was a statutory authority funded by the public exchequer. Any damages awarded to PRG Shipping would ultimately have to be paid from public funds.

Allowing both applications, the court made the injunction absolute, subject to PRG Shipping initiating arbitration within 12 weeks from October 16, 2026.

It clarified that its observations were confined to deciding the interim applications and would not extend to the arbitral proceedings. The injunction will automatically stand vacated if PRG Shipping fails to initiate arbitration within the stipulated period.

For Petitioner (The PRG Shipping Private Limited): Advocate R. Udhayakumar.

For Respondents (Tamil Nadu Maritime Board and Nagapattinam Port Officer):  Additional Advocate General P.V. Balasubramaniam; Advocate V. Prasad.