IN THE HIGH COURT OF DELHI AT NEW DELHI
W.P.(C)No.5625/2008
M/s. Hotel Natraj .... Petitioner
Through : Mr. K.T.S. Tulsi, Sr. Advocate with
Mr. Raj Kaul and Mr. R. Singh, Advs.
Versus
Union of India & Ors. .... Respondents
Through : Mr. Sanjeev Bhandari, Advocate for
Respondent No. 1
Mr. Rajiv Nayyar, Senior Advocate
with Mr.Sushant Kumar, Advocate
for Respondents No. 2 and 3.
CORAM:
HON'BLE MR. JUSTICE G.S. SISTANI
1. Whether reporters of local papers may be allowed to see
the Judgment? Yes.
2. To be referred to the Reporter or not? Yes.
3. Whether the Judgment should be reported in the Digest? Yes.
05.08.2008
G.S. Sistani, J. (Oral)
W.P.(C)No.5625/2008 & C.M. No. 10754/2008
1. The present writ petition is, inter alia, directed against a policy decision of the Indian Tourist Development Corporation Ltd. to refuse an "automatic second renewal" of the license granted by it to its existing licensees for running restaurants in the various hotels under its administration.
2. Notice.
W.P.(C)No 5625/2008 Page 1 of 23
3. Mr. Sushant Kumar, learned counsel for respondents no. 2 and 3 accepts notice. Mr. Sanjeev Bhandari, learned counsel for respondent no.1 accepts notice.
4. With the consent of both parties, the matter is taken up for final hearing.
5. The lis between the parties herein apparently has its roots in a departmental circular dated 15.11.1995 issued by the Indian Tourist Development Corporation (hereinafter, "I.T.D.C."). The circular, in general, lays down the procedure for licensing of restaurants in hotels under the administration of the I.T.D.C. and, inter alia, stipulates that the license for running restaurants in the I.T.D.C. hotels is to be granted on a percentage sharing basis of total sale/turnover, subject to a minimum fixed guaranteed amount. The circular further stipulates the license so granted to be renewable for a period of:
I. five years, where the licensee was required to invest capital for developing/renovating the restaurant and other equipments, etc.; II. three years, where the capital investment was to be made by the I.T.D.C.
6. With the circular dated 15.11.1995 as a basis, the I.T.D.C., on 1.7.2002, executed three separate License Deeds in favour of one M/s. Turkinz for running three different restaurants, namely, „Kasmir Club‟, W.P.(C)No 5625/2008 Page 2 of 23 „Mashrabia‟ and „Garden Lounge Bar‟ at Hotel Ashok, New Delhi. The license period, in respect of all the three restaurants, was of five years from 30.8.2002 to 29.8.2007, and the license so granted was renewable for another five years on mutual terms, subject to a maximum increase of 20% on the minimum guaranteed amount.
7. Likewise, the I.T.D.C., on 1.8.2002, executed a License Deed in favour of the petitioner for running the restaurant, namely, „Jewel of East‟ (later re-named as „Chinatown‟) at Hotel Ashok, New Delhi. The license period, in respect of the said restaurant, was of three years from 15.9.2002 to 14.9.2005, and was renewable for another three years on mutual terms, subject to a maximum increase of 20% on the minimum guaranteed amount.
8. It is contended by Mr. K.T.S. Tulsi, learned senior counsel for the petitioner, that although the restaurant was licensed to the petitioner on an "as is where is" basis, meaning thereby, that the petitioner was required to invest capital for developing/renovating the restaurant and other equipments, etc., the license period sanctioned by the I.T.D.C. was only of three years from 15.9.2002 to 14.9.2005, and that the license so granted was W.P.(C)No 5625/2008 Page 3 of 23 renewable for another three years on mutual terms. This, according to learned senior counsel, was inconsistent with the procedure laid down in the circular dated 15.11.1995 as per which licensees who were required to invest capital for developing/renovating the restaurants licensed to them were sanctioned a license period of five years, and the license so granted was renewable for another five years on mutual terms. It is further submitted that this initial error was, however, rectified by the I.T.D.C. vide its order dated 7.9.2008, and consequently, a fresh License Deed was executed between the parties herein with effect from 15.9.2005 to 14.9.2007. In view thereof, it is contended by learned senior counsel that inasmuch as the error in the license granted to the petitioner stood corrected from three to five years, the petitioner ipso facto became entitled to the renewal period of five years as stipulated in the circular dated 15.11.1995.
9. It is submitted by learned senior counsel for the petitioner that having exhausted its five year license period, the petitioner, on 22.6.2007, issued a legal notice to the I.T.D.C. for renewal of its license. It is contended that the I.T.D.C., in response to the legal notice dated 22.6.2007, renewed the license of the W.P.(C)No 5625/2008 Page 4 of 23 petitioner for a further period of one year, that is, from 15.9.2007 to 14.9.2008. This, according to learned senior counsel for the petitioner, was de hors the five year renewal period entitled to the petitioner in terms of the procedure prescribed in the circular dated 15.11.1995.
10. It is submitted by learned senior counsel that the woes of the petitioner were further compounded by the letter of the I.T.D.C., dated 5.5.2008, whereby the petitioner was informed that there would be no further renewal of the license granted to the petitioner beyond 14.9.2008, and accordingly, the petitioner was directed to hand over the vacant possession of the restaurant, namely, Chinatown, on or before the said date. For felicity of reference, the impugned letter dated 5.5.2008, filed at page 258 of the present petition, is reproduced below:
"THE ASHOK 05.05.2008 Ref. No. AP&P/B&C/08 M/s. Natraj Hotel Prop. Prominent Finance Co. (P) Ltd.
Outlet: Chinatown The Ashok May New Delhi - 110021 Kind Atten: Mr. K.S. Gambhir Dear Sir, W.P.(C)No 5625/2008 Page 5 of 23 Please be informed that the Management has taken a Policy Decision that no renewal would be granted to the existing licensees whose license agreement is to expire for a second time that there will be no automatic second renewal (i.e., third term) of their existing license.
The license in respect of premises licensed to you is going to expire on 14.9.2008.
In view of the above, you are hereby called upon to hand over the vacant and peaceful possession of the premises licensed to you and clear all the dues, if any, on or before 14.9.2008.
Upon failure to do so, Management would be free to initiate any action as deemed appropriate in this regard.
Thanking You, For the Ashok, S.K. Mehra The Manager (B&C)"
11. It is fervently contended by learned senior counsel that the impugned letter dated 5.5.2008, whereby the I.T.D.C. informed the petitioner that no renewal of its license would be allowed beyond 14.9.2008, is nothing but fallout of a policy decision taken by the I.T.D.C. to refuse an "automatic second renewal" of the license granted by it to its existing licensees for running restaurants in the various hotels under its administration. The policy decision was W.P.(C)No 5625/2008 Page 6 of 23 communicated to all concerned through circular bearing no. CMID/ITDC/2007, dated 30.3.2007, a copy whereof is filed at page 249 of the present petition and reproduced below:
"INDIAN TOURIST RAILWAY CORPORATION LTD.
CMID/ITDC/2007 March
30, 2007
Sub: Renewal of Licenses
It is seen that license fees being paid to the I.T.D.C. by the private parties running restaurants, health clubs, shops, beauty parlours, hair dressing salons, shops, showrooms, etc., are much lower than the market price.
Therefore, we should clearly tell all licensees six months before their license is to expire for second time that there will be no automatic second renewal (that is third term) of their existing license. The tendering process should begin five months before each license is to expire.
The incumbent always has the advantage of incumbency because he has to make no fresh investment, because his supply chain is in place, his staff is in place, he knows the market better than new entrants and the market knows his reputation better than that of any newcomer.
The incumbent can bid with the other prospective licensees with all these advantages.
W.P.(C)No 5625/2008 Page 7 of 23 I repeat, the tender notice should appear in newspapers five months before the existing license is to expire.
There can be no exception to this rule.
Parvez Dewan Chairman and MD"
(emphasis supplied)
12. The grievance of the petitioner is that the impugned policy decision has scuttled the opportunity of renewal entitled to the petitioner in respect of the license granted to it as per the procedure stipulated under the circular dated 15.11.1995. It is further alleged that the I.T.D.C. did not observe uniformity as well as parity in implementing its policy decision of 30.3.2007 at the time of renewing the licenses granted to similarly placed licensees in terms of the procedure prescribed in the circular dated 15.11.1995. To make good his point, learned senior counsel for the petitioner has submitted that while the licenses granted to M/s. Turkinz for the period 30.8.2002 to 29.8.2007 were further renewed for a period of five years from 30.8.2007 to 29.8.2012, the renewal granted to the petitioner was only for a period of one year from 15.9.2007 to 14.9.2008. It is thus the case of the petitioner that the impugned policy decision is being implemented by the I.T.D.C. in W.P.(C)No 5625/2008 Page 8 of 23 an arbitrary, oppressive and discriminatory manner thereby impinging the fundamental rights of the petitioner to equality and livelihood.
13. It has been further brought to the knowledge of this Court that the petitioner, on 1.7.2008, made a representation to the I.T.D.C. seeking parity with similarly placed licensees. It is submitted that while the petitioner‟s representation dated 1.7.2008 was still pending, the I.T.D.C., on 28.7.2007, has got issued tender notice calling for fresh bids in respect of the restaurant, namely, Chinatown.
14. Per contra, Mr. Rajiv Nayyar, learned senior counsel for the I.T.D.C., has vehemently resisted all contentions of the petitioner imputing arbitrariness and discrimination to the procedure followed by the I.T.D.C. whilst granting license for running restaurants in hotels under its administration. Qua the allegation of arbitrariness, it argued that in view of the fact that the license in question was granted as far back as in the year 2002, the petitioner should have either raised its objections to the license period of three years at the time of entering into the License Deed or should not have signed the License Deed in the first place. It is thus contended that having already derived the advantage of the License Deed stipulating W.P.(C)No 5625/2008 Page 9 of 23 a three year license period, the petitioner is cannot now assail the said License Deed as being arbitrary. Qua the allegation of discrimination, it is contended that at the time of granting license to the petitioner to run the Chinatown restaurant for a period of three years, licensing was also carried out in respect of two more restaurants, namely, „Sagar Ratna‟ and „Kumgang‟, for the same period of three years, and considering that these two restaurants are more popular than the petitioner‟s, it cannot be said that the petitioner is being singled out or discriminated. It is further argued by learned senior counsel that none of the pleas taken by the petitioner are substantiated by documents on record.
15. Refuting the petitioner‟s contention that the policy decision taken by the I.T.D.C. to refuse an "automatic second renewal" of the license granted by it to its existing licensees is unreasonable and violative of the equality clause enshrined in Article 14 of the Constitution of India, it is stoutly argued by learned senior counsel for the I.T.D.C. that the petitioner was bound by the provisions of the License Deed with the I.T.D.C., whereby the license granted to the petitioner was renewable for a period of three years on mutual terms, and accordingly, the last extension ought to W.P.(C)No 5625/2008 Page 10 of 23 have been granted to the petitioner only up till 14.9.2008 and no further.
16. It is lastly contended by learned senior counsel for the I.T.D.C. that the present petition appertains to a purely contractual obligation between the parties and what the petitioner is praying for is specific performance of a contract, which relief cannot be sought in a writ Court.
17. In order to countervail the aforesaid contention put forth on behalf the I.T.D.C., learned senior counsel for the petitioner has relied upon the decision in Noble Resources Ltd. v. State of Orissa and Anr. 1, wherein the Apex Court, upon a conspectus of judicial pronouncements on the seminal issue of maintainability of writ petitions in contractual matters, unequivocally opined that "if an action on the part of the State is violative (of) the equality clause contained in Article 14 of the Constitution of India, a writ petition would be maintainable even in the contractual field...While exercising contractual powers also, the government bodies may be subjected to judicial review in order to prevent arbitrariness or favouritism on its part."2 In similar 1 (2006) 10 SCC 236 2 id. at para 11 W.P.(C)No 5625/2008 Page 11 of 23 vein, the decisions in ABL International Ltd. and Anr. v. Export Credit Guarantee Corporation of India Ltd. and Ors.3, Mahabir Auto Stores and Ors. v. Indian Oil Corporation and Ors.4 and Jamshed Hormusji Wadia v. Board of Trustees, Port of Mumbai and Anr.5 have been relied upon to contend that even where the rights of a party are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality, public interest and non-discrimination.
18. I have heard the rival contentions of both sides at length and have also been taken through the documents filed on record.
19. It is no longer res integra that the Courts of law do not ordinarily interfere with a policy decision taken by the Government, unless such policy is wholly unreasonable in the Wednesbury sense, or the policy violates the equality principle enshrined in Article 14 of the Constitution, or the policy infringes any of the 3 (2004) 3 SCC 553 4 ( 1990 ) 3 SCC 752 5 ( 2004 ) 3 SCC 214 W.P.(C)No 5625/2008 Page 12 of 23 other Fundamental Rights, or the policy involves any public interest.
20. Coming to the present petition, the primary assault herein is directed against the policy decision taken by the I.T.D.C. to refuse an "automatic second renewal" of the license granted by it to its existing licensees for running restaurants in the various hotels under its administration. As I understand it, it is not the substantive content of the impugned policy decision, but the manner in which the said policy has been implemented by the I.T.D.C., which is the exact bone of contention between the parties herein. Learned senior counsel for the petitioner has mounted his attack against the impugned policy decision on a two- fold challenge, namely:
i. The letter dated 5.5.2008, which was communicated by the I.T.D.C. in pursuance of the impugned policy decision to refuse „automatic second renewal license‟, has scuttled the opportunity of renewal entitled to the petitioner in respect of the license granted to it.
ii. The I.T.D.C., while implementing the impugned policy decision, did not observe uniformity as well as parity in renewing the licenses granted to similarly placed licensees in terms of the procedure prescribed in the circular dated 15.11.1995.W.P.(C)No 5625/2008 Page 13 of 23
21. The first challenge made by the petitioner is obviously premised on the pre-supposition that the petitioner was granted license to run the restaurant, namely, Chinatown, for a period of five years, and as per the procedure stipulated under the circular dated 15.11.1995, the license so granted was renewable for a period of five years. I am afraid that this claim of the petitioner that he was granted license for a period of five years and consequently entitled was to a period of five years is starkly inconsistent from the documents brought on record. Clause 1 of the License Deed dated 1.8.2002 entered into between the parties herein, which is filed at page 197 of the present petition, clearly stipulates that the license was granted to the petitioner for a period of three years with effect from 15.9.2002 to 14.9.2005. It is also borne out from the documents filed on record that upon the expiry of the license granted to the petitioner on 14.9.2005, the I.T.D.C., vide License Deed dated 7.9.2005, renewed the license so granted for a period of two years with effect from 15.9.2005 to 14.9.2007. The fact that the license in question was initially granted for a period of three years, and not five years as claimed by the petitioner, is also evident W.P.(C)No 5625/2008 Page 14 of 23 from the legal notice dated 22.6.2007 which was issued by the petitioner assailing the I.T.D.C. for renewing the license so granted only for a period of two years as against the three year license period which was promised to the petitioner. The legal notice dated 22.6.2007, filed at page 255 of the present petition, is reproduced below:
"To, General Manager, Ashok Hotel, Aunit of ITDC Ltd.
Diplomatic Enclave, Chanakyapuri, New Delhi-110 021 Dear Sir, This notice is being issued under instructions from my client Mr. K.S. Gambhir, Owner of M/s. China Town - a license of Ashok Hotel - a Unit of ITDC Ltd.
My aforesaid Client was initially awarded the license to run the Chinese Restaurant in Ashok Hotel in September, 2002 for a term of three years. During this period he incurred huge investment to set up the Restaurant in a manner as benefits a 5 Star Deluxe Hotel. He was regular in his payments and took all possible steps to ensure the Restaurant as a popular value received from any quarter, in any manner whatsoever.W.P.(C)No 5625/2008 Page 15 of 23
On the expiry of the three years term on 28th October, 2002, my client as per procedure offered for renewal, which was agreed to by the Management at enhanced minimum guarantee and increase in percentage of sales.
Vide Letter Reference No. AH/B&C/05 dated 16th November 2005, Manager (B&C) Ashok Hotel requested me to arrange a fresh bank guarantee of Rs.10.23 Lakhs in favour of Hotel. "The Ashok" for the next period of three years (copy enclosed). From the enclosed communication it is evident that the bank guarantee amount of Rs.10.23 lakhs being the license fee for the next three years i.e. from 29.10.2005 to 28.10.2008, license Agreement stood renewed till 28.10.2008. The Bank Guarantee for a period of three years has already been given to Ashok Hotel amounting to Rs.10,23,000/- (Rupees Ten Lakhs Twenty Three Thousand Only) issued by O.B.C. Bank dated 26.12.2005.
Being assured of the renewal for three years, my Client has made necessary plans to renovate the restaurant, arrange for additional capital / revenue expenditure on renovation, crockery and cutlery etc. However, my Client was shocked to receive the offer from the Hotel Management to renew the Arrangement for two years only instead of three years which they had already W.P.(C)No 5625/2008 Page 16 of 23 agreed to and towards which all necessary terms as desired have been fulfilled by my Client.
In view of the above, the offer of the Management to renew the Agreement for two years which would amount to the termination of my Client‟s license on 28.10.2007 is arbitrary, bad in law and in violation of contract besides being grossly irregular. Having committed to renew the license Agreement for three years, the Ashok Hotel Management is stopped from unilaterally and arbitrary reduce the period to two years, knowing fully well that two years is too short a time to recover the expenditure in view of the increase in food sales percentage and minimum guarantee in food sales percentage ad minimum guarantee coupled with the additional capital /revenue expenditure on renovation, crockery and cutlery.
The reduction in the license period is, therefore, grossly unjust and against all canons of law and, therefore, by this Notice you are called upon to immediately withdraw you offer of renewal for two years and maintain the renewal period of three years up to 28.10.2008, failing which my Client shall be constrained to seek necessary remedy in the appropriate Court of Law and you shall be responsible for the cost and consequences thereof."W.P.(C)No 5625/2008 Page 17 of 23
For Sahijpal & Associates (emphasis supplied)
22. Thus, as per the petitioner‟s own understanding, which is amply reflected in its legal notice dated 22.6.2007, the petitioner was entitled to a license period of three years and that the license so granted was renewable, on mutual terms between the parties, for a further period of three years. It is also not in dispute that pursuant to the the legal notice dated 22.6.2007, the license granted to the petitioner was further extended for one year from 15.9.2007 to 14.9.2008. Therefore, the facts of the present case, when put in correct perspective, leave no room for doubt that the petitioner was initially granted license by the I.T.D.C. for a period of three years with effect from 15.9.2002 to 14.9.2005, and pursuant thereto, the license so granted was renewed twice, first from 15.9.2005 to 14.9.2007, and thereafter, for from 15.9.2007 to 14.9.2008. Thus, considering that the license granted to the petitioner already stands renewed twice - first, for a period of two years, and subsequently, for a period of one year, the petitioner, by 14.9.2008, would have already exhausted the renewal period of three years entitled to it as per the circular dated 15.11.1995. In these circumstances, the challenge of the petitioner to the letter dated W.P.(C)No 5625/2008 Page 18 of 23 5.5.2008, whereby the I.T.D.C. refused to grant a second renewal of the petitioner‟s license, is without merit and can hardly be countenanced.
23. Even otherwise, the claim of the petitioner that it was entitled was licence period of five years, and not three years, appears to be highly belated and an afterthought. The license was originally granted to the petitioner on 15.9.2002, and upon its expiry on 14.9 2005, was renewed for two years from 15.9.2005 to 14.9.2007, and thereafter, for one year from 15.9.2007 to 14.9.2008. There is no explanation from the petitioner as to what prevented the petitioner from assailing the license period sanctioned to it at the time of entering into agreement with the I.T.D.C on 1.8.2002. Having accepted and acted upon the License Deed dated 1.8.2002 and having taken advantage thereof for the last six years, the petitioner cannot now contradict the provisions of the License deed at this stage of the matter.
24. I take my cue from the stand of this Court in All India PNB Retired Officers Association (Regd.) & Anr. V Punjab National Bank6, wherein, the petitioners of their own accord and presumably after considering all the pros and cons, opted for the 6 WP(C) NO.6332/2003 & CW.9118-9373/2005 W.P.(C)No 5625/2008 Page 19 of 23 Punjab National Bank (Employees') Pension Regulations, 1995. As a consequence thereof, the petitioners therein were required to refund the amounts furnished to them at the time of their retirement along with interest. They also opted for commutation in terms of Rule 41. They were under no compulsion to do so because as per the conditions of service applicable to them at the time of their retirement, they had been paid all terminal benefits and dues. This Court, whilst dismissing the petition, held that if the benefits under the pension regulations were not suitable or detrimental to their interests, nothing prevented them from declining the offer. Having accepted the offer, opted for pension, complied with the terms of the regulations and even secured advantages for the last eight years, it was not open to them to contend that one or the other part of such scheme is arbitrary.
25. Thus, having already acted in terms of the provisions of the License Deed dated 1.8.2002, and further, having already exhausted the renewal period of three years sanctioned thereunder, the petitioner cannot now dispute the same at this stage.
26. Further, the plea taken by the petitioner that the I.T.D.C., while implementing the impugned policy W.P.(C)No 5625/2008 Page 20 of 23 decision, did not observe uniformity as well as parity in renewing the licenses granted to similarly placed licensees, is not well-founded. Bare perusal of the tender floated by the I.T.D.C. on 28.7.2008, which is also under challenge in the present petition, reveals that the petitioner is not being singled out inasmuch as bids have been invited in respect of two more restaurants, namely, „Sagar Ratna‟ and „Kumgang‟.
27. Reliance by the petitioner on the decisions in Noble Resources Ltd. v. State of Orissa and Anr.7, ABL International Ltd. and Anr. v. Export Credit Guarantee Corporation of India Ltd. and Ors. 8, Mahabir Auto Stores and Ors. v. Indian Oil Corporation and Ors.9 and Jamshed Hormusji Wadia v. Board of Trustees, Port of Mumbai and Anr.10 is misplaced. This Court does not, and cannot, dispute the settled position of law that even contractual matters can be assailed in writ proceedings. However, it is also trite that "[b]efore any adjudication on the question whether Article 14 of the Constitution could possibly be said to have been violated, as between persons governed by similar 7 supra at n. 1 8 supra at n. 3 9 supra at n. 4 10 supra at n. 5 W.P.(C)No 5625/2008 Page 21 of 23 contracts, they must be properly put in issue and established."11 In the present petition, the allegations on which violation of petitioner‟s fundamental right to equality and livelihood could be based, are neither properly made nor established. Even otherwise, the petitioner cannot seek parity with similarly placed licensees in a contract wherein renewal has been agreed to be granted on mutual terms between the parties. Moreover, the lis in the present petition appertains to purely the contractual rights and obligations of the parties herein and there is no element of public interest involved in the present petition warranting interference of this Court.
28. For the reasons outlined in the foregoing paragraphs, I find the challenge made by the petitioner wholly unsustainable. Consequently, the present petition is dismissed.
29. In view of the judgment rendered in the present petition, the application bearing C.M. 10754/2008 filed by the petitioner for restraining the I.T.D.C. from calling for fresh tendering in respect of the restaurant, namely, Chinatown, need not be dealt with separately and, therefore, is rejected.
11 per M.H. Beg, J. in Radhakrishna Agarwal and Ors. v. State of Bihar and Ors. reported at (1977) 3 SCC 457 W.P.(C)No 5625/2008 Page 22 of 23
30. The writ petition as well the application accompanying it accordingly stand disposed off.
August 05, 2008 G.S. SISTANI
„ssn‟ ( JUDGE )
W.P.(C)No 5625/2008 Page 23 of 23