The single judge bench of the Jharkhand High Court held that a policy cannot change the contractual clause more particularly when the policy decision has come into effect, subsequent to the contract and any novation, rescission or alteration of a contract can only be done with the agreement of both the parties to a contract and cannot be done unilaterally.
Brief facts
The factual matrix of the case is that the Petitioner purchased the land in the year 1902, an area of 0.67 acres has been settled and a lease was executed in the year 1945 in the favour of the father of the Petitioner for the period of 30 years. Before the expiry of the period, the application was filed for the renewal of the lease. The government resolution was passed to amend the provisions of the Khas Mahal Manual, 1953, and also the terms of the contract provided for the realization of Salami at the time of renewal of lease as well as for enhancement of rent contrary to the provisions of the previous contract. The present writ petition is filed seeking a prayer to hold that the government resolution passed has got prospective application and the same cannot be applied retrospectively to the lease already executed under Khas Mahal Manual, 1953, and the conditions stipulated therein.
Contentions of the Petitioner
The Petitioner submitted that according to the Khas Mahal Manual, the State is required to renew leases virtually automatically; any deviation from this is completely arbitrary, unfair, and unsustainable in the eyes of the law. It was furthermore submitted that any novation, rescission, or alteration of a contract under Section 62 of the Indian Contract Act can only be done with the agreement of both parties to a contract and cannot be done unilaterally. The Petitioner relied upon the judgments titled Khas Mahal Citizen Welfare Society Vs. The State of Bihar through the Principal Secretary, Department of Revenue and Land Reforms & Ors., Sime Darby Engineering SDN. BHD. Vs. Engineers India Limited, and Citi Bank N.A. Vs. Standard Chartered Bank.
Contentions of the State
The State submitted that policy decisions of the executives are best left to it and a court cannot be propelled into the unchartered ocean of government policy. It was furthermore submitted that the resolution is quite worthy of applied to a lease that was already executed before the Khas Mahal Manual, and none of the annexures are in any way unfair, arbitrary, or unsustainable in the eyes of the law. The government is also quite capable of establishing new policies on occasion, given that the market value of the land it leases increases significantly within 30 years of the previous lease(s), while the value of money falls significantly. The Respondent relied upon the judgments titled Federation Haj PTOs of India vs. Union of India, and Bennett Coleman & Co. Vs. Union of India.
Issue before the Court
“whether the Resolutions of the Government vis-à-vis their applicability to the terms and conditions of the lease entered into by the Government or its predecessor in interest with the petitioner or their predecessor in interest can have retrospective effect.”
Observations of the court
The Hon’ble Court observed that any novation, rescission, or modification of a contract can only be done with the consent of both parties to a contract and cannot be done unilaterally. A policy cannot change a contractual clause, especially once the policy decision has taken effect after the contract.
The court noted that the terms and conditions of the lease can only be changed with the consent of both parties and not unilaterally by the government.
Based on these considerations, the court held that resolutions passed by the government will have prospective application and the same cannot be applied retrospectively to the lease already executed under the Khas Mahal Manual, 1953.
The decision of the court
With the above direction, the court disposed of the writ petition.
Case Title: Kumar Gowardhan Prasad Singh V. The State of Jharkhand
Coram: Hon’ble Mr. Justice Anil Kumar Choudhary
Case No.: W.P. (C) No. 6055 of 2018
Advocate for the Petitioner: Mr. Rajeev Ranjan Tiwary, Advocate
Advocate for the Respondents: Mr. Mithilesh Singh, GA-IV
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