M/S Hotel Natraj vs Union Of India And Others
2008 Latest Caselaw 1232 Del

       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.

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‟,

„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

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

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,

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

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.

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

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

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

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

(2006) 10 SCC 236

id. at para 11

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

(2004) 3 SCC 553

( 1990 ) 3 SCC 752

( 2004 ) 3 SCC 214

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.

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

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.

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

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."

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

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

WP(C) NO.6332/2003 & CW.9118-9373/2005

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

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

supra at n. 1

supra at n. 3

supra at n. 4

supra at n. 5

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.

per M.H. Beg, J. in Radhakrishna Agarwal and Ors. v. State of Bihar and Ors. reported at (1977) 3 SCC 457

30. The writ petition as well the application

accompanying it accordingly stand disposed off.

August 05, 2008                                 G.S. SISTANI
„ssn‟                                            ( JUDGE )