Delhi High Court
The Indian Hotels Company Ltd vs New Delhi Municipal Council on 5 September, 2016
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on May 30, 2016
Judgment delivered on September 05,2016
+ CS(OS) 651/2013, IAs 9691/2015, 15819/2015 & 1530/2016
THE INDIAN HOTELS COMPANY LTD
..... Plaintiff
Through: Mr. Rajiv Nayar, Sr. Adv.
with Mr. Rishi Agrawala, Mr.
Karan Luthra, Ms. Niyati
Kohli & Mr. Saurabh Seth,
Advs.
versus
NEW DELHI MUNICIPAL COUNCIL
..... Defendant
Through: Mr. Sanjay Jain, ASG with
Mr. Akshay Makhija, CGSC,
Mr. Siddharth Thakur, Mr.
Vidur Mohan, Ms. Bani
Dixit, Ms. Rhea Verma &
Ms. Mahima Bahl, Advs.
CORAM:
HON'BLE MR. JUSTICE V.KAMESWAR RAO
V.KAMESWAR RAO, J.
1. This is a suit filed by the Indian Hotels Company Ltd., plaintiff
with the following prayers:-
―(a) Pass a decree of permanent injunction restraining the
Defendant by itself, its servants, agents, subordinates and
successors from in any manner interfering with the possession,
right to operate, run and maintain the hotel premises at 1, Man
Singh Road, New Delhi of the Plaintiff, as per the Collaboration
Agreement dated 18th December, 1976 read with the Deed of
Licence dated 18th December, 1976 and Supplemental Agreement
dated 25th September 1979;
(b) Pass a decree of permanent injunction restraining the
Defendant, its servants, officers, agents, subordinates and/or its
successors from giving effect to the decision communicated
through the letter dated 5.11.2012 having No.D/389/PA/D.E.-
l/2012 in respect of hotel premises at 1, Man Singh Road, New
Delhi, and/or from giving effect to any known or unknown
decision to conduct an auction for running /operating/
maintaining, the hotel premises at 1, Man Singh Road, New
Delhi;
(c) Pass any orders as the court may deem fit in the nature and
circumstances of the case.‖
2. The case, as set up by the plaintiff in the plaint is, that the areas in
what is popularly known as „Lutyens‟, Delhi are governed by the special
local authority which was formerly known as New Delhi Municipal
Committee constituted under the provisions of Punjab Municipal Act,
1911, these areas including various lands owned by the Government of
India. One of the plot, which is the subject-matter of the suit is plot
known as Plot No.1, Mansingh Road, New Delhi admeasuring 3.78 acres
(1,61,706 sq. feet). It is averred that vide allotment letter dated July 13,
1976 (Exh.P-1) issued by the Government of India, L&DO (Land and
Development Office) addressed to the New Delhi Municipal Committee,
the said plot was allotted for setting up of a Hotel. It is the case of the
plaintiff that it was given to understand, no formal agreement or lease
has been executed by Government of India in favour of the defendant.
However, the defendant holds this land on the basis of the aforesaid
allotment as a perpetual lessee.
3. In 1978, a conference of Pacific Asia Travel Association
("PATA") was proposed to be held. It is in order to facilitate the stay of
the delegates and visitors of the PATA conference, the defendant desired
to set up a five star hotel in New Delhi. However, since the defendant
did not have the expertise of setting up or running a five star hotel, it was
agreed that collaboration should be entered into with some expert of
repute in the field. It is averred in the plaint, that the plaintiff had also
applied for allotment of land for setting up a five star hotel in New Delhi
and the Govt. of India had identified the said plot for that purpose. On
March 3, 1976, the plaintiff addressed a letter to the defendant and
offered to equip a hotel of about 300 rooms of acceptable international
standards on the said plot. It is also averred that on March 31, 1976, a
further letter (Annexure to Exh.P-40) was addressed by the plaintiff to
the defendant proposing to construct a hotel on the subject plot. It was
suggested that, at that stage the cost of the hotel building, excluding the
cost of the land be borne by defendant, which will be around Rs.425
lakhs. The plaintiff would bear the costs of all other items such as
equipment of kitchen, furniture and furnishing in detail, landscaping,
operating, supplies etc and thereafter, there would be a revenue sharing
arrangement.
4. According to the plaintiff, it was in this background, an
Agreement called Collaboration Agreement for hotel building at 1,
Mansingh Road, New Delhi was executed by the plaintiff and the
defendant on December 18, 1976 (Exh.P-40). The Collaboration
Agreement recited the circumstances, in which the same was being
executed; viz so as to make the guests accommodation ready for PATA
conference sometime in 1978. According to the plaintiff, the
Collaboration Agreement broadly provided and recorded the following:-
(i) The plaintiff would undertake construction of hotel building at 1,
Mansingh Road, New Delhi at an estimated cost not exceeding Rs.475
lakhs;
(ii) The plaintiff has over 70 years of experience in running, planning,
designing, construction and operation of hotels;
(iii) NDMC agreed to collaborate with the plaintiff for construction of
hotel by financing the construction cost not exceeding Rs.475 lakhs and
to carry out the details as set out in schedule II to the CA;
(iv) In case the construction cost was found to be more than 475 lakhs,
the plaintiff would bear the same;
(v) the plaintiff would equip the hotel at its own cost, broad details of
which were given in Schedule III;
(vi) Article 1 provided for site and construction of hotel building;
(vii) Article II provided for services to be provided during construction
by plaintiff;
(viii) Clause 4 of Article II provided for cost of the hotel building;
(ix) Clause 5 of Article II provided for construction of hotel building;
(x) Clause 6 of Article II provided for assets, which belong to the
plaintiff;
(xi) Article III provided for general covenance between the parties;
(xii) Clause VIII of Article III provided for NDMC's rights and powers;
(xiii) Article IV provided for the manner of payment of cost of
construction;
(xiv) Article XI provided for settlement of specified disputes through
mechanism of arbitration as provided therein;
5. It is averred that on the same day, on December 18, 1976, another
document titled "Licence Deed" (Exh.P-41) of a hotel building between
plaintiff and the defendant came to be executed. According to the
plaintiff the licence deed broadly provided as follows:-
i) NDMC (called in the document as 'Licensor') would allow the
Plaintiff (described in the documents as 'Licencee') to operate the
hotel;
ii) Clause II provided as follows:
―Term:
1: The licence hereby granted shall be in force for a period of 33
years commencing from the date of occupation of the hotel first
by guest subject to the condition that the licencee shall be bound
by and observe and perform all the terms and conditions
contained in this licence throughout the period of this licence;
2. On the expiry of the period of licence of the said hotel building
hereby granted the licensor shall have option to grant licence for
further period on such terms and conditions as may be mutually
agreed upon between licensor and licencee. If licencee shall be
desired of obtaining a licence for further period after expiry of
present licence it shall give to the licensor a notice in writing of
not less than (60) sixty days prior to the date of expiry of the
present licence for the consideration of the licensor". (Emphasis
supplied)
iii) Clause III provided for licence fee and the manner of
payment, The licence fee being 10 ½ % of the gross income of the
licencee or a sum equivalent to 15% of the licensor's investment
whichever is higher.
iv) The agreement provided elaborately the manner and mode of
computation of gross income.
v) Clause VI provided for possession of the hotel building.
vi) Clause VII (2) provided that the Licencee shall reimburse to
the Licensor the amount of Ground Rent not exceeding 2.5% of
the cost of land valued at Rs. 9.48 lacs every year.
vii) Article VIII provided for other covenants on the part of the
licensor and licencee;
viii) Clause IX provided for future expectation of the hotel that
during the period of the licence hereby granted or the renewed
period of the licence, should it be necessary or expedient in the
interest of furtherance and development of tourism in the capital
city - Delhi to expand or add to the facilities in the said hotel
building in terms of additional guest rooms, function rooms,
public areas, restaurant and other facilities either in the same
premises and/or adjoining property, if and when made available,
the Licensor hereby permits the Licencee to carry out such
additions and expansion on the terms and conditions to be
mutually agreed upon.
ix) Clause XVI provided for arbitration as dispute settlement
mechanism in respect of the named subjects in the Clause only.‖
6. The plaintiff has averred that in terms of the Licence Deed
(Exh.P-41), the period of 33 years commenced from October 10, 1978.
On September 25, 1979, a Supplemental Agreement (Exh.P-42) was
executed between the plaintiff and the defendant, which provided:-
(i) Contribution of the defendant towards collaboration project of
construction, maintenance, operation and running of the hotel was
calculated as follows;
(a) cost of construction not exceeding 475 lakhs;
(b) Rs. 45 lakhs towards cost of financing, supervision and other
charges;
(c) Cost of acquiring land admeasuring 3.78 acres taken at Rs.106.64
lakhs with land valued at Rs.91.48 lakhs.
(d) It was clarified that the total investment of the defendant in the
project has been taken to be Rs.626 lakhs at the maximum
(ii) It was provided that the plaintiff shall pay, to the defendant, a sum
of Rs.12.00 lakhs per annum in lieu of house tax payable in respect of
hotel building;
7. It is averred by the plaintiff, that by virtue of Supplemental
Agreement, the cost of acquiring land being plot No.1, Mansingh Road,
New Delhi admeasuring 3.78 acres was valued at Rs.106.64 lakhs
comprising Rs.91.48 lakhs being the basic cost of the land of defendant
and sum of Rs.10.66 lakhs being arrears of ground rent and Rs.4.5 lakhs
being depreciated value of the building on the plot since demolished,
was brought in by the defendant into the Joint Venture as their
contribution in addition to the cash for construction of hotel building as
agreed in the initial agreement. It is the case of the plaintiff, that by
virtue of this agreement, the land became the asset of the Joint Venture.
According to the plaintiff, if the land was not so brought in, as an asset
of the Joint Venture, the defendant would have had to pay a sum of
Rs.106.64 lakhs in cash. Thus, from that date onwards, an interest in the
land was/stood created in favour of the Joint Venture hotel project. It is
the case of the plaintiff, that the land therefore, post the Supplemental
Agreement is an asset of the Joint Venture between the plaintiff and the
defendant and by virtue of being a Member of this Joint Venture, the
plaintiff has an interest in the land as it is an asset of the Joint Venture
between the plaintiff and the defendant.
8. The plaintiff would aver that thereafter, it had completed the
construction of the hotel building consisting of approximately 300 rooms
with all other allied facilities and started the commercial operation of the
hotel building with effect from October 10, 1978. The period of 33 years
is reckoned from the said date. It is also averred that the plaintiff has
incurred an expenditure, at that point of time, to the tune of Rs.461.61
lakhs. The plaintiff would aver that it has been operating and running
the hotel since October 10, 1978 and from time to time, has incurred
huge expenditure for refurbishing, renovating and maintaining the hotel
building and guests‟ rooms and other amenities in the hotel. It is the
case of the plaintiff, that till the date of filing of the suit, it had incurred a
capital expenditure on the hotel building, to the tune of Rs.129 crores
and it has been regularly paying the defendant, the licence fee, in the
manner provided in the Licence Deed (Exh.P-41) amounting to
Rs.247.25 crores during the initial term of the licence upto October 10,
2011 against defendant‟s investment of Rs.6.26 crores which remained
constant, whereas the plaintiff has incurred a capital expenditure of more
than Rs.129 crores during the initial term of licence. It is averred that
there has never been any litigation with the defendant on running,
maintaining and operating the hotel. It is the case of the plaintiff that in
terms of Collaboration Agreement, Licence Deed and Supplemental
Agreement, the following position emerges:-
i) That although the Collaboration Agreement and the Licence
Deed described the Plaintiff as 'licencee' the Plaintiff, in fact and
in law, is much more than a licencee and the hotel project is a
joint venture between the Plaintiff and the Defendant.
ii) The Plaintiff has interest in the project which includes the
land, the building, furnishing, operation and the brand value and
goodwill it has generated and associated with the property in
question inasmuch it is known be an iconic product of
international repute serving the cause of tourism in the capital
city.
iii) Although the documents is titled as Collaboration Agreement
and the Licence Deed, it is not a mere licence to run the hotel. In
fact, it is a Joint Venture between the Plaintiff and Defendant in
which the Defendant has brought in the land and a part finance
for construction as its contribution towards the Joint Venture.
The Plaintiff in turn has brought in it? contribution the cost of
balance construction and the entire costs of furbishing and
furnishing the said construction into an operational world
class Five Star Deluxe Hotel. The Plaintiff has also brought in its
expertise as hotelier of 70 years experience and repute. The
Plaintiff has also brought in huge goodwill and the brand equity
associated with the name "Taj Group of Hotels" and the
reputation of the industrial house which runs the same.
iv) The Collaboration Agreement was signed as the Defendant
desired to put up a hotel of about 350 rooms, because
Government of India was expected to host PATA Conference in
1978 and NDMC was keen to play some role in PATA
Conference.
v) While the investment made by the Defendant was up to Rs.626
lacs (including the value of land) towards this Joint Venture, the
balance entire contribution of an amount exceeding Rs.129
crores till date. By this joint venture hotel project, the Defendant
has earned by way of licence fee cumulatively a sum of Rs.
266.22 crores upto 31.3.2012 as against its total investment of
Rs. 6.26 crores in the hotel project.
vi) NDMC is to receive share of the gross revenue or a fixed
return on investment regardless of the economic performance of
the hotel or regardless of whether hotel has made any profit or
not.
vii) The project therefore is Joint Venture of Plaintiff and
Defendant and a new public private partnership model designed
in 1976 and is not mere licence as understood in the common
parlance.
viii) The relationship between Plaintiff and Defendant therefore
is not of a mere licencee but of equal status as partners in
collaboration. The arrangement and the legal status of the
collaboration between the Plaintiff and Defendant is sui
generous and therefore is not equivalent with a licence or lease
agreement under which the Defendant NDMC may grant licence
on its own existing property or auction or sale or lease of vacant
piece of land for a specified purpose in favour of a third party.
ix) The aforesaid status is also understood and acknowledged by
the parties that the Defendant has under the Licence Deed dated
18th December, 1976 an option to grant a licence for a further
period whereas the Plaintiff has a right to ask for
renewal/extension of licence. Like in normal deed of lease
between the parties governed by Transfer of Property Act with a
provision for renewal of the lease on such terms and conditions
as may be mutually agreed. The present relationship between the
Plaintiff and the Defendant is also to be renewed on the same
basis and in the event of there being any disagreement the same
has to be resolved by applying general principles of Transfer of
Property Act and additional administrative law principles since
the Defendant is a public authority.‖
9. The plaintiff states that on February 15, 2010 (Exh.P-22) the
plaintiff addressed a letter to the defendant intimating the plaintiff‟s
exercise of right to seek extension of a licence for a further period.
Pursuant thereto, a Committee of senior officials was constituted on
September 21, 2010 (Exh.P-2) by the defendant to consider the
extension/renewal of the licence of the hotel, and the plaintiff‟s
representatives were invited for discussion by the said Committee and
various issues were discussed. It is averred that the Committee raised
various issues including applicability of Section 141(2) of the New Delhi
Municipal Council Act, 1994 („Act of 1994‟ in short) and mode and
manner of operationalizing the renewal provisions in the Licence Deed
(Exh.P-41). According to the plaintiff, in response to the discussions
and queries raised by the defendant, the plaintiff on January 06, 2011
(Exh.P-3) sent a letter to the defendant and addressed all the issues
raised. The plaintiff clarified that the guidelines made by the defendant
in August 2000 under Section 141(2) of the Act of 1994 were not
applicable to the plaintiff for various reasons. It is also averred that on
January 11, 2011 plaintiff addressed a letter to the defendant forwarding
a legal opinion to explain the legal position arising out of interpretation
of Section 141 of the Act of 1994 and the decision of this Court and the
Supreme Court in case relating to Chanakya Cinema viz Aggarwal and
Modi Enterprises Ltd. vs. New Delhi Municipal Council. On May 04,
2011 (Exh.P-43) a notice of meeting on May 09, 2011 was issued by the
Estate department of the defendant in which the plaintiff‟s
representatives were invited. Further meeting was convened on June 03,
2011 (Exh.P-4 minutes of the meeting) vide notice dated June 02, 2011
(Exh.P-44). According to the plaintiff, detailed discussions were held
and thereon on July 15, 2011 the plaintiff placed on record, the broad
issues discussed with the Committee at the meeting, which inter alia
included that the licence of the Hotel shall be extended by the plaintiff
for a further period of 30 years on and from the expiry of the present
term of the licence and the licence fee payable to the defendant by the
plaintiff shall be at 17.25% of the gross turnover of the hotel for first 10
years; at 18.25% of the gross turnover of the hotel for the next 10 years
and 19.25% of the gross turnover of the hotel for the last 10 years with a
minimum guaranteed amount of Rs.21 crores, Rs.25 crores and Rs.30
crores per annum for each cycle of 10 years. According to the plaintiff,
the said Committee submitted its report based on discussions concluded
with the plaintiff as placed on record by the plaintiff vide its letter dated
July 15, 2011 addressed to the defendant. The report of the Committee
recommending the extension of the licence on the terms as negotiated
with the plaintiff was a testimony to the fact that the defendant had
agreed to the extension of licence in favour of the plaintiff and
acknowledged the commercial term, which were to be applicable during
the extension period. Before the matter of extension of licence in favour
of the plaintiff could be formally placed before the Council of the
defendant, a meeting of Ministry of Urban Development, Govt. of India
(Exh.P-7) took place on August 01, 2011 wherein it was felt that the
defendant should invite open bids and the plaintiff should be asked to
match the highest bidder to exercise its right of first refusal. On
September 08, 2011 (Exh.P-37), a letter was addressed by the defendant
to the Secretary, Ministry of Urban Development requesting to get the
matter re-examined and approve the defendant‟s proposal to process
extension of Licence Deed and Collaboration Agreement on mutually
agreed terms and conditions with the plaintiff. On September 28, 2011
(Exh.P-11), the plaintiff addressed a letter to the defendant and
requested it to expedite the matter of extension of licence between the
plaintiff and the defendant. It is averred by the plaintiff that on
September 30, 2011 (Exh.P-45), the plaintiff addressed a letter to the
Secretary, Govt. of India, Ministry of Urban of Development department
regarding the project and requested it to advise the defendant to go ahead
and consider the plaintiff‟s request for renewal of collaboration on
mutually agreed terms. It is averred that on October 12, 2011, the
plaintiff addressed a letter to the L&DO, Govt. of India forwarding the
documents relating to various queries raised by the defendant relating to
hotel project and the sanction plans. On November 08, 2011 (Exh.P-46),
a letter was addressed by the defendant to the plaintiff informing the
plaintiff that with reference to the plaintiff‟s request for extension of the
Collaboration Agreement and Licence Deed, made in the letter dated
February 15, 2010 (Exh.P-22) the matter was placed before the Council,
in its meeting dated October 07, 2011 (Exh.P-12 and Exh.P-13),
wherein, it was decided to accord sanction for extension of the existing
Collaboration Project and Licence Deed for one year upto October 10,
2012 subject to the condition that the plaintiff should agree to pay the
licence fee as per mutually agreed terms and conditions retrospectively
with effect from October 11, 2011.
10. It is averred that on November 09, 2011 (the document denied by
the defendant), the plaintiff addressed a letter to the defendant
acknowledging and confirming the initial extension of one year on the
understanding that the one year extension conveyed was to facilitate the
formalization of the documentation and the revised commercial terms for
the extension of the licence for a further period of 30 years and the
plaintiff requested the defendant to facilitate early closure of documents
and migration to the new commercial terms and regime. It is averred
that the defendant convened a meeting with the plaintiff on July 12, 2012
and apropos that meeting a letter dated July 12, 2012 (Exh.P-47), was
addressed by the defendant to the plaintiff requiring the plaintiff to
confirm as follows:
―(i) You have offered to pay a minimum licence fee of Rs.21 crores or
17.25% of the gross turnover whichever is higher for this period.
(ii) You will pay the licence fee for the aforesaid period on the basis of
actual Gross Turnover for the year 2011-12 as per the latest audited
accounts and the balance, if any, on the finalization of audited accounts
for the year 2012-13.
(iii) You undertake to make balance payment of the licence fee based on
para (i) above within a week of the receipt by you of the approval of the
Council as communicated by us in writing.
(iv) You clearly understand that figure indicated at (i) above is subject to
final approval by the Council before payment based on it are released.‖
11. On July 13, 2012 (Exh.P-16) the plaintiff confirmed the proposal
made by the defendant and requested it to accord its approval for
extension of collaboration for a period of 30 years in terms of the
plaintiff‟s letter dated July 15, 2011.
12. On August 16, 2012 (Exh.P-48) a letter was addressed by the
defendant to the plaintiff informing that the plaintiffs letter dated July
13, 2012 was placed before the Council at its meeting held on July 25,
2012 (Exh.P-19) and the Council had decided as follows:
―After considering the facts and circumstances of the case it was
resolved by the Council by majority that the Council may charge
from the licencee Messrs. IHC Ltd. fee at 17.25% of the gross
turnover or Rs.21 crores a year for the period from 11th October
2011 to 10th October, 2012 whichever is higher".
13. It is averred by the plaintiff that on August 17, 2012 the plaintiff
addressed a letter to the defendant forwarding the payment as indicated
in the defendant's letter. On September 26, 2011 the plaintiff addressed
a communication to the defendant forwarding therewith an opinion
obtained by the plaintiff from Senior Advocate on the issue as to whether
it was obligatory in law for the defendant to invite bids in an open
auction for deciding as to who should operate the hotel with an option to
the querist to match the highest bid received through such process or
whether the defendant could extend the licence of the hotel on the
mutually agreed terms and conditions. According to the plaintiff, the
opinion was necessitated in view of certain issues raised by the
defendant during the discussion process.
14. The plaintiff avers that it received a letter dated November 05,
2012 (Exh.P-49) from the defendant conveying the decision of the
Council taken in its meeting held on September 27, 2012 (Exh.P-20)
resolving to opt for public auction to determine the market price of the
licence fee with the first right of refusal to the Plaintiff as follows:- -
"New Delhi Municipal Council in its meeting held on 27th
September, 2012 had considered a proposal on the above cited
subject and had resolved to opt for public auction in a fair and
transparent manner of its property at 1 Mansingh Road, New
Delhi with first right of refusal to Indian Hotels Company
Limited. The recourse to public auction would serve to determine
the market price and the licence fee that Messrs. IHCL would
have to match if they wish to run the hotel at this property".
15. It is averred by the plaintiff that on November 20, 2012 (Exh.P-39)
the plaintiff addressed a letter to the defendant in response to letter dated
November 05, 2012 (Exh.P-49) expressing its surprise and
disappointment that instead of extending the Agreement on the mutually
agreeable terms the Council had decided to opt for public auction for the
hotel which the Plaintiff would have to match in case it wished to
operate the hotel. The letter recapitulated the history of the transaction
and in particular that:
i) the arrangement between the Plaintiff and Defendant was a Joint
Venture partnership collaboration and the terms of such collaboration
were initially recorded for a first tenure of 33 years;
ii) the plaintiff had a right to seek an extension of licence;
iii) such renewal was to be on a mutually accepted terms and conditions;
iv) that NDMC cannot and indeed did not have any issue or objection for
such renewal;
v) the only issue being on what terms such extension of collaboration is
to be made;
vi) the assumption that the renewal/extension of licence should be on the
market determined price of the project would run counter to the very
notion of a joint venture on which this project was founded;
vii) the Defendant had contributed land leased from the Govt.of India to
the hotel project which was valued at the then prevailing market rate of
Rs. 91.48 lacs. The said amount was accordingly treated by the parties
as having been paid in kind by the Defendant as part of its capital
contribution to the project established for the construction and operation
of the hotel. The investment in cash by the 'Defendant was capped at Rs.
475 lacs (later revised to Rs. 626 lacs including the cost of land by
mutual consent). The rest of the investment was made by the Plaintiff.
The hotel was thus constructed as a joint venture between the Plaintiff
and the Defendant;
viii) that treating this Hotel as a greenfield project in which the value
should be market determined overlooks the basic fact that in 1976, The
Defendant received in full the then market value of the land - albeit as a
credit towards its share of capital investment. It would have made no
difference if the value had been paid in cash and then brought back by
the Defendant into the joint venture. The consequence of payment of full
market value of the land by credit to the capital contribution is that the
land should be taken as being committed to the Joint venture. The
Defendant is a public body and is expected to act fairly. Just because the
joint venture arrangement was captured in a Licence Deed and a
Collaboration Agreement instead of a conveyance [since the joint
venture was not incorporated as a SPV - so as to benefit from the Brand
of Taj and Indian Hotels] does not alter the fact that Defendant has
received full credit for the value of the land, and has enjoyed returns on
that basis for all these years.
ix) that applying the principles of administrative law and considering the
fact that the Defendant is public authority, it must get a fair return and
the same should be determined in accordance with the normal procedure
adopted for renewal of leases under the Transfer of Property Act;
x) that the method suggested in the communication dated 5th November,
2012 of inviting the bids "to determine market price of licence fee" was
grossly unfair to the Plaintiff and in fact would raise all unnecessary and
unhealthy speculation to cause prejudice and injury to the Plaintiff.
16. It is averred that the plaintiff therefore submitted that in view of
the very long term relationship between NDMC and the Plaintiff the
matter should be reconsidered and the Defendant must earn a fair share
of gross revenue which should be determined on the basis of accepted
norms for such determination and not by competitive bidding.
17. On March 25, 2013 the Plaintiff was served with SLP(C) No.9142
of 2013 whereby one Mr. Mithilesh Kumar Pandey has challenged the
order passed by this Court in WP(C ) No.6615 of 2012 dated October 17,
2012 in respect of the two annual extensions of licence upto October
2013. The Plaintiff submits that it was not made a party to the Writ
Petition before this Court and became aware of the proceedings only
through the receipt of notice when the Supreme Court allowed the
impleadment of the plaintiff and issued notice on the SLP.
18. It is averred that on March 25, 2013, the plaintiff again
represented to the Defendant in respect of the Defendant's impugned
decision dated September 27, 2012 (Exh.P-20), conveyed to the Plaintiff
by virtue of the impugned communication dated November 05, 2012
(Exh.P-49).
19. It is in terms of the aforesaid background, the suit was filed by the
plaintiff on April 4, 2013, seeking the reliefs already reflected above.
20. The defendant initially filed a written statement on May 08, 2013.
On May 10, 2013, (Exh.DW1/P4) the Ministry of Home Affairs vide
their letter wrote to the defendant as under:-
―2. It is observed that the said proposal to allow IHCL to have
the first right to refusal in the said public auction has not been
provided for in the lease deed. A provision of the first right of
refusal will result in lower bids in the public auction. Therefore,
Ministry of Home Affairs is of the considered opinion that the
first right of refusal should not be allowed to IHCL in the
proposed auction and fresh lease should be granted by open
public auction.‖
21. On June 27, 2013, (Exh.DW1/P5), the Ministry of Home Affairs
wrote to the defendant as under:-
―I am directed to refer to NDMC's letter No.D-
43/Dir(GA/CS)/2013 dated 18.6.2013 on the subject cited above
and to say that the first right of refusal will not fetch the correct
market price. Either the competitors would bid excessively or
may perhaps show no interest at all. Therefore, in the interest of
transparency, it is better that NDMC may go for public auction,
whether the IHCL may participate as the bidder. It is also felt,
that Courts will not take objection to public auction as it is a
more transparent method and if NDMC so feels, can file a
revised reply quoting the directions of this Ministry.‖
22. The defendant vide letter dated October 11, 2013 (Exh.P-31)
wrote to the plaintiff as under:-
― Dated: 11.10.2013
Dh. D.K. Beri,
Sr. Vice President (Business & Corporate Affairs),
Indian Hotels Co. Ltd.
Taj Palace, Sardar Patel Marg,
New Delhi.
Sub: Extension of collaboration Agreement and Licence
Deed between Indian Hotels Co. Ltd. in respect of Hotel
Taj Man Singh.
Reference: (i) Letter No.D/290/DE-I dated 8.11.2011
(ii) Letter No. D/329/PA/DE-I/2012 dated 16.8.2012
(iii) Letter No.D/389/PA/DE-I/2012 dt. 5.11.2012
Sir,
The New Delhi Municipal Council in its meeting held on
7.10.2013 had considered the proposal on the above cited
subject and has resolved ―that the existing arrangement as
per Council's Resolution dated 27th September, 2012 is
available upto 10.10.2013. Since the instructions of the
Ministry of Home Affairs consequent upon the opinion of
the Solicitor General of India, as required by this Council
Meeting on 27.06.2013, has not been received, the Council
resolved that the existing arrangement for payment of
licence fee should continue till 31.3.2014, or till the
Council takes a decision on receipt of such opinion,
whichever is earlier‖.
2. This letter may be read in continuation to the letters
referred above.‖
23. On January 1, 2015 (Exh.DW1/5), the Ministry of Home Affairs
issued an OM directing the defendant under 396 of the NDMC Act, 1994
to resort to an open auction. It appears, in view of the direction of
Ministry of Home Affairs, the defendant filed an application being IA
No.16139/2015 under Order VI Rule 17 of the CPC for amendment of
the written statement. The said amendment was allowed by this Court
on March 17, 2016 on the statement of Mr. Rajiv Nayar, learned Senior
Counsel for the plaintiff giving no objection and the amended written
statement filed by the defendant was brought on record, which was
without prejudice to the rights and contentions of the plaintiff in the suit.
Amended replication has also been filed by the plaintiff.
24. It is the stand of the defendant in the amended written statement,
that the suit is barred by the provisions of Section 385 of the Act of 1994
for want of service of statutory notice to the defendant and as such, the
suit is liable to be dismissed. It is also averred that the plaintiff has no
legal enforceable right to claim any of the reliefs as sought for. It is also
stated that the plaintiff has absolutely no right, title or interest in the land
or building in question which exclusively belongs to and vests with the
defendant. The plaintiff has no right to demand extension of licence to
operate the hotel as of right as it has no such right in law, collaboration
agreement or the Licence Deed. The plaintiff was merely a licencee to
operate the hotel for a limited period with no right to transfer, sublet the
said hotel or any portion thereof, permanently or temporarily to anybody
else. The period whereof has since expired. The relief sought for,
cannot be granted without seeking declaration to the decision of the
Council. It is stated, that the suit does not disclose any cause of action in
the light of the expiry of the period of licence and the undertaking of the
plaintiff in the Licence Deed to hand over the possession of the hotel
building together with fittings and fixtures and all other installations
belonging to the defendant as per the Collaboration Agreement, on the
expiry of the licence period. It is stated that the suit is barred by law in
the light of the mandate of the provisions of law as contained in Section
141 (2) of the Act of 1994. The suit is hit by Order 1 Rule 2 CPC. A
reference was also made to Public Interest Litigation filed in this Court
vide Writ Petition (Civil) No.6615/2012, in which extension of licence
beyond October 10, 2012 was challenged. The Court dismissed the
Public Interest Litigation by noting the statement of the counsel for the
defendant, who refuted that the decision for extension of lease for one
year from October 2012 to October 2013 was without any agenda item.
It is also stated that the defendant further decided to opt for public
auction in a fair and transparent manner, with first right of refusal to
IHCL. It was also noted that the statement of the counsel for the
defendant was recorded that for a purpose of holding public auction, M/s
Ernst and Young consultants have been appointed and an attempt is
being made to hold the public auction within a period of three to six
months from that date.
25. It is also the stand of the defendant:-
(i) A plot of land measuring 3.78 acres together with structures
standing thereon at No. 1,Man Singh Road, New Delhi was allotted to
the defendant New Delhi Municipal Council vide letter dated July 13,
1976 by the Ministry of Works & Housing, Land & Development Office,
Govt of India. The said land was allotted to the defendant for
construction of a hotel inconformity with the architectural surrounding of
the area after approval of the building plans.
(ii) The purpose of the allotment of the land by the defendant was to
construct a Hotel which would be available for the Pacific Area Travel
Association Conference in 1978. The Plaintiff then sent a proposal to
the defendant stating therein that it would be glad to jointly participate in
the construction and management of a hotel of acceptable international
standards on the said land, After considering the proposal of the Plaintiff,
the defendant agreed to enter into a collaboration agreement for
construction of a hotel building along with a Licence Deed to operate the
said hotel after construction for a fixed period of 33 years.
(iii) The Plaintiff represented to the defendant that it had acquired
considerable expertise and knowledge in the planning, designing,
construction and operation of hotel for over 70 years and had offered its
services in the aforesaid areas to the NDMC, vide letter dated, March 31,
1976.
(iv) Accordingly on the basis of the representations made by the
Plaintiff, the defendant entered into a Collaboration Agreement for the
construction of a hotel building, on December 18, 1976 with Plaintiff
with the object of putting up a hotel of about 350 rooms together with all
related facilities conforming to 5 star classifications and also to boost its
own revenues.
(v) In order to put up a hotel of acceptable standards (5 star
classifications) the defendant NDMC agreed to finance the construction
of building at the cost not exceeding Rs.475 Lakhs, which included civil
construction, plumbing, sanitary fittings, heating, ventilation, air
conditioning, electrical installations, elevators and swimming pool etc.
(vi) On the basis of the representations made by the Plaintiff the
defendant had agreed to collaborate with the Plaintiff in the construction
of the hotel building by financing the cost of construction of the hotel
building as indicated above.
(vii) As per the said collaboration agreement the Plaintiff had agreed to
equip the hotel building with equipments such as kitchen equipments,
laundry equipment, furniture and furnishings at its own the cost. The cost
of equipments to be financed by the Plaintiff was around Rs. 550 Lakhs.
As per the said agreement the Plaintiff was also required to carry out the
detailed study for the purpose of putting up a hotel, to recommend the
salient design requirement, to provide project management services, to
select and appoint architect, consulting engineer etc. with approval of the
defendant. As per the said agreement the defendant had agreed to pay to
the Plaintiff in a phased manner on the basis of work completed by the
Plaintiff.
(viii) That in terms of the said collaboration agreement defendant
further granted a licence to the Plaintiff vide Licence Deed dated
December 18, 1976 (Exh.P-41) for the purpose of running a hotel of
acceptable standards (5 star classifications) for a fixed period of 33 years
only, commencing from the date of first guest occupation in the hotel.
The terms of the agreement and the Licence Deed clearly show that no
proprietary rights were vested in the Plaintiff at all which have always
continued to vest in the NDMC and that the collaboration agreement was
executed only for the purpose of construction of hotel building with the
further conditions that the Plaintiff would be entitled to only operate and
manage the hotel for a fixed period of 33 years only on licence basis
only.
26. It is the case of the defendant in the written statement, that the
plaintiff has totally misread the Licence Deed in total contravention of
the laws. The plaintiff has got no right to seek extension or renewal of
the Agreement as of right. According to the defendant, the building was
constructed by the defendant with the assistance of the plaintiff as per
Collaboration Agreement, and the said building was to be only managed
and operated as a Hotel as per the terms of the Licence Deed for a period
of 33 years only with no right in the property in favour of the plaintiff,
which continues to vest with the defendant. The defendant relied upon
the following clauses of the Licence Deed:-
(i) As per clause IV para 3 of the licence deed the defendant had
absolute right to revoke/cancel the licence, to take possession of the
licenced premises by recourse of laws as provided in the Public
Premises Act 1971, or any other such law in force, in the event of the
plaintiff committing a default in the payment of That licence fee.
(ii) As per Clause VI para 2 of the licence deed the ownership of the
hotel for all times exclusively vests with the defendant together with all
fitting, fixture and other installation of immovable type or the type the
removal of which is likely to cause damage to the building.
(iii) As per clause VI para 3 of the licence deed the ownership of all
movable assets in the hotel building referred to in schedule III to the
collaboration agreement was to remain with the plaintiff. Whereas, after
the termination of the licence deed, the option to buy the plaintiffs assets
at reasonable price was also given to the defendant.
(iv) As per clause VII para 6 of the licence deed, the plaintiff was
granted the licence to use the said hotel building exclusively and strictly
for the purposes of running a hotel as per acceptable standards together
with related facilities and business appurtenant thereto for the
furtherance and development of tourism in India and not for any other
purposes, whatsoever.
(v) As per clause VII para 12 of the licence deed, the plaintiff has no
right to transfer/sublet the said hotel or any portion thereof, permanently
or temporarily, to anybody else. As per clause X of the licence deed, the
right to terminate the licence deed remained with the defendant in case
of default in payment of licence feed in the manner provided in the
licence deed willfully or otherwise the plaintiff.
(vi) As per clause XII of the licence deed, the plaintiff had agreed to
hand over the possession of the hotel building together with fittings and
fixtures and all other installations belonging to the defendant as per the
Collaboration Agreement, on the expiry of the licence period and in the
event of the licence having been terminated earlier by the defendant,
within 30 days from the expiry of the same.
This clause also stipulates that the plaintiff shall pay such damage
charges for overstay in the premises from the date of expiry of the
licence period at the rates determined by the defendant from time to
time.
27. It is stated that the defendant had agreed to collaborate with the
plaintiff in the construction of hotel building by financing the
construction of the said building amounting to Rs.475 lakhs, later revised
to Rs.626 lakhs. The construction was done by the defendant with the
assistance of the plaintiff keeping in view its experience strictly as per
the Agreement. It is also stated, that whatever the plaintiff has invested
for running the hotel purely as a licencee, is, as per the terms of the
Agreement and the Licence Deed and the plaintiff has recovered its
investment in multiples of the same. It is stated that the tariffs/public
charges are directly proportionate to the standards maintained by the
hotel in the hospitality industry. The investment by the plaintiff was
squarely towards business consideration and profiteering by improving
the quality of services. It is also stated, that the price of the land on
which the hotel stands has multiplied manifold. It is also averred that the
Supplemental Agreement dated September 25, 1979 (Exh.P-42) was
executed between the parties, whereby the defendant‟s contribution was
raised from Rs.475 lakhs to Rs.626 lakhs, which was arrived at, by
including the cost of the land, arrears of ground rent etc. The defendant
denied that the stated contribution was an investment in the Joint
Venture hotel project for the land to become the asset of collaboration of
the plaintiff and the defendant. It is stated, neither the Collaboration
Agreement nor the intent of the defendant at any stage provide so. The
defendant relied upon explanation (A) II of the Supplemental Agreement
makes it explicitly clear that the defendant is the licensor and the
plaintiff is merely the licencee. Para 3 of the Supplemental Agreement
clearly provides that the defendant has offered and the plaintiff has
agreed to accept the licence to occupy and use the hotel building upon its
completion for the purpose of running the hotel only with no proprietary
rights in the least which continue to vest in the defendant and is public
property required to be dealt with as per law. According to the defendant
the Supplemental Agreement only supplement/clarifies the original
Agreement and does not change the original Licence Deed. It is stated
that as per Para 2 of Clause II of the Licence deed the option to renew
the licence for a further period has been exclusively vested with the
defendant. The discretion to renew or not to renew exclusively vests
with the defendant in terms of the Licence Deed dated December 18,
1976 (Exh.P-41). It is stated that no public property can be dealt with,
in violation of the provisions of the Act of 1994. Accordingly, the
Chairperson of the defendant had constituted a Committee on July 27,
2010 to examine the legal, contractual and financial aspects of the
proposal and request received from the plaintiff. The said Committee
held number of meetings and also considered the legal advice.
Meanwhile, the Ministry of Urban Development, Govt. of India
suggested that fresh bids should be invited for running the hotel at the
demised premises, while giving first right of refusal to the plaintiff. One
such meeting was convened by the defendant on June 3, 2011 to look
into the request of the plaintiff for renewal of licence and minutes of the
meeting were forwarded for approval of the Chairperson. Furthermore,
the defendant also decided to take the expert opinion of a consultant to
give the best possible evaluation in the matter. Since the consultant
required time to come up with detailed recommendation, the defendant
in the interregnum decided in its Council meeting dated October 7, 2011
to extend the terms of licence only for a period of one year from October
11, 2011 to October 10, 2012 which gives no vested right to the plaintiff.
It is stated that the extension of Licence Deed from October 11, 2011 to
October 10, 2012 and from October 11, 2012 to October 10, 2013 or till
such time, a new licencee was chosen was granted by the defendant to
the plaintiff only on temporary basis so that the hotel could be operated
by the plaintiff till the new vendor/licencee was put in place through
public auction for the purpose of operating and managing the hotel. The
Collaboration Agreement and the Licence Deed have to be read together.
According to the defendant, an attempt is being made to grab the public
property and wants to scuttle the provisions of law and the laws as
enunciated by the Apex Court qua the public property.
28. It is also averred in the written statement, that the Ministry of
Home Affairs, Govt. of India, vide OM dated May 10, 2013
(Exh.DW1/P4) and June 27, 2013 (Exh.DW1/P5), in exercise of its
power under Section 395 of the Act of 1994 issued directions whereby,
advising the defendant to go for open auction without giving the first
right of refusal to the plaintiff. According to the defendant, since there
were divergent opinions, the defendant brought the same to the notice of
the competent authority in the Central Government. While awaiting the
final view of the Central Government, in this regard, extended the
licence period from time to time. Final decision was conveyed by the
Central Government vide OM dated January 1, 2015 (Exh.DW1/5) in
exercise of its power under Section 396 of the Act of 1994, whereby
directing the defendant to resort to public auction without giving right of
first refusal to the plaintiff and find best bidder in respect of the property
situated at 1, Man Singh Road, New Delhi. It is stated, that offer given
to the plaintiff as right of first refusal in terms of resolution dated
September 27, 2012 stands superseded by the directions of the Central
Government and in terms of the resolution of the Council dated January
30, 2015 (page 202, part of Exh.DW1/6) and particularly March 25,
2015 (Exh.DW1/6). It is submitted that the plaintiff in any case, did not
accept the offer of right of first refusal given to it earlier and challenged
the decision of the Govt. of India for open auction before this Court by
way of the present suit. Thus, the offer of right of first refusal granted in
terms of resolution dated September 27, 2012 (Exh.P-20) stands
withdrawn in terms of OM dated January 1, 2015 before its acceptance
by the plaintiff.
29. The defendant in their written statement, has stated that in terms of
Section 141(2) of the Act of 1994 that the use of any immovable
property should be allowed on payment of licence fee, determined on
competitive basis. It is the stand of the defendant that auction to renew
the licence squarely and exclusively rests with the defendant, and the
stand has been narrated in the following manner in para 25, in reply to
merits.
―25. XXXX XXXX XXXX
The relevant provision of Section 141 of the N.D.M.C. Act
1994, which relates to "Property and Contracts" provides
that the Chairperson may with the sanction of the Council,
lease, sell, let out on hire or otherwise transfer any
immovable property belonging to the Council. The
consideration for which any immovable properly may be
sold, leased or otherwise transferred in normal and fair
competition. As per sub section(3) of this section, the
sanction of the Council under this section may be given
either generally or for any class of cases or especially for
any particular case. It is also relevant to note that after
the coming into force of the N.D.M.C. Act 1994, general
guidelines to attend to cases of disposal of immovable
property were not available. The Council in its Resolution
of 19 March 1999 approved detailed guidelines on the
subject.
In respect of "special categories of properties" the
approved guidelines as contained in clause 9 of the said
resolution was that "hotels, cinemas and similar projects
etc. may be governed as per mutually agreed terms and
conditions as entered into by the Council from time to
time".
The above policy of 19 March 1999 was reconsidered by
the Council in its meeting on 30 August 2000. Para 3 and
6(i) of the Agenda Item are relevant and are re-produced
hereunder:-
"3 It has been observed that renewal in case of premises of
hotels and the cinema complex is on mutually agreed term.
The existing Estate Policy
provides for determining terms and conditions as also
Licence fee on mutually agreed terms as approved by
N.D.M.C. vide its resolution No. 6 dated 18.3.99. Clause 9
for special categories reads as under:-
"Hotels/Cinemas and similar other projects may be
governed as mutually agreed terms and conditions as
entered into by the Council from time to time."
i. The above decision appears contradictory to section
141(2) of N.D.M.C. Act, which relates to the disposal of
immovable property and puts an embargo on transfer of
premises on non competitive terms. The Section reads as
under:
"141(2) - The consideration for which any immovable
,property may be sold, leased or otherwise transferred
shall not be less than the value at which such immovable
property could be sold, leased or otherwise transferred in
normal and fair competition."
ii. Thus it is obvious from the above Section that its use
should be allowed on payment of licence fees determined
on competitive basis. In case Council goes by the existing
policy as stated above, the existing licencee can always
involve the Council in unending disputes as it has
happened in case of Chanakya Cinema in which the
licencee started litigation against NDMC soon after
obtaining the Licence.
Same is the fate of premises licenced for hotel businesses
which the licencees stress on irrational terms and drag the
Council in various courts.
"6. In view of the above position, following proposal is laid
before the Council for consideration and approval:- :
(i) On the expiry of present term of licences of
hotels/cinema and other similar commercial complexes,
the licences shall not be renewed. The fresh Licence shall
be as per provisions of Section- 141(2) of the N.D.M.C. Act
1994."
The Council approved the proposed contained in para 6 of
the Agenda Item that on the expiry of the term of Licence
of the hotels/cinema and other similar commercial
complexes, the Licences shall not be renewed. A fresh
Licence shall be as per provisions of section 141(2) of the
N.D.M.C. Act 1994.‖
30. In para 28 (f) & (g), the following stand has been taken:-
―28(f) It is stated that the intention of the defendant was
only to create a licence in favour of the Plaintiff vide
licence deed dated 18.12.1976, which was executed for a
fixed period of 33 years only and accepted by the Plaintiff
on the said premises only. The substance of the
collaboration agreement and the licence deed clearly
reveal that the intention of defendant was to grant only a
licence and no legally vested proprietary right or to run
the hotel forever as allege. The subsequent events also
reveal the said explicit and clear intent of the parties. It is
stated that the nomenclature of the licence deed along with
its terms and conditions clearly manifest that the
relationship between the parties herein was purely that of
a licencee and a licensor. The collaboration agreement
and the licence deed as also subsequent documents and
event convey the said intent.‖
―28(g) It is stated that in terms of the licence deed, the
Plaintiff does not have any right of renewal nor any such
right was accrued to the Plaintiff. The option to renew the
licence squarely and exclusively vests with the defendant.
It is wrong and is denied the only as regards mode and
manner of finalization of the renewal on mutually agreed
terms as wrongly alleged by the Plaintiff. No renewal was
ever accorded as alleged. It is wrong and is denied that the
defendant has ever accepted renewal of the Plaintiff in
infinite or in perpetuity as wrongly fully been projected by
the Plaintiff in order to grab Government property. It is
wrong and is denied that there has been any deviation of
any kind in regard to the terms and conditions of the
licence agreement / collaboration agreement / revised
agreement or communications in the least as has been
wrongly alleged by the Plaintiff. The contents of this para
are a figment of Plaintiffs imagination which are
absolutely wrong and denied.‖
31. The defendant has denied the stand of the plaintiff that right is
only with regard to mode and manner of finalization of the renewal on
mutually agreed terms. In fact, it is stated that no renewal was ever
accorded.
32. Apart from the facts, as noted from the pleadings of the parties,
some additional facts are also noted from the record and the same are as
under:-
April 2, 1976 (Exh.P-14) Resolution No. 35 was passed by the
erstwhile Committee in respect of:-
(i) The allotment of land by the
Ministry of Works and Housing
for the construction of a hotel on
the terms and conditions as may
be offered be accepted;
(ii) Proposal of IHC for participation
jointly in the construction and
running of hotel be accepted in
principle.
(iii) Draft Licence Deed to be executed
with M/s The Indian Hotels Co. be
discussed and finalised for
approval of the Committee.
February 28, 1977
(Exh.DW1/P-2) Building plans were sanctioned.
September 21, 1979
(Exh.DW1/P3) Completion certificate issued by the
Committee.
July 14, 2011 (Exh.P-5) Minutes of the meeting constituted for
examining the request of the plaintiff for
extension.
September 13, 2011
(Exh.DW1/P6) Minutes and decision of the Council
with regard to Delhi Haat.
October 10, 2011 The period of 33 years expired.
November 14, 2011
(Exh.P-27) A meeting held under the Chairmanship
of the Secretary (UD), Govt. of India
August, 2012 The consultants M/s Ernst and Young
was appointed by the defendant which
gave its report (Exh.P-51)
October 17, 2012 A PIL being W.P.(C) No. 6615/2012
was filed in this Court for seeking a CBI
Inquiry into the grant of further licence
in respect of the Hotel, which was
dismissed.
January 11, 2013 The order dated October 17, 2012 was
challenged in SLP 9142/2013 herein the
plaintiff sought its impleadement which
was allowed.
April 4, 2013 The present suit was filed.
March 26, 2014
(Exh.DW1/2)
September 12, 2014
(Exh.DW1/3)
March 17, 2015
(Exh.DW1/4) The defendant granted further extensions
to the plaintiff during the pendency of
the present suit.
April 4, 2014 SLP No. 9142/2013 filed by Mr.
Mithlesh Kumar Pandey was dismissed.
January 1, 2015
(Exh.DW1/5) The MHA OM dated January 1, 2015
directing the defendant to resort to
public auction and find a best bidder in
respect of the property situated at 1, Man
Singh Road, New Delhi.
January 30, 2015 Defendant granted to the plaintiff
extension upto March 31, 2015 and for
placing the matter before the Council
immediately after the Code of Conduct
announced due to Lok Sabha Elections.
March 25, 2015
(Exh.DW1/6) Minutes of the meeting held on March
25, 2015 drawn on March 26, 2015
giving extension of three months to the
plaintiff and to complete the auction
within three months.
April 7, 2015 Defendant conveyed the decision taken
by the Council on March 26, 2015 that
the Hotel ought to be auctioned as a
running enterprise the same would fetch
a better price and would also give
additional revenue to the defendant and
three months time was granted complete
open auction.
April 18, 2015 IA 8099/2015, filed by the plaintiff
seeking stay of the proposed auction.
January 29, 2016 The defendant issued a letter extending
the licence of the plaintiff till January
31, 2016 and directed the plaintiff to
vacate the suit property by February 29,
2016. The defendant also conveyed, the
right of first refusal stood withdrawn.
February 1, 2016 IA 1530/2016 filed by the plaintiff
impugning letter dated January 29, 2016
on the basis of the statement given by
the learned ASG on instructions that no
coercive steps shall be taken till the next
date of hearing. The said statement
continues.
33. An amended replication has been filed by the plaintiff. On July
17, 2014, the following issues were framed by this Court:-
1. Whether the Plaintiff is entitled to the extension of licence as
claimed in the Suit? OPP
2. Whether the Suit is barred by Section 385 of the NDMC Act, 1994?
OPD
3. Whether Section 141 of the NDMC Act, 1994 is applicable to the
contracts and transactions between the Plaintiff and the Defendant in
respect of the extension of the licence deed dated 18.12.1976? OPD
4. Whether the Plaintiff is entitled to relief claimed in the present Suit?
OPP
5. Any other Relief.
34. I may state here that the defendant had filed one additional
affidavit on May 20, 2015 when they brought on record two documents,
OM dated January 1, 2015 (Exh.DW1/5) and minutes of meeting held on
March 25, 2015 drawn on March 26, 2015 along with resolution of the
Council dated January 30, 2015 (Exh.DW1/6). Further, the plaintiff has
filed evidence of affidavit of three witnesses namely PW 1 P.K. Bhatia,
PW 2 Anil Chauhan and PW 3 S. Balasubramanian. The defendant has
produced one witness namely P.P. Sharma (Exh.DW1/A) and has been
cross examined.
Submissions:-
35. Mr. Rajiv Nayar, learned Senior Counsel for the plaintiff would
submit that the plaintiff‟s letter dated March 31, 1976, upon being
accepted by the Committee, and a Resolution on April 2, 1976 having
been passed, a "Joint Venture" between the Plaintiff and the Defendant
for the "Hotel Project" at 1, Man Singh Road, New Delhi came into
being. The said Resolution considers "construction" and "running",
jointly as the main feature of the joint venture. According to him, the
following words in the Resolution dated April 2, 1976 (Exh. P-14) of the
Committee are of extreme relevance:
"ii) Acceptance of the proposals of M/s. The Indian
Hotels Co. Ltd. in principle for participation jointly in the
construction and running of the hotel."
36. He would state, the Collaboration Agreement dated December 18,
1976 (Exh.P-40) and the Licence Deed dated December 18, 1976
(Exh.P-41), are the product of the Joint Venture. Agreements were
executed pursuant to the Resolution passed by the Committee since
under Section 47 of the Punjab Municipal Act, 1911 "contract and
transfer of property" could be executed by the Committee with the mode
and manner of arriving at the consideration by the Committee. The Hotel
was built within a record time of less than two years and licence became
operational on October 11, 1978. After almost one year of the
operations, a Supplemental Agreement was executed on September 25,
1979 (Exh.P-42) by the Committee and the Plaintiff, where the most
relevant amendments were made to the Collaboration Agreement and the
Licence Deed which inter alia were:
(a) change of the basis of the licence fee to be calculated against
"Gross Receipts" instead of "Gross Income"
(b) investment of the Committee having been increased from the mere
construction value of the Hotel Building to inclusion of the "cost of the
land" and ground rent, the cost of removing the old structures
(c) putting the liability of payment of House Tax upon the Plaintiff.
37. He states, in view of Section 61 of the Punjab Municipal Act,
1911 the liability of paying House Tax through the Supplemental Deed,
having been transferred to the Plaintiff, shows that the Plaintiff became a
"tenant in perpetuity". By virtue of Section 62 of the Act of 1994, there
is an exemption on payment of House Tax on Buildings vested in the
Council, yet House Tax was charged from the Plaintiff even after 1994.
This construction of Clause 4 of the Supplemental Deed whereby House
Tax payment is put upon the Plaintiff, points towards the contribution of
the land to private hands in the form of the Joint Venture making it the
property of the partnership. He would state, the Supplemental Deed
changes the landscape of rights between the parties where now the land
stood contributed to the Joint Venture apart from the Hotel Building, as
the Committee‟s investment. Upon the Plaintiff triggering its rights for
extension of its licence through a letter dated February 15, 2010 (Exh.P-
22), the Defendant as a successor of the Committee construed the
Plaintiff‟s rights as that of a "Joint Venture Partner". Processes were
initiated, licence fee calculated, extended time period fixed by the
Defendant. The owner of the land i.e. Ministry of Urban Development
(MoUD) was kept informed who initially directed on August 1, 2011
that the licence fee ought to be determined by a "bidding process with a
right of first refusal" to the Plaintiff, but on the Defendant‟s
Chairperson‟s submission dated September 8, 2011 that the Plaintiff had
contractual rights, the MOUD gave its final decision on November 14,
2011 directing the Defendant to "strive to get as close as possible to the
market rent even if it has to negotiate" with the plaintiff. According to
him, this supports the contention of the Plaintiff that since the "Hotel" is
a joint venture project, the same cannot be auctioned, by ignoring the
Plaintiff‟s long term interests. He would state, the weight of evidence
and written documents suggest that the Defendant had no option but to
extend the Plaintiff‟s licence, by negotiating with the Plaintiff, the
licence fee payable by the Plaintiff for the extended period of 30 years.
He states, to this effect are also the opinion of the Standing Counsel of
the Defendant, E&Y‟s report, opinions of the Solicitor General of India
and the opinion of the Attorney General for India. The Defendant
however seeks to take shelter under Section 141 of the Act of 1994
while ignoring the above to say that it is compelled to hold an auction
"to determine licence fee". Even independent Reports of PWC and
KPMG opine that the Defendant must negotiate with the Plaintiff to
arrive at a mutually negotiated licence fees instead of an auction. He
also states Section 141 of the Act of 1994 is not applicable to the
plaintiff‟s licence due to Section 416(2)(b) of the said Act.
38. On the aspect of joint venture of the plaintiff and the defendant
and the plaintiff‟s right of extension of the licence, it is the submission of
Mr. Rajiv Nayar, that since the Plaintiff was in "joint venture" with the
Committee, for the "construction" and "running" of the "project hotel",
the Plaintiff has "long term interest" in the said hotel and therefore
entitled to an extension. He says this is in view of the following
documents and admissions of the Defendant :
(i) Letter dated March 31, 1976 of the Plaintiff to the Committee
which is a Part of the Collaboration Agreement dated December 18,
1976, where the Plaintiff had offered "joint participation" in the
construction and equipment of the Hotel. (Exh.P-40).
(ii) Committee‟s Resolution dated April 02, 1976 accepting the
Plaintiff‟s offer "for participating jointly in the construction and the
running of the hotel". (Exh. P-14). This itself is enough to suggest the
joint venture between the Plaintiff and the Defendant in respect of the
entire Hotel Project.
(iii) Collaboration Agreement dated December 18, 1976 noting to
"collaborate" with the Plaintiff. (Exh.P-40).
(iv) The Building Plans for the hotel approved by the Defendant
mention, the Plaintiff as the "Collaboration Partner".(Exh. DW1/P2
Colly).
(v) The Completion Certificate issued by the Defendant was in favour
of „The Taj Mahal Hotel‟. "(Exh. DW1/P3)
(vi) Defendant Council‟s Chairperson letter dated September 08, 2011
(Exh.P-37) states
(a) Approval to the "Joint Venture/ Collaboration" was granted by
the New Delhi Municipal committee in its meeting of April, 1976 on the
basis of which Collaboration Agreement, Licence Deed and
Supplemental Agreement were signed;
(b) A "unique PPP Model" was followed in the case of Hotel Taj Man
Singh;
(c) This "arrangement is broadly captured by three Agreements" as
mentioned above.
(d) "Construction and operation of a hotel" is through a "unique PPP
Model".
(e) The Plaintiff i.e. "the Collaboration partner and the present
operator has applied for extension of term".
(vii) Council‟s Resolution dated October 07, 2011 (Exh.P12), post
Plaintiff‟s request for extension of licence, admits:-
(a) The project is a "joint venture";
(b) The arrangement was a "unique joint venture / collaboration";
(c) "Land and construction funding" having been provided by the
Committee;
(d) The Plaintiff having "long term interest" in the property;
(e) The Plaintiff has invested about Rs. 129 crores up to March 2011
in substantive renovation and refurbishments of the hotel as against the
Defendant‟s final investment of Rs. 6.26 crores;
(f) The Plaintiff is a "collaboration partner" ;
(g) The licence arrangement being an outcome of the "joint venture /
Collaboration Agreement ";
(h) The Defendants and the Plaintiff‟s "investment are in this joint
venture";
(i) The Defendant has "invested in land and building" with the
Plaintiff having "invested in refurbishment, regular operations, brand
building and creating a loyal customer base".
Thus, according to Mr. Rajiv Nayar, the above admissions of the
Defendant itself unambiguously shows that the Plaintiff and the
Defendant are in "joint venture".
39. It is also the submission of Mr. Rajiv Nayar, that apart from the
above the following inferences show that the Plaintiff has "long term
interest" in the Hotel Project which arises from interpretation of the
terms of the documents.
(i) Collaboration Agreement dated December 18, 1976 (Exh.P-40),
uses the expression "Hotel Building" and "site" when only the
contribution of the Defendant is to be discussed. However, it uses the
expression "Hotel" when the fully operational Hotel is to be discussed.
This shows that the "Hotel" is the obvious joint venture of the Plaintiff
with the Defendant, where the Hotel Building stood converted into a
Hotel after the equipping of Hotel by the Plaintiff. This is clear from
the following recital at Page 14 of the Collaboration Agreement where
this distinction is acknowledged by the parties:
―Whereas IHC has agreed in principle to equip the said hotel building at
its cost with the necessary equipment and assets such as kitchen
equipment, laundry equipment, furniture, furnishings and other assets
details of which are mentioned in schedule III attached hereto so that the
said hotel building can be run as a hotel of acceptable standards; and
(ii) That this distinction between "hotel building‖ and "Hotel" is
present throughout the Collaboration Agreement. In Article II of the
Collaboration Agreement "services of the Plaintiff" are discussed where
throughout the word "Hotel" is used which relates to the "joint venture".
However, when it comes to only construction, it refers to "Hotel
Building".
(iii) In Article III it is stated that there is no demise in law of the "site"
in favour of the Plaintiff, which is defined as 1, Man Singh Road, New
Delhi in Article I. This clause stands diluted by virtue of the
Supplemental Agreement pursuant to which the "site" (Land) was
contributed by the Defendant to the Hotel project as its contribution and
against which the Defendant became entitled to return.
(iv) There is no termination clause in the Collaboration Agreement
post the construction of "Hotel Building" and it being converted into a
"Hotel". Article III (8) of the Collaboration Agreement allows re-entry
of the Committee only "until the construction of the hotel building has
been completed".
(v) The Collaboration Agreement clarifies that the only investment of
the Committee is going to be Rs.4.75 crores with any amounts above
that, to be funded by the Plaintiff. It also notes that the Plaintiff for
equipping the hotel may have to spent Rs.5.50, crores additionally. This
document therefore can only be interpreted to mean that the product of
the "joint venture" between the Plaintiff and the Committee is the
"Hotel" where Committee‟s contribution is the "Hotel Building". The
planning, designing, construction, equipment, commissioning and
operation of the "Hotel" is the Plaintiff‟s obligation.
(vi) Evidently, the Collaboration Agreement cannot be and was not
rightly treated to be only a construction contract for constructing the
"Hotel Building" as wrongly contended by the Defendant before this
Court.
(vii) That through the Supplemental Agreement dated September 25,
1979 (Exh.P-42) which was executed after the "hotel" had become
operational on October 10, 1978, evidences that even the "land" on
which the "hotel building" stands stood contributed to the "joint venture"
as the Committee‟s investment. This is evident from the following:
(a) In the original Collaboration Agreement the investment of the
Committee was only Rs.4.75 Crores for the construction of the "hotel
building". In the Supplemental Agreement, through Clauses 2 (b) & (c)
the "investment" of the Committee was increased by the following:
―b) Rs.45 Lakhs towards cost of financing, subversions and other
charges including initial cost of providing 11 K.V. Sub-Station.
c) Cost of acquiring land, measuring 3.78 acres (15.028 sq. meters)
being plot no.1, Man Singh Road, New Delhi, in terms of the plan
attached to the Collaboration Agreement, taken to be Rs.106.64 lakhs
comprising of Rs.91.48 lakhs being the basic cost of land to NDMC, a
sum of Rs.10.66 Lakhs being arrears of ground rent in respect of the said
plot paid by NDMC to Works & Housing Ministry, Government of
India, and depreciated value of the Building on the said plot since
demolished, estimated to be Rs.4.50 lakhs‖
(b) With the above amendment, the land underneath the "hotel
building" stood contributed into the joint venture since the Defendant‟s
investment was increased from Rs.4.75 crores to Rs.6.26 Crores. The
licence fees was also to be calculated on "gross receipt" instead of "gross
income". The Committee‟s entitlement to the revenues from the "joint
venture" also stood altered by this amalgam of the Committee‟s total
investment.
(c) The contribution of the land stands confirmed because of Clause
4 of the Supplemental Agreement, whereby the Plaintiff was now liable
to pay "house tax" on the hotel building although in the deed of licence,
the liability to pay such house tax was on the Committee. The liability to
pay house tax presupposes transfer of the property in favour of the "joint
venture".
(viii) The Plaintiff‟s witness Mr. S. Balasubramanian (PW3), who was
the only witness who had personal knowledge about the documents since
he was a signatory to the Supplemental Agreement, deposed as follows
in the examination - in - chief being (Exh.PW3/A):
―12. In the course of the discussions, it was clearly understood that the
NDMC and the Plaintiff would be in joint participation although the
financials would be renegotiated from time to time.
14. I say that subsequent to the Collaboration Agreement and thee
Licence Deed, a further discussion took place between the Plaintiff and
the Defendant in respect of the Project. These discussions centered
around, inter alia, NDMC's obligation to fund the Project. It was finally
agreed that instead of funding the project in cash, as provided for in the
Collaboration Agreement, the land would be treated as NDMC's
contribution to the project and be taken at market value. Accordingly, a
Supplemental Agreement (Exhibit P42) was negotiated and ultimately
executed between the Defendant and the Plaintiff on 24.09.1970. I was
involved in the discussions with the Defendants alongwith other officials
of the Plaintiff Company in respect to the negotiations, finalization and
execution of the Supplemental Agreement (Exhibit P42).
15. I say that the Supplemental Agreement amends the Collaboration
Agreement and the Licence Deed. I say that the cost of acquiring the
land being Plot No.1 Mansingh Road, New Delhi, admeasuring 3.78
acres was valued at Rs.106.64 lakhs. I say that through the
Supplemental Agreement, the land was brought in by the Defendant into
the Joint Venture as its contribution, towards the joint venture, for
construction of the Hotel Building. I say that though NDMC did not
contribute in cash a sum equivalent to the market value of land, its share
in revenue remained the same as original agreed. This was on account
of the fact that it was understood that the land was being contributed as
NDMC's share in lieu of cash. Accordingly, NDMC's return on its
investment was to be calculated against Rs.626 Lacs, which included the
cost of land instead of R.475 Lacs initially contributed by NDMC.
16. I say that as a departure from the Collaboration Agreement and
the Licence Deed, the above clause of the Supplemental Agreement,
which put the cost of acquiring the land into the Joint Venture as their
contribution in addition to the cash for construction of the hotel, shows
that the land stood committed to the joint venture.‖
40. The Plaintiff submits that PW3/A was cross examined by the
Defendant and the following answers elicited:
―Q.16 The attention of the witness is drawn to para 12 of Exh. PW3/A.
This statement made by you in the said para is based on the record of
Plaintiff company or out of your memory?
A. This is based on my discussions during the supplemental agreement
where both Collaboration Agreement and licence deed were also
discussed.
Q.17 Will it be correct to say that the averments mentioned in para 12
relates only to supplemental agreement and not the first agreement?
A. No.
Q.38. At whose behest the supplemental agreement was executed?
A. At the behest of NDMC.
Q. 39 Did you ask for amendment of licence deed other than the one
incorporated in supplemental agreement?
A. I don't think so as amendment sought was at behest of NDMC.
Vol. The main point that NDMC raised was that the land was not
recognized as the part of the contribution of NDMC initially which they
wanted to ass, which was done so that they could get return on the land
for NDMC.
Q.42 The attention of the witness is drawn to para 12 of his affidavit Ex.
PW3/A. Can you tell the basis of your understanding as mentioned in
said para, as to whether it based on some record or not?
A. The entire project was built in collaboration between NDMC and
IHC. It is based on all the three agreements i.e. Collaboration
Agreement, licence deed and the supplemental agreement.‖
41. It is further the submission of Mr. Rajiv Nayar, that the following
emerges from the documents and statements.
(i) The Resolution of the Committee dated April 02, 1976 connotes
the joint participation for both the „construction‟ and running of the
Hotel.
(ii) There is a Unique Joint Venture of the plaintiff and the
Committee.
(iii) The initial investments of both the parties at Rs.4.75 crores of the
Defendant and Rs.4.61 crores of the Plaintiff evidences the joint venture
and the creation of a partnership between the parties. The land stood
contributed to the partnership when the Defendant‟s investment
increased to Rs.6.26 crores. The Defendant has earned multifold
revenues returning all its investments. The Defendant has been a
sleeping partner which the Plaintiff in the joint venture since the running
of the Hotel continues to be done by the Plaintiff;
(iv) The hotel building with the land stands contributed into the said
"joint venture";
(v) The Licence Deed categorically provides that the terms on expiry
of the initial period of licence have to be "mutually negotiated";
(vi) There being no expiry mentioned in the Collaboration Agreement
which subsists even today, the Plaintiff is clearly entitled to an extension
of the licence period on negotiated terms and conditions, because the
contribution of the "running" of the Hotel through the hands of the
Plaintiff still subsists;
(vii) The Supplemental Agreement dated September 25, 1979 (Exh.P-
42) executed almost a year after the hotel became operational, recorded
amendments to the Collaboration Agreement and the Licence Deed,
between the Plaintiff and the Defendant;
(viii) The Plaintiff submits that the Defendant has led no contrary
evidence against the admitted position of a "joint venture" and
accordingly in view of the Defendant‟s own admission it is estopped
from making a completely contrary claim regarding the existence of the
joint venture;
(ix) The parties have acted in a mutually beneficial relationship for the
last 36 years evidencing their relationship to be of a "joint venture";
(x) The Plaintiff submits that the Defendant is seeking to read the
Deed of Licence (Exh.P41) in isolation. The Committee‟s Resolution
dated April 2, 1976, and the effect of the Supplemental Agreement on
the Collaboration Agreement and the Deed of Licence is being wrongly
ignored;
(xi) Clause II(2) of the Deed of Licence dated December 18, 1976
(Exh.P-41) therefore must be given effect to keeping in line the above
"joint venture" between the parties which stipulates as follows:
―......
2. In the expiry of the period of licence of the said hotel building hereby
granted, the Licensor shall have the option to grant the licence for a
further period on such terms and conditions as may be mutually agreed
upon between the Licensor and the Licencee. If the Licencee shall be
desirous of obtaining a licence for a further period after the expiry of the
present licence, it shall give to the licensor, a notice in writing of not less
than sixty (60) days prior to the date of expiry of the present licence for
the consideration of the Licensor‖
(xii) In the Deed of Licence the parties had always contemplated an
extended period because Clause IX clearly mentions "the renewed period
of licence" also to be considered for future expansion. Therefore, Clause
II(2) of the Deed of Licence has to be read alongwith Clause IX to
suggest that the Plaintiff is entitled to an extension;
(xiii) The Defendant Committee‟s offer of revised terms and an
extended period of 30 years was accepted by the Plaintiff without any
demur or dispute. The Defendant therefore is estopped from resiling
from this position.
42. He would state, that the Defendant had also proceeded on the basis
that the Plaintiff is entitled to extension of Licence, which is clear from
the following:
Effect of the conclusion on the actions of parties pre, during and
post licence term
(i) The Defendant admits that there is no default of the Plaintiff of
any sort either under the Collaboration Agreement or the Licence Deed
or the Supplemental Agreement.
(ii) The Defendant has earned huge revenues from a meagre
investment of Rs.6.26 crores of more than Rs.260 Crores. The payment
of licence fee amounts to Defendant‟s share being almost 50% of the net
profits (Refer: Exh.PW/A).
(iii) The Plaintiff has improved the property by investing a further sum
of Rs.125 crores.
(iv) That the Defendant proceeded to form an Internal Committee
under Section 9 of the NDMC Act to consider the Plaintiff‟s request for
extension of licence of the hotel. (Exh.P-2)
(v) The Internal Committee suggested that the licence of the Plaintiff
be extended for a period of 30 years on certain financial terms and
conditions and put it for the approval for the chairperson. (Exh.P4)
(vi) The internal Committee recorded that chairperson had agreed to
both the period and the financial terms of extension which, among other
factors, were based upon the NDMC (Determination of Annual Rental)
Bye-Laws 2009, to the Plaintiff vide its minutes dated July 14, 2011
(Exh.P5 & P6). Once the terms were accepted by the Plaintiff there was
no occasion to the Defendant to direct any auction especially because it
is a "joint venture" hotel property.
(vii) The Plaintiff accepted the terms for extension vide letter dated
July 15, 2011 and July 13, 2012 (Exh.P16).
(viii) Against the admitted non-breach-full performance of the
Agreements by the Plaintiff, other similar hotels in Delhi of the
Defendant are all in default. Yet, the Defendant is seeking to remove the
Plaintiff and hold an auction so that a new defaulting party can be
introduced in a well-run and maintained hotel property of Delhi through
the impugned letter dated November 05, 2012 (Exh.P47). Thus, under
equity the Plaintiff is entitled to the extension, apart from law and
contract.
(ix) In the Resolution dated October 07, 2011, the Defendant has
accepted the position that the Plaintiff is entitled to an extension while
holding out as follows:
―4.4 Thus the licence deed of 18.12.1976 itself provides for extension
of the licence period on mutually agreed terms and conditions. IHC, the
collaboration partner and the present operator has applied for extension
of term in February 15, 2010. As the original agreement/ deed provided
option to grant further terms in IHC, the case was processed for
appropriate decision.‖
(x) The Plaintiff submits that the Defendant had empowered a
consultant of an international repute namely Ernst and Young to suggest
the means and methodologies of extending the Plaintiff‟s licence. The
said empowered consultant has also suggested in its Report dated
August, 2012 (Exh.P-51) as under:
―Therefore, from the above we conclude that NDMC may choose any
one of the three options described above, however from a risk
management and commercial consideration perspective NDMC stands to
benefit the most if the existing contract with IHC is renegotiated and
extended.‖
Decision of MOUD is binding upon the Defendant
43. Mr. Nayar submits that considering all of the above, the Ministry
of Urban Development in its decision dated November 14, 2011 (Exh.P-
27) under Section 235 of the NDMC Act, read with Government of India
(Allocation of business Rules), 1961 had directed the Defendant as
follows:
―3. The minutes of the meetings held on 1.8.11 and 26.8.11 and the
D.O. letter written by Chairperson, NDMC in response to the Minutes
was mentioned. Additional Secretary (UD & DL) and JS(FA) stated that
NDMC should strive to get as close to the market rent as possible, even
if it has to negotiate with M/s. IHC. In relation to the said minutes,
Secretary, NDMC stated that in the meeting of the Council held on
7.10.2011 the Council has resolved to accord sanction for extension of
existing Collaboration Agreement and licence deed with M/s. IHC for a
period of one year subject to the condition that M/s. IHC shall pay
licence fee as per mutually agreed terms and conditions. It was further
stated by him that NDMC has also already initiated the process of
appointing a Transaction Consultant.‖
4. Secretary (UD) noted NDMC's above decision and advised that
the Council may further take appropriate steps.‖
44. He submits that the above direction also points towards the
Plaintiff‟s undisputed and unstinted right to obtain extension of the
licence, however there is no follow up of this direction of MoUD till
date. The Plaintiff therefore submits that the Defendant could not have
resorted to the impugned letter dated November 5, 2012 since only a
ministerial step of extending the licence in favour of the Plaintiff had
remained to be done. Thus, on the above facts, the Plaintiff has
discharged its onus in respect of issue No.1 framed by this Court being
the following:
―1. Whether the Plaintiff is entitled to the extension of licence as claimed
in the Suit? OPP‖
LEGAL SUBMISSIONS IN RESPECT OF JOINT VENTURE AND
ITS EFFECT
45. Submissions on provisions of law
A. Under Section 58 of the Evidence Act admitted facts need not be
proved. Under Section 78 (5) the proceeding of a Municipal Body can be
proved by place a certified copy thereof. The Resolutions of the
Defendant dated April 02, 1976 and October 07, 2011, clearly admit to
the Plaintiff and the Committee‟s "joint venture". Thus, applying the
admissions through the pre and post Resolutions of the Defendant itself,
it cannot be denied that there is a "joint venture" between the Plaintiff
and the Defendant in the form of the "hotel project". Under Section 47
of the Punjab Municipal Act, 1911, disposal of land by the Committee
did not require an auction. The hotel building and the land stood
disposed to the "joint venture" through the Supplemental Deed. Thus,
Licence Deed needs to be extended to give effect to that joint venture.
The Plaintiff has not disputed the Defendant‟s increase in the licence fee
and in fact accepted it. Turning this into a concluded issue, which only
required examination and not a separate agreement or a Licence Deed.
This is supported by Shreedhar Govind Kamerkar Vs. Yesahwant
Govind Kamerkar & Anr. (2006) 13 SCC 481 @ para 27.
B. Under Section 62(1)(b) of the Act of 1994 there is an exemption
on property tax on lands and buildings vested in the Council. However,
by virtue of the Supplemental Deed the Plaintiff is made to pay the house
tax which in the original Licence Deed was exempted. The Plaintiff
submits that this obligation to pay the house tax arose only after the land
stood contributed by the Committee to the joint venture. Otherwise, this
charge of house tax of Rs.12 Lakhs per year at least from the year 1994
ought not to have been received / demanded / levied by the Defendant.
C. Under Section 61 of the Punjab Municipal Act only a "tenant in
perpetuity" is required to pay the tax other than the owner. By virtue of
the Supplemental Deed the transfer of the liability upon the Plaintiff
indicates the Plaintiff‟s perpetual rights. The Defendant‟s reliance upon
Section 2(29) of the NDMC Act being the definition of "occupier" which
includes a licence in occupation of land and building, has no purport in
respect of payment of House Tax because that liability remains on the
owner even under the NDMC Act.
D. Under Section 235 of the Act of 1994 the Central Government can
direct the Defendant to act in a particular manner which is binding upon
the Defendant. In the present case through the decision dated November
14, 2011 the Defendant was directed by the Ministry of Urban
Development to negotiate with the Plaintiff "to strive to get as close to
the market rent as possible". Applying NDMC (Determination of
Annual Rental) Bye-laws 2009, the Defendant had come up with that
closest market rent suggested it to the Plaintiff. The Plaintiff had
accepted this suggestion. Thus, in execution and performance of the
Ministry of Urban Development direction dated November 14, 2011 the
Defendant ought to have extended the licence of the Plaintiff on the
terms agreed by the Plaintiff.
E. Under Regulation 33 and 34 of New Delhi Municipal Council
(Procedure and Conduct of Business) Regulations, 1997, the form and
admissibility of the Resolutions is mentioned. The Resolutions cannot
contain arguments or inferences. By this logic the Statements made by
the Council in its Resolution dated April 2, 1976 and October 7, 2011
indicate that there position in favour of the Plaintiff for extending the
licence is unstinted and has statutory force.
F. Under Section 91 and 92 of the Evidence Act the Defendant has
sought to plead that it is only the three documents which are required to
be read by this Court and no extrinsic evidence can be used. This
argument is made to somehow remove the Defendant‟s own admission
of a joint venture between the parties in the Defendant‟s own
Resolutions, letters and other documents. The Plaintiff submits that this
contention of the Defendant is wrong because in Schedule 1 to the
Collaboration Agreement the joint participation is suggested by the
Plaintiff and accepted by the Defendant‟s predecessor in its Resolution
dated April 2, 1976. The Collaboration Agreement itself uses the word
"to collaborate" at page 13 of the documents in the recital and uses the
word "jointly arrive" for determining costs. The Collaboration
Agreement clearly brings about the distinction between hotel building
and hotel where the hotel is not the Defendant‟s property but an outcome
of the joint participation of the Plaintiff and the Defendant. The Plaintiff
submits that the Defendant is seeking to create an ambiguity where none
exists. In any case, if there is an ambiguity, the law accepts extrinsic
evidence against such ambiguity. In the present case, the admissions of
the Defendant itself at the pre contractual stage and the subsequent
conduct ought to be read against the Defendant to destroy the
Defendant‟s self-serving argument on Sections 91 and 92 of the
Evidence Act.
46. Mr. Rajiv Nayar relied upon the following judgments in support of
his submission:-
(1) JOINT VENTURE PROPERTY STANDS ESTABLISHED
THROUGH CONTRIBUTION OF ASSETS TO THE "JOINT
VENTURE" WITH THE MOTIVE OF COMMON AND MUTUAL
PROFIT.
i. Suresh Dhanuka Vs. Sunita Mohapatra
(2012) 1 SCC 578 @ para 47
ii. Addanki Narayanappa & Anr. Vs. Bhaskara Kristappa & 13
Ors.
AIR 1966 SC 1300 @ para 7
iii. Sunil Siddharthbhai Vs. Commissioner of Income Tax
(1985) 4 SCC 519 @ para 16, 17
iv. Shreedhar Govind Kamerkar Vs. Yesahwant Govind Kamerkar
& Anr.
(2006) 13 SCC 481 @ para 27
v. Vidhi Constructions Pvt. Ltd. Vs. Smt. Baljit Kaur
(2001) 91 DLT 730 (DB) @ para 18
vi. Robinson Vs. Ashton
(1873) XX LR 25 (HL) at pg.28
(2) EXTRINSIC EVIDENCE IS AVAILABLE TO THE COURT
FOR INTERPRETING A CONTRACT WHERE THERE IS
AMBIGUITY
i. Godhra Electricity Co. Ltd. vs. State of Gujarat
(1975) 1 SCC 199 @ para 11, 12, 13, 15, 16-18
ii. Pure Helium India (P) Ltd. v. Oil & Natural Gas Commission,
(2003) 8 SCC 593 @ para 25,26
iii. Modi & Co. v. Union of India,
AIR 1969 SC 9 @ para 8
iv. Abdulla Ahmed v. Animendra Kissen Mitter,
AIR 1950 SC 15 @ para 27
v. Chartbrook Ltd. vs. Persimmon Homes Ltd.
(2009) UKHL 38
(3) AN AGREEMENT CAN BE FORMED THROUGH CONDUCT
AND CAN EVEN BE ORAL
i ITE India Pvt. Ltd. Vs. Delhi Tourism and Transport
Development Corpn. Ltd. - Judgment dated 23.5.2016 in FAO(OS)
No.46 of 2006 - Para 33 to 38
ii Alok Bose Vs. Parmatma Devi & Ors. (2009)2 SCC 582 at 16,
17, 18
(4) THE RECOMMENDED LICENCE FEE IS "REASONABLE
MARKET RATE" AS DETERMINED RATEABLE VALUE
i. NDMC Vs. M.N. Soi (1976) 4 SCC 535.
(5) DIRECTION OF CENTRAL GOVERNMENT UNDER
SECTION 235 OF THE NDMC ACT IS BINDING UPON THE
DEFENDANT.
(i) NDMC Vs. Tanvi Trading & Credit Pvt. Ltd. (2008) 8 SCC 765
at 32, 35, 36
BRIEF FACTS SHOWING THE INAPPLICABILITY OF S.
395 AND 396 OF THE NDMC ACT.
47. The further contention of Mr. Rajiv Nayar, in the present suit is
that the Plaintiff and the Defendant are in "joint venture" for the Taj
Mahal Hotel Project wherein the Defendant contributed the land and
funded the construction of the building with an amount of Rs.4.75
crores. The Plaintiff undertook construction of the "Hotel Building" and
provided equipment, furniture, fixtures and all other assets at its
(Plaintiff‟s) cost amounting to Rs. 5.5 crores (actual investment Rs. 4.61
crores). The building was converted into a "Hotel" as per the
Collaboration Agreement by providing all the furnishings and fittings.
Therefore, it was the basic understanding between the parties, that the
Plaintiff has long term interest in the "joint venture" and accordingly,
through the operation of Clause II(2) of the Licence Deed, there would
be an extension in favour of the Plaintiff on "such terms and conditions
as may be mutually agreed".
48. He submits that (a) the Resolutions of the Defendant dated April
2, 1976 [Exh. P-14], October 7, 2011 [Exh. P-12], July 25, 2012 [Exh.
P-19] and (b) the Minutes of the Committee dated June 3, 2011
empowered by the Defendant under Section 9 of the Act of 1994 through
its Minutes dated June 3, 2011 [Exh. P-4] and July 14, 2011 [Exh. P-5]
(c) the Ministry of Urban Development‟s decision dated November 14,
2011 (Exh. P-27], indicate that the Plaintiff is entitled to an extension
"on such terms and conditions as may be mutually agreed".
49. He submits that to the same effect are the opinions of the Standing
Counsel of the Defendant [Exh. P -34], by a Sr. Advocate [Exh. P -36],
Report of Ernst & Young [Exh. P -51 (Part -II)], (Consultant appointed
by the Defendant) and the opinion of the lawyer of Ernst & Young.
However, there is a singular advice of the Additional Solicitor General,
[Exh. P -35], which is contrary to the above. The said advice is
predicated on a misconstruction of Section 141(2) of the NDMC Act
read with the judgment of the Supreme Court of India in Aggarwal &
Modi Enterprises (P) Ltd. Vs. NDMC reported in (2007) 8 SCC 75.
50. The Resolution dated September 27, 2012 [Exh. P -20], while
considering the opinion of the Additional Solicitor General, as also the
long term interest of the Plaintiff, passed a hybrid decision stipulating as
follows:
―The Council carefully considered all the facts placed before it in
the Agenda Item, including the Annexures, and noted that IHC
not only has a clean record in its dealing with the Council, but
has also made regular payments of licence fee to it till date and
that there are no disputes between the Council and the Licencee
(IHC Ltd).
After discussing at length the pros-and cons of the two options
proposed in the Item the Council resolved by majority, to opt for
public auction, in a fair and transparent manner, of the NDMC
property at 1, Man Singh Road, with first right of refusal to
Indian Hotel Company. The recourse to public auction would
serve to determine the market price of the licence fee, that IHC
would have to match if they wish to run a hotel at this property.
This option, the Council noted would also safeguard its revenue
interests.
The Council further resolved by majority to extend the period of
licence of IHC, on existing terms and conditions, for a further
period of one year or till such time a new licencee is chosen
through the bidding process, whichever is earlier.
That further action may be taken by the Department in
anticipation of confirmation of the Minutes by the Council.‖
51. He states, the plaintiff filed the present Suit on April 04, 2013,
challenging the mode and manner of determining the licence fee payable
by the Plaintiff, when the Defendant had already fixed the licence fee by
virtue of the Committee, which was duly accepted by the Plaintiff vide
its letter dated July 15, 2011 and letter dated July 13, 2012 [Exh. P-16].
Even in the Counter Affidavit filed by the Defendant before the Supreme
Court of India in SLP (C) No. 9142 of 2013, the Defendant has stated
that the enhanced fee was agreed to by the Defendant to avoid any
revenue loss to the Defendant, thereby admitting that the licence fee
fixed was reasonable. During the pendency of the Suit, the Ministry of
Home Affairs (MHA) which is the administrative ministry of the
Defendant, sought an opinion from the Ld. Solicitor General of India,
which was provided on April 19, 2014 holding that there should be
negotiation with the Plaintiff before auction is resorted to.
52. On August 20, 2014, the Ld. Attorney General for India also
provided his opinion at the request of Ministry of Home Affairs
endorsing the opinion of the Ld. Solicitor General of India. Both these
opinions are contrary to the opinion of the Additional Solicitor General
(Exh.P-35) yet have been ignored, to defend the completely wrong
premise that Section 141 of the act applies to the Plaintiff‟s case.
FACTS REGARDING ACTIONS OF CENTRAL
GOVERNMENT UNDER SECTION 395 AND 396 OF THE
NDMC ACT, 1994.
53. Mr. Rajiv Nayar submits that before the opinion of the
Solicitor General of India had been provided, the Ministry of Home
Affairs wrote two letters to the Defendant, dated May 10, 2013 and
June 27, 2013 [Exh. DW1/P4 and DW1/P5]. Both these letters
indicate a request by the Ministry of Home Affairs to the Defendant
to hold an open public auction of 1, Man Singh Road, New Delhi.
The basis on which the Ministry of Home Affairs wrote these letters
has not been disclosed or brought on record and is alien to the
process outlined in Section 393 and 394 of the Act of 1994. There
is nothing on record to show whether the Ministry of Home Affairs
ever required the Chairperson of the Defendant to produce any
record, correspondence and report as envisaged in Section 393 of
the said Act or whether any inspection of the records of the
Defendant was carried out by the Ministry of Home Affairs as
required by Section 394 of the Act of 1994. Section 395 of the Act
of 1994 empowers the Central Government to issue directions to the
Defendant either on receipt of a report or information under Section
393 or 394 or otherwise. Even if the opinion formed by the Central
Government is based on the information/input gathered "otherwise"
used in Section 395, the said opinion has to have some basis. It is
also not on record if any other Ministry or Deptt. of the Central
Government expressed any apprehension on the functioning of
defendant to the Ministry of Home Affairs based on which the
Ministry of Home Affairs wrote a letter to the Defendant straight
away under Section 395 without following the process envisaged
under Section 393 or 394. It is settled law that if a statute provides
that an act is to be done in a particular manner, the thing has to be
done in the said manner alone. [Refer: State of Jharkhand Vs.
Ambay Cements reported in (2005) 1 SCC 368 @ Para 25 & 26]
54. The issues were framed by this Court after the direction dated
April 4, 2014 of the Supreme Court of India in SLP (C) No. 9142 of
2013. Before the Supreme Court in the said SLP, the Ministry of
Urban Development filed an affidavit stating as follows:
―5. It is submitted that Respondent No. 1, NDMC, is the main
contestant in the present case. The answering respondent is only
a policy making body and is not directly involved. The answering
respondent, being a proforma party, would not be giving any
reply on merits at this stage and craves leave to file
additional/detailed affidavit at a later stage of required or if
directed by this Hon'ble Court.‖
55. He states that on January 01, 2015, without considering the
opinion of (i) the Ld. Solicitor General of India and (ii) the Ld.
Attorney General for India, as also the Ministry of Urban
Development‟s position before the Supreme Court of India, and
ignoring the pendency of the present Suit, the Ministry of Home
Affairs passed a direction under Section 395/396 of the Act of
1994, on January 01, 2015 [Ex-DW1/5] against the Defendant
directing it to "resort to public auction and find the best bidder in
respect of the property at 1, Man Singh Road, New Delhi".
THE DIRECTION IS ILLEGAL SINCE IT RELATES TO
AUCTION OF "LEASE" RIGHTS PURPORTING TO BE A
"DUTY" OF THE COUNCIL
56. The said direction dated January 1, 2015 is predicated on its
own letter‟s dated May 10, 2013, June 27, 2013 and wrongly
records that opinion of the Ld Solicitor General of India on the
issue was "pending" (though it had already been rendered on April
19, 2014, eight months before the direction).
57. The basic fallacy in invoking 395 and 396 of the Act of 1994
is that the Ministry of Home Affairs considers that there is a "duty"
of the defendant to conduct an auction. This duty purportedly arises
out of Section 141(2) of the Act of 1994. As explained earlier
Section 141(2) of the Act of 1994 would be applicable to "leases".
58. This is the mistake made by the Ministry of Home Affairs in
its letter dated May 10, 2013 where it considers that the Plaintiff‟s
right is through a "lease deed" and what NDMC seeks to do freshly,
is a "lease". Both these mistakes are accepted by the Defendant‟s
Witness in cross examination in the following questions and
answers:
―Q116. Would it be correct to say that in view of your
answer to question No.57, the words ―lease‖ at points A to A, B
to B and C to C in Ex.DW1/6 should be read as ―Licence‖?
A. Yes.
Q117. In view of your answer to question no.116 would it not be
correct to say that in Ex.DW1/P4 also the words ―lease‖ are
incorrect?
A. Yes.‖
59. He submits that the letter dated June 27, 2013 of the Ministry
of Home Affairs reveals a complete wrongful conduct towards the
pendency of the present Suit before this Court. It is a matter of law
that an administrative body cannot be allowed to override the courts
of law, abrogate private rights, through administrative
decisions/directions.
60. He submits that even the Defendant in its Resolution dated
October 7, 2011 and decision pursuant to the Resolution dated
January 30, 2015 has made the same mistake by referring to the
Plaintiff‟s "licence" as a "lease".
61. He submits that the above two mistakes destroy and vitiate
the letter dated May 10, 2013 which is the genesis of the direction
of the Ministry of Home Affairs under Section 395/396 of the Act
of 1994. If the root of the decision dated January 1, 2015 stands
destroyed, the said letter automatically stands vitiated. Therefore, if
Section 395 and 396 have been invoked for a purpose for which
they are not meant, they shall be held to be non binding. Ref. H.C.
Sharma Vs. MCD (1983) 3 SCC 567 at paras 6, 35 and 36.
62. On another reason it stands vitiated as being a piece of
document which is without any application of mind is that it
mistakenly notes that the Solicitor General of India‟s opinion is still
"pending" when it had already been rendered. The said direction
dated January 01, 2015 therefore deserves to be totally ignored.
THE DIRECTION DATED 1.1.2015 IS ULTRA VIRES THE
ACT OF 1994 INASMUCH AS IT BREACHES THE ENTIRE
SCHEME OF THE SAID ACT.
63. Mr. Rajiv Nayar submits that Section 20 of the Act of 1994
creates a dichotomy between "powers" and "duties" of the NDMC.
Performance of duty entails "expenditure". Under Section 11 of the
Act of 1994 there are obligatory functions of the NDMC which are
inter alia keeping the streets clean, supply of electricity and water
etc. Chapters XI (Borrowing), XII (Electricity Supply), XIII
(Streets), XV (Sanitation and Public Health) and XVII (Public
Safety and Suppression of Nuisances) entail such "duties".
64. Under Chapter XIV of the Act of 1994 is regarding "Building
Regulations". Since through the Government of India (Allocation of
Business Rules) Rules 1961, the "land and buildings bye laws" is
within the control of the Ministry of Urban Development the
superintendence of this Chapter is with the Ministry of Urban
Development as the "Central Government". Further if the property
is owned by the Government of India then the entire control and
governance comes within Ministry of Urban Development as per
Government of India (Allocation of Business Rules) Rules 1961.
65. Therefore, a dichotomy is created in the two jurisdictions of
superintendence of the defendant.
66. He submits that Section 235 and Section 395 of the Act of
1994 require proper construction in this behalf. Section 235 of the
Act would provide the superintendence to the Central Government
led by MoUD and Section 395 provides superintendence to the
Central Government through the Ministry of Home Affairs.
67. He submits that Section 395 of the Act of 1994 only concerns
itself with "duties" of the NDMC. It is obvious that Chapter X
"Property and Contracts" is not a duty of the defendant. This
Chapter does not entail expenditure or provision. However, Section
395(b) of the Act clarifies this position since it only seeks to create
"provision" for "such duty". Thus, Chapter X is outside the
governance of the Central Government under Section 395 of the
NDMC Act, 1994. [Ref Dr. BL Wadhera Vs. Union of India
reported in (1996) 2 SCC 594 @ para 22]
68. However, he submits that Section 235 of the Act of 1994
provides a superintendence to the MOUD in respect of use of any
building through Sections 252 and 260(2)(u) of the Act of 1994.
Further, being the owner of the property at 1, Man Singh Road, it
also has the right to direct the use of such property. Its directions are
binding. [Ref NDMC v. Tanvi Trading and Credit Private Ltd.
reported in (2008) 8 SCC 765 @ para 18, 26, 32, 34 & 36] and
Bihari Lal Jalan Vs. DDA reported in 2003 (68) DRJ 593 (DB) at
para 12 and 13].
69. The Plaintiff therefore submits that the Ministry of Urban
Development is admittedly the owner of the land. The said Ministry
controls the users of the said land. The said Ministry in its decision
dated November 14, 2011 has decided that the Defendant must
negotiate with the Plaintiff. That decision is binding upon the
Defendant. This is the outcome of the Allocation of Business Rules
whereby all the Properties of the Union except specifically provided
therein are under the Ministry of Urban Development. In this
respect the Plaintiff seeks to rely upon the judgment of the Supreme
Court of India in Reliance Natural Resources Ltd. Vs. Reliance
Industries Ltd. reported in (2010) 7 SCC 1.
70. Mr. Nayar, therefore, submits that Section 395 and 396 of the
Act of 1994 are not invocable at all by MHA, and direct to hold an
auction of the Government of India‟s/MoUD‟s property. There is a
complete conflict in jurisdictions between MoUD and MHA. This is
a classic case of "Right hand knowing not what the left hand does".
(Ref. The Queen on the application of BAPIO Action Ltd. and
Secretary of State for the Home Department & Anr. (2007
EWCA Civ 1139) held as follows:
―54. If the Home Secretary had issued this guidance I do not see
how it could have been suggested that it was lawful in the light of
s.3 of the 1971 Act. It can be no more lawful if issued by another
minister of the Crown, for the Crown in right of the United
Kingdom is a single entity. Put in terms which political science,
though not the common law, would recognize, the acts of both
ministers are acts of the state; and in terms which the common law,
though probably not political science, would recognize, the state
cannot be heard to say that its left hand does not know what its right
hand is doing.‖
71. To the same effect is the judgment of the Hon‟ble Supreme
Court of India in D. Ramaswami Vs. State of Tamil Nadu 1982 (1)
SCC 510 para 1 and judgment of Ld. Single Judge of this Hon‟ble
Court Bio-chem Pharmaceutical Industries Vs. Astron
Pharmaceuticals 102 (2003) DLT 840 at para 18.
WITHOUT PREJUDICE TO THE ABOVE, SECTION 395 OF
THE NDMC ACT, 1994 CANNOT BE INVOKED FOR A
SINGLE TRANSACTION ESPECIALLY AFFECTING
PRIVATE RIGHTS.
72. Mr.Rajiv Nayar submits, the direction dated January 1, 2015
is passed by MHA in complete ignorance of the contractual rights of
the Plaintiff which are sub judice before this Hon‟ble Court. The
directions abrogates the Plaintiff‟s contractual rights arising out of
the three Agreements with NDMC.
73. The Defendant has relied upon the full bench judgment of this
Court in Satish Chandra Vs. Union of India reported in AIR 1983
Del 1 while seeking pari materia interpretation from similar
provisions being Sections 490 of the Delhi Municipal Corporation
Act.
74. Mr. Nayar, submits that on the above judgment it is clear that
Section 395 and 396 of the NDMC Act, 1994 cannot be invoked for
a particular transaction and can only be "policy" based where there
is repeated infraction of a duty. This is because the independence of
the Defendant‟s Council which in any case consists of high powered
Members, cannot be taken away by the Central Government. Four
of such high powered members are from the Ministry of Home
Affairs itself. Thus, it would be incongruent to suggest that the
Ministry of Home Affairs within the council, for a particular
transaction, would have a different view than when it is operating
outside the council.
75. Mr. Rajiv Nayar also relied upon the judgment of GMR
Infrastructure Ltd. v. National Highways Authority of India,
reported in (2009) 156 DLT 257 and Dr. Ramesh Kumar Yadav
Vs. University of Allahabad reported in (2013)4 All LJ 635.
76. According to him, the power used under Section 395 of the
NDMC Act has been used irrationally since it is based upon a
mistake of "lease", it is based upon non-application of mind
inasmuch as an available opinion of the Ld. Solicitor General of
India has been construed to be "pending", and it has been used to
abrogate private contractual rights pending before this Court. Thus
on the application of the above judgment the direction dated January
1, 2015 deserves to be ignored.
77. Therefore, the letter dated January 1, 2015 of the Central
Government cannot be resorted to and deserves to be ignored by
this Court.
GENERAL WISH OF THE DEFENDANT TO HOLD AN
AUCTION IRRESPECTIVE OF THE CONTRACTUAL
RIGHTS OF THE PLAINTIFF.
78. Mr. Rajiv Nayar submits if the Plaintiff succeeds on Issue 1,
then there cannot be an unbridled wish of the Defendant to hold an
auction. It must apply the law and the contract. Since the Rateable
Value Bye Laws read with the judgment of the Supreme Court of
India in MN Soi's (supra) case provide a full guideline in respect of
the Plaintiff‟s rights arising out of the Contract, the Defendant
cannot wish an auction in breach of the Plaintiff‟s agreements.
79. He submits that, absent application of Section 141 of the
NDMC Act, 1994 and the direction of the Central Government
under S. 395, and on application of the binding decision of the
MoUD dated November 14, 2011, the Defendant has no right to
wish an auction.
80. The Petitioner submits that the net effect of Section 235 of
the Act, MoUD‟s decision dated November 14, 2011 to the
Chairperson and the Judgment of the Supreme Court in Tanvir
Trading's case is that the decision of MoUD binds the chairperson
who is the only person authorized to act under Section 141 of the
NDMC Act. This is because Section 141 of the NDMC Act and
Section 235 both put the onus on the Chairperson.
81. According to Mr. Nayar, the Defendant, however, in its
amended Written Statement sought to allege that its Resolution
dated January 30, 2015 and March 25, 2015 after the filing of the
Suit provides for an auction without "Right of First Refusal" to the
Plaintiff.
82. He further states, the Defendant has sought to rely upon the
Central Government‟s direction and the pendency of the Suit for
coming up with the said Resolution. In Regulation 34(v) of the
New Delhi Municipal Council (Procedure and Conduct of Business)
Regulations, 1997 of the Defendant, the Defendant is prohibited
from deciding issues which are sub judice. On the Defendant‟s own
acceptance of the fact that because the Plaintiff had challenged the
letter dated November 5, 2012, the Defendant was seeking to
withdraw the Right of First Refusal, its decision would fly in the
face of the said Regulation.
83. He submits that throughout in all pleadings, both the Plaintiff
and the Defendant, have relied upon the Right of First Refusal in
November 5, 2012.
84. The Plaintiff has relied upon the said Right of First Refusal to
submit that the Defendant recognizes the Plaintiff‟s right in the
property. The Defendant relied upon the said Right of First Refusal
to submit that its decision dated November 5, 2012 is reasonable.
85. In the face of such pleading the Defendant could not have
altered its own decision. Accordingly, the Central Government‟s
direction is invalid for the above reasons.
86. The Plaintiff therefore submits that both the Central
Government‟s direction and the Resolution dated January 30, 2015,
May 23, 2015 and decision dated January 29, 2016 communicated
to the Plaintiff having been passed during the pendency of the
present Suit deserve to be ignored and this Court may assess the
rights of the parties in relation to the impugned letter dated
November 5, 2012 and the issues framed thereupon only.
87. THE NDMC ACT, 1994 IS NOT AVAILABLE TO THE
DEFENDANT IN RESPECT OF CONTRACTS EXECUTED
AND PERFORMED UNDER THE PUNJAB MUNICIPAL
ACT, 1911
1. Mr. Nayar submits that without prejudice to the any of the
contentions of the Plaintiff, the Agreements executed by the Plaintiff
with the Committee must be construed as per the provisions and rights
flowing from the Punjab Municipal Act, 1911.
2. He submits that in the Punjab Municipal Act, 1911 there is no
provision akin to Section 141 of the NDMC Act and in fact the disposal
of property is governed by Section 47 of the said Act which stipulates as
under:
―47. Mode of executing contract and transfer of property - (1) Every
contract made by or on behalf of any municipality of the first class
whereof the value or amount exceeds one hundred rupees, and every
contract made by or on behalf of the committee of any municipality of
the second [and third class] whereof the value of amount exceeds fifty
rupees, shall be in writing, and must be signed by two members, of whom
the President or a Vice-President shall be one, and countersigned by the
Secretary:
Provided that, when the power of entering into any contract on behalf of
the committee has been delegated under the last foregoing section, the
signature or signatures of the members to whom the power has been
delegated shall be sufficient.
(2) Every transfer of immovable property belonging to any committee
must be made by an instrument in writing, executed by the President or
Vice-President, and by at least two other members of committee, whose
execution thereof shall b attested by the Secretary.
(3) No contract or transfer of the description mentioned in this section
executed otherwise than in conformity with the provisions of this section
shall be binding on this committee.‖
3. According to him the "Committee" was superseded by the
"Council" in view of the Act of 1994 promulgated on May 25, 1994.
Section 416(2)(b) of the NDMC Act stipulates as follows:
―416. Repeal and savings.
(1) As from the date of the establishment of the Council, the Punjab
Municipal Act, 1911, (Punjab Act 3 of 1911) as applicable to New Delhi,
shall cease to have effect within New Delhi.
(2) Notwithstanding the provisions of sub- section (1) of this section,--
(b) all debts, obligations and liabilities incurred, all contracts entered
into and all matters and things engaged to be done by, with or for the
New Delhi Municipal Committee before the establishment of the Council
shall be deemed to have been incurred, entered into or engaged to be
done by, with or for the Council under this Act;
4. He would rely on the judgment of the Supreme Court of India on
interpreting a pari materia provision in the Electricity Act, 2003 in the
case of Grid Corporation of Orissa & Ors. Vs. Rasananda Das (2003)
10 SCC 297.
5. He also relies upon the Constitution Bench judgment of Supreme
Court of India in The Mysore State Electricity Board Vs. Bangalore
Woolen Cotton and Silk Mills Ltd. 1963 Suppl(2) SCR 127 at pg.143 -
145.
6. He further submits that applying the above principles, it is not
available to the Defendant to apply Section 141 of the Act of 1994 to the
Plaintiff‟s contractual rights which emerge out of the Contracts executed
prior to the Act of 1994.
88. Even otherwise, it is his submission that:-
(a) the defendant by applying Section 141 of the NDMC Act,
1994, decided on November 5, 2012 in respect of the Hotel at 1,
Man Singh Road, New Delhi, as under:
―The New Delhi Municipal Council in its meeting held on
27.09.2012 had considered the proposal on the above cited
subject and has resolved to opt for public auction, in a fair and
transparent manner, of its property at 1, Man Singh Road, with
first right of refusal to Indian Hotels Co. Ltd. the recourse to
public auction would serve to determine the market price of the
licence fee, that M/s. IHCL Ltd. would have to match, if they wish
to run the hotel at this property.
2. The council further resolved to extend the period of licence
of IHC Ltd., on the existing terms and conditions, for a further
period of one year or till such time a new licencee is chosen
through the bidding process, whichever is earlier.‖
(b) The plaintiff has impugned the above decision by way of the
present Suit seeking interalia the following relief:
(b) Pass a decree of permanent injunction restraining the
Defendant, its servants, officers, agents, subordinates and/or its
successors from giving effect to the decision communicated
through the letter dated 5.11.2012 having No.D/389/PA/D.E.-
I/2012 in respect of hotel premises at 1, Man Singh Road, New
Delhi, and/or from giving effect to any known or unknown
decision to conduct an auction for running /operating/
maintaining, the hotel premises at 1, Man Singh Road, New Delhi;
(c) In the Written Statement, the Defendant has relied upon
Section 141(2) of the NDMC Act, 1994 to defend the auction for a
fresh licence.
(d) This Court on July 17, 2014 framed the following issues in
the present Suit:
―1. Whether the Plaintiff is entitled to the extension of licence as
claimed in the Suit? OPP
2. Whether the Suit is barred by Section 385 of the NDMC Act,
1994? OPD
3. Whether Section 141 of the NDMC Act, 1994 is applicable to
the contracts and transactions between the Plaintiff and the
Defendant in respect of the extension of the licence deed dated
18.12.1976? OPD
4. Whether the Plaintiff is entitled to relief claimed in the present
Suit? OPP
5. Any other Relief.‖
(e) Therefore, it is the case of the plaintiff that defendant‟s right
to auction the Suit Property is directly in issue. According to him,
Section 141(2) of the Act of 1994 is not applicable to the Suit
Property:
i. For the extension of the Licence of the Plaintiff S. 141 (2)
cannot be resorted to.
ii. Even for a fresh Licence for the Hotel Section 141(2) of the
NDMC Act, 1994 cannot be resorted to.
(f) He submits Section 141(2) of the Act is applicable only to the
following actions by NDMC:
(1) "Lease" of immovable property;
(2) "Sale" of immovable property;
(3) Otherwise "transfer" of immovable property
(g) He states, that in the present situation the Defendant has not
anywhere stated that either the Plaintiff‟s right to
"extension/renewal of its Licence" amounted to a "Lease", "Sale" or
"Transfer" of immovable property.
(h) According to him, even the words "or otherwise transferred‖
have to be read ejusdem generis with the words "lease", and "sale".
Accordingly, "transfer" by NDMC would mean creation of fresh
rights in the immovable property, akin to rights by way of "lease" or
"sale".
(i) He also states, the Supreme Court has held that when the term
"otherwise" is preceded by terms of a particular class or group, it
must be given a restricted meaning falling within the said class or
group. He relies on the following judgments:
(1) Union Bank of India vs. Pijush Kanti Nandy reported in
(2009) 8 SCC 605;
(2) Kamlesh Kumar Sharma vs. Yogesh Kumar Gupta reported
in (1998) 3 SCC 45.
(j) According to him, both "Sale" and "Lease" of an immovable
property create an "interest" in the property, whereas it is an
asserted position of the Defendant that a "Licence" does not create
any interest in the immovable property.
(k) He refers to the term "Sale" as defined under Section 54 of
the Transfer of Property Act, 1882 and the term "Lease" as defined
under Section 105 of the said Act. Section 54 and 105 are as under:
―54. ―Sale‖ defined - ―Sale‖ is a transfer of ownership in
exchange for a price paid or promised or part paid and part
promised.
―105. Lease defined - A lease of immovable property is a transfer
of a right to enjoy such property, made for a certain time, express
of implied, or in perpetuity, in consideration of a price paid or
promised, or of money, a share of crops, service or any other thing
of value, to be rendered periodically or on specified occasions to
the transferor by the transferee, who accepts the transfer on such
terms.‖
(l) It is the Defendant‟s case that it only provided a "Licence"
which is defined under Section 52 of the Easements Act, 1882 and
is as under:
―52. ‗Licence' defined.--Where one person grants to another, or
to a definite number of other persons, a right to do, or continue to
do, in or upon the immovable property of the grantor, something
which would, in the absence of such right, be unlawful, and such
right does not amount to an easement or an interest in the
property, the right is called a licence.‖
(m) He would rely on the judgment of the Supreme Court
wherein, according to him, a distinction was made between a
"Licence" and a "Lease", Puran Singh Sahni v. Sundari
Bhagwandas Kripalani, reported in (1991) 2 SCC 180.
(n) He also relied on the judgment of the Supreme Court in the
case of Mangal Amusement Park (P) Ltd. v. State of M.P.,
reported in (2012) 11 SCC 713.
(o) He states, that through a Licence there is no "transfer" and it
is only right to use which is "granted".
(p) The defendant (NDMC) has at paragraph 3 of the Written
Statement stated as under:
―The Plaintiff was merely a licencee to operate the hotel for a
limited period with no right to right of transfer/sublet the said
hotel or any portion thereof, permanently or temporarily, to
anybody else, the period whereof has since expired.‖
(q) He further, submits that the above interpretation of Section
141(2) of the NDMC Act, 1994 is furthered from the
language/words used by the legislature in the sub section (1) and
sub-section (2) of Section 141 the said Act.
(r) According to him, while sub-section (1) of Section 141 deals
with the various modes in which the Council may "deal with the
immovable property" belonging to the Council, sub-section (2)
provides the manner for arriving at the consideration such
disposal/transfer mentioned therein.
(s) He states, sub-section (1) of Section 141 uses the words (i)
Lease; (ii) Sell, (iii) Let out on hire; (iv) or otherwise transfer.
However, the legislature has consciously omitted the words "let out
on hire" from Section 141(2) of the NDMC Act. Therefore the
manner of arriving at the consideration through competition only
applies to:
(1) A sale of immovable property
(2) A Lease of immovable property
(3) The property is transferred in a manner which creates an
interest in the property. (since the terms "otherwise" has to be
construed ejusdem generis as explained above)
(t) It is also his submission that Section 141 of the NDMC Act,
1994 nor any other provision of the said Act specifically deals with
the expression "let out on hire". However the New Delhi Municipal
Council (Determination of Annual Rent) Bye Laws, 2009 enacted
under Section 391 of the Act deal with the term "Let". The Plaintiff
submits that under Explanation to Bye Law 2 of the said Bye Laws,
it is provided that the expression "Let" includes "Licence".
(u) He would state, in the context of a different enactment the
terms "letting" came to be interpreted by the Hon‟ble Supreme
Court in the case of H.S. Rikhy Vs. New Delhi Municipal
Committee reported in AIR 1962 SC 554 to mean Licence
(v) He states, Section 141(2) of the NDMC Act, 1994 is not
applicable to the expression "let out on hire" and Bye Laws being
superior to the Council‟s resolution since the Bye Law are approved
by the Govt. of NCT of Delhi and are issued under Section 391 of
the NDMC Act, 1994, must be given effect to. Thus for
determination of Licence Fee there is no requirement of holding an
auction.
(w) It is a matter of fact that the Defendant has not held any
auction for extension of the licences of DTTDC in respect of „Dili
Haat‟ and extended the licence by mutual negotiations vide its
resolution dated September 13, 2011 and the Council vide its
Circular No. SO/Estate-1/963 dated 17.7.2014 has invited
application for renewal of licences of various shop units in various
markets across New Delhi also without resorting to auction. Thus it
is clear by the conduct of the Defendant that there is no requirement
of holding any auction of licence fee.
(x) He would state excluding the term "let out on hire‖ in sub-
section (2) of Section 141, which is akin to the grant of a "licence"
as interpreted by the Supreme Court, the legislature in its wisdom
consciously decided to exclude the mandate of arriving at the
consideration as per Section 141(2) in cases of grant of a simplictor
"Licence" by the Council.
(y) He would submit that when the legislature has consciously
omitted certain words, the Defendant cannot be permitted to add
the words "Licence" in Section 141(2) nor would the Court while
interpreting the said Section add or supply any words especially
when there is no ambiguity by applying the literal rule of
interpretation. He seeks to rely on the following judgments in this
regard:
(1) State v. Parmeshwaran Subramani, reported in (2009) 9
SCC 729;
(2) V. Jagannadha Rao v. State of A.P., reported in (2001) 10
SCC 401;
(3) Delhi Financial Corpn. v. Rajiv Anand, reported at
(2004) 11 SCC 625;
(4) Sree Balaji Nagar Residential Assn. v. State of T.N.,
reported at (2015) 3 SCC 353;
(5) Mohd. Shahabuddin v. State of Bihar, reported at (2010) 4
SCC 653;
(6) Bank of India v. Mehta Brothers, reported at (2008) 13
SCC 466.
(z) Since in the present circumstances, the Defendant has
provided a Licence, and is only seeking to provide a Fresh Licence
as per itself, Section 141 (2) of the Act of 1994 would not be
applicable. Accordingly the decision dated November 05, 2012 is
clearly wrong, and deserves to be set aside only on this ground.
Decision of Aggarwal Modi's case is not Applicable.
(aa) He states, the decision of the Supreme Court in the case of
Aggarwal & Modi Enterprises (P) Ltd. & Anr. Vs. New Delhi
Municipal Council is not applicable to the facts and circumstances
of the present case for the following reasons:
(1) In the case of Aggarwal Modi, there was no valid licence in
question and the Appellant therein was continuing in the property
from 1990-2000 without a licence. The Court came to a conclusion
that there was no option/entitlement of renewal since the there was
no licence in operation under which the right could be exercised.
(2) In paragraph 18 in the judgment is very relevant and is as
under:
―18. For appreciating the true scope and ambit of Section 141(2), it
is to be noted that by nature of the proposed changes it has to be
treated as fresh transaction particularly when not only the nature
of property changes but also the lease has expired. Though strong
reliance was placed on a Resolution dated 18-3-1999 by the
appellants, it is to be noted that the said resolution has practically
no effectiveness in 2006.‖
(3) From a bare perusal of the aforementioned paragraph, it is
clear that what was considered by the Supreme Court was that since
the Lease had expired and more so the nature of the property was
being changed in amounted to a „fresh transaction‟. Accordingly for
Section 141 to be applicable there has to be a "fresh disposal" of
property.
(4) In the present case, it is not the case of the Defendant that the
nature of use of the suit property is going to be changed and further
the Plaintiff had exercised its option of renewal during the validity
of the Licence. Further there is no "fresh disposal" of property since
the licence of the Plaintiff would only be extended.
(5) The Court in para 22 held as under:
"22. The mandate of Section 141(2) is that any immovable property
belonging to NDMC is to be sold, leased, licenced or transferred on
consideration which is not to be less than the value at which such
immovable property could be sold, leased, or transferred in fair
competition. The crucial expression is ―normal and fair
competition‖. In other words, NDMC is obligated to adopt the
procedure by which it can get maximum possible
return/consideration for such immovable property. The
methodology which can be adopted for receiving maximum
consideration in a normal and fair competition would be the public
auction which is expected to be fair and transparent. Public auction
not only ensures fair price and maximum return it also militates
against any allegation of favouritism on the part of the Government
authorities while giving grant for disposing of public property. The
courts have accepted public auction as a transparent means of
disposal of public property........‖
(6) In the second line of paragraph 22 the words "Licence" has
been used by the Court, however the term "Licence" is missing in
the fourth line which shows that the term "Licence" has crept in by
mistake since the Section 141 (2) does not use the term "Licence".
Further a bare perusal of the entire judgment would show that the
Court has used the term "Licence" and "Lease" synonymously since
the case of the Appellant therein was that the rights were of a Lessee
as noted in paragraph 3.
89. Mr. Rajiv Nayar in rejoinder to the submissions of Mr. Sanjay
Jain, with regard to Section 141 and Section 395 of the Act of 1994
would submit the reliance placed by Mr. Jain on Faqir Chand Gulati Vs.
Uppal Agencies Pvt. Ltd. (2008) 10 SCC 345 to submit that the
Collaboration does not provide any rights in property, is in a wrong
context. The contracts between the parties in the present case, provide a
joint control as also envisages sharing of profits. In this regard Para 25 of
the said judgment goes contrary to the Defendant‟s submissions. He
further submits that in the face of the admitted documents and the
Defendant‟s own admissions in the Resolutions the Defendant cannot be
allowed to take a contrary stand before this Court in oral arguments. He
would rely on paragraph 25 of the judgment, which is as follows:
"25. An illustration of joint venture may be of some assistance. An
agreement between the owner of a land and a builder, for construction of
apartments and sale of those apartments so as to share the profits in a
particular ratio may be a joint venture, if the agreement discloses an
intent that both parties shall exercise joint control over the
construction/development and be accountable to each other for their
respective acts with reference to the project.‖
(b) Insofar as the submission of Mr. Jain, that the interplay of Section
91 and 92 of the Evidence Act prohibits the Court from considering
exchange of letters. According to him, Mr. Jain wrongly sought to
contend that implications also cannot be drawn. No answer was given
by the Defendant to the Resolution of the Committee dated April 02,
1976 which itself uses the words "joint participation" as also the use of
the word "collaborate" in Collaboration Agreement and the clear
distinction made out between the words "Hotel Building" and "Hotel".
The concept of joint venture is omnipresent in the present case because
both the plaintiff and the Defendant came into the possession of 1, Man
Singh road, with one single purpose at the same time. Now, the
Defendant cannot argue that its rights are larger than the Plaintiff, in the
Hotel Project. The Defendant cannot be allowed to assess the
relationship between the parties under the regime of the Act of 1994 by
discarding and dislodging the rights of the parties as they existed on
April 02, 1976, December 18, 1976, September 25, 1979, and confirmed
by the Defendant itself in its Resolutions dated October 07, 2011, July
25, 2012 and September 27, 2012. All these documents have to be read
together and the Defendant cannot be allowed to read certain documents
in isolation.
(c) He would state, it was sought to be argued that the two stage
theory as per the Plaintiff is not possible while construing the application
of Section 141 of the Act of 1994 and also it sought to be argued that the
order passed by this Court on the Plaintiff‟s application under Order II
Rule 2 of the CPC is of no consequence or effect. The submission of the
Defendant can be appropriately dealt with after this Court passes a
decree directing the Defendant to negotiate with the Plaintiff.
(d) On the argument of Mr. Jain that once the licence stood expired,
there was no extension possible and only a renewal could be granted. A
renewal would mean an execution of fresh licence which would mean
holding of an auction. The Plaintiff submits that since the Plaintiff‟s
request for extension of the licence is much prior to the expiry of the
licence, the Plaintiff‟s rights deserve to be construed as per the date of
the request. This is the direct import of the judgment of the Supreme
Court of India in respect of mining leases Common Cause vs. Union of
India Writ Petition (C) No.114 of 2014 dated April 4, 2016.
(e) He would also state, the submission that under Section 2(29) of
the NDMC Act, the word "occupier" includes a "licencee" and
accordingly, in case of a licence, the licencee would be liable to pay
House Tax. This explanation of the Defendant is contrary to Section 61
of the Punjab Municipal Act as also Sections 62 read with Section 66 of
the Act of 1994 where the incidence of tax is defined to be on the owner.
(f) He would also state, the argument of Mr. Jain that "otherwise
transfer" in Section 141(2) of the Act of 1994 would include licensing of
the property, because as per the Transfer of Property Act there are only 4
ways of transfer i.e. gift, lease, sale or succession and would cover
"licence", is devoid of any merit because licence is defined in Section 52
of the Easements Act and is never construed to be a "transfer". In the
Written Statement and in the cross examination, the Defendants have
admitted that the licence does not amount to transfer. This unique
argument therefore cannot be resorted to by the Defendant during oral
arguments.
(g) He states, even the argument that the word "licence" in paragraph
22 of the judgment of the Supreme Court of India in Aggarwal Modi Vs.
NDMC as being the mandate of law pronounced by the Supreme Court
of India by relying on the judgments of the Supreme Court in the cases
of South Central Railway Employees Cooperative Credit Society
Employees Union Vs. B. Yashodabai (2015) 2 SCC 727 and Director
of Settlement A.P. and M.R. Apparao (2002) 4 SCC 638 is without
merit. He states, it is trite law that judgments cannot be read as "Euclid
formula". In this regard, he relied upon the judgment of the Supreme
Court in Union of India & Anr. Vs. Arulmozhi Iniarasu (2011) 7 SCC
397.
90. He also states, defendant‟s reliance on the judgment in Director of
Settlements A.P. Vs. M.R. Apparao (supra) also goes against the
Defendant‟s own submission since it holds that an obiter may not have a
binding precedent if the observation was unnecessary for the decision
pronounced.
91. He submits that to further the above argument of the Plaintiff the
following distinguishing features mentioned in the Aggarwal & Modi
Enterprises Pvt. Ltd. (supra) judgement make the said judgment not a
binding precedent in respect of the Plaintiff‟s case:
(i) there was "lease" in that case;
(ii) The lessee refused to accept defendant‟s terms and conditions for
extension
(iii) When that lessee approached for extension, the agreement had
expired and there was no lease in operation under which it could exercise
such an option.
(iv) It was a change in user of the premises from a Uniplex to a
multiplex-cum-commercial center.
(v) That was not a case of joint venture and there was no assessment
of rights as in the present case where evidence has been led.
92. According to him, the plaintiff‟s case is however totally distinct
and separate therefore the use of the word "licence" in paragraph 22 in
the judgment of Aggarwal & Modi Enterprises Pvt. Ltd. (supra) cannot
be isolatedly read without reference to Section 141 (2) and the facts in
Aggarwal & Modi Enterprises Pvt. Ltd. (supra), to mean that there is a
mandate of law to hold an auction for renewal of a licence even when
the request for extension was made during the existence of the Licence
under Clause 2(2) of the Licence Deed, and the purpose remains the
same.
93. He also states, the plea of Mr. Jain, the property at 1, Man Singh
Road, New Delhi is a "natural resource", is completely devoid of merit
because the whole building was constructed by the Plaintiff and is a
man-made structure. There are "joint venture" rights attached to the
building which cannot be ignored by the Defendant to somehow contend
that it is entitled to seek compensation for the use of the building
independent of Plaintiff‟s rights. The Plaintiff therefore submits that the
contention of the Defendant that the Hotel Project is a natural resource
deserves to be rejected.
94. Mr. Nayar states, the plea that NDMC determination of annual
rent cannot be resorted to by the Plaintiff since it regards House Tax, is
devoid of merit because these bye-laws have been adopted by the
Defendant to calculate the licence fee payable by the Plaintiff (Refer
Exh. P6). In any case, the Supreme Court of India has held that the
fixation of the reasonable market rent to determine the House Tax
payable is actually to determine the market rent (Refer: NDMC Vs.
M.N. Soi).
95. According to Mr. Nayar, the argument that extension of Dilli Haat
was for a different purpose, is devoid of merit because the case of Dilli
Haat is the same as that of the Plaintiff. If no auction is held for
extending Dilli Haat licence, obviously Section 141 cannot be applied to
the Plaintiff‟s case for extension of the Plaintiff‟s licence.
96. He also attacks the argument of Mr. Jain with regard to
Government of India (Allocation of Business) Rules, 1961 MOUD is the
Nodal Ministry only for making land and building bye-laws; and the
MHA is the Central Government in respect of Act of 1994 by relying
upon the judgment of the Division Bench of this Court in Tajdar Babar
(supra) as devoid of merits because it seeks to ignore the most
important part of the Government of India (Allocation of Business)
Rules, 1961 that the Government of India‟s properties come exclusively
within the control of MoUD, and the allotment of such properties is also
within MoUD‟s exclusive discretion. In respect of defendant, the Entry
of "land and building bye-laws" is also within the MoUD‟s control. The
Plaintiff submits that it is trite law that Entries have to be read in their
full width. It is also held by the Supreme Court of India that a decision
which is taken contrary to the allocation business rules is void ab initio.
Once it is admitted that 1, Man Singh Road, New Delhi being
Government of India property, obviously it is for the MOUD to direct a
particular treatment of the said property. Before the Supreme Court of
India in SLP(C) No.9142 of 2013 also in respect of this very case the
MoUD had stated that it is a "policy making body". The Defendant
therefore cannot ignore this direction of MoUD. The Plaintiff submits
that the role of MHA in the NDMC Act is therefore limited to the control
over the council and cannot touch upon right to transact in properties of
the Union of India which comes within the exclusive domain of MoUD.
97. He states, the submission of Mr. Jain that "duty" within Section
395 of the Act of 1994 would include the performance under Section 141
(2) of the Act, is totally devoid of merit because entering into contracts is
not a duty as envisaged in the Act of 1994. There is no expenditure in
holding an auction or contracting out property of the defendant. Thus,
the contention of the Defendant deserves to be rejected. In any case, this
Court as also the Supreme Court of India has held that there cannot be a
"duty" based upon a single transaction. Therefore, it cannot be that
under the Act of 1994, for any contract or act of the council the MHA
will get the power to override the council. MHA has no such control as
already contended by him.
98. He states, the argument that the Defendant does not lease or sell
properties and it only licences properties and therefore, the mandate
under Section 141(2) has to apply to the licensing activity of the
Defendant is devoid of merit as apparent from the Aggarwal & Modi
Enterprises Pvt. Ltd. (supra) judgement itself where it was a lease which
was being construed. In any case, this has no factual basis in any of the
pleadings or the evidence before this Court.
99. He would rely on the judgment of Union of India Vs. Hotel
Excelsior Ltd. ILR (2013) I Delhi 157 at para 28 has held as follows in
respect of the defendant:
―28. The appellant and other governmental agencies are known
to grant leases viz. of markets, shops etc. Infact one such leases
granted by NDMC to Chanakya Cinema at New Delhi was held to
have lapsed and the eviction was upheld till the Supreme Court
vide judgment reported as Aggarwal and Modi Enterprises Pvt.
Ltd. Vs. NDMC (2007) 8 SCC 75. The very fact that the
entitlement to freehold was confined only to those leases where
ownership rights had been conferred signifies that such
conversion was not intended where according to the appellant,
ownership rights had not been conferred. In the light of the
differences pointed out above, the appellant can well be believed
to have entertained an opinion that conversion is to be granted
only of those leases for which premium had been paid and not to
other leases.‖
100. He states, the argument that the expression "let out on hire" can be
equated to the expression "lease" and therefore even licence by the
Defendant would be covered by the expression "lease" making Section
141 of the Act applicable is devoid of merit. It is obvious that when a
legislature uses the expression "separately" and then omits one of them
in a subsequent provision, the omission is deemed to be deliberate.
Thus, there is no equivalence between the two expressions.
101. Mr. Nayar argues that the defendant has wrongly sought to dis-
apply Section 235 of the Act of 1994 by saying that it only applies to
sanctioning of plans and building regulations. He states, that it is trite
law that topics in legislations do not govern the stipulations. Section 252
of the Act of 1994 specifically covers use of a building in a particular
manner read with the ownership of the said land being with the
government of India, it is the MOUD only which has the control and
jurisdiction upon the Defendant in respect of properties of the Defendant.
Finally, he states the plaintiff is entitled to reliefs prayed for.
SUBMISSIONS ON BEHALF OF THE DEFENDANT:-
102. On the other hand, Mr. Sanjay Jain, learned ASG would state that
the plaintiff has filed the present suit seeking a permanent injunction
restraining the defendant from in any manner interfering with the
possession, right to operate, run and maintain the hotel premises at 1,
Man Singh Road, New Delhi as per the Collaboration Agreement dated
December 18, 1976 (Exh.P-40) read with Deed of Licence dated
December 18, 1976 (Exh.P-41) and Supplemental Agreement dated
September 25, 1979 (Exh.P-42). In addition, the plaintiff has also
prayed a decree of permanent injunction restraining the defendant from
giving effect to the decision communicated through letter dated
November 05, 2012 (Exh.P-49) to conduct an auction with respect to the
hotel premises at 1, Man Singh Road, New Delhi. He would state that
the primary grounds in the written statement are:
(a) That the suit is barred under the provisions of Section 385 of the
NDMC Act;
(b) That the suit is barred in view of the mandate of the provisions of
Section 141(2) of the NDMC Act; and
(c) That the plaintiff has no legally enforceable right to claim the relief
as sought in the present suit inasmuch as the plaintiff has no right, title or
interest in the land or in the building in question which exclusively
belongs to and vests in the defendant.
(d) It has further been stated that there is no right of extension that vests
with the plaintiff in terms of the Collaboration Agreement or the Licence
Deed. The period of licence having come to an end, no right in law
exists in favour of the plaintiff.
103. He would state, that the following issues were framed vide order
dated July 17, 2014:
1. Whether the Plaintiff is entitled to the extension of licence as
claimed in the Suit? OPP
2. Whether the Suit is barred by Section 385 of the NDMC Act, 1994?
OPD
3. Whether Section 141 of the NDMC Act, 1994 is applicable to the
contracts and transactions between the Plaintiff and the Defendant in
respect of the extension of the licence deed dated 18.12.1976? OPD
4. Whether the Plaintiff is entitled to relief claimed in the present Suit?
OPP
5. Any other Relief.
104. The Collaboration Agreement dated December 18, 1976 (Exh.P-
40), Deed of Licence dated December 18, 1976 (Exh.P-41) and
Supplemental Agreement dated September 25, 1979 (Exh.P-42) may
collectively be referred to as the basic written contracts.
105. With regard to issue No.1, he would state that it has been argued
on behalf of the plaintiff that notwithstanding the basic written contract
the status of Indian Hotels Company Ltd. (IHC) is not that of a mere
licencee but that of a Joint Venture Partner with an option for renewal of
the licence for the further period of 30 years after the expiry of the initial
term at the option of IHC; which option, according to IHC, has been
exercised by them on February 15, 2010 (Exh. P-49) and thus, the
licence has inevitably to be extended and there is no question of the
defendant not extending the licence. According to him, it was further
argued that clauses 10 and 12 of the Licence Deed are not applicable in
the facts of the present case as there has been no default by the plaintiff
of any of the terms of the Licence Deed and further, having exercised
with option for renewal before the terms came to an end, clause 12
would also not be applicable. He would state, it was further argued by
the plaintiff, that a fresh terms have already been agreed upon in terms of
the decision of the Committee constituted in this regard on June 03, 2011
wherein the revised licence fee was agreed @ 17.25% of the gross
income for the first 10 years; 18.25% for the second ten years and
19.25% for the last ten years. He also states, in this regard, it has also
been argued that there was no dispute between the defendant and
plaintiff with respect to renewal of Licence and to this effect reliance has
been placed on the Minutes of the meeting dated June 03, 2011 (Exh.P-
4) read with Minutes of the meeting dated July 14, 2011 (Exh.P-5) and
Minutes of the meeting dated November 14, 2011 (Exh.P-27). It has,
thus, sought to be contended that there was a concluded contract. He
would further state, it was argued by the plaintiff that even the Ministry
of Urban Development (MoUD), though, initially had suggested that the
property be put to auction, later changed its opinion as recorded in the
Minutes dated November 14, 2011 (Exh.P-27) wherein the MoUD
opined that NDMC should strive to get as close to the market rate as
possible even if it has to negotiate with IHC. He would state, another
argument of the plaintiff was that the relationship between the parties is
not that of a mere licensor or licencee but that of Joint Venture Partner
and that defendant has also always understood the same to be a Joint
Venture as is allegedly evident from the various Minutes of the NDMC.
According to him, it was contended by the plaintiff, that the land stood
contributed by defendant in the Joint Venture by way of investment vide
the Supplemental Agreement dated September 25, 1979 (Exh.P-42).
That in the light of the above contentions, the plaintiff is challenging a
decision of the defendant to put the hotel property to auction and not
granting extension. He states, before adverting to the contentions on
behalf of the defendant, it may be pointed out that during the pendency
of the suit vide letter dated January 29, 2016, the first right of refusal as
communicated to plaintiff vide defendant‟s letter dated November 05,
2012 (Exh.P-49) stands withdrawn. The plaintiff was further requested
to handover possession of the said property by February 29, 2016. The
plaintiff herein filed an application being IA No.1530/2016 seeking an
injunction restraining the defendant from acting upon the said letter
dated January 29, 2016. The said fact is being set out at the very outset
to highlight that no right of first refusal subsists in the plaintiff and the
right of first refusal as communicated vide letter dated November 05,
2012 (Exh.P-49) stands withdrawn. He states, that this is, however,
without prejudice to the contention which shall be elaborated further,
that no right of first refusal is borne out from a reading of the three
agreements that are being relied upon by the plaintiff i.e The
Collaboration Agreement dated December 18, 1976 (Exh.P-40) Deed of
Licence dated December 18, 1976 (Exh.P-41) and Supplemental
Agreement dated September 25, 1979 (Exh.P-42).
106. He would state, that with respect to the plaintiff‟s argument that it
has a vested right of renewal, it is stated that the same is not borne out
from the three agreements that have been executed between the parties:
(a) The Collaboration Agreement dated December 18, 1976 (Exh.P-40)
merely records the terms whereby the plaintiff was invited to build a 5-
star hotel on a plot owned by the defendant herein. A reading of the
Collaboration Agreement; and in particular, Article II clause 5, Article
III clauses 2 and 8 would clearly demonstrate that the land always vested
with NDMC. Not only the land but even the building belongs to NDMC
as it was NDMC only which paid for its construction, having paid 475
lakhs to IHC for the said purpose.
(b) The Licence Deed dated December 18, 1976 (Exh.P-41), is a licence
to run the hotel for a period of 33 years commencing from the date of
occupation of the hotel by the first paying guest. The said period
commenced from October 11, 1978 and came to an end on October 10,
2011. Clause II of the Licence Deed clearly states that the option to
grant the licence for a further period on such terms that may be mutually
agreed shall be that of the NDMC. The only discretion bestowed upon
plaintiff in terms of the Agreement is that if plaintiff is desirous of
obtaining licence for a further period after the expiry of the present
licence, it shall serve defendant with a notice in writing not less than 60
days prior to the expiry of the present licence of its desire to continue for
the consideration of the defendant. According to him, the argument of
the plaintiff that the option of renewal vests with plaintiff is completely
contrary to the terms of the Licence Deed (Exh.P-40). The Licence
Deed only bestows upon plaintiff an option to communicate to defendant
its desire to continue and after receipt of such communication the option
to renew the Licence Deed for a further period on such terms as may be
mutually agreed between the parties vests exclusively with the NDMC.
He states, the words used in the Licence Deed are "If the licencee shall
be desirous of obtaining a licence for a further period after the expiry of
the present licence, it shall give to the licensor, a notice in writing .... for
the consideration of the licensor‖, thus plaintiff can only express its
desire to continue, it is not a right. The discretion to consider the request
of plaintiff, positively or negatively is purely vests with defendant.
Clause VI(2) again reiterates that the ownership of the said hotel shall
vest with defendant;
(c) The Supplemental Agreement dated September 25, 1979 (Exh.P-42)
was entered into to record certain changes in the Licence Deed, and in
particular, to record facts that the total investment of defendant would be
taken as Rs.626 lakhs as against the stipulated investment of Rs.475
lakhs in the original Collaboration Agreement. Contrary to what has
been argued by the plaintiff, the amendment of enhancement of
defendant‟s contribution by including the cost of land did not in any
manner mean that plaintiff acquired some sort of interest in the land; and
that the said amendment was made for the reason that in terms of Clause
III of the Licence Deed the amount to be paid by plaintiff to defendant
was 10.5% of the gross income for every financial year or a sum
equivalent to 15% of the licensor‟s investment in the said hotel building
in terms of the Collaboration Agreement, whichever is higher. Thus, the
purpose for including the land value in the cost of the investment of
defendant was to increase the minimum guaranteed amount payable by
plaintiff to defendant, and not to make the land an asset of any Joint
Venture as alleged by the plaintiff. In fact, the term „Gross Income‟ was
also modified to read as „Gross Receipt‟.
107. He would state, with respect to the argument of the plaintiff, the
defendant has always treated this project as a unique Joint Venture, and
therefore, the status of plaintiff is not that of a mere licencee is
completely fallacious. It is stated that there was a collaboration between
defendant and plaintiff inasmuch as the construction of the building was
concerned, and for this purpose plaintiff was also granted the right to run
hotel for a period of 30 years. He would state, that mere use of term
Joint Venture or unique a partnership by some officers of the defendant
who are not legally trained would not change the nature of the
Agreement. The most basic ingredient of a Joint Venture is that two
legal entities get together to undertake a particular transaction or venture
for mutual profit. They agree to share profits and losses. It is submitted
that this very basis ingredient of profit and loss sharing, is missing in the
arrangement between the plaintiff and defendant. There is no sharing of
profit or loss. In fact, the defendant is taking a percentage of the gross
receipts, or the minimum guaranteed amount whichever is more. Thus,
the plaintiff is liable to pay defendant even if the hotel was to run in
losses. Therefore, it is submitted that the basic ingredient to term the
arrangement between the parties as a Joint Venture or Partnership are
missing. He would rely on the judgment of the Supreme Court in the
case of Faqir Chand Gulati vs. Uppal Agencies Pvt. Ltd 2008 (10) SCC
345 to contend that Joint Venture means (i) there should be joint
ownership and control of property; (ii) share of expenses, profits and
losses; (iii) having an exercising voice in determination and division of
net earnings; (iv) community of control and active participation in
management and direction of business enterprise. He submits, none of
these elements are present in the present case. He would state, even
assuming the case of the plaintiff to be correct that the agreement
between defendant and plaintiff was a Joint Venture partnership, it is
submitted that nothing turn on the term of the "Joint Venture". It is
submitted that even if the arrangement between the parties was, in fact, a
Joint Venture the same would have to be construed in accordance with
the terms of the three agreements, i.e Collaboration Agreement, Licence
Deed and Supplemental Agreement, which constitute the Joint Venture.
In this regard, Sections 91 and 92 of the Indian Evidence Act are clear,
that unless there is any ambiguity in the terms of the contract no external
evidence can be looked at to ascertain the agreement between the parties.
It is not the case of the plaintiff that the terms of the three Agreements
are ambiguous in any manner. He would further submit that merely by
terming the arrangement between the parties as a Joint Venture no new
right has come to vest in plaintiff beyond what has already been agreed
in the three agreements.
108. He would state, that the Supreme Court in the case of Bank of
India vs. K. Mohandas 2009(5) SCC 313 has held that; "The true
construction of a contract must depend upon the import of the words
used and not upon what the parties choose to say afterwards. Nor does
the subsequent conduct of the parties in performance of the contact
affect the true effect of the contract.‖ The said ratio is fully applicable to
the facts of the present case. He would state, the aforesaid argument is
without prejudice to the fact that merely terming the agreements between
plaintiff and defendant as Joint Venture in various meetings would not
change the legal character of the agreements between the parties which
remains with licensor and licencee. The fact that plaintiff‟s status was
that of a licencee has been admitted by PW-1 (Sh. P.K. Bhatia) in his
answer to question No.22. It is a settled preposition of law that
occupation of the licencee is merely permissive and does not amount to
possession. A licence does not create any interest in property. It merely
permits another person to make use of the property. There is no parting
with possession as the legal possession continues to be that of the owner.
He would state that in the case of Maria Margarida Sequeira
Fernandez and ors vs. Arasmo Jack Ded Sequeira 2012(5) SCC 370, it
has been held that, "the possession or occupation of the property by a
person other than the holder of legal title will be presumed to have been
under and in subordination to the legal title, and it will be for the person
resisting the claim for recovery of possession or claiming a right to
continue in possession, to establish that he has such a right.‖ In the facts
of the present case, the plaintiff has completely failed to establish its
right to continue in possession. The judgments cited by the plaintiff with
respect to partnership and Joint Venture are of no avail, and not at all
applicable to the facts of the present case. He would state that the terms
of the licence came to an end on October 10, 2011. Thereafter,
subsequent extensions were given from time to time on ad-hoc basis
pending a final decision on plaintiff‟s request/desire to renew. Though,
it is correct that after the plaintiff wrote to the defendant on February 15,
2010 (Exh.P-22) requesting for extension and a Committee was
constituted to look into that request, no concluded contract came into
being. The recommendations of the Committee recorded in the Minutes
of the meeting dated June 03, 2011 (Exh.P-4) was subject to approval of
the Chairperson of the NDMC. The communication of IHC dated July
15, 2011 accepting the recommendations of the Committee does not
amount to a concluded contract as plaintiff was aware that the same was
subject to confirmation, and therefore, plaintiff itself requested for
confirmation vide the said communication. In fact, the said letter was in
the nature of an offer from plaintiff to defendant. Subsequent thereto, at
a Council meeting held on October 07, 2011 (Exh.P-12), it was resolved
to agree to sanction extension for a period of one year upto October 10,
2012 subject to plaintiff agreeing to pay licence fee at enhanced rate as
mutually agreed retrospectively with effect from October 11, 2011. It
was also resolved that further action would be taken after legal advice
and consultant‟s report. It is, thus, evident that the enhanced rate of
17.25% was agreed to by the defendant only for extension with effect
from October 17, 2011 to October 10, 2012, and not for an extension of a
duration of 30 years. He would state, that in the Minutes of the meeting
dated November 14, 2011 (Exh.P-27) between NDMC and MoUD, it
was decided that NDMC should negotiate with IHC to get as close to the
market rate as possible. It is submitted that even this does not amount to
according a sanction for extension. Lastly, it is clearly evident from the
plaintiff‟s own letter dated July 13, 2012 (Exh.P-16) that even as per the
understanding of plaintiff there was no concluded contract, and
therefore, plaintiff was requesting for approval. Thus, there was no
concluded contract between the parties. In fact, in the entire plaint there
is no pleading with regard to a concluded contract, therefore, the reliance
by the plaintiff on the judgment of ITE India Pvt. Ltd vs. Delhi Tourism
& Transportation Development Corporation Ltd FAO(OS) 46/2016
dated May 23, 2016, is completely misplaced as that was a case where
consent to renew was withdrawn; whereas in the present case there has
never been a decision to renew for a period of 30 years. He would state
that a concluded contract could have come into place only if the
competent authority i.e the Council of NDMC had taken a decision in
this regard. The communications between the plaintiff and the officers
of the NDMC, without the sanction of the Council, would not result in a
concluded contract. Ref. U.P Rajkiya Nirman Nigam vs. Indure Pvt.
Ltd 1996 (2) SCC 667.
109. He would state, that subsequently the Council in its meeting held
on September 27, 2012 (Exh.P-20) after considering the clauses of the
three agreements entered into between the parties, the Report of the
Consultant appointed by the NDMC as well as various legal opinion
received in this regard, came to a decision to put the property for public
auction in a fair and transparent manner with right of first refusal to
plaintiff. It was further resolved to extend the period of licence of
plaintiff on existing terms and conditions for a period of one year or till
such time a new licencee is chosen through the bidding process,
whichever is earlier. The said decision of the Council was
communicated to plaintiff vide letter dated November 05, 2012 (Exh.P-
49). Pursuant to the aforesaid decision of the Council of NDMC, the
Ministry of Home Affairs (MHA) vide two different/separate
communications wrote to defendant stating that the right of first refusal
would not fetch the correct market price, and therefore, it is in the
interest of transparency that defendant goes for public auction wherein
plaintiff may participate as a bidder. It was also observed that the right
of first refusal has not been provided for in the Licence Deed. The same
is evident from the communication dated June 27, 2013 (Exh.DW1/P-4)
and letter dated May 10, 2013 (Exh.DW1/P-5). The said two letters
resulted in the MHA issuing a Memorandum dated January 01, 2015
(Exh.DW1/5) under Sections 395 and 396 of the Act of 1994 directing
the defendant to resort to public auction and find the best bidder for the
property situated at 1, Man Singh Road, New Delhi. He would state that
the Council of the NDMC vide its meeting held on January 30, 2015
resolved that in view of the directions of the MHA to abide by the
directions of the MHA and also decided to ad-interim extend the term of
the licence till March 31, 2015. Ultimately, vide letter dated January 29,
2016 it was communicated to plaintiff that the first right of refusal as
communicated to plaintiff vide defendant‟s letter dated November 05,
2012 stands withdrawn. The plaintiff was further requested to handover
possession of the said property by February 29, 2016. He would state,
that the plaintiff has no vested right of extension in terms of the
Agreement between the parties and is not entitled to extension of the
licence, as extension if any, is at the sole discretion of the defendant
herein and no decision has been taken by the defendant to extend the
licence for a further period of 30 years. In fact, on the contrary a
decision has been taken to put the property to auction. No concluded
contract to extend the licence for a period of 30 years ever culminated
between the parties, and nor was any such decision taken by the
defendant communicated to plaintiff. He would state that it is a settled
proposition of law that file notings do not constitute a decision, nor do
they have the sanction of law to be an effective order. Notings are
nothing more than opinions of officers for internal use and consideration
of the other officials of the department and for the benefit of the final
decision making authority. They are not meant for outside exposure.
Notings culminate into a decision or order only upon it getting the
approval of the competent authority and the same being communicated
to the person concerned. Thus reliance by the plaintiff on the decision
making process, and opinions of various officers in the course thereof,
are of no avail to the plaintiff, as no decision or order of extension for a
period of 30 years has been communicated to the plaintiff by the
defendant. Ref. (i) Bachhittar Singh vs. State of Punjab AIR 1963 SC
395 (para 10); (ii) Sethi Auto Service Station vs. DDA 2009 (1) SCC
180 (para 14 to 17).
110. With respect to the reasonableness and non-arbitrariness of the
decision to put the property to auction, it is submitted that auction is the
best form of determining market rate. The plaintiff is in no manner
precluded from participating in the auction, and as such, all arguments of
the plaintiff with respect to the investment etc. are meaningless as the
plaintiff was well-aware of the tenure of the licence. The Supreme Court
in various judgments has held that with respect to the Government
properties auction is the best method of disposal to achieve market price
in a transparent manner.
Ref. (i) State of Uttar Pradesh vs. Shiv Charan Sharma 1981
(Supp) 85;
(ii) Ram & Shyam Co. vs. State of Haryana 1985 (3) SCC 267;
(iii) Sterling Computer Ltd. vs. M & N Publications 1993 (1) SCC
496;
(iv) Haryana Financial Corporation vs. Jagdamba Alloy Mills 2002
SCC 496;
(v) Chenchu Rami Reddy & Anr vs. Govgt. Of Andhra Pradesh
1986 (3) SCC 391;
(vi) Haji T. M. Hassan Rawther vs. Kerala Financila Corporation
1988 (1) SCC 166
Even in the case of Natural Resources Allocation, In Re Special
Reference No.1 of 2012, (2012) 10 SCC 1 paras 146, 149 and 186, it
has been held that auction is the preferable method especially in cases
where resources are made available by the State to private persons for
commercial exploitation.
111. With respect to the power of MHA to issue directions to NDMC,
it is submitted that the same is ex-facie evident from a plain reading of
Sections 393 and 398 in Chapter XXII of the Act of 1994. In fact, a Full
Bench of this Court while dealing with Sections 487 and 490 which fall
under Chapter XXIV of the Delhi Municipal Corporation Act and which
are parimateria to Sections 393 and 398 of Chapter XXII of the NDMC
Act, in the case of Satish Chandra Khandelwal vs. UOI held;
―Section 490 which provides for supervision of the
Corporation appears in chapter XXIV which is headed
‗Control'. All told, central control is both wide and deep.
Behind the corporate facade stands the Central
Government with wide powers to issue directions, order
inspection, and compel obedience to its commands. The
Central Government exercises a considerable degree of
administrative control over the Corporation in the interest
of the community as a whole, for what is administered
locally is often national policy. The most effective single
agency is the control over finance and borrowings. Some
watch must be kept to ensure that the spending is
economic, for there always exists the possibility that the
Corporation may carry its permissive powers to far.‖
112. It is thus evident that the Central Government, in the present case
through the MHA, has wide pervasive powers over the NDMC. Thus if
the Central Government, is of the opinion that the Council is acting
contrary to national policy and against public interest, then it is fully
empowered to step in and issue directions to the NDMC. In the facts of
the present case, the MHA was of the opinion that the best and most
transparent method of achieving the market price would be to put the
property to public auction and that there is no provision in the
agreements for a right of first refusal, thus it requested NDMC to act
accordingly. When NDMC despite receipt of letters dated June 27, 2013
(Exh.DW1/P5) and May 10, 2013 (Exh.DW1/P4) did not take a decision
in the manner advised by the MHA, directions under Section 396 were
issued vide Memorandum dated January 1, 2015 (Exh.DW1/5) directing
the NDMC to resort to public auction and find the best bidder in respect
of the property 1, Man Singh Road, New Delhi. He would state, that the
decision of the MHA can in no manner be termed as arbitrary or
unreasonable, the same is in consonance with the dicta of the Supreme
Court, and is also the correct opinion as far as interpretation of the terms
of the Agreements are concerned. A decision of a public authority, is
generally not interfered with by the Court, unless it is vitiated by
arbitrariness or the decision making process is flawed. He would state
that none of the two ingredients are present in the present case.
113. With respect to the plaintiff‟s argument that Section 395 and 396
of the NDMC Act are not applicable in view of the fact that MHA has no
power of superintendence with respect to disposal of land and reliance,
in this regard, on the Allocation of Business Rules is completely
misplaced. He would state, the plaintiff is misreading the Allocation of
Business Rules of the MHA. The exclusion pointed out by the plaintiff
reads as under:
"(ii) all powers and functions of the Central Government as per
the provisions of the Municipal Corporation of Delhi Act, 1957
and New Delhi Municipal Council Act, 1994 except matters
pertaining to the Land and Building Bye-laws.‖
114. From the above, it is evident that what is excluded is matters
pertaining to the Land and Building Bye-laws, which fall under Chapter
XIV of the NDMC Act. A bare reading of the provisions of Chapter XIV
would clearly demonstrate that the same have no connection with
disposal of land and building. The plaintiff is reading the words „Land
and Building‟ without reading the limiting words „Bye-Laws‟, which are
required to read in a conjoint manner. It is, thus, ex-facie apparent that
the disposal of land in the Union Territory of Delhi is clearly within the
purview of the MHA. The fact that the NDMC falls under the Ministry
of Home Affairs and not the Ministry of Urban Development as has been
contended by the plaintiff is ex-facie evident from the judgment of this
Court in Tajdar Babbar vs. Union of India 2015 (222) DLT 426. The
same is a case relating to notification issued by the Govt. of India for
dissolving the NDMC. It is clear from para 2 of the said judgment that
the notification for dissolving NDMC was issued by the MHA. It is,
therefore, evident that the controlling Ministry for the NDMC is the
MHA. He would state, that the reliance on the Allocation of Business
Rules of the MoUD is a clear misreading of the Allocation of Business
Rules by the plaintiff. A conjoint reading of the Allocation of Business
Rules with respect to MoUD and the MHA makes it clear that what is
within the scope of MoUD is in the nature of managing layout plans,
transportation, coordination and urban planning, horticulture etc.
115. He would state, another argument taken by the plaintiff is that
very premise of the direction given by the MHA is incorrect as it is
based on incorrect consideration that the property is on lease; whereas
the property is, in fact, a licence. In this regard, it is stated that the said
argument is meaningless in view of the dicta of the Supreme Court in the
case of Aggarwal & Modi Enterprises Pvt. Ltd. (supra) wherein it has
been held that the mandate under Section 141(2) includes within its
scope "licence". Therefore, it would make no difference whether the
MHA considered the same to be a "lease" or "licence". It is stated that a
reading of letter dated May 10, 2013 (Exh. DW1/P4) and letter dated
June 27, 2013 (Exh.DW1/P5) would clearly demonstrate that the
decision of the MHA is based on the fact that the Agreement between the
plaintiff and the defendant does not provide for a right of first refusal
would result in lower bids in the public auction. Thus, there is no
infirmity in the decision of the MHA, which, it is, in any event,
empowered to take under Section 395 and 396 of the NDMC Act.
116. With regard to issue No.2, Mr. Sanjay Jain, learned ASG would
state that the defendant is not pressing the said issue as the trail has been
completed and the case is being decided on merit.
117. With regard to issue No.3, he would state that Section 141 (2) is
clearly applicable to the facts of the present case. Section 141 (2) reads
as under:-
―141.(2) The consideration for which any immovable property
may be sold, leased r otherwise transferred shall not be less than
the value at which such immovable property could be sold, leased
or otherwise transferred in normal and fair competition.‖
118. The Supreme Court while interpreting the mandate of Section
141(2) in the case of Aggarwal & Modi Enterprises (P) Ltd & Anr. vs.
NDMC, has held as under:-
―22. The mandate of Section 141(2) is that any immovable
property belonging to NDMC is to be sold, leased, licenced or
transferred on consideration which is not to be less than the value
at which such immovable property could be sold, leased, or
transferred in fair competition. The crucial expression is "normal
and fair competition". In other words, NDMC is obligated to
adopt the procedure by which it can get maximum possible
return/consideration for such immovable property. The
methodology which can be adopted for receiving maximum
consideration in a normal and fair competition would be the
public auction which is expected to be fair and transparent. Public
auction not only ensures fair price and maximum return it also
militates against any allegation of favouritism on the part of the
Government authorities while giving grant for disposing of public
property. The courts have accepted public auction as a
transparent mean of disposal of public property.
23. Disposal of public property partakes the character of trust and
there is distinct demarcated approach for disposal of public
property in contradiction to the disposal of private property i.e. it
should be for public purpose and in public interest. Invitation for
participation in public auction ensures transparency and it would
be free from bias or discrimination and beyond reproach.‖
119. He would state, the attempt of the plaintiff to distinguish the facts
of the present case from the case of the Aggarwal & Modi Enterprises
Pvt. Ltd. (supra) is completely misplaced. Even in the case of Aggarwal
& Modi Enterprises Pvt. Ltd. (supra), as in the present case the term of
the lease/licence had come to an end. The Cinema therein was operating
on the basis of ad-hoc extensions granted from time to time. Thus, the
facts to that extent are identical to the present case. There mere fact that
in the case of Aggarwal & Modi Enterprises Pvt. Ltd. (supra) the user
of the land was being changed from a single cinema to a multiplex would
make no difference as far as the interpretation and mandate of Section
141 (2) of the NDMC Act is concerned. Thus, in the submission of the
defendant, Section 141 is clearly applicable to the facts of the present
case and auction being a fair and transparent process is the best way
forward to achieve maximum consideration and to discover the correct
market value. He would state that the plaintiff has argued that the
present suit, in view of their application under Order II Rule 2 being
allowed, is only, what is described by the plaintiff, as Stage-1 of the
transaction, i.e its right of renewal. It is, thus the case of the plaintiff that
if its vested right of renewal, which already stands exercised, is upheld
then auction is merely a mode to determine the price for arriving at
mutually agreed terms. He would state, that the plaintiff has no right of
renewal as is evident from Clause II of the Licence Deed; therefore, if
the plaintiff fails in establishing its right of renewal, it cannot fault the
invocation of Section 141(2) of the NDMC Act as it would be a case of
fresh disposal and not a case of extension. He would state that Section
141 makes no distinction between "extension" and "fresh disposal"; as
such, Section 141 is applicable to disposal of all immovable properties
after coming into force of the NDMC Act. The Supreme Court in the
case of Aggarwal & Modi Enterprises Pvt. Ltd. (supra) has clearly
defined the mandate of Section 141(2) to include "licence" within its
mandate; as such, the arguments of the plaintiff that the terms "otherwise
transfer" would not include "licence" cannot be countenance. It is stated
that the argument of the plaintiff that the inclusion of the word "licence"
in para 22 of the judgment of Aggarwal & Modi Enterprises Pvt. Ltd.
(supra) is obiter is misplaced. It is stated that the same is clearly the
ratio of the judgment and not obiter. It is stated that the law declared by
the Supreme Court under Article 141 of the Constitution is binding on all
Courts in India. The ratio, i.e interpretation of law is always binding. It
is stated that the Supreme Court has defined the mandate of 141(2) and
what is stated in para 22 of the said judgment is an interpretation of the
law and cannot be stated to be obiter. Ref. (i) Director of Settlement vs.
M.R. Apparo 2002 (9) SCC 638; (ii) South Central Railway Employees
Co-Operative Credit Society Employees Union vs. B. Yashoda Bai 2015
(2) SCC 727.
120. He would further submit that the Transfer of Property Act
contemplates transfer only by the following modes: sale, lease,
gift/exchange or succession. Clearly, transfer by gift, exchange or
succession is not applied to NDMC. He would state that since sale and
lease are specifically mentioned in Section 141(2); therefore, the term
"otherwise transfer" has to be assigned some meaning. In this regard, it
is submitted that the same would include right of occupation create by
licence, tehbazari, etc guidance, in this regard is available under the
definition of "occupier" in Section 2(29) of the NDMC Act. An
occupier includes a licencee in occupation of any land or building. It is,
thus, stated that the definition of "occupier" has to be read as an aid for
assigning meaning to the words "otherwise transfer". He would state
that the widest possible meaning is required to be assigned to the words
"otherwise transfer" as the use of the term "otherwise" by the Legislature
itself connotes an intention to give a wide scope and meaning. Thus, the
argument of the plaintiff, the words "otherwise transfer" have to be read
in ejusdem generis to the words "lease" and "sale" are misplaced in the
context of the NDMC Act.
121. He would state, that another argument of the plaintiff seeking to
place reliance on the NDMC (Determination of Annual Rent) Bye-laws,
2009 to assign meaning to the words "otherwise transfer" is misplaced as
the said bye-laws are only for the purpose of determination of annual
rent for assessing property tax under Section 63 of the NDMC Act. The
same cannot, in any manner, be used as a tool to interpret Section 141.
He would state the Supreme Court in its opinion in Special Reference
No. 1 of 212 in the manner of allocation of natural resources, inter alia,
observed that:
―the action of the State, whether it relates to distribution of
largesse, grant of contracts, or allotment of land, is to be tested on
the touchstone of Article 14 of the Constitution‖.
122. The scope of testing of executive action against Article 14 has
been explained as follows:
―105.....the action has to be fair, reasonable, non-discriminatory,
transparent, non-capricious, unbiased, without favouritism or
nepotism, in pursuit of promotion of healthy competition and
equitable treatment. It should conform to the norms which are
rational, informed with reasons and guided by public interest, etc.
All these principles are inherent in the fundamental conception of
Article 14. This is the mandate of Article 14 of the Constitution of
India.‖
123. The Supreme Court has quoted an earlier decision in Sachidanand
Pandey after noticing Kasturi Lal's case:
―123..... State-owned or public-owned property is not to be dealt
with at the absolute discretion of the executive. Certain precepts
and principles have to be observed. Public interest is the
paramount consideration. One of the methods of securing the
public interest, when it is considered necessary to dispose of a
property, is to sell the property by public auction or by inviting
tenders. Though that is the ordinary rule, it is not an invariable
rule. There may be situations where there are compelling reasons
necessitating departure from the rule but then the reasons for the
departure must be rational and should not be suggestive of
discrimination. Appearance of public justice is as important as
doing justice. Nothing should be done which gives an appearance
of bias, jobbery or nepotism.‖ (emphasis added)
124. The Supreme Court has quoted several earlier instances where
open invitations to tender or participate in a project etc. have not been
made, but have nevertheless been upheld when challenged. In all such
cases, the Court has opened that:
―the ultimate test is only that of fairness of the decision making
process and compliance with Article 14 of the Constitution‖.
125. The Supreme Court has observed that:
―149.Regard being had to the aforesaid precepts, we have opined
that auction as a mode cannot be conferred the status of a
constitutional principle. Alienation of natural resources is a policy
decision, and the means adopted for the same are thus, executive
prerogatives. However, when such a policy decision is not
backed by a social or welfare purpose, and precious and scarce
natural resources are alienated for commercial pursuits of profit
maximizing private entrepreneurs, adoption of means other than
those that are competitive and maximize revenue may be
arbitrary and face the wrath of Article 14 of the Constitution.
Hence, rather than prescribing or proscribing a method, we
believe, a judicial scrutiny of methods of disposal of natural
resources should depend on the facts and circumstances of each
case, in consonance with the principles which we have culled out
above. Failing which, the Court, in exercise of power of judicial
review, shall term the executive action as arbitrary, unfair,
unreasonable and capricious due to its antimony with Article 14 of
the Constitution.‖ (emphasis added)
126. He would state, the Supreme in its judgment dated August 25,
2014 in W.P.(Crl) No. 120/2012 in the matter of allocation of coal
blocks observed that:
"71....Obviously, therefore, such allocation has to meet the twin
constitutional tests, one, the distribution of natural resources that vest in
the State is to sub-serve the common good and, two, the allocation is
not violative of Article 14‖ (emphasis added)
127. With regard to issue No.4, he would state that in view of the
submissions made hereinabove, the plaintiff is not entitled to the relief
claimed in the present suit.
128. Having heard the learned counsel for the parties and considered
the record, at the outset, I would state, during the course of his
submissions, Mr. Sanjay Jain, learned ASG has given up the objection of
the defendant with regard to Section 385 of the Act of 1994.
Accordingly, the issue No.2 does not survive for consideration of this
Court. The same is decided as not pressed. This Court would only
consider the issue Nos.1, 3, 4 and 5.
Issue No.1 Whether the Plaintiff is entitled to the extension of licence
as claimed in the Suit? OPP
129. For answering this issue, in view of the stand of the parties in their
pleadings, first it must be determined whether the relationship between
them is of a Joint Venture. For that purpose, it is necessary to examine
the Agreements entered into between the parties i.e Collaboration
Agreement dated December 18, 1976 (Exh.P-40), Licence Deed dated
December 18, 1976 (Exh.P-41) and Supplemental Agreement dated
September 25, 1979 (Exh.P-42). Before that, I may note here that there
is no dispute that in terms of Exh.P-1, which is a letter dated July 13,
1976, the Land & Development Office under the then Ministry of Works
& Housing, Government of India allotted the land in question at 1, Man
Singh Road, New Delhi admeasuring 3.78 acres together with structures
to the defendant for construction of a Hotel on certain terms and
conditions.
Collaboration Agreement dated December 18, 1976 (Exh.P-40)
130. The preamble of the Collaboration Agreement reveals that the
defendant, with the object of developing tourism in Delhi, is desirous of
putting up a Hotel of about 350 rooms together with all related facilities
confirming to the standards laid down by Director General of Tourism,
Department of Tourism, Government of India on the plot in question and
with a view to achieve its objective of putting up a Hotel of acceptable
standards, in a professional manner, is desirous in seeking the assistance
of professionals in planning, designing and construction of the said Hotel
and building. The Collaboration Agreement also records, the plaintiff,
which has an experience of 70 years in the field of hoteliering and has
acquired considerable expertise and knowledge in the planning,
designing, construction and operation of the Hotel, had offered its
services for construction of about 350 rooms Hotel in terms of its letter
dated March 31, 1976 and the defendant agreed to collaborate with the
plaintiff in the construction of the Hotel building at its cost not
exceeding Rs. 475 lakhs the hotel building including civil construction,
plumbing, sanitary fittings, heating, ventilation, air conditioning,
electrical installations, elevators and swimming pool etc, details of which
referred in Schedule II and the plaintiff also agreed to invest in some of
the items so as to limit the investment of the defendant to Rs.475 lakhs
and it was agreed by the plaintiff to equip the said hotel building, at its
cost with necessary equipment such as kitchen equipment, laundry
equipment, furniture, furnishing and other accessories, details of which
are mentioned in Schedule III to the Agreement, so that the hotel
building can be run as a hotel of acceptable standards.
131. In the above background, Article II of the Collaboration
Agreement, which relates to services of the IHC (plaintiff) vide Clause 1
stipulated, plaintiff will carry out a detailed study for the purpose of
putting up a and will confer with the defendant‟s officials for rendering
the following services:-
(a) Recommend the salient design requirement and other features
required in the proposed hotel.
(b) an order or magnitude cost estimates.
132. Clause 2 relates to design and other technical services, which
inter-alia included selecting and appointing Architect, Engineer,
Surveyor, other specialists and consultants as may be required for the
hotel building. The plaintiff was to submit to the defendant the names of
the Architect, consulting Engineers, Surveyor and other specialists and
consultants for its approval.
133. Clause 2 also stipulated; preparation by the plaintiff through the
Architect, consulting Engineers, Surveyor and other specialists and other
consultants and submit to the defendant for its approval, a technical
report to establish a programme of the facilities required in the hotel
including space allocation programme; outline user requirements and
specifications from the point of view of hotel operation sufficient to
illustrate the scope and quality of the project in all aspects including
civil, plumbing electrical heating, ventilation, air-conditioning etc. The
plaintiff was to prepare within 15 days of the execution of the
Agreement and submit to the defendant for its approval schematic plans,
layouts, design user requirements and specifications in respect of the said
hotel; the plaintiff within a period of 30 days from the execution of the
Agreement, submit to the defendant for its approval in the capacity as the
local authority the plans and designs as may be required; review the
schematic plans, designs, user requirements, specifications and cost
estimate; review the architectural, structural, heating, ventilation air-
conditioning, plumbing and electrical plans and specifications and
submit to the defendant the above plans and specifications for its
approval; the plaintiff was to provide Project Management Services
including site inspection and ensure that the work is being executed
generally in accordance with the standards and specifications approved
by the defendant; the plaintiff was to employ technically competent staff
for the day to day operations and ensure that the work is being carried
out in conformity with the designs and specifications prepared by the
Architect, consulting Engineers and other consultants. In substance, to
review the work of the project as a whole.
134. Clause 3, which relates to Technical Documents stipulated that the
plaintiff shall arrange to prepare the necessary technical documents
including specifications, bill of materials, quantity schedule, work
schedules etc. for the purpose of award of the various job of work
including site improvements, landscaping, civil construction work,
plumbing and sanitary fittings eligible, heating, ventilation and
airconditioning, electrical installation etc.
135. Clause 4 stipulated cost of the hotel building shall be jointly
arrived at by the authorised representative of the plaintiff and the
defendant and after the completion of the building and within 30 days of
the issue of completion certificate by the defendant, the authorised
representative of the defendant and the plaintiff will make a list of assets
financed by and belonging to the defendant and the plaintiff respectively.
136. Clause 5 stipulated with a view to achieving defendant‟s objective
of constructing the hotel building on the site, plaintiff will, on behalf of
defendant, undertake to construct the said hotel building through the
contractor and sub-contractors, engaged, retained or appointed for the
purpose by plaintiff. The list of contractors and sub-contractors, so
appointed will be submitted by plaintiff to defendant for its prior
approval.
137. Clause 6 of Article II stipulated all movable assets in the hotel
building referred to in Schedule III to this Agreement as well as all other
assets including assets such as air-conditioning compressors, air-
handling units, fan coil units, pumps cooling towers, piping electrical
panels, lighting fixtures, diesel generating sets, water treatment plants,
boilers, laundry equipment, kitchen equipment and other hotel
equipment, which plaintiff pays for and equips and furnishes the hotel
building with, shall belong at all times to the plaintiff. The plaintiff shall
be entitled to all rights, title and interest to or in respect of such assets
throughout the currency of this agreement as well as upon its
termination.
138. Article-III of the Collaboration Agreement stipulated General
Covenants.
139. Clause 1 of Article III stipulated that the plaintiff shall be allowed
to enter upon the site solely for the purpose of carrying out the works at
the site on "as is where is basis" subject further to the condition
mentioned in the succeeding clause 2.
140. Clause 2 stipulated that it is agreed and understood by defendant
and plaintiff that nothing contained in this agreement shall be construed
as a demise in law of the said site hereby agreed to be demised or any
part thereof so as to give plaintiff any legal interest or claim therein of
any nature whatsoever.
141. Clause 3 stipulated the plaintiff within a period of twenty (20)
calendar months following the date of execution of this agreement,
construct the hotel building in a workman like manner using the building
material of the standard description so as to ensure that the said hotel
building conforms to the approved specifications. The hotel building so
constructed shall be in compliance with all laws, rules and regulations as
in force and applicable to such building and will be strictly in accordance
with the plans approved by the defendant and will be carried, out to the
satisfaction of NDMC i.e defendant.
142. Clause 4 stipulated that the plaintiff shall not use any material or
execute any works which are considered unsound of unfit for the purpose
intended, or which is imperfect or if any deviation shall be made from
the approved plans, elevation details of specifications or if plaintiff shall
fail to observe and comply with any of the conditions or stipulations
contained therein, the defendant shall have the right to call upon plaintiff
immediately to remove all such unsound or unfit material or substitute
the same with sound and fit materials as shall be previously approved by
defendant and plaintiff shall make good that imperfect work if any and
correct deviations if any. If plaintiff shall neglect to do so for a period of
14 days, after having been called upon to do so, it shall be lawful but not
compulsory for defendant to remove unsound and unfit material and
substitute the same with sound and fit material to make good the
imperfect work, if any, and to correct deviation, if any and all cost,
charges and expenses of so doing shall be borne by plaintiff.
143. Clause 6 stipulated that if during the excavation of the site,
plaintiff discovers any coins or any articles of value or of public interest
or any mines, minerals, gold mines, earth oils and quarries the same shall
belong to the President of India and shall be handed over to the officer
nominated by the President of India or defendant.
144. Clause 8 relates to right and powers of NDMC i.e defendant. It
stipulated until the construction of the hotel building has been completed
and certified as completed in accordance with the terms of this
agreement, defendant shall have the following rights, which included
right for the authorised representative of defendant and other officers
under his direction at all reasonable times of enter upon the site to view
the site and progress of the constructions, to inspect and pass the material
and workmanship and for all other reasonable purpose connected with
this agreement; in case, the plaintiff commits any breach or make default
in the performance of all or any one or more of the covenants on its part
therein contained, defendant shall have the right to give written notice to
plaintiff setting forth the breach or default. Unless within 90 days after
giving of such notice, the breach is cured or default is rectified, it shall
be lawful for defendant or its authorised representative to evict from the
said site plaintiff or its representatives, agents contractors, sub-
contractors or whosoever may be on the site and take possession of all
the machinery, materials, tools and plants as may be found on the site for
the absolute use of the defendant, without any compensation and
thereupon this agreement, shall be void without prejudice to all other
legal rights and remedies of defendant against plaintiff; all building
materials, tools and plants which shall have been brought upon the site
by or for plaintiff for the purpose of erection of the hotel building as
aforesaid shall be considered as immediately attached to the said site and
no part thereof other than defective or imperfect material removed for
the purpose of replacement be removed without the previous written
consent of the defendant until after the grant of the completion
certificate.
145. Article III of the Collaboration Agreement also stipulated that the
plaintiff has clearly understood that the said site and the hotel building to
be constructed thereon shall at all times remain public premises as
defined under the Public Premises (Eviction of Unauthorised Occupants)
Act 1971 and shall always be subject to the provisions thereof.
146. Article IV relates to manner of payment towards cost of
construction, which is reproduced as under:-
Clause 1- Payment for construction of the Hotel Building
NDMC agrees and undertakes to bear the cost of the said hotel building
and other assets detailed in Schedule II. The cost of the building shall be
arrived at in terms of Clause 4 of Article II. While arriving at the cost as
aforesaid, NDMC and IHC will taken into account the elements of cost
beyond the control of either NDMC or IHC such as Government taxes,
customs and excise duties, sales tax and import duties and the provision
for their escalation shall be made in the estimate of the cost. In the cost
so arrived at, NDMC will be given due credit equivalent to the salvaged
value realised in respect of the existing structures on site as shown on the
plan annexed hereto. Subject as aforesaid, the cost of the hotel building
so arrived at, will determine the maximum liability of NDMC. In the
event of the cost of the said hotel building and other assets to be financed
by NDMC as per details in Schedule II exceeding the limit of the cost
arrived at, as aforesaid, IHC shall bear and pay such excess cost and
shall not claim any compensation from NDMC on this account.
Clause 2 : Manner of Payment
NDMC agrees and undertakes to pay to IHC the cost of the hotel
building in a phased manner on the basis of schedule of expected work to
be completed to be furnished by IHC to NDMC within 15 days from the
date of execution of this Agreement. The claim for payment by IHC will
be supported by a certificate from the Architect, Consulting Engineers
and other Consultants as may be applicable. NDMC shall before making
the payment have the right to verify such a claim and the progress of the
construction of the hotel building so as to enable NDMC to ensure that
the payment made to IHC from time to time is commensurate with the
progress of construction of the hotel building and the value of building
material lying at the site. Pending verification of the claim by NDMC as
aforesaid, NDMC shall make payment of the amount as claimed by IHC
within fifteen (15) days from the date of making such a claim as "On
Account" payment and make necessary adjustments from the next
instalment of payment becoming due and payable to IHC.
Clause 3: Verification of Bills
NDMC shall have the right to inspect final bills of the contractors and
sub-contractors engaged, retained or appointed by IHC in consultation
with and with the approval of NDMC for the construction of the said
hotel building. If as a result of such inspection, any sum of found to
have been over paid in respect of any work or if any work claimed to
have been done has not been executed in a workman like manner and
satisfactory to NDMC, IHC shall be giving due credit for such excess
payment or payment for the work not executed. If it is found that the
total amount paid by NDMC to IHC is less than the amount payable by
NDMC to IHC in terms of this agreement, the amount of such under-
payment shall be duly paid by NDMC to IHC.
147. Article V relates to use of documents; all drawings and
specifications prepared or caused to be prepared by plaintiff for the said
hotel building shall be the property of the defendant and defendant shall
not use the said plans, drawings and specifications in any other work
except with the consent of plaintiff. The defendant‟s name shall be
mentioned as the owner on all such plans, drawings and specifications.
Plaintiff shall have the right to include its name on the plans, drawings
and specifications and other documents prepared by the Architect and
other consultants to accord full professional recognition for the work
done.
148. Article VII relates to indemnity whereby, the plaintiff indemnifies
defendant and undertakes and agrees to keep defendant indemnified
throughout the period during which this Agreement shall remain in force
against any or all claims for damages which, may be caused to any
workman, to any adjoining building or property or any other premises or
persons as a result of the construction of the said hotel building or in
consequence of the execution of the aforesaid building work ,and also
against all payments whatsoever which during the progress of the work
of the said hotel building may become payable or be demanded by any
person or authority in respect of the construction of the said hotel
building or anything done under the authority therein contained.
149. Article IX stipulated, the plaintiff will not directly or indirectly
transfer, assign, encumber, let or subject or part with the possession of
the site or interest under and/or the benefit of this agreement or any part
thereof in any manner whatsoever.
150. Article-XI :-
ARBITRATION- Except where otherwise provided in this Agreement
all questions and disputes relating to the meaning of the specifications,
designs and drawings hereinbefore mentioned and as to the quality of
workmanship or materials used in the work or as to any other question,
claim, right, matter or thing whatsoever, in any way arising out of or
relating to this Agreement, designs, drawings, specifications, estimates,
orders or otherwise concerning the hotel building, or the execution or
failure to execute same whether arising during the progress of the work
or after the completion or abandonment thereof shall be referred to the
sole Arbitration of the person appointed by NDMC at time of dispute.
Subject as aforesaid, the provisions of the Arbitration Act, 1940 or
any statutory modification or re-enactment thereof and the rules made
thereunder and for the time being in force shall apply to the arbitration
proceedings under this Article.
The Arbitrator/s may, from time to time with the consent of the
parties enlarge the time for making and publishing the award.
Provided that any work towards the construction of the said hotel
building, except the work related to the issue under dispute/arbitration,
shall not be suspended or stopped during the arbitration proceedings.
Licence Deed dated December 18, 1976 (Exh.P-41)
151. From the preamble of the Licence Deed, it is noted that the
licensor i.e the defendant has offered the licencee i.e the plaintiff who
has agreed to accept the licence to occupy and use the hotel building in
terms of the Collaboration Agreement for the purpose therein a hotel
conforming to standards laid down by the Director General of Tourism,
Department of Tourism, Ministry of Tourism and Civil Aviation,
Government of India, New Delhi for 5 - Star classification with a view to
developing tourism in the capital city of Delhi, to be operated by the
plaintiff on licence basis on the terms and conditions hereinafter
appearing.
152. Clause 1, which relates to licence, stipulated, the defendant has,
subject to the provisions of sub-clause 1 of the Clause II, granted licence
to plaintiff to enter into and occupy the said hotel from a date to be
mutually agreed upon for the purpose of running a hotel of acceptable
standards together with all the related facilities and business appurtenant
thereto.
153. Clause II:-
(1) stipulated the Licence shall be in force for a period of thirty three
years commencing from the date of occupation of the hotel by the first
paying guest subject to the condition that the plaintiff shall be bound by
and observe and perform all the terms and conditions contained in the
licence throughout the period of the licence.
(2) On the expiry of the period of licence of the said hotel building, the
defendant shall have the option to grant the licence for a further period
on such terms and conditions as may be mutually agreed upon between
the defendant and the plaintiff. If the plaintiff shall be desirous of
obtaining a licence for a further period after the expiry of the present
licence, it shall give to the defendant, a notice in writing of not less than
sixty (60) days prior to the date of expiry of the present licence for the
consideration of the defendant.
154. Clause III relates to licence fee and manner of payment. The said
clause stipulated in consideration of the defendant granting to the
plaintiff, the Licence in respect of the said hotel building, the plaintiff
shall pay to the defendant as and by way of licence fee an amount
equivalent to 10-1/2 percent (ten and a half percent) of the gross income
of the plaintiff for every financial year of the plaintiff as certified by the
statutory auditors of the plaintiff or a sum equivalent to 15% (fifteen
percent) of the defendant‟s investment in the said hotel building in terms
of the Collaboration Agreement and whichever is, higher. The liability
for the payment of licence fee as aforesaid shall commence from the date
of commissioning of 300 rooms in the hotel or first day of December
1978, whichever is earlier. The licence fee in respect of the period which
is less than a full financial year shall be paid by the plaintiff to the
defendant on a prorata basis on the basis of the statement certified by the
statutory auditors of the plaintiff. Suffice to state, the said clause
stipulated what would constitute a „financial year‟, „gross income‟.
155. Clause IV relates to default in payment. It stipulated, in the event
of plaintiff committing a default in the payment of licence fee, for any
reason whatsoever, the plaintiff shall be liable to pay to the defendant,
Licence fee along with interest for the period of default at 12% (twelve
percent) per annum on the amount of licence fee, the payment of which
has been defaulted. In the event of the plaintiff failing to make payment
of the licencee fee due to the defendant, together with such interest
before the expiry of thirty (30) days from the date of such default, the
defendant shall have without further reference to the defendant the sole
discretion to call upon the bank which is furnishing the Guarantee to pay
the total amount due to the defendant from the plaintiff within a period
of 15 days from the date on which the bank is so called upon to make the
payment. In the event of the bank which has been called upon to make
the payment of licence fee, failing to make payment for any reason
whatsoever of the amount demanded by the defendant in full or in part,
the defendant shall have absolute discretion without further reference
either to the plaintiff or to its bank to revoke/cancel the licence granted
to the plaintiff for running the said hotel in terms of this licence, to take
possession of the licenced premises by recourse to law as provided in the
Public Premises (Eviction of Unauthorised Occupants) Act, 1971, or any
other such law in force at that time, after revocation of the licence and
the plaintiff cannot claim back the premises but only seek arbitration.
Further, Clause V gives right to the defendant for the inspection of the
books of accounts of the plaintiff.
156. Clause VI stipulated possession of the hotel building. It also
stipulated the ownership of the said hotel (the land on which the said
hotel is situated belongs to the defendant) shall at all times vest in
defendant, together with all fitting, fixtures and other installations of
immovable type or of the type the removal of which is likely to cause
damage to the building. A list of such fittings, fixtures and installation
shall be drawn jointly by the representatives of the defendant and the
plaintiff before the plaintiff takes over the hotel building for the purpose
of running a hotel of acceptable standards therein. It also stipulated, all
movable assets in the hotel building referred to in Schedule III to the
Collaboration Agreement as well as other assets including assets such as
air-conditioning, compressors, air handling units, fan coil units, pumps,
cooling towers, piping conducting, electrical panels, lighting fixtures,
diesel generating sets, water treatment plants, boilers, laundry
equipment, kitchen equipment and other hotel equipment which the
plaintiff pays for and equips and furnishes the hotel building with, shall
belong at all times to the plaintiff. The plaintiff shall be entitled to all
rights, title and interest to or in respect of such assets throughout the
currency of this agreement as well as upon its termination. The clause
also stipulated upon the termination of the agreement, the defendant may
purchase the plaintiff‟s assets at reasonable prices to be mutually agreed
upon between the plaintiff and the defendant.
157. Clause VII :-
OTHER COVENANTS ON THE PART OF THE LICENSOR AND
THE LICENCEE- 1. The Licencee shall adequately and completely
furnish and equip the said hotel building in terms of the Collaboration
Agreement so as to ensure that the hotel is approved by the Director
General of Tourism and also make it a hotel of acceptable standards so
as to run it efficiently and in a businesslike manner.
2. The present rent, the house tax, and any other related taxes payable by
an owner as per law in force in respect the said hotel building shall be
payable by the Licensor and the Licensor shall arrange to effect the said
payments promptly so as not to jeopardize the Licencee's business or
affect the running of the said hotel by the Licencee. In the event of the
Licensor failing to pay such taxes at the appropriate time for any reason
whatsoever, the Licencee shall have the right to pay such taxes on behalf
of and in the name of the Licensor and adjust the same, from the
instalment/s of licence fee becoming due and payable to the Licensor in
terms of this licence. However, the Licencee shall reimburse to the
Licensor the amount of ground rent not exceeding two and half percent
(2-1/2%) per annum of the cost of the land valued at Rupees Ninety one
Lakhs and forty eight thousand (Rs.91,48,000/-) every year.
3. All other charges and taxes with regard to the running of the business
of hotel including renewal fees in respect of lifts installed in the said
hotel shall be payable by the Licencee commencing from the date from
which the Licencee is put in possession of the said hotel building till the
expiry of the period of licence hereby granted or its sooner
determination. The Licencee shall provide to the Post and Telegraph
Department necessary space in the said hotel building for installation of
telephone exchange for the convenience of the Licencee, free of cost,
and the Licencee shall not claim any compensation whatsoever from the
Licensor on this account.
4. The Licencee at its own cost shall get the hotel building to be
constructed in terms of the Collaboration Agreement together with the
assets financed by and belonging to the Licensor as detailed in the said
Collaboration Agreement fully insured against the risks of fire and
earthquake, riots, civil commotion, electrical fire and flood for the
amount of not less than Rupees Four Crores and Seventy five lakhs for
the benefit of the Licensor within a period of 15 days from the date of
Complete Certificate given by the Licensor to the Licencee in terms of
the Collaboration Agreement. However, in the event of the Licencee
commissioning the hotel partially before the building is completed in
terms of the Collaboration Agreement and the completion certificate
given to the Licencee, the Licencee shall at its own cost insure the
building and other assets belonging to the Licensor against the aforesaid
risks for a sum of not less than Rupees Four Crores and Seventy Five
Lakhs. Such insurance will be effected within 7 days from the date of the
Licencee commissioning the hotel partially.
5. The Licencee shall make adequate provisions for fire detection/safety
fighting arrangements as may be prescribed by the Licensor/Chief fire
Officer or any other code/ standard practice or any other competent
authority in this behalf.
6. The Licencee shall use the said hotel building for the purpose of
running a hotel of acceptable standards together with related facilities
and business appurtenant thereto for the furtherance and development of
tourism in India and the Licencee shall not use the said hotel for any
other purposes whatsoever. The said hotel shall be named by the
Licencee in consultation with the licensor.
7. The Licencee shall be responsible to secure from time to time the
necessary permissions or licences or permits as may be required from the
authorities concerned in order to carry on the business of a hotel of
acceptable standards in the said hotel building.
8. The Licencee shall obtain from time to time, if required, by law or
under rules, prior approval in writing of the Director General of Tourism
to the room tariff to be charged by the Licencee in respect of the guest
rooms in the said hotel and the Licencee will ensure that the proposed
hotel building is recognized and approved by the Department of Tourism
of the Government of India. The Licencee shall satisfy the criteria laid
down by the Department of Tourism, Government of India for 5 star
classification. The Licencee shall do or cause to be done all such other
acts, deeds and things as may be required by the Director General of
Tourism for the purpose of classification of the hotel to be constructed in
terms of the Collaboration Agreement as a hotel of 5 star category from
the Department of Tourism, Government of India and for continuing the
same throughout the terms of the licence.
9. The Licencee shall be responsible to keep the said hotel building and
the entire premises together with its fittings, fixtures and other
installations including the air-conditioning plant, lifts, electrical
installations and other assets belonging to the Licensor in a safe and
sound condition. The Licencee shall also be responsible to carry out
effective maintenance and repairs, annual or special, as may be required
from time to time, including operation of all services, at its own cost
(including replacement of installations belonging to the Licensor for any
reason whatsoever).
10. The Licencee shall be further responsible for the maintenance of
lawns and open spaces and sub-station building in good condition, at its
own cost. The sub-station equipment including H.T. Switchgears,
Transformers, L&T Switchgears shall be maintained and operated by the
Licensor or its officer/ officers, who shall at all times have access to the
said substation without any obstruction or hindrance from the Licencee
and the Licencee shall not claim any compensation from the Licensor for
the space occupied by the substation. The Licencee is responsible for the
maintenance of all the electrical installations and appliances beyond the
L.T. meters. A telephone will be provided by the Licencee in the electric
sub-station. The initial cost of providing an 11 K.V. sub-station shall be
borne by the Licensor. Full cost of standby arrangement for electric
supply shall be borne by the Licencee.
11. Save as otherwise provided, the Licencee shall not make any
structural additions or alterations in the said hotel building and
installations without the prior written permission of the Licensor and
even when permitted by the Licensor, the said additions and alterations
shall be carried out by the Licencee at its own cost. The Licencee may
use or allow temporary licences of Shopping Arcade in the said hotel for
running such trades or services or business as may be consistent with the
business of a hotel but the Licencee shall be responsible for the conduct
of the various sub-licencees and observance of the rules and regulations.
The Licencee shall be further responsible to see that the sub-Licencee
quit the premises on the expiry or sooner determination of the licence
hereby granted. The sub-Licencee shall not get any right over and above
the right and privileges of the licencee. The Licencee shall furnish to the
Licensor the names of such sub-licencees in the hotel.
12. During the tenure of this licence, the Licencee shall not transfer or
sublet the said hotel or any portion thereof permanently or temporarily,
to anybody else nor shall it be entitled to allow any person/ persons to
occupy the said hotel or to use any part thereof save with the prior
permission in writing, of the Licensor.
13. The Licencee shall be bound to abide by the relevant provisions of
the Punjab Municipal Act and such other Act or Acts at present in force
as the Licensor is required to abide by or as is made applicable to the
Licensor in future and the byelaws made thereunder from time to time as
are existing or may be enacted hereafter and the provisions of the
Prevention of Adulteration of Food Act and Rules made thereunder and
applicable in Delhi, the provisions laid down by the Government of
India, Department of Tourism, in respect of the manner and method of
running a hotel or such other existing Central And Local Laws, rules and
regulations, enacted or to be enacted or introduced in connection with
the running of the hotel.
14. After giving seven days prior intimation in writing to the Licencee,
the Licensor may depute its authorized officers to inspect the hotel at any
time with a view to examining the state and condition of the said hotel
building and other fittings, fixture and installations installed therein and
for the purpose of examining whether the Licencee is complying with the
provisions of the appropriate laws and to ensure the compliance of this
Agreement. In the event of the Licensor being satisfied that any fittings,
fixtures and installations installed therein have been damaged or unduly
deteriorated due to poor maintenance and operation, the entire cost of
making good such damage or deteriorations shall be charged to the
Licencee.
158. Clause VIII :-
DESTRUCTION OF HOTEL BULDING- In the event of the said
hotel or any portion thereof being damaged due to fire, civil commotion,
riots, earthquakes, war or other acts of God resulting in the Licencee's
inability for reasons beyond its control, to conduct the business or
running the hotel for, any period whatsoever, the licence fee payable by
the Licencee to the Licensor as hereinabove stated, shall be reduced on a
pro-rata basis. The Licencee shall make good the building and/or the
fixtures, fittings or installations belonging to the Licensor and bring the
said hotel building or the said installations to the condition before the
occurrence of such damage and the Licencee shall not claim any
compensation or damage whatsoever from the Licensor on this account.
159. Clause X relates to termination. It stipulated, if the plaintiff
commits a default in the payment of the licence fee in the manner
provided in this Deed of Licence or ceased to do business in the said
hotel building or commits breach of any of the terms of this Deed
wilfully or otherwise, the defendant may give a notice in writing to the
plaintiff for remedying the breach and if the plaintiff fails to do so within
a period of thirty (30) days from the date of such notice, the defendant
may terminate the licence without giving any further notice.
160. Clause XI relates to waiver and Clause XII relates to HANDING
OVER POSSESSION OF THE HOTEL BUILDING TO THE
LICENSOR- On the expiry of the licence period and in the event of the
licence having been terminated earlier, the Licencee shall hand over the
possession of the hotel building together with fittings and fixtures and all
other installations belonging to the Licensor as per the Collaboration
Agreement (excluding those items of the Licensor replaced by the
Licencee in terms of the Deed of Licence heretofore) in the same
conditions as far as practicable as at the time of taking them from the
Licensor along with the installations as described to the Deed of Licence
heretofore save normal wear and tear and modifications along with the
building referred to in this Deed with its fittings and fixtures and all
other installations as stipulated in this Licence heretofore, within thirty
(30) days from the expiry of the licence period or termination of the
licence deed as the case may be. The Licencee shall pay such damage
charges for overstay in the premises from the date of expiry of the
licence period or from the date and licence is terminated at the rates as
may be determined by the Licensor from time to time and which shall
not be less than the licence fee paid immediately before the expiry of the
licence period or termination of the licence. Upon the expiry of the
licence period and in the event of the licence having been terminated
earlier, the Licencee shall have the right to take away the Licencee's
assets including the assets referred to In Schedule III to the Collaboration
Agreement and all other assets belonging to the Licencee, which
Licencee may voluntarily bring into the hotel at its own cost.
Clause XIII relates to non-assignability.
SUPPLEMENTAL AGREEEMENT DATED SEPTEMBER 25,
1979 (Exh.P-42)
161. Vide the Supplemental Agreement dated September 25, 1979
(Exh. P-42), the parties have mutually agreed for some modification of
Collaboration Agreement (Exh.P-41) and the Agreement of Licence
(Exh.P-40) by way of additions and alterations. By way of
Supplemental Agreement, in Clause III, Explanation II of original
Licence Deed the word "gross income" and "shop rental" were to be read
as "gross receipt" and "shopping area rental" and the word "include" was
to be replaced by the word "mean" wherever they occur. Defendant and
the plaintiff agreed on payment of licence fee and the manner of
payment as set out in sub-clause 1 to 5 of clause III of the Agreement of
Licence and the investment of the defendant for the purpose of aforesaid
clauses were to include the following:-
a) Actual cost of the hotel building financed by defendant in terms of
Collaboration Agreement, not exceeding Rs.475 lakhs.
b) Rs.45 Lakhs towards cost of financing, supervisions and other charges
including initial cost of providing 11 K.V. Sub-Station,
c) Cost of acquiring land, measuring 3.78 acres (15,028 sq. meters) being
plot no.1, Man Singh Road, New Delhi, in terms of the plan attached to
the Collaboration Agreement, taken to be Rs.106.64 lakhs comprising of
Rs.91.48 lakhs being the basic cost of land to defendant, a sum of Rs.
10.66 Lakhs being arrears of ground rent in respect of the said plot paid
by defendant to Works & Housing Ministry, Government of India, and
depreciated value of the Building on the said plot since demolished,
estimated to be Rs.4.50 lakhs.
162. The Supplemental Agreement also stipulated sub clause 2 of
Clause VII of the agreement of licence (Exh.P-41) shall stand modified
to the effect that the plaintiff will pay to the defendant an amount of
Rs.12,00,000/- per annum in lieu of House Tax payable in respect of
Hotel Building. The defendant had reserved its right to scrutinise the
rental receipt of shopping area situated in Taj Hotel for purposes of
determining reasonableness and in case of doubt/dispute regarding rent
receipts, the same was to be worked out by mutual agreement failing
which arbitration. The plaintiff agreed to furnish to the defendant bank
guarantee from any nationalised bank three months licence fee
guaranteeing payment of licence fee, which was to be renewed from year
to year before three months of its expiry. All terms and conditions of the
Collaboration Agreement and Agreement of Licence, except those which
were specifically modified vide Supplemental Agreement remained
unchanged and were binding on the parties, so also the terms and
conditions of the Supplemental Agreement.
163. Having noted, some of the relevant clauses of the three
Agreements, it is necessary to note the position of law, as to how the
Supreme Court has defined/held the word „Joint Venture‟. Mr. Sanjay
Jain, learned ASG, who has referred to the judgment of the Supreme
Court in the case of Faqir Chand Gulati (supra), the Supreme Court
dealt with an issue, whether an Agreement, under which the builder
agreed to make a housing construction for the land owner was a
Collaboration Agreement or a Joint Venture or the activity of the builder
squarely falls within the definition of service. It was observed by the
Supreme Court that the title or caption or the nomenclature of the
instrument/document is not a determining factor as regards the nature
and character of the instrument/document, and true purpose of a
document has to be ascertained with reference to the terms of the
document, which express the intention of the parties. The Supreme Court
held, joint venture connotes a legal entity in the nature of a partnership
engaged in the joint undertaking of a particular transaction for mutual
profit or an association of persons or companies jointly undertaking
some commercial enterprise wherein all contribute assets and share risks.
Therefore, use of the word Joint Venture or Collaboration in the title of
an Agreement or even the body of the Agreement will not make the
transaction a Joint Venture, if there are no provisions for shared control
of interest or enterprise and shared liability for losses. In an earlier
judgment in the case of New Horizons Ltd. vs. Union of India 1995
SCC (1) 478, the Supreme Court dealing with the question, whether a
particular company is a Joint Venture or not, rejecting the view of the
High Court that a Company cannot be called as a Joint Venture when
there is only a certain amount of equity participation by a foreign
company, held that when apart from having equity participation, the
Indian group of companies and the foreign based company have pooled
together their resources and all the constituents of the company have thus
contributed to its resources which shows that the Indian Company and
the foreign based company is an association of companies joint
undertaking a commercial enterprise wherein they will all contribute
assets and will share risks and have a community of interest, is a joint
venture company. The Supreme Court held: ―This shows that NHL is
an association of companies jointly undertaking a commercial enterprise
wherein they will all contribute assets and will share risks and have a
community of interest. We are, therefore, of the view that NHL has been
constituted as a Joint Venture by the group of Indian companies and
IIPL, the Singapore-based company and it would not be correct to say
that IIPL which has a substantial stake in the success of the venture,
having 40% of shareholding, is a mere shareholder in NHL‖.
164. From the above, it is noted, the sharing of risks, common interests,
contribution to assets and the intent to jointly run and undertaking were
taken as indicators of a Joint Venture. The Supreme Court in Para 21 to
25 also held as under:-
―21. This Court had occasion to consider the nature of ―joint-
venture‖ in New Horizons Ltd. v. Union of India. This Court
held: (SCC pp. 493-44, Para 24)
24. The expression ‗joint venture' is more frequently used
in the United States. It connotes a legal entity in the nature
of a partnership engaged in the joint undertaking of a
particular transaction for mutual profit or an association of
persons or companies jointly undertaking some commercial
enterprise wherein all contribute assets and share risks. It
requires a community of interest in the performance of the
subject-matter, a right to direct and govern the policy in
connection therewith, and duty, which may be altered by
agreement, to share both in profit and losses. (Black's Law
Dictionary, 6th Edn., p. 839). According to Words and
Phrases, Permanent Edn., a joint venture is an association
of two or more persons to carry out a single business
enterprise for profit (p. 117, Vol. 23). (emphasis supplied)
22. The following definition of ―joint venture‖ occurring in
American Jurisprudence (2nd Edn., Vol. 46, pp. 19, 22 and 23) is
relevant:
―A joint venture is frequently defined as an association of
two or more persons formed to carry out a single business
enterprise for profit. More specifically, it is in association
of persons with intent, by way of contract, express or
implied, to engage in and carry out a single business
venture for joint profit, for which purpose such persons
combine their property, money, effects, skill and knowledge,
without creating a partnership, a corporation or other
business entity, pursuant to an agreement that there shall be
a community of interest among the parties as to the purpose
of the undertaking, and that each joint venturer must stand
in the relation of principal, as well as agent, as to each of
the other coventurers within the general scope of the
enterprise.
Joint ventures are, in general, governed by the same rules
as partnerships. The relations of the parties to a joint
venture and the nature of their association are so similar
and closely akin to a partnership that their rights, duties
and liabilities are generally tested by rules which are
closely analogous to and substantially the same, if not
exactly the same as those which govern partnerships. Since
the legal consequences of a joint venture are equivalent to
those of a partnership, the courts freely apply partnership
law to joint ventures when appropriate. In fact, it has been
said that the trend in the law has been to blur the
distinctions between a partnership and a joint venture, very
little law being found applicable to one that does not apply
to the other. Thus, the liability for torts of parties to a joint
venture agreement is governed by the law applicable to
partnerships.
A joint venture is a distinguished from a relationship of
independent contractor, the latter being one who, exercising
an independent employment, contracts to do work according
to his own methods and without being subject to the control
of his employer except as to the result of the work, while a
joint venture is a special combination of two or more
persons where, in some specific venture, a profit is jointly
sought without any actual partnerships or corporate
designation.‖ (emphasis supplied)
23. To the same effect is the definition in Corpus Juris
Secundum (Vol. 48-A, pp. 314-15):
― ‗Joint Venture', a term used interchangeably and
synonymous with ‗joint adventure', or coventure, has been
defined as a special combination of two or more persons
wherein some specific venture for profit is jointly sought
without any actual partnership or corporate designation, or
as an association of two or more persons to carry out a
single business enterprise for profit or a special
combination of persons undertaking jointly some specific
adventure for profit, for which purpose they combine their
property, money, effects, skill, and knowledge... Among the
acts or conduct which are indicative of a joint venture, no
single one of which is controlling in determining whether a
joint venture exists, are: (1) joint ownership and control of
property; (2) sharing of expenses, profits and losses, and
having and exercising some voice in determining division of
net earnings; (3) community of control over, and active
participation in, management and direction of business
enterprise; (4) intention of parties, express or implied; and
(5) fixing of salaries by joint agreement.‖
(emphasis supplied)
24. Black's Law Dictionary (7th Edn., p. 843) defines ―joint
venture‖ thus:
―Joint venture - A business undertaking by two or more
persons engaged in a single defined project. The necessary
elements are: (1) an express or implied agreement; (2) a
common purpose that the group intends to carry out; (3)
shared profits and losses; and (4) each member's equal
voice in controlling the project.‖
25. An illustration of joint venture may be of some assistance. An
agreement between the owner of a land and a builder, for
construction of apartments and sale of those apartments so as to
share the profits in a particular ratio may be a joint venture, if the
agreement discloses an intent that both parties shall exercise joint
control over the construction/development and be accountable to
each other for their respective acts with reference to the project.‖
165. The Gujarat High Court in the case of Asia Foundations &
Constructions Ltd. vs. State of Gujarat AIR 1986 Guj 185 dealt with the
nature of Joint Venture and the rights and liabilities of the Joint Venture
partners at length. The relevant extract of the judgment is reproduced as
under:-
―The common law did not recognise the relationship of co-
adventures, but with the passage of time, the judicial decisions
recognised what is known as 'joint adventure' of two or more
persons undertaking to combine their property or labour in
conduct of particular line of trade or a general business for joint
profits. The Courts do not treat a joint adventure as identical with
a partnership though it is so similar in nature, and in the
contractual relationship created by such adventurerers that the
rights as between them are governed practically by the same rules
that govern the partnership. This relationship has been defined to
be a special combination of persons undertaking jointly some
specific adventure for profit without any actual partnership. It is
also described as a commercial or a maritime enterprise
undertaking by several persons jointly; a limited partnership not
limited in the statutory sense as to the liabilities of partners but as
to its scope and duration. Generally speaking the distinction
between a joint adventure and a partnership is that former relates
to a single transaction 'though it may comprehend a business to be
continued over several years' while the later relates to a joint
business of a particular kind (see 48 American Law Reports at p.
1055 under the caption "what amounts to a joint adventure" at
pages 1056-57 and 1060). It is generally agreed that in order to
constitute a joint venture, there must be community of interest and
right to joint control. It is recognised on authority that each of the
parties must have an equal voice in the matter of its performance
and control over the agencies used therein, though one authority
may entrust the performance to another. There is also an authority
to the effect that a joint venture may exist although the parties
have unequal control of operations. The rights, duties and
liabilities of joint ventures are similar or analogous to those which
govern the corresponding rights, duties and liabilities of the
partners. As in the case of partners, joint ventures may be jointly
and severally liable to third parties for the debts of the venture
(see: American Jurisprudence, Second Edition, Vol.46, para 12 at
pages 33-34 and para 57 to p.76). Joint Venture groups are
internationally recognised in form of cooperation in the joint
fulfilment of the construction contract obligations. Joint venture
groups in the construction industry come about through
agreements for combination of legally independent contractors for
the joint rendering of construction services limited in both time
and content. Typically they are restricted to a single project in
which case the members of the group act jointly at both the
tendering and award stages.
Joint venture groups are generally unincorporated
associations. The legal systems in general have not kept pace with
the growing economic means of joint venture groups and there is no
special legal form for this type of cooperation which has come to
stay in construction industry. xxx The services to be rendered by the
group are to be allocated amongst the members of the same by
internal agreement, and consequently the rights and duties of the
members inter se are also regulated by the group agreement. These
internal agreements are not effective vis-a-vis the third parties, and
they operate amongst the members inter se. Thus, all the members
are jointly and severally liable for performance of the construction
work jointly undertaken irrespective of internal division of the work.
If one member of the joint venture group does not fulfil his
commitments, the others are under joint and several obligation to
carry out such obligations vis-a-vis the customer. Such a situation
may arise when a member of a joint venture group drops out
prematurely because of the liquidation or insolvency. When a
contract is concluded with a joint venture group all members are
made jointly and severally liable even if only one is capable of
rendering the service in question. The joint and several liabilities of
the members of a joint venture group may cover the marginal
areas of the contract performance such as late performance,
faults, deficiency of goods and services etc.‖
166. Suffice to state, a reading of the aforesaid judgments, it is clear
that the Joint Venture involves elements like (i) contribution by the
parties of money, effort, knowledge and other assets to common
undertaking; (ii) joint property interests in the subject matter of the
venture; (iii) right of mutual control of management of the enterprise;
(iv) expectation of profit; (v) right to participate in the profits; and would
share the losses. Noting the aforesaid position of law, it is seen that the
aforesaid three Agreements do not contain any of the elements, which
constitute a Joint Venture. The Collaboration Agreement (Exh. P-40)
records the terms whereby the plaintiff was invited to build a 5 star hotel
on a plot owned by the defendant herein. It is an Agreement, whereby
the plaintiff was to render services to the defendant for the construction
of the hotel building. The Collaboration Agreement records the nature
of services to be offered by the plaintiff to the defendant in that regard
including detailed study for the purpose of putting the hotel preparation,
layout plan, specifications, appointment of Architect, Engineers,
Surveyors, provided management services, preparation of technical
documents for the purpose of award of work, appointment of contractors,
sub-contractors, all movable assets which the plaintiff equipped shall
belong to the plaintiff, the plaintiff shall enter the site solely for the
purpose of carrying out the work on the site on as is where is basis, there
is a stipulation whereby it has been agreed by the parties, nothing
contained in the Agreement shall be construed as a demise in law of the
said site agreed to be demised or any part thereof so as to give plaintiff
any legal interest or claim therein of any nature whatsoever. If during
the excavation of the sight plaintiff discover any coins or any articles of
value or of public interest or any mines, minerals etc., the same shall
belong to the President of India and shall be handed over to the Officer
nominated by the defendant. Further if there is a breach or default in
performance of all or any one or more of the covenants by the plaintiff
and in the eventuality of failure to rectify the cure or default the
defendant can evict the plaintiff from the sight or its representatives,
contractors, sub-contractors etc. and thereupon the agreement shall be
void. It is also provided that plaintiff will not encumber, let or part with
possession of the site or interest under / and / or the benefit of the
agreement or any part thereof in any manner. The clauses 2 and 8 of
Article III demonstrate that the land always vested with the defendant.
The land and the hotel building to be constructed thereon shall at all
times remain public premises as defined under the Pubic Premises
(Eviction of Unauthorised Occupants) Act, 1971 and shall always be
subject to the provision thereof. That apart, even the building belongs to
the defendant, who had paid for its construction. Clause IV The cost of
the hotel building together with the assets to be financed by the
defendant are listed in Schedule II of the Collaboration Agreement and
the assets to be financed by the plaintiff in Schedule III. Similarly, the
Licence Deed has been executed between the parties for the plaintiff to
use and occupy the hotel building for a period of 33 years. The fact that
the Licence Deed has been executed, would demonstrate that the parties
are not partners, which is relevant for a Joint Venture but it is a
relationship of a licensor or licencee. There is a stipulation in the
manner licence fee shall be paid. Similarly, there is an option in the
Licence Deed i.e., renewal of a licence for a further period at the
discretion of the defendant. There is a clause that the default in payment
of licence fee may lead to revocation or cancellation of the licence
agreement. There is a provision relating to inspection of books of
accounts. The ownership of the hotel (The land on which the said hotel
is situated belongs to the defendant) shall at all vest in defendant. The
plaintiff shall be entitled to all rights title and interest in respect of assets
in terms of the Schedule III of the collaboration agreement only. There
is a stipulation, upon termination of the Agreement the defendant may
purchase plaintiff‟s assets at reasonable prices to be mutually agreed
upon. There is a provision, wherein the plaintiff agreed to hand over the
possession of the hotel building on the expiry of the licence agreement
along with the fittings and fixtures and all other installation belonging to
the defendant as per Collaboration Agreement. Full rights have been
given to the defendant for inspection of the site, workmanship etc.
Similarly, the Supplemental Agreement (Exh.P-42) was entered into to
record certain changes in the Collaboration Agreement (Exh.P-40) and
Licence Deed (Exh.P-41) it is in particular to record the fact that the
total investment of the defendant would be taken as Rs.626 lakhs as
against stipulated investment of Rs.475 lakhs in the original
Collaboration Agreement (Exh.P-40). It is clear on the reading of the
Supplemental Agreement, the same was made for the reason that in
terms of clause III to the Licence Deed (Exh.P-41), the amount of
licence fee to be paid by plaintiff to the defendant was 10.5% of the
gross income of every financial year or a sum equivalent to 15% of the
defendant‟s investment in the said hotel building in terms of
Collaboration Agreement, whichever is higher. Thus, for the said
purpose land value was included in the cost of investment of defendant
so as to increase the minimum guaranteed amount payable by the
plaintiff to the defendant. That apart, Supplemental Agreement (Exh.P-
42) also recorded the right of the defendant to scrutinise the rental
receipt of shopping area situated in the Taj Hotel for purposes of
determining the reasonableness. The plaintiff also agreed to give bank
guarantee for licence fee of three months. Noting the provisions of the
three Agreements, it is clear that there is no Joint Venture between the
plaintiff and defendant. In other words, there are no elements seen in the
three Agreements, which show that there is a partnership between the
parties. There is also no stipulation for sharing the profit and losses.
Rather, if the plaintiff had suffered losses, it was still required to make
payment in terms of the Licence Deed as amended by the Supplemental
Agreement. The basic ingredient to term the arrangement between the
parties as a Joint Venture is missing. The reliance placed by Mr. Nayar
on para 25 of the judgment in Faqir Chand Gulati (supra) shall not be
of any help to the plaintiff.
167. Further, I note, in the letter dated March 31, 1976 which is part of
collaboration agreement (Exh.P-40), in Para 5 the plaintiff has
undertaken to maintain the hotel building with all its appurtenance at its
own cost during the whole licence period to the entire satisfaction of the
defendant. It also undertook to pay water and electricity consumption
charges and / or any other charges / taxes leviable in connection with the
operation of the hotel. Further, minutes of meeting dated April, 2, 1976
(Exh.P-14) would also not help the case of the plaintiff in as much as the
same would reveal that the Committee apart from accepting the
allotment of land by the Ministry of Works and Housing had accepted
the proposal of the plaintiff in terms of its letter dated March, 31, 1976,
which has been referred to above, for the running of the hotel on licence
basis as is clear from (iii) of the decision in (Exh.P-14), which directs
execution of Licence Deed. That apart, the request of the plaintiff vide
letter dated February, 15, 2010, (Exh.P-22), which on a reading is to
confirm the plaintiff‟s intent to renew the licence for a fresh period on
the expiry of its original term. The fact that the plaintiff was running
hotel on licence basis would itself negate the concept of joint venture.
Similarly, the minutes of the meeting dated October 7, 2011 (Exh.P-12)
would also not help the plaintiff as any reference made to the project
"Joint Venture" "Unique Joint Venture" "Collaboration" would have no
effect on the clear and unambiguous words in the agreements.
168. In so far as the judgments relied upon by Mr. Rajiv Nayar, Sr.
Counsel for the plaintiff are concerned, in Suresh Dhanuka (supra) in
Para 47 on which reliance has been placed by Mr. Nayar is concerned, in
the said case, the Supreme Court was concerned with an interim order
granted by the district court which was set aside by the High Court. In
Para 47, the Supreme Court had observed that it is not a case where
money can be an adequate compensation by noting that the appellant had
acquired 50% interest in the trademark in question together with the
goodwill of the business in relation to the products in which trademark is
used. It is not understood as to how the judgment is relevant to determine
the aspect of joint venture for which it has been relied upon as has been
held above that the agreements which are subject matter of inter se
relationship between the parties herein does not establish a joint venture.
This judgment has no applicability, as it is distinguishable on facts,
inasmuch as in the said case, the appellant has acquired 50% interest in
the trade mark in question together with goodwill of the business, which
surely depicts a partnership, which aspect is missing in the case in hand.
Similarly, in Shreedhar Govind Karmerkar (supra), wherein reliance
has been placed on Para 27 of the judgment is concerned, the facts are
that the parties before the Supreme Court were brothers. The dispute
between them is for tenancy rights in respect of a premises known as
Navelkar building, Dadar Mumbai. The appellant acquired the said
tenancy right in terms of the deed of assignment entered into by and
between him and one Saraswati Balkrishna Pawar and three others. One
Krishna Tatoba Pawar was the original tenant of the said premises. He
was running a Hair cutting saloon therein under the name and style of
Ananth Hair Dressing Saloon. He died leaving behind him the assignors
of the sale deed of assignment dated January 18, 1966. The business as
also the tenanted premises were assigned for valuable consideration. He
was allegedly carrying on business therein. Leave and licence agreement
was executed by him in relation to the self-same premises in favour of
one Sh. Walke on February 01, 1970. Shri Walke was running a
business in the premises under the Name and Style of Deepak
Provisional Store. A dispute arose between the parties resulted in
initiation of proceedings under Section 145 of Cr.P.C. The properties
were attached. Shri Walke filed a Suit and the Suit is said to have been
compromised. The appellant before the Supreme Court said to have
obtained possession of the said premises on March 23, 1978, where-
after, he started business under the Name and Style of "Shree Medico".
The parties before the Supreme Court, the three brothers entered into
partnership on April 01, 1971. The same was dissolved on the March 31,
1977 inter alia on the premise that the appellant has been claiming full
ownership in relation to the tenanted premises as also the business in
"Shree Medico". In Para 27, the Supreme Court has held as under:
―The very fact that the parties had referred to the business carried
out under the name and style of ―Deepak Provisional Store‖ at
N.C. Kelkar Road, Dadar, Bombay, which was not and could not
be the subject-matter of the partnership as the same was entered
into in the year 1971 and dissolved in 1977, the admission of the
appellant herein that the royalty received from the said tenanted
premises was being deposited in the partnership account assumes
significance. If the said property was the exclusive property of the
appellant, and he had been dealing therewith as the sole owner
thereof, the question of any reference being made thereto in the
deed of dissolution would not have arisen. It may be true that in
the absence of the original deed of partnership dated 1 st April,
1971 having been brought on record, it is difficult for the court to
arrive at a finding that the same had been originally brought in
the stock of the firm. There is also no direct evidence that the
appellant had brought the same as his investment in the
partnership at the initial stage thereof but it is evident that the
same was done at a latter point of time. An inference in relation
thereto must be drawn for the other materials on record. The said
agreement dated 1st April, 1971 having been in dispute, we may
not be decisive. In a case of this nature, the conduct of the parties
assumes significance. Admission, as is well known, is the best
proof of a claim. Section 58 of the Evidence Act states that the
facts admitted need not be proved. The very fact that the royalty
received in respect of the said premises was being deposited in the
partnership account is a clear pointer to show that the same was
the property of the partnership.‖
169. Suffice to state in the said case, the original deed of partnership
dated April 01, 1977 was not brought on record. In the absence of the
same the Supreme Court held that it is difficult for the Court to arrive at
a finding that the business under the Name and Style of Deepak
Provisional Store has been originally brought in the stock of the firm.
The Supreme Court held that in such a case, the conduct of the parties
assumes significance. According to the Supreme Court admission as is
well-known is the best proof of claim. It relied upon section 58 of the
Evidence Act holding that the facts admitted need not be proved. In as
much as the royalty received in respect of the said premises was being
deposited in the partnership account was held to be a clear pointer to
show that the same was the property of the partnership. The present case
is not of such a nature. All the three agreements which governed the
relationship between the parties are on record. The terms of the
agreements need to be looked into to understand the relationship
between the parties. There is no question of drawing an inference as to
the nature of agreement / relationship existed between the parties and
any admission necessarily has to be seen from the context of the terms
and conditions in the agreement and not otherwise and the same does not
prove Joint Venture. Insofar as Vidhi Construction (supra) is
concerned, the said judgment is also not applicable to the facts of this
case in as much as this Court in paragraph 18 records that the respondent
no. 2 who, to the knowledge to the respondent No. 1, had entered into
collaboration agreement with the appellant. The Court notes the fact that
the appellant had paid considerable amount to respondent no. 1 and in
part performance of the said collaboration agreement the appellant was
put in possession of the property, who demolished the one storey
building and has raised a new structure thereupon which structure
admittedly has been raised with the help of the money spent by the
appellant. It is in those facts, this Court had held that the Suit filed by
the plaintiff / respondent no. 1 is for partition, but in such a suit, decree
for declaration will be deemed to be included to the effect that she is the
owner to the extent of one-third share. Since declaration is implicit in
such a suit with respect of a status in the property. Therefore, it cannot
be said that the appellant is not a necessary party in the Suit. Grant of
decree in favour of respondent no.1 is likely to effect the right of the
appellant to hold portions of the newly constructed building which has
been constructed with the aid of the appellants money. The Court held
that it is a case where the appellant will be deemed to be having an
interest in the property. It is not a case of an agreement to sell, but the
subject is a collaboration agreement which was followed by delivery of
possession to the appellant pursuant to which construction has been
raised by the appellant, who has occupied first and second floors of the
building from which he cannot be dispossessed by respondent no. 1. In
the present case, the hotel building has been constructed on the
investment made by the defendant. The equipment of the plaintiff was in
terms of Schedule III which the agreement stipulated can be taken away
by the plaintiff on the expiry of the licence period. Suffice to state no
interest has accrued in the property in question. The relationship between
the parties being clearly regulated by the agreements, the judgment so
relied upon has no effect and would not help the case of the plaintiff. In
so far as Sunil Siddharthbai (supra) wherein the reliance was placed by
Mr. Nayar on Para 16 and 17 are concerned, the same is not applicable to
the facts of this case. In the said case, the Supreme Court has noted that
the assessee has bought the shares of the Limited Companies into the
partnership firm as its contribution to its Capital. No such facts exist in
the case in hand. Similarly, CIT v. Panipat Woollen and General Mills
(Supra) is also not applicable to the facts of this case. In the said case,
there was an agreement between the parties to share 50% of the profits
besides commission and also to share 50% of the losses. The Supreme
Court having regard to the terms and conditions of the agreement held
that the agents by contributing to the investments and by sharing the
profits as also the losses have actually contributed to a joint venture and
ultimate division of the profits with the principals and the agreement
must be construed as an agreement of divisions of profits in specified
proportions. In Addanki Narayanappa and Anr. (Supra) wherein,
reliance has been placed in Para 7 of the judgment, it must be held, the
same is not applicable to the facts of this case, inasmuch as the Supreme
Court in the said case has held that the whole concept of partnership is to
embark upon a Joint Venture and for that purpose to bring in as capital
money or even property including immovable property. Once, that is
done, whatever is brought in, would cease to be the trading asset of the
person, who brought it in. It would be the trading asset of the
partnership in which all the partners would have interest in proportion to
their share in the Joint Venture of the business of partnership. The
person, who brought it in would therefore, not be able to claim or
exercise any exclusive right over any property which he has brought in
much less over any other partnership property. He would not be able to
exercise his right even to the extent of his share in the business of the
partnership. The Supreme Court further held, his right during the
subsistence of the partnership is to get his share of profits from time to
time as may be agreed upon among the partners and after dissolution of
the partnership, or with his retirement from partnership of the value of
his share in net partnership asset as on the date of dissolution or
retirement after a deduction of liabilities and prior charges. Suffice to
state, the facts have no bearing, in view of my conclusion above on a
reading of the Agreements executed between the parties. Similarly, the
reliance placed on the judgment of the English Court in Robinson v.
Ashton (supra), more specifically at Page 28 of the said judgment,
wherein the Court has held as under:
―Sir G. Jessel, M.R., said that in the absence of special agreement
the rise or fall in value of fixed plant or real estate belonging to a
partnership was as much profit or loss of the partnership as
anything else. If a man said ―I bring in no money capital - I have
not got money, but here is a mill and machinery worth £20,000
which I bring in,‖ and he was credited in the books with £20,000 -
then the mill and machinery became partnership property just as
much as if the partner had brought in money, and the partnership
had with that money bought the mill and machinery. It was
suggested that the mill and machinery were Robinson's and that
the partnership had only paid rent for them; but tenants did not
generally lay out money on their landlords' property, especially
under circumstances such as those of the present case. There must
be a declaration that Ashton was entitled to one-half of the
proceeds of sale after payment thereon of the debts of the
partnership and the capital appearing by the books to be due to
each partner.‖
170. The said judgment has no bearing on the facts of this case, insofar
as the reliance placed by Mr. Nayar on New Horizons Ltd (supra), has
already been referred to by me above, and the said judgment would not
help the case of the plaintiff. Insofar as the submission of Mr. Nayar by
relying on Section 58 and Section 78(5) of the Indian Evidence Act that
there are documents on record which suggests that the relationship
between the parties is of a joint venture and the plaintiff has a right of
extension of a licence by relying upon the words "joint participation" in
the letter dated 31. 3. 1976, (Exh.P-40); for participating jointly in the
construction and the running of the hotel‖ in the committees resolution
dated April 02, 1976 (Exh.P-14); "collaborate‖ in the collaboration
agreement dated December 18, 1976 (Exh.P-40); the usage of the word
―collaboration partner‖ (Exh.DW1/P2) (Colly) issuance of completion
certificate by the defendant in favour of ―The Taj Mahal Hotel‖; and the
usage of the words in the defendants Chairpersons letter dated
September 08, 2011, (Exh.P-37) like ―joint venture/ collaboration‖
"unique PPP model‖ ―arrangement is broadly captured by three
agreements‖, ―construction and operation of a hotel‖ is through a
―unique PPP model‖, ―the collaboration partner and the present
operator has applied for extension of term‖. Similarly, the reliance
placed by Mr. Nayar on the Council‟s resolution dated October 07, 2011
(Exh.P-12), wherein a reference to the project is made as a ―joint
venture‖, ―unique joint venture / collaboration‖. The plaintiff is
having―long term interest‖ in the property. The plaintiff is a
―collaboration partner‖. The licence agreement being an outcome of
the ―joint venture / collaboration agreement‖ to contend that the above
admissions of the defendant itself unambiguously shows that the plaintiff
and the defendant are in ―joint venture‖ is untenable in law in as much
as it is a settled position of law in terms of Bank of India v. K.
Mohandas (supra), wherein the Supreme Court held that the true
construction of a contract must depend upon the import of the words
used and not upon what the parties chose to say afterwards. It was also
held that nor does the subsequent conduct of the parties in the
performance of the contract affect the true effect of the clear and
unambiguous words used in the contract. The intention of the parties
must be ascertained from the language they have used considered in the
light of the surrounding circumstances and the object of the contract. The
nature and purpose of the contract is an important guide in ascertaining
the intention of the parties. The aforesaid being the position of law, the
usage of the words, in the documents referred to by Mr. Nayar, would
not change the nature of agreements which are clear and unambiguous.
In other words, the same would not change the legal character of the
agreements between the parties which remains that of licensor and the
licencee. In fact, PW-1 P.K. Bhatia in his answer to question 22 had
admitted that the status of the plaintiff is that of a „licencee‟.
171. Even the reliance placed by Mr. Nayar on the oral evidence and
the inferences to support his contention of a joint venture is concerned,
the same is a misreading of the agreements, the purport of which has
been already delineated above. The distinction sought to be drawn by
Mr. Nayar between the words "Hotel Building" and "Hotel" in the
Collaboration Agreement (Exh.P-40) to contend that, the word „Hotel‟ is
used to relate it as a Joint Venture is devoid of merit. The Collaboration
Agreement (Exh.P-40) and Licence Deed (Exh.P-41), which have been
executed by the parties for construction of hotel building and running of
hotel on Licence are very clear. As concluded above, none of those
Agreements and the Supplemental Agreement suggest that the
relationship is of Joint Venture. The Supplemental Agreement vide
clause (2) clearly stipulated that the parties have agreed on payment of
licence fee and manner of payment as set out in sub clause 1 to 5 of
clause III (Licence Fee and Manner of Payment of the Agreement of
Licence). Investment of NDMC shall for the purpose of the aforesaid
clauses comprise the cost of acquiring land measuring 3.78 acres (15028
sq. meters) being Plot No.1, Man Singh Road, New Delhi in terms of the
plan attached to the Collaboration Agreement taken to be Rs.106.64
lakhs comprising of Rs.91.48 lakhs being the basic cost of land to
NDMC; a sum of Rs.10.66 lakhs being arrears of ground rent in respect
of the said plot paid by NDMC to Works and Housing Ministry, Govt. of
India and depreciated value of the building on the said plot since
demolished, estimated to Rs.4.50 lakhs and Rs.45 lakhs towards cost of
financing subversion and other charges including initial cost of providing
11 kv substation. Explanation (A) (I) of the Supplemental Agreement
clarifies that for the purpose of arriving at the total investment of NDMC
in the Hotel Building, the total of Rs.475/- lakhs, Rs.45 lakhs, Rs.106.64
lakhs, i.e Rs.626 lakhs at the maximum shall be considered, which would
have a bearing on licence fee payable, as clause III (1) of the Licence
Deed stipulates a sum equivalent of 15% of the defendant investment if
higher than the 10 ½ of the gross income of the plaintiff, whichever is
higher shall be the licence fee. Clause 8 of the Supplemental Agreement
stipulates all the terms and conditions of the Collaboration Agreement
and the Agreement of Licence except those which are specifically
modified in the Supplemental Agreement shall remain unchanged and
shall be binding on the parties to the Agreement so also the terms and
conditions incorporated in the Supplemental Agreement. It needs to be
held that the Supplemental Agreement has not diluted Article III (2) of
the Collaboration Agreement, nor, the land on which the hotel building
stands, stood contributed to the Joint Venture as contended by Mr.
Nayar.
172. Insofar as plea of Mr. Nayar that the payment of house tax by the
plaintiff, in terms of Clause 4 of the Supplemental Agreement evidences
the land on which the hotel building stands, stood contributed to the Joint
Venture is also without merit. I reproduce clause 4 of the Supplemental
Agreement as under:-
―(4) Sub clause (2) of the Clause VII of the agreement of
licence shall stand modified to the effect that IHC will pay to
the NDMC an amount of Rs.12,00,000/- per annum in lieu of
House Tax payable in respect of Hotel building‖
There is no Joint Venture and also in terms of Clause 4 sub-clause (2) of
clause VII of the Agreement of Licence (Exh.P-41) stood modified, is to
the effect that the plaintiff will pay to the defendant an amount of
Rs.12,00,000/- per annum in lieu of house tax payable in respect of hotel
building and not land. The said clause does not remotely suggest that it
is the plaintiff who had to pay the house tax to the authorities. The said
stipulation may have been incorporated purely from a commercial angle
and cannot be construed to mean that, the land has been contributed to
the Joint Venture. Nor does it suggest plaintiff a tenant in perpetuity.
Hence, there is a fallacy in the submission of Mr. Nayar and the same is
liable to be rejected. The reliance placed on the evidence of the plaintiff
witness, Mr. S. Balasubramanian, PW3 would also not help the case of
the plaintiff, in view of the agreements the terms of which are clear and
unambiguous. The reliance on oral evidence is not required in view of
the terms and conditions in the agreements, which governs the
relationship between the parties. Further inferences cannot be drawn to
interpret agreements which are clear and unambiguous. Even the
conclusions drawn by Mr. Nayar to contend Joint Venture (i) that,
resolution of Committee dated April 02, 1976 , connotes Joint Venture;
(ii) the initial investment of Rs.4.75 crores of the defendant and Rs.4.61
crores of the plaintiff evidences Joint Venture and partnership; (iii) the
land stood contributed to the partnership when the defendant‟s
investment increased to Rs.6.26 crores; (iv) the defendant has earned
multifold revenues returning all its investments; (v) the hotel building
with land stands contributed to the Joint Venture; (vi) the Licence Deed
provides that the terms on expiry of the initial period of Licence have to
be mutually negotiated; (vii) the defendant has not led any contrary
evidence against the admitted position of a Joint Venture, which is in
existence for the last 36 years, are also untenable. The documents,
which are the best evidence does not remotely show "Joint Venture".
The selective evidence on which reliance placed, cannot substitute the
documentary evidence, which is very clear. The reliance placed by Mr.
Nayar on the judgment of the Supreme Court in Godhra Electricity
(supra) to contend that extrinsic evidence to determine the effect of the
instrument is permissible is concerned, in the said case the appellant
company was granted licence for 50 years by notification dated
November 16, 1922 Under Section 3 of Indian Electricity Act, 1920.
The licence was signed on the next date i.e., November 17, 1922 and the
notification granting it was published in the gazette dated November 23,
1922. Since the initial period of 50 years of the licence was to expire,
the Gujarat State Electricity Board by notice dated November 08, 1971
exercised the option to purchase the undertaking by calling upon the
appellants to sell the undertaking to it on the midnight of November
15/16, 1972. The undertaking was eventually taken over. The appellant
contended that date of commencement of licence was a date on which
notification granting the licence was published in the Gazette viz.
November 23, 1922 and not the date of the notification granting licence
i.e., November 16, 1922 and hence the notice was improper. One of the
pleas on behalf of the respondent was that the original licence has been
amended clarifying that the licence was granted in the Govt. notification
of November 16, 1922, though that notification was published in the
Gazette November 23, 1922. So the amendment raised the question
whether subsequent interpreting statement made by the parties to a
written instrument is admissible evidence to construe the written
instrument. The Supreme Court held that subsequent interpreting
statements might not always change the meaning of a word or a phrase.
A word or a phrase is not always crystal clear. When both parties
subsequently say that by the word or phrase which in the context is
ambiguous, they mean this, it only supplies a glossary as to the meaning
of the word or phrase. After all the enquiry is as to what the intention of
the parties was from the language used and why is it the parties cannot
clear that latent ambiguity in the language by a subsequent interpreting
statement. If the meaning of the word or phrase or sentence is clear
extrinsic evidence is not admissible. It is only when there is a latent
ambiguity that extrinsic evidence in the shape of interpreting statement
in which both have concurred should be admissible. In the present case,
no such fact situation of any ambiguity in interpreting the agreements
arises. The ambiguity is the fitment of imagination of the plaintiff.
Hence there is no requirement of any extrinsic evidence for determining
the effect of the agreements. Even the reliance placed on the judgment
of the Supreme Court in the case of Pure Helium India (P) Ltd. (Supra)
specifically on Paras 25 and 26, wherein the Supreme Court noting that
the learned Arbitrators while making the Award, took into consideration
the documentary as well as circumstantial evidence including pleadings
of the parties, held, that the terms of the contract can be express or
implied. The conduct of the parties would also be relevant factor in the
matter of construction. The Supreme Court relied upon its judgment in
Khardah Co. Ltd vs. Raymon and Co. (India) Pvt. Ltd 1963 (3) SCR
183 wherein it held as under:-
―We agree that when a contract has been reduced to writing we
must look only to that writing for ascertaining the terms of the
agreement between the parties but it does not follow from this that
it is only what is set out expressly and in so many words in the
document that can constitute a term of the contract between the
parties. If on a reading of the document as a whole, it can fairly be
deduced from the words actually used therein that the parties had
agreed on a particular term, there is nothing in law which
prevents them from setting up that term. The terms of a contract
can be expressed or implied from what has been expressed. It is in
the ultimate analysis a question of construction of the contract.
And again it is well established that in construing a contract it
would be legitimate to take into account surrounding
circumstances.‖
173. In the case in hand, a reading of the terms of the agreements or in
other words on the construction of the agreements it is clear that the
nature of relationship between the parties herein is of a licensor and
licencee. Hence there is no reason/cause to construe the agreements by
taking into account the surrounding circumstances. On similar lines is
the judgment of the Supreme Court in Modi and Co. (Supra) which is
prior in time, wherein the Supreme court also relied upon the same
judgment in Khardah Co. Ltd. v. Raymon and Co. (India) P. Ltd. 1963,
3 SCR 183, suffice to state even this judgment would not help the case of
the plaintiff in view of the unequivocal terms of the agreements. No
extrinsic evidence is required to determine the effect of the agreements.
Similarly, the reliance placed on the case of Abdullah Ahmed (Supra)
more specifically Para 27 would not help the case of the plaintiff, in as
much as in Para 27, the Court had observed that the subsequent conduct
of both the parties to the agreement would be relevant for construction of
a contract. It is noted that the Court proceeded on a premise that the
phrase ―securing a purchaser‖ is not without ambiguity. The Court held
that extrinsic evidence to determine the effect of an instrument is
permissible where there remains a doubt as to its true meaning, which is
not the case here. Similarly, in the case of Chart Brook Ltd. (Supra),
the House of Lords was dealing with a case wherein the claimant
company was the owner of development land and the defendants were
developers. They entered into a contract whereby the defendants agreed
to obtain planning permission for the claimant‟s land and then, pursuant
to a licence from the claimant, to enter into possession, construct a
mixed residential and commercial development, and sell the properties
on long leases. The claimants agreed to grant the leases at the direction
of the defendant, who would receive the proceeds for their own account
and pay the claimant an agreed price for the land. Planning permission
was granted and the development was built. A dispute arose between the
parties regarding a term of the contract which provided for an "additional
residential payment", which was a term defined in the contract. The
dispute related to the calculation of the amount payable under that term.
The defendants calculated the sum due as pound 897,051 whereas the
claimants claimed to be entitled to pound 4,484,862. The claimants
brought proceedings against the defendants for the unpaid balance of the
additional residential payment, which they claimed to be owed. In
support of their construction of the term of the contract, the defendants
sought to rely on documents which were part of the pre-contractual
negotiations. Alternatively, the defendants counterclaimed for
rectification of the contract to accord with what they claimed to be the
parties‟ common agreement. The initial Judge held that the claimants‟
construction was the correct one and that evidence of the pre-contractual
negotiations was not admissible, particularly when an express definition
was contained within the contract. Accordingly, he gave judgment for
the claimants and dismissed the counterclaim. The Court of Appeal by a
majority, upheld the judge‟s decision. The House of Lords allowing the
appeal held (i) that a court would not easily accept that linguistic
mistakes had been made in formal documents, but if the context and
background drove a court to conclude that something had gone wrong
with the language of a contract, then the law did not require the court to
attribute to the parties an intention which a reasonable person would not
have understood them to have had; that if it was clear that there was a
mistake on the face of the document and it was clear what correction
ought to be made in order to cure the mistake, in that it was clear what a
reasonable person, having all the background knowledge which would
have been available to the parties, would have understood them by using
the language in the contract to have meant, then the court was entitled to
correct the mistake as a matter of construction; that both those
requirements were satisfied in that case; that the definition of "additional
residential payment" in the contract was ambiguous and obviously
defective as a piece of drafting; that there was always a commercial
context to a contract negotiated between businessmen, and to interpret
the definition in accordance with the ordinary rules of syntax made no
commercial sense; that, accordingly, taking the background and context
into consideration and, applying the established principles of
construction, the claimants‟ construction could not be upheld,, and the
construction put forward by the defendants was more appropriate.
(2) That it would not be inconsistent with the English objective theory
of contractual interpretation to admit evidence of previous
communications between parties as part of the background which might
throw light on what they meant by the language used, and there were no
conceptual limits to what could properly be regarded as background;
that, therefore pre-contractual negotiations were potentially relevant
background, but the usual rule was that they should be excluded as
inadmissible simply because they were irrelevant to the question which
the court had to decide, namely, what the parties could reasonably be
taken to have meant by the language which they finally adopted to
express their agreement; that, however, even in a case where background
might be relevant, a departure from that exclusionary rule would create
uncertainty of outcome in disputes over interpretation and add to the cost
of advice, litigation or arbitration; that the law of contract was designed
to enforce promises with a high degree of predictability and if
conventional meanings and syntax were to be displaced by inferences
drawn from background, the outcome was likely to be less predictable;
that unlike surrounding circumstances, which were by definition
objective and uncontroversial facts, statements in the course of pre-
contractual negotiations were subjective and could if oral, be disputed,
and it was not often easy to distinguish between statements which
reflected the aspirations of a party and those which embodied a
provisional consensus which might help in the interpretation of the
contract eventually concluded; that the exclusionary rule had been in
existence for many years and had been affirmed several times, and while
their Lordships had power to depart from it if it was impeding the proper
development of the law or had led to results, which were unjust or
contrary to public policy, that could not confidently be said of the
exclusionary rule; that the availability of the remedies of rectification
and estoppels by convention were safeguards which would in most cases
prevent the rule from causing any injustice, but those two remedies
would have to be pleaded and clearly established; that although the rule
excluded evidence of what was said or done during the course of
negotiating the agreement for the purpose of drawing inferences about
what the contract meant, it did not exclude the use of such evidence for
other purposes, such as to establish that a fact which might be relevant as
background was known to the parties, or to support a claim for
rectification or estoppels, which were not exceptions to the rule but
operated outside it; and that, accordingly, there were no grounds for
departing from the exclusionary rule.
(3) That rectification was not confined to cases where there had been
a concluded antecedent contract with which the final contract did not
conform, and it was also available when there was no binding antecedent
agreement but the parties had a common continuing intention in respect
of a particular matter in the instrument to be rectified; that in both cases
the question was what an objective observer would have thought the
intentions of the parties to be; that in order to get rectification it had to be
shown that the parties were in complete agreement on the terms of their
contract but that by an error wrote them down wrongly; that if by
looking at what the parties said or wrote to each other in coming to their
agreement, and then comparing it with the contract they had signed, it
could be predicated with certainty what their contract was, and that it
was by common mistake wrongly expressed in the document, then the
document could be rectified, but nothing less would suffice; that on the
facts of that case both parties were mistaken in thinking that the
definition of the construction of additional residential payment reflected
their prior consensus; and that accordingly, the defendants were entitled
to rectification.
174. Having noted, what has been held by the House of Lords, in the
case in hand, there is no issue that there are any linguistic mistake/wrong
with the language of a contract. No such case has been pleaded by the
plaintiff, which requires the previous communications between the
parties to be gone into to understand the mistake/language used in the
contract. As has been held above, the language of the Agreements is
very clear, which reflects the intent of the parties. The said judgment has
no applicability to the facts of this case.
175. I have already held above for interpreting the terms of the
agreements or construction of the agreements in the case in hand, the
extrinsic evidence is not required. I agree with the submission of
Mr.Sanjay Jain, ld. ASG who relied on Sections 91 and 92 of the Indian
Evidence Act that unless there is an ambiguity in the terms of the
contract, no external evidence can be looked to ascertain the agreements
between the parties. It is not the case of the plaintiff in the plaint that the
terms of the agreements are ambiguous. The mere usage of certain terms
in various resolutions by the officers would not change the character of
the documents.
176. The reliance placed by Mr. Nayar on the judgment of this Court in
the case of ITE India (P) Ltd. (supra) more specifically Para 33 to 38 to
contend an agreement can be formed through conduct and can be oral,
would also not help the case of the plaintiff in as much as in the said case
the original contract stipulated that the terms of the agreement would be
that of 10 years which was extendable by a further period of 5 years on
such terms and conditions as may be agreed upon which is unlike the
Clause-II of the Licence Deed clearly stipulating that the option to grant
the licence for a further period on such terms that may be mutually
agreed shall be that of the defendant. Further it is noted from the case
relied upon by Mr. Nayar, that the parties have settled their inter se
dispute and the appellant thereof has paid certain amounts besides the
litigation charges to the respondent. That apart the appellant withdrew
various proceedings against the respondent. It is also noted the offer
made by the respondent was unconditionally accepted by the appellant.
On the acceptance of the offer, the respondent issued a letter confirming
the said contract extending by a period of 5 years which was with the
concurrence and approval of the MD and CEO and all that was required
a mere signing of the agreement, whereas in the present case, there is no
decision of the competent authority which has been conveyed to the
plaintiff so as to bind the defendant with the same.
177. Similarly, in the case of Alok Bose (supra), on which reliance was
placed by Mr. Nayar, more specifically paras 16, 17 and 18, the Supreme
Court, held that agreement of sale comes into existence when the vendor
agrees to sell and the purchaser agrees to purchase, for an agreed
consideration on agreed terms. It can be oral. It can be by exchange of
communications which may or may not be signed. It may be by a single
document signed by both parties. It can also be by a document in two
parts, each party signing one copy and then exchanging the signed copy
as a consequence of which the purchaser has the copy signed by the
vendor and a vendor has a copy signed by the purchaser. Or it can be by
the vendor executing the document and delivering it to the purchaser
who accepts it. The Supreme Court also held, considering Section 10 of
the Contract Act, 1872, and the proviso thereto no attention has been
drawn to any law, applicable in the State concerned at the relevant time,
which requires an agreement of sale to be made in writing or in the
presence of witnesses or to be registered. Therefore, even an oral
agreement to sell is valid. If so, a written agreement signed by one of the
parties, if it evidences such an oral agreement will also be valid. In India
an agreement of sale signed by the vendor alone and delivered to the
purchaser, and accepted by the purchaser, has always been considered to
be a valid contract. In the event of breach by the vendor, it can be
specifically enforced by the purchaser. There is, however, no practice of
purchaser alone signing an agreement of sale. The case cited has, no
relevancy to the facts of this case. It is not the case of the plaintiff in the
plaint that a concluded contract has come about, through conduct or
orally.
178. The only conclusion that can be drawn from the agreements is that
the relationship between the parties is not of a joint venture, but of a
licensor and licencee and the licence as accepted by PW1 (P.K. Bhatia)
does not create any interest in the property. It permits the plaintiff to
make use of the property. There is no parting with the possession of the
property and the possession continues to be that of the owner i.e
defendant.
179. The plea of Mr. Nayar that Clause II (2) of the Licence Deed dated
December 18, 1976 must be given effect to, keeping in view the Joint
Venture and the Licence Deed always contemplated extended period,
because Clause IX clearly mentions "the renewed period of licence" and
both read together, the plaintiff is entitled to extension on terms to be
mutually negotiated is also untenable and is rejected. Such a submission
pre-supposes the right of renewal in favour of the plaintiff. Whereas on
a reading of the relevant Clause-II (2) it is clear, the same stipulated on
expiry of the period of licence of the Hotel building granted, the licensor,
the defendant herein, shall have the option to grant the licence for a
further period on such terms and conditions as may be mutually agreed
upon between the licensor and licencee. The option to grant licence for a
further period has been exclusively vested with the defendant. The only
discretion bestowed on the plaintiff is that if the plaintiff is desirous of
obtaining a licence for a further period after the expiry of the licence, it
shall give to the licensor a notice in writing of not less than 60 days. It is
in view of the latter part of the Clause, notice dated February 15, 2010
was given by the plaintiff. On receipt of notice from the plaintiff, the
defendant has option to grant or not to grant licence for a further period.
If opts, then the same shall be on such terms and conditions as may be
mutually agreed. The words "the Licensor shall have the option to grant
the licence for a further period" need to be given a meaning, otherwise
they would lose significance. So, the argument of Mr. Nayar that the
option of renewal vests with the plaintiff is contrary to Clause II(2). The
words "the renewed period of licence" in clause IX need to be read in the
context if the defendant had accepted the request of the plaintiff for grant
of licence for further period. So the plea of Mr. Nayar is liable to be
rejected.
180. It is noted, on receipt of the notice no doubt a committee was
constituted to look into the request and the Committee deliberated on the
issue on various occasions. But there was no decision of the Council, the
competent authority deciding the request of the plaintiff for extension of
the licence period. The plea that the minutes of the discussion held on
June 03, 2011, (Exh.P-4) wherein it was observed that the Chairperson
will be requested to approve the above terms for extension of the period
of licence and the financial terms based on the NDMC (Determination of
Annual Rent) Byelaws, 2009 and the minutes of the Committee dated
July 14, 2011, (Exh.P-5), wherein it was noted that the Chairperson
(though not competent) has agreed with the recommendation of the
Committee for extension would not be of any help to the plaintiff as the
said decision was not that of the Council, the competent authority. Even
otherwise, I agree with the submission of Mr. Sanjay Jain that as there
was no communication from the defendant conveying its decision to
grant licence for further period, which entails a fresh Licence Deed, there
is no concluded contract. The plea of Mr. Nayar that the plaintiff had
accepted the terms both period and financial vide its letter dated July 15,
2011 (page 555) is also not sustainable as the said communication has
been denied by the defendant and the document has not been exhibited to
be read in evidence. In any case, vide the letter dated July 15, 2011, the
plaintiff has called upon the defendant to confirm the terms as said to
have been discussed, which was never done. So, on plaintiff‟s own
showing the terms were to be confirmed by the defendant (by competent
authority) which was not done.
181. That subsequent thereto the Council‟s meeting held on October
07, 2011 (Exh.P-12) it was resolved to agree to sanction extension for a
period of 1 year up to October 10, 2012 subject to the plaintiff agreeing
to pay licence fee at enhanced rate at mutually agreed retrospectively
w.e.f. October 11, 2011. It was also resolved that the further action
would be taken after legal advice and consultants report. So it is clear
that the enhanced rate of 17.25% was agreed by the defendant only for
extension w.e.f. October 11, 2011 to October 10, 2012 and not for an
extension for a duration of 30 years. The Council also accorded sanction
for further review and action in accordance with the decision of the
Ministry of Urban Development, the legal advice, the committee‟s
recommendations and consultants report. That further, the minutes of the
meeting dated November 14, 2011, (Exh.P-27) between defendant and
the Ministry of Urban Development, it was decided that NDMC should
negotiate with the plaintiff to get as close to the market rate as possible.
The said observation does not amount to accord a sanction for extension.
I agree with the submission of Mr. Jain that even vide letter dated July
13, 2012 (Exh.P-16), the plaintiff requested the defendant to accord the
approval of extension of the licence of the hotel for a further period of 30
years, would reveal that the minutes of the earlier meetings on which
reliance was placed no decision with regard to grant of licence for a
further period of 30 years was taken. A concluded Contract could have
come into place if the competent authority i.e the Council of the NDMC
had taken a decision in that regard.
182. In the absence of a decision by the Council, there is no concluded
Contract. The communications between the plaintiff and the defendant,
without the sanction of the Council would not result in a binding
contract. The reliance placed by Mr. Sanjay Jain on U.P Rajkiya
Nirman Nigam (supra), is justified wherein the Supreme Court had held
that in a case of a Government Undertaking, unless a contract is duly
executed in accordance with the Articles of Association, the appellant i.e
the Government Undertaking is not bound by any such contract. The
Supreme Court found that there was no signed agreement by duly
competent officer on behalf of the appellant. The argument that it was
an indoor management between the appellant and its officers, was also
rejected. It was held that the doctrine of Indoor Management cannot be
extended to formation of the contract or essential terms of the contract
unless the contract with other parties is duly approved and signed on
behalf of a public undertaking or the Government with its seal by an
authorized or competent officer. Otherwise, it would be hazardous for
public undertaking or Government or its instrumentalities to deal on
contractual relations with third parties. It was also held that there did not
exist any concluded contract between the Board and the appellant for the
performance of the work as per the terms and conditions of the tender
floated by the Board. Since the tenders, the source of the contract
between the parties had not been transformed into a contract even if the
proposal and counter proposal are assumed to be constituted, an
Agreement, which is a contingent contract until it was accepted by the
Board. The Court also noted, by the operation of Section 32 of the
Contract Act, the counter proposal of the respondent cannot be enforced
since the event of entering into the contract with the Board has not taken
place, would squarely be applicable in the facts of the case, inasmuch as
the binding decision is the one, which has been taken by competent
authority, which in this case was the Council. It is not the case of the
plaintiff that the Council had in fact taken a decision.
183. It is also noted that subsequently, the Council, in its meeting held
on September 27, 2012, (Exh.P-20) after taking into consideration all the
facts including the Agreements, the report of the consultant as well as the
various legal opinions received in that regard, came to a decision to put
the property for public auction in a fair and transparent manner with
right of first refusal to the plaintiff. It was also resolved to extend the
period of licence of the plaintiff on existing terms and conditions for a
period of one year or till such time, a new licencee is chosen through a
bidding process, whichever is earlier. The said decision was
communicated to the plaintiff vide letter dated November 5, 2012
(Exh.P-49), which is the subject matter of the present suit having been
impugned. During the pendency of the present suit, the Ministry of
Home Affairs, vide two different/separate communications dated May
10, 2013 (Exh.DW1/P4) and June 27, 2013 (Exh.DW1/P5) wrote to the
defendant stating that the right of first refusal in the said public auction
has not been provided for in the lease deed (sic. Licence deed) and the
provision of first right of refusal will result in lower bids in the public
auction. The MoHA expressed the first right of refusal should not be
allowed to the plaintiff in the proposed auction and fresh lease (sic.
Licence) should be granted by open public auction. It was also stated
that the first right of refusal will not fetch the correct market price.
Either the competitors would bid excessively or perhaps show no interest
at all. Therefore, it is in the interest of the transparency that the
defendant may go for public auction wherein the plaintiff may
participate as a bidder. The aforesaid two communications were
followed by memorandum dated January 1, 2015 (Exh.DW5) under
Section 396 of the Act of 1994 directing the defendant to resort to public
auction and find the best bidder for the property.
184. The Council, the competent authority, vide its meeting held on
January 30, 2015 resolved that in view of the directions of the Ministry
of Home Affairs to abide by the directions and also decided to extend the
term of licence till March 31, 2015 and in its special meeting held on
March 25, 2015, the Council of the defendant resolved to extend the
licence for three months on the same terms and conditions and directed
the NDMC officials to complete the auction by the end of three months.
The Council of the defendant also decided that the direction of Ministry
of Home Affairs to resort to public auction and find best bidder in
respect of property without giving the first right of refusal to the plaintiff
is binding on NDMC. The Council in its meeting dated June 17, 2015,
confirmed the minutes. Finally, on January 29, 2016 it was
communicated to the plaintiff that the first right of refusal communicated
to the plaintiff on November 5, 2012 (Exh.P-49) stands withdrawn and
was called upon to hand over the possession of the property on February
29, 2016. Suffice to state, the plaintiff has no vested right of grant of
licence for further period in terms of the agreement, as the same is the
sole discretion of the defendant and no decision has been taken to grant
the licence for a further period of 30 years, rather a decision has been
taken to put the property to auction. The reliance placed on the file
notings is also misplaced. They are the views/opinion of the concerned
individual officers; till such time the notings culminate into a
decision/order of the competent authority and the same being
communicated to the party concerned, the same are of no benefit nor can
be used for any benefit by a party. There is no decision or order of grant
of licence for a further period of 30 years, so no question of any
communication made to the plaintiff by the defendant. In this regard, it
is relevant to quote/refer the law laid down by the Supreme Court in
Bachhittar Singh (supra), wherein the Constitution Bench of the
Supreme Court had the occasion to consider the effect of an order passed
by a Minister on a file, which order was not communicated to the person
concerned. Referring to Article 166(1) of the Constitution, the Court
held that order of the Minister could not amount to an order by the State
Government unless it was expressed in the name of Raj Pramukh as
required by the said Article and was then communicated to the party
concerned. The Court observed that business of State is a complicated
one and has necessarily to be conducted through the agency of a large
number of officials and authorities. Before an action is taken by the
authority concerned in the name of the Raj Pramukh, which formality is
a constitution necessity, nothing done would amount to an order creating
rights or casting liabilities to third parties. It is possible, observed the
Court, that after expressing one opinion about a particular matter at a
particular stage, a Minister or the Council of Ministers may express quite
a different opinion, which may be opposed to the earlier opinion. In
such cases, which of the two opinions can be regarded as the "order" of
the State Government? It was held that opinion becomes the decision of
the Government only when it is communicated to the person concerned.
185. On similar lines is the judgment of the Supreme Court in the case
of Sethi Auto Service Station (supra), wherein the Supreme Court relied
upon its judgment in Bachhitar Singh (supra) and also Laxmi Narain
R. Bhattad vs. State of Maharashtra 2003 5 SCC 413. I quote para 14
and 17 of the judgment of the Supreme Court in Sethi Auto Service
Station (supra).
―14. It is trite to state that notings in a departmental file
do not have the sanction of law to be an effective order. A
noting by an officer is an expression of his viewpoint on
the subject. It is no more than an opinion by an officer for
internal use and consideration of the other officials of the
department and for the benefit of the final decision-making
authority. Needless to add that internal notings are not
meant for outside exposure. Notings in the file culminate
into an executable order, affecting the rights of the parties,
only when it reaches the final decision-making authority in
the department; gets his approval and the final order is
communicated to the person concerned.
XXXX XXXX XXXX
17. In view of the above legal position and in the light of
the factual scenario as highlighted in the order of the
learned Single Judge, we find it difficult to hold that the
recommendation of the Technical Committee of the DDA
fructified into an order conferring legal right upon the
appellants.‖
186. A plea has been taken that in view of Section 235 of the Act, and
the Government of India (Allocation of Business Rules) 1961, the
minutes of the meeting of the Ministry of Urban Development dated
November 14, 2011 (Exh.P-27) is binding on the defendant and Sections
395 and 396 of the Act of 1994 are not applicable in view of the fact that
Ministry of Home Affairs has no power of superintendence with respect
to disposal of land. To appreciate this particular argument, it is
necessary to note the provision of Section 235 of the Act of 1994, which
reads as under:-
"CHAPTER XIV
BUILDING REGULATIONS
235. General superintendence, etc., of the Central
Government- Notwithstanding anything contained in any
other provision of this Act, the chairperson shall exercise his
powers and discharge his functions under this Chapter, under
the general superintendence, direction and control of the
Central Government.‖
187. Perusal of the Section 235 would reveal that the same is a non-
obstante clause stipulating that notwithstanding anything contained in
any other provision of the Act, the chairperson shall exercise his powers
and discharge his functions under this Chapter, under the general
superintendence, direction and control of the Central Government. The
said provision is in Chapter XIV, under the heading "Building
Regulations". The Chapter encompasses in itself Sections 235 to 260.
The same inter-alia relate to prohibition of building without sanction,
erection of building, applications for additions to, or repairs of buildings,
conditions of valid notice, sanction or refusal of building or work,
sanction accorded under misrepresentation, buildings at corners of
streets, period of completion of building or work, order of stoppage of
buildings or works in certain cases, power of Chairperson to require
alteration of work, power to seal unauthorized constructions, appellate
tribunal, completion certificates etc. The same do not relate to a decision
with regard to lease, sale, let out, licence, or otherwise transfer of
property of the defendant. It is only with regard to matters related to
building regulations, the Chairman exercises his powers and discharge
his functions under the general superintendence of the Central
Government. If the said provision is read in conformity with the
Government of India (Allocation of Business Rules), 1961 under the
head Ministry of Urban Development, on which reliance was placed by
Mr. Nayar, it is noted that the Ministry of Urban Development is
competent to deal with the properties of the Union where lands or
building with the exceptions namely (a) those belonging to the Ministry
of Defence, the Ministry of Railways and the Department of Atomic
Energy and the Department of Space; (b) Buildings or lands, the
construction or acquisition of which, has been financed otherwise than
from the civil works budget; (c) buildings or lands, the control of which
has, at the time of construction or acquisition or subsequently been
permanently made over to other Ministries and departments. At the
same time, under the Allocation of Business Rules, the Ministry of
Home Affairs have ―all powers and functions of the Central Government
as per the provisions of the Municipal Corporation of Delhi Act, 1957
and New Delhi Municipal Council Act, 1994 except matters pertaining to
land and building bye-laws.‖ It is evident from the above that, what is
excluded are matters pertaining to the Land and Building Bye-Laws,
which falls under Chapter XIV of the Act of 1994 "Building
Regulations" of the Act of 1994. The reading by the plaintiff the words
„Land and Building‟ without reading the words „Bye Laws‟ is not
tenable, as the words have to be read in a conjoint manner. So on a
reading of Section 235 of the Act of 1994 and Government of India
(Allocation of Business Rules), 1961, it is clear that, insofar as Section
235 is concerned, the Ministry of Urban Development is the Central
Government, as it relates to land and building bye-laws/building
regulations. With respect to the other provisions of the Act of 1994
(NDMC Act), including Chapter X Property and Contracts, it is the
Ministry of Home Affairs, which shall exercise all powers and functions
of Central Government. This aspect is also clear from the judgment of
this Court in Tajdar Babbar (supra), wherein this Court was concerned
with a challenge to two notifications dated September 5, 2014 issued by
the Govt. of India, Ministry of Home Affairs dissolving the NDMC in
exercise of the power conferred by Section 398(1) and appointing the
Chairperson and other Members afresh under Section 4(1) of the NDMC
Act. This Court had upheld the impugned action of the Ministry of
Home Affairs. The facts of the case and my conclusion above, it is clear
that the Ministry of Home Affairs is the Central Government with regard
to the provisions relating to the NDMC Act, 1994, except Chapter XIV
of the said Act.
188. Insofar as the judgment relied upon by Mr. Nayar in the case of
NDMC vs. Tanvi Trading & Credit Pvt. Ltd, more specifically paras 32,
35, 36 are concerned, the challenge in the said case relates to a judgment
dated May 19, 2004 rendered by the Division Bench of this Court in
W.P. No.4154/2000, whereby it was held that the order rejecting
building plans submitted by the respondents is illegal as well as without
jurisdiction and declared that the building plans submitted are deemed to
have been sanctioned under Section 241 (2) of the Act of 1994. It was
further directed by this Court to return the building plans submitted by
the respondents with an endorsement "sanctioned" within the time
specified in the order. From the aforesaid facts and the paras referred to
by Mr. Nayar, it is clear that the case before the Supreme Court was
concerning Sections 235, 241, which are the provisions under Chapter
XIV, which relates to the building regulations. There is no dispute, with
regard to the building regulations/land and building byelaws, the Central
Government is the Ministry of Urban Development and such directions
are binding on the NDMC. The facts in that case are totally different.
The case here does not relate to building regulations/land and building
byelaws but with regard to the disposal of property. Neither the Ministry
of Urban Development is competent nor its directions binding on the
defendant in that regard.
189. The reliance placed by Mr. Nayar on the judgment of the Supreme
Court in the case of Reliance Natural Resources Ltd. Vs. Reliance
Industries Ltd. (supra), to contend that the Government of India
(Allocation of Business) Rules are binding is concerned, there is no
dispute on the said proposition. The reference made by Mr. Nayar to the
judgments of The Queen on the application of BAPIO Action Ltd. and
Secretary of State for the Home Department & Anr. (2007 EWCA Civ
1139), D. Ramaswami (supra), Bio-chem Pharmaceutical Industries
(supra), would not help the plaintiff, in view of my conclusion above.
190. Insofar as the submission of Mr. Rajiv Nayar challenging the
direction of Ministry of Home Affairs to the defendant to resort to public
auction and find best bidder on the grounds that (i) there was no basis for
the Ministry of Home Affairs to write letters dated May 10, 2013
(Exh.DW1/PW4) and June 27, 2013 (Exh.DW1/P5) as they have not
disclosed or brought on record, on what basis, the same have been
written; are alien to the process outlined in Sections 393 and 394 of the
Act of 1994 (ii) there is nothing on record to show whether the Ministry
of Home Affairs required the Chairperson of the defendant to produce
any record, correspondence and report as envisaged in Section 393 of the
Act of 1994 (iii) there is nothing on record, whether any inspection was
carried out, of the record of the defendant (iv) directions under Section
395 of the Act of 1994 can be issued to the defendant either on the
receipt of the report or information (v) even if opinion of the Central
Government, MoHA is based on information/input gathered „otherwise‟
and there is nothing on record that if any department expressed any
apprehension on the functioning of the defendant to the Ministry of
Home Affairs (vi) the communication dated January 1, 2015 (Exh.DW5)
was issued without considering the opinion of the learned Solicitor
General of India and learned Attorney General as also the stand of the
Ministry of Urban Development before the Supreme Court of India (vii)
ignoring the pendency of the present suit, are concerned, to understand
the submissions, it is necessary to reproduce Section 393, 394, 395 and
396 of the Act of 1994.
393.The Central Government may at any time require the Chairperson
(1) To produce any record, correspondence, plan or other document in
his possession or under his control;
(2) To furnish any return, plan, estimate, statement, account or statistics
relating to the proceedings, duties or works of the Council;
(3) To furnish or obtain and furnish any report.
394. The Central Government may depute any person in the service of
that Government to inspect or examine any municipal department or
office or any service or work undertaken by the Council or any property
belonging to the Council and to report thereon and the Council, the
Chairperson and all municipal officers and other municipal employees
shall be bound to afford the person so deputed access at all reasonable
times to ther premises and properties of the Council and to all records,
accounts and other documents the inspection of which he may consider
necessary to enable him to discharge his duties.
395. If, whether on receipt of a report or on receipt of any information
or report obtained under section 393 or section 394 or otherwise, the
Central Government is of opinion, - (1) To produce any record,
correspondence, plan or other document in his possession or under his
control;
(2) To furnish any return, plan, estimate, statement, account or statistics
relating to the proceedings, duties or works of the Council;
(3) To furnish or obtain and furnish any report.
It may direct the Council within such period as it thinks fit, to
make arrangements to its satisfaction for the proper performance of the
duty, or as the case may be, to make financial provision, to its
satisfaction for the performance of the duty and the Council shall comply
with such direction.
Provided that unless in the opinion of the Central Government the
immediate execution of such order is necessary, it shall before making
any direction under this section give the Council an opportunity of
showing cause why such direction should not be made.
396. If, within the period fixed by a direction made under section 395,
any action the taking of which has been directed under that section has
not been duly taken, the Central Government may make arrangements
for the taking of such action and may direct that all expenses connected
therewith shall be defrayed out of the New Delhi Municipal Fund.
Section 393 is clear, it empowers the Central Government to call from
the Chairperson any record, account statistics, report etc. Similarly,
Section 394 contemplates procedure to carry out inspection by the
Central Government. Section 395 contemplates direction by the Central
Government pursuant to the receipt of report or on receipt of any
information or the report obtained under Section 393 or Section 394 or
otherwise the Central Government is of the opinion that the duty
imposed on the Council by or under this Act has not been performed or
has been performed in an imperfect, insufficient or unsuitable manner or
that adequate financial provision has not been made for the performance
of any such duty.
191. On a reading of Section 395 of the Act of 1994, from the word
„otherwise‟ as exists, it is clear that the same is couched in the widest
possible terms to include any information received, not necessarily under
Section 393 or 394. It can be information from any source. In the case in
hand, it can be noted from the letter dated May 10, 2013 (Exh.DW1/P4),
the same refers to the minutes of meeting dated September 27, 2012
(Exh.P-20). In other words, there was some basis for the Ministry of
Home Affairs to issue the communications dated May 10, 2013
(Exh.DW1/P4) and also of June 27, 2013 (Exh.DW1/P5). In the
minutes of September 27, 2012 (Exh.P-20), it was decided by the
Council to opt for public auction with first right of refusal to the
plaintiff. The Ministry of Home Affairs, vide its letter dated May 10,
2013 has only conveyed to the defendant/NDMC the position in the lease
deed (sic. Licence Deed) that first right of refusal has not been provided
for and opined that the first right of refusal could not be allowed to the
plaintiff in proposed auction and fresh lease (sic. Licence) should be
granted by open auction. As noted above, the source being the minutes
of meeting dated September 27, 2012, it is not relevant, how the Ministry
of Home Affairs has got the possession of the minutes dated September
27, 2012 (Exh.P-20). Insofar as the plea that the opinions of learned
Solicitor General of India and learned Attorney General of India were
not considered before issuance of OM dated January 1, 2015, is
concerned, the same are opinions. Till such time they culminate in a
decision of the competent authority, no benefit can be taken by a party.
Further, the pendency of the present suit in the absence of a restraint
order is no bar for the defendant/Ministry of Home Affairs to take a
decision. The pleas of Mr. Nayar needs to be rejected.
192. The reliance placed by Mr. Nayar on the judgment of the Supreme
Court in the case of State of Jharkhand Vs. Ambay Cements (supra), to
contend that if Statute provides that an Act is to be done in a particular
manner, the thing has to be done in that manner alone, has no application
in the facts of this case. The relevant portion of Section 395 of the Act
of 1994, which is reproduced above, would reveal that Section 393 or
394, are not the only source of information/material based on which the
Ministry of Home Affairs could have taken decision. The
information/input can be from any source. In the case in hand, the
communication dated May 10, 2013 refers to the minutes of meeting
dated September 27, 2012.
193. Further, the stand before the Supreme Court was, of the Ministry
of Urban Development the respondent therein and not the Ministry of
Home Affairs. The Ministry of Home Affairs being the Central
Government for the purpose of the Act of 1994 (excluding Chapter XIV)
and also in terms of the Allocation or Business Rules, 1961 was within
its right to communicate/direct the defendant through the letters/OM
dated May 10, 2013, June 27, 2013 and January 1, 2015.
194. The plea that OM dated January 1, 2015 wrongly records, that the
opinion of the learned Solicitor General is pending, is inconsequential.
The submission of Mr. Nayar that there is a basic fallacy in invoking
Sections 395 and 396 of the Act of 1994 inasmuch as the very premise of
the direction of the Ministry of Home Affairs is incorrect as it is based
on a consideration that the property is on "Lease", whereas the property
is in fact a Licence is concerned, the same is also liable to be rejected in
view of the judgment of the Supreme Court in the case of Aggarwal and
Modi Enterprises Ltd. vs. New Delhi Municipal Council (supra),
wherein the Supreme Court has in para 22, held that the mandate of
Section 141(2) includes „licence‟ therefore, for MHA to consider it as a
„lease‟ or „licence‟ would not make any difference. The above
conclusion also entails rejection of the plea of Mr. Nayar that the
defendant‟s resolution dated October 7, 2011 and January 30, 2015
refers to "lease" and not "licence".
195. The reliance placed by Mr. Nayar on the judgment of the Supreme
Court in the case of H.C. Sharma vs. MCD (supra), is misplaced as it
has no application, inasmuch as from para 6 of the judgment, it is noted
that the Municipal Corporation of Delhi, a statutory Authority is
controlled by the Central Government to the extent mentioned in Section
487 of the Delhi Municipal Corporation Act, 1957. The recruitment
regulations for the post of Assistant Engineer (Civil) were notified in the
official gazette on June 27, 1970. They provide for recruitment of
Assistant Engineers to the extent of 50% by promotion of Junior
Engineers and to the extent of 50% by direct recruitment. The CPWD
had decided to suspend direct recruitment to the Civil Engineering
Services, Class-II for seven years from 1972. The first respondent
therein, had resolved vide resolution dated July 20, 1964 to adopt the
CPWD pattern of work with regard to execution of works alone and not
with regard to the mode of recruitment and other service matters. The
Central Government Rules were made applicable to the employees of
respondent No.1 MCD only on the adoption and approval by the
Corporation. Otherwise, its employees are governed by the Rules &
Regulations framed by the corporation itself under Section 98 of the
Delhi Municipal Corporation Act, 1957. The representations received
from time to time for suspension of direct recruitment of Assistant
Engineers were duly considered but it was found that there is no
justification to comply with the request and a decision in that regard was
taken by the Council of the Corporation on April 19, 1978. Out of 401
Junior Engineers, one was unqualified, 343 were diploma holders and
only 57 were Graduates in Civil Engineering. The decision to fill up
eight posts of Assistant Engineers by direct recruitment was taken in
view of the shortfall in direct recruitment quota compared to the
promotion quota in accordance with the recruitment regulations, which
provide for filling up 50% by promotion and 50% by direct recruitment
of Assistant Engineers, though, sufficient number of Junior Engineers
amongst diploma holders had become eligible for the post of Assistant
Engineers. The practice of suspending direct recruitment followed by
other departments of the Central Government cannot, therefore, be
followed by respondent No.1. Section 487 of the Delhi Municipal
Corporation Act, 1957 provides for direction being given by the Central
Government. But the Central Government‟s letter dated February 23,
1976 to the effect that the consequent on the recommendations of the 3rd
Pay Commission, respondent No.1 may ban direct recruitment, as has
been done by the CPWD was not written in accordance with the power
conferred by Section 487 of the Delhi Municipal Corporation Act and it
cannot, therefore be taken as a directive from the Central Government.
In paras 36 and 37, the Supreme Court noted the contention advanced on
behalf of the petitioners that the letter dated February 23, 1976 does not
contain any direction, which could be issued by the Central Government
under Section 487 of the Delhi Municipal Corporation Act and is not
binding on the respondent No.1. The Supreme Court held that
Government Rules are applicable only on adoption thereof by the
Corporation. The Government‟s advice to the Corporation consequent
upon the pay commission‟s recommendation that the Corporation may
ban direct recruitment, as done by the CPWD is not a direction under
Section 487 of the Delhi Municipal Corporation Act and therefore, not
binding and therefore, the direct recruitment made by the Corporation in
accordance with the recruitment Rules framed under Section 98 of the
Delhi Municipal Corporation Act is proper. The facts in the said case
are totally different, inasmuch as the Court has rejected the contention of
the petitioners that the respondent No.1 should have suspended the direct
recruitment of Assistant Engineers and the quota rule laid down in the
recruitment regulations should not be followed, wherein in the case in
hand, the direction in OM dated January 1, 2015 under Section 396 of
the Act of 1994 (read with letter dated May 10, 2013 and June 27, 2013)
even though, refers to lease, was in terms of provisions of the Licence
Deed and Act of 1994. Similarly, the judgment of this Court in Bihari
Lal Jalan (supra) would also not help the plaintiff.
196. The plea that the direction dated January 1, 2015 is ultra-vires the
NDMC Act, as it breaches the entire scheme of the Act, inasmuch as
Section 141 under Chapter X, which relates to „Property and Contracts‟
and which does not entail „expenditure or provision‟, is not a duty is
concerned, the said submission is also liable to be rejected. First of all, a
distinction has to be drawn between a „power‟ and „duty‟. Power is the
ability to do something and duty is what is expected of one by legal or
moral obligation. Under Section 141 (2), it is clear, a duty has been
imposed both on the Chairperson and the Council as a sanctioning
authority to ensure the consideration for which immovable property may
be sold, leased, licenced or otherwise transferred shall not be less than
the value at which the immovable property could be sold, leased,
licenced or otherwise transferred in a normal and fair competition. This
being the duty and the Central Government i.e Ministry of Home Affairs
under Sections 395 and 396 is of the opinion that the duty imposed on
the Council by or under the Act has not been performed or has been
performed in an imperfect, insufficient or unsuitable manner, it may
direct the Council within such period as it thinks fit, to make
arrangements to its satisfaction for the proper performance of the duty.
In the case in hand, it is the opinion of the Central Government i.e the
Ministry of Home Affairs that the Council‟s decision dated September
27, 2012 (Exh.P-20), the right of first refusal granted to the plaintiff has
not been provided in the lease deed (sic. Licence Deed) and such right
should not be granted, surely would reflect that the decision dated
September 27, 2012 to that extent as communicated vide letter dated
November 5, 2012 (Exh.P-49) was imperfect/unsuitable. I agree with the
submission of Mr. Jain who relied on the judgment of the Supreme Court
in the case of Satish Chandra Khandelwal Vs. Union of India (supra),
wherein this Court in para 44 has held that Section 490 provides for
supersession of the Corporation appears in Ch. XXIV which is headed
„Control‟. All told, central control is both wide and deep. Behind the
corporate facade stands the Central Government with wide powers to
issue directions, order inspection', and compel obedience to its
commands. The Central Government exercises a considerable degree of
administrative control over the Corporation in the interests of the
community as a whole, for what is administered locally is often a
national policy. The most effective single agency is the control over
finances and borrowings. Some watch must be kept to ensure that
spending is economic, for, there always exists the possibility that the
Corporation may carry its permissive powers too far.
197. The judgment of the Supreme Court in the case of B.L. Wadera
(supra), on which Mr. Nayar has relied upon, more specifically para 2,
wherein the Supreme Court referred to the statutory duties interpreting
some of the provisions of the Act relatable to scavenging and cleaning of
the city of Delhi, would not infer, there are no other duties referred to in
the Act. Section 141(2) is a duty on the part of the Chairperson and
Council. It may be noted that the judgment of the Supreme Court in B.L.
Wadera (supra), had arisen in a public interest litigation filed by an
Advocate seeking direction to the MCD and NDMC to perform their
statutory duties, in particular the collection, removal and disposal of
garbage and other waste, which duty is at variance with the duty under
Section 141(2) of the Act. The judgment has no application.
198. The plea that MoUD being the owner of the land, its decision
dated January 14, 2011 is binding is not tenable. The competency of
MoUD to issue directions is limited to the provisions of Chapter XIV,
which relates to Building Regulations and the same has to be read in
conjunction with the provisions of the Allocation of Business Rules,
1961, which aspect has already been dealt above. It is not the concern of
the MoUD, to direct/decide the manner in which contracts/licence, with
regard to the "Hotel" need to be granted, otherwise it would be
encroaching the field of Ministry of Home Affairs as reserved/specified
in the Government of India (Allocation and Business) Rules, 1961.
199. On the plea that Section 395 of the Act of 1994 cannot be invoked
for a single transaction affecting private rights is concerned, the same is
also not tenable. No rights have been affected. That apart, I have
already held that under Sections 395/396, the Ministry of Home Affairs
has power to give directions to the defendant, if the defendant fails to
perform a duty, which includes a duty under Section 141(2). A reading
of Section 141(3), which I reproduce as under, it is clear the duty of the
Council would encompasses in itself a particular case as well and
further, there is no such restriction under Sections 395/396.
―141(3) The sanction of Council under section 140 or this section
may be given either generally for any class of cases or specially
for any particular case.‖
200. The best example indicating the defendant taking a decision to go
for auction is the Aggarwal & Modi Enterprises Pvt. Ltd. (supra), vide
its resolution dated August 30, 2000 (Exh.P-10), which has been
approved by the Supreme Court in paras 22 and 23 of its judgment in
Aggarwal & Modi Enterprises Pvt. Ltd. (supra). Having a precedent,
which has been upheld by the Supreme Court and noting the Section
141(3) it is clear the sanction of the Council may be given generally for
any class of cases or specially for any particular case. This plea of Mr.
Nayar is rejected.
201. Insofar as the reference made by Mr. Rajiv Nayar on the judgment
of this Court in GMR Infrastructure Ltd (supra), is concerned, the said
judgment is also not applicable, inasmuch as this Court had come to a
finding that the impugned action of the Government was not under
Sections 31 and 32 of the NHAI Act, under which, the Government can,
in public interest effectively divest the malfunctioning NHAI from the
control of a particular national highway but was of the view, action
having been taken under Section 33 of the Act, the revaluation could not
have been directed by the Ministry to be taken by the NHAI. The
Ministry of Home Affairs has found fault with right of first refusal given
to the plaintiff. The said direction has been followed by the Council of
the defendant on January 30, 2015, March 25, 2015 (Exh.DW1/6)
whereby, it decided to withdraw the right of first refusal, which decision
of the Council is justified as no such right flows from the Licence Deed
(Exh.P-41). The judgment is distinguishable on facts.
202. Insofar as the judgment of the Allahabad High Court in the case of
Dr. Ramesh Kumar Yadav, is concerned, the same is also
distinguishable on facts. There is a finding of fact by the High Court that
the Central Government has not been given power under Section 20(1)
of the UGC Act to override or overrule the decisions taken by the UGC
specially in respect of Regulations under Section 26(1) (e), (f) and (g),
which do not require the prior approval of the Central Government,
which is not the case here, as is clear from the aforesaid finding.
203. Insofar as the plea of Mr. Nayar that the directions of the Ministry
of Home Affairs abrogates the plaintiff‟s contractual rights with the
defendant, is also liable to be rejected. No contractual rights have been
abrogated, as is clear from above. I have already held, the plaintiff has no
right to have licence for further period under the Licence Deed. The
option to grant licence for further period, has not been acceded to, rightly
so. The directions of the Ministry of Home Affairs, cannot be faulted,
both on competency and on merit.
204. The plea of Mr. Rajiv Nayar that the Council in its resolution
dated April 2, 1996 and October 7, 2011 has taken a position in favour of
the plaintiff with regard to Joint Venture/extension of existing
Collaboration project and lease deed, is unstinted and has a statutory
force by relying upon Regulations 33 and 34 of the NDMC (Procedure &
Conduct of Business) Regulations 1997 is also without any merit. From
the perusal of the resolutions/decisions referred to above, it cannot be
deduced that the relationship between the parties is a „Joint Venture‟ or
there is a decision to extend the licence for a further period of 30 years.
205. The plea of discrimination is also not tenable when the
relationship between the parties is governed by the Agreements, which
have been entered with open eyes, clear understanding and knowing the
implications thereof. The defendant is within its right to take a decision
and act in a fair and transparent manner, which is in larger public interest
and equity has no role to play. On the Dilli Haat, it is the case of the
defendant that there is no comparison. In any case, it would not
invalidate the decisions of the defendant, which is in terms of the
Agreements and provisions of the Act of 1994.
206. The plea on behalf of the plaintiff that since the plaintiff requests
for extension of licence is much prior to the expiry of licence, the
plaintiff‟s right deserves to be construed as per the date of the request is
concerned, the same is not tenable. The notice given on February 15,
2010 by the plaintiff was in terms of the stipulation in Clause II(2) of the
Licence Deed and was for renewal of licence for a further period on the
expiry of the term and not extension as contended by Mr. Nayar. The
option to grant a Licence for further period was with the defendant, who
if had decided to grant licence, then same was to be on such terms and
conditions as mutually agreed. So, the grant of licence for a further
period was not a matter of right. The giving of 60 days notice much
before expiry of the term would not make such a request, a case of
extension, so as to make the rigours of Clause II(2) inapplicable. A
reference to the judgment of the Supreme Court in Common Cause case
(supra) is concerned, the same is not applicable to the facts of this case,
inasmuch as in the said case, the Supreme Court was dealing with an
issue arisen under the provisions of Mines & Minerals (Development &
Regulation) Act, 1957 and the Mineral Concession Rules, 1960. The
finding of the Supreme Court is based on the said provisions. The issue,
which arises for consideration in the case in hand, must be decided in
terms of the provisions of the Licence Deed and the Act of 1994. The
plaintiff cannot take any benefit of the fact that it has given notice for
grant of licence for further period, much in advance, as the same was
regulated by Clause II(2) of the Licence Deed.
207. Insofar as plea of Mr. Nayar that the Agreements executed by the
plaintiff with the Committee, must be construed as per the provisions
and rights flowing from the Punjab Municipal Act, 1911 is concerned,
the same is also without any merit, in view of Section 416 of the Act of
1994, which relates to repeal and savings, which I reproduce as under:-
416. Repeal and savings.
(1) As from the date of the establishment of the Council, the Punjab
Municipal Act, 1911, (Punjab Act 3 of 1911) as applicable to New Delhi,
shall cease to have effect within New Delhi.
(2) Notwithstanding the provisions of sub- section (1) of this section,--
(a) any appointment, notification, order, scheme, rule, form, notice or
bye- law made or issued, and any licence or permission granted under
the Act referred to in sub- section (1) of this section and in force
immediately before the establishment of the Council, shall, in so far as it
is not inconsistent with the provisions of this Act continue in force and be
deemed to have been made, issued or granted, under the provisions of
this Act, unless and until it is superseded by any appointment,
notification, order, scheme, rule, form, notice or bye- law made or issued
or any licence or permission granted under the said provisions;
(b) all debts, obligations and liabilities incurred, all contracts entered
into and all matters and things engaged to be done by, with or for the
New Delhi Municipal Committee before the establishment of the Council
shall be deemed to have been incurred, entered into or engaged to be
done by, with or for the Council under this Act;
(c) all budget estimates, assessments, valuations, measurements or
divisions made by the New Delhi Municipal committee shall in so far as
they are not inconsistent with the provisions of this Act, continue in force
and be deemed to have been made under the provisions of this Act unless
and until they are superseded by any budget estimate, assessment,
valuation, measurement or division made by the Council under the said
provisions;
(d) all properties, movable and immovable and all interests of
whatsoever nature and kind therein, vested in the New Delhi Municipal
Committee immediately before the establishment of the Council shall
with all rights of whatsoever description, use, enjoyed or possessed by
New Delhi Municipal Committee vest in the Council;
(e) all rates, taxes, fees, rents and other sums of money due to the New
Delhi Municipal Committee immediately before the establishment of the
Council shall be deemed to be due to the Council;
(f) all rates, taxes, fees, rents, fares and other charges shall, until and
unless they are varied by the Council continue to be levied at the same
rate at which they were being levied by the New Delhi Municipal
Committee immediately before the commencement of this Act;
(g) all suits, prosecutions and other legal proceedings instituted or
which might have been instituted by or against the New Delhi Municipal
Committee may be continued or instituted by or against the Council.
208. A perusal of sub-Sections 2(a) and 2(b) of Section 416, it is clear
that any licence or permission granted under the Punjab Municipal Act,
1911 and in force immediately before the establishment of the Council,
shall, insofar as it is not inconsistent with the provisions of the Act of
1994 continue in force and be deemed to have been made, issued or
granted under the provisions of the Act of 1994 unless or until
superseded by any licence or permission granted under the provisions of
the Act of 1994 and similarly, after May 25, 1994, all contracts shall be
with the Council. The case of the plaintiff is not of inconsistency
between the provisions of the Punjab Municipal Act, 1911 and the Act of
1994, but there is no provision under Section 47 of the Punjab Municipal
Act, 1911 akin to Section 141 of the Act of 1994. The vires of the said
provision Section 141 is not under challenge. The very existence of
Section 141 in the Act of 1994 imposes an obligation to follow the same.
It is not a case, the right as existed in favour of the plaintiff under the
Punjab Municipal Act, 1911 which has changed or taken away vide
Section 141 of the Act of 1994. Section 416(2)(b) is also very clear.
After May 25, 1994, all contracts shall be with the Council. So, after the
said date rights shall be regulated by the NDMC Act and the contract
executed i.e Licence Deed. That apart, it is noted that in terms of sub-
clause 13 of Clause VII under the heading "Other Covenants on the part
of the Licensor and the Licencee" of the Licence Deed, it is inter-alia
stipulated that the licencee shall be bound to abide by the relevant
provisions of the Punjab Municipal Act and such other Act or Acts at
present in force as the licensor is required to abide by, as is made
applicable to the licensor in future. x x x"
In view of the provisions of the Act of 1994 and the stipulation in the
Licence Deed, Section 47 of the Punjab Municipal Act, 1911 shall not be
applicable. The reliance placed on the judgment of the Supreme Court in
the case of Grid Corporation of Orissa and ors (supra), has no
application in the facts of this case, inasmuch as, in the said case a right
existed in favour of the employees to be retired at the age of 60 years
under Section 60 of the Act was sought to be taken away by reducing the
same to 58 years, with regard to which the Supreme Court upheld the
order of the High Court, wherein the High Court held the service
conditions of such employees cannot be taken away to their
disadvantage. For the sake of repetition, no right existed in favour of the
plaintiff earlier under the Punjab Municipal Act, 1911, which has been
taken away under Section 141(2) of the Act. Similarly, the reliance
placed on Mysore State Electricity Board case (supra), is also misplaced
and has no applicability.
209. Insofar as the plea of Mr. Nayar that in view of rateable value
Bye-laws enacted under Section 391 of the Act of 1994, being superior
to the Council‟s resolution, since the bye-laws are approved by the Govt.
of NCT of Delhi, the same must be given effect to and thus for
determination of licence fee, there is no requirement of holding an
auction is concerned, the said bye-laws have been enacted for the
purpose of Section 63, which relates to Determination of rateable value
of lands and buildings assessable to property tax. The determination is
through annual rent for which lands and building are expected to be let
out from year to year and for which purpose formula has been laid down
in para 3 and 4 of the said bye-laws. The said determination has no
correlation with the price, which the defendant may get for giving on
licence the property in question through auction, which is more regulated
by the market forces.
210. Even otherwise, bye-laws enacted under Section 388 of the Act of
1994 cannot override the mandate of Section 141(2) and the same is
clear from Section 388, which clearly stipulates;
(i) Subject to the provisions of this Act, the Council may, in addition to
any bye-law, which it is empowered to make by any other provision of
this Court make bye-laws to provide for all or any of the following
matter
XXXX XXXX XXXX
The reference made to the judgment in NDMC v. M.N. Soi and Anr
(supra) would not be of any help to the plaintiff, as the issue, which fell
for consideration of the Court was different.
211. With respect to reasonableness and non-arbitrariness of the
decision to put the property to auction, the law is well settled. Some of
which have been relied upon by Mr. Jain in the case of State of Uttar
Pradesh v. Shiv Charan Sharma (supra), Ram & Shyam Co. (supra),
Sterling Computer Ltd. (supra), Haryana Financial Corporation
(supra), Chenchu Rami Reddy (supra) and Hazi T.M. Hassan Rawther
(supra) and Natural Resources Allocation in Re-Special Reference
No.1/2012, (2012) 10 SCC 1 paras 146, 149 and 186. Even though, Mr.
Nayar contest that Hotel is not a natural resource demanding auction and
would try to justify the revenues that would be earned by the defendant
in 30 years, suffice to state, noting the conclusion of the Supreme Court
in paras 146 and 149 in Re-Special Reference No.1/2012 (supra), which
I reproduce as under and the Supreme Court in Aggarwal & Modi
Enterprises Pvt. Ltd (supra) in para 22 and 23 (as reproduced in issue
No.3) in identical situation with regard to the same defendant, the
decision of the defendant with regard to the auction cannot be interfered
with.
―146. To summarize in the context of the present Reference,
it needs to be emphasized that this Court cannot conduct a
comparative study of the various methods of distribution of
natural resources and suggest the most efficacious mode, if
there is one universal efficacious method in the first place. It
respects the mandate and wisdom of the executive for such
matters. The methodology pertaining to disposal of natural
resources is clearly an economic policy. It entails intricate
economic choices and the Court lacks the necessary expertise
to make them. As has been repeatedly said, it cannot, and
shall not, be the endeavour of this Court to evaluate the
efficacy of auction vis-a-vis other methods of disposal of
natural resources. The Court cannot mandate one method to
be followed in all facts and circumstances. Therefore,
auction, an economic choice of disposal of natural resources,
is not a constitutional mandate. We may, however, hasten to
add that the Court can test the legality and constitutionality
of these methods. When questioned, the Courts are entitled to
analyse the legal validity of different means of distribution
and give a constitutional answer as to which methods are
ultra vires and intra vires the provisions of the Constitution.
Nevertheless, it cannot and will not compare which policy is
fairer than the other, but, if a policy or law is patently unfair
to the extent that it falls foul of the fairness requirement of
Article 14 of the Constitution, the Court would not hesitate in
striking it down.
149. Regard being had to the aforesaid precepts, we have
opined that auction as a mode cannot be conferred the status
of a constitutional principle. Alienation of natural resources
is a policy decision, and the means adopted for the same are
thus, executive prerogatives. However, when such a policy
decision is not backed by a social or welfare purpose, and
precious and scarce natural resources are alienated for
commercial pursuits of profit maximizing private
entrepreneurs, adoption of means other than those that are
competitive and maximize revenue may be arbitrary and face
the wrath of Article 14 of the Constitution. Hence, rather
than prescribing or proscribing a method, we believe, a
judicial scrutiny of methods of disposal of natural resources
should depend on the facts and circumstances of each case,
in consonance with the principles which we have culled out
above. Failing which, the Court, in exercise of power of
judicial review, shall term the executive action as arbitrary,
unfair, unreasonable and capricious due to its antimony with
Article 14 of the Constitution.‖
212. In view of the discussion above, and the request of the plaintiff
for renewal of licence for further period has not been acceded to and
noting that the plaintiff has no right seeking renewal or grant of licence
for further period and the decision of the defendant to go for auction, the
plaintiff is not entitled to extension of licence as claimed in the suit.
This issue is decided against the plaintiff.
ISSUE No.2: Whether the suit is barred by Section 385 of the
NDMC Act, 1994? OPD
213. As the issue has not been pressed by the defendant, the same is
decided as not pressed.
ISSUE No.3: whether Section 141 of the NDMC Act, 1994 is
applicable to the contracts and transactions between the plaintiff
and the defendant in respect of the extension of the Licence Deed
dated 18th December, 1976? OPD
214. For deciding this issue, it is necessary to reproduce Section 141 of
the Act.
―141. Disposal of immovable property.-(l) The Chairperson may,
with the sanction of the Council, lease, sell, let out on hire or
otherwise transfer any immovable property belonging to the
Council.
(2) The consideration for which any immovable property may be
sold, leased or otherwise transferred shall not be less than the
value at which such immovable property could be sold, leased or
otherwise transferred in normal and fair competition.
(3) The sanction of Council under section 140 or this section may
be given either generally for any class of cases or specially for any
particular case.
(4) Subject to any conditions or limitation that may be specified in
any other provisions of this Act the foregoing provisions of section
140 and this section shall apply to every disposal of property
belonging to the Council made under, or for any purpose of this
Act.
(5) Every case of disposal of property under sub-section (1) of
section 140 shall be reported by the Chairperson without delay to
the Council.‖
215. I recapitulate the submissions of Mr. Rajiv Nayar as under:-
(1) Section 141(2) of the Act of 1994 is not applicable for
fresh/extension of licence.
(2) Section 141(2) of the Act of 1994 is applicable only to (1) lease of
immovable property; (ii) sale of immovable property; (iii) otherwise
"transfer" of immovable property.
(3) It is not the case of the defendant, the extension/renewal of licence
amounted to a lease, sale or transfer of immovable property, even
otherwise the words "or otherwise transferred" have to be read ejusdem
generis with the words "lease", "sale". Accordingly, "transfer" by
NDMC would mean creation of fresh rights in the immovable property
akin to rights by way of "lease" or "sale".
(4) "Sale" and "lease" of an immovable property create an interest in
the property, whereas a „licence‟ does not create any interest in the
immovable property.
(5) The above interpretation of Section 141(2) of the Act of 1994 is
furthered from the language/words used in sub-section (1) and sub-
Section (2) of Section 141 of the Act inasmuch as in sub-Section (i) of
Section 141 the words "the Council may deal with the immovable
property whereas sub-Section (2) provides the manner for arriving at the
consideration such disposal/transfer mentioned therein.
(6) The word "let out on hire" find mention in sub-Section (1) are
omitted consciously by legislature in sub-Section (2). So the manner of
arriving at the consideration through competition only applies to (1) sale
of immovable property; (ii) lease of immovable property; (iii) a property
transferred in a manner which creates an interest in the property.
(7) Letting has been held to be "licence", so 141(2) of the Act is not
applicable for extension of licence and hence, for determination of
licence fee, there is no requirement of holding an auction.
(8) And this Court can‟t supply/add the words licence in Section
141(2), when there is no ambiguity.
216. Suffice to state, the submissions as made by Mr. Nayar need to be
rejected only on the ground the issue(s) raised is/are no more res-integra,
having been decided by the Supreme Court in the case of Aggarwal &
Modi Enterprises Pvt Ltd. (supra), wherein, in paras 22 and 23, the
Supreme Court has held as under:-
―22. The mandate of Section 141(2) is that any
immovable property belonging to NDMC is to be sold,
leased, licenced or transferred on consideration which is
not to be less than the value at which such immovable
property could be sold, leased, or transferred in fair
competition. The crucial expression is "normal and fair
competition". In other words, NDMC is obligated to adopt
the procedure by which it can get maximum possible
return/consideration for such immovable property. The
methodology which can be adopted for receiving maximum
consideration in a normal and fair competition would be
the public auction which is expected to be fair and
transparent. Public auction not only ensures fair price and
maximum return it also militates against any allegation of
favouritism on the part of the Government authorities
while giving grant for disposing of public property. The
courts have accepted public auction as a transparent mean
of disposal of public property. (See State of UP v. Shiv
Charan Sharma (AIR 1981 SC 1722), Ram and Shyam
Company v. State of Haryana (1985 (3) 267), Sterling
Computers Ltd. v. M & N Publications Ltd. (1993 (1) SCC
445), Mahesh Chandra v. Regional Manager, UP
Financial Corporation (1993 (2) SCC 279), Pachaivappa's
Trust v. Official Trustee of Madras (1994 (1) SCC 475),
Chairman and M.D. SIPCO, Madras v. Contromix Pvt.
Ltd. (1995 (4) SCC 595), New India Public School v.
HUDA (AIR 1996 SC 3458), State of Kerala v. M.
Bhaskaran Pillai (1997 (5) SCC 432) and Haryana
Financial Corporation v. Jagdamba Oil Mills (2002 (3)
SCC 496).
23. Disposal of public property partakes the character
of trust and there is distinct demarcated approach for
disposal of public property in contradiction to the disposal
of private property i.e. it should be for public purpose and
in public interest. Invitation for participation in public
auction ensures transparency and it would be free from
bias or discrimination and beyond reproach.‖
217. From para 22 of the judgment, it is noted, the Supreme Court
clearly held that the mandate of Section 141(2) also includes „licence‟.
So, Section 141, which includes Section 141(2) applies to licence deed
executed between the parties on December 18, 1976 (Exh.P-41), whose
term has expired. The Supreme Court in Aggarwal & Modi Enterprises
Pvt. Ltd. (supra), while appreciating the true scope and ambit of Section
141(2), has in para 18 held, that the expiry of lease would also depict a
fresh transaction. Section 141 of the Act relates to disposal of property
coming into force the Act of 1994 and the same is by executing a licence
deed. Section 141 does not differentiate between extension/renewal/fresh
licence. So it follows, in every eventuality, the consideration for which
immovable property is sold, leased, licensed or otherwise transferred
shall not be less than the value at which such immovable property could
not be sold, leased, licensed or otherwise transferred in normal and fair
competition.
218. It must be held, the plea of Mr. Nayar that Section 141(2) of the
Act of 1994 is not applicable to grant of fresh licence/extension of
licence, is without merit.
219. Insofar as the submissions of Mr. Nayar as noted above, the
cumulative of which is that Section 141(2) of the Act of 1994 shall not
be applicable to „licence‟, including the plea that Section 141(2) of the
Act is applicable only to (i) sale of immovable property; (ii) lease of
immovable property; (iii) otherwise transferred of immovable property
and also the plea that the words „or otherwise transferred‟ have to be
read ejusdem generis with the words „lease‟ and „sale‟ and also the
judgments relied upon in support of his contentions on the proposition
that „let out on hire‟ is akin to „licence‟; court cannot add words which
are not contained in the Statute; distinction between „lease‟ and „licence‟
and disposal of property by NDMC by the method of „lease‟ is common,
needs to be rejected. Mr. Sanjay Jain is right in contending, such pleas
are not maintainable and runs contrary to the ratio laid down by the
Supreme Court in Aggarwal & Modi Enterprises Pvt. Ltd. (supra). In
fact, in substance the plea of Mr. Nayar is, this Court should not read,
rather omit the word „licence‟ in line 2 of para 22 of the said judgment.
This is impermissible as „licence‟ also has been held to be the mandate
of Section 141(2) of the Act of 1994. The ratio of the judgment of the
Supreme Court is binding on this Court under Article 141 of the
Constitution of India, which lays down that law declared by the Supreme
Court to be binding on all Courts. Therefore, all Courts including this
Court are bound to follow the decision of the Apex Court. The Article
141 empowers the Supreme Court to declare law, which becomes law of
the land, which is essential for proper administration of justice with the
expectation that like cases should be decided alike. Every Court is
bound to follow a case decided by a higher court in the hierarchy and the
Court is bound by the precedent. I agree with the reliance placed by Mr.
Sanjay Jain on the judgment of the Supreme Court in the case of South
Central Railway Employees Cooperative Credit Society Employees
Union (supra), wherein, the South Central Railway Employees
Cooperative Credit Society has framed Rules governing service
conditions of its employees and the said Rules had been approved by the
Registrar, Co-operative Societies, Government of Andhra Pradesh. The
Supreme Court decided a case titled as South Central Railway
Employees Cooperative Credit Society Employees Union vs. Registrar
of the Co-operative Societies (1998) 2 SCC 580, wherein it was held,
there is no reservation policy for the society in the matter of promotion
to higher grade. In order to give effect to the judgment of the Supreme
Court, the Society had issues orders of reversion to the employees, who
had been wrongly promoted. One such order was dated June 12, 1998,
served upon the employees concerned, who had been wrongly promoted
on the basis of their caste and creed. The said order dated June 12, 1998
was challenged by them by filing Writ Petition in the High Court of
Andhra Pradesh. The said writ petition was allowed and the order dated
June 12, 1998 was set aside by the High Court. Being aggrieved by the
judgment of the Single Judge of the High Court, a writ appeal was filed
by other employees of the Society, who had been aggrieved by the
wrongly promotions given to the Society on the basis of reservation
policy. The writ appeal was dismissed by the Division Bench of the
High Court vide order dated August 14, 2002. The counsel appearing
for the employees union had submitted before the Supreme Court that
the High Court had committed grave error by re-considering the issue,
which has already been decided by the Supreme Court in South Central
Railway Employees Cooperative Credit Society Employees Union
(supra). In the said background, the Supreme Court in paras 13 to 16,
has held as under:-
―13. In our opinion, the High Court should not have
considered any other factor especially when this Court had
come to a final conclusion that the policy with regard to
reservation in the matter of promotion to the employees was
not legal and proper.
14. We are of the view that it was not open to the High
Court to hold that the judgment delivered by this Court in
South Central Railway Employees Coop. Credit Society
Employee's Union vs. Registrar of Coop. Societies was per
incuriam.
15. If the view taken by the High Court is accepted, in our
opinion, there would be total chaos in this country because in
that case there would be no finality to any order passed by this
Court. When a higher court has rendered a particular
decision, the said decision must be followed by a subordinate
or lower court unless it is distinguished or overruled or set
aside. The High Court had considered several provisions,
which in its opinion, had not been considered or argued before
this Court when CA No.4343 of 1988 was decided. If the
litigants or lawyers are permitted to argue that something
what was correct, but was not argued earlier before the higher
court and on that ground if the courts below are permitted to
take a different view in a matter, possibly the entire law in
relation to the precedents and ratio decidendi will have to be
rewritten and, in our opinion, that cannot be done. Moreover,
by not following the law laid down by this Court, the High
Court or the subordinate courts would also be violating the
provisions of Article 141 of the Constitution of India.
16. We do not want to go into the arguments advanced by
the learned counsel appearing for the respondents before the
High Court for the simple reason that it was not open to them
to advance any argument which would run contrary to the
judgment delivered by this Court in South Central Railway
Employees Coop. Credit Society Employee's Union vs.
Registrar of Coop. Societies. In our opinion, the High Court
did something, which would be like setting aside a decree in
the execution proceedings!‖
220. On similar lines, is the judgment of the Supreme Court in the case
of Director of Settlement A.P. and M.R. Apparao (supra), wherein in
para 7, the Supreme Court held as under:-
―7. So far as the first question is concerned, Article 141 of
the Constitution unequivocally indicates that the law
declared by the Supreme Court shall be binding on all courts
within the territory of India. The aforesaid Article empowers
the Supreme Court to declare the law. It is, therefore, an
essential function of the Court to interpret a legislation. The
statements of the Court on matters other than law like facts
may have no binding force as the facts of two cases may not
be similar. But what is binding is the ratio of the decision
and not any finding of facts. It is the principle found out
upon a reading of a judgment as a whole, in the light of the
questions before the Court that forms the ratio and not any
particular word or sentence. To determine whether a
decision has ―declared law‖ it cannot be said to be a law
when a point is disposed of on concession and what is
binding is the principle underlying a decision. A judgment of
the Court has to be read in the context of questions which
arose for consideration in the case in which the judgment
was delivered. An ―obiter dictum‖ as distinguished from a
ratio decidendi is an observation by the Court on a legal
question suggested in a case before it but not arising in such
manner as to require a decision. Such an obiter may not
have a binding precedent as the observation was unnecessary
for the decision pronounced, but even though an obiter may
not have a binding effect as a precedent, but it cannot be
denied that it is of considerable weight. The law which will
be binding under Article 141 would, therefore, extend to all
observations of points raised and decided by the Court in a
given case. So far as constitutional matters are concerned, it
is a practice of the Court not to make any pronouncement on
points not directly raised for its decision. The decision in a
judgment of the Supreme Court cannot be assailed on the
ground that certain aspects were not considered or the
relevant provisions were not brought to the notice of the
Court (see Ballabhadas Mathurdas Lakhani v. Municipal
Committee, Malkapur and AIR 1973 SC 794). When the
Supreme Court decides a principle it would be the duty of the
High Court or a subordinate court to follow the decision of
the Supreme Court. A judgment of the High Court which
refuses to follow the decision and directions of the Supreme
Court or seeks to revive a decision of the High Court which
had been set aside by the Supreme Court is a nullity. (See
Narinder Singh vs. Surjit Singh and Kausalya Devi Bogra v.
Land Acquisition Officer). We have to answer the first
question bearing in mind the aforesaid guiding principles.
We may refer to some of the decisions cited by Mr. Rao in
elaborating his arguments contending that the judgment of
this Court dated 6.2.1986 cannot be held to be a law declared
by the Court within the ambit of Article 141 of the
Constitution. Mr. Rao relied upon the judgment of this Court
in the case of M.S.M. Sharma v. Sri Krishna Sinha wherein
the power and privilege of the State Legislature and the
fundamental right of freedom of speech and expression
including the freedom of the press was the subject-matter of
consideration. In the aforesaid judgment it has been
observed by the Court that the decision in Gunupati
Keshavram Reddy v. Nafisul Hasan relied upon by the
counsel for the petitioner which entirely proceeded on a
concession of the counsel cannot be regarded as a considered
opinion on the subject. There is no dispute with the aforesaid
proposition of law.‖
In view of the aforesaid position of law, the plea of Mr. Nayar that the
word „licence‟ in second line of paragraph 22 has been crept in by
mistake, also needs to be rejected.
221. The plea of Mr. Nayar that the decision of the Supreme Court in
Aggarwal & Modi Enterprises Pvt. Ltd. (supra), is not applicable is
concerned, the same is also liable to be rejected. No doubt, in Aggarwal
& Modi Enterprises Pvt. Ltd. (supra), the appellant therein was
continuing in property from 1990 to 2000 without a licence and the
Supreme Court has also noted this particular aspect and has concluded
that there was no option/entitlement/renewal, since there was no licence
in operation, under which, right could be exercised but this aspect would
not make the judgement inapplicable to the facts of this case, inasmuch
as in the present case also the licence had expired on October 10, 2011.
Thereafter, ad-hoc extensions were granted, which continued till January
31, 2016. Thereafter, there is no extension except on the strength of the
statement made by learned ASG that no coercive steps shall be taken
against the plaintiff. The reliance placed by Mr. Nayar on paragraph 18
of the judgment would also not help the case of the plaintiff. In para 18,
the Supreme Court while delineating the true scope and ambit of Section
141(2) of the Act of 1994, has held not only in view of the nature of the
proposed changes, it has to be treated as a fresh transaction but also, as
the lease has expired. As I have already held above that Section 141
does not make any distinction between extension/renewal/fresh disposal
of the immovable property. I have also held that Section 141 of the Act
relates to disposal of the property after coming into force the Act of 1994
and the same is by executing a licence deed. The exercise of option
within the licence period would be inconsequential. I reiterate that the
decision of Aggarwal & Modi Enterprises Pvt. Ltd. (supra) is applicable
on all force and the judgment of the Supreme Court in Union of India v.
Arulmozhi Iniarasu (supra) would not be applicable.
222. In view of my discussion above, the issue No.3 is decided in
favour of the defendant.
Issue No.4 Whether the Plaintiff is entitled to relief claimed in the
present Suit? OPP
Issue No.5 Relief.
223. In view of the finding against issue Nos.1 and 3, the plaintiff is not
entitled to the relief, as prayed for in the suit nor any other relief under
issue No.5. The suit is dismissed. No costs.
IAs 9691/2015, 15819/2015 & 1530/2016
In view of the order passed in the suit, the applications are
dismissed as infructuous.
(V.KAMESWAR RAO)
JUDGE
SEPTEMBER 05, 2016
ak
