The Delhi High Court recently comprising of a bench of Justices Vipin Sanghi & Rekha Palli held that court cannot interfere in the decision of extension of contact, if no arbitrariness is established. (Sushil Kumar Singh V. North Delhi Municipal Corporation)
The Court observed that the respondents cannot act arbitrarily or whimsically, while taking a decision whether, or not, to grant an extension of the contractual term. But, if there are good and germane reasons for not granting an extension of time, or limiting its extension for a period of less than one year at a time, it would not be correct for the Court to interfere in judgment.
Facts of the Case
The Petitioner was awarded the contract for the parking site for a period of two years, the period expired. In terms of Clause 3 of the License Conditions, the petitioner applied for renewal of the Licence. The petitioner has preferred the petition to restrain the respondents from proceeding to call for bids in respect of the parking site.
Contention of the Parties
Learned counsel for the petitioner submitted that after the filing of this Writ Petition, the petitioner has received a communication extending the licence period till the new H-1 Bidder takes over the parking site from the petitioner in terms of the impugned NIT.
Learned counsel for the petitioner submitted that the petitioner has a legitimate expectation of it being granted the extension for two years – one year at a time in terms of Clause 3, since, admittedly, there has been no default on the part of the petitioner in the performance of the contract, and it is not even the case of the respondents that the petitioner has not satisfactorily completed the contract during the contractual period.
Counsel for the respondents submitted that the petitioner is essentially seeking specific performance of the agreement which is not permissible in view of the fact that the contract itself is determinable. Ms. Pushkarna submitted that the respondents have made a scientific assessment of the actual worth of the parking site by using CAD Drawings, and on that basis, it has found that the minimum parking fee that the respondent can derive is to the tune of Rs.72,000/- per month. She submitted that in view of the said discovery, a conscious decision was taken by the respondents to grant extension to the petitioner till only the new H-1 Bidder is finalised. She submitted that this decision is taken in the interest of public revenue.
Courts Observation & Judgment
The court relied on the judgement of Delhi High court division bench in, Binay Kumar Mishra v. The Director (R.P.Cell), Delhi Urban Shelter Improvement Board and Ors., wherein the following observations were made, “13. ….In fact the respondents would be violating the public policy, if rather than fetching the maximum price which the subject parking site is capable of fetching, extend the term of the contract with the plaintiff therefore, without the plaintiff having any right under the said contract to extension as sought. Though the petitioner in the petition sought to give a color of discrimination to the action of the respondents, of issuing fresh NIT for the subject parking site while granting renewals with respect to other similarly situated parking sites but the petitioner has utterly failed to make out the said case. Even otherwise we are of the view that merely because the respondents may grant extension with respect to one parking site qua which the assessment of the respondents is that it is incapable of fetching more, would not be a ground for compelling the respondents to grant extension with respect to another parking site also, which indeed in the assessment of the respondents also is capable of fetching a much higher license fee. Court interference in price fixation is only on a case of mala fide and arbitrariness being established and which has not been done in the present case.”
The Court observed that Clause 3 of the terms and conditions shows that the term of the licence was two years which, admittedly has come to an end. It provides that the contract may be extended further. The right of the licensee to seek extension is pre-conditioned by his satisfactory completion of the period of the contract. Without such satisfactory completion, the contractor cannot even plead for further extension of the contract. However, that does not mean that in every case, the respondents are bound to grant the extension of the contractual term.
Certainly, the respondents cannot act arbitrarily or whimsically, while taking a decision whether, or not, to grant extension of the contractual term. But, if there are good and germane reasons for not granting extension of time, or limiting its extension for a period of less than one year at a time, it would not be correct for the Court to sit in judgment, and overrule the said decision of the respondents. The respondents have brought out the rationale for extending the petitioner’s contract only till the award of the fresh contract to H-1 Bidder. The file notings shared with us do show that the worth of the parking site has been scientifically assessed at a minimum of Rs.70,000/- per month, which is substantially more than the license fee that the petitioner would be paying even after 5% enhancement i.e. Rs. 46,568/- per month. The parking sites are auctioned by the respondent to augment its revenue for discharging its public duties.
The Court dismissing the petition observed, “That being the position, we find complete justification in the respondents not granting extension to the petitioner in terms of Clause 3 of the terms and conditions of the license, for a period of one year, and granting extension only till the new H-1 Bidder is finalised in terms of the impugned tender. We do not find any merit in this petition and dismiss the same leaving the parties to bear their respective costs.”
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