Gujarat High Court
Kinsfolk Infra Engineering vs State Of Gujarat on 1 December, 2021
Author: J.B.Pardiwala
Bench: J.B.Pardiwala, Vaibhavi D. Nanavati
C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 10321 of 2020
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE J.B.PARDIWALA
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI
==========================================================
1 Whether Reporters of Local Papers may be allowed to YES
see the judgment ?
2 To be referred to the Reporter or not ? NO
3 Whether their Lordships wish to see the fair copy of NO
the judgment ?
4 Whether this case involves a substantial question of NO
law as to the interpretation of the Constitution of India
or any order made thereunder ?
==========================================================
KINSFOLK INFRA ENGINEERING
Versus
STATE OF GUJARAT
==========================================================
Appearance:
MR MEHULSHARAD SHAH(773) for the Petitioner(s) No. 1,2
MR ADITYASINH JADEJA AGP(1) for the Respondent(s) No. 1
MR PREMAL R JOSHI(1327) for the Respondent(s) No. 2
RULE SERVED(64) for the Respondent(s) No. 3
==========================================================
CORAM:HONOURABLE MR. JUSTICE J.B.PARDIWALA
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI
Date : 01/12/2021
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1 By this writ application under Article 226 of the Constitution of India, the writ applicants have prayed for the following reliefs:
Page 1 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 "Lordships may graciously be pleased:-
(A) to issue a writ of mandamus and/or any other appropriate writ, order or direction in the nature of mandamus quashing and setting aside the order dated 19.08.2020 passed by respondent No.2 and thereby pleased to permit the petitioners to run the 'VISAMO' shelter (Hotel White Feather) at Saputara, as per the terms and conditions of the agreement.
(B) to issue a writ of mandamus or any other appropriate writ, order or direction, directing respondent No.2 to consider the date of commencement of agreement from 30.04.2017 instead of 24.04.2015 as permission to commence 'Visamo' (Hotel White Feather) was granted by the Collector only on 29.04.2017 and thereby deduct the said period from the total period of contract.
(C) to issue a writ of mandamus or any other appropriate writ, order or direction, declaring that the action of respondents in taking forceful possession of the contractual premises as illegal and in violation of principles of natural justice and thereby be pleased to quash and set- aside the officer order dated 25.06.2020 issued by the Manager (Commercial) of Tourism Corporation of Gujarat Limited.
(D) to issue a writ of mandamus or any other appropriate writ, order or direction, directing the respondents to consider to renew the period of agreement for additional period of five years, considering the date of commencement of the initial contract as 30.04.2017.
(E) to issue a writ of mandamus or any other appropriate writ, order or direction, directing the respondents to consider the extension of period of six months, in view of Covid'19 Global Pandemic, as directed by the Government of India vide notification dated 13.05.2020. To issue a writ of mandamus and/or any other appropriate writ, order or direction in the nature of mandamus quashing and setting aside the order dated 19.08.2020 passed by respondent No.2 and thereby pleased to permit the petitioners to run the 'VISAMO' shelter (Hotel White Feather) at Saputara, as per the terms and conditions of the agreement.
(F) Alternatively, without prejudice to all' other prayers, to issue a writ of mandamus and/or any other appropriate writ, order or direction in the nature of mandamus directing the respondents to grant one month time to the petitioners to take back all the movable properties which were installed by them at their own costs and expenses and permit the petitioners to restore the property to its original position which was prevalent on the date of agreement.
Page 2 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 (G) Pending admission, hearing and/or final disposal of this petition, Your Lordships may be pleased to direct the respondents to grant one month time to the petitioners to take back all the movable properties installed by them at their own costs and expenses and permit the petitioners to restore the property to its original position which was prevalent on the date of agreement.
(H) Pending admission, hearing and final disposal of this petition, Your Lordships may be pleased to direct the respondents to handover the possession of 'Visamo -- Hotel White Feather' at Saputara to the petitioners.
(I) Pending admission, hearing and final disposal of this petition, Your Lordships may be pleased to direct the respondents to extend the period of contract for another six months, in view of Covid'19 Global Pandemic, as directed by the Government of India vide notification dated 13.05.2020."
(J) To pass such other and further order/s as may be just and necessary in the circumstances of the case."
2 The facts giving rise to this writ application may be summarized as under:
3 The writ applicant No.1 is a partnership firm registered under the Indian Partnership Act, 1932 (for short, "the Act, 1932"), of which the writ applicant No.2 is one of the partners.
4 It appears from the materials on record that the respondent No.2 - Tourism Corporation of Gujarat Limited published a Tender Notice to manage and operate a property recognized as the "Visamo Shelter"
situated at Saputara, District : Dangs.
5 The writ applicant - firm submitted its bid on 27 th December 2013 and the same came to be accepted by the Corporation vide its letter dated 2nd July 2014.
6 It is the case of the writ applicant - firm that the property in Page 3 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021
question was not in a good condition and required lot of renovation. In such circumstances, the writ applicant - firmsubmitted a renovation plan along with its letter dated 29 th July 2014, which came to be sanctioned by the Executive Engineer of the Corporation.
7 The Corporation vide its letter dated 11 th November 2014 granted permission to renovate the property at the cost of the writ applicant - firm and four months time period was granted for the said purpose.
8 The Corporation executed an agreement with the writ applicant - firm on 8th April 2015. It was agreed between the parties that the firm would remit Rs.21,00,000/- (Rupees Twenty One Lakh only) towards the management fee which shall be increased by 10% every year. The clause 7 of the agreement provided that the management agreement was for a period of five years which may be extended by additional five years subject to the performance of the firm in managing, operating and maintaining the shelter i.e. the Visamo. The writ applicant - firm had also to submit irrevocable bank guarantee equivalent to the management fees.
9 The clause 13 of the agreement provided that " the Operator shall obtain License under the Prevention of Food and Adulteration Act from the Local Competent Authority and any other License, permission which is required under law to run the premises from appropriate local authority. The Operator shall handover such copy of permission, license to TCGL within 15 working days of taking over of the shelter (Visamo Premises)".
10 On 24th April 2015, the Corporation issued the work order in favour of the writ applicant - firm for operation and management of "Visamo" at Saputara, District : Dangs.
Page 4 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 11 The record further reveals that vide letter dated 14 th May 2015,
the writ applicant - firm applied with the Collector for Hotel License and registration certificate. In this regard, the Corporation vide its letter dated 24th July 2015 informed the Collector that the "Visamo Shelter"
was given to the writ applicant - firm and the writ applicant - firm would run and manage the same.
12 The writ applicant - firm vide its letter dated 12 th October 2015 informed the Managing Director of the Corporation that it had completed the renovation work in accordance with the plan and has applied for the license with the District Collector. It seems that the District Collector brought to the notice of the writ applicant - firm that the property in question was running in the name of the Government. In such circumstances, the writ applicant - firm requested the Managing Director of the Corporation to get the name of the Government deleted from the property card and substitute the same with that of the "TCGL"
so as to facilitate the writ applicant - firm in maintaining the appropriate certificate.
13 It appears that the Collector, initially, declined to grant the license in favour of the writ applicant - firm in view of the dispute as regards the ownership of the property i.e. the "Visamo". It appears that the Collector took more than six months to grant the license as the Collector was not able to resolve the controversy as regards the name of TCGL not figuring in the property card.
14 It is the case of the writ applicant - firm that while the issue was was pending with the Collector for grant of license to run a Restaurant at the Visamo, the firm had already invested Rs.3 Crore in renovating the "Visamo". The firm constructed kitchen, toilet blocks, 44 rooms, Page 5 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 dormitory, restaurants, parking facility, etc. 15 The record further reveals that vide letter dated 23 rd August 2019, the Collector informed the writ applicant - firm to submit an application through the Corporation for the purpose of considering the request for grant of license to run the restaurant at the "Visamo".
16 The Commissioner of Tourism and the Managing Director of the Corporation vide letter dated 3rd November 2016 requested the authority concerned to transfer the land in the name of the Tourism Commissioner and to grant the necessary permission to the writ applicant - firm.
17 Ultimately, the District Collector, Dangs issued a certificate of registration vide letter dated 29th April 2017 in the name of the writ applicant - firm under Section 4A of the Gujarat Tax on Luxury (Hotels, Lodgings and Houses), Act, 1977 and the period of five years may be considered from 30th April 2017.
18 The writ applicant vide its letter dated 22nd January 2018, once again, reiterated its aforesaid request pointing out that it had deposited Rs.21 Lakh towards deposit on 22 nd April 2015 and had also paid advance rent of Rs.21 Lakh in two installments, and in all, Rs.44 Lakh had been paid. The writ applicant - firm, once again, brought to the notice of the Corporation that it received the license only on 29 th April 2017 and in such circumstances, the contract may be considered to have commenced from 30th April 2017 for a period of five years instead of 22nd April 2015.
19 To the utter shock and dismay of the writ applicant - firm, it received a show cause notice dated 7th February 2018 from the Corporation asking the firm to deposit the rent of Rs.21 Lakh for the Page 6 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 year 2016-17 and 2017-18 respectively. The Corporation took the stance that the failure on the part of the writ applicant - firm in not depositing the aforesaid amount, amounted to breach of the conditions Nos.2 and 9 respectively of the work order.
20 To the aforesaid notice issued by the Corporation, the writ applicant - firm gave its reply vide letter dated 16 th April 2018 pointing out to the Corporation that the license was issued by the District Collector, Dangs on 29th April 2017. In such circumstances, the firm brought to the notice of the Corporation that it was not liable to pay any amount of rent for the year 2015-16 and 2016-17 respectively. The writ applicant - firm, however, made its clear that it was ready and willing to pay the rent from 30th April 2017.
21 It appears that the Corporation declined to accede to the request of the writ applicant - firm and in such circumstances, the writ applicant
- firm paid an amount of Rs.65,48,598/- by way of a cheque dated 20 th September 2018. A request was made to consider the said amount as advance rent for the year 2019-20 and 2020-21 respectively.
22 It is the case of the writ applicants that on 25 th June 2020, the officer of the Corporation, all of a sudden, visited the premises in question and asked the writ applicant - firm to vacate the premises. The officials of the Corporation drew a panchnama and affixed the office order and the rojkam on one of the doors of the Hotel premises.
23 The aforesaid action on the part of the Corporation compelled the writ applicant - firm to come to this High Court by way of filing the Special Civil Application No.7945 of 2020. The said writ application came to be disposed of vide order dated 4 th August 2020 in the following terms:
Page 7 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 "1. Heard Mr. Mehul Sharad Shah, learned counsel for the petitioners, Mr. Tirthraj Pandya, learned AGP for respondent No.1 & 3 and Mr. Premal Joshi, learned counsel for respondent No.2 through Video Conferencing.
2. By way of this petition under Article 226 of the Constitution of India, the petitioners have prayed for the following reliefs:
"(A) to issue a writ of mandamus or any other appropriate writ, order or direction, directing respondent no.2 to consider the date of commencement of agreement from 24.04.2015 as permission to commence "Visamo" (Hotel White Feather) was granted by the Collector only on 29.04.2017 and thereby deduct the said period from the total period of contract.
(B) to issue a writ of mandamus or any other appropriate writ, order or direction, declaring that the action of respondents in taking forceful possession of the contractual premises as illegal, and in violation of principles of natural justice and thereby, be pleased to quash and set aside the office order dated 25.06.2020 issued by the Manager (Commercial) of Tourism Corporation of Gujarat Ltd.
(C) to issue a writ of mandamus or any other appropriate writ, order or direction, directing the respondents to consider to renew the period of agreement for additional period of five years, considering the date of commencement of the initial contract as 30.04.2017.
(D)to issue a writ of mandamus or any other appropriate writ, order or direction, directing the respondents to consider the extension of period of six months, in view of Covid-19 Global Pandemic, as directed by the Government of India vide Notification dated 13.05.2020.
(E) Pending admission, hearing and final disposal of this petition, Your Lordships may be pleased to direct the respondents to handover the possession of Visamo - Hotel White Feather at Saputara to the petitioners;
(F) Pending admission, hearing and final disposal of this petition, Your Lordships may be pleased to direct the respondents to extend the period of contract for another six months in view of Covid-19 Global Pandemic, as directed by the Government of India vide Notification dated 13.05.2020.
(G) xxx"Page 8 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022
C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021
3. This Court while issuing notice, has passed the following order on 01.07.2020:
"1. By way of this petition, the petitioner challenges the alleged illegal action of respondent no.2- Tourism Corporation of Gujarat Limited (TCGL) for taking forceful possession of the Visama (presently known as Hotel White Feather) at Saputara on 25.06.2020 and also appointing the manager for running the hotel. This, according to the petitioner, is without issuance of notice or without affording any opportunity of hearing and in gross violation of principles of natural justice. As averred by the Petitioner, any gross violation of principles of natural justice would entitle the party to approach this Court seeking writ of mandamus or any other appropriate writ under Article 226 of the Constitution of India.
2. The prayers sought for are as follows: -
"(A) to issue a writ of mandamus or any other appropriate writ, order or direction, directing respondent no.2 to consider the date of commencement of agreement from 24.04.2015 as permission to commence "Visamo" (Hotel White Feather) was granted by the Collector only on 29.04.2017 and thereby deduct the said period from the total period of contract.
(B) to issue a writ of mandamus or any other appropriate writ, order or direction, declaring that the action of respondents in taking forceful possession of the contractual premises as illegal, and in violation of principles of natural justice and thereby, be pleased to quash and set aside the office order dated 25.06.2020 issued by the Manager (Commercial) of Tourism Corporation of Gujarat Ltd.
(C) to issue a writ of mandamus or any other appropraite writ, order or direction, directing the respondents to consider to renew the period of agreement for additional period of five years, considering the date of commencement of the initial contract as 30.04.2017.
(D)to issue a writ of mandamus or any other appropraite writ, order or direction, directing the respondents to consider the extension of period of six months, in view of Covil-19 Global Pandemic, as directed by the Government of India vide Notification dated 13.05.2020.
(E) Pending admission, hearing and final disposal of this petition, Your Lordships may be pleased to direct the respondents to handover the possession of Visamo - Hotel White Page 9 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 Feather at Saputara to the petitioners;
(F) Pending admission, hearing and final disposal of this petition, Your Lordships may be pleased to direct the respondents to extend the period of contract for another six months in view of Covid-19 Global Pandemic, as directed by the Government of India vide Notification dated 13.05.2020.
(G) to pass such other and further order/s as may be just and necessary in the circumstances of the case."
3. We have heard learned advocate Mr. Mehul Shah appearing for the petitioners who has taken us through the chronological events which have taken place right from the issuance of the tender notice till the taking over of the possession by the respondent no. 2 of 'Visamo'. He has fervently urged that with difficulties, in this Pandemic of COVID-19, businesses are permitted to be started and the petitioner also had some bookings which were needed to be cancelled and it also has earned the name and fame after spending huge amount as per the terms of contract, therefore, without affording any opportunity, the Petitioner could not have been throw out of his business in arbitrary manner and hence, he fervently urged that the mandatory relief of permitting the petitioner to run the business be granted till the matter is heard and decided , for which, all necessary conditions may be imposed by the Court. He has also substantiated his submissions with his certain authorities.
4. Learned advocate Mr. Premal Joshi appearing for and on behalf of the respondent no. 2 on caveat has responded to the submissions of learned advocate Mr. Shah. He has extensively made his submissions to urge strenuously that this petition is not maintainable and it is only after the contractual period of 5 years got over, the possession has been taken over as the Petitioner did not fulfill its contractual obligations. He has also urged the Court to relegate the parties to the Arbitral Tribunal as there is an explicit clause of Arbitration governing the relationship between the parties. He also submitted that.
5. We have also heard learned Assistant Government Pleader Ms. Jyoti Bhatt representing the State and the Collector both, who has urged that no prayer has been sought against the order of collector nor any action has been challenged, therefore, the dispute is essentially between the petitioner and respondent no.2.
6. Keeping all contentions open including of maintainability of Page 10 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 Petition, issue Notice returnable on 06.07.2020. Learned advocate Mr. Premal Joshi waives service of notice for and on behalf of the respondent no.2. Learned Assistant Government Pleader Ms. Jyoti Bhatt waives service of notice for and on behalf of the respondent nos. 1 and 3.
7. Before we proceed to consider the submissions of both the sides, the request on the part of the respondent no.2 for placing on record, the affidavit-in-reply to the averments in the petition is required to be accepted. Let such reply be filed by the contesting Respondent no.2 on or before 06.07.2020 with an advance copy to the other side. Learned Assistant Government Pleader Ms. Bhatt, if is desirous to file her reply, she may do that with an advance copy to the other side.
8. Let the status-quo be maintained by both the sides. The panchnama which has been carried out on 25.06.2020 mentions that "the committee of TCGL has taken the possession of Visamo (presently known as Hotel White Feather) at Saputara on 25.06.2020 as per the terms and conditions of the agreement and the property will be operated by the Manager of TCGL and he will be acting as caretaker/responsible officer for the said property." Manager Mr.R.J.Bhosle is deputed as a caretaker.
9. Name of learned advocate Mr. Premal Joshi appearing for respondent no.2 shall be reflected in the cause list.
10. Service of notice through e-mode is permitted. Copy of this order be made available to the parties through e-mode."
4. Thereafter, the pleadings have been exchanged between the parties and ultimately, upon hearing learned counsel for the parties, this Court passed the following order on 27.07.2020 : "Heard Mr. Mehul Sharad Shah, learned advocate appearing for the petitioners, Ms. Dhwani, learned AGP for respondent Nos.1 and 3 and Mr. Premal Joshi, learned advocate appearing for respondent No.2. Mr. Premal Joshi, learned advocate appearing for respondent No.2 to take instructions. The status quo shall continue to be maintained by both the parties, till next date of hearing. S.O to 04.08.2020."
5. Mr. Premal Joshi, learned counsel for respondent No.2, on written instructions, states that, the Managing Director of Tourism Corporation of Gujarat Ltd., shall hear the petitioners through their authorized officer on 10.08.2020 at 12'o clock at Noon at his Chamber situated at Block No.16/17, 4th Floor, Udyog Bhavan, Gandhinagar.
6. As averred in the petition and as pointed out by learned counsel for the parties, the petitioners are at liberty to raise all contentions as Page 11 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 raised in this petition before the Managing Director and the Managing Director shall also hear the petitioners on the following three aspects:-
(i) The extension clause provided in the agreement; (ii) To exclude the period of date of letter by which the petitioners were granted permission and the actual date of its starting, which was subject to permission from the Collector, which as per the facts took considerable time; (iii) On the basis of the Circular issued by the Government of India, the petitioner also intends to claim six months' extension due to Covid-19 Global Pandemic.
7. It is further directed that, the Managing Director after hearing the authorized representative of the petitioners, shall take appropriate decision in the matter, without in any manner being influenced by the impugned order in this petition and shall deal with all aspects that may be raised before him/her. It is further directed that the Managing Director shall not be influenced by any of the observations made in the impugned order as well as even the factum of taking over the possession and shall decide all the issues independently by a reasoned order. Such decision may be taken as expeditiously as possible. Status quo granted by this Court will continue for one week after the order is passed by the authority concerned as directed above in this order.
8. With the above observations and direction, present petition stands disposed of. Direct service through E-mail is permitted."
24 Pursuant to the order passed by this Court referred to above, the writ applicant - firm appeared before the Managing Director of the Corporation for the purpose of hearing. It appears that the Managing Director of the Corporation declined to afford any personal hearing and insisted that the written submissions may be filed.
25 The Managing Director, ultimately, passed the impugned order dated 19th August 2020 taking the view that the writ applicant - firm was liable to be evicted from the premises as the contract period had come to an end.
26 It appears from the impugned order passed by the Corporation that the Corporation addressed itself on three issues highlighted by the writ applicant - firm. The three issues are as under:
Page 12 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 [i] The extension clause provided in the agreement [ii] To exclude the period of date of letter by which the writ applicant - firm was granted permission and the actual date of its starting, which was subject to the permission from the Collector and such permission was granted by the Collector after a long delay, and [iii] On the basis of the circular issued by the Government of India, the writ applicant - firm requested that six months extension be granted considering the COVID-19 global pandemic.
27 On the first issue, the findings recorded by the Corporation are as under;
"So looking to above mentioned clauses in Tender Agreement and Work order about extension it will be decision of TCGL whether to extend the contract or not. TCGL does not want to extend the agreement. TCGL is not in favor for extension clause provided In the agreement. So as per the work order the tenure of five ears has already been expired on 24"
April 2020, so the agreement also automatically ceases to exist.
Collector, Dang vide his order dated 29/04/2017, order No:
MNR/Vashi-35 to 38/2017 has given permission subject to condition mentioned in the order in Clause No (10) that Registration Certificate will automatically comes to an end as soon as agreement between TCGL and Kinsfolk Infra Engineering comes to an end.
It is also to be noted here as per work order the tenure of five years has already expired on 24 April 2020. if TCGL is willing to give extension, TCGL might have conveyed the same before that time limit. So as the tenure of five years has already expired on 24" April 2020, and as per Agreement Clause No (15) "After the expiry of this management agreement period, the Operator shall surrender the possession of all movable and immovable items/articles including superstructure now exist within 7 working days after the expiry period of the agreement". Kinsfolk Infra Engineering did not act accordingly, so possession was taken back in a peaceful manner on 25/06/2020."Page 13 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022
C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 28 On the second issue, the findings recorded by the Corporation are as under:
"Referring all above mentioned clauses of Tender, LOI, Agreement and work order and rough all documents-Mobilization Period as per LOI dated 02/07/2014 was within 7 days going of signing of contract agreement. Because of construction of rooms at "VISAMO SHELTER"
and converting "VISAMO SHELTER" into Hotel, TCGL did not get any additional amount towards management fees except specified in the contract agreement."VISAMO SHELTER" was converted into Hotel at operator's cost and risk. Kinsfolk Infra Engineering was given sufficient time to start the commercial operations -after issuance of LOI and for that TCGL has given them four months to do work from 11/11/2014 vide letter No: PE/2014/701 at their own cost. After the completion of four months, agreement was signed on 08/04/2015. So last date of mobilization is 14/04/2015 and as per agreement Clause No (13): The operator shall hand over copy of such license permission to TCGL within 15 working days of taking over of the shelter "VISAMO"
premises. So work order was issued after fifteen days period as per agreement on 24/04/2015 and it has been specified that the Time Limit for the said Project is for five years (5 years ) and it shall be considered with effect from work order date.
It is also to be noted here that "VISAMO SHELTER" was consisting of Bus Shelter, Kitchen, Bus Parking, Sitting Hut + Kiosk, Car Parking, Underground Water Tank, Control Room (Attached Toilet), Electric Panel Room, Children Play Areas, Toilet Blocks (along with bus shelter) and Toilet Block (individual). TCGL invited tender for selection of Management Operator for "VISAMO SHELTER" for the above mentioned property details only. "VISAMO SHELTER" was constructed with the purpose to facilitate the tourist to get relaxation during daytime and cook their food and for their basic necessities. There was no concept of providing facility of accommodation. For a "VISAMO SHELTER" with the aforesaid facilities there was no need of any certificate u/s. 4A of the Gujarat Tax on Luxury (Hotels, Lodgings and Houses) Act, 1977. Thus, it was meant to be a "VISAMO" for facilitation tourists, not one meant for accommodation facilities.
Otherwise, TCGL would have got better bid for the aforesaid tender and other parties would have also bided higher price. "VISAMO SHELTER"
was converted into Hotel at operator's at own cost and risk and Kinsfolk Infra Engineering got maximum financial benefits from operating VISAMO as a Hotel, presently known as Hotel White Feather at Saputara. TCGL did not get any additional financial benefit due to conversion of VISAMO shelter into a Hotel towards the management fees.Page 14 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022
C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 "VISAMO SHELTER was constructed with the purpose to facilitate the tourist. TCGL invited tender for selection of Management Operator for "VISAMO SHELTER". Now, if there is any delay in getting certificate from the Collector under the Gujarat Tax on Luxury (Hotels, Lodgings and Houses) Act, 1977 to run a Hotel in place of "VISAMO SHELTER", the same cannot be considered to extend the contract period from 24/4/2015 to 30/4/2017 as "VISAMO SHELTER" require any certificate of Collector under the Gujarat Tax on Luxury (Hotels, Lodging Houses) Act, 1977.
So looking to all above facts and all clauses mentioned above-of - tender, LOI, Agreement and work order I am firmly of the opinion that no exclusion from the period of date of letter by which the petitioners were granted permission and the actual date of its starting, which was subject to permission from the Collector,is needed as no certificate under the Gujarat Tax on Luxury (Hotels, Lodging and Houses) Act, 1977 was required for a "VISAMO SHELTER" which was constructed with the purpose to facilitate the tourist to get relaxation during daytime and cook their food and for their basic necessities.
DECISION : (i) Considering all above factors I hereby decide that there is no need to consider the delay in the getting the permission from the Collector for certificate under the Gujarat Tax on Luxury (Hotels Lodging and Houses) Act 1977 for calculation of the five year contractual period. So, the five year work order period started is started on 24/04/2015 and ended on 23/04/2020.
(ii) Agreement Clause No.(15) with Kinsfolk Infra Engineering states that, "After the expiry of this management agreement period, the Operator shall surrender the possession of all movable and immovable items/articles including superstructure now exist within 7 working days after the expiry period of the agreement". Kinsfolk Indra Engineering did not act accordingly, so possession was taken back peacefully on 25/06/2020 and it is valid."
29 On the third issue referred to above, the findings recorded by the Corporation are as under:
"Vide Authority Letter of Managing Director, TCGL dated 24/06/2020, No: TCGL/MD/877, a committee constituted for the purpose of taking over the possession of the Visamo Hotel has taken over its possession on 25/06/2020 and looking to all above facts it is completely valid. Manager Commercial has appointed an officer in Page 15 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 charge for this property too. As per Agreement Clause No, (15) after the expiry of this management agreement period, the Operator shall surrender the possession of all movable and immovable items/articles including superstructure now exist within 7 working days after the expiry period of the agreement.
As per Tender clause (4.1) "The VISAMO Shelter will be handed over to selected Operator on 'AS IS WHERE IS CONDITION'. Any improvements need to be done only by the Operator entirely at his own cost with written approval of TCGL. The operator shall not be allowed to construct, extend or bring any structural changes in the property. Carrying on minor rectification and repair works shall be the responsibility, of the Operator only".
As per Agreement clause (1) "it is agreed by and between the parties that shelter "VISAMO" premises will be handed over to the operator on 'AS IS WHERE IS CONDITION'. Any improvement if needed to be done shall be done only by the Operator at his own cost. However, the operator shall obtain written approval of TCGL before any improvement is carried out by them. The operator shall not be allowed and entitled to construct, extend or bring any structural changes in the property. The shelter "VISAMO" premises shall be given to the operator only for the Purpose of managing, operating and maintaining the premises, all rights relating to title of interest, Ownership with regard to the property shall vest in TCGL."
As per work order clause (3) "Any improvement if needed to be done only by the operator at his own cost. However written approval of TCGL shall be taken before improvement Operator shall not be allowed and entitled to construct, extend or bring any structural changes in the property."
Now as per Hon. High Court oral order, Status quo granted it will continue for one week after the date of this order. As soon as status quo Is over after a week from today, considering the above mentioned clauses, a team consisting of (1) Company Secretary cum FM, TCGL (2) Manager (Commercial), TCGL (3) Associate Manager dealing with South Zone, TCGL (4) Manager Hotel, Saputara (5) Land Officer, TCGL will make a list of all movable and immovable items/articles including superstructure now exist at the site in the presence of representatives of Kinsfolk Infra Engineering.
Collector, Dang vide his order dated 29/04/2017, order No:
MNR/Vashi-35 to 38/2017 has given permission subject to certain conditions mentioned in the order. Condition No (10) says that Registration Certificate will automatically comes to an end as soon as agreement between TCGL and Kinsfolk Infra Engineering comes to an end. It came to an end on 24/04/2020 and possession of VISAMO was Page 16 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 taken back on 25/06/2020. So Collector, Dang is to be informed to do the needful for termination of Registration Certificate with effect from 25/06/2020.
It is also hereby ordered that the total management fees pending along with penalty including GST due is Rs. 12,10,211/and it is to be recovered from Kinsfolk Infra Engineering. Due to Covid-19 Global pandemic, TCGL has decided to give relaxation in the payment of management fees for the period from 22 nd March 2020 to 23rd April 2020. So, Kinsfolk Infra Engineering is exempted from paying Managing Fee plus GST (Rs.3,37,031/-) and penalty plus GST (Rs.8,532/-) for the period. So total relaxation given to Kinsfolk Infra Engineering is Rs.3,45,563/-. Thus, the total dues from the Kingfolk Infra Engineering is Rs.8,64,648/- and it is to be recovered from them. This amount of Rs.8,64,648/- is to be recovered from the Fixed Deposit Receipt and while making list of all movable and immovable items/articles including superstructure now exist, if any damage is there that is also be recovered as per agreement clause (11) in addition to Rs.8,64,648/-."
30 The final order passed by the Managing Director of the Corporation reads thus:
"I, Jenu Devan, IAS, Managing Director, Tourism Corporation of Gujarat Ltd. after going through all relevant documents and without in any manner being influenced by the impugned order in the petition, SCA No: 7945 of 2020 and dealing with all aspects made before me decide all the issues independently by this reasoned order as above and it is to be implemented after status quo by Hon. High Court is over."
31 In the aforesaid set of facts, the writ applicant - firm has once again come to this Court with the present writ application seeking to challenge the impugned order passed by the Corporation referred to above.
SUBMISSIONS ON BEHALF OF THE WRIT APPLICANT - FIRM: 32 Mr. Mehul Sharad Shah, the learned counsel appearing for the writ applicant - firm vehemently submitted that the action on the part of the Corporation should be termed as manifestly arbitrary. Mr. Shah would submit that the respondent No.2 - Corporation is an Page 17 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 instrumentality of the State and therefore, it was expected of the Corporation to act in a fair and reasonable manner.
33 Mr. Shah would submit that after taking over the possession of the property in question, his client invested a huge amount of Rs.3 Crore in renovating the entire premises. Over and above the expenses incurred towards renovation, his client paid an amount of Rs.65,48,598/- towards advance rent for the year 2019-20 and 2020-21 respectively. He pointed out that initially, an amount of Rs.21 Lakh was paid towards the deposit and another amount of Rs.21 Lakh towards the advance rent for the period between 2017 and 2018. He also pointed out that the advance rent for the year 2018-19 was paid by way of two cheques of Rs.13,26,900/- each aggregating to the sum of Rs.27,25,800/-. However, due to various difficulties, the firm could not do any business for even 24 hours. Mr. Shah would submit that having regard to the facts narrated above, his client had the legitimate expectation that the Corporation would at least permit the firm to run the "Visamo" for further two years i.e. upto 2022 considering the commencement date of the contract as 30th April 2017.
34 Mr. Shah would submit that the hearing given by the Managing Director of the Corporation was just an eyewash. It cannot be termed as a meaningful hearing. The Managing Director thought fit not to afford any personal hearing and took the final decision with a preconceived notion.
35 Mr. Shah submitted that in accordance with the work order, the period of five years expired on 24th April 2020, but, if the date of commencement is considered from 29 th April 2017 i.e. from the date on which the certificate of registration came to be issued by the Collector, then the period would expire on 29th April 2022.
Page 18 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 36 In such circumstances referred to above, Mr. Shah prays that there
being merit in his writ application, the same be allowed and the relief prayed for may be granted.
SUBMISSIONS ON BEHALF OF THE CORPORATION: 37 On the other hand, this writ application has been vehemently
opposed by Mr. Premal Joshi, the learned counsel appearing for the Corporation on the point of maintainability itself. Mr. Joshi would submit that the writ jurisdiction of this Court has been invoked in a purely contractual matter having no colour of public law of the writ remedy is thus not maintainable. Mr. Joshi would submit that even otherwise, no error, not to speak of any error of law could be said to have been committed by the Corporation in passing the impugned order dated 19th August 2020. Mr. Joshi would submit that it is not in dispute that the TCGL is Government of Gujarat Undertaking. The TCGL is a Public Limited Company classified as a State Government Company. Mr. Joshi brought to the notice the following from the affidavit-in-reply filed on behalf of the Corporation:
"9.2 A meeting of Development Committee for development of Saputara was held on 12/10/2010 and as per the decision taken in the aforesaid meeting it was held that TCGL would develop "VISAMO SHELTER" at Saputara with a view to provide facilities except accommodation to tourist more particularly weaker section of the society. Pursuant to that TCGL appointed an architect. The concept of "VISAMO SHELTER"was presented before the State Government and the State Government sanctioned the same. Thereafter, Higher Officers from the State Government and Officers of the District visited Saputara personally and earmarked Survey Number 143 and adjoining Kotar Land for construction of "VISAMO SHELTER".
9.3 The office of District Collector instructed on 20/6/2011 to the office of City Survey Office to do marking of the said land. Afterthat TCGL got "VISAMO SHELTER" constructed on 30/11/2013.
9.4 "VISAMO SHELTER" was consisting of Bus Shelter, Kitchen, Bus
Page 19 of 45
Downloaded on : Wed Jan 12 06:16:58 IST 2022
C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021
Parking, Sitting Hut + Kiosk, Car Parking, Underground Water Tank, Control Room (Attached Toilet), Electric Panel Room, children Play Areas, Toilet Blocks (along with bus shelter) and Toilet Block (individual).
9.5 At this stage, it is required to be noted that "VISAMO SHELTER"
was constructed with the purpose to facilitate the tourist to have food and get relaxation during daytime. There was no concept of providing facility of accommodation.
9.6 TCGL invited tender for selection of Management Operator for "VISAMO SHELTER" for the above mentioned property details only. The Bidders were very much aware that "VISAMO SHELTER" is having facilities to facilitate the tourist to have food and get relaxation during daytime and not having any facility of accommodation. At this stage it is required to be noted that to run "VISAMO SHELTER" with the aforesaid facilities there was no need of any certificate u/s. 4A of the Gujarat Tax on Luxury (Hotels, Lodgings and Houses) Act, 1977.
9.7 I state and submit that the tender document itself made it clear that bidders are encouraged to submit the respective Bids only after visiting the site, property and a certain themselves with the site conditions, location, surrounding and actual site dimensions and details mentioned. Bidder acknowledge and agreed that inadequacy, deficiency, lack of completeness or incorrectness or deviation in information provided in the tender document or ignorance of any of the matters - WHATSOEVER shall not be the reason for any claim for compensation / relaxation as after full and thorough investigation of all matters and details - tangible or intangible. Clause-2 of the tender document deals with definitions. Clause 2 (n) defines 'VISAMO SHELTER/PRORERY" or "VISAMO SHELTER" shall mean the Visamo shelter is set out in Clause 1 of the tender document."
"9.11 As per clause 4.7, the management agreement is for a period of 5 years which may be extendable by additional 5 years. The provision for extension shall be the decision of the authority; the same shall be based on mutually agreed terms and conditions.
9.12 As per Clause 4.14 , the operator should obtain license under Prevention of Food and Adulteration Act from the Local Health Authority, licence/permission from Local Area Authority and Pollution Control Board.
At this stage, it is required to be noted that no certificate under the Gujarat Tax on Luxury (Hotels, Lodging and Houses) Act, 1977 was required since "VISAMO SHELTER" was constructed with the purpose Page 20 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 to facilitate the tourist to have food and to get relaxation during daytime. There was no concept of providing facility of accommodation. TCGL invited tender for selection of Management Operator for "VISAMO SHELTER" for the above mentioned property details only. Pursuant to that TCGL received three (3) bids as under:
(i) Kinsfolk Infra Engineering:
Rs. 21,00,000/- + Applicable tax
(ii) Ruturaj Guest House &Dining Hall:
Rs. 1,98,660/+ Applicable tax
(iii) Vatika Garden Restaurant:
Rs. 6,21,000/+ Applicable tax 9.13 The aforesaid facts would make it clear that the "VISAMO SHELTER" was constructed with the purpose to facilitate the tourist to have food and to get relaxation during daytime. There was no concept of providing facility of accommodation. Otherwise, TCGL would have got better bid for the aforesaid tender and other parties would have also bided higher price.
9.14 After issuance of Letter of Intent (LOI) dated 2/7/2014, the petitioner addressed one letter dated 29/7/2014 to TCGL requesting to make necessary changes at his cost. In response to that TCGL vide letter dated 11/11/2014 granted permission to the petitioner to make internal changes without affecting the structural changes in the building.
9.15 I state and submit that the petitioner converted "VISAMO SHELTER" into Hotel and for that, the petitioner has to get permission from the District Collector under the Gujarat Tax on Luxury (Hotels, Lodgings and Houses) Act, 1977.
Tender was never invited to convert "VISAMO SHELTER" into Hotel. "VISAMO SHELTER" was constructed with the purpose to facilitate the tourist to have food and get relaxation during daytime. TCGL invited tender for selection of Management Operator for "VISAMO SHELTER" for the above mentioned property details only. However, after having been selected Management Operator for "VISAMO SHELTER" and after issuance of LOI, the petitioner requested to make changes and permission was granted with a condition not to make any structural changes.
Now, if there is any delay in getting certificate from the Collector under the Gujarat Tax on Luxury (Hotels, Lodgings and Houses) Act, 1977 to run Hotel in place of "VISAMO SHELTER", the same cannot be Page 21 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 considered to extend the contract period from 24/4/2015 to 30/4/2017. As stated earlier, to run "VISAMO SHELTER" no certificate of Collector under the Gujarat Tax on Luxury (Hotels, Lodgings and Houses) Act, 1977 is required."
"13. I deny that the possession of the premises is taken forcefully from the petitioner. Further, the question of issuing any notice did not arise since, the agreement came to an end on 24/4/2020. Admittedly, there is no extension of the contract by TCGL with petitioner. As per clause 15 of the agreement dated 8/4/2015 after the expiry of this management agreement period, the operator shall surrender the possession of all movable and immovable items/articles including superstructure now exist within 7 days after the expiry period of the agreement. Section 37 of the Indian Contract Act, 1872 provides that the parties to a contract must either perform, or offer to perform, the respective promises, unless such performances dispense with or excused under the provisions of this Act, or of any other law.
14. I state and submit that there is no deeming provision in the agreement that automatically the tenure of petitioner would be extended after the agreement comes to an end. As stated earlier, the agreement came to an end on 24/4/2020. As per the terms and conditions of the agreement, after the expiry of this management agreement the petitioner was supposed to surrender the possession immovable items/articles of all movable and including superstructure within 7 working days. Admittedly, the petitioner did not surrender the possession till the committee of TCGL visited on 25/6/2020 and took over peaceful possession of the property by carrying out rojkam/panchnama. The copy of rojkam/panchnama dated 25/6/2020 is annexed herewith and marked as Annexure-R/4.
15. I state and submit that after peaceful possession of the property was taken over by the committee of TCGL, the representative of petitioner forcefully applied locks everywhere in the premises."
38 In such circumstances referred to above, Mr. Joshi prays that there being no merit in the present writ application, the same be rejected.
39 To the aforesaid stance of the Corporation, the writ applicant - firm has said the following in its rejoinder:
"9. With reference to paragraph Nos.9.5 to 9.14 of the affidavit in reply, I say and submit that it is not true and correct that VISAMO was construed for the purpose top facilitate the tourists to have food and get Page 22 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 relaxed during day time and there was no concept of accommodation. It is also not true and correct that for the aforesaid facilities, there was no need of any certificate under the Gujarat Tax on Luxury (Hotels, Lodging and Houses) Act, 1977. It is respectfully submitted that Doctrine of Estoppel would apply to the TCGL after a period of five y ears to raise such contentions. It is respectfully that the property was not in proper condition and the petitioner had submitted the renovation plan along with letter Aster 29.10.2014 and the Executive Engineer, TCGL, had sanctioned the plan of renovation, TCGL vide order dated 11.11.2014 granted permission to renovate the property at the cost of the petitioner, Thereafter, petitioner had spent around Rs.3 Crores to make the property tourist friendly. TCGL has not raised any objection regarding renovation or the present status of the property since last five years and even that is not the ground for non renewal of the license or the exclusion of the period of initial two years when no permission was granted by the District Collector. I say and submit that even the Deputy Collector, vide order dated 31.03.2016 also did not grant permission to run the restaurant as the land was not in the name of TCGL.
10. With reference to paragraph No.9.15 of the affidavit in reply, I say and submit that what is stated therein is not true and correct and therefore not admitted. It is surprising to note that TCGL has submitted that petitioner has converted the VISAMO shelter into Hotel and therefore, petitioner has to obtain permission from the District Collector. It is respectfully submitted that before starting renovation the plans have been sanctioned by the Executive Engineer of the TCGL. Not only that, but the Managing Director of the TCGL had applied for permission before the Collector. If the petitioner has put up the construction against the basic concept of VISAMO shelter and it is only for the food and relaxation, then, the Managing Director of TCGL ought not to have applied for the permission before the Collector in the year 2017. The permission was also granted in the name of Managing Director of TCGL. Therefore, after a period of five years, it is not open for the TCGL to take such kind of frivolous and baseless contentions to save its skin. The delay has occurred because of the fault of TCGL as they have made false statement that the land was owned by them.
11. With reference to paragraph No.9.16 of the affidavit in reply, I say and submit that the respondent has no other point to defend the petition and therefore, in each and every paragraph, they are talking about the construction of rooms at VISAMO shelter. As stated earlier, after the completion of rooms and other facilities, the Managing Director, TCGL himself had applied for permission and the TCGL has granted permission to make the property tourist friendly by sanctioning the plan. Therefore, such contention is baseless and not tenable in law.
12. With reference to paragraph Nos.10 to 12 of the affidavit in reply, I say and submit that what is stated therein is not true and Page 23 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 correct and therefore, not admitted. I say and submit that I have not deposited the management fees for the year 2016-17 and 2017-18 in time because the dispute qua commencement permission was going on before the Collector due to the fault of the TCGL. I say and submit that TCGL had issued notice dated 07.02.2018 for recovery of amount of fees during the disputed period and that was replied and thereafter the amount was also paid.
13. With reference to paragraph No.13 of the affidavit in reply, I say and submit that what is stated therein is not true and correct and therefore not admitted. It is not true that the agreement came to an end on 24.04.2020. I say and submit that there is an extension of the agreement clause and there is no communication from TCGL as to why is extension is not granted. I say and submit that even several letters have been written to exclude the period of initial two years as no permission was granted by the Collector upto 29.04.2017. I say and submit that even in view of the recent Circular of the Central Government with respect to Covid-19 also six months' extension ought to have been granted by the TCGL. Therefore, in view of the above, it cannot be said that the agreement came to an end on 24.04.2020.
14. With reference to paragraph No. 14 of the affidavit in reply, I say and submit that it is not true that there is no deeming provision in the agreement that automatically to extend the tenure of the petitioner. I say and submit that there is a specific clause in the agreement that the agreement is for five years, which may be extendable by additional five years. Therefore, it is incumbent upon the TCGL to give reasons as to why they are not inclined to extend the period. In the present case, no such decision is communicated to the petitioner.
15. With reference to para 15 and 16 I say and submit that clause-6 of the agreement has no application in the present case as petitioner has already paid the entire management fees o the TCGL and there is no due amount with respect to the management fee. I say and submit that the dispute regarding the penalty of the amount would certainly be dependent upon exclusion of the period of initial two years and therefore, it cannot be termed as due amount.
16. With reference to para -17 of the reply I say and submit 'that it is not true that notification dated 13/05/2020 is not applicable in the present case. The benefit granted for the period 22/3/2020 to 23/04/2020 is also not as per direction of central government. I say and submit that the said notification will apply with full force and the TCGL js bound by the said notification and has to exclude the period of Covid-19 and to grant extension of six months.
17. With reference to paragraph-18 of the affidavit in reply, I say and submit that it is nothing but the repetition, however, I strongly Page 24 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 deny what is stated therein. I respectfully say and submit that the interpretation of the TCGL qua the notification of the Central Government is misplaced and it would also apply in the present case.
18. With reference to paragraph No.19 of the affidavit in reply, I say and submit that what is stated therein is not true and correct and not admitted. It is apparent from the record of the case that the entire dispute arose and prejudice caused to the petitioner only because of the misrepresentation on the part of TCGL. That by making false statement, the TCGL induced the petitioner to execute the agreement to manage and operate the VISAMO shelter, which was situated on the government land. It is not true that it was represented that TCGL is owner of the VISAMO only and not the owner of the land. I say and submit that if the owner of the land is government, then also, TCGL cannot construct VISAMO and run and manage the VISAMO without the permission of the government. It is obvious from the facts that after marathon efforts, when the Managing Director of the TCGL had applied for permission, it was granted in the name of Managing Director only, after a period of two years. Therefore, it is incumbent upon the TCGL to exclude the said period and permit the petitioner to continue with the agreement for a further period of two years and it is also incumbent upon the TCGL to extend the period of five years as per the agreement. It is also pertinent to note that respondent No.2 did not reply to various important contentions raised by the petitioner in the petition and the petition was not dealt with para-wise and only the facts convenient to the TCGL has been stated in the affidavit in reply. Therefore, what is not denied by the respondent No.2, stated by the petitioner in the petition, may kindly considered as admission on the part of respondent No.2."
MAINTAINABILITY OF THE WRIT APPLICATION UNDER
ARTICLE 226 OF THE CONSTITUTION:
40 As regards the issue of maintainability, we can do no better than
refer to a recent pronouncement of the Supreme Court in the case of Unitech Limited and others vs. Telangana State Industrial Infrastructure Corporation (TSIIC) and others, reported in 2021 SCC Online 99, wherein, His Lordship Hon'ble Dr.Justice Dhananjaya Y. Chandrachud speaking for the Bench, has observed as under:
"...However, to clear the ground, it is necessary to postulate that recourse to the jurisdiction under Article 226 of the Constitution is not Page 25 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 excluded altogether in a contractual matter. A public law remedy is available for enforcing legal rights subject to well-settled parameters.
39. A two Judge Bench of this Court in ABL International Ltd. vs. Export Credit Guarantee Corporation of India (2004) 3 SCC 553 [ABL International] analyzed a long line of precedent of this Court [K.N.Guruswamy vs. State of Mysore, AIR 1954 SC 592; Gujarat State Financial Corporation v. Lotus Hotels (P) Ltd. (1983) 3 SCC 379; Gunwant Kaur v. Municipal Committee, Bhatinda, (1969) 3 SCC 769] to conclude that writs under Article 226 are maintainable for asserting contractual rights against the state, or its instrumentalities, as defined under Article 12 of the Indian Constitution. Speaking through Justice N Santosh Hegde, the Court held:
"27. ...the following legal principles emerge as to the maintainability of a writ petition :
(a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable.
(b) Merely because some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule.
(c) A writ petition involving a consequential relief of monetary claim is also maintainable.
40. This exposition has been followed by this Court, and has been adopted by three Judge Bench decisions of this Court in State of UP vs. Sudhir Kumar [2020 SCC Online SC 847] and Popatrao Vynkatrao Patil vs. State of Maharashtra1 [Civil Appeal 1600 of 2000 (Supreme Court of India)]. The decision in the ABL International, cautions that the plenary power under Article 226 must be used with circumspection when other remedies have been provided by the contract. But as a statement of principle, the jurisdiction under Article 226 is not excluded in contractual matters. Article 23.1 of the Development Agreement in the present case mandates the parties to resolve their disputes through an arbitration. However, the presence of an arbitration clause within a contract between a state instrumentality and a private party has not acted as an absolute bar to availing remedies under Article 226 [Harbanslal Sahnia v. Indian Oil Corporation Ltd (2003) 2 SCC 107; Ram Baral Singh & Co. v. State of Bihar, (2015) 13 SCC 592]. If the state instrumentality violates its constitutional mandate under Article 14 to act fairly and reasonably, relief under the plenary powers of the Article 226 of the Constitution would lie. This principle was recognized in ABL International:
Page 26 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 "28. However, while entertaining an objection as to the maintainability of a writ petition under Article 226 of the Constitution of India, the court should bear in mind the fact that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the Constitution. The High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. The Court has imposed upon itself certain restrictions in the exercise of this power. (See Whirlpool Corpn. vs. Registrar of Trade Marks [(1998) 8 SCC 1]) And this plenary right of the High Court to issue a prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the Court thinks it necessary to exercise the said jurisdiction." (emphasis supplied)
41. Therefore, while exercising its jurisdiction under Article 226, the Court is entitled to enquire into whether the action of the State or its instrumentalities is arbitrary or unfair and in consequence, in violation of Article 14. The jurisdiction under Article 226 is a valuable constitutional safeguard against an arbitrary exercise of state power or a misuse of authority. In determining as to whether the jurisdiction should be exercised in a contractual dispute, the Court must, undoubtedly eschew, disputed questions of fact which would depend upon an evidentiary determination requiring a trial. But equally, it is well-settled that the jurisdiction under Article 226 cannot be ousted only on the basis that the dispute pertains to the contractual arena. This is for the simple reason that the State and its instrumentalities are not exempt from the duty to act fairly merely because in their business dealings they have entered into the realm of contract. Similarly, the presence of an arbitration clause does oust the jurisdiction under Article 226 in all cases though, it still needs to be decided from case to case as to whether recourse to a public law remedy can justifiably be invoked. The jurisdiction under Article 226 was rightly invoked by the Single Judge and the Division Bench of the Andhra Pradesh in this case, when the foundational representation of the contract has failed.."
41 The principle enunciated in the ABL International Ltd. vs. Export Credit Guarantee Corporation of India (2004) 3 SCC 553 has been consistently upheld by the Supreme Court in Noble Resources vs. State of Orissa and another (2006) 10 SCC 236 (at paragraph 15); Food Corp. of India and another vs. SEIL Ltd. and others (2008) 3 SCC 440 (at Page 27 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 paragraph 16); Central Bank of India vs. Devi Ispat Ltd. and others (2010) 11 SCC 186 (at paragraph 28); and Surya Constructions vs. State of U.P. and others (2019) 16 SCC 794 (at paragraph 3).
42 The judgement of the Supreme Court in the case of Radhakrishna Agarwal and others vs. State of Bihar and others, (1977) 3 SCC 457 was also discussed. It was a judgment in which a writ petition against the State Government's revision of the rates of royalty payable to it under a lease, and the cancellation of the said lease, was held to be governed by contract between the parties, no unreasonableness being made out by way of State action so as to attract the provisions of Article 14 of the Constitution of India. The broad proposition that all such questions are to be settled by civil courts, and not by writ petitions, has been expressly dissented from, as "much water has floated" since this judgment, which was delivered during the emergency when the fundamental rights of persons were suspended. Thus, in Verigamto Naveen vs. Government of A.P. and others (2001) 8 SCC 344, the Supreme Court stated:
"21. On the question that the relief as sought for and granted by the High Court arises purely in the contractual field and, therefore, the High Court ought not to have exercised its power under Article 226 of the Constitution placed very heavy reliance on the decision of the Andhra Pradesh High Court in Y.S. Raja Reddy v. A.P. Mining Corpn. Ltd. [(1988) 2 An LT 722] and the decisions of this Court in Har Shankar v. Dy. Excise & Taxation Commr. [(1975) 1 SCC 737], Radhakrishna Agarwal v. State of Bihar [(1977) 3 SCC 457], Ramlal & Sons v. State of Rajasthan [(1976) 1 SCC 112], Shiv Shankar Dal Mills v. State of Haryana [(1980) 2 SCC 437], Ramana Dayaram Shetty v. International Airport Authority of India [(1979) 3 SCC 489] and Basheshar Nath v. CIT [AIR 1959 SC 149] . Though there is one set of cases rendered by this Court of the type arising in Radhakrishna Agarwal case [(1977) 3 SCC 457] much water has flown in the stream of judicial review in contractual field. In cases where the decision making authority exceeded its statutory power or committed breach of rules or principles of natural justice in exercise of such power or its decision is perverse or passed an irrational order, this Court has interceded even after the contract was entered into between the parties and the Government and its agencies. We may advert to three decisions Page 28 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 of this Court in Dwarkadas Marfatia & Sons vs. Board of Trustees of the Port of Bombay [(1989) 3 SCC 293], Mahabir Auto Stores vs. Indian Oil Corpn. [(1990) 3 SCC 752] and Shrilekha Vidyarthi (Kumari) vs. State of U.P. [(1991) 1 SCC 212]. Where the breach of contract involves breach of statutory obligation when the order complained of was made in exercise of statutory power by a statutory authority, though cause of action arises out of or pertains to contract, brings it within the sphere of public law because the power exercised is apart from contract. The freedom of the Government to enter into business with anybody it likes is subject to the condition of reasonableness and fair play as well as public interest. After entering into a contract, in cancelling the contract which is subject to terms of the statutory provisions, as in the present case, it cannot be said that the matter falls purely in a contractual field. Therefore, we do not think it would be appropriate to suggest that the case on hand is a matter arising purely out of a contract and, therefore, interference under Article 226 of the Constitution is not called for. This contention also stands rejected." (emphasis supplied)
43 In Rishi Kiran Logistics vs. Board of Trustees of Kandla Port and others (2015) 13 SCC 233, the Supreme Court held that a writ petition under Article 226, being a public law remedy, a "public law element"
should be present on facts before Article 226 can be invoked - see paragraphs 37 and 38. The law on this subject has been laid down exhaustively in Joshi Technologies International Inc. vs. Union of India and others (2015) 7 SCC 728, the Supreme Court stating:
"69. The position thus summarised in the aforesaid principles has to be understood in the context of discussion that preceded which we have pointed out above. As per this, no doubt, there is no absolute bar to the maintainability of the writ petition even in contractual matters or where there are disputed questions of fact or even when monetary claim is raised. At the same time, discretion lies with the High Court which under certain circumstances, it can refuse to exercise. It also follows that under the following circumstances, "normally", the Court would not exercise such a discretion:
69.1. The Court may not examine the issue unless the action has some public law character attached to it.
69.2. Whenever a particular mode of settlement of dispute is provided in the contract, the High Court would refuse to exercise its discretion under Article 226 of the Constitution and relegate the party to the said mode of settlement, particularly when settlement of disputes is to be Page 29 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 resorted to through the means of arbitration.
69.3. If there are very serious disputed questions of fact which are of complex nature and require oral evidence for their determination.
69.4. Money claims per se particularly arising out of contractual obligations are normally not to be entertained except in exceptional circumstances.
70. Further, the legal position which emerges from various judgments of this Court dealing with different situations/aspects relating to contracts entered into by the State/public authority with private parties, can be summarised as under:
70.1. At the stage of entering into a contract, the State acts purely in its executive capacity and is bound by the obligations of fairness.
70.2. State in its executive capacity, even in the contractual field, is under obligation to act fairly and cannot practise some discrimination.
70.3. Even in cases where question is of choice or consideration of competing claims before entering into the field of contract, facts have to be investigated and found before the question of a violation of Article 14 of the Constitution could arise. If those facts are disputed and require assessment of evidence the correctness of which can only be tested satisfactorily by taking detailed evidence, involving examination and cross-examination of witnesses, the case could not be conveniently or satisfactorily decided in proceedings under Article 226 of the Constitution. In such cases the Court can direct the aggrieved party to resort to alternate remedy of civil suit, etc. 70.4. Writ jurisdiction of the High Court under Article 226 of the Constitution was not intended to facilitate avoidance of obligation voluntarily incurred.
70.5. Writ petition was not maintainable to avoid contractual obligation. Occurrence of commercial difficulty, inconvenience or hardship in performance of the conditions agreed to in the contract can provide no justification in not complying with the terms of contract which the parties had accepted with open eyes. It cannot ever be that a licensee can work out the licence if he finds it profitable to do so: and he can challenge the conditions under which he agreed to take the licence, if he finds it commercially inexpedient to conduct his business.
70.6. Ordinarily, where a breach of contract is complained of, the party complaining of such breach may sue for specific performance of the contract, if contract is capable of being specifically performed. Otherwise, the party may sue for damages.Page 30 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022
C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 70.7. Writ can be issued where there is executive action unsupported by law or even in respect of a corporation there is denial of equality before law or equal protection of law or if it can be shown that action of the public authorities was without giving any hearing and violation of principles of natural justice after holding that action could not have been taken without observing principles of natural justice.
70.8. If the contract between private party and the State/ instrumentality and/or agency of the State is under the realm of a private law and there is no element of public law, the normal course for the aggrieved party, is to invoke the remedies provided under ordinary civil law rather than approaching the High Court under Article 226 of the Constitution of India and invoking its extraordinary jurisdiction.
70.9. The distinction between public law and private law element in the contract with the State is getting blurred. However, it has not been totally obliterated and where the matter falls purely in private field of contract, this Court has maintained the position that writ petition is not maintainable. The dichotomy between public law and private law rights and remedies would depend on the factual matrix of each case and the distinction between the public law remedies and private law field, cannot be demarcated with precision. In fact, each case has to be examined, on its facts whether the contractual relations between the parties bear insignia of public element. Once on the facts of a particular case it is found that nature of the activity or controversy involves public law element, then the matter can be examined by the High Court in writ petitions under Article 226 of the Constitution of India to see whether action of the State and/or instrumentality or agency of the State is fair, just and equitable or that relevant factors are taken into consideration and irrelevant factors have not gone into the decision making process or that the decision is not arbitrary.
70.10. Mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirements of due consideration of a legitimate expectation forms part of the principle of non- arbitrariness.
70.11. The scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes."
44 It may be added that every case in which a citizen/person knocks at the doors of the writ court for breach of his or its fundamental rights Page 31 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 is a matter which contains a "public law element", as opposed to a case which is concerned only with breach of contract and damages flowing therefrom. Whenever a plea of breach of natural justice is made against the State, the said plea, if found sustainable, sounds in constitutional law as arbitrary State action, which attracts the provisions of Article 14 of the Constitution of India - see Nawabkhan Abbaskhan vs. State of Gujarat (1974) 2 SCC 121 at paragraph 7.
45 The case on hand is, therefore, a case which involves a "public law element". The writ applicant has alleged that the action on the part of the Corporation, leading to the termination of the contract, blacklisting the writ applicant and forfeiting the entire amount towards the security deposit without taking into consideration any of the aspects pointed out by the writ applicant, could be termed as a very arbitrary action.
MEANING AND TRUE IMPORT OF ARBITRARINESS:
46 In Ramana Dayaram Shetty vs. The International Airport Authority
of India and others [AIR 1979 SC 1628], the Supreme Court held:
"This rule also flows directly from the doctrine of equality embodied in Article 14. It is now well settled as a result of the decisions of this Court in E.P. Royappa vs. State of Tamil Nadu, AIR 1974 S.C. 555 and Maneka Gandhi vs. Union of India, AIR 1978 S.C. 597 that Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment. It requires that State action must not be arbitrary but must be based on some rational and relevant principle which is nondiscriminatory; it must not be guided by any extraneous or irrelevant consideration, because that would be denial of equality. The principle of reasonableness and rationality which is legally as well as philosophically an essential element of equality or non-arbitrariness is projected by Article 14 and it must characterize every State action, whether it be under authority of law or in exercise of executive power without making of law- The State cannot, therefore, act arbitrarily in entering into relationship, contractual or otherwise with a third party, but its action must conform to some standard or norm which is rational and non-discriminatory."Page 32 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022
C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021
47 In Dwarkadas Marfatia and Sons vs. Board of Trustees of the Port
of Bombay [A.I.R. 1989 SC 1642], the matter was reexamined in relation to an instrumentality of the State for applicability of Article 14 to all its actions. Referring to the earlier decisions of this Court and examining the arguments for applicability of Article 14, even in contractual matters, Sabyasachi Mukherji, J. (as the learned Chief Justice then was), speaking for himself and Kama, J., reiterated that every action of the State or an instrumentality of the State must be informed by reason......actions uninformed by reason may be questioned as arbitrary in proceedings under Article 226 or Article 32 of the Constitution.
48 In Kumari Shrilekha Vidyarthi etc. etc. vs. State of U.P. and others [AIR 1991 S.C. 537], a two Judges Bench of the Supreme Court made an extensive and in depth analysis of the scope of equality clause and laid down the following propositions:
"It can no longer be doubted at this point of time that Article 14 of the Constitution of India applies also to matters of governmental policy and if the policy or any action of the Government, even in contractual matters, fails to satisfy the test of reasonableness, it would be unconstitutional. (See Ramana Dayaram Shetty vs. The International Airport Authority of India, AIR 1979 S.C. 1628 and Kasturi Lal Lakshmi Reddy vs. State of Jammu and Kashmir, AIR 1980 S.C. 1982). In Col. A.S. Sangwan vs. Union of India, AIR 1981 S.C. 1545, while the discretion to change the policy in exercise of the executive power, when not trammelled by the statute or rule, was held to be wide, it was emphasized as imperative and implicit in Article 14 of the Constitution that a change in policy must be made fairly and should not give the impression that it was so done arbitrarily or by any ulterior criteria. The wide sweep of Article 14 and the requirement of every State action qualifying for its validity on this touch-stone, irrespective of the field of activity of the State, has long been settled. Later decisions of this Court have reinforced the foundation of this tenet and it would be sufficient to refer only to two recent decisions of this Court for this purpose.
It is now too well settled that every State action, in order to survive, must not be susceptible to the vice of arbitrariness which is the crux of Article 14 of the Constitution and basic to the rule of law, the system Page 33 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 which governs us. Arbitrariness is the very negation of the rule of law. Satisfaction of this basic test in every State action is sine qua non to its validity and in this respect, the State cannot claim comparison with a private individual even in the field of contract."
49 The meaning and true import of arbitrariness is more easily visualized than precisely stated or defined. The question, whether an impugned act is arbitrary or not, is ultimately to be answered on the facts and in the circumstances of a given case. An obvious test to apply is to see whether there is any discernible principle emerging from the impugned act and if so, does it satisfy the test of reasonableness. Where a mode is prescribed for doing an act and there is no impediment in following that procedure, performance of the act otherwise and in a manner which does not disclose any discernible principle which is reasonable, may itself attract the vice of arbitrariness. Every State action must be informed by reason and it follows that an act uninformed by reason, is arbitrary. Rule of law contemplates governance by laws and not by humour, whims or caprices of the men to whom the governance is entrusted for the time being. It is trite that be you ever so high, the laws are above you.
50 In S. G. Jaisinghani vs. Union of India [AIR 1967 S.C. 1427 at p. 1434], the Court indicated the test of arbitrariness and the pitfalls to be avoided in all State actions to prevent that vice, in a passage as under :
"In this context it is important to emphasize that the absence of arbitrary power is the first essential of the rule of law upon which our whole constitutional system is based. In a system governed by rule of law, discretion, when conferred upon executive authorities, must be confined within clearly defined limits. The rule of law from this point of view means that decisions should be made by the application of known principles and rules and, in general, such decisions should be predictable and the citizens should know where he is. If a decision is taken without any principle or without any rule it is unpredictable and such a decision is the antithesis of a decision taken in accordance with the rule of law. (See Dicey - "Law of the Constitution" - Tenth Edn., Introduction ex). "Law has reached its finest moments", stated Douglas, Page 34 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 J. in United States v. Wunderlick, (1951-342 US 98 : 96 Law Ed 113), "When it has freed man from the unlimited discretion of some ruler .....where discretion is absolute, man has always suffered". It is in this sense that the rule of law may be said to be the sworn enemy of caprice. Discretion, as Lord Mansfield stated it in classic terms in the case of John Wilkes (1770-98 E.R. 327), "means should discretion guided by law. It must be governed by rule, not humour: it must not be arbitrary, vague and fanciful."
51 In Liberty Oil Mills vs. Union of India, AIR 1984 S.C. 1271, the Supreme Court held that the expression 'without assigning any reason' implied that the decision has to be communicated but reason for the decision has to be stated; but the reason must exist, otherwise the decision would be arbitrary. This decision was relied upon in Shrilekha Vidyarthi (Kumari) vs. State of U.P. [(1991) 1 SCC 212] to reject the argument made on behalf of the State of Uttar Pradesh that in term of Clause 3 of para 7.06 the services of the Government Pleaders could be terminated at any time without assigning any cause as would appear from the following extract of the decision of Supreme Court :
"The other part of Clause 3 which enables the Government to terminate the appointment at any time without assigning any cause can also not be considered in the manner, suggested by the learned Additional Advocate General. The termination may be made even during the subsistence of the term of appointment and without assigning any cause means without communicating any cause to the appointee whose appointment is terminated. However, without assigning any cause is not to be equated with without existence of any cause. It merely means that the reason for which the termination is made need not to be assigned or communicated to the appointee. It was held in Liberty Oil Mills vs. Union of India, AIR 1984 S.C. 1271 that the expression without assigning any reason implies that the decision has to be communicated, but reasons for the decision have not to be stated; but the reasons must exist, otherwise, the decision would be arbitrary. The non-assigning of reasons or the non-communication thereof may be based on public policy, but termination of an appointment without the existence of any cogent reason in furtherance of the object for which the power is given would be arbitrary and, therefore, against public policy. Clause 3 of para 7.06 must, therefore, be understood to mean that the appointment of a District Government Counsel is not to be equated with appointment to a post under the Government in the strict sense, which does not necessarily mean that it results in denuding the Page 35 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 office of its public character; and that the appointment may be terminated even during currency of the term by only communicating the decision of termination without communicating the reasons which led to the termination. It does not mean that the appointment is at the sweet will of the Government which can be terminated at any time, even without the existence of any cogent reasons during the subsistence of the term..............In our opinion, the wide sweep of Article 14 undoubtedly takes within its fold the impugned circular issued by the State of U.P. in exercise of its executive power, irrespective of the precise nature of appointment of the Government counsel in the districts and the other rights, contractual or statutory, which the appointees may have. It is for this reason that we base our decision on the ground that independent of any statutory right, available to the appointees, and assuming for the purpose of this case that the rights flow only from the contract of appointment, the impugned circular, issued in exercise of the executive power of the State, must satisfy Article 14 of the Constitution and if it is shown to be arbitrary, it must be struck down."
52 In Dwarkadas Marfatia's case (supra), Sabyasachi Mukharji, J. (as he then was), indicated the extent of the power of judicial review by observing as under :
"......Where there is arbitrariness in State action, Article 14 springs in and judicial review strikes such an action down. Every action of the executive authority must be subject to rule of law and must be informed by reason. So, whatever, be the activity of the public authority, it should meet the test of Article 14......"
53 Before proceeding further, what may be noted is that a writ of mandamus is a public remedy and this remedy lies, when a public authority fails to perform the duty entrusted to it by law. In other words, a writ is issued against a person, who has a legal duty to perform, but has failed or neglected to do so. Distinguishing a case, wherein a public duty of a State is sought to be enforced, and a case, wherein a contractual obligation of a State is sought to be enforced, Professor Wade, in his well-known treatise, 'Administrative Law', makes it clear that while a public duty is enforceable by the public law remedy of a writ of mandamus, a contractual duty is enforceable, as a matter of Page 36 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 private law, through the avenues of civil courts. The observations made, in this regard, by Professor Wade read, thus, -
"...A distinction which needs to be clarified is that between public duties enforceable by mandamus, which are usually statutory and duties arising merely from contract. Contractual duties are enforceable as matters of private laws by the ordinary contractual remedies, such as damages, injunction, specific performance and declaration. They are not enforceable by mandamus, which in the first place is confined to public duties and secondly is not granted where there are other adequate remedies."
54 What, now, needs to be noted is that howsoever thin and subtle may be, there is, indeed, a real and definite line of demarcation not only between a public wrong and a private wrong, but also between a public law remedy and private law remedy. Article 226 is pre-eminently a public law remedy and is not, generally, available as a remedy against private wrongs. Resort to Article 226 can be had to enforce various rights of the public or to compel the public or statutory authorities to discharge their public duties and/or to act, in the realm of their public functions, within the bounds of law. The remedy under Article 226 can, no doubt, be availed of even against a private body or person; but the scope of the right of mandamus is limited to the enforcement of public duty. In minimum possible words, but with extreme exactitude, clarified the Supreme Court, in Binny Limited and Another vs. Sadasivan and others, reported in (2005) 6 SCC 657, the position of law, in this regard, in these words :
"Thus, it can be seen that a writ of mandamus or the remedy under Article 226 is pre-eminently a public law remedy and is not generally available as a remedy against private wrongs. It is used for enforcement of various rights of the public or to compel public/statutory authorities to discharge their duties and to act within their bounds. It may be used to do justice when there is wrongful exercise of power or a refusal to perform duties. This writ is admirably equipped to serve as a judicial control over administrative actions. This writ could also be issued against any private body or person, specially in view of the words used Page 37 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 in Article 226 of the Constitution. However, the scope of mandamus is limited to enforcement of public duty. The scope of mandamus is determined by the nature of the duty to be enforced, rather than the identity of the authority against whom it is sought. If the private body is discharging a public function and the denial of any right is in connection with the public duty imposed on such body, the public law remedy can be enforced. The duty cast on the public body may be either statutory or otherwise and the source of such power is immaterial, but, nevertheless, there must be the public law element in such action." (See also Kamala Kanta Kalita (DR.) and others v. Assam Cricket Association and others (2006) 1 GLT 528)."
55 Thus, in the face of succinctly laid down position of law with regard to the issuance of a writ of mandamus under Article 226, what one has to bear in mind is that in a case of private wrong, in order to invoke the writ jurisdiction under Article 226, two conditions must be satisfied, namely, (i) the identity of the person, against whom the writ is sought, as a person or body, which is amenable to writ jurisdiction, and
(ii) the nature of duty, which is sought to be enforced, is a public duty or has an element of public interest. In a given case, one may, perhaps, ignore the first pre-requisite, namely, the identity of the person or body as a person or body amenable to writ jurisdiction, but the second prerequisite, as indicated hereinbefore, cannot be ignored, for, in the absence of public interest or in the absence of breach of public duty or in the absence of any public wrong having been committed, no recourse to Article 226 is possible.
56 What also needs to be cautiously noted is that a constitutional or statutory duty is a public duty and enforceable by a writ of mandamus. To put in differently, the rights and duties go hand-in-hand. When a right is given to a person by a State, the State cast upon itself a duty to enforce such a right. Logically, therefore, when a person is given fundamental right by the Constitution, a duty rests on the State to ensure that the person realizes his fundamental rights. In a given case, therefore, if a person, aggrieved by a breach of contract, shows that Page 38 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 though the breach is in the realm of a contract, the duty, sought to be enforced, is a constitutional or statutory duty, the remedy of a writ of mandamus may not be refused, for, it is the constitutional obligation of the High Court, under Article 226, to enforce the constitutional and statutory duties of the State and its instrumentalities.
ANALYSIS: 57 Having heard the learned counsel appearing for the parties and
having gone through the materials on record, the only question that falls for consideration is whether the Corporation could be said to have acted in an unfair and arbitrary manner?
58 We should now look into few relevant terms and conditions stipulated in the agreement.
59 Clause 4.1 reads thus:
"The Visamo Shelter will be handed over to selected Operator on 'AS IS WHERE IS CONDITION'. Any improvements need to be done only by the Operator entirely at his own cost with written approval of TCGL. The operator shall not be allowed to construct, extend or bring any structural changes in the property. Carrying our minor rectification and repair works shall be the responsibility of the Operator only."
60 Clause 4.3 reads thus:
"The Visamo Shelter shall be run by the Operator but the fact that TCGL is the absolute owner of the property, the ownership shall remain with TCGL and during the operation period as stipulated in the Management Agreement, operator is given the following operational rights:
The operator should utilize the Visamo Shelter only for the purpose of running the property and not for any other purpose.
Effective functioning and maintenance of hygiene and cleanliness of all the Toilet Blocks and Wash Areas, round the Page 39 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 clock, during the entire Management Agreement Period, shall be the Prime Responsibility of the Operator. All the necessary repairs (major / minor repairs required for efficient functioning of all the water supply, drainage lines, electric lines and all the sanitary fixtures) required for the effective functioning of the Toilet Blocks and Wash Areas shall be the responsibility of the Operator and must be done by the Operator without any delay and entirely at the Operator's cost. Any blockage / choke up / leakage etc. in all lines / fixtures / fittings to be got rectified without any delay & entirely at operator's cost & any correspondence / liaison with all Local Authorities for permission / approval in this regard is the entire responsibility of the operator.
The food should be prepared and served in hygienic manner by the operator. Provision of safe drinking water shall be the responsibility of the Operator.
Repairs to the existing structure including addition / repair of furniture and fixtures, etc. can be undertaken by the operator at its own cost with the written consent of TCGL and the operator shall maintain the building in good conditions."
61 Clause 4.6 reads thus;
"The Management Fee is to be paid half years, in advance, and the fee shall be increased by 10% every year for the duration of operation. If the Operator failed to pay the Management Fee within the stipulated period, 12% interest per annum will be levied and if the Operator fails to remit the Management Fee and the interest even after 3 months from the due date, action will be taken to takeover possession of the Visamo Shelter from the Operator.
62 Clause 4.7 reads thus:
"The Management Agreement is for a period of five (5) years which may be extendable by additional 5 (five) years. The provision for extension shall be the decision of the Authority; the same shall be based on mutually agreed terms and conditions."
63 Clause 4.24 reads thus:
"In case of any dispute, TCGL will refer the dispute to an Arbitrator in accordance with the provision of the Arbitration and Conciliation Act, Page 40 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 1996 and the parties agreed to abide by the decision of the Arbitrator. All the arbitration shall be subject to the Courts of Gandhinagar jurisdiction."
64 Clause 4.7 referred to above is relevant for the purpose of deciding the present litigation. The said clause provides that the Management Agreement would be for a period of five years, which may be extendable by additional five years. However, it would be within the discretion of the authority whether to extend the Management Agreement for a further period or not.
65 Clause 4.24 provides that in the event of any dispute, the same shall be referred to an Arbitrator in accordance with the provisions of the Arbitration and Conciliation Act, 1996.
66 We are quite disappointed with the manner in which the Corporation has dealt with the writ applicant. It is not in dispute that when the writ applicant took over the "VISAMO", there was nothing at that place. The Corporation has admitted that the entire place was renovated and repaired by the writ applicant at his own costs, and according to the writ applicant, the cost incurred for the renovation is almost to the tune of Rs.3 Crore. All this was done after the renovation plans were approved by the Corporation. With all the basic amenities being provided at the VISAMO, the place became habitable attracting the tourists to stay at the VISAMO. We are informed that there was not even a kitchen to provide even light refreshment to the guests. By the time the renovation came to put an end, a period of two years elapsed i.e. from 2015 - 2017. It is also not in dispute that the writ applicant had to apply with the Collector for grant of license to run a restaurant at the VISAMO. After lot of hassles, ultimately, the Collector granted the license and that too, upon intervention of the Corporation itself. We fail to understand Page 41 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 why the Corporation has taken an unfair stance before us that the writ applicant was not supposed to do anything at the VISAMO and run the same in the same condition when the same was taken over. The renovation continued for a period of two years before the very eyes of the Corporation. If the Corporation was not agreeable to the same, why did it not stopped the writ applicant? Why did it allowed the writ applicant to continue with the renovation? Why did it allowed the writ applicant to invest almost an amount of Rs.3 Crore in upgrading the VISAMO? It is only after 2017 that the writ applicant was able to run the VISAMO for a period of just under three years, and by that time, the contractual period came to an end. Two years' of the writ applicant went without any business. In such circumstances, if the writ applicant requested the Corporation in accordance with clause 4.7 to extend the Management Agreement for a further period of two years' so as to make one composite period of five years', then, in our view, it cannot be said to be an unreasonable request. It was expected of the Corporation to consider the same having regard to the facts stated above.
67 It is not in dispute that the writ applicant has paid the license fee upto April 2021. The writ applicant was sought to be evicted from the premises from June 2020 onwards. No doubt, it is the discretion of the Corporation to extend the license / Management Agreement or not and such extension may be denied by the Corporation even without giving any reason, however, the decision should be rational and on some solid ground. There has been an legitimate expectation of the writ applicant as it has spent a huge amount in establishing the infrastructure. If there has been no infirmity or any other lapse on the part of the writ applicant, then, in such eventuality, the Corporation ought to have given extension for two more years'.
Page 42 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 68 The Delhi High Court, in the case of Kishan Freight Forwarders vs.
Union of India [181 (2011) DLT 547], in an almost identical situation, issued a writ of mandamus to the Railways to grant extension of the contract of the writ applicant therein. The Delhi High Court rejected the argument on the maintainability of the writ despite the arbitration clause in the contract, after relying on various decisions of the Apex Court. The Delhi High Court also rejected the argument of the Railways that fresh Tender would fetch more revenue. In the said case, the Delhi High Court found that the respondent acted in an arbitrary manner in granting extension in some cases while rejecting in others.
69 The Supreme Court in the case of Harbanslal Sahnia vs. Indian Oil Corporation [(2003) 2 SCC 107], set aside the termination of the dealership agreement by the Indian Oil Corporation in a writ petition after reversing the judgement of the High Court rejecting the writ petition on the ground that there existed an arbitration clause. The Supreme Court held that the remedy of writ is available despite the arbitration clause where there is violation of principles of natural justice or infringement of fundamental rights.
70 In the case of ABL International Limited (supra), the Apex Court held that a writ petition is not only maintainable in contractual matters of a Corporation, but also further held that a writ can be issued even in case of disputed facts and where the effect of mandamus is akin to a money decree provided the actions of the State are unfair and contrary to the contractual clauses.
71 We are of the view having regard to the facts of the present case that the writ applicant had a legitimate expectation to be treated fairly in the matter of grant of extension in view of the clear cut Tender clause Page 43 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022 C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 No.4.7 referred to above. The doctrine of legitimate expectation has been recognized by the Supreme Court as constituting a substantive and enforceable right in appropriate cases to import the principles of natural justice in favour of a party whose civil rights are likely to be affected if the Government departs from and takes decision contrary to the legitimate expectation of a party.
72 In the case of M. P. Oil Extraction vs. State of M. P. [(1997) 7 SCC 592], the Apex Court held that with respect to a renewal clause in an agreement, the same constitutes legitimate expectation that the Government should effect to such clause in its usual manner.
73 We are disappointed because whatever has been argued on behalf of the Corporation is contrary to the materials on record. Not only the action on the part of the Corporation in dealing with the writ applicant could be termed as unfair and unreasonable, but even the stance of the Corporation before this Court could be said to be unfair.
74 The writ applicant is entitled for extension as per clause 4.7 at least for a period of two years' from this point of time since the respondent - Corporation being an instrumentality of the State in terms of Article 12 of the Constitution of India is obliged to act in a fair, non- arbitrary, just, transparent and non-discriminatory manner. The respondent - Corporation is, therefore, bound by Article 14 of the Constitution of India and its action cannot result in any infringement of right to equality, as enshrined in the Constitution of India. At the cost of repetition, the extension may be at the discretion of the Corporation, but, the discretion has to be exercised in a fair, reasonable, non-arbitrary and non-discriminatory manner.
Page 44 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022C/SCA/10321/2020 JUDGMENT DATED: 01/12/2021 75 It is very easy for the Corporation to tell the writ applicant to
remove all of its movable fixtures like Air Conditioners, etc., and walk out, but, at the same time, the Corporation should not forget that the place in question, at one point of time, was a VISAMO in its true sense and in a span of two years', the writ applicant upgraded the VISAMO and brought it to a particular level. All that the writ applicant is asking is to permit him to run the VISAMO for a further period of two years'.
76 In view of the aforesaid, we have reached to the conclusion that the impugned order passed by the Managing Director of the Corporation deserves to be quashed and set aside, and the same is, accordingly, quashed and set aside. The petition succeeds and is hereby allowed to the extent that the Corporation shall pass an appropriate order permitting the writ applicants to run and manage the "VISAMO" for a further period of two years' on the same terms and conditions as stipulated in the agreement between the parties. We grant extension of two years' from the date an appropriate order is passed by the Corporation in this regard and the writ applicants start running the VISAMO. The writ applicants shall abide by all other terms and conditions of the contract.
77 The Corporation shall do the needful in accordance with what has been observed by this Court and pass an appropriate order within a period of two weeks from the date of the receipt of the writ of this order.
(J. B. PARDIWALA, J) (VAIBHAVI D. NANAVATI,J) CHANDRESH Page 45 of 45 Downloaded on : Wed Jan 12 06:16:58 IST 2022