Delhi High Court
Mukesh Gupta And Anr. vs Municipal Corporation Of Delhi And Anr. ... on 18 September, 2006
Author: S. Ravindra Bhat
Bench: S. Ravindra Bhat
JUDGMENT S. Ravindra Bhat, J.
1. These two writ proceedings involve common question of fact and law and were therefore heard together.
2. Both writ petitioners claim the relief of cancellation of the auction process in respect of shop Nos. 10 and 14, in the MCD Shopping Complex at Asaf Ali Road, pursuant to tender notice dated 24.10.2002. They also seek consequential directions to the Respondents (hereafter referred to as the MCD) for refund of earnest money deposited by each of them, to the tune of Rs.5 lakhs.
3. The MCD had advertised a tender inviting applications for several built up shops in its shopping complex at Asaf Ali Road. The said tender notice reads as follows:
MUNICIPAL CORPORATION OF DELHI REMUNERATIVE PROJECTS CELL NIT No. ADC/RPC/2002/616 Dated 24.10.02 MCD invites tenders for sale of built-up shops at Asaf Ali Road, on perpetual leasehold basis.
Description/Address of property Price (in lakhs) Build up Area Reserve Shop No.1,1A, 3A, 4,4A and 5 33.10 Sq. M 27.63 Shop No.2,2A and 3 32.88 Sq. M 27.45 Shop No.10 28.32 Sq. M 28.32 Shop No.11 29.02 Sq.M 29.02 Shop No.12,13,14 and 15 28.68 Sq.M 28.68 Shop No.17 29.75 Sq.M 29.75 Shop No.18 27.78 Sq.M 27.78
Tenderers shall enclose the Earnest Money amount equal to rupees five lakhs for each unit in the shape of Bank Draft/pay order or any Scheduled Bank in favor of Commissioner. Municipal Corporation of Delhi failing which the tender shall be summarily rejected.
Sale of tender form will begin on 01.11.2002 and the last date of sale of tender form will be 15.11.2002.
One tender form is to be used for one property only. In case of multiple properties, multiple tender forms have to be bought and separately applied for, with requisite amount of Earnest Money to be submitted, as above, separately for each case.
Check the details of the commercial units provided along with the tender form carefully before filling up the tender form, as the shops are to be allotted on 'as is where is basis'.
Sale is on perpetual lease basis and is on as is where is basis, before filing the tender form the tenderer is advised to see the concerned shop and satisfy himself. It will be deemed that the tenderer has filled in the tender after seeing the shop in question. No dispute regarding size, location and surroundings of built up shops will be entertained in future Tender form complete in all respects, should be deposited in the tender box up to 2.30 p.m. on 18.11.2002 at Room No.108, Remunerative Project Cell, Nigam Bhawan, Kashmere Gate, Delhi.
Tenders will be opened on 18.11.2002 at 3.00 p.m. For any inquiry, you may contact AO (R.P.CELL) on any working day between 2.30 p.m. and 5.00 p.m. In the event of being successful, the successful bidder shall have to deposit the amount of money as per the schedule in the provisional offer of allotment, falling which the earnest money deposited by him shall be forfeited without any further notice to him. No interest will be paid by the MCD on the Earnest Money.
Right of accepting or rejecting any tender/bid without assigning any reason9s) shall rest solely with the Commissioner, MCD nad shlal be bidndig upon the tenderer(s).
NB; Cost of tender form is Rs.500/-
(D.S.Brar) Additional Deputy Commissioner Remunerative Project Cell Tender also available on following Websites for entire validity period
(i) www.tendernotice.net
(ii) www.tenderhome.com
(iii) www.tenderstanding.com R.O.No.554/P10/02-03 (63/771)
4. The terms and conditions as well as guidelines governing auction to the property and the terms of allotment were spelt out by the MCD which had apparently made available a layout map/plan, of the complex to the intending bidders.
5. Both the petitioners submitted bids for the sum of Rs. 46.00 lakhs (in the case of WP(C) 4474/03) and Rs. 47 lakhs (in the case of WP 4483/03). These bids were accepted by the MCD on 25.2.2003; the petitioners were asked to pay the balance amounts as per the terms and conditions governing the bid within 30 days of issuance of the letter.
6. The petitioners projected a grievance that the nature of the layout plan, as a shopping complex was sought to be altered thus varying the offer itself; therefore they approached this Court by separate writ petitions namely WP (C)3165/03 AND 3163/03. The petitions were disposed off in identical terms by order dated 9.5.03, granting permission to them to represent the MCD within a week. The MCD was directed to decide on the representation within three weeks of the receipt of the representation.
7. In the representations subsequently submitted to the MCD the following points were highlighted:
(a) The original offer, as reflected in the layout plan indicated that the shopping complex was one of the largest markets for whole sale and retailing of drugs and pharmaceuticals; the original layout held out that the complex was to comprise of 38 shops with substantial parking space, restaurants etc.
(b) The representations gave a particular image to the petitioners about the nature of the locality and the area to be developed.
(c) the reserve price fixed worked out to Rs. 90,000/- per sq. meter, which was very high but in conformity with the kind of amenities held out
(d) the petitioners had bid considerably higher than the reserved price on the basis of the understanding about the size and nature of the complex
(e) the MCD had completely changed the plans, leaving only 16 shops and converting the rest of the area, earmarked for shops, restaurants etc. into offices, to be used by the horticulture department of the MCD. In view of the representations, the MCD was requested to cancel the auction so far it pertained to the petitioners bid and refund the amounts of Rs. 5 lakh each, deposited as earnest money.
8. The MCD rejected the representation on 18.6.03. It claimed that the various offices shifted into the shopping complex were pursuant to the decision of the Commissioner and that the shops in question allotted to the petitioners namely 10 and 14 were located at the outer side of the complex facing Jawahar Lal Nehru Marg where medical shops were already functioning. The MCD also stated that civic amenities were being increased/approved to facilitate the public expected to visit the offices. Both petitioners were asked to deposit the full and balance amount within a period of 7 days.
9. The petitioners have challenged the rejection and sought the reliefs claimed, alleging that the bids offered by them and accepted by MCD- were on the basis of a particular understanding, about the nature of the entire complex. That understanding was altered and the complex ceased to be one; instead it became an office complex of the MCD. This radically altered the situation and the MCD could not insist upon the petitioners depositing the balance amounts and subsequently refusing to refund the earnest money. The action of the MCD has been impugned as arbitrary. The petitioners have also sought to draw analogy with Section 64 of the Sales of Goods Act to say that the auction leading to the sale of the shops was voidable, since it was based upon a false representation.
10. The MCD in its return has resisted the allegations about change in nature of the market. It is claimed that the sale was to the on as is where is basis-a condition impressed upon all the intending bidders who were also given opportunity to see the shops. As per conditions of the auction no dispute regarding size, location and surroundings of built shops could be entertained in future.
11. It is alleged by the MCD that having voluntarily made bids that were accepted, the petitioners could not escape their contractual obligation to pay the balance amount or face forfeiture of earnest money, a condition they were well aware of when they participated in the bid. The allegation of arbitrariness has been refuted; Section 64 of the Sales of Goods Act, it is stated is inapplicable to the circumstances of the case.
12. Mr. Raman Kapur, learned Counsel submitted that out of the entire complex 4 shops were existing ones and as per plan , which was an integral part of the conditions of the bid, a total number of 38 shops were to be developed along with amenities, which marked out the entire area as a premier and unique pharmaceutical market/shopping complex. The petitioners offered their bids on the understanding that the MCD would develop the entire area and maintain it as a shopping complex and not later, change it into an office complex for its use.
13. Learned Counsel submitted that the very high reserve price of nearly Rs. 90,000/- per meter was indicative of the quality of amenities and the kind of construction held out or offered. On this premise, the petitioners offered high bids, also having regard to the location of the respective shops. In this background, the MCD could not have subsequently changed the layout and converted majority of the commercial space into shops, since it fundamentially altered the terms of offer. It would be inequitable and unconscionable to insist that the petitioners should nevertheless be held bound by the terms and conditions of bid and pay the rest of the amounts or face forfeiture of earnest money.
14. Learned Counsel relied upon the principle of promissory estoppel to say that having induced the petitioners to take a position by virtue of a representation, which resulted in their altering the circumstances to their detriment, the MCD was estopped from resiling from its representation, consistent with fairness and non-arbitrariness. He relied upon the decisions of the Supreme Court reported as Century Spinning and Manufacturing Co. Ltd. v. Ulhas Nagar Municipal Corporation ; Moti Lal Padampat Sugar Mills Co. Ltd. v. State of U.P. ; Lotus Hotels Mills v. Gujarat Financial Corporation , Union of India v. Godfray Philips India Ltd. and Dwarkadas Marfatia and Sons v. Board of Trustees of the Port of Bombay , in support of the submission that the respondent MCD was estopped from insisting upon the terms and conditions by the petitioners and forfeiting the earnest money deposited by them.
15. Learned Counsel submitted that as a public body, the respondent MCD had to act fairly and reasonably-this aspect applied even in the contractual field. The MCD action was neither fair nor reasonable. Counsel submitted that even though provisions of the Sale of Goods Act did not strictly apply, nevertheless the principles underlying Section 64(6) i.e. wherever auctions or bids were based on pretended or false representations, they are voidable at the instance of the tenderer.
16. Learned Counsel for the Respondents submitted that having willingly participated in the tender process and succeeded in it, which led to acceptance of the bid, a concluded contract came into existence between the parties. The petitioners could not in such circumstances wriggle out of their contractual obligations to either pay the balance amounts or face forfeiture of earnest money in the event of non-payment. The entire dispute fell exclusively within the domain of private law and the petitioners were unnecessarily drawing upon elements of public law, by invoking judicial review proceedings, which clearly were not maintainable.
17. Learned Counsel submitted that 16 out of the original 38 shops were retained as shops; however the rest of the space was converted into office use for the MCD having regard to its needs. This was done in view of a modification in the policy after taking into consideration all relevant factors. The petitioners could not be heard to complain, as their shops face the main road and they submitted bids, consciously after having inspected the location of the shops and being aware of the condition that tenders were on as is where is basis.
18. Counsel contended that the actions of the MCD were neither arbitrary nor unreasonable and that the doctrine of promissory estoppel were clearly inapplicable in contractual relationships like the present.
19. It is no doubt true that every action of the State, be it in purely executive functions or in the contractual sphere, has to be fair, reasonable and consistent with the equality Clause (i.e. non discriminatory and non arbitrary). However, the standards for adjudging the fairness of State action in the contractual sphere are somewhat different than in the realm of executive or administrative decision making. It has been recognized from long that the State cannot be saddled with any more restrictions than a private party and must be permitted considerable free play in the joints, in contractual matters. Judicial review of necessity is a nuanced exercise while dealing with State action in the contractual sphere. Thus, courts have been more interventionist and intrusive in scrutinizing pre-contractual factors leading up to establishment of a relationship (criteria specification, eligibility conditions, tender conditions, decision making process during tendering and so on). However, the courts have been far more circumspect and less willing to adjudicate upon the correctness of the State action once a contract is formed. This on the premise that upon acceptance of an offer culminating in existence of contractual relationship, the parties are to resolve their disputes in the normal manner through civil action or arbitration proceedings. This is also premised on the footing that issues such as mistake in contract formation, determination of factors leading to breach and culpability of one or the other party as well as the remedies available are essentially private law remedies which are best managed in civil proceedings, after the parties adduce evidence.
20. In this case, acceptance of the bid and communication of that event to the petitioners, by MCD culminated in a binding, contractual relationship 0between the parties. Thus the facts emerging from the petitions show that in February, 2003, the petitioners were communicated acceptance of their bids by MCD. This is not disputed. They were therefore bound, in terms of the contract which came into existence to adhere to the conditions. Any investigation by the courts as to whether the subsequent or intervening events relieved the petitioners from their obligation to pay full consideration or face forfeiture would be of necessity a fact finding exercise involving possibly elements such as mistake or change of the fundamental basis of contract which would justify or condone the petitioners action. At the other end the same exercise would involve examination of the defense of the MCD that such change did not alter the basis of the contract or that the petitioners did not suffer any monetory losses. All these have to be examined in the light of the materials and the claims, if any for damages/return of earnest money and conversely the stand of the MCD that such amounts have to be retained by it because the petitioners did not fulfilll their part of the bargain, would be seen in the light of evidence adduced. In that sense, this dispute is no different from any other dispute pertaining to a contract between builder (or developer) and purchaser of a property, which would have to be adjudicated upon in civil proceedings.
21. The doctrine of promissory estoppel as explained in the several judgments of the Supreme Court is the facet of non-arbitrariness. In Sharma Transport v. Govt. of A.P. , the Supreme Court described the law as follows:
there is preponderance of judicial opinion that to invoke the doctrine of promissory estoppel, clear, sound and positive foundation must be laid in the petition itself by the party invoking the doctrine and that bald expressions, without any supporting material, to the effect that the doctrine is attracted because the party invoking the doctrine has altered its position relying on the assurance of the Government would not be sufficient to press into aid the doctrine. The principle of promissory estoppel is that where one party has by his word or conduct made to the other a clear and unequivocal promise or representation which is intended to create legal relations or affect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise or representation is made and it is in fact so acted upon by the other party, the promise or representation would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so, having regard to the dealings which have taken place between the parties. The doctrine of promissory estoppel is now well-established one in the field of administrative law.
In the decision reported as Union of India v. Godfrey Philips (India) Ltd. , the Supreme Court held as follows:
The true principle of promissory estoppel is that where one party has by his word or conduct made to the other a clear and unequivocal promise or representation which is intended to create legal relations or effect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise or representation is made and it is in fact so acted upon by the other party, the promise or representation would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so, having regard to the dealings which have taken place between the parties. It has often been said in England that the doctrine of promissory estoppel cannot itself be the basis of an action: it can only be a shield and not a sword: but the law in India has gone far ahead of the narrow position adopted in England and as a result of the decision of this Court in Motilal Padampat Sugar Mills v. State of U.P. it is now well settled that the doctrine of promissory estoppel is not limited in its application only to defense but it can also found a cause of action. The decision of this Court in Motilal Sugar Mills case3 contains an exhaustive discussion of the doctrine of promissory estoppel and we find ourselves wholly in agreement with the various parameters of this doctrine outlined in that decision.
22. Again, in Kasinka Trading v. Union of India , the Supreme Court held as follows:
It has been settled by this Court that the doctrine of promissory estoppel is applicable against the Government also particularly where it is necessary to prevent fraud or manifest injustice. The doctrine, however, cannot be pressed into aid to compel the Government or the public authority to carry out a representation or promise which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make. There is preponderance of judicial opinion that to invoke the doctrine of promissory estoppel clear, sound and positive foundation must be laid in the petition itself by the party invoking the doctrine and that bald expressions, without any supporting material, to the effect that the doctrine is attracted because the party invoking the doctrine has altered its position relying on the assurance of the Government would not be sufficient to press into aid the doctrine. In our opinion, the doctrine of promissory estoppel cannot be invoked in the abstract and the courts are bound to consider all aspects including the results sought to be achieved and the public good at large, because while considering the applicability of the doctrine, the courts have to do equity and the fundamental principles of equity must for ever be present to the mind of the court, while considering the applicability of the doctrine. The doctrine must yield when the equity so demands if it can be shown having regard to the facts and circumstances of the case that it would be inequitable to hold the Government or the public authority to its promise, assurance or representation.
13. The ambit, scope and amplitude of the doctrine of promissory estoppel has been evolved in this country over the last quarter of a century through successive decisions of this Court starting with Union of India v. Indo-Afghan Agencies Ltd. Reference in this connection may be made with advantage to Century Spg. and Mfg. Co. Ltd. v. Ulhasnagar Municipal Council; Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P.; Jit Ram Shiv Kumar v. State of Haryana; Union of India v. Godfrey Philips India Ltd.; Indian Express Newspapers (Bom) (P) Ltd. v. Union of India; Pournami Oil Mills v. State of Kerala; Shri Bakul Oil Industries v. State of Gujarat; Asstt. CCT v. Dharmendra Trading Co.; Amrit Banaspati Co. Ltd. v. State of Punjab and Union of India v. Hindustan Development Corporation. In Godfrey Philips India Ltd. 6 this Court opined: (SCC p. 388, para 13) We may also point out that the doctrine of promissory estoppel being an equitable doctrine, it must yield when the equity so requires; if it can be shown by the Government or public authority that having regard to the facts as they have transpired, it would be inequitable to hold the Government or public authority to the promise or representation made by it, the Court would not raise an equity in favor of the person to whom the promise or representation is made and enforce the promise or representation against the Government or public authority. The doctrine of promissory estoppel would be displaced in such a case, because on the facts, equity would not require that the Government or public authority should be held bound by the promise or representation made by it.
14. In Excise Commissioner, U.P. v. Ram Kumar four learned Judges of this Court observed: (SCC p. 545, para 19) The fact that sales of country liquor had been exempted from sales tax vide Notification No. ST-1149/X-802 (33)-51 dated 6-4-1959 could not operate as an estoppel against the State Government and preclude it from subjecting the sales to tax if it felt impelled to do so in the interest of the revenues of the State which are required for execution of the plans designed to meet the ever- increasing pressing needs of the developing society. It is now well settled by a catena of decisions that there can be no question of estoppel against the Government in the exercise of its legislative, sovereign or executive powers.
15. Prof. S.A. de Smith in his celebrated treatise Judicial Review of Administrative Action, 3rd Edn., at p. 279 sums up the position thus: Contracts and covenants entered into by the Crown are not to be construed as being subject to implied terms that would exclude the exercise of general discretionary powers for the public good. On the contrary they are to be construed as incorporating an implied term that such powers remain exercisable. This is broadly true of other public authorities also. But the status and functions of the Crown in this regard are of a higher order. The Crown cannot be allowed to tie its hands completely by prior undertakings is as clear as the proposition that the Courts cannot allow the Crown to evade compliance with ostensibly binding obligations whenever it thinks fit. If a public authority lawfully repudiates or departs from the terms of a binding contract in order to have been bound in law by an ostensibly binding contract because the undertakings would improperly fetter its general discretionary powers the other party to the agreement has no right whatsoever to damages or compensation under the general law, no matter how serious the damages that party may have suffered.
23. For a proper application of the doctrine of promissory estoppel, there has to be a clear and unequivocal representation by the public authority/State about a fact or a series of facts which logically and factually induced the individual concerned to change his circumstances irrevocably, on the faith of such representation. The change of circumstances must be detrimental, and irrevocable, so as to bind the public authority to the statement initially made. All the ingredients or elements have to be present for application of the doctrine.
24. In the facts of this case, apart from the layout plan said to have been available with the MCD, neither the advertisement nor the terms and conditions of bid or allotment anywhere held out a clear and unequivocal representation as to the continued state of affairs in question i.e. existence of a shopping complex for pharmaceuticals/drugs shops with amenities of the kind alleged by the petitioners. The advertisement stipulates that shops are to be allotted on as is where is basis and more importantly, that no dispute regarding size, location and surroundings of built up shops were to be entertained in future. These two stipulations, to my mind emphatically underlined the MCDs position that the complex itself could be changed as also the nature of the shops or even the nearby shops/areas. Therefore, the argument about the petitioners acting to their detriment, irrevocably on the strength of a clear representation by the MCD, fails. On this score, the doctrine of promissory estoppel cannot apply.
25. As far as the argument of unreasonableness and unfairness is concerned the rationale set out in the preceding portion of the judgment pertaining to judicial review in the contractual sphere, in my opinion concludes the issue. I may also add that non-arbitrariness and unreasonableness, though invaluable principles, cannot be put in a straight jacket, through the prism of the judge concerned; the court performs the role of a ``secondary decision maker'`, mainly concerned with the legality of the decision making process and the bonafides of the decision maker, as well as the process. The court does not and should never, place itself in the position of an appellate body exercising an invasive, value judgment about the correctness or wisdom of the choice of the decision. Seen from these perspectives, the Respondents action cannot be termed as arbitrary or unreasonable.
26. The writ petitions fail in view of the foregoing discussion and are accordingly dismissed without any order as to costs.