Gujarat High Court
Tejmalbhai vs Board on 5 December, 2011
Author: Harsha Devani
Bench: Harsha Devani
SCA/18335/2011 15/ 15 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 18335 of 2011 ========================================= TEJMALBHAI AND COMPANY & 1 - Petitioner(s) Versus BOARD OF TRUSTEES,KANDLA PORT TRUST,THRO CHAIRMAN - Respondent(s) ========================================= Appearance : MR DEVANG NANAVATI with MR. SAURIN MEHTA, MS. PRACHITI SHAH for MRS VD NANAVATI for Petitioners MR DHAVAL D VYAS for Respondent ========================================= CORAM : HONOURABLE MS.JUSTICE HARSHA DEVANI Date : 18/04/2012 ORAL ORDER
By this petition under Article 226 of the Constitution of India, the petitioners have challenged the show cause notice dated 5.12.2011 issued by the respondent to show cause as to why the lease deed executed in favour of the petitioners and should not be determined by forfeiting payments made by the petitioners for the plots in question towards transfer fee, ground rent, deposits, etc. in favour of Kandla Port Trust (KPT).
The main grounds stated in the said show cause notice for seeking cancellation of the lease deed are that under the terms and conditions of the original lease deed, the lease was granted for the purpose of construction of godowns, however, the said purpose has fraudulently been changed from "godown" to "construction of storage tanks" in the lease agreement which was thereafter transferred to the petitioners. It is further alleged in the show cause notice that the matter was investigated by the Central Bureau of Investigation who had come to the conclusion that the fraud has been committed in collusion from the side of the petitioners. That no permission had ever been granted for construction of storage tanks as shown in the lease deed dated 17.4.2002 which in collusion with others, had been changed from "construction of godowns"
to "construction of storage tanks", thereby fraud has been committed. Another ground is that the amount of Rs.3,77,430/- is paid as transfer fees which is quantified much lower to what was required to be paid.
Mr. Devang Nanavati, learned advocate for the petitioners assailed the impugned show cause notice submitting that the same is without jurisdiction and authority of law. It was submitted that there is no provision in the Major Port Trusts Act, 1963 which empowers the respondent to unilaterally cancel the lease deed. Inviting attention to the conditions of the lease deed, it was submitted that the only ground for cancellation of the lease deed is on account of breach of conditions of lease. Referring to clause (3) of the lease deed, it was pointed out that even in case there is any breach, a notice has to be issued to the lessee to compound/remedy the said breach committed by the lessee within a period of a month, and it is only if the lessee fails or neglects to compound/remedy the breach committed by him to the satisfaction of the Chairman, KPT within the stipulated period of one month, the allotment of land will be cancelled and the lease determined by KPT with immediate effect by giving a notice of cancellation of allotment and/or determination of the lease to the party. It was submitted that the language employed in the show cause notice is in terms of clause (3) of the lease deed, however, the same is not issued in respect of any breach of condition and is de hors the powers of the KPT under the Act as well as the lease deed.
It was submitted that even if it is the case of the respondent KPT that the lease deed is void as having been tainted by fraud, it is settled legal position as held by the apex court in the case of Inderjit Singh Grewal v. State of Punjab, (2011) 12 SCC 588, that where a person gets an order by making misrepresentation or playing fraud upon the competent authority, such order cannot be sustained in the eye of the law as fraud unravels everything. However, for setting aside such an order, even if void, the party has to approach the appropriate forum. Thus, even if a decree is void ab initio, declaration to that effect has to be obtained by the person aggrieved from the competent court. It was submitted that under the circumstances, the respondent KPT is required to approach the appropriate forum for a declaration that the lease deed is void on account of fraud. However, the respondent does not have any power to adjudicate on its own the question as to whether the lease deed is void on account of fraud.
Reference was made to the decision of the Supreme Court in the case of Banatwala & Co. v. Life Insurance Corporation of India and another, (2011) 13 SCC 446, for the proposition that although the lease deed is also a contract between the parties, the provisions of the Transfer of Property Act relating to contracts, shall be taken as part of the Contract Act, 1872. As a "lease deed" is a contract relating to "leases" governed by the Transfer of Property Act, the relationship between the landlord and the tenant would be governed by the terms of the lease deed and subject to its terms, by section 108 relating to rights and liabilities of the lessor and lessee, and other statutory provisions controlling leases under the Transfer of Property Act. It was submitted that even if resort is made to the provisions of the Transfer of Property Act and the Contract Act, the same would be governed by the provisions of the lease deed and the statutory provisions controlling the leases. It was submitted that in the facts of the present case, under the conditions of the lease deed or under the statutory provisions, that is, under the Major Port Trusts Act, no cause of action has arisen for the respondent to issue the impugned show cause notice.
Reliance was also placed upon the decision of the Supreme Court in the case of Sunil Pannalal Banthia and others v. City & Industrial Development Corporation of Maharashtra Ltd. and another, (2007) 10 SCC 674, wherein the question before the apex court was as to whether CIDCO had acted in excess of its jurisdiction and authority in cancelling the allotment made to the appellants therein on a unilateral consideration that the allotment had been made in contravention of its rules and regulations and was thereby opposed to public policy and was illegal and void in terms of section 23 of the Contract Act, 1872. The court held that it was not open to CIDCO to take a unilateral decision to cancel the allotment on the ground that it had acted without jurisdiction and/or in excess of jurisdiction and in violation of its rules and regulations. It was held that the stand adopted by CIDCO is opposed to public policy since CIDCO was not entitled to take a unilateral decision to cancel the allotment after the appellants had acted on the basis thereof and had expended large sums of money towards the construction which has progressed to some extent. It was submitted that the said decision would be squarely applicable to the facts of the present case inasmuch as, the lease deed in question has been executed by the respondent in favour of the predecessor in title of the petitioners and that if at all any fraud has been committed, it is by the officer of the Kandla Port Trust who was authorized to execute such lease deed. It was submitted that under the circumstances, KPT is not empowered to unilaterally cancel the lease deed.
Reliance was also placed upon the decision of the Supreme Court in the case of Vishwanath Bapurao Sabale v. Shalinibai Nagappa Sabale and others, (2009) 12 SCC 101, for the proposition that when the fraudulent misrepresentation is as regards character of the document, the same is void, but fraudulent misrepresentation as regards the contents of the document is voidable. It was submitted that in the facts of the present case, the fraud alleged is in respect of the contents of the document and as such, the same is merely voidable for which the respondent KPT is required to approach the appropriate forum for adjudication in that regard, to get the deed avoided. It was, accordingly, urged that the petition deserves to be admitted by granting the interim relief as prayed for.
Reliance was also placed upon a decision of the Supreme Court in the case of ITC Limited v. State of Uttar Pradesh and others, (2011) 7 SCC 493 wherein the court held that a lease governed exclusively by the provisions of the Transfer of Property Act, 1882, could be cancelled only by filing a civil suit for its cancellation or for a declaration that it is illegal, null and void and for the consequential relief of delivery back of possession. Unless and until a court of competent jurisdiction grants such a decree, the lease will continue to be effective and binding. Unilateral cancellation of a registered lease deed by the lessor will neither terminate the lease nor entitle a lessor to seek possession. This is the position under private law. But where the grant of lease is governed by a statute or statutory regulations, and if such statute expressly reserves the power of cancellation or revocation to the lessor, it will be permissible for an authority, as the lessor, to cancel a duly executed and registered lease deed, even if possession has been delivered, on the specific grounds of cancellation provided in the statute.
Vehemently opposing the petition, Mr. Dhaval Vyas, learned advocate for the respondent - Kandla Port Trust reiterated the averments made in the affidavit in reply filed on behalf of the respondent. Attention was also invited to the gist of the averments made in the first information report filed by the Central Bureau of Investigation pursuant to which the show cause notice had been issued, to submit that categorical findings of fraud have been recorded by the Central Bureau of Investigation in its report and that according to the CBI, collusion of the petitioners is also evident. It was submitted that the fraud vitiates everything and as such, the respondent - KPT is duly empowered to seek cancellation of the lease deed. Attention was invited to the provisions of section 34 of the Major Port Trusts Act to submit that in case where a lease for a term is exceeding thirty years, the same has to be made with the previous approval of the Central Government. It was submitted that in the facts of the present case, the Central Government has approved the lease for the purpose of construction of godown and not for the purpose of construction of storage tanks. Under the circumstances, the lease deed executed in favour of the petitioners is without authority of law as it is contrary to the approval granted by the Central Government. Inviting attention to sub-section (3) of section 34 of the Act, which says that no contract which is not made in accordance with the provisions of the Act and the regulations made thereunder shall be binding on the Board, it was submitted that in the light of the fact that the lease deed is not in consonance with the approval granted by the Central Government, the same is not binding upon the Board. It was further submitted that the petition has been filed challenging the show cause notice and as such, the same is premature, inasmuch as, it would always be permissible for the petitioners to raise all contentions before the respondent in response to the show cause notice issued by the KPT.
Reliance was placed upon the decision of the Supreme Court in the case of Hitkarini State v. Corporation of the City of Jabalpur, (1972) 2 SCC 325, wherein the court in the facts of the said case, was of the opinion that if the officer who executed the lease deed had no power to lease out the property in question, the grant of the lease was wholly null and void. It was held that if the so called deed of lease was wholly ineffective and void for the purpose of demising the land for a period of thirty years one could only look at the provisions of the Transfer of Property Act for determining the term for which the tenancy came into existence. Under section 106 of the Transfer of Property Act, the tenancy in such case could only be from month to month because the immovable property had not been leased out for agricultural or manufacturing purpose in which case the lease would have been from year to year. It was submitted that in the facts of the present case, the lease deed being tainted by fraud, the same had been rendered wholly ineffective; hence, for determining the term of tenancy, one has to look at the provisions of the Transfer of Property Act. It was submitted that under the circumstances, the power to determine the lease flows from the provisions of the Transfer of Property Act and the Contract Act. Referring to section 106 of the Transfer of Property Act, which provides for issuance of notice for determination of lease, it was submitted that the impugned notice can be said to be a notice under section 106 of the Transfer of Property Act for determination of the tenancy. Reliance was also placed on the decision of the Supreme Court in the case of Parwati Bai v. Radhika, (2003) 12 SCC 551, wherein the court has held that an objection as to invalidity or infirmity of notice under section 106 of the Transfer of Property Act should be raised specifically and at the earliest; else it will be deemed to have been waived even if there exists one. It was submitted that the petitioners, therefore, had an opportunity to raise objection pursuant to the notice issued by the respondent and as such, no prejudice is caused to the petitioners. Reliance was also placed upon the decision of the Supreme Court in the case of Vasantkumar Radhakisan Vora v. Board of Trustees of the Port of Bombay, (1991) 1 SCC 761, for the proposition that if there is no contract in law, section 106 will be operative and regulate the duration of the lease. It was submitted that the lease deed in question being vitiated by fraud, there is no valid contract as the same does not fulfill the requirements of section 34 of the Major Port Trusts Act and as such, section 106 of the Transfer of Property Act will be operative and regulate the duration of the lease.
Reliance was also placed upon the decision of the Supreme Court in the case of Bhaiya Punjalal Bhagwandin v. Dave Bhagwatprasad Prabhuprasad, AIR 1963 SC 120, for the proposition that section 111 of the Transfer of Property Act states the various circumstances in which a lease of immovable property determines. Clause (h) provides for the determination of the lease on the expiration of a notice to determine the lease, or to quit, or of intention to quit, the property leased, duly given by one party to the other. It was submitted that under the circumstances, the impugned notice is a notice under section 111(h) of the Transfer of Property Act, namely, that it is a notice to determine the lease. It was submitted that the impugned notice is a notice for cancellation of the lease deed as well as for determination of rights under the lease deed and as such, the impugned notice is notice under section 106 read with section 111(h) of the Transfer of Property Act. It was accordingly submitted that the petition being devoid of any merit, deserves to be dismissed.
The facts as emerging from the record show that the respondent KPT had executed a lease deed dated 17.4.2010 in favour of M/s J. M. Baxi & Co., the predecessor in title of the petitioners which contained a covenant to the effect that the lessee shall strictly use the plot, building, structure erected thereon only for the purpose for which the allotment is made, that is, construction of storage tanks. Prior to the execution of the said lease deed, the covenant in the earlier lease deed executed in favour of M/s J. M. Baxi & Co. was that the lessee shall use the plot for the purpose for which the allotment is made, that is, construction of godown. It is the case of the respondent KPT that the words "construction of storage tanks" instead of the words "construction of godowns"
have been fraudulently introduced in the lease deed without the approval of the Central Government. Reliance was placed upon the provisions of section 34 of the Major Port Trusts Act for the purpose of contending that since the Central Government had granted approval for grant of lease for the purpose of construction of godown, the lease itself is bad on the count of not being in consonance with the approval granted by the Central Government and as such, is not binding on the Board. It may be noted that it is not the case of the respondent that the lease deed has been executed by a person who was not authorized to execute the lease. Thus, the officer duly authorized to execute the lease deed has executed the lease deed in favour of the predecessor in title of the petitioners containing the aforesaid covenant. Under the circumstances, reliance placed upon the decision of the Supreme Court in the case of Hitkarini State v. Corporation of the City of Jabalpur (supra) would be of no assistance to the respondent, inasmuch as, in the facts of the said case, the officer who had executed the lease deed had no power to lease out the property in question and as such, grant of the lease was ab-initio null and void. In the facts of the present case, prima facie, grant of lease is not wholly null and void inasmuch as, the same has been executed by the officer duly empowered to do so. The only contention is that the covenant which has been introduced is contrary to the approval of the Central Government. In the aforesaid premises, this court is of the prima facie view that if it is the case of the respondent-KPT that the lease deed is void for the reason that the same is not in consonance with the approval of the Central Government, it is for the KPT to approach the appropriate forum for cancellation of the lease deed.
A perusal of the lease deed in question shows that there is no power vested in the respondent to determine the lease except as provided therein, that is, in respect of breach of any of the terms and conditions of allotment. In the present case, it is an admitted position that there is no breach of any of the terms and conditions of the lease deed so as to permit the respondent to invoke any of the clauses of the lease deed for cancellation of the allotment. A perusal of the provisions of the Major Port Trusts Act shows that there is no provision which empowers the respondent to unilaterally cancel a lease deed executed by it. Thus, neither the statute nor the terms and conditions of the lease deed permit the respondent to cancel the lease deed executed by it, except for breach of terms and conditions of the lease deed. The decision of the Supreme Court in the case of ITC Ltd. v. State of U. P. (supra) is apposite to the facts of the present case, wherein it has been held thus :
"A lease governed exclusively by the provisions of the Transfer of Property Act, 1882 ("the TP Act", for short), could be cancelled only by filing a civil suit for its cancellation or for a declaration that it is illegal, null and void and for the consequential relief of delivery back of possession. Unless and until a court of competent jurisdiction grants such a decree, the lease will continue to be effective and binding. Unilateral cancellation of a registered lease deed by the lessor will neither terminate the lease nor entitle a lessor to seek possession. This is the position under private law. But where the grant of lease is governed by a statute or statutory regulations, and if such statute expressly reserves the power of cancellation or revocation to the lessor, it will be permissible for an authority, as the lessor, to cancel a duly executed and registered lease deed, even if possession has been delivered, on the specific grounds of cancellation provided in the statute."
A perusal of the lease deed in question shows that the duration of the lease is for a term of thirty years from 24.12.1994. Under the circumstances, the duration of the lease deed would come to an end on 23.12.2024. Section 106 of the Transfer of Property Act provides for determination of a lease by issuance of notice under sub-section (1) thereof, depending upon the nature of the lease, namely, whether the lease is from year to year or month to month. Thus, section 106 of the Transfer of Property Act would be applicable in case where the lease is from for month to month or year to year. In the facts of the present case, the lease is for a fixed duration, that is, for a period of thirty years. Under the circumstances, the provisions of section 106 of the Transfer of Property Act would not be attracted. Insofar as section 111 of the Transfer of Property Act is concerned, the same provides for determination of lease on the happening of any of the eventualities mentioned therein. In the present case, reliance has been placed by the learned advocate for the respondent on clause (h) of section 111 which provides for determination of a lease of immovable property on the expiration of a notice to determine the lease, or to quit, or of intention to quit, the property leased, duly given by one party to the other. In the opinion of the Court, prima facie, the provisions of clause (h) of section 111 of the Transfer of Property Act would not be attracted in the facts of the present case because there is no power vested in the lessor to determine a fixed duration lease by issuing notice for determination of lease as contemplated under section 111(h) of the Transfer of Property Act. When the lease is for a fixed duration, the determination of the same has to be founded on any one of the grounds stated in the lease deed or in terms of the provisions of the statute. The authorities cannot arbitrarily determine the rights and interest created in a person in lawful possession of the public premises except for contravention of the conditions of the contract or for violation of the statutory provisions. In the facts of the present case, admittedly there is no contravention of the conditions of the lease deed, nor is there any contravention of any statutory provisions which would call for determination of the lease.
From the contentions advanced by the learned advocate for the respondent, it is apparent that the case of the respondent is that the impugned notice has been issued in exercise of powers under section 106 read with section 111(h) of the Transfer of Property Act. The Supreme Court, in the case of ITC Ltd. v. State of U. P. (supra) has held that a lease governed exclusively by the provisions of the Transfer of Property Act, 1882, can be cancelled only by filing a civil suit for its cancellation or for a declaration that it is illegal, null and void and for the consequential relief of delivery back of possession. Unless and until a court of competent jurisdiction grants such a decree, the lease will continue to be effective and binding. Unilateral cancellation of a registered lease deed by the lessor will neither terminate the lease nor entitle a lessor to seek possession. This is the position under private law. But where the grant of lease is governed by a statute or statutory regulations, and if such statute expressly reserves the power of cancellation or revocation to the lessor, it will be permissible for an authority, as the lessor, to cancel a duly executed and registered lease deed, even if possession has been delivered, on the specific grounds of cancellation provided in the statute. In the facts of the present case, though the grant of lease is governed by statute, the cancellation of lease deed is not sought on the specific grounds for cancellation provided in the statute. Under the circumstances, the second part of the said decision would not be applicable in the facts of the present case. Therefore, when the lease is sought to be cancelled by resorting to the provisions of the Transfer of Property Act, it is not permissible for the respondent to unilaterally cancel the lease deed or to terminate the lease. For the purpose of cancellation of the lease, the respondent would be required to institute a civil suit in that regard.
In the light of the aforesaid discussion, this court is of the view that the matter deserves consideration. Hence, Issue Rule. The petitioners having made out a prima facie case for the reasons stated hereinabove, the interim relief granted earlier shall continue till the final disposal of the petition. Mr. Dhaval Vyas, learned advocate waives service of notice of rule on behalf of the respondent - Kandla Port Trust.
It is clarified that pendency of the present petition shall not preclude the respondent - Kandla Port Trust from resorting to any other remedy in accordance with law for cancellation of the lease deed.
[HARSHA DEVANI, J.] parmar*