Delhi High Court
The Indian Hotels Company Ltd vs New Delhi Municipal Council on 5 September, 2016
Author: V.Kameswar Rao
Bench: V.Kameswar Rao
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on May 30, 2016
Judgment delivered on September 05,2016
+ CS(OS) 651/2013, IAs 9691/2015, 15819/2015 & 1530/2016
THE INDIAN HOTELS COMPANY LTD
..... Plaintiff
Through: Mr. Rajiv Nayar, Sr. Adv.
with Mr. Rishi Agrawala, Mr.
Karan Luthra, Ms. Niyati
Kohli & Mr. Saurabh Seth,
Advs.
versus
NEW DELHI MUNICIPAL COUNCIL
..... Defendant
Through: Mr. Sanjay Jain, ASG with
Mr. Akshay Makhija, CGSC,
Mr. Siddharth Thakur, Mr.
Vidur Mohan, Ms. Bani
Dixit, Ms. Rhea Verma &
Ms. Mahima Bahl, Advs.
CORAM:
HON'BLE MR. JUSTICE V.KAMESWAR RAO
V.KAMESWAR RAO, J.
1. This is a suit filed by the Indian Hotels Company Ltd., plaintiff with the following prayers:-
―(a) Pass a decree of permanent injunction restraining the Defendant by itself, its servants, agents, subordinates and successors from in any manner interfering with the possession, right to operate, run and maintain the hotel premises at 1, Man CS(OS) 651/2013 Page 1 of 257 Singh Road, New Delhi of the Plaintiff, as per the Collaboration Agreement dated 18th December, 1976 read with the Deed of Licence dated 18th December, 1976 and Supplemental Agreement dated 25th September 1979;
(b) Pass a decree of permanent injunction restraining the Defendant, its servants, officers, agents, subordinates and/or its successors from giving effect to the decision communicated through the letter dated 5.11.2012 having No.D/389/PA/D.E.-
l/2012 in respect of hotel premises at 1, Man Singh Road, New Delhi, and/or from giving effect to any known or unknown decision to conduct an auction for running /operating/ maintaining, the hotel premises at 1, Man Singh Road, New Delhi;
(c) Pass any orders as the court may deem fit in the nature and circumstances of the case.‖
2. The case, as set up by the plaintiff in the plaint is, that the areas in what is popularly known as „Lutyens‟, Delhi are governed by the special local authority which was formerly known as New Delhi Municipal Committee constituted under the provisions of Punjab Municipal Act, 1911, these areas including various lands owned by the Government of India. One of the plot, which is the subject-matter of the suit is plot known as Plot No.1, Mansingh Road, New Delhi admeasuring 3.78 acres (1,61,706 sq. feet). It is averred that vide allotment letter dated July 13, 1976 (Exh.P-1) issued by the Government of India, L&DO (Land and CS(OS) 651/2013 Page 2 of 257 Development Office) addressed to the New Delhi Municipal Committee, the said plot was allotted for setting up of a Hotel. It is the case of the plaintiff that it was given to understand, no formal agreement or lease has been executed by Government of India in favour of the defendant. However, the defendant holds this land on the basis of the aforesaid allotment as a perpetual lessee.
3. In 1978, a conference of Pacific Asia Travel Association ("PATA") was proposed to be held. It is in order to facilitate the stay of the delegates and visitors of the PATA conference, the defendant desired to set up a five star hotel in New Delhi. However, since the defendant did not have the expertise of setting up or running a five star hotel, it was agreed that collaboration should be entered into with some expert of repute in the field. It is averred in the plaint, that the plaintiff had also applied for allotment of land for setting up a five star hotel in New Delhi and the Govt. of India had identified the said plot for that purpose. On March 3, 1976, the plaintiff addressed a letter to the defendant and offered to equip a hotel of about 300 rooms of acceptable international standards on the said plot. It is also averred that on March 31, 1976, a further letter (Annexure to Exh.P-40) was addressed by the plaintiff to the defendant proposing to construct a hotel on the subject plot. It was suggested that, at that stage the cost of the hotel building, excluding the CS(OS) 651/2013 Page 3 of 257 cost of the land be borne by defendant, which will be around Rs.425 lakhs. The plaintiff would bear the costs of all other items such as equipment of kitchen, furniture and furnishing in detail, landscaping, operating, supplies etc and thereafter, there would be a revenue sharing arrangement.
4. According to the plaintiff, it was in this background, an Agreement called Collaboration Agreement for hotel building at 1, Mansingh Road, New Delhi was executed by the plaintiff and the defendant on December 18, 1976 (Exh.P-40). The Collaboration Agreement recited the circumstances, in which the same was being executed; viz so as to make the guests accommodation ready for PATA conference sometime in 1978. According to the plaintiff, the Collaboration Agreement broadly provided and recorded the following:-
(i) The plaintiff would undertake construction of hotel building at 1, Mansingh Road, New Delhi at an estimated cost not exceeding Rs.475 lakhs;
(ii) The plaintiff has over 70 years of experience in running, planning, designing, construction and operation of hotels;
(iii) NDMC agreed to collaborate with the plaintiff for construction of hotel by financing the construction cost not exceeding Rs.475 lakhs and to carry out the details as set out in schedule II to the CA;
(iv) In case the construction cost was found to be more than 475 lakhs, the plaintiff would bear the same;CS(OS) 651/2013 Page 4 of 257
(v) the plaintiff would equip the hotel at its own cost, broad details of which were given in Schedule III;
(vi) Article 1 provided for site and construction of hotel building;
(vii) Article II provided for services to be provided during construction by plaintiff;
(viii) Clause 4 of Article II provided for cost of the hotel building;
(ix) Clause 5 of Article II provided for construction of hotel building;
(x) Clause 6 of Article II provided for assets, which belong to the plaintiff;
(xi) Article III provided for general covenance between the parties;
(xii) Clause VIII of Article III provided for NDMC's rights and powers;
(xiii) Article IV provided for the manner of payment of cost of construction;
(xiv) Article XI provided for settlement of specified disputes through mechanism of arbitration as provided therein;
5. It is averred that on the same day, on December 18, 1976, another document titled "Licence Deed" (Exh.P-41) of a hotel building between plaintiff and the defendant came to be executed. According to the plaintiff the licence deed broadly provided as follows:-
i) NDMC (called in the document as 'Licensor') would allow the Plaintiff (described in the documents as 'Licencee') to operate the hotel;
ii) Clause II provided as follows:
―Term:
1: The licence hereby granted shall be in force for a period of 33 years commencing from the date of occupation of the hotel first CS(OS) 651/2013 Page 5 of 257 by guest subject to the condition that the licencee shall be bound by and observe and perform all the terms and conditions contained in this licence throughout the period of this licence;
2. On the expiry of the period of licence of the said hotel building hereby granted the licensor shall have option to grant licence for further period on such terms and conditions as may be mutually agreed upon between licensor and licencee. If licencee shall be desired of obtaining a licence for further period after expiry of present licence it shall give to the licensor a notice in writing of not less than (60) sixty days prior to the date of expiry of the present licence for the consideration of the licensor". (Emphasis supplied)
iii) Clause III provided for licence fee and the manner of payment, The licence fee being 10 ½ % of the gross income of the licencee or a sum equivalent to 15% of the licensor's investment whichever is higher.
iv) The agreement provided elaborately the manner and mode of computation of gross income.
v) Clause VI provided for possession of the hotel building.
vi) Clause VII (2) provided that the Licencee shall reimburse to the Licensor the amount of Ground Rent not exceeding 2.5% of the cost of land valued at Rs. 9.48 lacs every year.
vii) Article VIII provided for other covenants on the part of the licensor and licencee;
viii) Clause IX provided for future expectation of the hotel that during the period of the licence hereby granted or the renewed period of the licence, should it be necessary or expedient in the CS(OS) 651/2013 Page 6 of 257 interest of furtherance and development of tourism in the capital city - Delhi to expand or add to the facilities in the said hotel building in terms of additional guest rooms, function rooms, public areas, restaurant and other facilities either in the same premises and/or adjoining property, if and when made available, the Licensor hereby permits the Licencee to carry out such additions and expansion on the terms and conditions to be mutually agreed upon.
ix) Clause XVI provided for arbitration as dispute settlement mechanism in respect of the named subjects in the Clause only.‖
6. The plaintiff has averred that in terms of the Licence Deed (Exh.P-41), the period of 33 years commenced from October 10, 1978. On September 25, 1979, a Supplemental Agreement (Exh.P-42) was executed between the plaintiff and the defendant, which provided:-
(i) Contribution of the defendant towards collaboration project of construction, maintenance, operation and running of the hotel was calculated as follows;
(a) cost of construction not exceeding 475 lakhs; (b) Rs. 45 lakhs towards cost of financing, supervision and other charges; (c) Cost of acquiring land admeasuring 3.78 acres taken at Rs.106.64 lakhs with land valued at Rs.91.48 lakhs. (d) It was clarified that the total investment of the defendant in the
project has been taken to be Rs.626 lakhs at the maximum
(ii) It was provided that the plaintiff shall pay, to the defendant, a sum of Rs.12.00 lakhs per annum in lieu of house tax payable in respect of CS(OS) 651/2013 Page 7 of 257 hotel building;
7. It is averred by the plaintiff, that by virtue of Supplemental Agreement, the cost of acquiring land being plot No.1, Mansingh Road, New Delhi admeasuring 3.78 acres was valued at Rs.106.64 lakhs comprising Rs.91.48 lakhs being the basic cost of the land of defendant and sum of Rs.10.66 lakhs being arrears of ground rent and Rs.4.5 lakhs being depreciated value of the building on the plot since demolished, was brought in by the defendant into the Joint Venture as their contribution in addition to the cash for construction of hotel building as agreed in the initial agreement. It is the case of the plaintiff, that by virtue of this agreement, the land became the asset of the Joint Venture. According to the plaintiff, if the land was not so brought in, as an asset of the Joint Venture, the defendant would have had to pay a sum of Rs.106.64 lakhs in cash. Thus, from that date onwards, an interest in the land was/stood created in favour of the Joint Venture hotel project. It is the case of the plaintiff, that the land therefore, post the Supplemental Agreement is an asset of the Joint Venture between the plaintiff and the defendant and by virtue of being a Member of this Joint Venture, the plaintiff has an interest in the land as it is an asset of the Joint Venture between the plaintiff and the defendant.
CS(OS) 651/2013 Page 8 of 257
8. The plaintiff would aver that thereafter, it had completed the construction of the hotel building consisting of approximately 300 rooms with all other allied facilities and started the commercial operation of the hotel building with effect from October 10, 1978. The period of 33 years is reckoned from the said date. It is also averred that the plaintiff has incurred an expenditure, at that point of time, to the tune of Rs.461.61 lakhs. The plaintiff would aver that it has been operating and running the hotel since October 10, 1978 and from time to time, has incurred huge expenditure for refurbishing, renovating and maintaining the hotel building and guests‟ rooms and other amenities in the hotel. It is the case of the plaintiff, that till the date of filing of the suit, it had incurred a capital expenditure on the hotel building, to the tune of Rs.129 crores and it has been regularly paying the defendant, the licence fee, in the manner provided in the Licence Deed (Exh.P-41) amounting to Rs.247.25 crores during the initial term of the licence upto October 10, 2011 against defendant‟s investment of Rs.6.26 crores which remained constant, whereas the plaintiff has incurred a capital expenditure of more than Rs.129 crores during the initial term of licence. It is averred that there has never been any litigation with the defendant on running, maintaining and operating the hotel. It is the case of the plaintiff that in terms of Collaboration Agreement, Licence Deed and Supplemental CS(OS) 651/2013 Page 9 of 257 Agreement, the following position emerges:-
i) That although the Collaboration Agreement and the Licence Deed described the Plaintiff as 'licencee' the Plaintiff, in fact and in law, is much more than a licencee and the hotel project is a joint venture between the Plaintiff and the Defendant.
ii) The Plaintiff has interest in the project which includes the land, the building, furnishing, operation and the brand value and goodwill it has generated and associated with the property in question inasmuch it is known be an iconic product of international repute serving the cause of tourism in the capital city.
iii) Although the documents is titled as Collaboration Agreement and the Licence Deed, it is not a mere licence to run the hotel. In fact, it is a Joint Venture between the Plaintiff and Defendant in which the Defendant has brought in the land and a part finance for construction as its contribution towards the Joint Venture.
The Plaintiff in turn has brought in it? contribution the cost of balance construction and the entire costs of furbishing and furnishing the said construction into an operational world class Five Star Deluxe Hotel. The Plaintiff has also brought in its expertise as hotelier of 70 years experience and repute. The Plaintiff has also brought in huge goodwill and the brand equity associated with the name "Taj Group of Hotels" and the reputation of the industrial house which runs the same.
iv) The Collaboration Agreement was signed as the Defendant desired to put up a hotel of about 350 rooms, because Government of India was expected to host PATA Conference in CS(OS) 651/2013 Page 10 of 257 1978 and NDMC was keen to play some role in PATA Conference.
v) While the investment made by the Defendant was up to Rs.626 lacs (including the value of land) towards this Joint Venture, the balance entire contribution of an amount exceeding Rs.129 crores till date. By this joint venture hotel project, the Defendant has earned by way of licence fee cumulatively a sum of Rs. 266.22 crores upto 31.3.2012 as against its total investment of Rs. 6.26 crores in the hotel project.
vi) NDMC is to receive share of the gross revenue or a fixed return on investment regardless of the economic performance of the hotel or regardless of whether hotel has made any profit or not.
vii) The project therefore is Joint Venture of Plaintiff and Defendant and a new public private partnership model designed in 1976 and is not mere licence as understood in the common parlance.
viii) The relationship between Plaintiff and Defendant therefore is not of a mere licencee but of equal status as partners in collaboration. The arrangement and the legal status of the collaboration between the Plaintiff and Defendant is sui generous and therefore is not equivalent with a licence or lease agreement under which the Defendant NDMC may grant licence on its own existing property or auction or sale or lease of vacant piece of land for a specified purpose in favour of a third party.
ix) The aforesaid status is also understood and acknowledged by the parties that the Defendant has under the Licence Deed dated CS(OS) 651/2013 Page 11 of 257 18th December, 1976 an option to grant a licence for a further period whereas the Plaintiff has a right to ask for renewal/extension of licence. Like in normal deed of lease between the parties governed by Transfer of Property Act with a provision for renewal of the lease on such terms and conditions as may be mutually agreed. The present relationship between the Plaintiff and the Defendant is also to be renewed on the same basis and in the event of there being any disagreement the same has to be resolved by applying general principles of Transfer of Property Act and additional administrative law principles since the Defendant is a public authority.‖
9. The plaintiff states that on February 15, 2010 (Exh.P-22) the plaintiff addressed a letter to the defendant intimating the plaintiff‟s exercise of right to seek extension of a licence for a further period. Pursuant thereto, a Committee of senior officials was constituted on September 21, 2010 (Exh.P-2) by the defendant to consider the extension/renewal of the licence of the hotel, and the plaintiff‟s representatives were invited for discussion by the said Committee and various issues were discussed. It is averred that the Committee raised various issues including applicability of Section 141(2) of the New Delhi Municipal Council Act, 1994 („Act of 1994‟ in short) and mode and manner of operationalizing the renewal provisions in the Licence Deed (Exh.P-41). According to the plaintiff, in response to the discussions CS(OS) 651/2013 Page 12 of 257 and queries raised by the defendant, the plaintiff on January 06, 2011 (Exh.P-3) sent a letter to the defendant and addressed all the issues raised. The plaintiff clarified that the guidelines made by the defendant in August 2000 under Section 141(2) of the Act of 1994 were not applicable to the plaintiff for various reasons. It is also averred that on January 11, 2011 plaintiff addressed a letter to the defendant forwarding a legal opinion to explain the legal position arising out of interpretation of Section 141 of the Act of 1994 and the decision of this Court and the Supreme Court in case relating to Chanakya Cinema viz Aggarwal and Modi Enterprises Ltd. vs. New Delhi Municipal Council. On May 04, 2011 (Exh.P-43) a notice of meeting on May 09, 2011 was issued by the Estate department of the defendant in which the plaintiff‟s representatives were invited. Further meeting was convened on June 03, 2011 (Exh.P-4 minutes of the meeting) vide notice dated June 02, 2011 (Exh.P-44). According to the plaintiff, detailed discussions were held and thereon on July 15, 2011 the plaintiff placed on record, the broad issues discussed with the Committee at the meeting, which inter alia included that the licence of the Hotel shall be extended by the plaintiff for a further period of 30 years on and from the expiry of the present term of the licence and the licence fee payable to the defendant by the plaintiff shall be at 17.25% of the gross turnover of the hotel for first 10 CS(OS) 651/2013 Page 13 of 257 years; at 18.25% of the gross turnover of the hotel for the next 10 years and 19.25% of the gross turnover of the hotel for the last 10 years with a minimum guaranteed amount of Rs.21 crores, Rs.25 crores and Rs.30 crores per annum for each cycle of 10 years. According to the plaintiff, the said Committee submitted its report based on discussions concluded with the plaintiff as placed on record by the plaintiff vide its letter dated July 15, 2011 addressed to the defendant. The report of the Committee recommending the extension of the licence on the terms as negotiated with the plaintiff was a testimony to the fact that the defendant had agreed to the extension of licence in favour of the plaintiff and acknowledged the commercial term, which were to be applicable during the extension period. Before the matter of extension of licence in favour of the plaintiff could be formally placed before the Council of the defendant, a meeting of Ministry of Urban Development, Govt. of India (Exh.P-7) took place on August 01, 2011 wherein it was felt that the defendant should invite open bids and the plaintiff should be asked to match the highest bidder to exercise its right of first refusal. On September 08, 2011 (Exh.P-37), a letter was addressed by the defendant to the Secretary, Ministry of Urban Development requesting to get the matter re-examined and approve the defendant‟s proposal to process extension of Licence Deed and Collaboration Agreement on mutually CS(OS) 651/2013 Page 14 of 257 agreed terms and conditions with the plaintiff. On September 28, 2011 (Exh.P-11), the plaintiff addressed a letter to the defendant and requested it to expedite the matter of extension of licence between the plaintiff and the defendant. It is averred by the plaintiff that on September 30, 2011 (Exh.P-45), the plaintiff addressed a letter to the Secretary, Govt. of India, Ministry of Urban of Development department regarding the project and requested it to advise the defendant to go ahead and consider the plaintiff‟s request for renewal of collaboration on mutually agreed terms. It is averred that on October 12, 2011, the plaintiff addressed a letter to the L&DO, Govt. of India forwarding the documents relating to various queries raised by the defendant relating to hotel project and the sanction plans. On November 08, 2011 (Exh.P-46), a letter was addressed by the defendant to the plaintiff informing the plaintiff that with reference to the plaintiff‟s request for extension of the Collaboration Agreement and Licence Deed, made in the letter dated February 15, 2010 (Exh.P-22) the matter was placed before the Council, in its meeting dated October 07, 2011 (Exh.P-12 and Exh.P-13), wherein, it was decided to accord sanction for extension of the existing Collaboration Project and Licence Deed for one year upto October 10, 2012 subject to the condition that the plaintiff should agree to pay the licence fee as per mutually agreed terms and conditions retrospectively CS(OS) 651/2013 Page 15 of 257 with effect from October 11, 2011.
10. It is averred that on November 09, 2011 (the document denied by the defendant), the plaintiff addressed a letter to the defendant acknowledging and confirming the initial extension of one year on the understanding that the one year extension conveyed was to facilitate the formalization of the documentation and the revised commercial terms for the extension of the licence for a further period of 30 years and the plaintiff requested the defendant to facilitate early closure of documents and migration to the new commercial terms and regime. It is averred that the defendant convened a meeting with the plaintiff on July 12, 2012 and apropos that meeting a letter dated July 12, 2012 (Exh.P-47), was addressed by the defendant to the plaintiff requiring the plaintiff to confirm as follows:
―(i) You have offered to pay a minimum licence fee of Rs.21 crores or 17.25% of the gross turnover whichever is higher for this period.
(ii) You will pay the licence fee for the aforesaid period on the basis of actual Gross Turnover for the year 2011-12 as per the latest audited accounts and the balance, if any, on the finalization of audited accounts for the year 2012-13.
(iii) You undertake to make balance payment of the licence fee based on para (i) above within a week of the receipt by you of the approval of the Council as communicated by us in writing.
(iv) You clearly understand that figure indicated at (i) above is subject to CS(OS) 651/2013 Page 16 of 257 final approval by the Council before payment based on it are released.‖
11. On July 13, 2012 (Exh.P-16) the plaintiff confirmed the proposal made by the defendant and requested it to accord its approval for extension of collaboration for a period of 30 years in terms of the plaintiff‟s letter dated July 15, 2011.
12. On August 16, 2012 (Exh.P-48) a letter was addressed by the defendant to the plaintiff informing that the plaintiffs letter dated July 13, 2012 was placed before the Council at its meeting held on July 25, 2012 (Exh.P-19) and the Council had decided as follows:
―After considering the facts and circumstances of the case it was resolved by the Council by majority that the Council may charge from the licencee Messrs. IHC Ltd. fee at 17.25% of the gross turnover or Rs.21 crores a year for the period from 11th October 2011 to 10th October, 2012 whichever is higher".
13. It is averred by the plaintiff that on August 17, 2012 the plaintiff addressed a letter to the defendant forwarding the payment as indicated in the defendant's letter. On September 26, 2011 the plaintiff addressed a communication to the defendant forwarding therewith an opinion obtained by the plaintiff from Senior Advocate on the issue as to whether it was obligatory in law for the defendant to invite bids in an open auction for deciding as to who should operate the hotel with an option to CS(OS) 651/2013 Page 17 of 257 the querist to match the highest bid received through such process or whether the defendant could extend the licence of the hotel on the mutually agreed terms and conditions. According to the plaintiff, the opinion was necessitated in view of certain issues raised by the defendant during the discussion process.
14. The plaintiff avers that it received a letter dated November 05, 2012 (Exh.P-49) from the defendant conveying the decision of the Council taken in its meeting held on September 27, 2012 (Exh.P-20) resolving to opt for public auction to determine the market price of the licence fee with the first right of refusal to the Plaintiff as follows:- -
"New Delhi Municipal Council in its meeting held on 27th September, 2012 had considered a proposal on the above cited subject and had resolved to opt for public auction in a fair and transparent manner of its property at 1 Mansingh Road, New Delhi with first right of refusal to Indian Hotels Company Limited. The recourse to public auction would serve to determine the market price and the licence fee that Messrs. IHCL would have to match if they wish to run the hotel at this property".
15. It is averred by the plaintiff that on November 20, 2012 (Exh.P-39) the plaintiff addressed a letter to the defendant in response to letter dated November 05, 2012 (Exh.P-49) expressing its surprise and disappointment that instead of extending the Agreement on the mutually CS(OS) 651/2013 Page 18 of 257 agreeable terms the Council had decided to opt for public auction for the hotel which the Plaintiff would have to match in case it wished to operate the hotel. The letter recapitulated the history of the transaction and in particular that:
i) the arrangement between the Plaintiff and Defendant was a Joint Venture partnership collaboration and the terms of such collaboration were initially recorded for a first tenure of 33 years;
ii) the plaintiff had a right to seek an extension of licence;
iii) such renewal was to be on a mutually accepted terms and conditions;
iv) that NDMC cannot and indeed did not have any issue or objection for such renewal;
v) the only issue being on what terms such extension of collaboration is to be made;
vi) the assumption that the renewal/extension of licence should be on the market determined price of the project would run counter to the very notion of a joint venture on which this project was founded;
vii) the Defendant had contributed land leased from the Govt.of India to the hotel project which was valued at the then prevailing market rate of Rs. 91.48 lacs. The said amount was accordingly treated by the parties as having been paid in kind by the Defendant as part of its capital contribution to the project established for the construction and operation of the hotel. The investment in cash by the 'Defendant was capped at Rs.
475 lacs (later revised to Rs. 626 lacs including the cost of land by mutual consent). The rest of the investment was made by the Plaintiff. The hotel was thus constructed as a joint venture between the Plaintiff and the Defendant;
CS(OS) 651/2013 Page 19 of 257
viii) that treating this Hotel as a greenfield project in which the value should be market determined overlooks the basic fact that in 1976, The Defendant received in full the then market value of the land - albeit as a credit towards its share of capital investment. It would have made no difference if the value had been paid in cash and then brought back by the Defendant into the joint venture. The consequence of payment of full market value of the land by credit to the capital contribution is that the land should be taken as being committed to the Joint venture. The Defendant is a public body and is expected to act fairly. Just because the joint venture arrangement was captured in a Licence Deed and a Collaboration Agreement instead of a conveyance [since the joint venture was not incorporated as a SPV - so as to benefit from the Brand of Taj and Indian Hotels] does not alter the fact that Defendant has received full credit for the value of the land, and has enjoyed returns on that basis for all these years.
ix) that applying the principles of administrative law and considering the fact that the Defendant is public authority, it must get a fair return and the same should be determined in accordance with the normal procedure adopted for renewal of leases under the Transfer of Property Act;
x) that the method suggested in the communication dated 5th November, 2012 of inviting the bids "to determine market price of licence fee" was grossly unfair to the Plaintiff and in fact would raise all unnecessary and unhealthy speculation to cause prejudice and injury to the Plaintiff.
16. It is averred that the plaintiff therefore submitted that in view of the very long term relationship between NDMC and the Plaintiff the matter should be reconsidered and the Defendant must earn a fair share CS(OS) 651/2013 Page 20 of 257 of gross revenue which should be determined on the basis of accepted norms for such determination and not by competitive bidding.
17. On March 25, 2013 the Plaintiff was served with SLP(C) No.9142 of 2013 whereby one Mr. Mithilesh Kumar Pandey has challenged the order passed by this Court in WP(C ) No.6615 of 2012 dated October 17, 2012 in respect of the two annual extensions of licence upto October 2013. The Plaintiff submits that it was not made a party to the Writ Petition before this Court and became aware of the proceedings only through the receipt of notice when the Supreme Court allowed the impleadment of the plaintiff and issued notice on the SLP.
18. It is averred that on March 25, 2013, the plaintiff again represented to the Defendant in respect of the Defendant's impugned decision dated September 27, 2012 (Exh.P-20), conveyed to the Plaintiff by virtue of the impugned communication dated November 05, 2012 (Exh.P-49).
19. It is in terms of the aforesaid background, the suit was filed by the plaintiff on April 4, 2013, seeking the reliefs already reflected above.
20. The defendant initially filed a written statement on May 08, 2013. On May 10, 2013, (Exh.DW1/P4) the Ministry of Home Affairs vide their letter wrote to the defendant as under:-
―2. It is observed that the said proposal to allow IHCL to have CS(OS) 651/2013 Page 21 of 257 the first right to refusal in the said public auction has not been provided for in the lease deed. A provision of the first right of refusal will result in lower bids in the public auction. Therefore, Ministry of Home Affairs is of the considered opinion that the first right of refusal should not be allowed to IHCL in the proposed auction and fresh lease should be granted by open public auction.‖
21. On June 27, 2013, (Exh.DW1/P5), the Ministry of Home Affairs wrote to the defendant as under:-
―I am directed to refer to NDMC's letter No.D-
43/Dir(GA/CS)/2013 dated 18.6.2013 on the subject cited above and to say that the first right of refusal will not fetch the correct market price. Either the competitors would bid excessively or may perhaps show no interest at all. Therefore, in the interest of transparency, it is better that NDMC may go for public auction, whether the IHCL may participate as the bidder. It is also felt, that Courts will not take objection to public auction as it is a more transparent method and if NDMC so feels, can file a revised reply quoting the directions of this Ministry.‖
22. The defendant vide letter dated October 11, 2013 (Exh.P-31) wrote to the plaintiff as under:-
― Dated: 11.10.2013
Dh. D.K. Beri,
Sr. Vice President (Business & Corporate Affairs), Indian Hotels Co. Ltd.
CS(OS) 651/2013 Page 22 of 257Taj Palace, Sardar Patel Marg, New Delhi.
Sub: Extension of collaboration Agreement and Licence Deed between Indian Hotels Co. Ltd. in respect of Hotel Taj Man Singh.
Reference: (i) Letter No.D/290/DE-I dated 8.11.2011
(ii) Letter No. D/329/PA/DE-I/2012 dated 16.8.2012
(iii) Letter No.D/389/PA/DE-I/2012 dt. 5.11.2012 Sir, The New Delhi Municipal Council in its meeting held on 7.10.2013 had considered the proposal on the above cited subject and has resolved ―that the existing arrangement as per Council's Resolution dated 27th September, 2012 is available upto 10.10.2013. Since the instructions of the Ministry of Home Affairs consequent upon the opinion of the Solicitor General of India, as required by this Council Meeting on 27.06.2013, has not been received, the Council resolved that the existing arrangement for payment of licence fee should continue till 31.3.2014, or till the Council takes a decision on receipt of such opinion, whichever is earlier‖.
2. This letter may be read in continuation to the letters referred above.‖
23. On January 1, 2015 (Exh.DW1/5), the Ministry of Home Affairs issued an OM directing the defendant under 396 of the NDMC Act, 1994 to resort to an open auction. It appears, in view of the direction of Ministry of Home Affairs, the defendant filed an application being IA CS(OS) 651/2013 Page 23 of 257 No.16139/2015 under Order VI Rule 17 of the CPC for amendment of the written statement. The said amendment was allowed by this Court on March 17, 2016 on the statement of Mr. Rajiv Nayar, learned Senior Counsel for the plaintiff giving no objection and the amended written statement filed by the defendant was brought on record, which was without prejudice to the rights and contentions of the plaintiff in the suit. Amended replication has also been filed by the plaintiff.
24. It is the stand of the defendant in the amended written statement, that the suit is barred by the provisions of Section 385 of the Act of 1994 for want of service of statutory notice to the defendant and as such, the suit is liable to be dismissed. It is also averred that the plaintiff has no legal enforceable right to claim any of the reliefs as sought for. It is also stated that the plaintiff has absolutely no right, title or interest in the land or building in question which exclusively belongs to and vests with the defendant. The plaintiff has no right to demand extension of licence to operate the hotel as of right as it has no such right in law, collaboration agreement or the Licence Deed. The plaintiff was merely a licencee to operate the hotel for a limited period with no right to transfer, sublet the said hotel or any portion thereof, permanently or temporarily to anybody else. The period whereof has since expired. The relief sought for, cannot be granted without seeking declaration to the decision of the CS(OS) 651/2013 Page 24 of 257 Council. It is stated, that the suit does not disclose any cause of action in the light of the expiry of the period of licence and the undertaking of the plaintiff in the Licence Deed to hand over the possession of the hotel building together with fittings and fixtures and all other installations belonging to the defendant as per the Collaboration Agreement, on the expiry of the licence period. It is stated that the suit is barred by law in the light of the mandate of the provisions of law as contained in Section 141 (2) of the Act of 1994. The suit is hit by Order 1 Rule 2 CPC. A reference was also made to Public Interest Litigation filed in this Court vide Writ Petition (Civil) No.6615/2012, in which extension of licence beyond October 10, 2012 was challenged. The Court dismissed the Public Interest Litigation by noting the statement of the counsel for the defendant, who refuted that the decision for extension of lease for one year from October 2012 to October 2013 was without any agenda item. It is also stated that the defendant further decided to opt for public auction in a fair and transparent manner, with first right of refusal to IHCL. It was also noted that the statement of the counsel for the defendant was recorded that for a purpose of holding public auction, M/s Ernst and Young consultants have been appointed and an attempt is being made to hold the public auction within a period of three to six months from that date.
CS(OS) 651/2013 Page 25 of 257
25. It is also the stand of the defendant:-
(i) A plot of land measuring 3.78 acres together with structures standing thereon at No. 1,Man Singh Road, New Delhi was allotted to the defendant New Delhi Municipal Council vide letter dated July 13, 1976 by the Ministry of Works & Housing, Land & Development Office, Govt of India. The said land was allotted to the defendant for construction of a hotel inconformity with the architectural surrounding of the area after approval of the building plans.
(ii) The purpose of the allotment of the land by the defendant was to construct a Hotel which would be available for the Pacific Area Travel Association Conference in 1978. The Plaintiff then sent a proposal to the defendant stating therein that it would be glad to jointly participate in the construction and management of a hotel of acceptable international standards on the said land, After considering the proposal of the Plaintiff, the defendant agreed to enter into a collaboration agreement for construction of a hotel building along with a Licence Deed to operate the said hotel after construction for a fixed period of 33 years.
(iii) The Plaintiff represented to the defendant that it had acquired considerable expertise and knowledge in the planning, designing, construction and operation of hotel for over 70 years and had offered its services in the aforesaid areas to the NDMC, vide letter dated, March 31, CS(OS) 651/2013 Page 26 of 257 1976.
(iv) Accordingly on the basis of the representations made by the Plaintiff, the defendant entered into a Collaboration Agreement for the construction of a hotel building, on December 18, 1976 with Plaintiff with the object of putting up a hotel of about 350 rooms together with all related facilities conforming to 5 star classifications and also to boost its own revenues.
(v) In order to put up a hotel of acceptable standards (5 star classifications) the defendant NDMC agreed to finance the construction of building at the cost not exceeding Rs.475 Lakhs, which included civil construction, plumbing, sanitary fittings, heating, ventilation, air conditioning, electrical installations, elevators and swimming pool etc.
(vi) On the basis of the representations made by the Plaintiff the defendant had agreed to collaborate with the Plaintiff in the construction of the hotel building by financing the cost of construction of the hotel building as indicated above.
(vii) As per the said collaboration agreement the Plaintiff had agreed to equip the hotel building with equipments such as kitchen equipments, laundry equipment, furniture and furnishings at its own the cost. The cost of equipments to be financed by the Plaintiff was around Rs. 550 Lakhs.
As per the said agreement the Plaintiff was also required to carry out the CS(OS) 651/2013 Page 27 of 257 detailed study for the purpose of putting up a hotel, to recommend the salient design requirement, to provide project management services, to select and appoint architect, consulting engineer etc. with approval of the defendant. As per the said agreement the defendant had agreed to pay to the Plaintiff in a phased manner on the basis of work completed by the Plaintiff.
(viii) That in terms of the said collaboration agreement defendant further granted a licence to the Plaintiff vide Licence Deed dated December 18, 1976 (Exh.P-41) for the purpose of running a hotel of acceptable standards (5 star classifications) for a fixed period of 33 years only, commencing from the date of first guest occupation in the hotel. The terms of the agreement and the Licence Deed clearly show that no proprietary rights were vested in the Plaintiff at all which have always continued to vest in the NDMC and that the collaboration agreement was executed only for the purpose of construction of hotel building with the further conditions that the Plaintiff would be entitled to only operate and manage the hotel for a fixed period of 33 years only on licence basis only.
26. It is the case of the defendant in the written statement, that the plaintiff has totally misread the Licence Deed in total contravention of the laws. The plaintiff has got no right to seek extension or renewal of CS(OS) 651/2013 Page 28 of 257 the Agreement as of right. According to the defendant, the building was constructed by the defendant with the assistance of the plaintiff as per Collaboration Agreement, and the said building was to be only managed and operated as a Hotel as per the terms of the Licence Deed for a period of 33 years only with no right in the property in favour of the plaintiff, which continues to vest with the defendant. The defendant relied upon the following clauses of the Licence Deed:-
(i) As per clause IV para 3 of the licence deed the defendant had absolute right to revoke/cancel the licence, to take possession of the licenced premises by recourse of laws as provided in the Public Premises Act 1971, or any other such law in force, in the event of the plaintiff committing a default in the payment of That licence fee.
(ii) As per Clause VI para 2 of the licence deed the ownership of the hotel for all times exclusively vests with the defendant together with all fitting, fixture and other installation of immovable type or the type the removal of which is likely to cause damage to the building.
(iii) As per clause VI para 3 of the licence deed the ownership of all movable assets in the hotel building referred to in schedule III to the collaboration agreement was to remain with the plaintiff. Whereas, after the termination of the licence deed, the option to buy the plaintiffs assets at reasonable price was also given to the defendant.CS(OS) 651/2013 Page 29 of 257
(iv) As per clause VII para 6 of the licence deed, the plaintiff was granted the licence to use the said hotel building exclusively and strictly for the purposes of running a hotel as per acceptable standards together with related facilities and business appurtenant thereto for the furtherance and development of tourism in India and not for any other purposes, whatsoever.
(v) As per clause VII para 12 of the licence deed, the plaintiff has no right to transfer/sublet the said hotel or any portion thereof, permanently or temporarily, to anybody else. As per clause X of the licence deed, the right to terminate the licence deed remained with the defendant in case of default in payment of licence feed in the manner provided in the licence deed willfully or otherwise the plaintiff.
(vi) As per clause XII of the licence deed, the plaintiff had agreed to hand over the possession of the hotel building together with fittings and fixtures and all other installations belonging to the defendant as per the Collaboration Agreement, on the expiry of the licence period and in the event of the licence having been terminated earlier by the defendant, within 30 days from the expiry of the same.
This clause also stipulates that the plaintiff shall pay such damage charges for overstay in the premises from the date of expiry of the licence period at the rates determined by the defendant from time to CS(OS) 651/2013 Page 30 of 257 time.
27. It is stated that the defendant had agreed to collaborate with the plaintiff in the construction of hotel building by financing the construction of the said building amounting to Rs.475 lakhs, later revised to Rs.626 lakhs. The construction was done by the defendant with the assistance of the plaintiff keeping in view its experience strictly as per the Agreement. It is also stated, that whatever the plaintiff has invested for running the hotel purely as a licencee, is, as per the terms of the Agreement and the Licence Deed and the plaintiff has recovered its investment in multiples of the same. It is stated that the tariffs/public charges are directly proportionate to the standards maintained by the hotel in the hospitality industry. The investment by the plaintiff was squarely towards business consideration and profiteering by improving the quality of services. It is also stated, that the price of the land on which the hotel stands has multiplied manifold. It is also averred that the Supplemental Agreement dated September 25, 1979 (Exh.P-42) was executed between the parties, whereby the defendant‟s contribution was raised from Rs.475 lakhs to Rs.626 lakhs, which was arrived at, by including the cost of the land, arrears of ground rent etc. The defendant denied that the stated contribution was an investment in the Joint Venture hotel project for the land to become the asset of collaboration of CS(OS) 651/2013 Page 31 of 257 the plaintiff and the defendant. It is stated, neither the Collaboration Agreement nor the intent of the defendant at any stage provide so. The defendant relied upon explanation (A) II of the Supplemental Agreement makes it explicitly clear that the defendant is the licensor and the plaintiff is merely the licencee. Para 3 of the Supplemental Agreement clearly provides that the defendant has offered and the plaintiff has agreed to accept the licence to occupy and use the hotel building upon its completion for the purpose of running the hotel only with no proprietary rights in the least which continue to vest in the defendant and is public property required to be dealt with as per law. According to the defendant the Supplemental Agreement only supplement/clarifies the original Agreement and does not change the original Licence Deed. It is stated that as per Para 2 of Clause II of the Licence deed the option to renew the licence for a further period has been exclusively vested with the defendant. The discretion to renew or not to renew exclusively vests with the defendant in terms of the Licence Deed dated December 18, 1976 (Exh.P-41). It is stated that no public property can be dealt with, in violation of the provisions of the Act of 1994. Accordingly, the Chairperson of the defendant had constituted a Committee on July 27, 2010 to examine the legal, contractual and financial aspects of the proposal and request received from the plaintiff. The said Committee CS(OS) 651/2013 Page 32 of 257 held number of meetings and also considered the legal advice. Meanwhile, the Ministry of Urban Development, Govt. of India suggested that fresh bids should be invited for running the hotel at the demised premises, while giving first right of refusal to the plaintiff. One such meeting was convened by the defendant on June 3, 2011 to look into the request of the plaintiff for renewal of licence and minutes of the meeting were forwarded for approval of the Chairperson. Furthermore, the defendant also decided to take the expert opinion of a consultant to give the best possible evaluation in the matter. Since the consultant required time to come up with detailed recommendation, the defendant in the interregnum decided in its Council meeting dated October 7, 2011 to extend the terms of licence only for a period of one year from October 11, 2011 to October 10, 2012 which gives no vested right to the plaintiff. It is stated that the extension of Licence Deed from October 11, 2011 to October 10, 2012 and from October 11, 2012 to October 10, 2013 or till such time, a new licencee was chosen was granted by the defendant to the plaintiff only on temporary basis so that the hotel could be operated by the plaintiff till the new vendor/licencee was put in place through public auction for the purpose of operating and managing the hotel. The Collaboration Agreement and the Licence Deed have to be read together. According to the defendant, an attempt is being made to grab the public CS(OS) 651/2013 Page 33 of 257 property and wants to scuttle the provisions of law and the laws as enunciated by the Apex Court qua the public property.
28. It is also averred in the written statement, that the Ministry of Home Affairs, Govt. of India, vide OM dated May 10, 2013 (Exh.DW1/P4) and June 27, 2013 (Exh.DW1/P5), in exercise of its power under Section 395 of the Act of 1994 issued directions whereby, advising the defendant to go for open auction without giving the first right of refusal to the plaintiff. According to the defendant, since there were divergent opinions, the defendant brought the same to the notice of the competent authority in the Central Government. While awaiting the final view of the Central Government, in this regard, extended the licence period from time to time. Final decision was conveyed by the Central Government vide OM dated January 1, 2015 (Exh.DW1/5) in exercise of its power under Section 396 of the Act of 1994, whereby directing the defendant to resort to public auction without giving right of first refusal to the plaintiff and find best bidder in respect of the property situated at 1, Man Singh Road, New Delhi. It is stated, that offer given to the plaintiff as right of first refusal in terms of resolution dated September 27, 2012 stands superseded by the directions of the Central Government and in terms of the resolution of the Council dated January 30, 2015 (page 202, part of Exh.DW1/6) and particularly March 25, CS(OS) 651/2013 Page 34 of 257 2015 (Exh.DW1/6). It is submitted that the plaintiff in any case, did not accept the offer of right of first refusal given to it earlier and challenged the decision of the Govt. of India for open auction before this Court by way of the present suit. Thus, the offer of right of first refusal granted in terms of resolution dated September 27, 2012 (Exh.P-20) stands withdrawn in terms of OM dated January 1, 2015 before its acceptance by the plaintiff.
29. The defendant in their written statement, has stated that in terms of Section 141(2) of the Act of 1994 that the use of any immovable property should be allowed on payment of licence fee, determined on competitive basis. It is the stand of the defendant that auction to renew the licence squarely and exclusively rests with the defendant, and the stand has been narrated in the following manner in para 25, in reply to merits.
―25. XXXX XXXX XXXX The relevant provision of Section 141 of the N.D.M.C. Act 1994, which relates to "Property and Contracts" provides that the Chairperson may with the sanction of the Council, lease, sell, let out on hire or otherwise transfer any immovable property belonging to the Council. The consideration for which any immovable properly may be sold, leased or otherwise transferred in normal and fair competition. As per sub section(3) of this section, the CS(OS) 651/2013 Page 35 of 257 sanction of the Council under this section may be given either generally or for any class of cases or especially for any particular case. It is also relevant to note that after the coming into force of the N.D.M.C. Act 1994, general guidelines to attend to cases of disposal of immovable property were not available. The Council in its Resolution of 19 March 1999 approved detailed guidelines on the subject.
In respect of "special categories of properties" the approved guidelines as contained in clause 9 of the said resolution was that "hotels, cinemas and similar projects etc. may be governed as per mutually agreed terms and conditions as entered into by the Council from time to time".
The above policy of 19 March 1999 was reconsidered by the Council in its meeting on 30 August 2000. Para 3 and 6(i) of the Agenda Item are relevant and are re-produced hereunder:-
"3 It has been observed that renewal in case of premises of hotels and the cinema complex is on mutually agreed term. The existing Estate Policy provides for determining terms and conditions as also Licence fee on mutually agreed terms as approved by N.D.M.C. vide its resolution No. 6 dated 18.3.99. Clause 9 for special categories reads as under:-
"Hotels/Cinemas and similar other projects may be governed as mutually agreed terms and conditions as CS(OS) 651/2013 Page 36 of 257 entered into by the Council from time to time."
i. The above decision appears contradictory to section 141(2) of N.D.M.C. Act, which relates to the disposal of immovable property and puts an embargo on transfer of premises on non competitive terms. The Section reads as under:
"141(2) - The consideration for which any immovable ,property may be sold, leased or otherwise transferred shall not be less than the value at which such immovable property could be sold, leased or otherwise transferred in normal and fair competition."
ii. Thus it is obvious from the above Section that its use should be allowed on payment of licence fees determined on competitive basis. In case Council goes by the existing policy as stated above, the existing licencee can always involve the Council in unending disputes as it has happened in case of Chanakya Cinema in which the licencee started litigation against NDMC soon after obtaining the Licence.
Same is the fate of premises licenced for hotel businesses which the licencees stress on irrational terms and drag the Council in various courts.
"6. In view of the above position, following proposal is laid before the Council for consideration and approval:- :
(i) On the expiry of present term of licences of hotels/cinema and other similar commercial complexes, the licences shall not be renewed. The fresh Licence shall CS(OS) 651/2013 Page 37 of 257 be as per provisions of Section- 141(2) of the N.D.M.C. Act 1994."
The Council approved the proposed contained in para 6 of the Agenda Item that on the expiry of the term of Licence of the hotels/cinema and other similar commercial complexes, the Licences shall not be renewed. A fresh Licence shall be as per provisions of section 141(2) of the N.D.M.C. Act 1994.‖
30. In para 28 (f) & (g), the following stand has been taken:-
―28(f) It is stated that the intention of the defendant was only to create a licence in favour of the Plaintiff vide licence deed dated 18.12.1976, which was executed for a fixed period of 33 years only and accepted by the Plaintiff on the said premises only. The substance of the collaboration agreement and the licence deed clearly reveal that the intention of defendant was to grant only a licence and no legally vested proprietary right or to run the hotel forever as allege. The subsequent events also reveal the said explicit and clear intent of the parties. It is stated that the nomenclature of the licence deed along with its terms and conditions clearly manifest that the relationship between the parties herein was purely that of a licencee and a licensor. The collaboration agreement and the licence deed as also subsequent documents and event convey the said intent.‖ ―28(g) It is stated that in terms of the licence deed, the Plaintiff does not have any right of renewal nor any such CS(OS) 651/2013 Page 38 of 257 right was accrued to the Plaintiff. The option to renew the licence squarely and exclusively vests with the defendant. It is wrong and is denied the only as regards mode and manner of finalization of the renewal on mutually agreed terms as wrongly alleged by the Plaintiff. No renewal was ever accorded as alleged. It is wrong and is denied that the defendant has ever accepted renewal of the Plaintiff in infinite or in perpetuity as wrongly fully been projected by the Plaintiff in order to grab Government property. It is wrong and is denied that there has been any deviation of any kind in regard to the terms and conditions of the licence agreement / collaboration agreement / revised agreement or communications in the least as has been wrongly alleged by the Plaintiff. The contents of this para are a figment of Plaintiffs imagination which are absolutely wrong and denied.‖
31. The defendant has denied the stand of the plaintiff that right is only with regard to mode and manner of finalization of the renewal on mutually agreed terms. In fact, it is stated that no renewal was ever accorded.
32. Apart from the facts, as noted from the pleadings of the parties, some additional facts are also noted from the record and the same are as under:-
April 2, 1976 (Exh.P-14) Resolution No. 35 was passed by the erstwhile Committee in respect of:-CS(OS) 651/2013 Page 39 of 257
(i) The allotment of land by the
Ministry of Works and Housing
for the construction of a hotel on
the terms and conditions as may
be offered be accepted;
(ii) Proposal of IHC for participation
jointly in the construction and
running of hotel be accepted in
principle.
(iii) Draft Licence Deed to be executed
with M/s The Indian Hotels Co. be
discussed and finalised for
approval of the Committee.
February 28, 1977
(Exh.DW1/P-2) Building plans were sanctioned.
September 21, 1979
(Exh.DW1/P3) Completion certificate issued by the
Committee.
July 14, 2011 (Exh.P-5) Minutes of the meeting constituted for examining the request of the plaintiff for extension.
September 13, 2011 (Exh.DW1/P6) Minutes and decision of the Council with regard to Delhi Haat.
October 10, 2011 The period of 33 years expired.
November 14, 2011 (Exh.P-27) A meeting held under the Chairmanship of the Secretary (UD), Govt. of India August, 2012 The consultants M/s Ernst and Young was appointed by the defendant which gave its report (Exh.P-51) October 17, 2012 A PIL being W.P.(C) No. 6615/2012 was filed in this Court for seeking a CBI Inquiry into the grant of further licence in respect of the Hotel, which was CS(OS) 651/2013 Page 40 of 257 dismissed.
January 11, 2013 The order dated October 17, 2012 was challenged in SLP 9142/2013 herein the plaintiff sought its impleadement which was allowed.
April 4, 2013 The present suit was filed.
March 26, 2014 (Exh.DW1/2) September 12, 2014 (Exh.DW1/3) March 17, 2015 (Exh.DW1/4) The defendant granted further extensions to the plaintiff during the pendency of the present suit.
April 4, 2014 SLP No. 9142/2013 filed by Mr. Mithlesh Kumar Pandey was dismissed.
January 1, 2015 (Exh.DW1/5) The MHA OM dated January 1, 2015 directing the defendant to resort to public auction and find a best bidder in respect of the property situated at 1, Man Singh Road, New Delhi.
January 30, 2015 Defendant granted to the plaintiff extension upto March 31, 2015 and for placing the matter before the Council immediately after the Code of Conduct announced due to Lok Sabha Elections.
March 25, 2015 (Exh.DW1/6) Minutes of the meeting held on March 25, 2015 drawn on March 26, 2015 giving extension of three months to the plaintiff and to complete the auction within three months.CS(OS) 651/2013 Page 41 of 257
April 7, 2015 Defendant conveyed the decision taken by the Council on March 26, 2015 that the Hotel ought to be auctioned as a running enterprise the same would fetch a better price and would also give additional revenue to the defendant and three months time was granted complete open auction.
April 18, 2015 IA 8099/2015, filed by the plaintiff seeking stay of the proposed auction.
January 29, 2016 The defendant issued a letter extending the licence of the plaintiff till January 31, 2016 and directed the plaintiff to vacate the suit property by February 29, 2016. The defendant also conveyed, the right of first refusal stood withdrawn.
February 1, 2016 IA 1530/2016 filed by the plaintiff impugning letter dated January 29, 2016 on the basis of the statement given by the learned ASG on instructions that no coercive steps shall be taken till the next date of hearing. The said statement continues.
33. An amended replication has been filed by the plaintiff. On July 17, 2014, the following issues were framed by this Court:-
1. Whether the Plaintiff is entitled to the extension of licence as claimed in the Suit? OPP
2. Whether the Suit is barred by Section 385 of the NDMC Act, 1994?
OPD
3. Whether Section 141 of the NDMC Act, 1994 is applicable to the CS(OS) 651/2013 Page 42 of 257 contracts and transactions between the Plaintiff and the Defendant in respect of the extension of the licence deed dated 18.12.1976? OPD
4. Whether the Plaintiff is entitled to relief claimed in the present Suit? OPP
5. Any other Relief.
34. I may state here that the defendant had filed one additional affidavit on May 20, 2015 when they brought on record two documents, OM dated January 1, 2015 (Exh.DW1/5) and minutes of meeting held on March 25, 2015 drawn on March 26, 2015 along with resolution of the Council dated January 30, 2015 (Exh.DW1/6). Further, the plaintiff has filed evidence of affidavit of three witnesses namely PW 1 P.K. Bhatia, PW 2 Anil Chauhan and PW 3 S. Balasubramanian. The defendant has produced one witness namely P.P. Sharma (Exh.DW1/A) and has been cross examined.
Submissions:-
35. Mr. Rajiv Nayar, learned Senior Counsel for the plaintiff would submit that the plaintiff‟s letter dated March 31, 1976, upon being accepted by the Committee, and a Resolution on April 2, 1976 having been passed, a "Joint Venture" between the Plaintiff and the Defendant for the "Hotel Project" at 1, Man Singh Road, New Delhi came into being. The said Resolution considers "construction" and "running", CS(OS) 651/2013 Page 43 of 257 jointly as the main feature of the joint venture. According to him, the following words in the Resolution dated April 2, 1976 (Exh. P-14) of the Committee are of extreme relevance:
"ii) Acceptance of the proposals of M/s. The Indian Hotels Co. Ltd. in principle for participation jointly in the construction and running of the hotel."
36. He would state, the Collaboration Agreement dated December 18, 1976 (Exh.P-40) and the Licence Deed dated December 18, 1976 (Exh.P-41), are the product of the Joint Venture. Agreements were executed pursuant to the Resolution passed by the Committee since under Section 47 of the Punjab Municipal Act, 1911 "contract and transfer of property" could be executed by the Committee with the mode and manner of arriving at the consideration by the Committee. The Hotel was built within a record time of less than two years and licence became operational on October 11, 1978. After almost one year of the operations, a Supplemental Agreement was executed on September 25, 1979 (Exh.P-42) by the Committee and the Plaintiff, where the most relevant amendments were made to the Collaboration Agreement and the Licence Deed which inter alia were:
(a) change of the basis of the licence fee to be calculated against "Gross Receipts" instead of "Gross Income"CS(OS) 651/2013 Page 44 of 257
(b) investment of the Committee having been increased from the mere construction value of the Hotel Building to inclusion of the "cost of the land" and ground rent, the cost of removing the old structures
(c) putting the liability of payment of House Tax upon the Plaintiff.
37. He states, in view of Section 61 of the Punjab Municipal Act, 1911 the liability of paying House Tax through the Supplemental Deed, having been transferred to the Plaintiff, shows that the Plaintiff became a "tenant in perpetuity". By virtue of Section 62 of the Act of 1994, there is an exemption on payment of House Tax on Buildings vested in the Council, yet House Tax was charged from the Plaintiff even after 1994. This construction of Clause 4 of the Supplemental Deed whereby House Tax payment is put upon the Plaintiff, points towards the contribution of the land to private hands in the form of the Joint Venture making it the property of the partnership. He would state, the Supplemental Deed changes the landscape of rights between the parties where now the land stood contributed to the Joint Venture apart from the Hotel Building, as the Committee‟s investment. Upon the Plaintiff triggering its rights for extension of its licence through a letter dated February 15, 2010 (Exh.P-
22), the Defendant as a successor of the Committee construed the Plaintiff‟s rights as that of a "Joint Venture Partner". Processes were CS(OS) 651/2013 Page 45 of 257 initiated, licence fee calculated, extended time period fixed by the Defendant. The owner of the land i.e. Ministry of Urban Development (MoUD) was kept informed who initially directed on August 1, 2011 that the licence fee ought to be determined by a "bidding process with a right of first refusal" to the Plaintiff, but on the Defendant‟s Chairperson‟s submission dated September 8, 2011 that the Plaintiff had contractual rights, the MOUD gave its final decision on November 14, 2011 directing the Defendant to "strive to get as close as possible to the market rent even if it has to negotiate" with the plaintiff. According to him, this supports the contention of the Plaintiff that since the "Hotel" is a joint venture project, the same cannot be auctioned, by ignoring the Plaintiff‟s long term interests. He would state, the weight of evidence and written documents suggest that the Defendant had no option but to extend the Plaintiff‟s licence, by negotiating with the Plaintiff, the licence fee payable by the Plaintiff for the extended period of 30 years. He states, to this effect are also the opinion of the Standing Counsel of the Defendant, E&Y‟s report, opinions of the Solicitor General of India and the opinion of the Attorney General for India. The Defendant however seeks to take shelter under Section 141 of the Act of 1994 while ignoring the above to say that it is compelled to hold an auction "to determine licence fee". Even independent Reports of PWC and CS(OS) 651/2013 Page 46 of 257 KPMG opine that the Defendant must negotiate with the Plaintiff to arrive at a mutually negotiated licence fees instead of an auction. He also states Section 141 of the Act of 1994 is not applicable to the plaintiff‟s licence due to Section 416(2)(b) of the said Act.
38. On the aspect of joint venture of the plaintiff and the defendant and the plaintiff‟s right of extension of the licence, it is the submission of Mr. Rajiv Nayar, that since the Plaintiff was in "joint venture" with the Committee, for the "construction" and "running" of the "project hotel", the Plaintiff has "long term interest" in the said hotel and therefore entitled to an extension. He says this is in view of the following documents and admissions of the Defendant :
(i) Letter dated March 31, 1976 of the Plaintiff to the Committee which is a Part of the Collaboration Agreement dated December 18, 1976, where the Plaintiff had offered "joint participation" in the construction and equipment of the Hotel. (Exh.P-40).
(ii) Committee‟s Resolution dated April 02, 1976 accepting the Plaintiff‟s offer "for participating jointly in the construction and the running of the hotel". (Exh. P-14). This itself is enough to suggest the joint venture between the Plaintiff and the Defendant in respect of the entire Hotel Project.
(iii) Collaboration Agreement dated December 18, 1976 noting to "collaborate" with the Plaintiff. (Exh.P-40).CS(OS) 651/2013 Page 47 of 257
(iv) The Building Plans for the hotel approved by the Defendant mention, the Plaintiff as the "Collaboration Partner".(Exh. DW1/P2 Colly).
(v) The Completion Certificate issued by the Defendant was in favour of „The Taj Mahal Hotel‟. "(Exh. DW1/P3)
(vi) Defendant Council‟s Chairperson letter dated September 08, 2011 (Exh.P-37) states
(a) Approval to the "Joint Venture/ Collaboration" was granted by the New Delhi Municipal committee in its meeting of April, 1976 on the basis of which Collaboration Agreement, Licence Deed and Supplemental Agreement were signed;
(b) A "unique PPP Model" was followed in the case of Hotel Taj Man Singh;
(c) This "arrangement is broadly captured by three Agreements" as mentioned above.
(d) "Construction and operation of a hotel" is through a "unique PPP Model".
(e) The Plaintiff i.e. "the Collaboration partner and the present operator has applied for extension of term".
(vii) Council‟s Resolution dated October 07, 2011 (Exh.P12), post Plaintiff‟s request for extension of licence, admits:-
(a) The project is a "joint venture";
CS(OS) 651/2013 Page 48 of 257
(b) The arrangement was a "unique joint venture / collaboration";
(c) "Land and construction funding" having been provided by the
Committee;
(d) The Plaintiff having "long term interest" in the property;
(e) The Plaintiff has invested about Rs. 129 crores up to March 2011
in substantive renovation and refurbishments of the hotel as against the Defendant‟s final investment of Rs. 6.26 crores;
(f) The Plaintiff is a "collaboration partner" ; (g) The licence arrangement being an outcome of the "joint venture / Collaboration Agreement "; (h) The Defendants and the Plaintiff‟s "investment are in this joint venture"; (i) The Defendant has "invested in land and building" with the
Plaintiff having "invested in refurbishment, regular operations, brand building and creating a loyal customer base".
Thus, according to Mr. Rajiv Nayar, the above admissions of the Defendant itself unambiguously shows that the Plaintiff and the Defendant are in "joint venture".
39. It is also the submission of Mr. Rajiv Nayar, that apart from the above the following inferences show that the Plaintiff has "long term interest" in the Hotel Project which arises from interpretation of the CS(OS) 651/2013 Page 49 of 257 terms of the documents.
(i) Collaboration Agreement dated December 18, 1976 (Exh.P-40), uses the expression "Hotel Building" and "site" when only the contribution of the Defendant is to be discussed. However, it uses the expression "Hotel" when the fully operational Hotel is to be discussed. This shows that the "Hotel" is the obvious joint venture of the Plaintiff with the Defendant, where the Hotel Building stood converted into a Hotel after the equipping of Hotel by the Plaintiff. This is clear from the following recital at Page 14 of the Collaboration Agreement where this distinction is acknowledged by the parties:
―Whereas IHC has agreed in principle to equip the said hotel building at its cost with the necessary equipment and assets such as kitchen equipment, laundry equipment, furniture, furnishings and other assets details of which are mentioned in schedule III attached hereto so that the said hotel building can be run as a hotel of acceptable standards; and
(ii) That this distinction between "hotel building‖ and "Hotel" is present throughout the Collaboration Agreement. In Article II of the Collaboration Agreement "services of the Plaintiff" are discussed where throughout the word "Hotel" is used which relates to the "joint venture".
However, when it comes to only construction, it refers to "Hotel Building".
(iii) In Article III it is stated that there is no demise in law of the "site" in favour of the Plaintiff, which is defined as 1, Man Singh Road, New Delhi in Article I. This clause stands diluted by virtue of the Supplemental Agreement pursuant to which the "site" (Land) was CS(OS) 651/2013 Page 50 of 257 contributed by the Defendant to the Hotel project as its contribution and against which the Defendant became entitled to return.
(iv) There is no termination clause in the Collaboration Agreement post the construction of "Hotel Building" and it being converted into a "Hotel". Article III (8) of the Collaboration Agreement allows re-entry of the Committee only "until the construction of the hotel building has been completed".
(v) The Collaboration Agreement clarifies that the only investment of the Committee is going to be Rs.4.75 crores with any amounts above that, to be funded by the Plaintiff. It also notes that the Plaintiff for equipping the hotel may have to spent Rs.5.50, crores additionally. This document therefore can only be interpreted to mean that the product of the "joint venture" between the Plaintiff and the Committee is the "Hotel" where Committee‟s contribution is the "Hotel Building". The planning, designing, construction, equipment, commissioning and operation of the "Hotel" is the Plaintiff‟s obligation.
(vi) Evidently, the Collaboration Agreement cannot be and was not rightly treated to be only a construction contract for constructing the "Hotel Building" as wrongly contended by the Defendant before this Court.
(vii) That through the Supplemental Agreement dated September 25, 1979 (Exh.P-42) which was executed after the "hotel" had become operational on October 10, 1978, evidences that even the "land" on which the "hotel building" stands stood contributed to the "joint venture"
as the Committee‟s investment. This is evident from the following:CS(OS) 651/2013 Page 51 of 257
(a) In the original Collaboration Agreement the investment of the Committee was only Rs.4.75 Crores for the construction of the "hotel building". In the Supplemental Agreement, through Clauses 2 (b) & (c) the "investment" of the Committee was increased by the following:
―b) Rs.45 Lakhs towards cost of financing, subversions and other charges including initial cost of providing 11 K.V. Sub-Station.
c) Cost of acquiring land, measuring 3.78 acres (15.028 sq. meters) being plot no.1, Man Singh Road, New Delhi, in terms of the plan attached to the Collaboration Agreement, taken to be Rs.106.64 lakhs comprising of Rs.91.48 lakhs being the basic cost of land to NDMC, a sum of Rs.10.66 Lakhs being arrears of ground rent in respect of the said plot paid by NDMC to Works & Housing Ministry, Government of India, and depreciated value of the Building on the said plot since demolished, estimated to be Rs.4.50 lakhs‖
(b) With the above amendment, the land underneath the "hotel building" stood contributed into the joint venture since the Defendant‟s investment was increased from Rs.4.75 crores to Rs.6.26 Crores. The licence fees was also to be calculated on "gross receipt" instead of "gross income". The Committee‟s entitlement to the revenues from the "joint venture" also stood altered by this amalgam of the Committee‟s total investment.
(c) The contribution of the land stands confirmed because of Clause 4 of the Supplemental Agreement, whereby the Plaintiff was now liable to pay "house tax" on the hotel building although in the deed of licence, the liability to pay such house tax was on the Committee. The liability to CS(OS) 651/2013 Page 52 of 257 pay house tax presupposes transfer of the property in favour of the "joint venture".
(viii) The Plaintiff‟s witness Mr. S. Balasubramanian (PW3), who was the only witness who had personal knowledge about the documents since he was a signatory to the Supplemental Agreement, deposed as follows in the examination - in - chief being (Exh.PW3/A):
―12. In the course of the discussions, it was clearly understood that the NDMC and the Plaintiff would be in joint participation although the financials would be renegotiated from time to time.
14. I say that subsequent to the Collaboration Agreement and thee Licence Deed, a further discussion took place between the Plaintiff and the Defendant in respect of the Project. These discussions centered around, inter alia, NDMC's obligation to fund the Project. It was finally agreed that instead of funding the project in cash, as provided for in the Collaboration Agreement, the land would be treated as NDMC's contribution to the project and be taken at market value. Accordingly, a Supplemental Agreement (Exhibit P42) was negotiated and ultimately executed between the Defendant and the Plaintiff on 24.09.1970. I was involved in the discussions with the Defendants alongwith other officials of the Plaintiff Company in respect to the negotiations, finalization and execution of the Supplemental Agreement (Exhibit P42).
15. I say that the Supplemental Agreement amends the Collaboration Agreement and the Licence Deed. I say that the cost of acquiring the land being Plot No.1 Mansingh Road, New Delhi, admeasuring 3.78 acres was valued at Rs.106.64 lakhs. I say that through the Supplemental Agreement, the land was brought in by the Defendant into the Joint Venture as its contribution, towards the joint venture, for construction of the Hotel Building. I say that though NDMC did not contribute in cash a sum equivalent to the market value of land, its share in revenue remained the same as original agreed. This was on account of the fact that it was understood that the land was being contributed as NDMC's share in lieu of cash. Accordingly, NDMC's return on its investment was to be calculated against Rs.626 Lacs, which included the cost of land instead of R.475 Lacs initially contributed by NDMC.CS(OS) 651/2013 Page 53 of 257
16. I say that as a departure from the Collaboration Agreement and the Licence Deed, the above clause of the Supplemental Agreement, which put the cost of acquiring the land into the Joint Venture as their contribution in addition to the cash for construction of the hotel, shows that the land stood committed to the joint venture.‖
40. The Plaintiff submits that PW3/A was cross examined by the Defendant and the following answers elicited:
―Q.16 The attention of the witness is drawn to para 12 of Exh. PW3/A. This statement made by you in the said para is based on the record of Plaintiff company or out of your memory?
A. This is based on my discussions during the supplemental agreement where both Collaboration Agreement and licence deed were also discussed.
Q.17 Will it be correct to say that the averments mentioned in para 12 relates only to supplemental agreement and not the first agreement?
A. No. Q.38. At whose behest the supplemental agreement was executed?
A. At the behest of NDMC.
Q. 39 Did you ask for amendment of licence deed other than the one incorporated in supplemental agreement?
A. I don't think so as amendment sought was at behest of NDMC.
Vol. The main point that NDMC raised was that the land was not recognized as the part of the contribution of NDMC initially which they wanted to ass, which was done so that they could get return on the land for NDMC.
Q.42 The attention of the witness is drawn to para 12 of his affidavit Ex. PW3/A. Can you tell the basis of your understanding as mentioned in said para, as to whether it based on some record or not?CS(OS) 651/2013 Page 54 of 257
A. The entire project was built in collaboration between NDMC and IHC. It is based on all the three agreements i.e. Collaboration Agreement, licence deed and the supplemental agreement.‖
41. It is further the submission of Mr. Rajiv Nayar, that the following emerges from the documents and statements.
(i) The Resolution of the Committee dated April 02, 1976 connotes the joint participation for both the „construction‟ and running of the Hotel.
(ii) There is a Unique Joint Venture of the plaintiff and the Committee.
(iii) The initial investments of both the parties at Rs.4.75 crores of the Defendant and Rs.4.61 crores of the Plaintiff evidences the joint venture and the creation of a partnership between the parties. The land stood contributed to the partnership when the Defendant‟s investment increased to Rs.6.26 crores. The Defendant has earned multifold revenues returning all its investments. The Defendant has been a sleeping partner which the Plaintiff in the joint venture since the running of the Hotel continues to be done by the Plaintiff;
(iv) The hotel building with the land stands contributed into the said "joint venture";
(v) The Licence Deed categorically provides that the terms on expiry of the initial period of licence have to be "mutually negotiated";
(vi) There being no expiry mentioned in the Collaboration Agreement which subsists even today, the Plaintiff is clearly entitled to an extension of the licence period on negotiated terms and conditions, because the CS(OS) 651/2013 Page 55 of 257 contribution of the "running" of the Hotel through the hands of the Plaintiff still subsists;
(vii) The Supplemental Agreement dated September 25, 1979 (Exh.P-
42) executed almost a year after the hotel became operational, recorded amendments to the Collaboration Agreement and the Licence Deed, between the Plaintiff and the Defendant;
(viii) The Plaintiff submits that the Defendant has led no contrary evidence against the admitted position of a "joint venture" and accordingly in view of the Defendant‟s own admission it is estopped from making a completely contrary claim regarding the existence of the joint venture;
(ix) The parties have acted in a mutually beneficial relationship for the last 36 years evidencing their relationship to be of a "joint venture";
(x) The Plaintiff submits that the Defendant is seeking to read the Deed of Licence (Exh.P41) in isolation. The Committee‟s Resolution dated April 2, 1976, and the effect of the Supplemental Agreement on the Collaboration Agreement and the Deed of Licence is being wrongly ignored;
(xi) Clause II(2) of the Deed of Licence dated December 18, 1976 (Exh.P-41) therefore must be given effect to keeping in line the above "joint venture" between the parties which stipulates as follows:
―......
2. In the expiry of the period of licence of the said hotel building hereby granted, the Licensor shall have the option to grant the licence for a further period on such terms and conditions as may be mutually agreed upon between the Licensor and the Licencee. If the Licencee shall be desirous of obtaining a licence for a further period after the expiry of the present licence, it shall give to the licensor, a notice in writing of not less than sixty (60) days prior to the date of expiry of the present licence for CS(OS) 651/2013 Page 56 of 257 the consideration of the Licensor‖
(xii) In the Deed of Licence the parties had always contemplated an extended period because Clause IX clearly mentions "the renewed period of licence" also to be considered for future expansion. Therefore, Clause II(2) of the Deed of Licence has to be read alongwith Clause IX to suggest that the Plaintiff is entitled to an extension;
(xiii) The Defendant Committee‟s offer of revised terms and an extended period of 30 years was accepted by the Plaintiff without any demur or dispute. The Defendant therefore is estopped from resiling from this position.
42. He would state, that the Defendant had also proceeded on the basis that the Plaintiff is entitled to extension of Licence, which is clear from the following:
Effect of the conclusion on the actions of parties pre, during and post licence term
(i) The Defendant admits that there is no default of the Plaintiff of any sort either under the Collaboration Agreement or the Licence Deed or the Supplemental Agreement.
(ii) The Defendant has earned huge revenues from a meagre investment of Rs.6.26 crores of more than Rs.260 Crores. The payment of licence fee amounts to Defendant‟s share being almost 50% of the net profits (Refer: Exh.PW/A).
(iii) The Plaintiff has improved the property by investing a further sum of Rs.125 crores.CS(OS) 651/2013 Page 57 of 257
(iv) That the Defendant proceeded to form an Internal Committee under Section 9 of the NDMC Act to consider the Plaintiff‟s request for extension of licence of the hotel. (Exh.P-2)
(v) The Internal Committee suggested that the licence of the Plaintiff be extended for a period of 30 years on certain financial terms and conditions and put it for the approval for the chairperson. (Exh.P4)
(vi) The internal Committee recorded that chairperson had agreed to both the period and the financial terms of extension which, among other factors, were based upon the NDMC (Determination of Annual Rental) Bye-Laws 2009, to the Plaintiff vide its minutes dated July 14, 2011 (Exh.P5 & P6). Once the terms were accepted by the Plaintiff there was no occasion to the Defendant to direct any auction especially because it is a "joint venture" hotel property.
(vii) The Plaintiff accepted the terms for extension vide letter dated July 15, 2011 and July 13, 2012 (Exh.P16).
(viii) Against the admitted non-breach-full performance of the Agreements by the Plaintiff, other similar hotels in Delhi of the Defendant are all in default. Yet, the Defendant is seeking to remove the Plaintiff and hold an auction so that a new defaulting party can be introduced in a well-run and maintained hotel property of Delhi through the impugned letter dated November 05, 2012 (Exh.P47). Thus, under equity the Plaintiff is entitled to the extension, apart from law and contract.CS(OS) 651/2013 Page 58 of 257
(ix) In the Resolution dated October 07, 2011, the Defendant has accepted the position that the Plaintiff is entitled to an extension while holding out as follows:
―4.4 Thus the licence deed of 18.12.1976 itself provides for extension of the licence period on mutually agreed terms and conditions. IHC, the collaboration partner and the present operator has applied for extension of term in February 15, 2010. As the original agreement/ deed provided option to grant further terms in IHC, the case was processed for appropriate decision.‖
(x) The Plaintiff submits that the Defendant had empowered a consultant of an international repute namely Ernst and Young to suggest the means and methodologies of extending the Plaintiff‟s licence. The said empowered consultant has also suggested in its Report dated August, 2012 (Exh.P-51) as under:
―Therefore, from the above we conclude that NDMC may choose any one of the three options described above, however from a risk management and commercial consideration perspective NDMC stands to benefit the most if the existing contract with IHC is renegotiated and extended.‖ Decision of MOUD is binding upon the Defendant
43. Mr. Nayar submits that considering all of the above, the Ministry of Urban Development in its decision dated November 14, 2011 (Exh.P-
27) under Section 235 of the NDMC Act, read with Government of India (Allocation of business Rules), 1961 had directed the Defendant as follows:
―3. The minutes of the meetings held on 1.8.11 and 26.8.11 and the D.O. letter written by Chairperson, NDMC in response to the Minutes CS(OS) 651/2013 Page 59 of 257 was mentioned. Additional Secretary (UD & DL) and JS(FA) stated that NDMC should strive to get as close to the market rent as possible, even if it has to negotiate with M/s. IHC. In relation to the said minutes, Secretary, NDMC stated that in the meeting of the Council held on 7.10.2011 the Council has resolved to accord sanction for extension of existing Collaboration Agreement and licence deed with M/s. IHC for a period of one year subject to the condition that M/s. IHC shall pay licence fee as per mutually agreed terms and conditions. It was further stated by him that NDMC has also already initiated the process of appointing a Transaction Consultant.‖
4. Secretary (UD) noted NDMC's above decision and advised that the Council may further take appropriate steps.‖
44. He submits that the above direction also points towards the Plaintiff‟s undisputed and unstinted right to obtain extension of the licence, however there is no follow up of this direction of MoUD till date. The Plaintiff therefore submits that the Defendant could not have resorted to the impugned letter dated November 5, 2012 since only a ministerial step of extending the licence in favour of the Plaintiff had remained to be done. Thus, on the above facts, the Plaintiff has discharged its onus in respect of issue No.1 framed by this Court being the following:
―1. Whether the Plaintiff is entitled to the extension of licence as claimed in the Suit? OPP‖ LEGAL SUBMISSIONS IN RESPECT OF JOINT VENTURE AND ITS EFFECT
45. Submissions on provisions of law CS(OS) 651/2013 Page 60 of 257 A. Under Section 58 of the Evidence Act admitted facts need not be proved. Under Section 78 (5) the proceeding of a Municipal Body can be proved by place a certified copy thereof. The Resolutions of the Defendant dated April 02, 1976 and October 07, 2011, clearly admit to the Plaintiff and the Committee‟s "joint venture". Thus, applying the admissions through the pre and post Resolutions of the Defendant itself, it cannot be denied that there is a "joint venture" between the Plaintiff and the Defendant in the form of the "hotel project". Under Section 47 of the Punjab Municipal Act, 1911, disposal of land by the Committee did not require an auction. The hotel building and the land stood disposed to the "joint venture" through the Supplemental Deed. Thus, Licence Deed needs to be extended to give effect to that joint venture. The Plaintiff has not disputed the Defendant‟s increase in the licence fee and in fact accepted it. Turning this into a concluded issue, which only required examination and not a separate agreement or a Licence Deed. This is supported by Shreedhar Govind Kamerkar Vs. Yesahwant Govind Kamerkar & Anr. (2006) 13 SCC 481 @ para 27.
B. Under Section 62(1)(b) of the Act of 1994 there is an exemption on property tax on lands and buildings vested in the Council. However, by virtue of the Supplemental Deed the Plaintiff is made to pay the house CS(OS) 651/2013 Page 61 of 257 tax which in the original Licence Deed was exempted. The Plaintiff submits that this obligation to pay the house tax arose only after the land stood contributed by the Committee to the joint venture. Otherwise, this charge of house tax of Rs.12 Lakhs per year at least from the year 1994 ought not to have been received / demanded / levied by the Defendant. C. Under Section 61 of the Punjab Municipal Act only a "tenant in perpetuity" is required to pay the tax other than the owner. By virtue of the Supplemental Deed the transfer of the liability upon the Plaintiff indicates the Plaintiff‟s perpetual rights. The Defendant‟s reliance upon Section 2(29) of the NDMC Act being the definition of "occupier" which includes a licence in occupation of land and building, has no purport in respect of payment of House Tax because that liability remains on the owner even under the NDMC Act.
D. Under Section 235 of the Act of 1994 the Central Government can direct the Defendant to act in a particular manner which is binding upon the Defendant. In the present case through the decision dated November 14, 2011 the Defendant was directed by the Ministry of Urban Development to negotiate with the Plaintiff "to strive to get as close to the market rent as possible". Applying NDMC (Determination of Annual Rental) Bye-laws 2009, the Defendant had come up with that CS(OS) 651/2013 Page 62 of 257 closest market rent suggested it to the Plaintiff. The Plaintiff had accepted this suggestion. Thus, in execution and performance of the Ministry of Urban Development direction dated November 14, 2011 the Defendant ought to have extended the licence of the Plaintiff on the terms agreed by the Plaintiff.
E. Under Regulation 33 and 34 of New Delhi Municipal Council (Procedure and Conduct of Business) Regulations, 1997, the form and admissibility of the Resolutions is mentioned. The Resolutions cannot contain arguments or inferences. By this logic the Statements made by the Council in its Resolution dated April 2, 1976 and October 7, 2011 indicate that there position in favour of the Plaintiff for extending the licence is unstinted and has statutory force.
F. Under Section 91 and 92 of the Evidence Act the Defendant has sought to plead that it is only the three documents which are required to be read by this Court and no extrinsic evidence can be used. This argument is made to somehow remove the Defendant‟s own admission of a joint venture between the parties in the Defendant‟s own Resolutions, letters and other documents. The Plaintiff submits that this contention of the Defendant is wrong because in Schedule 1 to the Collaboration Agreement the joint participation is suggested by the CS(OS) 651/2013 Page 63 of 257 Plaintiff and accepted by the Defendant‟s predecessor in its Resolution dated April 2, 1976. The Collaboration Agreement itself uses the word "to collaborate" at page 13 of the documents in the recital and uses the word "jointly arrive" for determining costs. The Collaboration Agreement clearly brings about the distinction between hotel building and hotel where the hotel is not the Defendant‟s property but an outcome of the joint participation of the Plaintiff and the Defendant. The Plaintiff submits that the Defendant is seeking to create an ambiguity where none exists. In any case, if there is an ambiguity, the law accepts extrinsic evidence against such ambiguity. In the present case, the admissions of the Defendant itself at the pre contractual stage and the subsequent conduct ought to be read against the Defendant to destroy the Defendant‟s self-serving argument on Sections 91 and 92 of the Evidence Act.
46. Mr. Rajiv Nayar relied upon the following judgments in support of his submission:-
(1) JOINT VENTURE PROPERTY STANDS ESTABLISHED THROUGH CONTRIBUTION OF ASSETS TO THE "JOINT VENTURE" WITH THE MOTIVE OF COMMON AND MUTUAL PROFIT.
i. Suresh Dhanuka Vs. Sunita Mohapatra (2012) 1 SCC 578 @ para 47 CS(OS) 651/2013 Page 64 of 257
ii. Addanki Narayanappa & Anr. Vs. Bhaskara Kristappa & 13 Ors.
AIR 1966 SC 1300 @ para 7 iii. Sunil Siddharthbhai Vs. Commissioner of Income Tax (1985) 4 SCC 519 @ para 16, 17 iv. Shreedhar Govind Kamerkar Vs. Yesahwant Govind Kamerkar & Anr.
(2006) 13 SCC 481 @ para 27 v. Vidhi Constructions Pvt. Ltd. Vs. Smt. Baljit Kaur (2001) 91 DLT 730 (DB) @ para 18 vi. Robinson Vs. Ashton (1873) XX LR 25 (HL) at pg.28 (2) EXTRINSIC EVIDENCE IS AVAILABLE TO THE COURT FOR INTERPRETING A CONTRACT WHERE THERE IS AMBIGUITY i. Godhra Electricity Co. Ltd. vs. State of Gujarat (1975) 1 SCC 199 @ para 11, 12, 13, 15, 16-18 ii. Pure Helium India (P) Ltd. v. Oil & Natural Gas Commission, (2003) 8 SCC 593 @ para 25,26 iii. Modi & Co. v. Union of India, AIR 1969 SC 9 @ para 8 iv. Abdulla Ahmed v. Animendra Kissen Mitter, AIR 1950 SC 15 @ para 27 v. Chartbrook Ltd. vs. Persimmon Homes Ltd.
(2009) UKHL 38
(3) AN AGREEMENT CAN BE FORMED THROUGH CONDUCT
CS(OS) 651/2013 Page 65 of 257
AND CAN EVEN BE ORAL
i ITE India Pvt. Ltd. Vs. Delhi Tourism and Transport
Development Corpn. Ltd. - Judgment dated 23.5.2016 in FAO(OS) No.46 of 2006 - Para 33 to 38 ii Alok Bose Vs. Parmatma Devi & Ors. (2009)2 SCC 582 at 16, 17, 18 (4) THE RECOMMENDED LICENCE FEE IS "REASONABLE MARKET RATE" AS DETERMINED RATEABLE VALUE i. NDMC Vs. M.N. Soi (1976) 4 SCC 535.
(5) DIRECTION OF CENTRAL GOVERNMENT UNDER SECTION 235 OF THE NDMC ACT IS BINDING UPON THE DEFENDANT.
(i) NDMC Vs. Tanvi Trading & Credit Pvt. Ltd. (2008) 8 SCC 765 at 32, 35, 36 BRIEF FACTS SHOWING THE INAPPLICABILITY OF S. 395 AND 396 OF THE NDMC ACT.
47. The further contention of Mr. Rajiv Nayar, in the present suit is that the Plaintiff and the Defendant are in "joint venture" for the Taj Mahal Hotel Project wherein the Defendant contributed the land and funded the construction of the building with an amount of Rs.4.75 crores. The Plaintiff undertook construction of the "Hotel Building" and provided equipment, furniture, fixtures and all other assets at its CS(OS) 651/2013 Page 66 of 257 (Plaintiff‟s) cost amounting to Rs. 5.5 crores (actual investment Rs. 4.61 crores). The building was converted into a "Hotel" as per the Collaboration Agreement by providing all the furnishings and fittings. Therefore, it was the basic understanding between the parties, that the Plaintiff has long term interest in the "joint venture" and accordingly, through the operation of Clause II(2) of the Licence Deed, there would be an extension in favour of the Plaintiff on "such terms and conditions as may be mutually agreed".
48. He submits that (a) the Resolutions of the Defendant dated April 2, 1976 [Exh. P-14], October 7, 2011 [Exh. P-12], July 25, 2012 [Exh. P-19] and (b) the Minutes of the Committee dated June 3, 2011 empowered by the Defendant under Section 9 of the Act of 1994 through its Minutes dated June 3, 2011 [Exh. P-4] and July 14, 2011 [Exh. P-5]
(c) the Ministry of Urban Development‟s decision dated November 14, 2011 (Exh. P-27], indicate that the Plaintiff is entitled to an extension "on such terms and conditions as may be mutually agreed".
49. He submits that to the same effect are the opinions of the Standing Counsel of the Defendant [Exh. P -34], by a Sr. Advocate [Exh. P -36], Report of Ernst & Young [Exh. P -51 (Part -II)], (Consultant appointed by the Defendant) and the opinion of the lawyer of Ernst & Young. CS(OS) 651/2013 Page 67 of 257 However, there is a singular advice of the Additional Solicitor General, [Exh. P -35], which is contrary to the above. The said advice is predicated on a misconstruction of Section 141(2) of the NDMC Act read with the judgment of the Supreme Court of India in Aggarwal & Modi Enterprises (P) Ltd. Vs. NDMC reported in (2007) 8 SCC 75.
50. The Resolution dated September 27, 2012 [Exh. P -20], while considering the opinion of the Additional Solicitor General, as also the long term interest of the Plaintiff, passed a hybrid decision stipulating as follows:
―The Council carefully considered all the facts placed before it in the Agenda Item, including the Annexures, and noted that IHC not only has a clean record in its dealing with the Council, but has also made regular payments of licence fee to it till date and that there are no disputes between the Council and the Licencee (IHC Ltd).
After discussing at length the pros-and cons of the two options proposed in the Item the Council resolved by majority, to opt for public auction, in a fair and transparent manner, of the NDMC property at 1, Man Singh Road, with first right of refusal to Indian Hotel Company. The recourse to public auction would serve to determine the market price of the licence fee, that IHC would have to match if they wish to run a hotel at this property. This option, the Council noted would also safeguard its revenue interests.
The Council further resolved by majority to extend the period of licence of IHC, on existing terms and conditions, for a further period of one year or till such time a new licencee is chosen through the bidding process, whichever is earlier.CS(OS) 651/2013 Page 68 of 257
That further action may be taken by the Department in anticipation of confirmation of the Minutes by the Council.‖
51. He states, the plaintiff filed the present Suit on April 04, 2013, challenging the mode and manner of determining the licence fee payable by the Plaintiff, when the Defendant had already fixed the licence fee by virtue of the Committee, which was duly accepted by the Plaintiff vide its letter dated July 15, 2011 and letter dated July 13, 2012 [Exh. P-16]. Even in the Counter Affidavit filed by the Defendant before the Supreme Court of India in SLP (C) No. 9142 of 2013, the Defendant has stated that the enhanced fee was agreed to by the Defendant to avoid any revenue loss to the Defendant, thereby admitting that the licence fee fixed was reasonable. During the pendency of the Suit, the Ministry of Home Affairs (MHA) which is the administrative ministry of the Defendant, sought an opinion from the Ld. Solicitor General of India, which was provided on April 19, 2014 holding that there should be negotiation with the Plaintiff before auction is resorted to.
52. On August 20, 2014, the Ld. Attorney General for India also provided his opinion at the request of Ministry of Home Affairs endorsing the opinion of the Ld. Solicitor General of India. Both these opinions are contrary to the opinion of the Additional Solicitor General CS(OS) 651/2013 Page 69 of 257 (Exh.P-35) yet have been ignored, to defend the completely wrong premise that Section 141 of the act applies to the Plaintiff‟s case.
FACTS REGARDING ACTIONS OF CENTRAL GOVERNMENT UNDER SECTION 395 AND 396 OF THE NDMC ACT, 1994.
53. Mr. Rajiv Nayar submits that before the opinion of the Solicitor General of India had been provided, the Ministry of Home Affairs wrote two letters to the Defendant, dated May 10, 2013 and June 27, 2013 [Exh. DW1/P4 and DW1/P5]. Both these letters indicate a request by the Ministry of Home Affairs to the Defendant to hold an open public auction of 1, Man Singh Road, New Delhi. The basis on which the Ministry of Home Affairs wrote these letters has not been disclosed or brought on record and is alien to the process outlined in Section 393 and 394 of the Act of 1994. There is nothing on record to show whether the Ministry of Home Affairs ever required the Chairperson of the Defendant to produce any record, correspondence and report as envisaged in Section 393 of the said Act or whether any inspection of the records of the Defendant was carried out by the Ministry of Home Affairs as required by Section 394 of the Act of 1994. Section 395 of the Act of 1994 empowers the Central Government to issue directions to the CS(OS) 651/2013 Page 70 of 257 Defendant either on receipt of a report or information under Section 393 or 394 or otherwise. Even if the opinion formed by the Central Government is based on the information/input gathered "otherwise" used in Section 395, the said opinion has to have some basis. It is also not on record if any other Ministry or Deptt. of the Central Government expressed any apprehension on the functioning of defendant to the Ministry of Home Affairs based on which the Ministry of Home Affairs wrote a letter to the Defendant straight away under Section 395 without following the process envisaged under Section 393 or 394. It is settled law that if a statute provides that an act is to be done in a particular manner, the thing has to be done in the said manner alone. [Refer: State of Jharkhand Vs. Ambay Cements reported in (2005) 1 SCC 368 @ Para 25 & 26]
54. The issues were framed by this Court after the direction dated April 4, 2014 of the Supreme Court of India in SLP (C) No. 9142 of 2013. Before the Supreme Court in the said SLP, the Ministry of Urban Development filed an affidavit stating as follows:
―5. It is submitted that Respondent No. 1, NDMC, is the main contestant in the present case. The answering respondent is only a policy making body and is not directly involved. The answering respondent, being a proforma party, would not be giving any reply on merits at this stage and craves leave to file CS(OS) 651/2013 Page 71 of 257 additional/detailed affidavit at a later stage of required or if directed by this Hon'ble Court.‖
55. He states that on January 01, 2015, without considering the opinion of (i) the Ld. Solicitor General of India and (ii) the Ld. Attorney General for India, as also the Ministry of Urban Development‟s position before the Supreme Court of India, and ignoring the pendency of the present Suit, the Ministry of Home Affairs passed a direction under Section 395/396 of the Act of 1994, on January 01, 2015 [Ex-DW1/5] against the Defendant directing it to "resort to public auction and find the best bidder in respect of the property at 1, Man Singh Road, New Delhi". THE DIRECTION IS ILLEGAL SINCE IT RELATES TO AUCTION OF "LEASE" RIGHTS PURPORTING TO BE A "DUTY" OF THE COUNCIL
56. The said direction dated January 1, 2015 is predicated on its own letter‟s dated May 10, 2013, June 27, 2013 and wrongly records that opinion of the Ld Solicitor General of India on the issue was "pending" (though it had already been rendered on April 19, 2014, eight months before the direction).
57. The basic fallacy in invoking 395 and 396 of the Act of 1994 is that the Ministry of Home Affairs considers that there is a "duty" of the defendant to conduct an auction. This duty purportedly arises CS(OS) 651/2013 Page 72 of 257 out of Section 141(2) of the Act of 1994. As explained earlier Section 141(2) of the Act of 1994 would be applicable to "leases".
58. This is the mistake made by the Ministry of Home Affairs in its letter dated May 10, 2013 where it considers that the Plaintiff‟s right is through a "lease deed" and what NDMC seeks to do freshly, is a "lease". Both these mistakes are accepted by the Defendant‟s Witness in cross examination in the following questions and answers:
―Q116. Would it be correct to say that in view of your answer to question No.57, the words ―lease‖ at points A to A, B to B and C to C in Ex.DW1/6 should be read as ―Licence‖?
A. Yes.
Q117. In view of your answer to question no.116 would it not be correct to say that in Ex.DW1/P4 also the words ―lease‖ are incorrect?
A. Yes.‖
59. He submits that the letter dated June 27, 2013 of the Ministry of Home Affairs reveals a complete wrongful conduct towards the pendency of the present Suit before this Court. It is a matter of law that an administrative body cannot be allowed to override the courts of law, abrogate private rights, through administrative decisions/directions.CS(OS) 651/2013 Page 73 of 257
60. He submits that even the Defendant in its Resolution dated October 7, 2011 and decision pursuant to the Resolution dated January 30, 2015 has made the same mistake by referring to the Plaintiff‟s "licence" as a "lease".
61. He submits that the above two mistakes destroy and vitiate the letter dated May 10, 2013 which is the genesis of the direction of the Ministry of Home Affairs under Section 395/396 of the Act of 1994. If the root of the decision dated January 1, 2015 stands destroyed, the said letter automatically stands vitiated. Therefore, if Section 395 and 396 have been invoked for a purpose for which they are not meant, they shall be held to be non binding. Ref. H.C. Sharma Vs. MCD (1983) 3 SCC 567 at paras 6, 35 and 36.
62. On another reason it stands vitiated as being a piece of document which is without any application of mind is that it mistakenly notes that the Solicitor General of India‟s opinion is still "pending" when it had already been rendered. The said direction dated January 01, 2015 therefore deserves to be totally ignored.
THE DIRECTION DATED 1.1.2015 IS ULTRA VIRES THE ACT OF 1994 INASMUCH AS IT BREACHES THE ENTIRE SCHEME OF THE SAID ACT.
63. Mr. Rajiv Nayar submits that Section 20 of the Act of 1994 CS(OS) 651/2013 Page 74 of 257 creates a dichotomy between "powers" and "duties" of the NDMC. Performance of duty entails "expenditure". Under Section 11 of the Act of 1994 there are obligatory functions of the NDMC which are inter alia keeping the streets clean, supply of electricity and water etc. Chapters XI (Borrowing), XII (Electricity Supply), XIII (Streets), XV (Sanitation and Public Health) and XVII (Public Safety and Suppression of Nuisances) entail such "duties".
64. Under Chapter XIV of the Act of 1994 is regarding "Building Regulations". Since through the Government of India (Allocation of Business Rules) Rules 1961, the "land and buildings bye laws" is within the control of the Ministry of Urban Development the superintendence of this Chapter is with the Ministry of Urban Development as the "Central Government". Further if the property is owned by the Government of India then the entire control and governance comes within Ministry of Urban Development as per Government of India (Allocation of Business Rules) Rules 1961.
65. Therefore, a dichotomy is created in the two jurisdictions of superintendence of the defendant.
66. He submits that Section 235 and Section 395 of the Act of CS(OS) 651/2013 Page 75 of 257 1994 require proper construction in this behalf. Section 235 of the Act would provide the superintendence to the Central Government led by MoUD and Section 395 provides superintendence to the Central Government through the Ministry of Home Affairs.
67. He submits that Section 395 of the Act of 1994 only concerns itself with "duties" of the NDMC. It is obvious that Chapter X "Property and Contracts" is not a duty of the defendant. This Chapter does not entail expenditure or provision. However, Section 395(b) of the Act clarifies this position since it only seeks to create "provision" for "such duty". Thus, Chapter X is outside the governance of the Central Government under Section 395 of the NDMC Act, 1994. [Ref Dr. BL Wadhera Vs. Union of India reported in (1996) 2 SCC 594 @ para 22]
68. However, he submits that Section 235 of the Act of 1994 provides a superintendence to the MOUD in respect of use of any building through Sections 252 and 260(2)(u) of the Act of 1994. Further, being the owner of the property at 1, Man Singh Road, it also has the right to direct the use of such property. Its directions are binding. [Ref NDMC v. Tanvi Trading and Credit Private Ltd. reported in (2008) 8 SCC 765 @ para 18, 26, 32, 34 & 36] and CS(OS) 651/2013 Page 76 of 257 Bihari Lal Jalan Vs. DDA reported in 2003 (68) DRJ 593 (DB) at para 12 and 13].
69. The Plaintiff therefore submits that the Ministry of Urban Development is admittedly the owner of the land. The said Ministry controls the users of the said land. The said Ministry in its decision dated November 14, 2011 has decided that the Defendant must negotiate with the Plaintiff. That decision is binding upon the Defendant. This is the outcome of the Allocation of Business Rules whereby all the Properties of the Union except specifically provided therein are under the Ministry of Urban Development. In this respect the Plaintiff seeks to rely upon the judgment of the Supreme Court of India in Reliance Natural Resources Ltd. Vs. Reliance Industries Ltd. reported in (2010) 7 SCC 1.
70. Mr. Nayar, therefore, submits that Section 395 and 396 of the Act of 1994 are not invocable at all by MHA, and direct to hold an auction of the Government of India‟s/MoUD‟s property. There is a complete conflict in jurisdictions between MoUD and MHA. This is a classic case of "Right hand knowing not what the left hand does". (Ref. The Queen on the application of BAPIO Action Ltd. and Secretary of State for the Home Department & Anr. (2007 CS(OS) 651/2013 Page 77 of 257 EWCA Civ 1139) held as follows:
―54. If the Home Secretary had issued this guidance I do not see how it could have been suggested that it was lawful in the light of s.3 of the 1971 Act. It can be no more lawful if issued by another minister of the Crown, for the Crown in right of the United Kingdom is a single entity. Put in terms which political science, though not the common law, would recognize, the acts of both ministers are acts of the state; and in terms which the common law, though probably not political science, would recognize, the state cannot be heard to say that its left hand does not know what its right hand is doing.‖
71. To the same effect is the judgment of the Hon‟ble Supreme Court of India in D. Ramaswami Vs. State of Tamil Nadu 1982 (1) SCC 510 para 1 and judgment of Ld. Single Judge of this Hon‟ble Court Bio-chem Pharmaceutical Industries Vs. Astron Pharmaceuticals 102 (2003) DLT 840 at para 18.
WITHOUT PREJUDICE TO THE ABOVE, SECTION 395 OF THE NDMC ACT, 1994 CANNOT BE INVOKED FOR A SINGLE TRANSACTION ESPECIALLY AFFECTING PRIVATE RIGHTS.
72. Mr.Rajiv Nayar submits, the direction dated January 1, 2015 is passed by MHA in complete ignorance of the contractual rights of the Plaintiff which are sub judice before this Hon‟ble Court. The directions abrogates the Plaintiff‟s contractual rights arising out of the three Agreements with NDMC.
73. The Defendant has relied upon the full bench judgment of this CS(OS) 651/2013 Page 78 of 257 Court in Satish Chandra Vs. Union of India reported in AIR 1983 Del 1 while seeking pari materia interpretation from similar provisions being Sections 490 of the Delhi Municipal Corporation Act.
74. Mr. Nayar, submits that on the above judgment it is clear that Section 395 and 396 of the NDMC Act, 1994 cannot be invoked for a particular transaction and can only be "policy" based where there is repeated infraction of a duty. This is because the independence of the Defendant‟s Council which in any case consists of high powered Members, cannot be taken away by the Central Government. Four of such high powered members are from the Ministry of Home Affairs itself. Thus, it would be incongruent to suggest that the Ministry of Home Affairs within the council, for a particular transaction, would have a different view than when it is operating outside the council.
75. Mr. Rajiv Nayar also relied upon the judgment of GMR Infrastructure Ltd. v. National Highways Authority of India, reported in (2009) 156 DLT 257 and Dr. Ramesh Kumar Yadav Vs. University of Allahabad reported in (2013)4 All LJ 635. CS(OS) 651/2013 Page 79 of 257
76. According to him, the power used under Section 395 of the NDMC Act has been used irrationally since it is based upon a mistake of "lease", it is based upon non-application of mind inasmuch as an available opinion of the Ld. Solicitor General of India has been construed to be "pending", and it has been used to abrogate private contractual rights pending before this Court. Thus on the application of the above judgment the direction dated January 1, 2015 deserves to be ignored.
77. Therefore, the letter dated January 1, 2015 of the Central Government cannot be resorted to and deserves to be ignored by this Court.
GENERAL WISH OF THE DEFENDANT TO HOLD AN AUCTION IRRESPECTIVE OF THE CONTRACTUAL RIGHTS OF THE PLAINTIFF.
78. Mr. Rajiv Nayar submits if the Plaintiff succeeds on Issue 1, then there cannot be an unbridled wish of the Defendant to hold an auction. It must apply the law and the contract. Since the Rateable Value Bye Laws read with the judgment of the Supreme Court of India in MN Soi's (supra) case provide a full guideline in respect of the Plaintiff‟s rights arising out of the Contract, the Defendant cannot wish an auction in breach of the Plaintiff‟s agreements. CS(OS) 651/2013 Page 80 of 257
79. He submits that, absent application of Section 141 of the NDMC Act, 1994 and the direction of the Central Government under S. 395, and on application of the binding decision of the MoUD dated November 14, 2011, the Defendant has no right to wish an auction.
80. The Petitioner submits that the net effect of Section 235 of the Act, MoUD‟s decision dated November 14, 2011 to the Chairperson and the Judgment of the Supreme Court in Tanvir Trading's case is that the decision of MoUD binds the chairperson who is the only person authorized to act under Section 141 of the NDMC Act. This is because Section 141 of the NDMC Act and Section 235 both put the onus on the Chairperson.
81. According to Mr. Nayar, the Defendant, however, in its amended Written Statement sought to allege that its Resolution dated January 30, 2015 and March 25, 2015 after the filing of the Suit provides for an auction without "Right of First Refusal" to the Plaintiff.
82. He further states, the Defendant has sought to rely upon the Central Government‟s direction and the pendency of the Suit for CS(OS) 651/2013 Page 81 of 257 coming up with the said Resolution. In Regulation 34(v) of the New Delhi Municipal Council (Procedure and Conduct of Business) Regulations, 1997 of the Defendant, the Defendant is prohibited from deciding issues which are sub judice. On the Defendant‟s own acceptance of the fact that because the Plaintiff had challenged the letter dated November 5, 2012, the Defendant was seeking to withdraw the Right of First Refusal, its decision would fly in the face of the said Regulation.
83. He submits that throughout in all pleadings, both the Plaintiff and the Defendant, have relied upon the Right of First Refusal in November 5, 2012.
84. The Plaintiff has relied upon the said Right of First Refusal to submit that the Defendant recognizes the Plaintiff‟s right in the property. The Defendant relied upon the said Right of First Refusal to submit that its decision dated November 5, 2012 is reasonable.
85. In the face of such pleading the Defendant could not have altered its own decision. Accordingly, the Central Government‟s direction is invalid for the above reasons.
86. The Plaintiff therefore submits that both the Central CS(OS) 651/2013 Page 82 of 257 Government‟s direction and the Resolution dated January 30, 2015, May 23, 2015 and decision dated January 29, 2016 communicated to the Plaintiff having been passed during the pendency of the present Suit deserve to be ignored and this Court may assess the rights of the parties in relation to the impugned letter dated November 5, 2012 and the issues framed thereupon only.
87. THE NDMC ACT, 1994 IS NOT AVAILABLE TO THE DEFENDANT IN RESPECT OF CONTRACTS EXECUTED AND PERFORMED UNDER THE PUNJAB MUNICIPAL ACT, 1911
1. Mr. Nayar submits that without prejudice to the any of the contentions of the Plaintiff, the Agreements executed by the Plaintiff with the Committee must be construed as per the provisions and rights flowing from the Punjab Municipal Act, 1911.
2. He submits that in the Punjab Municipal Act, 1911 there is no provision akin to Section 141 of the NDMC Act and in fact the disposal of property is governed by Section 47 of the said Act which stipulates as under:
―47. Mode of executing contract and transfer of property - (1) Every contract made by or on behalf of any municipality of the first class whereof the value or amount exceeds one hundred rupees, and every contract made by or on behalf of the committee of any municipality of the second [and third class] whereof the value of amount exceeds fifty rupees, shall be in writing, and must be signed by two members, of whom the President or a Vice-President shall be one, and countersigned by the Secretary:CS(OS) 651/2013 Page 83 of 257
Provided that, when the power of entering into any contract on behalf of the committee has been delegated under the last foregoing section, the signature or signatures of the members to whom the power has been delegated shall be sufficient.
(2) Every transfer of immovable property belonging to any committee must be made by an instrument in writing, executed by the President or Vice-President, and by at least two other members of committee, whose execution thereof shall b attested by the Secretary.
(3) No contract or transfer of the description mentioned in this section executed otherwise than in conformity with the provisions of this section shall be binding on this committee.‖
3. According to him the "Committee" was superseded by the "Council" in view of the Act of 1994 promulgated on May 25, 1994. Section 416(2)(b) of the NDMC Act stipulates as follows:
―416. Repeal and savings.
(1) As from the date of the establishment of the Council, the Punjab Municipal Act, 1911, (Punjab Act 3 of 1911) as applicable to New Delhi, shall cease to have effect within New Delhi.
(2) Notwithstanding the provisions of sub- section (1) of this section,--
(b) all debts, obligations and liabilities incurred, all contracts entered into and all matters and things engaged to be done by, with or for the New Delhi Municipal Committee before the establishment of the Council shall be deemed to have been incurred, entered into or engaged to be done by, with or for the Council under this Act;
4. He would rely on the judgment of the Supreme Court of India on interpreting a pari materia provision in the Electricity Act, 2003 in the CS(OS) 651/2013 Page 84 of 257 case of Grid Corporation of Orissa & Ors. Vs. Rasananda Das (2003) 10 SCC 297.
5. He also relies upon the Constitution Bench judgment of Supreme Court of India in The Mysore State Electricity Board Vs. Bangalore Woolen Cotton and Silk Mills Ltd. 1963 Suppl(2) SCR 127 at pg.143 -
145.
6. He further submits that applying the above principles, it is not available to the Defendant to apply Section 141 of the Act of 1994 to the Plaintiff‟s contractual rights which emerge out of the Contracts executed prior to the Act of 1994.
88. Even otherwise, it is his submission that:-
(a) the defendant by applying Section 141 of the NDMC Act, 1994, decided on November 5, 2012 in respect of the Hotel at 1, Man Singh Road, New Delhi, as under:
―The New Delhi Municipal Council in its meeting held on 27.09.2012 had considered the proposal on the above cited subject and has resolved to opt for public auction, in a fair and transparent manner, of its property at 1, Man Singh Road, with first right of refusal to Indian Hotels Co. Ltd. the recourse to public auction would serve to determine the market price of the licence fee, that M/s. IHCL Ltd. would have to match, if they wish to run the hotel at this property.
2. The council further resolved to extend the period of licence of IHC Ltd., on the existing terms and conditions, for a further period of one year or till such time a new licencee is chosen through the bidding process, whichever is earlier.‖
(b) The plaintiff has impugned the above decision by way of the present Suit seeking interalia the following relief:
(b) Pass a decree of permanent injunction restraining the CS(OS) 651/2013 Page 85 of 257 Defendant, its servants, officers, agents, subordinates and/or its successors from giving effect to the decision communicated through the letter dated 5.11.2012 having No.D/389/PA/D.E.-
I/2012 in respect of hotel premises at 1, Man Singh Road, New Delhi, and/or from giving effect to any known or unknown decision to conduct an auction for running /operating/ maintaining, the hotel premises at 1, Man Singh Road, New Delhi;
(c) In the Written Statement, the Defendant has relied upon Section 141(2) of the NDMC Act, 1994 to defend the auction for a fresh licence.
(d) This Court on July 17, 2014 framed the following issues in the present Suit:
―1. Whether the Plaintiff is entitled to the extension of licence as claimed in the Suit? OPP
2. Whether the Suit is barred by Section 385 of the NDMC Act, 1994? OPD
3. Whether Section 141 of the NDMC Act, 1994 is applicable to the contracts and transactions between the Plaintiff and the Defendant in respect of the extension of the licence deed dated 18.12.1976? OPD
4. Whether the Plaintiff is entitled to relief claimed in the present Suit? OPP
5. Any other Relief.‖
(e) Therefore, it is the case of the plaintiff that defendant‟s right to auction the Suit Property is directly in issue. According to him, Section 141(2) of the Act of 1994 is not applicable to the Suit Property:
i. For the extension of the Licence of the Plaintiff S. 141 (2) cannot be resorted to.CS(OS) 651/2013 Page 86 of 257
ii. Even for a fresh Licence for the Hotel Section 141(2) of the NDMC Act, 1994 cannot be resorted to.
(f) He submits Section 141(2) of the Act is applicable only to the following actions by NDMC:
(1) "Lease" of immovable property; (2) "Sale" of immovable property; (3) Otherwise "transfer" of immovable property (g) He states, that in the present situation the Defendant has not anywhere stated that either the Plaintiff‟s right to
"extension/renewal of its Licence" amounted to a "Lease", "Sale" or "Transfer" of immovable property.
(h) According to him, even the words "or otherwise transferred‖ have to be read ejusdem generis with the words "lease", and "sale".
Accordingly, "transfer" by NDMC would mean creation of fresh rights in the immovable property, akin to rights by way of "lease" or "sale".
(i) He also states, the Supreme Court has held that when the term "otherwise" is preceded by terms of a particular class or group, it must be given a restricted meaning falling within the said class or group. He relies on the following judgments:
(1) Union Bank of India vs. Pijush Kanti Nandy reported in (2009) 8 SCC 605;
(2) Kamlesh Kumar Sharma vs. Yogesh Kumar Gupta reported in (1998) 3 SCC 45.
(j) According to him, both "Sale" and "Lease" of an immovable property create an "interest" in the property, whereas it is an CS(OS) 651/2013 Page 87 of 257 asserted position of the Defendant that a "Licence" does not create any interest in the immovable property.
(k) He refers to the term "Sale" as defined under Section 54 of the Transfer of Property Act, 1882 and the term "Lease" as defined under Section 105 of the said Act. Section 54 and 105 are as under:
―54. ―Sale‖ defined - ―Sale‖ is a transfer of ownership in exchange for a price paid or promised or part paid and part promised.
―105. Lease defined - A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express of implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.‖
(l) It is the Defendant‟s case that it only provided a "Licence"
which is defined under Section 52 of the Easements Act, 1882 and is as under:
―52. ‗Licence' defined.--Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a licence.‖
(m) He would rely on the judgment of the Supreme Court wherein, according to him, a distinction was made between a "Licence" and a "Lease", Puran Singh Sahni v. Sundari Bhagwandas Kripalani, reported in (1991) 2 SCC 180.CS(OS) 651/2013 Page 88 of 257
(n) He also relied on the judgment of the Supreme Court in the case of Mangal Amusement Park (P) Ltd. v. State of M.P., reported in (2012) 11 SCC 713.
(o) He states, that through a Licence there is no "transfer" and it is only right to use which is "granted".
(p) The defendant (NDMC) has at paragraph 3 of the Written Statement stated as under:
―The Plaintiff was merely a licencee to operate the hotel for a limited period with no right to right of transfer/sublet the said hotel or any portion thereof, permanently or temporarily, to anybody else, the period whereof has since expired.‖
(q) He further, submits that the above interpretation of Section 141(2) of the NDMC Act, 1994 is furthered from the language/words used by the legislature in the sub section (1) and sub-section (2) of Section 141 the said Act.
(r) According to him, while sub-section (1) of Section 141 deals with the various modes in which the Council may "deal with the immovable property" belonging to the Council, sub-section (2) provides the manner for arriving at the consideration such disposal/transfer mentioned therein.
(s) He states, sub-section (1) of Section 141 uses the words (i) Lease; (ii) Sell, (iii) Let out on hire; (iv) or otherwise transfer.
However, the legislature has consciously omitted the words "let out on hire" from Section 141(2) of the NDMC Act. Therefore the manner of arriving at the consideration through competition only applies to:
(1) A sale of immovable property
CS(OS) 651/2013 Page 89 of 257
(2) A Lease of immovable property
(3) The property is transferred in a manner which creates an
interest in the property. (since the terms "otherwise" has to be construed ejusdem generis as explained above)
(t) It is also his submission that Section 141 of the NDMC Act, 1994 nor any other provision of the said Act specifically deals with the expression "let out on hire". However the New Delhi Municipal Council (Determination of Annual Rent) Bye Laws, 2009 enacted under Section 391 of the Act deal with the term "Let". The Plaintiff submits that under Explanation to Bye Law 2 of the said Bye Laws, it is provided that the expression "Let" includes "Licence". (u) He would state, in the context of a different enactment the terms "letting" came to be interpreted by the Hon‟ble Supreme Court in the case of H.S. Rikhy Vs. New Delhi Municipal Committee reported in AIR 1962 SC 554 to mean Licence
(v) He states, Section 141(2) of the NDMC Act, 1994 is not applicable to the expression "let out on hire" and Bye Laws being superior to the Council‟s resolution since the Bye Law are approved by the Govt. of NCT of Delhi and are issued under Section 391 of the NDMC Act, 1994, must be given effect to. Thus for determination of Licence Fee there is no requirement of holding an auction.
(w) It is a matter of fact that the Defendant has not held any auction for extension of the licences of DTTDC in respect of „Dili Haat‟ and extended the licence by mutual negotiations vide its resolution dated September 13, 2011 and the Council vide its Circular No. SO/Estate-1/963 dated 17.7.2014 has invited CS(OS) 651/2013 Page 90 of 257 application for renewal of licences of various shop units in various markets across New Delhi also without resorting to auction. Thus it is clear by the conduct of the Defendant that there is no requirement of holding any auction of licence fee.
(x) He would state excluding the term "let out on hire‖ in sub- section (2) of Section 141, which is akin to the grant of a "licence" as interpreted by the Supreme Court, the legislature in its wisdom consciously decided to exclude the mandate of arriving at the consideration as per Section 141(2) in cases of grant of a simplictor "Licence" by the Council.
(y) He would submit that when the legislature has consciously omitted certain words, the Defendant cannot be permitted to add the words "Licence" in Section 141(2) nor would the Court while interpreting the said Section add or supply any words especially when there is no ambiguity by applying the literal rule of interpretation. He seeks to rely on the following judgments in this regard:
(1) State v. Parmeshwaran Subramani, reported in (2009) 9 SCC 729;
(2) V. Jagannadha Rao v. State of A.P., reported in (2001) 10 SCC 401;
(3) Delhi Financial Corpn. v. Rajiv Anand, reported at (2004) 11 SCC 625;
(4) Sree Balaji Nagar Residential Assn. v. State of T.N., reported at (2015) 3 SCC 353;
(5) Mohd. Shahabuddin v. State of Bihar, reported at (2010) 4 SCC 653;CS(OS) 651/2013 Page 91 of 257
(6) Bank of India v. Mehta Brothers, reported at (2008) 13 SCC 466.
(z) Since in the present circumstances, the Defendant has provided a Licence, and is only seeking to provide a Fresh Licence as per itself, Section 141 (2) of the Act of 1994 would not be applicable. Accordingly the decision dated November 05, 2012 is clearly wrong, and deserves to be set aside only on this ground.
Decision of Aggarwal Modi's case is not Applicable. (aa) He states, the decision of the Supreme Court in the case of Aggarwal & Modi Enterprises (P) Ltd. & Anr. Vs. New Delhi Municipal Council is not applicable to the facts and circumstances of the present case for the following reasons:
(1) In the case of Aggarwal Modi, there was no valid licence in question and the Appellant therein was continuing in the property from 1990-2000 without a licence. The Court came to a conclusion that there was no option/entitlement of renewal since the there was no licence in operation under which the right could be exercised. (2) In paragraph 18 in the judgment is very relevant and is as under:
―18. For appreciating the true scope and ambit of Section 141(2), it is to be noted that by nature of the proposed changes it has to be treated as fresh transaction particularly when not only the nature of property changes but also the lease has expired. Though strong reliance was placed on a Resolution dated 18-3-1999 by the appellants, it is to be noted that the said resolution has practically no effectiveness in 2006.‖ (3) From a bare perusal of the aforementioned paragraph, it is clear that what was considered by the Supreme Court was that since CS(OS) 651/2013 Page 92 of 257 the Lease had expired and more so the nature of the property was being changed in amounted to a „fresh transaction‟. Accordingly for Section 141 to be applicable there has to be a "fresh disposal" of property.
(4) In the present case, it is not the case of the Defendant that the nature of use of the suit property is going to be changed and further the Plaintiff had exercised its option of renewal during the validity of the Licence. Further there is no "fresh disposal" of property since the licence of the Plaintiff would only be extended.
(5) The Court in para 22 held as under:
"22. The mandate of Section 141(2) is that any immovable property belonging to NDMC is to be sold, leased, licenced or transferred on consideration which is not to be less than the value at which such immovable property could be sold, leased, or transferred in fair competition. The crucial expression is ―normal and fair competition‖. In other words, NDMC is obligated to adopt the procedure by which it can get maximum possible return/consideration for such immovable property. The methodology which can be adopted for receiving maximum consideration in a normal and fair competition would be the public auction which is expected to be fair and transparent. Public auction not only ensures fair price and maximum return it also militates against any allegation of favouritism on the part of the Government authorities while giving grant for disposing of public property. The courts have accepted public auction as a transparent means of disposal of public property........‖ (6) In the second line of paragraph 22 the words "Licence" has been used by the Court, however the term "Licence" is missing in the fourth line which shows that the term "Licence" has crept in by mistake since the Section 141 (2) does not use the term "Licence".
Further a bare perusal of the entire judgment would show that the CS(OS) 651/2013 Page 93 of 257 Court has used the term "Licence" and "Lease" synonymously since the case of the Appellant therein was that the rights were of a Lessee as noted in paragraph 3.
89. Mr. Rajiv Nayar in rejoinder to the submissions of Mr. Sanjay Jain, with regard to Section 141 and Section 395 of the Act of 1994 would submit the reliance placed by Mr. Jain on Faqir Chand Gulati Vs. Uppal Agencies Pvt. Ltd. (2008) 10 SCC 345 to submit that the Collaboration does not provide any rights in property, is in a wrong context. The contracts between the parties in the present case, provide a joint control as also envisages sharing of profits. In this regard Para 25 of the said judgment goes contrary to the Defendant‟s submissions. He further submits that in the face of the admitted documents and the Defendant‟s own admissions in the Resolutions the Defendant cannot be allowed to take a contrary stand before this Court in oral arguments. He would rely on paragraph 25 of the judgment, which is as follows:
"25. An illustration of joint venture may be of some assistance. An agreement between the owner of a land and a builder, for construction of apartments and sale of those apartments so as to share the profits in a particular ratio may be a joint venture, if the agreement discloses an intent that both parties shall exercise joint control over the construction/development and be accountable to each other for their respective acts with reference to the project.‖
(b) Insofar as the submission of Mr. Jain, that the interplay of Section CS(OS) 651/2013 Page 94 of 257 91 and 92 of the Evidence Act prohibits the Court from considering exchange of letters. According to him, Mr. Jain wrongly sought to contend that implications also cannot be drawn. No answer was given by the Defendant to the Resolution of the Committee dated April 02, 1976 which itself uses the words "joint participation" as also the use of the word "collaborate" in Collaboration Agreement and the clear distinction made out between the words "Hotel Building" and "Hotel".
The concept of joint venture is omnipresent in the present case because both the plaintiff and the Defendant came into the possession of 1, Man Singh road, with one single purpose at the same time. Now, the Defendant cannot argue that its rights are larger than the Plaintiff, in the Hotel Project. The Defendant cannot be allowed to assess the relationship between the parties under the regime of the Act of 1994 by discarding and dislodging the rights of the parties as they existed on April 02, 1976, December 18, 1976, September 25, 1979, and confirmed by the Defendant itself in its Resolutions dated October 07, 2011, July 25, 2012 and September 27, 2012. All these documents have to be read together and the Defendant cannot be allowed to read certain documents in isolation.
(c) He would state, it was sought to be argued that the two stage CS(OS) 651/2013 Page 95 of 257 theory as per the Plaintiff is not possible while construing the application of Section 141 of the Act of 1994 and also it sought to be argued that the order passed by this Court on the Plaintiff‟s application under Order II Rule 2 of the CPC is of no consequence or effect. The submission of the Defendant can be appropriately dealt with after this Court passes a decree directing the Defendant to negotiate with the Plaintiff.
(d) On the argument of Mr. Jain that once the licence stood expired, there was no extension possible and only a renewal could be granted. A renewal would mean an execution of fresh licence which would mean holding of an auction. The Plaintiff submits that since the Plaintiff‟s request for extension of the licence is much prior to the expiry of the licence, the Plaintiff‟s rights deserve to be construed as per the date of the request. This is the direct import of the judgment of the Supreme Court of India in respect of mining leases Common Cause vs. Union of India Writ Petition (C) No.114 of 2014 dated April 4, 2016.
(e) He would also state, the submission that under Section 2(29) of the NDMC Act, the word "occupier" includes a "licencee" and accordingly, in case of a licence, the licencee would be liable to pay House Tax. This explanation of the Defendant is contrary to Section 61 of the Punjab Municipal Act as also Sections 62 read with Section 66 of CS(OS) 651/2013 Page 96 of 257 the Act of 1994 where the incidence of tax is defined to be on the owner.
(f) He would also state, the argument of Mr. Jain that "otherwise transfer" in Section 141(2) of the Act of 1994 would include licensing of the property, because as per the Transfer of Property Act there are only 4 ways of transfer i.e. gift, lease, sale or succession and would cover "licence", is devoid of any merit because licence is defined in Section 52 of the Easements Act and is never construed to be a "transfer". In the Written Statement and in the cross examination, the Defendants have admitted that the licence does not amount to transfer. This unique argument therefore cannot be resorted to by the Defendant during oral arguments.
(g) He states, even the argument that the word "licence" in paragraph 22 of the judgment of the Supreme Court of India in Aggarwal Modi Vs. NDMC as being the mandate of law pronounced by the Supreme Court of India by relying on the judgments of the Supreme Court in the cases of South Central Railway Employees Cooperative Credit Society Employees Union Vs. B. Yashodabai (2015) 2 SCC 727 and Director of Settlement A.P. and M.R. Apparao (2002) 4 SCC 638 is without merit. He states, it is trite law that judgments cannot be read as "Euclid formula". In this regard, he relied upon the judgment of the Supreme CS(OS) 651/2013 Page 97 of 257 Court in Union of India & Anr. Vs. Arulmozhi Iniarasu (2011) 7 SCC
397.
90. He also states, defendant‟s reliance on the judgment in Director of Settlements A.P. Vs. M.R. Apparao (supra) also goes against the Defendant‟s own submission since it holds that an obiter may not have a binding precedent if the observation was unnecessary for the decision pronounced.
91. He submits that to further the above argument of the Plaintiff the following distinguishing features mentioned in the Aggarwal & Modi Enterprises Pvt. Ltd. (supra) judgement make the said judgment not a binding precedent in respect of the Plaintiff‟s case:
(i) there was "lease" in that case;
(ii) The lessee refused to accept defendant‟s terms and conditions for
extension
(iii) When that lessee approached for extension, the agreement had expired and there was no lease in operation under which it could exercise such an option.
(iv) It was a change in user of the premises from a Uniplex to a multiplex-cum-commercial center.
(v) That was not a case of joint venture and there was no assessment CS(OS) 651/2013 Page 98 of 257 of rights as in the present case where evidence has been led.
92. According to him, the plaintiff‟s case is however totally distinct and separate therefore the use of the word "licence" in paragraph 22 in the judgment of Aggarwal & Modi Enterprises Pvt. Ltd. (supra) cannot be isolatedly read without reference to Section 141 (2) and the facts in Aggarwal & Modi Enterprises Pvt. Ltd. (supra), to mean that there is a mandate of law to hold an auction for renewal of a licence even when the request for extension was made during the existence of the Licence under Clause 2(2) of the Licence Deed, and the purpose remains the same.
93. He also states, the plea of Mr. Jain, the property at 1, Man Singh Road, New Delhi is a "natural resource", is completely devoid of merit because the whole building was constructed by the Plaintiff and is a man-made structure. There are "joint venture" rights attached to the building which cannot be ignored by the Defendant to somehow contend that it is entitled to seek compensation for the use of the building independent of Plaintiff‟s rights. The Plaintiff therefore submits that the contention of the Defendant that the Hotel Project is a natural resource deserves to be rejected.
94. Mr. Nayar states, the plea that NDMC determination of annual CS(OS) 651/2013 Page 99 of 257 rent cannot be resorted to by the Plaintiff since it regards House Tax, is devoid of merit because these bye-laws have been adopted by the Defendant to calculate the licence fee payable by the Plaintiff (Refer Exh. P6). In any case, the Supreme Court of India has held that the fixation of the reasonable market rent to determine the House Tax payable is actually to determine the market rent (Refer: NDMC Vs. M.N. Soi).
95. According to Mr. Nayar, the argument that extension of Dilli Haat was for a different purpose, is devoid of merit because the case of Dilli Haat is the same as that of the Plaintiff. If no auction is held for extending Dilli Haat licence, obviously Section 141 cannot be applied to the Plaintiff‟s case for extension of the Plaintiff‟s licence.
96. He also attacks the argument of Mr. Jain with regard to Government of India (Allocation of Business) Rules, 1961 MOUD is the Nodal Ministry only for making land and building bye-laws; and the MHA is the Central Government in respect of Act of 1994 by relying upon the judgment of the Division Bench of this Court in Tajdar Babar (supra) as devoid of merits because it seeks to ignore the most important part of the Government of India (Allocation of Business) Rules, 1961 that the Government of India‟s properties come exclusively CS(OS) 651/2013 Page 100 of 257 within the control of MoUD, and the allotment of such properties is also within MoUD‟s exclusive discretion. In respect of defendant, the Entry of "land and building bye-laws" is also within the MoUD‟s control. The Plaintiff submits that it is trite law that Entries have to be read in their full width. It is also held by the Supreme Court of India that a decision which is taken contrary to the allocation business rules is void ab initio. Once it is admitted that 1, Man Singh Road, New Delhi being Government of India property, obviously it is for the MOUD to direct a particular treatment of the said property. Before the Supreme Court of India in SLP(C) No.9142 of 2013 also in respect of this very case the MoUD had stated that it is a "policy making body". The Defendant therefore cannot ignore this direction of MoUD. The Plaintiff submits that the role of MHA in the NDMC Act is therefore limited to the control over the council and cannot touch upon right to transact in properties of the Union of India which comes within the exclusive domain of MoUD.
97. He states, the submission of Mr. Jain that "duty" within Section 395 of the Act of 1994 would include the performance under Section 141 (2) of the Act, is totally devoid of merit because entering into contracts is not a duty as envisaged in the Act of 1994. There is no expenditure in holding an auction or contracting out property of the defendant. Thus, CS(OS) 651/2013 Page 101 of 257 the contention of the Defendant deserves to be rejected. In any case, this Court as also the Supreme Court of India has held that there cannot be a "duty" based upon a single transaction. Therefore, it cannot be that under the Act of 1994, for any contract or act of the council the MHA will get the power to override the council. MHA has no such control as already contended by him.
98. He states, the argument that the Defendant does not lease or sell properties and it only licences properties and therefore, the mandate under Section 141(2) has to apply to the licensing activity of the Defendant is devoid of merit as apparent from the Aggarwal & Modi Enterprises Pvt. Ltd. (supra) judgement itself where it was a lease which was being construed. In any case, this has no factual basis in any of the pleadings or the evidence before this Court.
99. He would rely on the judgment of Union of India Vs. Hotel Excelsior Ltd. ILR (2013) I Delhi 157 at para 28 has held as follows in respect of the defendant:
―28. The appellant and other governmental agencies are known to grant leases viz. of markets, shops etc. Infact one such leases granted by NDMC to Chanakya Cinema at New Delhi was held to have lapsed and the eviction was upheld till the Supreme Court vide judgment reported as Aggarwal and Modi Enterprises Pvt. Ltd. Vs. NDMC (2007) 8 SCC 75. The very fact that the CS(OS) 651/2013 Page 102 of 257 entitlement to freehold was confined only to those leases where ownership rights had been conferred signifies that such conversion was not intended where according to the appellant, ownership rights had not been conferred. In the light of the differences pointed out above, the appellant can well be believed to have entertained an opinion that conversion is to be granted only of those leases for which premium had been paid and not to other leases.‖
100. He states, the argument that the expression "let out on hire" can be equated to the expression "lease" and therefore even licence by the Defendant would be covered by the expression "lease" making Section 141 of the Act applicable is devoid of merit. It is obvious that when a legislature uses the expression "separately" and then omits one of them in a subsequent provision, the omission is deemed to be deliberate. Thus, there is no equivalence between the two expressions.
101. Mr. Nayar argues that the defendant has wrongly sought to dis- apply Section 235 of the Act of 1994 by saying that it only applies to sanctioning of plans and building regulations. He states, that it is trite law that topics in legislations do not govern the stipulations. Section 252 of the Act of 1994 specifically covers use of a building in a particular manner read with the ownership of the said land being with the government of India, it is the MOUD only which has the control and jurisdiction upon the Defendant in respect of properties of the Defendant. Finally, he states the plaintiff is entitled to reliefs prayed for. CS(OS) 651/2013 Page 103 of 257 SUBMISSIONS ON BEHALF OF THE DEFENDANT:-
102. On the other hand, Mr. Sanjay Jain, learned ASG would state that the plaintiff has filed the present suit seeking a permanent injunction restraining the defendant from in any manner interfering with the possession, right to operate, run and maintain the hotel premises at 1, Man Singh Road, New Delhi as per the Collaboration Agreement dated December 18, 1976 (Exh.P-40) read with Deed of Licence dated December 18, 1976 (Exh.P-41) and Supplemental Agreement dated September 25, 1979 (Exh.P-42). In addition, the plaintiff has also prayed a decree of permanent injunction restraining the defendant from giving effect to the decision communicated through letter dated November 05, 2012 (Exh.P-49) to conduct an auction with respect to the hotel premises at 1, Man Singh Road, New Delhi. He would state that the primary grounds in the written statement are:
(a) That the suit is barred under the provisions of Section 385 of the NDMC Act;
(b) That the suit is barred in view of the mandate of the provisions of Section 141(2) of the NDMC Act; and
(c) That the plaintiff has no legally enforceable right to claim the relief CS(OS) 651/2013 Page 104 of 257 as sought in the present suit inasmuch as the plaintiff has no right, title or interest in the land or in the building in question which exclusively belongs to and vests in the defendant.
(d) It has further been stated that there is no right of extension that vests with the plaintiff in terms of the Collaboration Agreement or the Licence Deed. The period of licence having come to an end, no right in law exists in favour of the plaintiff.
103. He would state, that the following issues were framed vide order dated July 17, 2014:
1. Whether the Plaintiff is entitled to the extension of licence as claimed in the Suit? OPP
2. Whether the Suit is barred by Section 385 of the NDMC Act, 1994?
OPD
3. Whether Section 141 of the NDMC Act, 1994 is applicable to the contracts and transactions between the Plaintiff and the Defendant in respect of the extension of the licence deed dated 18.12.1976? OPD
4. Whether the Plaintiff is entitled to relief claimed in the present Suit? OPP
5. Any other Relief.
CS(OS) 651/2013 Page 105 of 257
104. The Collaboration Agreement dated December 18, 1976 (Exh.P-
40), Deed of Licence dated December 18, 1976 (Exh.P-41) and Supplemental Agreement dated September 25, 1979 (Exh.P-42) may collectively be referred to as the basic written contracts.
105. With regard to issue No.1, he would state that it has been argued on behalf of the plaintiff that notwithstanding the basic written contract the status of Indian Hotels Company Ltd. (IHC) is not that of a mere licencee but that of a Joint Venture Partner with an option for renewal of the licence for the further period of 30 years after the expiry of the initial term at the option of IHC; which option, according to IHC, has been exercised by them on February 15, 2010 (Exh. P-49) and thus, the licence has inevitably to be extended and there is no question of the defendant not extending the licence. According to him, it was further argued that clauses 10 and 12 of the Licence Deed are not applicable in the facts of the present case as there has been no default by the plaintiff of any of the terms of the Licence Deed and further, having exercised with option for renewal before the terms came to an end, clause 12 would also not be applicable. He would state, it was further argued by the plaintiff, that a fresh terms have already been agreed upon in terms of the decision of the Committee constituted in this regard on June 03, 2011 CS(OS) 651/2013 Page 106 of 257 wherein the revised licence fee was agreed @ 17.25% of the gross income for the first 10 years; 18.25% for the second ten years and 19.25% for the last ten years. He also states, in this regard, it has also been argued that there was no dispute between the defendant and plaintiff with respect to renewal of Licence and to this effect reliance has been placed on the Minutes of the meeting dated June 03, 2011 (Exh.P-
4) read with Minutes of the meeting dated July 14, 2011 (Exh.P-5) and Minutes of the meeting dated November 14, 2011 (Exh.P-27). It has, thus, sought to be contended that there was a concluded contract. He would further state, it was argued by the plaintiff that even the Ministry of Urban Development (MoUD), though, initially had suggested that the property be put to auction, later changed its opinion as recorded in the Minutes dated November 14, 2011 (Exh.P-27) wherein the MoUD opined that NDMC should strive to get as close to the market rate as possible even if it has to negotiate with IHC. He would state, another argument of the plaintiff was that the relationship between the parties is not that of a mere licensor or licencee but that of Joint Venture Partner and that defendant has also always understood the same to be a Joint Venture as is allegedly evident from the various Minutes of the NDMC. According to him, it was contended by the plaintiff, that the land stood contributed by defendant in the Joint Venture by way of investment vide CS(OS) 651/2013 Page 107 of 257 the Supplemental Agreement dated September 25, 1979 (Exh.P-42). That in the light of the above contentions, the plaintiff is challenging a decision of the defendant to put the hotel property to auction and not granting extension. He states, before adverting to the contentions on behalf of the defendant, it may be pointed out that during the pendency of the suit vide letter dated January 29, 2016, the first right of refusal as communicated to plaintiff vide defendant‟s letter dated November 05, 2012 (Exh.P-49) stands withdrawn. The plaintiff was further requested to handover possession of the said property by February 29, 2016. The plaintiff herein filed an application being IA No.1530/2016 seeking an injunction restraining the defendant from acting upon the said letter dated January 29, 2016. The said fact is being set out at the very outset to highlight that no right of first refusal subsists in the plaintiff and the right of first refusal as communicated vide letter dated November 05, 2012 (Exh.P-49) stands withdrawn. He states, that this is, however, without prejudice to the contention which shall be elaborated further, that no right of first refusal is borne out from a reading of the three agreements that are being relied upon by the plaintiff i.e The Collaboration Agreement dated December 18, 1976 (Exh.P-40) Deed of Licence dated December 18, 1976 (Exh.P-41) and Supplemental Agreement dated September 25, 1979 (Exh.P-42).
CS(OS) 651/2013 Page 108 of 257
106. He would state, that with respect to the plaintiff‟s argument that it has a vested right of renewal, it is stated that the same is not borne out from the three agreements that have been executed between the parties:
(a) The Collaboration Agreement dated December 18, 1976 (Exh.P-40) merely records the terms whereby the plaintiff was invited to build a 5-
star hotel on a plot owned by the defendant herein. A reading of the Collaboration Agreement; and in particular, Article II clause 5, Article III clauses 2 and 8 would clearly demonstrate that the land always vested with NDMC. Not only the land but even the building belongs to NDMC as it was NDMC only which paid for its construction, having paid 475 lakhs to IHC for the said purpose.
(b) The Licence Deed dated December 18, 1976 (Exh.P-41), is a licence to run the hotel for a period of 33 years commencing from the date of occupation of the hotel by the first paying guest. The said period commenced from October 11, 1978 and came to an end on October 10, 2011. Clause II of the Licence Deed clearly states that the option to grant the licence for a further period on such terms that may be mutually agreed shall be that of the NDMC. The only discretion bestowed upon plaintiff in terms of the Agreement is that if plaintiff is desirous of obtaining licence for a further period after the expiry of the present CS(OS) 651/2013 Page 109 of 257 licence, it shall serve defendant with a notice in writing not less than 60 days prior to the expiry of the present licence of its desire to continue for the consideration of the defendant. According to him, the argument of the plaintiff that the option of renewal vests with plaintiff is completely contrary to the terms of the Licence Deed (Exh.P-40). The Licence Deed only bestows upon plaintiff an option to communicate to defendant its desire to continue and after receipt of such communication the option to renew the Licence Deed for a further period on such terms as may be mutually agreed between the parties vests exclusively with the NDMC. He states, the words used in the Licence Deed are "If the licencee shall be desirous of obtaining a licence for a further period after the expiry of the present licence, it shall give to the licensor, a notice in writing .... for the consideration of the licensor‖, thus plaintiff can only express its desire to continue, it is not a right. The discretion to consider the request of plaintiff, positively or negatively is purely vests with defendant. Clause VI(2) again reiterates that the ownership of the said hotel shall vest with defendant;
(c) The Supplemental Agreement dated September 25, 1979 (Exh.P-42) was entered into to record certain changes in the Licence Deed, and in particular, to record facts that the total investment of defendant would be CS(OS) 651/2013 Page 110 of 257 taken as Rs.626 lakhs as against the stipulated investment of Rs.475 lakhs in the original Collaboration Agreement. Contrary to what has been argued by the plaintiff, the amendment of enhancement of defendant‟s contribution by including the cost of land did not in any manner mean that plaintiff acquired some sort of interest in the land; and that the said amendment was made for the reason that in terms of Clause III of the Licence Deed the amount to be paid by plaintiff to defendant was 10.5% of the gross income for every financial year or a sum equivalent to 15% of the licensor‟s investment in the said hotel building in terms of the Collaboration Agreement, whichever is higher. Thus, the purpose for including the land value in the cost of the investment of defendant was to increase the minimum guaranteed amount payable by plaintiff to defendant, and not to make the land an asset of any Joint Venture as alleged by the plaintiff. In fact, the term „Gross Income‟ was also modified to read as „Gross Receipt‟.
107. He would state, with respect to the argument of the plaintiff, the defendant has always treated this project as a unique Joint Venture, and therefore, the status of plaintiff is not that of a mere licencee is completely fallacious. It is stated that there was a collaboration between defendant and plaintiff inasmuch as the construction of the building was CS(OS) 651/2013 Page 111 of 257 concerned, and for this purpose plaintiff was also granted the right to run hotel for a period of 30 years. He would state, that mere use of term Joint Venture or unique a partnership by some officers of the defendant who are not legally trained would not change the nature of the Agreement. The most basic ingredient of a Joint Venture is that two legal entities get together to undertake a particular transaction or venture for mutual profit. They agree to share profits and losses. It is submitted that this very basis ingredient of profit and loss sharing, is missing in the arrangement between the plaintiff and defendant. There is no sharing of profit or loss. In fact, the defendant is taking a percentage of the gross receipts, or the minimum guaranteed amount whichever is more. Thus, the plaintiff is liable to pay defendant even if the hotel was to run in losses. Therefore, it is submitted that the basic ingredient to term the arrangement between the parties as a Joint Venture or Partnership are missing. He would rely on the judgment of the Supreme Court in the case of Faqir Chand Gulati vs. Uppal Agencies Pvt. Ltd 2008 (10) SCC 345 to contend that Joint Venture means (i) there should be joint ownership and control of property; (ii) share of expenses, profits and losses; (iii) having an exercising voice in determination and division of net earnings; (iv) community of control and active participation in management and direction of business enterprise. He submits, none of CS(OS) 651/2013 Page 112 of 257 these elements are present in the present case. He would state, even assuming the case of the plaintiff to be correct that the agreement between defendant and plaintiff was a Joint Venture partnership, it is submitted that nothing turn on the term of the "Joint Venture". It is submitted that even if the arrangement between the parties was, in fact, a Joint Venture the same would have to be construed in accordance with the terms of the three agreements, i.e Collaboration Agreement, Licence Deed and Supplemental Agreement, which constitute the Joint Venture. In this regard, Sections 91 and 92 of the Indian Evidence Act are clear, that unless there is any ambiguity in the terms of the contract no external evidence can be looked at to ascertain the agreement between the parties. It is not the case of the plaintiff that the terms of the three Agreements are ambiguous in any manner. He would further submit that merely by terming the arrangement between the parties as a Joint Venture no new right has come to vest in plaintiff beyond what has already been agreed in the three agreements.
108. He would state, that the Supreme Court in the case of Bank of India vs. K. Mohandas 2009(5) SCC 313 has held that; "The true construction of a contract must depend upon the import of the words used and not upon what the parties choose to say afterwards. Nor does CS(OS) 651/2013 Page 113 of 257 the subsequent conduct of the parties in performance of the contact affect the true effect of the contract.‖ The said ratio is fully applicable to the facts of the present case. He would state, the aforesaid argument is without prejudice to the fact that merely terming the agreements between plaintiff and defendant as Joint Venture in various meetings would not change the legal character of the agreements between the parties which remains with licensor and licencee. The fact that plaintiff‟s status was that of a licencee has been admitted by PW-1 (Sh. P.K. Bhatia) in his answer to question No.22. It is a settled preposition of law that occupation of the licencee is merely permissive and does not amount to possession. A licence does not create any interest in property. It merely permits another person to make use of the property. There is no parting with possession as the legal possession continues to be that of the owner. He would state that in the case of Maria Margarida Sequeira Fernandez and ors vs. Arasmo Jack Ded Sequeira 2012(5) SCC 370, it has been held that, "the possession or occupation of the property by a person other than the holder of legal title will be presumed to have been under and in subordination to the legal title, and it will be for the person resisting the claim for recovery of possession or claiming a right to continue in possession, to establish that he has such a right.‖ In the facts of the present case, the plaintiff has completely failed to establish its CS(OS) 651/2013 Page 114 of 257 right to continue in possession. The judgments cited by the plaintiff with respect to partnership and Joint Venture are of no avail, and not at all applicable to the facts of the present case. He would state that the terms of the licence came to an end on October 10, 2011. Thereafter, subsequent extensions were given from time to time on ad-hoc basis pending a final decision on plaintiff‟s request/desire to renew. Though, it is correct that after the plaintiff wrote to the defendant on February 15, 2010 (Exh.P-22) requesting for extension and a Committee was constituted to look into that request, no concluded contract came into being. The recommendations of the Committee recorded in the Minutes of the meeting dated June 03, 2011 (Exh.P-4) was subject to approval of the Chairperson of the NDMC. The communication of IHC dated July 15, 2011 accepting the recommendations of the Committee does not amount to a concluded contract as plaintiff was aware that the same was subject to confirmation, and therefore, plaintiff itself requested for confirmation vide the said communication. In fact, the said letter was in the nature of an offer from plaintiff to defendant. Subsequent thereto, at a Council meeting held on October 07, 2011 (Exh.P-12), it was resolved to agree to sanction extension for a period of one year upto October 10, 2012 subject to plaintiff agreeing to pay licence fee at enhanced rate as mutually agreed retrospectively with effect from October 11, 2011. It CS(OS) 651/2013 Page 115 of 257 was also resolved that further action would be taken after legal advice and consultant‟s report. It is, thus, evident that the enhanced rate of 17.25% was agreed to by the defendant only for extension with effect from October 17, 2011 to October 10, 2012, and not for an extension of a duration of 30 years. He would state, that in the Minutes of the meeting dated November 14, 2011 (Exh.P-27) between NDMC and MoUD, it was decided that NDMC should negotiate with IHC to get as close to the market rate as possible. It is submitted that even this does not amount to according a sanction for extension. Lastly, it is clearly evident from the plaintiff‟s own letter dated July 13, 2012 (Exh.P-16) that even as per the understanding of plaintiff there was no concluded contract, and therefore, plaintiff was requesting for approval. Thus, there was no concluded contract between the parties. In fact, in the entire plaint there is no pleading with regard to a concluded contract, therefore, the reliance by the plaintiff on the judgment of ITE India Pvt. Ltd vs. Delhi Tourism & Transportation Development Corporation Ltd FAO(OS) 46/2016 dated May 23, 2016, is completely misplaced as that was a case where consent to renew was withdrawn; whereas in the present case there has never been a decision to renew for a period of 30 years. He would state that a concluded contract could have come into place only if the competent authority i.e the Council of NDMC had taken a decision in CS(OS) 651/2013 Page 116 of 257 this regard. The communications between the plaintiff and the officers of the NDMC, without the sanction of the Council, would not result in a concluded contract. Ref. U.P Rajkiya Nirman Nigam vs. Indure Pvt. Ltd 1996 (2) SCC 667.
109. He would state, that subsequently the Council in its meeting held on September 27, 2012 (Exh.P-20) after considering the clauses of the three agreements entered into between the parties, the Report of the Consultant appointed by the NDMC as well as various legal opinion received in this regard, came to a decision to put the property for public auction in a fair and transparent manner with right of first refusal to plaintiff. It was further resolved to extend the period of licence of plaintiff on existing terms and conditions for a period of one year or till such time a new licencee is chosen through the bidding process, whichever is earlier. The said decision of the Council was communicated to plaintiff vide letter dated November 05, 2012 (Exh.P-
49). Pursuant to the aforesaid decision of the Council of NDMC, the Ministry of Home Affairs (MHA) vide two different/separate communications wrote to defendant stating that the right of first refusal would not fetch the correct market price, and therefore, it is in the interest of transparency that defendant goes for public auction wherein CS(OS) 651/2013 Page 117 of 257 plaintiff may participate as a bidder. It was also observed that the right of first refusal has not been provided for in the Licence Deed. The same is evident from the communication dated June 27, 2013 (Exh.DW1/P-4) and letter dated May 10, 2013 (Exh.DW1/P-5). The said two letters resulted in the MHA issuing a Memorandum dated January 01, 2015 (Exh.DW1/5) under Sections 395 and 396 of the Act of 1994 directing the defendant to resort to public auction and find the best bidder for the property situated at 1, Man Singh Road, New Delhi. He would state that the Council of the NDMC vide its meeting held on January 30, 2015 resolved that in view of the directions of the MHA to abide by the directions of the MHA and also decided to ad-interim extend the term of the licence till March 31, 2015. Ultimately, vide letter dated January 29, 2016 it was communicated to plaintiff that the first right of refusal as communicated to plaintiff vide defendant‟s letter dated November 05, 2012 stands withdrawn. The plaintiff was further requested to handover possession of the said property by February 29, 2016. He would state, that the plaintiff has no vested right of extension in terms of the Agreement between the parties and is not entitled to extension of the licence, as extension if any, is at the sole discretion of the defendant herein and no decision has been taken by the defendant to extend the licence for a further period of 30 years. In fact, on the contrary a CS(OS) 651/2013 Page 118 of 257 decision has been taken to put the property to auction. No concluded contract to extend the licence for a period of 30 years ever culminated between the parties, and nor was any such decision taken by the defendant communicated to plaintiff. He would state that it is a settled proposition of law that file notings do not constitute a decision, nor do they have the sanction of law to be an effective order. Notings are nothing more than opinions of officers for internal use and consideration of the other officials of the department and for the benefit of the final decision making authority. They are not meant for outside exposure. Notings culminate into a decision or order only upon it getting the approval of the competent authority and the same being communicated to the person concerned. Thus reliance by the plaintiff on the decision making process, and opinions of various officers in the course thereof, are of no avail to the plaintiff, as no decision or order of extension for a period of 30 years has been communicated to the plaintiff by the defendant. Ref. (i) Bachhittar Singh vs. State of Punjab AIR 1963 SC 395 (para 10); (ii) Sethi Auto Service Station vs. DDA 2009 (1) SCC 180 (para 14 to 17).
110. With respect to the reasonableness and non-arbitrariness of the decision to put the property to auction, it is submitted that auction is the CS(OS) 651/2013 Page 119 of 257 best form of determining market rate. The plaintiff is in no manner precluded from participating in the auction, and as such, all arguments of the plaintiff with respect to the investment etc. are meaningless as the plaintiff was well-aware of the tenure of the licence. The Supreme Court in various judgments has held that with respect to the Government properties auction is the best method of disposal to achieve market price in a transparent manner.
Ref. (i) State of Uttar Pradesh vs. Shiv Charan Sharma 1981 (Supp) 85;
(ii) Ram & Shyam Co. vs. State of Haryana 1985 (3) SCC 267;
(iii) Sterling Computer Ltd. vs. M & N Publications 1993 (1) SCC 496;
(iv) Haryana Financial Corporation vs. Jagdamba Alloy Mills 2002 SCC 496;
(v) Chenchu Rami Reddy & Anr vs. Govgt. Of Andhra Pradesh 1986 (3) SCC 391;
(vi) Haji T. M. Hassan Rawther vs. Kerala Financila Corporation 1988 (1) SCC 166 Even in the case of Natural Resources Allocation, In Re Special Reference No.1 of 2012, (2012) 10 SCC 1 paras 146, 149 and 186, it has been held that auction is the preferable method especially in cases where resources are made available by the State to private persons for commercial exploitation.
CS(OS) 651/2013 Page 120 of 257
111. With respect to the power of MHA to issue directions to NDMC, it is submitted that the same is ex-facie evident from a plain reading of Sections 393 and 398 in Chapter XXII of the Act of 1994. In fact, a Full Bench of this Court while dealing with Sections 487 and 490 which fall under Chapter XXIV of the Delhi Municipal Corporation Act and which are parimateria to Sections 393 and 398 of Chapter XXII of the NDMC Act, in the case of Satish Chandra Khandelwal vs. UOI held;
―Section 490 which provides for supervision of the Corporation appears in chapter XXIV which is headed ‗Control'. All told, central control is both wide and deep.
Behind the corporate facade stands the Central Government with wide powers to issue directions, order inspection, and compel obedience to its commands. The Central Government exercises a considerable degree of administrative control over the Corporation in the interest of the community as a whole, for what is administered locally is often national policy. The most effective single agency is the control over finance and borrowings. Some watch must be kept to ensure that the spending is economic, for there always exists the possibility that the Corporation may carry its permissive powers to far.‖
112. It is thus evident that the Central Government, in the present case through the MHA, has wide pervasive powers over the NDMC. Thus if CS(OS) 651/2013 Page 121 of 257 the Central Government, is of the opinion that the Council is acting contrary to national policy and against public interest, then it is fully empowered to step in and issue directions to the NDMC. In the facts of the present case, the MHA was of the opinion that the best and most transparent method of achieving the market price would be to put the property to public auction and that there is no provision in the agreements for a right of first refusal, thus it requested NDMC to act accordingly. When NDMC despite receipt of letters dated June 27, 2013 (Exh.DW1/P5) and May 10, 2013 (Exh.DW1/P4) did not take a decision in the manner advised by the MHA, directions under Section 396 were issued vide Memorandum dated January 1, 2015 (Exh.DW1/5) directing the NDMC to resort to public auction and find the best bidder in respect of the property 1, Man Singh Road, New Delhi. He would state, that the decision of the MHA can in no manner be termed as arbitrary or unreasonable, the same is in consonance with the dicta of the Supreme Court, and is also the correct opinion as far as interpretation of the terms of the Agreements are concerned. A decision of a public authority, is generally not interfered with by the Court, unless it is vitiated by arbitrariness or the decision making process is flawed. He would state that none of the two ingredients are present in the present case. CS(OS) 651/2013 Page 122 of 257
113. With respect to the plaintiff‟s argument that Section 395 and 396 of the NDMC Act are not applicable in view of the fact that MHA has no power of superintendence with respect to disposal of land and reliance, in this regard, on the Allocation of Business Rules is completely misplaced. He would state, the plaintiff is misreading the Allocation of Business Rules of the MHA. The exclusion pointed out by the plaintiff reads as under:
"(ii) all powers and functions of the Central Government as per the provisions of the Municipal Corporation of Delhi Act, 1957 and New Delhi Municipal Council Act, 1994 except matters pertaining to the Land and Building Bye-laws.‖
114. From the above, it is evident that what is excluded is matters pertaining to the Land and Building Bye-laws, which fall under Chapter XIV of the NDMC Act. A bare reading of the provisions of Chapter XIV would clearly demonstrate that the same have no connection with disposal of land and building. The plaintiff is reading the words „Land and Building‟ without reading the limiting words „Bye-Laws‟, which are required to read in a conjoint manner. It is, thus, ex-facie apparent that the disposal of land in the Union Territory of Delhi is clearly within the purview of the MHA. The fact that the NDMC falls under the Ministry CS(OS) 651/2013 Page 123 of 257 of Home Affairs and not the Ministry of Urban Development as has been contended by the plaintiff is ex-facie evident from the judgment of this Court in Tajdar Babbar vs. Union of India 2015 (222) DLT 426. The same is a case relating to notification issued by the Govt. of India for dissolving the NDMC. It is clear from para 2 of the said judgment that the notification for dissolving NDMC was issued by the MHA. It is, therefore, evident that the controlling Ministry for the NDMC is the MHA. He would state, that the reliance on the Allocation of Business Rules of the MoUD is a clear misreading of the Allocation of Business Rules by the plaintiff. A conjoint reading of the Allocation of Business Rules with respect to MoUD and the MHA makes it clear that what is within the scope of MoUD is in the nature of managing layout plans, transportation, coordination and urban planning, horticulture etc.
115. He would state, another argument taken by the plaintiff is that very premise of the direction given by the MHA is incorrect as it is based on incorrect consideration that the property is on lease; whereas the property is, in fact, a licence. In this regard, it is stated that the said argument is meaningless in view of the dicta of the Supreme Court in the case of Aggarwal & Modi Enterprises Pvt. Ltd. (supra) wherein it has been held that the mandate under Section 141(2) includes within its CS(OS) 651/2013 Page 124 of 257 scope "licence". Therefore, it would make no difference whether the MHA considered the same to be a "lease" or "licence". It is stated that a reading of letter dated May 10, 2013 (Exh. DW1/P4) and letter dated June 27, 2013 (Exh.DW1/P5) would clearly demonstrate that the decision of the MHA is based on the fact that the Agreement between the plaintiff and the defendant does not provide for a right of first refusal would result in lower bids in the public auction. Thus, there is no infirmity in the decision of the MHA, which, it is, in any event, empowered to take under Section 395 and 396 of the NDMC Act.
116. With regard to issue No.2, Mr. Sanjay Jain, learned ASG would state that the defendant is not pressing the said issue as the trail has been completed and the case is being decided on merit.
117. With regard to issue No.3, he would state that Section 141 (2) is clearly applicable to the facts of the present case. Section 141 (2) reads as under:-
―141.(2) The consideration for which any immovable property may be sold, leased r otherwise transferred shall not be less than the value at which such immovable property could be sold, leased or otherwise transferred in normal and fair competition.‖
118. The Supreme Court while interpreting the mandate of Section CS(OS) 651/2013 Page 125 of 257 141(2) in the case of Aggarwal & Modi Enterprises (P) Ltd & Anr. vs. NDMC, has held as under:-
―22. The mandate of Section 141(2) is that any immovable property belonging to NDMC is to be sold, leased, licenced or transferred on consideration which is not to be less than the value at which such immovable property could be sold, leased, or transferred in fair competition. The crucial expression is "normal and fair competition". In other words, NDMC is obligated to adopt the procedure by which it can get maximum possible return/consideration for such immovable property. The methodology which can be adopted for receiving maximum consideration in a normal and fair competition would be the public auction which is expected to be fair and transparent. Public auction not only ensures fair price and maximum return it also militates against any allegation of favouritism on the part of the Government authorities while giving grant for disposing of public property. The courts have accepted public auction as a transparent mean of disposal of public property.
23. Disposal of public property partakes the character of trust and there is distinct demarcated approach for disposal of public property in contradiction to the disposal of private property i.e. it should be for public purpose and in public interest. Invitation for participation in public auction ensures transparency and it would be free from bias or discrimination and beyond reproach.‖
119. He would state, the attempt of the plaintiff to distinguish the facts CS(OS) 651/2013 Page 126 of 257 of the present case from the case of the Aggarwal & Modi Enterprises Pvt. Ltd. (supra) is completely misplaced. Even in the case of Aggarwal & Modi Enterprises Pvt. Ltd. (supra), as in the present case the term of the lease/licence had come to an end. The Cinema therein was operating on the basis of ad-hoc extensions granted from time to time. Thus, the facts to that extent are identical to the present case. There mere fact that in the case of Aggarwal & Modi Enterprises Pvt. Ltd. (supra) the user of the land was being changed from a single cinema to a multiplex would make no difference as far as the interpretation and mandate of Section 141 (2) of the NDMC Act is concerned. Thus, in the submission of the defendant, Section 141 is clearly applicable to the facts of the present case and auction being a fair and transparent process is the best way forward to achieve maximum consideration and to discover the correct market value. He would state that the plaintiff has argued that the present suit, in view of their application under Order II Rule 2 being allowed, is only, what is described by the plaintiff, as Stage-1 of the transaction, i.e its right of renewal. It is, thus the case of the plaintiff that if its vested right of renewal, which already stands exercised, is upheld then auction is merely a mode to determine the price for arriving at mutually agreed terms. He would state, that the plaintiff has no right of renewal as is evident from Clause II of the Licence Deed; therefore, if CS(OS) 651/2013 Page 127 of 257 the plaintiff fails in establishing its right of renewal, it cannot fault the invocation of Section 141(2) of the NDMC Act as it would be a case of fresh disposal and not a case of extension. He would state that Section 141 makes no distinction between "extension" and "fresh disposal"; as such, Section 141 is applicable to disposal of all immovable properties after coming into force of the NDMC Act. The Supreme Court in the case of Aggarwal & Modi Enterprises Pvt. Ltd. (supra) has clearly defined the mandate of Section 141(2) to include "licence" within its mandate; as such, the arguments of the plaintiff that the terms "otherwise transfer" would not include "licence" cannot be countenance. It is stated that the argument of the plaintiff that the inclusion of the word "licence" in para 22 of the judgment of Aggarwal & Modi Enterprises Pvt. Ltd. (supra) is obiter is misplaced. It is stated that the same is clearly the ratio of the judgment and not obiter. It is stated that the law declared by the Supreme Court under Article 141 of the Constitution is binding on all Courts in India. The ratio, i.e interpretation of law is always binding. It is stated that the Supreme Court has defined the mandate of 141(2) and what is stated in para 22 of the said judgment is an interpretation of the law and cannot be stated to be obiter. Ref. (i) Director of Settlement vs. M.R. Apparo 2002 (9) SCC 638; (ii) South Central Railway Employees Co-Operative Credit Society Employees Union vs. B. Yashoda Bai 2015 CS(OS) 651/2013 Page 128 of 257 (2) SCC 727.
120. He would further submit that the Transfer of Property Act contemplates transfer only by the following modes: sale, lease, gift/exchange or succession. Clearly, transfer by gift, exchange or succession is not applied to NDMC. He would state that since sale and lease are specifically mentioned in Section 141(2); therefore, the term "otherwise transfer" has to be assigned some meaning. In this regard, it is submitted that the same would include right of occupation create by licence, tehbazari, etc guidance, in this regard is available under the definition of "occupier" in Section 2(29) of the NDMC Act. An occupier includes a licencee in occupation of any land or building. It is, thus, stated that the definition of "occupier" has to be read as an aid for assigning meaning to the words "otherwise transfer". He would state that the widest possible meaning is required to be assigned to the words "otherwise transfer" as the use of the term "otherwise" by the Legislature itself connotes an intention to give a wide scope and meaning. Thus, the argument of the plaintiff, the words "otherwise transfer" have to be read in ejusdem generis to the words "lease" and "sale" are misplaced in the context of the NDMC Act.
121. He would state, that another argument of the plaintiff seeking to CS(OS) 651/2013 Page 129 of 257 place reliance on the NDMC (Determination of Annual Rent) Bye-laws, 2009 to assign meaning to the words "otherwise transfer" is misplaced as the said bye-laws are only for the purpose of determination of annual rent for assessing property tax under Section 63 of the NDMC Act. The same cannot, in any manner, be used as a tool to interpret Section 141. He would state the Supreme Court in its opinion in Special Reference No. 1 of 212 in the manner of allocation of natural resources, inter alia, observed that:
―the action of the State, whether it relates to distribution of largesse, grant of contracts, or allotment of land, is to be tested on the touchstone of Article 14 of the Constitution‖.
122. The scope of testing of executive action against Article 14 has been explained as follows:
―105.....the action has to be fair, reasonable, non-discriminatory, transparent, non-capricious, unbiased, without favouritism or nepotism, in pursuit of promotion of healthy competition and equitable treatment. It should conform to the norms which are rational, informed with reasons and guided by public interest, etc. All these principles are inherent in the fundamental conception of Article 14. This is the mandate of Article 14 of the Constitution of India.‖
123. The Supreme Court has quoted an earlier decision in Sachidanand CS(OS) 651/2013 Page 130 of 257 Pandey after noticing Kasturi Lal's case:
―123..... State-owned or public-owned property is not to be dealt with at the absolute discretion of the executive. Certain precepts and principles have to be observed. Public interest is the paramount consideration. One of the methods of securing the public interest, when it is considered necessary to dispose of a property, is to sell the property by public auction or by inviting tenders. Though that is the ordinary rule, it is not an invariable rule. There may be situations where there are compelling reasons necessitating departure from the rule but then the reasons for the departure must be rational and should not be suggestive of discrimination. Appearance of public justice is as important as doing justice. Nothing should be done which gives an appearance of bias, jobbery or nepotism.‖ (emphasis added)
124. The Supreme Court has quoted several earlier instances where open invitations to tender or participate in a project etc. have not been made, but have nevertheless been upheld when challenged. In all such cases, the Court has opened that:
―the ultimate test is only that of fairness of the decision making process and compliance with Article 14 of the Constitution‖.
125. The Supreme Court has observed that:
―149.Regard being had to the aforesaid precepts, we have opined that auction as a mode cannot be conferred the status of a CS(OS) 651/2013 Page 131 of 257 constitutional principle. Alienation of natural resources is a policy decision, and the means adopted for the same are thus, executive prerogatives. However, when such a policy decision is not backed by a social or welfare purpose, and precious and scarce natural resources are alienated for commercial pursuits of profit maximizing private entrepreneurs, adoption of means other than those that are competitive and maximize revenue may be arbitrary and face the wrath of Article 14 of the Constitution. Hence, rather than prescribing or proscribing a method, we believe, a judicial scrutiny of methods of disposal of natural resources should depend on the facts and circumstances of each case, in consonance with the principles which we have culled out above. Failing which, the Court, in exercise of power of judicial review, shall term the executive action as arbitrary, unfair, unreasonable and capricious due to its antimony with Article 14 of the Constitution.‖ (emphasis added)
126. He would state, the Supreme in its judgment dated August 25, 2014 in W.P.(Crl) No. 120/2012 in the matter of allocation of coal blocks observed that:
"71....Obviously, therefore, such allocation has to meet the twin constitutional tests, one, the distribution of natural resources that vest in the State is to sub-serve the common good and, two, the allocation is not violative of Article 14‖ (emphasis added) CS(OS) 651/2013 Page 132 of 257
127. With regard to issue No.4, he would state that in view of the submissions made hereinabove, the plaintiff is not entitled to the relief claimed in the present suit.
128. Having heard the learned counsel for the parties and considered the record, at the outset, I would state, during the course of his submissions, Mr. Sanjay Jain, learned ASG has given up the objection of the defendant with regard to Section 385 of the Act of 1994. Accordingly, the issue No.2 does not survive for consideration of this Court. The same is decided as not pressed. This Court would only consider the issue Nos.1, 3, 4 and 5.
Issue No.1 Whether the Plaintiff is entitled to the extension of licence as claimed in the Suit? OPP
129. For answering this issue, in view of the stand of the parties in their pleadings, first it must be determined whether the relationship between them is of a Joint Venture. For that purpose, it is necessary to examine the Agreements entered into between the parties i.e Collaboration Agreement dated December 18, 1976 (Exh.P-40), Licence Deed dated December 18, 1976 (Exh.P-41) and Supplemental Agreement dated September 25, 1979 (Exh.P-42). Before that, I may note here that there is no dispute that in terms of Exh.P-1, which is a letter dated July 13, CS(OS) 651/2013 Page 133 of 257 1976, the Land & Development Office under the then Ministry of Works & Housing, Government of India allotted the land in question at 1, Man Singh Road, New Delhi admeasuring 3.78 acres together with structures to the defendant for construction of a Hotel on certain terms and conditions.
Collaboration Agreement dated December 18, 1976 (Exh.P-40)
130. The preamble of the Collaboration Agreement reveals that the defendant, with the object of developing tourism in Delhi, is desirous of putting up a Hotel of about 350 rooms together with all related facilities confirming to the standards laid down by Director General of Tourism, Department of Tourism, Government of India on the plot in question and with a view to achieve its objective of putting up a Hotel of acceptable standards, in a professional manner, is desirous in seeking the assistance of professionals in planning, designing and construction of the said Hotel and building. The Collaboration Agreement also records, the plaintiff, which has an experience of 70 years in the field of hoteliering and has acquired considerable expertise and knowledge in the planning, designing, construction and operation of the Hotel, had offered its services for construction of about 350 rooms Hotel in terms of its letter dated March 31, 1976 and the defendant agreed to collaborate with the CS(OS) 651/2013 Page 134 of 257 plaintiff in the construction of the Hotel building at its cost not exceeding Rs. 475 lakhs the hotel building including civil construction, plumbing, sanitary fittings, heating, ventilation, air conditioning, electrical installations, elevators and swimming pool etc, details of which referred in Schedule II and the plaintiff also agreed to invest in some of the items so as to limit the investment of the defendant to Rs.475 lakhs and it was agreed by the plaintiff to equip the said hotel building, at its cost with necessary equipment such as kitchen equipment, laundry equipment, furniture, furnishing and other accessories, details of which are mentioned in Schedule III to the Agreement, so that the hotel building can be run as a hotel of acceptable standards.
131. In the above background, Article II of the Collaboration Agreement, which relates to services of the IHC (plaintiff) vide Clause 1 stipulated, plaintiff will carry out a detailed study for the purpose of putting up a and will confer with the defendant‟s officials for rendering the following services:-
(a) Recommend the salient design requirement and other features required in the proposed hotel.
(b) an order or magnitude cost estimates.CS(OS) 651/2013 Page 135 of 257
132. Clause 2 relates to design and other technical services, which inter-alia included selecting and appointing Architect, Engineer, Surveyor, other specialists and consultants as may be required for the hotel building. The plaintiff was to submit to the defendant the names of the Architect, consulting Engineers, Surveyor and other specialists and consultants for its approval.
133. Clause 2 also stipulated; preparation by the plaintiff through the Architect, consulting Engineers, Surveyor and other specialists and other consultants and submit to the defendant for its approval, a technical report to establish a programme of the facilities required in the hotel including space allocation programme; outline user requirements and specifications from the point of view of hotel operation sufficient to illustrate the scope and quality of the project in all aspects including civil, plumbing electrical heating, ventilation, air-conditioning etc. The plaintiff was to prepare within 15 days of the execution of the Agreement and submit to the defendant for its approval schematic plans, layouts, design user requirements and specifications in respect of the said hotel; the plaintiff within a period of 30 days from the execution of the Agreement, submit to the defendant for its approval in the capacity as the local authority the plans and designs as may be required; review the CS(OS) 651/2013 Page 136 of 257 schematic plans, designs, user requirements, specifications and cost estimate; review the architectural, structural, heating, ventilation air- conditioning, plumbing and electrical plans and specifications and submit to the defendant the above plans and specifications for its approval; the plaintiff was to provide Project Management Services including site inspection and ensure that the work is being executed generally in accordance with the standards and specifications approved by the defendant; the plaintiff was to employ technically competent staff for the day to day operations and ensure that the work is being carried out in conformity with the designs and specifications prepared by the Architect, consulting Engineers and other consultants. In substance, to review the work of the project as a whole.
134. Clause 3, which relates to Technical Documents stipulated that the plaintiff shall arrange to prepare the necessary technical documents including specifications, bill of materials, quantity schedule, work schedules etc. for the purpose of award of the various job of work including site improvements, landscaping, civil construction work, plumbing and sanitary fittings eligible, heating, ventilation and airconditioning, electrical installation etc.
135. Clause 4 stipulated cost of the hotel building shall be jointly CS(OS) 651/2013 Page 137 of 257 arrived at by the authorised representative of the plaintiff and the defendant and after the completion of the building and within 30 days of the issue of completion certificate by the defendant, the authorised representative of the defendant and the plaintiff will make a list of assets financed by and belonging to the defendant and the plaintiff respectively.
136. Clause 5 stipulated with a view to achieving defendant‟s objective of constructing the hotel building on the site, plaintiff will, on behalf of defendant, undertake to construct the said hotel building through the contractor and sub-contractors, engaged, retained or appointed for the purpose by plaintiff. The list of contractors and sub-contractors, so appointed will be submitted by plaintiff to defendant for its prior approval.
137. Clause 6 of Article II stipulated all movable assets in the hotel building referred to in Schedule III to this Agreement as well as all other assets including assets such as air-conditioning compressors, air- handling units, fan coil units, pumps cooling towers, piping electrical panels, lighting fixtures, diesel generating sets, water treatment plants, boilers, laundry equipment, kitchen equipment and other hotel equipment, which plaintiff pays for and equips and furnishes the hotel building with, shall belong at all times to the plaintiff. The plaintiff shall CS(OS) 651/2013 Page 138 of 257 be entitled to all rights, title and interest to or in respect of such assets throughout the currency of this agreement as well as upon its termination.
138. Article-III of the Collaboration Agreement stipulated General Covenants.
139. Clause 1 of Article III stipulated that the plaintiff shall be allowed to enter upon the site solely for the purpose of carrying out the works at the site on "as is where is basis" subject further to the condition mentioned in the succeeding clause 2.
140. Clause 2 stipulated that it is agreed and understood by defendant and plaintiff that nothing contained in this agreement shall be construed as a demise in law of the said site hereby agreed to be demised or any part thereof so as to give plaintiff any legal interest or claim therein of any nature whatsoever.
141. Clause 3 stipulated the plaintiff within a period of twenty (20) calendar months following the date of execution of this agreement, construct the hotel building in a workman like manner using the building material of the standard description so as to ensure that the said hotel building conforms to the approved specifications. The hotel building so CS(OS) 651/2013 Page 139 of 257 constructed shall be in compliance with all laws, rules and regulations as in force and applicable to such building and will be strictly in accordance with the plans approved by the defendant and will be carried, out to the satisfaction of NDMC i.e defendant.
142. Clause 4 stipulated that the plaintiff shall not use any material or execute any works which are considered unsound of unfit for the purpose intended, or which is imperfect or if any deviation shall be made from the approved plans, elevation details of specifications or if plaintiff shall fail to observe and comply with any of the conditions or stipulations contained therein, the defendant shall have the right to call upon plaintiff immediately to remove all such unsound or unfit material or substitute the same with sound and fit materials as shall be previously approved by defendant and plaintiff shall make good that imperfect work if any and correct deviations if any. If plaintiff shall neglect to do so for a period of 14 days, after having been called upon to do so, it shall be lawful but not compulsory for defendant to remove unsound and unfit material and substitute the same with sound and fit material to make good the imperfect work, if any, and to correct deviation, if any and all cost, charges and expenses of so doing shall be borne by plaintiff.
143. Clause 6 stipulated that if during the excavation of the site, CS(OS) 651/2013 Page 140 of 257 plaintiff discovers any coins or any articles of value or of public interest or any mines, minerals, gold mines, earth oils and quarries the same shall belong to the President of India and shall be handed over to the officer nominated by the President of India or defendant.
144. Clause 8 relates to right and powers of NDMC i.e defendant. It stipulated until the construction of the hotel building has been completed and certified as completed in accordance with the terms of this agreement, defendant shall have the following rights, which included right for the authorised representative of defendant and other officers under his direction at all reasonable times of enter upon the site to view the site and progress of the constructions, to inspect and pass the material and workmanship and for all other reasonable purpose connected with this agreement; in case, the plaintiff commits any breach or make default in the performance of all or any one or more of the covenants on its part therein contained, defendant shall have the right to give written notice to plaintiff setting forth the breach or default. Unless within 90 days after giving of such notice, the breach is cured or default is rectified, it shall be lawful for defendant or its authorised representative to evict from the said site plaintiff or its representatives, agents contractors, sub- contractors or whosoever may be on the site and take possession of all CS(OS) 651/2013 Page 141 of 257 the machinery, materials, tools and plants as may be found on the site for the absolute use of the defendant, without any compensation and thereupon this agreement, shall be void without prejudice to all other legal rights and remedies of defendant against plaintiff; all building materials, tools and plants which shall have been brought upon the site by or for plaintiff for the purpose of erection of the hotel building as aforesaid shall be considered as immediately attached to the said site and no part thereof other than defective or imperfect material removed for the purpose of replacement be removed without the previous written consent of the defendant until after the grant of the completion certificate.
145. Article III of the Collaboration Agreement also stipulated that the plaintiff has clearly understood that the said site and the hotel building to be constructed thereon shall at all times remain public premises as defined under the Public Premises (Eviction of Unauthorised Occupants) Act 1971 and shall always be subject to the provisions thereof.
146. Article IV relates to manner of payment towards cost of construction, which is reproduced as under:-
Clause 1- Payment for construction of the Hotel Building CS(OS) 651/2013 Page 142 of 257 NDMC agrees and undertakes to bear the cost of the said hotel building and other assets detailed in Schedule II. The cost of the building shall be arrived at in terms of Clause 4 of Article II. While arriving at the cost as aforesaid, NDMC and IHC will taken into account the elements of cost beyond the control of either NDMC or IHC such as Government taxes, customs and excise duties, sales tax and import duties and the provision for their escalation shall be made in the estimate of the cost. In the cost so arrived at, NDMC will be given due credit equivalent to the salvaged value realised in respect of the existing structures on site as shown on the plan annexed hereto. Subject as aforesaid, the cost of the hotel building so arrived at, will determine the maximum liability of NDMC. In the event of the cost of the said hotel building and other assets to be financed by NDMC as per details in Schedule II exceeding the limit of the cost arrived at, as aforesaid, IHC shall bear and pay such excess cost and shall not claim any compensation from NDMC on this account.
Clause 2 : Manner of Payment NDMC agrees and undertakes to pay to IHC the cost of the hotel building in a phased manner on the basis of schedule of expected work to be completed to be furnished by IHC to NDMC within 15 days from the date of execution of this Agreement. The claim for payment by IHC will CS(OS) 651/2013 Page 143 of 257 be supported by a certificate from the Architect, Consulting Engineers and other Consultants as may be applicable. NDMC shall before making the payment have the right to verify such a claim and the progress of the construction of the hotel building so as to enable NDMC to ensure that the payment made to IHC from time to time is commensurate with the progress of construction of the hotel building and the value of building material lying at the site. Pending verification of the claim by NDMC as aforesaid, NDMC shall make payment of the amount as claimed by IHC within fifteen (15) days from the date of making such a claim as "On Account" payment and make necessary adjustments from the next instalment of payment becoming due and payable to IHC.
Clause 3: Verification of Bills NDMC shall have the right to inspect final bills of the contractors and sub-contractors engaged, retained or appointed by IHC in consultation with and with the approval of NDMC for the construction of the said hotel building. If as a result of such inspection, any sum of found to have been over paid in respect of any work or if any work claimed to have been done has not been executed in a workman like manner and satisfactory to NDMC, IHC shall be giving due credit for such excess payment or payment for the work not executed. If it is found that the CS(OS) 651/2013 Page 144 of 257 total amount paid by NDMC to IHC is less than the amount payable by NDMC to IHC in terms of this agreement, the amount of such under-
payment shall be duly paid by NDMC to IHC.
147. Article V relates to use of documents; all drawings and specifications prepared or caused to be prepared by plaintiff for the said hotel building shall be the property of the defendant and defendant shall not use the said plans, drawings and specifications in any other work except with the consent of plaintiff. The defendant‟s name shall be mentioned as the owner on all such plans, drawings and specifications. Plaintiff shall have the right to include its name on the plans, drawings and specifications and other documents prepared by the Architect and other consultants to accord full professional recognition for the work done.
148. Article VII relates to indemnity whereby, the plaintiff indemnifies defendant and undertakes and agrees to keep defendant indemnified throughout the period during which this Agreement shall remain in force against any or all claims for damages which, may be caused to any workman, to any adjoining building or property or any other premises or persons as a result of the construction of the said hotel building or in consequence of the execution of the aforesaid building work ,and also CS(OS) 651/2013 Page 145 of 257 against all payments whatsoever which during the progress of the work of the said hotel building may become payable or be demanded by any person or authority in respect of the construction of the said hotel building or anything done under the authority therein contained.
149. Article IX stipulated, the plaintiff will not directly or indirectly transfer, assign, encumber, let or subject or part with the possession of the site or interest under and/or the benefit of this agreement or any part thereof in any manner whatsoever.
150. Article-XI :-
ARBITRATION- Except where otherwise provided in this Agreement all questions and disputes relating to the meaning of the specifications, designs and drawings hereinbefore mentioned and as to the quality of workmanship or materials used in the work or as to any other question, claim, right, matter or thing whatsoever, in any way arising out of or relating to this Agreement, designs, drawings, specifications, estimates, orders or otherwise concerning the hotel building, or the execution or failure to execute same whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the sole Arbitration of the person appointed by NDMC at time of dispute.CS(OS) 651/2013 Page 146 of 257
Subject as aforesaid, the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceedings under this Article.
The Arbitrator/s may, from time to time with the consent of the parties enlarge the time for making and publishing the award.
Provided that any work towards the construction of the said hotel building, except the work related to the issue under dispute/arbitration, shall not be suspended or stopped during the arbitration proceedings.
Licence Deed dated December 18, 1976 (Exh.P-41)
151. From the preamble of the Licence Deed, it is noted that the licensor i.e the defendant has offered the licencee i.e the plaintiff who has agreed to accept the licence to occupy and use the hotel building in terms of the Collaboration Agreement for the purpose therein a hotel conforming to standards laid down by the Director General of Tourism, Department of Tourism, Ministry of Tourism and Civil Aviation, Government of India, New Delhi for 5 - Star classification with a view to developing tourism in the capital city of Delhi, to be operated by the plaintiff on licence basis on the terms and conditions hereinafter CS(OS) 651/2013 Page 147 of 257 appearing.
152. Clause 1, which relates to licence, stipulated, the defendant has, subject to the provisions of sub-clause 1 of the Clause II, granted licence to plaintiff to enter into and occupy the said hotel from a date to be mutually agreed upon for the purpose of running a hotel of acceptable standards together with all the related facilities and business appurtenant thereto.
153. Clause II:-
(1) stipulated the Licence shall be in force for a period of thirty three years commencing from the date of occupation of the hotel by the first paying guest subject to the condition that the plaintiff shall be bound by and observe and perform all the terms and conditions contained in the licence throughout the period of the licence.
(2) On the expiry of the period of licence of the said hotel building, the defendant shall have the option to grant the licence for a further period on such terms and conditions as may be mutually agreed upon between the defendant and the plaintiff. If the plaintiff shall be desirous of obtaining a licence for a further period after the expiry of the present licence, it shall give to the defendant, a notice in writing of not less than CS(OS) 651/2013 Page 148 of 257 sixty (60) days prior to the date of expiry of the present licence for the consideration of the defendant.
154. Clause III relates to licence fee and manner of payment. The said clause stipulated in consideration of the defendant granting to the plaintiff, the Licence in respect of the said hotel building, the plaintiff shall pay to the defendant as and by way of licence fee an amount equivalent to 10-1/2 percent (ten and a half percent) of the gross income of the plaintiff for every financial year of the plaintiff as certified by the statutory auditors of the plaintiff or a sum equivalent to 15% (fifteen percent) of the defendant‟s investment in the said hotel building in terms of the Collaboration Agreement and whichever is, higher. The liability for the payment of licence fee as aforesaid shall commence from the date of commissioning of 300 rooms in the hotel or first day of December 1978, whichever is earlier. The licence fee in respect of the period which is less than a full financial year shall be paid by the plaintiff to the defendant on a prorata basis on the basis of the statement certified by the statutory auditors of the plaintiff. Suffice to state, the said clause stipulated what would constitute a „financial year‟, „gross income‟.
155. Clause IV relates to default in payment. It stipulated, in the event of plaintiff committing a default in the payment of licence fee, for any CS(OS) 651/2013 Page 149 of 257 reason whatsoever, the plaintiff shall be liable to pay to the defendant, Licence fee along with interest for the period of default at 12% (twelve percent) per annum on the amount of licence fee, the payment of which has been defaulted. In the event of the plaintiff failing to make payment of the licencee fee due to the defendant, together with such interest before the expiry of thirty (30) days from the date of such default, the defendant shall have without further reference to the defendant the sole discretion to call upon the bank which is furnishing the Guarantee to pay the total amount due to the defendant from the plaintiff within a period of 15 days from the date on which the bank is so called upon to make the payment. In the event of the bank which has been called upon to make the payment of licence fee, failing to make payment for any reason whatsoever of the amount demanded by the defendant in full or in part, the defendant shall have absolute discretion without further reference either to the plaintiff or to its bank to revoke/cancel the licence granted to the plaintiff for running the said hotel in terms of this licence, to take possession of the licenced premises by recourse to law as provided in the Public Premises (Eviction of Unauthorised Occupants) Act, 1971, or any other such law in force at that time, after revocation of the licence and the plaintiff cannot claim back the premises but only seek arbitration. Further, Clause V gives right to the defendant for the inspection of the CS(OS) 651/2013 Page 150 of 257 books of accounts of the plaintiff.
156. Clause VI stipulated possession of the hotel building. It also stipulated the ownership of the said hotel (the land on which the said hotel is situated belongs to the defendant) shall at all times vest in defendant, together with all fitting, fixtures and other installations of immovable type or of the type the removal of which is likely to cause damage to the building. A list of such fittings, fixtures and installation shall be drawn jointly by the representatives of the defendant and the plaintiff before the plaintiff takes over the hotel building for the purpose of running a hotel of acceptable standards therein. It also stipulated, all movable assets in the hotel building referred to in Schedule III to the Collaboration Agreement as well as other assets including assets such as air-conditioning, compressors, air handling units, fan coil units, pumps, cooling towers, piping conducting, electrical panels, lighting fixtures, diesel generating sets, water treatment plants, boilers, laundry equipment, kitchen equipment and other hotel equipment which the plaintiff pays for and equips and furnishes the hotel building with, shall belong at all times to the plaintiff. The plaintiff shall be entitled to all rights, title and interest to or in respect of such assets throughout the currency of this agreement as well as upon its termination. The clause CS(OS) 651/2013 Page 151 of 257 also stipulated upon the termination of the agreement, the defendant may purchase the plaintiff‟s assets at reasonable prices to be mutually agreed upon between the plaintiff and the defendant.
157. Clause VII :-
OTHER COVENANTS ON THE PART OF THE LICENSOR AND THE LICENCEE- 1. The Licencee shall adequately and completely furnish and equip the said hotel building in terms of the Collaboration Agreement so as to ensure that the hotel is approved by the Director General of Tourism and also make it a hotel of acceptable standards so as to run it efficiently and in a businesslike manner.
2. The present rent, the house tax, and any other related taxes payable by an owner as per law in force in respect the said hotel building shall be payable by the Licensor and the Licensor shall arrange to effect the said payments promptly so as not to jeopardize the Licencee's business or affect the running of the said hotel by the Licencee. In the event of the Licensor failing to pay such taxes at the appropriate time for any reason whatsoever, the Licencee shall have the right to pay such taxes on behalf of and in the name of the Licensor and adjust the same, from the instalment/s of licence fee becoming due and payable to the Licensor in CS(OS) 651/2013 Page 152 of 257 terms of this licence. However, the Licencee shall reimburse to the Licensor the amount of ground rent not exceeding two and half percent (2-1/2%) per annum of the cost of the land valued at Rupees Ninety one Lakhs and forty eight thousand (Rs.91,48,000/-) every year.
3. All other charges and taxes with regard to the running of the business of hotel including renewal fees in respect of lifts installed in the said hotel shall be payable by the Licencee commencing from the date from which the Licencee is put in possession of the said hotel building till the expiry of the period of licence hereby granted or its sooner determination. The Licencee shall provide to the Post and Telegraph Department necessary space in the said hotel building for installation of telephone exchange for the convenience of the Licencee, free of cost, and the Licencee shall not claim any compensation whatsoever from the Licensor on this account.
4. The Licencee at its own cost shall get the hotel building to be constructed in terms of the Collaboration Agreement together with the assets financed by and belonging to the Licensor as detailed in the said Collaboration Agreement fully insured against the risks of fire and earthquake, riots, civil commotion, electrical fire and flood for the amount of not less than Rupees Four Crores and Seventy five lakhs for CS(OS) 651/2013 Page 153 of 257 the benefit of the Licensor within a period of 15 days from the date of Complete Certificate given by the Licensor to the Licencee in terms of the Collaboration Agreement. However, in the event of the Licencee commissioning the hotel partially before the building is completed in terms of the Collaboration Agreement and the completion certificate given to the Licencee, the Licencee shall at its own cost insure the building and other assets belonging to the Licensor against the aforesaid risks for a sum of not less than Rupees Four Crores and Seventy Five Lakhs. Such insurance will be effected within 7 days from the date of the Licencee commissioning the hotel partially.
5. The Licencee shall make adequate provisions for fire detection/safety fighting arrangements as may be prescribed by the Licensor/Chief fire Officer or any other code/ standard practice or any other competent authority in this behalf.
6. The Licencee shall use the said hotel building for the purpose of running a hotel of acceptable standards together with related facilities and business appurtenant thereto for the furtherance and development of tourism in India and the Licencee shall not use the said hotel for any other purposes whatsoever. The said hotel shall be named by the Licencee in consultation with the licensor.CS(OS) 651/2013 Page 154 of 257
7. The Licencee shall be responsible to secure from time to time the necessary permissions or licences or permits as may be required from the authorities concerned in order to carry on the business of a hotel of acceptable standards in the said hotel building.
8. The Licencee shall obtain from time to time, if required, by law or under rules, prior approval in writing of the Director General of Tourism to the room tariff to be charged by the Licencee in respect of the guest rooms in the said hotel and the Licencee will ensure that the proposed hotel building is recognized and approved by the Department of Tourism of the Government of India. The Licencee shall satisfy the criteria laid down by the Department of Tourism, Government of India for 5 star classification. The Licencee shall do or cause to be done all such other acts, deeds and things as may be required by the Director General of Tourism for the purpose of classification of the hotel to be constructed in terms of the Collaboration Agreement as a hotel of 5 star category from the Department of Tourism, Government of India and for continuing the same throughout the terms of the licence.
9. The Licencee shall be responsible to keep the said hotel building and the entire premises together with its fittings, fixtures and other installations including the air-conditioning plant, lifts, electrical CS(OS) 651/2013 Page 155 of 257 installations and other assets belonging to the Licensor in a safe and sound condition. The Licencee shall also be responsible to carry out effective maintenance and repairs, annual or special, as may be required from time to time, including operation of all services, at its own cost (including replacement of installations belonging to the Licensor for any reason whatsoever).
10. The Licencee shall be further responsible for the maintenance of lawns and open spaces and sub-station building in good condition, at its own cost. The sub-station equipment including H.T. Switchgears, Transformers, L&T Switchgears shall be maintained and operated by the Licensor or its officer/ officers, who shall at all times have access to the said substation without any obstruction or hindrance from the Licencee and the Licencee shall not claim any compensation from the Licensor for the space occupied by the substation. The Licencee is responsible for the maintenance of all the electrical installations and appliances beyond the L.T. meters. A telephone will be provided by the Licencee in the electric sub-station. The initial cost of providing an 11 K.V. sub-station shall be borne by the Licensor. Full cost of standby arrangement for electric supply shall be borne by the Licencee.
11. Save as otherwise provided, the Licencee shall not make any CS(OS) 651/2013 Page 156 of 257 structural additions or alterations in the said hotel building and installations without the prior written permission of the Licensor and even when permitted by the Licensor, the said additions and alterations shall be carried out by the Licencee at its own cost. The Licencee may use or allow temporary licences of Shopping Arcade in the said hotel for running such trades or services or business as may be consistent with the business of a hotel but the Licencee shall be responsible for the conduct of the various sub-licencees and observance of the rules and regulations.
The Licencee shall be further responsible to see that the sub-Licencee quit the premises on the expiry or sooner determination of the licence hereby granted. The sub-Licencee shall not get any right over and above the right and privileges of the licencee. The Licencee shall furnish to the Licensor the names of such sub-licencees in the hotel.
12. During the tenure of this licence, the Licencee shall not transfer or sublet the said hotel or any portion thereof permanently or temporarily, to anybody else nor shall it be entitled to allow any person/ persons to occupy the said hotel or to use any part thereof save with the prior permission in writing, of the Licensor.
13. The Licencee shall be bound to abide by the relevant provisions of the Punjab Municipal Act and such other Act or Acts at present in force CS(OS) 651/2013 Page 157 of 257 as the Licensor is required to abide by or as is made applicable to the Licensor in future and the byelaws made thereunder from time to time as are existing or may be enacted hereafter and the provisions of the Prevention of Adulteration of Food Act and Rules made thereunder and applicable in Delhi, the provisions laid down by the Government of India, Department of Tourism, in respect of the manner and method of running a hotel or such other existing Central And Local Laws, rules and regulations, enacted or to be enacted or introduced in connection with the running of the hotel.
14. After giving seven days prior intimation in writing to the Licencee, the Licensor may depute its authorized officers to inspect the hotel at any time with a view to examining the state and condition of the said hotel building and other fittings, fixture and installations installed therein and for the purpose of examining whether the Licencee is complying with the provisions of the appropriate laws and to ensure the compliance of this Agreement. In the event of the Licensor being satisfied that any fittings, fixtures and installations installed therein have been damaged or unduly deteriorated due to poor maintenance and operation, the entire cost of making good such damage or deteriorations shall be charged to the Licencee.
CS(OS) 651/2013 Page 158 of 257
158. Clause VIII :-
DESTRUCTION OF HOTEL BULDING- In the event of the said hotel or any portion thereof being damaged due to fire, civil commotion, riots, earthquakes, war or other acts of God resulting in the Licencee's inability for reasons beyond its control, to conduct the business or running the hotel for, any period whatsoever, the licence fee payable by the Licencee to the Licensor as hereinabove stated, shall be reduced on a pro-rata basis. The Licencee shall make good the building and/or the fixtures, fittings or installations belonging to the Licensor and bring the said hotel building or the said installations to the condition before the occurrence of such damage and the Licencee shall not claim any compensation or damage whatsoever from the Licensor on this account.
159. Clause X relates to termination. It stipulated, if the plaintiff commits a default in the payment of the licence fee in the manner provided in this Deed of Licence or ceased to do business in the said hotel building or commits breach of any of the terms of this Deed wilfully or otherwise, the defendant may give a notice in writing to the plaintiff for remedying the breach and if the plaintiff fails to do so within a period of thirty (30) days from the date of such notice, the defendant may terminate the licence without giving any further notice. CS(OS) 651/2013 Page 159 of 257
160. Clause XI relates to waiver and Clause XII relates to HANDING OVER POSSESSION OF THE HOTEL BUILDING TO THE LICENSOR- On the expiry of the licence period and in the event of the licence having been terminated earlier, the Licencee shall hand over the possession of the hotel building together with fittings and fixtures and all other installations belonging to the Licensor as per the Collaboration Agreement (excluding those items of the Licensor replaced by the Licencee in terms of the Deed of Licence heretofore) in the same conditions as far as practicable as at the time of taking them from the Licensor along with the installations as described to the Deed of Licence heretofore save normal wear and tear and modifications along with the building referred to in this Deed with its fittings and fixtures and all other installations as stipulated in this Licence heretofore, within thirty (30) days from the expiry of the licence period or termination of the licence deed as the case may be. The Licencee shall pay such damage charges for overstay in the premises from the date of expiry of the licence period or from the date and licence is terminated at the rates as may be determined by the Licensor from time to time and which shall not be less than the licence fee paid immediately before the expiry of the licence period or termination of the licence. Upon the expiry of the licence period and in the event of the licence having been terminated CS(OS) 651/2013 Page 160 of 257 earlier, the Licencee shall have the right to take away the Licencee's assets including the assets referred to In Schedule III to the Collaboration Agreement and all other assets belonging to the Licencee, which Licencee may voluntarily bring into the hotel at its own cost. Clause XIII relates to non-assignability.
SUPPLEMENTAL AGREEEMENT DATED SEPTEMBER 25, 1979 (Exh.P-42)
161. Vide the Supplemental Agreement dated September 25, 1979 (Exh. P-42), the parties have mutually agreed for some modification of Collaboration Agreement (Exh.P-41) and the Agreement of Licence (Exh.P-40) by way of additions and alterations. By way of Supplemental Agreement, in Clause III, Explanation II of original Licence Deed the word "gross income" and "shop rental" were to be read as "gross receipt" and "shopping area rental" and the word "include" was to be replaced by the word "mean" wherever they occur. Defendant and the plaintiff agreed on payment of licence fee and the manner of payment as set out in sub-clause 1 to 5 of clause III of the Agreement of Licence and the investment of the defendant for the purpose of aforesaid clauses were to include the following:-
CS(OS) 651/2013 Page 161 of 257
a) Actual cost of the hotel building financed by defendant in terms of Collaboration Agreement, not exceeding Rs.475 lakhs.
b) Rs.45 Lakhs towards cost of financing, supervisions and other charges including initial cost of providing 11 K.V. Sub-Station,
c) Cost of acquiring land, measuring 3.78 acres (15,028 sq. meters) being plot no.1, Man Singh Road, New Delhi, in terms of the plan attached to the Collaboration Agreement, taken to be Rs.106.64 lakhs comprising of Rs.91.48 lakhs being the basic cost of land to defendant, a sum of Rs.
10.66 Lakhs being arrears of ground rent in respect of the said plot paid by defendant to Works & Housing Ministry, Government of India, and depreciated value of the Building on the said plot since demolished, estimated to be Rs.4.50 lakhs.
162. The Supplemental Agreement also stipulated sub clause 2 of Clause VII of the agreement of licence (Exh.P-41) shall stand modified to the effect that the plaintiff will pay to the defendant an amount of Rs.12,00,000/- per annum in lieu of House Tax payable in respect of Hotel Building. The defendant had reserved its right to scrutinise the rental receipt of shopping area situated in Taj Hotel for purposes of determining reasonableness and in case of doubt/dispute regarding rent CS(OS) 651/2013 Page 162 of 257 receipts, the same was to be worked out by mutual agreement failing which arbitration. The plaintiff agreed to furnish to the defendant bank guarantee from any nationalised bank three months licence fee guaranteeing payment of licence fee, which was to be renewed from year to year before three months of its expiry. All terms and conditions of the Collaboration Agreement and Agreement of Licence, except those which were specifically modified vide Supplemental Agreement remained unchanged and were binding on the parties, so also the terms and conditions of the Supplemental Agreement.
163. Having noted, some of the relevant clauses of the three Agreements, it is necessary to note the position of law, as to how the Supreme Court has defined/held the word „Joint Venture‟. Mr. Sanjay Jain, learned ASG, who has referred to the judgment of the Supreme Court in the case of Faqir Chand Gulati (supra), the Supreme Court dealt with an issue, whether an Agreement, under which the builder agreed to make a housing construction for the land owner was a Collaboration Agreement or a Joint Venture or the activity of the builder squarely falls within the definition of service. It was observed by the Supreme Court that the title or caption or the nomenclature of the instrument/document is not a determining factor as regards the nature CS(OS) 651/2013 Page 163 of 257 and character of the instrument/document, and true purpose of a document has to be ascertained with reference to the terms of the document, which express the intention of the parties. The Supreme Court held, joint venture connotes a legal entity in the nature of a partnership engaged in the joint undertaking of a particular transaction for mutual profit or an association of persons or companies jointly undertaking some commercial enterprise wherein all contribute assets and share risks. Therefore, use of the word Joint Venture or Collaboration in the title of an Agreement or even the body of the Agreement will not make the transaction a Joint Venture, if there are no provisions for shared control of interest or enterprise and shared liability for losses. In an earlier judgment in the case of New Horizons Ltd. vs. Union of India 1995 SCC (1) 478, the Supreme Court dealing with the question, whether a particular company is a Joint Venture or not, rejecting the view of the High Court that a Company cannot be called as a Joint Venture when there is only a certain amount of equity participation by a foreign company, held that when apart from having equity participation, the Indian group of companies and the foreign based company have pooled together their resources and all the constituents of the company have thus contributed to its resources which shows that the Indian Company and the foreign based company is an association of companies joint CS(OS) 651/2013 Page 164 of 257 undertaking a commercial enterprise wherein they will all contribute assets and will share risks and have a community of interest, is a joint venture company. The Supreme Court held: ―This shows that NHL is an association of companies jointly undertaking a commercial enterprise wherein they will all contribute assets and will share risks and have a community of interest. We are, therefore, of the view that NHL has been constituted as a Joint Venture by the group of Indian companies and IIPL, the Singapore-based company and it would not be correct to say that IIPL which has a substantial stake in the success of the venture, having 40% of shareholding, is a mere shareholder in NHL‖.
164. From the above, it is noted, the sharing of risks, common interests, contribution to assets and the intent to jointly run and undertaking were taken as indicators of a Joint Venture. The Supreme Court in Para 21 to 25 also held as under:-
―21. This Court had occasion to consider the nature of ―joint- venture‖ in New Horizons Ltd. v. Union of India. This Court held: (SCC pp. 493-44, Para 24)
24. The expression ‗joint venture' is more frequently used in the United States. It connotes a legal entity in the nature of a partnership engaged in the joint undertaking of a particular transaction for mutual profit or an association of persons or companies jointly undertaking some commercial enterprise wherein all contribute assets and share risks. It requires a community of interest in the performance of the CS(OS) 651/2013 Page 165 of 257 subject-matter, a right to direct and govern the policy in connection therewith, and duty, which may be altered by agreement, to share both in profit and losses. (Black's Law Dictionary, 6th Edn., p. 839). According to Words and Phrases, Permanent Edn., a joint venture is an association of two or more persons to carry out a single business enterprise for profit (p. 117, Vol. 23). (emphasis supplied)
22. The following definition of ―joint venture‖ occurring in American Jurisprudence (2nd Edn., Vol. 46, pp. 19, 22 and 23) is relevant:
―A joint venture is frequently defined as an association of two or more persons formed to carry out a single business enterprise for profit. More specifically, it is in association of persons with intent, by way of contract, express or implied, to engage in and carry out a single business venture for joint profit, for which purpose such persons combine their property, money, effects, skill and knowledge, without creating a partnership, a corporation or other business entity, pursuant to an agreement that there shall be a community of interest among the parties as to the purpose of the undertaking, and that each joint venturer must stand in the relation of principal, as well as agent, as to each of the other coventurers within the general scope of the enterprise.
Joint ventures are, in general, governed by the same rules as partnerships. The relations of the parties to a joint venture and the nature of their association are so similar and closely akin to a partnership that their rights, duties and liabilities are generally tested by rules which are closely analogous to and substantially the same, if not exactly the same as those which govern partnerships. Since the legal consequences of a joint venture are equivalent to those of a partnership, the courts freely apply partnership law to joint ventures when appropriate. In fact, it has been said that the trend in the law has been to blur the distinctions between a partnership and a joint venture, very little law being found applicable to one that does not apply to the other. Thus, the liability for torts of parties to a joint CS(OS) 651/2013 Page 166 of 257 venture agreement is governed by the law applicable to partnerships.
A joint venture is a distinguished from a relationship of independent contractor, the latter being one who, exercising an independent employment, contracts to do work according to his own methods and without being subject to the control of his employer except as to the result of the work, while a joint venture is a special combination of two or more persons where, in some specific venture, a profit is jointly sought without any actual partnerships or corporate designation.‖ (emphasis supplied)
23. To the same effect is the definition in Corpus Juris Secundum (Vol. 48-A, pp. 314-15):
― ‗Joint Venture', a term used interchangeably and synonymous with ‗joint adventure', or coventure, has been defined as a special combination of two or more persons wherein some specific venture for profit is jointly sought without any actual partnership or corporate designation, or as an association of two or more persons to carry out a single business enterprise for profit or a special combination of persons undertaking jointly some specific adventure for profit, for which purpose they combine their property, money, effects, skill, and knowledge... Among the acts or conduct which are indicative of a joint venture, no single one of which is controlling in determining whether a joint venture exists, are: (1) joint ownership and control of property; (2) sharing of expenses, profits and losses, and having and exercising some voice in determining division of net earnings; (3) community of control over, and active participation in, management and direction of business enterprise; (4) intention of parties, express or implied; and (5) fixing of salaries by joint agreement.‖ (emphasis supplied)
24. Black's Law Dictionary (7th Edn., p. 843) defines ―joint venture‖ thus:
―Joint venture - A business undertaking by two or more CS(OS) 651/2013 Page 167 of 257 persons engaged in a single defined project. The necessary elements are: (1) an express or implied agreement; (2) a common purpose that the group intends to carry out; (3) shared profits and losses; and (4) each member's equal voice in controlling the project.‖
25. An illustration of joint venture may be of some assistance. An agreement between the owner of a land and a builder, for construction of apartments and sale of those apartments so as to share the profits in a particular ratio may be a joint venture, if the agreement discloses an intent that both parties shall exercise joint control over the construction/development and be accountable to each other for their respective acts with reference to the project.‖
165. The Gujarat High Court in the case of Asia Foundations & Constructions Ltd. vs. State of Gujarat AIR 1986 Guj 185 dealt with the nature of Joint Venture and the rights and liabilities of the Joint Venture partners at length. The relevant extract of the judgment is reproduced as under:-
―The common law did not recognise the relationship of co- adventures, but with the passage of time, the judicial decisions recognised what is known as 'joint adventure' of two or more persons undertaking to combine their property or labour in conduct of particular line of trade or a general business for joint profits. The Courts do not treat a joint adventure as identical with a partnership though it is so similar in nature, and in the contractual relationship created by such adventurerers that the rights as between them are governed practically by the same rules that govern the partnership. This relationship has been defined to be a special combination of persons undertaking jointly some CS(OS) 651/2013 Page 168 of 257 specific adventure for profit without any actual partnership. It is also described as a commercial or a maritime enterprise undertaking by several persons jointly; a limited partnership not limited in the statutory sense as to the liabilities of partners but as to its scope and duration. Generally speaking the distinction between a joint adventure and a partnership is that former relates to a single transaction 'though it may comprehend a business to be continued over several years' while the later relates to a joint business of a particular kind (see 48 American Law Reports at p. 1055 under the caption "what amounts to a joint adventure" at pages 1056-57 and 1060). It is generally agreed that in order to constitute a joint venture, there must be community of interest and right to joint control. It is recognised on authority that each of the parties must have an equal voice in the matter of its performance and control over the agencies used therein, though one authority may entrust the performance to another. There is also an authority to the effect that a joint venture may exist although the parties have unequal control of operations. The rights, duties and liabilities of joint ventures are similar or analogous to those which govern the corresponding rights, duties and liabilities of the partners. As in the case of partners, joint ventures may be jointly and severally liable to third parties for the debts of the venture (see: American Jurisprudence, Second Edition, Vol.46, para 12 at pages 33-34 and para 57 to p.76). Joint Venture groups are internationally recognised in form of cooperation in the joint fulfilment of the construction contract obligations. Joint venture groups in the construction industry come about through CS(OS) 651/2013 Page 169 of 257 agreements for combination of legally independent contractors for the joint rendering of construction services limited in both time and content. Typically they are restricted to a single project in which case the members of the group act jointly at both the tendering and award stages.
Joint venture groups are generally unincorporated associations. The legal systems in general have not kept pace with the growing economic means of joint venture groups and there is no special legal form for this type of cooperation which has come to stay in construction industry. xxx The services to be rendered by the group are to be allocated amongst the members of the same by internal agreement, and consequently the rights and duties of the members inter se are also regulated by the group agreement. These internal agreements are not effective vis-a-vis the third parties, and they operate amongst the members inter se. Thus, all the members are jointly and severally liable for performance of the construction work jointly undertaken irrespective of internal division of the work. If one member of the joint venture group does not fulfil his commitments, the others are under joint and several obligation to carry out such obligations vis-a-vis the customer. Such a situation may arise when a member of a joint venture group drops out prematurely because of the liquidation or insolvency. When a contract is concluded with a joint venture group all members are made jointly and severally liable even if only one is capable of rendering the service in question. The joint and several liabilities of the members of a joint venture group may cover the marginal areas of the contract performance such as late performance, CS(OS) 651/2013 Page 170 of 257 faults, deficiency of goods and services etc.‖
166. Suffice to state, a reading of the aforesaid judgments, it is clear that the Joint Venture involves elements like (i) contribution by the parties of money, effort, knowledge and other assets to common undertaking; (ii) joint property interests in the subject matter of the venture; (iii) right of mutual control of management of the enterprise;
(iv) expectation of profit; (v) right to participate in the profits; and would share the losses. Noting the aforesaid position of law, it is seen that the aforesaid three Agreements do not contain any of the elements, which constitute a Joint Venture. The Collaboration Agreement (Exh. P-40) records the terms whereby the plaintiff was invited to build a 5 star hotel on a plot owned by the defendant herein. It is an Agreement, whereby the plaintiff was to render services to the defendant for the construction of the hotel building. The Collaboration Agreement records the nature of services to be offered by the plaintiff to the defendant in that regard including detailed study for the purpose of putting the hotel preparation, layout plan, specifications, appointment of Architect, Engineers, Surveyors, provided management services, preparation of technical documents for the purpose of award of work, appointment of contractors, sub-contractors, all movable assets which the plaintiff equipped shall belong to the plaintiff, the plaintiff shall enter the site solely for the CS(OS) 651/2013 Page 171 of 257 purpose of carrying out the work on the site on as is where is basis, there is a stipulation whereby it has been agreed by the parties, nothing contained in the Agreement shall be construed as a demise in law of the said site agreed to be demised or any part thereof so as to give plaintiff any legal interest or claim therein of any nature whatsoever. If during the excavation of the sight plaintiff discover any coins or any articles of value or of public interest or any mines, minerals etc., the same shall belong to the President of India and shall be handed over to the Officer nominated by the defendant. Further if there is a breach or default in performance of all or any one or more of the covenants by the plaintiff and in the eventuality of failure to rectify the cure or default the defendant can evict the plaintiff from the sight or its representatives, contractors, sub-contractors etc. and thereupon the agreement shall be void. It is also provided that plaintiff will not encumber, let or part with possession of the site or interest under / and / or the benefit of the agreement or any part thereof in any manner. The clauses 2 and 8 of Article III demonstrate that the land always vested with the defendant. The land and the hotel building to be constructed thereon shall at all times remain public premises as defined under the Pubic Premises (Eviction of Unauthorised Occupants) Act, 1971 and shall always be subject to the provision thereof. That apart, even the building belongs to CS(OS) 651/2013 Page 172 of 257 the defendant, who had paid for its construction. Clause IV The cost of the hotel building together with the assets to be financed by the defendant are listed in Schedule II of the Collaboration Agreement and the assets to be financed by the plaintiff in Schedule III. Similarly, the Licence Deed has been executed between the parties for the plaintiff to use and occupy the hotel building for a period of 33 years. The fact that the Licence Deed has been executed, would demonstrate that the parties are not partners, which is relevant for a Joint Venture but it is a relationship of a licensor or licencee. There is a stipulation in the manner licence fee shall be paid. Similarly, there is an option in the Licence Deed i.e., renewal of a licence for a further period at the discretion of the defendant. There is a clause that the default in payment of licence fee may lead to revocation or cancellation of the licence agreement. There is a provision relating to inspection of books of accounts. The ownership of the hotel (The land on which the said hotel is situated belongs to the defendant) shall at all vest in defendant. The plaintiff shall be entitled to all rights title and interest in respect of assets in terms of the Schedule III of the collaboration agreement only. There is a stipulation, upon termination of the Agreement the defendant may purchase plaintiff‟s assets at reasonable prices to be mutually agreed upon. There is a provision, wherein the plaintiff agreed to hand over the CS(OS) 651/2013 Page 173 of 257 possession of the hotel building on the expiry of the licence agreement along with the fittings and fixtures and all other installation belonging to the defendant as per Collaboration Agreement. Full rights have been given to the defendant for inspection of the site, workmanship etc. Similarly, the Supplemental Agreement (Exh.P-42) was entered into to record certain changes in the Collaboration Agreement (Exh.P-40) and Licence Deed (Exh.P-41) it is in particular to record the fact that the total investment of the defendant would be taken as Rs.626 lakhs as against stipulated investment of Rs.475 lakhs in the original Collaboration Agreement (Exh.P-40). It is clear on the reading of the Supplemental Agreement, the same was made for the reason that in terms of clause III to the Licence Deed (Exh.P-41), the amount of licence fee to be paid by plaintiff to the defendant was 10.5% of the gross income of every financial year or a sum equivalent to 15% of the defendant‟s investment in the said hotel building in terms of Collaboration Agreement, whichever is higher. Thus, for the said purpose land value was included in the cost of investment of defendant so as to increase the minimum guaranteed amount payable by the plaintiff to the defendant. That apart, Supplemental Agreement (Exh.P-
42) also recorded the right of the defendant to scrutinise the rental receipt of shopping area situated in the Taj Hotel for purposes of CS(OS) 651/2013 Page 174 of 257 determining the reasonableness. The plaintiff also agreed to give bank guarantee for licence fee of three months. Noting the provisions of the three Agreements, it is clear that there is no Joint Venture between the plaintiff and defendant. In other words, there are no elements seen in the three Agreements, which show that there is a partnership between the parties. There is also no stipulation for sharing the profit and losses. Rather, if the plaintiff had suffered losses, it was still required to make payment in terms of the Licence Deed as amended by the Supplemental Agreement. The basic ingredient to term the arrangement between the parties as a Joint Venture is missing. The reliance placed by Mr. Nayar on para 25 of the judgment in Faqir Chand Gulati (supra) shall not be of any help to the plaintiff.
167. Further, I note, in the letter dated March 31, 1976 which is part of collaboration agreement (Exh.P-40), in Para 5 the plaintiff has undertaken to maintain the hotel building with all its appurtenance at its own cost during the whole licence period to the entire satisfaction of the defendant. It also undertook to pay water and electricity consumption charges and / or any other charges / taxes leviable in connection with the operation of the hotel. Further, minutes of meeting dated April, 2, 1976 (Exh.P-14) would also not help the case of the plaintiff in as much as the CS(OS) 651/2013 Page 175 of 257 same would reveal that the Committee apart from accepting the allotment of land by the Ministry of Works and Housing had accepted the proposal of the plaintiff in terms of its letter dated March, 31, 1976, which has been referred to above, for the running of the hotel on licence basis as is clear from (iii) of the decision in (Exh.P-14), which directs execution of Licence Deed. That apart, the request of the plaintiff vide letter dated February, 15, 2010, (Exh.P-22), which on a reading is to confirm the plaintiff‟s intent to renew the licence for a fresh period on the expiry of its original term. The fact that the plaintiff was running hotel on licence basis would itself negate the concept of joint venture. Similarly, the minutes of the meeting dated October 7, 2011 (Exh.P-12) would also not help the plaintiff as any reference made to the project "Joint Venture" "Unique Joint Venture" "Collaboration" would have no effect on the clear and unambiguous words in the agreements.
168. In so far as the judgments relied upon by Mr. Rajiv Nayar, Sr. Counsel for the plaintiff are concerned, in Suresh Dhanuka (supra) in Para 47 on which reliance has been placed by Mr. Nayar is concerned, in the said case, the Supreme Court was concerned with an interim order granted by the district court which was set aside by the High Court. In Para 47, the Supreme Court had observed that it is not a case where CS(OS) 651/2013 Page 176 of 257 money can be an adequate compensation by noting that the appellant had acquired 50% interest in the trademark in question together with the goodwill of the business in relation to the products in which trademark is used. It is not understood as to how the judgment is relevant to determine the aspect of joint venture for which it has been relied upon as has been held above that the agreements which are subject matter of inter se relationship between the parties herein does not establish a joint venture. This judgment has no applicability, as it is distinguishable on facts, inasmuch as in the said case, the appellant has acquired 50% interest in the trade mark in question together with goodwill of the business, which surely depicts a partnership, which aspect is missing in the case in hand. Similarly, in Shreedhar Govind Karmerkar (supra), wherein reliance has been placed on Para 27 of the judgment is concerned, the facts are that the parties before the Supreme Court were brothers. The dispute between them is for tenancy rights in respect of a premises known as Navelkar building, Dadar Mumbai. The appellant acquired the said tenancy right in terms of the deed of assignment entered into by and between him and one Saraswati Balkrishna Pawar and three others. One Krishna Tatoba Pawar was the original tenant of the said premises. He was running a Hair cutting saloon therein under the name and style of Ananth Hair Dressing Saloon. He died leaving behind him the assignors CS(OS) 651/2013 Page 177 of 257 of the sale deed of assignment dated January 18, 1966. The business as also the tenanted premises were assigned for valuable consideration. He was allegedly carrying on business therein. Leave and licence agreement was executed by him in relation to the self-same premises in favour of one Sh. Walke on February 01, 1970. Shri Walke was running a business in the premises under the Name and Style of Deepak Provisional Store. A dispute arose between the parties resulted in initiation of proceedings under Section 145 of Cr.P.C. The properties were attached. Shri Walke filed a Suit and the Suit is said to have been compromised. The appellant before the Supreme Court said to have obtained possession of the said premises on March 23, 1978, where- after, he started business under the Name and Style of "Shree Medico". The parties before the Supreme Court, the three brothers entered into partnership on April 01, 1971. The same was dissolved on the March 31, 1977 inter alia on the premise that the appellant has been claiming full ownership in relation to the tenanted premises as also the business in "Shree Medico". In Para 27, the Supreme Court has held as under:
―The very fact that the parties had referred to the business carried out under the name and style of ―Deepak Provisional Store‖ at N.C. Kelkar Road, Dadar, Bombay, which was not and could not be the subject-matter of the partnership as the same was entered into in the year 1971 and dissolved in 1977, the admission of the appellant herein that the royalty received from the said tenanted CS(OS) 651/2013 Page 178 of 257 premises was being deposited in the partnership account assumes significance. If the said property was the exclusive property of the appellant, and he had been dealing therewith as the sole owner thereof, the question of any reference being made thereto in the deed of dissolution would not have arisen. It may be true that in the absence of the original deed of partnership dated 1 st April, 1971 having been brought on record, it is difficult for the court to arrive at a finding that the same had been originally brought in the stock of the firm. There is also no direct evidence that the appellant had brought the same as his investment in the partnership at the initial stage thereof but it is evident that the same was done at a latter point of time. An inference in relation thereto must be drawn for the other materials on record. The said agreement dated 1st April, 1971 having been in dispute, we may not be decisive. In a case of this nature, the conduct of the parties assumes significance. Admission, as is well known, is the best proof of a claim. Section 58 of the Evidence Act states that the facts admitted need not be proved. The very fact that the royalty received in respect of the said premises was being deposited in the partnership account is a clear pointer to show that the same was the property of the partnership.‖
169. Suffice to state in the said case, the original deed of partnership dated April 01, 1977 was not brought on record. In the absence of the same the Supreme Court held that it is difficult for the Court to arrive at a finding that the business under the Name and Style of Deepak Provisional Store has been originally brought in the stock of the firm. The Supreme Court held that in such a case, the conduct of the parties assumes significance. According to the Supreme Court admission as is well-known is the best proof of claim. It relied upon section 58 of the Evidence Act holding that the facts admitted need not be proved. In as much as the royalty received in respect of the said premises was being CS(OS) 651/2013 Page 179 of 257 deposited in the partnership account was held to be a clear pointer to show that the same was the property of the partnership. The present case is not of such a nature. All the three agreements which governed the relationship between the parties are on record. The terms of the agreements need to be looked into to understand the relationship between the parties. There is no question of drawing an inference as to the nature of agreement / relationship existed between the parties and any admission necessarily has to be seen from the context of the terms and conditions in the agreement and not otherwise and the same does not prove Joint Venture. Insofar as Vidhi Construction (supra) is concerned, the said judgment is also not applicable to the facts of this case in as much as this Court in paragraph 18 records that the respondent no. 2 who, to the knowledge to the respondent No. 1, had entered into collaboration agreement with the appellant. The Court notes the fact that the appellant had paid considerable amount to respondent no. 1 and in part performance of the said collaboration agreement the appellant was put in possession of the property, who demolished the one storey building and has raised a new structure thereupon which structure admittedly has been raised with the help of the money spent by the appellant. It is in those facts, this Court had held that the Suit filed by the plaintiff / respondent no. 1 is for partition, but in such a suit, decree CS(OS) 651/2013 Page 180 of 257 for declaration will be deemed to be included to the effect that she is the owner to the extent of one-third share. Since declaration is implicit in such a suit with respect of a status in the property. Therefore, it cannot be said that the appellant is not a necessary party in the Suit. Grant of decree in favour of respondent no.1 is likely to effect the right of the appellant to hold portions of the newly constructed building which has been constructed with the aid of the appellants money. The Court held that it is a case where the appellant will be deemed to be having an interest in the property. It is not a case of an agreement to sell, but the subject is a collaboration agreement which was followed by delivery of possession to the appellant pursuant to which construction has been raised by the appellant, who has occupied first and second floors of the building from which he cannot be dispossessed by respondent no. 1. In the present case, the hotel building has been constructed on the investment made by the defendant. The equipment of the plaintiff was in terms of Schedule III which the agreement stipulated can be taken away by the plaintiff on the expiry of the licence period. Suffice to state no interest has accrued in the property in question. The relationship between the parties being clearly regulated by the agreements, the judgment so relied upon has no effect and would not help the case of the plaintiff. In so far as Sunil Siddharthbai (supra) wherein the reliance was placed by CS(OS) 651/2013 Page 181 of 257 Mr. Nayar on Para 16 and 17 are concerned, the same is not applicable to the facts of this case. In the said case, the Supreme Court has noted that the assessee has bought the shares of the Limited Companies into the partnership firm as its contribution to its Capital. No such facts exist in the case in hand. Similarly, CIT v. Panipat Woollen and General Mills (Supra) is also not applicable to the facts of this case. In the said case, there was an agreement between the parties to share 50% of the profits besides commission and also to share 50% of the losses. The Supreme Court having regard to the terms and conditions of the agreement held that the agents by contributing to the investments and by sharing the profits as also the losses have actually contributed to a joint venture and ultimate division of the profits with the principals and the agreement must be construed as an agreement of divisions of profits in specified proportions. In Addanki Narayanappa and Anr. (Supra) wherein, reliance has been placed in Para 7 of the judgment, it must be held, the same is not applicable to the facts of this case, inasmuch as the Supreme Court in the said case has held that the whole concept of partnership is to embark upon a Joint Venture and for that purpose to bring in as capital money or even property including immovable property. Once, that is done, whatever is brought in, would cease to be the trading asset of the person, who brought it in. It would be the trading asset of the CS(OS) 651/2013 Page 182 of 257 partnership in which all the partners would have interest in proportion to their share in the Joint Venture of the business of partnership. The person, who brought it in would therefore, not be able to claim or exercise any exclusive right over any property which he has brought in much less over any other partnership property. He would not be able to exercise his right even to the extent of his share in the business of the partnership. The Supreme Court further held, his right during the subsistence of the partnership is to get his share of profits from time to time as may be agreed upon among the partners and after dissolution of the partnership, or with his retirement from partnership of the value of his share in net partnership asset as on the date of dissolution or retirement after a deduction of liabilities and prior charges. Suffice to state, the facts have no bearing, in view of my conclusion above on a reading of the Agreements executed between the parties. Similarly, the reliance placed on the judgment of the English Court in Robinson v. Ashton (supra), more specifically at Page 28 of the said judgment, wherein the Court has held as under:
―Sir G. Jessel, M.R., said that in the absence of special agreement the rise or fall in value of fixed plant or real estate belonging to a partnership was as much profit or loss of the partnership as anything else. If a man said ―I bring in no money capital - I have not got money, but here is a mill and machinery worth £20,000 which I bring in,‖ and he was credited in the books with £20,000 -CS(OS) 651/2013 Page 183 of 257
then the mill and machinery became partnership property just as much as if the partner had brought in money, and the partnership had with that money bought the mill and machinery. It was suggested that the mill and machinery were Robinson's and that the partnership had only paid rent for them; but tenants did not generally lay out money on their landlords' property, especially under circumstances such as those of the present case. There must be a declaration that Ashton was entitled to one-half of the proceeds of sale after payment thereon of the debts of the partnership and the capital appearing by the books to be due to each partner.‖
170. The said judgment has no bearing on the facts of this case, insofar as the reliance placed by Mr. Nayar on New Horizons Ltd (supra), has already been referred to by me above, and the said judgment would not help the case of the plaintiff. Insofar as the submission of Mr. Nayar by relying on Section 58 and Section 78(5) of the Indian Evidence Act that there are documents on record which suggests that the relationship between the parties is of a joint venture and the plaintiff has a right of extension of a licence by relying upon the words "joint participation" in the letter dated 31. 3. 1976, (Exh.P-40); for participating jointly in the construction and the running of the hotel‖ in the committees resolution dated April 02, 1976 (Exh.P-14); "collaborate‖ in the collaboration agreement dated December 18, 1976 (Exh.P-40); the usage of the word ―collaboration partner‖ (Exh.DW1/P2) (Colly) issuance of completion certificate by the defendant in favour of ―The Taj Mahal Hotel‖; and the CS(OS) 651/2013 Page 184 of 257 usage of the words in the defendants Chairpersons letter dated September 08, 2011, (Exh.P-37) like ―joint venture/ collaboration‖ "unique PPP model‖ ―arrangement is broadly captured by three agreements‖, ―construction and operation of a hotel‖ is through a ―unique PPP model‖, ―the collaboration partner and the present operator has applied for extension of term‖. Similarly, the reliance placed by Mr. Nayar on the Council‟s resolution dated October 07, 2011 (Exh.P-12), wherein a reference to the project is made as a ―joint venture‖, ―unique joint venture / collaboration‖. The plaintiff is having―long term interest‖ in the property. The plaintiff is a ―collaboration partner‖. The licence agreement being an outcome of the ―joint venture / collaboration agreement‖ to contend that the above admissions of the defendant itself unambiguously shows that the plaintiff and the defendant are in ―joint venture‖ is untenable in law in as much as it is a settled position of law in terms of Bank of India v. K. Mohandas (supra), wherein the Supreme Court held that the true construction of a contract must depend upon the import of the words used and not upon what the parties chose to say afterwards. It was also held that nor does the subsequent conduct of the parties in the performance of the contract affect the true effect of the clear and unambiguous words used in the contract. The intention of the parties CS(OS) 651/2013 Page 185 of 257 must be ascertained from the language they have used considered in the light of the surrounding circumstances and the object of the contract. The nature and purpose of the contract is an important guide in ascertaining the intention of the parties. The aforesaid being the position of law, the usage of the words, in the documents referred to by Mr. Nayar, would not change the nature of agreements which are clear and unambiguous. In other words, the same would not change the legal character of the agreements between the parties which remains that of licensor and the licencee. In fact, PW-1 P.K. Bhatia in his answer to question 22 had admitted that the status of the plaintiff is that of a „licencee‟.
171. Even the reliance placed by Mr. Nayar on the oral evidence and the inferences to support his contention of a joint venture is concerned, the same is a misreading of the agreements, the purport of which has been already delineated above. The distinction sought to be drawn by Mr. Nayar between the words "Hotel Building" and "Hotel" in the Collaboration Agreement (Exh.P-40) to contend that, the word „Hotel‟ is used to relate it as a Joint Venture is devoid of merit. The Collaboration Agreement (Exh.P-40) and Licence Deed (Exh.P-41), which have been executed by the parties for construction of hotel building and running of hotel on Licence are very clear. As concluded above, none of those CS(OS) 651/2013 Page 186 of 257 Agreements and the Supplemental Agreement suggest that the relationship is of Joint Venture. The Supplemental Agreement vide clause (2) clearly stipulated that the parties have agreed on payment of licence fee and manner of payment as set out in sub clause 1 to 5 of clause III (Licence Fee and Manner of Payment of the Agreement of Licence). Investment of NDMC shall for the purpose of the aforesaid clauses comprise the cost of acquiring land measuring 3.78 acres (15028 sq. meters) being Plot No.1, Man Singh Road, New Delhi in terms of the plan attached to the Collaboration Agreement taken to be Rs.106.64 lakhs comprising of Rs.91.48 lakhs being the basic cost of land to NDMC; a sum of Rs.10.66 lakhs being arrears of ground rent in respect of the said plot paid by NDMC to Works and Housing Ministry, Govt. of India and depreciated value of the building on the said plot since demolished, estimated to Rs.4.50 lakhs and Rs.45 lakhs towards cost of financing subversion and other charges including initial cost of providing 11 kv substation. Explanation (A) (I) of the Supplemental Agreement clarifies that for the purpose of arriving at the total investment of NDMC in the Hotel Building, the total of Rs.475/- lakhs, Rs.45 lakhs, Rs.106.64 lakhs, i.e Rs.626 lakhs at the maximum shall be considered, which would have a bearing on licence fee payable, as clause III (1) of the Licence Deed stipulates a sum equivalent of 15% of the defendant investment if CS(OS) 651/2013 Page 187 of 257 higher than the 10 ½ of the gross income of the plaintiff, whichever is higher shall be the licence fee. Clause 8 of the Supplemental Agreement stipulates all the terms and conditions of the Collaboration Agreement and the Agreement of Licence except those which are specifically modified in the Supplemental Agreement shall remain unchanged and shall be binding on the parties to the Agreement so also the terms and conditions incorporated in the Supplemental Agreement. It needs to be held that the Supplemental Agreement has not diluted Article III (2) of the Collaboration Agreement, nor, the land on which the hotel building stands, stood contributed to the Joint Venture as contended by Mr. Nayar.
172. Insofar as plea of Mr. Nayar that the payment of house tax by the plaintiff, in terms of Clause 4 of the Supplemental Agreement evidences the land on which the hotel building stands, stood contributed to the Joint Venture is also without merit. I reproduce clause 4 of the Supplemental Agreement as under:-
―(4) Sub clause (2) of the Clause VII of the agreement of licence shall stand modified to the effect that IHC will pay to the NDMC an amount of Rs.12,00,000/- per annum in lieu of House Tax payable in respect of Hotel building‖ CS(OS) 651/2013 Page 188 of 257 There is no Joint Venture and also in terms of Clause 4 sub-clause (2) of clause VII of the Agreement of Licence (Exh.P-41) stood modified, is to the effect that the plaintiff will pay to the defendant an amount of Rs.12,00,000/- per annum in lieu of house tax payable in respect of hotel building and not land. The said clause does not remotely suggest that it is the plaintiff who had to pay the house tax to the authorities. The said stipulation may have been incorporated purely from a commercial angle and cannot be construed to mean that, the land has been contributed to the Joint Venture. Nor does it suggest plaintiff a tenant in perpetuity.
Hence, there is a fallacy in the submission of Mr. Nayar and the same is liable to be rejected. The reliance placed on the evidence of the plaintiff witness, Mr. S. Balasubramanian, PW3 would also not help the case of the plaintiff, in view of the agreements the terms of which are clear and unambiguous. The reliance on oral evidence is not required in view of the terms and conditions in the agreements, which governs the relationship between the parties. Further inferences cannot be drawn to interpret agreements which are clear and unambiguous. Even the conclusions drawn by Mr. Nayar to contend Joint Venture (i) that, resolution of Committee dated April 02, 1976 , connotes Joint Venture;
(ii) the initial investment of Rs.4.75 crores of the defendant and Rs.4.61 crores of the plaintiff evidences Joint Venture and partnership; (iii) the CS(OS) 651/2013 Page 189 of 257 land stood contributed to the partnership when the defendant‟s investment increased to Rs.6.26 crores; (iv) the defendant has earned multifold revenues returning all its investments; (v) the hotel building with land stands contributed to the Joint Venture; (vi) the Licence Deed provides that the terms on expiry of the initial period of Licence have to be mutually negotiated; (vii) the defendant has not led any contrary evidence against the admitted position of a Joint Venture, which is in existence for the last 36 years, are also untenable. The documents, which are the best evidence does not remotely show "Joint Venture".
The selective evidence on which reliance placed, cannot substitute the documentary evidence, which is very clear. The reliance placed by Mr. Nayar on the judgment of the Supreme Court in Godhra Electricity (supra) to contend that extrinsic evidence to determine the effect of the instrument is permissible is concerned, in the said case the appellant company was granted licence for 50 years by notification dated November 16, 1922 Under Section 3 of Indian Electricity Act, 1920. The licence was signed on the next date i.e., November 17, 1922 and the notification granting it was published in the gazette dated November 23, 1922. Since the initial period of 50 years of the licence was to expire, the Gujarat State Electricity Board by notice dated November 08, 1971 exercised the option to purchase the undertaking by calling upon the CS(OS) 651/2013 Page 190 of 257 appellants to sell the undertaking to it on the midnight of November 15/16, 1972. The undertaking was eventually taken over. The appellant contended that date of commencement of licence was a date on which notification granting the licence was published in the Gazette viz. November 23, 1922 and not the date of the notification granting licence i.e., November 16, 1922 and hence the notice was improper. One of the pleas on behalf of the respondent was that the original licence has been amended clarifying that the licence was granted in the Govt. notification of November 16, 1922, though that notification was published in the Gazette November 23, 1922. So the amendment raised the question whether subsequent interpreting statement made by the parties to a written instrument is admissible evidence to construe the written instrument. The Supreme Court held that subsequent interpreting statements might not always change the meaning of a word or a phrase. A word or a phrase is not always crystal clear. When both parties subsequently say that by the word or phrase which in the context is ambiguous, they mean this, it only supplies a glossary as to the meaning of the word or phrase. After all the enquiry is as to what the intention of the parties was from the language used and why is it the parties cannot clear that latent ambiguity in the language by a subsequent interpreting statement. If the meaning of the word or phrase or sentence is clear CS(OS) 651/2013 Page 191 of 257 extrinsic evidence is not admissible. It is only when there is a latent ambiguity that extrinsic evidence in the shape of interpreting statement in which both have concurred should be admissible. In the present case, no such fact situation of any ambiguity in interpreting the agreements arises. The ambiguity is the fitment of imagination of the plaintiff. Hence there is no requirement of any extrinsic evidence for determining the effect of the agreements. Even the reliance placed on the judgment of the Supreme Court in the case of Pure Helium India (P) Ltd. (Supra) specifically on Paras 25 and 26, wherein the Supreme Court noting that the learned Arbitrators while making the Award, took into consideration the documentary as well as circumstantial evidence including pleadings of the parties, held, that the terms of the contract can be express or implied. The conduct of the parties would also be relevant factor in the matter of construction. The Supreme Court relied upon its judgment in Khardah Co. Ltd vs. Raymon and Co. (India) Pvt. Ltd 1963 (3) SCR 183 wherein it held as under:-
―We agree that when a contract has been reduced to writing we must look only to that writing for ascertaining the terms of the agreement between the parties but it does not follow from this that it is only what is set out expressly and in so many words in the document that can constitute a term of the contract between the CS(OS) 651/2013 Page 192 of 257 parties. If on a reading of the document as a whole, it can fairly be deduced from the words actually used therein that the parties had agreed on a particular term, there is nothing in law which prevents them from setting up that term. The terms of a contract can be expressed or implied from what has been expressed. It is in the ultimate analysis a question of construction of the contract. And again it is well established that in construing a contract it would be legitimate to take into account surrounding circumstances.‖
173. In the case in hand, a reading of the terms of the agreements or in other words on the construction of the agreements it is clear that the nature of relationship between the parties herein is of a licensor and licencee. Hence there is no reason/cause to construe the agreements by taking into account the surrounding circumstances. On similar lines is the judgment of the Supreme Court in Modi and Co. (Supra) which is prior in time, wherein the Supreme court also relied upon the same judgment in Khardah Co. Ltd. v. Raymon and Co. (India) P. Ltd. 1963, 3 SCR 183, suffice to state even this judgment would not help the case of the plaintiff in view of the unequivocal terms of the agreements. No extrinsic evidence is required to determine the effect of the agreements.
Similarly, the reliance placed on the case of Abdullah Ahmed (Supra) more specifically Para 27 would not help the case of the plaintiff, in as CS(OS) 651/2013 Page 193 of 257 much as in Para 27, the Court had observed that the subsequent conduct of both the parties to the agreement would be relevant for construction of a contract. It is noted that the Court proceeded on a premise that the phrase ―securing a purchaser‖ is not without ambiguity. The Court held that extrinsic evidence to determine the effect of an instrument is permissible where there remains a doubt as to its true meaning, which is not the case here. Similarly, in the case of Chart Brook Ltd. (Supra), the House of Lords was dealing with a case wherein the claimant company was the owner of development land and the defendants were developers. They entered into a contract whereby the defendants agreed to obtain planning permission for the claimant‟s land and then, pursuant to a licence from the claimant, to enter into possession, construct a mixed residential and commercial development, and sell the properties on long leases. The claimants agreed to grant the leases at the direction of the defendant, who would receive the proceeds for their own account and pay the claimant an agreed price for the land. Planning permission was granted and the development was built. A dispute arose between the parties regarding a term of the contract which provided for an "additional residential payment", which was a term defined in the contract. The dispute related to the calculation of the amount payable under that term. The defendants calculated the sum due as pound 897,051 whereas the CS(OS) 651/2013 Page 194 of 257 claimants claimed to be entitled to pound 4,484,862. The claimants brought proceedings against the defendants for the unpaid balance of the additional residential payment, which they claimed to be owed. In support of their construction of the term of the contract, the defendants sought to rely on documents which were part of the pre-contractual negotiations. Alternatively, the defendants counterclaimed for rectification of the contract to accord with what they claimed to be the parties‟ common agreement. The initial Judge held that the claimants‟ construction was the correct one and that evidence of the pre-contractual negotiations was not admissible, particularly when an express definition was contained within the contract. Accordingly, he gave judgment for the claimants and dismissed the counterclaim. The Court of Appeal by a majority, upheld the judge‟s decision. The House of Lords allowing the appeal held (i) that a court would not easily accept that linguistic mistakes had been made in formal documents, but if the context and background drove a court to conclude that something had gone wrong with the language of a contract, then the law did not require the court to attribute to the parties an intention which a reasonable person would not have understood them to have had; that if it was clear that there was a mistake on the face of the document and it was clear what correction ought to be made in order to cure the mistake, in that it was clear what a CS(OS) 651/2013 Page 195 of 257 reasonable person, having all the background knowledge which would have been available to the parties, would have understood them by using the language in the contract to have meant, then the court was entitled to correct the mistake as a matter of construction; that both those requirements were satisfied in that case; that the definition of "additional residential payment" in the contract was ambiguous and obviously defective as a piece of drafting; that there was always a commercial context to a contract negotiated between businessmen, and to interpret the definition in accordance with the ordinary rules of syntax made no commercial sense; that, accordingly, taking the background and context into consideration and, applying the established principles of construction, the claimants‟ construction could not be upheld,, and the construction put forward by the defendants was more appropriate. (2) That it would not be inconsistent with the English objective theory of contractual interpretation to admit evidence of previous communications between parties as part of the background which might throw light on what they meant by the language used, and there were no conceptual limits to what could properly be regarded as background; that, therefore pre-contractual negotiations were potentially relevant background, but the usual rule was that they should be excluded as CS(OS) 651/2013 Page 196 of 257 inadmissible simply because they were irrelevant to the question which the court had to decide, namely, what the parties could reasonably be taken to have meant by the language which they finally adopted to express their agreement; that, however, even in a case where background might be relevant, a departure from that exclusionary rule would create uncertainty of outcome in disputes over interpretation and add to the cost of advice, litigation or arbitration; that the law of contract was designed to enforce promises with a high degree of predictability and if conventional meanings and syntax were to be displaced by inferences drawn from background, the outcome was likely to be less predictable; that unlike surrounding circumstances, which were by definition objective and uncontroversial facts, statements in the course of pre- contractual negotiations were subjective and could if oral, be disputed, and it was not often easy to distinguish between statements which reflected the aspirations of a party and those which embodied a provisional consensus which might help in the interpretation of the contract eventually concluded; that the exclusionary rule had been in existence for many years and had been affirmed several times, and while their Lordships had power to depart from it if it was impeding the proper development of the law or had led to results, which were unjust or contrary to public policy, that could not confidently be said of the CS(OS) 651/2013 Page 197 of 257 exclusionary rule; that the availability of the remedies of rectification and estoppels by convention were safeguards which would in most cases prevent the rule from causing any injustice, but those two remedies would have to be pleaded and clearly established; that although the rule excluded evidence of what was said or done during the course of negotiating the agreement for the purpose of drawing inferences about what the contract meant, it did not exclude the use of such evidence for other purposes, such as to establish that a fact which might be relevant as background was known to the parties, or to support a claim for rectification or estoppels, which were not exceptions to the rule but operated outside it; and that, accordingly, there were no grounds for departing from the exclusionary rule.
(3) That rectification was not confined to cases where there had been a concluded antecedent contract with which the final contract did not conform, and it was also available when there was no binding antecedent agreement but the parties had a common continuing intention in respect of a particular matter in the instrument to be rectified; that in both cases the question was what an objective observer would have thought the intentions of the parties to be; that in order to get rectification it had to be shown that the parties were in complete agreement on the terms of their CS(OS) 651/2013 Page 198 of 257 contract but that by an error wrote them down wrongly; that if by looking at what the parties said or wrote to each other in coming to their agreement, and then comparing it with the contract they had signed, it could be predicated with certainty what their contract was, and that it was by common mistake wrongly expressed in the document, then the document could be rectified, but nothing less would suffice; that on the facts of that case both parties were mistaken in thinking that the definition of the construction of additional residential payment reflected their prior consensus; and that accordingly, the defendants were entitled to rectification.
174. Having noted, what has been held by the House of Lords, in the case in hand, there is no issue that there are any linguistic mistake/wrong with the language of a contract. No such case has been pleaded by the plaintiff, which requires the previous communications between the parties to be gone into to understand the mistake/language used in the contract. As has been held above, the language of the Agreements is very clear, which reflects the intent of the parties. The said judgment has no applicability to the facts of this case.
175. I have already held above for interpreting the terms of the agreements or construction of the agreements in the case in hand, the CS(OS) 651/2013 Page 199 of 257 extrinsic evidence is not required. I agree with the submission of Mr.Sanjay Jain, ld. ASG who relied on Sections 91 and 92 of the Indian Evidence Act that unless there is an ambiguity in the terms of the contract, no external evidence can be looked to ascertain the agreements between the parties. It is not the case of the plaintiff in the plaint that the terms of the agreements are ambiguous. The mere usage of certain terms in various resolutions by the officers would not change the character of the documents.
176. The reliance placed by Mr. Nayar on the judgment of this Court in the case of ITE India (P) Ltd. (supra) more specifically Para 33 to 38 to contend an agreement can be formed through conduct and can be oral, would also not help the case of the plaintiff in as much as in the said case the original contract stipulated that the terms of the agreement would be that of 10 years which was extendable by a further period of 5 years on such terms and conditions as may be agreed upon which is unlike the Clause-II of the Licence Deed clearly stipulating that the option to grant the licence for a further period on such terms that may be mutually agreed shall be that of the defendant. Further it is noted from the case relied upon by Mr. Nayar, that the parties have settled their inter se dispute and the appellant thereof has paid certain amounts besides the CS(OS) 651/2013 Page 200 of 257 litigation charges to the respondent. That apart the appellant withdrew various proceedings against the respondent. It is also noted the offer made by the respondent was unconditionally accepted by the appellant. On the acceptance of the offer, the respondent issued a letter confirming the said contract extending by a period of 5 years which was with the concurrence and approval of the MD and CEO and all that was required a mere signing of the agreement, whereas in the present case, there is no decision of the competent authority which has been conveyed to the plaintiff so as to bind the defendant with the same.
177. Similarly, in the case of Alok Bose (supra), on which reliance was placed by Mr. Nayar, more specifically paras 16, 17 and 18, the Supreme Court, held that agreement of sale comes into existence when the vendor agrees to sell and the purchaser agrees to purchase, for an agreed consideration on agreed terms. It can be oral. It can be by exchange of communications which may or may not be signed. It may be by a single document signed by both parties. It can also be by a document in two parts, each party signing one copy and then exchanging the signed copy as a consequence of which the purchaser has the copy signed by the vendor and a vendor has a copy signed by the purchaser. Or it can be by the vendor executing the document and delivering it to the purchaser CS(OS) 651/2013 Page 201 of 257 who accepts it. The Supreme Court also held, considering Section 10 of the Contract Act, 1872, and the proviso thereto no attention has been drawn to any law, applicable in the State concerned at the relevant time, which requires an agreement of sale to be made in writing or in the presence of witnesses or to be registered. Therefore, even an oral agreement to sell is valid. If so, a written agreement signed by one of the parties, if it evidences such an oral agreement will also be valid. In India an agreement of sale signed by the vendor alone and delivered to the purchaser, and accepted by the purchaser, has always been considered to be a valid contract. In the event of breach by the vendor, it can be specifically enforced by the purchaser. There is, however, no practice of purchaser alone signing an agreement of sale. The case cited has, no relevancy to the facts of this case. It is not the case of the plaintiff in the plaint that a concluded contract has come about, through conduct or orally.
178. The only conclusion that can be drawn from the agreements is that the relationship between the parties is not of a joint venture, but of a licensor and licencee and the licence as accepted by PW1 (P.K. Bhatia) does not create any interest in the property. It permits the plaintiff to make use of the property. There is no parting with the possession of the CS(OS) 651/2013 Page 202 of 257 property and the possession continues to be that of the owner i.e defendant.
179. The plea of Mr. Nayar that Clause II (2) of the Licence Deed dated December 18, 1976 must be given effect to, keeping in view the Joint Venture and the Licence Deed always contemplated extended period, because Clause IX clearly mentions "the renewed period of licence" and both read together, the plaintiff is entitled to extension on terms to be mutually negotiated is also untenable and is rejected. Such a submission pre-supposes the right of renewal in favour of the plaintiff. Whereas on a reading of the relevant Clause-II (2) it is clear, the same stipulated on expiry of the period of licence of the Hotel building granted, the licensor, the defendant herein, shall have the option to grant the licence for a further period on such terms and conditions as may be mutually agreed upon between the licensor and licencee. The option to grant licence for a further period has been exclusively vested with the defendant. The only discretion bestowed on the plaintiff is that if the plaintiff is desirous of obtaining a licence for a further period after the expiry of the licence, it shall give to the licensor a notice in writing of not less than 60 days. It is in view of the latter part of the Clause, notice dated February 15, 2010 was given by the plaintiff. On receipt of notice from the plaintiff, the CS(OS) 651/2013 Page 203 of 257 defendant has option to grant or not to grant licence for a further period. If opts, then the same shall be on such terms and conditions as may be mutually agreed. The words "the Licensor shall have the option to grant the licence for a further period" need to be given a meaning, otherwise they would lose significance. So, the argument of Mr. Nayar that the option of renewal vests with the plaintiff is contrary to Clause II(2). The words "the renewed period of licence" in clause IX need to be read in the context if the defendant had accepted the request of the plaintiff for grant of licence for further period. So the plea of Mr. Nayar is liable to be rejected.
180. It is noted, on receipt of the notice no doubt a committee was constituted to look into the request and the Committee deliberated on the issue on various occasions. But there was no decision of the Council, the competent authority deciding the request of the plaintiff for extension of the licence period. The plea that the minutes of the discussion held on June 03, 2011, (Exh.P-4) wherein it was observed that the Chairperson will be requested to approve the above terms for extension of the period of licence and the financial terms based on the NDMC (Determination of Annual Rent) Byelaws, 2009 and the minutes of the Committee dated July 14, 2011, (Exh.P-5), wherein it was noted that the Chairperson CS(OS) 651/2013 Page 204 of 257 (though not competent) has agreed with the recommendation of the Committee for extension would not be of any help to the plaintiff as the said decision was not that of the Council, the competent authority. Even otherwise, I agree with the submission of Mr. Sanjay Jain that as there was no communication from the defendant conveying its decision to grant licence for further period, which entails a fresh Licence Deed, there is no concluded contract. The plea of Mr. Nayar that the plaintiff had accepted the terms both period and financial vide its letter dated July 15, 2011 (page 555) is also not sustainable as the said communication has been denied by the defendant and the document has not been exhibited to be read in evidence. In any case, vide the letter dated July 15, 2011, the plaintiff has called upon the defendant to confirm the terms as said to have been discussed, which was never done. So, on plaintiff‟s own showing the terms were to be confirmed by the defendant (by competent authority) which was not done.
181. That subsequent thereto the Council‟s meeting held on October 07, 2011 (Exh.P-12) it was resolved to agree to sanction extension for a period of 1 year up to October 10, 2012 subject to the plaintiff agreeing to pay licence fee at enhanced rate at mutually agreed retrospectively w.e.f. October 11, 2011. It was also resolved that the further action CS(OS) 651/2013 Page 205 of 257 would be taken after legal advice and consultants report. So it is clear that the enhanced rate of 17.25% was agreed by the defendant only for extension w.e.f. October 11, 2011 to October 10, 2012 and not for an extension for a duration of 30 years. The Council also accorded sanction for further review and action in accordance with the decision of the Ministry of Urban Development, the legal advice, the committee‟s recommendations and consultants report. That further, the minutes of the meeting dated November 14, 2011, (Exh.P-27) between defendant and the Ministry of Urban Development, it was decided that NDMC should negotiate with the plaintiff to get as close to the market rate as possible. The said observation does not amount to accord a sanction for extension. I agree with the submission of Mr. Jain that even vide letter dated July 13, 2012 (Exh.P-16), the plaintiff requested the defendant to accord the approval of extension of the licence of the hotel for a further period of 30 years, would reveal that the minutes of the earlier meetings on which reliance was placed no decision with regard to grant of licence for a further period of 30 years was taken. A concluded Contract could have come into place if the competent authority i.e the Council of the NDMC had taken a decision in that regard.
182. In the absence of a decision by the Council, there is no concluded CS(OS) 651/2013 Page 206 of 257 Contract. The communications between the plaintiff and the defendant, without the sanction of the Council would not result in a binding contract. The reliance placed by Mr. Sanjay Jain on U.P Rajkiya Nirman Nigam (supra), is justified wherein the Supreme Court had held that in a case of a Government Undertaking, unless a contract is duly executed in accordance with the Articles of Association, the appellant i.e the Government Undertaking is not bound by any such contract. The Supreme Court found that there was no signed agreement by duly competent officer on behalf of the appellant. The argument that it was an indoor management between the appellant and its officers, was also rejected. It was held that the doctrine of Indoor Management cannot be extended to formation of the contract or essential terms of the contract unless the contract with other parties is duly approved and signed on behalf of a public undertaking or the Government with its seal by an authorized or competent officer. Otherwise, it would be hazardous for public undertaking or Government or its instrumentalities to deal on contractual relations with third parties. It was also held that there did not exist any concluded contract between the Board and the appellant for the performance of the work as per the terms and conditions of the tender floated by the Board. Since the tenders, the source of the contract between the parties had not been transformed into a contract even if the CS(OS) 651/2013 Page 207 of 257 proposal and counter proposal are assumed to be constituted, an Agreement, which is a contingent contract until it was accepted by the Board. The Court also noted, by the operation of Section 32 of the Contract Act, the counter proposal of the respondent cannot be enforced since the event of entering into the contract with the Board has not taken place, would squarely be applicable in the facts of the case, inasmuch as the binding decision is the one, which has been taken by competent authority, which in this case was the Council. It is not the case of the plaintiff that the Council had in fact taken a decision.
183. It is also noted that subsequently, the Council, in its meeting held on September 27, 2012, (Exh.P-20) after taking into consideration all the facts including the Agreements, the report of the consultant as well as the various legal opinions received in that regard, came to a decision to put the property for public auction in a fair and transparent manner with right of first refusal to the plaintiff. It was also resolved to extend the period of licence of the plaintiff on existing terms and conditions for a period of one year or till such time, a new licencee is chosen through a bidding process, whichever is earlier. The said decision was communicated to the plaintiff vide letter dated November 5, 2012 (Exh.P-49), which is the subject matter of the present suit having been CS(OS) 651/2013 Page 208 of 257 impugned. During the pendency of the present suit, the Ministry of Home Affairs, vide two different/separate communications dated May 10, 2013 (Exh.DW1/P4) and June 27, 2013 (Exh.DW1/P5) wrote to the defendant stating that the right of first refusal in the said public auction has not been provided for in the lease deed (sic. Licence deed) and the provision of first right of refusal will result in lower bids in the public auction. The MoHA expressed the first right of refusal should not be allowed to the plaintiff in the proposed auction and fresh lease (sic. Licence) should be granted by open public auction. It was also stated that the first right of refusal will not fetch the correct market price. Either the competitors would bid excessively or perhaps show no interest at all. Therefore, it is in the interest of the transparency that the defendant may go for public auction wherein the plaintiff may participate as a bidder. The aforesaid two communications were followed by memorandum dated January 1, 2015 (Exh.DW5) under Section 396 of the Act of 1994 directing the defendant to resort to public auction and find the best bidder for the property.
184. The Council, the competent authority, vide its meeting held on January 30, 2015 resolved that in view of the directions of the Ministry of Home Affairs to abide by the directions and also decided to extend the CS(OS) 651/2013 Page 209 of 257 term of licence till March 31, 2015 and in its special meeting held on March 25, 2015, the Council of the defendant resolved to extend the licence for three months on the same terms and conditions and directed the NDMC officials to complete the auction by the end of three months. The Council of the defendant also decided that the direction of Ministry of Home Affairs to resort to public auction and find best bidder in respect of property without giving the first right of refusal to the plaintiff is binding on NDMC. The Council in its meeting dated June 17, 2015, confirmed the minutes. Finally, on January 29, 2016 it was communicated to the plaintiff that the first right of refusal communicated to the plaintiff on November 5, 2012 (Exh.P-49) stands withdrawn and was called upon to hand over the possession of the property on February 29, 2016. Suffice to state, the plaintiff has no vested right of grant of licence for further period in terms of the agreement, as the same is the sole discretion of the defendant and no decision has been taken to grant the licence for a further period of 30 years, rather a decision has been taken to put the property to auction. The reliance placed on the file notings is also misplaced. They are the views/opinion of the concerned individual officers; till such time the notings culminate into a decision/order of the competent authority and the same being communicated to the party concerned, the same are of no benefit nor can CS(OS) 651/2013 Page 210 of 257 be used for any benefit by a party. There is no decision or order of grant of licence for a further period of 30 years, so no question of any communication made to the plaintiff by the defendant. In this regard, it is relevant to quote/refer the law laid down by the Supreme Court in Bachhittar Singh (supra), wherein the Constitution Bench of the Supreme Court had the occasion to consider the effect of an order passed by a Minister on a file, which order was not communicated to the person concerned. Referring to Article 166(1) of the Constitution, the Court held that order of the Minister could not amount to an order by the State Government unless it was expressed in the name of Raj Pramukh as required by the said Article and was then communicated to the party concerned. The Court observed that business of State is a complicated one and has necessarily to be conducted through the agency of a large number of officials and authorities. Before an action is taken by the authority concerned in the name of the Raj Pramukh, which formality is a constitution necessity, nothing done would amount to an order creating rights or casting liabilities to third parties. It is possible, observed the Court, that after expressing one opinion about a particular matter at a particular stage, a Minister or the Council of Ministers may express quite a different opinion, which may be opposed to the earlier opinion. In such cases, which of the two opinions can be regarded as the "order" of CS(OS) 651/2013 Page 211 of 257 the State Government? It was held that opinion becomes the decision of the Government only when it is communicated to the person concerned.
185. On similar lines is the judgment of the Supreme Court in the case of Sethi Auto Service Station (supra), wherein the Supreme Court relied upon its judgment in Bachhitar Singh (supra) and also Laxmi Narain R. Bhattad vs. State of Maharashtra 2003 5 SCC 413. I quote para 14 and 17 of the judgment of the Supreme Court in Sethi Auto Service Station (supra).
―14. It is trite to state that notings in a departmental file do not have the sanction of law to be an effective order. A noting by an officer is an expression of his viewpoint on the subject. It is no more than an opinion by an officer for internal use and consideration of the other officials of the department and for the benefit of the final decision-making authority. Needless to add that internal notings are not meant for outside exposure. Notings in the file culminate into an executable order, affecting the rights of the parties, only when it reaches the final decision-making authority in the department; gets his approval and the final order is communicated to the person concerned.
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17. In view of the above legal position and in the light of the factual scenario as highlighted in the order of the CS(OS) 651/2013 Page 212 of 257 learned Single Judge, we find it difficult to hold that the recommendation of the Technical Committee of the DDA fructified into an order conferring legal right upon the appellants.‖
186. A plea has been taken that in view of Section 235 of the Act, and the Government of India (Allocation of Business Rules) 1961, the minutes of the meeting of the Ministry of Urban Development dated November 14, 2011 (Exh.P-27) is binding on the defendant and Sections 395 and 396 of the Act of 1994 are not applicable in view of the fact that Ministry of Home Affairs has no power of superintendence with respect to disposal of land. To appreciate this particular argument, it is necessary to note the provision of Section 235 of the Act of 1994, which reads as under:-
"CHAPTER XIV BUILDING REGULATIONS
235. General superintendence, etc., of the Central Government- Notwithstanding anything contained in any other provision of this Act, the chairperson shall exercise his powers and discharge his functions under this Chapter, under the general superintendence, direction and control of the Central Government.‖
187. Perusal of the Section 235 would reveal that the same is a non-CS(OS) 651/2013 Page 213 of 257
obstante clause stipulating that notwithstanding anything contained in any other provision of the Act, the chairperson shall exercise his powers and discharge his functions under this Chapter, under the general superintendence, direction and control of the Central Government. The said provision is in Chapter XIV, under the heading "Building Regulations". The Chapter encompasses in itself Sections 235 to 260.
The same inter-alia relate to prohibition of building without sanction, erection of building, applications for additions to, or repairs of buildings, conditions of valid notice, sanction or refusal of building or work, sanction accorded under misrepresentation, buildings at corners of streets, period of completion of building or work, order of stoppage of buildings or works in certain cases, power of Chairperson to require alteration of work, power to seal unauthorized constructions, appellate tribunal, completion certificates etc. The same do not relate to a decision with regard to lease, sale, let out, licence, or otherwise transfer of property of the defendant. It is only with regard to matters related to building regulations, the Chairman exercises his powers and discharge his functions under the general superintendence of the Central Government. If the said provision is read in conformity with the Government of India (Allocation of Business Rules), 1961 under the head Ministry of Urban Development, on which reliance was placed by CS(OS) 651/2013 Page 214 of 257 Mr. Nayar, it is noted that the Ministry of Urban Development is competent to deal with the properties of the Union where lands or building with the exceptions namely (a) those belonging to the Ministry of Defence, the Ministry of Railways and the Department of Atomic Energy and the Department of Space; (b) Buildings or lands, the construction or acquisition of which, has been financed otherwise than from the civil works budget; (c) buildings or lands, the control of which has, at the time of construction or acquisition or subsequently been permanently made over to other Ministries and departments. At the same time, under the Allocation of Business Rules, the Ministry of Home Affairs have ―all powers and functions of the Central Government as per the provisions of the Municipal Corporation of Delhi Act, 1957 and New Delhi Municipal Council Act, 1994 except matters pertaining to land and building bye-laws.‖ It is evident from the above that, what is excluded are matters pertaining to the Land and Building Bye-Laws, which falls under Chapter XIV of the Act of 1994 "Building Regulations" of the Act of 1994. The reading by the plaintiff the words „Land and Building‟ without reading the words „Bye Laws‟ is not tenable, as the words have to be read in a conjoint manner. So on a reading of Section 235 of the Act of 1994 and Government of India (Allocation of Business Rules), 1961, it is clear that, insofar as Section CS(OS) 651/2013 Page 215 of 257 235 is concerned, the Ministry of Urban Development is the Central Government, as it relates to land and building bye-laws/building regulations. With respect to the other provisions of the Act of 1994 (NDMC Act), including Chapter X Property and Contracts, it is the Ministry of Home Affairs, which shall exercise all powers and functions of Central Government. This aspect is also clear from the judgment of this Court in Tajdar Babbar (supra), wherein this Court was concerned with a challenge to two notifications dated September 5, 2014 issued by the Govt. of India, Ministry of Home Affairs dissolving the NDMC in exercise of the power conferred by Section 398(1) and appointing the Chairperson and other Members afresh under Section 4(1) of the NDMC Act. This Court had upheld the impugned action of the Ministry of Home Affairs. The facts of the case and my conclusion above, it is clear that the Ministry of Home Affairs is the Central Government with regard to the provisions relating to the NDMC Act, 1994, except Chapter XIV of the said Act.
188. Insofar as the judgment relied upon by Mr. Nayar in the case of NDMC vs. Tanvi Trading & Credit Pvt. Ltd, more specifically paras 32, 35, 36 are concerned, the challenge in the said case relates to a judgment dated May 19, 2004 rendered by the Division Bench of this Court in CS(OS) 651/2013 Page 216 of 257 W.P. No.4154/2000, whereby it was held that the order rejecting building plans submitted by the respondents is illegal as well as without jurisdiction and declared that the building plans submitted are deemed to have been sanctioned under Section 241 (2) of the Act of 1994. It was further directed by this Court to return the building plans submitted by the respondents with an endorsement "sanctioned" within the time specified in the order. From the aforesaid facts and the paras referred to by Mr. Nayar, it is clear that the case before the Supreme Court was concerning Sections 235, 241, which are the provisions under Chapter XIV, which relates to the building regulations. There is no dispute, with regard to the building regulations/land and building byelaws, the Central Government is the Ministry of Urban Development and such directions are binding on the NDMC. The facts in that case are totally different.
The case here does not relate to building regulations/land and building byelaws but with regard to the disposal of property. Neither the Ministry of Urban Development is competent nor its directions binding on the defendant in that regard.
189. The reliance placed by Mr. Nayar on the judgment of the Supreme Court in the case of Reliance Natural Resources Ltd. Vs. Reliance Industries Ltd. (supra), to contend that the Government of India CS(OS) 651/2013 Page 217 of 257 (Allocation of Business) Rules are binding is concerned, there is no dispute on the said proposition. The reference made by Mr. Nayar to the judgments of The Queen on the application of BAPIO Action Ltd. and Secretary of State for the Home Department & Anr. (2007 EWCA Civ 1139), D. Ramaswami (supra), Bio-chem Pharmaceutical Industries (supra), would not help the plaintiff, in view of my conclusion above.
190. Insofar as the submission of Mr. Rajiv Nayar challenging the direction of Ministry of Home Affairs to the defendant to resort to public auction and find best bidder on the grounds that (i) there was no basis for the Ministry of Home Affairs to write letters dated May 10, 2013 (Exh.DW1/PW4) and June 27, 2013 (Exh.DW1/P5) as they have not disclosed or brought on record, on what basis, the same have been written; are alien to the process outlined in Sections 393 and 394 of the Act of 1994 (ii) there is nothing on record to show whether the Ministry of Home Affairs required the Chairperson of the defendant to produce any record, correspondence and report as envisaged in Section 393 of the Act of 1994 (iii) there is nothing on record, whether any inspection was carried out, of the record of the defendant (iv) directions under Section 395 of the Act of 1994 can be issued to the defendant either on the receipt of the report or information (v) even if opinion of the Central CS(OS) 651/2013 Page 218 of 257 Government, MoHA is based on information/input gathered „otherwise‟ and there is nothing on record that if any department expressed any apprehension on the functioning of the defendant to the Ministry of Home Affairs (vi) the communication dated January 1, 2015 (Exh.DW5) was issued without considering the opinion of the learned Solicitor General of India and learned Attorney General as also the stand of the Ministry of Urban Development before the Supreme Court of India (vii) ignoring the pendency of the present suit, are concerned, to understand the submissions, it is necessary to reproduce Section 393, 394, 395 and 396 of the Act of 1994.
393.The Central Government may at any time require the Chairperson (1) To produce any record, correspondence, plan or other document in his possession or under his control;
(2) To furnish any return, plan, estimate, statement, account or statistics relating to the proceedings, duties or works of the Council;
(3) To furnish or obtain and furnish any report.
394. The Central Government may depute any person in the service of that Government to inspect or examine any municipal department or office or any service or work undertaken by the Council or any property belonging to the Council and to report thereon and the Council, the Chairperson and all municipal officers and other municipal employees shall be bound to afford the person so deputed access at all reasonable CS(OS) 651/2013 Page 219 of 257 times to ther premises and properties of the Council and to all records, accounts and other documents the inspection of which he may consider necessary to enable him to discharge his duties.
395. If, whether on receipt of a report or on receipt of any information or report obtained under section 393 or section 394 or otherwise, the Central Government is of opinion, - (1) To produce any record, correspondence, plan or other document in his possession or under his control;
(2) To furnish any return, plan, estimate, statement, account or statistics relating to the proceedings, duties or works of the Council;
(3) To furnish or obtain and furnish any report.
It may direct the Council within such period as it thinks fit, to make arrangements to its satisfaction for the proper performance of the duty, or as the case may be, to make financial provision, to its satisfaction for the performance of the duty and the Council shall comply with such direction.
Provided that unless in the opinion of the Central Government the immediate execution of such order is necessary, it shall before making any direction under this section give the Council an opportunity of showing cause why such direction should not be made.
396. If, within the period fixed by a direction made under section 395, any action the taking of which has been directed under that section has not been duly taken, the Central Government may make arrangements for the taking of such action and may direct that all expenses connected CS(OS) 651/2013 Page 220 of 257 therewith shall be defrayed out of the New Delhi Municipal Fund. Section 393 is clear, it empowers the Central Government to call from the Chairperson any record, account statistics, report etc. Similarly, Section 394 contemplates procedure to carry out inspection by the Central Government. Section 395 contemplates direction by the Central Government pursuant to the receipt of report or on receipt of any information or the report obtained under Section 393 or Section 394 or otherwise the Central Government is of the opinion that the duty imposed on the Council by or under this Act has not been performed or has been performed in an imperfect, insufficient or unsuitable manner or that adequate financial provision has not been made for the performance of any such duty.
191. On a reading of Section 395 of the Act of 1994, from the word „otherwise‟ as exists, it is clear that the same is couched in the widest possible terms to include any information received, not necessarily under Section 393 or 394. It can be information from any source. In the case in hand, it can be noted from the letter dated May 10, 2013 (Exh.DW1/P4), the same refers to the minutes of meeting dated September 27, 2012 (Exh.P-20). In other words, there was some basis for the Ministry of Home Affairs to issue the communications dated May 10, 2013 CS(OS) 651/2013 Page 221 of 257 (Exh.DW1/P4) and also of June 27, 2013 (Exh.DW1/P5). In the minutes of September 27, 2012 (Exh.P-20), it was decided by the Council to opt for public auction with first right of refusal to the plaintiff. The Ministry of Home Affairs, vide its letter dated May 10, 2013 has only conveyed to the defendant/NDMC the position in the lease deed (sic. Licence Deed) that first right of refusal has not been provided for and opined that the first right of refusal could not be allowed to the plaintiff in proposed auction and fresh lease (sic. Licence) should be granted by open auction. As noted above, the source being the minutes of meeting dated September 27, 2012, it is not relevant, how the Ministry of Home Affairs has got the possession of the minutes dated September 27, 2012 (Exh.P-20). Insofar as the plea that the opinions of learned Solicitor General of India and learned Attorney General of India were not considered before issuance of OM dated January 1, 2015, is concerned, the same are opinions. Till such time they culminate in a decision of the competent authority, no benefit can be taken by a party. Further, the pendency of the present suit in the absence of a restraint order is no bar for the defendant/Ministry of Home Affairs to take a decision. The pleas of Mr. Nayar needs to be rejected.
192. The reliance placed by Mr. Nayar on the judgment of the Supreme CS(OS) 651/2013 Page 222 of 257 Court in the case of State of Jharkhand Vs. Ambay Cements (supra), to contend that if Statute provides that an Act is to be done in a particular manner, the thing has to be done in that manner alone, has no application in the facts of this case. The relevant portion of Section 395 of the Act of 1994, which is reproduced above, would reveal that Section 393 or 394, are not the only source of information/material based on which the Ministry of Home Affairs could have taken decision. The information/input can be from any source. In the case in hand, the communication dated May 10, 2013 refers to the minutes of meeting dated September 27, 2012.
193. Further, the stand before the Supreme Court was, of the Ministry of Urban Development the respondent therein and not the Ministry of Home Affairs. The Ministry of Home Affairs being the Central Government for the purpose of the Act of 1994 (excluding Chapter XIV) and also in terms of the Allocation or Business Rules, 1961 was within its right to communicate/direct the defendant through the letters/OM dated May 10, 2013, June 27, 2013 and January 1, 2015.
194. The plea that OM dated January 1, 2015 wrongly records, that the opinion of the learned Solicitor General is pending, is inconsequential. The submission of Mr. Nayar that there is a basic fallacy in invoking CS(OS) 651/2013 Page 223 of 257 Sections 395 and 396 of the Act of 1994 inasmuch as the very premise of the direction of the Ministry of Home Affairs is incorrect as it is based on a consideration that the property is on "Lease", whereas the property is in fact a Licence is concerned, the same is also liable to be rejected in view of the judgment of the Supreme Court in the case of Aggarwal and Modi Enterprises Ltd. vs. New Delhi Municipal Council (supra), wherein the Supreme Court has in para 22, held that the mandate of Section 141(2) includes „licence‟ therefore, for MHA to consider it as a „lease‟ or „licence‟ would not make any difference. The above conclusion also entails rejection of the plea of Mr. Nayar that the defendant‟s resolution dated October 7, 2011 and January 30, 2015 refers to "lease" and not "licence".
195. The reliance placed by Mr. Nayar on the judgment of the Supreme Court in the case of H.C. Sharma vs. MCD (supra), is misplaced as it has no application, inasmuch as from para 6 of the judgment, it is noted that the Municipal Corporation of Delhi, a statutory Authority is controlled by the Central Government to the extent mentioned in Section 487 of the Delhi Municipal Corporation Act, 1957. The recruitment regulations for the post of Assistant Engineer (Civil) were notified in the official gazette on June 27, 1970. They provide for recruitment of CS(OS) 651/2013 Page 224 of 257 Assistant Engineers to the extent of 50% by promotion of Junior Engineers and to the extent of 50% by direct recruitment. The CPWD had decided to suspend direct recruitment to the Civil Engineering Services, Class-II for seven years from 1972. The first respondent therein, had resolved vide resolution dated July 20, 1964 to adopt the CPWD pattern of work with regard to execution of works alone and not with regard to the mode of recruitment and other service matters. The Central Government Rules were made applicable to the employees of respondent No.1 MCD only on the adoption and approval by the Corporation. Otherwise, its employees are governed by the Rules & Regulations framed by the corporation itself under Section 98 of the Delhi Municipal Corporation Act, 1957. The representations received from time to time for suspension of direct recruitment of Assistant Engineers were duly considered but it was found that there is no justification to comply with the request and a decision in that regard was taken by the Council of the Corporation on April 19, 1978. Out of 401 Junior Engineers, one was unqualified, 343 were diploma holders and only 57 were Graduates in Civil Engineering. The decision to fill up eight posts of Assistant Engineers by direct recruitment was taken in view of the shortfall in direct recruitment quota compared to the promotion quota in accordance with the recruitment regulations, which CS(OS) 651/2013 Page 225 of 257 provide for filling up 50% by promotion and 50% by direct recruitment of Assistant Engineers, though, sufficient number of Junior Engineers amongst diploma holders had become eligible for the post of Assistant Engineers. The practice of suspending direct recruitment followed by other departments of the Central Government cannot, therefore, be followed by respondent No.1. Section 487 of the Delhi Municipal Corporation Act, 1957 provides for direction being given by the Central Government. But the Central Government‟s letter dated February 23, 1976 to the effect that the consequent on the recommendations of the 3rd Pay Commission, respondent No.1 may ban direct recruitment, as has been done by the CPWD was not written in accordance with the power conferred by Section 487 of the Delhi Municipal Corporation Act and it cannot, therefore be taken as a directive from the Central Government. In paras 36 and 37, the Supreme Court noted the contention advanced on behalf of the petitioners that the letter dated February 23, 1976 does not contain any direction, which could be issued by the Central Government under Section 487 of the Delhi Municipal Corporation Act and is not binding on the respondent No.1. The Supreme Court held that Government Rules are applicable only on adoption thereof by the Corporation. The Government‟s advice to the Corporation consequent upon the pay commission‟s recommendation that the Corporation may CS(OS) 651/2013 Page 226 of 257 ban direct recruitment, as done by the CPWD is not a direction under Section 487 of the Delhi Municipal Corporation Act and therefore, not binding and therefore, the direct recruitment made by the Corporation in accordance with the recruitment Rules framed under Section 98 of the Delhi Municipal Corporation Act is proper. The facts in the said case are totally different, inasmuch as the Court has rejected the contention of the petitioners that the respondent No.1 should have suspended the direct recruitment of Assistant Engineers and the quota rule laid down in the recruitment regulations should not be followed, wherein in the case in hand, the direction in OM dated January 1, 2015 under Section 396 of the Act of 1994 (read with letter dated May 10, 2013 and June 27, 2013) even though, refers to lease, was in terms of provisions of the Licence Deed and Act of 1994. Similarly, the judgment of this Court in Bihari Lal Jalan (supra) would also not help the plaintiff.
196. The plea that the direction dated January 1, 2015 is ultra-vires the NDMC Act, as it breaches the entire scheme of the Act, inasmuch as Section 141 under Chapter X, which relates to „Property and Contracts‟ and which does not entail „expenditure or provision‟, is not a duty is concerned, the said submission is also liable to be rejected. First of all, a distinction has to be drawn between a „power‟ and „duty‟. Power is the CS(OS) 651/2013 Page 227 of 257 ability to do something and duty is what is expected of one by legal or moral obligation. Under Section 141 (2), it is clear, a duty has been imposed both on the Chairperson and the Council as a sanctioning authority to ensure the consideration for which immovable property may be sold, leased, licenced or otherwise transferred shall not be less than the value at which the immovable property could be sold, leased, licenced or otherwise transferred in a normal and fair competition. This being the duty and the Central Government i.e Ministry of Home Affairs under Sections 395 and 396 is of the opinion that the duty imposed on the Council by or under the Act has not been performed or has been performed in an imperfect, insufficient or unsuitable manner, it may direct the Council within such period as it thinks fit, to make arrangements to its satisfaction for the proper performance of the duty. In the case in hand, it is the opinion of the Central Government i.e the Ministry of Home Affairs that the Council‟s decision dated September 27, 2012 (Exh.P-20), the right of first refusal granted to the plaintiff has not been provided in the lease deed (sic. Licence Deed) and such right should not be granted, surely would reflect that the decision dated September 27, 2012 to that extent as communicated vide letter dated November 5, 2012 (Exh.P-49) was imperfect/unsuitable. I agree with the submission of Mr. Jain who relied on the judgment of the Supreme Court CS(OS) 651/2013 Page 228 of 257 in the case of Satish Chandra Khandelwal Vs. Union of India (supra), wherein this Court in para 44 has held that Section 490 provides for supersession of the Corporation appears in Ch. XXIV which is headed „Control‟. All told, central control is both wide and deep. Behind the corporate facade stands the Central Government with wide powers to issue directions, order inspection', and compel obedience to its commands. The Central Government exercises a considerable degree of administrative control over the Corporation in the interests of the community as a whole, for what is administered locally is often a national policy. The most effective single agency is the control over finances and borrowings. Some watch must be kept to ensure that spending is economic, for, there always exists the possibility that the Corporation may carry its permissive powers too far.
197. The judgment of the Supreme Court in the case of B.L. Wadera (supra), on which Mr. Nayar has relied upon, more specifically para 2, wherein the Supreme Court referred to the statutory duties interpreting some of the provisions of the Act relatable to scavenging and cleaning of the city of Delhi, would not infer, there are no other duties referred to in the Act. Section 141(2) is a duty on the part of the Chairperson and Council. It may be noted that the judgment of the Supreme Court in B.L. CS(OS) 651/2013 Page 229 of 257 Wadera (supra), had arisen in a public interest litigation filed by an Advocate seeking direction to the MCD and NDMC to perform their statutory duties, in particular the collection, removal and disposal of garbage and other waste, which duty is at variance with the duty under Section 141(2) of the Act. The judgment has no application.
198. The plea that MoUD being the owner of the land, its decision dated January 14, 2011 is binding is not tenable. The competency of MoUD to issue directions is limited to the provisions of Chapter XIV, which relates to Building Regulations and the same has to be read in conjunction with the provisions of the Allocation of Business Rules, 1961, which aspect has already been dealt above. It is not the concern of the MoUD, to direct/decide the manner in which contracts/licence, with regard to the "Hotel" need to be granted, otherwise it would be encroaching the field of Ministry of Home Affairs as reserved/specified in the Government of India (Allocation and Business) Rules, 1961.
199. On the plea that Section 395 of the Act of 1994 cannot be invoked for a single transaction affecting private rights is concerned, the same is also not tenable. No rights have been affected. That apart, I have already held that under Sections 395/396, the Ministry of Home Affairs has power to give directions to the defendant, if the defendant fails to CS(OS) 651/2013 Page 230 of 257 perform a duty, which includes a duty under Section 141(2). A reading of Section 141(3), which I reproduce as under, it is clear the duty of the Council would encompasses in itself a particular case as well and further, there is no such restriction under Sections 395/396.
―141(3) The sanction of Council under section 140 or this section may be given either generally for any class of cases or specially for any particular case.‖
200. The best example indicating the defendant taking a decision to go for auction is the Aggarwal & Modi Enterprises Pvt. Ltd. (supra), vide its resolution dated August 30, 2000 (Exh.P-10), which has been approved by the Supreme Court in paras 22 and 23 of its judgment in Aggarwal & Modi Enterprises Pvt. Ltd. (supra). Having a precedent, which has been upheld by the Supreme Court and noting the Section 141(3) it is clear the sanction of the Council may be given generally for any class of cases or specially for any particular case. This plea of Mr. Nayar is rejected.
201. Insofar as the reference made by Mr. Rajiv Nayar on the judgment of this Court in GMR Infrastructure Ltd (supra), is concerned, the said judgment is also not applicable, inasmuch as this Court had come to a finding that the impugned action of the Government was not under Sections 31 and 32 of the NHAI Act, under which, the Government can, CS(OS) 651/2013 Page 231 of 257 in public interest effectively divest the malfunctioning NHAI from the control of a particular national highway but was of the view, action having been taken under Section 33 of the Act, the revaluation could not have been directed by the Ministry to be taken by the NHAI. The Ministry of Home Affairs has found fault with right of first refusal given to the plaintiff. The said direction has been followed by the Council of the defendant on January 30, 2015, March 25, 2015 (Exh.DW1/6) whereby, it decided to withdraw the right of first refusal, which decision of the Council is justified as no such right flows from the Licence Deed (Exh.P-41). The judgment is distinguishable on facts.
202. Insofar as the judgment of the Allahabad High Court in the case of Dr. Ramesh Kumar Yadav, is concerned, the same is also distinguishable on facts. There is a finding of fact by the High Court that the Central Government has not been given power under Section 20(1) of the UGC Act to override or overrule the decisions taken by the UGC specially in respect of Regulations under Section 26(1) (e), (f) and (g), which do not require the prior approval of the Central Government, which is not the case here, as is clear from the aforesaid finding.
203. Insofar as the plea of Mr. Nayar that the directions of the Ministry of Home Affairs abrogates the plaintiff‟s contractual rights with the defendant, is also liable to be rejected. No contractual rights have been CS(OS) 651/2013 Page 232 of 257 abrogated, as is clear from above. I have already held, the plaintiff has no right to have licence for further period under the Licence Deed. The option to grant licence for further period, has not been acceded to, rightly so. The directions of the Ministry of Home Affairs, cannot be faulted, both on competency and on merit.
204. The plea of Mr. Rajiv Nayar that the Council in its resolution dated April 2, 1996 and October 7, 2011 has taken a position in favour of the plaintiff with regard to Joint Venture/extension of existing Collaboration project and lease deed, is unstinted and has a statutory force by relying upon Regulations 33 and 34 of the NDMC (Procedure & Conduct of Business) Regulations 1997 is also without any merit. From the perusal of the resolutions/decisions referred to above, it cannot be deduced that the relationship between the parties is a „Joint Venture‟ or there is a decision to extend the licence for a further period of 30 years.
205. The plea of discrimination is also not tenable when the relationship between the parties is governed by the Agreements, which have been entered with open eyes, clear understanding and knowing the implications thereof. The defendant is within its right to take a decision and act in a fair and transparent manner, which is in larger public interest and equity has no role to play. On the Dilli Haat, it is the case of the CS(OS) 651/2013 Page 233 of 257 defendant that there is no comparison. In any case, it would not invalidate the decisions of the defendant, which is in terms of the Agreements and provisions of the Act of 1994.
206. The plea on behalf of the plaintiff that since the plaintiff requests for extension of licence is much prior to the expiry of licence, the plaintiff‟s right deserves to be construed as per the date of the request is concerned, the same is not tenable. The notice given on February 15, 2010 by the plaintiff was in terms of the stipulation in Clause II(2) of the Licence Deed and was for renewal of licence for a further period on the expiry of the term and not extension as contended by Mr. Nayar. The option to grant a Licence for further period was with the defendant, who if had decided to grant licence, then same was to be on such terms and conditions as mutually agreed. So, the grant of licence for a further period was not a matter of right. The giving of 60 days notice much before expiry of the term would not make such a request, a case of extension, so as to make the rigours of Clause II(2) inapplicable. A reference to the judgment of the Supreme Court in Common Cause case (supra) is concerned, the same is not applicable to the facts of this case, inasmuch as in the said case, the Supreme Court was dealing with an issue arisen under the provisions of Mines & Minerals (Development & CS(OS) 651/2013 Page 234 of 257 Regulation) Act, 1957 and the Mineral Concession Rules, 1960. The finding of the Supreme Court is based on the said provisions. The issue, which arises for consideration in the case in hand, must be decided in terms of the provisions of the Licence Deed and the Act of 1994. The plaintiff cannot take any benefit of the fact that it has given notice for grant of licence for further period, much in advance, as the same was regulated by Clause II(2) of the Licence Deed.
207. Insofar as plea of Mr. Nayar that the Agreements executed by the plaintiff with the Committee, must be construed as per the provisions and rights flowing from the Punjab Municipal Act, 1911 is concerned, the same is also without any merit, in view of Section 416 of the Act of 1994, which relates to repeal and savings, which I reproduce as under:-
416. Repeal and savings.
(1) As from the date of the establishment of the Council, the Punjab Municipal Act, 1911, (Punjab Act 3 of 1911) as applicable to New Delhi, shall cease to have effect within New Delhi.
(2) Notwithstanding the provisions of sub- section (1) of this section,--
(a) any appointment, notification, order, scheme, rule, form, notice or bye- law made or issued, and any licence or permission granted under the Act referred to in sub- section (1) of this section and in force immediately before the establishment of the Council, shall, in so far as it CS(OS) 651/2013 Page 235 of 257 is not inconsistent with the provisions of this Act continue in force and be deemed to have been made, issued or granted, under the provisions of this Act, unless and until it is superseded by any appointment, notification, order, scheme, rule, form, notice or bye- law made or issued or any licence or permission granted under the said provisions;
(b) all debts, obligations and liabilities incurred, all contracts entered into and all matters and things engaged to be done by, with or for the New Delhi Municipal Committee before the establishment of the Council shall be deemed to have been incurred, entered into or engaged to be done by, with or for the Council under this Act;
(c) all budget estimates, assessments, valuations, measurements or divisions made by the New Delhi Municipal committee shall in so far as they are not inconsistent with the provisions of this Act, continue in force and be deemed to have been made under the provisions of this Act unless and until they are superseded by any budget estimate, assessment, valuation, measurement or division made by the Council under the said provisions;
(d) all properties, movable and immovable and all interests of whatsoever nature and kind therein, vested in the New Delhi Municipal Committee immediately before the establishment of the Council shall with all rights of whatsoever description, use, enjoyed or possessed by New Delhi Municipal Committee vest in the Council;
(e) all rates, taxes, fees, rents and other sums of money due to the New Delhi Municipal Committee immediately before the establishment of the Council shall be deemed to be due to the Council;CS(OS) 651/2013 Page 236 of 257
(f) all rates, taxes, fees, rents, fares and other charges shall, until and unless they are varied by the Council continue to be levied at the same rate at which they were being levied by the New Delhi Municipal Committee immediately before the commencement of this Act;
(g) all suits, prosecutions and other legal proceedings instituted or which might have been instituted by or against the New Delhi Municipal Committee may be continued or instituted by or against the Council.
208. A perusal of sub-Sections 2(a) and 2(b) of Section 416, it is clear that any licence or permission granted under the Punjab Municipal Act, 1911 and in force immediately before the establishment of the Council, shall, insofar as it is not inconsistent with the provisions of the Act of 1994 continue in force and be deemed to have been made, issued or granted under the provisions of the Act of 1994 unless or until superseded by any licence or permission granted under the provisions of the Act of 1994 and similarly, after May 25, 1994, all contracts shall be with the Council. The case of the plaintiff is not of inconsistency between the provisions of the Punjab Municipal Act, 1911 and the Act of 1994, but there is no provision under Section 47 of the Punjab Municipal Act, 1911 akin to Section 141 of the Act of 1994. The vires of the said provision Section 141 is not under challenge. The very existence of Section 141 in the Act of 1994 imposes an obligation to follow the same. It is not a case, the right as existed in favour of the plaintiff under the CS(OS) 651/2013 Page 237 of 257 Punjab Municipal Act, 1911 which has changed or taken away vide Section 141 of the Act of 1994. Section 416(2)(b) is also very clear. After May 25, 1994, all contracts shall be with the Council. So, after the said date rights shall be regulated by the NDMC Act and the contract executed i.e Licence Deed. That apart, it is noted that in terms of sub- clause 13 of Clause VII under the heading "Other Covenants on the part of the Licensor and the Licencee" of the Licence Deed, it is inter-alia stipulated that the licencee shall be bound to abide by the relevant provisions of the Punjab Municipal Act and such other Act or Acts at present in force as the licensor is required to abide by, as is made applicable to the licensor in future. x x x"
In view of the provisions of the Act of 1994 and the stipulation in the Licence Deed, Section 47 of the Punjab Municipal Act, 1911 shall not be applicable. The reliance placed on the judgment of the Supreme Court in the case of Grid Corporation of Orissa and ors (supra), has no application in the facts of this case, inasmuch as, in the said case a right existed in favour of the employees to be retired at the age of 60 years under Section 60 of the Act was sought to be taken away by reducing the same to 58 years, with regard to which the Supreme Court upheld the order of the High Court, wherein the High Court held the service CS(OS) 651/2013 Page 238 of 257 conditions of such employees cannot be taken away to their disadvantage. For the sake of repetition, no right existed in favour of the plaintiff earlier under the Punjab Municipal Act, 1911, which has been taken away under Section 141(2) of the Act. Similarly, the reliance placed on Mysore State Electricity Board case (supra), is also misplaced and has no applicability.
209. Insofar as the plea of Mr. Nayar that in view of rateable value Bye-laws enacted under Section 391 of the Act of 1994, being superior to the Council‟s resolution, since the bye-laws are approved by the Govt. of NCT of Delhi, the same must be given effect to and thus for determination of licence fee, there is no requirement of holding an auction is concerned, the said bye-laws have been enacted for the purpose of Section 63, which relates to Determination of rateable value of lands and buildings assessable to property tax. The determination is through annual rent for which lands and building are expected to be let out from year to year and for which purpose formula has been laid down in para 3 and 4 of the said bye-laws. The said determination has no correlation with the price, which the defendant may get for giving on licence the property in question through auction, which is more regulated by the market forces.
CS(OS) 651/2013 Page 239 of 257
210. Even otherwise, bye-laws enacted under Section 388 of the Act of 1994 cannot override the mandate of Section 141(2) and the same is clear from Section 388, which clearly stipulates;
(i) Subject to the provisions of this Act, the Council may, in addition to any bye-law, which it is empowered to make by any other provision of this Court make bye-laws to provide for all or any of the following matter XXXX XXXX XXXX The reference made to the judgment in NDMC v. M.N. Soi and Anr (supra) would not be of any help to the plaintiff, as the issue, which fell for consideration of the Court was different.
211. With respect to reasonableness and non-arbitrariness of the decision to put the property to auction, the law is well settled. Some of which have been relied upon by Mr. Jain in the case of State of Uttar Pradesh v. Shiv Charan Sharma (supra), Ram & Shyam Co. (supra), Sterling Computer Ltd. (supra), Haryana Financial Corporation (supra), Chenchu Rami Reddy (supra) and Hazi T.M. Hassan Rawther (supra) and Natural Resources Allocation in Re-Special Reference No.1/2012, (2012) 10 SCC 1 paras 146, 149 and 186. Even though, Mr. Nayar contest that Hotel is not a natural resource demanding auction and CS(OS) 651/2013 Page 240 of 257 would try to justify the revenues that would be earned by the defendant in 30 years, suffice to state, noting the conclusion of the Supreme Court in paras 146 and 149 in Re-Special Reference No.1/2012 (supra), which I reproduce as under and the Supreme Court in Aggarwal & Modi Enterprises Pvt. Ltd (supra) in para 22 and 23 (as reproduced in issue No.3) in identical situation with regard to the same defendant, the decision of the defendant with regard to the auction cannot be interfered with.
―146. To summarize in the context of the present Reference, it needs to be emphasized that this Court cannot conduct a comparative study of the various methods of distribution of natural resources and suggest the most efficacious mode, if there is one universal efficacious method in the first place. It respects the mandate and wisdom of the executive for such matters. The methodology pertaining to disposal of natural resources is clearly an economic policy. It entails intricate economic choices and the Court lacks the necessary expertise to make them. As has been repeatedly said, it cannot, and shall not, be the endeavour of this Court to evaluate the efficacy of auction vis-a-vis other methods of disposal of natural resources. The Court cannot mandate one method to be followed in all facts and circumstances. Therefore, auction, an economic choice of disposal of natural resources, is not a constitutional mandate. We may, however, hasten to CS(OS) 651/2013 Page 241 of 257 add that the Court can test the legality and constitutionality of these methods. When questioned, the Courts are entitled to analyse the legal validity of different means of distribution and give a constitutional answer as to which methods are ultra vires and intra vires the provisions of the Constitution. Nevertheless, it cannot and will not compare which policy is fairer than the other, but, if a policy or law is patently unfair to the extent that it falls foul of the fairness requirement of Article 14 of the Constitution, the Court would not hesitate in striking it down.
149. Regard being had to the aforesaid precepts, we have opined that auction as a mode cannot be conferred the status of a constitutional principle. Alienation of natural resources is a policy decision, and the means adopted for the same are thus, executive prerogatives. However, when such a policy decision is not backed by a social or welfare purpose, and precious and scarce natural resources are alienated for commercial pursuits of profit maximizing private entrepreneurs, adoption of means other than those that are competitive and maximize revenue may be arbitrary and face the wrath of Article 14 of the Constitution. Hence, rather than prescribing or proscribing a method, we believe, a judicial scrutiny of methods of disposal of natural resources should depend on the facts and circumstances of each case, in consonance with the principles which we have culled out above. Failing which, the Court, in exercise of power of judicial review, shall term the executive action as arbitrary, CS(OS) 651/2013 Page 242 of 257 unfair, unreasonable and capricious due to its antimony with Article 14 of the Constitution.‖
212. In view of the discussion above, and the request of the plaintiff for renewal of licence for further period has not been acceded to and noting that the plaintiff has no right seeking renewal or grant of licence for further period and the decision of the defendant to go for auction, the plaintiff is not entitled to extension of licence as claimed in the suit. This issue is decided against the plaintiff.
ISSUE No.2: Whether the suit is barred by Section 385 of the NDMC Act, 1994? OPD
213. As the issue has not been pressed by the defendant, the same is decided as not pressed.
ISSUE No.3: whether Section 141 of the NDMC Act, 1994 is applicable to the contracts and transactions between the plaintiff and the defendant in respect of the extension of the Licence Deed dated 18th December, 1976? OPD
214. For deciding this issue, it is necessary to reproduce Section 141 of the Act.
―141. Disposal of immovable property.-(l) The Chairperson may, with the sanction of the Council, lease, sell, let out on hire or otherwise transfer any immovable property belonging to the Council.
(2) The consideration for which any immovable property may be sold, leased or otherwise transferred shall not be less than the value at which such immovable property could be sold, leased or CS(OS) 651/2013 Page 243 of 257 otherwise transferred in normal and fair competition. (3) The sanction of Council under section 140 or this section may be given either generally for any class of cases or specially for any particular case.
(4) Subject to any conditions or limitation that may be specified in any other provisions of this Act the foregoing provisions of section 140 and this section shall apply to every disposal of property belonging to the Council made under, or for any purpose of this Act.
(5) Every case of disposal of property under sub-section (1) of section 140 shall be reported by the Chairperson without delay to the Council.‖
215. I recapitulate the submissions of Mr. Rajiv Nayar as under:-
(1) Section 141(2) of the Act of 1994 is not applicable for fresh/extension of licence.
(2) Section 141(2) of the Act of 1994 is applicable only to (1) lease of immovable property; (ii) sale of immovable property; (iii) otherwise "transfer" of immovable property.
(3) It is not the case of the defendant, the extension/renewal of licence amounted to a lease, sale or transfer of immovable property, even otherwise the words "or otherwise transferred" have to be read ejusdem generis with the words "lease", "sale". Accordingly, "transfer" by NDMC would mean creation of fresh rights in the immovable property CS(OS) 651/2013 Page 244 of 257 akin to rights by way of "lease" or "sale".
(4) "Sale" and "lease" of an immovable property create an interest in the property, whereas a „licence‟ does not create any interest in the immovable property.
(5) The above interpretation of Section 141(2) of the Act of 1994 is furthered from the language/words used in sub-section (1) and sub-
Section (2) of Section 141 of the Act inasmuch as in sub-Section (i) of Section 141 the words "the Council may deal with the immovable property whereas sub-Section (2) provides the manner for arriving at the consideration such disposal/transfer mentioned therein. (6) The word "let out on hire" find mention in sub-Section (1) are omitted consciously by legislature in sub-Section (2). So the manner of arriving at the consideration through competition only applies to (1) sale of immovable property; (ii) lease of immovable property; (iii) a property transferred in a manner which creates an interest in the property. (7) Letting has been held to be "licence", so 141(2) of the Act is not applicable for extension of licence and hence, for determination of licence fee, there is no requirement of holding an auction. (8) And this Court can‟t supply/add the words licence in Section CS(OS) 651/2013 Page 245 of 257 141(2), when there is no ambiguity.
216. Suffice to state, the submissions as made by Mr. Nayar need to be rejected only on the ground the issue(s) raised is/are no more res-integra, having been decided by the Supreme Court in the case of Aggarwal & Modi Enterprises Pvt Ltd. (supra), wherein, in paras 22 and 23, the Supreme Court has held as under:-
―22. The mandate of Section 141(2) is that any immovable property belonging to NDMC is to be sold, leased, licenced or transferred on consideration which is not to be less than the value at which such immovable property could be sold, leased, or transferred in fair competition. The crucial expression is "normal and fair competition". In other words, NDMC is obligated to adopt the procedure by which it can get maximum possible return/consideration for such immovable property. The methodology which can be adopted for receiving maximum consideration in a normal and fair competition would be the public auction which is expected to be fair and transparent. Public auction not only ensures fair price and maximum return it also militates against any allegation of favouritism on the part of the Government authorities while giving grant for disposing of public property. The courts have accepted public auction as a transparent mean of disposal of public property. (See State of UP v. Shiv CS(OS) 651/2013 Page 246 of 257 Charan Sharma (AIR 1981 SC 1722), Ram and Shyam Company v. State of Haryana (1985 (3) 267), Sterling Computers Ltd. v. M & N Publications Ltd. (1993 (1) SCC
445), Mahesh Chandra v. Regional Manager, UP Financial Corporation (1993 (2) SCC 279), Pachaivappa's Trust v. Official Trustee of Madras (1994 (1) SCC 475), Chairman and M.D. SIPCO, Madras v. Contromix Pvt.
Ltd. (1995 (4) SCC 595), New India Public School v.
HUDA (AIR 1996 SC 3458), State of Kerala v. M. Bhaskaran Pillai (1997 (5) SCC 432) and Haryana Financial Corporation v. Jagdamba Oil Mills (2002 (3) SCC 496).
23. Disposal of public property partakes the character of trust and there is distinct demarcated approach for disposal of public property in contradiction to the disposal of private property i.e. it should be for public purpose and in public interest. Invitation for participation in public auction ensures transparency and it would be free from bias or discrimination and beyond reproach.‖
217. From para 22 of the judgment, it is noted, the Supreme Court clearly held that the mandate of Section 141(2) also includes „licence‟. So, Section 141, which includes Section 141(2) applies to licence deed executed between the parties on December 18, 1976 (Exh.P-41), whose term has expired. The Supreme Court in Aggarwal & Modi Enterprises Pvt. Ltd. (supra), while appreciating the true scope and ambit of Section CS(OS) 651/2013 Page 247 of 257 141(2), has in para 18 held, that the expiry of lease would also depict a fresh transaction. Section 141 of the Act relates to disposal of property coming into force the Act of 1994 and the same is by executing a licence deed. Section 141 does not differentiate between extension/renewal/fresh licence. So it follows, in every eventuality, the consideration for which immovable property is sold, leased, licensed or otherwise transferred shall not be less than the value at which such immovable property could not be sold, leased, licensed or otherwise transferred in normal and fair competition.
218. It must be held, the plea of Mr. Nayar that Section 141(2) of the Act of 1994 is not applicable to grant of fresh licence/extension of licence, is without merit.
219. Insofar as the submissions of Mr. Nayar as noted above, the cumulative of which is that Section 141(2) of the Act of 1994 shall not be applicable to „licence‟, including the plea that Section 141(2) of the Act is applicable only to (i) sale of immovable property; (ii) lease of immovable property; (iii) otherwise transferred of immovable property and also the plea that the words „or otherwise transferred‟ have to be read ejusdem generis with the words „lease‟ and „sale‟ and also the judgments relied upon in support of his contentions on the proposition CS(OS) 651/2013 Page 248 of 257 that „let out on hire‟ is akin to „licence‟; court cannot add words which are not contained in the Statute; distinction between „lease‟ and „licence‟ and disposal of property by NDMC by the method of „lease‟ is common, needs to be rejected. Mr. Sanjay Jain is right in contending, such pleas are not maintainable and runs contrary to the ratio laid down by the Supreme Court in Aggarwal & Modi Enterprises Pvt. Ltd. (supra). In fact, in substance the plea of Mr. Nayar is, this Court should not read, rather omit the word „licence‟ in line 2 of para 22 of the said judgment. This is impermissible as „licence‟ also has been held to be the mandate of Section 141(2) of the Act of 1994. The ratio of the judgment of the Supreme Court is binding on this Court under Article 141 of the Constitution of India, which lays down that law declared by the Supreme Court to be binding on all Courts. Therefore, all Courts including this Court are bound to follow the decision of the Apex Court. The Article 141 empowers the Supreme Court to declare law, which becomes law of the land, which is essential for proper administration of justice with the expectation that like cases should be decided alike. Every Court is bound to follow a case decided by a higher court in the hierarchy and the Court is bound by the precedent. I agree with the reliance placed by Mr. Sanjay Jain on the judgment of the Supreme Court in the case of South Central Railway Employees Cooperative Credit Society Employees CS(OS) 651/2013 Page 249 of 257 Union (supra), wherein, the South Central Railway Employees Cooperative Credit Society has framed Rules governing service conditions of its employees and the said Rules had been approved by the Registrar, Co-operative Societies, Government of Andhra Pradesh. The Supreme Court decided a case titled as South Central Railway Employees Cooperative Credit Society Employees Union vs. Registrar of the Co-operative Societies (1998) 2 SCC 580, wherein it was held, there is no reservation policy for the society in the matter of promotion to higher grade. In order to give effect to the judgment of the Supreme Court, the Society had issues orders of reversion to the employees, who had been wrongly promoted. One such order was dated June 12, 1998, served upon the employees concerned, who had been wrongly promoted on the basis of their caste and creed. The said order dated June 12, 1998 was challenged by them by filing Writ Petition in the High Court of Andhra Pradesh. The said writ petition was allowed and the order dated June 12, 1998 was set aside by the High Court. Being aggrieved by the judgment of the Single Judge of the High Court, a writ appeal was filed by other employees of the Society, who had been aggrieved by the wrongly promotions given to the Society on the basis of reservation policy. The writ appeal was dismissed by the Division Bench of the High Court vide order dated August 14, 2002. The counsel appearing CS(OS) 651/2013 Page 250 of 257 for the employees union had submitted before the Supreme Court that the High Court had committed grave error by re-considering the issue, which has already been decided by the Supreme Court in South Central Railway Employees Cooperative Credit Society Employees Union (supra). In the said background, the Supreme Court in paras 13 to 16, has held as under:-
―13. In our opinion, the High Court should not have considered any other factor especially when this Court had come to a final conclusion that the policy with regard to reservation in the matter of promotion to the employees was not legal and proper.
14. We are of the view that it was not open to the High Court to hold that the judgment delivered by this Court in South Central Railway Employees Coop. Credit Society Employee's Union vs. Registrar of Coop. Societies was per incuriam.
15. If the view taken by the High Court is accepted, in our opinion, there would be total chaos in this country because in that case there would be no finality to any order passed by this Court. When a higher court has rendered a particular decision, the said decision must be followed by a subordinate or lower court unless it is distinguished or overruled or set aside. The High Court had considered several provisions, which in its opinion, had not been considered or argued before CS(OS) 651/2013 Page 251 of 257 this Court when CA No.4343 of 1988 was decided. If the litigants or lawyers are permitted to argue that something what was correct, but was not argued earlier before the higher court and on that ground if the courts below are permitted to take a different view in a matter, possibly the entire law in relation to the precedents and ratio decidendi will have to be rewritten and, in our opinion, that cannot be done. Moreover, by not following the law laid down by this Court, the High Court or the subordinate courts would also be violating the provisions of Article 141 of the Constitution of India.
16. We do not want to go into the arguments advanced by the learned counsel appearing for the respondents before the High Court for the simple reason that it was not open to them to advance any argument which would run contrary to the judgment delivered by this Court in South Central Railway Employees Coop. Credit Society Employee's Union vs. Registrar of Coop. Societies. In our opinion, the High Court did something, which would be like setting aside a decree in the execution proceedings!‖
220. On similar lines, is the judgment of the Supreme Court in the case of Director of Settlement A.P. and M.R. Apparao (supra), wherein in para 7, the Supreme Court held as under:-
―7. So far as the first question is concerned, Article 141 of the Constitution unequivocally indicates that the law declared by the Supreme Court shall be binding on all courts CS(OS) 651/2013 Page 252 of 257 within the territory of India. The aforesaid Article empowers the Supreme Court to declare the law. It is, therefore, an essential function of the Court to interpret a legislation. The statements of the Court on matters other than law like facts may have no binding force as the facts of two cases may not be similar. But what is binding is the ratio of the decision and not any finding of facts. It is the principle found out upon a reading of a judgment as a whole, in the light of the questions before the Court that forms the ratio and not any particular word or sentence. To determine whether a decision has ―declared law‖ it cannot be said to be a law when a point is disposed of on concession and what is binding is the principle underlying a decision. A judgment of the Court has to be read in the context of questions which arose for consideration in the case in which the judgment was delivered. An ―obiter dictum‖ as distinguished from a ratio decidendi is an observation by the Court on a legal question suggested in a case before it but not arising in such manner as to require a decision. Such an obiter may not have a binding precedent as the observation was unnecessary for the decision pronounced, but even though an obiter may not have a binding effect as a precedent, but it cannot be denied that it is of considerable weight. The law which will be binding under Article 141 would, therefore, extend to all observations of points raised and decided by the Court in a given case. So far as constitutional matters are concerned, it is a practice of the Court not to make any pronouncement on CS(OS) 651/2013 Page 253 of 257 points not directly raised for its decision. The decision in a judgment of the Supreme Court cannot be assailed on the ground that certain aspects were not considered or the relevant provisions were not brought to the notice of the Court (see Ballabhadas Mathurdas Lakhani v. Municipal Committee, Malkapur and AIR 1973 SC 794). When the Supreme Court decides a principle it would be the duty of the High Court or a subordinate court to follow the decision of the Supreme Court. A judgment of the High Court which refuses to follow the decision and directions of the Supreme Court or seeks to revive a decision of the High Court which had been set aside by the Supreme Court is a nullity. (See Narinder Singh vs. Surjit Singh and Kausalya Devi Bogra v. Land Acquisition Officer). We have to answer the first question bearing in mind the aforesaid guiding principles. We may refer to some of the decisions cited by Mr. Rao in elaborating his arguments contending that the judgment of this Court dated 6.2.1986 cannot be held to be a law declared by the Court within the ambit of Article 141 of the Constitution. Mr. Rao relied upon the judgment of this Court in the case of M.S.M. Sharma v. Sri Krishna Sinha wherein the power and privilege of the State Legislature and the fundamental right of freedom of speech and expression including the freedom of the press was the subject-matter of consideration. In the aforesaid judgment it has been observed by the Court that the decision in Gunupati Keshavram Reddy v. Nafisul Hasan relied upon by the CS(OS) 651/2013 Page 254 of 257 counsel for the petitioner which entirely proceeded on a concession of the counsel cannot be regarded as a considered opinion on the subject. There is no dispute with the aforesaid proposition of law.‖ In view of the aforesaid position of law, the plea of Mr. Nayar that the word „licence‟ in second line of paragraph 22 has been crept in by mistake, also needs to be rejected.
221. The plea of Mr. Nayar that the decision of the Supreme Court in Aggarwal & Modi Enterprises Pvt. Ltd. (supra), is not applicable is concerned, the same is also liable to be rejected. No doubt, in Aggarwal & Modi Enterprises Pvt. Ltd. (supra), the appellant therein was continuing in property from 1990 to 2000 without a licence and the Supreme Court has also noted this particular aspect and has concluded that there was no option/entitlement/renewal, since there was no licence in operation, under which, right could be exercised but this aspect would not make the judgement inapplicable to the facts of this case, inasmuch as in the present case also the licence had expired on October 10, 2011.
Thereafter, ad-hoc extensions were granted, which continued till January 31, 2016. Thereafter, there is no extension except on the strength of the statement made by learned ASG that no coercive steps shall be taken against the plaintiff. The reliance placed by Mr. Nayar on paragraph 18 CS(OS) 651/2013 Page 255 of 257 of the judgment would also not help the case of the plaintiff. In para 18, the Supreme Court while delineating the true scope and ambit of Section 141(2) of the Act of 1994, has held not only in view of the nature of the proposed changes, it has to be treated as a fresh transaction but also, as the lease has expired. As I have already held above that Section 141 does not make any distinction between extension/renewal/fresh disposal of the immovable property. I have also held that Section 141 of the Act relates to disposal of the property after coming into force the Act of 1994 and the same is by executing a licence deed. The exercise of option within the licence period would be inconsequential. I reiterate that the decision of Aggarwal & Modi Enterprises Pvt. Ltd. (supra) is applicable on all force and the judgment of the Supreme Court in Union of India v. Arulmozhi Iniarasu (supra) would not be applicable.
222. In view of my discussion above, the issue No.3 is decided in favour of the defendant.
Issue No.4 Whether the Plaintiff is entitled to relief claimed in the present Suit? OPP Issue No.5 Relief.
223. In view of the finding against issue Nos.1 and 3, the plaintiff is not entitled to the relief, as prayed for in the suit nor any other relief under CS(OS) 651/2013 Page 256 of 257 issue No.5. The suit is dismissed. No costs.
IAs 9691/2015, 15819/2015 & 1530/2016 In view of the order passed in the suit, the applications are dismissed as infructuous.
(V.KAMESWAR RAO) JUDGE SEPTEMBER 05, 2016 ak CS(OS) 651/2013 Page 257 of 257